UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the quarterly period ended: July 31, 1997
--------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission file number: 0-20688
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GLASGAL COMMUNICATIONS, INC.
----------------------------
(Exact name of Registrant as specified in its charter)
Delaware 94-2914253
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20C Commerce Way, Totowa, NJ 07512
- ---------------------------- -------------------
(Address of principal executive (Zip Code)
offices)
(201) 890-4800
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Registrant's telephone number, including area code
Check whether the Registrant (1) has filed all reports required to be filed by
Section 12 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the Registrant was required to file such
reports) and (2) has been subjected to such filing requirements for the past 90
days. Yes X No .
----- -----
The number of shares of Registrant's Common Stock outstanding on October 31,
1997 was 28,211,134.
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GLASGAL COMMUNICATIONS, INC.
FORM 10-Q/A
THREE MONTHS ENDED JULY 31, 1997
INDEX
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PART I: FINANCIAL INFORMATION
PAGE
Item 1: Consolidated Financial Statements
Balance Sheets at April 30, 1997 and
July 31, 1997 3
Statements of Operations for the three months ended
July 31, 1996 and 1997 4
Statements of Cash Flows for the three months ended
July 31, 1996 and 1997 5
Notes to Unaudited Consolidated Financial Statements 6
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II: OTHER INFORMATION 9
Item 4: Submission of Matters to a Vote of Security Holders
Item 6: Exhibits and Reports of Form 8-K
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GLASGAL COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
APRIL 30, 1997 JULY 31, 1997
-------------- -------------
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 1,135 $ 759
Accounts receivable, net 11,289 11,545
Inventory 2,134 2,473
Prepaid expenses and other current assets 1,446 3,320
Net assets from discontinued operations 4,816 4,421
-------- --------
Total current assets 20,820 22,518
Property and Equipment, net 3,634 3,559
Goodwill 1,680 1,634
Other Assets 1,670 1,822
-------- --------
Total assets $ 27,804 $ 29,533
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Short-term borrowings $ 11,675 $ 9,234
Current portion of long-term
obligations 850 3,545
Accounts payable 5,415 7,294
Accrued liabilities 5,331 5,182
Other current liabilities 506 206
-------- --------
Total current liabilities 23,777 25,461
-------- --------
Due to Related Parties 1,026 951
-------- --------
Long-term Obligations 5,001 2,000
-------- --------
Commitments and Contingencies
Shareholders' Equity (Deficit):
Preferred stock, $.001 par value -- --
Common stock, $.001 par value 24 25
Additional paid-in capital 10,341 13,425
Accumulated deficit (12,080) (12,055)
Cumulative translation adjustment (285) (274)
-------- --------
Total shareholders' equity (deficit) (2,000) 1,121
-------- --------
Total liabilities and shareholders'
equity (deficit) $ 27,804 $ 29,533
======== ========
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THESE CONSOLIDATED BALANCE SHEETS.
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GLASGAL COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
for the three months ended,
(in thousands, except per share data)
JULY 31, 1996 JULY 31, 1997
------------- -------------
(unaudited)
Net sales $ 15,830 $ 18,600
Cost of sales 9,060 11,277
-------- --------
Gross profit 6,770 7,323
Selling, general and administrative expenses 4,549 6,844
-------- --------
Operating income 2,221 479
Interest expense 280 454
-------- --------
Income before taxes 1,941 25
Provision for income taxes 44 --
-------- --------
Income (loss) from continuing operations 1,897 25
Loss from discontinued operations (503) --
-------- --------
Net income $ 1,394 $ 25
-------- --------
Net income per share:
Income from continuing operations $ 0.07 $ 0.00
Income (loss) from discontinued operations $ (0.02) $ 0.00
-------- --------
Net income $ 0.05 $ 0.00
======== ========
Weighted average shares outstanding 26,875 25,834
======== ========
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
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GLASGAL COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the three months ended,
(in thousands)
JULY 31, 1996 JULY 31, 1997
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,394 $ 25
Adjustments to reconcile net income to net
cash used in operating activities--
Depreciation and amortization 377 489
Extraordinary item -- --
Changes in operating assets and liabilities:
Increase in accounts receivable, net (3,892) (256)
Increase in inventory (14) (339)
Decrease (increase) in prepaid expenses
and other assets 129 (2,114)
(Increase) decrease in assets held for sale
or disposition (2,660) 395
Increase in accounts payable, accrued
liabilities and other 1,211 1,430
-------- --------
Net cash used in operating activities (3,455) (370)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net (657) (280)
-------- --------
Net cash used in investing activities (657) (280)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) from short-term
borrowings, net 2,094 (2,441)
Net proceeds (payments) of indebtedness (143) (381)
Net proceeds from Common Stock/Warrant
issuances 279 3,085
Net proceeds from related parties -- --
Distributions to Stockholders -- --
-------- --------
Net cash provided by financing activities 2,230 263
-------- --------
Net effect of foreign currency translation
on cash (51) 11
-------- --------
Net decrease in cash (1,933) (376)
CASH AT BEGINNING OF PERIOD 2,219 1,135
-------- --------
CASH AT END OF PERIOD $ 286 $ 759
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Interest paid $ 414 $ 380
======== ========
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN
INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
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GLASGAL COMMUNICATIONS, INC.
Notes to Unaudited Consolidated Financial Statements
(in thousands, except per share data)
(1) Business
Glasgal Communications, Inc. (the "Company" or "Glasgal"), and its
subsidiaries are in the business of providing configuration, integration and
rapid deployment services for the implementation of complex computer networking
and connectivity systems.
(2) Basis of Presentation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All intercompany accounts and transactions have been
eliminated.
The accompanying unaudited consolidated financial statements have been
prepared in conformity with generally accepted accounting principles consistent
with those applied in, and should be read in conjunction with, the audited
financial statements for the year ended April 30, 1997. The interim financial
information is unaudited, but reflects all normal recurring adjustments that
are, in the opinion of management, necessary for a fair statement of results for
the interim periods presented. The results for the three months ended July 31,
1997 are not necessarily indicative of results expected for the full fiscal
year.
(3) Earnings per share
Earnings per share is computed based upon the weighted average number of
common shares and common equivalent shares outstanding during each period.
Common equivalent shares have not been included, if antidilutive.
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" which makes certain
changes to the manner in which earnings per share is reported. The Company is
required to adopt this standard for the year ending April 30, 1998.
If the Company had adopted this standard for the quarter ended July 31,
1997, basic and diluted earnings per common share from continuing operations,
discontinued operations and net income would have been $.00, based on 23,709
weighted average shares outstanding.
(4) Debt
The Company's credit facility requires the Company to comply with certain
financial and nonfinancial covenants. As of July 31, 1997 the Company was not in
compliance with certain covenants and is in the process of obtaining waivers. As
there can be no assurance that such waivers will be obtained, certain long-term
debt has been classified as current.
(5) Equity
In June and July 1997, the Company, through private placement equity
offerings, issued 855 shares of common stock for approximately $3.1 million.
Included in other current assets is $1.5 million of proceeds received in August
1997.
(6) Subsequent events
In August 1997 the Company issued 237 shares of Common Stock upon the
conversion of $800 aggregate principal plus accrued interest of the Company's
convertible notes.
In October 1997 the Company received net proceeds of approximately $9.8
million upon exercise of outstanding redeemable warrants to purchase an
aggregate of 2,743 shares of Common Stock at an exercise price of $3.75 per
warrant.
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GLASGAL COMMUNICATIONS, INC.
PART I - FINANCIAL INFORMATION
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - FOR THE THREE MONTHS ENDED JULY 31, 1997
NET SALES. Net sales for the three months ended July 31, 1997 were $18.6
million compared to $15.8 million for the three months ended July 31, 1996,
representing an increase of 17.5%. Included in net sales for the three months
ended July 31, 1997 was software license revenue of $1.1 million. While the
Company does not typically market its software, the Company may license such
software in the future as strategic or other business opportunities arise. A
significant portion of the remaining 10.6% increase in net sales was
attributable to an increase in sales to indirect customers.
GROSS PROFIT. Gross profit for the three months ended July 31, 1997 was $7.3
million compared to $6.8 million for the three months ended July 31, 1996. Gross
profit as a percentage of net sales was 39.4% for the three months ended July
31, 1997 compared to 42.8% for the three months ended July 31, 1996. The
decrease in gross profit margin was attributable to the timing difference
created by the Company's transition over the past 12 months into more complex
implementation projects. These complex projects require the Company to incur a
significant amount of expenses associated with the initial stages of an
implementation project, of which only a portion of these expenses are deferred
and amortized in conjunction with the associated revenue. The negative impact on
gross profit margin was partially offset by the recognition of licensing
revenues which have higher profit margins.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the three months ended July 31, 1997 were $6.8
million compared to $4.5 million for the three months ended July 31, 1996,
representing 36.8% and 28.7% of net sales, respectively. This increase was
partly attributable to the fact that when the Company discontinued distributing
data communications equipment, it retained those individuals who were qualified
to transition into the complex services business.
INTEREST EXPENSE. Interest expense for the three months ended July 31, 1997
was $454,000 compared to $280,000 for the three months ended July 31, 1996,
representing an increase of 62.1%. This increase was attributable to an increase
in average borrowings due to higher sales volume and average receivables over
the three month period, amortization of deferred financing fees associated with
the Company's credit facility that was entered into in March 1997 and an
increase in long term debt.
Financial Position
The Company has a working capital deficiency as of July 31, 1997 of $2.9
million compared to a working capital deficiency of $3.0 million as of April 30,
1997.
The Company has a credit facility with a bank that provides for maximum
borrowing of $17.0 million. The credit facility consists of a term loan that
began on March 19, 1997 at $2.0 million with principal and interest due monthly.
In addition the credit facility provides for a $15.0 million revolving credit
facility, with allowable borrowing under the facility based on a
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formula of receivables and inventory. Outstanding borrowings under the term loan
and revolving credit facility as of July 31, 1997 were $1.9 million and $9.2
million, respectively.
The Company's credit facility requires the Company to comply with certain
financial and nonfinancial covenants. As of July 31, 1997 the Company was not in
compliance with certain covenants and is in the process of obtaining waivers. As
there can be no assurance that such waivers will be obtained, certain long-term
debt has been classified as current.
In June 1997 and July 1997 the Company issued an aggregate of 855,000 shares
of Common Stock in private equity placements, and received net proceeds of
approximately $3.1 million.
In October 1997 the Company received net proceeds of approximately $9.8
million upon the exercise of outstanding redeemable warrants to purchase an
aggregate of 2,743,290 shares of Common Stock at an exercise price of $3.75 per
warrant. The net proceeds were used to reduce outstanding borrowings under the
Company's revolving credit facility.
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GLASGAL COMMUNICATIONS, INC.
FORM 10-Q
PART II - OTHER INFORMATION
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K PAGE #
(a) Exhibits
*10(a) Amended and Restated License Agreement dated as of
July 1, 1997 by and between CASI and Datanet
International Incorporated (portions of this
exhibit are omitted and were filed separately with
the Securities Exchange Commission pursuant to the
Company's application requesting confidential
treatment in accordance with Rule 24b-2 as
promulgated under the Securities Exchange Act of
1934). 12
*10(b) Reseller Agreement effective as of September 15th,
1997 by and between CASI and Datanet International
Incorporated (portions of this exhibit are omitted
and were filed separately with the Securities
Exchange Commission pursuant to the Company's
application requesting confidential treatment in
accordance with Rule 24b-2 as promulgated under
the Securities Exchange Act of 1934). 30
*11 Statement of Computation of Per Share Earnings. 56
*27 Financial Data Schedule. 57
- -------------------------------------------
* Filed herewith.
(b) Reports on Form 8-K
None
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GLASGAL COMMUNICATIONS, INC.
Registrant
Dated: November 6, 1997 By: /s/ James M. Caci
-------------------------
James M. Caci
Chief Financial Officer
Authorized Officer
10
CONFIDENTIAL PORTIONS OF THIS DOCUMENT
HAVE BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE
COMMISSION
RESELLER AGREEMENT
THIS RESELLER AGREEMENT (the "Agreement") is made effective as of the
15th day of September, 1997 by and between COMPUTER-AIDED SOFTWARE INTEGRATION,
INC. ("CASI"), a Delaware corporation, and DATANET INTERNATIONAL, INC.
("RESELLER"), a California corporation.
A. CASI markets and supports certain proprietary computer software
products that RESELLER desires to use to provide services to its Customers and
to market to third parties on a non-exclusive basis.
B. RESELLER markets and supports certain hardware and/or software
products and systems and is knowledgeable of the market for CASI products
therein.
C. CASI and RESELLER desire to enter into this Agreement authorizing
RESELLER to market, distribute and support CASI's products upon the terms and
provisions stated herein.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises hereinafter set forth and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending legally to be bound, hereby agree as follows:
1 DEFINITIONS.
1.1 Products. The term "Products" means authorized copies of the CASI
computer software programs (in object or source code as stipulated below) and
related Documentation (as defined in Section 1.2 hereof) described in Exhibit A
attached hereto and incorporated by reference herein.
1.2 Documentation. The term "Documentation" means all user manuals and
other written materials to be prepared by and provided by CASI to RESELLER (for
redistribution to Customers) describing the installation, operation and
maintenance of the Products, including without limitation, technical manuals,
user manuals, bug reports, enhancements, upgrades, updates, sequels, technical
bulletins.
1.3 Customer. The term "Customer" means a person or entity, which has
either indicated to RESELLER an interest in acquiring one (1) or more of the
Products for use, or is a Licensee and end-user of a Product.
<PAGE>
1.4 Licensee. The term "Licensee" means any Customer to whom RESELLER
has granted a license to use one (1) or more of the Products in accordance with
Article 6 of this Agreement pursuant to a License Agreement.
1.5 License Agreement. The term "License Agreement" means a license
agreement between RESELLER (as sublicensor hereunder) and a Licensee (as a
sublicensee to the RESELLER hereunder) substantially in the form attached hereto
as Exhibit B.
1.6 Trial License Agreement. The term "Trial License Agreement" means a
trial license agreement between RESELLER and a Licensee substantially in the
form attached hereto as Exhibit C, under which a Customer is provided an
opportunity to test the Product without charge (or at minimal charge) for a
limited time.
1.7 Source Code. The term "Source Code" means the complete instruction
set for the Products, including all comments and procedural code, such as
compilation switches and job control language statements and a description of
the system/program generation procedure, in a form intelligible to RESELLER's
human programmers and capable of being readily and easily translated by them
into object code for execution on computer equipment through minimal assembly or
compiling, together with all necessary or proper documentation to facilitate
such translation, assembly and compiling, including, without limitation,
programmers' notes, technical and functional specifications, flow charts,
schematics, test programs, statements of principles of operations, architectural
and design standards, and descriptions of data flows, data structures and
control logic.
1.8 Derivative Work. The term "Derivative Work" means a work that is
solely based on one or more preexisting works, such as a revision, enhancement,
modification, translation, abridgement, condensation, expansion, or any other
form in which such preexisting works may be recast, transformed, or adapted, and
that, if prepared without authorization of the owner of the copyright in such
preexisting work, would constitute a copyright infringement. For purposes
hereof, a Derivative Work shall also include any compilation that incorporates
such a preexisting work if no significant alteration is made to such preexisting
work in including it in the Derivative Work. Unless otherwise provided in this
Agreement, all references to the Products include any Derivative Works provided
by Licensor or made by RESELLER hereunder.
2 APPOINTMENT OF RESELLER.
2.1 Grant of Certain Rights.
(a) CASI hereby grants to RESELLER, and RESELLER hereby accepts, the
non-exclusive worldwide right, subject to the other provisions of this
Agreement, (i) to use and modify the Source Code to the Products to create
Derivative Works of the Products incorporating modifications, enhancements and
custom configurations of the Products, (ii) to use the Products and Derivative
Works, in Source Code and Object Code form, to provide services to RESELLER's
Customers and sublicensees and (iii) to market, distribute, license and support
the Products and Derivative Works, in object-code form, to RESELLER's Customers
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and sublicensees. Notwithstanding anything herein to the contrary,
RESELLER's rights to the Source Code shall only become effective in the event
RESELLER is entitled to receive the Source Code pursuant to the Restated License
(as defined below).
(b) RESELLER acknowledges that CASI shall have the unrestricted right
to market, distribute and support the Products (except in those exclusive
territories as set forth in the Amended and Restated License Agreement entered
into between the parties hereto and Glasgal as of the date of this Agreement
("Restated License")), directly and through authorized third parties, without
any obligation to RESELLER under this Agreement, unless otherwise agreed in
writing by CASI. Notwithstanding the above, CASI shall not enter into any
agreement with a third party which provides for the right to license or resell
the Products in the countries comprising Asia, the Pacific Rim, Japan or
Australia without allowing RESELLER a first right of refusal to create an
agreement with such third party as a distributor and/or sub- licensee and/or
first offering RESELLER the right to license or resell on terms and conditions,
including price, equivalent to those contained in the proposed third party
agreement.
(c) RESELLER shall have the right, without charge, to use one (1)
limited evaluation copy of each Product for demonstration purposes during the
term hereof. Such copy shall be restricted to use for internal testing of the
product, training of Reseller employees, or demonstration to prospective
Customers, and shall be subject to the terms and conditions (other than the
payment terms) of the Trial License Agreement. In addition to the provisions of
the License Agreement, Reseller agrees that it will not use the evaluation copy
on behalf of, or for use by, any Customer, or receive any monetary compensation
from any third party for the use directly or indirectly of the evaluation copy.
Any use of the evaluation copy in support of, or directly applied to, the
provision of integration services shall be a violation of sections 6 and 7 of
this Agreement.
(d) RESELLER shall have the right to engage sub-distributors to market
and distribute the Products, in object code form only, under the same terms and
conditions contained in this Agreement; provided, however, that RESELLER shall
have no right to engage sub-distributors without CASI's consent unless such
sub-distributor qualifies under the following terms: the potential
sub-distributor (or any predecessor or affiliated entity thereto) (i) shall have
been in the computer technology integration business for not less than three (3)
years; and (ii) shall have had annual revenues of not less than One Million
Dollars ($1,000,000) in each of its last three (3) fiscal years.
2.2 No Agency Relationship. This Agreement does not create any
relationship of association, partnership, joint venture or agency between the
parties. RESELLER agrees to conducts its business as an independent contractor.
RESELLER agrees not to display or use the name "CASI" or "COMPUTER-AIDED
SOFTWARE INTEGRATION" or any mark or symbol used by CASI in identifying the
Products (or permit or authorize the same to be displayed or used) except as
specifically provided in Section 8.1 of this Agreement. RESELLER further agrees
(i) not to assume, create or enter into any obligation, agreement or commitment
on behalf of, or for the account of, CASI or obligate CASI in any manner other
than as stipulated in this Agreement and (ii) to assume sole responsibility for
all expenses incurred by RESELLER in
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performing its duties under this Agreement, unless such expenses are made for
the purpose of performing obligations required to be but not actually performed
by CASI hereunder.
3 UNDERTAKINGS OF CASI.
3.1 Duties of CASI. CASI agrees to provide to RESELLER, from CASI's
principal place of business, Maintenance Services, the materials and technical
assistance set forth herein and in Section XVII. Additional Consulting Services
of the Restated License, pursuant to the terms and conditions of such Restated
License.
(a) Copies of all necessary or appropriate Product corrections,
enhancements and new releases which CASI makes available for general
distribution to Licensees enrolled in CASI's maintenance plans, in Object and
Source Code form, for reproduction and distribution (in Object Code only) to
Customers pursuant to Article 4 hereof and for the other purposes set forth in
Section 2.1(a) hereof, as well as any other enhancements or new releases
necessary to allow RESELLER to obtain the full benefit of the rights it
bargained for hereunder;
(b) Copies of all promotional materials, suggested price lists
(including pricing for additional promotional materials) and other materials
which CASI may hereafter develop from time to time to assist RESELLER in
marketing the Products, for use by RESELLER pursuant to Article 4 hereof;
(c) Necessary and appropriate "second level" technical support by
telephone to RESELLER's designated personnel concerning the installation,
operation and maintenance of the Products in cases where RESELLER is unable,
after using reasonable commercial efforts, to resolve a technical problem
encountered by a Licensee or Customer (with such second level technical support
to include, but not be limited to, providing emergency bypasses to solve
technical problems and fixing program errors as identified by RESELLER), along
with all technical support and marketing support required under the CASI License
Agreement (as defined herein).
3.2 Product Standards. CASI shall provide to RESELLER a new version of
each Product at the time that such version is released for general commercial
distribution. CASI reserves the right at any time to modify, revise, replace or
reconfigure any of the Products (so long as it is in a manner compatible with
and does not degrade the performance of the prior version of the Product and
which does not require significant effort from RESELLER in order to prepare for
general commercial use with the Customers or sublicensees of RESELLER).
3.3 Product Warranty.
(a) CASI warrants for a period of twelve (12) months after the date
hereof, for RESELLER's benefit alone, that each Product, as originally delivered
(or, if subsequently modified by CASI, then in regard to each such modification
as well) and when operated with the equipment configuration and in the operating
environment of a Permitted Configuration Center, as defined in the Restated
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License, will perform in accordance with the technical and functional
specifications set forth in the Documentation for such Product provided by CASI.
CASI does not warrant that each Product will be error-free in all circumstances.
In the event of any defect or error, RESELLER agrees to provide CASI with
sufficient information to allow CASI to reproduce and repair the defect or
error. As RESELLER's primary remedy for any defect or error in a Product covered
by such warranty, CASI will correct such errors or defects at CASI's facility by
promptly issuing corrected instructions, a restriction, or a bypass, in
accordance with its' obligation for Maintenance Services, as defined in the
Restated License. CASI is not responsible for any defect or error not reported
during the warranty period (unless such defect or error did not come to
RESELLER's attention until after due use and examination of the Product during
said warranty period) or any defect or error in a Product which RESELLER has
modified, misused or damaged in a manner causing the error or defect.
(b) EXCEPT AS OTHERWISE PROVIDED IN THIS SECTION 3.3, CASI DISCLAIMS
ALL WARRANTIES, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. EXCEPT AS PROVIDED IN THIS
AGREEMENT, IN NO CASE SHALL EITHER PARTY BE LIABLE FOR ANY SPECIAL OR
CONSEQUENTIAL DAMAGES, UNLESS CAUSED BY WILFUL OR KNOWING CONDUCT, INCLUDING,
WITHOUT LIMITATION, ANY SUCH SPECIAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THE
USE OR OPERATION OF THE PRODUCTS, DELAYS IN DELIVERY OR REPAIR, LOSS OF USE OF
THE PRODUCTS, OR DAMAGE TO ANY DOCUMENTS OR OTHER PROPERTY OF RESELLER OR ITS
LICENSEES, EXCEPT IN THE CASE OF WILFUL MISCONDUCT. Either party's liability
arising out of contract, negligence, strict liability in tort or warranty shall
not, except in the case of wilful misconduct, exceed the amounts paid by
RESELLER under this Agreement. Notwithstanding the foregoing, CASI (i) warrants
that RESELLER will not be required to obtain any third-party software in order
to operate the Products other than that which is set forth in the Restated
License; (ii) warrants that the documentation and technical materials provided
by CASI to RESELLER will be accurate and complete; (iii) warrants that it has
not placed, nor is it aware of, any disabling code in the Products or Source
Code which would alter, destroy, or inhibit any use of the Products or Source
Code or the data contained therein; (iv) covenants and agrees that it will not
terminate or attempt to terminate, by modem or by electronic means or by other
means, use of the Products by RESELLER in connection with any dispute; and (v)
warrants that the Products are designed to operate in the year 2000 and beyond
to store, calculate, process and print year 2000 dates and is coded so that the
progression from the year 1999 to 2000 (and beyond) will not cause the Products
to cease operating, to operate incorrectly or otherwise fail to meet its
documentation.
4 UNDERTAKINGS OF RESELLER.
4.1 Duties of RESELLER. RESELLER agrees to promote, market, distribute
and support the Products as set forth below and agrees, in furtherance of the
foregoing:
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(a) To identify and contact Customers in person, by telephone or using
direct mailings, to demonstrate the Products to Customers and to advise
Customers on the selection, use, functionality, specifications and
price/performance characteristics of the Products in accordance with the
Documentation;
(b) To market and distribute the Products only under License Agreements
in accordance with Article 5 hereof;
(c) To provide reasonable "first level" technical assistance to
Customers and Licensees concerning the installation, operation and maintenance
of the Products;
(d) To distribute corrections and enhancements prepared by CASI to, and
new releases of, the Products to Licensees;
(e) To remit promptly all amounts due to CASI pursuant to Section 9.1
hereof;
(f) To maintain records concerning the name, address, contact person,
e-mail address, telephone and telefax number of all Customers and Licensees;
(g) To provide CASI with the periodic reports described in Section 9.2
hereof;
(h) To maintain an adequate number of experienced personnel who are
properly trained and certified by CASI to promote, license, install, maintain
and otherwise support the Products; and
(i) To notify CASI promptly of any Product defects or other unresolved
technical problems concerning the installation, use, or performance of the
Products.
4.2 Standard of Performance. RESELLER shall use commercially reasonable
efforts to perform each of the duties described in Section 4.1 hereof in a
commercially reasonable manner that reasonably preserves and protects CASI's
business reputation and all of its proprietary rights in the Products.
4.3 Certain Covenants. RESELLER agrees not to make any warranties to
any third party concerning the Products which are in excess of the warranty
provided to RESELLER by CASI hereunder, except to the extent that such
warranties relate to features of Derivative Works not contained in the original
Products, for which RESELLER will be responsible.
4.4 Indemnification. Unless any of the following bases for liability on
the part of RESELLER arise due to information, guidance or Products provided to
RESELLER by CASI, or arise as a result of a breach by CASI of its' obligations
under this Agreement or the Restated License, RESELLER agrees to indemnify and
hold CASI harmless from and against any and all
-6-
<PAGE>
claims, liabilities, costs and expenses (including reasonable legal fees and
costs), up to its limit of liability set forth in Section 3.3(b) above, arising
out of (i) the improper installation, support or maintenance of the Products by
RESELLER or its employees or agents, (ii) any misrepresentations by RESELLER or
its employees and agents in respect of the Products, (iii) any violation by
RESELLER of any of the material provisions of this Agreement, (iv) any
negligent, wrongful or intentional acts or omissions on the part of RESELLER or
its employees and agents or (v) any warranty or other claim arising from
Customers' use or inability to use Derivative Works made by or for RESELLER.
5 Reproduction of Products.
5.1 RESELLER may make copies of the master copy of the Product for the
purpose of marketing and distributing such Product to a Customer. Such copies
may be distributed or furnished to a Customer only if RESELLER and Customer have
executed a License Agreement in compliance with the provisions of Section 6.1 of
this Agreement.
5.2 RESELLER agrees not to remove any copyright notice or other
proprietary markings from the master copy of any Product, and each copy of a
Product shall contain the same copyright notices and proprietary markings
contained in or appearing on the master copy of such Product. All copies of the
Product or Documentation licensed to the U.S. Government shall contain an
appropriate "Restricted Rights" or "Limited Rights" legend according to
applicable U.S. government regulations.
5.3 Except as provided in this Agreement or the Restated License,
RESELLER agrees not to duplicate or reproduce, directly or indirectly, any
master copy or any copy of a Product derived therefrom in whole or in part.
6 PRODUCT LICENSES.
6.1 Licensing. RESELLER is authorized to sublicense the Products to
Customers. Each Product License Agreement shall be a signed instrument between
RESELLER and a Customer. RESELLER agrees not to make the Products available to
any Customer unless and until such Customer shall have executed and delivered to
RESELLER a signed License Agreement (except that RESELLER shall substitute its
name for CASI's in such an agreement), and RESELLER shall have accepted,
executed and delivered such License Agreement. RESELLER shall thereafter make
Products available to such Customer only in accordance with the terms of such
License Agreement.
6.2 Enforcement of License Agreements. RESELLER agrees to use
commercially reasonable efforts, without taking any legal actions, to enforce
each License Agreement under applicable law and to safeguard all material rights
(proprietary or otherwise) of CASI in the Products. RESELLER agrees to notify
CASI promptly following RESELLER's receipt of any material legal notice or
service of process relating to any legal action relating to
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<PAGE>
the Products or to this Agreement. RESELLER agrees to institute any legal action
or other proceedings or to enter into any compromise without the prior written
consent of CASI.
7 TRADE SECRETS AND PROPRIETARY INFORMATION.
7.1 Proprietary Nature of Products. (a) RESELLER acknowledges CASI's
claim that it is the owner (or is an authorized licensee) of the Products, that
the Products are confidential in nature and not in the public domain, that CASI
claims all intellectual and industrial property rights granted by law therein on
behalf of itself or the licensor(s) and that CASI does not hereby grant nor
otherwise transfer any rights or ownership of the Products to RESELLER or any
third party. Except as otherwise expressly permitted hereunder, RESELLER agrees
not to copy or otherwise reproduce any Product, in whole or in part, other than
as required for internal use in order to provide, or allow third parties to
provide, integration services to Customers, without CASI's prior written
consent. RESELLER further agrees to take all commercially reasonable steps to
ensure that no unauthorized persons shall have access to any of the Products and
that all authorized persons having access to the Products shall refrain from any
such disclosure, duplication or reproduction except to the extent required in
the performance of RESELLER's duties under this Agreement. Notwithstanding the
above, CASI acknowledges that each Derivative Work which is developed
exclusively by or for RESELLER hereunder, whether by RESELLER's personnel or by
CASI as in its performance of CASI Services hereunder, shall be owned by
RESELLER; provided, however, that RESELLER shall own only the new material
embodied in such Derivative Work and not any preexisting material (unless such
preexisting material has become part of the public domain or does not constitute
a material element of the Derivative Work). Each such Derivative Work shall be
assigned a unique version number by CASI and shall display a statement
indicating ownership and copyright of appropriate modules or features by
RESELLER.
(b) RESELLER agrees to accord the Products and all other confidential
information relating to this Agreement at least the same degree and methods of
protection as RESELLER undertakes with respect to its own confidential
information, trade secrets and other proprietary data.
(c) Except as permitted by law, RESELLER agrees not directly or through
any agent or intermediary, to register, apply for registration or attempt to
acquire any legal protection for any of the Products or any proprietary rights
therein or to take any other action which infringes CASI's right, title or
interest in or to the Products in any jurisdiction.
(d) RESELLER acknowledges that, in the event of a willful material
breach by RESELLER of its obligations under this Article 7, CASI may bring an
appropriate legal action to enjoin any such breach hereof, and shall be entitled
to recover from RESELLER reasonable legal fees and costs in addition to other
appropriate relief.
7.2 Notices and Legends. All copies of the Products and the
Documentation distributed by RESELLER shall retain the copyright notices and
proprietary markings contained in or appearing on the master copy thereof
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<PAGE>
supplied to RESELLER by CASI; provided, however, that RESELLER may add
proprietary markings relating to Derivative Works to the extent such works are
owned by RESELLER. All copies of the Products and Documentation licensed to the
United States Government shall contain an appropriate "Restricted Rights" or
"Limited Rights" legend according to applicable United States government
regulations.
8 USE OF TRADE NAMES AND TRADEMARKS.
8.1 Scope of Use.
(a) RESELLER hereby acknowledges CASI's claim of ownership of the trade
names and marks "CASI", "COMPUTER-AIDED SOFTWARE INTEGRATION", and "INTEGRATOR'S
WORKBENCH PRODUCT SERIES", each of the Product names and all related trademarks
and service marks. RESELLER further acknowledges that it shall acquire no
interest therein by virtue of this Agreement or the performance by RESELLER of
its duties and obligations hereunder. RESELLER agrees not to use the names
"CASI" or "COMPUTER- AIDED SOFTWARE INTEGRATION", or any of the Product names or
marks (or any confusingly similar name or symbol), in whole or in part, as part
of RESELLER's business or trade name.
(b) CASI hereby grants to RESELLER during the term of this Agreement
the non-exclusive, worldwide limited right to use the proprietary Product names
and marks only in connection with the performance of RESELLER's duties under
this Agreement. RESELLER agrees not to use such names or marks in connection
with any other products or services other than as in its generic sense to
describe the function of the products or services provided by Licensee.
(c) RESELLER agrees to identify CASI as the owner of the Products in
all Documentation and promotional material. CASI reserves the right to
reasonably approve all material promotional material but only for the purpose of
ensuring that RESELLER properly uses CASI's proprietary names and marks. Upon
termination of this Agreement, RESELLER agrees and undertakes not to use such
proprietary names and marks.
8.2 Protection Against Infringement. During the term of this Agreement,
RESELLER agrees to notify CASI promptly of (i) any known use or registration by
third parties of any trade names or marks which might infringe CASI's trade or
Product names or marks and (ii) any notice or claim of infringement against
RESELLER based on or resulting from RESELLER's use of such names and marks.
RESELLER acknowledges and agrees that CASI shall have the sole right and duty to
protect such names and marks from a legal action or suit for infringement
thereof.
-9-
<PAGE>
9 PRICE, PAYMENT AND REPORTS.
9.1 Price and Payment.
(a) RESELLER shall pay CASI the license fees and CASI Service fees set
forth in the attached Exhibit D, which is hereby incorporated by this reference
herein, on the terms set forth therein.
(b) CASI agrees to supply the Products for resale to Licensees and
Customers by RESELLER pursuant to Article 5 hereof at current list prices, less
the applicable Product discounts specified in Exhibit D. All prices are
exclusive of taxes, shipping, insurance and other charges, and are subject to
change on not less than sixty (60) days' written notice to RESELLER, as more
specifically set forth in Exhibit D.
(c) RESELLER agrees to pay CASI for each Product licensed to a Customer
not later than sixty (60) days after delivery of such Product to such Customer,
so long as RESELLER has received payment from such Customer.
(d) Past due amounts shall accrue interest from the due date thereof
until paid in full, at the prime rate as published in the Wall Street Journal,
plus two percent per annum, or the maximum rate otherwise permitted by
applicable law, whichever shall be lower.
(e) In the event that RESELLER shall, at any time, be in arrears on
payments in excess of $200,000 owing to CASI or otherwise in material default of
this Agreement, CASI may, upon one hundred and eighty (180) days' prior written
notice to RESELLER, seek whatever remedies are available to it at law or in
equity, including the right to terminate, if RESELLER fails to cure such default
during such period.
(f) In the event that any License Agreement shall be canceled or
terminated for any reason or CASI breaches any of its obligations under this
Agreement or the Restated License, the amount payable by RESELLER to CASI
hereunder shall be reduced proportionately based on payments actually received
and retained by RESELLER.
9.2 Periodic Reports. Within twenty (20) days after the last day of
each calendar month, RESELLER agrees to prepare and transmit to CASI by telefax
a report stating the company name, address, contact name, phone number, Product,
hardware manufacturer and model number, operating system and release number of
each Product licensed, shipped or installed that month.
9.3 Financial Review. CASI shall have the right, during the term of
this Agreement and for a period of one (1) year following termination thereof
through an independent third party ("CPA"), upon not less than fifteen (15) days
prior written notice to RESELLER, to conduct a review at RESELLER's principal
business offices of RESELLER's books and records relating to this Agreement and
to make copies thereof at CASI's expense. If the results of such a review shall
disclose a deficiency in amounts payable by RESELLER to CASI in excess of five
percent (5%) of the amounts actually paid or reported as payable to CASI
hereunder for any period which is so reviewed, then RESELLER shall promptly
reimburse CASI for such amounts and for the cost of such review, including, but
not limited to, reasonable professional fees and travel expenses. The CPA shall
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<PAGE>
be one of the largest six accounting firms which is not currently providing
service to or has provided service to CASI and shall have entered into an
agreement with RESELLER agreeing not to disclose any information of RESELLER to
CASI, except for the amount of deficiency.
10 TERM AND BREACH.
10.1 Term of Agreement. The term of this Agreement shall be perpetual,
commencing as of the effective date hereof.
10.2 Breach by RESELLER. Notwithstanding the provisions of Section 10.1
hereof, CASI may seek whatever remedies are available to it at law or in equity,
including the right of termination at any time after the occurrence of any of
the following events:
(a) Pursuant to a final judgment or order of a court with competent
jurisdiction, RESELLER is declared bankrupt, and such judgment or order remains
unstayed or unappealed (by filing of motion after judgment or order or filing of
appeal to higher governmental authority) and in effect for 60 days;
(b) RESELLER assigns or transfers this Agreement or any License
Agreement or Trial Agreement or any of its rights to obligations hereunder or
thereunder, without CASI's prior written consent, which consent CASI shall not
unreasonably withheld;
(c) RESELLER violates any material provision of this Agreement and
fails to cure such violation upon one hundred and eighty (180) days written
notice detailing the violation; or
(d) RESELLER becomes insolvent.
10.3 Termination by RESELLER. Notwithstanding the provisions of Section
6.1 hereof, RESELLER may terminate this Agreement at any time after the
occurrence of any of the following events:
(a) Pursuant to a final judgment or order of a court with competent
jurisdiction, CASI is declared bankrupt, and such judgment or order remains
unstayed or unappealed (by filing of motion after judgment or order or filing of
appeal to higher governmental authority) and in effect for 60 days; or
(b) CASI assigns or transfers this Agreement or any License Agreement
or Trial Agreement or any of its rights to obligations hereunder or thereunder,
without RESELLER's prior written consent, which consent shall not be
unreasonably withheld; or
(c) CASI violates any material provision of this Agreement.
10.4 Continuing Obligations. No termination of this Agreement for any
reason whatsoever shall in any way affect the continuing obligations of the
parties under Sections 4.4, 7.1, 9.1 (but only as payments, reports or other
obligations for any prior months or the then-current month during which
termination occurs) and 10.4 hereof.
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<PAGE>
11 GENERAL PROVISIONS.
11.1 Complete Agreement. This Agreement, together with the Exhibits
hereto and the Restated License, sets forth the entire agreement and
understandings between the parties hereto with respect to the subject matter
hereof. This Agreement merges all previous discussions and negotiations between
the parties and supersedes and replaces any and every other agreement, which may
have existed between CASI and RESELLER.
11.2 Modification or Amendment. Except to the extent and in the manner
specified in this Agreement, any modification or amendment of any provisions of
this Agreement must be in writing and bear the signature of the duly authorized
representative of each party.
11.3 No Implied Waivers. The failure of either party to exercise any
right or option it is granted herein, or to require the performance by the other
party hereto of any provision if this Agreement, or the waiver by either party
of any breach of this Agreement shall not prevent a subsequent exercise or
enforcement of such provisions or be deemed a waiver of any subsequent breach of
the same or any other provision of this Agreement.
11.4 Assignability. Neither party shall sell, assign, transfer, convey,
delegate or encumber any of its rights, duties or obligations hereunder, and
shall not suffer or permit any encumbrance thereof, by operation of law or
otherwise, without the prior written consent of the other party, not to be
unreasonably withheld; provided, that each party reserves the right to assign or
transfer this Agreement or any of its rights, duties and obligations hereunder,
to any of its direct or indirect subsidiary or affiliate.
11.5 Notices. All notices, requests, reports, submissions and other
communications permitted or required to be given under this Agreement shall be
deemed to have been duly given if such notice of communication shall be in
writing and sent by personal delivery or by airmail, cable, telegram, telex,
facsimile transmission or other commercial means of rapid delivery, postage or
costs of transmission and delivery prepaid, to the parties at addresses
specified herein until such time as either party hereto shall give the other
party hereto not less than ten (10) days' prior written notice of a change of
address in accordance with the provisions hereof.
11.6 Law Governing Agreement. The validity of this Agreement and the
rights, obligations and relations of the parties hereunder shall be construed
and determined under and in accordance with the substantive laws of the State of
California, without regard to its rules of conflicts of law. In the event any
legal proceeding is brought to enforce or interpret the provisions of this
Agreement, the parties hereby agree to submit to the jurisdiction of the courts
of Los Angeles, California, which shall be the exclusive venue for all such
proceedings.
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11.7 Severability. If any provision of this Agreement is determined by
a court of competent jurisdiction to be in violation of any applicable law or
otherwise invalid or unenforceable, such provision shall to such extent as it
shall be determined to be illegal, invalid or unenforceable under such law be
deemed null and void, but this Agreement shall otherwise remain in full force
and effect.
11.8 Publicity. RESELLER shall not publicize or disclose to any third
party by other means any of the terms or provisions of this Agreement, or the
discussions relating thereto, without the prior written consent of a duly
authorized officer of CASI, except as required by law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
CASI: RESELLER:
COMPUTER-AIDED SOFTWARE DATANET INTERNATIONAL, INC.
INTEGRATION, INC., a Delaware a California corporation
corporation
By:/s/ JAMES M. CACI By:/S/ JAMES UNG
- -------------------- --------------------
Name: James M. Caci Name: James Ung
Title: C.F.O. Title: President
Address: 12477 W. Cedar Dr. Address: 1305 John Reed Court
Suite 201 City of Industry, CA 91745
Denver, CO 80228
Telephone: 303-987-3499 Telephone: 818-968-9868
Fax: 303-987-3923 Fax: 818-937-1986
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<PAGE>
LIST OF EXHIBITS
EXHIBIT A Product
EXHIBIT B Form of Customer License Agreement
EXHIBIT C Form of Trial License Agreement
EXHIBIT D Price and Quantity Terms
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<PAGE>
EXHIBIT A
PRODUCTS
1. IWPS Configuration(TM)
CASI's IWPS Configurator products, version 2.20 or higher. IWPS Configurator
shall include all modules, tools and utilities produced by CASI for use with the
IWPS Configurator product line as described on the then current IWPS
Configurator Pricing Schedule.
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<PAGE>
EXHIBIT B
FORM OF CUSTOMER LICENSE AGREEMENT
[To be provided at a later date]
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<PAGE>
EXHIBIT C
FORM OF TRIAL LICENSE AGREEMENT
[To be provided at a later date]
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<PAGE>
EXHIBIT D
PRICE AND QUANTITY TERMS
A. RESELLER shall pay CASI for each License Agreement entered into, a
fee equal to the suggested retail price set forth on CASI's then most current
IWPS Configuration Pricing Schedule, minus the discount set forth immediately
below in Section B. CASI reserves the right to change the suggested retail price
of the IWPS CONFIGURATOR, upon sixty (60) days' prior written notice to
RESELLER, provided that CASI hereby offers the IWPS CONFIGURATOR for sale to
RESELLER on terms, including price, no worse than it offers such item to any of
its other customers, licensees or distributors; and provided further, that any
such price increase shall not, in the aggregate over the term of this Agreement,
exceed 125% of the lower of (i) its suggested retail price as of the date of
this Agreement, or (ii) the price that is no worse than offered to its other
customers, licensees or distributors.
B. Discounts. Discounts for the IWPS CONFIGURATOR will be set on a
projected annual commitment basis for sales of the Product and shall be
evaluated quarterly for performance; that is, the IWPS CONFIGURATOR discount for
each quarter will be set based on the RESELLER's ability to successfully achieve
at least 25% of its annual commitment each quarter based on the quantity of IWPS
CONFIGURATOR products sold in the prior quarter. Notwithstanding whether
RESELLER achieves its quarterly commitment, the following quantity discount
schedule shall apply; provided that, at the end of each annual period a
reconciliation shall be done so that if RESELLER exceeds its Annual Commitment,
it shall receive a payment equal to the difference between the higher discount
percentage applicable, times the amount of all sales made, minus the discount,
times all sales made, already taken.
===========================================================================
Annual Commitment Discount Per Unit
- ---------------------------------------------------------------------------
0 to $250,000 [omitted]%
- ---------------------------------------------------------------------------
$250,000 to $799,999 [omitted]%
- ---------------------------------------------------------------------------
$800,000 to $1,599,999 [omitted]%
- ---------------------------------------------------------------------------
$1,600,000 to $3,200,000 [omitted]%
- ---------------------------------------------------------------------------
Over $3,200,000 [omitted]%
===========================================================================
For the twelve (12) month period commencing on the date of this
Agreement, RESELLER agrees to an Annual Commitment of $[text omitted] to $[text
omitted]. The parties agree to negotiate an Annual Commitment for each
successive twelve (12) month period, and appropriate discounts related thereto;
provided that, in the event the parties fail to agree, the Annual Commitment and
discounts set forth above, or, as applicable, the most recently agreed to Annual
Commitment and discounts shall continue to apply to each successive period.
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CONFIDENTIAL PORTIONS OF THIS DOCUMENT
HAVE BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE
COMMISSION
AMENDED AND RESTATED LICENSE AGREEMENT
THIS AMENDED AND RESTATED LICENSE AGREEMENT dated as of July 1, 1997
(the "Effective Date"), by and between COMPUTER-AIDED SOFTWARE INTEGRATION, INC.
(the "Licensor"), a Delaware corporation, and DATANET INTERNATIONAL,
INCORPORATED (the "Licensee"), a California corporation.
WHEREAS the Licensor and the Licensee are parties to a license
agreement dated as of April 30, 1997; and
WHEREAS the Licensor and the Licensee desire to amend such agreement
and to restate the agreement as so amended (as so amended and restated, this
"Agreement").
For and in consideration of the mutual covenants contained herein, it
is hereby agreed by and between the undersigned, intending to be bound thereby
as follows:
I. DEFINITIONS
A. SOFTWARE. The term "Software" means authorized copies of all of the
most recent versions of the Licensor computer software programs (in both object
and Source Code, as stipulated below) described in Exhibit A "Software" attached
hereto, including without limitation, technical manuals, user manuals, bug
reports and fixes, enhancements, upgrades, updates, sequels and technical
bulletins.
B. SOURCE CODE. The term "Source Code" means the complete instruction
set for the Software, including all comments and procedural code, such as
compilation switches, job control language statements and a description of the
system/program generation procedure, in a form intelligible to human programmers
and capable of being readily and easily translated into object code for
execution on computer equipment through minimal assembly or compiling, together
with all documentation to facilitate such translation, assembly and compiling;
including, without limitation, programmers' notes, technical and functional
specifications, flow charts, schematics, test programs, statements of principles
of operations, architectural and design standards, and descriptions of data
flows, data structures and control logic.
C. LICENSEE'S BUSINESS. The term "Licensee's Business" shall mean the
business of providing assembly, integration and configuration related solutions
and services to equipment manufacturers, software vendors, system integrators,
government and corporate entities and other businesses seeking such solutions
and services.
<PAGE>
II. LICENSE
In accordance with the terms herein, Licensor grants to Licensee, and
Licensee accepts from Licensor, a worldwide, perpetual, nonexclusive (except as
to the countries comprising South America (excluding Central America) and
Malaysia where the license granted herein shall be exclusive for a term of five
years from the Effective Date) and non-transferable license to reproduce, use
and distribute, and reproduce, disclose to others for the purpose of
maintenance, use, change, modify and otherwise prepare derivative works based on
the Source Code ("License"). The License may be exercised only at Licensee's
configuration centers in Los Angeles or other configuration centers in or
outside of the United States where the equipment on which the Software is used
is more than 50% owned by Licensee or, in the event Licensee leases the
equipment, the Licensee is obligated for more than 50% of the lease payment for
such equipment when used in connection with the Software (collectively
"Permitted Configuration Centers"). The Software shall be used only in
connection with Licensee's Business. Licensee shall not permit any third party
to use the Software. A license may be temporarily transferred to back up
equipment if the particular scheduled equipment is inoperative for more than one
(1) hour. Licensee may make copies, and use the Software for testing purposes.
Licensee may exercise the License with respect to the Source Code upon
and after occurrence of any of the following events (but not prior to the
occurrence of such events):
A. Licensor or Glasgal Communications, Inc. ("Glasgal") ceases doing
business;
B. Licensor or Glasgal becomes insolvent or makes a general assignment
for benefit of creditors;
C. The filing of a petition by or against Licensor or Glasgal for
relief under the laws of bankruptcy;
D. The petition of an appointment or an actual appointment of a
receiver or other custodian for the business or assets of Licensor or Glasgal;
E. Licensor or Glasgal admits in writing its inability to pay its debts
generally as they become due; or
F. Licensor materially breaches any of its obligations under this
Agreement, or the Reseller Agreement between the parties, and such default or
breach has not been cured. As used above, material breach is hereby defined to
include, without limitation, any default or breach that results in a hinderance
to Licensee's ability to operate Licensee's Business.
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<PAGE>
III. COPIES
The License granted herein includes the right to copy the Software in
non-printed, machine readable form in whole or in part as necessary for
Licensee's Business. In order to protect Licensor's trade secret and copyrights
in the Software, Licensee agrees to reproduce and incorporate Licensor's trade
secret or copyright notice in any copies, modifications or partial copies.
Licensee shall maintain no more than three copies (or such greater number as
Licensor shall reasonably consent to) of the object code for the Software for
each Permitted Configuration Center at any time.
IV. PRICE AND PAYMENT
Licensee has paid Licensor a license fee of $[text omitted] for the
Software and Source Code License, representing payment in full. As of the date
hereof, $[text omitted] of such fee has been paid to Licensor by Licensee in
cash, and an additional $[text omitted] of such license fee has been paid by
execution and delivery by Licensee to Licensor of the promissory note attached
hereto and incorporated herein by this reference as Exhibit "C" (the "Note").
Licensor hereby agrees that prior to entering into an agreement to
license the Software or Source Code to any third party for use in the countries
comprising Asia, Japan, the Pacific Rim and Australia, it shall first offer
Licensee the right to such license on terms and conditions, including price,
equivalent to those contained in the proposed third party agreement.
Any payment for any services or other performance by Licensor shall be
payable one hundred and eighty (180) days after receipt of a correct invoice
from Licensor; provided that portions of amounts disputed in good faith by
Licensee will be payable upon resolution of the dispute. Unless otherwise
expressly stated herein, there shall be no additional charges for any materials
and services provided under this Agreement.
V. SOFTWARE OWNERSHIP
Licensor represents and warrants that it is the sole owner (or is an
authorized licensee) of the Software and Source Code and all portions thereof
and that it has the right to modify same and to grant Licensee the Software and
Source Code License and that Licensee shall have no obligation or liability
toward any third parties for the exercise of the License and that Licensee's use
of the Software and Source Code will not infringe any third party rights in any
patent, copyright, trade secret or other proprietary right.
VI. INTENT TO COOPERATE
Both Licensor and Licensee acknowledge that successful implementation
of the Software pursuant to this Agreement shall require their full and mutual
best efforts. The parties acknowledge that they shall timely fulfill their
responsibilities set forth in this Agreement.
-3-
<PAGE>
VII. TITLE TO SOFTWARE SYSTEMS AND CONFIDENTIALITY
The Software and all programs developed hereunder by Licensor and all
copies thereof are proprietary to Licensor and title thereto remains in
Licensor. All applicable rights to patents, copyrights, trademarks and trade
secrets in the Software or any modifications made by Licensor shall remain in
Licensor. Licensee shall not sell, transfer, publish, disclose, display or
otherwise make available the Software or copies thereof to others in violation
of this Agreement. Licensee agrees to take reasonable efforts to secure and
protect each module, software product, documentation and copies thereof in a
manner which Licensee takes to secure and protect its own software in order to
maintain Licensor's rights therein and to take appropriate action by instruction
or agreement with its employees or consultants who are permitted access to each
program or software product to satisfy its obligations hereunder. All copies
made by the Licensee of the Software and other programs developed hereunder,
including translations, compilations, partial copies with modifications and
updated and derivative works, are the property of Licensee. Licensee
acknowledges Licensor's claim that the Software is confidential in nature and
not in the public domain, that the Licensor claims all intellectual and
industrial property rights granted by law therein on behalf of itself or the
licensor(s) and that the Licensor does not hereby grant nor otherwise transfer
any rights or ownership of the Software to the Licensee or any third party
except in accordance with this Agreement. Except as otherwise expressly
permitted hereunder, the Licensee agrees not to copy or otherwise reproduce the
Software, in whole or in part. The Licensee further agrees to take all
reasonable steps which Licensee takes to protect its own software to ensure that
no unauthorized persons shall have access to the Software and that all
authorized persons having access to the Software shall refrain from any such
disclosure, duplication or reproduction.
The Licensee agrees to accord the Software, and both parties agree to
accord all other confidential information relating to this Agreement and each
party's proprietary business information such as pricing and customer identities
at least the same degree and methods of protection as such party undertakes with
respect to its own confidential information, trade secrets and other proprietary
data.
The Licensee agrees not directly or through any agent or intermediary,
to register, apply for registration or attempt to acquire any legal protection
for the Software or any proprietary rights therein or to take any other action
which would or could infringe upon the Licensor's right, title or interest in or
to the Software in any jurisdiction.
Provided that Licensor provides sixty (60) days written notice to
Licensee specifically stating in sufficient detail the violation or breach and
such violation or breach, capable of being cured, is not cured during this sixty
(60) day period, the Licensee acknowledges that, in the event of a breach or
violation by the Licensee of its obligations under this Section 7, the Licensor
may immediately terminate its performance under this Agreement without liability
to the Licensee and may bring an appropriate legal action to enjoin any such
breach or violation hereof.
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All copies of the Software shall retain the copyright notices and
proprietary markings contained in or appearing on the master copy thereof
supplied to the Licensee by the Licensor.
VIII. USE OF TRADE NAMES AND TRADEMARKS
Licensee hereby acknowledges Licensor's claim of ownership of the
generic trade names and marks "CASI", "COMPUTER-AIDED SOFTWARE INTEGRATION", and
"INTEGRATOR'S WORKBENCH PRODUCT SERIES", the Software names. Licensee further
acknowledges that it shall acquire no interest therein by virtue of this
Agreement or the performance by Licensee of its duties and obligations
hereunder, other than the License granted to Licensee under this Agreement.
Licensee agrees not to use the names "CASI" or "COMPUTER-AIDED SOFTWARE
INTEGRATION", or such Software names or marks (or any confusingly similar name
or symbol), in whole or in part, as part of the Licensee's business or trade
name.
The Licensee agrees to notify the Licensor promptly of any known use or
registration by third parties of any trade names or marks which might infringe
the Licensor's trade or Software names or marks. The Licensee acknowledges and
agrees that the Licensor shall have the sole right and duty to protect such
names and marks from a legal action or suit for infringement thereof.
IX. WARRANTY
A. The Licensor warrants that the Software will (i) conform, when
operated in Permitted Configuration Centers to Licensor's current published
specifications and documentation attached hereto or otherwise provided to
Licensee, including without limitation, those specifications set forth in
Licensor's so-called White Sheet Report; and (ii) will be free of defects which
affect the Software's performance. The Licensor does not warrant that the
Software will be defect or error free in all circumstances.
B. Licensor warrants that Licensee will not be required to obtain any
third-party software (other than third party operating system software) in order
to operate the Software or Source Code other than that which is set forth in
this Agreement and that the entering into and carrying out of the terms of this
Agreement will not violate or constitute a breach of any agreement binding on
Licensor.
C. Licensor warrants that the documentation and technical materials
provided by Licensor to Licensee will be accurate and complete.
D. Licensor warrants that there is not any disabling code in the
Software or Source Code which would alter, destroy, or inhibit any use of the
Software or Source Code or the data contained therein.
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E. Licensor warrants that it will not terminate or attempt to
terminate, by modem or by electronic means or by other means, use of the
Software by Licensee in connection with any dispute.
F. Licensor warrants that the Software is designed to operate in the
year 2000 and beyond to store, calculate, process and print year 2000 dates and
is coded so that the progression from the year 1999 to 2000 (and beyond) will
not cause the Software to cease operating, to operate incorrectly or otherwise
fail to meet its documentation.
G. Licensor warrants that it will perform its obligations arising
pursuant to this Agreement in a diligent and professional manner and in
accordance with current industry standards.
H. Licensor warrants that as of the Effective Date Licensor has no
knowledge of any written notice asserting a claim which might reasonably be
expected to impair Licensee's right to use the Software.
I. Licensee must notify Licensor in writing, within twelve (12) months
of delivery of the Software, or any changes or additions to the Software, to
Licensee (not including delivery of any subsequent modifications to the
Software), of its claim of any such defect(s) which Licensee is aware of. If the
Software is defective, Licensor shall remedy such defect in accordance with the
time frames set forth in Exhibit B "SOFTWARE MAINTENANCE AGREEMENT" attached
hereto and incorporated herein by this reference. The Licensee agrees to provide
the Licensor with information available to Licensee to allow the Licensor to
remedy such defect. The Licensor is not responsible for any defect or error,
which Licensee is aware of but not reported within such twelve (12) month
period, or any defect or error in the Software caused by any Licensee
modification, misuse or damage, except as set forth in Exhibit B. Except as set
forth above, the Software is being licensed to the Licensee "AS IS" and without
warranty of any kind.
J. THE ABOVE IS A LIMITED WARRANTY AND THE WARRANTIES SET FORTH IN THIS
AGREEMENT ARE THE ONLY WARRANTIES MADE BY LICENSOR. LICENSOR MAKES AND LICENSEE
RECEIVES NO WARRANTY (EXCEPT AS SET FORTH IN THIS AGREEMENT) EXPRESS OR IMPLIED
AND THERE ARE EXPRESSLY EXCLUDED ALL WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE. NEITHER PARTY SHALL HAVE ANY LIABILITY WITH RESPECT TO
ITS OBLIGATIONS UNDER THIS AGREEMENT FOR INDIRECT, SPECIAL, CONSEQUENTIAL,
EXEMPLARY, OR INCIDENTAL DAMAGES EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES, INCLUDING, WITHOUT LIMITATION ANY DAMAGE TO ANY PROPERTY OF THE
LICENSEE EXCEPT IN THE CASE OF WILFUL MISCONDUCT.
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K. Correction for difficulties or defects traceable to the Licensee's
errors, or systems changes or modifications made by Licensee, shall be billed
pursuant to Section XVII Additional Consulting Services.
L. Either party's liability arising out of contract, negligence, strict
liability in tort or warranty shall not, except in the case of wilful
misconduct, exceed the amount paid by Licensee under this Agreement.
X. INDEMNITY
A. Licensor hereby agrees to indemnify, defend and hold harmless
Licensee, its shareholders, directors, officer, agents, employees, agents, and
representatives from and against any and all claims, expenses, damages, losses,
costs, fees, royalties or penalties (including reasonable attorneys' fees, costs
and expenses), liability, actions made or brought against Licensee arising out
of any allegation of any infringement of third party's rights, including without
limitation, patent, trademark, copyright, and trade secrets arising out of or
related to this Agreement, provided: (a) Licensee gives prompt written notice of
such claim to Licensor, b) Licensor has sole control of the defense and
settlement negotiation, on condition that Licensee may participate and appoint
any counsel to participate in any defense and settlement negotiation at
Licensee's expense, c) Licensee cooperates with Licensor in such defense and
settlement negotiation, at Licensor's expense and d) the infringement is based
on the use of the latest release of the Software made available to Licensee. In
no event shall Licensee settle any such claim, lawsuit or proceeding without
Licensor's prior written approval.
If, as a result of any claim of infringement against any patent,
copyright, license or other property right, Licensor is enjoined from using the
Software, or if Licensor believes that the Software is likely to become the
subject of a claim of infringement, Licensor at its option and expense may
procure the right for Licensee to continue to use the Software, or replace or
modify the Software so as to make it non-infringing, provided such replacement
or modification is reasonably acceptable to Licensee. If neither of these two
options is reasonably practicable or acceptable to Licensee, Licensor may
discontinue the license granted herein on one hundred and twenty days (120)
days' written notice and indemnify and hold Licensee harmless in accordance with
the paragraph set forth immediately above. The foregoing states the entire
liability of Licensor with respect to infringement of any copyrights, patents,
license or other property rights by the Software or any parts thereof. Upon the
occurrence of any event which triggers Licensor's obligation under this
Agreement, Licensee may suspend any of its obligations under this Agreement and
deposit any amount owed under this Agreement into an interest-bearing trust
account pending final resolution of such claim, action or liability.
B. Licensor shall defend, indemnify and hold harmless Licensee, and its
respective directors, officers, employees and agents from and against all
claims, demands, causes of action, expenses, damages, losses, costs, fees or
penalties (including reasonable attorneys' fees, expenses and costs of
settlement) whether based upon tort, breach of contract or otherwise of
whatsoever kind and nature arising out of or on account of, or resulting in
whole or part from, any misrepresentation or default in the performance of
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Licensor's obligations pursuant to this Agreement, to the extent caused by any
act, error or omission of Licensor, employees of Licensor, or of any other
persons or entities who are directly or indirectly associated with Licensor.
Licensee shall give Licensor prompt notice of any claim or liability hereby
indemnified against by Licensor and thereupon Licensor shall be entitled to
control, and shall assume full responsibility for, the defense of such matter.
The indemnity contained herein shall not be deemed to be a waiver of or in
limitation of any other rights Licensee may have.
XI. BREACH
Except as otherwise specifically set forth herein, Licensor shall have
the right to terminate this Agreement and the license granted herein in the
event Licensee is in default of its obligations under this Agreement (including
those set forth immediately below); upon one hundred and eighty (180) days prior
written notice detailing the reason for termination and providing an opportunity
for Licensee to cure any such default during such period:
A. In the event that Licensee, its officers or employees violates any
provision of this Agreement including, but not limited to, confidentiality and
payment and such violation is not cured during such period;
B. In the event Licensee (i) terminates its business; (ii) becomes
subject to any bankruptcy or insolvency proceeding (whether voluntary or
involuntary) under Federal or state statute or (iii) becomes insolvent, is
otherwise unable to pay its debts as they become due or becomes subject to
direct control by a trustee, receiver or similar authority;
C. In the event the Licensee assigns or transfers this Agreement or any
of its rights or obligations hereunder, without the Licensor's prior written
consent, which shall not be unreasonably withheld; provided however, no consent
is required other than notice in the event Licensee assigns or transfers this
Agreement or any of its rights or obligations hereunder to an affiliate
controlled by, under common control with or controlling Licensee or a successor
to all or substantially all of Licensee's assets used in Licensee's Business.
D. Within five days after termination, Licensee will return to Licensor
the Software and all copies in the form provided by Licensor or as modified by
Licensee, or upon request by Licensor destroy the Software and all copies, and
certify in writing that they have been destroyed. Termination shall not relieve
Licensee of its obligations regarding confidentiality of the Software.
Termination will be in addition to and not in lieu of any equitable remedies
available to Licensor.
Licensor shall be provided written notice by Licensee in the event of
any breach or default hereunder by Licensor. Licensor shall have fifteen (15)
days from receipt of such written notice to cure any such breach; provided
however, licensor shall have five days from receipt of such written notice to
cure the first occasion of any breach where Licensor has committed to a fixed
time frame for performance as expressly set forth in this Agreement. In any such
instance, time shall be considered of the essence.
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XII. TAXES
Licensee shall, in addition to the other amounts payable under this
Agreement, pay all sales and other taxes, federal, state, or otherwise, however
designated, which are levied or imposed by reason of the transactions
contemplated by this Agreement, other than based on the income derived from
these transactions. Licensee shall pay to Licensor an amount equal to any such
items actually paid, or required to be collected or paid by Licensor at the time
the payment for the services performed or the License granted under this
Agreement.
XIII. HARDWARE REQUIREMENTS
Licensee shall make available for the Software implementation, at each
Permitted Configuration Center, computer equipment and software configurations
equivalent to any configuration which Licensor has approved prior to or during
the term of this Agreement for other licensees or customers.
XIV. DELIVERY, INSTALLATION AND TESTING
Licensee hereby acknowledges receipt of a previous version of the
Software. The Source Code shall be delivered within three days of an event
occurring under Section II that would allow Licensee access to the Source Code.
XV. CUSTOM MODIFICATIONS
All custom modifications to the Software, not including assisting
Licensee in implementation of the Software job control language, shall be
undertaken by Licensor in accordance with Section XVII Additional Consulting
Services.
XVI. GENERAL
A. Each party acknowledges that it has read this Agreement, together
with the Exhibits hereto, it understands it, and agrees to be bound by its
terms, and further agrees that this is the complete and exclusive statement of
the agreement between the parties, which supersedes and merges all prior
proposals, understandings and all other agreements, oral and written, between
the parties relating to this Agreement. This Agreement may not be modified or
altered except by written instrument duly executed by both parties.
B. Dates or times by which Licensor is required to make performance
under this Agreement shall be postponed automatically to the extent that
Licensor is prevented from meeting them by causes beyond its reasonable control,
but no more than thirty (30) days.
C. This Agreement and the rights, obligations and relations of the
parties hereunder shall be governed by the laws of the State of California
without regard to its rules of conflicts of law. In the event any legal
proceeding is brought to enforce or interpret the provisions of this Agreement
the parties hereby agree to submit to the jurisdiction of the courts of Los
Angeles, California, which shall be the exclusive venue for all such
proceedings.
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D. If any provision of this Agreement is invalid under any applicable
statute or rule of law, it is to that extent to be deemed omitted, but this
Agreement shall otherwise remain in full force and effect.
E. Neither party may sell, assign, transfer, convey, delegate, encumber
or sub-license, without the prior written consent of the other party, its
rights, duties or obligations under this Agreement to any person or entity, in
whole or in part, which consent shall not be unreasonably withheld, except as
otherwise provided in Section XI(c). Notwithstanding anything in this Agreement
to the contrary, in the event of a proposed assignment or transfer of the
Agreement by Licensee, and the assignee's use of the Software would materially
increase beyond the anticipated future use of the Software by Licensee, i.e., an
increase to at least 150% of the anticipated future use of the Software by
Licensee, the Licensor shall have the right to charge such assignee an
additional reasonable license fee equivalent to the fees Licensor then charges
to companies that would use the Software in an amount reasonably equivalent to
such assignees' anticipated usage, minus the license fee(s) paid by Licensee
hereunder. In the event such assignee refuses to pay such equivalent fee,
Licensor may in its sole and absolute discretion, refuse to consent to such
assignment or transfer.
F. In the event of any dispute or legal proceeding between the parties
arising out of related to this Agreement or its breach, the prevailing party
shall be entitled to recover from the non-prevailing party all fees, costs and
expenses, including without limitation, all attorney's and expert witness fees
and disbursements incurred in connection with such dispute or legal proceeding.
G. The waiver or failure of either party to exercise in any respects
any right provided for herein shall not be deemed a waiver of any further right
hereunder.
H. All notices requests, reports, submissions and other communications
permitted or required to be given under this Agreement shall be deemed to have
been duly given if such notice of communication shall be in writing and sent by
personal delivery or by airmail, cable, telegram, telex, facsimile transmission
or other commercial means of rapid delivery, postage or costs of transmission
and delivery prepaid, to the parties at addresses specified herein until such
time as either party hereto shall give the other party hereto not less than ten
(10) days' prior written notice of a change of address in accordance with the
provisions hereof.
XVII. ADDITIONAL CONSULTING SERVICES
During the term of this Agreement, Licensor shall provide Licensee with
various business and technical consulting services as may be requested by
Licensee. Such services shall be provided subject to the following terms and
conditions.
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A. Licensee shall be entitled to order services to be provided by
Licensor and Glasgal (or its subsidiaries) under the terms of this Agreement.
This Agreement includes the ability to require the services of any Licensor or
Glasgal "without limitations" (or its subsidiaries) personnel. Such services
shall be provided in a professional and workmanlike manner.
B. Unless otherwise cancelled in writing by Licensee, Licensee agrees
to pay Licensor $[text omitted] as a refundable Service Retainer Fee one week
after the beginning of each two month period beginning on the Effective Date
(the "Service Period") for all maintenance, installation, training,
modification, support and other services to be provided by Licensor that are not
being provided by Licensor pursuant to Exhibit "B". In the event that in any two
month Service Period the fees for the actual services provided by Licensor total
less than $[text omitted], Licensee shall subtract the remaining balance of the
Service Retainer Fee and shall pay Licensor the difference as the Minimum
Service Fee for the forthcoming Service Period.
If Licensee requests services during the first year after the execution date of
this Agreement in excess of $[text omitted] each Service Period, after deducting
any unused balance remaining from prior Service Periods, which by year end is in
excess of $[text omitted] (at the Exhibit D rates) all such excess requested
services will be provided by Licensor at the then current rate charged to a
majority of its customers. Licensor may charge for such excess services each
Service Period, subject to a year end reconciliation. To the extent total
services for the year (at the Exhibit D rates) are less than $[text omitted],
Licensor shall immediately refund any payments made by Licensee in excess
thereof. After such year, Licensor may charge for services requested by Licensee
in excess of $[text omitted] ($[text omitted] each Service Period), at its then
current rates charged to a majority of its customers, again subject to an annual
reconciliation and otherwise as set forth immediately above.
C. Licensee agrees to pay all reasonable out-of-pocket expenses.
Licensee shall have the option to book travel arrangements for Licensor and/or
Glasgal (or its subsidiaries) personnel.
D. Service fees that exceed the Service Retainer Fee shall be due and
payable within thirty (30) days following the end of the Service Period and the
receipt of invoice.
E. Services shall be provided based upon job classifications and at the
hourly rates specified in Exhibit "D" "SCHEDULE OF SERVICE CLASSIFICATIONS AND
RATES" attached hereto and incorporated by this reference herein. In the event
Licensee chose not to pay the Service Retainer Fee for any Service Period,
Licensor has the sole option to change the rates specified in Exhibit "D"
through notification, in writing, to its then current standard rates.
F. Licensor shall submit time records in writing for each month
detailing the personnel, services and time provided to Licensee by the fifth day
of the following month. Licensee shall have five (5) business days to review
such time records for accuracy and submit discrepancies to Licensor. Licensor
shall use its best efforts to ensure that only time spent working on behalf of
Licensee is reported and billed.
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G. Licensee agrees to provide Licensor with a purchase order for
services to be provided under the terms herein at least three (3) days prior to
the required start date for the provision of the services.
H. Licensor hereby agrees to provide the Maintenance Services,
commencing on the execution date, set forth in Exhibit "B" in consideration of
the payment by Licensee to Licensor of $[text omitted] per quarter, payable
within thirty (30) days of receipt of invoice. Such payment shall commence on
March 1, 1998. In the event Licensee chooses not to secure Maintenance Services
it will no longer be obligated to make such payment and Licensor will no longer
be obligated to provide Maintenance Services.
XVIII. TECHNICAL SUPPORT
Licensor will deliver to Licensee any changes, updates, upgrades, or
enhancements to Software (and Source Code when and if Licensee is entitled to it
under the provisions of Section II hereof), including without limitation
programming changes, releases, versions, and other enhancements, along with
updates or revisions to technical materials and documentation to the extent that
they relate to the Software and Source Code within thirty (30) days of the
release to Licensor's own technical, programming, or support staff and in any
event, no later than the release to any customer or licensee of Licensor or
Glasgal and as otherwise set forth in Exhibit B; provided that Licensee is then
current in its payment for Maintenance Services (as defined in Exhibit B). End
User documentation shall be updated on diskette in Microsoft Word for Windows or
such other industry standard program as mutually agreed to by the parties.
Licensor agrees to perform technically-feasible Software programming
changes requested by Licensee during the term of this Agreement, including
changes to or new formats for inclusion in the Software, in a timely manner and
at rates to be negotiated in good faith by the parties.
XIX. CORPORATE GUARANTEE
Glasgal unconditionally guarantees the performance of Licensor under
the Sections entitled Warranty and Indemnity of this Agreement, including
without limitation any obligation or liabilities of Licensor owed to Licensee
thereunder, heretofore, now or hereafter made, incurred or created, whether
voluntary or involuntary and however arising, whether due or not due, absolute
or contingent, liquidated or unliquidated, determined or undetermined, and
whether Licensor may be liable individually or jointly with others, or whether
recovery may be or hereafter become barred by any statute of limitations, or
whether such performance may be or hereafter become otherwise unenforceable.
Glasgal authorizes Licensee, without notice or demand and without
affecting its liability under this Agreement, from time to time to (a) renew,
compromise, extend, accelerate, or otherwise change, increase, or decrease
Licensor's performance or the terms of this Agreement
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Glasgal waives any defense arising by reason of any disability or other
defense of Licensor or by reason of the cessation from any cause whatsoever of
the liability of Licensor. Until this Agreement has expired and all performance
of Licensor to Licensee shall have been fully performed, Glasgal shall have no
right of subrogation, and waives any right to enforce any remedy, which Glasgal
now has or may hereafter have against Licensor. Guarantor waives all demands for
performance, notices of nonperformance, protests, notices of protest, and of the
creation, or incurring of new or additional obligation or liability of Licensor.
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LICENSOR: LICENSEE:
COMPUTER-AIDED SOFTWARE DATANET INTERNATIONAL,
INTEGRATION, INC. INCORPORATED
By: /s/ JAMES M. CACI By: /s/ JAMES UNG
------------------ -------------------
Name: James M. Caci Name: James Ung
Title: C.F.O. Title: President
Address: 12477 W. Ceder Dr. Address: 1304 John Reed Court
Suite 201 Industry, CA 91745
Denver, CO 80228
Glasgal Communications, Inc. EXECUTION DATE: September 15, 1997
as to Section XIX Corporate Guaranty only
By: /s/ JAMES M. CACI
------------------
Name: James M. Caci
Title: C.F.O.
Address: 20C Commerce way
Totowa, NJ 07054
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EXHIBIT A
SOFTWARE
Licensor's IWPS Configurator products, version 2.20 or higher. IWPS
Configurator shall include all modules, tools and utilities produced by Licensor
for use with the IWPS Configurator product line.
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EXHIBIT B
SOFTWARE MAINTENANCE AGREEMENT
Article 1
DEFINITIONS.
Terms in this Maintenance Agreement which are capitalized have the
meanings set forth below, or as defined elsewhere in this Agreement.
"Error" means an instance of failure of the Software to meet the
requirements of Section XI, Warranty of this Agreement. An Error is a Class 1
Error if it renders continued use of the Software commercially infeasible in
Licensee's reasonable judgment. An Error is a Class 2 Error if it makes
continued use of the Software seriously inconvenient and substantially reduces
its value to Licensee, in Licensee's reasonable judgment. All other Errors are
Class 3 Errors; in particular, all documentation shortcomings and deviations and
cosmetic errors that do not have the economic consequences defined for Class 1
and Class 2 Errors shall be deemed Class 3 Errors.
Article 2
TERM AND TERMINATION.
2.1 TERM. Commencing upon delivery of the Software, the term for
providing Maintenance Services for such Software shall be three months and shall
automatically renew quarterly, unless Licensee notifies Licensor in writing of
its decision to not renew.
2.2 TERMINATION BY LICENSOR. Licensor may terminate the provision of
Maintenance Services at any time, whereupon Licensee's Source Code License shall
commence.
2.3 TERMINATION BILLING. Licensor shall refund any prepaid charges for
Maintenance Services pro rata from the effective date of any permitted
termination. Licensee shall pay any charges for Maintenance Services rendered
pro rata to the effective date of any permitted termination.
Article 3
CHARGES.
Charges for Maintenance Services shall be as stated in Section XVII.
Additional Consulting Services of the Agreement.
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Article 4
SERVICE RESPONSIBILITIES.
4.1 MAINTENANCE. Licensor shall provide Licensee the maintenance
services described in this Exhibit and the Agreement with respect to the
Software and Source Code, including providing updates and corrections
("Maintenance Services"). Licensor shall correct all Errors reported by Licensee
by means of the procedures established by this Exhibit. Maintenance Services
shall be performed in a timely and professional manner by qualified maintenance
technicians familiar with the Software and Source Code and its operation.
Licensor shall provide, upon Licensee's request, periodic reports on the status
of Maintenance Services requested by Licensee.
4.2 SUPPORT AND RESPONSE TIME.
(i) Licensor shall provide telephone support solely for the reporting
and correction of suspected Errors ("Support") Monday through Friday, 9:30 a.m.
to 5:30 p.m., Mountain Standard Time, except Licensee holidays ("Maintenance
Period"). Licensor will also have personnel on call outside of the Maintenance
Period during which time Licensee may request Maintenance Services. Maintenance
Services, both in and outside of the Maintenance Period, shall be provided as
set forth below.
(ii) Licensor shall provide to Licensee, and keep current, a list of
persons and telephone numbers ("Calling List") for Licensee to contact for
Support. Such Calling List shall include: (1) the first person to contact for
the answer or assistance desired, and (2) the persons in successively more
responsible or qualified positions to provide the answer or assistance desired.
(iii) If Licensee desires Maintenance Services, Licensee shall contact
Licensor's telephone Support service in accordance with the Calling List.
Licensor shall make best efforts to respond to Licensee's initial telephone call
with off-site telephone consultation, assistance and advice relating to Support
of the Software within thirty (30) minutes of Licensee's first call for
Maintenance Services or, as to requests for assistance not involving suspected
Class 1 or 2 Errors made outside of the Maintenance Period, within thirty (30)
minutes after the start of the next day occurring during the Maintenance Period
and, in any event, Licensor shall respond within two hours of such allowed
response times. If Licensor fails to so respond; or if Licensee is unable, after
three or more calls within a fifteen (15) minute period, to reach Licensor's
telephone Support service; or if the designated person from the Calling List is
not available when Licensee makes contact with Licensor to obtain consultation
and assistance, then Licensee shall attempt to contact the next more responsible
or qualified person on the Calling List until contact is made and a designated
person responds to the call.
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(iv) After Licensee reports a suspected Class 1 or 2 Error, Licensor
shall provide a correction or workaround as soon as possible. Licensee shall
consult with Licensor to convey the severity of the Error. If Licensor has not
diagnosed and corrected a Class 1 or Class 2 Error on the same day as Licensee's
initial telephone call, Licensee shall submit to Licensor a listing of output
and such other data as Licensor may request and is reasonably available to
Licensee in order to reproduce operating conditions similar to those present
when Licensee detected such Error.
(v) For Class 1 Errors, Licensor shall provide a workaround reasonable
in Licensee's judgment, or a correction, in any event within three days after
receipt of output or other documentation of such Error. Licensor shall, upon
Licensee's request, without limitation, assign fully-qualified technicians to
work with Licensee at Licensee's site without interruption (i.e., 24 hours per
day) until Licensor provides a workaround reasonable in Licensee's judgment, or
a correction.
(vi) For Class 2 Errors, Licensor shall provide a workaround reasonable
in Licensee's judgment, or a correction, in any event within five days after
receipt of output or other documentation of such Error. Licensor shall, upon
Licensee's request, without limitation, assign fully-qualified technicians to
work with Licensee at Licensee's site during Licensee's regular business hours
until Licensor provides a workaround reasonable in Licensee's judgment, or a
correction.
(vii) For Class 3 Errors, Licensor shall correct such Error by
modifying the Software no later than the next update, unless Licensor has
scheduled release of such update less than thirty (30) days after Licensee's
notice, in which case Licensor shall correct the Error in the following update.
4.3 UPDATES. Licensor shall provide Licensee updates to the Software,
whenever Licensor makes such updates generally available to its customers.
4.4 CONTINUING SUPPORT. Licensee may decline to install an update or
upgrade Licensor offers. In such event, Licensor shall continue the Maintenance
Services for whatever version of the Software that is installed at Licensee,
subject to Licensor's right to terminate this Maintenance agreement as permitted
in article 2.3 TERMINATION BY LICENSOR. Licensor may charge additionally for
such Maintenance Services pursuant to Section XX Additional Consulting Services
provided that Licensee is more than one update or upgrade behind and continues
to decline to install a prior update or upgrade that would cause the Software to
be in compliance with the Warranty.
4.5 COMPATIBILITY. Within ninety (90) days after the supplier of an
operating system ("OS") in use at a Permitted Configuration Center makes a new,
upgraded version or release of such OS generally available to its customers,
Licensor shall deliver to Licensee, upon Licensee's request, an update to the
Software and Source Code to ensure its compatibility with such new OS release,
or if no update is necessary, Licensor shall so state to Licensee in writing
within such ninety (90) days. Licensor may charge Licensee for such upgrade
pursuant to Section XVII Additional Consulting Services. In such event, Licensee
-18-
<PAGE>
shall have the exclusive right to such upgrade and Licensor shall not be
entitled to license, sell, market or distribute such upgrade to any third party.
4.6 EARLY VERSION. Licensor shall, upon Licensee's request, provide
early versions of updates or upgrades prior to general release in order to
provide development feedback. Licensee, at its request, will be included in
Licensor design meetings during the development cycle and Licensor shall make
all reasonable efforts to include general interest features suggested by
Licensee and develop the workpapers and modules that Licensee considers most
important. Licensee may send a reasonable number of employees to attend end-user
group meetings sponsored by Licensor. Licensee shall pay all out-of-pocket
expenses associated therewith.
4.7 TRANSITIONAL SUPPORT. If the provision of Maintenance Services to
the Software covered by this Exhibit is terminated by Licensor as allowed in
Article 2.3 TERMINATION BY LICENSOR, Licensor shall give Licensee at least one
hundred and eighty (180) days' prior notice, whereupon the Source Code License
shall become effective.
Article 5
LICENSEE RESPONSIBILITIES.
5.1 SUSPECTED ERRORS. If Licensee discovers any suspected Error in the
Software Licensee shall analyze the suspected Error to determine if it is the
result of Licensee's misuse or misunderstanding of the Software before seeking
Licensor's assistance.
5.2 LICENSEE RESPONSIBILITY. In the event Licensor determines that the
problem reported by Licensee is directly related to unauthorized alterations of
the Software by Licensee, then
(i) Licensor may charge for employee time expended in accordance with
Section XVII Additional Consulting Services in addition to reasonable
out-of-pocket expenses.
-19-
<PAGE>
EXHIBIT C- NOTE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOT BEEN REGISTERED UNDER TO
SECURITIES ACT OF 1933 (THE "ACT") OR STATE SECURITIES LAWS AND NO TRANSFER OF
THESE SECURITIES MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT, OR (B) PURSUANT TO AN EXEMPTION THEREFROM WITH RESPECT
TO WHICH THE COMPANY MAY, UPON REQUEST, REQUIRE A SATISFACTORY OPINION OF
COUNSEL FOR THE HOLDER THAT SUCH TRANSFER IS EXEMPT FROM THE REQUIREMENTS OF THE
ACT.
As of July 1, 1997 $[text omitted]
Non-Interest Bearing
Promissory Note Due March 31, 1998,
DataNet International, Incorporated, a California corporation (together
with its successors and assigns, "Issuer"), for value received hereby promises
to pay to Computer-Aided Software Integration, Inc., a Delaware corporation
(together with its successors, transferees and assigns, "Noteholder"), by wire
transfer of immediately available funds to an account designated by Noteholder
by notice to Issuer the principal sum of [text omitted] ("Note Amount"), as
provided herein.
This Note (the "Note") is delivered to Noteholder as payment in full
for the license fee (the "License Fee") for the licenses and rights provided to
Issuer pursuant to that certain Amended and Restated License Agreement dated as
of the date hereof by and between Issuer and Noteholder (the "License
Agreement"). This Note is an amendment and restatement of, and issued in
substitution for, that certain Note of the Issuer dated April 30, 1997 in favor
of Noteholder in the principal amount of $[text omitted] (the "April Note"). The
execution and delivery of this Note shall render the April Note null, void,
canceled, terminated and satisfied in all respects, and Issuer shall have no
liability in connection therewith or such execution and delivery.
1. TERMS OF NOTE. The Note Amount shall not accrue interest and shall
be due and payable in two installments (the "First Installment" and the "Second
Installment," respectively), payable in the amounts and on the dates as follows:
Payment Date Principal Payment
------------ -----------------
First
Installment: October 31, 1991 $[text omitted]
Second
Installment: February 28, 1998 $[text omitted]
-20-
<PAGE>
; provided, however, that:
(i) in the event that Issuer in its sole discretion consummates a
Qualified Financing (as hereinafter defined) prior to payment
of the First Installment, the first $[text omitted] of
proceeds of such Qualified Financing shall be immediately
applied to pre-payment of the Second Installment; and
(ii) in the event that Issuer in its sole discretion consummates a
Qualified IPO (as hereinafter defined) prior to payment of the
Second Installment, the first $[text omitted] of proceeds of
such Qualified Financing shall be immediately applied to
prepayment of the Second Installment.
For purposes of this Note, (i) a Qualified Financing shall mean a subordinated
debt or equity financing transaction or a series of subordinated debt or equity
financing transactions which yield gross proceeds to the Issuer or any of its
subsidiaries of at least $1,000,000, and (ii) a Qualified IPO shall mean an
initial underwritten offering by the Issuer of its securities to the public
pursuant to a registration statement filed with the Securities Exchange
Commission under the Securities Act of 1933, as amended.
Whenever any payment of this Note shall be stated to be due on a day,
which is not a Business Day, such payment shall be made on the next succeeding
Business Day. For purposes of this Note, "Business Day" means any day except a
Saturday, Sunday or other day on which commercial banks in the City of New York
are authorized by law to close.
2. EVEN OF DEFAULT DEFINED: ACCELERATION OF PAYMENT. In case one or
more of the following events ("Events of Default") (if it shall be voluntary or
pursuant to any final judgment, decree or order of any court or any final order
of any administrative or governmental body) shall have occurred and be
continuing:
(a) Failure on the part of Issuer to pay any installment under this
Note when due at maturity, upon acceleration or otherwise and such default
continues for a period of more than thirty (30) days after the date on which
written notice specifying such failure, stating that such notice is a "Notice of
Default" hereunder and demanding that Issuer remedy the same, shall have been
given by registered or certified mail, return receipt requested, to Issuer; or
(b) Material failure on the part of Issuer duly to observe or perform
any of the material covenants or agreements on the part of Issuer contained in
the License Agreement, for a period
-21-
<PAGE>
of thirty (30) days after the date on which written notice specifying such
failure, stating that such notice is a "Notice of Default" hereunder and
demanding that Issuer remedy the same, shall have been given by registered or
certified mail, return receipt requested, to Issuer; or
(c) A material final judgment or order (not covered by insurance) for
the payment of money in excess of $500,000 shall be rendered against Issuer
(treating any deductibles as not so covered) sill rendered against Issuer and
such judgment or order shall continue unsatisfied, unstayed or unappealed (by
filing of motion after judgment or order or filing of appeal to higher
governmental authority) for a period of 30 days; or
(d) Issuer makes an assignment for benefit of creditors involving all
of its assets; or
(e) Issuer pursuant to or within the meaning of title 11, U.S. Code or
any succeeding federal law ("Bankruptcy Law"):
i) Commences a voluntary case or proceeding, which is not
dismissed within ninety (90) days of commencement,
ii) Consents to the entry of an order for relief against it
effectuating the transfer of all of its assets in an involuntary case or
proceeding, unless such case or proceeding is dismissed within ninety (90) days
of commencement, or
iii) Consents to the appointment of any receiver, trustee,
assignee for the benefit of creditors, liquidator or similar official under any
Bankruptcy Law (a "Custodian") for it or for all or substantially all of its
property, which Custodian is not removed within ninety (90) days of appointment,
or
iv) A court of competent jurisdiction enters a final order or
decree under any Bankruptcy Law that:
v) Is for relief against Issuer effectuating the transfer of
all of its assets in an involuntary case or proceeding, unless such case or
proceeding is dismissed within ninety (90) days,
vi) Appoints a Custodian of Issuer for all or substantially
all of the property of Issuer, which Custodian is not removed within ninety (90)
days of appointment, or
vii) Orders the complete liquidation of all of the assets of
Issuer,
And such order or decree remains unstayed or unappealed (by filing of
motion after judgment or order or filing of appeal to higher governmental
authority) and in effect for 60 days;
-22-
<PAGE>
Then, (i) in each case where a material Event of Default occurs (other
than a material Event of Default under Section 3(e) or 3(f) hereof), the
Noteholder, by thirty (30) days notice in writing to Issuer (the "Acceleration
Notice"), may declare the aggregate Note Amount to be due, and upon the passage
of such thirty (30) days, the same shall become due; provided that if a material
Event of Default under Section 3(e) or 3(f) occurs, the Note Amount shall become
and be immediately due upon receipt of written notice of such default to Issuer
on the part of the Noteholder. Subject to Section 7 below, the Noteholder may
exercise this option to accelerate on the terms of this Note during any default
by Issuer regardless of any prior forbearance.
Upon the occurrence of, and during the continuation of, any material
Every of Default (or, in the case of those Events of Default with allotted cure
periods, upon expiration of the allotted cure period of such material Event of
Default) the principal amount of this Note shall bear interest at a rate of
[text omitted]% per annum (the "Default Interest").
3. DEFAULT BY NOTEHOLDER OR GLASGAL. If Noteholder or Glasgal
Communications, Inc. or any of its subsidiaries or affiliates (collectively,
"Glasgal") breaches the License Agreement or any other agreement by and among
Issuer and Noteholder and/or Glasgal, then this Note shall be immediately
rendered null, void, canceled, terminated and satisfied in all respects, and
Issuer shall have no liability in connection therewith after such execution and
delivery.
4. PREPAYMENT. The Issuer may prepay the unpaid principal balance of
this Note in whole or in part, without penalty at any time. The principal amount
of this Note may be prepaid only in cash.
5. TRANSFER. This Note is assignable and transferable by Noteholder
only with the consent of Issuer and only upon compliance with the provisions of
Section 2 above, and by Issuer with Noteholders consent.
6. NO WAIVER. No failure on the part of Noteholder to exercise, and no
delay in exercising, any right hereunder shall operate as a waiver thereof; nor
shall any single exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right hereunder. The remedies
herein provided have been negotiated by the parties, are cumulative and are
exclusive of any other remedies provided by law.
7. NO COLLECTION. Notwithstanding any provision of Section 3 of this
Note, the License Agreement or otherwise, no suit may be brought to collect this
Note or for payment of the License Fee; instead, Noteholder shall only be able,
and its
-23-
<PAGE>
exclusive remedy for any default under this Note or the failure to pay the
License Fee shall be to apply the entire amount due hereunder to payment for the
Common Stock of the Issuer pursuant to the terms of that certain Warrant
Agreement of even date herewith by and between the Issuer and the Noteholder.
8. AMENDMENT. No amendment or waiver of any provision of this Note, nor
consent to any departure by the Issuer herefrom, shall in any event be effective
unless the same shall be in writing and signed by Noteholder and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
9. MISCELLANEOUS. This Note shall be governed by and be construed in
accordance with the laws of the State of California without regard to the
conflicts of law rules of such state. Issuer hereby assents to extensions of the
time of payment, or forbearance or other indulgence without notice. The Section
headings herein are for convenience only and shall not affect the construction
hereof. After delivery of an indemnity in form and substance reasonably
satisfactory to Issuer, Issuer agrees to issue a replacement Note if this Note
has been lost, stolen, mutilated or destroyed.
10. NOTICES. All notices, requests and other communications to either
party hereunder shall be in writing by nationally recognized overnight mail
carrier, certified mail, return receipt requested or facsimile and shall be
given,
If to Issuer to:
Data Net International, Incorporated
1304 John Reed Court
City of Industry, California 91745
Attn: Maxwell Riazi
Fax: (805) 492-4294
If to Noteholder:
Computer-Aided Software Integration, Inc.
c/o Glasgal Communications, Inc.
20C Commerce Way
Totowa, New Jersey 07512
Attention: Chief Financial Officer
Telephone: (201) 890-4800
Fax: (901) 890-2888
-24-
<PAGE>
with a copy (which shall not constitute notice) to:
Olshan Grundman Frome & Rosenzweig LLP
505 Park Avenue
New York, New York 10022-1170
Attention: Robert H. Friedman, Esq.
Telephone: (212) 753-7200
Fax: (212) 755-1467
If to Glasgal
Glasgal Communications, Inc.
20C Commerce Way
Totowa, New Jersey 07519
Attention: Chief Financial Officer
Telephone: (201) 890-4800
Fax: (201) 890-2888
Any notice sent by nationally recognized mail carrier shall be deemed
to be delivered to the address shown on the mailing receipt upon actual receipt
by the recipient. Any notice sent by certified mail, return receipt requested,
shall be deemed to be delivered 3 days after mailing. Any notice sent by
facsimile shall be deemed delivered upon the receipt by sender of written
confirmation of transmission so long as within 24 hours such notice is also sent
by regular mail to the appropriate address written above.
IN WITNESS WHEREOF, Issuer has caused this Note to be executed as of
the date first above written.
DATANET INTERNATIONAL, INCORPORATED
By:
---------------------------------
Name:
Title:
Agreed and Accepted:
Computer-Aided Software Integration, Inc.
By:
---------------------------------
Name:
Title:
Dated:
---------------------------------
-25-
<PAGE>
EXHIBIT D
"SCHEDULE OF SERVICE CLASSIFICATIONS AND RATES"
SERVICE TYPE JOB CLASS HOURLY RATE
Management Consulting Principal $[Text Omitted]
Software Development Programmer $[Text Omitted]
Technical Consulting Consulting Engineer $[Text Omitted]
Deployment Technician (Std Hours) $[Text Omitted]
Technician (Overtime) $[Text Omitted]
Technician (Holidays) $[Text Omitted]
The above rates reflect a preferred rate.
The above rates may be adjusted by Licensor on each anniversary of the
execution date of this Agreement, upon at least 60 days prior written notice to
Licensee, to rates no higher than the lowest effective rate for each category of
Job Class (or functionally equivalent Job Class) charged by Licensor to
Licensor's then most favored customers.
The above rates shall be adjusted by Licensor one year after the
execution date of this Agreement, and shall thereafter continue to be adjusted,
as and when necessary to reduce (but not increase) such rates to the lowest
effective rate for each category of Job Class (or functionally equivalent Job
Class) then charged by Licensor to Licensor's then most favored customers.
-26-
EXHIBIT 11
GLASGAL COMMUNICATIONS, INC.
COMPUTATION OF EARNINGS (LOSS) PER SHARE
For the Three Months Ended
(in thousands, except per share data)
July 31, 1997 July 31, 1996
--------------- ---------------
Earnings (loss) per share
Income (loss) from continuing operations $ 25 $ 1,897
Discontinued operations -- (503)
--------- -------
Net income $ -- $ 1,394
--------- -------
Weighted average number of shares 23,709 20,306
outstanding
Assumed issuances under exercise of stock 2,125 6,569
options and warrants --------- -------
Weighted average and common stock 25,834 26,875
equivalents --------- -------
Income (loss) from continuing operations $ 0.00 $ 0.07
Discontinued operations per share 0.00 (0.02)
Net loss per share $ 0.00 $ 0.05
--------- -------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GLASGAL
COMMUNICATIONS INC.'S FINANCIAL STATEMENTS AS OF JULY 31, 1997, AS AMENDED AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> JUL-31-1997
<CASH> 759
<SECURITIES> 0
<RECEIVABLES> 12,048
<ALLOWANCES> (503)
<INVENTORY> 2,473
<CURRENT-ASSETS> 22,518
<PP&E> 6,737
<DEPRECIATION> (3,178)
<TOTAL-ASSETS> 29,533
<CURRENT-LIABILITIES> 25,461
<BONDS> 0
0
0
<COMMON> 25
<OTHER-SE> 1,096
<TOTAL-LIABILITY-AND-EQUITY> 29,533
<SALES> 18,600
<TOTAL-REVENUES> 18,600
<CGS> 11,277
<TOTAL-COSTS> 11,277
<OTHER-EXPENSES> 6,844
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 454
<INCOME-PRETAX> 25
<INCOME-TAX> 0
<INCOME-CONTINUING> 25
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
