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 EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1999.
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 0-23212
Telular Corporation
(Exact name of Registrant as specified in its charter)
Delaware 36-3885440
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
647 North Lakeview Parkway
Vernon Hills, Illinois
60061
(Address of principal executive offices)
(Zip Code)
(847) 247-9400
(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
The number of shares outstanding of the Registrant's common stock, par
value $.01, as of June 30, 1999, the latest practicable date, was
9,307,549 shares.
<PAGE>
TELULAR CORPORATION
Index
Part I - Financial Information Page No.
Item 1. Financial Statements:
Consolidated Balance Sheets
June 30, 1999 (unaudited) and September 30, 1998 3
Consolidated Statements of Operations (unaudited)
Three Months Ended June 30, 1999 and
June 30, 1998 4
Consolidated Statements of Operations (unaudited)
Nine Months Ended June 30, 1999 and
June 30, 1998 5
Consolidated Statement of Stockholders' Equity (unaudited)
Period from September 30, 1998 to
June 30, 1999 6
Consolidated Statements of Cash Flows (unaudited)
Nine Months Ended June 30, 1999 and
June 30, 1998 7
Notes to the Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk 16
Part II - Other Information
Item 1. Legal Proceedings 16
Item 2. Changes in Securities and Recent Sales of
Unregistered Securities 16
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 20
Exhibit Index 21
<PAGE>
<TABLE>
TELULAR CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
June 30, September 30,
1999 1998
------------ -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 10,739 $ 19,854
Receivables:
Trade, net of allowance for doubtful accounts
of $345 and $112 at June 30, 1999
and September 30, 1998, respectively 6,699 4,468
Related parties 1,913 1,268
------------ ------------
8,612 5,736
Inventories, net 9,419 11,594
Prepaid expenses and other current asset 1,082 853
------------ ------------
Total current assets 29,852 38,037
Property and equipment, net 5,615 5,496
Other assets:
Excess of cost over fair value of net assets
acquired, less accumulated amortization of
$1,174 and $785 at June 30, 1999 and
September 30, 1998, respectively 3,721 4,111
Intangible assets, less accumulated amortization
of $1,058 and $845 at June 30, 1999 and
September 30, 1998, respectively 37 250
Long term receivable 0 316
Long term investment 56 525
Deposits and other 75 77
------------ ------------
3,889 5,279
------------ ------------
$ 39,356 $ 48,812
============ ============
<PAGE>
LIABILITIES, REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable:
Trade $ 5,103 $ 5,138
Related parties 1,170 1,185
Accrued liabilities 2,557 3,521
------------ ------------
Total current liabilities 8,830 9,844
Commitments and contingencies 0 0
Redeemable Preferred Stock:
Series A convertible preferred stock, $.01
par value; $13,712 and $17,709 liquidation
preference at June 30, 1999 and
September 30, 1998, respectively; 21,000 shares
authorized at June 30, 1999 and September
30, 1998; 12,350 shares and 16,506 shares issued
and outstanding at June 30, 1999 and
September 30, 1998, respectively. 13,513 18,286
Stockholders' Equity:
Preferred stock $.01 par value; 9,979,000 shares
authorized at June 30, 1999 and
September 30, 1998; none outstanding 0 0
Common stock; $.01 par value; 75,000,000 shares
authorized; 9,307,549 and 8,534,298 outstanding
at June 30, 1999 and September 30, 1998,
respectively 93 346
Additional paid-in capital 122,832 117,326
Deficit (103,911) (95,458)
Unrealized loss on investments (394) 75
Treasury stock, 140,000 shares at cost (1,607) (1,607)
------------ ------------
Total stockholders' equity 17,013 20,682
------------ ------------
Total liabilities, redeemable preferred stock
and stockholders' equity $ 39,356 $ 48,812
============ ===========
See accompanying notes
</TABLE>
<PAGE>
<TABLE>
TELULAR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
(Unaudited)
Three Months Ended June 30,
1999 1998
---------- ----------
<S> <C> <C>
Net product sales to unrelated parties $ 8,859 $ 8,604
Net product sales to related parties 1,037 0
---------- ----------
Total net product sales 9,896 8,604
Royalty and royalty settlement revenue 788 53
---------- ----------
Total revenue 10,684 8,657
Cost of sales 9,584 6,675
---------- ----------
1,100 1,982
Engineering and development expenses 1,327 1,787
Selling and marketing expenses 1,690 1,562
General and administrative expenses 975 1,024
Provision for doubtful accounts 215 25
Amortization 161 236
---------- ----------
Loss from operations (3,268) (2,652)
Other income, net 52 103
---------- ----------
Net loss $ (3,216) $ (2,549)
========== ==========
Less: Cumulative dividend on redeemable
preferred stock (168) (222)
---------- ----------
Net loss applicable to common shares $ (3,384) $ (2,271)
========== ==========
Basic and diluted net loss per common share $ (0.38) $ (0.33)
========== ==========
Weighted average number of common shares 8,989,930 8,385,882
========== ==========
</TABLE>
<PAGE>
<TABLE>
TELULAR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
(Unaudited)
Nine Months Ended June 30,
1999 1998
---------- ----------
<S> <C> <C>
Net product sales to unrelated parties $ 24,175 $ 30,970
Net product sales to related parties 1,285 0
---------- ----------
Total net product sales 25,460 30,970
Royalty and royalty settlement revenue 1,798 1,429
---------- ----------
Total revenue 27,258 32,399
Cost of sales 21,852 24,284
---------- ----------
5,406 8,115
Engineering and development expenses 4,346 6,245
Selling and marketing expenses 5,538 4,945
General and administrative expenses 2,852 3,308
Provision for doubtful accounts 265 75
Amortization 603 708
---------- ----------
Loss from operations (8,198) (7,166)
Other income, net 294 758
---------- ----------
Net loss $ (7,904) $ (6,408)
========== ==========
Less: Cumulative dividend on redeemable
preferred stock (549) (691)
---------- ----------
Net loss applicable to common shares $ (8,453) $ (7,099)
========== ==========
Basic and diluted net loss per common share $ (0.96) $ (0.86)
========== ==========
Weighted average number of common shares 8,850,186 8,255,628
========== ==========
See accompanying notes
</TABLE>
<PAGE>
<TABLE>
Telular Corporation
Consolidated Statements of Stockholders' Equity
(In Thousands)
Unrealized
Additional gain (loss) Total
Preferred Common Paid-in on Treasury Stockholder's
Stock Stock Capital Deficit Investments Stock Equity
--------- ------ --------- --------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1998 $ 0 $346 $117,326 $ (95,458) $ 75 $ (1,607) $ 20,682
Comprehensive income:
Net loss for period from
October 1, 1998 to June
30, 1999 0 0 0 (7,904) 0 0 (7,904)
Other comprehensive income
Unrealized loss on investments 0 0 0 0 (469) 0 (469)
---------
Comprehensive income (8,373)
---------
One-for-four stock exchange 0 (269) 269 0 0 0 0
Deferred compensation related
to stock options 0 0 135 0 0 0 135
Stock issued in connection
with services 0 2 219 0 0 0 221
Conversion of preferred stock
to common stock 0 14 4,883 0 0 0 4,897
Cumulative dividend on
redeemable preferred stock 0 0 0 (549) 0 0 (549)
--------- ------ --------- --------- ---------- -------- ----------
Balance at June 30, 1999 0 93 122,832 (103,911) (394) (1,607) 17,013
========= ====== ========= ========= ========== ======== ==========
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
TELULAR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Nine Months Ended June 30,
1999 1998
---------- ----------
<S> <C> <C>
Operating Activities:
Net loss $ (7,904) $ (6,408)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation 1,164 1,344
Amortization 603 708
Inventory obsolescence expense 1,980 227
Provision for doubtful accounts 265 75
Compensation expense related to
stock options and grants 135 138
Common stock issued for services
and compensation 221 219
Equity in net income of affiliate 0 (84)
Changes in assets and liabilities:
Trade receivables (2,496) 1,803
Related parties receivables, net (645) 3,937
Inventories 195 (723)
Prepaid expenses, deposits and other 89 (1,567)
Trade accounts payable (35) (420)
Related parties accounts payable (15) (3,557)
Accrued liabilities (1,389) (513)
---------- ----------
Net cash used in operating activities (7,832) (4,821)
Investing Activities:
Acquisition of property and equipment (1,283) (2,027)
---------- ----------
Net cash used in investing activities (1,283) (2,027)
---------- ----------
Financing Activities:
Proceeds from the issuance of common stock 0 150
---------- ----------
Net cash provided by financing activities 0 150
---------- ----------
Net decrease in cash and cash equivalents (9,115) (6,698)
Cash and cash equivalents, beginning of period 19,854 28,451
---------- ----------
Cash and cash equivalents, end of period $ 10,739 $ 21,753
========== ==========
See accompanying notes
</TABLE>
<PAGE>
TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from
those estimates. In the opinion of management, all adjustments
considered necessary for a fair presentation have been included.
Operating results for the three and nine months ended June 30, 1999,
are not necessarily indicative of the results that may be expected for
the full fiscal year ending September 30, 1999. For further
information, refer to the consolidated financial statements and the
footnotes included in the Annual Report on Form 10-K for the fiscal
year ended September 30, 1998.
2. Inventories
The components of inventories consist of the following (000's):
June 30, September 30,
1999 1998
---------- -------------
(unaudited)
Raw materials $ 5,246 $ 6,709
Finished goods 4,861 5,488
---------- -------------
10,107 12,197
Less: Reserve for obsolescence 688 603
---------- -------------
$ 9,419 $ 11,594
========== =============
3. Investment in Wireless Domain Corporation (formerly TelePath
Corporation)
On June 28, 1996, the Company entered into an agreement to acquire a
33% interest in Wireless Domain Incorporated (WD) in exchange for $1
million in cash and common stock of the Company (Common Stock) valued
at approximately $2.2 million. During the year ended September 30,
1997, the Company increased its equity ownership in WD to 50% by
purchasing an additional 17% of WD in exchange for $0.5 million in
cash and 150,000 shares of Common Stock valued at approximately $0.7
million.
Effective October 1, 1997, the Company acquired the remaining 50% of
WD. Under the terms of the merger, the Company issued 500,000 shares
of Common Stock to the shareholders of WD and relinquished control of
the 500,000 shares of Common Stock held by WD. This acquisition was
accounted for using the purchase method of accounting. The excess of
consideration paid over the fair value of net assets purchased of $4.7
million was recorded as goodwill, which is being amortized over ten
years. Prior to October 1, 1997, the Company had accounted for its
investment in WD using the equity method.
<PAGE>
TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999
4. Redeemable Preferred Stock
In 1997, the Company issued 20,000 shares of Series A Convertible
Preferred Stock (the Preferred Stock) for $18.8 million which is net
of issuance cost of $1.2 million. The Preferred Stock automatically
converts to Common Stock on October 16, 1999 and includes the
equivalent of a 5% annual stock dividend. Holders of the Preferred
Stock are entitled, at their option, subject to trading volume and
other restrictions, to convert Preferred Stock into shares of Common
Stock using defined conversion formulas based on the Nasdaq closing
bid prices for the Common Stock. In addition, the holders have the
option to redeem the Preferred Stock upon the occurrence of : (i) a
consolidation or merger with another company; (ii) sale or transfer of
substantially all assets; (iii) 50% change in ownership; or (iv)
certain triggering events including suspension of the SEC registration
statement for the Common Stock to be issued upon conversion of the
Preferred Stock, failure to be listed on Nasdaq or another national
securities exchange, and notice by the Company of its intention not to
comply with proper requests for conversion. The redemption price upon
holder redemption is the greater of $1,250 per share and the cash
equivalent of the defined conversion formula on the date of
redemption. The Company is entitled to require the holders to convert
the Preferred Stock and accrued dividends into shares of Common Stock
using a defined conversion formula based upon the Nasdaq closing bid
prices for Common Stock. In addition, the Company has the right to
redeem the Preferred Stock after April 15, 1999 for $1,200 per share
plus 120% of the accrued dividends. Holders of the Preferred Stock
are not entitled to vote on matters submitted for vote to the
stockholders of the Company.
The Preferred Stock reflects a beneficial conversion feature that
allows holders to convert the security to Common Stock at a discount.
The amount of the discount is determined using Nasdaq closing bid
prices for the Common Stock. During fiscal year 1997, the Company
recorded a $2.2 million provision for Preferred Stock beneficial
conversion discount. The offset entry to the above provision
increased redeemable Preferred Stock by $2.2 million. This amount
will accrete to the Common Stock and additional paid in capital
accounts as shares of redeemable Preferred Stock are converted into
shares of common stock of the Company. As of June 30, 1999, 7,650
shares of preferred stock have been converted into 1,100,452 shares of
Common Stock.
5. Comprehensive Income
On October 1, 1998, the Company adopted Statement of Financial
Accounting Standard No. 130, Reporting Comprehensive Income (SFAS
No. 130). Comprehensive income is defined by SFAS No. 130 as net
income plus other comprehensive income, which, under existing
accounting standards includes foreign currency items, minimum pension
liability and unrealized gains and losses on certain investments in
debt and equity securities. Comprehensive income is reported by the
Company in the consolidated statement of stockholders' equity.
6. Segment Disclosures
In June 1997, the FASB issued Statement of Financial Accounting
Standard No. 131, Disclosures about Segments of an Enterprise and
Related Information (SFAS No. 131), which is effective for years
beginning after December 15, 1997. SFAS No. 131 establishes standards
for the way public business enterprises report information about
operating segments in annual financial statements and requires that
those enterprises report selected information about operating segments
in interim financial reports. It also establishes standards for
related disclosures about products and services, geographic areas, and
major customers. The Company will adopt the new requirements
retroactively during the three month period ended September 30, 1999.
Management has not completed its review of SFAS No. 131, but anticipates
that the adoption of this statement will not have a significant effect
on the Company's financial disclosures.
<PAGE>
TELULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1999
7. Contingencies
The Company is involved in litigation with Global Emerging Markets
North America, Inc. (GEM) over a commission GEM claims in connection
with the Preferred Stock issued by the Company in 1997 (see footnote 4
above). On April 5, 1999, the Circuit Court of Cook County (Illinois)
awarded GEM $549,305, and the Company appealed that judgement.
Subsequent to filing the appeal the litigation was settled for
$425,000, which the Company will pay in August 1999. The payment that
the Company has agreed to make is deemed to be issuance cost and has
been accrued in its financial statements as a reduction to Redeemable
Preferred Stock.
The Company is involved in other legal proceedings in the ordinary
course of business. While all litigation contains an element of
uncertainty, based upon discussion with the Company's counsel, except
for the GEM case described above, management believes that the outcome
of such proceedings will not have a material adverse effect on the
Company's consolidated financial position and results of operations.
8. Reverse Stock Split
The number of shares of common stock outstanding, the weighed average
number of common shares outstanding and basic and diluted net loss per
share amounts have all been restated to reflect the one-for-four (1:4)
reverse stock split of the Company's common stock on January 27, 1999.
9. Reclassification
Certain amounts in the June 30, 1998 financial statements have been
reclassified to conform to the
June 30, 1999 presentation.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
The Company is in the fixed wireless telecommunications industry. The
Company designs, develops, manufactures and markets products based on its
proprietary interface technologies, which provide the capability to bridge
wireline telecommunications customer premises equipment with cellular-type
transceivers for use in wireless communication networks. Applications of
the Company's technology include fixed wireless telecommunications as a
primary service where wireline systems are unavailable, unreliable or
uneconomical, as well as wireless backup systems for wireline telephone
systems and wireless alarm signaling (WAS). The Company's principal product
lines are: PHONECELL, a line of fixed wireless terminals (FWTs), and
TELGUARD, a line of WAS products.
The Company is investing in new product development for both analog and
digital fixed wireless terminals. As with any emerging market, it is
difficult to predict the timing of the market demand. If anticipated sales
in any quarter do not occur as expected, expenditure and inventory levels
could be disproportionately high, and the Company's operating results for
that quarter, and potentially for future quarters, could be adversely
affected. Certain factors that could significantly impact expected results
are described in the Company's Cautionary Statements Pursuant to the
Securities Litigation Reform Act which is attached as Exhibit 99 to the
Company's Form 10-K for the period ended September 30, 1998.
Results of Operations
Third quarter fiscal year 1999 compared to third quarter fiscal year 1998
Total Net Product Sales. Total net product sales includes sales of
finished products and components. Sales of FWTs increased 48% and sales of
WAS products increased 18% during the third quarter of fiscal year 1999
compared to the same period last year. Sales of components decreased 49%
or $1.1 million during the third quarter of fiscal year 1999 compared to
the same period last year. The decline in component sales resulted from a
$2.1 million decrease in sales to Qualcomm, partially offset by a $1.0
million increase in sales to Motorola.
Royalty and Royalty Settlement Revenue. Royalty and royalty settlement
revenue increased $0.7 million for the third quarter of fiscal year 1999
compared to the third quarter of fiscal year 1999. This increase resulted
primarily from increased royalty revenue from Motorola this year compared
to last year. Beginning in fiscal year 1999 Motorola pays the Company
royalties as a percentage of its sales on two product lines, Code Division
Multiple Access (CDMA) and Advanced Mobile Phone System (AMPS), instead of
a single product line, AMPS, as in the previous fiscal year.
Cost of sales. Cost of sales increased from $6.7 million for the third
quarter of fiscal year 1998 to $9.6 million for the third quarter of fiscal
year 1999. During the third quarter of fiscal year 1999 the Company
recorded a one-time special charge of $1.5 million (or $.17 per share) to
write-off its Extended Total Access Communication System (ETACS) and CDMA
inventories. On June 30, 1999, the Company decided to exit the ETACS
business and to offer a new generation of CDMA products that are purchased
by the Company from Motorola. Excluding this one-time charge, cost of
sales for the third quarter of fiscal year 1999 of $8.1 million or 76
percent of sales compares to $6.7 million or 77 percent of sales for the
same period of fiscal year 1998.
Engineering and Development Expenses. Engineering and development expenses
of $1.3 million for the third quarter of fiscal year 1999 decreased
approximately 26% or $0.5 million from the same quarter of fiscal year
1998. In fiscal year 1998 the Company had increasing engineering and
development expenses as a result of its efforts to bring several new lower
cost products and a wider range of products to market. Because many of
these new products were completed and introduced to market during fiscal
year 1998, the Company has reduced its engineering and development
expenses, primarily through reductions in material costs and contracted
engineering services.
<PAGE>
Provision for doubtful accounts. Provision for doubtful accounts increased
$0.2 million during the third quarter of fiscal year 1999, compared to the
same period last year. The increase is a result of the Company providing
reserves for three accounts where the Company's potential exposure exceeds
its insurance coverage.
Net loss. The Company recorded a net loss of $3.2 million or $0.36 per
share for the third quarter in fiscal year 1999 compared to a net loss of
$2.5 million or $0.30 per share for the third quarter of fiscal year 1998.
Excluding the $1.5 million one-time charge to write-off certain
inventories, net loss of $1.7 million or $0.19 per share for the third
quarter in fiscal year 1999 compares to net loss of $2.5 million or $0.30
per share for the third quarter of fiscal year 1998.
Net loss applicable to common shares. After giving effect to the
cumulative preferred stock dividend of $0.2 million for the third quarter
of fiscal year 1999, net loss applicable to common shares of $3.4 million
or $0.38 per share compared to a net loss of $2.8 million or $0.33 per
share for the third quarter of fiscal year 1998.
First nine months of fiscal year 1999 compared to first nine months of
fiscal year 1998
Total Net Product Sales. Net product sales of $25.5 million for the nine
months ended June 30, 1999 decreased 18% from $31.0 million for the nine
months ended June 30, 1998. Sales of FWTs decreased 27% from $23.8 million
during the first nine months of fiscal year 1998 to $17.4 million during
the same period of fiscal year 1999. The decrease resulted primarily from
lower shipments to Africa and Philippines during the current year, but also
due to economic turmoil in Asia in general and in specific areas of South
America. Mexico as well as a few areas of South America have been
experiencing increased sales, to help offset weaker sales in the other
regions. The Company shipped $10.4 million of FWTs to Guinea, West Africa
and Philippines during the first nine months of fiscal year 1998. There
have been no sales to these destinations in fiscal year 1999. The sale of
WAS products increased approximately 13% from $7.2 million during the nine
months ended June 30, 1998 to $8.1 million during the nine months ended
June 30, 1999. Net Product sales to related parties of approximately $1.3
million represents sales of radios and components to Motorola.
Royalty and Royalty Settlement Revenue. Royalty and royalty settlement
revenue increased from $1.4 million during the first nine months of fiscal
year 1998 to $1.8 million during the same period of fiscal year 1999. The
fiscal year 1998 amount included $1.2 million for the royalty settlement
with ORA Electronics, Inc. The fiscal year 1999 amount includes $0.9
million of royalty settlement revenue from Motorola. The amount from
Motorola is a wrap-up payment related to the Option Agreement with
Motorola. The above payment together with favorable changes in terms
granted to the Company by Motorola in connection with the Hungary project
comprise the balance of liquidated damages owed the Company by Motorola in
connection with the Option Agreement and the Hungary project contract.
Further, in connection with the above settlement, the Company has agreed to
reduce certain present and future royalties from Motorola.
Cost of sales. Cost of sales decreased from $24.3 million for the first
nine months of fiscal year 1998 to $21.9 million for the first nine months
of fiscal year 1999. During the third quarter of fiscal year 1999 the
Company recorded a one-time special charge of $1.5 million (or $.17 per
share) to write-off its ETACS and CDMA inventories. On June 30, 1999, the
Company decided to exit the ETACS business and to offer a new generation of
CDMA products which are purchased by the Company. Excluding this one-time
charge, cost of sales for the first nine months of fiscal year 1999 of
$20.4 million or 75 percent of sales compares to $24.3 million or 75
percent of sales for the same period of fiscal year 1998.
<PAGE>
Engineering and Development Expenses. Engineering and development expenses
of $4.3 million during the first nine months of fiscal year 1999 decreased
approximately 30% or $1.9 million over the first nine months of fiscal year
1998. In fiscal year 1998 the Company had increasing engineering and
development expenses as a result of efforts to bring several new lower cost
products and a wider range of products to market. Because many of these
products were completed and introduced to market during that year, the
Company has reduced engineering and development expenses, primarily through
reductions in material costs and contracted engineering services.
Selling and Marketing Expenses. Selling and marketing expenses for the
first nine months of fiscal year 1999 increased 12% or $0.6 million
compared to the period of fiscal year 1998. The increase was primarily a
result of the Company's efforts to market its new products and increase its
sales force to support worldwide sales coverage. The Company has added new
direct sales personnel in Western Europe, China, and Turkey during the
first nine months of fiscal year 1999.
General and Administrative Expenses (G&A). G&A for the first nine months
of fiscal year 1999 decreased 14% compared to the first nine months of
fiscal year 1998. The decrease is primarily attributable to the reduction
of insurance premiums as a result of favorable negotiations with insurance
carriers.
Provision for doubtful accounts. Provision for doubtful accounts increased
$0.2 million during the first nine months of fiscal year 1999, compared to
the same period last year. The increase is a result of the Company
providing reserves for three accounts where the Company's potential
exposure exceeds its insurance coverage.
Other Income. Other income during the first nine months of fiscal year
1999 decreased by $0.5 million compared to the same period of fiscal year
1998. The decrease is primarily due to lower interest income due to
reduced cash balances during the first nine months of fiscal year 1999
compared to the same nine months of fiscal year 1998.
Net loss. The Company recorded a net loss of $7.9 million or $0.89 per
share for the first nine months in fiscal year 1999 compared to a net loss
of $6.4 million or $0.78 per share for the first nine months of fiscal year
1998. Excluding the $1.5 million one-time charge to write-off certain
inventories, net loss of $6.4 million or $0.72 per share for the first nine
months of fiscal year 1999 compares to net loss of $6.4 million or $0.72
per share for the first nine months of fiscal year 1998.
Net loss applicable to common shares. After giving effect to the
cumulative preferred stock dividend of $0.5 million for the first nine
months of fiscal year 1999, net loss applicable to common shares of $8.5
million or $0.96 per share compares to a net loss of $7.1 million or $0.86
per share for the first nine months of fiscal year 1998.
Liquidity and Capital Resources
At June 30, 1999, the Company had $10.7 million in cash and cash
equivalents with a working capital surplus of $21.0 million. The increase
is primarily the result of temporary changes in working capital, partially
offset by lower capital spending.
The Company used $9.1 million during the first nine months of fiscal year
1999 compared to $6.7 million of cash used during the same period last
year. Cash used for capital spending was $1.3 million during the nine
months ended June 30, 1999, compared to $2.0 million during the same period
last fiscal year.
<PAGE>
In 1997, the Company issued 20,000 shares of Series A Convertible Preferred
Stock (the Preferred Stock) for $18.8 million, which is net of issuance
cost of $1.2 million. The Preferred Stock automatically converts into
shares of the Company's common stock (Common Stock) on October 16, 1999 and
includes the equivalent of a 5% annual stock dividend. Holders of the
Preferred Stock are entitled, at their option, subject to trading volume
and other restrictions, to convert Preferred Stock into shares of Common
Stock using defined conversion formulas based on the Nasdaq closing bid
prices for the Common Stock. In addition, the holders have the option to
redeem the Preferred Stock upon the occurrence of a (i) consolidation or
merger with another company; (ii) sale or transfer of substantially all
assets; (iii) 50% change in ownership; or (iv) certain triggering events
including suspension of the SEC registration statement for the Common Stock
to be issued upon conversion of the Preferred Stock, failure to be listed
on Nasdaq or another national securities exchange, and notice by the
Company of its intention not to comply with proper requests for conversion.
The redemption price upon holder redemption is the greater of $1,250 per
share and the cash equivalent of the defined conversion formula on the date
of redemption. The Company is entitled to require the holders to convert
the Preferred Stock and accrued dividends into shares of Common Stock using
a defined conversion formula based upon the Nasdaq closing bid prices for
the Common Stock. In addition, the Company has the right to redeem the
Preferred Stock after April 15, 1999 for $1,200 per share plus 120% of the
accrued dividends. Holders of the Preferred Stock are not entitled to vote
on matters submitted for vote to the stockholders of the Company. As of
June 30, 1999, 7,650 shares of preferred stock have been converted into
1,100,452 shares of Common Stock.
On July 30, 1999, the Company agreed to a written proposal from The CIT
Group, Inc. (CIT) to provide a credit facility with maximum borrowings of
$10.0 million (the Proposed Loan), and paid a deposit to CIT to commence
due diligence procedures. Borrowings under the Proposed Loan will be
subject to borrowing base requirements and other restrictions. The
Proposed Loan would mature on August 10, 2003. If consummated, the Company
will grant stock options and pay additional financing fees to CIT on the
date of closing. As of June 30, 1999, the Company estimated its borrowing
capacity under the Proposed Loan would be $7.7 million. The Proposed Loan
would replace a previous Loan and Security Agreement with Fleet Capital
Corporation (the successor to Sanwa Business Credit Corporation) which was
terminated on July 15, 1999.
If the Proposed Loan is approved, the Company expects to borrow funds from
time to time to fund working capital requirements, to fund future product
development efforts and to sustain significant levels of cash reserves
which are required to qualify for large sales opportunities.
Based upon its current operating plan, the Company believes its existing
capital resources, including the Proposed Loan and proceeds from the
issuance of Preferred Stock, should enable it to maintain its current and
planned operations. Cash requirements may vary and are difficult to
predict given the nature of the developing markets targeted by the Company.
The amount of royalty income from the Company's licensees is unpredictable,
but could have an impact on the Company's actual cash flow.
The Company requires letters of credit or qualification for export credit
insurance underwritten by third party credit insurance companies or the
Export-Import Bank of the United States on a substantial portion of its
international sales orders. Also, to mitigate the effects of currency
fluctuations on the Company's results of operations, the Company endeavors
to conduct all of its international transactions in U.S. dollars. To date,
the Company's sales have not been adversely affected by currency
fluctuations; however, as the Company's international operations grow,
foreign exchange or the inflation of a foreign currency may pose greater
risks for the Company, and the Company may be required to develop and
implement additional strategies to manage these risks.
<PAGE>
Impact of the Year 2000 Issue
Recently, national attention has focused on the potential problems and
associated costs resulting from computer programs that have been written
using two digits rather than four to define the applicable year. These
programs treat all years as occurring between 1900 and 1999 and do not
self-correct to reflect the upcoming change in the century. If not
corrected, computer applications could fail or create erroneous results by
or at the Year 2000.
In 1998, management conducted a formal assessment of its significant
information technology systems, including computers used in its production
and manufacturing functions. Based upon this assessment, management
developed an action plan to modify its internal software and hardware
(imbedded chips) so that its computer systems will function properly with
respect to dates in the Year 2000 and thereafter. The cost of such
modifications, including testing and implementation, was not significant
and was funded with available cash. Although the Company has completed all
known changes to its internal computer systems and has obtained
certification of year 2000 compliance from its key external software
providers, there can be no absolute assurance that all of the Company's
internal systems will operate properly in the Year 2000 and beyond. The
Company is prepared to operate the business without the benefit of internal
uter systems should its systems fail to operate after December 31,
1999.
The Company does not conduct any of its purchase transactions through
computer systems that interface directly with suppliers. However, the
Company has initiated a formal assessment of its significant suppliers to
determine the extent to which the Company would be vulnerable if those
third parties fail to remedy Year 2000 issues. To date, the Company has
received written responses from most of its suppliers. The Company has
evaluated these responses and is now monitoring the progress of suppliers
that are not fully ready for the Year 2000. Where the Company determines
that critical suppliers will not be ready for the Year 2000, the Company
will take appropriate actions.
The Company currently has no material systems that interface directly with
customers. Further, the Company has not entered into any significant
supply contracts that extend beyond December 31, 1999. The Company's large
customers beyond December 31, 1999 will likely be new customers due to the
project nature of its business. However, as a global company that operates
in many different countries, some of which may not be addressing the Year
2000 problem as aggressively as the United States, there can be no
assurances that future customers will be Year 2000 compliant. Moreover,
because markets for the Company's products are dependent on third parties,
such as wireless local loop network providers, management cannot fully
assess the impact that the Year 2000 problem will have on future sales.
The Company has reviewed each of its product lines and has determined that
its products will operate properly in the Year 2000 and beyond. However,
for some industries, the Company's products are integrated with other
companies' products and sold as combined product, by another companies.
There can be no assurances that such combined products, current and future,
will operate properly in the Year 2000 and beyond.
The cost of the Company's efforts to prepare for the Year 2000 was
approximately $100,000, of which approximately 50% was incurred during the
current fiscal year. Management will continue to monitor this issue,
particularly the possible impact of third-party Year 2000 compliance on the
Company's operations.
Management believes that it is Year 2000 ready and does not anticipate any
additional preparation cost. Nevertheless, because it is not possible to
anticipate all future outcomes, especially when third parties are involved,
there could be circumstances in which the Company is adversely affected by
Year 2000 problems. The loss of revenue from such occurrences has not been
estimated.
<PAGE>
Outlook
The statements contained in this outlook are based on current expectations.
These statements are forward looking, and actual results may differ
materially.
Based upon observed trends, the Company believes that the market for FWTs
will experience substantial growth over the next five years. Nearer term
prospects should enable the Company to grow, but at more modest rates. The
economic turmoil in Asia, a key market for the Company's products, will
negatively impact growth prospects in the near term. However, the Company
has identified significant near term opportunities primarily in Africa,
Brazil, Dominican Republic, Mexico, Malaysia, Turkey and Venezuela. Each
of these markets will develop at a different pace, and the sales cycle for
these regions are several months or quarters, but market indications remain
positive. The Company is well positioned with a wide range of products and
an expanded sales force to capitalize on these market opportunities.
Statements contained in this filing, other than historical statements,
consist of forward-looking information. The Company's actual results may
vary considerably from those discussed in the Outlook section and
elsewhere in this filing as a result of various risks and uncertainties.
For example, there are a number of uncertainties as to the degree and
duration of the Company's revenue momentum, which could impact the
Company's ability to be profitable as lower sales may likely result in
lower margins. In addition, product development expenditures, which are
expected to benefit future periods, are likely to have a negative impact on
near term earnings. Other risks and uncertainties, which are discussed in
Exhibit 99 to the Company's Form 10-K for the period ended September 30,
1998, include the risk that technological change could render the Company's
technology obsolete, the risk of litigation, the Company's ability to
develop new products, the Company's dependence on contractors and Motorola,
the Company's ability to maintain quality control, the risk of doing
business in developing markets, the Company's dependence on research and
development, the uncertainty of additional funding, the potential for
redemption of preferred stock, the effects of control by existing
shareholders, the effect of changes in management, intense industry
competition and uncertainty in the development of wireless service
generally.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In 1998, the Company received 300,000 shares of common stock of ORA
Electronics, Inc. (ORA stock) in connection with the settlement of
litigation. ORA stock is traded on Nasdaq's Over The Counter (OTC) system.
Although ORA stock is subject to price fluctuations associated with all
securities that are traded on the OTC system, the Company has the right to
receive additional shares of ORA stock to ensure the fair market value of
the settlement consideration received in stock is equivalent to $1.5
million on February 1, 2000.
The Company frequently invests available cash and cash equivalents in short
term instruments such as: certificates of deposit, commercial paper and
money market accounts. Although the rate of interest available on such
investments may fluctuate over time, each of the Company's investments is
made at a fixed interest rate over the duration of the investment. All of
these investments have maturities of less than 90 days. The Company
believes its exposure to market risk fluctuates for these investments is
not material as of June 30, 1999.
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of trade accounts
receivable. Credit risks with respect to trade receivables are limited due
to the diversity of customers comprising the Company's customer base. The
Company generally receives irrevocable letters of credit that are confirmed
by U.S. banks to reduce its credit risk. Further, the Company purchases
credit insurance for all significant open accounts outside of the United
States. The Company performs ongoing credit evaluations and charges
uncollectible amounts to operations when they are determined to be
uncollectible.
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is involved in litigation with Global Emerging Markets North
America, Inc. (GEM) over a commission GEM claims in connection with the
Preferred Stock issued by the Company in 1997. On April 5, 1999, the
Circuit Court of Cook County (Illinois) awarded GEM $549,305, and the
Company appealed that judgement. Subsequent to filing the appeal the
litigation was settled for $425,000, which the Company will pay in August
1999.
Item 2. CHANGES IN SECURITIES AND RECENT SALES OF UNREGISTERED SECURITIES
Changes in Securities
Under the terms of the Series A Convertible Preferred Stock issued on April
16, 1997 and June 6, 1997, for so long as such stock is outstanding,
dividends may be paid on the Common Stock only out of retained earnings of
the Company generated after April 1, 1997.
Under the terms of the Proposed Loan, the Company will be prohibited from
paying cash dividends during the term of the Loan.
Recent Sales of Unregistered Securities
During the three months ended June 30, 1999, the Company issued 25,602
shares of Common Stock valued at $78,406 to the law of firm of Hamman and
Benn for legal services. These issuances were exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933, as amended, as they
did not involve a public offering of securities.
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits (listed by number according to Exhibit table of Item 601 in
Regulation S-K)
Number Description Reference
------ ---------------------------- -----------------------------
3.1 Certificate of Incorporation Filed as Exhibit 3.1 to
Registration Statement
No. 33-72096 (the
Registration Statement)
3.2 Amendment No. 1 to Certificate Filed as Exhibit 3.2
of Incorporation to the Registration Statement
3.3 Amendment No. 2 to Certificate Filed as Exhibit 3.3 to the
of Incorporation Registration Statement
3.4 Amendment No. 3 to Certificate Filed as Exhibit 3.4 to Form
of Incorporation 10-Q filed February 16, 1999
3.5 Amendment No. 4 to Certificate Filed as Exhibit 3.5 to Form
of Incorporation 10-Q filed February 16, 1999
3.6 By-Laws Filed as Exhibit 3.4 to the
Registration Statement
4.1 Loan Agreement with LaSalle Filed as Exhibit 4.1
National Bank and Amendment to Form 10-K filed December
thereto 27, 1995
4.2 Debenture Agreements dated Filed as Exhibit 4.2
December 11, 1995 to Form 10-K filed
December 27, 1995
<PAGE>
4.3 Certificate of Designations, Filed as Exhibit 99.2
Preferences, and Rights of Form 8-K filed
Series A Convertible Preferred April 25, 1997
Stock
4.4 Loan and Security Agreement with Filed as Exhibit 4.2 to
Sanwa Business Credit Corporation Form 10-Q filed August 14, 1997
10.1 Consulting Agreement with Filed as Exhibit 10.1
William L. De Nicolo to the Registration Statement
10.2 Employment Agreement with Filed as Exhibit 10.1 to Form
Kenneth E. Millard 10-Q filed August 14, 1996
10.3 Stock Option Agreement with Filed as Exhibit 10.2 to Form
Kenneth E. Millard 10-Q filed August 14, 1996
10.4 Stock Purchase Agreement By Filed as Exhibit
and Among Telular Corporation 10.3 to Form 10-Q
and TelePath Corporation (which filed August 14, 1996
had changed its name to Wireless
Domain, Incorporated)
10.5 Appointment of Larry J. Ford Filed as Exhibit 10.2
to Form 10-Q filed
May 1, 1995
<PAGE>
10.6 Option Agreement with Motorola Filed as Exhibit 10.6
dated November 10, 1995 to Form 10-K filed
December 26, 1996(1)
10.7 Amendment No. 1 dated September Filed herewith
24, 1996 to Option Agreement
with Motorola
10.8 Amendment No. 2 dated April 30, Filed herewith (1)
1999 to Option Agreement with
Motorola
10.9 Stock Purchase Agreement Filed as Exhibit 10.11
between Motorola, Inc. and to the Registration Statement
Telular Corporation dated
September 20, 1993
10.10 Patent Cross License Agreement Filed as Exhibit 10.12
between Motorola, Inc. and the to the Registration
Company, dated March 23, 1990 Statement(1)
and Amendments No. 1, 2 and
3 thereto
10.11 Amendment No 4 to Patent Cross Filed herewith (1)
License Agreement between
Motorola, Inc. and the Company
dated May 3, 1999
10.12 Exclusive Distribution and Filed as Exhibit 10.14
Trademark License Agreement the Registration
between Telular Canada Inc. Statement(1)
and the Company, dated April 1,
1989, and Amendments thereto
10.13 Amended and Restated Shareholders Filed as Exhibit 10.15
Agreement dated November 2, 1993 to the Registration
Statement(1)
<PAGE>
10.14 Amendment No. 1 to Amended and Filed as Exhibit 10.24
Restated Shareholders the Registration
Agreement, dated January 24, 1994 Statement
10.15 Amendment No. 2 to Amended and Filed as Exhibit 10.5
Restated Shareholders Agreement, to the Form 10-Q filed
dated June 29, 1995 July 28, 1995
10.16 Amended and Restated Registration Filed as Exhibit 10.16
Rights Agreement dated November to the Registration
2, 1993 Statement
10.17 Amendment No. 1 to Amended and Filed as Exhibit 10.25
Restated Registration Rights to the Registration
Agreement, dated January 24, Statement
1994
10.18 Amended and Restated Employee Filed as Exhibit 10.17
Stock Option Plan to Form 10-K filed
December 26, 1996
10.19 Stock Option Grant to Filed as Exhibit 10.7
Independent Directors to Form 10-Q filed
July 28, 1995
10.20 Securities Purchase Agreement Filed as Exhibit 99.1 to
dated April 16, 1997, by and Form 8-K filed
between Telular Corporation and April 25, 1997
purchasers of the Series A
Convertible Preferred Stock
<PAGE>
10.21 Registration Rights Agreement Filed as Exhibit 99.3 to
dated April 16, 1997, by and Form 8-K filed
between Telular Corporation and April 25, 1997
purchasers of the Series A
Convertible Preferred Stock
10.22 Securities Purchase Agreement Filed as Exhibit 99.3 to
dated June 6, 1997, by and Registration Statement on
between Telular Corporation and Form S-3, Registration
purchasers of the Series A No. 333-27915, as amended
Convertible Preferred Stock by Amendment No. 1 filed
June 13, 1997, and further
Amended by Amendment
No. 2 filed July 8, 1997
(Form S-3)
10.23 Registration Rights Agreement Filed as Exhibit 99.4 to
dated June 6, 1997, by and Form S-3
between Telular Corporation and
purchasers of the Series A
Convertible Preferred Stock
10.24 Agreement and Plan of Merger by Filed as Exhibit 10.21
and among Wireless Domain to Form 10-K filed
Incorporated (formerly TelePath), December 19, 1998
Telular-WD (a wholly-owned
subsidiary of Telular) and
certain stockholder of Wireless
Domain Incorporated
10.25 Employment Agreement with Daniel Filed as Exhibit 10.22
D. Giacopelli to Form 10-Q filed
February 13, 1998
<PAGE>
10.26 Employment Agreement with Robert Filed as Exhibit 10.23
C. Montgomery to Form 10-Q filed
February 13, 1998
10.27 OEM Equipment Purchase Agreement Filed herewith (1)
for WAFU dated April 30, 1999
11 Statement regarding computation Filed herewith
of per share earnings
27 Financial data schedule Filed herewith
(1) Confidential treatment granted with respect to redacted
portions of documents.
(b) Reports on Form 8-K
The Company did not file any report on Form 8-K during the three
months ended June 30, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report on Form 10-Q to be signed
on its behalf by the undersigned, thereunto duly authorized.
Telular Corporation
Date August 13, 1999 By: /s/ Kenneth E. Millard
----------------- -------------------------
Kenneth E. Millard
President & Chief Executive Officer
Date August 13, 1999 /s/ Jeffrey L. Herrmann
----------------- -------------------------
Jeffrey L. Herrmann
Senior Vice President & Chief
Financial Officer
Exhibit Index
Number Description Reference
------ ---------------------------- -----------------------------
3.1 Certificate of Incorporation Filed as Exhibit 3.1 to
Registration Statement
No. 33-72096 (the
Registration Statement)
3.2 Amendment No. 1 to Certificate Filed as Exhibit 3.2
of Incorporation to the Registration Statement
3.3 Amendment No. 2 to Certificate Filed as Exhibit 3.3 to the
of Incorporation Registration Statement
3.4 Amendment No. 3 to Certificate Filed as Exhibit 3.4 to Form
of Incorporation 10-Q filed February 16, 1999
3.5 Amendment No. 4 to Certificate Filed as Exhibit 3.5 to Form
of Incorporation 10-Q filed February 16, 1999
3.6 By-Laws Filed as Exhibit 3.4 to the
Registration Statement
4.1 Loan Agreement with LaSalle Filed as Exhibit 4.1
National Bank and Amendment to Form 10-K filed December
thereto 27, 1995
4.2 Debenture Agreements dated Filed as Exhibit 4.2
December 11, 1995 to Form 10-K filed
December 27, 1995
<PAGE>
4.3 Certificate of Designations, Filed as Exhibit 99.2
Preferences, and Rights of Form 8-K filed
Series A Convertible Preferred April 25, 1997
Stock
4.4 Loan and Security Agreement with Filed as Exhibit 4.2 to
Sanwa Business Credit Corporation Form 10-Q filed August 14, 1997
10.1 Consulting Agreement with Filed as Exhibit 10.1
William L. De Nicolo to the Registration Statement
10.2 Employment Agreement with Filed as Exhibit 10.1 to Form
Kenneth E. Millard 10-Q filed August 14, 1996
10.3 Stock Option Agreement with Filed as Exhibit 10.2 to Form
Kenneth E. Millard 10-Q filed August 14, 1996
10.4 Stock Purchase Agreement By Filed as Exhibit
and Among Telular Corporation 10.3 to Form 10-Q
and TelePath Corporation (which filed August 14, 1996
had changed its name to Wireless
Domain, Incorporated)
10.5 Appointment of Larry J. Ford Filed as Exhibit 10.2
to Form 10-Q filed
May 1, 1995
<PAGE>
10.6 Option Agreement with Motorola Filed as Exhibit 10.6
dated November 10, 1995 to Form 10-K filed
December 26, 1996(1)
10.7 Amendment No. 1 dated September Filed herewith
24, 1996 to Option Agreement
with Motorola
10.8 Amendment No. 2 dated April 30, Filed herewith (1)
1999 to Option Agreement with
Motorola
10.9 Stock Purchase Agreement Filed as Exhibit 10.11
between Motorola, Inc. and to the Registration Statement
Telular Corporation dated
September 20, 1993
10.10 Patent Cross License Agreement Filed as Exhibit 10.12
between Motorola, Inc. and the to the Registration
Company, dated March 23, 1990 Statement(1)
and Amendments No. 1, 2 and
3 thereto
10.11 Amendment No 4 to Patent Cross Filed herewith (1)
License Agreement between
Motorola, Inc. and the Company
dated May 3, 1999
10.12 Exclusive Distribution and Filed as Exhibit 10.14
Trademark License Agreement the Registration
between Telular Canada Inc. Statement(1)
and the Company, dated April 1,
1989, and Amendments thereto
10.13 Amended and Restated Shareholders Filed as Exhibit 10.15
Agreement dated November 2, 1993 to the Registration
Statement(1)
<PAGE>
10.14 Amendment No. 1 to Amended and Filed as Exhibit 10.24
Restated Shareholders the Registration
Agreement, dated January 24, 1994 Statement
10.15 Amendment No. 2 to Amended and Filed as Exhibit 10.5
Restated Shareholders Agreement, to the Form 10-Q filed
dated June 29, 1995 July 28, 1995
10.16 Amended and Restated Registration Filed as Exhibit 10.16
Rights Agreement dated November to the Registration
2, 1993 Statement
10.17 Amendment No. 1 to Amended and Filed as Exhibit 10.25
Restated Registration Rights to the Registration
Agreement, dated January 24, Statement
1994
10.18 Amended and Restated Employee Filed as Exhibit 10.17
Stock Option Plan to Form 10-K filed
December 26, 1996
10.19 Stock Option Grant to Filed as Exhibit 10.7
Independent Directors to Form 10-Q filed
July 28, 1995
10.20 Securities Purchase Agreement Filed as Exhibit 99.1 to
dated April 16, 1997, by and Form 8-K filed
between Telular Corporation and April 25, 1997
purchasers of the Series A
Convertible Preferred Stock
<PAGE>
10.21 Registration Rights Agreement Filed as Exhibit 99.3 to
dated April 16, 1997, by and Form 8-K filed
between Telular Corporation and April 25, 1997
purchasers of the Series A
Convertible Preferred Stock
10.22 Securities Purchase Agreement Filed as Exhibit 99.3 to
dated June 6, 1997, by and Registration Statement on
between Telular Corporation and Form S-3, Registration
purchasers of the Series A No. 333-27915, as amended
Convertible Preferred Stock by Amendment No. 1 filed
June 13, 1997, and further
Amended by Amendment
No. 2 filed July 8, 1997
(Form S-3)
10.23 Registration Rights Agreement Filed as Exhibit 99.4 to
dated June 6, 1997, by and Form S-3
between Telular Corporation and
purchasers of the Series A
Convertible Preferred Stock
10.24 Agreement and Plan of Merger by Filed as Exhibit 10.21
and among Wireless Domain to Form 10-K filed
Incorporated (formerly TelePath), December 19, 1998
Telular-WD (a wholly-owned
subsidiary of Telular) and
certain stockholder of Wireless
Domain Incorporated
10.25 Employment Agreement with Daniel Filed as Exhibit 10.22
D. Giacopelli to Form 10-Q filed
February 13, 1998
<PAGE>
10.26 Employment Agreement with Robert Filed as Exhibit 10.23
C. Montgomery to Form 10-Q filed
February 13, 1998
10.27 OEM Equipment Purchase Agreement Filed herewith (1)
for WAFU dated April 30, 1999
11 Statement regarding computation Filed herewith
of per share earnings
27 Financial data schedule Filed herewith
(1) Confidential treatment granted with respect to redacted
portions of documents.
Exhibit (11) - Statement Re: Computation of Earnings Per Share and
Pro Forma Earnings Per Share (1999)
<TABLE>
<CAPTION> Three Months Ended
June 30,
1999 1998
-------------- -------------
<S> <C> <C>
Average number of shares outstanding 8,989,930 8,385,882
============== =============
Net loss $ (3,216,000) $ (2,549,000)
Less: cumulative dividend on
redeemable preferred stock $ (168,000) $ (222,000)
-------------- -------------
Loss applicable to common shares $ (3,384,000) $ (2,771,000)
============== =============
Net loss per share $ (0.38) $ (0.33)
============== =============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 10739
<SECURITIES> 0
<RECEIVABLES> 8957
<ALLOWANCES> 345
<INVENTORY> 9419
<CURRENT-ASSETS> 29852
<PP&E> 11231
<DEPRECIATION> 5616
<TOTAL-ASSETS> 39356
<CURRENT-LIABILITIES> 8830
<BONDS> 0
13513
0
<COMMON> 93
<OTHER-SE> 16920
<TOTAL-LIABILITY-AND-EQUITY> 39356
<SALES> 9896
<TOTAL-REVENUES> 10684
<CGS> 9584
<TOTAL-COSTS> 9584
<OTHER-EXPENSES> 4101
<LOSS-PROVISION> 215
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3216)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3216)
<DISCONTINUED> 0
<EXTRAORDINARY> (168)
<CHANGES> 0
<NET-INCOME> (3384)
<EPS-BASIC> (0.38)
<EPS-DILUTED> (0.38)
</TABLE>
Exhibit 10.27
CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR PORTIONS OF THIS
EXHIBIT, WHICH PORTIONS HAVE BEEN
OMITTED FROM THE ATTACHED EXHIBIT
AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION. THE OMITTED
PORTIONS HAVE BEEN REPLACED BY AN X
ENCLOSED BY BRACKETS ([X]).
Motorola - Buyer
OEM EQUIPMENT PURCHASE AGREEMENT FOR WAFU
This Agreement is entered into as of the 30 day of April, 1999
between Motorola, Inc. through its Network Solutions Sector, with
offices at 1475 West Shure Drive, Arlington Heights, Illinois 60004
(Motorola) and Telular, Inc., with offices at 647 North Lakeview
Parkway, Vernon Hills, IL 60089 (Buyer).
1. PRODUCTS AND PRICES. Buyer agrees to purchase and Motorola
agrees to sell Products during the term of this Agreement under
the terms and conditions set forth in this Agreement. The
Products and the applicable prices are as set forth in Attachment
A.
2. SPECIFICATIONS AND CHANGES TO SPECIFICATIONS. The Products are
warranted, under the terms of Attachment B, Limited Commercial
Warranty, to comply with Motorola's applicable specifications,
which are set forth in Attachment C, (the Specifications).
Motorola will obtain Buyer's written approval before implementing
in the Products any change to the Specifications that materially
adversely affects the Products' compatibility with Compatible
Products (as hereinafter defined), performance, features or
physical appearance. Motorola otherwise reserves the right to
make changes to the Products. Compatible Products shall mean the
RJ11 connector and the RJ45 connector (each, as more fully
described in Attachment C to this Agreement) and Lucent and
Motorola infrastructure equipment. Motorola agrees to provide
updated, completed product literature to Telular within thirty
(30) days of commercial shipment of the Product(s) to the field,
to reflect any changes implemented in the Product(s).
3. TERM. The term of this Agreement will commence as of the date
set forth above and will terminate 60 months later, subject to
earlier termination as provided in this Agreement.
4. ORDERS. Buyer may issue orders to Motorola under the terms of
this Agreement. The only effect of any terms and conditions in
Buyer's orders or elsewhere will be to request the time and place
of delivery and number of units to be delivered, subject to
Motorola's acceptance, but they will not change, alter or add to
these terms and conditions in any other way. Orders are also
subject to the terms in Attachment E, Unit Forecasting Process -
Telular/Motorola.
5. EXPORT CONTROLS: Buyer agrees to comply with applicable export
laws, regulations and orders. Specifically, but without
limitation, Buyer agrees that it will not resell, reexport or
ship, directly or indirectly, any Product, or technical data in
any form without obtaining appropriate export or reexport license
from the United States Government. Buyer acknowledges that the
export laws, regulations and orders applicable to Products may
differ from item to item and/or from time to time. Buyer agrees
that violation of any provision of this Paragraph will constitute
just cause for immediate termination of the Agreement by Motorola
without liability to Buyer.
<PAGE>
6. [X]
7. DELIVERY AND PAYMENT. (a). All deliveries are FOB Motorola's
plant. Shipping will be to Buyer's designated location at
Telular, 647 North Lakeview Parkway, Vernon Hills, and IL 60061,
with shipping charges prepaid and invoiced to Buyer. The parties
agree that orders shall be shipped in accordance with the chart
titled Factory Delivery Schedule contained in Attachment E.
Subject to Motorola's approval of Buyer's credit, each such
delivery will be separately invoiced and payment from Buyer will
be due thirty (30) days from the date thereof without regard to
other deliveries. -IN NO EVENT WILL MOTOROLA BE LIABLE FOR
INCREASED COST, LOSS OF PROFITS OR GOOD WILL OR ANY OTHER
INCIDENTAL OR CONSEQUENTIAL DAMAGES due to late delivery or non-
delivery of the Products. Motorola reserves the right, in its
sole discretion, to change Buyer's credit limit or to impose
credit terms, including without limitation the requirement that
Buyer provide an acceptable letter of credit or make full or
partial advance payment, as conditions to Motorola's acceptance
of any order or the delivery of any Products. In the event Buyer
has not made payment to Motorola of any amount due in accordance
with the applicable payment terms, Motorola, at its option, may
offset such amount against any payments due or that become due
from Motorola (or its affiliates) to Buyer, including without
limitation, payment due Buyer under the Motorola-Telular Cross
Licensing Agreement dated March 23, 1990, Amendment Number 1,
dated August 24, 1992, Amendment Number 2, dated August 24, 1992
and Amendment Number 3, dated September 20, 1993. Buyer
authorizes any such offset and agrees that upon such an offset,
the amount offset will be deemed to have been paid Buyer. (b).
Title to the Products sold will pass to Buyer at the FOB point.
(c). Buyer hereby grants to Motorola a security interest and
lien upon Buyer's Products which shall extend only until the
applicable Products are paid for by Telular. Buyer agrees to
cooperate in whatever manner necessary to assist Motorola in
perfecting and recording such security interest and lien upon
request.
8. PRODUCT MODIFICATIONS. Buyer represents and agrees that the
Products do not require mechanical or electrical alteration. Any
modifications or alterations to the Products could void
Motorola's obligations under the Limited Commercial Warranty (see
Attachment B, IV (c)). In addition, modifications or alterations
to the Products could affect the reparability of Products by the
Motorola Repair Center.
9. TECHNICAL ASSISTANCE. Motorola's Limited Commercial Warranty
will not be enlarged by, and no obligation or liability will
arise out of, Motorola's rendering of technical advice,
facilities or service in connection with Buyer's purchase of
Products. Buyer represents and agrees that the Product design
does not require customization of Product by Motorola or Motorola
engineering support. Buyer will provide first-line technical
and service support for Products. However, Motorola will provide
back-up technical support directly to Telular and not to
Telular's customers when necessary from its technical service
center at Motorola Inc., Network Solutions Sector, technical
services center. Buyer will be solely responsible for arranging
for onsite service, installation, maintenance, and programming of
the Products. Engineering support is not included under this
Agreement; however, Motorola may, in its discretion, make
engineering support available to Buyer by separate agreement that
may also involve additional charges.
10. CONTINUATION OF SUPPLY: Motorola agrees that in the event it
shall cease manufacturing the Products or products equivalent to
the Products, Motorola shall use its best efforts to obtain,
engage or otherwise provide for an alternate source (which may
include without limitation, a sector, group or division of
Motorola other than the Network Solutions Sector) to supply to
Buyer such Products. If Motorola is unable to do so, Motorola
agrees to take reasonable actions to enable Buyer to have the
Products manufactured by an alternative source.
<PAGE>
11. INTEROPERABILITY TESTING. Motorola agrees to have every revision
of the Product delivered to Telular interoperability tested for
standard CDG stage 2 on a minimum of Motorola and Lucent
infrastructure. Completed results from these tests and any CDG
stage 2 interoperability tests with other infrastructure
providers which Motorola may undertake in its sole discretion
will be forwarded to Telular. This Agreement is initially based
on Rev 2.3 including analog fax.
12. COMPLIANCE TESTING. Telular agrees to perform a compliance test
by Telular for each new customer for which an order is received.
Orders will not be accepted until this compliance testing is
successfully completed. All trouble reports generated in this
process will be reported to Motorola technical service center.
Motorola will advise Telular within thirty (30) days of any
actions that may be implemented.
13. WARRANTY. Motorola warrants the Products, in accordance with its
Limited Commercial Warranty attached to this Agreement as
Attachment B, to Buyer only and to no other party. Motorola
makes no representation or warranty of any other kind, express or
implied. MOTOROLA SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. Buyer
understands and agrees that Motorola will not be responsible in
any way for any warranty which Buyer may extend to its customers
except as provided in Attachment B.
14. RESTRICTIONS ON QUANTITY OF SALES. Telular agrees that it may
not sell more than [X] units that it purchases in 1999 and 2000
from Motorola at [X] per unit in the aggregate to an operator.
15. FORCE MAJEURE. Motorola will not be liable for any delay or
failure to perform due to any cause beyond its control. Causes
include but are not limited to strikes, acts of God, acts of
Buyer, interruptions of transportation or inability to obtain
necessary labor, materials or facilities, or default of any
supplier. The delivery schedule will be considered extended by a
period of time equal to the time lost because of any excusable
delay.
16. PATENT AND COPYRIGHT INDEMNIFICATION. (a). Motorola agrees to
defend, at its expense, any suits against Buyer based upon a
claim that any Product(s) furnished hereunder directly infringes
a U.S. patent or copyright and to pay costs and damages finally
awarded in any such suit, provided that Motorola is notified
promptly in writing of the suit and at Motorola's request and at
its expense is given control of said suit and all requested
assistance for defense of same. Buyer agrees that if any
Product(s) furnished hereunder becomes or in Motorola's opinion
is likely to be the subject of such a claim or is enjoined as a
result of such suit, Buyer will permit Motorola at its option and
at no expense to Buyer, (i) to obtain for Buyer the right to use
or sell said Product(s); or (ii) to substitute an equivalent
product reasonably acceptable to Buyer and extend this indemnity
thereto; or (iii) if neither of the foregoing options are
available on terms which are reasonable in Motorola's judgment,
Motorola will accept the return of Product(s) and reimburse Buyer
the purchase price therefor, less a reasonable charge for
reasonable wear and tear. This indemnity does not extend to any
suit based upon any infringement or alleged infringement of any
patent or copyright by the alteration of any Product(s) furnished
by Motorola or by the combination, operation or use of any
Products(s) furnished by Motorola with other elements nor does it
extend to any products(s) of Buyer's own design, specification or
formula. The foregoing states the entire liability of Motorola
for patent or copyright infringement. (b). IN NO EVENT WILL
MOTOROLA BE LIABLE FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES
ARISING FROM INFRINGEMENT OR ALLEGED INFRINGEMENT OF PATENTS,
TRADEMARKS OR COPYRIGHTS.
<PAGE>
17. LOGOS, TRADEMARKS AND USE OF MOTOROLA NAME (a) Some Products will
carry Buyers designated logo and trade name or such other logo or
trade name, and may be marketed by Buyer as such. (b) Some
Products will be marked with Motorola's logos, trademarks, and or
tradenames as Motorola deems appropriate. In order that Motorola
may protect its trademarks, trade names, corporate slogans,
corporate logo, goodwill and product designations, Buyer, without
the express written consent of Motorola, will have no right to
use any such marks, names, slogans or designations of Motorola in
the sale, lease or advertising of any products or on any product
container, component part, business forms, sales, advertising and
promotional materials or other business supplies or material,
whether in writing, orally, or otherwise. Except as provided for
in Attachment D, Buyer further agrees not to advertise or
otherwise publicly disclose that Motorola is the manufacturer or
supplier of the Products.
18. LICENSE DISCLAIMER. Nothing contained herein will be deemed to
grant either directly or by implication, estoppel, or otherwise,
any license under any patents, copyrights, trademarks or trade
secrets of Motorola.
19. TAXES. Buyer agrees (i) to pay and be responsible for all taxes
imposed by any federal, state, county or local governmental
authority with respect to the Products or upon the ordering,
purchase, sale, ownership, delivery, leasing, possession, use,
operation, return or other disposition thereof, excepting
federal, state, county or local taxes based on or measured by the
net income of Motorola or (ii) prior to shipment, to provide
Motorola with a valid certificate of exemption acceptable by the
appropriate taxing authority.
20. LIMITATION OF LIABILITY. EXCEPT FOR PERSONAL INJURY, MOTOROLA'S
TOTAL LIABILITY WHETHER FOR BREACH OF CONTRACT, WARRANTY,
NEGLIGENCE, STRICT LIABILITY IN TORT OR OTHERWISE, IS LIMITED TO
THE PRICE OF THE PARTICULAR PRODUCTS SOLD HEREUNDER WITH RESPECT
TO WHICH LOSSES OR DAMAGES ARE CLAIMED. BUYER'S SOLE REMEDY IS
TO REQUEST MOTOROLA AT MOTOROLA'S OPTION TO EITHER REFUND THE
PURCHASE PRICE, REPAIR OR REPLACE PRODUCT(S) THAT ARE NOT AS
WARRANTED. IN NO EVENT WILL MOTOROLA BE LIABLE FOR ANY LOSS OF
USE, LOSS OF TIME, INCONVENIENCE, COMMERCIAL LOSS, LOST PROFITS
OR SAVINGS OR OTHER INCIDENTAL OR CONSEQUENTIAL DAMAGES TO THE
FULL EXTENT SUCH MAY BE DISCLAIMED BY LAW. NO ACTION WILL BE
BROUGHT FOR ANY BREACH OF THIS AGREEMENT MORE THAN ONE (1) YEAR
AFTER THE ACCRUAL OF SUCH CAUSE OF ACTION EXCEPT FOR MONEY DUE
UPON OPEN ACCOUNT.
21. PARTY RELATIONSHIP. This Agreement does not create any agency,
joint venture or partnership between Buyer and Motorola. Buyer
will not impose or create any obligation or responsibility,
express or implied, or make any promises, representations or
warranties on behalf of Motorola, other than as expressly
provided herein.
22. TYPE APPROVAL. Under Paragraph 2, Attachment C and Attachment B,
the Products are warranted to comply with certain type approval
requirements which are referenced in the Specifications. Buyer
will be solely responsible for all other type approval and
registration requirements, including without limitation such
requirements that apply to the Product.
<PAGE>
23. TERMINATION. (a). Either party will be considered to be in
default if any of the following occurs: (i) it assigns this
Agreement or any of its rights under this Agreement in violation
of Paragraph 27; (ii) it fails to perform any material obligation
under this Agreement; (iii) it makes an assignment for the
benefit of its creditors, or a receiver, trustee in bankruptcy or
similar officer is appointed to take charge of its assets; (iv)
it files for relief under state or federal bankruptcy laws; or
(v) there is a substantial change in its control and in the case
of Telular, the change of control is through a transaction with a
competitor of Motorola. (b). If Telular is not in default
pursuant to the foregoing sentence, Motorola will be considered
in default if it fails to deliver duly ordered Products within
thirty (30) days of the time periods described in the Factory
Delivery Schedule set forth in Attachment E. (c). In the event
of a default, the non-defaulting party may terminate this
Agreement by notice if the other party has not cured the default
within 30 days after its receipt of notice of default. (d).
Nothing contained in this Agreement will be deemed to create any
express or implied obligation on either party to renew or extend
this Agreement or to create any right to continue this Agreement
on the same terms and conditions contained in it. All sums owed
by either party to the other under this Agreement will become due
and payable immediately upon the termination or expiration of
this Agreement.
24. U.S. GOVERNMENT SALES. In the event that Buyer elects to sell
Motorola products or services to the U.S. Government or any
foreign, state, county, municipal or other governmental entity,
or to a prime contractor selling to any such governmental entity,
Buyer remains solely and exclusively responsible for compliance
with all procurement statutes and regulations governing such
sales. Motorola makes no representations, certifications or
warranties whatsoever with respect to the ability of its goods,
services or prices to satisfy any such statutes or regulations.
Failure of Buyer to conduct any sales to such a government entity
or to such a prime contractor in strict accordance with
applicable laws and regulations will constitute a default under
this Agreement.
25. DISPUTE RESOLUTION. Motorola and Buyer will attempt to settle
any claim or controversy arising out of this Agreement through
consultation and negotiation in the spirit of mutual friendship
and cooperation. If such attempts fail, then the dispute will be
mediated by a mutually acceptable mediator to be chosen by
Motorola and Buyer within 45 days after notice by one of the
parties demanding such mediation. Neither party may unreasonably
withhold consent to the selection of a mediator, and the parties
will share the costs of the mediation equally. The parties may
also agree to replace mediation with some other form of non-
binding alternative dispute resolution, such as neutral fact-
finding or a mini-trial. Any dispute which the parties cannot so
resolve between themselves within six months of the date of the
initial demand by any party will be finally determined by
judicial proceedings. The use of such a procedure will not be
construed to affect adversely the rights of any party under the
doctrines of laches, waiver or estoppel. Nothing in this
Paragraph will prevent either party from resorting to judicial
proceedings if (a) good faith efforts to resolve a dispute under
these procedures have been unsuccessful or (b) interim resort to
a court is believed necessary to prevent serious and irreparable
injury to that party or others.
26. CONFIDENTIALITY. The parties agree that the existence and types
of products, quantities, prices, and dates in this Agreement are
confidential and will not be disclosed by either party to third
parties, and will only be disclosed to their own employees on a
need to know basis; provided that subject to Motorola's prior
written approval, Buyer may disclose such information as may be
required for public securities filings. The confidentiality
obligations of the parties shall survive termination of this
Agreement for twelve (12) months.
<PAGE>
27. NOTICES. Any notices given under this Agreement must be in
writing and be either delivered personally or sent by certified
mail, return receipt requested, addressed to the appropriate
party at the address stated on the first page of this Agreement
(or to a new address provided by notice to the other party) and
will be effective upon receipt or at such time as delivery is
refused upon presentation.
28. GENERAL. This Agreement constitutes the entire and final
expression of agreement between the parties pertaining to the
subject matter thereof and supersedes all prior and
contemporaneous negotiations, offers, discussions, arrangements,
promises, representations, agreements, letters of intent or
understandings of the parties whether written, oral or otherwise,
in connection therewith. The parties agree that, although this
Agreement makes reference to the Motorola-Telular Licensing
Agreement dated March 23, 1990 the subject matter of this
Agreement does not include the subject matter of the Motorola-
Telular Cross Licensing Agreement dated March 23, 1990 and this
Agreement in no way supersedes the Motorola-Telular Cross
Licensing Agreement dated March 23, 1990. No alterations or
modifications of this Agreement will be binding upon either Buyer
or Motorola unless made in writing and signed by an authorized
representative of each. If any term or provision of this
Agreement is to any extent held by a court or other tribunal to
be invalid, void or unenforceable, insofar as it is in conflict
with law, the remaining rights and obligations of the parties
will be construed and enforced as if the Agreement did not
contain the particular term or provision held to be invalid, void
or unenforceable. No assignment of this Agreement or of any
right granted therewith will be made by Buyer without the prior
written consent of Motorola. The failure of any party to
enforce, at any time, any provision of this Agreement will not be
construed as a waiver of such provision or of the right of any
party thereafter to enforce such provision. This Agreement will
be enforced and construed in accordance with the laws of the
State of Illinois.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives.
SELLER: BUYER:
MOTOROLA, INC., by and through its TELULAR, INC.
Network
Solutions Sector
By: /s/ Daniel Coombes By: /s/ Robert Montgomery
Title: SR VP & GM Title: Exec VP and COO
Date: 4/30/99 Date: 5/3/99
Attachments
A. Products and Prices
B. Limited Commercial Warranty
C. Specifications
D. Policy for the Use of Motorola Name/Trademarks and Product
Descriptions
E. Unit Forecasting Process - Telular/Motorola
<PAGE>
Attachment A
Motorola - Telular
Confidential and Proprietary
CDMA Fixed Wireless Terminals, Accessories and Services
Price List
Products
----------
Model: ST1056 800MHz FWT
ST1001 1.9GHz FWT
Includes: Battery, power supply, spike, antenna, bracket,
instruction manual, plain box.
Unit Pricing
Quantity 1999
-------- -----
[X] [X]
[X] [X]
*Up to [X] units not purchased or shipped in year 1999 will be
available for purchase in year 2000 at the price of [X]
Quantity 2000 2001 2002
-------- ----- ----- -----
[X] [X] [X] [X]
[X] [X] [X] [X]
Accessory Pricing:
Model: ST1006 Field Programming Kit (Two required per 1,000 FWTs)
Includes: 5 PC to FWT Programming Cables, 5 DB9M/DB25F Connector
Adapters, & 10 Pigtail Cables
Price: [X]
Note: This pricing is valid for the accessories relating to the
[X] FWTs purchased during 1999 and 2000 for [X]. Standard
pricing will apply to other purchases.
Model: STKF4001 Digital Data Cable
Price: [X]
Model: STNN4003 Lead Acid Battery
Price: [X]
Models: STLN4123B, STLN4124B, STLN4125B, STLN4126B, STLN4127B,
STLN4128B Power Cube
Price [X]
Services:
Technical Training 2 classes of 8 participants.
Sales Training 2 classes of 8 participants.
All other subsequent training classes will be charged at Motorola's
standard pricing.
<PAGE>
ATTACHMENT B
Motorola - Buyer
LIMITED COMMERCIAL WARRANTY
I. WHAT THIS WARRANTY COVERS AND FOR HOW LONG:
MOTOROLA, INC. (Motorola) warrants that the Products (including
accessories) shall comply with the applicable Specifications and shall
be free from defects in material and workmanship under normal use and
service for a period of fifteen (15) months from date of shipment.
Motorola, at its option, shall at no charge either repair. replace or
refund the purchase price of the Product during the warranty period,
provided it is returned by Buyer in accordance with the terms of this
warranty to the Motorola Network Solutions Sector Repair center.
Repair or replacement, at Motorola's option, may include the
replacement of parts, boards or Products with functionally equivalent
reconditioned items. Repaired and replacement items are warranted for
the balance of the original warranty period. All replaced items shall
become the property of Motorola. Such action on the part of Motorola
shall be the full extent of Motorola's liability hereunder, and Buyers
exclusive remedy. Buyer shall be responsible for all costs and
expenses incurred by Buyer including without limitation any handling,
labor or transportation charges. This express warranty Is extended by
Motorola, Inc., 1475 W. Shure Drive, Arlington Heights, Illinois
60004, to Buyer only and not to Buyer's customers or users of Buyer's
Products.
II. HOW TO OBTAIN WARRANTY SERVICE
Product covered under this warranty shall only be accepted from and
returned to Buyer's central warranty depot. Buyer's dealers,
distributors, agents, and end users cannot submit items to Motorola's
Network Solutions Sector Repair center or other authorized Motorola
cellular Warranty centers under this warranty. To receive warranty
service, the defective or non-compliant Product should be sent by
Buyer freight pre-paid to: Motorola Network Solutions Sector Repair
Center, accompanied by a completed Motorola Repair Processing Form to
the address designated in such Form. Blank forms shall be supplied to
Buyer by Motorola on request.
III. WARRANTY CONDITIONS:
This is the complete warranty for the Products manufactured by
Motorola and sold to Buyer. Motorola assumes no obligation or
liability for additions or modifications to this warranty unless made
in writing and signed by an officer of Motorola. Unless made in
separate written agreement between Motorola and Buyer, Motorola does
not warrant the installation, field maintenance or service of the
Products or parts.
Motorola cannot be responsible in any way for any ancillary equipment
not furnished by Motorola which is attached to or used in connection
with the Products or for operation of the Products with any ancillary
equipment and all such equipment is expressly excluded from this
warranty. Furthermore, Motorola cannot be responsible for any damage
to the Products resulting from the use of ancillary equipment not
furnished by Motorola for use with the Products.
When the Product is used in conjunction with ancillary or peripheral
equipment not manufactured by Motorola, Motorola does not warrant the
operation of the Product/peripheral combination, and Motorola shall
honor no warranty claim where the Product is used in such a
combination and it is determined by Motorola that there is no fault
with the Product. Motorola disclaims liability for range, coverage,
availability, or operation of the Cellular System which is provided by
the Carrier.
<PAGE>
IV. WHAT THIS WARRANTY DOES NOT COVER:
(a) Defects, non-compliance or damage resulting from use of the
Product in other than its normal and customary manner. (b) Defects,
noncompliance or damage from misuse, accident or neglect. (c) Defects,
noncompliance or damage from improper testing, operation, maintenance,
installation, adjustment, or any alteration or modification of any
kind. (d) Product disassembled or repaired in such a manner as to
adversely affect performance or prevent adequate inspection and
testing to verify any warranty claim. (e) Product which has had the
serial number removed or made illegible. (f) Defects, non-compliance
or damage due to spills of food or liquid. (g) All plastic surfaces
and all other externally exposed parts that are scratched or damaged
due to customer normal use. (h) Product rented. (i) Costs and
expenses, including without limitation handling, labor and
transportation, incurred in returning Product for warranty service to
Motorola's Network Solutions Sector Repair Center.
V. GENERAL PROVISIONS:
THIS WARRANTY IS GIVEN IN LIEU OF ALL OTHER EXPRESS WARRANTIES.
IMPLIED WARRANTIES, INCLUDING WITHOUT LIMITATION IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE DISCLAIMED.
FURTHER, AS THE CELLULAR CARRIER IS NOT CONTROLLED BY MOTOROLA, NO
WARRANTY IS MADE AS TO COVERAGE, AVAILABILITY OR GRADE OF SERVICE
PROVIDED BY THE CELLULAR CARRIER. IN NO EVENT SHALL MOTOROLA BE
LIABLE FOR DAMAGES IN EXCESS OFTHE PURCHASE PRICE OF THE PRODUCT, FOR
ANY LOSS OF USE, LOSS OF TIME, INCONVENIENCE, COMMERCIAL LOSS, LOST
PROFITS OR SAVINGS OR OTHER INCIDENTAL, SPECIAL OR CONSEQUENTIAL
DAMAGES ARISING OUT OF THE USE OR INABILITY TO USE SUCH PRODUCT. TO
THE FULL EXTENT SUCH MAY BE DISCLAIMED BY LAW.
VI. SOFTWARE PROVISIONS:
Laws in the United States and other countries preserve for Motorola
certain exclusive rights for copyrighted Motorola software such as the
exclusive rights to reproduce in copies and distribute copies of such
Motorola software. Motorola software may be copied into, used in and
redistributed with only the Product associated with such Motorola
software. No other use, including without limitation, disassembly of
such Motorola software or exercise of exclusive rights in such
Motorola software is permitted.
<PAGE>
ATTACHMENT C
Motorola - Buyer
SPECIFICATIONS
Item 1 ST1056 800MHZ FWT; ST1001 1.9GHZ FWT
Item 2 ST1006 Field Programming Kit
Item 3 STKF4001 Digital Data Cable
Item 4 STNN4003 Lead Acid Battery
All information is provided on a Non-Disclosure, limited
distribution basis.
Item 1: ST1056A 800MHZ FWT; ST1001A 1.9GHZ FWT Attachment C
Section 2: CDMA FWT Technical Specifications
The purpose of this section is to describe or define the
minimum performance specifications of a Motorola CDMA FWT. Some
features require infrastructure support to be fully utilized.
2.1 FWT General Characteristics _ ST1056A 800MHZ FWT; ST1001A 1.9GHZ FWT
Table 2.1.1: FWT General Characteristics and Features
Category Units Description
----------------- ------------ ---------------------------
Unit Summary ********* ****************
Indoor Unit Yes Stylish Molded Housing
Single Line Unit Yes Supports a single telephone
line.
Programming/Test Port1 Yes Via the RJ-11 jack using
Motorola's custom FWT-PDS
software.
Installation Support Yes FWT Programming and
Tools2 Diagnostics Software,
Motorola custom RJ-11
electronic interface cable,
and PC with a suitable
serial port.
Post Origination DTMF Yes Processes DTMF for
Tones transmission over the air
from FWT to land only.
Hook Flash support Yes On/Off hook transition
utilized to engage system
features such as call
waiting, call forwarding.
<PAGE>
Coverage Measurement Yes When placed into the
Indicator2 coverage measurement mode,
Note: This feature is the service LED on the top
currently available of the unit represents a
only while using the relative RF coverage level
FWT in the Local by flashing at different
dialtone mode. rates. The more frequent
the flashes the occur, the
better the coverage. See
installation manual for
details.
Visual Indicators Yes SERVICE LED:
(LED's) - Green ON: Detects CDMA
carrier
- OFF: Out of service or
service is unavailable
POWER/FAILURE LED
- Green ON
Steady: No faults
present & operating from
an external power source
Slow blink: Operating from
battery
Fast blink: Operating from
low battery
- Red ON: Failure Fault
detected
- Red Slow Blink:
Indicates a dead battery
Distinctive Ringing and Yes Programmable 15-65 Hz.
Cadence (default 20 Hz).
Local Dial Tone Yes Programmable (default
Bellcore).
Registration Yes Time based
Hand-off Yes Supports hard, soft, and
softer hand off.
Note 1: FWT-PDS software and RJ-11 electronic interface cable not
included.
Note 2: Requires appropriate software license.
All information is provided on a Non-Disclosure, limited
distribution basis.
<PAGE>
Item 1: ST1056A 800MHZ FWT; ST1001A 1.9GHZ FWT Attachment C
Table 2.1.2: FWT Interfaces and Standards
Category Range- Description
Units
-------------------- ------- -------------------------
Physical Interfaces ******** *****************
Antenna Connection TNC receptacle, 50 ohms.
TELCO Generic 6 pin modular
receptacle is used to
support the RJ12 interface.
Method of Interface Loop start tip and ring via
RJ-12.
Ground start is not
supported.
Main Power Jack for Coaxial DC receptacle, 5.5
Wall Cube or other mm external, 2.1mm internal
approved power sources. contact. Center positive
Auxiliary Power Input Standard 2 pin MOLEX
Jack receptacle, standard 0.100"
For battery connections center spacing.
only.
Battery On/Off Switch Toggle type. Allows manual
control to disable battery
powered operation.
Technology ******** ************
Speech coding technique 8K or 13K QCELP, or 8K EVRC
Speech vocoder rates Kbps 8 Kbps or 13 Kbps
RF modulation type QPSK for Forward Link, OQPSK
for Reverse Link
Multiple access type No CDMA only. (Analog hand
down not allowed).
Authentication IS-95A (ST1056)
technique J-STD-008 (ST1001)
Encryption technique Inherent within IS-95A and
J-STD-008
Standards ********* **********
IS-95A CDMA Air Yes Supports 8K & 13K CDMA Only,
Interface with TSB-74 dual mode operation such as
(ST1056) AMPs/NAMPs is not supported.
J-STD-008 (ST1001)
IS-96-A Service Option 1 Yes 8K QCELP voice service
IS-127 Service Option 3 Yes 8K EVRC voice service
IS-733 Service Option 17 Yes 13K QCELP voice service
IS-98A Mobile RF Yes Supports CDMA Only, dual
Minimum Standards mode operation such as
(ST1056) AMPs/NAMPs is not supported.
J-STD-008 (ST1001)
IS-126-A Yes Digital loop back. Requires
Service Option 2 (8K) infrastructure system
Service Option 9 (13K) support and FWT PDS
connection.
<PAGE>
UL1492/CSA-C22.2 No. 1 Yes Safety standards used for
Standard for Safety of Cellular Phones.
Audio-Video Products
and Accessories.
EMI FCC part. Yes Part 15, Subpart J.
Compliant with select Yes Requires infrastructure
CDMA support for full utilization
Development Group Stage
2 tests.
Compliant with select Yes Requires infrastructure
CDMA Development Group support for full utilization
Stage 3 tests.
Caller ID Yes Requires a compatible
Per Bellcore GR-30-CORE external viewing device and
infrastructure support for
message delivery.
Note: While in a call, the
FWT will not deliver the ID
information for call waiting.
All information is provided on a Non-Disclosure, limited
distribution basis.
Item 1: ST1056A 800MHZ FWT; ST1001A 1.9GHZ FWT Attachment C
Table 2.1.3: FWT Mechanical Characteristics
Category Range- Description
Units
---------------------- ------- ----------------------
Environmental ******** *********
Operating Temperature .C [X] ambient (indoor)
Range (min/max) Battery derating required at
above [X]
Humidity % [X] RH, non condensing
Installation ******** **************
Optimal installation See installation manual for
proper installation
procedures.
Installation density A minimum distance of 3
(co-existence) meters should be maintained
between two or more FWTs
installed in the same
location.
Physical ********* ************
Physical dimensions (h mm 61 mm high x 215 mm wide x
x w x d) 165 mm long (w/o antenna) or
[2.4" x 8.5" x 6.5"]
Weight Kg <1.6 Kg with the internal
battery
Mounting technique Desk top or wall mounted.
An optional high security
mounting bracket option is
available.
(See Security Below)
<PAGE>
Mounting recommendation Near a window sill or ledge
favoring the CDMA system.
Desk mount Yes Integral feet.
Wall mount Yes Integral Mounting Tabs.
Security Yes Optional Steel wall mounting
bracket with pad locking tabs.
Unit Color Ivory over Gray.
All information is provided on a Non-Disclosure, limited
distribution basis.
Item 1: ST1056A 800MHZ FWT; ST1001A 1.9GHZ FWT Attachment C
Table 2.1.4: FWT Power Characteristics
Category Range- Description
Units
--------------------- ----------- -----------------------
Wall Transformer ********** *********
Input voltage range(s). 120V Optional Class II self
Wall cube options are 220V protecting wall cubes are
available with regional 240V sourced to be compatible
plugs and line with regional electric
voltages. UL for utility requirements.
110/120V models CE or
TUV for 220/240V models
Output voltage 14V DC +/- @ 850 milliampere, 100% duty
(nominal) 5% cycle. A standard 5.5 mm
coaxial DC plug with a 2.1mm
positive(+) tip connection
is used.
Reverse Voltage Yes Mechanical Reverse Voltage
Protection Protection
FWT Std Power Input ********* **********
FWT Input Voltage 14V DC to The FWT is specification
nominal 15.5V DC compliant and operates
safely while within these
supply ranges
FWT Lower Voltage Input 10-13.9V The FWT will safely operate
Extreme within these extended ranges
but with reduced battery
charging capacity.
FWT Upper Voltage Input 15.6-18V The FWT will safely operate
Extreme within these extended
ranges.
FWT box power < 8 W < 7 watts typical (TX @ full
dissipation power and full rate)
Auxiliary Power Input ********* *********
Input voltage range 13V Min Designed to be connected to
15V Max an external high capacity
battery. 14V nominal for
spec operation.
<PAGE>
Reverse Voltage Yes Mechanical Reverse Voltage
Protection Protection
Internal Battery ********* *********
Battery Type 12V, 2 Ahr Sealed Lead-Acid
Mechanical Polarity Yes Polarized connector
Reversal
Recharge time 20 hr Max 90% charged at 25C, nominal
line, new battery
Battery Talk Time 2 Hour Min Using fully charged battery,
nominal link power, and 0.42
VAF.
Battery Standby Time 4 Hour Min Using fully charged battery
and non slotted mode
operation. At the end of 4
hours of standby, battery
reserves will support a
single call with a VAF of
0.42 for 3 minutes duration.
Battery Standby Time 8 Hour Min Using fully charged battery
and using slotted mode
operation. At the end of 8
hours of standby, battery
reserves will support a
single call with a VAF of
0.42 for 3 minutes duration.
Low/Dead Battery Yes Blinking Power LED/Blinking
Alarming Red LED
All information is provided on a Non-Disclosure, limited
distribution basis.
Item 1: ST1056A 800MHZ FWT; ST1001A 1.9GHZ FWT Attachment C
Table 2.1.5: FWT Telco Characteristics
Category Range- Description
Units
--------------------- --------- -------------------------
Ringing ********* *********
Battery Backed Ringing Yes
Min Ring Voltage (ac Vrms 40 Vrms @ max loop length &
component) max REN load
Ring Voltage (dc VDC -75 to -21 VDC. -55 VDC
component) typical.
Ring Frequency Hz Type A Ringer: 17 to 23 Hz
(programmable) per FCC part 68.312
Type B Ringer: 15 to 68 HZ
per FCC part 68.312
REN Load (Max)
Type A [X] REN Where 1 REN load = 7000 ohms
Type B [X] REN
<PAGE>
Table 2.1.6: ST 1056 FWT RF Characteristics
Category Range- Description
Units
-------------------- ---------- -------------------------
Functional ********* *********
IS-95-A CDMA Only
IS-98-A CDMA Only
Transmitter ********* *********
Reverse Link frequency MHz 824-849
range
Mobile Station Class Class III
Guaranteed Minimum RF mW 200 mW as defined by IS-98-A
power output section 10.4.5
Channel spacing MHz 1.25 MHz
Receiver ********* *********
Forward Link frequency MHz 869-894
range
All information is provided on a Non-Disclosure, limited
distribution basis.
Item 1: ST1056A 800MHZ FWT; ST1001A 1.9GHZ FWT Attachment C
Table 2.1.7: ST1001 FWT RF Characteristics
Category Range- Description
Units
--------------------- --------- -------------------------
Functional ********* *********
J-STD-008 (ST1001A) CDMA Only
J-STD-018 (ST1001A) CDMA Only
Transmitter ********* *********
Reverse Link frequency MHz 1850-1910
range
Mobile Station Class Class II
Guaranteed Minimum RF mW 200 mW as defined by J-STD-
power output 018 section 4.4.5
Channel spacing MHz 1.25 MHz
Receiver ********* *********
Forward Link frequency MHz 1930-1990 (ST 1001A)
range
All information is provided on a Non-Disclosure, limited
distribution basis.
<PAGE>
Item 1: ST1006AC Field Programming Kit Attachment C
1.1 Field Programming - ST1006C
The FWT is provisioned with the FWT-PDS. Parameters
which require programming before operation include the
Mobile ID, System ID, Network ID, and channel number
assignments. In addition, numerous parameters which
describe how the FWT behaves may be programmed if desired.
Table 1.1.1: FWT Programmer Port Characteristics
Topic of Description Range/Units Method or recommendation
----------------------- ------------- -------------------------
Physical Connection N/A RJ-12 to DB-9, Motorola
electronic programmer cable.
This kit includes a DB9 to
DB25 adapter.
Communications Protocol Asynchronous RS-232 N81
Communications Data 19.2 Kbps
Rate using PDS
Communications Data -8 Kbps
Rate using IS-99 based
OTASD2
Time for PDS to prepare Minutes Dependent on computing
software upgrade file platform speed and available
for local or remote memory it will take from 3
upgrade. to 20 minutes to preprocess
the file.
Typical Time to Upgrade Minutes Less than 15 minutes when
FWT Operating Software done locally. Approximately
[X] when done remotely using
Over-The-Air Software
Download.
Visual Indicators while Yes SERVICE LED:
upgrading (LED's) - Blinks with a 75%
cadence while a software
codeplug download is in
process and the FWT see's
service.
- Blinks with a 25%
cadence while a software
codeplug download is in
progress and the FWT does
not see service.
Time to Provision Minutes Less than 5 minutes when
(excluding upgrade of done locally.
operating software).
Programmer Version Version FWT-PDS V2.10 is backward
2.1 or compatible with the ST1000A
later.
Note 1: When using the Motorola electronic programmer cable, RTS
and DTR must be asserted high and low respectively in
order for the cable to function properly.
Note 2: OTASD requires OPTIONAL infrastructure/network support.
All information is provided on a Non-Disclosure, limited
distribution basis.
<PAGE>
Item 3: STKF4001A Digital Data Cable Attachment C
2.4 Connectors:
2.4.1 Connector A
2.4.1.1 Body material: Natural polycarbonate UL
94V-2 rated\
2.4.1.2 Contact: Phosphor bronze, plated with
0.76 to 1.27 x E-3 MM (30 to 50 micro-
inches) gold over 1.27 to 3.81 x E-3 MM (50
150 micro-inches) nickel.
2.4.1.3 Overmold material: PVC, black color.
2.4.2 Connector B
2.4.2.1 Body material: Nylon, flame retardant,
94V-O rated, glass filled, black.
2.4.2.2 Shell material: Steel, zinc plated and
yellow chromated.
2.4.2.3 Contacts: Beryllium copper or phosphor
bronze, plated with 0.76 to 1.27 x E-3 MM
(30 to 50 micro-inches) gold over 1.27 to
3.81 x E-3 MM (50 to 150 micro-inches)
nickel in contact area, plating in solder of
contact to be in tin lead.
2.4.2.4 Overmold material: PVC, black color.
2.4.2.5 Motorola logo shall be molded in. The
maximum height of the logo embossment shall
be 0.8 MM. The minimum overall dimension of
the logo shall be 5 MM. The placement,
size, and color of the logo shall comply to
Motorola identity guidelines.
2.5 Cable
2.5.1 Jacket material: PVC, black color, matte finish
2.5.2 Conductor: 30 AWG3 conductors of tin plated copper.
2.6 Insulation resistance: 500 ME60HMS minimum between any
two conductors, after one minute electrification at 100
VDC.
2.7 Voltage breakdown: shall withstand 500 VRMS, 60 Hz, for
one minute between any two conductors.
3.0 Performance Requirements:
3.1 Environmental
3.1.1 Operating temperature range: [X]
3.1.2 Storage temperature range: [X]
3.1.3 Humidity range: [X] relative humidity
All information is provided on a Non-Disclosure, limited
distribution basis.
<PAGE>
Item 4: STNN4003A Lead Acid Battery Attachment C
Internal Battery ********** ***********
--------------------- ----------- ---------------------------
Battery Type 12V, 2 Ahr Sealed Lead-Acid
Mechanical Polarity Yes Polarized connector
Reversal
Recharge time 20 hr Max 90% charged at 25C, nominal
line, new battery
Battery Talk Time 2 Hour Min Using fully charged battery,
nominal link power, and 0.42
VAF.
Battery Standby Time 4 Hour Min Using fully charged battery
and non slotted mode
operation. At the end of 4
hours of standby, battery
reserves will support a
single call with a VAF of
0.42 for 3 minutes duration.
Battery Standby Time 8 Hour Min Using fully charged battery
and using slotted mode
operation. At the end of 8
hours of standby, battery
reserves will support a
single call with a VAF of
0.42 for 3 minutes duration.
Low/Dead Battery Yes Blinking Power LED/Blinking
Alarming Red LED
<PAGE>
ATTACHMENT D
Motorola - Buyer
POLICY FOR THE USE OF
MOTOROLA NAME/TRADEMARKS
AND PRODUCT DESCRIPTIONS
I. USE OF THE MOTOROLA NAME/TRADEMARKS
1. Telular shall make no reproduction of the Motorola mark, the
Motorola logo, the stylized M design logo or any stylized
version of the Motorola name.
2. Other than as outlined below, Telular shall make no use of the
Motorola name.
II. PRODUCT PROMOTIONAL LITERATURE
1. In any Telular Fixed Product promotional literature which is
used in connection with Product(s) supplied by Motorola,
Telular may use the following:
This unit is manufactured by Motorola, Inc.
2. When such information statement is used, it shall not be more
prominent than Telular's name and company information.
III. WRITTEN RESPONSE TO BIDS, PROPOSALS, TENDERS
When Telular is required by bid specifications or written
indication from end-user and/or equipment purchasers to
divulge the manufacturer of components within the Telular
Fixed Product, Telular may state that Motorola is the
manufacturer of the fixed product and provide the
Specifications contained in Attachment C.
IV. ADVERTISING. PRESS RELEASES
1. As part of advertising in trade publications of specific
Motorola Product(s) manufactured for Telular under this
Agreement, Telular may use the Motorola name in the manner
outlined in Paragraph II (above), but Telular may not use the
Motorola logo or trademark, or stylized M design logo, or
any stylized version of the Motorola name..
2. Apart from the above, Telular is not authorized to use the
Motorola name, logo, trademark, or stylized M design logo,
in any media advertising or press releases without the express
written consent of Motorola on a case-by-case basis.
V. CUSTOMER PRESENTATIONS
Telular may use the Motorola name in Customer presentations
provided that reference to Motorola is limited to the sentence
highlighted in Paragraph II (above).
<PAGE>
ATTACHMENT E
Motorola - Buyer
UNIT FORECASTING PROCESS - TELULAR/MOTOROLA
The following procedure will be used by Telular to forecast, order and
pay for the Product. The process is designed to allow for the
greatest flexibility possible in maintaining customer delivery
requirements.
1. The central handling point for all scheduling and ordering will
be the Director of Purchasing at Telular. This person, or his
designee, will be responsible for compiling and coordinating all
ordering activity with Motorola on a monthly basis.
2. By the tenth of each month, Telular will provide a firm order
quantity for the following month's requirements for the Products.
Also, a forecast for three additional months will be provided at the
same time.
3. Unless otherwise agreed, the firm order quantity will not vary
from what had been forecasted for that month on the previous month's
schedule by more than [X]. Forecasted months two and three will not
vary by more than [X] from the previous schedule's month three and
four. The fourth month on each schedule is open.
4. Telular, will review all the order quantities in relation to the
previous forecast and advise if any changes are necessary. This
review will be completed by the tenth of the month, in time for the
orders to be placed. Orders will specify quantity and planned
destination, if units are to be drop shipped. If with respect to any
purchase order placed for Products, Telular give notice of
cancellation less than [X] days prior to the scheduled ship date,
Telular shall be charged a cancellation fee of [X] of the purchase
price of the affected Products.
5. Orders will be sent to Telular's designated Motorola sales
representative at, Motorola Inc., NSS, 1701 Golf Road, 8th Floor.
IL35, Rolling Meadows, IL 60008.
6. The Product will then be shipped directly from Motorola to
Telular at 647 North Lakeview Parkway, Vernon Hill, IL 60061 or drop
ship destination; with invoicing sent to Telular, at such address.
Telular is ultimately responsible for timely payment of invoices.
7. Telular will provide a yearly forecast on request with reasonable
notice from Motorola. Motorola commits to the following factory
delivery schedule.
FACTORY DELIVERY SCHEDULE
Quantity Forecasted Product Non-Forecasted
Product
--------- ------------------ --------------------
[X] [X] [X]
[X] [X] [X]
[X] [X] [X]
NOTE: LEAD TIMES REPRESENT DELIVERY TIMING AFTER ORDER ENTRY DATE
<PAGE>
Exhibit 10.8
CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR PORTIONS OF THIS EXHIBIT,
WHICH PORTIONS HAVE BEEN OMITTED FROM
THE ATTACHED EXHIBIT AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
THE OMITTED PORTIONS HAVE BEEN REPLACED BY AN
X ENCLOSED BY BRACKETS ([X]).
AMENDMENT NO. 2 DATED APRIL 30, 1999
TO OPTION AGREEMENT BETWEEN
MOTOROLA, INC. AND TELULAR CORPORATION
This Amendment is effective this day of April 30, 1999, between
Motorola, Inc., a Delaware Corporation, acting by and through its
Network Solutions Sector (hereinafter Motorola), and Telular
Corporation, a Delaware Corporation (hereinafter Telular).
Each of Motorola and Telular may be referred to herein
individually as a Party, or collectively as the Parties.
WHEREAS, on November 10, 1995, Motorola and Telular entered into
an Option Agreement (hereinafter referred to as the Option
Agreement); and
WHEREAS, Motorola and Telular have previously amended the Option
Agreement (Amendment No. 1 dated November 11, 1996);
WHEREAS, Motorola and Telular desire to again amend the Option
Agreement in certain respects;
NOW THEREFORE, in consideration of the mutual obligations
contained herein, the Parties hereby agree as follows:
1. Except as set forth herein, and as contained in Amendment
No. 1, all capitalized terms not defined herein shall have
the meanings given to them in the Option Agreement.
2. The parties agree that payment of $897,794 made by Motorola to
Telular on March 30, 1999, satisfies in full, Motorola's
contractual obligations under paragraph 3 of the Option
Agreement, as amended, and no additional amounts shall be
due and payable by Motorola to Telular pursuant to such
paragraph 3.
3. The Agreement is hereby amended by:
A. Replacing Paragraphs 4.2.1, 4.2.2 and 4.2.3 in the
Option Agreement with a new paragraph 4.2.1 as follows:
4.2.1 The terms and conditions governing the
purchase and sale of WAFU Products by Motorola to
Telular is contained in Attachment 1 to Amendment
No. 2 dated April 30, 1999 to Option Agreement
between Motorola and Telular, entitled OEM
Equipment Purchase Agreement for WAFU, dated
April 30, 1999 (the OEM Agreement).
B. Replacing the second sentence of paragraph 5
in the Option Agreement with a new sentence as
follows:
<PAGE>
Commencing on the date of execution of this
Agreement and ending on the date of expiration of
the patents identified in paragraph 1 of this
Agreement, notwithstanding anything to the
contrary contained in the Motorola Telular Cross
Licensing Agreement dated March 23, 1990, as
amended, the royalty rate for all CDWA WFAUs that
Motorola sells directly to third parties, without
Telular repackaging, is [X], provided, however,
that the royalty rate shall be increased to [X] if
Telular duly terminates the OEM Agreement based on
a default under paragraph 23(b) of such OEM
Agreement.
1. Nothing herein contained shall in any way alter, waive,
annul, vary or affect any terms, conditions or
provisions of the Option Agreement, except as
specifically provided herein, it being the intent of
the parties hereto that all of the terms, conditions
and provisions of the Option Agreement shall continue
in full force and effect, except as specifically
amended.
IN WITNESS WHEREOF, the Parties hereto have caused this
Amendment to be duly executed by their proper and duly
authorized officers as of the day and year first above
written.
MOTOROLA, INC., by and through its TELULAR CORPORATION
Network Solutions Sector
Signature: /s/ Daniel Coombes Signature: /s/ Robert C. Montgomery
Printed/Typed Name: Daniel Coombes Printed/Typed Name: Robert C.
Montgomery
Title: Sr VP & GM
Title: Exec VP and COO
Exhibit 10.11
CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR PORTIONS OF THIS EXHIBIT,
WHICH PORTIONS HAVE BEEN OMITTED FROM
THE ATTACHED EXHIBIT AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
THE OMITTED PORTIONS HAVE BEEN REPLACED BY AN
X ENCLOSED BY BRACKETS ([X]).
AMENDMENT NO. 4
TO
PATENT CROSS LICENSING AGREEMENT
BETWEEN
MOTOROLA, INC.
AND
TELULAR, INC.
EFFECTIVE MARCH 23, 1990,
As amended by
AMENDMENT NOS. 1, 2 and 3
This Amendment No. 4 is made as of the date of the last to
sign below (Amendment No. 4 Execution Date), to the above-
captioned Licensing Agreement between MOTOROLA, INC., a
corporation organized and existing under the laws of the State of
Delaware, United States of America, having its principal place of
business at 1303 E. Algonquin Road, Schaumburg, Illinois 60196
(hereinafter MOTOROLA) and TELULAR, INC., an Illinois
corporation having its principal place of business at 647 North
Lakeview, Vernon Hills, Illinois 60061 (hereinafter TELULAR).
WHEREAS, MOTOROLA and TELULAR wish to amend the above-
captioned Patent Cross-Licensing Agreement in order to amend
definitions therein and to remove restrictions against MOTOROLA
with respect to selling certain products in certain countries.
NOW, THEREFORE, MOTOROLA and TELULAR agree to amend the
Patent Cross-Licensing Agreement as follows:
I. Paragraph 6(b) shall be amended to read:
6. Licensed Product
(b) Integrated Product or Integrated
Transceiver shall mean any Cellular-Type
Transceiver which has a Cellular-Type Interface
integrated into the circuitry of the Cellular-Type
Transceiver or internally coupled thereto, and is
manufactured to be contained within a cabinet or
enclosure as a single unit. The Integrated
Product may be removable coupled to a Booster
Product;
I. Paragraph 7(a) shall be amended to read:
6. Cellular Related Devices
(a) Cellular-Type Transceiver shall mean
any cellular type radio-technology transceiver
device for utilization within a wireless
transmission network, system or technology;
I. Paragraph 10(a)(i) shall be amended to read:
10(a) Geographic Area shall mean the whole world with
the following exceptions:
(i) The license granted in paragraph 14 to
MOTOROLA shall be limited to Accessory Products
and Integrated Products only in Puerto Rico, the
Dominican Republic and the Bahamas. MOTOROLA
shall notify its customers or distributors who
purchase the Accessory Product or Integrated
Product of the limitation contained in this
paragraph with regards to the use of the Accessory
Product or Integrated Product in a Fixed Product.
The limitation contained in this paragraph shall
not apply to a Fixed Product which operates on a
code-division multiple access (CDMA) air-
interface.
I. Paragraph 19(a)(ii) shall be amended to read:
19. Royalty
(a) MOTOROLA agrees to pay TELULAR the
following percentage royalty calculated on
MOTOROLA's net sales of each class of product as
follows:
(i) For each Fixed Product leased used for
commercial purpose, sold or otherwise disposed of
by MOTOROLA under the Non-Exclusive License
granted in paragraph 14(b)
a) [X] of Fixed Products;
b) [X] of Fixed Products; and
c) [X] of Fixed Products;
d) notwithstanding the above, [X]
of Fixed Products which operate on a CDMA
air-interface and which MOTOROLA sells
directly to third parties, without TELULAR
repackaging, provided, however, that the
royalty rate shall be as recited in Sections
19(a)(ii)(a) 19(a)(ii)(c) above if TELULAR
duly terminates the OEM Equipment Purchase
Agreement for WFAU dated April 30, 1999
based on a default under paragraph 23(b) of
that Agreement;
I. MOTOROLA and TELULAR agree that all other terms and
conditions of the Patent Cross-License Agreement, as amended
in Amendment Nos. 1, 2 and 3, remain the same and this
Amendment No. 4 shall control any conflict between the
identified paragraphs of this Amendment No. 4 and the
corresponding paragraphs of the above-captioned License
Agreement as previously amended.
IN WITNESS THEREOF, MOTOROLA and TELULAR have caused this
Amendment No. 4 to be signed in duplicate originals by their duly
authorized representatives as of the date written beneath their
respective signatures.
MOTOROLA, INC. TELULAR, INC.
By: /s/ Daniel Coombes By: /s/ Robert C. Montgomery
Name: Daniel Coombes Name: Robert C. Montgomery
Title: SR VP and GM Title: Exec VP and COO
Date: 4/30/99 Date: 5/3/99
Exhibit 10.7
AMENDMENT NO. 1 DATED SEPTEMBER 24, 1996 TO OPTION AGREEMENT BETWEEN
MOTOROLA, INC. AND TELULAR CORPORATION
This Amendment is effective this 24th day September, 1996 between
Motorola, Inc., a Delaware corporation, acting by and through its
Cellular Infrastructure Group (hereinafter Motorola), and Telular
Corporation, a Delaware corporation (hereinafter) Telular). Each of
Motorola and Telular may be referred to herein individually as a Party,
or collectively as the Parties.
WHEREAS, on November 10, 1995, Motorola and Telular entered into an
option agreement (hereinafter referred as the Option Agreement); and
WHEREAS, Motorola and Telular desire to amend the Option Agreement in
certain respects;
NOW THEREFORE, in consideration of the mutual obligations contained
herein, the parties hereby agree as follows:
1. Except as set forth herein, all capitalized terms not defined
herein shall have the meanings given to them in the Option
Agreement.
2. The Option Agreement is hereby amended by adding a new paragraph
12, as follows:
12. Dispute Resolution
12.1 The validity, performance, and all matters
relating to the effect of this Option Agreement and any
amendment hereto shall be governed by the laws of the
state of Illinois, USA. The parties will attempt to
settle any dispute, claim or controversy arising out of
this Agreement through consultation and negotiation in
good faith and in a spirit of mutual cooperation. If
those attempts fail, then the dispute will be mediated
by a mutually-acceptable mediator to be chosen by the
parties within 20 days after written notice by either
Party demanding mediation. Neither Party may
unreasonably withhold its consent to the selection of a
mediator, and the Parties will share the costs of the
mediation (or other alternative dispute resolution)
equally. Each party shall pay its own attorneys' fees
and other costs. The mediator shall be knowledgeable
about the telecommunications industry and relevant areas
of law. By mutual agreement, however, the Parties may
postpone mediation until each has completed some
specified but limited discovery about the dispute.
12.2 Any dispute which the Parties cannot resolve
between them through negotiation or mediation within
four months of the date of the initial demand for it by
one of the Parties may be submitted for final resolution
to the American Arbitration Association for proceedings
in Chicago, Illinois, U.S.A. under its rules. Under no
circumstances shall the arbitrator(s) have any authority
to award punitive damages. Judgement on the
arbitrator's award will be binding and may then by
entered in any court which has proper jurisdiction.
12.3 Notwithstanding the foregoing, any disputes with
respect to intellectual property rights shall be
submitted to the courts and not be subject to the
provisions of this section 12.
<PAGE>
3. Motorola hereby confirms that it approves the PhoneCell SXH
project as an appropriate project to be funded by Motorola pursant to
the terms of Section 2 of the Option Agreement. Following execution of
this Amendment, Motorola will deliver to Telular a check in the amount
of $843,694.65 in reimbursement for the funds previously expended by
Telular for such project. Motorola continues to believe that this
project was to be included in the price of the units quoted in
paragraph 6 of the Purchase Order Addendum dated March 8, 1996 (the
Purchase Order Addendum), and the Parties agree that Motorola's payment
of such amount out of the development funds shall not be deemed as
waiving Motorola's right to assert in any mediation or arbitration that
the quoted purchase price was intended to include the PhoneCell SXH
project.
4. The parties have been engaging in various discussions relating to
certain modifications to the Option Agreement and to the prices for
Phases II and III units as set forth in the Purchase Order Addendum;
this Amendment is not intended as resolving or dispensing of any issues
pertaining to the Option Agreement or the Purchase Order Addendum.
This Amendment shall not be deemed in any way to prejudice any rights or
either of the Parties, except with regard to the approval of the
project described in Section 3 above, and the arrangements regarding
dispute resoultion in Section 2 above.
5. Nothing herein contained shall in any way alter, waive, annul,
vary or affect any terms, conditions or provisions of the Option
Agreement, except as specifically provided herein, it being the intent
of the parties hereto that all of the terms, conditions and provisions
of the Option Agreement shall continue in full force and effect,
except as hereby amended.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to by
duly executed by their proper and duly authorized officers as of the
day and year first above written.
MOTOROLA, INC TELULAR CORPORATION
/s/ Martin H. Singer /s/ Kenneth Millard
-------------------- ---------------------
Signature Signature
Martin H. Singer Kenneth Millard
------------------- --------------------
Printed/Typed Name Printed/Typed Name
VP & GM Wireless Access President/CEO
Business Development Director
----------------------------- ---------------------
Title Title
