<PAGE>
As filed with the Securities and Exchange Commission on March 15, 2000
Registration No. 333-94873
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
Under the Securities Act of 1933
(Amendment No. 2)
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ULTICOM, INC.
(Exact Name of Registrant as Specified in its Charter)
New Jersey 3661 22-2050748
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification Number)
Incorporation or Classification Code
Organization) Number)
1020 Briggs Road
Mt. Laurel, New Jersey 08054
(856) 787-2700
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
Mr. Shawn Osborne
President and Chief Executive Officer
Ulticom, Inc.
1020 Briggs Road
Mt. Laurel, New Jersey 08054
(856) 787-2700
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
Copies to:
Stephen M. Besen, Esq. Ira Rosenberg, Esq. Barbara L. Becker, Esq.
Weil, Gotshal & Manges Sills Cummis Radin Chadbourne & Parke LLP
LLP Tischman Epstein & 30 Rockefeller Plaza
767 Fifth Avenue Gross, P.A. New York, New York 10112
New York, New York 10153 1 Riverfront Plaza (212) 408-5100
(212) 310-8000 Newark, New Jersey 07102
(973) 643-7000
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
Proposed Proposed
maximum maximum
Title of each class of Amount offering price aggregate Amount of
securities to be to be per Common offering registration
registered registered(1) Share(2) price(2) fee
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<S> <C> <C> <C> <C>
Common stock, no par
value................. 4,887,500 $12.00 $58,650,000 $15,484
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</TABLE>
(1) Includes 637,500 common shares subject to the underwriters' over-allotment
option.
(2) Estimated solely for the purpose of calculating the registration fee. The
registration fee was paid as follows: $13,200 on January 18, 2000 and the
balance on February 29, 2000.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information contained in this prospectus is not complete and may be +
+changed. We may not sell these securities until the registration statement +
+filed with the Securities and Exchange Commission is effective. This +
+prospectus is not an offer to sell these securities and it is not soliciting +
+an offer to buy these securities in any state where the offer or sale is not +
+permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, dated March 15, 2000
PROSPECTUS
4,250,000 Shares
[LOGO ULTICOM]
Common Stock
-------------
This is our initial public offering of shares of common stock. We are offering
4,250,000 shares. No public market currently exists for our shares.
We have applied to have our common stock listed for quotation on the Nasdaq
National Market under the symbol "ULCM."
We estimate that the initial public offering price will be between $10 and $12
per share.
Investing in the shares involves risk. See "Risk Factors" beginning on page 6.
<TABLE>
<CAPTION>
Per Share Total
--------- -------
<S> <C> <C>
Public Offering Price........................................ $ $
Underwriting Discounts and Commissions....................... $ $
Proceeds to Ulticom.......................................... $ $
</TABLE>
We have granted the underwriters a 30-day option to purchase up to 637,500
additional shares to cover any over-allotments.
Neither the Securities and Exchange Commission nor any State securities
commission has approved or disapproved of these securities or determined if
this prospectus is accurate or complete. Any representation to the contrary is
a criminal offense.
Lehman Brothers expects to deliver the shares on or about , 2000.
-------------
Lehman Brothers
Chase H&Q
U.S. Bancorp Piper Jaffray
Fidelity Capital Markets
a division of National Financial Services
Corporation
, 2000
<PAGE>
[LOGO]
Network Software
[PHOTO]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Summary........................................................ 3
The Offering.............................................................. 4
Risk Factors.............................................................. 6
Special Note Regarding Forward-Looking Statements......................... 13
Use Of Proceeds........................................................... 14
Dividend Policy........................................................... 14
Capitalization............................................................ 15
Dilution.................................................................. 16
Selected Financial Data................................................... 17
Management's Discussion And Analysis Of Financial Condition And Results Of
Operations............................................................... 18
</TABLE>
<TABLE>
<S> <C>
Business................................................................... 24
Management................................................................. 34
Related Party Transactions................................................. 43
Principal Shareholders..................................................... 46
Description Of Securities.................................................. 47
United States Federal Tax Considerations For Non-United States Holders..... 50
Shares Eligible For Future Sale............................................ 52
Underwriting............................................................... 54
Legal Matters.............................................................. 56
Experts.................................................................... 56
Available Information...................................................... 57
Reports To Shareholders.................................................... 57
</TABLE>
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You should only rely on the information contained in this prospectus. We and
the underwriters have not authorized anyone to provide you with any different
or additional information. This prospectus is not an offer to sell or a
solicitation of an offer to buy common stock in any jurisdiction where it is
unlawful. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of common stock.
Until , 2000, all dealers that buy, sell or trade our common stock,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
1
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[This page is intentionally left blank.]
2
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PROSPECTUS SUMMARY
This summary highlights some information contained elsewhere in this
prospectus. You should read the entire prospectus carefully, including the
section entitled "Risk Factors" and our financial statements and related notes,
before deciding to invest in our common stock.
Ulticom
We are a leading provider of network signaling software for wireless,
wireline and Internet communication services. Our Signalware call control
products interconnect the complex switching, database and messaging systems and
manage the vital number, routing and billing information that form the backbone
of today's communication networks. These products incorporate signaling system
#7, a widely used set of signaling standards and protocols for communication
networks worldwide. Signalware enables communication service providers to offer
intelligent network services, such as voice-activated dialing, prepaid calling,
caller ID and text messaging. These products also enable voice and data
networks to interoperate, or converge, allowing service providers to offer such
converged network services as voice over the Internet and Internet call
waiting. Our new Nexworx product line is designed to move service control into
the hands of subscribers, so that businesses or consumers can access network
resources to create, manage and personalize their communication services.
Demand for enhanced voice and data communication services has grown rapidly
over recent years due to the emergence of the Internet, the growth in wireless
subscribers, and the proliferation of competitive service providers. Network
equipment manufacturers, application developers and service providers
increasingly require enabling products that allow the rapid development and
delivery of these enhanced services. Our products offer the following key
benefits:
Accelerated Time to Market. We believe our comprehensive solutions allow
customers to deploy services more rapidly than internally developed
alternatives. In addition, our products allow our customers to concentrate
their efforts on application development, significantly reducing the time it
takes for them to bring communication services to market.
Network and Platform Interoperability. Our products are designed for
deployment on disparate network environments and multiple computer platforms.
Signaling networks around the world vary based on different country standards
and infrastructures. Our products overcome these differences and provide our
customers with the ability to create applications that are marketable around
the world. Our products also provide our customers with the flexibility to
develop applications on one computing platform and then migrate to another as
market demands or industry standards change.
High Performance and Reliability. Service providers consider it critical that
their networks provide high quality, uninterrupted service. As a result, they
will only purchase solutions that are stable, fast and scalable. Our products
meet the need to provide these mission-critical performance and reliability
requirements.
We have over 40 customers throughout North America, Europe and the Pacific
Rim and our products are deployed globally by major service providers in more
than 50 countries. Our products are used by equipment manufacturers,
application developers and service providers. Our customers include
communication industry leaders such as Ericsson, Comverse Network Systems,
Siemens, Lucent, and Logica, each of which accounted for at least 5% of our
revenues in fiscal 1999.
We are a subsidiary of Comverse Technology, Inc. Our company was incorporated
in New Jersey on December 18, 1974 as "Dale, Gesek, McWilliams & Sheridan,
Inc.," and we were formerly known as "DGM&S Telecom, Inc." In May 1999 we
changed our name to "Ulticom, Inc." Our principal executive offices are located
at 1020 Briggs Road, Mount Laurel, New Jersey 08054. Our telephone number is
(856) 787-2700.
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The Offering
<TABLE>
<S> <C>
Common Stock offered by us................................... 4,250,000 shares
Common Stock to be outstanding after this offering........... 36,977,000 shares
Over-allotment option........................................ 637,500 shares
Proposed Nasdaq National Market symbol....................... "ULCM"
</TABLE>
The Common Stock outstanding after this offering excludes:
. 3,272,700 shares of common stock issuable upon the exercise of stock
options outstanding as of January 31, 2000 under our stock incentive
compensation plan, with a weighted average exercise price of $2.57 per
share; and
. 544,725 shares of common stock issuable upon the exercise of stock
options granted under such plan upon completion of this offering at an
exercise price equal to the initial public offering price.
About This Prospectus
Unless otherwise indicated, the information in this prospectus assumes no
exercise of the underwriters' over-allotment option.
References in this prospectus to Comverse refer to our controlling
shareholder, Comverse Technology, Inc., and its subsidiaries excluding Ulticom.
References in this prospectus to Comverse Network Systems refer to our
affiliate, Comverse Network Systems, Inc. and its subsidiaries. Comverse
Network Systems is a wholly-owned subsidiary of Comverse.
In 1998, we changed our fiscal year from the calendar year to the fiscal year
ending January 31. References in this prospectus to fiscal 1997 refer to the
year ended December 31, 1997. References in this prospectus to fiscal 1998
refer to our fiscal year ended January 31, 1999. References in this prospectus
to fiscal 1999 refer to our fiscal year ended January 31, 2000.
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SUMMARY FINANCIAL DATA
The following table summarizes the financial data for our business. You
should read this information together with the financial statements and the
notes to those statements appearing elsewhere in this prospectus. See "Selected
Financial Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<TABLE>
<CAPTION>
One Month Year Ended
Year Ended December 31, Ended January 31,
------------------------- January 31, ---------------
1995 1996 1997 1998 1999 2000
------- ------- ------- ----------- ------- -------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Sales................... $15,355 $ 6,450 $14,559 $ 212 $18,629 $25,831
Income (loss) from
operations............. 553 (2,183) 3,775 (635) 2,844 2,809
Net income (loss)....... $ (213) $(1,577) $ 2,055 $ (431) $ 1,567 $ 1,574
Earnings (loss) per
share:
Basic................... $ (0.01) $ (0.05) $ 0.06 $(0.01) $ 0.05 $ 0.05
Diluted................. $ (0.01) $ (0.05) $ 0.06 $(0.01) $ 0.05 $ 0.05
Shares used in computing
basic earnings per
share.................. 32,727 32,727 32,727 32,727 32,727 32,727
Shares used in computing
diluted earnings per
share.................. 32,727 32,727 32,727 32,727 33,087 33,759
</TABLE>
The following table summarizes our balance sheet as of January 31, 2000:
.on an actual basis; and
. on an as adjusted basis to give effect to the sale of 4,250,000 shares
in this offering, at an assumed offering price of $11.00 per share,
after deducting the underwriting discounts and estimated offering
expenses, and our anticipated application of the net proceeds of the
offering.
<TABLE>
<CAPTION>
As of
January 31, 2000
-----------------
As
Actual Adjusted
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(In thousands)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents..................................... $ 6,299 $ 44,977
Working capital............................................... 742 39,420
Total assets.................................................. 17,364 56,042
Long-term debt(1)............................................. 3,800 --
Stockholders' equity.......................................... 1,120 43,598
</TABLE>
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(1) The long-term debt reflects outstanding bank debt. We expect to repay this
bank debt in July 2000.
5
<PAGE>
RISK FACTORS
Investing in our common stock involves risk. You should carefully consider
the risks described below and other information in this prospectus before
deciding to invest in our common stock.
Risks Related To Our Business
Because our quarterly operating results may fluctuate significantly and may be
below the expectations of analysts and investors, the market price for our
stock may be volatile.
Our quarterly operating results are difficult to predict and may fluctuate
significantly in the future. As a result, our stock price may be volatile. The
following factors, many of which are outside our control, can cause
fluctuations in our operating results and volatility in our stock price:
. the size, timing, terms and conditions of orders and shipments
. customer order deferrals in anticipation of enhancements or new products
. unanticipated delays or problems in releasing new products
. the timing and success of our customers' deployment of network services
and products
. the relative mix of products and services we sell through our direct and
indirect sales channels
. our timing of and investments in research and development activities
Since our products have long sales cycles which typically range from six to
twelve months, our ability to forecast the timing and amount of specific sales
is limited. The deferral or loss of one or more significant sales could
materially adversely affect our operating results in any fiscal quarter,
especially if there are significant sales and marketing expenses associated
with the deferred or lost sales. We base our current and future expense levels
on our internal operating plans and sales forecasts, and our operating costs
are to a large extent fixed. As a result, we may not be able to sufficiently
reduce our costs in any quarter to compensate for an unexpected near-term
shortfall in revenues.
We are dependent upon sales of our Signalware products and any reduction in
demand for these products could adversely affect our business and operating
results.
Our Signalware products generated substantially all of our product sales
during the last two years. We expect sales of these products to continue to
account for a substantial amount of our revenues for the foreseeable future. We
may not be successful in marketing our other products because the markets they
are meant to address may not develop or they may not be accepted by the market.
We may also not be successful in taking any other steps to reduce the risk
associated with any slowdown in demand for our Signalware products. As a
result, any decline or slow down in sales of our Signalware products could
adversely effect our operating results.
We depend on a limited number of customers, and the loss of any of these
customers could adversely affect our business and operating results.
Historically, a limited number of customers have accounted for a significant
percentage of our revenues in each fiscal quarter. Our five largest customers,
one of which is Comverse Network Systems, accounted for approximately 64% of
our revenues for fiscal 1999. We anticipate that our operating results in any
given period will continue to depend to a significant extent upon revenues from
a small number of customers. The loss of any of these customers could have a
material adverse effect on our business. In order to increase our revenues, we
will need to attract additional significant customers on an ongoing basis.
Our significant international sales subject us to currency exchange risks.
Revenues from customers located outside the U.S. represented approximately
50%, 51% and 63% of our revenues in fiscal 1997, fiscal 1998 and fiscal 1999,
respectively. To date, international sales have been denominated solely in U.S.
dollars. As a result, our sales may be adversely affected by a strengthening
U.S.
6
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dollar in general or a weakening of other currencies in the countries in which
we have sales. In future periods we expect a portion of international sales may
be denominated in currencies other than U.S. dollars, which could expose us to
gains and losses on non-U.S. currency transactions.
Our failure to hire and retain the personnel we need could limit our ability to
grow.
We depend on the continued services of our executive officers and other key
personnel. In addition, we need to attract and retain a substantial number of
new employees, particularly sales and marketing personnel and technical
personnel, with signaling system #7 knowledge and experience. If we are unable
to attract and retain qualified employees, our ability to continue our growth
could be impaired. Competition for new hires is intense, and we have
experienced difficulty in recruiting qualified personnel due to the market
demand for their services. We historically have filled a portion of our new
personnel needs with non-U.S. citizens holding temporary work visas that allow
such persons to work in the U.S. for only a limited period of time.
Accordingly, any change in U.S. immigration policy limiting the issuance of
temporary work visas could adversely affect our ability to recruit new
personnel.
We may decide to make acquisitions or investments in the future which could
turn out to be unsuccessful.
We may in the future pursue acquisitions of businesses, products and
technologies, or the establishment of joint venture arrangements, that could
expand our business. The negotiation of potential acquisitions or joint
ventures as well as the integration of an acquired or jointly developed
business, technology or product could cause diversion of management's time and
resources. Our future acquisitions could result in potentially dilutive
issuances of equity securities, the incurrence of debt and contingent
liabilities, amortization of goodwill and other intangibles, research and
development write-offs and other acquisition-related expenses. In addition, we
may fail to successfully integrate acquired businesses with our operations or
successfully realize the intended benefits of any acquisition.
We rely on a limited number of suppliers for our board components and we may
not be able to obtain substitute suppliers on terms that are as favorable if
our supplies are interrupted.
The components included in our printed circuit interface boards are acquired
from a limited number of suppliers. We purchase relatively small amounts of
components from these suppliers and do not have any long term supply
agreements. If there is a shortage of supply for these components, we may be
more likely to have our supply interrupted because we are a relatively small
purchaser. In this case, alternate sourcing would be required. This sourcing
may not be available on reasonable terms, if at all, and could delay or prevent
customer deliveries.
Our reliance on a limited number of independent manufacturers to manufacture
boards for our products could lead to a disruption in supply of these boards.
We do not subcontract to manufacture a large number of boards and do not have
any manufacturing agreements. If our manufacturers experience financial,
operational, manufacturing capacity or other difficulties, we are more likely
to have our supply disrupted because their volume of business with us is
relatively small. In this case, we will be required to seek alternate
manufacturers. We may not be able to find alternate manufacturers that meet our
requirements and existing or alternative sources for boards may not continue to
be available at favorable prices. Our inability to develop alternative sources
if and as required in the future could result in delays or reductions in
product shipments or increases in product costs. In addition, we have reduced
control over product quality and delivery schedules because we rely on
independent manufacturers.
Our products may become inoperable if we cannot adapt them to conform with new
computer hardware and/or new versions of, and other changes in, operating
systems.
We have no control over the producers of computer hardware or operating
systems on which our products operate, or the timing or nature of changes that
such producers may make to such hardware or operating
7
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systems. For example, in response to the release of a new version of an
operating system, we may need to make changes to our products or substantially
modify our product design. Any such change or modification may be costly, may
take a significant amount of time and may not prove successful. Any delay in
integrating our products with new hardware or new releases of operating systems
could delay or prevent product shipments.
Our products may contain undetected defects, which could impair market
acceptance of these products.
Software products as complex as those we offer may contain undetected defects
or errors, particularly when first introduced or as new versions are released.
Despite our testing we may not discover such defects or errors until after our
product has been released and used by the customer. These defects or errors
could result in delayed acceptance of our product or in lost sales. We may not
be able to detect all defects or errors in our products prior to their release.
Undetected defects or errors in future releases of our products would force us
to prepare corrective releases. In addition, defects or errors in our products
may result in product liability claims brought against us, which could cause
adverse publicity and impair market acceptance of our products.
Our products may infringe on the intellectual property rights of others, which
could lead to costly disputes or disruptions.
The communications industry is characterized by the existence of a large
number of patents and frequent allegations of patent infringement. We may
receive in the future notices from holders of patents that raise issues as to
possible infringement by our products. Any proceeding alleging infringement
could be time consuming and expensive to defend or resolve, result in
substantial diversion of management resources, cause product shipment delays,
or force us to enter into royalty or license agreements rather than dispute the
merits of any such proceeding initiated against us. We may not be able to
procure such royalty or license agreements on terms acceptable to us, if at
all. As the number of communications network products increases and the
functionality of these products further overlaps, we believe that we may become
increasingly subject to allegations of infringement. Patent holders or other
holders of intellectual property may initiate legal proceedings against us and
we may not be successful in defending against such proceedings.
If our products infringe on the intellectual property rights of others, we may
be required to indemnify our customers for any damages they suffer.
We have agreed to indemnify some of our customers with respect to
infringement by our products of the proprietary rights of third parties. Third
parties may assert infringement claims against our customers. These claims may
require us to incur protracted and costly litigation on behalf of our
customers, regardless of the merits of these claims. If any of these claims
succeed, we may be forced to pay damages on behalf of our customers or may be
required to obtain licenses for the products they sell. If we cannot obtain all
necessary licenses on commercially reasonable terms, our customers may be
forced to stop selling and/or using our products.
Third parties might infringe upon our proprietary technology causing a
diversion of our management and other resources.
Our continued success depends in part upon our proprietary technology. We do
not generally make our proprietary software code available to our customers.
Exceptions to this principle were made in the past in limited circumstances for
large customers where adequate controls were in place to protect our
intellectual property rights. However, we cannot assure you that our
proprietary software code has not in the past and will not in the future be
copied or used inappropriately.
Despite the measures taken by us, it may be possible for a third party to
copy or otherwise use our proprietary technology and information without
authorization. Policing unauthorized use of our products is difficult, and
litigation may be necessary in the future to enforce our intellectual property
rights. This litigation could be time consuming and expensive to prosecute or
resolve and result in substantial diversion of
8
<PAGE>
management resources. In addition, the laws of some foreign countries do not
protect our proprietary rights in our products to the same extent as do the
laws of the U.S. There can be no assurance that we will be successful in
protecting our proprietary technology.
Our failure or the failure of our key suppliers and customers to be Year 2000
compliant may negatively impact our business.
The year 2000 issue is the result of computer systems and programs using two
digits to identify a given year. The year 2000 issue creates significant risks
for us including:
. potential warranty or other claims arising from our products;
. non-compliance of the components manufactured by our suppliers; and
. impairment of the systems used by our suppliers and customers.
We still do not know if our year 2000 compliance efforts have been fully
successful or that unanticipated costs and problems will not still arise. We
could receive warranty and other claims as a result of year 2000 issues arising
from undetected defects in our products or the non-compliance of components or
technologies we acquire from others.
Certain provisions of our certificate of incorporation and New Jersey law may
make it more difficult for you to get a change in control premium.
Our board's ability to designate and issue up to 10,000,000 shares of
undesignated stock and to change the designations, numbers, relative rights,
preferences and limitations of any authorized but unissued shares of preferred
stock could adversely effect the voting power of the holders of common stock,
and could have the effect of making it more difficult for a person to acquire,
or could discourage a person from seeking to acquire, control of our company.
If this occurred you could lose the opportunity to get a premium on the sale of
your shares in a change of control transaction.
In addition, the New Jersey Shareholders Protection Act contains provisions
that would have the effect of restricting, delaying and/or preventing
altogether certain business combinations with interested shareholders.
Interested shareholders include, among others, any person that after this
offering becomes a beneficial owner of 10% or more of our outstanding common
stock. Such provisions could also limit your ability to obtain a premium in a
change of control transaction.
Because a significant portion of our sales are made to customers in Israel,
political, military and economic conditions in that country may adversely
affect our business and operating results.
Political, economic and military conditions in Israel may affect our sales.
Since the establishment of the State of Israel in 1948, a number of armed
conflicts have taken place between Israel and its Arab neighbors and a state of
hostility, varying in degree and intensity, has led to security and economic
problems for Israel. Our sales could be adversely affected by any major
hostilities involving Israel, the interruption or curtailment of trade between
Israel and its trading partners, a significant increase in inflation, or a
significant downturn in the economic or financial condition of Israel.
Risks Related To The Market For Our Products
If the convergence of different types of communications switching networks does
not occur, or takes longer than anticipated, sales of our network software
products, and our profitability, would be adversely affected.
We expect a substantial portion of any increases in our future sales of
network software products may result from the interconnection, or convergence,
of the two types of switching networks, circuit based networks and packet based
networks. See "Business--Industry Background" on page 24 for an explanation of
these
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types of networks. Factors which might prevent or slow the convergence of
circuit and packet networks could materially and adversely affect the growth
opportunities for our business. These factors include:
. the failure to solve or difficulty in solving certain technical obstacles to
the transmission of voice conversations over a packet network;
. delays in the formulation of standards for the transmission of voice
conversations over a packet network, which may cause service providers to
delay their purchasing plans; and
. the imposition on packet network operators of access fees, would reduce the
economic advantages of using packet networks.
If signaling system #7 does not play an integral role in the architecture for
converged circuit and packet networks, our business and operating results could
suffer.
All of our products are designed to support signaling system #7. If future
networks do not utilize signaling system #7 and we are unable to adapt our
products to work with the appropriate converged network signaling protocols,
our products will become less competitive or obsolete. We cannot assure you
that signaling system #7 or our products will play a key role as network
architecture designs for converged circuit and packet networks evolve. In
addition, signaling system #7 may be modified substantially for the
architecture of converged networks. Any of these changes or adaptations may be
costly. Moreover, we may not be able to respond to this modification in a
timely manner, or at all.
If we are not successful in continuing to develop our Nexworx products or if
these products are not accepted in the market, our growth opportunities could
be limited.
We are developing our Nexworx service control products. We have recently
introduced our first Nexworx product, from which we have derived limited
revenues. The success of this product line is dependent primarily upon the
development of a market for these types of products and customer acceptance of
our products. If a market for these or other new products does not develop or
development takes longer than anticipated, or if our Nexworx products are not
accepted by our customers, our continued growth could be adversely affected and
our investment in these products may be lost.
If we fail to keep up with the rapidly changing technology in our markets, we
will lose business and market share.
The market for our products is characterized by rapidly changing technology,
frequent new product introductions and enhancements and evolving industry
standards. Our success depends upon our ability to accurately anticipate the
evolution of new products and technologies and enhance our existing products
accordingly or develop and introduce new products. If we fail to keep up with
or anticipate changes in our marketplace, we will lose customers to our
competitors and our growth opportunities may be limited. We cannot assure you
that we will be successful in selecting, developing, manufacturing and
marketing new products or enhancing our existing products on a timely or cost-
effective basis. In addition, products or technologies developed by others may
render our products noncompetitive or obsolete, thereby making it harder for us
to compete for new business.
If we are unable to compete successfully against our competitors or if our
customers opt to develop internal substitutes for our products, our business
and operating results could suffer.
The market for communication network signaling software is intensely
competitive, both in the U.S. and internationally. Increased competition could
make it more difficult for us to sustain our growth or increase our
profitability. Our competitors may be able to develop more quickly or adapt
faster to new or emerging technologies and changes in customer requirements, or
devote greater resources to the development, promotion and sale of their
products. Some of our competitors have, in relation to us, longer operating
histories, larger customer bases, longer-standing relationships with customers,
greater name recognition and significantly greater financial, technical,
marketing, customer service, public relations, distribution and other
resources. New
10
<PAGE>
competitors or alliances among competitors could emerge and rapidly acquire
significant market share. In addition, some of our customers may in the future
decide to develop internally their own signaling software platforms and other
software-based solutions instead of purchasing them from us. Increased
competition could force us to lower our prices or take other actions to
differentiate our products.
Because our software products are integrated into products of equipment
manufacturers and application developers, we depend on our relationships with
these customers and we are potentially vulnerable to the performance of their
products.
Our products are primarily sold to equipment manufacturers and application
developers, who integrate our products with their products and sell them to
service providers. Equipment manufacturers and application developers who make
their product design compatible with ours and choose to purchase our products
may not develop or deliver their products on a timely basis, or may not develop
products which perform as expected or are priced competitively. If they are not
successful in the development and deployment of their products, our business
and operating results may suffer. In addition, if we cannot successfully
establish channel and marketing relationships with leading equipment
manufacturers and application developers or maintain these relationships on
favorable terms, our business and operating results may suffer.
Demand for our products might decrease if our prospective customers continue to
consolidate.
We sell our products to the communications industry. The communications
industry has been undergoing a period of rapid consolidation during the past
few years. Further consolidations of our prospective customers may delay or
cause cancellations of significant sales of our products.
Risks Related To Our Relationship With Comverse
Comverse will control our business and affairs and its interests may not be
aligned with your interests.
Upon completion of the offering, Comverse will beneficially own approximately
82% of the outstanding shares of common stock. Consequently, Comverse will
effectively control the outcome of all matters submitted for shareholder
action, including the composition of our board of directors and the approval of
significant corporate transactions. Through its representation on our board of
directors, Comverse will have a controlling influence on our management,
direction and policies, including the ability to appoint and remove our
officers. As a result Comverse may cause us to take actions which may not be
aligned with your interests. For example, Comverse may prevent or delay any
transaction involving a change in control or in which shareholders might
receive a premium over the prevailing market price for their shares.
We may lose business opportunities to Comverse that might otherwise be
available to us.
We have entered into an agreement with Comverse which addresses potential
conflicts of interest between Comverse and us. This agreement allocates between
Comverse and us opportunities to pursue transactions or matters that, absent
such allocation, could constitute corporate opportunities of both companies. As
a result, we may lose business opportunities that could be valuable to us. In
general, we are precluded from pursuing opportunities offered to directors,
officers or employees of Comverse who may also be our directors, officers or
employees, unless Comverse fails to pursue these opportunities. See "Related
Party Transactions--Conflicts of Interest."
Comverse may compete with us and competes with some of our customers.
Comverse may engage in any business that is similar to ours, do business with
a potential or actual customer of ours or employ, solicit or engage any of our
officers, directors or employees. If Comverse competes with us or our
customers, our business may suffer. For example, we may from time to time lose
a revenue-earning opportunity to supply a customer with our products if that
customer is not awarded a project that was awarded to Comverse Network Systems.
Although our products would likely be included in Comverse Network Systems'
products, because Comverse Network Systems has a non-exclusive royalty-free
license to use our products we would not earn any license revenues.
11
<PAGE>
Our directors and employees that also hold positions with Comverse may have
conflicts of interest with respect to matters involving both companies.
Five of our nine directors are officers and/or directors of Comverse, or
otherwise affiliated with Comverse. These directors will have fiduciary duties
to both companies and may have conflicts of interest on matters affecting both
us and Comverse and in some circumstances may have interests adverse to our
interests.
Our Chairman and director, Mr. Kobi Alexander, will continue to be Chairman,
President and Chief Executive Officer of Comverse following the offering. In
addition, our Chief Financial Officer and director, Mr. David Kreinberg, will
continue to be Vice President of Finance and Chief Financial Officer of
Comverse following the offering. These positions with Comverse will continue to
impose significant demands on their time and present potential conflicts of
interest following the offering. Messrs. Alexander and Kreinberg will spend a
substantial amount of their professional time and effort on behalf of Comverse.
In many instances, their efforts for Comverse will relate to activities which
are related to our interests.
So long as we are included in Comverse's consolidated group for tax purposes,
we are potentially liable for taxes not our own.
After this offering is completed we will continue to be included in the
Comverse consolidated group for federal income tax purposes and we will not
file our own federal income tax returns. To the extent Comverse or other
members of the group fail to make any federal income tax payments required of
them by law in respect of years for which Comverse files consolidated federal
income tax returns which include us, we would be liable for the shortfall.
Similar principles apply for state income tax purposes in many states. In
addition, by virtue of its controlling ownership and our tax sharing agreement
with Comverse, Comverse effectively controls all our tax decisions. For so long
as we are included in the Comverse consolidated group for federal income tax
purposes, Comverse has sole authority to respond to and conduct all tax
proceedings and audits relating to us, to file all income tax returns on our
behalf and to determine the amount of our liability to, or entitlement to
payment from, Comverse under our tax sharing agreement. Despite this agreement,
federal law provides that each member of a consolidated group is liable for the
group's entire tax obligation and we could, under certain circumstances be
liable for taxes of other members of the Comverse consolidated group.
For a discussion of our relationships with Comverse, see "Related Party
Transactions--Relationship with Comverse."
Risks Related To This Offering
There has been no prior market for our common stock; our stock price is likely
to be highly volatile and could drop unexpectedly.
The initial public offering price for our common stock may not be
representative of the price that will prevail in the open market. Accordingly,
the market price of our common stock may fluctuate significantly after this
offering is completed. In addition, the public markets have experienced
volatility that has particularly affected the market prices of securities of
many technology companies for reasons that have often been unrelated to
operating results. This volatility may adversely affect the market price of our
common stock and our visibility and credibility in the markets.
Future sales of our common stock may hurt our market price.
A substantial number of shares of our common stock will be available for
resale within a short period of time after the offering. If our shareholders
sell substantial amounts of our common stock in the public market following the
offering, the market price of our common stock could fall. These sales also
might make it more difficult for us to sell equity securities in the future at
times and prices that we deem appropriate.
We and all of our officers, directors and existing shareholders have agreed
not to offer, sell or otherwise dispose of any shares of capital stock or any
securities which may be converted into or exchanged for any
12
<PAGE>
shares of capital stock for a period of 180 days from the date of this
prospectus. However, the underwriters may waive this restriction and allow us
or them to sell shares at any time. Shares of capital stock subject to these
lock-up agreements will become eligible for sale in the public market upon
expiration of these lock-up agreements, subject to limitations imposed by Rule
144 under the Securities Act.
Because we do not have specific uses for a significant portion of the proceeds
of this offering, investors are relying on management's judgment as to the use
of these proceeds.
Our management will have broad discretion over the allocation of a
significant portion of the net proceeds from the offering as well as over the
timing of their expenditure. As a result, investors will be relying upon
management's judgement with only limited information about its specific
intentions for the use of such proceeds.
You will experience immediate and significant dilution of book value per share.
The initial public offering price of our common stock is substantially higher
than the net tangible book value per share of the outstanding common stock
immediately after this offering. If you purchase our common stock in this
offering, you will incur immediate dilution of approximately $9.82 in the net
tangible book value per share of common stock from the price you pay for our
common stock in this offering, assuming an initial offering price of $11.00 per
share. See "Dilution."
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements based on our current
expectations, assumptions, estimates and projections about us and our industry.
These statements may be found in the sections of this prospectus entitled,
"Prospectus Summary," "Risk Factors," "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business," and in this prospectus generally. These statements may be
identified by the use of words such as "expect," "estimate," "anticipate,"
"intend," "plan" and "will" and similar expressions. These forward-looking
statements involve risks and uncertainties. Our actual results could differ
materially from those anticipated in these forward-looking statements as a
result of many factors, as more fully described in the "Risk Factors" section
and elsewhere in this prospectus.
13
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds we will receive from the sale of the
4,250,000 shares in this offering, assuming a public offering price of $11.00
per share, will be approximately $42.5 million, or approximately $49.0 million
if the underwriters exercise their over-allotment option in full, in each case
after deducting the underwriting discounts and estimated expenses of this
offering.
We expect to use $3.8 million of the net proceeds of this offering to repay
outstanding bank debt which was incurred by us to repay indebtedness owed to
Comverse. This bank debt bears interest at a rate of LIBOR plus 0.35%, matures
in July 2001 and may be prepaid without penalty on each six-month anniversary
of the loan.
We expect to use the remaining net proceeds to finance the continued growth
of our business and for general corporate purposes. We may also use a portion
of the proceeds for acquisitions or other investments. However, we have no
present understanding or agreement relating to any specific acquisition or
investment.
We have not yet determined the amount of net proceeds to be used specifically
for each of the foregoing purposes, other than the repayment of the bank debt
described above. Accordingly, management will have significant flexibility in
applying the net proceeds of the offering remaining after repayment of such
debt. Pending their use as described above, we intend to invest the net
proceeds of this offering in interest-bearing instruments.
DIVIDEND POLICY
We do not expect to pay any cash dividends for the foreseeable future. We
currently intend to retain future earnings, if any, to finance operations and
the expansion of our business.
Any future determination to pay cash dividends will be at the discretion of
the board of directors and will depend upon our financial condition, operating
results, capital requirements and such other factors as the board of directors
deems relevant.
14
<PAGE>
CAPITALIZATION
The following table sets forth, as of January 31, 2000, our capitalization:
(1) on an actual basis, and
(2) on an as adjusted basis to give effect to the sale of the 4,250,000
shares offered by us in this offering, at an assumed offering price of
$11.00 per share, after deducting the underwriting discounts and
estimated offering expenses payable by us, and the application of the
net proceeds therefrom.
The table excludes:
. 3,272,700 shares of common stock issuable upon the exercise of stock
options outstanding as of January 31, 2000 under our stock incentive
compensation plan, with a weighted average exercise price of $2.57 per
share; and
. 544,725 shares of common stock issuable upon the exercise of stock
options granted under such plan upon completion of this offering at an
exercise price equal to the initial public offering price.
Please read this table together with the sections of this prospectus entitled
"Selected Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our financial statements and
related notes included in this prospectus.
<TABLE>
<CAPTION>
As of January 31,
2000
------------------
Actual As Adjusted
------ -----------
(in thousands)
<S> <C> <C>
Cash and cash equivalents................................... $6,299 $44,977
====== =======
Long-term debt(1)........................................... $3,800 $ --
------ -------
Stockholders' equity:
Undesignated Stock, no par value, 10,000,000 shares
authorized; no shares issued and outstanding............... -- --
Common Stock, no par value, 200,000,000 shares authorized;
32,727,000 shares issued and outstanding on an actual
basis; and 36,977,000 shares issued and outstanding on an
as adjusted basis.......................................... -- --
Additional paid-in capital.................................. 10 42,488
Retained Earnings........................................... 1,110 1,110
------ -------
Total stockholders' equity.................................. 1,120 43,598
------ -------
Total capitalization........................................ $4,920 $43,598
====== =======
</TABLE>
- --------
(1) The long-term debt reflects outstanding bank debt. We expect to repay this
bank debt in July 2000.
15
<PAGE>
DILUTION
Our net tangible book value as of January 31, 2000 was $1,120,000, or $0.03
per share. Net tangible book value per share represents the total amount of our
tangible assets reduced by the total amount of our liabilities and divided by
the number of shares of common stock outstanding as of January 31, 2000. After
giving effect to our sale of the 4,250,000 shares in this offering at an
assumed initial public offering price of $11.00 per share and receipt of the
net proceeds from this offering, after deducting the underwriting discounts and
estimated offering expenses, and the application of the estimated net proceeds
therefrom, our net tangible book value as of January 31, 2000 would have been
approximately $43.6 million, or $1.18 per share. This represents an immediate
increase in pro forma net tangible book value of $1.15 per share to existing
shareholders and an immediate dilution in pro forma net tangible book value of
$9.82 per share to new investors.
Dilution per share represents the difference between the price per share to
be paid by new investors and the net tangible book value per share immediately
after this offering. The following table illustrates this per share dilution:
<TABLE>
<CAPTION>
Per Per
Share Share
----- ------
<S> <C> <C>
Assumed initial public offering price per share................ $11.00
Net tangible book value per share before this offering......... $0.03
Increase per share attributable to new investors............... 1.15
-----
Net tangible book value per share after this offering.......... 1.18
------
Dilution per share to new investors............................ $ 9.82
======
</TABLE>
The following table sets forth, as of January 31, 2000, the differences
between the total consideration paid and the average price per share paid by
existing investors and by new investors purchasing shares in this offering.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------ ------------------- Price
Number Percent Amount Percent Per Share
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders.......... 32,727,000 89% $20,365,068 30% $ 0.62
New investors.................. 4,250,000 11% 46,750,000 70% $11.00
---------- --- ----------- ---
Total........................ 36,977,000 100% $67,115,068 100%
========== === =========== ===
</TABLE>
The foregoing table does not reflect:
. 3,272,700 shares of common stock issuable upon exercise of options
outstanding as of January 31, 2000 under our stock incentive
compensation plan at a weighted average exercise price of $2.57 per
share; and
. 544,725 shares of common stock issuable upon the exercise of stock
options granted under such plan upon completion of this offering at an
exercise price equal to the initial offering price.
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<PAGE>
SELECTED FINANCIAL DATA
We derived the selected financial data presented below from our financial
statements and related notes included in this prospectus. You should read the
selected financial data together with our financial statements and related
notes and the section of this prospectus entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Statements of operations data for the year ended December 31, 1997, the one
month ended January 31, 1998 and the years ended January 31, 1999 and 2000, and
the balance sheet data at January 31, 1999 and 2000 have been derived from our
financial statements which have been audited and reported on by Deloitte &
Touche LLP, independent auditors, and are included elsewhere in this
prospectus. Statements of operations data for the year ended December 31, 1996
and balance sheet at January 31, 1998 have been derived from audited financial
statements not included herein. Statements of operations data for the year
ended December 31, 1995 and the balance sheet data at December 31, 1995, 1996
and 1997 are derived from our unaudited financial statements not included
herein.
<TABLE>
<CAPTION>
One Month Year Ended
Year Ended December 31, Ended January 31,
------------------------- January 31, ----------------
1995 1996 1997 1998 1999 2000
------- ------- ------- ----------- ------- -------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Sales................... $15,355 $ 6,450 $14,559 $ 212 $18,629 $25,831
Cost of sales........... 7,238 2,853 4,495 294 6,131 8,883
------- ------- ------- ------ ------- -------
Gross profit............ 8,117 3,597 10,064 (82) 12,498 16,948
Research and
development............ 2,644 1,905 2,398 205 4,706 6,015
Selling, general and
administrative......... 4,920 3,875 3,891 348 4,948 8,124
Income (loss) from
operations............. 553 (2,183) 3,775 (635) 2,844 2,809
Interest income
(expense), net......... (328) (342) (507) (45) (350) (271)
------- ------- ------- ------ ------- -------
Income (loss) before
income taxes........... 225 (2,525) 3,268 (680) 2,494 2,538
Income tax provision
(benefit).............. 438 (948) 1,213 (249) 927 964
------- ------- ------- ------ ------- -------
Net income (loss)....... $ (213) $(1,577) $ 2,055 $ (431) $ 1,567 $ 1,574
======= ======= ======= ====== ======= =======
Earnings (loss) per
share--
Basic................... ($0.01) ($0.05) $ 0.06 ($0.01) $ 0.05 $ 0.05
Diluted................. ($0.01) ($0.05) $ 0.06 ($0.01) $ 0.05 $ 0.05
Shares used in computing
basic
earnings per share..... 32,727 32,727 32,727 32,727 32,727 32,727
Shares used in computing
diluted
earnings per share..... 32,727 32,727 32,727 32,727 33,087 33,759
</TABLE>
<TABLE>
<CAPTION>
As of December 31, As of January 31
------------------------- -------------------------
1995 1996 1997 1998 1999 2000
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents............. $ 206 $ 315 $ 1,030 $ 584 $ 2,544 $ 6,299
Working capital
(deficit)............... (3,080) (4,699) (2,999) (3,513) (2,236) 742
Total assets............. 6,317 4,858 7,319 6,878 8,883 17,364
Long-term debt........... -- -- -- -- -- 3,800
Stockholders' equity
(deficit)............... (858) (3,389) (1,333) (2,021) (454) 1,120
Dividend to parent....... -- 953 -- 256 -- --
</TABLE>
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results should be
read in conjunction with our financial statements and the related notes thereto
which appear elsewhere in this prospectus.
Overview
Substantially all of our product revenues have been generated by our
Signalware product line. Signalware product sales consist of software licenses,
printed circuit interface boards, training, and support revenues. In certain
limited circumstances, we sell Signalware development services typically under
fixed fee arrangements with our customers. New customers begin development of
applications and services by purchasing the appropriate Signalware development
kit, which includes a development site license, an interface board, and a one-
year maintenance plan. At deployment, the customer generally purchases one or
more deployment licenses, additional interface boards and a deployment
maintenance and support plan.
In accordance with Statement of Position 97-2, "Software Revenue
Recognition," product revenues are generally recognized in the period in which
the products are delivered and accepted by the customer, the fee is fixed and
determinable and collection is considered probable. When we have significant
obligations subsequent to shipment, revenues are not recognized until the
obligations are fulfilled. Revenues from arrangements that include significant
acceptance terms are not recognized until acceptance has occurred. Revenues
from product support services, including those included in initial licensing
fees, are recognized ratably over the contract period. Post-contract support
services included in the initial licensing fee are allocated from the total
contract amount based on the relative fair value determined using vendor-
specific objective evidence.
During the last three years, a growing proportion of our total revenues were
derived from customers located outside the U.S. To date international sales
have been denominated in U.S. dollars. Accordingly, we have not been exposed to
fluctuations in non-U.S. currency exchange rates. However, we expect that in
future periods, a portion of international sales may be denominated in
currencies other than U.S. dollars, which could expose us to gains and losses
on non-U.S. currency transactions. We may choose to limit our exposure by
utilizing hedging strategies. There can be no assurance that any such hedging
strategies that we undertake would be successful in avoiding exchange rate
losses.
Our cost of sales include material costs, subcontractor costs, salary and
related benefits for the operations and service departments, depreciation and
amortization of equipment used in the operations and service departments,
amortization of capitalized software costs and an overhead allocation. Our
research and development costs include salaries and related benefits as well as
travel, depreciation and amortization of research and development equipment, an
overhead allocation, as well as other costs associated with our research and
development activities. Our selling, general and administrative costs include
salary and related benefits, travel, depreciation and amortization, marketing
and promotional materials, recruiting expenses, professional fees, corporate
services provided by Comverse, facility costs, as well as other costs
associated with our sales, marketing, finance and administrative departments.
18
<PAGE>
Results of Operations
The following table sets forth, for the periods indicated, certain financial
data expressed as a percentage of sales:
<TABLE>
<CAPTION>
Year One Month Year Ended
Ended Ended January 31,
December 31, January 31, -------------
1997 1998 1999 2000
------------ ----------- ----- -----
<S> <C> <C> <C> <C>
Sales................................. 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales......................... 30.9 % 138.7 % 32.9 % 34.4 %
----- ------ ----- -----
Gross profit.......................... 69.1 % (38.7)% 67.1 % 65.6 %
Research and development.............. 16.5 % 96.7 % 25.3 % 23.3 %
Selling, general and administrative... 26.7 % 164.2 % 26.6 % 31.5 %
Interest income (expense), net........ (3.5)% (21.2)% (1.9)% (1.0)%
----- ------ ----- -----
Income (loss) before taxes............ 22.4 % (320.8)% 13.3 % 9.8 %
Income tax provision (benefit)........ 8.3 % (117.5)% 4.9 % 3.7 %
----- ------ ----- -----
Net income (loss)..................... 14.1 % (203.3)% 8.4 % 6.1 %
===== ====== ===== =====
</TABLE>
Year Ended January 31, 2000 Compared to Year Ended January 31, 1999
Sales. Sales for our fiscal year ended January 31, 2000, or fiscal 1999,
increased by approximately $7.2 million, or 39%, compared to our fiscal year
ended January 31, 1999, or fiscal 1998. This increase is primarily attributable
to higher volume of sales of our Signalware products to international
customers. Sales to international customers represented 63% of our total sales
in fiscal 1999, compared to 51% of our total sales in fiscal 1998. We believe
that sales of our Signalware product to international customers will continue
to represent a significant portion of our future sales.
Cost of Sales. Cost of sales for fiscal 1999 increased by approximately $2.8
million, or 45%, compared to fiscal 1998. The increase in cost of sales is
attributable to an increase in personnel-related costs of approximately $1.7
million, due to hiring of additional personnel and increased compensation and
benefits for existing personnel. In addition, materials and production costs
increased by approximately $1.5 million due to the increase in sales. Gross
margins decreased from approximately 67% in the fiscal 1998 to approximately
66% in fiscal 1999. We believe that cost of sales in the next fiscal year
should not vary significantly as a percentage of sales from fiscal 1999.
Research and Development Expenses. Research and development expenses for
fiscal 1999 increased by approximately $1.3 million, or 28%, compared to fiscal
1998 due to overall growth of research and development operations and the
initiation of significant new research and development projects. The increase
primarily resulted from an increase in personnel-related costs of approximately
$0.9 million, due to hiring of additional personnel and increased compensation
and benefits for existing personnel. We expect that research and development
expenses in future periods will increase further as these investments are
crucial for our ability to develop our technologies and expand our product
offerings to meet our customers' needs.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for fiscal 1999 increased by approximately $3.2
million, or 64%, compared to fiscal 1998, and as a percentage of sales
increased from approximately 27% for fiscal 1998 to approximately 31% for
fiscal 1999. The increase was primarily a result of an increase in personnel-
related costs of approximately $1.7 million, due to hiring of additional
personnel and increased compensation and benefits for existing personnel. In
addition, expenses related to marketing and promotional materials increased by
approximately $200,000 and rent expense increased by approximately $150,000. We
anticipate that selling, general and administrative expenses will continue to
increase in the future as we accommodate our growth, add to our infrastructure,
and incur expenses related to being a public company.
19
<PAGE>
Income Tax Provision. Provision for income taxes increased by approximately
$37,000, or 4%, due to increased pre-tax income. Our overall effective tax rate
increased from approximately 37% for fiscal 1998 to approximately 38% for
fiscal 1999.
Net Income. Net income increased by approximately $7,000 in fiscal 1999
compared to fiscal 1998, while net income as a percentage of sales decreased
from approximately 8% for fiscal 1998 to approximately 6% for fiscal 1999. The
decreases resulted primarily from the factors described above.
Year Ended January 31, 1999 Compared to Year Ended January 31, 1998
Sales. Sales increased in fiscal 1998 by approximately $4.1 million, or 28%,
compared to our fiscal year ended January 31, 1998, or fiscal 1997, primarily
resulting from an increase in the number of customers deploying our Signalware
products.
Cost of Sales. Cost of sales increased in fiscal 1998 by approximately $1.6
million, or 36%, compared to fiscal 1997 primarily as a result of the increase
in sales. Gross margins decreased from approximately 69% in fiscal 1997 to
approximately 67% in fiscal 1998. This decrease was primarily caused by the
recording of an impairment loss of approximately $0.6 million to reduce
software development costs to their net realizable value.
Research and Development Expenses. Research and development expenses
increased in fiscal 1998 by approximately $2.3 million, or 96%, compared to
fiscal 1997 due to overall growth of research and development operations and
the initiation of significant new research and development projects. The
increase primarily resulted from an increase in personnel-related costs of
approximately $1.9 million due to hiring of additional personnel and increased
compensation and benefits for existing personnel and increases in other costs
associated with research and development operations.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased in fiscal 1998 by approximately $1.1 million,
or 27%, compared to fiscal 1997, and as a percentage of sales remained at
approximately 27% in both periods. The increase was primarily a result of an
increase in personnel-related costs of approximately $1.0 million, due to
hiring of additional personnel and increased compensation and benefits for
existing personnel.
Income Tax Provision. Provision for income taxes increased in fiscal 1998 by
approximately $0.3 million, or 24%, compared to fiscal 1997 due to increased
pre-tax income. Our overall effective tax rate remained at approximately 37%
for both periods.
Net Income. Net income increased by approximately $0.5 million, or 24%, in
fiscal 1998 compared to fiscal 1997. Net income as a percentage of sales
decreased from approximately 14% in fiscal 1997 to approximately 8% in fiscal
1998. The decreases resulted primarily from the factors described above.
One Month Ended January 31, 1998 Compared to One Month Ended January 31, 1997
Sales. Sales decreased in January 1998 by approximately $0.5 million, or 71%,
compared to January 1997. The decrease was a result of decreased shipments of
our Signalware product during the January 1998 period.
Cost of Sales. Cost of sales increased in January 1998 by approximately
$66,000, or 29%, compared to January 1997. The increase was primarily a result
of increased personnel-related costs during the 1998 period due to hiring of
additional personnel in the operations and services departments as well as
increased compensation for existing personnel in those departments.
Research and Development Expenses. Research and development expenses
increased in January 1998 by approximately $80,000, or 64%, compared to January
1997. The increase was primarily a result of increased personnel-related costs
during the 1998 period due to hiring of additional personnel as well as
increased compensation for existing personnel.
20
<PAGE>
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased in January 1998 by $152,000, or 78%, compared
to January 1997. The increase was primarily a result of increased personnel-
related costs during the 1998 period due to hiring of additional personnel as
well as increased compensation for existing personnel.
Income Tax Provision. In January 1998 we had an income tax benefit of $0.2
million, compared to an income tax expense of $53,000 in January 1997. Our
effective tax rate was approximately 37% in both periods.
Net Income (Loss). There was a net loss of approximately $0.4 million in
January 1998 compared to net income of $91,000 in January 1997, as a result of
the factors described above.
Selected Quarterly Results of Operations
The following tables set forth statement of operations data for each of the
eight consecutive quarters ended January 31, 2000. This information has been
derived from our unaudited financial statements. The unaudited financial
statements have been prepared substantially on the same basis as the audited
financial statements appearing elsewhere in this prospectus and include all
adjustments, consisting only of normal recurring adjustments, that we consider
necessary for a fair presentation of such information. You should read this
information in conjunction with our financial statements and the related notes
elsewhere in this prospectus. The operating results for any quarter are not
necessarily indicative of the operating results of any future period.
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------------------------------
Apr. 30, July 31, Oct. 31, Jan. 31, Apr. 30, July 31, Oct. 31, Jan. 31,
1998 1998 1998 1999 1999 1999 1999 2000
-------- -------- -------- -------- -------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales................... $4,261 $4,554 $4,721 $5,093 $5,363 $6,069 $6,792 $7,607
Cost of sales........... 1,527 1,517 1,460 1,627 1,888 2,076 2,347 2,572
------ ------ ------ ------ ------ ------ ------ ------
Gross profit............ 2,734 3,037 3,261 3,466 3,475 3,993 4,445 5,035
Research and
development............ 1,079 1,194 1,178 1,255 1,299 1,405 1,559 1,752
Selling, general and
administrative......... 998 1,168 1,336 1,446 1,703 1,959 2,159 2,303
Interest income
(expense), net......... (107) (83) (103) (57) (66) (43) (70) (92)
------ ------ ------ ------ ------ ------ ------ ------
Income before income
taxes.................. 550 592 644 708 407 586 657 888
Income tax provision.... 204 219 243 261 156 225 247 336
------ ------ ------ ------ ------ ------ ------ ------
Net income.............. $ 346 $ 373 $ 401 $ 447 $ 251 $ 361 $ 410 $ 552
====== ====== ====== ====== ====== ====== ====== ======
<CAPTION>
Three Months Ended
-----------------------------------------------------------------------
Apr. 30, July 31, Oct. 31, Jan. 31, Apr. 30, July 31, Oct. 31, Jan. 31,
1998 1998 1998 1999 1999 1999 1999 2000
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
As a percentage of
sales:
Sales................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales........... 35.8 33.3 31.0 31.9 35.2 34.2 34.6 33.8
Gross profit............ 64.2 66.7 69.0 68.1 64.8 65.8 65.4 66.2
Research and
development............ 25.3 26.2 25.0 24.6 24.2 23.2 23.0 23.0
Selling, general and
administrative......... 23.4 25.7 28.3 28.4 31.8 32.3 31.8 30.3
Interest income
(expense), net......... (2.6) (1.8) (2.2) (1.2) (1.2) (.7) (1.0) (1.2)
Income before income
taxes.................. 12.9 13.0 13.5 13.9 7.6 9.6 9.6 11.7
Income tax provision.... 4.8 4.8 5.0 5.2 2.9 3.7 3.6 4.4
------ ------ ------ ------ ------ ------ ------ ------
Net income.............. 8.1% 8.2% 8.5% 8.7% 4.7% 5.9% 6.0% 7.3%
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
Our quarterly sales increased throughout fiscal 1998 and fiscal 1999
primarily as a result of increased sales to international customers. Cost of
sales as a percentage of sales varied in each quarter depending on the mix of
sales between customers. Operating expenses increased in each quarter primarily
as a result of the increase in the number of employees in research and
development, sales and marketing, as well as finance and administrative
functions. The increased headcount resulted from our need to support our sales
growth. A large portion of our expenses, including rent and salaries, are set
based upon expected future sales. Accordingly, if sales are below expectations,
operating results may be adversely affected.
21
<PAGE>
Liquidity and Capital Resources
We have funded our operations and met our capital expenditure requirements
primarily through cash flows from operations and borrowings from Comverse. As
of January 31, 2000, we had cash and cash equivalents of approximately $6.3
million and working capital of approximately $0.7 million.
Cash provided by operating activities were approximately $3.7 million, $4.0
million and $7.2 million for fiscal 1997, fiscal 1998 and fiscal 1999,
respectively. Operating cash flows in fiscal 1997 resulted primarily from
income from operations, increases in deferred revenues and accounts payable and
accrued expenses and a decrease in prepaid expenses and other current assets,
partially offset by increases in due from related parties and inventories.
Operating cash flows in fiscal 1998 resulted primarily from income from
operations, and an increase in accounts payable and accrued expenses. Operating
cash flow in fiscal 1999 resulted primarily from income from operations,
increases in deferred revenue and account payable and accrued expenses and a
decrease in due from related parties, partially offset by increases in accounts
receivable, inventories, prepaid expenses and other current assets, and other
assets.
Cash used in investing activities was primarily purchases of property and
equipment and investments in software development costs and were approximately
$0.9 million, $1.8 million, and $3.5 million for fiscal 1997, fiscal 1998, and
fiscal 1999, respectively.
Cash used in financing activities was primarily borrowings and repayments of
borrowings and was $2.1 million and $0.2 million in fiscal 1997 and fiscal
1998, respectively.
In January 2000, we borrowed $3.8 million under a term loan from a bank. We
used the loan proceeds to repay outstanding indebtedness owed to Comverse. The
term loan is due in July 2001, bears interest at a rate of LIBOR plus 0.35% and
may be prepaid without penalty on each six-month anniversary of the loan. The
term loan is secured by a deposit of Comverse at that bank. As of January 31,
2000, the interest rate on the loan was 6.6%. We expect to use the proceeds of
this offering to prepay the loan in July 2000.
We may in the future pursue acquisitions of businesses, products or
technologies that could expand our business and the products we offer. Any
material acquisition could result in a decrease of the working capital
depending upon the amount, timing and nature of the consideration paid.
We believe that the net proceeds from this offering, together with our
current cash balances and potential cash flow from operations, will be
sufficient to meet the anticipated cash needs for working capital, capital
expenditures and other activities for at least the next 12 months. Thereafter,
if current sources are not sufficient to meet our needs, we may seek additional
debt or equity financing. In addition, although there are no present
understandings, commitments or agreements with respect to any acquisitions of
other businesses, products, or technologies, we may in the future consider such
transactions which may require additional debt or equity financing. There can
be no assurance that such additional financing would be available on acceptable
terms, if at all.
Year 2000 Compliance
Our Products. We have completed a comprehensive program designed to address
year 2000 readiness of our current products and have made enquiries regarding
the year 2000 compliance of components or technologies we acquire from others
and incorporate into our products. Although we believe that our current
products generally are year 2000 compliant, we cannot assure you that our year
2000 compliance efforts have been fully successful or that unanticipated costs
and problems will still not arise. In addition, we have determined that older
generations of a number of our products are not and cannot, without
unreasonable effort and expense, be made year 2000 compliant.
To date we have not experienced any material year 2000 compliance problems
with our products. Nevertheless, we could receive warranty and other claims as
a result of year 2000 issues arising from undetected defects in our products or
the non-compliance of components or technologies we acquire from others. Our
agreements with customers typically contain provisions designed to limit
generally our liability for
22
<PAGE>
customer claims. It is possible, however, that these measures will not provide
adequate protection from year 2000 liability claims, as a result of existing or
future laws or unfavorable judicial decisions. Any such claims could result in
a material adverse affect on our business, financial condition and results of
operations, including increased warranty costs, customer satisfaction issues
and potential legal damages.
Our Internal Systems. We have completed a comprehensive program designed to
address year 2000 readiness of our most critical internal systems. Based on
this program and on our experience to date, we believe that our critical
internal systems are year 2000 compliant.
Significant Customers and Suppliers. We have communicated with our
significant customers and suppliers and financial institutions to determine the
extent to which we are vulnerable to the failure of their internal systems to
be year 2000 compliant. We have received assurances of year 2000 compliance
from a number of those contacted. Most of our customers and suppliers under
existing contracts were under no contractual obligation to provide us with such
information. Although to date we have not experienced any significant
operational problems with our significant customers and suppliers as a result
of the year 2000 issue, we cannot assure you that such problems will not arise
in the future.
Costs. The total cost of our year 2000 readiness programs for fiscal 1999 did
not exceed $1.0 million. This does not include potential costs related to any
customer or other claims or the costs of internal software or hardware replaced
in the normal course of business.
23
<PAGE>
BUSINESS
Overview
We are a leading provider of network signaling software for wireless,
wireline and Internet communication services. Our Signalware call control
products interconnect the complex switching, database and messaging systems and
manage the vital number, routing and billing information that form the backbone
of today's communication networks. Signalware enables communication service
providers to offer intelligent network services, such as voice-activated
dialing, prepaid calling, caller ID and text messaging. These products also
enable voice and data networks to interoperate, or converge, allowing service
providers to offer such converged network services as voice over the Internet
and Internet call waiting. Our new Nexworx product line is designed to move
service control into the hands of subscribers, so that businesses or consumers
can access network resources to create, manage and personalize their
communication services.
Our products are used by equipment manufacturers, application developers and
service providers. In addition, as a founding member of The Parlay Group and
the Java API Integrated Networks initiative, two industry consortia, we are at
the forefront of defining industry standards that we believe are critical to
foster continued growth for us and our industry.
Industry Background
Demand for enhanced voice and data communication services has grown rapidly
in recent years due to the following trends:
. the growth of the Internet as a global communications medium enabling
millions of people to share information and conduct business
electronically;
. the growth in wireless communications as cellular and other wireless
services have become more widely available and affordable; and
. the introduction of new services by traditional service providers and an
increasing number of new competitive service providers, including
Internet and wireless service providers.
In response to these trends, service providers are building increasingly
complex communication networks. Traditionally, voice networks were based on a
technology called "circuit switching." In circuit switched networks, a
dedicated line or circuit is established for each telephone call and maintained
for the duration of the call. At the conclusion of the call the dedicated line
or circuit is disconnected. While circuit switching has offered reliable and
high quality voice communications, an emerging technology called "packet
switching" is inherently more efficient and cost effective. In packet switched
networks, the voice or data information being transmitted is formatted into a
series of shorter digital messages called "packets." These packets of voice or
data information travel over a shared line or circuit. The cost and performance
superiority of packet switching has led many traditional and new service
providers to build packet networks to handle data traffic. It has also led
service providers to explore the interoperability or convergence of voice and
data networks and the transmission of voice communications over packet
networks.
The circuit switched network provides its high voice quality and reliability
by separating the voice and signaling portions of a call. The signaling
infrastructure processes in real time the information needed to set-up,
connect, route, terminate and bill a call, and also provides a foundation to
develop and offer enhanced network services. The signaling portion of a
telephone network that controls each call is based on a complex set of
standards and protocols called signaling system #7. Signaling system #7 has
been implemented by service providers worldwide, including traditional,
emerging, Internet and wireless service providers. Signaling system #7 provides
the speed and reliability required for processing increasingly complex call
control information. Because signaling system #7 is the industry-wide standard
signaling protocol, industry experts believe that signaling for converged
circuit and packet networks will be based upon signaling system #7 as well.
24
<PAGE>
The Market Opportunity
There is increasing demand for innovative enabling products that allow the
rapid creation and delivery of new services on intelligent and converged
networks. Some of the key challenges that service providers face include:
. expanding and/or upgrading their network infrastructure to support
enhanced services;
. building and managing networks that can cost-effectively support circuit
and packet technologies; and
. enabling subscribers to access network resources to create, manage and
personalize their voice and data communication services.
Service providers are seeking high performance network signaling software
products that can facilitate the convergence of circuit and packet networks
without compromising functionality, reliability and scalability. We also
believe that most equipment manufacturers and service providers would prefer
purchasing network signaling software products which they can easily bundle and
sell with their own products rather than develop these software products
internally.
We believe that an emerging opportunity exists to develop the next generation
of communication networks, which we believe will be accessible to subscribers
and provide programmability when subscribers need it. Our vision of this
programmable network is a network which places service control in the hands of
subscribers, enabling them to manage communication network resources from a
desktop or hand-held computer.
The Ulticom Solution
Our products enable service providers to expand and/or upgrade their networks
to support new and enhanced services and facilitate the convergence of circuit
and packet networks. We are developing additional products to address the need
for an emerging programmable network. These products will help separate
communications services from the network infrastructure, allowing subscribers
to have more control over their voice and data communications.
Our products provide our customers with the following key benefits:
Accelerated Time to Market. We believe our comprehensive solutions allow
customers to deploy services more rapidly than internally developed
alternatives. In addition, our products allow our customers to concentrate
their efforts on application development, significantly reducing the time it
takes for them to bring communications services to market.
Network and Platform Interoperability. Our products are designed for
deployment on disparate network environments and multiple computer platforms.
Signaling networks around the world vary based on different country standards
and infrastructures. Our products overcome these differences and provide our
customers with the ability to create applications that are marketable around
the world. Our products also provide our customers with the flexibility to
develop applications on one computing platform and then migrate to another as
market demands or industry standards change.
High Performance and Reliability. Service providers consider it critical that
their networks provide high quality, uninterrupted service. As a result, they
will only purchase solutions that are stable, fast and scalable. Our products
meet the need to provide these mission-critical performance and reliability
requirements.
25
<PAGE>
Our Strategy
Our objective is to be the leading provider of network signaling software for
wireless, wireline and Internet communication services. Key elements of our
strategy to achieve this objective include:
Enhance Technology Leadership. We believe that one of our core competitive
strengths is the breadth of our knowledge and expertise in communication
technologies, particularly in voice and data call control, such as signaling
system #7 and other related signaling technologies. We intend to enhance our
existing products and to develop new products by continuing to make significant
investments in research and development.
Target High Growth Market Opportunities. We are leveraging our core
technologies and market leadership position to develop solutions targeted at
high growth opportunities in our market, including:
. products that enable the creation of new intelligent network services on
existing wireless and wireline networks;
. products that enable the convergence of circuit and packet networks and
the development of new services on these converged networks; and
. products for the programmable network of the future that will enable
subscribers--business and consumer--to create, manage and personalize
their voice and data communication services.
Set Industry Standards. We believe that active participation in setting
industry standards is critical to maintain our position as a market leader and
foster continued growth. We are a founding member of two industry consortia
which are driving standards to facilitate the rapid development and deployment
of communication services. We also play a leadership role in the Softswitch
Consortium, an industry organization created for global cooperation and
coordination in the development of open standards and interoperability for
packet networks.
Develop Channel Relationships with Industry Leaders. Establishing strong
relationships with leading equipment manufacturers, application developers,
systems integrators and service providers is important to the successful
worldwide deployment of our solutions. We have developed and will continue to
develop these relationships to enhance the marketing and distribution of our
solutions.
Expand Our International Presence. Our customers are located throughout the
world and our products are deployed globally. We have a development, support
and sales office in France and we anticipate further expansion in Europe to
better serve our existing customers and develop new customer relationships. We
may also seek to expand into the Pacific Rim, either through establishment of
new sales offices, or through one or more channel relationships.
Products and Services
We currently offer two product lines, Signalware and Nexworx:
Signalware
Our Signalware call control products work within wireless, wireline and
Internet networks to interconnect and interoperate voice and data communication
systems and services. Signalware provides our customers with many of the
features that are crucial to the global connectivity of communication networks,
including:
. open standards--running applications on multiple software platforms;
. fault resilience--building systems with no single point of failure;
. high performance--processing transactions at very high rates;
. scalability--increasing computing capacity to run various applications;
and
. global operability--creating applications that could run on various
communications networks around the world.
26
<PAGE>
Signalware plays a key role in the convergence of disparate networks by
providing a means to bridge circuit and packet technology. Signalware also
enables carriers to offer intelligent network services, which include services
other than the call or data transmission itself. Signalware is used to build a
wide range of intelligent network services and services for converged networks,
including:
Signalware
Intelligent Network Services: Converged Network Services:
Satellite Services Wireless Internet Services
Prepaid Calling Service Voice over the Internet Services
Virtual Private Networks Internet Call Waiting
Wireless Authentication Internet Call Forwarding
Wireless Roaming Service Wireless Email Service
Caller ID Internet Fax Delivery
Number Portability Unified Messaging
Wireless 911 Service
Wireless Text Messaging
800 Number Service
Voice Messaging Service
Personal Number Service
411/Operator Assistance
Voice Activated Dialing
Taxi Dispatch Service
Enhanced 611 Service
Electronic Banking Service
Televoting
Airport Information Service
Signalware is sold in packages that offer specific features and
functionality. Signalware works with multiple signaling system #7 networks,
supports a wide variety of signaling system #7 protocol elements and enables
analog or digital wireless transmission. Signalware provides the functionality
needed for call set-up/call termination and call routing/call billing.
Signalware product packages run on a range of operating systems, including Sun
Solaris, Unixware, and Windows NT, and for a broad range of hardware platforms.
Signalware packages can be configured for use in single or multiple computing
configurations for fault resiliency and reliability. Our signalware product
also provides a means to separate the signaling function from the application
development environment which provides greater flexibility in configuring
services.
Our Signalware product includes interface boards which are necessary to
provide the physical connection to the signaling network. Signalware boards are
configured to support a wide range of hardware platforms and network links. The
bundling of our interface boards with our Signalware software allows us to
control product performance, capacity and compliance with standards.
New customers begin development of applications and services by purchasing
the appropriate Signalware development kit, which includes a development site
license. Each kit includes software, an interface board, cables and
documentation, along with registration for two training classes. A development
maintenance plan for one year is also included with each development kit. The
maintenance plan provides access to customer support services, including our
help desk, along with service packs and scheduled release upgrades of the
software. After the initial year the maintenance plan must be renewed for a fee
in order to continue to receive support and upgrades.
When the application is ready for installation, the customer purchases one or
more deployment licenses per installation, in addition to continuing the
development site license and maintenance. In addition, in order to
27
<PAGE>
deploy our systems, a customer generally must purchase one or more interface
boards and a deployment system maintenance and support plan.
Nexworx
In June 1999, we announced our Nexworx service control product line.
Currently, this product combines the key attributes of Signalware with an
object-oriented database and additional network management capabilities
creating a platform for new programmable network services. Our Nexworx product
line is designed to move service control into the hands of subscribers, so that
businesses and consumers can access network resources to create, manage and
personalize their communication services. Our first Nexworx product is a
software-based server that enables subscribers to maintain their telephone
number, regardless of location or service provider. The product is highly
scalable to give the service provider the capacity for growth as demand for
this and future Nexworx services increase. Other Nexworx products currently
under development may enable subscribers to create a virtual call center on a
desktop and schedule time-of-day routing over the Internet.
Support Services
We believe that customer support, training and custom development services
are key to building and maintaining strong customer relationships. We offer
customer support to our customers as part of their maintenance agreements:
Customer Support. We provide comprehensive technical support to help our
customers develop and deploy new services. Our support organization provides
continuous support and interfaces with customers' technical staff through a 24-
hour-a-day, 7-day-a-week help desk to answer questions, resolve problems and
provide assistance. Our support organization is managed through our corporate
headquarters in Mount Laurel, New Jersey with remote service locations in Texas
and France to provide extended geographic and same-time-zone coverage.
Training Services. We offer our customers a comprehensive training program
with courses in application development and operations and troubleshooting.
Courses are scheduled throughout the year. We also provide customized and/or
on-site training programs to meet the specific needs of our customers for an
additional fee.
Custom Development Services. We offer fee-based custom development services
to create customer-specific enhancements to our products. Such services are
provided by our experienced engineering staff. This service assists customers
by accelerating their time-to-market, and also hastens the point in the
development cycle when we begin to receive recurring license deployment
royalties.
Sales and Marketing
Sales Operations
Our sales organization operates from the U.S. and Europe. Account teams
comprised of dedicated account managers and pre-sales engineers work closely
with our product management and development organizations to provide customers
a consultative sales approach. The consultative approach facilitates the sale
of development kits to enable our customers to immediately begin to build
prototypes of their products.
Marketing
We actively work to further enhance market awareness and acceptance of our
company and our products. To this end our efforts are focused on identifying
market opportunities in cooperation with our customers and developing and
enhancing our products to seize these opportunities in a timely fashion. Based
on market considerations, we may port our software products to additional
operating systems, develop new features and functionality and engage in new
strategic alliances and partnerships.
28
<PAGE>
Our market strategy includes enhancing brand awareness for our Signalware and
Nexworx product lines with a web site, promotional literature, direct marketing
to current and prospective customers using an e-services approach, advertising,
continued participation in industry relevant trade shows and conferences, and a
public relations program that includes public demonstrations of products and
prototypes. Our representatives also are called upon to address industry
symposia and conferences, are frequently quoted in industry publications and
may from time to time author articles about developments in communications
technology.
Channel Relationships
Our products are sold primarily to equipment manufacturers and application
developers, who include our products within their products and sell them as an
integrated solution to service providers. Service providers will install the
solution in their communication networks and offer the service enabled by such
solution to their subscribers. Since we and our customers have a mutual
interest in developing solutions that are widely accepted by subscribers and
profitable to service providers, we work closely with our customers to support
their development efforts and produce solutions that are unique, reliable,
scalable and cost effective. For example, we engage in joint promotion, sales
efforts, training, testing, design, integration and installation with Sun
Microsystems and other computer integrators who use Sun Microsystems'
components.
Customers
Our products are currently used by over 40 customers and are deployed in more
than 50 countries. We market our products and services through a direct sales
organization and through key relationships with our customers. Customers that
have accounted for at least five percent of our sales during fiscal 1997,
fiscal 1998 or fiscal 1999 are:
. equipment manufacturers: Alcatel, Ericsson, Lucent, Qualcomm, Siemens
and Sun Microsystems;
. application developers: Comverse Network Systems and Logica; and
. service providers: MCI Worldcom.
For fiscal 1997, Sun Microsystems, Qualcomm, Siemens and Comverse Network
Systems and its affiliates accounted for approximately 10%, 13%, 13% and 19%
respectively, of our sales. For fiscal 1998, Siemens and Comverse Network
Systems and its affiliates accounted for approximately 13% and 20%,
respectively, of our sales. For fiscal 1999, Ericsson, Siemens and Comverse
Network Systems and its affiliates accounted for approximately 20%, 12% and
18%, respectively, of our sales.
Sales to international customers accounted for 50% of our revenues in fiscal
1997, 51% of our revenues in fiscal 1998 and 63% of our revenues for fiscal
1999.
Alliances and Consortia
The Parlay Group
We are leaders in defining the technology that facilitates the convergence of
telephone networks with the Internet. We introduced the concept of the
programmable network in a 1997 white paper. Following our white paper, we were
approached by British Telecom, Microsoft, Nortel and Siemens to further explore
this concept. These discussions resulted in the founding of the Parlay Group in
March 1998.
The Parlay Group, an industry consortium now with 11 members, seeks to
specify an interface to enable secure, public access to core capabilities of
voice and data networks. The goal of The Parlay Group is to open up
communications capabilities in the same manner that the architecture of the
personal computer permitted software developers to be creative and to innovate.
The Parlay interface enables service providers and application developers to
integrate communications capabilities into generic information technology
software. Implementation of this interface will allow service providers to
offer mass-customization of services that meet the specific needs of their
subscribers. Two specifications of this interface have been published to date.
The Parlay interface is platform-vendor-independent and technology-independent,
allowing it to be implemented on multiple operating systems, including Windows
NT, JAVA and UNIX, and work easily with other industry initiatives. Members of
The Parlay Group as of January 1, 2000 are set forth in the table below.
29
<PAGE>
The Parlay Group
<TABLE>
<S> <C>
Founding Members Other Members
Ulticom AT&T
British Telecom Cegetel
Microsoft Cisco
Nortel Ericsson
Siemens IBM
Lucent
</TABLE>
JAVA API Integrated Networks Initiative
In June 1998, we became a founding member of the JAVA API Integrated Networks
industry initiative. This industry initiative was established to define common
interfaces between intelligent network and signaling system #7 environments so
that services and protocols can run anywhere in the network. This initiative,
lead by Sun Microsystems, will help service providers, most of whom have a
variety of hardware and software environments within their networks, by
eliminating the need to program many different devices to provide one new
service. The objective of this industry initiative is to make intelligent
network application development, including computer telephony integration,
faster, simpler and less expensive through platform-independent JAVA
technology. Members of this industry initiative as of January 1, 2000 are set
forth in the table below.
Java API Integrated Networks Initiative
<TABLE>
<S> <C>
Founding Members
Sun Microsystems
Ulticom
ADC NewNet
Ericsson InfoTech
ApiON (now part of Phone.com)
--------------------------------------------------------
Other Members
Andersen Consulting Natural Microsystems
British Telecom Nokia
Broadsoft Nortel
CMG NTT
Datakinetics Object Wave Corporation
DynamicSoft Oracle
Eurescom (representing 26 European service
providers) Periphonics Corporation
France Telecom Solentro
INP/MTL Symsoft
KPN Telcordia
Lucent Telesoft Design
Mahindra Telesys Software
Motorola Trillium
Westwave Communications
</TABLE>
30
<PAGE>
International Softswitch Consortium
In August 1999, we joined the International Softswitch Consortium, an
organization founded in May 1999 for international cooperation and coordination
of internetworking technologies in the field of Internet-based real-time
interactive communications and related applications. Many applications emulate
circuit switching software, hence the name softswitch. The Softswitch
Consortium is a non-profit corporation with open membership committed to
advancing Internet protocol distributed network architecture standards that
enable and expedite application development. More than 50 companies from around
the world participate as members of the organization.
Work of the Softswitch Consortium focuses on the compatibility and
interoperability of multimedia Internet protocol networks and their
interconnection to other networks such as the voice telephone networks. The
purpose of the Softswitch Consortium is to support advancement of application
development for evolving Internet protocol networks which support both voice
and multimedia communications. We participate in two Softswitch working groups:
. the architecture working group, which will create and document the
reference architecture for the softswitch; and
. the applications working group, which will focus on a means to build
applications in the softswitch environment.
Research and Development
We continue to enhance the features and performance of our existing products
and introduce new products. We believe that our future success depends on a
number of factors, which include our ability to:
. identify and respond to emerging technological trends in our target
markets;
. develop and maintain competitive solutions that meet our customers'
changing needs; and
. enhance our existing products by adding features and functionality that
differentiate our products from those of our competitors.
As a result, we have made and intend to continue to make significant
investments in research and development. We allocate our research and
development resources in response to market research and customer demands for
additional features and products. Our development strategy involves rolling out
initial releases of our products and adding features over time. We continuously
incorporate product feedback we receive from our customers into our product
development process. While we expect that new products will continue to be
developed internally, we may, based on timing and cost considerations, acquire
or license technologies, products or applications from third parties.
Our research and development expenses were approximately $2.4 million for
fiscal 1997, $4.7 million for fiscal 1998 and $6.0 million for fiscal 1999. Our
research and development activities are located in Mount Laurel, New Jersey,
Dallas, Texas and in France. As of January 31, 2000, we had 52 employees
engaged in our research and development activities. We believe that recruiting
and retaining highly skilled engineering personnel is essential to our success.
Manufacturing
Our Signalware products have two components: software and interface boards.
Our software is duplicated in house and provided to customers on several media,
primarily CD-ROM, and digital audio tape. Each software shipment is configured
to provide the specific operating system version and features requested by the
customer. Each order is tracked by purchase order number and documented
according to internal quality standards.
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<PAGE>
Assembly of our printed circuit interface boards is performed by
subcontractors who are certified by the International Standards Organization.
Periodic audits are performed to ensure adherence to quality standards.
Subcontractors are responsible for purchasing, inspecting, installing and
assembling components of our interface boards. Completed assemblies are burned-
in, inspected, tested and packaged in our facility according to International
Standards Organization standards. All inspection, test, repair, revision and
shipping information is tracked by product type and serial number and
maintained in our tracking database.
We work closely with our interface board component suppliers to monitor
component changes and availability. However, we do not have any long term
supply agreements with these suppliers to ensure uninterrupted supply of
components. Under certain circumstances, we may place blanket orders to ensure
availability of discontinued components. In the event of a reduction or an
interruption in the supply of components, a significant amount of time could be
required to qualify alternate suppliers and receive an adequate supply of
replacement components.
We do not have any long term agreements with any of our manufacturers, some
of whom are small, privately held companies. In the event that these
manufacturers experience financial, operational or quality assurance
difficulties, our business could be adversely affected until an alternate
manufacturer could be found. There is no assurance that an alternate
manufacturer will be able to meet our requirements or that existing or
alternate sources for interface boards will continue to be available at
favorable prices.
Intellectual Property Rights
We have accumulated a significant amount of proprietary know-how and
expertise over the years in developing network signaling software and signaling
system #7 protocol technology for communication services. Our continued success
is dependent, in part, upon our ability to protect our proprietary rights to
the technologies used in our products. If we are not adequately protected, our
competitors could use the intellectual property that we have developed to
enhance their products and services, which could harm our business. To
safeguard our proprietary technology, we rely on a combination of technical
innovation, trade secret, copyright and trademark laws, restricted licensing
arrangements and non-disclosure agreements, each of which affords only limited
protection, and in the future we may rely on patents. As of January 31, 2000,
we had no registered patents and one patent application pending. We
occasionally review with our patent attorneys new areas of technology to
determine whether they are patentable. However, there can be no assurance that
we will receive any patents.
The names UlticomTM, Signalware(R), NexworxTM, Ultimate Call ControlTM,
Programmable NetworkTM and SoftserviceTM and our logos are our trademarks. Each
trademark, trade name or service mark of any other company appearing in this
prospectus belongs to its holder.
We license software from third parties that is incorporated into some
versions of Signalware for the Windows NT operating system. Our Nexworx
products also include licensed software from third parties.
Due to the value of our intellectual property rights, we do not generally
make our proprietary software code available to customers. Exceptions to this
principle were made in the past, in limited circumstances, for large customers
where adequate control mechanisms were in place to protect our intellectual
property rights.
We have granted Comverse Network Systems, our affiliate, a perpetual,
royalty-free, non-exclusive license to use and operate software products for
incorporation into any of Comverse Network Systems' products. See "Related
Party Transactions--Computer Software License Agreement."
Our affiliate, Comverse Patent Holding Company, Inc., entered into an
agreement with Lucent Technologies GRL Corp. under which Comverse Patent
Holding granted Lucent GRL a non-exclusive license to those patents now owned
by Comverse Patent Holding or which Comverse Patent Holding has a right to
license and to those patents granted to Comverse Patent Holding or which
Comverse Patent Holding obtains the
32
<PAGE>
right to license during the term of the agreement. In return, Comverse Patent
Holding was granted a non-exclusive license to certain patents now owned by
Lucent GRL or which Lucent GRL has a right to license and to those patents
granted to Lucent GRL or which Lucent GRL obtains the right to license during
the term of the agreement. The agreement provides that Comverse Patent Holding
has the right to grant a sublicense to us. In connection with that agreement,
we entered into a patent license agreement with Comverse Patent Holding under
which we have granted a non-exclusive royalty-free license to Comverse Patent
Holding with the right to sublicense to Lucent GRL our patents and those
patents granted to us or which we obtain the right to license during the term
of the agreement. In return, Comverse Patent Holding granted to us a non-
exclusive royalty-free sublicense to all patents that are licensed by Lucent
GRL to Comverse Patent Holding. See "Related Party Transactions--Patent License
Agreement."
Competition
The market for network signaling software is intensely competitive, both in
the U.S. and internationally. We expect competition to persist, intensify and
increase in the future, especially with the anticipated convergence of voice
and data networks.
We compete with a number of U.S. and international suppliers that vary in
size and in the scope and breadth of the products and services offered.
Competitors for our present and planned future products include a number of
companies ranging from signaling system #7 software solution providers, such as
ADC NewNet and Trillium Digital Systems, to vendors of communication and
network infrastructure equipment, such as Hewlett Packard and Compaq. We
believe we compete principally on the basis of:
. product performance and functionality;
. product quality and reliability;
. customer service and support; and
. price.
We believe our success will depend primarily on our ability to provide
technologically advanced and cost effective signaling solutions. Additionally,
we must provide our customers with prompt and responsive customer support.
However, we cannot assure you that the products and services we offer will
compete effectively with those of our competitors or that our customers will
not seek to develop their own substitutes for our products internally.
Furthermore, should competition intensify, we may have to reduce the prices of
our products.
Employees
As of January 31, 2000, we had approximately 153 employees. We consider our
relationship with our employees to be good. Our employees are not covered by
any collective bargaining agreement.
Facilities
We have headquarters and development facilities in Mount Laurel, New Jersey
where we lease approximately 36,000 square feet of office space. This lease
expires in April 2006. We also lease approximately 9,000 square feet of office
space for a development, support and sales facility in Dallas, Texas. This
lease expires in August 2000. In addition, we lease approximately 2,800 square
feet for a development, support and sales office in France. This lease expires
in January 2009. Due to our growth, we anticipate leasing new office space in
Dallas. We believe that the additional space will be available when it is
needed.
Legal Proceedings
We are subject to legal actions arising in the normal course of our business.
We do not believe that any pending legal action would, if adversely determined,
have a material adverse effect on our business or operating results.
33
<PAGE>
MANAGEMENT
Directors, Executive Officers and Key Employees
The following table sets forth certain information concerning our directors,
executive officers and key employees.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Executive Officers and
Directors:
Kobi Alexander (1)(3)... 47 Chairman of the Board of Directors and Director
Shawn Osborne (1)....... 39 President and Chief Executive Officer and Director
David Kreinberg (1)..... 35 Chief Financial Officer and Director
William F. Sorin
(1)(3)................. 51 Secretary and Director
Paul D. Baker........... 41 Director
Yaacov Koren............ 46 Director
Zvi Bar-On (2).......... 48 Nominee Director*
Ron Hiram (2)(3)........ 47 Nominee Director*
Rex McWilliams (2)...... 64 Nominee Director*
Key Employees:
Alan P. David........... 45 Vice President of Quality and Information
Steven C. Davis......... 50 Vice President of Research and Development
James H. Grim........... 38 Vice President of Engineering
James Johnston.......... 43 Vice President of Operations
Lisa Roberts............ 34 Vice President of Finance
Kannan Sreedhar......... 41 Vice President of Sales and Marketing
</TABLE>
- --------
* This nominee shall become a director upon closing of this offering.
(1) Member of the executive committee.
(2) Member of the audit committee and the stock option committee.
(3) Member of the compensation committee.
Executive Officers and Directors
Kobi Alexander has been a director since August, 1995. Mr. Alexander, a
founder of Comverse Technology, Inc., has served as Chairman of the Board of
Directors of Comverse since September 1986, as President and Chief Executive
Officer since April 1987 and as a director of Comverse since its formation in
October 1984. Mr. Alexander also served as Co-Managing Director of Comverse's
wholly-owned Israeli subsidiary, Comverse Network Systems Ltd. from its
formation in 1982 until October 1986. From October 1984 to September 1986, Mr.
Alexander served as Co-Chairman and Co-Chief Executive Officer of Comverse.
Prior to the formation of Comverse Network Systems, in 1980 and 1981, Mr.
Alexander served as an independent financial and business consultant to a
number of multinational corporations. Between 1978 and 1980, Mr. Alexander
worked in the Corporate Finance Department of Shearson Loeb Rhoades. Mr.
Alexander received a B.A., magna cum laude, in Economics from the Hebrew
University of Jerusalem in 1977, and an M.B.A. in finance from New York
University in 1980. He has served as the Chairman of the High-Tech Research and
Development Section of the Israeli Association of Industrialists.
Shawn K. Osborne was named our President and Chief Executive Officer in
September 1997 and a director in January 2000. Mr. Osborne joined our company
in January 1997 as Vice President of Sales and Strategic Planning. Mr. Osborne
was President and Vice President of Sales and Marketing of CellTel Data, a
provider of wireless data systems and transaction services, from October 1994
to January 1997. Prior to joining
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CellTel, Mr. Osborne held senior level management positions with several high-
technology communications companies, including Vice President of Sales of EBS
(now ADCNewNet), and Vice President of Sales and Marketing of Cognitronics
Corporation. Mr. Osborne received a B.S. in computer science from the State
University of New York. He currently serves on the Board of Directors of the
Telecommunications Industry Association.
David Kreinberg was named Chief Financial Officer in December 1999 and a
director in January 2000. He also serves as Vice President of Finance and Chief
Financial Officer of Comverse Technology, Inc., a position he has held since
May 1999. He previously had served Comverse as Vice President of Finance and
Treasurer from April 1996, and Vice President of Financial Planning from April
1994. Mr. Kreinberg is a Certified Public Accountant, and prior to joining
Comverse he was a senior manager at Deloitte & Touche LLP. Mr. Kreinberg
received a B.S., summa cum laude, in accounting from Yeshiva University and an
M.B.A. in finance and international business from Columbia Business School in
1986 and 1990, respectively.
William F. Sorin has served as a director since August 1995. He has served as
the Corporate Secretary and a director of Comverse Technology, Inc. since its
formation in October 1984. He is an attorney engaged in private practice and is
general counsel to Comverse. Mr. Sorin received a B.A. in Economics from
Trinity College in 1970 and a J.D., cum laude, from Harvard Law School in 1973.
Paul D. Baker was named a director in January 2000. He also serves as Vice
President, Corporate and Marketing Communications of Comverse Technology, Inc.,
a position he has held since joining Comverse in April 1991. Mr. Baker held
various positions in sales, marketing, and corporate communications with
Robotic Vision Systems, Inc. from 1984 to 1991. Mr. Baker received a B.S. in
Management from Babson College in 1980 and an M.B.A. in marketing management
from St. John's University in 1984.
Yaacov Koren was named a director in January 2000. Mr. Koren is the Managing
Director of Comverse Investments Ltd., an investment division of Comverse
Technology, Inc., a position he has held since July 1994. Additionally, Mr.
Koren serves on the board of directors of several private companies, primarily
companies in which the Comverse group is invested. Mr. Koren has over 20 years
of experience in the investment and financial industries. Prior to joining
Comverse, Mr. Koren was the Chief Executive Officer of Batucha Securities and
Investments Ltd., one of the largest Israeli brokerage and portfolio management
companies. Mr. Koren is also a director of Lanoptics Ltd. Mr. Koren received
his LL.B. from the Tel-Aviv University, Law School in 1982.
Zvi Bar-On will become a director effective upon the completion of this
offering. Mr. Bar-On is the founder, President and Chief Executive Officer of
ComponentControl.Com, a business he founded in May 1998. In 1984 he also
founded and managed Aero Support USA Inc., which was merged during 1997 with
Kellstrom Industries. After the merger, Mr. Bar-On served as a consultant to
Kellstrom until September 1998. From 1981 to 1983, he was employed as a Sales
Manager and Marketing Director by Electro Methods Inc., becoming the company's
President in 1983. He received an M.B.A. from New York University in 1981 and a
B.S. in Mechanical Engineering from Brooklyn Polytechnic in 1976.
Ron Hiram will become a director effective upon the closing of this offering.
Mr. Hiram joined Soros Fund Management L.L.C. in February 1995 and became a
Managing Director in January 1997. He also serves as a member of boards of
directors of private companies in which Soros Fund Management has investments
and as a member of management committees of joint venture and investment
partners. Prior to joining Soros Fund Management, Mr. Hiram was at Lehman
Brothers for 12 years, most recently serving as Managing Director. Mr. Hiram is
also a director of Outboard Marine Corporation. Mr. Hiram received an M.B.A.
from Columbia University in 1981.
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<PAGE>
Rex A. McWilliams will become a director of our company effective upon the
closing of this offering. Mr. McWilliams is the Chairman of ODI Diagnostics, a
position he has held since April 1999. Mr. McWilliams, also serves as the
Chairman of Newvent Management, a position he has held since January 1997.
Between 1974 and September 1997, Mr. McWilliams served as our Chairman and CEO.
Previously, he was a partner in Technology Management Group. He also was the
Co-Founder of National Computer Analysts and served as its President from 1965
through 1970. Between 1957 and 1962, he was involved with computer development
with RCA Computer Division. Mr. McWilliams has a B.S. in Mathematics/Physics
from Morningside College, which he earned in 1958.
Key Employees
Alan P. David was named our Vice President of Quality and Information in
October 1999. Prior to joining our company, from December 1995 to October 1999,
Mr. David was Director of Operations at Computer Sciences Corporation. From
April 1990 to December 1995, he held senior level management positions at
Computer Sciences Corporation in the areas of enterprise systems, program
management, systems engineering, and software engineering. From January 1985 to
April 1990, Mr. David served as a program manager and systems engineer at
Sperry (now Unisys Corporation). From 1979 to 1985, Mr. David worked for the
Department of Defense in communications engineering and protocol design. Prior
to 1979, Mr. David served on active duty in the U.S. Air Force for four years
as a systems programmer/analyst.
Steven C. Davis was named our Vice President of Research and Development in
February 1999. Mr. Davis also serves on the board of The Parlay Group. Mr.
Davis joined our company in July 1997, but was previously associated with our
company for over 20 years in various contracting relationships beginning in
1979. From February 1988 to July 1997, Mr. Davis served as President and Chief
Executive Officer of Finite State. Mr. Davis was a shareholder and officer of
Tenis Software, Inc. from 1982 to 1987, and was employed with the Burroughs
Corporation as manager for software engineering for Great Valley Laboratories
from 1974 to 1979. He has a B.S. in Mathematics from the South Dakota School of
Mines and Technology, which he earned in 1971.
James H. Grim was named our Vice President of Engineering in October 1999. He
joined our Company in June 1998 as Vice President of Operations. From February
1996 to June 1998, Mr. Grim served as Vice President of Programs and as Vice
President of Engineering and Engineering Program Manager for InterDigital
Communications Corporation. From April 1993 to February 1996, he held
engineering management positions at Lockheed Martin Corporation, Astro Space
Division. From 1985 to 1993, Mr. Grim held engineering, engineering management,
and program management positions with GE Aerospace. Mr. Grim received a B.S. in
electrical engineering from Capitol College in 1985 and an M.S. in engineering
from Pennsylvania State University in 1990.
James Johnston was named our Vice President of Operations in October 1999.
From March 1999 to October 1999, Mr. Johnston served as our Vice President of
Quality and Information. Mr. Johnston joined our company in May 1998 as Manager
of Quality Assurance. From May 1997 to April 1998, Mr. Johnston provided
consulting services to the Vanguard Investment Group in the areas of operations
management, testing, and quality assurance. From January 1994 to April 1997,
Mr. Johnston was an operations manager at Computer Sciences Corporation. From
1984 to 1993, he held several positions at Pacer InfoTech, Inc., in program
management, operations, system testing, and quality assurance. Mr. Johnston
also served nine years in active duty in the U.S. Navy. He received a B.S. in
Business Administration from Rider University in 1989.
Lisa Roberts has been our Vice President of Finance since June 1998. From
January 1997 to June 1998, she served as our Director of Finance. Prior to
that, she served as our Controller since 1995. She is a Certified Public
Accountant, and prior to joining Ulticom she was a manager at Simonson,
Lipshutz & Fogel, PC, a public accounting firm, and an accountant at Tait,
Weller & Baker. Ms. Roberts received a B.S. in accounting with high honors from
Drexel University in 1988.
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<PAGE>
Kannan Sreedhar has been our Vice President of Sales and Marketing since
February 1999. From January 1994 to February 1999, he served as a Regional
Sales Manager at Bell Atlantic Data Solutions Group. From 1984 to December
1993, Mr. Sreedhar spent ten years at Northern Telecom, where he participated
in software design and product development, and he advanced to managerial roles
in product management, strategic planning, new product introduction and account
management. From 1982 to 1984, he was employed at Ericsson Communications in
the Public Switching Division. He received an M.S. in computer science from the
University of Oklahoma in 1982 and an M.B.A. from Duke University in 1987.
Board Composition
Our by-laws currently authorize our board of directors to have not less than
three and not more than fifteen members. Our board of directors currently has
two members and upon completion of this offering will have nine members.
Members of the board of directors are elected each year at the annual meeting
of shareholders to serve until the following annual meeting of shareholders or
until their successors have been elected and qualified. Directors may be
removed by the affirmative vote of the holders of a majority of the shares
entitled to vote at an election of directors. There are no family relationships
among any of our directors and executive officers.
Board Committees
Prior to or upon completion of this offering, our board of directors will
create an executive committee, a compensation committee, an audit committee and
a stock option committee. Members will serve on these committee for one-year
terms.
We expect that our executive committee will consist of Messrs. Alexander,
Osborne, Kreinberg and Sorin. The executive committee will have all the
authority of the board, except with respect to items requiring shareholder
approval or submission and except as otherwise required by law.
We expect that our compensation committee will consist of Messrs. Alexander,
Sorin and Hiram. The compensation committee will make recommendations to the
board of directors regarding the various incentive compensation and benefit
plans and determines salaries for the executive officers and incentive
compensation for employees.
We expect that our audit committee will consist of Messrs. Bar-On, Hiram and
McWilliams. The audit committee will make recommendations to the board of
directors regarding the selection of independent public accountants, review the
results and scope of the audit and other services provided by our independent
public accountants and review and evaluate our control functions.
We expect that our stock option committee will consist of Messrs. Bar-On,
Hiram and McWilliams. The stock option committee will administer the issuance
of stock options under our stock incentive compensation plan.
Director Compensation
Our directors do not currently receive any cash compensation for serving on
the board of directors or any committee of the board. Our directors are
reimbursed for the expenses they incur in attending meetings of the board or
board committees. Each of Messrs. Bar-On, Hiram and McWilliams will receive
options to purchase 15,000 shares of common stock under our stock incentive
compensation plan upon completion of this offering, with an exercise price
equal to the initial public offering price. Each such director will also
receive on an annual basis options to purchase 5,000 shares of common stock
under our stock incentive compensation plan with an exercise price equal to the
fair market value on the date of grant. These options will vest based on the
number of board meetings attended over the year.
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<PAGE>
Compensation Committee Interlocks and Insider Participation
Executive compensation decisions in fiscal 1999 were made exclusively by our
Chairman, Kobi Alexander. No interlocking relationship exists between our board
of directors and the board of directors or compensation committee of any other
company, nor has any such interlocking relationship existed in the past.
Executive Compensation
The following table sets forth information for the fiscal year ended January
31, 2000 concerning the compensation we paid or accrued to our executive
officers.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
-----------------------
Fiscal Other Annual
Name and Principal Position Year Salary Bonus Compensation
--------------------------- ------ -------- ------- ------------
<S> <C> <C> <C> <C>
Shawn K. Osborne,
President and Chief Executive Officer..... 1999 $200,000 $60,000 $13,988
</TABLE>
Mr. Kreinberg does not receive any compensation from us. Mr. Kreinberg
receives his compensation from Comverse. Mr. Kreinberg's services are provided
to us under our services agreement with Comverse. See "Related Party
Transactions--Services Agreement."
Stock Option Information
No options were granted by Ulticom to our executive officers during the
fiscal year ended January 31, 2000.
Year-End Option Values
No options granted by Ulticom were exercised by the executive officers during
the fiscal year ended January 31, 2000. The following table provides certain
information concerning options granted by Ulticom as of January 31, 2000, with
respect to each of the executive officers. Upon the completion of this
offering, these options will vest in four equal annual increments commencing
one year after this offering is completed. The value of the unexercised options
set forth below has been calculated by subtracting the exercise price from the
assumed initial offering price of $11.00 per share and multiplying that amount
by the number of shares underlying the option.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at January 31, 2000 at January 31, 2000
------------------------------- -------------------------
Exercisable Unexercisable Exercisable Unexercisable
------------ --------------- ----------- -------------
<S> <C> <C> <C> <C>
Shawn K. Osborne........ -- 490,905 -- $4,424,955
David Kreinberg(1)...... -- -- -- --
</TABLE>
- --------
(1) Mr. Kreinberg currently does not have any options granted by us. Comverse
has granted to Mr. Kreinberg options to purchase 98,181 shares from
Comverse. These options will vest in four equal annual increments
commencing one year after this offering is completed. The value of such
options as of January 31, 2000 was $884,991, based on an assumed initial
public offering price of $11.00 per share.
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<PAGE>
Employment Agreement
We have entered into an employment agreement with Mr. Osborne, our President
and Chief Executive Officer, which has the following principal terms:
. The agreement will terminate on January 31, 2003, but will be
automatically extended for an additional two years, unless either party
notifies the other of its intention not to extend the employment period.
. Mr. Osborne will receive an annual base salary of $210,000. Mr. Osborne
will also be entitled to receive an annual bonus of up to $75,000 per
year. Our board of directors will review Mr. Osborne's base salary
annually and may, at its discretion, increase his base salary.
. Upon completion of this offering, we will grant Mr. Osborne options to
purchase 50,000 shares of our common stock under our stock incentive
plan at an exercise price per share equal to the offering price. These
options will vest six months following the date of grant.
. If during the one-year period following a change in control Mr.
Osborne's employment is terminated either
. by us for any reason other than cause, or
. by Mr. Osborne, should we fail to continue his employment on
substantially equivalent compensation terms,
Mr. Osborne will be entitled to receive a payment equal to his annual
base salary and, for the purpose of determining the exercisability of
his stock options, he will be deemed to have concluded an additional
period of 24 months of employment with us.
. We or Mr. Osborne may terminate his employment at any time during the
employment term upon giving 90 days' notice, except that no notice is
required if we terminate Mr. Osborne's employment for cause. If we
terminate Mr. Osborne's employment for reasons other than cause, he will
be entitled to receive his earned but unpaid salary and bonus pro rated
through the date of termination and, for the purpose of determining the
exercisability of his stock options, he will be deemed to have concluded
an additional period of 12 months of employment with us.
1998 Stock Incentive Compensation Plan
The purpose of this plan is to assist us, our subsidiaries and affiliates in
attracting and retaining valued employees by offering them a greater stake in
our success and a closer identity with us, and to encourage these employees to
own our stock.
General. The plan provides for the grant of deferred stock, restricted stock,
options and stock appreciation rights. We have reserved 6,500,000 shares of our
common stock for issuance upon exercise of awards under the plan.
Administration. The plan has been to date, and up to the closing of this
offering will be, administered by our board of directors. Following completion
of this offering, the plan will be administered by a stock option committee
consisting of Messrs. Bar-On, Hiram and McWilliams.
Eligibility and Extent of Participation. Any officer, director or other key
employee of our company, a subsidiary or an affiliate is eligible to
participate under the plan. The maximum number of shares of common stock that
may be awarded under the plan to any employee may not exceed 250,000 during any
calendar year. Transactions under the plan are intended to comply with all
applicable conditions of Rule 16b-3 under the Exchange Act for all employees
subject to Section 16 of that Act. Any provision of the plan or action by the
committee that fails to comply with Rule 16b-3 will be deemed null and void to
the extent permitted by law and deemed advisable by the committee.
Deferred Stock. An award of deferred stock is an agreement by Ulticom to
deliver to an employee, a specified number of shares of common stock at the end
of a specified deferral period or periods. Before the issuance and delivery of
the deferred stock, the awarded employee does not have any rights as a
stockholder
39
<PAGE>
with respect to any shares of deferred stock credited to his or her account.
Dividends declared during the deferral period on shares covered by a deferred
stock award will be paid to the awarded employee currently, or deferred and
deemed to be reinvested in additional deferred stock, or otherwise reinstated
on terms as the committee may determine at the time of the award. The committee
may condition the grant of the deferred stock award or the expiration of the
deferral period upon the employee's achievement of one or more performance
goals. Shares of deferred stock credited to the account of the awarded employee
are issued and delivered to the employee at the end of the deferral period
under the terms of the deferred stock agreement. The committee may, in its sole
discretion, accelerate the delivery of all or any part of a deferred stock
award or waive the deferral limitations for all or any part of the deferred
stock awards, other than deferred stock awards intended to qualify for the
performance-based compensation exception to Section 162(m) of the Internal
Revenue Code.
Restricted Stock. An award of restricted stock to an employee is a grant by
the Company of a specified number of shares of common stock subject to
forfeiture upon the happening of specified events. The certificates
representing shares of restricted stock are legended as to sale, transfer,
assignment, pledge or other encumbrances during the restriction period and are
deposited by the employee, together with a stock power endorsed in blank, with
Ulticom, to be held in escrow during the restriction period. Unless the
committee determines otherwise, during the restriction period, the awarded
employee has the right to receive dividends from and to vote the shares of
restricted stock. The committee may condition the grant of an award of
restricted stock or the expiration of the restriction period upon the
employee's achievement of one or more performance goals. The committee may, in
its sole discretion, modify or accelerate the vesting and delivery of shares of
restricted stock, other than restricted stock intended to qualify for the
performance-based compensation exception to Section 162(m) of the Code.
Options. Options give an employee the right to purchase a specified number of
shares of common stock, deferred stock or restricted stock from us for a
specified time period at a fixed price. Options granted to employees may be
either incentive stock options or options not intended to be incentive stock
options, called non-qualified options. The price per share at which common
stock may be purchased upon exercise of an option is determined by the
committee; however, in the case of grants of incentive stock options, the price
per share may not be less than the fair market value of a share of common stock
on the date of grant. In case of any incentive stock option granted to a person
who owns stock possessing more than 10% of the total combined voting power of
all classes of our capital stock, the option price per share will not be less
than 110% of the fair market value of a share of common stock on the date of
grant. The option price per share for non-qualified options may be less than
the fair market value of a share of common stock on the date of grant.
Option terms may not be greater than 10 years, or five years in the case of
an incentive stock option granted to a holder of 10% or more of the voting
power of our capital stock. We may not grant incentive stock options to
employees of our affiliates. Except as provided in an option agreement, the
price upon exercise of an option will be paid in full at the time of the
exercise in cash, in shares of common stock at fair market value on the date of
exercise or a combination of cash and shares. The committee may permit other
methods of payment upon the exercise of options, including by delivery of a
note by the employee or by restricted stock. The committee or our board of
directors may in their discretion extend the period during which an option held
by an employee may be exercised to a period, not to exceed 3 years following
the termination of an employee's employment or service, as the committee or our
board of directors may determine to be appropriate in any particular instance.
Stock Appreciation Rights. Stock appreciation rights are rights to receive
payment in cash, common stock, restricted stock or deferred stock or any
combination of these equal to the increase in the fair market value of a
specified number of shares of common stock from the date of grant of the rights
to the date of exercise. Stock appreciation rights may be granted in tandem
with all or a portion of a related option under the plan, or may be granted
separately as a freestanding stock appreciation right. A tandem stock
appreciation right may be granted either at the time of the grant of the option
or at any time thereafter during the term of the option and may be exercisable
only to the extent that the related option is exercisable. No stock
appreciation
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right may be exercisable within the first six months of its grant. The base
price of a tandem stock appreciation right may only be the option price under
the related option. The base price of a freestanding stock appreciation right
may not be less than 100% of the fair market value of the common stock, as
determined by the committee, on the date of grant.
Adjustments Upon a Change in Control. Except as otherwise provided by
applicable agreement, upon the occurrence of a change in control, excluding a
hostile change of control, the committee may elect to provide that all
outstanding options and stock appreciation rights will immediately vest and
become exercisable, each deferral period and restriction period will
immediately lapse, or all shares of deferred stock subject to outstanding
awards will be issued and delivered to the awarded employee. In the event of a
hostile change in control, each of the foregoing actions will occur
automatically upon the occurrence of the hostile change in control. At any time
before a change in control, the committee may, without the consent of any
employee to whom an option was granted:
. require the entity effecting the change in control or a parent or
subsidiary of the entity to assume each outstanding option or substitute
an equivalent option therefor, or
. terminate and cancel all outstanding options upon the change in control
and pay the employee to whom an option was granted cash equal to the
product of (x) the difference between the fair market value of common
stock on the date of the change in control and the exercise price of the
option and (y) the number of shares of common stock subject to the
option.
Effective Date, Termination and Amendment. The plan will remain effective
until the earlier of 10 years from the date of its adoption, or the date it is
terminated by our board of directors. Under the provisions of Section 12 of the
plan, our board of directors has the power to amend, suspend or terminate the
plan at any time; however the board may not effect any of the following
amendments without stockholder approval:
. increasing the total number of shares available for issuance under the
plan;
. changing the class of individuals eligible to participate under the
plan;
. modifying the 250,000 share limit under awards during any calendar year
for any employee or the categories of performance goals previously
disclosed to shareholders;
. changing the provisions of Section 12 of the plan; or
. any other change for which stockholder approval is required under
Section 16(b) or any successor provision of the Exchange Act.
2000 Employee Stock Purchase Plan
We expect to adopt an employee stock purchase plan prior to the completion of
this offering. The purpose of this plan is to provide a method whereby our
employees and those of our eligible subsidiaries, if any, will have an
opportunity to acquire a proprietary interest in our company through the
purchase of shares of our common stock.
General. The plan is intended to comply with the provisions of Section 423 of
the Code. The plan will allow eligible employees who elect to participate in
the plan to make purchases of our common stock through payroll deductions at a
price of 85% of the fair market value of our common stock on the first day or
last day of each offering period, whichever is lower. Participants will be
limited by the Code to a maximum of $25,000 deducted from their compensation
under the plan during any calendar year.
Administration. The plan will be administered by our compensation committee,
which will be authorized to decide questions of eligibility and to make rules
and regulations for the administration and interpretation of the plan, subject
to final authority of our board of directors. All determinations of the
compensation committee with respect to the plan will be binding. The expenses
of administering the plan will be borne by us.
Shares Available Under the Plan. Under the Plan, we will issue an aggregate
of not more than 600,000 shares of our company's common stock. The maximum
number of shares issuable under the plan will be subject to adjustment for any
dividend, stock split or other relevant change in our capitalization.
Eligibility. With certain exceptions, all full-time employees who have been
employed by us or an eligible subsidiary, if any, for at least three months,
are eligible to participate in the plan. The purchase of shares under the plan
will be voluntary, and we cannot determine the number of shares to be purchased
under the plan.
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Operation of the Stock Purchase Plan. Our common stock will be purchased
under the plan through semi-annual offering periods. The first offering period
is expected to begin on the first business day on which price quotations for
our common stock are available on the Nasdaq National Market. Offering periods
will begin on March 1 and September 1 of each year. However, because the first
day on which price quotations for our common stock will be available on the
Nasdaq National Market may not be March 1 or September 1, the length of the
first offering period may be more or less than six months.
During each offering period, the maximum number of shares which may be
purchased by a participant will be determined on the first day of the offering
period under a formula whereby 85% of the market value of a share of our common
stock on the first day of the offering period will be divided into an amount
equal to 6% of that participant's annualized base pay, as defined in the plan.
A participant may elect to have up to 10% of his or her base pay withheld from
his or her pay for this purpose. The price at which the participant may
purchase shares will be the lower of:
. 85% of the last sale price of our common stock on the Nasdaq National
Market on the first day of the offering period; and
. 85% of such price on the last day of the offering period.
Amendment. Our board of directors may at any time, and from time to time,
modify, terminate or amend the plan in any respect without obtaining
shareholder approval, except where the approval of our shareholders is required
under:
. Section 423 of the Code;
. Rule 16b-3 of the Exchange Act or any successor provisions; or
. under any applicable listing requirement of Nasdaq.
The termination, modification or amendment of this plan shall not, without
the consent of a participant, affect his or her rights under a purchase option
previously selected by the participant. With the consent of the participant
affected, our board of directors may amend outstanding purchase options in a
manner not inconsistent with the terms of the plan. Our board of directors
shall also have the right to amend or modify the terms and provisions of the
plan and of any purchase options previously granted under the plan to the
extent necessary to ensure the continued qualification of the plan under
Section 423 of the Code and Rule 16b-3. The plan also contains provisions
relating to the disposition of purchase options in the event of certain mergers
or other significant transactions in which we may be involved.
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RELATED PARTY TRANSACTIONS
Relationship with Comverse
We are a subsidiary of Comverse. Set forth below is a brief description of
the existing relationships and agreements between us and Comverse.
Services Agreement
We have a services agreement with Comverse. Under this agreement, Comverse
provides us with the following services:
. consulting services with respect to financial planning and reporting;
. routine legal services;
. administration of employee benefit plans;
. maintaining in effect a policy of directors' and officers' liability
insurance covering our directors and officers; and
. consulting services with respect to our public relations.
We pay Comverse a quarterly fee of $150,000 for the services provided by
Comverse during each fiscal quarter. In addition, we agreed to reimburse
Comverse for any out-of-pocket expenses incurred by Comverse in providing the
services. During fiscal 1999, no amounts were paid to Comverse for
reimbursement of out-of-pocket expenses. The term of this agreement extends to
January 31, 2003 and is automatically extended for additional twelve-month
periods unless terminated by either Comverse or us. Since 1996, Comverse has
been providing these services to us for a quarterly fee of $150,000. This
agreement currently covers the services of Mr. Kreinberg who was paid aggregate
salary and bonus of $260,000 by Comverse in fiscal 1999. We believe that the
terms of this agreement are as favorable as could have been obtained from an
unaffiliated third party.
Sales to Subsidiaries of Comverse
We sell products and services to other subsidiaries of Comverse in the
ordinary course of our business. Sales to these subsidiaries were approximately
$2.7 million, $3.8 million and $4.7 million for fiscal 1997, fiscal 1998 and
fiscal 1999, respectively.
Federal Income Tax Sharing Agreement
We have a tax sharing agreement with Comverse. Comverse is the parent company
of a group of companies which includes us and for which Comverse files
consolidated federal income tax returns. After this offering is completed we
will continue to be included in the Comverse consolidated group for federal
income tax purposes and we will not file our own federal income tax returns.
Under the terms of the tax sharing agreement, during years in which Comverse
files a consolidated federal income tax return which includes us, we pay
Comverse an amount equal to our separate tax liability computed by Comverse in
its reasonable discretion. Our separate tax liability will be that amount of
federal income tax that we would owe if we filed a tax return independent of
the Comverse group. If the calculation of our separate tax liability for any
year results in a net operating loss, we are not entitled to receive any
payments from Comverse with respect to such net operating loss in such year or
as a result of carrying such net operating loss back to any prior year or
forward to any future year. The tax sharing agreement continues in effect until
sixty days after the expiration of the applicable statute of limitations with
respect to the final year of the Comverse group which includes us.
Patent License Agreement
Our affiliate, Comverse Patent Holding, granted Lucent GRL a non-exclusive
license to those patents now owned by Comverse Patent Holding or which Comverse
Patent Holding has a right to license and to those patents granted to Comverse
Patent Holding or which Comverse Patent Holding obtains the right to license
during the term of that arrangement. In return, Comverse Patent Holding was
granted a non-exclusive license to
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certain patents now owned by Lucent GRL or which Lucent GRL has right to
license and to those patents granted to Lucent GRL or which Lucent GRL obtains
the right to license during the term of that arrangement. Under that
arrangement, Comverse Patent Holding has the right to grant a sublicense to us.
In connection with that arrangement, effective December 30, 1999, we entered
into a patent license agreement with Comverse Patent Holding under which we
have granted a non-exclusive royalty-free license to Comverse Patent Holding
with the right to sublicense to Lucent GRL our patents and those patents
granted to us or which we obtain the right to license during the term of the
agreement. In return, Comverse Patent Holding granted to us a non-exclusive
royalty-free sublicense to all patents that are licensed by Lucent GRL to
Comverse Patent Holding. We believe that the value of our sublicense from
Comverse Patent Holding is greater than the value of our license to Comverse
Patent Holding.
License Agreement
We have a license agreement with Comverse Network Systems. Under this
agreement, we granted Comverse Network Systems an irrevocable, perpetual,
royalty-free, non-exclusive license to use certain elements of the Signalware
software for incorporation into Comverse Network Systems' products.
Specifically, the license granted to Comverse Network Systems includes the
following rights:
. the right to install and use our software products at any of Comverse
Network Systems' sites and locations;
. the right to install and use our software products on or in connection
with any Comverse Network Systems' product;
. the right to use and execute the software products on any platform;
. the right to create, add to, enhance or modify our software products;
and
. the right to sublicense and/or otherwise provide our software products
to others provided that our products cannot be licensed as a stand-alone
interface.
Comverse Network Systems may not use or sublicense to others any of our
software products except on or as an element of a Comverse Network Systems
product. Any additions, enhancements or other modifications made by Comverse
Network Systems to our software products shall be the property of Comverse
Network Systems.
The term of this agreement is ten years, commencing on February 1, 1999.
Thereafter, the agreement will automatically renew for one-year periods unless
terminated by either Comverse Network Systems or us. The license granted by us
under the agreement, and any sublicenses granted by Comverse Network Systems,
survive termination or expiration of the agreement. Although we did not receive
any consideration from Comverse Network Systems for entering into this
agreement, we believe that this agreement will lead to revenues from sales of
our interface boards to Comverse Network Systems upon its deployment of its
products which include our Signalware software.
Development and Production Agreement
We have a development and production agreement with Comverse Network Systems.
Under this agreement, we agreed to design and develop for Comverse Network
Systems a signaling system #7 signaling link module board. Comverse Network
Systems agreed to purchase from us minimum quantities of this and other types
of boards at prices which we believe are competitive given the committed
quantities. Comverse Network Systems may also purchase from us additional
boards over the minimum quantities at its sole discretion. If requested by
Comverse Network Systems, for an additional fee we will furnish repair and/or
replacement services to Comverse Network Systems for boards purchased under
this agreement.
Registration Rights Agreement
We have entered into a registration rights agreement with Comverse. Under
this agreement, Comverse may require us on one occasion to register our common
stock for sale on Form S-1 under the Securities Act if
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we are not eligible to use Form S-3 under that Act. After we become eligible to
use Form S-3, Comverse may require us on unlimited occasions to register our
common stock for sale on this form. In addition, we are required to file a
registration statement on this form to register for sale shares of our common
stock that are or have been acquired by directors, officers and employees of
Comverse upon the exercise of options granted to them by Comverse. Comverse
will also have an unlimited number of piggyback registration rights. This means
that any time we register our common stock for sale, Comverse may require us to
include shares of our common stock held by it or its directors, officers and
employees in that offering and sale. Comverse will not be allowed to exercise
any registration rights during the 180-day lock-up period.
We have agreed to pay all expenses that result from registration of our
common stock under the registration rights agreement, other than underwriting
commissions for such shares and taxes. We have also agreed to indemnify
Comverse, its directors, officers and employees against liabilities that may
result from their sale of our common stock, including Securities Act
liabilities.
Business Opportunities Agreement
We have a business opportunities agreement with Comverse which addresses
potential conflicts of interest between Comverse and us. This agreement
allocates between Comverse and us opportunities to pursue transactions or
matters that, absent such allocation, could constitute corporate opportunities
of both companies. We are precluded from pursuing an opportunity offered to any
person who is a director of our company but not an officer or employee of our
company and who is also an officer or employee of Comverse, unless Comverse
fails to pursue such opportunity diligently. Comverse is precluded from
pursuing an opportunity offered to any person who is a director of Comverse but
not an officer or employee of Comverse and who is also an officer or employee
of our company, unless we fail to pursue such opportunity diligently. We are
also precluded from pursuing an opportunity offered to any person who is an
employee or officer of both companies or a director of both companies, unless
Comverse fails to pursue such opportunity diligently. Accordingly, we may be
precluded from pursuing transactions or opportunities that we would otherwise
be able to pursue if we were not affiliated with Comverse. We have agreed to
indemnify Comverse and its directors and officers against any liabilities
arising out of any claim that any provision of the agreement or the failure to
offer any business opportunity to us violates or breaches any duty that may be
owed to us by Comverse or any of its directors or officers.
Intercompany Loan
In January 2000, we borrowed $3.8 million under a term loan from a bank and
we used the proceeds to pay our outstanding indebtedness owed to Comverse. The
bank loan is secured by a deposit of Comverse at the bank. During fiscal 1997,
fiscal 1998 and fiscal 1999, we were charged with interest on our indebtedness
to Comverse in an amount equal to approximately $532,000, $419,000 and
$362,000, respectively. The interest rate on our indebtedness to Comverse was
the prime rate during fiscal 1997, fiscal 1998 and fiscal 1999.
Guarantee of the Lease for Our Dallas Facility
Comverse has guaranteed the payment of rent and the performance of all other
obligations under the lease for our facility in Dallas, Texas. This lease will
expire in August 2000.
Charges to Affiliates of Comverse
During fiscal 1997, fiscal 1998 and fiscal 1999, affiliates of Comverse paid
us approximately $1.1 million, $0.6 million and $42,000, respectively, for rent
and other shared facility charges.
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PRINCIPAL SHAREHOLDERS
The following table contains information as of January 31, 2000 with respect
to the beneficial ownership of our common stock and the beneficial ownership of
Comverse common stock by:
. each person who we know beneficially owns more than 5% of our common
stock;
. each of our directors and each individual who serve as our named
executive officers individually; and
. all of our directors and executive officers as a group.
Unless otherwise indicated, to our knowledge, all persons listed below have
sole voting and investment power with respect to their shares of common stock.
Share ownership in each case includes shares issuable upon exercise of
outstanding options that are exercisable within 60 days. Each of our directors
and executive officers who is also a director or officer of Comverse disclaims
ownership of the shares of our common stock owned by Comverse.
<TABLE>
<CAPTION>
Shares of Ulticom Common Shares of
Stock Comverse
Beneficially Owned Common Stock
---------------------------- Beneficially
Percent Owned
----------------- -----------------
Before After
Number Offering Offering Number Percent
---------- -------- -------- --------- -------
<S> <C> <C> <C> <C> <C>
Principal Shareholders:
Comverse Technology, Inc.(1)... 31,499,738 96.25% 85.19% -- --
Directors and Executive
Officers:
Kobi Alexander(2).............. 1,227,263 3.75% 3.32% 1,534,659 2.0%
Shawn Osborne(2)(3)............ -- -- -- 5,625 *
David Kreinberg(2)(4).......... 32,727 * * 20,452 *
William F. Sorin (2)(4)(5)..... 32,727 * * 18,750 *
Paul D. Baker(2)(4)............ -- -- -- 1,008 *
Yaacov Koren(2)(4)............. -- -- -- 2,500 *
Zvi Bar-On..................... -- -- -- 300 *
Ron Hiram...................... -- -- -- -- --
Rex McWilliams................. -- -- -- 49,400 *
All executive officers and
directors as a group (nine
persons)(6)................... 1,292,717 3.95% 3.50% 1,632,694 2.1%
</TABLE>
- --------
(1) Includes 1,259,990 shares of our common stock owned by Messrs. Alexander
and Kreinberg which Comverse has the right to vote. Also includes 647,995
shares of our common stock subject to options that were granted to certain
directors and employees of Comverse, including options for 165,454 shares
which are currently exercisable.
(2) Excludes 1,121,250, 5,625, 85,416, 94,689, 53,563 and 2,500 shares of
Comverse common stock subject to options granted to Messrs. Alexander,
Osborne, Kreinberg, Sorin, Baker and Koren, respectively. These excluded
options are not exercisable within 60 days.
(3) Excludes 490,905 shares of our common stock subject to options issued by us
and 50,000 shares of our common stock subject to options to be issued by us
upon completion of this offering. These excluded options are not
exercisable within 60 days.
(4) Excludes 98,181, 32,727, 32,727 and 16,364 shares of our common stock
subject to options granted by Comverse to Messrs. Kreinberg, Sorin, Baker
and Koren, respectively. These options are not exercisable within 60 days.
(5) Represents currently exercisable options to purchase from Comverse shares
of our common stock.
(6) Includes currently exercisable options granted to Mr. Sorin to purchase
from Comverse 32,727 shares of our common stock.
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DESCRIPTION OF SECURITIES
Set forth below is a summary of the material provisions of our capital stock.
For a more detailed description, see our amended and restated certificate of
incorporation and by-laws, copies of which we have filed as exhibits to the
registration statement.
We are a New Jersey corporation, subject to the provisions of the New Jersey
Business Corporation Act. Our authorized capital stock consists of 210,000,000
shares, with no par value, divided into 200,000,000 shares of common stock and
10,000,000 shares of undesignated stock. After giving effect to the issuance of
the 4,250,000 shares of common stock offered by this prospectus, we will have
36,977,000 shares of common stock outstanding. Upon the closing of the
offering, we will not have designated any of the undesignated stock and none
will be outstanding.
Common Stock
General. The rights, preferences and privileges of holders of common stock
are subject to, and may be adversely affected by, the rights of the holders of
shares of any series of preferred stock that our board of directors may
designate and issue in the future.
Voting Rights. Holders of common stock are entitled to one vote for each
share held of record on all matters submitted to a vote of shareholders.
Holders of common stock do not have cumulative voting rights in the election of
directors. Accordingly, Comverse, our controlling shareholder, may elect all of
the directors standing for election.
Dividends. Holders of common stock are entitled to receive ratably such
dividends, if any, as the board of directors may declare on the common stock
out of funds legally available for that purpose.
Liquidation. Upon the liquidation, dissolution or winding up of Ulticom,
holders of common stock are entitled to share ratably in all assets remaining
after the payment of all debts and other liabilities, subject to the prior
rights of any outstanding shares of preferred stock that our board of directors
may choose to designate.
Undesignated Stock
Our board of directors is expressly authorized in our certificate of
incorporation, without further shareholder approval, to amend our certificate
of incorporation to divide the 10,000,000 shares of undesignated stock into one
or more classes of common or preferred stock. The board can further divide any
of those or any hereafter created classes of undesignated stock designated as
preferred stock into series and to determine their designations, numbers,
relative rights, preferences and limitations, including the dividend rights,
dividend rates, conversion rights, voting rights, terms of redemption,
redemption price or prices, liquidation preferences and the number of shares
constituting any series or designations of these series. The relative rights,
preferences and limitations of each class or series of common or preferred
stock may differ from those of any and all other classes or series of common or
preferred stock, as the case may be. Our board of directors is expressly
authorized in our certificate of incorporation, without further shareholder
approval, to amend our certificate of incorporation to change the designations,
numbers, relative rights, preferences and limitations of any authorized but
unissued shares of preferred stock.
Our ability to designate and issue additional shares of undesignated stock in
this manner, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could adversely affect the voting
power of the holders of common stock, and could have the effect of making it
more difficult for a person to acquire, or of discouraging a person from
seeking to acquire, control of our company. The potential for issuance of
shares of undesignated stock may have an adverse impact on the market price of
the common stock outstanding after the offering. We have no present plans to
issue any shares of common or preferred stock from the shares of undesignated
stock.
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Options
Options to purchase a total of 6,500,000 shares of common stock may be
granted under our stock incentive compensation plan. As of January 31, 2000,
there were outstanding options to purchase a total of 3,272,700 shares of
common stock at a weighted average exercise price of $2.57 per share. In
addition, we plan to issue options to purchase 544,725 shares of common stock
under such plan upon completion of this offering at an exercise price equal to
the initial public offering price.
Certain Provisions of New Jersey Law
The New Jersey Business Corporation Act provides that in determining whether
a proposal or offer to acquire a corporation is in the best interest of the
corporation, the board of directors may, in addition to considering the effects
of any action on shareholders, consider any of the following:
. the effects of the proposed action on the corporation's employees,
suppliers, creditors and customers;
. the effects on the community in which the corporation operates; and
. the long-term as well as short-term interests of the corporation and its
shareholders, including the possibility that these interests may best be
served by the continued independence of the corporation.
The statute further provides that if, based on these factors, the board of
directors determines that any such offer is not in the best interest of the
corporation, it may reject the offer. These provisions may make it more
difficult for a shareholder to challenge the board of directors' rejection of,
and may facilitate the rejection of, an offer to acquire Ulticom.
We are also subject to the New Jersey Shareholders Protection Act which
prohibits certain New Jersey corporations, such as our company, from engaging
in a business combination, including mergers, consolidations, significant asset
dispositions and certain stock issuances, with any interested shareholder for
five years after such person becomes an interested shareholder, unless the
business combination is approved by the board of directors prior to the date
the shareholder became an interested shareholder. Interested shareholder is
defined to include, among others, any person that becomes a beneficial owner of
10% or more of the affected corporation's voting power. In addition, the
Protection Act prohibits any business combination at any time with an
interested shareholder other than a transaction that:
. is approved by the board of directors prior to the date that such
shareholder became an interested shareholder;
. is approved by the affirmative vote of the holders of two-thirds of the
voting stock not beneficially owned by the interested shareholder; or
. satisfies certain fair price and related criteria.
The Protection Act does not apply to certain business combinations, including
those with persons who acquired 10% or more of the voting power of the
corporation prior to the time the corporation was required to file periodic
reports under the Securities Exchange Act of 1934, as amended, or prior to the
time the corporation's securities began to trade on a national securities
exchange. Accordingly, the Protection Act does not apply to Comverse.
Limitation of Liability of Directors and Officers
Our certificate of incorporation provides that our directors and officers
will not be personally liable to us or our shareholders for damages for the
breach of any duty owed to us or our shareholders except to the extent that
this exception is not permitted by the New Jersey Business Corporation Act.
Indemnification of Directors and Officers
The New Jersey Business Corporation Act provides for the power to indemnify
any directors, officers, employees and agents and to purchase and maintain
insurance with respect to liability arising out of their capacity or status as
directors, officers, employees and agents. The indemnification provisions are
not exclusive of any other rights to which directors and officers may be
entitled under a corporation's certificate of incorporation or bylaws, any
agreement, a vote of stockholders or otherwise.
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Our certificate of incorporation provides that every person who:
. is or was our director, officer, employee or agent or of any constituent
corporation absorbed by us in a consolidation or merger, or the legal
representative of any such director, officer, employee or agent, or
. is or was a director, officer, trustee, employee or agent of any other
enterprise, serving as such at our request, or of any such constituent
corporation, or the legal representative of any such director, officer,
trustee, employee or agent,
shall be indemnified to the fullest extent permitted by law for all expenses
and liabilities in connection with any proceeding involving such person in this
capacity. Our certificate also provides that, during the pendency of any such
proceeding, we will advance to the fullest extent permitted by law expenses
incurred from time to time by an indemnified person in connection with the
proceeding, subject to our receipt of an undertaking as required by law. We
intend to enter into an indemnity agreement with each of our directors and
officers under which we will agree to provide indemnification and expense
reimbursement as outlined above.
Our bylaws also permit us to secure insurance on behalf of any officer,
director, employee or agent for any liability asserted against or incurred by
these individuals in their capacity, or arising out of their status, as our
officer, director or employee, regardless of whether the New Jersey Business
Corporation Act would permit indemnification. Under our services agreement,
Comverse has obtained directors' and officers' liability insurance which also
provides coverage for our officers and directors.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock will be American Stock
Transfer and Trust Company. Its address is 40 Wall Street, New York, New York
10005 and its telephone number at this location is (212) 936-5100.
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UNITED STATES FEDERAL TAX CONSIDERATIONS
FOR NON-UNITED STATES HOLDERS
The following is a general discussion of some of the U.S. federal income and
estate tax consequences of the ownership and disposition of our common stock
applicable to non-U.S. holders.
A non-U.S. holder is generally an individual, corporation, estate or trust
other than:
. an individual who is a citizen or resident of the United States for U.S.
federal income tax purposes;
. a corporation created or organized in the United States or under the
laws of the United States or of any subdivision thereof;
. an estate whose income is includable in gross income for U.S. federal
income tax purposes regardless of source; and
. a trust subject to the primary supervision of a court within the United
States and the control of one or more U.S. persons.
The following discussion is based on provisions of the U.S. Internal Revenue
Code of 1986, as amended, applicable Treasury regulations, and administrative
and judicial interpretations as of the date of this prospectus, all of which
are subject to change, possibly with retroactive effect. The following summary
is for general information and applies only to non-U.S. holders that hold our
common stock as a capital asset. In addition, this discussion does not apply to
persons holding our shares through a partnership or other pass-through entity.
If you are a non-U.S. holder, you should consult a tax advisor on the U.S.
federal tax consequences of holding and disposing of our common stock with
respect to your particular circumstances, for example, if you are a former
citizen or resident of the United States, as well as any tax consequences under
the laws of any U.S. state or local or non-U.S. taxing jurisdiction.
Dividends
Dividends paid to a non-U.S. holder of common stock generally will be subject
to withholding of U.S. federal income tax at a 30% rate or a lower rate that an
applicable income tax treaty may specify. Non-U.S. holders should consult their
tax advisors on their entitlement to benefits under a relevant income tax
treaty.
Dividends that are effectively connected with a non-U.S. holder's conduct of
a trade or business in the U.S. are generally subject to U.S. federal income
tax on a net income basis at regular graduated rates, but are not generally
subject to the 30% withholding tax if the non-U.S. holder files the appropriate
IRS form with the withholding agent. Any U.S. trade or business income received
by a non-U.S. holder that is a corporation may, under specific circumstances,
be subject to an additional branch profits tax at a 30% rate or a lower rate
that an applicable income tax treaty may specify.
Dividends paid prior to January 1, 2001 to an address in a foreign country
are presumed, absent actual knowledge to the contrary, to be paid to a resident
of that country for purposes of the withholding discussed above and for
purposes of determining the applicability of an income tax treaty rate. For
dividends paid after December 31, 2000 a non-U.S. holder of common stock that
claims the benefit of an income tax treaty rate generally will be required to
satisfy applicable certification and other requirements.
A non-U.S. holder of common stock that is eligible for a reduced rate of U.S.
withholding tax under an income tax treaty may obtain a refund or credit of any
excess amounts withheld by filing an appropriate claim for a refund with the
IRS.
Disposition of Common Stock
A non-U.S. holder generally will not be subject to U.S. federal income tax in
respect of gain recognized on a disposition of common stock unless:
. the gain is effectively connected with a U.S. trade or business, in
which case the branch profits tax may also apply to a corporate non-U.S.
holder;
50
<PAGE>
. the non-U.S. holder is an individual who is present in the United States
for 183 or more days in the taxable year of the disposition and meets
other requirements;
. the non-U.S. holder is subject to U.S. tax under provisions applicable
to certain U.S. expatriates (including certain former citizens or
residents of the United States); or
. we are or have been a U.S. real property holding corporation for U.S.
federal income tax purposes at any time during the shorter of the five-
year period ending on the date of disposition and the non-U.S. holder's
holding period for the common stock.
The tax relating to stock in a U.S. real property holding corporation does
not apply to a non-U.S. holder whose holdings, actual and constructive, at all
times during the applicable period, amount to 5% or less of the common stock,
provided that the common stock is regularly traded on an established securities
market. Generally, a corporation is a U.S. real property holding corporation if
the fair market value of its U.S. real property interests equals or exceeds 50%
of the sum of the fair market value of its worldwide real property interests
and its other assets used or held for use in a trade or business. We believe
that we have not been, are not, and do not anticipate becoming, a U.S. real
property holding corporation for U.S. federal income tax purposes.
Federal Estate Taxes
Common stock owned or treated as owned by an individual who is a non-U.S.
holder at the time of death will be included in the individual's gross estate
for U.S. federal estate tax purposes and may be subject to U.S. federal estate
tax, unless an applicable estate tax treaty provides otherwise.
Information Reporting Requirements and Backup Withholding Tax
Under specific circumstances, the IRS requires information reporting and
backup withholding at a rate of 31% on specific payments on common stock. Under
currently applicable law, non-U.S. holders of common stock generally will be
exempt from information reporting and backup withholding on dividends paid
prior to January 1, 2001 to an address outside the U.S. For dividends paid
after December 31, 2000, however, a non-U.S. holder of common stock that fails
to certify its non-U.S. holder status under applicable Treasury regulations may
be subject to information reporting and backup withholding at a rate of 31% on
payments of dividends.
With respect to the payment of proceeds upon the disposition of common stock,
under current law, non-U.S. holders are not subject to backup withholding and
will generally not be subject to information reporting but may be required to
comply with certification or identification requirements to prove their
exemption.
Non-U.S. holders should consult their own tax advisors on the application of
information reporting and backup withholding to them in their particular
circumstances, including upon their disposition of common stock.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from a payment to a non-U.S. holder will be refunded
or credited against the holder's U.S. federal income tax liability, if any, if
the holder provides the required information to the IRS.
51
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of our common stock in the public market could
adversely affect prevailing market prices of our common stock. Furthermore,
since no shares will be available for sale shortly after this offering because
of contractual and legal restrictions on resale described below, sales of
substantial amounts of common stock in the public market after these
restrictions lapse could adversely affect the prevailing market price and our
ability to raise equity capital in the future.
Upon completion of this offering, we will have outstanding an aggregate of
36,977,000 shares of common stock, assuming no exercise of the underwriters'
over-allotment option. All of the shares sold in this offering will be freely
tradable without restriction or further registration under the Securities Act,
unless such shares are purchased by affiliates as that term is defined in Rule
144 under the Securities Acts. All of the 32,727,000 shares of common stock
outstanding prior to this offering will be restricted securities, as defined in
Rule 144 under the Securities Act, which may only be sold in the public market
if registered under the Securities Act or in accordance with an exemption from
the registration requirements of the Securities Act or an exemption from
registration under Rule 144 under the Securities Act, which rules are
summarized below. These restricted securities will be available for sale in the
public market, subject to the volume limitations and other conditions of Rule
144, immediately upon the expiration of the 180-day lock-up period.
Lock-up Agreements
All of our officers and directors and Comverse have signed lock-up agreements
under which they agreed not to transfer, dispose of or hedge any shares of
common stock or any securities convertible into or exchangeable for shares of
common stock for a period of 180 days from the date of this prospectus.
Transfers or dispositions can be made sooner with the prior written consent of
Lehman Brothers Inc.
Rule 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of
common stock that are restricted securities for at least one year would be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of:
. 1% of the number of shares of common stock then outstanding, which will
equal approximately 369,770 shares immediately after this offering; or
. the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to such sale.
Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about us.
Rule 701
In general, under Rule 701, any of our employees, directors, officers,
consultants or advisors who purchases shares of our common stock from us in
connection with a compensatory stock or option plan or other written agreement
before the effective date of this offering is entitled to resell these shares
90 days after the
52
<PAGE>
effective date of this offering in reliance on Rule 144, without having to
comply with certain restrictions, including the holding period, contained in
Rule 144.
The Securities and Exchange Commission has indicated that Rule 701 will apply
to typical stock options granted by an issuer before it becomes subject to the
reporting requirements of the Securities Exchange Act of 1934, along with the
shares acquired upon exercise of these options (including exercises after the
date of this prospectus). Securities issued in reliance on Rule 701 are
restricted securities and, subject to the contractual restrictions described
above, beginning 90 days after the date of this prospectus, may be sold by
persons other than affiliates subject only to the manner of sale provisions of
Rule 144 and by affiliates under Rule 144 without compliance with its one year
minimum holding period requirement.
Share Options
We intend to file a registration statement on Form S-8 under the Securities
Act covering shares of our common stock reserved for issuance under our stock
incentive compensation plan. The registration statement on Form S-8 will become
effective automatically upon filing. As of January 31, 2000 options to purchase
3,272,700 shares of common stock were issued and outstanding, of which options
to purchase 818,175 shares will vest one year after this offering is completed.
In addition, we plan to issue options to purchase 544,725 shares of common
stock under such plan upon completion of this offering, of which options to
purchase 50,000 shares will vest six months after this offering is completed
and options to purchase 123,681 shares will vest one year after this offering
is completed.
Registration Rights
We have entered into a registration rights agreement with Comverse. See
"Related Party Transactions--Relationship with Comverse--Registration Rights
Agreement." We do not have any other contractual obligations to register our
common stock.
53
<PAGE>
UNDERWRITING
Under the underwriting agreement, which is filed as an exhibit to the
registration statement relating to the prospectus, each of the underwriters
named below, for whom Lehman Brothers Inc., Chase Securities Inc., U.S. Bancorp
Piper Jaffray Inc., and Fidelity Capital Markets, a division of National
Financial Services Corporation, are acting as representatives, has agreed to
purchase from us the respective number of shares of common stock shown opposite
its name below:
<TABLE>
<CAPTION>
Number of
Underwriters Shares
------------ ---------
<S> <C>
Lehman Brothers Inc.................................................
Chase Securities Inc................................................
U.S. Bancorp Piper Jaffray Inc......................................
Fidelity Capital Markets, a division of National Financial Services
Corporation........................................................
---------
Total............................................................. 4,250,000
=========
</TABLE>
The underwriting agreement provides that the underwriters' obligations to
purchase shares of common stock depend on the satisfaction of the conditions
contained in the underwriting agreement, and that if any of the shares of
common stock are purchased by the underwriters under the underwriting
agreement, then all of the shares of common stock which the underwriters have
agreed to purchase under the underwriting agreement must be purchased. The
conditions contained in the underwriting agreement include that:
. the representations and warranties made by us to the underwriters are
true;
. there is no material change in the financial markets; and
. we deliver customary closing documents to the underwriters.
The representatives had advised us that the underwriters propose to offer the
shares of common stock directly to the public at the public price set forth on
the cover page of this prospectus, and to selected dealers, who may include the
underwriters, at such public offering price less a selling concession not in
excess of $ per share. The underwriters may allow, and the selected dealers
may reallow, a concession not in excess of $ per share to brokers and
dealers. After the offering, the underwriters may change the offering price and
other selling terms.
The following table summarizes the underwriting discounts and commissions we
will pay. The underwriting discounts and commissions are equal to the public
offer price per share less the amount paid to us per share. The underwriting
discounts and commissions are equal to % of the public offering price.
<TABLE>
<CAPTION>
Total
-----------------------------
Without With
Per Share Over-allotment Over-allotment
--------- -------------- --------------
<S> <C> <C> <C>
Underwriting discounts and commissions
to be paid by us..................... $ $ $
</TABLE>
We estimate that the total expenses of the offering, including registration,
filing and listing fees, printing fees and legal and accounting expenses but
excluding underwriting discounts and commissions, will be approximately $1.0
million.
We have granted to the underwriters an option to purchase up to an aggregate
of 637,500 additional shares of common stock, exercisable solely to cover over-
allotments, if any, at the public offering price less the underwriting
discounts and commissions shown on the cover page of this prospectus. The
underwriters may exercise this option at any time, and from time to time, until
30 days after the date of the underwriting agreement. To the extent the
underwriters exercise this option, each underwriter will be committed, so long
as
54
<PAGE>
the conditions of the underwriting agreement are satisfied, to purchase a
number of additional shares of common stock proportionate to that underwriter's
initial commitment as indicated in the preceding table, and we will be
obligated, under the over-allotment option to sell the shares of common stock
to the underwriters.
We have agreed that, without the prior written consent of Lehman Brothers,
Inc., we will not offer, sell or otherwise dispose of any shares of capital
stock or any securities which may be converted into or exchanged for any shares
of capital stock for a period of 180 days from the date of this prospectus.
Comverse and all of our executive officers, directors and existing shareholders
have agreed under lock-up agreements that, without the prior written consent of
Lehman Brothers Inc., they will not offer, sell or otherwise dispose of any
shares of capital stock or any securities which may be converted into or
exchanged for any shares of capital stock for a period of 180 days from the
date of this prospectus, except that Comverse may sell shares of our capital
stock to a purchaser or purchasers of the shares who agree to be bound by the
same restrictions that bind Comverse. Without the prior written consent of
Lehman Brothers Inc., individuals participating in the directed share program
described below will be prohibited from disposing of shares of common stock for
a period of 90 days after the date of this prospectus.
Prior to the offering, there has been no public market for the shares of
common stock. The initial public offering price was negotiated between the
representatives and us. In determining the initial public offering price of the
common stock, the representatives considered:
. prevailing market conditions;
. our historical performance;
. our capital structure;
. estimates of our business potential and earning prospects;
. an overall assessment of our management; and
. the consideration of the above factors in relation to market valuation
of companies in related businesses.
Fidelity Capital Markets, a division of National Financial Services
Corporation, is acting as an underwriter in this offering, and will be
facilitating electronic distribution through the Internet/intranet and other
proprietary electronic technology.
We have agreed to indemnify the underwriters against liabilities relating to
the offering, including liabilities under the Securities Act, liabilities
arising from breaches of the representations and warranties contained in the
underwriting agreement, and liabilities incurred in connection with the
directed share program referred to below, and to contribute to payments that
the underwriters may be required to make for these liabilities.
Until the distribution of the common stock is completed, rules of the
Securities and Exchange commission may limit the ability of the underwriters
and selling group members to bid for and purchase shares of common stock. As an
exception to these rules, the representatives are permitted to engage in
transactions that stabilize the price of the common stock. These transactions
may consist of bids or purchases for the purpose of pegging, fixing or
maintaining the price of the common stock.
The underwriters may create a short position in the common stock in
connection with the offering, which means that they may sell more shares of
common stock than are set forth on the cover page of this prospectus. If the
underwriters create a short position, then the representatives may reduce that
short position by purchasing common stock in the open market. The
representatives also may elect to reduce any short position by exercising all
or part of the over-allotment option described in this prospectus.
The representatives also may impose a penalty bid on underwriters and selling
group members. This means that if the representatives purchase shares of common
stock in the open market to reduce the
55
<PAGE>
underwriters' short position or to stabilize the price of the common stock,
they may reclaim the amount of the selling concession from the underwriters and
selling group members who sold those shares as part of the offering.
In general, purchasers of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid could have an effect on the price of a security to
the extent that it were to discourage resales of the security by purchasers in
an offering.
Neither we nor any of the underwriters make any representation or prediction
as to the direction or magnitude of any effect that the transactions described
above may have on the price of the common stock. In addition, neither we nor
any of the underwriters make any representation that the representatives will
engage in such transactions or that any such transaction, once commenced, will
not be discontinued without notice.
Purchasers of the shares of common stock offered in this prospectus may be
required to pay stamp taxes and other charges under the laws and practices of
the country of purchase, in addition to the offering price listed on the cover
of this prospectus.
At our request, Lehman Brothers Inc. has reserved up to shares of the
common stock, or % of the common stock offered by this prospectus, for sale
under a directed share program to officers, directors and employees and their
family members of Comverse and its affiliates, including Ulticom, and friends
of management of Comverse and us. All of the persons purchasing the reserved
shares must commit to purchase no later than the close of business on the day
following the date of this prospectus. The number of shares available for sale
to the general public will be reduced to the extent these persons purchase the
reserved shares.
The underwriters have informed us that they do not intend to confirm sales to
discretionary accounts that exceed 5% of the total number of shares of common
stock offered by them.
Lehman Brothers Inc. has served as underwriter and manager for five security
offerings for Comverse in the past and has received customary compensation for
these services.
LEGAL MATTERS
The validity of the shares of common stock being offered hereby and certain
other legal matters in connection with this offering with respect to New Jersey
law will be passed upon for Ulticom by Sills Cummis Radin Tischman Epstein &
Gross, P.A., Newark, New Jersey. Certain legal matters in connection with this
offering with respect to New York laws and the federal laws of the United
States will be passed upon for Ulticom by Weil, Gotshal & Manges LLP, New York,
New York. Certain legal matters in connection with this offering will be passed
upon for the underwriters by Chadbourne & Parke LLP, New York, New York.
EXPERTS
The financial statements included in this prospectus and in the registration
statement have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing in this prospectus, and have been so included
in reliance on the report of such firm given upon their authority as experts in
auditing and accounting.
56
<PAGE>
AVAILABLE INFORMATION
We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-1 under the Securities Act of 1933, as amended, with
respect to the shares of common stock to be sold in the offering. This
prospectus does not contain all the information set forth in the Registration
Statement. We refer you to the Registration Statement for further information
with respect to us and the shares of common stock to be sold in the offering.
With respect to any statement contained in this prospectus as to the contents
of any contract, agreement or other document referred to herein, we refer you
to the contract, agreement or other document filed as an exhibit to the
Registration Statement. Each such statement is qualified in all respects by
reference to the exhibit.
You may read and copy all or any portion of the Registration Statement or any
other information we file at the Securities and Exchange Commission's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can
request copies of these documents, upon payment of a duplicating fee, by
writing to the Securities and Exchange Commission. Please call the Securities
and Exchange Commission at 1-800-SEC-0330 for further information on the
operation of the public reference rooms. Our Securities and Exchange Commission
filings, including the Registration Statement, are also available to you on the
Securities and Exchange Commission's Web site (http://www.sec.gov).
As a result of the offering, we will become subject to the information and
reporting requirements of the Securities Exchange Act of 1934, as amended, and,
in accordance with the Exchange Act, we will file periodic reports, proxy
statements and other information with the Securities and Exchange Commission.
Upon approval of the common stock for the quotation on the Nasdaq National
Market, any of these reports, proxy and information statements and other
information may also be inspected at the offices of Nasdaq Operations, 1735 K
Street, N.W., Washington, D.C. 20006.
REPORTS TO SHAREHOLDERS
We intend to furnish our shareholders annual reports containing audited
financial statements and will make available copies of quarterly reports for
the first three quarters of each year containing unaudited interim financial
information.
57
<PAGE>
ULTICOM, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report.............................................. F-2
Balance Sheets as of January 31, 1999 and 2000............................ F-3
Statements of Operations for the year ended December 31, 1997, the one
month ended January 31, 1998, the years ended January 31, 1999 and 2000.. F-4
Statements of Stockholders' Equity (Deficit) for the year ended December
31, 1997, the one month ended January 31, 1998, the years ended January
31, 1999 and 2000........................................................ F-5
Statements of Cash Flows for the year ended December 31, 1997, the one
month ended January 31, 1998, the years ended January 31, 1999 and 2000.. F-6
Notes to the Financial Statements......................................... F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Ulticom, Inc.
Mt. Laurel, New Jersey
We have audited the accompanying balance sheets of Ulticom, Inc. (the
"Company") as of January 31, 1999 and 2000, and the related statements of
operations, stockholders' equity (deficit), and cash flows for the year ended
December 31, 1997, the one month ended January 31, 1998 and the years ended
January 31, 1999 and 2000. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of January 31, 1999 and
2000, and the results of its operations and its cash flows for the year ended
December 31, 1997, the one month ended January 31, 1998 and the years ended
January 31, 1999 and 2000 in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
New York, New York
February 25, 2000 (March 13, 2000 as to Note 1)
F-2
<PAGE>
ULTICOM, INC
BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
January 31, January 31,
1999 2000
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................ $2,544 $ 6,299
Accounts receivable, net of allowance for doubtful
accounts of $205 and $250........................... 1,525 3,162
Due from related parties............................. 1,662 1,009
Inventories.......................................... 873 1,812
Prepaid expenses and other current assets............ 73 408
Deferred tax asset................................... 167 332
------ -------
Total current assets............................... 6,844 13,022
Property and equipment, net.......................... 1,739 3,190
Other assets......................................... 300 1,152
------ -------
Total Assets....................................... $8,883 $17,364
====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable and accrued expenses................ $2,154 $ 4,225
Deferred revenue..................................... 2,619 7,438
Due to related parties............................... 4,307 617
------ -------
Total current liabilities.......................... 9,080 12,280
------ -------
Long-Term Liabilities:
Note payable, bank................................... -- 3,800
Deferred tax liability............................... 257 164
------ -------
Total long-term liabilities........................ 257 3,964
------ -------
Commitments and Contingencies
Stockholders' Equity (Deficit):
Undesignated stock, no par value, 10,000,000 shares
authorized, no shares issued and outstanding........ -- --
Common stock, no par value, 200,000,000 authorized,
32,727,000 issued and outstanding................... -- --
Additional paid-in capital........................... 10 10
Retained earnings (deficit).......................... (464) 1,110
------ -------
Total stockholders' equity (deficit)............... (454) 1,120
------ -------
Total liabilities and stockholders' equity
(deficit)......................................... $8,883 $17,364
====== =======
</TABLE>
See notes to financial statements
F-3
<PAGE>
ULTICOM, INC.
STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
One Month Year Ended
Year Ended Ended January 31,
December 31, January 31, ----------------
1997 1998 1999 2000
------------ ----------- ------- -------
<S> <C> <C> <C> <C>
Sales.............................. $14,559 $ 212 $18,629 $25,831
Cost of sales...................... 4,495 294 6,131 8,883
------- ------ ------- -------
Gross profit....................... 10,064 (82) 12,498 16,948
Operating expenses:
Research and development........... 2,398 205 4,706 6,015
Selling, general and
administrative.................... 3,891 348 4,948 8,124
------- ------ ------- -------
Income (loss) from operations...... 3,775 (635) 2,844 2,809
Interest income (expense), net..... (507) (45) (350) (271)
------- ------ ------- -------
Income (loss) before income taxes.. 3,268 (680) 2,494 2,538
Income tax provision (benefit)..... 1,213 (249) 927 964
------- ------ ------- -------
Net income (loss).................. $ 2,055 $ (431) $ 1,567 $ 1,574
======= ====== ======= =======
Earnings (loss) per share:
Basic.............................. $ 0.06 $(0.01) $ 0.05 $ 0.05
======= ====== ======= =======
Diluted............................ $ 0.06 $(0.01) $ 0.05 $ 0.05
======= ====== ======= =======
</TABLE>
See notes to financial statements
F-4
<PAGE>
ULTICOM, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(In thousands)
<TABLE>
<CAPTION>
Common Stock
------------------- Additional Retained
Number of Paid-In Earnings
Shares Par Value Capital (Deficit) Total
--------- --------- ---------- --------- -------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997..... 32,727 $-- $10 $(3,399) $(3,389)
Net income................... 2,055 2,055
------ ---- --- ------- -------
Balance, December 31, 1997... 32,727 -- 10 (1,344) (1,334)
Net loss..................... (431) (431)
Dividend to Parent........... (256) (256)
------ ---- --- ------- -------
Balance, January 31, 1998.... 32,727 -- 10 (2,031) (2,021)
Net income................... 1,567 1,567
------ ---- --- ------- -------
Balance, January 31, 1999.... 32,727 -- 10 (464) (454)
Net income................... 1,574 1,574
------ ---- --- ------- -------
Balance, January 31, 2000.... 32,727 $-- $10 $ 1,110 $ 1,120
====== ==== === ======= =======
</TABLE>
See notes to financial statements
F-5
<PAGE>
ULTICOM, INC.
STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
One month
Year Ended Ended Year Ended January 31,
December 31, January 31, ------------------------
1997 1998 1999 2000
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss).......... $ 2,055 $ (431) $ 1,567 $ 1,574
Adjustments to reconcile
net income (loss) to net
cash provided by (used in)
operating activities:
Depreciation and
amortization............ 529 42 1,408 1,689
Deferred income taxes.... 136 8 276 (258)
Changes in assets and
liabilities:
Accounts receivable...... (95) 319 (140) (1,637)
Due from related
parties................. (1,025) (30) 118 653
Inventories.............. (873) (91) 91 (939)
Prepaid expenses and
other current assets.... 467 (30) 56 (335)
Other assets............. (3) 29 (14) (507)
Accounts payable and
accrued expenses........ 680 (88) 335 2,071
Deferred revenue......... 1,785 119 263 4,819
------- ------ ----------- -----------
Net cash provided by
(used in) operating
activities.............. 3,656 (153) 3,960 7,130
------- ------ ----------- -----------
Cash flows from investing
activities:
Purchase of property and
equipment............... (883) (72) (1,254) (2,853)
Capitalization of
software development
costs................... -- -- (508) (632)
------- ------ ----------- -----------
Net cash used in
investing activities.... (883) (72) (1,762) (3,485)
------- ------ ----------- -----------
Cash flows from financing
activities:
Dividend to parent....... -- (256) -- --
Note payable, bank....... -- -- -- 3,800
Due to related parties... (2,058) 35 (238) (3,690)
------- ------ ----------- -----------
Net cash provided by
(used in) financing
activities.............. (2,058) (221) (238) 110
------- ------ ----------- -----------
Net increase (decrease) in
cash and cash
equivalents............... 715 (446) 1,960 3,755
Cash and cash equivalents,
beginning of period....... 315 1,030 584 2,544
------- ------ ----------- -----------
Cash and cash equivalents,
end of period............. $ 1,030 $ 584 $ 2,544 $ 6,299
------- ------ ----------- -----------
Supplemental disclosures of
cash flow information:
Cash paid for interest: $ -- $ -- $ -- $ --
------- ------ ----------- -----------
Cash paid for taxes...... $ -- $ -- $ -- $ 48
======= ====== =========== ===========
</TABLE>
See notes to financial statements
F-6
<PAGE>
ULTICOM, INC.
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 1997,
One Month Ended January 31, 1998, and
Years Ended January 31, 1999 and 2000
1. Business and Summary of Significant Accounting Policies
Company Business and Background--Ulticom, Inc., ("the Company"), formerly
DGM&S Telecom, Inc., a New Jersey corporation and subsidiary of Comverse
Technology, Inc. ("Comverse"), is engaged in the design, development,
manufacture, marketing and support of software and hardware for use in the
communications industry. In May 1999, the Company amended its certificate of
incorporation to change its name from DGM&S Telecom, Inc. to Ulticom, Inc.
Recapitalization--In December 1998, the Company amended its certificate of
incorporation to increase its authorized capital stock to 110,000,000 shares
without par, of which 100,000,000 shares were designated as common stock and
10,000,000 shares were authorized without designation and available for
issuance with such designations and relative rights, preferences and
limitations as may be specified from time to time by the Board of Directors. On
March 10, 2000, the Company amended its certificate of incorporation in
connection with its initial public offering to increase its authorized capital
stock to 210,000,000 shares without par, of which 200,000,000 have been
designated as common stock and 10,000,000 shares have been authorized without
designation and available for issuance with such designations and relative
rights, preferences and limitations as may be specified from time to time by
the Board of Directors.
Effective as of December 31, 1998, the Board of Directors declared a stock
dividend on the Company's outstanding common stock at the rate of 100,000
shares of common stock for each outstanding share of common stock. On March 13,
2000, the Board of Directors declared a stock dividend on the Company's
outstanding common stock at the rate of 2.2727 shares of common stock for each
outstanding share of common stock. All references to per share amounts and the
number of shares in these financial statements have been adjusted to reflect
the increase in authorized capital stock and the stock dividends referred to
above.
Basis of Presentation--In January 1998, in connection with the merger of
Comverse with another company, the Company along with Comverse changed its
fiscal year from a calendar year to the year ending January 31. This report
presents the financial statements of the Company for the year ended December
31, 1997, the one-month period ended January 31, 1998, and the years ended
January 31, 1999 and 2000. Unaudited statement of operations data for the one
month ended January 31, 1997 is as follows (in thousands, except per share
data):
<TABLE>
<S> <C>
Sales............................................................ $734
Gross profit..................................................... $506
Income tax provision............................................. $ 53
Net income....................................................... $ 91
Net income per share (basic and diluted)......................... $ 0.00
</TABLE>
Cash and Cash Equivalents--The Company considers all highly liquid
investments purchased with a maturity of three months or less to be cash
equivalents.
Fair Value of Financial Instruments--The estimated fair value amounts have
been determined by the Company, using available market information and
appropriate valuation methodologies. However, considerable judgement is
necessarily required in interpreting market data to develop the estimates of
fair value. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that the Company could realize in a current market
exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimate fair value amounts.
F-7
<PAGE>
ULTICOM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Concentration of Credit Risk--Financial instruments which potentially expose
the Company to a concentration of credit risk consist of cash and cash
equivalents and trade receivables. The Company places its cash investments with
high quality financial institutions. The Company sells its products to
customers who are dispersed across many geographic regions and who are
principally in the communications industry. The Company believes no significant
concentration of credit risk exists with respect to these cash investments and
accounts receivable. The carrying amount of the financial instruments are
reasonable estimates of their fair value.
Inventories--Inventories are stated at the lower of cost or market. Cost is
determined by the first in, first out (FIFO) method.
Property and Equipment--Property and equipment are recorded at cost less
accumulated depreciation and amortization. The Company depreciates its
furniture and equipment using straight-line depreciation over periods ranging
from three to seven years. Leasehold improvements are amortized over the lesser
of the term of the respective lease or the estimated useful lives of the
improvements (7 years). The cost of maintenance and repairs are charged to
operations as incurred. Significant renewals and betterments are capitalized.
Income Taxes--The Company accounts for income taxes under the asset and
liability method. Under this method, deferred tax assets and liabilities are
determined based on differences between the financial reporting and the tax
bases of assets and liabilities, and are measured using the enacted tax rates
and laws that are expected to be in effect when the differences are expected to
reverse. For federal income tax purposes, the Company's results will be
included in the Comverse consolidated tax return as long as Comverse retains
beneficial ownership of at least 80% of the total voting power and value of the
outstanding common stock of the Company. Income taxes are determined as if the
Company was a separate taxpayer. Income tax currently payable has been charged
to the due to related parties account in the period that the liability arose.
Under the tax sharing agreement between the Company and Comverse, the Company
does not receive any benefit for losses that it incurs. Accordingly, for the
one month ended January 31, 1998 the benefit attributable to the loss incurred
by the Company has been reflected as a deemed dividend to Comverse.
Revenue and Expense Recognition--Revenues from product sales are generally
recognized upon shipment. The Company provides its customers with post-contract
support services, which generally consist of bug-fixing and telephone access to
the Company's technical personnel, but may also include the right to receive
product updates, upgrades and enhancements. Revenue from these services is
recognized ratably over the contract period. Post-contract support services
included in the initial licensing fee are allocated from the total contract
amount based on the relative fair value of vendor specific objective evidence
("VSOE"). For multi-element arrangements, VSOE of fair value is determined
based on the price charged when the same element is sold separately or, for
elements not yet being sold separately, the price established by management
having the relevant authority. If VSOE of fair value does not exist for one or
more delivered elements of a multi-element arrangement and VSOE of fair value
exists for all undelivered elements, then revenue is recognized using the
"residual method."
Deferred revenue consist primarily of amounts billed to customers pursuant to
terms specified in contracts but for which revenue has not been recognized.
Included in Sales are license revenues amounting to approximately $6,651,000,
$74,000, $7,946,000 and $5,270,000 for the year ended December 31, 1997, the
one month ended January 31, 1998, and the years ended January 31, 1999 and
2000. The related costs of revenues associated with these license revenues were
not material in each of the periods presented.
Expenses incurred in connection with research and development activities,
other than certain software development costs that are capitalized, and
selling, general and administrative expenses are charged to operations as
incurred.
F-8
<PAGE>
ULTICOM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Software Development Costs--Software development costs are capitalized upon
the establishment of technological feasibility and are amortized over the
estimated useful life of the software, which has been four years or less.
Amortization begins in the period when the product is available for general
release to customers. Amortization expenses amounted to $211,000, $18,000,
$134,000, and $287,000 for the year ended December 31, 1997, the one-month
ended January 31, 1998 and the years ended January 31, 1999 and 2000,
respectively. In the year ended January 31, 1999, the Company recorded an
impairment loss of $619,000 to reduce the carrying value of the software
development costs to their net realizable value.
Comprehensive Income--In 1997, the Financial Accounting Standards Board
("FASB") issued Statement No. 130, Reporting Comprehensive Income. The
statement establishes standards for the reporting and display of comprehensive
income and its components in a full set of general-purpose financial
statements. The statement became effective for the Company beginning January 1,
1998. For all periods presented, the Company had no components of comprehensive
income other than net income.
Long Lived Assets--The Company reviews for the impairment of long-lived
assets and certain identifiable intangibles whenever events change, or changes
in circumstance indicate that the carrying amount of an asset may not be
recoverable. An impairment loss would be recognized when estimated future cash
flows expected to result from the use of an asset and its eventual disposition
is less than its carrying amount. The Company has identified no such impairment
losses.
Pervasiveness of Estimates--The preparation of the 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 disclosures 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.
Reclassifications--Certain prior year balances have been reclassified to
conform with the current year classifications.
2. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
January 31,
---------------
1999 2000
---------------
(In thousands)
<S> <C> <C>
Work in process.............................................. $ 454 $ 709
Finished goods............................................... 419 1,103
------ --------
$ 873 $ 1,812
====== ========
</TABLE>
3. Property and Equipment
Property and equipment consists of the following:
<TABLE>
<CAPTION>
January 31,
----------------
1999 2000
------- -------
(In thousands)
<S> <C> <C>
Furniture and equipment.................................... $ 5,894 $ 4,407
Transportation equipment................................... 66 --
Leasehold improvements..................................... 102 158
------- -------
6,062 4,565
Less: accumulated depreciation............................. (4,323) (1,375)
------- -------
$ 1,739 $ 3,190
======= =======
</TABLE>
F-9
<PAGE>
ULTICOM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
4. Other Assets
Other assets consist of the following:
<TABLE>
<CAPTION>
January 31,
-----------
1999 2000
---- ------
(In
thousands)
<S> <C> <C>
Software development costs, net of accumulated amortization of
$2,327 and $2,431............................................ $129 $ 658
Other assets.................................................. 171 494
---- ------
$300 $1,152
==== ======
</TABLE>
5. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
January 31,
---------------
1999 2000
------- -------
(In thousands)
<S> <C> <C>
Accounts payable............................................ $ 559 $ 716
Accrued salaries and benefits............................... 959 2,039
Other....................................................... 636 1,470
------- -------
$ 2,154 $ 4,225
======= =======
</TABLE>
6. Related Party Transactions
The Company sells products and provides services to other subsidiaries of
Comverse. Sales to related parties were approximately $2,681,000, $42,000,
$3,789,000 and $4,679,000 for the year ended December 31, 1997, the one month
ended January 31, 1998, and the years ended January 31, 1999 and 2000,
respectively. The amounts charged to related parties for administrative
services were approximately $1,106,000, $152,000, $644,000 and $42,000, for the
year ended December 31, 1997, the one month ended January 31, 1998, and the
years ended January 31, 1999 and 2000, respectively. These charges are included
in their entirety in selling, general and administrative expenses. The Company
was charged interest on balances owed to Comverse amounting to approximately
$532,000, $48,000, $419,000 and $362,000 for the year ended December 31, 1997,
the one month ended January 31, 1998, and the years ended January 31, 1999 and
2000, respectively.
The Company has a services agreement with Comverse. Under this agreement,
Comverse provides the Company with various administrative and consulting
services. The Company has agreed to pay to Comverse a quarterly fee of
$150,000, payable in arrears at the end of each fiscal quarter, in
consideration for all services provided by Comverse during such fiscal quarter.
The Company was charged $600,000 in each of the years ended December 31, 1997,
January 31, 1999 and January 31, 2000, for consulting and other corporate
services provided by Comverse. In addition, the Company has agreed to reimburse
Comverse for any out-of-pocket expenses incurred by Comverse in providing the
services. The term of the agreement extends to January 31, 2003 and is
automatically extended for additional twelve-month periods unless terminated by
either party.
In January 2000, the Company secured a bank loan in the amount of $3.8
million. Such loan bears interest at LIBOR plus 0.35%, matures in July 2001 and
may be prepaid without penalty at six month intervals. As of January 31, 2000,
the interest rate on the loan was 6.6%. The proceeds of such loan were used to
repay amounts owed to related parties. The loan is secured by a deposit made by
Comverse with the bank. The fair value of the loan approximates market value
due to the recent issuance of such debt.
F-10
<PAGE>
ULTICOM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
7. Stock Options
Employee Stock Options--At January 31, 2000, 3,272,700 shares of common stock
were reserved for issuance upon exercise of options then outstanding and
3,227,300 options were available for future grant under the Company's stock
option plan. Options under the plan may be granted to key employees, directors,
and other persons rendering services to the Company. Options which are
designated as "incentive stock options" under the option plans may be granted
with an exercise price not less than the fair market value of the underlying
shares at the date of grant and are subject to certain quantity and other
limitations specified in Section 422 of the Internal Revenue Code. Options
which are not intended to qualify as incentive stock options may be granted at
any price, but not less than the par value of the underlying shares, and
without restriction as to amount. The options and the underlying shares are
subject to adjustment in accordance with the terms of the plans in the event of
stock dividends, recapitalizations and similar transactions.
The changes in the number of options were as follows:
<TABLE>
<CAPTION>
One Month
Year Ended Ended Years Ended January 31,
December 31, January 31, ------------------------
1997 1998 1999 2000
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Outstanding at beginning
of period.............. -- -- -- 2,899,612
Granted during the
period................. -- -- 3,655,606 877,084
Exercised during the
period................. -- -- -- --
Canceled, terminated and
expired................ -- -- (755,994) (503,996)
----- ----- ----------- -----------
Outstanding at end of
period................. -- -- 2,899,612 3,272,700
===== ===== =========== ===========
All of the options vest seven years from the date of grant. The options
contain acceleration provisions upon certain events (an "Acceleration Event"),
including a public offering of the Company's common stock registered under the
Securities Act of 1933. Upon the happening of an Acceleration Event, the
options vest in four equal annual increments from the date of the Acceleration
Event.
Weighted average option exercise price information were as follows:
<CAPTION>
One Month Years Ended
Year Ended Ended January 31,
December 31, January 31, ------------------------
1997 1998 1999 2000
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Outstanding at beginning
of period.............. $ -- $ -- $ -- $ 2.21
Granted during the
period................. -- -- 2.17 3.71
Exercise during the
period................. -- -- -- --
Canceled, terminated and
expired................ -- -- 1.99 2.51
----- ----- ----------- -----------
Outstanding at end of
period................. $ -- $ -- $ 2.21 $ 2.57
===== ===== =========== ===========
</TABLE>
F-11
<PAGE>
ULTICOM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Significant option groups outstanding at January 31, 2000, and related
weighted average price and life information were as follows:
<TABLE>
<CAPTION>
Weighted Average Weighted Weighted
Range of Number Remaining Average Number Average
Exercise Price Outstanding Contractual Life Exercise Price Exercisable Exercise Price
-------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$1.99 1,777,076 8.01 $1.99 -- $--
$2.75 703,631 8.83 2.75 -- --
$3.36 343,633 9.10 3.36 -- --
$3.97 448,360 9.50 3.97 -- --
--------- ---- ----- ---- ----
3,272,700 8.50 $2.57 -- $--
========= ==== ===== ==== ====
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations in accounting for
its option plans. Accordingly, as all options have been granted at exercise
prices equal to fair market value on the date of grant, no compensation expense
has been recognized by the Company in connection with its stock-based
compensation plans. Had compensation cost for the Company's stock plans been
determined based upon the fair value at the date of grant for awards under
these plans consistent with the methodology prescribed under Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation", the Company's net income and earnings per share would be reduced
by approximately $196,763 and $297,447 or $0.01 and $0.01 per diluted share for
the years ended January 31, 1999 and 2000, respectively. The weighted average
fair value of the options granted during the years ended January 31, 1999 and
2000 is estimated at $0.66 and $1.21, respectively, on the date of grant (using
the Black-Scholes option pricing model) assuming an expected life of seven
years and assuming the following weighted average assumptions: (i) volatility
of 0% and risk free interest rate of 5.4% for the year ended January 31, 1999,
and (ii) volatility of 0% and risk free interest rate of 5.8% for the year
ended January 31, 2000.
8. Earnings Per Share ("EPS")
Basic earnings per share is determined by using the weighted average number
of shares of common stock outstanding during each period. Diluted earnings per
share further assumes the issuance of common shares for all dilutive potential
shares outstanding. The calculation for earnings per share for the year ended
December 31, 1997, the one-month period ended January 31, 1998, and the years
ended January 31, 1999 and 2000 was as follows:
<TABLE>
<CAPTION>
December 31, 1997 January 31, 1998
----------------------- ------------------------
Per Share Per Share
Income Shares Amount Income Shares Amount
------ ------ --------- ------ ------ ---------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Net Income (Loss)......... $2,055 32,727 $0.06 $(431) 32,727 $(0.01)
Effect of Dilutive
Securities-Options....... -- -- -- -- -- --
------ ------ ----- ----- ------ ------
Diluted EPS............... $2,055 32,727 $0.06 $(431) 32,727 $(0.01)
====== ====== ===== ===== ====== ======
</TABLE>
F-12
<PAGE>
ULTICOM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
January 31, 1999 January 31, 2000
----------------------- -----------------------
Per Share Per Share
Income Shares Amount Income Shares Amount
------ ------ --------- ------ ------ ---------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Net income................. $1,567 32,727 $0.05 $1,574 32,727 $0.05
Effect of dilutive
securities-options........ -- 360 -- -- 1,032 --
------ ------ ----- ------ ------ -----
Diluted EPS................ $1,567 33,087 $0.05 $1,574 33,759 $0.05
====== ====== ===== ====== ====== =====
</TABLE>
9. Interest Income (Expense), Net
Interest income (expense), net consists of the following:
<TABLE>
<CAPTION>
One Month Year Ended
Year Ended Ended January 31,
December 31, January 31, -------------
1997 1998 1999 2000
------------ ----------- ----- ------
(In thousands)
<S> <C> <C> <C> <C>
Interest income..................... $ 25 $ 3 $ 69 $ 103
Interest expense.................... (532) (48) (419) (374)
------ ----- ----- ------
Net................................. $ (507) $ (45) $(350) $ (271)
====== ===== ===== ======
10. Income Taxes
The provision for income taxes consists of the following:
<CAPTION>
One Month Year Ended
Year Ended Ended January 31,
December 31, January 31, -------------
1997 1998 1999 2000
------------ ----------- ----- ------
(In thousands)
<S> <C> <C> <C> <C>
Current:
Federal........................... $ 958 $(229) $ 578 $1,075
State............................. 119 (28) 73 147
------ ----- ----- ------
Total current................... 1,077 (257) 651 1,222
------ ----- ----- ------
Deferred (benefit):
Federal........................... 122 7 249 (246)
State............................. 14 1 27 (12)
------ ----- ----- ------
Total deferred.................. 136 8 276 (258)
------ ----- ----- ------
$1,213 $(249) $ 927 $ 964
====== ===== ===== ======
The reconciliation of the U.S. Federal statutory tax rate to the Company's
effective rate is as follows:
<CAPTION>
One Month Year Ended
Year Ended Ended January 31,
December 31, January 31, -------------
1997 1998 1999 2000
------------ ----------- ----- ------
<S> <C> <C> <C> <C>
U.S. Federal statutory rate......... 34% (34%) 34% 34%
State taxes, net.................... 3 (3) 3 4
------ ----- ----- ------
Company's effective tax rate........ 37% (37%) 37% 38%
====== ===== ===== ======
</TABLE>
F-13
<PAGE>
ULTICOM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The tax effects of
significant items comprising the Company's deferred tax asset and liability at
January 31, 1999 and 2000 are as follows:
<TABLE>
<CAPTION>
January 31,
----------------
1999 2000
------- -------
(In thousands)
<S> <C> <C>
Deferred tax asset:
Accrued liabilities and other............................ $ 105 $ 239
Allowance for doubtful accounts.......................... 62 93
------- -------
Total deferred tax asset............................... 167 332
------- -------
Deferred tax liability:
Depreciation............................................. (257) (164)
------- -------
Total deferred tax liability............................. (257) (164)
------- -------
Net deferred tax asset (liability)..................... $ (90) $ 168
======= =======
</TABLE>
11. Business Segment Information
The Company is engaged in one business segment: the design, development,
manufacture, marketing and support of special software and hardware for the
communications industry.
Sales by country, as a percentage of total sales is as follows:
<TABLE>
<CAPTION>
Year Ended
Year Ended One Month January 31,
December 31, Ended January 31, -------------
1997 1998 1999 2000
------------ ----------------- ----- -----
<S> <C> <C> <C> <C>
United States.................. 50% 78% 49% 37%
Germany........................ 13% -- 13% 12%
Israel......................... 19% 20% 20% 18%
England........................ 11% 1% 7% 5%
Sweden......................... -- -- 3% 16%
Other.......................... 7% 1% 8% 12%
--- --- ----- -----
Total........................ 100% 100% 100% 100%
=== === ===== =====
</TABLE>
The Company has no significant long-lived assets deployed outside of the
United States. For the year ended December 31, 1997, subsidiaries of Comverse,
Qualcomm, Siemens and Sun Microsystems, accounted for approximately 19%, 13%,
13% and 10%, respectively, of the Company's sales. For the one month ended
January 31, 1998, Amdahl, subsidiaries of Comverse and Compaq accounted for
approximately 50%, 20% and 14%, respectively, of the Company's sales. For the
year ended January 31, 1999, subsidiaries of Comverse and Siemens accounted for
approximately 20% and 13%, respectively, of the Company's sales. For the year
ended January 31, 2000, Ericsson, subsidiaries of Comverse, and Siemens
accounted for approximately 20%, 18% and 12%, respectively, of the Company's
sales.
F-14
<PAGE>
ULTICOM, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
12. Commitments and Contingencies
Leases--The Company leases office space under non-cancelable operating
leases. Rent expense for all leased premises approximated $443,000, $46,000,
$541,000 and $593,000 and for the year ended December 31, 1997, the one month
ended January 31, 1998, and the years ended January 31, 1999 and 2000,
respectively. For the year ended December 31, 1997, the one month ended January
31, 1998 and the years ended January 31, 1999 and 2000, the Company received
rental income from other subsidiaries of Comverse of $213,000, $18,000,
$138,000, and $0, respectively, for their proportionate share of the leased
space. At January 31, 2000, the Company does not share office space with any
subsidiaries of Comverse.
As of January 31, 2000, the minimum rent obligations of the Company were
approximately as follows:
<TABLE>
<CAPTION>
Years Ending
January 31, Amount
------------ --------------
(In thousands)
<S> <C>
2001........................................................ $ 537
2002........................................................ 464
2003........................................................ 483
2004........................................................ 503
2005 and thereafter......................................... 1,212
------
$3,199
======
</TABLE>
Litigation--The Company is subject to legal actions arising in the normal
course of business. After taking into consideration legal counsel's evaluation
of such actions, management is of the opinion that their final resolution will
not have a significant adverse effect on the Company's business or its
financial statements.
F-15
<PAGE>
Ulticom's global customer base and worldwide product penetration.
[MAP]
. Customer locations by headquarters
[ ] Product by country
<PAGE>
[GRAPHIC OF SECTION OF WORLD MAP]
4,250,000 Shares
[LOGO OF ULTICOM/TM/]
Common Stock
------------
PROSPECTUS
, 2000
------------
Lehman Brothers
Chase H&Q
U.S. Bancorp Piper Jaffray
Fidelity Capital Markets
a division of National Financing Services Corporation
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The expenses, other than underwriting commissions, expected to be incurred by
the Company in connection with the issuance and distribution of the securities
being registered under this Registration Statement are estimated to be as
follows:
<TABLE>
<CAPTION>
Amount to
Be Paid
----------
<S> <C>
Securities and Exchange Commission Registration Fee.............. $ 15,584
National Association of Securities Dealers, Inc. Filing Fee...... 6,365
Nasdaq National Market Filing Fee................................ 95,000
Printing and Engraving........................................... 200,000
Legal Fees and Expenses.......................................... 400,000
Accounting Fees and Expenses..................................... 200,000
Miscellaneous.................................................... 83,051
----------
Total.......................................................... $1,000,000
==========
</TABLE>
- --------
* To be filed by amendment
Item 14. Indemnification of Directors and Officers.
The New Jersey Business Corporation Act provides for the power to indemnify
any directors, officers, employees and agents and to purchase and maintain
insurance with respect to liability arising out of their capacity or status as
directors, officers, employees and agents. The indemnification provisions are
not exclusive of any other rights to which directors and officers may be
entitled under a corporation's certificate of incorporation or bylaws, any
agreement, a vote of stockholders or otherwise.
Our certificate of incorporation provides that every person who:
. is or was a director, officer, employee or agent of ours or of any
constituent corporation absorbed by us in a consolidation or merger, or
the legal representative of any such director, officer, employee or
agent, or
. is or was a director, officer, trustee, employee or agent of any other
enterprise, serving as such at our request, or of any such constituent
corporation, or the legal representative of any such director, officer,
trustee, employee or agent.
shall be indemnified to the fullest extent permitted by law for all expenses
and liabilities in connection with any proceeding involving such person in this
capacity. Our certificate also provides that, during the pendency of any such
proceeding, we will advance to the fullest extent permitted by law expenses
incurred from time to time by an indemnified person in connection with the
proceeding, subject to our receipt of an undertaking as required by law. We
intend to enter into an indemnity agreement with each of our directors and
officers, pursuant to which we will agree to provide indemnification and
expense reimbursement as outlined above.
Our bylaws also permit us to secure insurance on behalf of any officer,
director, employee or agent for any liability asserted against or incurred by
these individuals in their capacity, or arising out of their status, as our
officer, director or employee, regardless of whether the New Jersey Business
Corporation Act would permit indemnification. Pursuant to our services
agreement, Comverse has obtained directors' and officers' liability insurance
which also provides coverage for our officers and directors.
II-1
<PAGE>
Item 15. Recent Sales of Unregistered Securities.
Described below are unregistered securities sold by the Company during the
three years preceding the filing of this Registration Statement:
None
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of Ulticom, Inc.
3.2 Amended and Restated Bylaws of Ulticom, Inc.
4.1 Specimen Common Stock certificate.
4.2 See Exhibit 3.1 for provisions defining the rights of holders of common
stock of the Registrant.
5.1+ Opinion of Sills Cummis Radin Tischman Epstein & Gross, P.A.
10.1* Services Agreement, dated as of February 1, 1998, between Comverse
Technology, Inc. and Ulticom, Inc.
10.2* Federal Income Tax Sharing Agreement, dated as of December 21, 1999,
between Comverse Technology, Inc. and Ulticom, Inc.
10.3* Patent License Agreement, dated January 12, 2000, between Comverse
Patent Holding Company, Inc. and Ulticom, Inc.
10.4 License Agreement, dated as of February 1, 2000, between Comverse
Network Systems, Inc. and Ulticom, Inc.
10.5* Registration Rights Agreement, dated as of January 1, 2000, between
Comverse Technology, Inc. and Ulticom, Inc.
10.6* Business Opportunities Agreement, dated as of January 1, 1999, between
Comverse Technology, Inc. and Ulticom, Inc.
10.7* Form of Indemnification Agreement.
10.8 1998 Stock Incentive Compensation Plan.
10.9 Employment Agreement, dated as of February 1, 2000, between Shawn
Osborne and Ulticom, Inc.
11.1 Statement re: Computation of Basic and Diluted Earnings (Loss) Per
Share.
23.1 Consent of Deloitte & Touche LLP.
23.2+ Consent of Sills Cummis Radin Tischman Epstein & Gross, P.A. (included
in Exhibit 5.1).
24.1 Powers of Attorney (See Signature Page).
27.1 Financial Data Schedule.
</TABLE>
- --------
+ To be supplied by amendment.
* Previously filed.
(b) Financial Statement Schedules.
None
II-2
<PAGE>
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 14 above, or
otherwise, the Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and this offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 15th day of March, 2000.
Ulticom, Inc.
By: /s/ Shawn K. Osborne
-----------------------------
Name:Shawn K. Osborne
Title:President and Chief Executive
Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of Ulticom, Inc. (the "Company")
and each of us, do hereby constitute and appoint Shawn Osborne and David
Kreinberg, or either of them, our true and lawful attorneys-in-fact and agents,
each with full power of substitution and resubstitution, to do any and all acts
and things in our names and on our behalf in our capacities as directors and
officers and to execute any and all instruments for us and in our names in the
capacities indicated above, which said attorneys or agents, or either of them,
may deem necessary or advisable to enable the Company to comply with the
Securities Act of 1933, as amended, and any rules, regulations and requirements
of the Securities and Exchange Commission, and any and all amendments
(including post-effective amendments) to this Registration Statement, in
connection with the public offering of the common stock of the Company,
including specifically but without limitation, power and authority to sign for
us or any of us in our names in the capacities indicated below, any and all
amendments (including post-effective amendments) to such Registration
Statement; and we do hereby ratify and confirm all that the said attorneys and
agents, or their substitute or substitutes, or either of them, shall do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Chairman of the Board and March 15, 2000
______________________________________ Director
Kobi Alexander
/s/ Shawn K. Osborne President and Chief March 15, 2000
______________________________________ Executive Officer and
Shawn K. Osborne Director
/s/ David Kreinberg Chief Financial Officer March 15, 2000
______________________________________ and Director (Principal
David Kreinberg Financial and Accounting
Officer)
* Director March 15, 2000
______________________________________
William F. Sorin
* Director March 15, 2000
______________________________________
Paul D. Baker
/s/ Yaacov Koren Director March 15, 2000
______________________________________
Yaacov Koren
*By: /s/ David Kreinberg
______________________________________
David Kreinberg
(Attorney-in-Fact)
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of Ulticom, Inc.
3.2 Amended and Restated Bylaws of Ulticom, Inc.
4.1 Specimen Common Stock certificate.
4.2 See Exhibit 3.1 for provisions defining the rights of holders of common
stock of the Registrant.
5.1+ Opinion of Sills Cummis Radin Tischman Epstein & Gross, P.A.
10.1* Services Agreement, dated as of February 1, 1998, between Comverse
Technology, Inc. and Ulticom, Inc.
10.2* Federal Income Tax Sharing Agreement, dated as of December 21, 1999,
between Comverse Technology, Inc. and Ulticom, Inc.
10.3* Patent License Agreement, dated January 12, 2000, between Comverse
Patent Holding Company, Inc. and Ulticom, Inc.
10.4 License Agreement, dated as of February 1, 2000, between Comverse
Network Systems, Inc. and Ulticom, Inc.
10.5* Registration Rights Agreement, dated as of January 1, 2000, between
Comverse Technology Inc. and Ulticom, Inc.
10.6* Business Opportunities Agreement, dated as of January 1, 1999, between
Comverse Technology Inc. and Ulticom, Inc.
10.7* Form of Indemnification Agreement.
10.8 1998 Stock Incentive Compensation Plan
10.9 Employment Agreement, dated as of February 1, 2000, between Shawn
Osborne and Ulticom, Inc.
11.1 Statement re: Computation of Basic and Diluted Earnings (Loss) Per
Share.
23.1 Consent of Deloitte & Touche LLP.
23.2+ Consent of Sills Cummis Radin Tischman Epstein & Gross, P.A.(included
in Exhibit 5.1).
24.1 Powers of Attorney (See Signature Page).
27.1 Financial Data Schedule.
</TABLE>
- --------
+ To be supplied by amendment.
* Previously filed.
<PAGE>
EXHIBIT 1.1
ULTICOM, INC.
Common Stock
Form of
UNDERWRITING AGREEMENT
----------------------
March __, 2000
Lehman Brothers Inc.
Chase Securities Inc.
U.S. Bancorp Piper Jaffray Inc.
Fidelity Capital markets,
a division of National Financial
Services Corporation
As Representatives of the
several Underwriters named in Schedule 1,
c/o LEHMAN BROTHERS INC.
Three World Financial Center
New York, NY 10285
Dear Sirs:
Ulticom, Inc., a New Jersey corporation (the "Company"), proposes to
sell _________ shares (the "Firm Stock") of the Company's Common Stock, no par
value (the "Common Stock"). In addition, the Company proposes to grant to the
Underwriters named in Schedule 1 hereto (the "Underwriters") an option to
purchase up to an additional _______ shares of the Common Stock on the terms and
for the purposes set forth in Section 2 (the "Option Stock"). The Firm Stock
and the Option Stock, if purchased, are hereinafter collectively called the
"Stock." This is to confirm the agreement concerning the purchase of the Stock
from the Company by the Underwriters.
1. Representations, Warranties and Agreements of the Company. The
Company represents, warrants and agrees that:
(a) A registration statement on Form S-1, and amendments thereto,
with respect to the Stock have (i) been prepared by the Company in
conformity with the requirements of the United States Securities Act
of 1933, as amended (the "Securities Act") and the rules and
regulations (the "Rule and Regulations") of the United States
Securities and Exchange Commission (the "Commission") thereunder, (ii)
been filed with the Commission under the Securities Act and (iii)
become effective under the Securities Act. Copies of such
registration statement and all amendments thereto have been delivered
by the Company to you as the representatives (the "Representatives")
of the Underwriters. As used in this Agreement, "Effective Time"
means the date and the time as of which such registration statement,
or the most recent post-effective amendment thereto, if any,
<PAGE>
was declared effective by the Commission; "Effective Date" means the
date of the Effective Time; "Preliminary Prospectus" means each
prospectus included in such registration statement, or amendments
thereof, before it became effective under the Securities Act and any
prospectus filed with the Commission by the Company with the consent
of the Representatives pursuant to Rule 424(a) of the Rules and
Regulations; "Registration Statement" means such registration
statement, as amended at the Effective Time, including all information
contained in the final prospectus filed with the Commission pursuant
to Rule 424(b) of the Rules and Regulations in accordance with Section
5(a) hereof and deemed to be a part of the Registration Statement as
of the Effective Time pursuant to paragraph (b) of Rule 430A of the
Rules and Regulations; and "Prospectus" means such final prospectus,
as first filed with the Commission pursuant to paragraph (1) or (4) of
Rule 424(b) of the Rules and Regulations. The Commission has not
issued any order preventing or suspending the use of any Preliminary
Prospectus.
(b) The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement or
the Prospectus will, when they become effective or are filed with the
Commission, as the case may be, conform in all material respects to
the requirements of the Securities Act and the Rules and Regulations
and do not and will not, as of the applicable Effective Date (as to
the Registration Statement and any amendment thereto) and as of the
applicable filing date (as to the Prospectus and any amendment or
supplement thereto) contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided,
that no representation or warranty is made as to information contained
in or omitted from the Registration Statement or the Prospectus in
reliance upon and in conformity with written information furnished to
the Company through the Representatives by or on behalf of any
Underwriter specifically for inclusion therein, it being understood
that the only information so furnished is specified in Section 9(e).
(c) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of New Jersey, is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which its
ownership or lease of property or the conduct of its business requires
such qualification (except where the failure to be so qualified or in
good standing would not have, individually or in the aggregate, a
material adverse effect on the business, properties, financial
condition, stockholders' equity or results of operations of the
Company (a "Material Adverse Effect")), and has all corporate power
and authority necessary to own or hold its properties and to conduct
the business in which it is engaged. [Ulticom Europe SA ("Ulticom
Europe") is the only subsidiary of the Company and is neither a
"significant subsidiary" as that term is defined in Rule 405 of the
Rules and Regulations nor has it conducted any material business
operations.]
2
<PAGE>
(d) The Company has the authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully
paid and non-assessable and conform to the description thereof
contained in the Prospectus.
(e) The shares of the Stock to be issued and sold by the Company
to the Underwriters have been duly and validly authorized and, when
issued and delivered against payment therefor as provided herein, will
be duly and validly issued, fully paid and non-assessable; and the
Stock will conform to the description thereof contained in the
Prospectus under the caption "Description of Securities--Common
Stock."
(f) Upon payment for and delivery of the Stock to be sold by the
Company pursuant to this Agreement, the Underwriters, or other persons
in whose names the Stock is registered will acquire good and valid
title to such Stock, in each case free and clear of all liens,
encumbrances, equities, preemptive rights and other claims.
(g) This Agreement has been duly authorized, executed and
delivered by the Company; and (assuming the due authorization,
execution and delivery thereof by the other parties thereto)
constitutes the legal, valid and binding obligation of the Company,
enforceable against it in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) or an implied
covenant of good faith and fair dealing, except that any rights or
indemnification or contribution under this Agreement may be limited by
the laws of the State of New York, the federal laws of the United
States or public policy relating thereto.
(h) The execution, delivery and performance of this Agreement by
the Company and the consummation of the transactions contemplated
hereby and the _______-for-________ stock split described in the
Prospectus under the caption "Prospectus Summary" (such stock split is
herein call the "Recapitalization") did not and will not conflict with
or result in a breach or violation of any of the terms or provisions
of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the
Company is a party or by which the Company is bound or to which any of
the property or assets of the Company is subject, nor will such
actions result in any violation of the provisions of the charter or
by-laws of the Company or any statute or any order, rule or regulation
of any court or governmental agency or body having jurisdiction over
the Company or any of its properties or assets; and except for the
registration of the Stock under the Securities Act and such consents,
approvals, authorizations, registrations or qualifications as may be
required under the Exchange Act of 1934, as amended (the
3
<PAGE>
"Exchange Act"), and applicable state securities laws in connection
with the purchase and distribution of the Stock by the Underwriters,
no consent, approval, authorization or order of, or filing or
registration with, any such court or governmental agency or body is
required for the execution, delivery and performance of this Agreement
by the Company and the consummation of the transactions contemplated
hereby and by the Recapitalization.
(i) Except as described in the Prospectus and in the Registration
Rights Agreement, dated [February __,] 2000, by and among the Company
and Comverse Technology, Inc. ("Comverse"), there are no contracts,
agreements or understandings between the Company and any person
granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company owned or to be owned by such person or to
require the Company to include such securities in the securities
registered pursuant to the Registration Statement or in any securities
being registered pursuant to any other registration statement filed by
the Company under the Securities Act. The holders of outstanding
shares of the Company's capital stock are not entitled to preemptive
or other rights to subscribe for the Stock. Except for (i) the
options to purchase from the Company __________ shares of the Common
Stock in the aggregate (after giving effect to the Recapitalization)
granted to officers, directors and employees of the Company under the
Company's 1998 Stock Incentive Compensation Plan (the "1998 Plan") and
(ii) the options to purchase from the Company, shares of the Common
Stock in the aggregate (after giving effect to the Recapitalization)
to be granted to officers, directors and employees of the Company
under the 1998 Plan upon completion of the offering, no options,
warrants or other rights to purchase from the Company, agreements or
other obligations of the Company to issue, or rights to convert any
obligations of the Company into or exchange any securities of the
Company for, shares of capital stock of or ownership interests in the
Company are outstanding.
(j) The Company has not sold or issued any shares of Common Stock
during the six-month period preceding the date of the Prospectus,
including any sales pursuant to Rule 144A under, or Regulations D or S
of, the Securities Act, other than shares issued pursuant to the 1998
Plan or pursuant to outstanding options or rights granted under the
1998 Plan.
(k) The Company has not sustained, since the date of the latest
audited financial statements included in the Prospectus, any material
loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus; and, since such
date, other than the Recapitalization, there has not been any material
change in the capital stock or long-term debt of the Company or any
material adverse change, or any development involving a prospective
material adverse
4
<PAGE>
change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the
Company, otherwise than as set forth or contemplated in the
Prospectus.
(l) The financial statements (including the related notes and
supporting schedules) filed as part of the Registration Statement or
included in the Prospectus present fairly in all material respects the
financial condition and results of operations of the Company, at the
dates and for the periods indicated, and have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods involved.
(m) Deloitte & Touche LLP, who have certified certain financial
statements of the Company, whose report appears in the Prospectus and
who have delivered the initial letter referred to in Section 8(g)
hereof, are independent public accountants as required by the
Securities Act and the Rules and Regulations.
(n) The Company does not own any real property; and the Company
has good and marketable title to all material personal property owned
by it, free and clear of all liens, encumbrances and defects, except
such as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such
property by the Company. All real property and buildings held under
lease by the Company are held by it under valid, subsisting and
enforceable leases, with such exceptions as are not material and do
not interfere with the use made and proposed to be made of such
property and buildings by the Company.
(o) The Company carries, or is covered by, insurance in such
amounts and covering such risks as is adequate for the conduct of its
business and the value of its properties and as is customary for
companies engaged in similar businesses in similar industries.
(p) Except as described in the Prospectus, the Company owns or
possesses adequate rights to use all material patents and trademarks,
including all applications therefor, copyrights and licenses necessary
for the conduct of its business as now conducted [or as proposed to be
conducted as described in the Prospectus]; and the Company has no
reason to believe that the conduct of its business will conflict with,
and has not received any notice of any claim of conflict with, any
such rights of others, except where such conflict would not have a
Material Adverse Effect.
(q) There are no legal or governmental proceedings pending to
which the Company is a party or of which any property or assets of the
Company is the subject which, if determined adversely to the Company,
might have a Material Adverse Effect; and to the best of the Company's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others.
5
<PAGE>
(r) There are no contracts or other documents which are required
to be described in the Prospectus or filed as exhibits to the
Registration Statement by the Securities Act or by the Rules and
Regulations which have not been described in the Prospectus or filed
as exhibits to the Registration Statement.
(s) No relationship, direct or indirect, exists between or among
the Company on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company on the other hand,
which is required to be described in the Prospectus which is not so
described.
(t) No labor disturbance by the employees of the Company exists
or, to the knowledge of the Company, is imminent which might be
expected to have a Material Adverse Effect.
(u) The Company is in compliance in all material respects with
all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and
published interpretations thereunder ("ERISA"); and no "reportable
event" (as defined in ERISA) has occurred with respect to any "pension
plan" (as defined in ERISA) for which the Company would have any
liability. The Company has not incurred and does not expect to incur
liability under (i) Title IV of ERISA with respect to termination of,
or withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of
the Internal Revenue Code of 1986, as amended, including the
regulations and published interpretations thereunder (the "Code"); and
each "pension plan" for which the Company would have any liability
that is intended to be qualified under Section 401(a) of the Code is
so qualified in all material respects and nothing has occurred,
whether by action or by failure to act, which would cause the loss of
such qualification.
(v) The Company has filed all federal, state and local income and
franchise tax returns required to be filed through the date hereof
and, to its knowledge, has paid all taxes due thereon, and no tax
deficiency has been determined adversely to the Company which has had
(nor does the Company have any knowledge of any tax deficiency which,
if determined adversely to the Company, might have) a Material Adverse
Effect.
(w) Since the date as of which information is given in the
Prospectus through the date hereof, and except as may otherwise be
disclosed in the Prospectus, the Company has not (i) issued or granted
any securities, (ii) incurred any material liability or obligation,
direct or contingent, other than liabilities and obligations which
were incurred in the ordinary course of business, (iii) entered into
any material transaction not in the ordinary course of business or
(iv) declared or paid any dividend on its capital stock.
6
<PAGE>
(x) The Company (i) makes and keeps accurate books and records
and (ii) maintains internal accounting controls which provide
reasonable assurance that (A) transactions are executed in accordance
with management's authorization, (B) transactions are recorded as
necessary to permit preparation of its financial statements and to
maintain accountability for its assets, (C) access to its assets is
permitted only in accordance with management's authorization and (D)
the reported assets of the Company set forth in its books and records
are compared with existing assets at reasonable intervals.
(y) The Company is not (i) in violation of its charter or by-
laws, (ii) in default, and no event has occurred which, with notice or
lapse of time or both, would constitute such a default, in the due
performance or observance of any term, covenant or condition contained
in any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which it is a party or by which it is bound
or to which any of its properties or assets is subject, except where
such default would not have a Material Adverse Effect or (iii) in
violation of any law, ordinance, governmental rule, regulation or
court decree to which it or its property or assets may be subject,
except where such default would not have a Material Adverse Effect.
The Company has not failed to obtain any license, permit, certificate,
franchise or other governmental authorization or permit necessary to
the ownership of its property or to the conduct of its business,
except where such default would not have a Material Adverse Effect.
(z) Neither the Company nor any director, officer, agent,
employee or other person associated with or acting on behalf of the
Company, has (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating
to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee
from corporate funds; (iii) violated or is in violation of any
provision of the Foreign Corrupt Practices Act of 1977; or (iv) made
any bribe, rebate, payoff, influence payment, kickback or other
unlawful payment.
(aa) The Company is not an "investment company" within the
meaning of such term under the Investment Company Act of 1940, as
amended, and the rules and regulations of the Commission thereunder.
(bb) There are no contracts, agreements or understandings between
the Company and any person that would give rise to a valid claim
against the Company or any Underwriter for a brokerage commission,
finder's fee or other like payment in connection with this offering.
(cc) Except as described in the Prospectus, all of the current
versions of the Company's products will record, store, process,
calculate and present calendar dates falling after January 1, 2000,
and will calculate any information dependent on or relating to such
dates in the same manner, and with the same functionality, data
7
<PAGE>
integrity and performance, as the products recorded, stored,
processed, calculated and presented calendar dates on or before
December 31, 1999, or calculated any information dependent on or
relating to such dates (herein collectively called "Year 2000
Compliant"). The Company has not experienced any material Year 2000
Compliance problems with the current versions of its products.
2. Purchase of the Stock by the Underwriters. On the basis of the
representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Company agrees to sell _______ shares of the
Firm Stock to the several Underwriters and each of the Underwriters, severally
and not jointly, agrees to purchase the number of shares of the Firm Stock set
opposite that Underwriter's name in Schedule 1 hereto. The respective purchase
obligations of the Underwriters with respect to the Firm Stock shall be rounded
among the Underwriters to avoid fractional shares, as the Representatives may
determine.
In addition, the Company grants to the Underwriters an option to
purchase up to _______ shares of Option Stock. Such option is granted for the
purpose of covering over-allotments in the sale of Firm Stock and is exercisable
as provided in Section 4 hereof. Shares of Option Stock shall be purchased
severally for the account of the Underwriters in proportion to the number of
shares of Firm Stock set opposite the name of such Underwriters in Schedule 1
hereto. The respective purchase obligations of each Underwriter with respect to
the Option Stock shall be adjusted by the Representatives so that no Underwriter
shall be obligated to purchase Option Stock other than in 100 share amounts.
The price of both the Firm Stock and any Option Stock shall be $_____ per share.
The Company shall not be obligated to deliver any of the Stock to be
delivered on any Delivery Date (as hereinafter defined), as the case may be,
except upon payment for all the Stock to be purchased on such Delivery Date as
provided herein.
3. Offering of Stock by the Underwriters.
Upon authorization by the Representatives of the release of the Firm
Stock, the several Underwriters propose to offer the Firm Stock for sale upon
the terms and conditions set forth in the Prospectus.
It is understood that approximately _______ shares of the Firm Stock
("Directed Shares") will initially be reserved by the Underwriters for offer and
sale to employees and persons having business relationships with the Company
and/or Comverse ("Directed Share Participants") upon the terms and conditions
set forth in the Prospectus (the "Directed Share Program") and in accordance
with the rules and regulations of the National Association of Securities
Dealers, Inc. ("NASD"), and that any allocation of such Directed Shares among
such persons will be made in accordance with timely directions received by
Lehman Brothers Inc. from the Company. Under no circumstances will Lehman
Brothers Inc. or any Underwriter be liable to the Company, Comverse or to any
Directed Share Participant for any action taken or omitted to be taken in good
faith in connection with such Directed Share Program. To the extent that any
Directed Shares are not affirmatively reconfirmed for purchase by any Directed
Share
8
<PAGE>
Participant on or immediately after the date of this Agreement, such Directed
Shares may be offered to the public as part of the public offering contemplated
hereby.
The Company agrees to pay all fees and disbursements incurred by the
Underwriters in connection with the Directed Share Program, including counsel
fees and any stamp duties or other taxes incurred by the Underwriters in
connection with the Directed Share Program.
In connection with the offer and sale of the Directed Shares, the
Company shall, promptly upon a request in writing, indemnify and hold harmless
Lehman Brothers Inc. and the other Underwriters from and against any loss,
claim, damage, expense, liability or action which (i) arises out of, or is based
upon, any untrue statement or alleged untrue statement of a material fact
contained in any material prepared by or with the approval of the Company for
distribution to Directed Share Participants in connection with the Directed
Share Program or any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, (ii) arises out of the failure of the Directed Share Participant
to pay for and accept delivery of Directed Shares that the Directed Share
Participant agreed to purchase or (iii) is otherwise related to the Directed
Share Program, other than losses, finally judicially determined to have resulted
directly from the bad faith or gross negligence of Lehman Brothers Inc.
4. Delivery of and Payment for the Stock. Delivery of and payment
for the Firm Stock shall be made at the office of Chadbourne & Parke LLP, 30
Rockefeller Plaza, New York, New York 10112, at 10:00 A.M., New York City time,
on the fourth full business day following the date of this Agreement or at such
other date or place as shall be determined by agreement between the
Representatives and the Company. This date and time are sometimes referred to
as the "First Delivery Date." On the First Delivery Date, the Company shall
deliver or cause to be delivered certificates representing the Firm Stock to the
Representatives for the account of each Underwriter against payment to or upon
the order of the Company of the purchase price by wire transfer in immediately
available funds. Time shall be of the essence, and delivery at the time and
place specified pursuant to this Agreement is a further condition of the
obligation of each Underwriter hereunder. Upon delivery, the Firm Stock shall
be registered in such names and in such denominations as the Representatives
shall request in writing not less than two full business days prior to the First
Delivery Date. For the purpose of expediting the checking and packaging of the
certificates for the Firm Stock, the Company shall make the certificates
representing the Firm Stock available for inspection by the Representatives in
New York, New York, not later than 2:00 P.M., New York City time, on the
business day prior to the First Delivery Date.
The option granted in Section 2 will expire 30 days after the date of
this Agreement and may be exercised in whole or in part from time to time by
written notice being given to the Company by the Representatives. Such notice
shall set forth the aggregate number of shares of Option Stock as to which the
option is being exercised, the names in which the shares of Option Stock are to
be registered, the denominations in which the shares of Option Stock are to be
issued and the date and time, as determined by the Representatives, when the
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shares of Option Stock are to be delivered; provided, however, that this date
and time shall not be earlier than the First Delivery Date nor earlier than the
second business day after the date on which the option shall have been exercised
nor later than the fifth business day after the date on which the option shall
have been exercised. The date and time the shares of Option Stock are delivered
are sometimes referred to as a "Second Delivery Date" and the First Delivery
Date and any Second Delivery Date are sometimes each referred to as a "Delivery
Date".
Delivery of and payment for the Option Stock shall be made at the
place specified in the first sentence of the first paragraph of this Section 4
(or at such other place as shall be determined by agreement between the
Representatives and the Company) at 10:00 A.M., New York City time, on such
Second Delivery Date. On such Second Delivery Date, the Company shall deliver
or cause to be delivered the certificates representing the Option Stock to the
Representatives for the account of each Underwriter against payment to or upon
the order of the Company of the purchase price by wire transfer in immediately
available funds. Time shall be of the essence, and delivery at the time and
place specified pursuant to this Agreement is a further condition of the
obligation of each Underwriter hereunder. Upon delivery, the Option Stock shall
be registered in such names and in such denominations as the Representatives
shall request in the aforesaid written notice. For the purpose of expediting
the checking and packaging of the certificates for the Option Stock, the Company
shall make the certificates representing the Option Stock available for
inspection by the Representatives in New York, New York, not later than 2:00
P.M., New York City time, on the business day prior to such Second Delivery
Date.
5. Further Agreements of the Company. The Company agrees:
(a) To prepare the Prospectus in a form approved by the
Representatives and to file such Prospectus pursuant to Rule 424(b)
under the Securities Act not later than the Commission's close of
business on the second business day following the execution and
delivery of this Agreement or, if applicable, such earlier time as may
be required by Rule 430A(a)(3) under the Securities Act; to make no
further amendment or any supplement to the Registration Statement or
to the Prospectus except as permitted herein; to advise the
Representatives, promptly after it receives notice thereof, of the
time when any amendment to the Registration Statement has been filed
or becomes effective or any supplement to the Prospectus or any
amended Prospectus has been filed and to furnish the Representatives
with copies thereof; to advise the Representatives, promptly after it
receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus, of the suspension of the
qualification of the Stock for offering or sale in any jurisdiction,
of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or the Prospectus or for
additional information; and, in the event of the issuance of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or suspending any such
qualification, to use promptly its best efforts to obtain its
withdrawal.
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(b) To furnish promptly to each of the Representatives and to
counsel for the Underwriters a signed copy of the Registration
Statement as originally filed with the Commission, and each amendment
thereto filed with the Commission, including all consents and exhibits
filed therewith.
(c) To deliver promptly to the Representatives such number of the
following documents as the Representatives shall reasonably request:
(i) conformed copies of the Registration Statement as originally filed
with the Commission and each amendment thereto (in each case excluding
exhibits other than this Agreement and the computation of per share
earnings) and, (ii) each Preliminary Prospectus, the Prospectus and
any amended or supplemented Prospectus and, if the delivery of a
prospectus is required at any time after the Effective Time in
connection with the offering or sale of the Stock and if at such time
any events shall have occurred as a result of which the Prospectus as
then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not
misleading, or, if for any other reason it shall be necessary to amend
or supplement the Prospectus in order to comply with the Securities
Act, to notify the Representatives and, upon their request, to file
such document and to prepare and furnish without charge to each
Underwriter and to any dealer in securities as many copies as the
Representatives may from time to time reasonably request of an amended
or supplemented Prospectus which will correct such statement or
omission or effect such compliance.
(d) To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the
Prospectus that may, in the judgment of the Company or the
Representatives, be required by the Securities Act or requested by the
Commission.
(e) Prior to filing with the Commission any amendment to the
Registration Statement or supplement to the Prospectus or any
Prospectus pursuant to Rule 424 of the Rules and Regulations, to
furnish a copy thereof to the Representatives and counsel for the
Underwriters and obtain the consent of the Representatives to the
filing.
(f) As soon as practicable after the Effective Date (but in no
event later than 45 days after the first anniversary of the end of the
fiscal quarter following the effective date of the Registration
Statement, or 90 days if such period is a fiscal year), to make
generally available to the Company's security holders and to deliver
to the Representatives an earnings statement of the Company (which
need not be audited) complying with Section 11(a) of the Securities
Act and the Rules and Regulations (including, at the option of the
Company, Rule 158).
(g) For a period of three years following the Effective Date, to
furnish to the Representatives copies of all materials furnished by
the Company to its
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shareholders and all public reports and all reports and financial
statements furnished by the Company to the Nasdaq National Market or
to any national securities exchange upon which the Common Stock may be
listed pursuant to requirements of or agreements with such exchange,
or to the Commission pursuant to the Exchange Act or any rule or
regulation of the Commission thereunder.
(h) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify the Stock for
offering and sale under the securities laws of such jurisdictions as
the Representatives may request and to comply with such laws so as to
permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the
distribution of the Stock; provided, that, in connection therewith,
the Company shall not be required to qualify as a foreign corporation
or to file a general consent to service of process in any
jurisdiction.
(i) For a period of 180 days from the date of the Prospectus, not
to, directly or indirectly, (1) offer for sale, sell, pledge or
otherwise dispose of (or enter into any transaction or device which is
designed to, or could be expected to, result in the disposition by any
person at any time in the future of) any shares of Common Stock or
securities convertible into or exchangeable for Common Stock (other
than the Stock and shares issued pursuant to the 1998 Plan, the
Company's 2000 Employer Stock Purchase Plan or pursuant to currently
outstanding options, warrants or rights), or sell or grant options,
rights or warrants with respect to any shares of Common Stock or
securities convertible into or exchangeable for Common Stock (other
than the grant of options pursuant to the 1998 Plan), or (2) enter
into any swap or other derivatives transaction that transfers to
another, in whole or in part, any of the economic benefits or risks of
ownership of such shares of Common Stock, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of
Common Stock or other securities, in cash or otherwise, in each case
without the prior written consent of Lehman Brothers Inc.; and to
cause each officer, director, shareholder of the Company (other than
Comverse) and each Directed Share Participant to furnish to the
Representatives, prior to the First Delivery Date, a letter or
letters, in form and substance satisfactory to counsel for the
Underwriters, pursuant to which each such person shall agree not to,
directly or indirectly, (1) offer for sale, sell, pledge or otherwise
dispose of (or enter into any transaction or device which is designed
to, or could be expected to, result in the disposition by any person
at any time in the future of) any shares of Common Stock or securities
convertible into or exchangeable for Common Stock or (2) enter into
any swap or other derivatives transaction that transfers to another,
in whole or in part, any of the economic benefits or risks of
ownership of such shares of Common Stock, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of
Common Stock or other securities, in cash or otherwise, in each case
for a period of 180 days (or 90 days with respect to those persons who
receives Stock under the Directed Share Program, except for those
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<PAGE>
otherwise subject to the 180-day lock-up) from the date of the
Prospectus, without the prior written consent of Lehman Brothers Inc.
(j) Prior to the Effective Date, to apply for the inclusion of
the Stock on the Nasdaq National Market System and to use its best
efforts to effect that quotation, subject only to official notice of
issuance prior to the First Delivery Date.
(k) To apply the net proceeds from the sale of the Stock as set
forth in the Prospectus under the caption "Use of Proceeds."
(l) To take such steps as shall be necessary to ensure that the
Company shall not become an "investment company" within the meaning of
such term under the Investment Company Act of 1940 and the rules and
regulations of the Commission thereunder.
(m) In connection with the Directed Share Program, to ensure in
accordance with the Conduct Rules of the NASD that the Directed Shares
are not sold, transferred, assigned, pledged or hypothecated for a
period of 90 days following the Effective Date and to direct the
transfer agent that transfer restrictions be placed on the stock
certificates of the Participants in the Directed Share Program
identified by Lehman Brothers Inc. as needing to be so restricted.
(n) To comply with all applicable securities and other applicable
laws, rules and regulations in each foreign jurisdiction in which the
Directed Shares are offered in connection with the Directed Share
Program.
6. Agreements of Comverse. Comverse agrees, for a period of 180 days
from the date of the Prospectus, not to, directly or indirectly, (1) offer for
sale, sell, pledge or otherwise dispose of (or enter into any transaction or
device which is designed to, or could be expected to, result in the disposition
by any person at any time in the future of) any shares of Common Stock or
securities convertible into or exchangeable for Common Stock or (2) enter into
any swap or other derivatives transaction that transfers to another, in whole or
in part, any of the economic benefits or risks of ownership of such shares of
Common Stock, whether any such transaction described in clause (1) or (2) above
is to be settled by delivery of Common Stock or other securities, in cash or
otherwise, in each case without the prior written consent of Lehman Brothers
Inc.
7. Expenses. The Company agrees to pay (a) the costs incident to the
authorization, issuance, sale and delivery of the Stock and any taxes payable in
that connection; (b) the costs incident to the preparation, printing and filing
under the Securities Act of the Registration Statement and any amendments and
exhibits thereto; (c) the costs of distributing the Registration Statement as
originally filed and each amendment thereto and any post-effective amendments
thereof (including, in each case, exhibits), any Preliminary Prospectus, the
Prospectus and any amendment or supplement to the Prospectus, all as provided in
this Agreement; (d) the filing fees incident to securing any required review by
the NASD of the terms
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<PAGE>
of sale of the Stock; (e) any applicable listing or other fees; (f) the fees and
expenses of qualifying the Stock under the securities laws of the several
jurisdictions as provided in Section 5(h) (including filing fees and the fees
and expenses of counsel for the Underwriters relating to such registration and
qualification); and (g) all other costs and expenses incident to the performance
of the obligations of the Company under this Agreement; provided that, except as
provided in this Section 7 and in Section 12, the Underwriters shall pay their
own costs and expenses, including the costs and expenses of their counsel, their
own costs and expenses associated with the road shows and the expenses of
advertising any offering of the Stock made by the Underwriters.
8. Conditions of Underwriters' Obligations. The respective
obligations of the Underwriters hereunder are subject to the accuracy, when made
and on each Delivery Date, of the representations and warranties of the Company
contained herein, to the performance by the Company and Comverse of their
respective obligations hereunder, and to each of the following additional terms
and conditions:
(a) The Prospectus shall have been timely filed with the
Commission in accordance with Section 5(a); no stop order suspending
the effectiveness of the Registration Statement or any part thereof
shall have been issued and no proceeding for that purpose shall have
been initiated or threatened by the Commission; and any request of the
Commission for inclusion of additional information in the Registration
Statement or the Prospectus or otherwise shall have been complied
with.
(b) No Underwriter shall have discovered and disclosed to the
Company on or prior to such Delivery Date that the Registration
Statement or the Prospectus or any amendment or supplement thereto
contains an untrue statement of a fact which, in the reasonable
opinion of Chadbourne & Parke LLP, counsel for the Underwriters, is
material or omits to state a fact which, in the reasonable opinion of
such counsel, is material and is required to be stated therein or is
necessary to make the statements therein not misleading.
(c) All corporate proceedings and other legal matters incident to
the authorization, form and validity of this Agreement, the Stock, the
Registration Statement and the Prospectus, and all other legal matters
relating to this Agreement and the transactions contemplated hereby
shall be reasonably satisfactory in all material respects to counsel
for the Underwriters, and the Company shall have furnished to such
counsel all documents and information that they may reasonably request
to enable them to pass upon such matters.
(d) Weil, Gotshal & Manges LLP shall have furnished to the
Representatives its written opinion, as counsel to the Company,
addressed to the Underwriters and dated such Delivery Date, in form
and substance reasonably satisfactory to the Representatives, to the
effect that:
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(i) the Company is duly qualified to transact business
and is in good standing as a foreign corporation in each
jurisdiction identified in such opinion; [and Ulticom Europe is
the only subsidiary of the Company and is neither a "significant
subsidiary" as that term is defined in Rule 405 of the Rules and
Regulations nor has it conducted any material business
operations];
(ii) the Registration Statement has become effective
under the Securities Act, and such counsel is not aware of any
stop order suspending the effectiveness of the Registration
Statement. To such counsel's knowledge, no proceedings therefor
have been initiated or overtly threatened by the Commission and
any required filing of the Prospectus and any supplement thereto
pursuant to Rule 424(b) under the Securities Act has been made in
the manner and within the time period required by such rule;
(iii) the Registration Statement at the time it became
effective and the Prospectus and any further amendments or
supplements thereto made by the Company prior to such Delivery
Date (except for the financial statements and notes thereto and
other financial and accounting data included in the Registration
Statement or Prospectus, as to which such counsel need express no
opinion) comply as to form in all material respects with the
requirements of the Securities Act and the Rules and Regulations;
(iv) the statements contained in the Prospectus under
the captions "United States Federal Tax Considerations For Non-
United States Holders" and "Shares Eligible for Future Sale", in
each case insofar as such statements constitute summaries of
federal statutes, rules and regulations referred to therein,
fairly present the information called for with respect to such
federal statutes, rules and regulations and fairly summarize the
matters referred to therein in all material respects; and
(v) the execution, delivery and performance of this
Agreement by the Company and the consummation of the transactions
contemplated hereby and the Recapitalization did not and will not
conflict with or result in a breach or violation of any of the
terms or provisions of, or any federal or New York statute or any
order, rule or regulation known to such counsel of any federal or
New York court or governmental agency or body having jurisdiction
over the Company or any of its properties or assets; and except
for the registration of the Stock under the Securities Act and
such consents, approvals, authorizations, registrations or
qualifications as may be required under the Exchange Act and
applicable state securities laws in connection with the purchase
and distribution of the Stock by the Underwriters, no consent,
approval, authorization or order of, or filing or registration
with, any such court or governmental agency or body is required
for the
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<PAGE>
execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated
hereby and by the Recapitalization.
In rendering such opinion, such counsel may state that its opinion is
limited to matters governed by the Federal laws of the United States
of America and the laws of the State of New York, and in respect of
matters of fact, upon certificates of officers of the Company,
provided that such certificates are appended to the opinion being
delivered hereunder. Such counsel shall also have furnished to the
Representatives a written statement, addressed to the Underwriters and
dated such Delivery Date, in form and substance satisfactory to the
Representatives, to the effect that (x) such counsel has acted as
counsel to the Company in connection with the preparation of the
Registration Statement, and (y) based on the foregoing, no facts have
come to the attention of such counsel which lead it to believe that
the Registration Statement, as of the Effective Date, contained any
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the
statements therein not misleading, or that the Prospectus contains any
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. The foregoing opinion and statement may be
qualified by a statement to the effect that such counsel does not
assume any responsibility for the accuracy, completeness or fairness
of the statements contained in the Registration Statement or the
Prospectus except for the statements made in the Prospectus under the
captions "United States Federal Tax Considerations For Non-United
States Holders" and "Shares Eligible for Future Sale", insofar as such
statements relate to the Stock and concern legal matters.
(e) Sills Cummis Radin Tischman Epstein & Gross, P.A. shall have
furnished to the Representatives its written opinion, as New Jersey
counsel to the Company, addressed to the Underwriters and dated such
Delivery Date, in form and substance reasonably satisfactory to the
Representatives, to the effect that:
(i) the Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws
of the State of New Jersey, and has all corporate power and
authority under New Jersey law necessary to own or hold its
properties and to conduct the business in which it is engaged;
(ii) the Company has the authorized capitalization as
set forth in the Prospectus, and all of the shares of Stock being
delivered on such Delivery Date) have been duly and validly
authorized and issued, are fully paid and non-assessable and
conform to the description thereof contained in
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the Prospectus under the caption "Description of Securities -
Common Stock";
(iii) there are no preemptive or other rights to
subscribe for or to purchase, nor any restriction upon the voting
or transfer of, any shares of the Stock pursuant to the Company's
charter or by-laws or any agreement or other instrument known to
such counsel;
(iv) this Agreement has been duly authorized, executed
and delivered by the Company; and (assuming the due
authorization, execution and delivery thereof by the other
parties thereto) constitutes the legal, valid and binding
obligation of the Company, enforceable against it in accordance
with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a
proceeding in equity or at law) or an implied covenant of good
faith and fair dealing, except that any rights or indemnification
or contribution under this Agreement may be limited by the laws
of the State of New York, the federal laws of the United States
or the or public policy relating thereto;
(v) the execution, delivery and performance of this
Agreement by the Company and the consummation of the transactions
contemplated hereby and the Recapitalization did not and will not
conflict with or result in a violation of the provisions of the
charter or by-laws of the Company or any New Jersey statute or
any order, rule or regulation know to such counsel of any New
Jersey court or governmental agency or body having jurisdiction
over the Company or any of its properties or assets; and no
consent, approval, authorization or order of, or filing or
registration with, any such court or governmental agency or body
is required for the execution, delivery and performance of this
Agreement by the Company and the consummation of the transactions
contemplated hereby and by the recapitalization;
(vi) all real property and buildings held under lease by
the Company are held by it under valid, subsisting and
enforceable leases, with such exceptions as are not material and
do not interfere with the use made and proposed to be made of
such property and buildings by the Company;
(vii) the statements contained in the Prospectus under
the captions "Risk Factors - certain provisions of our
certificate of incorporation and New Jersey law may have the
effect of discouraging, delaying or preventing a change in
control" and "Description of Securities", insofar as such
statements relate to the law of the State of New Jersey,
constitute a fair summary thereof in all material respects.
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<PAGE>
(f) William F. Sorin shall have furnished to the Representatives
a written opinion[, as special counsel to the Company], addressed to
the Underwriters and dated such Delivery Date, in form and substance
reasonably satisfactory to the Representatives, to the effect that:
(i) the execution delivery and performance of the
Agreement by the Company and the consummation of the transactions
contemplated hereby and the Recapitalization did not and will not
conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument known to such counsel to which the
Company is a party or by which the Company is bound or to which
any of the property or assets of the Company is subject;
(ii) to the best of such counsel's knowledge, there are
no legal or governmental proceedings pending to which the Company
is a party or of which any property or assets of the Company is
the subject which, if determined adversely to the Company, might
have a Material Adverse Effect; and, to the best of such
counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(iii) to the best of such counsel's knowledge, there
are no contracts or other documents which are required to be
described in the Prospectus or filed as exhibits to the
Registration Statement by the Securities Act or by the Rules and
Regulations which have not been so described or filed as exhibits
to the Registration Statement; and
(iv) except as described in the Prospectus and in the
Registration Rights Agreement, dated February __, 2000, by and
among the Company and Comverse, to the best of such counsel's
knowledge, there are no contracts, agreements or understandings
between the Company and any person granting such person the right
to require the Company to file a registration statement under the
Securities Act with respect to any securities of the Company
owned or to be owned by such person or to require the Company to
include such securities in the securities registered pursuant to
the Registration Statement or in any securities being registered
pursuant to any other registration statement filed by the Company
under the Securities Act. Except for (i) the options to purchase
from the Company, shares of the Common Stock in the aggregate
(after giving effect to the Recapitalization) granted to
officers, directors and employees under the 1998 Plan and (ii)
the options to purchase from the Company, shares of the Common
Stock in the aggregate (after giving effect to the
Recapitalization) to be granted to officers, directors and
employees under the 1998 Plan upon completion of
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the offering, no options, warrants or other rights to purchase
from the Company, agreements or other obligations of the Company
to issue, or rights to convert any obligations of the Company
into or exchange any securities of the Company for, shares of
capital stock of or ownership interests in the Company are
outstanding.
(g) the Representatives shall have received from Chadbourne &
Parke LLP, counsel for the Underwriters, such opinion or opinions,
dated such Delivery Date, with respect to the issuance and sale of the
Stock, the Registration Statement, the Prospectus and other related
matters as the Representatives may reasonably require, and the Company
shall have furnished to such counsel such documents as they reasonably
request for the purpose of enabling them to pass upon such matters.
(h) At the time of execution of this Agreement, the
Representatives shall have received from Deloitte & Touche LLP a
letter, in form and substance satisfactory to the Representatives,
addressed to the Underwriters and dated the date hereof (i) confirming
that they are independent public accountants within the meaning of the
Securities Act and are in compliance with the applicable requirements
relating to the qualification of accountants under Rule 2-01 of
Regulation S-X of the Commission, (ii) stating, as of the date hereof
(or, with respect to matters involving changes or developments since
the respective dates as of which specified financial information is
given in the Prospectus, as of a date not more than five days prior to
the date hereof), the conclusions and findings of such firm with
respect to the financial information and other matters ordinarily
covered by accountants' "comfort letters" to underwriters in
connection with registered public offerings.
(i) With respect to the letter of Deloitte & Touche LLP referred
to in the preceding paragraph and delivered to the Representatives
concurrently with the execution of this Agreement (the "initial
letter"), the Company shall have furnished to the Representatives a
letter (the "bring-down letter") of such accountants, addressed to the
Underwriters and dated such Delivery Date (i) confirming that they are
independent public accountants within the meaning of the Securities
Act and are in compliance with the applicable requirements relating to
the qualification of accountants under Rule 2-01 of Regulation S-X of
the Commission, (ii) stating, as of the date of the bring-down letter
(or, with respect to matters involving changes or developments since
the respective dates as of which specified financial information is
given in the Prospectus, as of a date not more than five days prior to
the date of the bring-down letter), the conclusions and findings of
such firm with respect to the financial information and other matters
covered by the initial letter and (iii) confirming in all material
respects the conclusions and findings set forth in the initial letter.
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(j) The Company shall have furnished to the Representatives a
certificate, dated such Delivery Date, of its chief executive officer
and its chief financial officer stating that:
(i) the representations, warranties and agreements of
the Company in Section 1 are true and correct as of such Delivery
Date; the Company has complied with all its agreements contained
herein; and the conditions set forth in Sections 8(a) and 8(k)
have been fulfilled; and
(ii) they have carefully examined the Registration
Statement and the Prospectus and, in their opinion (A) as of the
Effective Date, the Registration Statement and Prospectus did not
include any untrue statement of a material fact and did not omit
to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and (B)
since the Effective Date, no event has occurred which should have
been set forth in a supplement or amendment to the Registration
Statement or the Prospectus which has not been so set forth.
(k) (i) The Company shall not have sustained, since the date of
the latest audited financial statements included in the Prospectus,
any loss or interference with its business from fire, explosion, flood
or other calamity, whether or not covered by insurance, or from any
labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Prospectus or (ii)
since such date, there shall not have been any change in the capital
stock (other than the Recapitalization) or long-term debt of the
Company or any change, or any development involving a prospective
change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the
Company, otherwise than as set forth or contemplated in the
Prospectus, the effect of which, in any such case described in clause
(i) or (ii), is, in the judgment of the Representatives, so material
and adverse as to make it impracticable or inadvisable to proceed with
the public offering or the delivery of the Stock being delivered on
such Delivery Date on the terms and in the manner contemplated in the
Prospectus.
(l) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in
securities generally on the New York Stock Exchange or the Nasdaq
National Market or in the over-the-counter market, or trading in any
securities of the Company on any exchange or in the over-the-counter
market, (A) shall have been suspended and such suspension makes it, in
the reasonable judgment of the Representatives, impracticable or
inadvisable to proceed with the public offering or delivery of the
Stock being delivered on such Delivery Date on the terms and in the
manner contemplated in the Prospectus, or (B) minimum prices shall
have been established on any such exchange or such market by the
Commission, by such exchange or by any other
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regulatory body or governmental authority having jurisdiction, (ii) a
banking moratorium shall have been declared by Federal or state
authorities, (iii) the United States shall have become engaged in
hostilities, there shall have been an escalation in hostilities
involving the United States or there shall have been a declaration of
a national emergency or war by the United States or (iv) there shall
have occurred such a material adverse change in general economic,
political or financial conditions (or the effect of international
conditions on the financial markets in the United States shall be
such) as to make it, in the judgment of the Representatives,
impracticable or inadvisable to proceed with the public offering or
delivery of the Stock being delivered on such Delivery Date on the
terms and in the manner contemplated in the Prospectus.
(m) The Nasdaq National Market System shall have approved the
Stock for quotation, subject only to official notice of issuance and
evidence of satisfactory distribution.
All opinions, letters, evidence and certificates mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the provisions hereof
only if they are in form and substance reasonably satisfactory to counsel for
the Underwriters.
9. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each Underwriter,
its officers and employees and each person, if any, who controls any Underwriter
within the meaning of the Securities Act, from and against any loss, claim,
damage or liability, joint or several, or any action in respect thereof
(including, but not limited to, any loss, claim, damage, liability or action
relating to purchases and sales of Stock), to which that Underwriter, officer,
employee or controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained (A) in any Preliminary Prospectus, the Registration
Statement or the Prospectus or in any amendment or supplement thereto or (B) in
any materials or information provided to investors by, or with the approval of,
the Company in connection with the marketing of the offering of the Stock,
including any roadshow or investor presentations made to investors by the
Company (whether in person or electronically) (the "Marketing Materials"), (ii)
the omission or alleged omission to state in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or in any amendment or supplement
thereto, or in any Marketing Materials, any material fact required to be stated
therein or necessary to make the statements therein not misleading or (iii) any
act or failure to act or any alleged act or failure to act by any Underwriter in
connection with, or relating in any manner to, the Stock or the offering
contemplated hereby, and which is included as part of or referred to in any
loss, claim, damage, liability or action arising out of or based upon matters
covered by clause (i) or (ii) above (provided that the Company shall not be
liable under this clause (iii) to the extent that it is determined in a final
judgment by a court of competent jurisdiction that such loss, claim, damage,
liability or action resulted directly from any such acts or failures to act
undertaken or
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<PAGE>
omitted to be taken by such Underwriter through its gross negligence or willful
misconduct), and shall reimburse each Underwriter and each such officer,
employee or controlling person promptly upon demand for any legal or other
expenses reasonably incurred by that Underwriter, officer, employee or
controlling person in connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, any untrue statement or alleged untrue
statement or omission or alleged omission made in any Preliminary Prospectus,
the Registration Statement or the Prospectus, or in any such amendment or
supplement, in reliance upon and in conformity with written information
concerning such Underwriter furnished to the Company through the Representatives
by or on behalf of any Underwriter specifically for inclusion therein which
information consists solely of the information specified in Section 9(e). The
indemnification agreement set forth in this paragraph 9(a) with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter from
whom the person asserting any such losses, claims, damages, liabilities or
expenses purchased the Stock which is the subject thereof (or to the benefit of
any person controlling such Underwriter) if at or prior to the written
confirmation of the sale of such Stock a copy of the Prospectus (or the
Prospectus as amended or supplemented) was not sent or delivered to such person
and the untrue statement or omission of a material fact contained in such
Preliminary Prospectus was corrected in the Prospectus (or in the Prospectus as
amended or supplemented) in any case where such delivery is required by the
Securities Act, unless the failure is the result of noncompliance by the Company
with paragraph 5(a) hereof. The foregoing indemnity agreement is in addition to
any liability which the Company or Comverse may otherwise have to any
Underwriter or to any officer, employee or controlling person of that
Underwriter.
(b) Each Underwriter, severally and not jointly, shall indemnify and
hold harmless the Company, its officers and employees, each of its directors
(including any person who, with his or her consent, is named in the Registration
Statement as about to become a director of the Company), and each person, if
any, who controls the Company within the meaning of the Securities Act, from and
against any loss, claim, damage or liability, joint or several, or any action in
respect thereof, to which the Company or any such director, officer or
controlling person may become subject, under the Securities Act or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained (A) in any Preliminary Prospectus, the Registration Statement or
the Prospectus or in any amendment or supplement thereto, or (B) in any
Marketing Materials or (ii) the omission or alleged omission to state in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or in any
amendment or supplement thereto, or in any Marketing Materials, any material
fact required to be stated therein or necessary to make the statements therein
not misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission was made in reliance upon and in conformity
with written information concerning such Underwriter furnished to the Company
through the Representatives by or on behalf of that Underwriter specifically for
inclusion therein, which information consists solely of the information
specified in Section 9(e), and shall reimburse the Company and any such
director, officer or controlling person for any legal or other
22
<PAGE>
expenses reasonably incurred by the Company or any such director, officer or
controlling person in connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action as such
expenses are incurred. The foregoing indemnity agreement is in addition to any
liability which any Underwriter may otherwise have to the Company or any such
director, officer, employee or controlling person.
(c) Promptly after receipt by an indemnified party under this Section
9 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 9, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 9 except to the extent it has
been materially prejudiced by such failure and; provided further, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section 9.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After notice
from the indemnifying party to the indemnified party of its election to assume
the defense of such claim or action, the indemnifying party shall not be liable
to the indemnified party under this Section 9 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
the Representatives shall have the right to employ counsel to represent jointly
the Representatives and those other Underwriters and their respective officers,
employees and controlling persons who may be subject to liability arising out of
any claim in respect of which indemnity may be sought by the Underwriters
against the Company under this Section 9 if, in the reasonable judgment of the
Representatives either (i) there is an actual or potential conflict between the
position of the Company and the Underwriters, (ii) there may be defenses
available to it or them that are different from or additional to those available
to the Company (in any of which events the Company shall not have the right to
direct the defense of such action on behalf of the Representative or
Representatives with respect to such different defenses) or (iii) the Company
has failed to assume to defense of such action and employ counsel reasonably
satisfactory to the Representatives, in any of which events such fees and
expenses shall be borne by the Company. No indemnifying party shall (i) without
the prior written consent of the indemnified parties (which consent shall not be
unreasonably withheld), settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding, or (ii) be liable for any
settlement of any such action effected without its written consent (which
consent shall not be unreasonably withheld), but if settled with the consent of
the indemnifying party or if there be a final judgment of the plaintiff in any
such action, the indemnifying party
23
<PAGE>
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 9 shall for
any reason be unavailable to or insufficient to hold harmless an indemnified
party under Section 9(a) or 9(b) in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriters on the other from
the offering of the Stock or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Company on the one hand, and the Underwriters on the
other hand, with respect to the statements or omissions which resulted in such
loss, claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other with respect to such
offering shall be deemed to be in the same proportion as the total net proceeds
from the offering of the Stock purchased under this Agreement (before deducting
expenses) received by the Company on the one hand, and the total underwriting
discounts and commissions received by the Underwriters with respect to the
shares of the Stock purchased under this Agreement on the other hand, bear to
the total gross proceeds from the offering of the shares of the Stock under this
Agreement, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to whether the
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Underwriters, the intent of the parties and their relative knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 9(d) were to be determined
by pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take into
account the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this Section 9
shall be deemed to include, for purposes of this Section 9(d), any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 9(d), no Underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the shares
of Stock underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such Underwriter has otherwise
paid or become liable to pay by reason of any untrue or alleged untrue statement
or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute as
provided in this Section 9(d) are several in proportion to their respective
underwriting obligations and not joint.
24
<PAGE>
(e) The Underwriters severally confirm and the Company acknowledges
that (i) the statements with respect to the public offering of the Stock by the
Underwriters set forth on the cover page of, (ii) the statements with respect to
the delivery of the Prospectus set forth on page (i) of the Prospectus, and
(iii) the concession and reallowance figures and the discussion concerning over-
allotments, stabilization and the factors the Representatives will consider in
pricing, all appearing under the caption "Underwriting" in, the Prospectus are
correct and constitute the only information concerning such Underwriters
furnished in writing to the Company by or on behalf of the Underwriters
specifically for inclusion in the Registration Statement and the Prospectus.
10. Defaulting Underwriters.
If, on either Delivery Date, any Underwriter defaults in the
performance of its obligations under this Agreement, the remaining non-
defaulting Underwriters shall be obligated to purchase the Stock which the
defaulting Underwriter agreed but failed to purchase on such Delivery Date in
the respective proportions which the number of shares of the Firm Stock set
opposite the name of each remaining non-defaulting Underwriter in Schedule 1
hereto bears to the total number of shares of the Firm Stock set opposite the
names of all the remaining non-defaulting Underwriters in Schedule 1 hereto;
provided, however, that the remaining non-defaulting Underwriters shall not be
obligated to purchase any of the Stock on such Delivery Date if the total number
of shares of the Stock which the defaulting Underwriter or Underwriters agreed
but failed to purchase on such date exceeds 9.09% of the total number of shares
of the Stock to be purchased on such Delivery Date, and any remaining non-
defaulting Underwriter shall not be obligated to purchase more than 110% of the
number of shares of the Stock which it agreed to purchase on such Delivery Date
pursuant to the terms of Section 2. If the foregoing maximums are exceeded, the
remaining non-defaulting Underwriters, or those other underwriters satisfactory
to the Representatives who so agree, shall have the right, but shall not be
obligated, to purchase, in such proportion as may be agreed upon among them, all
the Stock to be purchased on such Delivery Date. If the remaining Underwriters
or other underwriters satisfactory to the Representatives do not elect to
purchase the shares which the defaulting Underwriter or Underwriters agreed but
failed to purchase on such Delivery Date, this Agreement (or, with respect to
the Second Delivery Date, the obligation of the Underwriters to purchase, and of
the Company to sell, the Option Stock) shall terminate without liability on the
part of any non-defaulting Underwriter or the Company, except that the Company
will continue to be liable for the payment of expenses to the extent set forth
in Sections 7 and 12. As used in this Agreement, the term "Underwriter"
includes, for all purposes of this Agreement unless the context requires
otherwise, any party not listed in Schedule 1 hereto who, pursuant to this
Section 10, purchases Firm Stock which a defaulting Underwriter agreed but
failed to purchase.
Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have to the Company for damages caused by its default. If
other underwriters are obligated or agree to purchase the Stock of a defaulting
or withdrawing Underwriter, either the Representatives or the Company may
postpone the Delivery Date for up to seven full business days in order to effect
any changes that in the opinion of counsel for the Company or counsel for
25
<PAGE>
the Underwriters may be necessary in the Registration Statement, the Prospectus
or in any other document or arrangement.
11. Termination. The obligations of the Underwriters hereunder may
be terminated by the Representatives by notice given to and received by the
Company prior to delivery of and payment for the Firm Stock if, prior to that
time, any of the events described in Sections 8(k) or 8(l), shall have occurred
or if the Underwriters shall decline to purchase the Stock for any reason
permitted under this Agreement.
12. Reimbursement of Underwriters' Expenses. If the Company shall
fail to tender the Stock for delivery to the Underwriters by reason of any
failure, refusal or inability on the part of the Company to perform any
agreement on its part to be performed, or because any other condition of the
Underwriters' obligations hereunder required to be fulfilled by the Company is
not fulfilled, the Company will reimburse the Underwriters for all reasonable
out-of-pocket expenses (including fees and disbursements of counsel) incurred by
the Underwriters in connection with this Agreement and the proposed purchase of
the Stock, and upon demand the Company shall pay the full amount thereof to the
Representatives. If this Agreement is terminated pursuant to Section 10 by
reason of the default of one or more Underwriters, the Company shall not be
obligated to reimburse any defaulting Underwriter on account of those expenses.
13. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Underwriters, shall be delivered or sent by mail,
telex or facsimile transmission to Lehman Brothers Inc., Three World
Financial Center, New York, New York 10285, Attention: Syndicate
Department (Fax: 212-526-6588), with a copy, in the case of any notice
pursuant to Section 9(c), to the Director of Litigation, Office of the
General Counsel, Lehman Brothers Inc., 3 World Financial Center, 10th
Floor, New York, NY 10285; and
(b) if to the Company or to Comverse, shall be delivered or sent
by mail, telex or facsimile transmission to the address of the Company
set forth in the Registration Statement, Attention: Shawn Osborne,
President and Chief Executive Officer (Fax: (856) 886-2033), with a
copy to Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, NY
10153, Attention: Stephen Besen, Esquire (Fax: (212) 310-8007); and
to William F. Sorin, Esq., c/o Comverse Technology, Inc., 900 Third
Avenue, New York, NY 10022 (Fax: (212) 414-1499);
provided, however, that any notice to an Underwriter pursuant to Section 9(c)
shall be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its acceptance telex to the
Representatives, which address will be supplied to any other party hereto by the
Representatives upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Company shall
be entitled to act and rely upon any
26
<PAGE>
request, consent, notice or agreement given or made on behalf of the
Underwriters by Lehman Brothers Inc. on behalf of the Representatives.
14. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the Underwriters, the Company, and
their respective successors; provided that Section 6 of this Agreement shall be
binding upon Comverse and its successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons, except that
(A) the representations, warranties, indemnities and agreements of the Company
and Comverse contained in this Agreement shall also be deemed to be for the
benefit of the person or persons, if any, who control any Underwriter within the
meaning of Section 15 of the Securities Act and (B) the indemnity agreement of
the Underwriters contained in Section 9(b) of this Agreement shall be deemed to
be for the benefit of directors of the Company, officers of the Company who have
signed the Registration Statement and any person controlling the Company within
the meaning of Section 15 of the Securities Act. Nothing in this Agreement is
intended or shall be construed to give any person, other than the persons
referred to in this Section 14, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.
15. Survival. The respective indemnities, representations,
warranties and agreements of the Company, Comverse and the Underwriters
contained in this Agreement or made by or on behalf on them, respectively,
pursuant to this Agreement, shall survive the delivery of and payment for the
Stock and shall remain in full force and effect, regardless of any investigation
made by or on behalf of any of them or any person controlling any of them.
16. Definition of the Terms "Business Day" and "Subsidiary". For
purposes of this Agreement, (a) "business day" means each Monday, Tuesday,
Wednesday, Thursday or Friday which is not a day on which banking institutions
in New York are generally authorized or obligated by law or executive order to
close and (b) "subsidiary" has the meaning set forth in Rule 405 of the Rules
and Regulations.
17. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of New York.
18. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
19. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
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<PAGE>
If the foregoing correctly sets forth the agreement among the Company,
Comverse and the Underwriters, please indicate your acceptance in the space
provided for that purpose below.
Very truly yours,
ULTICOM, INC.
By
-------------------------------------
Name:
Title:
COMVERSE TECHNOLOGY, INC.
By
-------------------------------------
Name:
Title:
Accepted:
Lehman Brothers Inc.
Chase Securities Inc.
U.S. Bancorp Piper Jaffray Inc.
Fidelity Capital markets,
a division of National Financial
Services Corporation
For themselves and as Representatives
of the several Underwriters named
in Schedule 1 hereto
By Lehman Brothers Inc.
By
-----------------------------
Authorized Representative
28
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ULTICOM, INC.
ULTICOM, INC., a New Jersey corporation since December 18, 1974, hereby
amends and restates its Restated Certificate of Incorporation, as amended to
date, pursuant to the provisions of Section 14A:9-5 of the New Jersey Business
Corporation Act (as amended and/or hereafter restated from time to time,
"NJBCA"), to read as follows:
ARTICLE FIRST
The name of the corporation is Ulticom, Inc. (the "Corporation").
ARTICLE SECOND
A. The current registered office of the Corporation within the State of
New Jersey is 820 Bear Tavern Road, West Trenton, New Jersey 08628 and the
current registered agent is The Corporation Trust Company.
B. As of the date on which this Amended and Restated Certificate of
Incorporation is filed by the Secretary of the State of the State of New Jersey
(the "Filing Time"), there are six directors constituting the Board of Directors
of the Corporation. The names and addresses of such directors are as follows:
NAME ADDRESS
---- -------
Kobi Alexander 170 Crossways Park Drive
Woodbury, NY 11797
William F. Sorin 823 Park Avenue
New York, NY 10021
Shawn K. Osborne 1020 Briggs Road
Mount Laurel, NJ 08054
David Kreinberg 170 Crossways Park Drive
Woodbury, NY 11797
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Paul D. Baker 170 Crossways Park Drive
Woodbury, NY 11797
Yaacov Koren 170 Crossways Park Drive
Woodbury, NY 11797
ARTICLE THIRD
The Corporation is authorized to issue two hundred ten million
(210,000,000) shares, with no par value, divided into: two hundred million
(200,000,000) shares of common stock and ten million (10,000,000) shares of
undesignated stock ("Undesignated Stock" or "Undesignated Shares"), all of
which shares shall have the relative rights, preferences, and limitations
required by applicable law and as set forth in this certificate of
incorporation.
A. The Board of Directors of the Corporation is hereby expressly
authorized to amend the certificate of incorporation to divide the Undesignated
Shares of the Corporation into one or more classes of common or preferred stock,
and to further divide any classes or any existing classes of Undesignated Stock
designated as preferred stock ("preferred stock") into series, and to determine
the designations, numbers, relative rights, preferences and limitations of such
preferred stock. The authority of the Board of Directors with respect to
establishing the designations, numbers, relative rights, preferences and
limitations of each class or series of Undesignated Stock designated as
preferred stock shall include, but shall not be limited to, determining the
following:
(i) the designation of such class or series, the number of shares
to constitute such class or series and the stated value if different from
the par value thereof;
(ii) whether the shares of such class or series shall have voting
rights, in addition to any voting rights provided by law, and, if so, the
terms of such voting rights, which may be general or limited;
(ii) the dividends, if any, payable on such class or series,
whether any such dividends shall be cumulative, and, if so, from what
dates, the conditions and dates upon which such dividends shall be payable,
and the preference or relation which such dividends shall bear to the
dividends payable on any shares of stock of any other class or any other
series of common or preferred stock, as the case may be;
(iv) whether the shares of such class or series shall be subject
to redemption either by the corporation or the holders thereof, and, if so,
the times, prices and other conditions of such redemption;
(v) the amount or amounts payable to the holders of shares of
such class
2
<PAGE>
or series upon, and rights of the holders of such class or series in, the
voluntary or involuntary liquidation, dissolution or winding up, or upon
any distribution of the assets, of the corporation;
(vi) whether the shares of such class or series shall be subject
to the operation of a retirement or sinking fund and, if so, the extent to
and the manner in which any such retirement or sinking fund shall be
applied to the purchase or redemption of the shares of such class or series
for retirement or other corporate purposes and the terms and provisions
relating to the operation thereof;
(vi) whether the shares of such class or series shall be
convertible into, or exchangeable for, shares of stock of any other class
or any other series of common or preferred stock or any other securities
and, if so, the price or prices or the rate or rates of conversion or
exchange and the method, if any, of adjusting the same, and any other terms
and conditions of conversion or exchange;
(vi) the limitations and restrictions, if any, to be effective
while any shares of such class or series are outstanding upon the payment
of dividends or the making of other distributions on, and upon the
purchase, redemption or other acquisition by the corporation of, shares of
stock of any other class or any other series of common or preferred stock;
(ix) the conditions or restrictions, if any, upon the creation of
indebtedness of the corporation or upon the issuance of any additional
stock, including additional shares of such class or series or any other
class or series of common or preferred stock; and
(x) any other relative rights, preferences and limitations.
To the maximum extent permitted by applicable law, the relative rights,
preferences and limitations of each class or series of preferred stock may
differ from those of any and all other classes or series of preferred stock.
All shares of any one series of preferred stock and all shares of any one class
of preferred stock (except for differences, to the maximum extent permitted by
applicable law, between shares of a different series within a class), shall be
identical in all respects with all other shares of such series or class, as
applicable, except that shares of any one series or class, as the case may be,
issued at different times may differ as to the dates from which dividends
thereof shall be cumulative.
B. The Board of Directors of the Corporation is hereby expressly
authorized to amend the certificate of incorporation to change the designations,
numbers, relative rights, preferences and limitations of any authorized but
unissued shares of Undesignated Stock designated as preferred stock.
ARTICLE FOURTH
3
<PAGE>
The purpose of the Corporation is to engage in any activity within the
purposes for which corporations may be organized under the NJBCA.
ARTICLE FIFTH
The Board of Directors shall have the power to make, alter and repeal by-
laws of the Corporation, but by-laws made by the Board of Directors may be
altered or repealed, and the new by-laws may be made, by the shareholders.
ARTICLE SIXTH
Officers and directors of the Corporation shall not be personally liable to
the Corporation or its shareholders for damages for the breach of any duty owed
to the Corporation or its shareholders except to the extent that an exemption
from personal liability is not permitted by the NJBCA. Neither the amendment nor
repeal of this Article, nor the adoption of any provision of this Certificate
of Incorporation inconsistent with this Article, shall eliminate or reduce the
protection afforded by this Article to a director or officer of the Company
with respect to any matter which occurred, or any cause of action, suit or
claim which, but for this Article, would have accrued or arisen, prior to such
amendment, repeal or adoption.
ARTICLE SEVENTH
Every person (a) who is or was a director, officer, employee or agent of
the Corporation or of any constituent corporation absorbed by the Corporation in
a consolidation or merger, or the legal representative of any such director,
officer, employee or agent (b) who is or was a director, officer, trustee,
employee or agent of any other enterprise, serving as such at the request of the
Corporation, or of any such corporation absorbed by the Corporation in a
consolidation or merger, or the legal representative of any such director,
officer, trustee, employee or agent (each such person referred to in clause (a)
or (b) a "Corporate Agent") shall be indemnified by the Corporation to the
fullest extent allowed by law, including but not limited to the indemnification
permitted by Section 14A:3-5(8) of the NJBCA, against all expenses and
liabilities in connection with any proceeding involving such Corporate Agent by
reason of his being or having been such a Corporate Agent. During the pendency
of any such proceeding, the Corporation shall, to the fullest extent permitted
by law, promptly advance expenses that are incurred, from time to time, by the
Corporate Agent in connection with the proceeding, subject to the receipt by the
Corporation of an undertaking as required by law. No elimination of or
amendment to this Article Seventh shall deprive any person of rights
hereunder arising out of alleged or actual occurrences, acts or failures to act
occurring prior to such elimination or amendment. Notwithstanding the preceding
provisions of this Article Seventh (a) no Corporate Agent shall be entitled to
indemnification if he or she settles any such matter without the prior written
consent of the Corporation and (b) the Corporation shall have the right to
defend any such Corporate Agent in respect of any claim made by the Corporate
Agent for indemnification, except to the extent there exists a conflict of
interest between the Corporation and such Corporate Agent with respect to such
claim.
4
<PAGE>
IN WITNESS WHEREOF, the undersigned does hereby certify that this Amended
and Restated Certificate of Incorporation, which both restates and amends the
provisions of the Amended and Restated Certificate of Incorporation of the
Corporation in effect immediately prior to the Filing Time, was duly adopted in
accordance with the provisions of Sections 14A:9-2(4) and 14A:9-5 of the NJBCA
and by written consent of all of the shareholders of the Corporation in
accordance with Section 14A:5-6 of the NJBCA.
Dated: March 8, 2000
ULTICOM, INC.
By: /s/ SHAWN OSBORNE
---------------------------
Name: Shawn Osborne
Title: President
5
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED BY-LAWS
of
ULTICOM, INC.
A New Jersey Corporation
as Amended and Restated on March 8, 2000
ARTICLE I
OFFICES
-------
The registered office of Ulticom, Inc. (the "Company" or the "Corporation")
shall be in the Township of Mount Laurel, State of New Jersey or such other
place within or without the State of New Jersey as the Board of Directors may
from time to time designate. The Company may also establish and have such other
offices within or without the State of New Jersey, as the Board of Directors may
from time to time designate or its business may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
------------------------
SECTION 1. PLACE OF MEETINGS. Meetings of the shareholders shall be held
-----------------
at the registered office of the Company in New Jersey, or at such other place,
within or without the State of New Jersey, as may be designated by the Board of
Directors and stated in the notice of the meeting.
SECTION 2. ANNUAL AND SPECIAL MEETINGS. The annual meeting of
---------------------------
shareholders for the election of directors and the transaction of such other
business as may be related to the purposes set forth in the notice of the
meeting shall be held at such time as may be fixed by the Board of Directors.
If the annual meeting of shareholders is not held on the date designated, the
Board of Directors may call a special meeting of the shareholders for the
election of directors and the transaction of other business. Special meetings
of the shareholders may be called by the Board of Directors or by the Chairman
of the Board or by the President, and shall be called by the Chairman of the
Board or by the President upon written request of a majority of the Directors
then in office or of shareholders holding a majority of the Company's
outstanding shares, which request shall state the time, place and purpose of the
meeting. No business may be transacted at an annual meeting of shareholders,
other than business that is either (a) specified in the notice of meeting (or
any supplement thereto) given by or at the direction of the Board of Directors
(or any duly authorized committee thereof), (b) otherwise properly brought
before the annual meeting by or at the direction of the Board of Directors (or
any duly authorized committee thereof) or (c) otherwise properly brought before
the annual meeting by any shareholder of the Company (i) who is a shareholder of
record on the date of the giving of the notice provided for in this Section 2
and on the
<PAGE>
record date for the determination of shareholders entitled to vote at such
annual meeting and (ii) who complies with the notice procedures set forth in
Section 11 of this Article II, provided, however, that, once business has been
properly brought before the annual meeting in accordance with such procedures,
nothing in this Section 2 shall be deemed to preclude discussion by any
shareholder of any such business, provided further that any such initial
discussion and any continuation thereof shall be subject to the discretion of
the Chairman of the meeting. If the Chairman of an annual meeting determines
that business was not properly brought before the annual meeting in accordance
with the foregoing procedures, the Chairman shall declare to the meeting that
the business was not properly brought before the meeting and such business shall
not be transacted.
SECTION 3. QUORUM. The presence, in person or by proxy, of the holders of
------
shares representing a majority of the votes entitled to be cast at a meeting
shall constitute a quorum. The shareholders present in person or by proxy at a
duly organized meeting may continue to do business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum. If a quorum not be present or represented at any meeting, the Chairman
of the meeting or shareholders holding more than 20% of the shares present in
person or by proxy at the meeting, shall have power to adjourn the meeting
without notice. At such adjourned meeting so long as a quorum (as determined by
the first sentence of this Section 3) is present, any business may be transacted
which might have been transacted at the meeting as originally notified.
SECTION 4. NOTICE OF MEETINGS. A written notice of each annual or
--------------------
special meeting of the shareholders of the Company, signed by the Chairman of
the Board, the President or the Secretary, which shall state the time, place and
purpose of such meeting, shall be delivered personally or mailed, not less than
10 days (or greater period required by law) nor more than 60 days before the
date of any such meeting, to each shareholder of record entitled to vote at such
meeting. If mailed, the notice shall be directed to the shareholder at his
address as it appears on the records of the Company or its stock transfer agent.
Any shareholder, in person or by proxy, may at any time by a duly signed
statement in writing to that effect, waive any statutory or other notice of any
meeting, whether such statement be signed before or after such meeting.
SECTION 5. VOTING. At all meetings of the shareholders, each holder of
-------
common stock having the right to vote, and present at the meeting in person or
by proxy, shall be entitled to one vote for each full share of common stock of
the Company entitled to vote and registered in his name. Each holder of
preferred stock of any series shall have such voting powers, if any, as the
Board of Directors shall have fixed by resolution prior to the issuance of any
shares of such series. Whenever any action is to be taken by vote of the
shareholders, it shall be authorized by a majority of the votes cast at a
meeting of the shareholders by the holders of shares entitled to vote (a)
unless a greater plurality is required by law or the Certificate of
Incorporation and (b) except that directors shall be elected by a plurality of
the votes cast at elections.
SECTION 6. CONSENTS IN LIEU OF MEETING. Unless otherwise provided in
---------------------------
the Certificate of Incorporation or any amendment thereto or by the laws of the
State of New Jersey, any action required by the laws of the State of New Jersey
to be taken at any annual or special meeting
<PAGE>
of stockholders, or any action which may be taken at any annual or special
meeting of such stockholders, may be taken without a meeting, without prior
notice and without a vote, if: (i) a consent in writing, setting forth the
action so taken, shall be signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted, and (ii) prompt notice of the taking of such action by less
than unanimous written consent is given to the other stockholders to the extent
and in the manner required by the laws of the State of New Jersey, provided
however, that if such action is not approved by the unanimous written consent of
the stockholders, such action shall not be effective until such time as any
prior written notification to stockholders and subsequent passage of time
required by Section 5-6 of the New Jersey Business Corporation Act as amended
from time to time (collectively, the "New Jersey Business Corporation Act ") has
been satisfied.
SECTION 7. LIST OF STOCKHOLDERS. At least ten days before every
--------------------
stockholders meeting, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order and showing the address and the
number of shares registered in the name of each stockholder, shall be prepared
by the secretary or the transfer agent in charge of the stock ledger of the
corporation. Such list shall be open for examination by any stockholder to the
extent required by the laws of the State of New Jersey. The stock ledger shall
be the only evidence as to who are the stockholders entitled to examine such
list or to vote in person or by proxy at such meeting.
SECTION 8. PROXIES. Any shareholder of record entitled to vote may be
-------
represented at any annual or special meeting of the shareholders by a duly
appointed proxy. All proxies shall be written and properly signed, but shall
require no other attestation, and shall be filed with the Secretary of the
meeting before being voted. Proxies may be revoked by proper written notice
delivered to the Secretary prior to such meeting.
SECTION 9. ORGANIZATION. The Chairman of the Board, or in the absence of
------------
the Chairman of the Board, the Chief Executive Officer or the President, shall
act as chairman of the meeting at all meetings of the shareholders. The
Secretary, or in his absence one of the Assistant Secretaries, shall act as
secretary of the meeting. In case none of the officers above designated to act
as Chairman or Secretary of the meeting shall be present, a chairman or a
secretary of the meeting, as the case may be, shall be chosen by a vote of the
shareholders.
SECTION 10. ORDER OF BUSINESS. The order of business at all meetings of
-----------------
the shareholders shall be as determined by the Chairman of the meeting, but the
order of business to be followed at any meeting at which a quorum is present may
be changed by a vote of the shareholders.
SECTION 11. SHAREHOLDER REQUESTS. In addition to any other applicable
--------------------
requirements, for business to be properly brought before an annual meeting by a
shareholder, such shareholder must have given timely notice thereof in proper
written form to the Secretary of the Company. To be timely, a shareholder's
notice to the Secretary must be delivered to or mailed and received at the
principal executive offices of the Company not less than 90 days nor more than
120
<PAGE>
days prior to the anniversary date of the immediately preceding annual meeting
of shareholders; provided however, that in the event that the annual meeting is
called for on a date that is not within 30 days before or after such anniversary
date, notice by the shareholder in order to be timely must be so received not
later than the close of business on the tenth day following the day on which
such notice of the date of the annual meeting was mailed or such public
disclosure of the date of the annual meeting was made, whichever first occurs.
To be in proper written form, a shareholder's notice to the Secretary must set
forth the following as to each matter such shareholder proposes to bring before
the annual meeting: (a) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (b) the name and record address of such shareholder, (c)
the class or series and number of shares of capital stock of the Company that
are owned beneficially or of record by such shareholder, (d) a description of
all arrangements or understandings between such shareholder and any other person
or persons (including their names) in connection with the proposal of such
business by such shareholder and any material interest of such shareholder in
such business and (e) a representation that such shareholder intends to appear
in person or by proxy at the annual meeting to bring such business before the
meeting. The Company shall have no obligation to bring any matter referred to in
this Section 11 before the annual meeting except to the extent required by law.
SECTION 12. METHOD OF VOTING; INSPECTORS. The vote by the stockholders on
----------------------------
any matter properly brought before any stockholders' meeting shall be by written
ballot, unless the Chairman of the meeting shall otherwise decide. With
respect to all elections of directors by the shareholders and with respect to
any other matters designated by the presiding officer at the meeting, an
independent inspector shall be chosen by the presiding officer of the meeting.
Such inspector need not but may be a shareholder and/or employee of the Company.
Such inspector shall take and sign an oath faithfully to execute the duties of
inspector at such meeting with strict impartiality and according to the best of
his ability.
ARTICLE III
DIRECTORS
---------
SECTION 1. QUALIFICATIONS. Each Director shall be at least 21 years of
--------------
age, and shall be elected in the manner provided by these By-Laws.
SECTION 2. DUTIES AND POWERS. The Board of Directors shall control and
-----------------
manage the business and affairs of the Company, and shall exercise all powers of
the Company and perform all acts which are not required to be exercised or
performed by the shareholders. The Directors may adopt such rules and
regulations for the conduct of their meetings and the management of the Company
as they may deem proper.
SECTION 3. NUMBER OF DIRECTORS. The number of directors (exclusive of
-------------------
directors, if any, elected by the holders of one or more classes of preference
stock designated by the directors pursuant to the Certificate of Incorporation,
voting separately as a class pursuant to the
<PAGE>
provisions of the Certificate of Incorporation applicable thereto) shall be not
less than three (3) or more than fifteen (15) directors. The number of directors
constituting the entire Board of Directors shall be determined from time to time
by resolution adopted by affirmative vote of a majority of the entire Board of
Directors.
SECTION 4. PLACE OF MEETINGS. Meetings of the Board of Directors
-----------------
shall be held at the principal office of the Company or at such other place
within or without the State of New Jersey, as the Chairman of the Board or the
Board may designate.
SECTION 5. TELEPHONE MEETINGS. Any or all Directors may participate in a
------------------
meeting of the Board or a committee of the Board by means of conference
telephone or any other means of communication by which all persons participating
in the meeting are able to hear each other.
SECTION 6. NOTICE OF MEETINGS There shall be an annual meeting of the
------------------
Board of Directors held without notice immediately following the annual meeting
of shareholders, or as soon thereafter as convenient, at the same place as the
annual meeting of shareholders unless some other location is designated by the
Chairman of the Board or by the President. Regular meetings, without notice,
may be held at such time and place as the Board of Directors may designate. The
Chairman of the Board or the President may call any special meeting of the Board
of Directors, and shall do so whenever requested in writing by at least one-
third of the Directors. Notice of each special meeting (a) shall be mailed
to each director at least four days before the date on which the meeting is to
be held, or (b) shall be telephoned or sent to each Director by telegraph,
telex, TWX, cable, wireless or similar means of communication, or be delivered
in person, not later than the day before the date on which such meeting is to be
held. The Board of Directors may meet to transact business at any time and
place without notice, provided that each director shall be present, or that any
Director or Directors not present shall waive notice in writing, either before
or after such meeting. The attendance of any Director at a meeting without
protesting prior to the conclusion of the meeting the lack of notice of such
meeting shall constitute a waiver of notice by him. Neither the business to be
transacted at, nor the purpose of, any meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting. Notice of an
adjourned meeting need not be given if the time and place are fixed at the
meeting adjourning and if the period of adjournment does not exceed 10 days in
any one adjournment.
SECTION 7. QUORUM. A majority of the Directors then in office shall
------
constitute a quorum for the transaction of business, but the Director or
Directors present, if less than a quorum, may adjourn any meeting from time to
time until such quorum shall be present. All questions coming before the Board
of Directors shall be determined and decided by a majority vote of the Directors
present, unless the vote of a greater number is required by statute, the
Certificate of Incorporation or these By-Laws.
SECTION 8. ACTION WITHOUT A MEETING. The Board of Directors may act
------------------------
without a meeting if, prior or subsequent to such action, each Director shall
consent in writing to such action.
<PAGE>
Such written consent or consents shall be filed with the minutes of the
proceedings of the Board of Directors.
SECTION 9. RESIGNATIONS; REMOVAL; VACANCIES. A director shall hold office
--------------------------------
until the next annual meeting of shareholders and until his or her successor
shall be elected and shall qualify, subject, however, to prior resignation,
death, or removal with or without cause from office. Except as may otherwise be
provided in the Certificate of Incorporation, any director may be removed, with
or without cause, by holders of shares constituting a majority of the votes cast
at a meeting of the shareholders at which a quorum is present or pursuant to
Section 6 of Article II of these by-laws. A director may resign at any time,
such resignation to be effective upon receipt by the Chairman and Secretary of
the Company of such written notice (or to be effective on such later date as is
provided for in such resignation by such director). Any newly created
directorship resulting from an increase in the number of directors and any other
vacancy on the board of directors, however caused, may be filled by a majority
of the directors then in office, although less than a quorum, or by a sole
remaining director. Any director so elected to fill a vacancy shall hold office
until the next succeeding annual meeting of shareholders and until his or her
successor shall have been elected and qualify, subject to prior resignation,
death or removal with or without cause from office.
SECTION 10. COMPENSATION OF DIRECTORS. The Board may, by the affirmative
-------------------------
vote of a majority of the Directors then in office, fix reasonable fees or
compensation of the Directors for services to the Company, including attendance
at meetings of the Board of Directors or Committees of the Board. Nothing herein
contained shall be construed to preclude any Director from serving the Company
in any other capacity and receiving compensation therefor. Each Director shall
be entitled to receive reimbursement for reasonable expenses incurred in the
performance of his duties.
ARTICLE IV
COMMITTEES
----------
SECTION 1. HOW CONSTITUTED AND POWERS. The Board of Directors, by
--------------------------
resolution of a majority of the Directors then in office, may appoint from among
its members the committees enumerated in the By-laws and may appoint one or more
other committees. The Board may designate one member of each committee its
chairman. To the extent provided in the By-law or any resolution conferring or
limiting its powers each committee shall have and may exercise all the authority
of the Board, except that no committee shall:
(a) make, alter, or repeal any By-law of the Company;
(b) elect, or appoint any Director, or remove any officer or director;
(c) submit to shareholders any action that requires approval of
shareholders;
<PAGE>
(d) amend or repeal any resolution adopted by the Board of Directors which
by its terms is amendable or repealable only by the Board.
The Board, by resolution of a majority of the Directors then in office may
fill any vacancy in any committee; appoint one or more alternate members of
any committee to act in the absence or disability of members of such committees
with all the powers of such absent or disabled members; or remove any director
from membership on any committee.
SECTION 2. EXECUTIVE COMMITTEE. The Executive Committee shall consist of
-------------------
not less than three members. During the intervals between meetings of the Board
of Directors and subject to Section 1 of this Article, to the extent permitted
by applicable law, the Executive Committee shall possess and may exercise all
the powers and authority of the Board of Directors in the control and management
of the business and affairs of the Company.
SECTION 3. AUDIT COMMITTEE. The Audit Committee shall consist of not less
---------------
than three members, none of whom are officers or employees of the Company or any
subsidiary, and a majority of whom are not former officers of the Company or any
subsidiary. The Audit Committee shall (i) recommend to the Board of Directors
each year a firm of independent accountants to be the auditors of the Company
for the ensuing fiscal year; (ii) review and discuss with the auditors and
report to the Board of Directors thereon, prior to the annual meeting of
shareholders, the plan and results of the annual audit of the Company; (iii)
review and discuss with the auditors their independence, fees, functions and
responsibilities, the internal auditing, control, and accounting systems of
the Company and other related matters as the Committee from time to time deems
necessary or desirable and evaluate such control functions; and (iv) perform
such other duties as may from time to time be assigned by the Board of Directors
with respect to matters related to the Company's accounting and/or finances,
including without limitation, related to the Company's accounting systems and/or
internal controls.
SECTION 4. COMPENSATION COMMITTEE. The Compensation Committee shall
----------------------
consist of not less than two members. The Compensation Committee shall: (i)
make recommendations to the Board of Directors regarding the Company's various
incentive compensation and benefit plans; (ii) determine salaries for the
executive officers and incentive compensation for employees; and (iii) perform
such other duties as may from time to time be assigned by the Board of Directors
with respect to executive compensation.
SECTION 5. STOCK OPTION COMMITTEE. The Stock Option Committee shall
----------------------
consist of not less than two members, none of whom are officers or employees of
the Company. The Stock Option Committee shall administer the issuance of stock
options under the Company's 1998 Stock Incentive Compensation Plan and such
other compensation plans as may be assigned by the Board of Directors from time
to time.
<PAGE>
SECTION 6. MEETINGS AND PROCEDURES. Each committee may make its own rules
-----------------------
of procedure and shall meet as provided by such rules or by resolution of the
Board of Directors, and shall also meet at the call of the chairman of the
committee, the Chairman of the Board, the President, or a majority of the
members of the committee. A majority of the members of a committee shall
constitute a quorum. The affirmative vote of a majority of all of the members
shall be necessary for the adoption of a resolution or to approve any matter
within the scope of the authority of a committee. Minutes of the proceedings of
a committee shall be recorded in a book provided for that purpose and filed with
the Secretary of the Company. A committee may act without a meeting if, prior or
subsequent to such action, each member shall consent in writing to such action.
Such written consent or consents shall be filed with the minutes of the
proceedings of the committee. Action taken by a committee, with or without a
meeting, shall be reported to the Board of Directors at its next regular meeting
following such committee action; except that, when the meeting of the Board is
held within two days after the committee action, such report, if not made at the
first meeting, shall be made to the Board at its second meeting following such
action.
ARTICLE V
OFFICERS
--------
SECTION 1. ENUMERATION, APPOINTMENT AND REMOVAL. The corporate officers
------------------------------------
of the Company shall be a Chairman of the Board, a Chief Executive Officer, a
President, a Chief Financial Officer and a Secretary. Should any vacancy occur
among said officers by death, resignation or otherwise, the same shall be filled
at a meeting of the Board of Directors. The Board may from time to time appoint
one or more of the following corporate officers: a Vice Chairman of the Board,
one or more Executive Vice Presidents, one or more Senior Vice Presidents, one
or more Group Presidents, one or more Vice Presidents, a Controller, a
Treasurer, and such other corporate officers (including assistant treasurers,
assistant secretaries and other corporate officers) as the Board of Directors
may deem necessary or desirable for the transaction of the business of the
Company. Any two or more offices may be held by the same person. The corporate
officers shall be elected at the first meeting of the Board of Directors after
the annual election of Directors, and shall hold office until the next
succeeding annual meeting of the Board of Directors, subject to the power of the
Board of Directors to remove any corporate officer at pleasure by an affirmative
vote of the majority of the Directors then in office. Every corporate officer
shall have such authority and perform such duties in the management of the
Company as may be provided in these By-laws, or such duties consistent with
these By-laws as may be assigned by the Board of Directors or the Chief
Executive Officer.
SECTION 2. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall
-----------------------
have general charge and supervision over and responsibility for the business and
affairs of the Company. He shall keep the Board of Directors fully informed
concerning those areas in his charge, and shall perform such other duties as may
be assigned to him by the Board of Directors.
SECTION 3. CHAIRMAN OF THE BOARD The Chairman of the Board shall preside
---------------------
<PAGE>
at all meetings of the Board of Directors and of the shareholders and shall
perform such other duties as these By-laws or the Board of Directors may
prescribe.
SECTION 4. VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the Board
--------------------------
shall perform such duties as may be assigned to him by the Board of Directors or
the Chairman of the Board.
SECTION 5. PRESIDENT. The President shall have such powers and perform
---------
such duties as may be provided by statute, these By-laws, and as may be assigned
by the Board of Directors or the Chief Executive Officer.
SECTION 6. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall
-----------------------
have the care and custody of the Company funds and securities, maintain banking
relationships and execute credit and collection policies. He shall perform
such other duties and possess such other powers as are incident to his office.
SECTION 7. SECRETARY. The Secretary shall attend all meetings of the
---------
Board of Directors and of the shareholders, and shall record all proceedings of
such meetings in books to be kept for that purpose. The Secretary or any
Assistant Secretary may give, or cause to be given, notice of all meetings of
the shareholders and the Board of Directors. He shall have the custody of the
seal of the Company and shall affix the same to all instruments requiring it,
and attest the same. He shall perform such other duties and possess such other
powers as are incident to his office.
ARTICLE VI
CERTIFICATE OF CAPITAL STOCK
----------------------------
SECTION 1. FORM AND TRANSFERS. The interest of each shareholder of the
------------------
Company shall be evidenced by certificates for shares of capital stock,
certifying the number of shares represented thereby and in such form as the
Board of Directors may from time to time prescribe. Transfers of shares of the
capital stock of the Company shall be made only on the books of the Company,
which shall include the books of the stock transfer agent, by the registered
holder thereof, or by his attorney authorized by power of attorney duly executed
and filed with the Secretary of the Company, or a transfer agent appointed as
provided in Section 4 of this Article, and on surrender of the certificate or
certificates for such shares properly endorsed and the payment of all taxes
thereon. The person in whose name shares of capital stock stand on the books of
the Company shall be deemed the owner thereof for all purposes. The Board may,
from time to time, make such additional rules and regulations as it may deem
expedient concerning the issue, transfer, and registration of certificates for
shares of the capital stock of the Company. Certificates may be signed by, or
in the name of the corporation by, the Chairman or Vice Chairman of the Board,
or the President or a Vice-President, and may be countersigned by the Chief
Financial Officer, the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary of the corporation and may be sealed with the
<PAGE>
seal of the corporation or a facsimile thereof. Any or all signatures upon a
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon such
certificate, shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of its issue.
SECTION 2. FIXING RECORD DATE. For the purpose of determining the
------------------
shareholders entitled to notice of or to vote at any meeting of shareholders or
an adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining the shareholders entitled
to receive payment of any dividend or allotment of any right, or for the purpose
of any other action, the Board of Directors shall fix a date not more than 60
days nor less than 10 days (or greater number of days if required by applicable
law) before the date of any such meeting, nor more than 60 days prior to any
other action, as the record date for any such determination of shareholders.
SECTION 3. LOST, STOLEN, DESTROYED, OR MUTILATED CERTIFICATES. No
--------------------------------------------------
certificate for shares of capital stock in the Company shall be issued in place
of any certificate alleged to have been lost, destroyed or stolen, except on
production of evidence of such loss, destruction or theft and on delivery to the
Company, if the Board of Directors shall so require, of a bond of indemnity upon
such terms and secured by such surety as the Board of Directors may in its
discretion require. A new certificate may be issued without requiring any bond
when, in the judgment of the Board of Directors, it is proper to do so.
SECTION 4. TRANSFER AGENT AND REGISTRAR. The Board of Directors may
----------------------------
appoint one or more transfer agents and one or more registrars, and may require
all certificates of capital stock to bear the signature or signatures of any of
them. One corporation may serve as both transfer agent and registrar.
SECTION 5. EXAMINATION OF BOOKS BY SHAREHOLDERS. So far as it is not
------------------------------------
inconsistent with the law of New Jersey, the Board of Directors shall have power
to determine, from time to time, whether and to what extent and at what times
and places and under what conditions and regulations the books and records of
account, minutes of the proceedings of the shareholders, Board of Directors and
any committee of the Company, and other documents of the Company, or any of
them, shall be open to inspection of the shareholders.
SECTION 6. VOTING SHARES OF OTHER CORPORATIONS. Unless otherwise ordered
-----------------------------------
by the Board of Directors, the Chairman of the Board, the President or the Chief
Financial Officer, or any of them, shall have full power and authority on behalf
of the Company to attend and to act and to vote at any meeting of Shareholders
of any corporation in which the Company may hold stock, and at any such meeting
shall possess and may exercise any and all rights and powers incident to the
ownership of such stock, and which, as the owner thereof, the Company might have
possessed and exercised if present. The Board of Directors, by resolution, from
time to time, may confer like powers upon any other person or persons.
<PAGE>
ARTICLE VII
DIVIDENDS
---------
Dividends shall be declared and paid at such times and in such amounts as
the Board of Directors may in its absolute discretion determine and designate,
subject to the restrictions and limitations imposed by law.
ARTICLE VIII
SIGNATURES
----------
Unless otherwise required by law, by the Certificate of Incorporation, by
these By-laws, or by resolution of the Board of Directors, the Chief Executive
Officer, the President or any Executive Vice President, Senior Vice President,
Group President, or Vice President, or Chief Financial Officer, the Controller
or the Treasurer of the Company may enter into and execute in the name of the
Company, contracts or other instruments in the regular course of business, or
contracts or other instruments not in the regular course of business which are
authorized either generally or specifically by the Board of Directors, and the
Secretary or an Assistant Secretary shall affix the Company seal thereto and
attest the same, if required.
ARTICLE IX
FISCAL YEAR
-----------
The fiscal year of the Company shall begin on the 1st day of February in
each year and end on the last day of January of the next succeeding year.
ARTICLE X
AMENDMENTS
----------
These By-laws may be altered, amended or repealed by the shareholders or by
a majority vote of the Directors then in office. Any By-law adopted, amended or
repealed by the shareholders may be amended or repealed by a majority vote of
the Directors then in office unless the resolution of the shareholders adopting
such By-law expressly reserves the right to amend or repeal it to the
shareholders.
<PAGE>
ARTICLE XI
FORCE AND EFFECT OF BY-LAWS
---------------------------
These By-laws are subject to the provisions of the New Jersey Business
Corporation Act and the Company's Certificate of Incorporation, as each may be
amended from time to time. If any provision in these By-laws is inconsistent
with a provision in the New Jersey Business Corporation Act or the Certificate
of Incorporation, the provision of the New Jersey Business Corporation Act or
the Certificate of Incorporation shall govern to the extent of such
inconsistency.
<PAGE>
EXHIBIT 4.1
SPECIMEN COMMON STOCK CERTIFICATE
ULTICOM, INC.
SO LONG AS THE CORPORATION SHALL BE AUTHORIZED TO ISSUE SHARES OF ONE OR
MORE THAN ONE CLASS OR SERIES, THE CORPORATION WILL FURNISH WITHOUT CHARGE TO
EACH STOCKHOLDER WHO SO REQUESTS, A FULL STATEMENT OF THE DESIGNATIONS, RELATIVE
RIGHTS, PREFERENCES AND LIMITATIONS OF EACH OF THE SHARES OF EACH CLASS OF STOCK
OR SERIES THEREOF AUTHORIZED TO BE ISSUED SO FAR AS THEY HAVE BEEN FIXED AND
DETERMINED AND OF THE AUTHORITY OF THE BOARD OF DIRECTORS OF THE CORPORATION TO
DESIGNATE AND FIX THE RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF CLASSES OR
SERIES OF SHARES OF THE CORPORATION. ANY SUCH REQUEST SHOULD BE MADE TO THE
CORPORATION AT ITS PRINCIPAL OFFICE.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - .................Custodian..................
TEN ENT - as tenants by the entireties (Cust) (Minor)
IT TEN - as joint tenants with right under Uniform Gifts to Minors
of survivorship and not as
tenants in common Act..........................
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received,.......................hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------------------
- ---------------------------------------------..................................
...............................................................................
(Please print or typewrite name and address including postal zip code of
assignee)
...............................................................................
.........................................................................Shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably
constitute and appoint.........................................................
.......................................................................Attorney
to transfer the said Shares on the books of the within-named Corporation with
full power of substitution in the premises.
Dated.........................
Signature(s) Guaranteed:
_____________________________________________________________________________
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS,STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM). PURSUANT TO
B.E.C, RULE 17Ad-15.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, MUTILATED OR
DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO
THE ISSUANCE OF A REPLACEMENT CERTIFICATE.
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the certificate in every particular, without alteration
or enlargement, or any change whatever.
<PAGE>
<TABLE>
<S> <C>
------------------------ ------------------------
NUMBER SHARES
------------------------ ------------------------
UC
------------------------ ------------------------
ULTICOM, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF NEW JERSEY CUSIP 903844 10 8
SEE REVERSE FOR CERTAIN DEFINITIONS
COMMON STOCK
</TABLE>
- --------------------------------------------------------------------------------
THIS CERTIFIES that
is the owner of
- --------------------------------------------------------------------------------
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
CERTIFICATE OF STOCK
Ulticom, Inc. (the Corporation), transferable on the books of the Corporation by
the said owner in person, or by duty authorized attorney, upon surrender of this
Certificate properly endorsed. This Certificate and the shares represented
hereby are subject to all the terms, conditions and limitations of the
Certificate of incorporation and all amendments thereto and supplements thereof.
This Certificate is not valid until countersigned and registered by the
Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of the Corporation's duly authorized officers.
Dated: [SEAL OF ULTICOM]
Chief Financial Officer President and Chief Executive Officer
Countersigned and Registered:
AMERICAN STOCK TRANSFER & TRUST COMPANY
(New York, N.Y.) Transfer Agent
and Registrar
By
Authorized Signature
<PAGE>
EXHIBIT 10.4
LICENSE AGREEMENT
The Agreement, dated as of February 1, 2000, is by and between Ulticom, Inc., a
New Jersey corporation ("Licensor"), and Comverse Network Systems, Inc., a
Delaware corporation ("Comverse").
1. DEFINITIONS
1.1 "Affiliate" of a party means any corporation or other business entity
that directly or indirectly controls, is controlled by, or is under common
control with, such party at any time. For the avoidance of doubt, Affiliate of
Comverse shall include without limitation each of the entities listed in Exhibit
21 to the Annual Report of Comverse Technology, Inc. for the year ended January
31, 1999.
1.2 "Code" means computer programming code of the Licensed Program and
Modifications, including, without limitation, Source Code and Object Code
thereof.
1.2.1 "Source Code" means the human-readable form of the computer
programming code of the Licensed Program and Modifications, including
all comments, source code listings, flow charts, assembler
instructions, and any procedural code such as job control language
statements.
1.2.2 "Object Code" means the machine-readable form of the computer
programming code of the Licensed Program and Modifications.
1.3 "Confidential Information" means information treated as confidential
and proprietary by a party ("Disclosing Party") disclosing the same to the other
("Receiving Party") under or in connection with this Agreement, including,
without limitation, the Source Code and Intellectual Property and other
confidential information embodied in the Licensed Materials, where such
information is marked "Confidential" or "Proprietary" or when the nature of such
information reasonably suggests that the information is confidential or
proprietary. Confidential Information shall not include information that is (a)
in the possession of the Receiving Party without obligation of confidence to
Disclosing Party before receipt thereof from the Disclosing Party; (b) available
to the public without fault of the Receiving Party; (c) disclosed to the
Receiving Party, without restriction, by a third party who is not under any
legal obligation (either by agreement with the Disclosing Party or otherwise)
prohibiting such disclosure; or (d) developed independently by the Receiving
Party without reliance upon the Confidential Information furnished by the
Disclosing Party.
1.4 "Derivative Work" means any addition, change, Enhancement or
Modification by Licensee of or to the Licensed Materials, but shall not include
any unmodified elements of the Licensed Materials used or licensed for use with
any such addition, change, Enhancement or Modification. Title to all Derivative
Works shall immediately vest in Licensee and Derivative Works shall not be
subject to any restriction in this Agreement.
1.5 "Documentation" means any and all material in written, electronic or
other form that describes the design, functions, operation or use of the
Licensed Program, including, without limitation, Technical Documentation and
User Documentation, as the foregoing may exist from
<PAGE>
time to time and at any time.
1.5.1 "Technical Documentation" means any and all available material
in written, electronic or other form that describes the design,
function or operation of the Licensed Program, including, without
limitation, Program Specifications, functional requirements, logic
manuals, flow charts, schematics, statements of principles of
operations, and architecture standards describing the data flows, data
structures and control logic of the Licensed Program.
1.5.2 "User Documentation" means any and all available material in
written, electronic or other form that describes the functions,
operation, or use of the Licensed Program, including, without
limitation, installation guides, user manuals, training materials,
release notes, and working papers.
1.6 "Enhancements" means any and all changes or additions to the Licensed
Program and/or Documentation, including new releases and versions thereof other
than Modifications, that add significant new functions to, or substantially
improve performance of, any material aspect of the Licensed Program and/or
Documentation.
1.7 "Error" means any statement or omission that causes or results, in the
case of the Licensed Program, in an incorrect functioning, or, in the case of
Documentation, in an incomplete or incorrect statement, and that results, in
either case, in a failure to comply in any material respect with the Program
Specifications.
1.8 "Intellectual Property" means any and all intellectual property
associated with the Licensed Program and Documentation including, without
limitation, designs, formulas, procedures, methods, apparatus, ideas, creations,
improvements, works of authorship, materials, processes, inventions, techniques,
data, know-how, algorithms, programs, subroutines, tools, patents and patentable
materials, copyrights and copyrightable materials, and trade secrets.
1.9 "Licensed Materials" means the Licensed Program, Documentation, and
Intellectual Property, or any part thereof.
1.10 "Licensed Program" means the computer software heretofore delivered
by Licensor to Comverse in Source Code format under the names Signalware and
OMNI, and Modifications thereof, including, but not limited to, Code, screens,
user interfaces, report formats, templates, menus, and icons.
1.11 "Licensee" means Comverse and its Affiliates.
1.12 "Licensee System" means any product which is manufactured, developed,
marketed, sold, licensed or used by Licensee or used by a Licensee customer that
provides significant value, content and/or functionality in addition to that of
the Licensed Program incorporated therein and, in the case of software products,
without limitation on the generality of the foregoing, includes applications and
application programming interfaces in addition to those included in the Licensed
Program.
1.13 "Modifications" means any and all changes or additions to the
Licensed Program
<PAGE>
and/or Documentation, other than Enhancements, to correct Errors therein,
including the Code of such Modifications.
1.14 "Program Specifications" means the description and requirements of
the design, features, functions or operations of the Licensed Program included
in its Documentation.
2. LICENSE
2.1 Grant. Licensor hereby grants to Licensee an irrevocable, perpetual,
royalty-free, world-wide, non-exclusive license (i) to use, exploit or
sublicense or otherwise provide to others (with the right to sublicense) the
Licensed Materials; (ii) to develop or otherwise create, or to have developed or
otherwise created, any Licensee System incorporating Licensed Materials; and
(iii) to use, exploit, sublicense or otherwise provide to others (with the right
to sublicense) the Licensed Materials in conjunction with, on or as an element
of, any Licensee System; provided, that Licensee shall not, without the prior
written consent of Licensor, by sublicense or otherwise, distribute or authorize
the use of Licensed Materials except in conjunction with, on or as an element
of, a Licensee System.
2.2 Scope. The license granted to Licensee pursuant to Section 2.1
includes all of the following rights:
2.2.1 The right to install, use and exploit the Licensed Materials at
any Licensee sites and locations;
2.2.2 The right to install, use and exploit the Licensed Materials
(i) for the purpose of developing or otherwise creating or of having
developed or otherwise created any Licensee System and (ii) in conjunction
with, on or in connection with any Licensee System;
2.2.3 The right to use and execute the Licensed Materials on any
platform;
2.2.4 The right to create Derivative Works;
2.2.5 The right to permit subcontractors to develop Licensee Systems
and the right to have independent third parties use the Licensee Systems to
develop products to be used in conjunctions with, on or in connection with
the Licensee Systems; and
2.2.6 The right to sublicense and/or otherwise provide the Licensed
Materials (with the right to sublicense) to others;
provided, however, that Licensee shall not use, operate, execute or
otherwise exploit, or sublicense others to use, operate, execute or otherwise
exploit, Licensed Materials except as provided in the "provided" phrase of
Section 2.1.
3. DELIVERY, MAINTENANCE AND SUPPORT
3.1 Deliverables. The parties acknowledge that a complete copy of the
Licensed Program has heretofore been delivered to Comverse and that, except as
hereinafter expressly
<PAGE>
provided, Licensor shall not be required to deliver any further Licensed
Programs to Licensee hereunder.
3.2 Maintenance and Support. It is expressly agreed that Licensee will be
responsible for providing technical support to its customers. Licensor shall
provide Tier 4 support as requested by Licensee. This shall be "expert to
expert" basis. Licensee's support center will contact Licensor's support
center. The price for such support will be $150 (U.S.) per hour. While
Licensee does not contemplate using Licensor for remote or deployed site
support, in the event such support is deemed necessary, requisite travel,
lodging and incidental expenses will be invoiced to Licensee as a separate line
item. Licensor will provide Licensee with all Modifications promptly as they
become available.
4. PROPRIETARY RIGHTS
4.1 Ownership. Notwithstanding the license granted under section 2.1,
Licensor retains all of its ownership and license rights in the Licensed
Materials (including, without limitation, all Intellectual Property), except as
to Derivative Works, which shall be the property of Licensee.
4.2 Treatment of Licensor Confidential Information. Licensee shall
maintain all Licensor Confidential Information in confidence and shall use it
only for the purposes contemplated by this Agreement.
4.3 Exceptions. Notwithstanding Section 4.2:
4.3.1 Licensee may disclose Confidential Information, including
without limitation Source Code of the Licensed Program, in connection with
the development, manufacture, distribution, sale, licensing, operation and
support of Licensee Systems, under agreements restricting the further
disclosure or use thereof for any other purpose. Without limitation on the
generality of the foregoing, Licensee expressly agrees that Source Code of
the Licensed Program shall not be licensed to any person or disclosed to
any person under terms that would permit the use thereof other than in
connection with the use, support or development of Licensee Systems.
4.3.2 Licensee may disclose Confidential Information: (a) to those
persons who have a need to know such information to accomplish the purposes
and activities contemplated by this Agreement; or (b) upon the prior
written approval of Licensor.
4.3.3 Licensee may disclose Confidential Information to governmental
agencies or in litigation, as required by law. Licensee will give Licensor
the greatest practicable notice of any such compelled disclosure.
4.4 Treatment of Licensee Confidential Information. Licensor shall
maintain all Licensee Confidential Information in confidence and shall use it
only in connection with the work Licensor is to perform for Licensee. Licensor
shall not use such information for its own benefit and shall use reasonable
precautions to retain it in confidence to prevent its disclosure to others.
Such information shall not be disclosed to anyone other than Licensor's
employees or
<PAGE>
agents who need such information to be able to perform the work to be done.
4.5 Exceptions. Notwithstanding Section 4.4:
4.5.1 Licensor may disclose Confidential Information: (a) to those
persons who have a need to know such information to accomplish the work; or
(b) upon the prior written approval of Licensee.
4.5.2 Licensor may disclose Licensee confidential material to
governmental agencies or in litigation, as required by law. Licensor shall
give Licensee the greatest practicable notice of any such compelled
disclosure.
4.6 Return of Confidential Information. Upon termination or expiration of
this Agreement, each party shall deliver to the other all Confidential
Information belonging to the latter that is in its possession or under its
control, except for Confidential Information which relates to licenses and
sublicenses that survive the expiration or termination of this Agreement
pursuant to Section 7.1 and 10.5.
4.7 Irreparable Harm. The parties agree that breach of the above
obligations of confidentiality shall be deemed to cause irreparable harm.
5. REPRESENTATIONS AND WARRANTIES
5.1 Warranty of Title. Licensor hereby represents, warrants and covenants
to Licensee that it is the legal and beneficial owner of all right, title and
interest in and to the Licensed Materials (including, without limitation, all
Intellectual Property), having good title thereto, free and clear of any and all
liens, and that it has full power and authority to grant the licenses and
perform its obligations under this Agreement.
5.2 No Other Warranty. Except for the warranty set forth in Section 5.1,
the Licensed Materials are provided AS IS, and Licensor makes no other warranty,
express or implied with respect to performance, functionality, absence of
defects, or non-infringement. THE REPRESENTATIONS AND WARRANTIES OF LICENSOR
SET FORTH IN THIS AGREEMENT WITH RESPECT TO THE LICENSED MATERIALS ARE IN LIEU
OF ALL OTHER REPRESENTATIONS OR WARRANTIES, EXPRESS, IMPLIED OR STATUTORY,
INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED REPRESENTATIONS OR WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
5.3 Indemnification. Licensor shall defend or settle, at its sole
expense, any and all suits, proceedings and claims for infringement or alleged
infringement of any patent, copyright, trade secret or other proprietary right
of any third party, arising out of any use of the Licensed Materials pursuant
to, in connection with or as contemplated by this Agreement, and shall indemnify
and save Licensee harmless from and against all costs, damages, and expenses on
account of such infringement (including reasonable attorneys' fees), provided
that Licensor is notified promptly in writing of such claim or of the
commencement of such suit or proceeding, as the case may be, and is given
authority, information, and reasonable assistance for defense or settlement
thereof. If Licensee modifies, alters or changes the Licensed Materials without
<PAGE>
Licensor's review and consent, then any indemnity of Licensor to Licensee under
this Section 5.3 shall be null and void to the extent that the infringement
would not exist but for such modification, alteration or change.
Notwithstanding the foregoing, in no event shall Licensor be liable to Licensee
for any incidental, indirect, consequential or exemplary damages.
6. DISPUTE RESOLUTION. Each party hereby consents to jurisdiction and venue
in the federal and state courts sitting in the County of New York, State of New
York.
7. TERM AND TERMINATION
7.1 Term. This Agreement shall be in effect for the period of ten (10)
years following the date first set forth above. Thereafter, this Agreement
shall automatically renew from year to year unless terminated by either party by
written notice to the other not less than sixty (60) days prior to the
expiration of the initial or any subsequent renewal period. The licenses
granted hereunder, and any sublicenses granted by Licensee, shall survive the
termination or expiration of this Agreement.
7.2 Remedies. Except as provided under Section 7.1, this Agreement may
not be terminated, and the parties shall be entitled solely to actions for
damages or injunctive relief in the event of any breach or threatened breach of
the provisions hereof.
7.3 Bankruptcy. Pursuant to section 365(n)(1)(B) of the Bankruptcy Code,
11 U.S.C. (S) 365(n)(1)(B), if this Agreement is rejected by the trustee in
bankruptcy as an executory contract, failure by Licensee to assert its right to
retain the benefits of the intellectual property encompassed by the Licensed
Materials, shall not be construed by the courts as a termination by the Licensee
of this Agreement under section 365(n)(1)(A) of the Bankruptcy Code, 11 U.S.C.
(S)365(n)(1)(A). In the event of Licensor's bankruptcy, then (1) unless and
until the trustee in bankruptcy rejects this Agreement, on written request by
Licensee the trustee shall perform this Agreement or provide Licensee with a
copy of any new or additional Source Code for the Software which has not been
previously provided to Licensee hereunder; and (2) if and when the trustee
rejects this Agreement, in addition to Licensee's other rights at law or in
equity, Licensee shall be entitled to its rights under section 365(n) of the
Bankruptcy Code, 11 U.S.C. (S) 365(n), including, without limitation, the right
to obtain a copy of such new or additional Source Code for the Software from the
trustee. In the event the trustee in bankruptcy releases the Source Code for
the Software to Licensee, Licensee shall be obligated to use such Source Code
solely in connection with the exercise of its rights under Section 2 of this
Agreement. Licensee acknowledges that the Source Code shall remain Licensor's
sole and exclusive property, and that Licensee shall acquire neither title nor
ownership rights to such Source Code or the Licensed Program.
8. Modifications Developed By Licensee
Licensee shall advise Licensor promptly of its development of any
Modifications and provide a description of the nature and content thereof. At
the request of Licensor, Licensee shall grant to Licensor an irrevocable,
perpetual, royalty-free, world-wide, non-exclusive license to use, exploit or
sublicense or otherwise provide to others (with the right to sublicense) any
Modifications, which license shall be equivalent in all material respects to the
rights and license
<PAGE>
granted to Licensee hereunder.
9. Remedies
The parties agree and acknowledge that the Licensed Materials constitute
critical and strategic elements of Licensee's business and the Licensee Systems.
Accordingly, Licensee is making and will make substantial investment and take
strategic decisions in reliance upon this Agreement and the rights and licenses
granted to Licensee hereunder. In light of the foregoing, the rights and
licenses granted to Licensee hereunder shall be irrevocable, shall be broadly
construed and shall not be subject to termination for any reason or cause
whatsoever including, without limitation, by operation of law or by virtue of
any claimed or actual breach of this Agreement.
10. MISCELLANEOUS
10.1 Headings. Unless otherwise stated, all references to Articles and
Sections refer to the articles and sections of this Agreement. The headings of
the Articles and Sections of this Agreement are for convenience only and in no
way limit or affect the terms or conditions of this Agreement.
10.2 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York (without regard to
the principles of conflicts of law embodied therein) applicable to contracts
executed and performable in such state.
10.3 Severability. If any provision or any portion of any provision of
this Agreement is construed to be illegal, invalid or unenforceable, such
provision or portion thereof shall be deemed stricken and deleted from this
Agreement to the same extent and effect as if it were never incorporated herein,
but all other provisions of this Agreement and the remaining portion of any
provision that is construed to be illegal, invalid or unenforceable in part
shall continue in full force and effect; provided that such resulting
construction of the Agreement does not frustrate the main purpose of the
Agreement.
10.4 Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes all previous agreements, promises,
representations, understandings and negotiations, whether written or oral,
between the parties with respect to the subject matter hereof. Any modification
and/or amendment to this Agreement must be in writing and executed by both
parties.
10.5 Survival. The provisions of Articles 2, 4, 5, 6, 8 and 9 shall
survive termination or expiration of the Agreement.
10.6 Successors and Assigns. All the terms and conditions of this
Agreement are binding upon and inure to the benefit of the parties hereto, their
successors, legal representatives and permitted assigns. Except as permitted in
this Agreement, Licensee may not transfer, lease, assign or sublicense its
rights hereunder to any third party, provided that this Agreement may be
assigned to any Affiliate of Licensee and may be assigned pursuant to a merger,
consolidation or other disposition as a going concern of the business and assets
of Licensee, or of the business
<PAGE>
unit of Licensee engaged in the distribution of Licensee Systems.
10.7 Relationship Between the Parties. Neither party shall represent
itself as the agent or legal representative of the other or as joint venturers
for any purpose whatsoever, and neither shall have any right to create or assume
any obligations of any kind, express or implied, for or on behalf of the other
in any way whatsoever.
10.8 Non-Waiver. A failure of either party to enforce at any time any
term, provision or condition of this Agreement, or to exercise any right or
option herein, shall in no way operate as a waiver thereof, nor shall any single
or partial exercise preclude any other right or option herein; in no way
whatsoever shall a waiver of any term, provision or condition of this Agreement
be valid unless in writing, signed by the waiving party, and only to the extent
set forth in such writing.
10.9 Notices. Unless expressly stated otherwise, all notices required
herein shall be given in writing and shall be delivered (and notice shall be
deemed effective upon delivery) in person, by courier, or sent by certified
United States mail, postage prepaid, return receipt requested, to the following
address:
To Licensee: Comverse Network Systems, Inc.
100 Quannapowit Parkway
Wakefield, Massachusetts 01880
Attn: Legal Department
To Licensor: Ulticom, Inc.
1020 Briggs Road
Mount Laurel, NJ 08054
Attn: Contracts Administration
10.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
IN WITNESS THEREOF, Licensor and Licensee have caused this Agreement to be
signed and delivered, all as of the date first hereinabove written
ULTICOM, INC. COMVERSE NETWORK SYSTEMS, INC.
By: /s/ Shawn Osborne By: /s/ Sachi Gerlitz
-------------------------------- ----------------------------------
Shawn Osborne Sachi Gerlitz
President Executive Vice President
<PAGE>
EXHIBIT 10.8
ULTICOM, INC.
1998 STOCK INCENTIVE COMPENSATION PLAN
(as amended, through January 20, 2000)
1. Purpose of the Plan
-------------------
The purpose of the Plan is to assist the Company, its Subsidiaries and
Affiliates in attracting and retaining valued employees by offering them a
greater stake in the Company's success and a closer identity with it, and to
encourage ownership of the Company's stock by such employees.
2. Definitions
-----------
2.1 "Affiliate" means any entity other than the Subsidiaries in
which the Company has a substantial direct or indirect equity interest, as
determined by the Board.
2.2 "Award" means an award of Deferred Stock, Restricted Stock,
Options or SARs under the Plan.
2.3 "Board" means the Board of Directors of the Company.
2.4 "Change in Control" means (i) the Board (or, if approval of
the Board is not required as a matter of law, the shareholders of the Company)
shall approve (a) any consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or pursuant to which
shares of Common Stock would be converted into cash, securities or other
property, other than a merger of the Company in which the holders of Common
Stock immediately prior to the merger have the same proportionate ownership of
common stock of the surviving corporation immediately after the merger, or (b)
any sale, lease, exchange or other transfer (on one transaction or a series of
related transactions) of all, or substantially all, the assets of the Company or
(c) the adoption of any plan or proposal for the liquidation or dissolution of
the Company; (ii) any person (as such term is defined in Section 13(d) of the
1934 Act), corporation or other entity other than the Company shall make a
tender offer or exchange offer to acquire any Common Stock (or securities
convertible into Common Stock) for cash, securities or any other consideration,
provided that (a) at least a portion of such securities sought pursuant to the
- --------
offer in question is acquired and (b) after consummation of such offer, the
person, corporation or other entity in question is the "beneficial owner" (as
such term is defined in Rule 13d-3 under the 1934 Act), directly or indirectly,
of 20% or more of the outstanding shares of Common Stock (calculated as provided
in paragraph (d) of such Rule 13d-3 in the case of rights to acquire Common
Stock); (iii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the entire Board ceased
1
<PAGE>
for any reason to constitute a majority thereof unless the election, or the
nomination for election by the Company's stockholders, of each new director was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the period; or (iv) the occurrence of any
other event the Committee determines shall constitute a "Change in Control"
hereunder.
2.5 "Code" means the Internal Revenue Code of 1986, as amended.
2.6 "Common Stock" means the common stock of the Company,
without par value, or such other class or kind of shares or other securities
resulting from the application of Section 10.
2.7 "Company" means ULTICOM, INC., a New Jersey corporation, or
any successor corporation.
2.8 "Committee" means the committee designated by the Board to
administer the Plan under Section 4. The Committee shall have at least three
members, each of whom shall be a member of the Board, a Non-Employee Director
and an Outside Director.
2.9 "Deferred Stock" means an Award made under Section 6 of the
Plan to receive Common Stock at the end of a specified Deferral Period.
2.10 "Deferral Period" means the period during which the receipt
of a Deferred Stock Award under Section 6 of the Plan will be deferred.
2.11 "Director" means each member of the Board who is not an
Employee, who does not receive compensation from the Company, or from any Parent
corporation or Subsidiary of the Company in any capacity other than as a
Director, and whose membership on the Board is not attributable to any contract
between the Company and such Director or any other entity with which such
Director is affiliated.
2.12 "Employee" means an officer or other key employee of the
Company, a Subsidiary or an Affiliate including a director who is such an
employee.
2.13 "Fair Market Value" means, on any given date, the mean
between the highest and lowest prices of actual sales of shares of Common Stock
on the principal national securities exchange on which the Common Stock is
listed on such date or, if Common Stock was not traded on such date, on the last
preceding day on which the Common Stock was traded, or, if the Common Stock is
not listed for trading on any national securities exchange, the fair market
value on such date of one share of Common Stock as the Board shall determine.
2.14 "Holder" means an Employee to whom an Award is made.
2.15 "Hostile Change in Control" means any Change in Control
described in Section 2.4(ii) that is not approved or recommended by the Board.
-2-
<PAGE>
2.16 "Incentive Stock Option" means an Option intended to meet
the requirements of an incentive stock option as defined in Section 422 of the
Code and designated as an Incentive Stock Option.
2.17 "1934 Act" means the Securities Exchange Act of 1934, as
amended.
2.18 "Non-Employee Director" means a person defined in Rule 16b-
3(b)(3) promulgated by the Securities and Exchange Commission under the 1934
Act, or any successor definition adopted by the Securities and Exchange
Commission.
2.19 "Non-Qualified Option" means an Option not intended to be
an Incentive Stock Option, and designated as a Non-Qualified Option.
2.20 "Option" means any stock option granted from time to time
under Section 8 of the Plan.
2.21 "Outside Director" means a member of the Board who is an
"outside director" within the meaning of Section 162(m) of the Code and the
regulations promulgated thereunder.
2.22 "Parent" means any corporation (other than the Company) in
an unbroken chain of corporations ending with the Company if each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
2.23 "Plan" means the Ulticom, Inc. 1998 Stock Incentive
Compensation Plan herein set forth, as amended from time to time.
2.24 "Restricted Stock" means Common Stock awarded by the
Committee under Section 7 of the Plan.
2.25 "Restriction Period" means the period during which
Restricted Stock awarded under Section 7 of the Plan is subject to forfeiture.
2.26 "Retirement" means retirement from the active employment of
the Company, a Subsidiary or an Affiliate pursuant to the relevant provisions of
the applicable pension plan of such entity or as otherwise determined by the
Committee.
2.27 "SAR" means a stock appreciation right awarded by the
Committee under Section 9 of the Plan.
2.28 "Subsidiary" means any corporation (other than the Company)
in an unbroken chain of corporations beginning with the Company (or any
subsequent parent of the
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Company) if each of the corporations other than the last corporation in the
unbroken chain owns stock possession 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
2.29 "Ten Percent Shareholder" means a person who on any given
date owns, either directly or indirectly (taking into account the attribution
rules contained in Section 424(d) of the Code), stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company or a
Subsidiary or Parent.
3. Eligibility
-----------
3.1 Any Employee is eligible to receive an Award.
3.2 Subject to adjustment as provided in Section 10, each
Director shall receive (i) upon joining the Board, Options to purchase 15,000
shares of Common Stock having an exercise price per share equal to the Fair
Market Value as of the date he or she becomes a Director and (ii) in each fiscal
year of the Company, commencing with the year after the year such Director first
joins the Board, Options to purchase 5,000 shares of Common Stock having an
exercise price per share equal to the Fair Market Value as of the date two
business days after the publication of the audited year-end financial statements
of the Company for the immediately preceding fiscal year (the "Annual Options").
The Annual Options shall vest and become non-forfeitable incrementally, to the
extent of one-fifth of the total number of shares per meeting of the Board, and
any committees of the Board of which such Director is a member, attended by the
recipient during the year of grant. In the event a Director attends fewer than
five Board or Committee meetings in any year in which such Director receives
Annual Options, the portion of such Director's Annual Options which have not
previously vested shall be forfeited back to the Company.
4. Administration and Implementation of Plan
-----------------------------------------
4.1 The Plan shall be administered by the Committee, which shall
have full power to interpret and administer the Plan and full authority to act
in selecting the Employees to whom Awards will be granted, in determining the
type and amount of Awards to be granted to each such Employee, the terms and
conditions of Awards granted under the Plan and the terms of agreements which
will be entered into with Holders.
4.2 The Committee's powers shall include, but not be limited to,
the power to determine whether, to what extent and under what circumstances an
Option may be exchanged for cash, Common Stock, Restricted Stock, Deferred Stock
or some combination thereof; to determine whether, to what extent and under what
circumstances an Award is made and operates in tandem with other Awards made
hereunder; to determine whether, to what extent and under what circumstances
Common Stock or cash payable with respect to an Award shall be deferred, either
automatically or at the election of the Holder (including the power to add
deemed earnings to any such deferral); and to grant Awards (other than Incentive
Stock Options) that are transferable by the Holder.
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4.3 The Committee shall have the power to adopt regulations for
carrying out the Plan and to make changes in such regulations as it shall, from
time to time, deem advisable. Any interpretation by the Committee of the terms
and provisions of the Plan and the administration thereof, and all action taken
by the Committee, shall be final and binding on Holders.
4.4 The Committee may condition the grant of any Award or the
lapse of any Deferral or Restriction Period (or any combination thereof) upon
the Holder's achievement of a Performance Goal that is established by the
Committee before the grant of the Award. For this purpose, a "Performance Goal"
shall mean a goal that must be met by the end of a period specified by the
Committee (but that is substantially uncertain to be met before the grant of the
Award) based upon: (i) the price of Common Stock, (ii) the market share of the
Company, its Subsidiaries or Affiliates (or any business unit thereof), (iii)
sales by the Company, its Subsidiaries or Affiliates (or any business unit
thereof), (iv) earnings per share of Common Stock, (v) return on shareholder
equity of the Company, or (vi) costs of the Company, its Subsidiaries or
Affiliates (or any business unit thereof). The Committee shall have discretion
to determine the specific targets with respect to each of these categories of
Performance Goals. Before granting an Award or permitting the lapse of any
Deferral or Restriction Period subject to this Section, the Committee shall
certify in writing that an individual has satisfied the applicable Performance
Goal.
4.5 In the event that a committee of the Board shall not have
been appointed hereunder, or having been appointed shall at any time be
incapacitated or unavailable, the Board may exercise all powers and authority of
the Committee and all references in this Plan to the Committee shall be deemed
to refer to the Board, acting in such capacity.
5. Shares of Stock Subject to the Plan
-----------------------------------
5.1 Subject to adjustment as provided in Section 10, the total
number of shares of Common Stock available for Awards under the Plan shall be
6,500,000 shares.
5.2 The maximum number of shares of Common Stock subject to an
Award that may be awarded to any Employee shall not exceed 250,000 during any
calendar year (the "Individual Limit"). Subject to Section 5.3 and Section 10,
any shares of Common Stock subject to an Award that is canceled or repriced by
the Committee shall count against the Individual Limit. Notwithstanding the
foregoing, the Individual Limit may be adjusted to reflect the effect on shares
of Common Stock of any transaction or event described in Section 10.
5.3 Any shares issued by the Company through the assumption or
substitution of outstanding grants from an acquired company shall not (i) reduce
the shares available for Awards under the Plan, or (ii) be counted against the
Individual Limit. Any shares issued hereunder may consist, in whole or in part,
of authorized and unissued shares or treasury shares. If any shares subject to
any Award granted hereunder are forfeited or such Award otherwise terminates
without the issuance of such shares or the payment of other consideration in
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lieu of such shares, the shares subject to such Award, to the extent of any such
forfeiture or termination, shall again be available for Awards under the Plan.
6. Deferred Stock
--------------
An Award of Deferred Stock is an agreement by the Company to deliver
to the recipient a specified number of shares of Common Stock at the end of a
specified deferral period or periods. Such an Award shall be subject to the
following terms and conditions:
6.1 Deferred Stock Awards shall be evidenced by Deferred Stock
agreements. Such agreements shall conform to the requirements of the Plan and
may contain such other provisions as the Committee shall deem advisable.
6.2 Upon determination of the number of shares of Deferred Stock
to be awarded to a Holder, the Committee shall direct that the same be credited
to the Holder's account on the books of the Company but that issuance and
delivery of the same shall be deferred until the date or dates provided in
Section 6.5 hereof. Prior to issuance and delivery hereunder the Holder shall
have no rights as a stockholder with respect to any shares of Deferred Stock
credited to the Holder's account.
6.3 Amounts equal to any dividends declared during the Deferral
Period with respect to the number of shares covered by a Deferred Stock Award
will be paid to the Holder currently, or deferred and deemed to be reinvested in
additional Deferred Stock, or otherwise reinvested on such terms as are
determined at the time of the Award by the Committee, in its sole discretion,
and specified in the Deferred Stock agreement.
6.4 The Committee may condition the grant of an Award of Deferred
Stock or the expiration of the Deferral Period upon the Employee's achievement
of one or more Performance Goal(s) specified in the Deferred Stock agreement.
If the Employee fails to achieve the specified Performance Goal(s), either the
Committee shall not grant the Deferred Stock Award to the Employee or the Holder
shall forfeit the Award and no Common Stock shall be transferred to him pursuant
to the Deferred Stock Award. Unless otherwise determined by the Committee at
the time of an Award, dividends paid during the Deferral Period on Deferred
Stock subject to a Performance Goal shall be reinvested in additional Deferred
Stock and the lapse of the Deferral Period for such Deferred Stock shall be
subject to the Performance Goal(s) previously established by the Committee.
6.5 The Deferred Stock agreement shall specify the duration of
the Deferral Period taking into account termination of employment on account of
death, disability, Retirement or other cause. The Deferral Period may consist of
one or more installments. At the end of the Deferral Period or any installment
thereof the shares of Deferred Stock applicable to such installment credited to
the account of a Holder shall be issued and delivered to the Holder (or, where
appropriate, the Holder's legal representative) in accordance with the terms of
the Deferred Stock agreement. The Committee may, in its sole discretion,
accelerate the delivery of all or any part of a Deferred Stock Award or waive
the deferral limitations for all or any part of a
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Deferred Stock Award, other than Deferred Stock Awards intended to qualify for
the "performance-based compensation exception" to Section 162(m) of the Code.
7. Restricted Stock
----------------
An Award of Restricted Stock is a grant by the Company of a specified
number of shares of Common Stock to the Employee, which shares are subject to
forfeiture upon the happening of specified events. Such an Award shall be
subject to the following terms and conditions:
7.1 Restricted Stock shall be evidenced by Restricted Stock
agreements. Such agreements shall conform to the requirements of the Plan and
may contain such other provisions as the Committee shall deem advisable.
7.2 Upon determination of the number of shares of Restricted
Stock to be granted to the Holder, the Committee shall direct that a certificate
or certificates representing the number of shares of Common Stock be issued to
the Holder with the Holder designated as the registered owner. The
certificate(s) representing such shares shall be legended as to sale, transfer,
assignment, pledge or other encumbrances during the Restriction Period and
deposited by the Holder, together with a stock power endorsed in blank, with the
Company, to be held in escrow during the Restriction Period.
7.3 Unless otherwise determined by the Committee at the time of
an Award, during the Restriction Period the Holder shall have the right to
receive dividends from and to vote the shares of Restricted Stock.
7.4 The Committee may condition the grant of an Award of
Restricted Stock or the expiration of the Restriction Period upon the Employee's
achievement of one or more Performance Goal(s) specified in the Restricted Stock
Agreement. If the Employee fails to achieve the specified Performance Goal(s),
either the Committee shall not grant the Restricted Stock to the Employee or the
Holder shall forfeit the Award of Restricted Stock and the Common Stock shall be
forfeited to the Company.
7.5 The Restricted Stock agreement shall specify the duration of
the Restriction Period and the performance, employment or other conditions
(including termination of employment on account of death, disability, Retirement
or other cause) under which the Restricted Stock may be forfeited to the
Company. At the end of the Restriction Period the restrictions imposed hereunder
shall lapse with respect to the number of shares of Restricted Stock as
determined by the Committee, and the legend shall be removed and such number of
shares delivered to the Holder (or, where appropriate, the Holder's legal
representative). The Committee may, in its sole discretion, modify or accelerate
the vesting and delivery of shares of Restricted Stock, other than Restricted
Stock intended to qualify for the "performance-based compensation exception" to
Section 162(m) of the Code.
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8. Options
-------
Options give an Employee or Director the right to purchase a specified
number of shares of Common Stock, Deferred Stock or Restricted Stock (as
selected by the Committee) from the Company for a specified time period at a
fixed price. Options granted to Employees may be either Incentive Stock Options
or Non-Qualified Stock Options. Option granted to Directors pursuant to Section
3.2 shall be Non-Qualified Stock Options. The grant of Options shall be subject
to the following terms and conditions:
8.1 Options shall be evidenced by Option agreements. Such
agreements shall conform to the requirements of the Plan, and may contain such
other provisions as the Committee shall deem advisable.
8.2 Subject to Section 3.2, the price per share at which Common
Stock may be purchased upon exercise of an Option shall be determined by the
Committee, but, in the case of grants of Incentive Stock Options, shall be not
less than the Fair Market Value of a share of Common Stock on the date of grant.
In the case of any Incentive Stock Option granted to a Ten Percent Shareholder,
the option price per share shall not be less than 110% of the Fair Market Value
of a share of Common Stock on the date of grant. The option price per share for
Non-Qualified Options may be less than the Fair Market Value of a share of
Common Stock on the date of grant.
8.3 The Option agreements shall specify when an Option may be
exercised and the terms and conditions applicable thereto. The term of an
Option shall in no event be greater than ten years (five years in the case of an
Incentive Stock Option granted to a Ten Percent Shareholder).
8.4 Each provision of the Plan and each Option agreement relating
to an Incentive Stock Option shall be construed so that each Incentive Stock
Option shall be an incentive stock option as defined in Section 422 of the Code,
and any provisions of the Option agreement thereof that cannot be so construed
shall be disregarded. Incentive Stock Options may not be granted to employees of
Affiliates.
8.5 No Incentive Stock Option shall be transferable otherwise
than by will or the laws of descent and distribution and, during the lifetime of
the Holder, shall be exercisable only by the Holder. Upon the death of a Holder,
the person to whom the rights have passed by will or by the laws of descent and
distribution may exercise an Incentive Stock Option only in accordance with this
Section 8.
8.6 Except as provided in an Option Agreement, the option price
of the shares of Common Stock upon the exercise of an Option shall be paid in
full at the time of the exercise in cash, in Shares of Common Stock valued at
Fair Market Value on the date of exercise or a combination of cash and such
shares of Common Stock. With the consent of the Committee, payment upon the
exercise of a Non-Qualified Option may be made in whole or in part by Restricted
Stock (based on the fair market value of the Restricted Stock on the date the
Option is exercised, as determined by the Committee). In such case the Common
Stock to which the
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Option relates shall be subject to the same forfeiture restrictions originally
imposed on the Restricted Stock exchanged therefor. The Committee may provide in
the applicable Option agreement for other methods for exercising options
including by delivery of a note by the Holder in the amount of the exercise
price.
8.7 With the Holder's consent, the Committee may amend any
outstanding Option to deliver shares of Deferred Stock or Restricted Stock
instead of Common Stock.
8.8 If a Holder's employment by the Company, a Subsidiary or
Affiliate terminates by reason of death, any Option granted to such Holder may
thereafter be exercised (to the extent such Option was exercisable at the time
of death or on such accelerated basis as the Committee may determine at or after
grant) by, where appropriate, the Holder's transferee or by the Holder's legal
representative, until the earlier of the date specified in the applicable Option
Agreement or one year after the Holder's death.
8.9 If a Holder's employment by the Company, a Subsidiary or
Affiliate terminates by reason of disability (as determined by the Committee) or
Retirement, any unexercised Option granted to the Holder shall become
immediately exercisable and may thereafter be exercised by the Holder (or, where
appropriate, the Holder's transferee or legal representative) until the earlier
of the date specified in the applicable Option Agreement or 90 days after such
termination of employment.
8.10 If a Holder's employment by the Company, Subsidiary or
Affiliate terminates for any reason other than death, disability or Retirement,
all unexercised Options awarded to the Holder shall terminate on the earlier of
the date specified in the applicable Option Agreement or 90 days after such
termination of employment.
8.11 The Committee or the Board may in their discretion extend
the period during which an Option held by an Employee may be exercised to such
period, not to exceed three years following the termination of an Employee's
employment or service with the Company or any of the Subsidiaries, as the
committee or the Board may determine to be appropriate in any particular
instance.
9. Stock Appreciation Rights
-------------------------
SARs are rights to receive a payment in cash, Common Stock, Restricted
Stock or Deferred Stock (as selected by the Committee) equal to the increase in
the Fair Market Value of a specified number of shares of Common Stock from the
date of grant of the SAR to the date of exercise. The grant of SARs shall be
subject to the following terms and conditions:
9.1 SARs shall be evidenced by SAR agreements. Such agreements
shall conform to the requirements of the Plan and may contain such other
provisions as the committee shall deem advisable. A SAR may be granted in tandem
with all or a portion of a related Option under the Plan ("Tandem SAR"), or may
be granted separately ("Freestanding
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SAR"). A Tandem SAR may be granted either at the time of the grant of the Option
or at any time thereafter during the term of the Option and shall be exercisable
only to the extent that the related Option is exercisable. In no event shall any
SAR be exercisable within the first six months of its grant.
9.2 The base price of a Tandem SAR shall be the option price
under the related Option. The base price of a Freestanding SAR shall be not less
than 100% of the Fair Market Value of the Common Stock, as determined by the
Committee, on the date of grant of the Freestanding SAR.
9.3 A SAR shall entitle the recipient to receive a payment equal
to the excess of the Fair Market Value of the shares of Common Stock covered by
the SAR on the date of exercise over the base price of the SAR. Such payment may
be in cash, in shares of Common Stock, in shares of Deferred Stock, in shares of
Restricted Stock or any combination, as the Committee shall determine. Upon
exercise of a Tandem SAR as to some or all of the shares of Common Stock covered
by the grant, the related Option shall be canceled automatically to the extent
of the number of shares of Common Stock covered by such exercise, and such
shares shall no longer be available for purchase under the Option pursuant to
Section 8. Conversely, if the related Option is exercised as to some or all of
the shares of Common Stock covered by the Award, the related Tandem SAR, if any,
shall be canceled automatically to the extent of the number of shares of Common
Stock covered by the Option exercise.
9.4 SARs shall be subject to the same terms and conditions
applicable to Options as stated in Sections 8.3, 8.5, 8.7, 8.8, 8.9 and 8.10.
10. Adjustments upon Changes in Capitalization
------------------------------------------
In the event of a reorganization, recapitalization, stock split, spin-
off, split-off, split-up, stock dividend, issuance of stock rights, combination
of shares, merger, consolidation or any other change in the corporate structure
of the Company affecting Common Stock, or any distribution to stockholders other
than a cash dividend, the Board shall make appropriate adjustment in the number
and kind of shares authorized by the Plan and any adjustments to outstanding
Awards as it determines appropriate. No fractional shares of Common Stock shall
be issued pursuant to such an adjustment. The Committee may determine to pay
the Fair Market Value of any fractional shares resulting from adjustments
pursuant to this Section in cash to the Holder.
11. Adjustments Upon a Change in Control
------------------------------------
Except as otherwise provided in an applicable agreement, upon the
occurrence of a Change in Control (other than a Hostile Change of Control), the
Committee may elect to provide that all outstanding Options and Stock
Appreciation Rights shall immediately vest and become exercisable, each Deferral
Period and Restriction Period shall immediately lapse or all shares of Deferred
Stock subject to outstanding Awards shall be issued and delivered to the Holder.
In the event of a Hostile Change in Control, each of the foregoing actions shall
occur
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automatically upon the occurrence of such Hostile Change in Control. At
any time before a Change in Control, the Committee may, without the consent of
any Holder of an Option, (i) require the entity effecting the Change in Control
or a parent or subsidiary of such entity to assume each outstanding Option or
substitute an equivalent option therefor or (ii) terminate and cancel all
outstanding Options upon the Change in Control and pay the Holder of each such
Option cash equal to the product of (x) the difference between the Fair Market
Value of Common Stock on the date of the Change in Control and the exercise
price of such Option and (y) the number of shares of Common Stock subject to
such Option. For the purposes of this Section, an Option shall be considered
assumed if, following the merger, the option confers the right to purchase, for
each share of Common Stock subject to the Option immediately prior to the
merger, the consideration (whether stock, cash, or other securities or property)
received in the merger by holders of Common Stock for each share held on the
effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
-------- -------
in the merger was not solely common stock of the successor corporation or its
parent, the Committee may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of the Option,
for each share of Common Stock subject to the Option, to be solely common stock
of the successor corporation or its parent equal in fair market value to the per
share consideration received by holders of Common Stock in the merger.
12. Effective Date, Termination and Amendment
-----------------------------------------
The Plan shall become effective on December 21, 1998, subject to
shareholder approval. The Plan shall remain in full force and effect until the
earlier of 10 years from the date of its adoption by the Board, or the date it
is terminated by the Board. The Board shall have the power to amend, suspend or
terminate the Plan at any time, provided that no such amendment shall be made
without stockholder approval which shall:
12.1 Increase (except as provided in Section 10) the total number
of shares available for issuance pursuant to the Plan;
12.2 Change the class of individuals eligible to be Holders;
12.3 Modify the Individual Limit (except as provided in Section
10) or the categories of Performance Goals previously disclosed to shareholders;
12.4 Change the provisions of this Section 12; or
12.5 Make any other change for which shareholder approval is
required under Section 16(b) or any successor provision of the 1934 Act.
Termination of the Plan pursuant to this Section 12 shall not affect
Awards outstanding under the Plan at the time of termination.
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13. Transferability
---------------
Except as provided below, Awards may not be pledged, assigned or
transferred for any reason during the Holder's lifetime, and any attempt to do
so shall be void and the relevant Award shall be forfeited. The Committee may
grant Awards (except Incentive Stock Options) that are transferable by the
Holder during his lifetime, but such Awards shall be transferable only to the
extent specifically provided in the agreement entered into with the Holder. The
transferee of the Holder shall, in all cases, be subject to the provisions of
the agreement between the Company and the Holder.
14. General Provisions
------------------
14.1 Nothing contained in the Plan, or any Award granted
pursuant to the Plan, shall confer upon any Employee any right with respect to
continued employment by the Company, a Subsidiary or Affiliate, nor interfere in
any way with the right of the Company, a Subsidiary or Affiliate to terminate
the employment of any Employee at any time.
14.2 For purposes of this Plan, transfer of employment between
the Company and its Subsidiaries and Affiliates shall not be deemed termination
of employment.
14.3 In connection with the transfer of shares of Common Stock
as a result of the exercise or vesting of an Award or upon any other event that
would subject the Holder to taxation, the Company shall have the right to
require the Holder to pay an amount in cash or to retain or sell without notice,
or to demand surrender of, shares of Common Stock in value sufficient to cover
any tax, including any Federal, state or local income tax, required by any
governmental entity to be withheld or otherwise deducted and paid with respect
to such transfer ("Withholding Tax"), and to make payment (or to reimburse
itself for payment made) to the appropriate taxing authority of an amount in
cash equal to the amount of such Withholding Tax, remitting any balance to the
employee. For purposes of this Section 14.3, the value of shares of Common Stock
so retained or surrendered shall be the Fair Market Value on the date that the
amount of the Withholding Tax is to be determined (the "Tax Date"), and the
value of shares of Common Stock so sold shall be the actual net sale price per
share (after deduction of commissions) received by the Company.
Notwithstanding the foregoing, the Holder shall be entitled to satisfy
the obligation to pay any Withholding Tax, in whole or in part, by providing the
Company with funds sufficient to enable the Company to pay such Withholding Tax
or by requiring the Company to retain or to accept upon delivery thereof shares
of Common Stock (other than unvested Restricted Stock) sufficient in value
(determined in accordance with the last sentence of the preceding paragraph) to
cover the amount of such Withholding Tax. Each election by a Holder to have
shares retained or to deliver shares for this purpose shall be subject to the
following restrictions: (i) the election must be in writing and made on or
prior to the Tax Date; and (ii) the election shall be subject to the disapproval
of the Committee.
14.4 With respect to Holders subject to Section 16 of the
Exchange Act, transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3
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or its successors under the Exchange Act. To the extent any provision of the
Plan or action by the Committee fails to so comply, it shall be deemed null and
void, to the extent permitted by law and deemed advisable by the Committee.
14.5 Without amending the Plan, Awards may be granted to
Employees who are foreign nationals or employed outside the United States or
both, on such terms and conditions different from those specified in the Plan as
may, in the judgment of the Committee, be necessary or desirable to further the
purpose of the Plan.
14.6 To the extent that Federal laws (such as the 1934 Act, the
Code or the Employee Retirement Income Security Act of 1974) do not otherwise
control, the Plan and all determinations made and actions taken pursuant hereto
shall be governed by the law of New Jersey and construed accordingly.
14.7 The Committee may amend any outstanding Awards (other than
an Award intended to qualify for the "performance-based compensation exception"
to Section 162(m) of the Code) to the extent it deems appropriate. Such
amendment may be made by the Committee without the consent of the Holder, except
in the case of amendments adverse to the Holder, in which case the Holder's
consent is required for any such amendment. Notwithstanding the foregoing, the
Committee may exercise its authority under Section 11 without the consent of
Holders.
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EXHIBIT 10.9
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 1st day of February 2000, between ULTICOM, INC., a
New Jersey corporation with offices at 1020 Briggs Road, Mt. Laurel, NJ 08054
(the "Company"), and SHAWN OSBORNE (the "Employee").
W I T N E S S E T H :
In consideration of the mutual covenants herein contained, and for
other good and valuable consideration the receipt and sufficiency of which are
hereby mutually acknowledged by the parties, it is agreed as follows:
1. Schedule of Employment Terms.
----------------------------
The Schedule of Employment Terms appended to this Agreement (the
"Term Sheet") sets forth certain of the terms and conditions of the Employee's
engagement by the Company hereunder. Such terms and conditions are hereby
acknowledged and agreed to by the parties and are incorporated into this
Agreement by reference in their entirety. In the event of any inconsistency
between the Term Sheet and any provision of this Agreement, the provisions of
the Term Sheet shall govern.
2. Term and Duties.
---------------
During the period commencing as of February 1, 2000 and continuing
thereafter, unless sooner terminated hereunder, until January 31, 2003 (as and
if extended, the "Employment Term"), the Company shall employ the Employee, and
the Employee shall perform services for and on behalf of the Company, in the
capacity set forth in Paragraph 3 of the Term Sheet. Such employment shall
automatically be extended for an additional two years unless either party, prior
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to July 31, 2002, notifies the other party of its intention not to extend the
Employment Term. The period of any such extension shall be included within the
Employment Term and be subject to the terms and conditions of this Agreement.
During the Employment Term the Employee shall devote his full business time and
best efforts to the business of the Company, in accordance with the policies
from time to time established by the Company's Board of Directors, and shall not
have any other business affiliations, except as may otherwise be agreed by the
Company in any particular instance. The Employee agrees to perform to the best
of his ability the duties and responsibilities normally associated with his
position, and such additional duties and responsibilities for the Company and/or
any subsidiary of the Company as the Company's Board of Directors may from time
to time reasonably request.
3. Compensation.
------------
In full compensation for the services to be rendered by the Employee
hereunder during the Employment Term, upon the terms and subject to the
conditions set forth in this Agreement and in the Term Sheet, the Company will
pay to the Employee, and the Employee shall accept as such compensation, the
basic annual salary set forth in Paragraph 4 of the Term Sheet (the "Base
Salary") and the bonus or commissions, if any, determined from time to time in
accordance with the provisions of Paragraph 6 of the Term Sheet. Payment of base
salary to the Employee hereunder shall be made in accordance with the relevant
Company policies in effect from time to time, including normal payroll
practices, and shall be subject to all applicable employment and withholding
taxes. Annual bonus shall be paid within two weeks after the availability of
audited financial statements for the applicable year.
4. Business Expenses; Travel.
-------------------------
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<PAGE>
All out-of-pocket expenses reasonably and properly incurred by the
Employee in the performance of his duties and responsibilities hereunder, and in
accordance with the Company's applicable travel and entertainment policies and
procedures in effect at the time, will be reimbursed by the Company on
presentation to it of expense accounts and appropriate documentation in
accordance with the established procedures of the Company for reimbursement of
expenses. The Employee shall undertake such travel as may be required in
connection with the performance of his duties.
5. Vacation.
--------
During the Employment Term, the Employee shall be entitled to
vacation periods of the duration specified in Paragraph 5 of the Term Sheet, to
be taken at such time or times as shall be mutually convenient to the Company
and the Employee. Up to two weeks of unused vacation in any year may be carried
forward and used in a subsequent year.
6. Termination of Employment; Disability or Death.
----------------------------------------------
6.1 The Company may, at its election at any time during the
Employment Term, terminate the employment of the Employee hereunder. The
Employee shall be entitled to receive his Base Salary, plus the full potential
bonus applicable to the period in which termination occurs, pro rated through
the effective date of termination. In addition, any bonus or commissions due the
Employee will be paid within 30 days of termination. Except in the event of
termination pursuant to Section 12 hereof, such termination shall be effective
upon the expiration of the period of notice set forth in Paragraph 7(a) of the
Term Sheet and otherwise in accordance with the Company's established practices
at the date of termination. The Employee shall continue in the good faith
full-time performance of his duties and responsibilities hereunder throughout
Page3
<PAGE>
any notice period; provided that the Company, in its sole discretion, may
discharge any obligation to provide notice hereunder by the payment of Base
Salary for the minimum period otherwise required for such notice to become
effective, and the Employee's engagement hereunder shall in such event terminate
immediately.
6.2 If the Employee, as a result of Substantial Disability (as
hereinafter defined), becomes unable to render to the Company the services
required hereunder, the Company may, in its discretion, with prior written
notice of at least two weeks, terminate the Employee's engagement hereunder. The
Employment Term shall terminate at the expiration of such notice period,
provided that such termination shall not affect the right of the Employee to
continue to receive benefits under any disability insurance plan covering the
Employee which is in effect at the date of termination. For the purposes of this
Section 6.2, the term "Substantial Disability" shall mean a condition of illness
or other physical or mental disability that (a) shall permit the Employee to
receive long-term disability benefits under the applicable health insurance
policies maintained by the Company or (b) renders the Employee unable to perform
the services required under this Agreement for a period of 60 consecutive days,
or otherwise for a total of 90 days during any period of 12 months.
6.3 The Employee shall give the Company prior written notice as set
forth in Paragraph 7(b) of the Term Sheet if the Employee decides to terminate
his employment hereunder.
6.4 The Employment Term shall end immediately, without any notice or
other action by the Company, upon the death of the Employee.
Page4
<PAGE>
7. Confidential Information; Competitive Activities.
------------------------------------------------
7.1 For the purposes of this Agreement, all confidential or
proprietary information concerning the business and affairs of the Company,
including, without limitation, all trade secrets, know how and other information
generally retained on a confidential basis by the Company concerning its
designs, software codes and specifications, formulae, processes, inventions and
discoveries, business plans, pricing, product plans and the identities of, and
the nature of the Company's dealings with, its suppliers and customers, whether
or not such information shall, in whole or in part, be subject to or capable of
being protected by patent, copyright or trademark laws, shall constitute
"Company Confidential Information." The Employee acknowledges that he will from
time to time have access to and obtain knowledge of certain Company Confidential
Information, and that improper use or revelation thereof by the Employee, during
or after the termination of his employment by the Company, could cause serious
injury to the business of the Company. Accordingly, the Employee agrees that he
will forever keep secret and inviolate all Company Confidential Information
which shall have come or shall hereafter come into his possession, and that he
will not use the same for his own private benefit, or directly or indirectly for
the benefit of others, and that he will not, other than in furtherance of the
business of the Company, disclose such Company Confidential Information to any
other person.
7.2 During the Employment Term, and thereafter for the duration of
any Restricted Period (as defined in Section 7.4), the Employee will not
(whether as an officer, director, partner, proprietor, investor, associate,
employee, consultant, adviser or otherwise), directly or indirectly, engage or
invest in any business activity that is competitive with any business
Page5
<PAGE>
engaged in by the Company or any parent, subsidiary or corporate affiliate of
the Company (collectively, "Affiliates"). Nothing herein contained shall be
deemed to prohibit the Employee from owning, as a passive investment, not more
than one percent of the outstanding units of any publicly-traded security.
7.3 During the Employment Term and for the period of five years
thereafter, the Employee shall not, directly or by assisting any other person to
(a) solicit or encourage any other employee, agent, consultant or representative
to leave the service of the Company for any reason, or (b) induce any customer,
supplier or other person with whom the Company engaged in business, or to the
actual knowledge of the Employee had a reasonable expectation to engage in
business, during the Employment Term to terminate any commercial relationship
with the Company or cease to purchase its products.
7.4 For the purposes of this Agreement, except as hereinafter
provided, the term "Restricted Period" shall mean the period of 18 months
following the date of termination of employment under this Agreement for any
reason. Within the terms of this Agreement, it is intended to limit disclosure
and competition by the Employee to the maximum extent permitted by law. If it
shall be finally determined by any court of competent jurisdiction ruling on
this Agreement that the scope or duration of any limitation contained in this
Agreement is too extensive to be legally enforceable, then the parties hereby
agree that the provisions hereof shall be construed to be confined to such scope
or duration (not greater than that provided for herein) as shall be legally
enforceable, and the Employee hereby consents to the enforcement of such
limitations as so modified.
7.5 The Employee acknowledges that any violation by him of the
provisions of this Section 7 would cause serious and irreparable damage
Page6
<PAGE>
to the Company. He further acknowledges that it might not be possible to measure
such damage in money. Accordingly, the Employee further acknowledges that, in
the event of a breach or threatened breach by him of the provisions of this
Section, the Company may seek, in addition to any other rights or remedies,
including money damages, an injunction or restraining order prohibiting the
Employee from doing or continuing to do any acts constituting such breach or
threatened breach.
8. Employee's Work Product.
-----------------------
To the maximum extent permitted by law, all works created by the
Employee during the Employment Term shall be deemed works for hire. Without
limiting the foregoing, the Employee agrees to assign and transfer to the
Company, its successors and assigns, his entire right, title and interest in and
to any or all copyrightable or patentable material, inventions, designs,
discoveries and improvements which he may make, either solely or jointly with
others, during the Employment Term and for a period of 24 months thereafter,
which relate in any way to the business or products of the Company or any of its
Affiliates, together with all rights to letters patent which may be granted
thereon and/or copyrights thereto. Immediately upon the design or making of any
patentable inventions, designs, discoveries or improvements, and immediately
upon the authorship of any copyrightable material, the Employee shall notify the
Company and, at the expense of the Company but without further compensation,
shall execute and deliver to the Company such documents as may be necessary to
prepare or prosecute applications for patents upon such inventions,
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<PAGE>
designs, discoveries and improvements, or copyrights upon such copyrightable
material, and shall assign and transfer to the Company his entire right, title
and interest therein.
9. Survival of Covenants.
---------------------
The provisions of Section 7 and Section 8 hereof shall survive the
termination or expiration of this Agreement, whether such termination is
instituted by the Employee or the Company and whether or not such termination is
for cause.
10. Employment Benefits.
-------------------
The Company agrees to provide to the Employee during the Employment
Term such medical, insurance and employment-related fringe benefits as are
provided generally to its employees.
11. Employee's Representations.
--------------------------
The Employee hereby represents to the Company that he has the right
to enter into this Agreement and to carry out his duties and responsibilities
hereunder without thereby being in breach of or default under any employment,
confidentiality, non-compete or other agreement by which he may be bound.
12. Default by Employee.
-------------------
If the Employee shall willfully:
(i) commit an act of fraud or dishonesty against the Company;
or
(ii) commit any act which constitutes a crime under applicable
law (other than a traffic infraction or similar
misdemeanor); or
Page8
<PAGE>
(iii) commit any act contrary to Company policy which subjects
the Company to embarrassment or loss of good will; or
(iv) chronically or willfully fail or refuse to carry out his
duties and responsibilities as provided for in this
Agreement, or to implement any lawful direction of the
Company's Board of Directors;
then, and in any or each such instance, the Company may, immediately
upon notice to the Employee, terminate the employment of the Employee hereunder
and, in the event of any such termination, the Employee shall no longer have any
right to any benefits (including future payments of salary, bonus or incentive
compensation) which would otherwise have accrued after such termination. Said
notice shall set forth the specific acts for which the Employee is being
terminated and the harm, if any, caused to the Company from those acts.
13. Successors and Assigns.
----------------------
The rights, benefits, duties and obligations under this Agreement
shall inure to and be binding upon the Company, its successors and assigns and
upon the Employee and his legal representatives, legatees and heirs. It is
specifically understood, however, that this Agreement may not be transferred or
assigned by the Employee. The Company may assign any of its rights and
obligations hereunder to any subsidiary or affiliate of the Company, or to a
successor or surviving corporation resulting from a merger, consolidation, sale
of assets or other corporate reorganization.
In the event that, during the period of one year following a
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<PAGE>
"change in control" (as hereinafter defined) of the Company, the employment of
the Employee shall be terminated either (i) by the Company, for reasons other
than default by the Employee under Section 12 hereof, or (ii) by the Employee,
if the Company has not continued the employment of the Employee hereunder or
offered the Employee continuing employment on substantially equivalent
compensation terms, the Company shall pay the Employee a sum equal to one year's
salary and, for the purpose of determining the exercisability of all stock
options granted to the Employee by the Company, he shall be deemed to have
concluded an additional period of 24 months of employment with the Company. A
"change in control" shall occur for purposes hereof if at any time more than 51%
of the members of the Board of Directors of the Company shall be persons who
have not been elected by the current controlling shareholders.
14. Notices.
-------
Notices hereunder shall be in writing and shall be sent by certified
or registered mail to the Company at its principal executive offices (with a
copy to Comverse Technology, Inc., 170 Crossways Park Drive, Woodbury, NY 11797,
attention: Chief Executive Officer and General Counsel) and to the Employee at
the address set forth on the Term Sheet, or in either case to such address as
the party to whom such notice is directed shall have notified the other party
hereunder. Notices shall be deemed effective five days after deposit in the
mail. Notices to the Employee may also be delivered to him personally, effective
upon delivery. Notices of change of address shall be given as provided above,
but shall be effective only when actually received.
15. Waivers.
-------
No waiver of any term or condition of this Agreement shall be
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<PAGE>
effective unless set forth in writing duly executed by the party sought to be
bound thereby. The failure by either party to insist upon the strict performance
of any term or condition of this Agreement shall not be construed as a waiver or
relinquishment of the right to insist upon future compliance therewith, nor
shall the waiver of any term or condition hereof constitute or give rise to the
waiver of any other term or condition.
16. Entire Agreement; Governing Law.
-------------------------------
This Agreement constitutes the sole and entire agreement between the
parties relative to the subject matter hereof and supersedes any and all prior
agreements or understandings relative to such subject matter. This Agreement may
not be modified except by a writing signed by the party or parties sought to be
bound thereby. This Agreement is made under, and shall be construed in
accordance with, the laws of New Jersey applicable to contracts made and to be
performed entirely in such State.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
ULTICOM, INC. EMPLOYEE:
By: /s/ Kobi Alexander /s/ Shawn Osborne
----------------------------- ------------------------
Kobi Alexander Shawn Osborne
Chairman of the Board
By: /s/ David Kreinberg
-----------------------------
David Kreinberg
Chief Financial Officer
Page11
<PAGE>
ULTICOM, INC.
EMPLOYMENT AGREEMENT WITH SHAWN OSBORNE
------------------
Schedule of Employment Terms
------------------
1. Effective Date of Agreement
February 1, 2000
2. Date of Expiration of Agreement
January 31, 2003
3. Position
President and Chief Executive Officer. The Company shall use its best
reasonable efforts to cause the Employee's election to the Board of
Directors of the Company throughout the Employment Term.
4. Annual Salary
$210,000, with annual review by the Board of Directors.
5. Vacation
Three weeks per annum
6. Bonus or Commission Arrangement, if Applicable
Up to $75,000 per year, of which $50,000 will be based on achievement
of financial goals mutually agreed upon for each employment year and
$25,000 will be based on assessment of performance by the Board of
Directors.
7. Notice Period for Termination
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(a) By the Company: 90 days
(b) By the Employee: 90 days
8. Address for Notices
1020 Briggs Road, Mt. Laurel, NJ 08054
9. Other Provisions
(a) Effective as of the date of the initial public offering of
the Company's shares, the Company shall grant to the
Employee options to purchase 50,000 of the then current
shares of the Company (i.e., approximately 15,277.9 of the
current shares of the Company, prior to the 3.2727 stock
split anticipated to occur between the date hereof and the
date of such public offering) under Company-standard terms
at an exercise price per share equal to the price of the
Company's shares in its initial public offering. Such
option s shall vest six months following the date of grant.
(b) The Company will lease a car for the exclusive use of the
Employee at a total cost (including rent, taxes, down
payment and all other lease payments) not to exceed $999
per month.
(c) In the event that the employment of the Employee is
terminated by the Company, for reasons other than default
by the Employee under Section 12 of the Agreement, for the
purpose of determining the exercisability of all
Page13
<PAGE>
stock options granted to the Employee by the Company, he
shall be deemed to have concluded an additional period of
12 months of employment with the Company.
10. Defined Terms
Any terms used in this schedule, but not otherwise defined herein,
shall have the same meanings as are ascribed to such terms in the
Agreement.
ACCEPTED AND AGREED:
ULTICOM, INC. EMPLOYEE:
By: /s/ David Kreinberg /s/ Shawn Osborne
----------------------------- ------------------------
David Kreinberg Shawn Osborne
Chief Financial Officer
Page 14
<PAGE>
EXHIBIT 11.1
ULTICOM, INC.
Schedule of Computation of Earnings Per Share
<TABLE>
<CAPTION>
YEAR ENDED ONE MONTH ENDED YEAR ENDED
DECEMBER 31, JANUARY 31, JANUARY 31,
------------ --------------- ----------------------------
1997 1998 1999 2000
---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
BASIC EPS:
Net income (loss).................... $ 2,055 $ (431) $ 1,567 $ 1,574
Weight average shares outstanding.... 32,727 32,727 32,727 32,727
----------- -------------- ------------ ------------
Basic EPS............................ $ 0.06 $ (0.01) $ 0.05 $ 0.05
=========== ============== ============ ============
DILUTED EPS:
Net income (loss).................... $ 2,055 $ (431) $ 1,567 $ 1,574
----------- -------------- ------------ ------------
Weighted average shares outstanding.. 32,727 32,727 32,727 32,727
Effective of dilutive securities -
options............................ - - 360 1,032
----------- -------------- ------------ ------------
Weighted average common and common
equivalent shares outstanding...... 32,727 32,727 33,087 33,759
----------- -------------- ------------ ------------
Diluted EPS.......................... $ 0.06 $ (0.01) $ 0.05 $ 0.05
=========== ============== ============ ============
</TABLE>
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 2 to Registration Statement
No. 333-94873 of Ulticom, Inc. on Form S-1 of our report dated February 25, 2000
(March 13, 2000 as to Note 1) appearing in the Prospectus, which is part of
this Registration Statement, and to the reference to us under the headings
"Selected Financial Data" and "Experts" in such Prospectus.
/S/ Deloitte & Touche LLP
New York, New York
March 13, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
financial statements contained in the body of the accompanying Form S-1 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> FEB-01-1999
<PERIOD-END> JAN-31-2000
<CASH> 6,299
<SECURITIES> 0
<RECEIVABLES> 3,162
<ALLOWANCES> 250
<INVENTORY> 1,812
<CURRENT-ASSETS> 13,022
<PP&E> 3,190
<DEPRECIATION> 1,375
<TOTAL-ASSETS> 17,364
<CURRENT-LIABILITIES> 12,280
<BONDS> 3,800
0
0
<COMMON> 10
<OTHER-SE> 1,110
<TOTAL-LIABILITY-AND-EQUITY> 17,364
<SALES> 20,561
<TOTAL-REVENUES> 25,831
<CGS> 8,883
<TOTAL-COSTS> 8,883
<OTHER-EXPENSES> 14,094
<LOSS-PROVISION> 45
<INTEREST-EXPENSE> 374
<INCOME-PRETAX> 2,538
<INCOME-TAX> 964
<INCOME-CONTINUING> 1,574
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,574
<EPS-BASIC> 0.05
<EPS-DILUTED> 0.05
</TABLE>
