<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition Period from ______ to ______.
Commission file number 0-18511
---------------------
DIGITAL SYSTEMS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
corporation or organization)
WASHINGTON 91-1273645
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
6464 185TH AVE. N.E.
REDMOND, WASHINGTON 98052
(Address of principal executive offices) (Zip Code)
(206) 881-7544
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Common stock, par value $0.01 per share: 9,507,080 shares outstanding
as of June 30, 1996.
Page 1 of 12 sequentially numbered pages.
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DIGITAL SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
TABLE OF CONTENTS
---------------------
PART I: FINANCIAL INFORMATION PAGE NO.
--------
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial Condition 8
PART II: OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 13
There were no reports on Form 8-K filed during the quarter ended June 30, 1996
<PAGE> 3
PART I:
ITEM 1. FINANCIAL STATEMENTS
DIGITAL SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS) JUNE 30, 1996 DEC 31, 1995
- -------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents and short-term investments $ 36,659 $ 39,762
Trade accounts receivable, net 19,627 21,236
Notes receivable 724 240
Inventories 2,640 2,958
Current installments of contracts receivable 2,451 2,797
Prepaid expenses and other current assets 3,190 2,958
----------- ----------
Total current assets 65,291 69,951
Property, plant and equipment, net 6,085 5,508
Contracts receivable, less current installments 863 1,793
Capitalized software costs, net 2,377 3,375
Other assets 1,554 564
----------- ----------
Total assets $ 76,170 $ 81,191
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations $ 73 $ 77
Accounts payable 3,551 4,270
Accrued compensation 2,592 2,082
Accrued expenses 6,768 5,583
Customer deposits and unearned revenue 3,536 9,730
----------- ----------
Total current liabilities 16,520 21,742
Deferred Federal income taxes 338 1,199
Other long-term liabilities 651 738
----------- ----------
Total liabilities 17,509 23,679
----------- ----------
Shareholders' equity
Total shareholders' equity 58,661 57,512
----------- ----------
Total liabilities and shareholders' equity $ 76,170 $ 81,191
=========== ==========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
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DIGITAL SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA) THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
- ------------------------------------------------------------------------------------------------------------
1996 1995 (UNAUDITED) 1996 1995
<S> <C> <C> <C> <C>
Revenue:
Product sales $ 14,474 $ 11,341 $ 27,591 $ 20,964
Service and miscellaneous 6,310 5,296 13,251 10,758
-------- -------- -------- --------
20,784 16,637 40,842 31,722
-------- -------- -------- --------
Cost of product sales and services:
Product sales 4,439 4,264 9,484 8,499
Service and miscellaneous 3,060 2,155 5,783 4,344
-------- -------- -------- --------
7,499 6,419 15,267 12,843
-------- -------- -------- --------
Gross profit 13,285 10,218 25,575 18,879
-------- -------- -------- --------
Operating expenses:
Selling, general and administrative 7,089 6,097 13,975 12,090
Research and development 2,981 1,645 5,338 3,443
Write-off of capitalized software costs -- -- 705 --
Purchase of in-process research -- --
and development -- -- 4,307 --
-------- -------- -------- --------
Total operating expenses 10,070 7,742 24,325 15,533
-------- -------- -------- --------
Operating income 3,215 2,476 1,250 3,346
Other income, net 426 516 870 1,108
-------- -------- -------- --------
Earnings before income taxes 3,641 2,992 2,120 4,454
Income tax expense 1,298 1,088 2,293 1,621
-------- -------- -------- --------
Net earnings (loss) $ 2,343 $ 1,904 $ (173) $ 2,833
======== ======== ======== ========
Net earnings (loss) per share $ 0.24 $ 0.19 $ (0.02) $ 0.28
======== ======== ======== ========
Weighted average common shares and
equivalents outstanding 9,844 9,793 9,354 9,985
======== ======== ======== ========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
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DIGITAL SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT PER SHARE DATA) SIX MONTHS ENDED JUNE 30,
- --------------------------------------------------------------------------------------
1996 1995
(UNAUDITED)
<S> <C> <C>
Net cash provided by (used in) operating activities: $ (628) $ 5,416
-------- --------
Cash flows from investing activities:
Purchase of short-term investments (22,779) (24,022)
Proceeds from the maturity of short-term investments 24,679 --
Purchase of property, plant and equipment (2,099) (823)
Additions to capitalized software development costs (641) (982)
Increase in other assets, net -- (26)
-------- --------
Net cash used in investing activities (840) (25,853)
-------- --------
Effect of exchange rate changes on cash 47 (11)
Cash flows from financing activities:
Repayment of long-term obligations (44) (904)
Purchase of treasury stock -- (4,048)
Exercise of stock options, other 1,262 186
-------- --------
Net cash provided by (used in) financing activities 1,218 (4,766)
-------- --------
Decrease in cash and cash equivalents (203) (25,214)
Cash and cash equivalents at beginning of period 5,914 40,971
-------- --------
Cash and cash equivalents at end of period 5,711 15,757
-------- --------
Short-term investments at end of period 30,948 24,033
-------- --------
Cash and cash equivalents and
short-term investments at end of period $ 36,659 $ 39,790
======== ========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
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DIGITAL SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include
the accounts of Digital Systems International, Inc. and its wholly
owned subsidiaries, collectively referred to as the "Company". The
unaudited interim condensed consolidated financial statements and
related notes have been prepared pursuant to the rules and regulations
of the Securities and Exchange Commission. Accordingly, certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations.
The accompanying consolidated financial statements and related notes
should be read in conjunction with the audited consolidated financial
statements and notes thereto included in the Company's annual report
and Form 10-K for the fiscal year ended December 31, 1995.
The information furnished reflects, in the opinion of management, all
adjustments, consisting of only normal recurring items, necessary for a
fair presentation of the results for the interim periods presented.
Interim results are not necessarily indicative of results for a full
year.
2. INVENTORIES
A summary of inventories follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) JUNE 30, 1996 Dec 31, 1995
--------------- --------------
(unaudited)
<S> <C> <C>
Raw materials $1,455 $ 838
Work in process 696 1,269
Finished goods 111 26
Installations in progress 277 610
Spare parts 101 215
------ ------
Total $2,640 $2,958
====== ======
</TABLE>
3. NET EARNINGS (LOSS) PER SHARE
Net earnings per share is computed using the weighted average number of
common shares outstanding plus the dilutive common equivalent shares
outstanding during the period. Common equivalent shares are calculated
under the treasury stock method and consist of unexercised stock
options. Net loss per share is computed using only the weighted average
number of common shares outstanding during the period. Fully diluted
earnings per share for all periods presented were not materially
different from primary earnings per share.
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4. NEW ACCOUNTING STANDARD
In October 1995, the Financial Accounting Standards Board issued
Statement No. 123, Accounting for Stock-Based Compensation. This
pronouncement establishes accounting and reporting standards for
stock-based employee compensation plans, including: stock purchase
plans, stock options and stock appreciation rights. This standard
defines a fair value based method of accounting for these equity
instruments. This method measures compensation cost based on the value
of the award and recognizes that cost over the service period.
Companies may elect to adopt this standard or to continue accounting
for these types of equity instruments under current guidance, APB
Opinion No. 25, Accounting for Stock Issued to Employees. Companies
which elect to continue using the rules of Opinion No. 25 must make pro
forma disclosures of net income and earnings per share as if this new
statement had been applied. This standard is required for fiscal years
beginning after December 15, 1995.
The Company has elected to continue accounting for these types of
equity instruments under APB Opinion No. 25 and will adopt the
disclosure requirements in 1996.
5. RECLASSIFICATIONS
Certain reclassifications have been made to the prior period financial
statements to conform with the current year presentation.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
GENERAL
For the second quarter of 1996, the Company reported a 25% increase in
revenue to $20.8 million over the $16.6 million reported in the second quarter
of 1995. The Company reported second quarter 1996 net earnings of $2.3 million
or 24 cents per share, compared with net earnings of $1.9 million or 19 cents
per share for the comparable quarter of 1995.
For the six months ended June 30, 1996, the Company reported a net loss
of $0.2 million, or 2 cents per share. In February 1996, the Company acquired
Caleo Software, Inc. and wrote-off $4.3 million of in-process research and
development costs associated with the acquisition. In addition, the Company
wrote-off $0.7 million of previously capitalized software. Excluding these
charges, net earnings for the first six months of 1996 would have been $4.6
million, or 47 cents per share, compared to $2.8 million, or 28 cents per share
for 1995.
REVENUE
Revenue of $20.8 million for the second quarter of 1996 represents a
25% increase over revenue of $16.6 million reported in the comparable quarter of
the prior year. Product sales increased $3.1 million to $14.5 million in 1996
versus $11.3 million in 1995. Service and miscellaneous revenue increased by
$1.0 million, to $6.3 million from $5.3 million as a result of increased
professional service revenues. International revenue decreased to $3.4 million
in 1996 from $3.9 million in 1995, due to decreased product sales in Europe and
Asia.
Year-to-date revenue of $40.8 million represents a 29% increase over
the $31.7 million reported last year. The overall revenue increase was driven by
continued acceptance of the MOSAIX 5300 Series products by large-scale
telemarketing and financial service customers.
In the second quarter of 1996, the sale of MOSAIX systems to 3
customers accounted for 28% of that period's total product revenue, while three
customers accounted for 35% in the second quarter of 1995.
GROSS MARGIN
Gross margin improved to 64% of revenue for the second quarter of 1996
from 61% of revenue during the second quarter ended June 30, 1995. Gross margin
on product sales was 69% of revenue in the second quarter of 1996 compared to
62% in the comparable period of the prior year. During the second quarter of
condensed 1996, the Company sold a greater proportion of large-scale, complex
telemarketing and financial services application products in the MOSAIX 5300
Series. These sales contributed to the increase in gross margin. In addition,
the Company has begun to realize the benefit of several product cost reduction
efforts, as well as improved overhead coverage. Gross margin on service and
miscellaneous revenue was 52% of revenue compared to 59% in the comparable
period of the prior year, due to a higher mix of professional service revenues
and lower customer support margins.
Gross margin on year-to-date sales was 63% in 1996 versus 60% in 1995.
Gross margin on product sales was 66% of revenue for the first six months of
1996 compared to 60% in the comparable period of the prior year. Product gross
margins are influenced in part by the increase in
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sales volume as well as product mix, overhead coverage, and software
amortization expense. Gross margin in 1995 includes accelerated software
amortization expense resulting from the replacement of earlier versions of
MOSAIX software with the MOSAIX 5000 Series products. In the first half of 1996,
the Company expensed $0.9 million related to software amortization, compared to
$1.9 million in the comparable period a year ago. Gross margin on service and
miscellaneous revenue for the first six months was 56% of revenue compared to
60% in the comparable period of the prior year, due to a higher mix of
professional service revenues and lower customer support margins.
SELLING, GENERAL & ADMINISTRATIVE
Selling, general & administrative expenses were $7.1 million or 34% of
revenue in the second quarter of 1996, compared to $6.1 million or 37% of
revenue in the comparable period of the prior year. For the six months ended
June 30, 1996, selling, general & administrative expenses were $14.0 million or
34% of revenue compared to $12.1 million, or 38% in 1995. While selling, general
and administrative expenses decreased as a percentage of revenue, the increase
in spending is due to increased travel expenses as well as expansion of
marketing activities, advertising and personnel costs.
RESEARCH & DEVELOPMENT
Research and development expense, net of amounts capitalized were
$3.0 million or 14% of revenue in the second quarter of 1996, compared to $1.6
million or 10% of revenue in the comparable quarter of the prior year. Research
and development spending increased to $3.2 million from $2.1 million, and
software costs capitalized as a percent of spending were 8% (or $0.3 million) in
the second quarter of 1996 and 22% (or $0.5 million) in 1995. The increase in
research and development expenses is due to increased investment in the
development of software applications and a decrease in the amount of capitalized
research and development costs.
For the six months ended June 30, 1996, research and development
expenses net of amounts capitalized were $5.3 million, or 13% of revenue,
compared with $3.4 million or 11% of revenue in the comparable period of the
prior year. Research and development spending increased by $1.6 million from
$4.4 million to $6.0 million due primarily to increases in engineering staff and
outside contractors.
The Company remains committed to the ongoing development of new
products and improvements to existing products as a key source of future
revenue. The Company expects to invest approximately 10-12% of revenue in new
product development. However, from time to time the Company may exceed the
current level of investment.
In February, 1996, the Company acquired Caleo Software, Inc. and
wrote-off $4.3 million of in-process research and development costs associated
with the acquisition. In addition, the Company wrote-off $0.7 million of
previously capitalized software due to rapidly changing technology. As a result,
capitalized software (net) continues to decrease, and as of June 30, 1996, has
been reduced to $2.4 million versus $3.4 million at December 31, 1995.
OTHER INCOME, NET
Net other income is comprised primarily of interest income, net and was
$0.4 million in the second quarter of 1996, compared with $0.5 million in the
prior year. Year-to-date interest income totaled $0.9 million versus $1.1
million in 1995. Interest income was slightly lower in 1996 compared to a year
ago due to a decrease in invested cash.
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INCOME TAXES
The effective tax rate for the quarter was 35.6% in 1996 compared to
36.4% in 1995. The rate difference was due primarily to the mix of foreign
income compared to the prior year. The year-to-date effective tax rate,
including the effect of the in-process research and development write off
related to the Caleo acquisition in the first quarter was 108.2% in 1996 versus
36.4% in 1995. The in-process research and development, write off, is not
deductible for tax purposes. Excluding the $4.3 million charge, the Company's
six-month 1996 effective tax rate was 35.8% compared to 36.4% in the comparable
period of the prior year.
FINANCIAL CONDITION
LIQUIDITY & CAPITAL RESOURCES
The Company's combined cash and cash equivalents and short-term
investments were $36.7 million at June 30, 1996 versus $39.8 million at December
31, 1995. The short-term investment portfolio is invested in municipal
securities, corporate notes and bonds, and commercial paper, and is diversified
among security types and issuers. It does not include any derivative products.
During the first six months of 1996, the Company used $.6 million in cash from
operations compared to $5.4 million generated in 1995. The use of cash from
operating activities in 1996 was due primarily to the purchase of in-process
research and development as a part of the purchase of Caleo Software, Inc. for
$4.8 million in cash during February 1996. The majority of the purchase price
was charged to operations. At June 30, 1996, the Company's working capital was
$48.8 million compared to $48.2 million at December 31, 1995.
During the first six months the Company invested $2.1 million to
purchase property, plant and equipment compared to $0.8 million for the prior
year. The increase is primarily due to the investment in internal customer
management hardware and software systems. The Company made repayments on
long-term obligations of $.04 million in 1996 versus $0.9 million in 1995.
In addition to its cash and short term investment balances, the Company
has available $10 million of domestic lines of credit to meet cash flow needs.
The Company has elected to not renew a second $10 million line of credit at this
time. Management believes that existing cash and short-term investments and cash
flow from operations, together with available credit lines, will continue to be
sufficient to meet ongoing operating requirements as well as the Company's
investment in capital additions and research and development activities. In
connection with research and development and market expansion, cash may be used
to acquire technology or to fund strategic ventures.
The Board of Directors has authorized management to repurchase, from
time to time, subject to certain conditions and limitations, up to 1,600,000
shares of common stock of the Company. These shares will be used to service the
Company's employee stock option and stock purchase plans. As of August 2, 1996,
a total of 678,000 shares have been repurchased at a cost of approximately $5.3
million.
FACTORS AFFECTING FUTURE RESULTS AND REGARDING FORWARD-LOOKING STATEMENTS
The Company, in its annual report to shareholders, its annual report on
Form 10-K, its quarterly reports on Form 10-Q and in other documents filed with
the Securities and Exchange Commission, as well as its press releases and oral
communications, has made and may in the future continue to make forward-looking
statements. When used in these contexts, the words "believes",
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"anticipates", "expects" and similar expressions are intended to identify
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date of such
statement. The Company undertakes no obligation to publicly release results of
any revisions of such forward looking statements that may be made to reflect
events or circumstances after the date of any such statement or to reflect the
occurrence of unanticipated events. In addition the following important factors,
among others, could cause the Company's actual results to differ materially from
those expressed in the Company's forward-looking statements in any of these
contexts.
FUTURE OPERATING RESULTS AND QUARTERLY FLUCTUATIONS. The Company
believes that its quarterly operating results could be subject to fluctuations
for a variety of reasons. The Company currently operates with a small backlog
relative to its revenue; thus, most of its sales in each quarter result from
orders received in the current or prior quarter. In addition, because prices for
the Company's products are relatively substantial, a significant portion of net
sales for each quarter is attributable to a relatively small number of orders
and customers. Sales in a quarter depend in part on the configuration of systems
sold and on the volume and timing of bookings received during the current and
prior quarter. In addition, the Company's operating expenses are relatively
fixed in the short term. As a result, variations in timing of revenue can cause
significant variations in quarterly results of operations. The Company's
operating results for any quarter are, accordingly, not necessarily indicative
of results for any future period.
COMPETITION. The market for call processing systems is intensely
competitive. The Company competes directly with three principal competitors and
indirectly with a number of other competitors, some of whom have substantially
greater financial, technical and marketing resources than the Company.
PRODUCT CONCENTRATION, TECHNOLOGICAL CHANGE. The market for the
Company's products and services is subject to rapid technological changes,
requiring continual research and development expenditures by the Company.
Competitors or new market entrants may introduce new products, features or
services, or changes in communication technology could develop, that could
adversely affect the competitive position of the Company's products and services
in some or all of its markets. During the past two years, the Company's products
have changed rapidly and significantly. Though the Company continues to invest
significantly in research and development, there is no assurance that the
Company will be able to maintain its competitive position.
MARKET. The Company's future financial performance will depend on the
size and rate of growth of the call center customer management market. Future
development of this market will depend upon the expansion of current
applications, successful creation of new applications for existing markets, and
the increasing acceptance of call processing technology.
REGULATORY ENVIRONMENT. While existing industry legislation does not
directly regulate the manufacture and sale of the Company's products, certain
existing legislation affects the ability of the Company's customers to use some
of its products in certain ways. For example, The Company's MOSAIX systems may
not be used for certain prohibited debt collection and remote telephone
solicitation practices, nor may they be used under certain circumstances to
leave or play artificial or prerecorded messages. The adoption of legislation at
the federal or state level and the promulgation of regulations under such
statutes could have adverse affects on the Company's results by regulating the
use of the Company's products and services.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS. Despite the Company's
efforts to protect its proprietary rights, unauthorized parties may attempt to
copy aspects of the Company's products or to obtain and use information the
Company regards as proprietary. Although the Company has not registered its
copyrighted software, the Company's software is protected by copyright and trade
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secrets laws. There can be no assurance that steps taken by the Company to
protect its proprietary rights will be adequate to deter misappropriation or
independent third-party development of its technology.
PART II: OTHER INFORMATION
A. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
B. The annual meeting of Digital Systems International, Inc.'s shareholders was
held on April 30, 1996. The following proposals were submitted to a vote:
a) To elect three directors to hold office for terms of three years, or until
their respective successors are elected and qualified. The proposal passed
with the following number of votes:
<TABLE>
<CAPTION>
Affirmative Abstentions
-----------------------------
<S> <C> <C>
Harvey N. Gillis 7,591,413 49,582
David J. Ladd 7,590,211 50,784
Robert S. Leventhal 7,591,143 49,852
</TABLE>
b) To approve an amendment to the Digital Systems International, Inc. Restated
1992 Stock Option Plan for Non-Employee Directors. This proposal passed with
6,805,389 affirmative votes, 753,455 negative votes, and 82,151 abstentions.
c) To ratify the selection of KPMG Peat Marwick LLP as independent auditors for
the Company. This proposal passed with 7,610,511 affirmative votes, 4,237
negative votes, and 26,247 abstentions.
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C. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11. Computation of Earnings Per Share is on page 14.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during
the three months ended June 30, 1996.
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DIGITAL SYSTEMS INTERNATIONAL, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
EXHIBIT 11: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C> <C> <C>
Weighted average number of shares outstanding 9,439 9,321 9,354 9,524
Dilutive common equivalent shares from outstanding
stock options using the treasury stock method 405 472 461
--------------------- ----------------------
Weighted average common shares and common
equivalent shares 9,844 9,793 9,354 9,985
===================== ======================
Net earnings (loss) $ 2,343 $ 1,904 $ (173) $ 2,833
===================== ======================
Net earnings (loss) per share $ 0.24 $ 0.19 $ (0.02) $ 0.28
===================== ======================
</TABLE>
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
DIGITAL SYSTEMS INTERNATIONAL, INC.
(Registrant)
DATE: August 6, 1996 BY: Richard L. Anderson
----------------------------------
Richard L. Anderson
Vice President - Controller
(Chief Accounting Officer)
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EXHIBIT 10.1
TO
DIGITAL SYSTEMS INTERNATIONAL, INC.
FORM 10-Q
"[*]" = confidential information omitted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment.
-1-
<PAGE> 2
AMENDMENT 1
TO ORIGINAL EQUIPMENT MANUFACTURER (OEM) AGREEMENT
1. Add the following paragraph 11m:
"m) Should HP become insolvent and unable to perform its
obligations under these license terms, HP will provide
Customer with the same solutions that it provides to all of
its other licensees at that time."
2. Add the following sentence to the end of paragraph 12b:
"Such depreciated value refund shall be based upon a three (3) year
straight line method of depreciation."
All other terms and conditions remain unchanged.
DIGITAL SYSTEMS INTERNATIONAL, INC. HEWLETT-PACKARD COMPANY
/s/ JEFF JARVIS /s/ MARY CRAFT
- ---------------------------- ----------------------------
Authorized Representative Authorized Representative
Jeff Jarvis Mary Craft
- ---------------------------- ----------------------------
Typed Name Typed Name
Executive Director Contract Administrator
- ---------------------------- ----------------------------
Title Title
4/22/96 4/24/96
- ---------------------------- ----------------------------
Date Date
-2-
<PAGE> 3
[Hewlett Packard Letterhead]
Dear DIGITAL SYSTEMS INTERNATIONAL, INC.:
Hewlett-Packard is pleased to have the opportunity of doing business
with you. Our objective is to provide the highest quality products and support.
In order to help us achieve this objective, we encourage your feedback.
This letter, together with the attached HP Business Terms and all other
attached exhibits establishes the entire agreement ("Agreement") under which HP
will sell and you will buy products and support. The initial term of this
Agreement will be 12 months from the effective date appearing below.
We look forward to providing you with the best products and support
available. If you have any questions or concerns, please contact Mary Craft at
(800) 386-1117, ext. 53858.
HP AGREEMENT NUMBER AWC04 EFFECTIVE DATE 24 April 1996
AGREED TO: AGREED TO:
Customer: DIGITAL SYSTEMS Customer: HEWLETT-PACKARD COMPANY
INTERNATIONAL, INC.
/s/ JEFF JARVIS /s/ MARY CRAFT
- ------------------------------------ -----------------------------------
Authorized Representative Signature Authorized Representative Signature
Name: Name: Mary Craft
Title: Title: Contracts Administrator
Address: 6464 185th Avenue N.E. Address: 8000 Foothills Blvd.
Redmond, WA 98052 Roseville, CA 94747
-3-
<PAGE> 4
HP BUSINESS TERMS
1. DEFINITIONS
(a) "Anniversary Date" is the date that a renewal term of this
Agreement begins.
(b) "Estimated Volume" is the mutually agreed combined monetary
amount of eligible Products and related Support which Customer plans to order
from each Exhibit during each Ordering Period.
(c) "Exhibits" are documents attached to, incorporated by
reference in, or added to this Agreement at a later date which describe
Products, Support, or other business terms.
(d) "Ordering Period" is the initial 12 month term or any 12 month
renewal term of this Agreement.
(e) "Price List" is HP's listing of available Products, Support
and prices in the locations where Customer places orders and takes delivery.
(f) "Products" include hardware, Software, options, documentation,
accessories, supplies, spare parts and upgrades on HP's Price List on the date
HP receives Customer's order. "Special Products" are Products which have been
modified by mutual agreement to meet Customer requested changes.
(g) "Software" is one or more programs, capable of operating on a
computer, processor, or controller which is either listed separately as a
Software Product on the Price List, included with another Product on the Price
List, or fixed in hardware and not removable in normal operation.
(h) "Support" includes hardware maintenance and repair, Software
updates, maintenance and support services, consulting, training, and other
support services provided by HP.
2. PRICES
(a) Quoted prices are valid for the period indicated on the
quotation or for the applicable Ordering Period, whichever expires first.
(b) Prices include standard HP delivery to the receiving area at
the "Ship To" address in the country where Customer's order is placed.
(c) Taxes are not included in prices and will be invoiced, if
applicable, as separate items.
(d) Product prices remain valid for 180 days from the original
order date; change orders which extend delivery beyond 180 days become new
orders at prices in effect when HP receives the change orders.
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(e) Support prices may be changed by HP upon 60 days written
notice.
3. DISCOUNTS
(a) Discounts are listed on Exhibits and are based on Estimated
Volumes. If a Product or Support is eligible on more than one Exhibit, the
highest applicable discount will be granted. Each purchase will be credited
toward the Estimated Volume of the Exhibit from which the discount is granted.
Additional credit may be granted if indicated on Exhibits.
(b) If Customer's orders exceed the Estimated Volume for an
Exhibit during the Ordering Period, Customer will be granted discounts on
incremental orders at the total volume level achieved at the time each
additional order is received. If incremental orders are cancelled, discounts on
later orders will be based on the volume of Products and Support actually
delivered.
(c) If Customer's orders under an Exhibit during the first six
months of an Ordering Period are equal to 60% or more of the Estimated Volume
required to receive a higher discount level, then Customer's discount for that
Exhibit will be adjusted upward to the higher level for the remainder of that
Ordering Period.
(d) If orders used to meet Estimated Volumes are cancelled and not
replaced with new orders within 30 days, HP may adjust the Estimated Volumes and
related discounts in the next Ordering Period based on the volume of Products
and Support actually delivered.
4. ORDERS
(a) Product orders must reference this Agreement, be issued during
the applicable Ordering Period, and specify delivery within 180 days from order
date.
(b) Customer will issue orders from one location within its
organization and will specify "Ship To" addresses within the country where the
order is placed, unless otherwise mutually agreed.
(c) Customer will pay transportation and related charges for
returning Products to HP's shipping location if Product orders are cancelled
after shipment. Customer may incur additional charges for cancelling Special
Product orders. Customer may delete Products under Support or cancel Support
orders upon 30 days written notice. Upon 60 days written notice, HP may cancel
Support orders.
5. DELIVERY
Delivery is subject to HP's Product availability at the time Customer's
order is received. HP will make every reasonable effort to meet delivery dates
quoted or acknowledged. If HP fails to deliver Products for 30 days beyond the
agreed delivery date, Customer may cancel such orders without charge.
6. SHIPMENT AND RISK OF LOSS
(a) HP will ship according to HP standard commercial practice.
Customer requested special packing or shipping instructions must be mutually
agreed, and charges will be billed separately to Customer.
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(b) Title to hardware Products and risk of loss and damage will
pass to Customer at destination. If Products are shipped under Customer's
shipping instructions, title and risk of loss and damage will pass to Customer
at HP's shipping dock.
7. INSTALLATION
(a) Product installation classification is defined by codes
appearing on HP's Price List. HP installation, when included in the purchase
price, will be considered complete when the Product passes HP's installation and
test procedures.
(b) Acceptance by Customer will occur upon completion of HP
installation for Products with installation in the purchase price and upon
delivery for Products without installation in the purchase price. When the
purchase price of a Product does not include HP installation, acceptance by
Customer will be presumed unless Customer demonstrates within 14 days after
delivery that the Product does not pass HP's established test procedures or
programs.
(c) If HP installation is scheduled or delayed by Customer more
than 30 days after delivery, Customer acceptance of the Products will occur on
the 31st day after the delivery date.
8. PAYMENT
(a) Payment will be due 30 days from the date of HP's invoice.
Charges for contractual Support services will be invoiced in advance. HP may
change credit terms without notice.
(b) If Customer fails to pay any sum when due or fails to perform
under this or any other agreement with HP after 10 days written notice, HP may
discontinue performance under this Agreement.
9. SUPPORT
(a) An order for Support will constitute Customer acceptance of
the terms of the Exhibit for that Support in effect on the date of order, which
terms are incorporated by this reference.
(b) To be eligible for Support, Products must be in good operating
condition and at current specified revision levels. HP will charge HP standard
rates in effect on the date of the Support order to bring non-eligible Products
up to these requirements.
(c) HP may, at no additional charge, modify Products to improve
operation and reliability or to meet legal requirements.
(d) Relocation of Products is Customer's responsibility and may
result in additional Support charges and modified service response times.
Products moved to another country may continue to be serviced subject to
availability of an HP authorized Support provider.
(e) HP does not provide Support for nonqualified products.
"Nonqualified products" are hardware and software not supplied or approved by
HP, and Products for which Customer does not allow HP to incorporate
modifications. Customer is responsible for removing nonqualified products to
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allow HP to perform Support services. If Support services are made more
difficult because of a nonqualified product, HP will charge Customer for the
extra work at HP's standard rates.
(f) Support does not cover any damage or failure caused by:
(1) use of non-HP media and supplies or use of items not
designated for use with Products; or
(2) site conditions that do not conform to HP's site
specifications; or
(3) neglect, improper use, fire or water damage,
electrical disturbances, transportation by Customer, work or modification by
people other than HP employees or subcontractors, or other causes beyond HP's
control.
(g) Customer is responsible for the security of its proprietary
and confidential information and for maintaining a procedure external to the
Products to reconstruct lost or altered Customer files, data or programs.
Customer must have a representative present when HP provides Support services.
Customer must notify HP if Products are being used in an environment which poses
a potential health hazard to HP employees or subcontractors; HP may require
Customer to maintain such Products under HP supervision.
10. WARRANTY
(a) HP warrants hardware Products against defects in materials and
workmanship. If HP receives notice of such defects during the warranty period,
HP will, at its option, either repair or replace hardware Products which prove
to be defective.
(b) HP warrants that Software will not fail to execute its
programming instructions due to defects in material and workmanship when
properly installed and used on the hardware product designated by HP. If HP
receives notice of such defects during the warranty period, HP will repair or
replace Software media which does not execute its programming instructions due
to such defects.
(c) HP does not warrant that the operation of Products will be
uninterrupted or error free. If HP is unable, within a reasonable time, to
repair or replace any Product to a condition as warranted, Customer will be
entitled to a refund of the purchase price upon prompt return of the Product to
HP.
(d) Products carry a standard warranty as defined by a code
appearing on HP's Price List in effect on the date HP receives the Customer's
order, unless the Customer has purchased an option or a system which supersedes
the Product's standard warranty. Additional information on warranty is available
on request. HP reserves the right to change the warranty code; such changes will
affect only new orders. The warranty period begins on the date of delivery or on
the date of installation if installed by HP. If Customer schedules or delays HP
installation more than 30 days after delivery, warranty begins on the 31st day
from delivery.
(e) Products with on site warranty will receive warranty services
outside the country of initial purchase if Customer pays HP's international
prices for the Products. Products with return to HP warranty purchased at HP's
international prices and battery-powered Products may be returned to the
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closest HP authorized repair center worldwide. All other Products with return to
HP warranty must be returned to an HP authorized repair center within the
country of original purchase.
(f) Warranty does not apply to defects resulting from improper or
inadequate maintenance or calibration by Customer, Customer-supplied software,
interfacing or supplies, unauthorized modification or improper use, operation
outside of the published environmental specifications for the Product, or
improper site preparation or maintenance by Customer.
(g) THE ABOVE WARRANTIES ARE EXCLUSIVE AND NO OTHER WARRANTY,
WHETHER WRITTEN OR ORAL, IS EXPRESSED OR IMPLIED. HP SPECIFICALLY DISCLAIMS THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
11. LICENSES
(a) In this Section on Licenses, the term "Use" means storing,
loading, installing, executing or displaying Software on a computer, processor
or controller, or making a copy of Software for archival or backup purposes
only.
(b) In return for the associated fee, HP grants Customer a
non-exclusive license to Use one copy of the Software listed in Customer's order
in conformance with the applicable Software License specified in the Price List.
HP's Standard Software Licenses are described below. Other types of Software
Licenses may be made available for some Software. If no license is specified for
Software, then, in return for the applicable fee, HP grants Customer a license
to Use one copy of the Software on one computer, processor or controller at any
one time.
SYSTEM: Customer may use the Software at any one time:
(1) on any one computer or processor (Basic System License);
(2) on any one of a class of computers or processors (Class
License); or
(3) on a single, registered computer or processor (Nodelocked
License).
Some System licenses may be limited to a maximum number of users as
described in the Price List.
CONCURRENT: An identified number of users may Use the Software
concurrently at any time.
TEMPORARY: Customer may Use the Software only for an identified period
of time.
RUNTIME: Customer may Use only the execution features of the Software
and none of its program development features.
(c) HP grants to Customer a license to Use Software fixed in
hardware and not removable in normal operation only when operating the
associated Product in the configuration in which that
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Product is sold by HP or subsequently upgraded by HP. Customer may transfer
Software fixed in hardware and not removable in normal operation only upon
transfer of the associated hardware Product.
(d) The following licenses are available for selected Software if
so indicated on the Price List and upon payment of the applicable fee:
(1) Customer may make and Use one copy of that Software
icensed directly from HP;
(2) Customer may sublicense one copy of the Software to
an end-user for its Use or sublicense one copy of the Software to an HP
authorized reseller for subsequent distribution to an end-user for its Use.
These sublicenses must incorporate the terms of this Section 11 in a written and
binding sublicensing agreement, which will be made available to HP upon request.
Use authorization(s) for Software will apply to copies of that Software
made under those licenses.
(e) Customer's license does not include the right to updates,
upgrades or other enhancements. HP reserves the right to require an additional
license and fee for Use of the Software on upgraded computers, processors, or
controllers.
(f) Software bundled with a hardware Product may be used only with
that hardware Product in the configuration in which that Product is sold by HP
or subsequently upgraded by HP.
(g) Customer's license confers no title or ownership in the
Software and no rights in any associated source code, and will not be construed
as a sale of any rights in Software.
(h) Customer may not disassemble or decompile the Software unless
HP's prior written consent is either obtained or not required by law. Upon
request, Customer will provide HP with reasonably detailed information regarding
any disassembly or decompilation.
(i) Customer's entire license in Software is transferable subject
to HP's prior written authorization and payment to HP of any applicable transfer
fees. Customer will immediately upon transfer deliver all copies of the Software
to the party to whom HP has authorized transfer of Customer's license. The
transferee must agree in writing to the terms of Customer's license. All license
terms will be binding on involuntary transferees. Customer's license will
automatically terminate upon any transfer.
(j) Any third party supplier of Software may protect its rights
against infringement of its copyright and violations of Customer's license.
(k) HP may terminate Customer's or any transferee's or any
sublicensee's license in Software upon notice for failure to comply with any
applicable license terms. In the event of termination of Customer's license for
any other reason, Customer will destroy or return to HP the Software and all
copies of the Software immediately upon termination. Customer will remove and
destroy all copies of the Software from any adaptation into which they are
merged, except for individual pieces of Customer data in a related database.
With HP's written consent, Customer may retain one copy of the Software
subsequent to termination for archival purposes.
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(l) If Software is licensed for use in the performance of a U.S.
government prime contract or subcontract, Customer agrees that Software is
delivered as "Commercial Computer Software" as defined in DFARS 252.227-7013 or
"restricted computer software" as defined in FAR 52.227-19 if used,
respectively, in the performance of a Department of Defense ("DoD") or non-DoD
U.S. government contract. Customer agrees that the regulations and obligations
in Exhibit U1 apply to all such Software and that the Software is adequately
marked when the Restricted Rights Legend in Exhibit U1 is affixed to the
Software media. Customer further agrees that the Software has been developed
entirely at private expense.
12. INTELLECTUAL PROPERTY RIGHTS
(a) HP will defend or settle any claim against Customer that a
Product or Support delivered under this Agreement infringes a patent, utility
model, industrial design, copyright, mask work or trademark in the country where
Customer uses the Product or receives Support, provided Customer:
(1) promptly notifies HP in writing of the claim; and
(2) cooperates with HP in, and grants HP sole authority to control
the defense and any related settlement.
(b) HP will pay the cost of such defense and settlement and any
costs and damages finally awarded by a court against Customer. If such a claim
is made or appears likely to be made, HP may procure the right for Customer to
continue using the Product, may modify the Product or may replace it. If use of
the Product is enjoined by a court and HP determines that none of these
alternatives is reasonably available, HP will take back the Product and refund
its depreciated value.
(c) HP has no obligation for any claim of infringement arising
from:
(1) HP's compliance with any designs, specifications or
instructions of Customer;
(2) modification of the Product by Customer or a third
party;
(3) use of the Product in a way not specified by HP; or
(4) use of the Product with products not supplied by HP.
(d) If HP furnished the Product for resale, Customer's rights and
obligations extend to the territory in which Customer is authorized to resell
the HP Product and to anyone to whom Customer resells the Product.
(e) These terms state the entire liability of HP for claims for
infringement by Products and Support supplied by HP.
13. LIMITATION OF REMEDIES AND LIABILITY
(a) HP will not be liable for performance delays or for
non-performance, due to causes beyond its reasonable control.
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(b) Products are not specifically designed, manufactured or
intended for sale as parts, components or assemblies for the planning,
construction, maintenance, or direct operation of a nuclear facility. Customer
is solely liable if Products or Support purchased by Customer are used for these
applications. Customer will indemnify and hold HP harmless from all loss,
damage, expense or liability in connection with such use.
(c) HP will be liable for damage to tangible property per incident
up to the greater of $300,000 or the actual charges paid to HP for the Product
that is the subject of the claim, and for damages for bodily injury or death, to
the extent that all such damages are determined by a court of competent
jurisdiction to have been directly caused by a defective Product sold hereunder.
(d) For any material breach of Support services by HP, Customer's
remedy and HP's liability will be limited to a refund of the related Support
charges paid during the period of breach, up to a maximum of 12 months.
(e) THE REMEDIES IN THIS AGREEMENT ARE CUSTOMER'S SOLE AND
EXCLUSIVE REMEDIES. EXCEPT AS INDICATED ABOVE, IN NO EVENT WILL HP OR ITS
SUBCONTRACTORS BE LIABLE FOR LOSS OF DATA OR FOR DIRECT, SPECIAL, INCIDENTAL,
CONSEQUENTIAL (INCLUDING LOST PROFIT), OR OTHER DAMAGE WHETHER BASED IN
CONTRACT, TORT, OR OTHERWISE.
14. RENEWAL
This Agreement will remain in effect until terminated. However,
Estimated Volumes and Exhibits will be reviewed and revised, as appropriate,
prior to each Anniversary Date. Any other changes for a renewal term must be
mutually agreed in writing.
15. TERMINATION
(a) Upon 30 days written notice, either party may terminate this
Agreement either at the end of an Ordering Period, or, if for cause, at any time
unless the other party cures the breach within 30 days of written notice of such
breach.
(b) If either party becomes insolvent, is unable to pay its debts
when due, files for bankruptcy, is the subject of involuntary bankruptcy, has a
receiver appointed, or has its assets assigned, the other party may terminate
this Agreement without notice and may cancel any unfulfilled obligations.
(c) The provisions of Sections 10 through 13 will survive the
termination or expiration of this Agreement, and all provisions of this
Agreement will survive for open Support orders.
16. GENERAL
(a) Some newly manufactured Products may contain remanufactured
parts equivalent to new in performance. Service parts are new or equivalent to
new.
(b) Products that are classified by HP as "remarketed" do not
qualify as "New" or of "Original Use" for tax purposes.
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(c) Any term of this Agreement which is held to be invalid will be
deleted, but the remainder of the Agreement will not be affected.
(d) Neither party may assign any rights or obligations without
prior written consent of the other party.
(e) Neither party's failure to exercise any of its rights under
this Agreement will constitute or be deemed a waiver or forfeiture of those
rights.
(f) No government procurement regulations or contract clauses are
binding on either party unless required by law or included in this Agreement.
(g) Customer who exports Products assumes responsibility for
complying with applicable laws and regulations and for obtaining required export
and import authorizations. Customer will not export or re-export Products or any
technical data in violation of applicable export regulations.
(h) Any disputes arising in connection with this Agreement will be
governed by the laws of California.
(i) This Agreement supersedes any previous communications,
representations or agreements between the parties, whether oral or written,
regarding transactions hereunder. Customer's additional or different terms and
conditions will not apply. Customer's purchase or license of Products and
Support will constitute Customer's acceptance of this Agreement, which may not
be changed except by an amendment signed by an authorized representative of each
party.
CUSTOMER'S ESTIMATED VOLUMES
The Estimated Volume for each Exhibit appears below.
EXHIBIT TOTAL VOLUME
A3002 [*]
A3004 [*]
- -----------------------------
[*] Confidential Treatment Requested
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EXHIBITS
The Exhibit(s) attached and listed below are part of this Agreement.
E99 HP BUSINESS TERMS
SS HP SYSTEM SUPPORT OPTIONS
02 OEM CERTIFICATION
W1 OEM/VAR WARRANTY
E09 MULTINATIONAL TERMS
X MULTINATIONAL RELEASE POINTS
I5 HP CHANNEL PARTNER INSIGNIA
A3002 OEM COMPUTER SYSTEM PRODUCTS
A3004 OEM COMPUTER SYSTEM PRODUCTS
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EXHIBIT SS
HP SYSTEM SUPPORT OPTIONS
HP System Support Options are governed by this Exhibit and the Hewlett-Packard
(HP) Terms and Conditions of Sale and Service or HP Business Terms.
1. SERVICES INCLUDED
HP System Support Options are offered in one-year and three-year
increments. HP System Support Options provide the following features for HP
Products. Not all of the features are offered with every option or supported
Product. Features for each option will be provided as described in the
specifications sheet for HP System Support Options. Some service features have
prerequisites. Service features may include one or more of the following:
- On-site hardware support during warranty
- Flexible call submittal
- Phone-in software assistance
- License to Use software updates
- Software media and documentation updates
- HP SupportLine electronic support
- Escalation management
- Remote support (for selected HP Products)
- HP PowerPatch tapes (for select HP Products)
- Assigned account support engineer
- Assigned HP Response Center account advocate
- Patch management assistance
- Operational reviews
- System release planning seminars and assistance
- Installation of software updates
- Installation, configuration, and verification of systems and
networks
2. PREREQUISITES
HP reserves the right to make the final judgment as to whether Customer
adequately meets the requirements outlined in this document.
a. MINIMUM SYSTEM CONFIGURATION
HP System Support Options require, at a minimum, that a system include
a central processing unit (CPU), a peripheral capable of reading standard HP
diagnostics and verification tests, and a peripheral that allows HP to interact
fully with the covered Products.
b. UNIFORM COVERAGE
All Products that constitute the minimum system configuration must be
covered at the same HP System Support Option service level.
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Options 0S0-0S6 and 3Y0-3Y6 may not be combined on the same contract
for software-only Products.
c. CONNECTORS AND CABLES
All Products covered by HP System Support Options must be
interconnected by cables or connectors listed in the appropriate HP
documentation as compatible with the CPU. For HP Products not meeting this
requirement, service is available at HP's standard service rates.
d. SOFTWARE SUPPORT
All HP systems for which execution of diagnostic tests is
software-dependent must, at a minimum, be covered by an HP System Support Option
that provides periodic software updates.
e. COVERAGE REQUIREMENTS
For HP System Support Options orders that include software support, all
systems supported by one system manager, except PC systems, must be covered by
an HP System Support Option or by an existing contractual HP software support
service.
f. RIGHT TO COPY DOCUMENTATION
Customer may copy documentation updates for use with other systems
covered by HP System Support Options that provide software support.
g. SOFTWARE LICENSES
Customer can purchase HP System Support Options only for HP software
for which Customer has rightfully acquired an appropriate HP software license.
h. DESIGNATED CALLERS AND TRAINING REQUIREMENTS
The following contacts for HP must be designated and trained through
completion of the appropriate HP training courses as defined by HP: system
manager and alternate; extended hours alternate; if applicable, application
software manager and alternate. Only the designated callers can use the HP
Response Center.
i. REMOTE SUPPORT
For HP to provide remote support, Customer must give authorization and
provide access to a qualified modem, as well as access to one voice-grade
telephone and one data-quality telephone line or network with terminations near
the system. If HP cannot access a system remotely, HP may charge standard
service rates if on-site service is needed.
j. HP SUPPORTLINE
HP SupportLine electronic support is available via the World Wide Web,
electronic mail, and a character mode interface. With a character-mode
interface, Customer can access HP SupportLine
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electronic support using a modem or the Internet. To use HP SupportLine
electronic support through modem access, Customer must provide one data-quality
telephone line, one locally compatible modem set for 1200, 2400, 9600 or 14,400
baud, and an HP-compatible terminal or terminal emulator, in addition to the
equipment required for remote support above. Customers who submit HP Response
Center calls via HP SupportLine must meet the same training requirements as the
system manager.
k. COUNTRY BOUNDARIES
All systems supported by one system manager must be located within the
same country.
l. PRIORITY PLUS SUPPORT
Products may be covered by the Priority Plus hardware service level if
HP System Support Option charges for a site exceed a minimum amount. If remote
support is available on the Products, customer must allow remote access to
receive Priority Plus support.
3. SERVICE LIMITATIONS
a. HARDWARE AND SOFTWARE SUPPORT
Any services involving hardware, software or network-related problems
not covered by the HP System Support Options service ordered will be subject to
HP's standard service rates.
b. MAXIMUM USE LIMITATIONS
Products operated in excess of their maximum usage rate (as specified
in the Product's data sheet or operating manual) cannot be covered by HP System
Support Options, but can be serviced at HP's standard service rates.
c. INTERFACES AND ACCESSORIES
HP may cover cables, connectors, accessories, and interfaces under the
same hardware service level purchased for the Products with which they are used.
d. SUPPORTED SOFTWARE VERSIONS
HP provides support only for the current and immediately preceding
versions of HP Software, and only when the Software is used with hardware that
is included in HP-specified configurations. If support coverage lapses,
additional fees may be required to resume support coverage. HP will support
specified versions of selected non-HP Software, but will not support the
Software any longer than the vendor supports it. For Non-HP Software, HP
provides support only for Software versions that are specifically documented as
supported on a specified configuration.
e. NON-HP SOFTWARE
Support for non-HP Software covered by HP System Support Options is
limited to telephone assistance and, if available to HP from the third-party
software vendor, patches, workarounds, and
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updates. HP's decision on how long to offer HP support on selected versions of
non-HP software is final.
f. NON-HP PRODUCTS
HP is not liable for the performance or nonperformance of third-party
software vendors, their products, or their support services, including design
Plans in and/or incompatible with non-HP products.
g. HP SOFTWARE ON NON-HP SYSTEMS
HP System Support Options for specified HP Software Products used with
designated non-HP systems provides the following features: phone-in assistance,
software problem reporting, HP SupportLine electronic information access and
call submittal, license for software updates, and patches.
h. ESCALATION MANAGEMENT
On-site assistance for critical software problems is limited to systems
supported by one system manager and situated within a 1/2 mile (one kilometer)
radius of each other. Systems situated beyond this limit requiring on-site
assistance will be subject to additional charges at HP's standard service rates.
i. ACCESS TO THE HP RESPONSE CENTER
HP Response Center use is limited to the system manager for the
operating system and subsystem software; if applicable, the network operator for
the network; if applicable, the application software manager(s) for each family
of HP Software; and if purchased, additional HP Response Center callers. In the
absence of any of these managers, the HP Response Center is available to their
designated alternates and, if applicable, during after-hours telephone
assistance to the designated after-hours alternate.
j. SOURCE CODE SUPPORT
For HP source code software covered under HP System Support Options,
assistance is limited to problems that can be duplicated on the current version
of the object code of the particular Software. HP charges Customer at HP's
standard service rates for any other assistance required.
k. HP PREDICTIVE SUPPORT (SELECTED SYSTEMS)
HP is not responsible if HP Predictive Support Software does not
identify or remedy system or peripheral problems prior to actual occurrence.
l. NETWORK SOFTWARE COVERAGE
Support for HP network Software that provides multivendor node
connectivity is limited to product-usage and problem-solving assistance and
software update materials unless network support is purchased.
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m. TRAVEL ZONES
Customer sites located beyond 100 miles of a primary HP Support
Responsible Office may be subject to travel charges, longer response times, and
reduced coverage hours as specified in HP's "Worldwide Customer Support Travel
and Office Directory." Availability of some coverage levels is based on distance
from a primary HP Support Responsible Office.
n. EXCLUSIONS
HP System Support Options do not include assistance that involves
program development, coding, isolation of coding problems, implementation
assistance, performance consulting, data recovery regardless of the cause of
data loss, hardware malfunctions, or problems and investigation time relating to
the use of privileged code on HP 3000 systems. HP System Support Options do not
include consulting. Consulting may be purchased separately. HP System Support
Options are not a substitute for any formal training offered by HP.
o. AVAILABILITY
Some HP System Support Options service features and coverage levels are
subject to local availability.
p. OUT OF COVERAGE HOURS
Customer requests for hardware and software support services or
installation and configuration services scheduled after HP's normal business
hours may be subject to local availability and additional charges.
4. CUSTOMER RESPONSIBILITIES
a. ACCESS
Customer must provide HP with the following:
1. Access to the Products covered under HP System
Support Options.
2. Adequate working space and facilities within a
reasonable distance of the Products.
3. Access to and use of all information, internal
resources, and facilities determined necessary by HP to service the Product.
b. OPERATING PROCEDURES
Customer must follow routine operating procedures as specified in the
HP Product operating manual.
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c. USAGE-LEVEL CHARGES
Customer must allow HP to install or remove usage meters on specified
electromechanical devices. Usage charges may be invoiced separately.
d. DIAGNOSTIC/MAINTENANCE SOFTWARE (SELECTED SYSTEMS)
Customer must allow HP to keep system and network diagnostic and
maintenance programs resident on Customer's system or site for the exclusive
purpose of performing diagnostics and maintenance. Prior to submitting a
software problem report to HP, Customer may be required to assist HP in running
these HP-supplied programs. Customers with HP Predictive Support Software must
use the electronic data transfer capability it provides to inform HP of events
identified by the Software. Customer acknowledges that Customer has no ownership
interest in diagnostic software provided by HP and that HP may remove these
diagnostic programs and any HP-loaned modems upon termination of HP System
Support Options.
e. SERVICE REQUESTS
Prior to placing a service request with HP, Customer may be required to
run HP-supplied diagnostic programs.
f. REVISION LEVELS
Customer must maintain all associated system hardware and firmware,
except PC systems, at the latest HP-specified configuration and code revision
level. For PC systems, Customer must maintain all associated system hardware and
firmware at a revision level specified by HP. Customers must maintain
HP-supported non-HP software at a code revision level specified by HP.
g. TELECOMMUNICATIONS CHARGES
Customer is responsible for all telecommunications charges associated
with using HP SupportLine electronic support.
h. TEMPORARY PROCEDURES
Customer is responsible for implementing temporary procedures or
workarounds while permanent solutions are being sought.
5. SOFTWARE LICENSE AND COPYRIGHTS
a. UPDATES
1. HP grants Customer a License to Use software updates
provided by HP under an HP System Support Option.
2. In addition, HP grants Customer a license to use and
make one copy of the updates received from HP for each HP software Product
license for which Customer has purchased an HP System Support option that
provides software support.
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<PAGE> 20
3. Customer agrees that the license to use and copy the
updates is governed by the HP Software License Terms (Exhibit E36) in effect on
the date HP ships the update to Customer. Said HP Software License Terms are a
part of this Exhibit.
b. HP UPDATE OWNERSHIP
Customer acknowledges that it does not own and has no right to, title
to, or interest in the updates except as set forth in the HP Software License
Terms.
c. COPYRIGHT AND TRADEMARK NOTICES
Customer agrees to reproduce and conspicuously affix those copyright
and trademark notices from the original software or documentation on each copy
of an update that Customer makes or obtains from an electronic data source, such
as HP SupportLine support.
6. CHARGES
a. CANCELLATION
If HP System Support Options are canceled, Customer will receive a pro
rata refund only for the unused prepaid services beyond the first three months.
All charges for HP System Support Options cover a 12-month period for one-year
options and a 36-month period for three-year options.
b. FINANCING
If HP System Support Options are financed as part of an HP Financing
Agreement, cancellation of HP System Support Options will not result in a
refund.
-20-
<PAGE> 21
EXHIBIT 02
OEM CERTIFICATION
1. CERTIFICATION
Customer hereby certifies that as an Original Equipment Manufacturer
(OEM):
a) It is experienced in the use and operation of the products to
be purchased hereunder and will assume sole responsibility for
marketing these products and will require no assistance from
HP in conducting its business.
b) It is an independent contractor, not an agent or legal
representative of HP, and that any representation made or
agreements executed by OEM will be OEM's sole responsibility.
c) The products purchased hereunder for OEM purposes will be
incorporated in a system consisting of a substantial amount of
other hardware and/or software which OEM manufactures or
develops ("added value") and which OEM sells or leases to
end-users (other than OEM's corporate parent, division, or any
subsidiary of corporate parent) in the regular course of
business. This added value represents a significant functional
and value enhancement to the HP products OEM furnishes. If
OEM's added value consists of software, the software solves a
major application need for the system being purchased.
d) It is responsible for maintaining support services for the
added value portion of the system.
e) HP will ship products only to OEM and not to OEM's end-users.
f) It is responsible for complying with all training requirements
designated by HP on each eligible Product the reseller
carries.
2. CONDITIONS
a) Whenever products are being purchased for OEM purposes, OEM
will so specify in its order.
b) OEM discounts are only available for the products for which an
annual volume estimate has been made under this Agreement.
c) OEM will have no claim against HP for compensation or
commission from any purchase of HP products from HP or a third
party to OEM's end-users or prospective end-users.
d) OEM will qualify for OEM discounts on add-on HP equipment and
upgrades to the HP systems previously purchased if: (1) OEM
initially resold the HP system being enhanced or upgraded with
added value in accordance with the terms of this exhibit,
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<PAGE> 22
and (2) OEM has provided and continues to provide ongoing
support on the initial system to its end-user.
e) HP will invoice OEM for any applicable taxes based on point of
delivery unless the appropriate resale exemption certificates
are on file at HP's order entry point or unless HP agrees the
sale is otherwise exempt.
f) HP reserves the right, at its discretion and upon reasonable
notice to OEM, to verify OEM's compliance with the terms of
this exhibit. At HP's request, OEM will provide HP with
information to substantiate that OEM has fulfilled its
obligations under this exhibit. Upon discovery of a violation,
OEM will be asked to forfeit its rights under this Agreement.
HP reserves the fight either to terminate this Agreement upon
30 days notice to OEM or to not renew this Agreement based on
the discovery of such violation.
g) HP reserves the right to not renew this Agreement if HP
decides to cease distribution of the products through OEM's.
3. PRODUCT MODIFICATIONS
OEM will submit in writing to HP any proposed produce modifications
which might affect either the performance, safety or radiated emissions
certifications of the product. In the event HP believes such
modifications may have an adverse effect, HP reserves the right to
further modify this exhibit to clarify the rights and obligations of HP
and OEM with respect to support, marketing and technical
specifications.
-22-
<PAGE> 23
EXHIBIT W1
OEM/VAR WARRANTY
This Exhibit provides a warranty for OEM or VAR Customers of qualified HP
Products. To qualify, a Product must meet these criteria:
a. It must be listed on a current version of at least one of the
following Exhibits for which an estimate is specified under this Agreement:
A3001, A3002, A3003, or A3004;
b. It must have a warranty classification code of either "2D",
"2F", "2G", "3A", "3B", "5G", "5H", "5J", "5K," "5L," "5M," "5N," or "5R" on the
currently HP Price List, or be a peripheral included in the system configuration
and purchased on a coordinated delivery with a system having a code of "2D",
"2F", "2G", "3A", "3B", "5G", "5H", "5J", "5K," "5L," "5M," "5N," or "5R" and
c. The HP hardware Product has not been modified.
All HP's Warranty terms in this Agreement remain unchanged except as
follows:
a. In order for a Product to qualify for the warranty under this
Exhibit, the OEM or VAR Customer must affix on the Product a warranty label (HP
#5953-9164 or #5957-3989) supplied to OEM or VAR Customer by HP. The OEM or VAR
Customer must also record the date the Product has been shipped to the end user
in the space provided on the warranty label. Normal HP accessories and
interfaces utilized with Products covered under a warranty label are also
included under such warranty.
b. In the event that the ship date on the warranty label is not
entered, or the ship date is entered incorrectly, OEM or VAR Customer guarantees
to pay for service rendered to the end user customer. Such services will be
invoiced at HP's then current time and material rates.
c. The warranty period for Products qualifying under this Exhibit
will begin on the date the OEM or VAR Customer ships the qualified Product to
the end user customer or 90 days from the date the Product is shipped by HP to
the OEM or VAR Customer, whichever occurs first. Warranty service will be in
accordance with HP's normal warranty repair policy for the Product.
d. Upon receipt of the Product, and prior to shipment of the
Product to the end-user customer or utilization of the Product, OEM or VAR
Customer may inspect and test the Product and, if the Product is found
defective, such Product shall qualify to receive HP's standard warranty service
for such Product.
e. ALL RIGHTS OFFERED UNDER THIS WARRANTY MUST BE EXERCISED BY
THE OEM OR VAR CUSTOMER.
A package of the Warranty Labels may be ordered free of charge. Please
forward your request, in writing, to the following address. Your request should
include your HP Purchase Agreement Number and the name and address of the
individual to whom the package should be sent.
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<PAGE> 24
S. Wadiak/Code W1
Hewlett-Packard Company/MS 43UW
19420 Homestead Road
Cupertino, California 95014-0610
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<PAGE> 25
EXHIBIT E09
MULTINATIONAL TERMS
This Exhibit is attached to and made a part of HP Agreement No. ___________
("Agreement") for the purpose of determining Customer purchase location
eligibility and establishing the terms and conditions which will apply in the
eligible purchase locations.
Customer and HP mutually agree that all orders or compensation requests from
Customer will be subject to the terms and conditions as set forth below. In case
of any conflict between the provisions of this Exhibit and those of the
Agreement, the provisions of this Exhibit will prevail. Except as expressly
modified herein, all terms and conditions of the Agreement remain in full force
and effect.
1. PARTIES
Customer and HP agree that each of them is acting for itself and on
behalf of those legal entities set forth in Exhibit X (respectively
referred to as "Customer Entity" or "HP Selling Entity"). Customer
certifies that each Customer Entity listed in Exhibit X is related to
Customer in one of the following ways:
a) Customer, either directly or indirectly, holds more than 50%
of the issued shares of voting stock of the Customer Entity or
has the power to exercise more than 50% of the voting rights
in the Customer Entity, or holds more than 50% of the capital
or business assets of the Customer Entity;
b) Customer Entity, either directly or indirectly, holds more
than 50% of the issued shares of voting stock of the Customer
or has the power to exercise more than 50% of the voting
rights in the Customer, or holds more than 50% of the capital
or business assets of the Customer; or
c) Customer and Customer Entity, either directly or indirectly,
are both owned by a person or company which holds more than
50% of the issued shares of voting stock of the Customer and
Customer Entity or has the power to exercise more than 50% of
the voting rights in the Customer and Customer Entity, or
holds more than 50% of the capital or business assets of the
Customer and Customer Entity.
If applicable law limits ownership and control, the above conditions
will be met where ownership and control are the maximum allowed by law.
2. ORDERS OR COMPENSATION REQUESTS
Orders or compensation requests under the Agreement will be issued by
each Customer Entity to the corresponding HP Selling Entity as
specified in Exhibit X and will reference the Agreement.
-25-
<PAGE> 26
3. PRICE, DISCOUNTS AND COMPENSATION
The price for Products or Support purchased hereunder will be subject
to the terms specified in the Agreement. The price on which discounts
or compensation is based will be the applicable Product price of the HP
Selling Entity.
Discounts or compensation will be determined by the discount schedule
or compensation terms in effect at the HP Selling Entity corresponding
to each Customer Entity to the extent permitted by the laws of the
country in which the HP Selling Entity is located. Unless otherwise
mutually agreed, compensation payments will be made in the currency of
the local HP Selling Entity. Compensation payments will be made in the
name of the Customer Entity in the country in which the orders were
placed.
4. MULTINATIONAL TERMS AND CONDITIONS
Orders or compensation requests from a Customer Entity will be subject
to the applicable terms and conditions of the local HP Selling Entity.
Any sale of a Product or Support to, or compensation request from, a
Customer Entity in a country in which there is no HP Selling Entity
will be subject to HP's prior written consent and a mutually agreed
maintenance and support plan.
Customer and HP, on behalf of themselves and the Customer Entities and
HP Selling Entities respectively, expressly agree that the United
Nations Convention on Contracts for the International Sale of Goods
will not apply to the Agreement or to transactions processed under the
Agreement.
The laws of the country in which the HP Selling Entity is located,
excluding conflicts of law rules, will apply. The courts of the country
in which the HP Selling Entity is located will have jurisdiction over
any disputes arising between the Customer Entity and the HP Selling
Entity.
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<PAGE> 27
EXHIBIT X
MULTINATIONAL RELEASE POINTS
The following Customer Entities may purchase or, if applicable, receive
compensation hereunder from the corresponding HP Selling Entities effective the
___ day of ______________, 1996.
For Customers who qualify for multiple Value-Added Business (VAB) channels, one
VAB type ("VAR", "OEM" or "SWS") must be specified for each release point in
order to determine the applicable discount or compensation.
VAR = Value-Added Reseller *
OEM = Original Equipment Manufacturer
SWS = Software Supplier or Independent Software Vendor
* If applicable, VAR may also receive compensation as a Software Supplier or
Independent Software Vendor.
-27-
<PAGE> 28
EXHIBIT I5
HP CHANNEL PARTNER INSIGNIA
The purpose of this Exhibit is to provide eligible participants in the HP
Channel Partner Program with a right to use an insignia which identifies them as
such, under conditions that property protect the insignia.
1. DEFINITIONS
a) "Referenced Contract" means Agreement No. ____________
effective the ___ day of ____________, 1996 between
Hewlett-Packard Company ("HP") and the Participant named
below, to which this Exhibit is a part.
b) "Program" means the HP marketing program known as the "Channel
Partner Program" to which HP has admitted Participant by
written notice.
c) "Authorized Products" means any products or services of
Participant offered to customers pursuant to the Referenced
Contract.
d) "Insignia" means the insignia shown below:
[HP Insignia's]
e) "HP Mark" means any HP trademark, trade name, logo or
insignia, including the Insignia.
2. INSIGNIA OWNERSHIP
Participant acknowledges that the Insignia is a trademark of HP and
that it shall remain the sole property of HP. Participant's right to
use the Insignia is only by virtue of this Exhibit and Participant
shall acquire no rights to the Insignia through use. Participant agrees
not to attack or challenge the validity of the Insignia as a trademark
or challenge the validity of the Insignia as a trademark of HP or HP's
ownership of or right to control the use of the Insignia. Participant
agrees that any use it makes of the Insignia shall inure to the benefit
of HP.
3. AUTHORIZATION
Participant is authorized to use the Insignia subject to the following
provisions (the "Authorization"). Participant is authorized to use the
Insignia only in connection with the promotion and sale of Authorized
Products. Participant will comply with all provisions in this Exhibit
and the Referenced Contract as well as all rules, standards or
guidelines promulgated from time to time by HP for the display and use
of the Insignia. Participant will at all times use the Insignia in good
taste and will refrain from using it in a manner that would bring the
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<PAGE> 29
Insignia or HP into disrepute. Participant is not authorized to use,
and shall not use, any other HP Mark on, or in connection with, the
sale of Authorized Products. Participant is not authorized to, and
shall not purport to, authorize its customers, or anyone else, to sue
any HP Mark, including the Insignia. Neither the Insignia, nor any
other HP Mark shall be used by Participant in connection with the sale
of any products other than Authorized Products. Any change in this
authorization or any additional authorization with respect to any HP
Mark, must be in writing signed by an authorized representative of HP.
Participate will promptly report to HP any misuse or authorized use of
the Insignia that comes to Participant's attention.
4. QUALITY STANDARD
Participant agrees to maintain at least the same level of quality in
the Authorized Products, any associated or related documentation,
material, services and packaging as it maintained when the Participant
qualified for the Program. Participant also agrees to comply with all
standards set by HP from time to time for inclusion in the Program. Any
time that, in HP's sole judgment and absolute discretion, the
Authorized Product falls below this level of quality or Participant
fails to comply with the standards required for inclusion in the
Program, HP may immediately terminate the Authorization and take other
appropriate measures as specified below. Participant understands that
HP will from time to time evaluate the Authorized Product for
compliance with the Standards of Quality, including surveying
Participant's customers for the Authorized Product; and Participant
agree to cooperate with HP in such evaluations upon request.
5. TERMINATION
HP may terminate or suspend the foregoing Authorization (i) at will
upon thirty (30) days prior written notice in the event HP suspends or
changes the Program or (ii) immediately upon written notice to
Participant if Participant fails to comply with any of the provisions
of this Exhibit or any of the rules or standards promulgated by HP for
the use of the Insignia. This Authorization shall automatically
terminate upon the termination of the Referenced Contract. Upon any
termination of the Authorization, Participation will immediately cease
use of the Insignia and remove the Insignia from any and all Authorized
Products and advertising materials still in Participant's possession or
control on the date of termination, and Participant will replace any
Authorized Products that bear the Insignia that are still in the hands
of any distributors or other resellers with products that do not bear
the Insignia. In the event of the termination of the Authorization
given above, Participant agrees to the entry of injunction against it
prohibiting the use of the Insignia, agrees not to contest the entry of
such an injunction and agrees that money damages would not be an
adequate remedy for unauthorized use of the Insignia.
6. APPROVALS
Participant will, upon request by HP, submit to HP for its prior
approval any and all proposed uses for the Insignia. Any failure by HP
to object to a particular practice, use or omission by Participant
shall not be construed as a waiver of HP's right to object to, or
require changes in, such practice, use, or omissions in the future, nor
shall it be construed as an approval of such practice, use or omission.
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<PAGE> 30
7. REGISTRATIONS
Participant will cooperate with HP in making or facilitating any
governmental registrations or submission that are necessary to protect
the Insignia and HP's ownership thereof, including, but not limited to,
registration of Participant as a Registered User of the Insignia. Upon
termination of this Exhibit, Participant will cooperate with HP in the
revocation of any such registration.
8. LEGAL RELATIONSHIP
Participant's relationship with HP will be that of an independent
contractor. Neither party will have, nor represent that it has, any
power, right or authority to bind the other party, or to assume or
create any obligation or responsibility, express or implied on behalf
of the other party. Nothing stated in this Exhibit shall be construed
as creating a legal partnership between Participant and HP, or as
created the relationship of employer and employee, master and servant
or principal and agent between the parties.
9. COMMUNICATIONS WITH THIRD PARTIES
Participant understands that the term "partner" is often used to
promote arms-length relationships between a hardware vendor and
non-affiliated business entities such as VARs, OEMs and software
suppliers. Participant shall not suggest that the use of the term
"partner" as part of the Insignia implies any actual legal partnership
between Participant and HP. Participant shall not hold itself out to
third parties as being in a legal partnership with HP, sharing profits
or losses with HP, or sharing management responsibility with HP.
10. INSIGNIA ORDERING INFORMATION
To use the Insignia herein when promoting your relationship with
Hewlett-Packard, you may order camera ready artwork and usage
guidelines by calling the Hewlett-Packard LitLine at the following
phone numbers:
HP LitLine Voice: 1-800-862-0633
1-408-447-1000
HP LitLine Fax: 1-408-376-3203
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<PAGE> 31
<TABLE>
PARTICIPANT:
<S> <C> <C> <C>
DIGITAL SYSTEMS INTERNATIONAL, INC. HEWLETT-PACKARD COMPANY
/s/ JEFF JARVIS /s/ MARY CRAFT
----------------------------------- -----------------------------------
Authorized Representative Signature Authorized Representative Signature
Name: Name: Mary Craft
Title: Title: Contracts Administrator
Address: 6464 185th Avenue N.E. Address: 8000 Foothills Blvd.
Redmond, WA 98052 Roseville, CA 94747
----------------------------------- -----------------------------------
----------------------------------- -----------------------------------
</TABLE>
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<PAGE> 32
EXHIBIT A3002
OEM COMPUTER SYSTEM PRODUCTS
The Products listed on this Exhibit and all applicable standard options
appearing on the current HP Price Listearn discounts based on the total volume
purchased in accordance with the following Discount Schedule(s) at the level
established under this Agreement. Special options may be subject to the same
discount as standard options as mutually agreed upon between Customer and HP
prior to each order. The total volume is the sum of the list prices of the total
quantity of Product (including all applicable options) purchased from the
Products listed on this Exhibit and, if made part of this Agreement, A3004. All
language versions of the Products listed on this Exhibit qualify.
DISCOUNT
Each Product is categorized for discount rate into a "Discount Percentage
Schedule" column as shown in the "Products Subject to discount" table.
<TABLE>
DISCOUNT PERCENTAGE SCHEDULE
UNITED STATES I II III
US DOLLAR LIST
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
[*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
[*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
[*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
[*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
[*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
[*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
</TABLE>
PRODUCTS
Product grouping subject to discount under this Exhibit by column of the
"Discount Percentage Schedule" are indicated below. Some Products may not be
included in the columns designated for their Product grouping. Detailed listing
of the specific Products and associated discount columns are available from HP
upon request.
_______________________________
[*] Confidential Treatment Requested
-32-
<PAGE> 33
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
I II III
<S> <C> <C>
Some Series 800 UNIX Servers Most Series 800 UNIX Servers Series 300, 400, 700
Workstations
Some Series 3000 Model 900 Most Series 3000 Model 900 Workstation related peripherals,
Servers Servers networking, and software
products
Some Serve related peripherals, Most Server related peripherals, Most Client related accessories,
networking, and software networking, and software networking, and software
products products products
Series 1000 Control Systems
X-Stations
- ---------------------------------------------------------------------------------------------------------
</TABLE>
OEM CERTIFICATION
Customer must execute an Exhibit 02 (OEM Certification) to receive a discount on
qualifying orders under this Exhibit.
APPROVED OEM PRODUCT FAMILIES
OEM discounts are available only for the items directly associated with the
Product families approved by HP as indicated below.
HP 3000 Series 9xx Systems _____
HP 9000 Series 8xx Multi-user Systems _____
HP 9000 Series 4xxx/7xx Workstations _____
WARRANTY
All Products purchased under this Exhibit carry the standard warranty as defined
by the code appearing for each Product number on the HP Price List in effect on
the date HP receives the Customer's order, unless the OEM/VAR Warranty Exhibit
W1 has been made part of this Agreement and the Customer has exercised its
rights under that Exhibit.
[Detailed list of approximately 3,600 HP Products subject to Agreement omitted
from this version of Agreement.]
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<PAGE> 34
EXHIBIT A3004
OEM COMPUTER SYSTEM PRODUCTS
The Products listed on this Exhibit and all applicable standard options
appearing on the current HP Price List earn discounts based on the total volume
purchased in accordance with the following Discount Schedule(s) at the level
established under this Agreement.
Special options may be subject to the same discount as standard options as
mutually agreed upon between Customer and HP prior to each order. the total
volume is the sum of the list prices of the total quantity of Products
(including all applicable options) purchased from the Products listed on this
Exhibit and, if made a part of this Agreement, A3002. All language versions of
the Products listed on this Exhibit qualify.
DISCOUNT
Each Product is categorized for discount rate into a "Discount Percentage
Schedule" column as shown in the "Products Subject to Discount" table.
DISCOUNT PERCENTAGE SCHEDULE
UNITED STATES
US DOLLAR LIST
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
PRODUCTS
Product grouping subject to discount under this Exhibit by column of the
"Discount Percentage Schedule" are indicated below. Some Products may not be
included in the columns designated for their Product grouping. Detailed listing
of the specific Products and associated discount columns are available from HP
upon request.
_____________________________
[*] Confidential Treatment Requested
-34-
<PAGE> 35
----------------------------------
I
----------------------------------
HP3000 Corporate Business Systems
----------------------------------
HP9000 Corporate Business Servers
----------------------------------
HP5000 High Speed Printers
----------------------------------
Series 1200 Fault Tolerant Systems
----------------------------------
OEM CERTIFICATION
Customer must execute an Exhibit 02 (OEM Certification) to receive a discount on
qualifying orders under this Exhibit.
APPROVED OEM PRODUCT FAMILIES
OEM discounts are available only for the items directly associated with the
Product families approved by HP as indicated below.
HP 3000 Corporate Business System 99x ____
HP 9000 Corporate Business Server 890 ____
WARRANTY
All Products purchased under this Exhibit carry the standard warranty as defined
by the code appearing for each Product number on the HP Price List in effect on
the date HP receives the Customer's order, unless the OEM/VAR Warranty Exhibit
W1 has been made part of this Agreement and the Customer has exercised its
rights under that Exhibit.
[Detailed list of approximately 250 HP Products subject to Agreement omitted
from this version of Agreement.]
-35-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 36,659
<SECURITIES> 0
<RECEIVABLES> 20,665
<ALLOWANCES> 314
<INVENTORY> 2,640
<CURRENT-ASSETS> 65,291
<PP&E> 18,176
<DEPRECIATION> 12,090
<TOTAL-ASSETS> 76,170
<CURRENT-LIABILITIES> 16,520
<BONDS> 651
0
0
<COMMON> 95
<OTHER-SE> 58,566
<TOTAL-LIABILITY-AND-EQUITY> 76,170
<SALES> 14,474
<TOTAL-REVENUES> 20,784
<CGS> 4,439
<TOTAL-COSTS> 7,499
<OTHER-EXPENSES> 10,070
<LOSS-PROVISION> 4
<INTEREST-EXPENSE> 2
<INCOME-PRETAX> 3,641
<INCOME-TAX> 1,298
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,343
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0
</TABLE>
