<PAGE>
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, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 000-23698
APPLIED DIGITAL ACCESS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 68-0132939
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
9855 SCRANTON ROAD, SAN DIEGO, CALIFORNIA 92121
(Address of principal executive offices, zip code)
(619) 623-2200
(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 [ ]
There were 12,704,148 shares of the registrant's Common Stock, $.001 par value,
outstanding as of July 31, 1998.
<PAGE>
APPLIED DIGITAL ACCESS, INC.
INDEX TO FORM 10-Q
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at June 30, 1998
and December 31, 1997 .................................... 3
Condensed Consolidated Statements of Operations for the
three and six months ended June 30, 1998 and
June 30, 1997 ............................................ 4
Condensed Consolidated Statements of Cash Flows for
the six months ended June 30, 1998 and June 30, 1997 ..... 5
Notes to Condensed Consolidated Financial Statements ..... 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ...................... 8-11
Risks and Uncertainties .................................. 12-17
Item 3. Quantitative and Qualitative Disclosures About Market
Risk ..................................................... 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ........................................ 18
Item 2. Changes in Securities and Use of Proceeds ................ 18
Item 3. Defaults Upon Senior Securities .......................... 18
Item 4. Submission of Matters to a Vote of Security Holders ..... 18
Item 5. Other Information ........................................ 18
Item 6. Exhibits and Reports on Form 8-K ......................... 19
SIGNATURES .......................................................... 20
2
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
APPLIED DIGITAL ACCESS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,134 $ 4,400
Investments 9,876 8,779
Accounts receivable, net 9,003 12,981
Inventory, net 5,924 5,859
Deferred income taxes 130 130
Prepaid expenses and other current assets 2,381 3,775
------- -------
Total current assets 30,448 35,924
Property and equipment, net 6,260 6,165
Deferred income taxes 1,426 1,372
Other, net 1,753 2,822
------- -------
$ 39,887 $ 46,283
------- -------
------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $5,125 $3,478
Acquisition payments due to licensor -- 867
Accrued expenses 1,255 1,997
Accrued warranty 1,315 1,323
Deferred revenue and other current liabilities 2,518 1,471
------- -------
Total current liabilities 10,213 9,136
Obligations under capital leases, net of
current portion 5 15
------- -------
Total liabilities 10,218 9,151
------- -------
Shareholders' equity:
Preferred stock, $.001 par value, 7,500,000
shares authorized, no shares issued -- --
Common stock, $.001 par value, 30,000,000
shares authorized, 12,704,148 and 12,605,082
shares issued and outstanding at June 30,
1998 and December 31, 1997, respectively 51,998 51,610
Additional paid-in capital 2,519 2,492
Unrealized gain on investments 72 84
Accumulated deficit (24,920) (17,054)
------- -------
Total shareholders' equity 29,669 37,132
------- -------
$39,887 $46,283
------- -------
------- -------
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
APPLIED DIGITAL ACCESS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
--------------------------------- ---------------------------------
1998 1997 1998 1997
--------- ---------- ---------- ----------
(AMOUNTS IN THOUSANDS (AMOUNTS IN THOUSANDS
EXCEPT PER SHARE AMOUNTS) EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenue $8,580 $8,164 $13,852 $14,552
Cost of revenue 3,741 3,711 7,405 6,922
------- ------- ------- -------
Gross profit 4,839 4,453 6,447 7,630
Operating expenses:
Research and development 3,777 2,534 7,320 4,535
In-process research and
development related to
asset acquisition -- 1,578 -- 1,578
Sales and marketing 2,551 1,902 4,831 3,360
General and administrative 1,295 1,082 2,414 2,437
------- ------- ------- -------
Total operating expenses 7,623 7,096 14,565 11,910
------- ------- ------- -------
Operating loss (2,784) (2,643) (8,118) (4,280)
Interest income 168 268 342 510
Other income (expense), net (6) 14 (16) 11
------- ------- ------- -------
Loss before income taxes (2,622) (2,361) (7,792) (3,759)
Provision for income taxes 36 13 73 64
------- ------- ------- -------
Net loss ($2,658) ($2,374) ($7,865) ($3,823)
------- ------- ------- -------
------- ------- ------- -------
Net loss per share ($0.21) ($0.19) ($0.62) ($0.31)
------- ------- ------- -------
------- ------- ------- -------
Number of shares used in per share
computations 12,675 12,452 12,650 12,381
Comprehensive Loss ($2,751) ($2,344) ($7,877) ($3,809)
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
4
<PAGE>
APPLIED DIGITAL ACCESS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
----------------------
1998 1997
----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net loss ($7,865) ($3,823)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
In-process research and development related to
asset acquisition -- 1,578
Depreciation and amortization 1,853 1,335
Other (101) (116)
Changes in assets and liabilities:
Accounts receivable 3,978 (2,893)
Inventory (65) 256
Prepaid expenses and other current assets 1,394 (114)
Deferred income taxes (54) --
Accounts payable 1,647 1,992
Acquisition payments due licensor (867) 2,600
Accrued expenses (743) 64
Accrued warranty (8) (24)
Deferred revenue 1,047 393
-------- --------
Net cash provided by operating activities 216 1,248
-------- --------
Cash flows from investing activities:
Purchases of investments (7,854) (9,778)
Maturities of investments 6,835 14,017
Purchases of property and equipment (1,370) (826)
Purchase costs related to asset acquisitions 500 (3,383)
-------- --------
Net cash provided (used) by investing
activities (1,889) 30
-------- --------
Cash flows from financing activities:
Principal payments on capital leases (9) (8)
Proceeds from the issuance of common
stock under stock option plans 416 447
-------- --------
Net cash provided by financing activities 407 439
-------- --------
Net increase(decrease) in cash and
cash equivalents (1,266) 1,717
-------- --------
Cash and cash equivalents, beginning of period 4,400 1,504
Cash and cash equivalents, end of period $3,134 $3,221
-------- --------
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
APPLIED DIGITAL ACCESS, INC.
Notes to Condensed Consolidated Financial Statements
June 30, 1998
(Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
include the accounts of Applied Digital Access, Inc. (the "Company" or
"ADA") and its wholly owned subsidiary: Applied Digital Access - Canada,
Inc. All significant intercompany balances and transactions have been
eliminated in consolidation. These financial statements have been
prepared in accordance with the interim reporting requirements of Form
10-Q, pursuant to the rules and regulations of the Securities and
Exchange Commission ("SEC"). Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
In the opinion of management, all adjustments (consisting of only normal
recurring adjustments) considered necessary for a fair presentation have
been included. Operating results for the three and six month periods
ended June 30, 1998 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1998. These financial
statements should be read in conjunction with the Company's audited
financial statements and notes thereto, together with Management's
Discussion and Analysis of Financial Condition and Results of
Operations, and Risks and Uncertainties, contained in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997
filed with the SEC.
2. New Accounting Pronouncements
The Company has adopted the provisions of Statement of Financial
Accounting Standards No. 130, "Reporting of Comprehensive Income,"
effective January 1, 1998. This statement requires the disclosure of
comprehensive income and its components in a full set of
general-purpose financial statements. Comprehensive income is defined
as net income plus revenues, expenses, gains and losses that, under
generally accepted accounting principles, are excluded from net income.
The components of comprehensive income, which are excluded from net
income are foreign currency gains/losses and unrealized gains/losses on
securities and have been included in the calculation of comprehensive
income.
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 131, "Disclosures about Segments of
an Enterprise and Related Information" ("SFAS 131"), which supersedes
Statement of Financial Accounting Standards, "Financial Reporting of
Segments of a Business Enterprise" ("SFAS 14"). SFAS 131 changes current
practice under SFAS 14 by establishing a new framework on which to base
segment reporting and also requires interim reporting of segments
information. This statement is effective for fiscal years beginning after
December 15, 1997. This statement's interim reporting disclosures are not
required until the first quarter immediately subsequent to the fiscal year
in which SFAS 131 is effective.
3. Inventory
Inventory is valued at the lower of cost (determined using the first-in,
first-out method) or market. Inventory was as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Raw materials $3,703 $3,419
Work-in-process 2,021 2,223
Finished goods 660 787
------ ------
6,384 6,429
Less inventory reserve (460) (570)
------ ------
$5,924 $5,859
------ ------
------ ------
</TABLE>
6
<PAGE>
4. Per Share Information
The Company has adopted the provisions of Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"),
effective December 31, 1997. SFAS 128 requires the presentation of basic
and diluted earnings per share. Basic EPS is computed by dividing income
available to common stockholders by the weighted average number of
common shares outstanding for the period. Diluted EPS is computed giving
effect to all dilutive potential common shares that were outstanding
during the period. Dilutive potential common shares consist of the
incremental common shares issuable upon the conversion of convertible
preferred stock (using the "if converted") method and exercise of stock
options and warrants for all periods. All prior period earnings per
share amounts have been restated to comply with SFAS 128.
In accordance with the disclosure requirements of SFAS 128, a
reconciliation of the numerator and denominator of basic and diluted EPS is
provided as follows (dollars in thousands, except per share amounts).
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
---------------------------- ---------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Numerator - basis and diluted EPS:
Net Loss $(2,658) $(2,374) $(7,865) $(3,823)
Denominator - basic and diluted EPS:
Weighted Average common stock 12,675 12,452 12,650 12,381
outstanding
Basic and diluted earnings per share $(0.21) $(0.19) $(0.62) $(0.31)
</TABLE>
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE STATEMENTS CONTAINED IN THIS FORM 10-Q THAT ARE NOT PURELY HISTORICAL ARE
FORWARD LOOKING STATEMENT. STATEMENTS WHICH USE THE WORDS "SEEK," "INTEND,"
"WILL," "ANTICIPATE," "CAN," "CONTINUE," AND "EXPECT" ARE FORWARD LOOKING
STATEMENTS. THESE FORWARD LOOKING STATEMENTS, INCLUDING STATEMENTS REGARDING
THE COMPANY'S (I) PLANS FOR DEVELOPMENT OR ACQUISITION OF NEW PRODUCTS OR
ENHANCEMENT OF EXISTING PRODUCTS, (II) STRATEGY AND (III) EXPANDED SALES AND
MARKETING EFFORTS, ARE BASED ON INFORMATION AVAILABLE TO THE COMPANY AS OF
THE DATE HEREOF, AND THE COMPANY ASSUMES NO OBLIGATION TO UPDATE ANY SUCH
FORWARD LOOKING STATEMENT. IT IS IMPORTANT TO NOTE THAT THE COMPANY'S ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE IN SUCH FORWARD LOOKING
STATEMENTS. AMONG THE FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY ARE THE FACTORS SET FORTH BELOW UNDER THE HEADING "RISKS AND
UNCERTAINTIES."
The following should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Risks and
Uncertainties", contained in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997 filed with the Securities and Exchange
Commission.
OVERVIEW
ADA is a leading provider of network performance management products that
include systems, software, and services used to manage the quality,
performance, availability and reliability of telecommunications service
providers' ("TSP") networks. ADA's products are designed to enable TSPs to
improve their quality of service, to increase productivity, to lower
operating expenses and to effectively deploy new services. ADA has
positioned its business to assist TSPs in addressing the rapidly increasing
demand for new services, higher bandwidth and access to the Internet. ADA's
systems and software provide network management functions such as circuit
provisioning, network configuration management, network performance
management, circuit testing, and traffic management of the public switched
network. ADA has addressed the industry demand for network management
products with a three-faceted approach: (1) network systems that provide
testing and performance monitoring functions as well as selected transport
functions; (2) network management software that enables TSPs to manage their
network operations; and (3) services that are customized to meet the evolving
needs of the Company's TSP market. The Company has two business units: the
Network Systems business unit and the Network Management business unit. The
business units are the result of the evolution of the Company from a single
product line to multiple product lines. The Network Systems business unit is
built around the Company's test and performance management products and
services, including its T3AS Test and Performance Monitoring System ("T3AS"),
Centralized Test System ("CTS"), Remote Module, a DS1 network interface unit
("NIU"), and Protocol Analysis Access System ("PAAS"). The Network Management
business unit focuses on Operations Systems ("OS") software products,
including .Provisioner, Test OS, Graphical Test Assistant ("GTA"),
Sectionalizer, Fault Management System ("FMS"), Traffic Data Collection and
Engineering System ("TDC&E"), and OS design services.
RESULTS OF OPERATIONS
Revenue totaled $8,580,000 for the three months ended June 30, 1998, a 5%
increase from revenue of $8,164,000 for the three months ended June 30, 1997.
The increase for the quarter was primarily the result of increased sales of
the Company's network systems test and performance management products
partially offset by decreases sales of the Company's network management OS
design services. Revenue from the Company's network systems test and
performance management products for the three months ended June 30, 1998
totaled $5,014,000, a 13% increase from $4,430,000 in the same period last
year. Increased sales of the Company's Remote Module and T3AS products
accounted for the majority of the increase. Revenue from network management
OS software products and services for the three months ended June 30, 1998
totaled $3,566,000, a 4% decrease from $3,734,000 in the same period last
year. The decrease resulted from decreased sales of the Company's OS design
services to Northern Telecom, Ltd. ("Northern Telecom") substantially offset
by increased sales of the Company's .Provisioner, TDC&E and Test OS software
products. The decreased revenue from OS design services resulted from the
Company's acquisition of an exclusive license to Northern Telecom's DSS II
software product in June 1997. Prior to the acquisition, the Company
provided OS design services to Northern Telecom that supported the DSS II
product. As a result of the acquisition, the Company's OS design services
business supporting DSS II shifted to a product-based business. The Company
now markets and supports the DSS II product and technology under the new name
.Provisioner. Unlike revenue from OS software design services which is
recognized as the service is performed, revenue from OS software product
sales requires the satisfaction of specific delivery and acceptance criteria
prior to revenue recognition. As a result, the Company has experienced and
may in the future continue to experience increased quarterly revenue
fluctuations that could have a material adverse affect on the Company's
business, operating results and financial condition. See "Risks and
Uncertainties -- Fluctuations in Quarterly Operating Results; History of
Losses".
Revenue for the six months ended June 30, 1998 totaled $13,852,000, a 5%
decrease from
8
<PAGE>
$14,552,000 in the same period last year. The decrease for the six months
ended June 30, 1998 is a result of decreased revenue from the Company's
network management OS software design services substantially offset by
increased sales of the Company's network systems test and performance
management products. Revenue from the Company's network systems test and
performance management products for the six months ended June 30, 1998
totaled $8,131,000, a 13% increase from $7,189,000 in the same period last
year. The majority of the increase resulted from increased sales of the
Company's Remote Module product partially offset by decreased sales of the
Company's CTS product. Revenue from network management OS software products
and services for the six months ended June 30, 1998 totaled $5,721,000, a 22%
decrease from $7,363,000 in the same period last year. The decrease for the
six month period ended June 30, 1998 was the result of the same reasons
discussed above for the three month period ended June 30, 1998.
The Company believes that revenue for the six months ended June 30, 1998 was
also negatively impacted by customer order delays resulting from prolonged
contract negotiations with a current RBOC customer for the Company's T3AS,
CTS and Remote Module products. There can be no assurances that customer
order delays will not continue in the future, each of which could have a
material adverse effect on the Company's business, operating results and
financial condition. See "Risks and Uncertainties -- Fluctuations in
Quarterly Operating Results; History of Losses" and "-- Concentration of
Major Customers; Telephone Company Qualification Requirements."
Gross profit totaled $4,839,000 for the three months ended June 30, 1998, a
9% increase from $4,453,000 in the same period last year. Gross profit as a
percent of revenue was 56.4% for the three months ended June 30, 1998
compared to 54.5% for the three months ended June 30, 1997. The increase in
gross profit was primarily the result of a shift in the majority of the
Company's OS software design services business to an OS software
product-based business and increased revenue. As a result of the
.Provisioner (formerly DSS II) license acquisition, a majority of engineering
labor previously associated with OS design services revenue shifted from the
cost of revenue line to research and development operating expenses
supporting OS software product development. In addition, the Company's
relatively fixed manufacturing overhead costs allocated over greater revenue
levels in the second quarter of 1998 resulted in increased overall gross
profit levels. The increase in gross profit as a percent of revenue resulted
from the factors discussed above partially offset by increased sales of the
Company's Remote Module NIU product which carries a lower gross profit margin
than the Company's OS software, CTS and T3AS products. The highly
competitive NIU market is subject to severe pricing pressures which have
contributed to significantly lower overall gross profits on this product.
Gross profit totaled $6,447,000 for the six months ended June 30, 1998, a 16%
decrease from $7,630,000 in the same period last year. Gross profit as a
percent of revenue was 46.5% for the six months ended June 30, 1998 compared
to 52.4% in the same period last year. The decrease in gross profit was the
result of a product mix weighted toward the Company's lower-margin Remote
Module NIU product (described in the previous paragraph), decreased revenue
and the impact of a $378,000 one-time inventory obsolescence charge in the
first quarter of 1998. The Company's relatively fixed manufacturing overhead
costs allocated over lower revenue levels in the first half of 1998 resulted
in lower overall gross profit levels. The net decrease in gross profit as a
percent of revenue resulted from the factors discussed above substantially
offset by the shift in the Company's OS software design services business to
an OS software product-based business (described in the previous paragraph).
There can be no assurance that the Company will be able to maintain current
gross profit or gross profit as a percent of revenue levels. Factors which
may materially and adversely affect the Company's gross profit in the future
include its level of revenue, competitive pricing pressure in the
telecommunication network management market, fluctuations in quarterly order
bookings and revenue, new product introductions by the Company or its
competitors, potential inventory obsolescence and scrap, possible recalls,
production or quality problems, timing of development expenditures, changes
in material cost, disruptions in sources of supply, regulatory changes,
capital spending, and changes in general economic conditions.
Research and development expenses totaled $3,777,000 for the three months
ended June 30, 1998, a 49% increase from $2,534,000 for the three months
ended June 30, 1997. Research and development expenses totaled $7,320,000
for the six months ended June 30, 1998, a 61% increase from $4,535,000 for
the six months ended June 30, 1997. The majority of the increase for the
three and six months ended June 30, 1998 was due to the shift in engineering
labor from cost of revenue to research and development operating expenses as
a result of the .Provisioner license acquisition discussed above in the gross
profit analysis and the addition of research and development personnel to
support the Joint Development Agreement ("JDA") with Northern Telecom Inc.
("Nortel") and increased non-recurring engineering expenses related to the
JDA and other product developments. In September 1997, the Company entered
into the JDA with Nortel to develop unique synchronous optical network
("SONET") products for the telecommunications industry. Nortel and ADA both
contribute technology and development resources to projects conducted under
the JDA and equally share the development costs. For the three and six months
ended June 30, 1998, the Company's research and development expenses include
a $1 million and $1.7 million reduction, respectively, representing Nortel's
proportionate share of development costs incurred under the initial project
being conducted under the JDA. The Company believes that its future success
depends on its ability to maintain its technological leadership through
enhancement of its existing products and development of innovative new
products and services that meet customer needs. Therefore, the Company
intends to continue to make significant investments in research and product
development in association with planned development projects.
9
<PAGE>
In the three and six months ended June 30, 1997 the Company recorded a charge of
approximately $1.6 million for purchased research and development costs related
to the acquisition of the .Provisioner license and related assets from Northern
Telecom.
Sales and marketing expenses totaled $2,551,000 for the three months ended June
30, 1998, a 34% increase from $1,902,000 for the three months ended June 30,
1997. Sales and marketing expenses totaled $4,831,000 for the six months ended
June 30, 1998, a 44% increase from $3,360,000 for the six months ended June 30,
1997. The majority of the increases for the three and six months is the result
of increased staff in sales to support increased sales efforts and new customer
accounts and increased personnel costs in technical support and marketing to
support the shift of a majority of the Company's OS design services business to
an OS software product-based business. The Company expects that sales and
marketing expenses will continue to increase in absolute dollars as the Company
continues to hire additional sales, marketing and technical support personnel to
support both current products and planned product introductions.
General and administrative expenses totaled $1,295,000 for the three months
ended June 30, 1998, a 20% increase from $1,082,000 for the three months ended
June 30, 1997. General and administrative expenses totaled $2,414,000 for the
six months ended June 30, 1998, a 1% decrease from $2,437,000 for the six months
ended June 30, 1997. The majority of the increase for the three months ended
June 30, 1998 resulted from increased expense related to the amortization of
intangible assets associated with the .Provisioner license acquisition that
occurred in June 1997 and increased legal expenses related to general
administrative issues. The majority of the decrease for the six months ended
June 30, 1998 resulted from lower consulting and recruiting costs offset by
increased expenses for the amortization of intangible assets and increased legal
expenses. The Company expects that general and administrative expenses will
increase in absolute dollars in the future as the Company expands its internal
networking capabilities to support the integration of its geographically
distributed organization.
Interest income totaled $168,000 for the three months ended June 30, 1998, a
37% decrease from $268,000 in the same quarter a year ago. Interest income
totaled $342,000 for the six months ended June 30, 1998, a 33% decrease from
$510,000 for the six months ended June 30, 1997. The decreases resulted from
decreased levels of cash investments compared to the same periods last year.
For the three and six months ended June 30, 1998 and June 30, 1997, the Company
provided for income taxes related to the operations of the Company's Canadian
subsidiary, based on an annual effective Canadian tax rate of 46%. The Company
did not provide for U.S. income taxes for the three or six months ended June 30,
1998 or June 30, 1997 due to net losses. The Company expects to provide for
foreign, federal and state income taxes for 1998 at applicable statutory rates,
after giving effect to net operating losses, remaining available net operating
loss carryforwards, and any available tax credits.
As a result of the factors discussed above, the Company incurred a net loss
of $2,658,000, or $.21 per basic and diluted share, for the three months
ended June 30, 1998 compared to a net loss of $2,374,000, or $.19 per basic
and diluted share, for the three months ended June 30, 1997. The Company
incurred a net loss of $7,865,000, or $.62 per basic and diluted share, for
the six months ended June 30, 1998 compared to a net loss of $3,823,000, or
$.31 per basic and diluted share, for the six months ended June 30, 1997.
Excluding the above referenced $1.6 million charge for purchased research and
development associated with the .Provisioner license acquisition, the Company
would have incurred a net loss of $796,000, or $.06 per share, for the three
months ended June 30, 1997 and a net loss of $2,245,000, or $.18 per share,
for the six months ended June 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998 the Company had approximately $13,010,000 in cash and
investments, compared to $13,179,000 at December 31, 1997, a decrease of
$169,000. The decrease in cash and investments was primarily the result of net
operating losses and, to a lesser extent, purchases of capital equipment.
Working capital totaled $20,235,000 at June 30, 1998, a decrease of $6,553,000
from $26,788,000 at December 31, 1997. The decrease in working capital was
primarily the result of net operating losses, decreased accounts receivable and
other current assets as well as an increase in accounts payable and other
current liabilities.
For the six months ended June 30, 1998 the Company's operating activities
provided $216,000 in cash, primarily the result of decreased accounts receivable
and other current assets and increased accounts payable and other current
liabilities significantly offset by net operating losses.
10
<PAGE>
For the six months ended June 30, 1998 cash used for capital expenditures
totaled approximately $1,370,000. Most of the capital equipment additions
were for software tool kits, computer workstations and lab equipment related
to the Company's expanded research and development efforts and the
Richardson, Texas office moving to a new location. The Company expects the
level of capital expenditures will increase in 1998 as a result of
investments in research and development projects.
Assuming no material changes in the Company's current operating plans, the
Company believes that cash generated from operations, and the total of its cash
and investments, will be sufficient to meet its working capital and capital
expenditure requirements for at least the next twelve months. However, the
Company may seek additional capital resources to meet working capital and
capital expenditure requirements. Additionally, significant additional capital
resources may be required to fund acquisitions of complementary businesses,
products or technologies. The Company may need to issue additional shares of
its capital stock or incur indebtedness in connection with any such acquisitions
or future operations. At present, the Company does not have any agreements or
commitments with respect to any such acquisitions.
The Company believes the impact of inflation on its business activities has not
been significant to date.
11
<PAGE>
RISKS AND UNCERTAINTIES
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS; HISTORY OF LOSSES. The Company has
experienced significant fluctuations in bookings, revenue and operating results
from quarter to quarter due to a combination of factors and expects such
fluctuations to continue in future periods. Factors that may cause the Company's
results of operations to vary significantly from quarter to quarter include but
are not limited to the size and timing of customer orders and subsequent
shipment of systems products and implementation of OS software products to major
customers, timing and market acceptance of product introductions or enhancements
by the Company or its competitors, customer order deferrals in anticipation of
new products, technological changes in the telecommunications industry,
competitive pricing pressures, changes in the Company's operating expenses,
personnel changes, management of a changing business, changes in the mix of
products sold and licensed, disruption in sources of supply, changes in pricing
policies by the Company's suppliers, regulatory changes, capital spending,
delays of payments by customers and general economic conditions. The Company
believes that in late 1997 it began experiencing seasonality in its product
shipments and OS software licensing. Generally, TSPs place more orders for
products and licenses in the second and fourth quarters, with the orders
significantly down in the first quarter and relatively flat in the third quarter
of each year. The Company expects that revenue may begin to reflect these
seasonal order cycles more closely, which could result in quarterly
fluctuations. There can be no assurance that the TSPs will not defer or delay
orders contrary to the historical seasonal pattern or that they will not change
their ordering patterns. Because of the relatively fixed nature of most of the
Company's costs, including personnel and facilities costs, any unanticipated
shortfall in revenue in any fiscal quarter would have a proportionately greater
impact on the Company's operating income in that quarter and may result in
fluctuations in the price of the Company's Common Stock.
As the impact of the Company's Network Management business unit on the Company's
revenue increases, the Company may be faced with greater fluctuations in
operating income. The licensing and implementation of the Company's OS products
generally involves a significant capital expenditure and a commitment of
resources by prospective customers. Accordingly, the Company is dependent on its
customers' decisions as to the timing and level of commitment and expenditures.
In addition, the Company typically realizes a significant portion of license
revenues in the last weeks or even days of a quarter. As a result, the magnitude
of quarterly fluctuations in the Network Management business unit may not become
evident until late in, or after the close of, a particular quarter. In addition,
the Company does not recognize service revenues until the services are rendered.
The time required to implement the Company's OS products can vary significantly
with the needs of its customers and is generally a process that extends for
several months. Because of their complexity, larger implementations may take
multiple quarters to complete. Additionally, quarter-to-quarter product mix
variations, customer orders tending to be placed late in the quarter, and
competitive pressures on pricing could have a materially adverse effect on the
Company's operating results in any one quarter. The Company's expenses are based
in part on the Company's expectations as to future revenues and to a large
extent are fixed in the short term. If revenues do not meet expectations, the
Company's business, operations and financial condition are likely to be
materially adversely affected. The Company has experienced losses in the past
and there can be no assurance that the Company will not experience losses in the
future.
COMPETITION. Competition in the Company's markets is intense and is
characterized by rapidly changing technologies, conformance with evolving
industry standards, frequent new product introductions and enhancements,
rapid changes in customer requirements, and price-competitive bidding. To
maintain and improve its competitive position, the Company must continue to
develop and introduce, in a timely and cost-effective manner, new products
and features that keep pace with increasing customer requirements. The
Company expects competition in its markets to increase from existing
competitors and from other companies which may enter the Company's current or
future markets. The Company believes the principal competitive factors
affecting the market for its network systems test and performance monitoring
products are product features, price, conformance with BellCore and other
industry transmission standards and specifications, performance and
reliability, technical support, and the maintenance of close working
relationships with customers. The Company's network systems products,
especially CTS and Remote Module, are currently focused in highly competitive
market niches. The environment for CTS and Remote Module is fiercely
competitive with respect to price, product features, established
customer-supplier relationships and conformance with industry standards. The
Company believes the current competitors that provide partial solutions to
either performance monitoring or testing of the DS3, and the DS1 and DS0
circuits that make up the DS3 circuit, include Hekimian Laboratories, Inc.,
Telecommunications Techniques Corporation, Anritsu Wiltron Corporation and
some of the manufacturers of large transmission equipment and digital
cross-connect test and performance monitoring equipment such as Lucent
Technologies, Inc. ("Lucent"), Alcatel Data Networks, Ericsson Communication
Inc. ("Ericsson"), ADC Telecommunications, and Tellabs, Inc. The Company's
Remote Module product addresses the DS1 NIU market in which current
competitors include Westell Inc., Teltrend Inc., and Troncom, Inc. Many of
these competitors have significantly greater technical, financial,
manufacturing, and marketing resources than the Company. In addition, in
1997, ANSI adopted certain of the Company's technology as an industry
standard. As a result, the Company is obligated to grant licenses of this
technology to third parties, including competitors, on fair and equitable
terms and thus, also faces competition from the licensees of its own
technology.
12
<PAGE>
The Company believes there are an increasing number of current competitors in
the network management OS market that provide network management OS applications
for circuit and services provisioning and services management, testing and test
management, fault and alarm management and surveillance, network and circuit
performance monitoring and traffic management telecommunications functions. The
OS market is characterized by a wide range of companies that have varying
degrees of market influence. The nature of the network management OS market is
such that improved technologies and tool sets have made the barriers to entry in
this market relatively small resulting in fierce competition. The principal
competitive factors affecting the Company's network management OS products
include product quality, performance, price, customer support, corporate
reputation, and product features such as scalability, interoperability,
functionality and ease of use. The Company's existing and potential competitors
offer a variety of solutions to address network management needs. Competitors
include suppliers of standard off-the-shelf products, custom software
developers, large telecommunications equipment vendors that offer software
applications to manage their own and other suppliers' equipment, such as Lucent,
Northern Telecom, Inc., Fujitsu, and Ericsson, hardware and software vendors,
including IBM, Sun Microsystems and Hewlett Packard, and providers of specific
network management and OS applications, such as BellCore, Objective Systems
Integrators, Inc., TCSI Corporation, Architel Systems Corporation and others.
Additionally, many of the Company's existing and potential customers
continuously evaluate whether they should develop their own network management
and OS applications or license them from outside vendors. The Company expects
competition in the OS market to increase significantly in the future.
Additionally, several of the Company's competitors have long-established
relationships with the Company's current and prospective customers which may
adversely affect the Company's ability to successfully compete for business with
these customers. In addition, product price reductions resulting from market
share penetration initiatives or competitive pricing pressures could have a
material and adverse effect on the Company's business, operating results, and
financial condition. There can be no assurance that the Company will have the
financial resources, technical expertise or manufacturing, marketing,
distribution and support capabilities to compete successfully in the future.
CONCENTRATION OF MAJOR CUSTOMERS; TELEPHONE COMPANY QUALIFICATION REQUIREMENTS.
The market for the Company's products and services currently consists of the
five regional Bell operating companies ("RBOCs"), long distance or
"interexchange carriers" ("IXCs"), local exchange carriers ("LECs"), competitive
local exchange carriers ("CLECs"), competitive access providers ("CAPs"),
Internet service providers ("ISPs"), enterprise networks and other TSPs.
Historically, the Company's marketing efforts focused primarily on the RBOCs,
which accounted for approximately 99%, 73%, 31%, and 50% of the Company's total
revenue in 1995, 1996, 1997, and the first six months of 1998, respectively.
However, the Company's strategy has been to focus its efforts on diversifying
its customer base. RBOCs, IXCs and enterprise customers accounted for 31%, 27%
and 20% of the Company's total revenue in 1997, and 50%, 35% and 0% of the
Company's total revenue for the first six months of 1998. The increased customer
base is primarily a function of the Company's acquisitions in 1996 of Applied
Computing Devices, Inc. ("ACD") and the Special Services Network ("SSN")
division of MPR Teltech Inc. and the acquisition of the DSS II license from
Northern Telecom in 1997. As a result of these acquisitions, the Company added
OS related products and services that the Company has been able to market to a
wider group of customers. In addition, the Company added a number of TSPs that
were new customers to the Company. To date, the OS customers tend to be IXCs,
CAPs and enterprise vendors who have not invested in legacy systems from
BellCore. While the Company believes its customer base diversification is
beneficial to the Company, there can be no assurances that the Company will be
able to continue expanding the distribution of its OS and system products and
services to additional prospective customers. In addition, the Company's
customers are significantly larger than the Company and may be able to exert a
high degree of influence over the Company. The loss of one or more of the
Company's major customers, the reduction of orders, a delay in deployment of the
Company's products, a labor strike at one or more of the Company's major
customers, such as the recent Bell Atlantic strike, or the cancellation,
modification or non-renewal of license or maintenance agreements could
materially and adversely affect the Company's business, operating results and
financial condition. BellSouth, Bell Atlantic, Ameritech, Southwestern Bell and
MCI have entered into purchase contracts with the Company. MCI has also entered
into license agreements with the Company. Other TSPs purchase the Company's
network system products and license OS products under standard purchase orders.
Since the RBOC and MCI contracts may be terminated at either the customer's or
the Company's convenience, the Company believes that the purchase contracts and
license agreements are not materially different than purchasing or licensing
under purchase orders. Prior to selling products to RBOCs and certain other
TSPs, a vendor must often first undergo a product qualification process with the
TSP for its products. Although the qualification process for a new product
varies somewhat among these prospective customers, the Company's experience is
that the process often takes a year or more. Currently, the five RBOCs, MCI,
Worldcomm and several other customers have qualified the Company's products,
when required. Any failure on the part of any of the Company's customers to
maintain their qualification of the Company's products, failure of any of the
TSPs to deploy the Company's products, or any attempt by any of the TSPs to seek
out alternative suppliers could have a material adverse effect on the Company's
business, operating results and financial condition. There can be no assurance
that the Company's products will be qualified by new customers, or that such
qualification will not be significantly delayed. Furthermore, work force
reductions and staff reassignments by some of the Company's customers have in
13
<PAGE>
the past delayed the product qualification process, and the Company expects
such reductions and reassignments to continue in the future. There can be no
assurance that such reductions and reassignments will not have a material
adverse effect on the Company's business, operating results and financial
condition.
HIGH DEPENDENCE ON TWO PRODUCT LINES. Historically, the majority of the
Company's revenue has been derived from the sale of its network systems products
and services. However, as a result of acquisitions completed in 1996 and 1997,
the Company added additional product lines and derived revenue from a product
mix of both network systems products and services and network management OS
software products and services. Revenue from network systems products and
services, including CTS, T3AS and Remote Module, generated 74%, 50% and 59% of
the Company's total revenues in 1996, 1997 and first six months of 1998,
respectively. Revenue from network management OS products and services,
including software design services, .Provisioner, Test OS, TDC&E and FMS,
generated 26%, 50% and 41% of the Company's total revenue in 1996, 1997 and
first six months of 1998, respectively. However, there can be no assurance that
the Company's future revenues will not be heavily dependent on sales from one of
its primary product lines. The Company is investing in the expansion of these
two product lines through the enhancement, development and marketing of its
Remote Module, CTS, PAAS, T3AS and OS products. Failure by the Company to
enhance either its existing products and services or to develop new product
lines and new markets could materially and adversely affect the Company's
business, operating results and financial condition. There is no assurance that
the Company will be able to develop and market new products and technology or
otherwise diversify its source of revenue.
MANAGEMENT OF CHANGING BUSINESS. As a result of acquisitions in 1996, the
Company obtained additional office space and hired additional personnel in both
Terre Haute, Indiana and British Columbia, Canada to support the business
operations of the new products, services and technologies acquired. The Company
continues to face significant management challenges related to the integration
of the business operations of the new organizations' personnel, products,
services and technologies acquired. In 1996, the Company formed two business
units: the Network Systems business unit and the Network Management business
unit. The business units are a result of the evolution of the Company from a
single product line to multiple product lines. The Network Management business
unit focuses on OS software products including .Provisioner, Test OS, GTA,
Sectionalizer, FMS, TDC&E, and OS design services. The Network Systems business
unit is built around the Company's test and performance management products,
including T3AS, CTS, Remote Module and PAAS products. There can be no assurance
that the Company will be successful in managing its new business unit structure.
In June 1997, the Company acquired a license from Northern Telecom to its DSS II
software product and technology. The Company markets and supports the DSS II
product and technology under the new name .Provisioner. The Company is
integrating the licensed technology into new product development. The
acquisition of the software license has generated a shift in the Company's
Canadian subsidiary's operations from a software design services business to a
product business and the transition will likely place a significant strain on
the Company's management, information systems and operations and there can be no
assurance that such a transition can be successfully managed. In addition, in
November 1997, the Company opened an office in Richardson, Texas to expand new
product development efforts. The acquisitions and resultant growth in the
Company's infrastructure have placed, and are expected to continue to place, a
significant strain on the Company's management, information systems and
operations. The strain experienced to date has chiefly been in management of a
geographically distributed organization, and in hiring sufficient numbers of
qualified personnel to support the expansion of the business. The Company may
also make future acquisitions where it believes it can acquire new products or
otherwise rapidly enter new or emerging markets. Mergers and acquisitions of
high technology companies are inherently risky and can place significant strains
on the Company's management, information systems and operations. The Company is
not able to forecast additional strains that may be placed on the Company's
management, information systems and operations as a result of recent or future
acquisitions or in the future. The Company's potential inability to manage its
changing business effectively could have a material adverse effect on the
Company's business, operating results, and financial condition.
CUSTOMER MERGERS. Of the nine major TSPs currently involved in or that have
recently completed merger transactions, seven are customers of the Company.
Several of the mergers involve companies that purchase network systems and
software products and services from the Company's competitors. Consequently,
the completion of certain of these mergers may result in the loss of
business and customers for the Company. Additionally, the impact of capital
spending constraints during the merger transitions and thereafter could
have a material adverse effect on the Company's business, operating results
and financial condition. In addition, future merger transactions involving or
contemplated by the Company's current or prospective customers may cause
increased concentration among some of the Company's major customers or delays
or decreases in their capital spending decisions, any of which could have a
material adverse effect on the Company's business, operating results and
financial condition.
RAPID TECHNOLOGICAL CHANGE AND DEPENDENCE ON NEW PRODUCTS. The market for
the Company's products is characterized by rapid technological advances,
evolving industry transmission standards, changing regulatory environments,
price-competitive bidding, changes in customer requirements, and frequent new
product introductions and enhancements. The introduction
14
<PAGE>
of telecommunications network performance management products involving
superior technologies or the evolution of alternative technologies or new
industry transmission standards could render the Company's existing products,
as well as products currently under development, obsolete and unmarketable.
The Company believes its future success will depend in part upon its ability,
on a cost-effective and timely basis, to continue to enhance its products, to
develop and introduce new products for the telecommunications network
performance management market, to address new industry standards and changing
customer needs and to achieve broad market acceptance for its products. In
particular, the Company anticipates that the SONET and SDH optical
transmission standards will become the industry transmission standards over
the coming years for the North American and international networks,
respectively. The Company's current network circuit test and performance
monitoring systems do not address either the SONET or SDH transmission
standards. The Company intends to extend its current products and develop new
products to accommodate such new transmission standards and other advances in
technology, as they evolve. The widespread adoption of SONET and/or SDH as
industry transmission standards before the Company is able to successfully
develop products which address such transmission standards could in the
future adversely affect the sale and deployment of the Company's products.
The Company's OS products are designed to operate on a variety of hardware and
software platforms and with a variety of databases employed by its customers in
their networks. The Company must continually modify and enhance its OS products
to keep pace with changes in hardware and software platforms and database
technology. As a result, uncertainties related to the timing and nature of new
product announcements, introductions or modifications by systems vendors,
particularly, Sun Microsystems and Hewlett Packard, and by vendors of relational
database software, particularly, Oracle Corporation, could materially adversely
impact the Company's business, operating results and financial condition. In
addition, the failure of the Company's OS products to operate across the various
existing and evolving versions of hardware and software platforms and database
environments employed by customers would have a material adverse effect on the
Company's business, operating results and financial condition.
The introduction or announcement of products by the Company or one or more of
its competitors embodying new technologies, or changes in industry standards or
customer requirements, could render the Company's existing products and
solutions obsolete and unmarketable. The introduction of new or enhanced
versions of its products requires the Company to manage the transition from
older products in order to minimize disruption in customer ordering. There can
be no assurance that the introduction or announcement of new product offerings
by the Company or its competitors will not cause customers to defer licensing or
purchasing of existing Company products or engaging the Company's services. Any
deferral of revenues could have a material adverse effect on the Company's
business, operating results and financial condition.
Any failure by the Company to anticipate or respond on a cost-effective and
timely basis to technological developments, changes in industry transmission
standards or customer requirements, or any significant delays in product
development or introduction could have a material adverse effect on the
Company's business. There can be no assurance that the Company will be able to
successfully develop new products to meet customer requirements, to address new
industry transmission standards and technological changes or to respond to new
product announcements by others, or that such products will achieve market
acceptance.
DEPENDENCE ON SUPPLIERS AND SUBCONTRACTORS. Certain components used in the
Company's T3AS, CTS, PAAS and Remote Module products, including its VLSI ASICs,
are available from a single source and other components are available from only
a limited number of sources. The Company has few supply agreements and generally
makes its purchases with purchase orders. Further, certain components require an
order lead time of up to one year. Other components that currently are readily
available may become difficult to obtain in the future. Failure of the Company
to order sufficient quantities of these components in advance could prevent the
Company from increasing production in response to customer orders in excess of
amounts projected by the Company. In the past, the Company has experienced
delays in the receipt of certain of its key components, which have resulted in
delays in product deliveries. There can be no assurance that delays in key
component and part deliveries will not occur in the future.
The inability to obtain sufficient key components as required or to develop
alternative sources if and as required in the future could result in delays
or reductions in product shipments, which in turn could have a material
adverse effect on the Company's customer relationships and operating results.
Additionally, the Company uses third-party subcontractors for the manufacture
of its sub-assemblies, some of which are located in Asia. This reliance on
third-party subcontractors involves several risks, including the potential
absence of adequate capacity, the unavailability of or interruption in access
to certain process technologies, and reduced control over product quality,
delivery schedules, manufacturing yields and costs. The Company believes that
the recent significant economic downturns in Asia may increase these risks
with respect to its Asian third-party subcontractors. Shortages of raw
materials or production capacity constraints at the Company's subcontractors
could negatively affect the Company's ability to meet its production
obligations and could result in increased prices for affected parts.
15
<PAGE>
HIGH INVENTORY LEVELS AND NEED TO MAKE ADVANCE PURCHASE COMMITMENTS. To respond
to anticipated customer demand, the Company maintains high inventory levels.
Maintaining high inventory levels substantially increases the risk that the
Company's profitability and results of operations may from time to time be
materially and adversely affected by inventory obsolescence. To procure adequate
supplies of certain products or components, the Company must make advance
commitments to purchase relatively large quantities of such products or
components in a number of circumstances. A large portion of the Company's
purchase commitments consists of custom parts, some of which are sole-source
such as VLSI ASICs, for which there is no alternative use or application. The
inability of the Company to sell such products or incorporate such components in
its other products could have a material adverse effect on the Company's
business, operating results and financial condition.
YEAR 2000 COMPLIANCE. Many installed computer systems and software products are
coded to accept only two digit entries in the date code field. As the year 2000
approaches, these code fields will need to accept four digit entries to
distinguish years beginning with "19" from those beginning with "20" dates. As a
result, in less than two years, computer systems and/or software products used
by many companies may need to be upgraded to comply with such year 2000
requirements. The Company is assessing its products, as well as its internal
management information systems in order to identify and modify those products
and systems that are not year 2000 compliant. Based upon a preliminary
assessment, the Company expects such modifications will be made on a timely
basis and does not believe that the cost of such modifications will have a
material effect on the Company's operating results or financial condition. There
can be no assurance, however, that the Company's preliminary assessment is
accurate. If the Company encounters any unanticipated delays in or costs
associated with the implementation of such changes, in particular with
respect to the Company's products, the Company's business, operating results
and financial condition could be materially adversely affected.
PRODUCT RECALL AND DEFECTS. Producers of telecommunications network performance
management products such as those being marketed by the Company, are often
required to meet rigorous standards imposed by BellCore, the research and
development entity created following the divestiture of AT&T to provide ongoing
engineering support to the RBOCs. In addition, the Company must meet specialized
standards imposed by many of its customers. The Company's products are also
required to interface in a complex and changing environment with
telecommunication network equipment made by numerous other suppliers. Since many
of these suppliers are competitors of the Company, there can be no assurance
that they will cooperate with the Company. In the event there are material
deficiencies or defects in the design or manufacture of the Company's systems,
or if the Company's systems become incompatible with existing third-party
network equipment, the affected products could be subject to a recall. The
Company has experienced two significant product recalls in its history and there
can be no assurance that the Company will not experience any product recalls in
the future. The cost of any subsequent product recall and associated negative
publicity could have a material adverse effect on the Company's business,
operating results and financial condition. In addition, the Company's
development and enhancement of its complex OS products entails substantial risks
of product defects. There can be no assurance that software errors will not be
found in existing or new products or releases after commencement of commercial
licensing, which may result in delay or loss of revenue, loss of market share,
failure to achieve market acceptance, or may otherwise adversely impact the
Company's business, operating results and financial condition.
GOVERNMENT REGULATION. The majority of the Company's customers operate within
the telecommunications industry which is subject to regulation in the United
States and other countries. Most of the Company's customers must receive
regulatory approvals in conducting their businesses. Although the
telecommunications industry has recently experienced government deregulation,
there is no assurance this trend will continue. Moreover, the federal and state
courts and the FCC continue to interpret and clarify the provisions of the 1996
Telecommunications Act. In fact, recent regulatory rulings have affected the
ability of the Company's customers to enter new markets and deliver new services
which could impact their ability to make significant capital expenditures. The
effect of judicial or regulatory rulings by federal and state agencies on the
Company's customers may adversely impact the Company's business, operating
results and financial condition.
POTENTIAL COMPETITION FROM RBOCS. The 1996 Telecommunications Act has generally
eliminated the restrictions which had previously prohibited the RBOCs from
manufacturing telecommunications equipment (subject to first satisfying certain
conditions designed to facilitate local exchange competition and receipt of
prior approval by the FCC). These restrictions had been imposed under the
Modification of Final Judgment, which governed the structure of the 1984
divestiture by AT&T of its local operating telephone company subsidiaries. The
passage of the 1996 Telecommunications Act may have an adverse effect on the
Company because the RBOCs, which are presently the Company's principal
customers, may now become manufacturers of some or all of the products currently
manufactured and sold by the Company and, consequently, may no longer purchase
telecommunications equipment produced by the Company at the levels historically
experienced.
16
<PAGE>
PROPRIETARY TECHNOLOGY. The Company relies on a combination of technical
leadership, patent, trade secret, copyright and trademark protection and
non-disclosure agreements to protect its proprietary rights. Although the
Company has pursued and intends to continue to pursue patent protection of
inventions that it considers important and for which such protection is
available, the Company believes its success will be largely dependent on its
reputation for technology, product innovation, affordability, marketing
ability and response to customers needs. Currently, the Company has fourteen
U.S. patents granted and five U.S. patent applications allowed. Four of the
granted patents relates to the Company's Remote Module product.
Additionally, the Company has five pending U.S. patent applications and four
international (Patent Cooperation Treaty and European Patent Office)
applications on file covering various circuit and system aspects of its
products. There can be no assurance that the Company will be granted
additional patents or that, if any patents are granted, they will provide the
Company's products with significant protection or will not be challenged.
Additionally, should a third party challenge any of the Company's current or
future patents, there can be no assurance that the Company will be successful
in defending its patents or that any litigation, regardless of outcome, will
not result in substantial cost to and diversion of efforts by the Company. As
part of its confidentiality procedures, the Company generally enters into
non-disclosure agreements with its employees, consultants and suppliers, and
limits access to and distribution of its proprietary information. Despite
these precautions, it may be possible for a third party to copy or otherwise
obtain and use the Company's technology without authorization. Accordingly,
there can be no assurance that the Company will be successful in protecting
its proprietary technology or that ADA's proprietary rights will preclude
competitors from developing products or technology equivalent or superior to
that of the Company. The telecommunications industry is characterized by the
existence of a large number of patents and frequent litigation based on
allegations of patent infringement. The Company is currently not party to any
litigation regarding any patents or other intellectual property rights.
However, there can be no assurance that third parties will not assert
infringement claims against the Company in the future or that any such
assertions will not result in costly litigation or require the Company to
obtain a license to intellectual property rights of such parties. There can
be no assurance that any such licenses would be available on terms acceptable
to the Company, if at all. Further, litigation, regardless of outcome, could
result in substantial cost to and diversion of efforts by the Company. Any
infringement claims or litigation by or against the Company could materially
and adversely affect the Company's business, operating results and financial
condition. Moreover, the laws of some foreign countries do not protect the
Company's proprietary rights in the products to the same extent as do the
laws of the United States.
The Company relies on certain software that it licenses from third parties,
including software that is integrated with internally developed software and
used in the Company's products to perform key functions. There can be no
assurance that these third party software licenses will continue to be available
to the Company on commercially reasonable terms or that such licenses will not
be terminated. Although the Company believes that alternative software is
available from other third party suppliers, the loss of or inability of the
third parties to enhance their products in a timely and cost-effective manner
could result in delays or reductions in product shipments by the Company until
equivalent software could be developed internally or identified, licensed, and
integrated, which could have a material adverse effect on the Company's
business, operating results and financial condition.
DEPENDENCE ON KEY PERSONNEL. The success of the Company is dependent, in part,
on its ability to attract and retain highly qualified personnel. Competition for
such personnel is intense and the inability to attract and retain additional key
employees or the loss of one or more current key employees could adversely
affect the Company. There can be no assurance that the Company will be
successful in hiring or retaining requisite personnel.
VOLATILITY OF STOCK PRICE. The Company's future earnings and stock price may
be subject to significant volatility, particularly on a quarterly basis. Any
shortfall in revenue or earnings from levels expected by public market analysts
and investors could have an immediate and significant adverse effect on the
trading price of the Company's Common Stock. Fluctuation in the Company's stock
price may also have an effect on customer decisions to purchase the Company's
products which could have a material adverse effect on the Company's business,
operating results and financial condition.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
17
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
From time to time, ADA may be involved in litigation relating to claims
arising out of its operations in the normal course of business. As of the
date of this Quarterly Report, the Company is not a party to any legal
proceedings.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of Stockholders was held on May 21, 1998. At the
meeting, the stockholders elected Kenneth E. Olson, Christopher B. Paisley,
Peter P. Savage and Edward F. Tuck as directors of the Company for the
ensuing year and until their respective successors are elected. The
following tables sets forth the results of voting in this election:
<TABLE>
<CAPTION>
FOR AGAINST WITHHELD
--- ------- --------
<S> <C> <C> <C>
Kenneth E. Olson 10,280,182 -- 115,231
Christopher B. Paisley 10,284,820 -- 110,593
Peter P. Savage 10,283,972 -- 111,441
Edward F. Tuck 10,287,458 -- 107,955
</TABLE>
In addition, the stockholders voted on the following proposals:
(a) To approve the adoption of the Company's 1998 Employee Stock Purchase
Plan:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C>
9,093,861 1,245,499 56,053
</TABLE>
This proposal was approved.
(b) To approve the adoption of the amendment to the Company's 1994 Stock
Option/Stock Issuance Plan:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C>
8,170,229 2,177,409 47,525
</TABLE>
This proposal was approved.
(c) To ratify the appointment of Coopers and Lybrand L.L.P. as the
Company's independent public accountants for the fiscal year ending
December 31, 1998:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C>
10,314,229 42,315 38,869
</TABLE>
This proposal was approved.
ITEM 5. OTHER INFORMATION.
Proposals of stockholders intended to be presented at the next Annual
Meeting of the Stockholders of the Company must be received by the Company
at its offices at 9855 Scranton Road, San Diego, CA, 92121 not later than
December 14, 1998.
18
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.3(1) Certificate of Incorporation of the Company.
3.4(2) Certificate of Agreement of Merger of the Company and its
California predecessor.
3.5(1) Bylaws of the Company.
10.1* Agreement between Telesector Resources Group, Inc. ("Bell Atlantic")
and Applied Digital Access, Inc. executed July 15, 1998.
27.1 Financial Data Schedule.
- ----------
(1) Incorporated by reference to the Company's Current Report on Form 8-K
dated December 23, 1997 (File No. 0-23698).
(2) Incorporated by reference to the Company's Current Report on Form 8-K/A
dated January 12, 1998 (File No. 0-26398).
* Certain confidential portions of this Exhibit were omitted by means of
deleting the text and replacing it with an asterisk (the "Mark"). This
Exhibit has been filed separately with the Secretary of the Commission
without the Mark pursuant to the Company's Application Requesting
Confidential Treatment under rule 24b-2 under the Securities Exchange Act of
1934.
(b) Reports on Form 8-K.
None.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Applied Digital Access, Inc.
Date: August 14, 1998 /s/ PETER P. SAVAGE
----------------------------
Peter P. Savage
Director
President and Chief Executive Officer
Date: August 14, 1998 /s/ JAMES L. KEEFE
----------------------------
James L. Keefe
Vice President Finance and
Administration and Chief
Financial Officer
20
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. APPENDICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2.1. ACCEPTANCE DATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2.2. AFFILIATE . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . .1
2.3. DOCUMENTATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
2.4. LICENSED MATERIALS . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.5. PRODUCT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.6. SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.7. SOFTWARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.8. SOURCE CODE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.9. SYSTEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.10. WORK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
3. AGREEMENT TO PURCHASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
3.1. SCOPE OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
3.2. TERM OF AGREEMENT ("TERM"). . . . .. . . . . . . . . . . . . . . . . . . .2
3.3. INTERRELATIONSHIP WITH ORDERS AND APPENDICES . . . . . . . . . . . . . . .3
3.4. NON-EXCLUSIVE MARKET RIGHTS. . . . . . . . . . . . . . . . . . . . . . . .3
4. SPECIFICATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
4.1. SPECIFICATIONS AND DRAWINGS. . . . . . . . . . . . . . . . . . . . . . . .3
5. PRICES AND TERMS OF PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . .3
5.1. PRICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
5.1.A. Pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
5.1.B. Increase During Term . . . . . . . . . . . . . . . . . . . . . . . . .3
5.1.C. Reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
5.1.D. Continuous Improvement . . . . . . . . . . . . . . . . . . . . . . . .4
5.1.E. New Technology Replacement . . . . . . . . . . . . . . . . . . . . . .4
5.1.F. New Technology Additions . . . . . . . . . . . . . . . . . . . . . . .4
5.1.G. BELL ATLANTIC-Requested Enhancements . . . . . . . . . . . . . . . . .4
5.2. TERMS OF PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
5.2.A. PRODUCT and SOFTWARE . . . . . . . . . . . . . . . . . . . . . . . . .4
5.2.B. Engineering SERVICES . . . . . . . . . . . . . . . . . . . . . . . . .5
5.2.C. All other SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . .5
5.3. DISCOUNTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
5.4. BILLING VERIFICATION AND AUTHORIZATION FOR PAYMENT PROCESS ("BVAPP") . . .5
6. ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
6.1. ASSIGNMENT BY BELL ATLANTIC. . . . . . . . . . . . . . . . . . . . . . . .5
6.2. ASSIGNMENT BY SUPPLIER. . .. . . . . . . . . . . . . . . . . . . . . . . .5
6.3. PROHIBITED ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . . . .5
7. TITLE; INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . .6
7.1. PUBLICITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
7.2. PRODUCT MARKINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
7.3. INFORMATION AND INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . . .6
7.3.A. Information Defined. . . . . . . . . . . . . . . . . . . . . . . . . .6
7.3.B. ADA Information. . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.3.C. BA Information . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
7.3.D. Work Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
7.4. LICENSED MATERIALS.. . . . . . . . . . . . . . . . . . . . . . . . . . . .8
7.5. PROHIBITED USES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
7.6. ACCESS TO WORK IN PROGRESS.. . . . . . . . . . . . . . . . . . . . . . . .9
7.7. TITLE AND RISK OF LOSS.. . . . . . . . . . . . . . . . . . . . . . . . . .9
7.8. QUIET ENJOYMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
7.9. INFRINGEMENT OF PATENTS, COPYRIGHTS, AND TRADEMARKS. . . . . . . . . . . .9
8. PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
8.1. SUPPLIER COMPREHENSIVE RESPONSIBILITIES FOR OVERALL PERFORMANCE. . . . . 10
8.2. PERFORMANCE STANDARDS. . . . . . . . . . . . . . . . . . . . . . . . . . 10
9. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.1. TERMINATION FOR CAUSE. . . . . . . . . . . . . . . . . . . . . . . . . 11
9.2. TERMINATION WITHOUT CAUSE . . . . . . . . . . . . . . . . . . . . . . . 11
9.3. TERMINATION FOR INSOLVENCY, BANKRUPTCY, ASSIGNMENT, EXPROPRIATION,
AND/OR LIQUIDATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.4. RIGHTS IN TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . 11
10. DELIVERY AND SHIPPING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.1. FOB POINT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.2. COSTS AND ROUTING . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.3. SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.3.A. Schedules ARO . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.3.B. Accelerated Schedules . . . . . . . . . . . . . . . . . . . . . . . 12
10.3.C. Notice of Delivery. . . . . . . . . . . . . . . . . . . . . . . . . 12
10.3.D. Keeping Schedules . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.4. SHIPPING AND BILLING. . . . . . . . . . . . . . . . . . . . . . . . . . 12
10.5. SHIPPING SCHEDULE . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10.6. NOTICE OF DELAY.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
11. ORDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
11.1. ORDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.2. VARIATION IN QUANTITY . . . . . . . . . . . . . . . . . . . . . . . . . 13
11.3. TERMINATION OF ORDER. . . . . . . . . . . . . . . . . . . . . . . . . . 13
11.4. CHANGE ORDER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
11.4.A. Request and Issuance. . . . . . . . . . . . . . . . . . . . . . . . 14
11.4.B. Adjustment Limitations. . . . . . . . . . . . . . . . . . . . . . . 14
11.4.C. BELL ATLANTIC Assistance/Advice . . . . . . . . . . . . . . . . . . 14
11.4.D. Request for Information . . . . . . . . . . . . . . . . . . . . . . 14
11.5. STOP WORK ORDER.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
11.5.A. Issuance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
11.5.B. Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
11.5.C. Cancellation or Expiration. . . . . . . . . . . . . . . . . . . . . 15
11.5.D. Termination of Work . . . . . . . . . . . . . . . . . . . . . . . . 15
12. QUALITY ASSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
12.1. QUALITY SYSTEM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
12.2. QUALITY PERFORMANCE REPORTING . . . . . . . . . . . . . . . . . . . . . 16
12.3. SOURCE INSPECTION.. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
12.4. PACKING.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
12.5. MARKING.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
12.6. TECHNICAL SUPPORT.. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
12.6.A. Full Customer Support During Engineering, Installation and
Conversion Periods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
12.6.B. Customer Support Post Acceptance. . . . . . . . . . . . . . . . . . 17
12.7. ENGINEERING COMPLAINTS. . . . . . . . . . . . . . . . . . . . . . . . . 18
12.8. CHANGES TO PRODUCT OR SOFTWARE CHANGE NOTICES ("PCNS"). . . . . . . . . 19
12.9. REPAIRS AND REPLACEMENT . . . . . . . . . . . . . . . . . . . . . . . . 19
12.9.A. Repair And Replacement Procedures . . . . . . . . . . . . . . . . . 19
12.9.B. Pre-Acceptance. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
12.9.C. In Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
12.9.D. Out Of Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . 21
12.9.E. Emergency "Out Of Service" Conditions . . . . . . . . . . . . . . . 21
12.10. DETAIL ENGINEERING, OFFICE RECORDS . . . . . . . . . . . . . . . . . . 22
12.11. INSTALLATION BY SUPPLIER . . . . . . . . . . . . . . . . . . . . . . . 22
12.12. INSTALLATION BY BELL ATLANTIC, ITS AFFILIATES OR AFFILIATE'S AGENTS. . 22
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
12.12.A. Installation Interval and Documentation. . . . . . . . . . . . . . 22
12.12.B. Installation Procedures. . . . . . . . . . . . . . . . . . . . . . 22
12.13. ACCEPTANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
12.14. INFORMATION KEPT CURRENT . . . . . . . . . . . . . . . . . . . . . . . 23
12.15. CORRECTIVE ACTION. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
12.16. CONTINUOUS IMPROVEMENT PLAN [SOFTWARE QUALITY IMPROVEMENT PLAN
("SQIP"). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
13. WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
13.1. WARRANTY OF TITLE . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
13.2. PRODUCT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
13.3. SOFTWARE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
13.4. WARRANTY PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
13.4.A. Commencement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
13.4.B. PRODUCT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
13.4.C. SOFTWARE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
13.4.D. Third Party PRODUCTS and SOFTWARE . . . . . . . . . . . . . . . . . 25
13.4.E. Consumable Components . . . . . . . . . . . . . . . . . . . . . . . 25
13.4.F. Identical SYSTEM(s), PRODUCT, or SOFTWARE . . . . . . . . . . . . . 25
13.4.G. Extension for non-conforming PRODUCT or SOFTWARE. . . . . . . . . . 25
13.5. YEAR 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
13.5.A. SOFTWARE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
13.5.B. SYSTEMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
13.6. ILLICIT CODE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
13.7. SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
13.8. EMPLOYEES AND SUBCONTRACTORS BOUND. . . . . . . . . . . . . . . . . . . 26
13.9. LIMITATIONS ON WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . 26
14. COMPLIANCE WITH REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 27
14.1. COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . . . . 27
14.2. RADIO FREQUENCY ENERGY STANDARDS. . . . . . . . . . . . . . . . . . . . 27
14.3. REGISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
14.4. GOVERNMENT CONTRACT PROVISIONS. . . . . . . . . . . . . . . . . . . . . 28
14.5. ENVIRONMENTAL COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . . . 28
14.6. HAZARDOUS CHEMICAL INFORMATION. . . . . . . . . . . . . . . . . . . . . 28
14.7. OCCUPATIONAL SAFETY AND HEALTH ACT (O.S.H.A.) . . . . . . . . . . . . . 28
14.8. EXPORT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
15. WORKAROUND. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
15.1. SCHEDULING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
16. DOCUMENTATION AND RECORD KEEPING. . . . . . . . . . . . . . . . . . . . . . . 29
16.1. DOCUMENTATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
16.2. PERIODIC REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
16.3. RECORDS AND AUDIT . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
17. PROFESSIONAL SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
17.1. TRAINING SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
17.2. CONSULTING SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . 31
18. SUPPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
18.1. CONTINUING AVAILABILITY . . . . . . . . . . . . . . . . . . . . . . . . 31
18.2. EXTRAORDINARY SUPPORT . . . . . . . . . . . . . . . . . . . . . . . . . 31
18.3. REGULATORY ASSISTANCE . . . . . . . . . . . . . . . . . . . . . . . . . 32
19. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
19.1. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
19.2. CHOICE OF LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
19.3. MINORITY AND WOMEN-OWNED BUSINESS ENTERPRISES . . . . . . . . . . . . . 32
19.4. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
19.5. SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
19.6. NON-WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
19.7. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
19.8. FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
19.9. MOST FAVORED CUSTOMER . . . . . . . . . . . . . . . . . . . . . . . . . 33
19.10. RELEASES VOID. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
19.11. ALTERNATE DISPUTE RESOLUTION . . . . . . . . . . . . . . . . . . . . . 34
19.11.A. Referral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
19.11.B. Mediation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
19.12. INDEPENDENT OBLIGATION OF SUPPLIER TO CONTINUE PERFORMANCE . . . . . . 35
19.13. LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
19.14. INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
19.15. IMPLEADER AND LIMITED LIABILITY OF BELL ATLANTIC . . . . . . . . . . . 36
19.16. WORK PERFORMED ON BELL ATLANTIC PREMISES . . . . . . . . . . . . . . . 36
19.16.A. Clean Up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
19.16.B. Harmony. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
19.16.C. Plant And Work Rules . . . . . . . . . . . . . . . . . . . . . . . 36
19.16.D. Right Of Access. . . . . . . . . . . . . . . . . . . . . . . . . . 36
19.16.E. Tools And Equipment. . . . . . . . . . . . . . . . . . . . . . . . 36
19.16.F. Work Hereunder . . . . . . . . . . . . . . . . . . . . . . . . . . 36
19.17. RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
19.18. HEADINGS AND CAPTIONS
20.0 NPRM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
21. ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
<PAGE>
Page 1 of 38
BELL ATLANTIC and APPLIED DIGITAL ACCESS (ADA) AGREEMENT
THIS AGREEMENT ("AGREEMENT") is entered into this March 1, 1998 (the "Effective
Date") by and between Telesector Resources Group, Inc., a Delaware corporation
with offices at 240 E. 38th Street, New York, N.Y. 10016, on behalf of itself
and for the benefit of its AFFILIATES, (hereinafter collectively referred to as
"BELL ATLANTIC") and Applied Digital Access, Inc. with offices at 9855 Scranton
Road, San Diego, CA 92121 (hereinafter referred to as "SUPPLIER"). Under the
AGREEMENT, BELL ATLANTIC agrees to purchase and SUPPLIER agrees to sell SYSTEMS,
PRODUCT, SERVICES and DOCUMENTATION and to license SOFTWARE when ordered by BELL
ATLANTIC in accordance with the terms and conditions stated in this AGREEMENT.
NOW, THEREFORE, in consideration of the mutual promises and conditions set forth
herein, and intending to be legally bound, the parties agree as follows:
1. APPENDICES
The following appendices are attached hereto and are hereby made a part of
this AGREEMENT:
Appendix Title
A Prices, Schedules, Discounts
B Documentation
C Specifications
D Training
E Engineering, Installation and Installation Support
F Intentionally Omitted
G Intentionally Omitted
H BVAPP
I Quality Exceptions
J Software Upgrade Program
K Diversified Supplier Second Tier Report Form
L Sample Non-Disclosure
M CTS/T3AS NPRM Support Matrix
2. DEFINITIONS
2.1. ACCEPTANCE DATE
ACCEPTANCE DATE shall mean the day the applicable PRODUCT successfully
completes all acceptance requirements provided for in this AGREEMENT and
any applicable ORDER.
2.2. AFFILIATE
AFFILIATE means, at any time, and with respect to any corporation,
person or other entity (a) any other corporation that at such time,
directly or indirectly through one or more intermediaries, controls, or
is controlled by, or is under common control with, such first
corporation, person or other entity; or (b) any other corporation,
person or other entity beneficially owning or holding, directly or
indirectly, 25% or more of any class of voting or equity interests of
the first corporation or any subsidiary or any corporation of which the
first corporation and its subsidiaries beneficially own or hold, in the
aggregate, directly or indirectly, 25% or more of any class of voting or
equity interests. As used in this definition, "Control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a corporation, person or
other entity whether through the ownership of voting securities, or by
contract or otherwise.
2.3. DOCUMENTATION
DOCUMENTATION shall mean the written materials, drawings, and
specifications provided by SUPPLIER associated with a PRODUCT that are
more fully described or referenced on Exhibit B, that include but are
not limited to, descriptions of planning, installation, engineering,
use, test, maintenance, analysis, repair, operation, and acceptance
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testing of the SYSTEM, together with any and all modifications,
revisions, additions, improvements or enhancements made generally
available by SUPPLIER from time to time.
2.4. LICENSED MATERIALS
LICENSED MATERIALS shall mean the SOFTWARE and the firmware or internal
code fixed in, or otherwise incident to, the PRODUCT, for which licenses
are granted by SUPPLIER under this AGREEMENT.
2.5. PRODUCT
PRODUCT shall mean any or all hardware, components, materials,
apparatus, documentation and LICENSED MATERIALS as specified in this
AGREEMENT or in an ORDER, or which are integral to, or associated with
the acceptable functioning and performance of SUPPLIER's SYSTEM, which
may be ordered hereunder from SUPPLIER by BELL ATLANTIC.
2.6. SERVICES
SERVICES shall mean the SUPPLIER's system engineering, installation,
installation support, technical support, emergency technical assistance,
training, and other related SERVICES which may be ordered hereunder,
including, without limitation, those set forth or otherwise identified
in the Appendices to this AGREEMENT.
2.7. SOFTWARE
SOFTWARE shall mean a program, or programs, consisting of machine
readable logical instructions and tables of information, including,
without limitation, those set forth or otherwise identified in all
Appendices to this AGREEMENT, which guide the functioning of a processor
and which provide BELL ATLANTIC with the functional and operational
performance capabilities and capacities or as may be identified in any
ORDER, associated Appendices or other document or attachments associated
with the ORDER. Such programs include, but are not limited to, control
programs, application programs, operating SYSTEM programs, base-feature
programs, optional-feature programs, and other programs related to the
operation, administration and/or support of PRODUCT.
2.8. SOURCE CODE
SOURCE CODE shall mean a computer program in the form of high-level
language that generally is not directly executable by a processor.
2.9. SYSTEM
SYSTEM shall mean the PRODUCT(S) and SOFTWARE of, and associated with,
SUPPLIER's system, functioning together, performing and interoperating
as a fully integrated and efficient whole with itself and with specified
other network elements and other facilities and equipment in the BELL
ATLANTIC network in accordance with the requirements and specifications
incident to this AGREEMENT or any ORDER(s) issued pursuant to this
AGREEMENT, including, without limitation, those set forth or otherwise
identified in all Appendices to this AGREEMENT.
2.10. WORK
WORK shall mean the provision of SYSTEMs, PRODUCT, SOFTWARE, and
DOCUMENTATION and the performance of SERVICES incident to this AGREEMENT
or any ORDER(s) issued pursuant to this AGREEMENT, including, without
limitation, those set forth or otherwise identified in all Appendices to
this AGREEMENT.
3. AGREEMENT TO PURCHASE
3.1. SCOPE OF AGREEMENT
BELL ATLANTIC agrees to purchase and SUPPLIER agrees to sell, SYSTEM(S),
PRODUCT(S), SERVICES and DOCUMENTATION and to license SOFTWARE, when
ordered by BELL ATLANTIC in accordance with the terms and conditions
stated in this AGREEMENT at the prices identified in Appendix A, hereto,
entitled PRICES, SCHEDULES, DISCOUNTS. This is an "as ordered"
agreement. This Agreement is not intended and shall not be construed as
a commitment on the part of BELL ATLANTIC to purchase any SYSTEMS,
PRODUCT(S) or SERVICES, or to purchase a license to any SOFTWARE and
RELATED DOCUMENTATION from SUPPLIER.
3.2. TERM OF AGREEMENT ("TERM")
This AGREEMENT shall commence on March 1, 1998 and, unless otherwise
terminated pursuant to the provisions of this AGREEMENT, shall continue
until February 28, 2001. BELL ATLANTIC shall have the option to extend
the AGREEMENT for successive terms of one (1) year by giving written
notice to SUPPLIER at least thirty (30) days prior to February 28, 2001
or the applicable succeeding anniversary date, which shall be the
effective date of termination, or unless otherwise terminated as
provided herein. This AGREEMENT shall be effective for SYSTEMS,
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PRODUCTS, SOFTWARE, SERVICES, DOCUMENTATION, and LICENSED MATERIALS
ordered by BELL ATLANTIC during the Term and any extension thereof.
3.3. INTERRELATIONSHIP WITH ORDERS AND APPENDICES
Whenever the provisions of an ORDER conflict with the provisions of this
AGREEMENT, the typewritten provisions of the ORDER which have been
mutually agreed upon by the parties in writing and which are not
pre-printed as part of a form shall control and take precedence over the
conflicting provisions of this AGREEMENT, but only for purposes of such
ORDER and, except for the conflicting provisions of such ORDER, the
terms and conditions of this AGREEMENT shall not be deemed to be
amended, modified, canceled, or waived. Conflicting pre-printed
provisions on the reverse or front of the forms belonging to either
party shall be deemed deleted. In the event of any conflict between
this AGREEMENT and the Appendices attached hereto, the following order
of precedence is provided: a) this AGREEMENT, (b) Appendix A, (c)
Appendix J, (d) Appendix D, (e) Appendix B, (f) Appendix C, (g) Appendix
E, (h) Appendix H, (i) Appendix I (j) Appendix K, (k) Appendix L and
(l) Appendix M.
3.4. NON-EXCLUSIVE MARKET RIGHTS
It is expressly understood and agreed that this AGREEMENT neither grants
to SUPPLIER an exclusive privilege to sell or provide to BELL ATLANTIC
any or all PRODUCTS or SERVICES of the type described in this AGREEMENT
which BELL ATLANTIC may require, nor does it require the purchase of any
SYSTEM, PRODUCTS, SOFTWARE, DOCUMENTATION, LICENSED MATERIALS, or
SERVICES from SUPPLIER by BELL ATLANTIC. SUPPLIER understands and agrees
that BELL ATLANTIC is free to and may contract with other manufacturers
and suppliers for the procurement of comparable products.
4. SPECIFICATIONS
4.1. SPECIFICATIONS AND DRAWINGS
SUPPLIER's standard commercial and/or technical specifications
(including drawings) or other applicable documentation referenced or
listed in Appendix C hereto, entitled SPECIFICATIONS (collectively
"SPECIFICATIONS") relating to the SYSTEM, PRODUCT, SERVICES,
DOCUMENTATION and LICENSED MATERIALS provided hereunder , as may be
amended and approved by BELL ATLANTIC, shall be considered a part of
this AGREEMENT. Upon request, SUPPLIER agrees to provide BELL ATLANTIC,
at no charge, a total of *copies of all such SPECIFICATIONS and approved
amendments thereto, as issued.
5. PRICES AND TERMS OF PAYMENT
5.1. PRICES
5.1.A. PRICING
SYSTEMS, PRODUCTS, SOFTWARE, SERVICES, DOCUMENTATION and LICENSED
MATERIALS will be furnished by SUPPLIER in accordance with the
prices stated in APPENDIX A hereof, entitled PRICES, SCHEDULES,
DISCOUNTS. All costs and prices identified are inclusive of
Appendices A through J as well as all terms and conditions of this
AGREEMENT. Such prices shall be applicable to ORDERs issued to
SUPPLIER by BELL ATLANTIC(s) at the location and by the method
agreed to by the parties. SUPPLIER's price list for SOFTWARE in
APPENDIX A hereto, entitled PRICES, SCHEDULES, DISCOUNTS must
differentiate between operating system SOFTWARE and applications
SOFTWARE according to the FCC mandated Uniform SYSTEM of Accounts,
Part 32 of the FCC Rules and Regulations.
5.1.B. INCREASE DURING TERM
For a period of three (3) years after the initial Effective Date,
SUPPLIER shall not increase prices for any SYSTEMS, PRODUCT,
SOFTWARE, SERVICES, DOCUMENTATION and LICENSED MATERIALS specified
in Appendix A. *However, SUPPLIER must reserve the right to review
its prices based on unexpected changes in parts costs and
availability. If there is a documented need to increase prices
for the renewal period, SUPPLIER will provide thirty (30) days
advance written notice of any price increase including
documentation and an explanation for the increase. Any active and
valid proposal(s) shall be honored.. Price increases for any
SYSTEM, PRODUCT, SOFTWARE, SERVICES, DOCUMENTATION or LICENSED
MATERIALS shall not occur more frequently than *every *.
5.1.C. REDUCTIONS
Price reductions may be initiated by SUPPLIER at any time.
* Confidential portion has been omitted and filed separately with
the Secretary of the Commission.
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5.1.D. CONTINUOUS IMPROVEMENT
SUPPLIER and BELL ATLANTIC shall identify areas in which SUPPLIER
shall seek to attain improvement in cost, quality, pricing and
service over the term of this AGREEMENT ("Continuous Improvement").
SUPPLIER shall use commercially reasonable efforts to afford BELL
ATLANTIC the ability to realize the benefits of such improvement
including price reductions. SUPPLIER and BELL ATLANTIC will meet
at least once every three months to assess SUPPLIER's progress
towards implementation of Continuous Improvement.
5.1.E. NEW TECHNOLOGY REPLACEMENT
BELL ATLANTIC and SUPPLIER recognize that SUPPLIER may develop and
market new PRODUCTS ("New Technology") that are designed to enhance
or replace the PRODUCTS provided for in this AGREEMENT. SUPPLIER
agrees to include the New Technology as part of its PRODUCT
offerings within the terms provided for in this AGREEMENT, subject
to the following:
1. New Technology shall only be furnished to BELL ATLANTIC pursuant
to a written amendment hereto and in accordance with Section
11.4, entitled CHANGE ORDERS, except that price reductions may be
made at any time.
2. New Technology shall be priced at the same or lower price for
comparable, or substitute features and functionality, as the
replaced PRODUCT or SOFTWARE in accordance with the mutual goal
of Continuous Improvement.
3. In the event New Technology will cause the SUPPLIER to incur
greater per-unit costs compared to current PRODUCTS but will
offer substantially increased capacity or features such that
SUPPLIER believes a price increase is justified, then:
3.a. SUPPLIER shall provide to BELL ATLANTIC a written
detailed explanation of such proposed price increase
including a breakdown of the additional costs incurred
by the SUPPLIER in providing such PRODUCTS and how such
additional features or capacity shall help reach the
goal of Continuous Improvement.
3.b. SUPPLIER shall ensure continued availability of the
current PRODUCTS or PRODUCTS of similar functionality
during the Term at the same or lower price as stated in
Appendix A, entitled PRICES, SCHEDULES and DISCOUNTS
(as such price may have been adjusted in accordance
with the terms of this Agreement), unless otherwise
agreed to pursuant to a written amendment to this
AGREEMENT.
4. All such proposed changes to Appendix A hereto, entitled PRICES,
SCHEDULES, DISCOUNTS, relating to New Technology shall be
subject to BELL ATLANTIC's written consent evidenced by a written
amendment to this AGREEMENT which shall not be unreasonably
withheld or delayed.
5.1.F. NEW TECHNOLOGY ADDITIONS
SUPPLIER may propose the addition of New Technology to Appendix A
hereto which is not intended to replace or upgrade current PRODUCT
("New Technology Addition"). SUPPLIER shall provide a detailed
written explanation of how such New Technology Addition will meet
the joint goal of Continuous Improvement. All proposed New
Technology Additions shall only be furnished to BELL ATLANTIC
pursuant to a written amendment to this AGREEMENT or pursuant to a
separate written agreement between the parties.
5.1.G. BELL ATLANTIC-REQUESTED ENHANCEMENTS
BELL ATLANTIC shall have the right, from time to time, to request
SUPPLIER to develop enhancements to the System ("Enhancements") by
providing SUPPLIER with written notice of its request and a
description of the requested Enhancement. The parties agree to
negotiate in good faith, the terms of any such development,
including, without limitation, the rights that BELL ATLANTIC shall
have in the Enhancement, if any, and BELL ATLANTIC's payment of
development fees, to be set forth in a definitive written
agreement. Nothing in this Agreement shall restrict SUPPLIER's
development and/or licensing of any technology for third parties or
obligate either party to negotiate for more than ninety (90) days.
5.2. TERMS OF PAYMENT
5.2.A. PRODUCT AND SOFTWARE
SUPPLIER's invoice for PRODUCT and/or SOFTWARE shall be paid net
thirty (30) days from receipt of invoice, but in no event shall
invoice be dated prior to shipment of PRODUCT and/or SOFTWARE by
BELL ATLANTIC.
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5.2.B. ENGINEERING SERVICES
SUPPLIER's invoice for engineering SERVICES shall be paid net
thirty (30) days from receipt of invoice, but in no event shall
invoice be dated prior to completion and acceptance of engineering
SERVICES and delivery of the job specifications(s) to BELL ATLANTIC.
5.2.C. ALL OTHER SERVICES
SUPPLIER's invoice for all other SERVICES shall be paid net thirty
(30) days from receipt of invoice, but in no event shall invoice be
dated prior to the completion and acceptance of such SERVICES.
5.3. DISCOUNTS
SUPPLIER agrees to grant BELL ATLANTIC the discounts set forth in the
section of Appendix A entitled "Discounts." The applicable discounts
shall be in effect throughout the effective period of this AGREEMENT and
shall apply to PRODUCT, LICENSED MATERIALS, DOCUMENTATION, and SERVICES
as specified in Appendix A.
5.4. BILLING VERIFICATION AND AUTHORIZATION FOR PAYMENT PROCESS ("BVAPP")
Whenever BELL ATLANTIC issues an ORDER, the identification number of
which is prefaced by the letter "B,"SUPPLIER shall code central office
equipment and render billing in accordance with Appendix H , "BVAPP
Central Office Equipment Identification and Invoicing Requirements".
Whenever the provisions of this clause conflict with any other clause in
this AGREEMENT, the provisions of this clause shall prevail.
6. ASSIGNMENT
6.1. ASSIGNMENT BY BELL ATLANTIC
BELL ATLANTIC shall have the right to assign this AGREEMENT and/or to
assign its rights and delegate its duties, obligations or commitments
under this AGREEMENT, either in whole or in part, to any of its
AFFILIATES, parent, and/or subsidiaries upon written notice to SUPPLIER
provided the assignee agrees in writing to assume all of BELL ATLANTIC's
obligations hereunder.
Except to an AFFILIATE, BELL ATLANTIC may not sublicense, assign, or
otherwise transfer the right to use SUPPLIER's LICENSED MATERIAL (including
LICENSED MATERIAL embedded in a PRODUCT or SYSTEM) without SUPPLIER's prior
written approval. SUPPLIER'S approval shall be contingent, in part, upon
the parties reaching written agreement with respect to the terms for
payment of royalties or license fees to SUPPLIER relating to the usage of
the transferred LICENSED MATERIAL by the transferee. BELL ATLANTIC
acknowledges that any such sublicense, assignment or other transfer shall
not include an assignment of the warranty terms in Article 13 entitled
WARRANTIES. Notwithstanding anything to the contrary herein, BELL ATLANTIC
and its AFFILIATES are expressly prohibited from transferring or otherwise
assigning the right to use SUPPLIER's LICENSED MATERIAL or technical
information to any of SUPPLIER's competitors or any foreign company,
governmental body, or agency which is not subject to the U.S. laws and
enforcement pertaining to patents and copyrights protection.
Any assignment pursuant to this clause shall neither affect nor diminish
any rights or duties that BELL ATLANTIC may then have as to PRODUCT or
SERVICES ordered by, or SOFTWARE licensed to, BELL ATLANTIC or delivered by
SUPPLIER prior to the effective date of the assignment or as to PRODUCT,
SERVICES or SOFTWARE which is beyond the scope of the assignment. Upon the
acceptance of the assignment and the assumption of the duties under this
AGREEMENT by the assignee, the assignor shall be released and discharged,
to the extent of the assignment, from all further duties under this
AGREEMENT.
6.2. ASSIGNMENT BY SUPPLIER
SUPPLIER shall have the right to assign this AGREEMENT and/or to assign
its rights and delegate its duties, obligations or commitments under
this AGREEMENT, either in whole or in part, to any of its AFFILIATES,
parent, and/or subsidiaries or in connection with the sale of all or
substantially all of the assets, business or equity securities of
SUPPLIER upon written notice to BELL ATLANTIC provided the assignee
agrees in writing to assume all of SUPPLIER's obligations hereunder.
6.3. PROHIBITED ASSIGNMENTS
Any assignment of any right or interest under this AGREEMENT, or ORDERs
issued pursuant to this AGREEMENT, except in accordance with this
Article or the assignment of monies due or to become due, without the
prior written consent of the non-assigning party, which consent will not
be unreasonably withheld, shall be deemed void and ineffective. Any
assignment of monies shall be void and ineffective to the extent that
(1) SUPPLIER shall not have given BELL ATLANTIC at least sixty (60)
days prior written notice of such assignment and/or (2) such assignment
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attempts to impose upon BELL ATLANTIC obligations to the assignee
additional to the payment of such monies, or which are in excess of or
differ from its obligations hereunder, or to preclude BELL ATLANTIC from
dealing solely and directly with SUPPLIER in all matters pertaining to
this AGREEMENT including the negotiation of amendments or settlements of
charges due.
7. TITLE; INTELLECTUAL PROPERTY
7.1. PUBLICITY
SUPPLIER and BELL ATLANTIC agree to submit to the other party all
advertising, sales, and promotional materials, press releases and other
publicity materials relating to the SYSTEM, PRODUCT, SOFTWARE to be
furnished, or the SERVICES performed, by the SUPPLIER under this
AGREEMENT wherein the name, marks, or the name or mark of the other is
mentioned or containing language from which the connection of said names
or marks may be inferred or implied; and the parties further agree not
to publish or use such advertising, sales and promotional materials,
press releases, or other publicity materials before receiving the prior
written approval from the other party. Such approval shall not be
unreasonably withheld. SUPPLIER shall not use any trademark, trade
name, trade dress or any name, picture or logo which is commonly
identified with BELL ATLANTIC or any BELL ATLANTIC AFFILIAATES without
the express written permission of BELL ATLANTIC.
7.2. PRODUCT MARKINGS
If BELL ATLANTIC requires or allows SUPPLIER to place any marking or
name on PRODUCTS (other than SUPPLIER's customary and ordinary markings
and names), SUPPLIER shall ensure that the name or marking is only
placed on PRODUCTS covered by this AGREEMENT. SUPPLIER shall completely
remove the marking or name from any PRODUCTS upon which the name or
marking was placed but which are not sold to or accepted by BELL
ATLANTIC.
7.2.A. INFORMATION AND INTELLECTUAL PROPERTY
7.2.B. INFORMATION DEFINED. The term "Information" includes:
programs; specifications, drawings, models, technical and business
data and plans; works of authorship and other creative works; and
ideas, knowledge and know-how. Information may be transmitted in
writing (or other tangible form) or orally
7.2.B ADA INFORMATION. The parties acknowledges that in
connection with the performance of this AGREEMENT, ADA may seek to
provide information, documented on any tangible media, including,
without limitation, writings, drawings, sound recordings, computer
programs, pictorial representations and graphs, to BELL ATLANTIC,
which ADA claims is proprietary, and ADA may require that BELL
ATLANTIC protect the confidentiality of such information and
prevent its disclosure outside BELL ATLANTIC. ADA has already
provided to BELL ATLANTIC certain information ("Contract
Information"), which ADA considers proprietary and in connection
with which ADA requests confidential treatment. BELL ATLANTIC
acknowledges the proprietary nature of this information. Such
Contract Information shall be attached to this AGREEMENT and shall
be specifically listed below and specifically referenced in the
mutual non-disclosure agreement attached as Appendix L hereto.
BELL ATLANTIC make as a good faith commitment to protect such
Contract Information from disclosure outside BELL ATLANTIC to the
degree set forth below and as set forth in the mutual
non-disclosure agreement attached as Appendix L hereto. The
Contract Information is specifically identified below.
1. Appendix A - Prices, Schedules and Discounts
2. Pricing Information on Appendix J - Software Upgrade Program
3. Specifications in Appendix C
4. Source Code in any Product (as defined in the Agreement)
5. Remote Module Command Guide
6. Pricing Guide - T3AS, Centralized Test System, Protocol Analysis
Access System (Revs. A, B, C, D)
Pursuant to the process described below, ADA may add to the
Contract Information additional information ("Subsequent
Confidential Information") which it considers proprietary and in
connection with which BELL ATLANTIC makes a good faith commitment
to prevent its disclosure outside BELL ATLANTIC to the degree
described below and as set forth in the mutual non-disclosure
agreement attached as Appendix L hereto. Prior to providing such
Subsequent Confidential Information to BELL ATLANTIC, ADA shall
make a request for such confidential treatment in writing to Mr.
Tom Trempy of BELL ATLANTIC (or his designated successor ) ("the
Gatekeeper") and provide a single copy of the relevant Subsequent
Confidential Information for which protection is sought along with
the request. The Gatekeeper will determine whether the SUBSEQUENT
CONFIDENTIAL INFORMATION is of a proprietary nature such that
confidential
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treatment is appropriate and/or whether it is essential that ADA
provide such information to BELL ATLANTIC.
1. In the event the Gatekeeper decides that the Subsequent
Confidential Information is not essential to BELL ATLANTIC, he
shall promptly return the Subsequent Confidential Information to
ADA.
2. If the Gatekeeper determines that the Subsequent
Confidential Information is essential but that it is not, in his
opinion, sufficiently proprietary to warrant confidential
treatment, he shall notify ADA of his conclusion and ADA, at its
option, may demand that he return the Subsequent Confidential
Information or rescind its request for confidential treatment.
3. If the Gatekeeper concludes that the Subsequent
Confidential Information deserves such confidential treatment and
that such information is essential to BELL ATLANTIC, the parties
shall specifically identify the Subsequent Confidential Information
in the mutual non-disclosure agreement attached as Appendix L
hereto.
Upon receipt of the request and its accompanying Subsequent
Confidential Information and throughout the period during which he
conducts his review, the Gatekeeper will protect the Subsequent
Confidential Information from disclosure.
Pursuant to such an executed non-disclosure agreement, BELL
ATLANTIC will make a good faith commitment to ADA to maintain such
information, specifically identified in the mutual non-disclosure
agreement, in confidence with the same level of protection and care
that BELL ATLANTIC normally affords its own confidential
information, but in no event less than reasonable care; and shall
take commercially-reasonable steps sufficient to meet its good
faith commitment, including informing BELL ATLANTIC employees,
agents, representatives or independent contractors, who receive
either Contract Information or Subsequent Confidential Information,
of their obligation not to disclose such outside BELL ATLANTIC.
Notwithstanding the foregoing provisions of this section, BELL
ATLANTIC shall not be liable to ADA for damages of any kind for its
inadvertent and unintentional failure to meet its good faith
commitment. Furthermore, BELL ATLANTIC's disclosure of the such
information will not be deemed to breach this section if and to the
extent such information:
1. Is now or hereafter becomes available to the public without a
breach of this section;
2. Is rightfully received by the receiving party without restrictions
on its use or further disclosure by a third party; or
3. Is disclosed pursuant to any applicable law, rule, regulation or
order of a court of competent jurisdiction, agency or regulatory
commission. In the event that ADA discloses information which it
claims is proprietary prior to or without requesting
confidential treatment in the manner discussed above, BELL
ATLANTIC shall not treat such information as proprietary
(regardless of whether it bears a proprietary or confidential
legend or marking) and BELL ATLANTIC shall be under no
obligation to protect such information from disclosure.
The terms of this section shall supersede all prior letters of
intent, agreements, covenants, arrangements, communications,
representations, or warranties, whether oral or written, by any
officer, employee, or representative of either party relating to
the confidentiality of information exchanged by the parties in
connection with the performance of this AGREEMENT.
7.2.C. BA INFORMATION
Information that BELL ATLANTIC furnishes to SUPPLIER or that
SUPPLIER otherwise comes into contact with under this Agreement
will remain BELL ATLANTIC property. SUPPLIER will return such BELL
ATLANTIC'S Information to BELL ATLANTIC at BELL ATLANTIC's request.
Information that SUPPLIER furnishes to BELL ATLANTIC or that BELL
ATLANTIC otherwise comes into contact with under this Agreement
will remain SUPPLIER property. BELL ATLANTIC will return such
SUPPLIER Information to SUPPLIER at SUPPLIER's request.
7.2.D. WORK PRODUCT
The parties concur that, except as they may separately agree
pursuant to a definitive written development agreement, none of the
firmware, software, documentation or other works of authorship,
processes, methods, techniques, or know-how produced or developed
by SUPPLIER pursuant to this Agreement shall constitute a work for
hire and, accordingly, no copyright rights or other intellectual
property rights with respect to the same shall accrue to BELL
ATLANTIC.
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7.3. LICENSED MATERIALS
Unless otherwise specified in an ORDER and subject to all the terms and
conditions of this Agreement and the applicable ORDER, SUPPLIER hereby
grants to BELL ATLANTIC, as to any LICENSED MATERIALS supplied by
SUPPLIER under an ORDER, a perpetual, worldwide, non-sublicensable,
non-transferable, non-exclusive license:
(i) to use, execute and operate the LICENSED MATERIALS , in whole or in
part, on any hardware on which it was delivered or intended to execute or
operate in the normal course of business;
(ii) to display, transmit, reproduce one (1) copy solely for archival and
backup purposes, and integrate the LICENSED MATERIALS exclusively on BELL
ATLANTIC's internal data communications network (which includes, without
limitation, BELL ATLANTIC's public switch and transmission facilities
network); and
(iii) to sublicense, distribute, and market the LICENSED MATERIALS
upon execution of a separate re-seller or other marketing AGREEMENT subject
to terms for royalty fees and conditions for sublicense as agreed upon by
SUPPLIER.
If the Federal Communications Commission or a comparable state-level
regulatory agency mandates that the SYSTEM or its functionalities be
accessible to competitors of BELL ATLANTIC or other users of the network on
which the SYSTEM is placed, or in any way requires further licensing of the
LICENSED MATERIALS, then SUPPLIER agrees promptly to undertake negotiations
in good faith to license directly those competitors or potential SYSTEM
users as identified by BELL ATLANTIC. In the event that the
aforementioned legal mandate requires a sublicensing scheme to facilitate
access to unbundled operational service support network elements, or if
BELL ATLANTIC determines that business practicalities necessitate a
sublicensing scheme, then SUPPLIER agrees to permit BELL ATLANTIC to
sublicense SUPPLIER's LICENSED MATERIALS. Such sublicense must be drafted
in accordance with the following terms:
i) As Sublicensor, BELL ATLANTIC may grant to a Sublicensee (whether a
competing local exchange carrier or other entity that requires access under
the applicable law) a perpetual, network specific (available for use on
only those telecommunications networks maintained by BELL ATLANTIC and
subject to this AGREEMENT), nonsublicensable, nontransferable,
non-exclusive, sublicense in any Licensed Materials subject to this
AGREEMENT;
ii) Sublicensee must agree to abide by the use parameters defined by this
AGREEMENT with the following amendments:
a) Permissive uses as set forth in this AGREEMENT may be granted
to the Sublicensee, however, at no time may a Sublicensee have
physical or electronic access to the source code of the SOFTWARE;
and
b) As the Sublicensee did not purchase and does not possess any
hardware on which to execute or operate the SOFTWARE, all uses must
be confined to only those possible through Sublicensor's display
interface hardware.
iii) Sublicensee must agree in writing a) not to engage in any of the
prohibited uses set forth in this AGREEMENT; b) that it will have no right
to further license any rights to the LICENSED MATERIALS; and c) that it
will keep all confidences as described within this AGREEMENT; and
iv) The Sublicensee must contain mutually agreeable pricing provisions.
The license term for SOFTWARE shall commence on the date of invoice of such
SOFTWARE and shall continue perpetually, unless terminated in accordance
with Section 9.
With each license of SOFTWARE ordered hereunder, SUPPLIER shall provide
BELL ATLANTIC with one copy of the applicable DOCUMENTATION identified in
Appendix B hereof, entitled DOCUMENTATION. DOCUMENTATION shall comply with
commonly accepted industry standards with respect to content, size,
legibility and reproducibility.
7.4. PROHIBITED USES
BELL ATLANTIC agrees not to translate, decompile, dissemble or reverse
engineer any PRODUCT, SOFTWARE, LICENSED MATERIALS or SYSTEM or
otherwise attempt to alter, adapt or discover the SOURCE CODE of any
PRODUCT, SOFTWARE, LICENSED MATERIALS or SYSTEM by any means whatsoever
or permit another to do so. Further, except as expressly permitted under
this Agreement, BELL ATLANTIC may not:
a) Provide, rent, lease, lend, use for timesharing or service bureau
purposes, sell, network, transfer, or otherwise distribute or allow
others to use any PRODUCT, SOFTWARE, LICENSED MATERIALS or SYSTEM, or
any copy or portion thereof, or BELL ATLANTIC's rights under this
AGREEMENT on a temporary or permanent basis to or for the benefit of
another person or entity without the prior written permission of
SUPPLIER;
b) Modify, incorporate into or with other software or create a
derivative work based upon any part of any PRODUCT, SOFTWARE,
LICENSED MATERIALS or SYSTEM or attempt or permit a third party to
do so, except to the limited extent that such actions do not affect
the form or function of any PRODUCT, SOFTWARE,
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LICENSED MATERIALS or SYSTEM provided that foregoing shall not
restrict BELL ATLANTIC from using standard application program
interfaces as necessary to permit interoperability of any PRODUCT,
SOFTWARE, LICENSED MATERIALS or SYSTEM with other applications;
c) Make any copies of the PRODUCTS, SOFTWARE, LICENSED MATERIALS or
DOCUMENTATION or distribute any other materials provided by SUPPLIER
other than for BELL ATLANTIC's (excluding any affiliates which
function as telecommunications equipment suppliers) own internal use,
except as reasonably required to use the PRODUCTS, SOFTWARE, LICENSED
MATERIALS or DOCUMENTATION in accordance with the license granted
hereunder or as otherwise required by law and, except for one (1) copy
made solely for archival and back-up purposes;
d) Remove, modify, or obscure the copyright, trademark, and/or any other
propriety notices or legends contained in any part of any PRODUCT,
SOFTWARE, LICENSED MATERIALS or SYSTEM or affixed on the PRODUCT,
SOFTWARE, LICENSED MATERIALS, DOCUMENTATION or SYSTEM media or
packaging;
e) Disclose the results of any benchmark of any PRODUCT, SOFTWARE,
LICENSED MATERIALS or SYSTEM to any third party without the prior
written authorization of SUPPLIER.
In the event BELL ATLANTIC translates, decompiles, dissembles or reverse
engineers any PRODUCT, SOFTWARE, LICENSED MATERIALS or SYSTEM or
otherwise attempts to alter, adapt or discover the SOURCE CODE of any
PRODUCT, SOFTWARE, LICENSED MATERIALS or the SYSTEM by any means
whatsoever or permit another to do so, SUPPLIER shall have the right to
terminate BELL ATLANTIC's right to use the affected SOFTWARE or LICENSED
MATERIALS as specified by the license in accordance with Section 9 . In
the event BELL ATLANTIC engages in any of the prohibited uses designated
as items A-E above, SUPPLIER shall have the right to terminate BELL
ATLANTIC's right to use the affected SOFTWARE or LICENSED MATERIALS as
specified by the license in accordance with Section 9, provided such
prohibited use is of a material nature and, in SUPPLIER's reasonable
belief, causes a material adverse effect upon SUPPLIER. The limits
upon SUPPLIER's right to terminate affected licenses outlined above does
not preclude SUPPLIER from seeking damages which result from such
prohibited use and seek injunctive relief intended to end the prohibited
use, but not to enjoin the use of the SOFTWARE or LICENSED MATERIALS in
accordance with the terms and conditions of the license.
7.5. ACCESS TO WORK IN PROGRESS
SUPPLIER agrees to promptly render, on reasonable request, status
reports of the Work in progress containing the information reasonably
requested by BELL ATLANTIC.
7.6. TITLE AND RISK OF LOSS
Title to and risk of loss for PRODUCTs, excluding LICENSED MATERIAL,
purchased hereunder shall vest in BELL ATLANTIC when the delivery of the
PRODUCT has been completed to the F.O.B. point specified in the ORDER,
including unloading, hoisting and rigging where ordered. BELL ATLANTIC
acknowledges and agrees that BELL ATLANTIC shall not acquire any
ownership interest in any LICENSED MATERIALS. Passing title to any
PRODUCT shall not constitute acceptance on the part of BELL ATLANTIC.
When purchasing PRODUCTS for shipment directly to New York Telephone
Company or New England Telephone and Telegraph Company, Telesector
Resources Group, Inc. shall be acting solely as a purchasing agent for the
company to which the PRODUCT is to be shipped. When the ORDER(s) is
placed by an AFFILIATE(s), title to direct ship PRODUCT shall pass from
SUPPLIER directly to the applicable AFFILIATE(s) and the receiving company
shall be entitled to all of the rights otherwise afforded to Telesector
Resources Group, Inc. under this AGREEMENT.
7.7. QUIET ENJOYMENT
With respect to any PRODUCT or Service furnished hereunder, SUPPLIER
agrees that BELL ATLANTIC, shall be entitled to possess and use such
PRODUCT or SERVICE during the initial term, including any extensions or
renewals thereof, without interruption by SUPPLIER or any person
claiming by or through SUPPLIER, provided only that BELL ATLANTIC shall
duly perform its obligations pursuant to this AGREEMENT and the
applicable ORDER.
7.8. INFRINGEMENT OF PATENTS, COPYRIGHTS, AND TRADEMARKS
The following terms apply to any infringement, claim of infringement or
other misappropriation of any United States patent issued as of the
first date of delivery of the applicable PRODUCT, trademark, copyright,
or trade secret ("Claim") based on or arising out of BELL ATLANTIC's
use, possession, or permitted transfer or resale of any PRODUCT,
SYSTEM, SOFTWARE or DOCUMENTATION, or part thereof, or SERVICES
furnished, or the use of any PRODUCT, DOCUMENTATION, and/or SERVICES
furnished, or the use of any LICENSED MATERIALS within the scope of the
licenses granted to BELL ATLANTIC under this AGREEMENT.
SUPPLIER shall indemnify BELL ATLANTIC from and against any loss, cost,
damage, expense, or liability that may arise out of or result solely by
reason of any such infringement or Claim, except to the extent that such
infringement or Claim (1) arises solely from SUPPLIER's adherence to Bell
Atlantic's written instructions, and which instructions
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could not have been satisfied by SUPPLIER, with the exercise of
commercial reasonableness, absent such infringement; (2) arises solely
as a result of the use of such PRODUCTS or SERVICES in combination with
software, hardware or services not provided by SUPPLIER, unless such use
is within its normally intended uses, and the infringement is caused by
the SUPPLIER's PRODUCTS or SERVICES, and not by another supplier's
products or services; (3) arises from a modification of the SYSTEM,
PRODUCT, LICENSED MATERIALS, SOFTWARE or DOCUMENTATION, or any part
thereof, after delivery to BELL ATLANTIC or its AFFILIATES, as
applicable, by someone other than SUPPLIER, provided such modification
solely and directly gives rise to the claim; (4) arises from BELL
ATLANTIC's continued allegedly infringing activity after being notified
thereof or after being informed of modifications that would have avoided
the alleged infringement; (5) incidental use of the SYSTEM, PRODUCT,
SOFTWARE or DOCUMENTATION, or any part thereof, where the infringement
does not result from the SYSTEM, PRODUCT, SOFTWARE or DOCUMENTATION; or
(6) arises from the use of the SYSTEM, PRODUCT, SOFTWARE or
DOCUMENTATION, or any part thereof, that is not in accordance with the
license granted hereunder provided such prohibited use solely and
directly gives rise to the claim . BELL ATLANTIC will indemnify and
hold SUPPLIER harmless from all suits, actions, claims, losses, damages
and the like, and expenses (including reasonable attorneys' fees)
related to claim of infringement excluded from SUPPLIER's indemnity
obligations by the preceding sentence upon the same terms and conditions
as set forth herein. SUPPLIER acknowledges and agrees that BELL ATLANTIC
may look to its other suppliers to fulfill its infringement
indemnification obligations hereunder.
If SUPPLIER is promptly notified by BELL ATLANTIC in writing, in accordance
with Section 19.7 hereof, of receipt of notice of a Claim of infringement
for which SUPPLIER is responsible and is given information, assistance and
the sole authority to defend or settle such claim, SUPPLIER shall (i)
defend or settle any action, suit or proceeding against BELL ATLANTIC
arising in connection with a Claim and (ii) pay any damages and costs
incurred by BELL ATLANTIC in connection with such claim or suit, including,
without limitation, legal fees and expenses awarded against or reasonably
incurred by BELL ATLANTIC in any such action or proceeding. SUPPLIER shall
have no responsibility under this Section 7.8 for any settlement it does
not approve in writing.
Without limitation of the foregoing, should BELL ATLANTIC's use of, or full
benefit from, the SYSTEM, PRODUCT, SOFTWARE, DOCUMENTATION or LICENSED
MATERIALS and/or SERVICES be impeded, prevented or limited by injunction or
other court order arising out of any such infringement or other cause of
action for which SUPPLIER is responsible, SUPPLIER shall, in addition to
the above indemnity, at its option:
1. replace or modify such PRODUCT, SYSTEM, DOCUMENTATION, LICENSED
MATERIALS and/or SERVICES or any part thereof so that they become
non-infringing but only if the modification or replacement does not
adversely affect BELL ATLANTIC's rights or ability to use such
PRODUCT, DOCUMENTATION and LICENSED MATERIALS and/or SERVICES; or
2. by license or other release from claim of infringement, procure for
BELL ATLANTIC's benefit the right to continue to use such PRODUCT,
SYSTEM, DOCUMENTATION, LICENSED MATERIALS and/or SERVICES; or
3. accept return of such infringing PRODUCT, SYSTEM, DOCUMENTATION,
LICENSED MATERIALS and/or SERVICES and refund BELL ATLANTIC for the
purchase price of such, less depreciation based on a life of five (5)
years.
The foregoing states the entire responsibility of SUPPLIER to BELL ATLANTIC
for infringement and is in lieu of any warranties of non-infringement which
are hereby disclaimed.
8. PERFORMANCE
8.1. SUPPLIER COMPREHENSIVE RESPONSIBILITIES FOR OVERALL PERFORMANCE
SUPPLIER represents, warrants and agrees that it has the full and final
responsibility, duty and obligation to provide, perform, deliver and
install, the SYSTEM, PRODUCTS, SOFTWARE and SERVICES as well as any
ancillary SERVICES, facilities, and equipment, set forth any ORDER(s)
issued by BELL ATLANTIC and accepted by SUPPLIER pursuant to this
AGREEMENT and further SUPPLIER agrees and acknowledges that any failure
in SUPPLIER's performance under this AGREEMENT may under the
circumstances set forth in this AGREEMENT constitute a Default by
SUPPLIER and may give rise to an obligation to pay money damages and
such other and additional relief or remedy as may be set forth in this
AGREEMENT or permitted at law or in equity.
8.2. PERFORMANCE STANDARDS
Performance Standards are set forth in Article 12 hereof, entitled
Quality Assurance, together with those as shall be set forth in the
applicable ORDER(s). SUPPLIER shall meet or exceed such performance
standards in all material respects in all work performed or PRODUCT or
SOFTWARE provided under this AGREEMENT or any ORDER(s). In the event
SUPPLIER fails to meet Performance Standards, BELL ATLANTIC shall
provide SUPPLIER with
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written Notice thereof, in accordance with Section 19.7 entitled
NOTICES, for each month in which SUPPLIER falls below the minimum
performance requirements. Failure to meet material performance
requirements shall occur, if SUPPLIER performs below the minimum
performance requirements in any material respect consistently over a
consecutive three (3) month period or during any six (6) months out of a
twelve (12) month period, whether or not such twelve (12) month period
coincides with a calendar year. BELL ATLANTIC shall have the option to
invoke Default, should SUPPLIER fail to meet the material performance
requirements of this AGREEMENT or any ORDER(s) issued pursuant to this
AGREEMENT.
9. TERMINATION
9.1. TERMINATION FOR CAUSE
If either party is in default of any material provision of this
AGREEMENT (a "Default"), then the other party may, in addition to any
other remedy that may be available in this AGREEMENT or at law,
terminate this AGREEMENT upon giving at least thirty (30) days written
notice. However, each party under this paragraph may, by curing the
breach within thirty (30) days of receipt of the notice (the "Cure
Period"), prevent the termination for cause. Notwithstanding the
foregoing, should a Default arise which the parties agree is of such a
nature that it cannot be remedied within the Cure Period ("Extended Cure
Default"), SUPPLIER shall present within such Cure Period a plan of
action to remedy such Extended Cure Default, which plan shall have, in
BELL ATLANTIC's reasonable judgment, a reasonable opportunity for
success. If, at the end of the Cure Period, a plan to remedy such
Extended Cure Default reasonably acceptable to BELL ATLANTIC is not
presented, then BELL ATLANTIC may terminate the AGREEMENT by giving
SUPPLIER at least ten (10) business days prior written notice of the
effective date of such termination. With the exception of termination
for BELL ATLANTIC's uncured breach of Section 7.4, in no way shall such
termination by SUPPLIER act to impair BELL ATLANTIC's right, title and
interest to the PRODUCT purchased hereunder and its license rights under
Section 7.3.
9.2. TERMINATION WITHOUT CAUSE
BELL ATLANTIC may terminate this AGREEMENT without any liability to
SUPPLIER (except for PRODUCTS and SERVICES already purchased pursuant to
an ORDER) by providing SUPPLIER with sixty (60) days prior written
notice.
9.3. TERMINATION FOR INSOLVENCY, BANKRUPTCY, ASSIGNMENT, EXPROPRIATION,
AND/OR LIQUIDATION
Either party may terminate this AGREEMENT immediately by giving written
notice, without liability to the other party (except for PRODUCTS and
SERVICES already purchased pursuant to an ORDER), in the event the other
party:
(1) is declared insolvent or bankrupt, or makes an assignment or other
arrangement for the benefit of its creditors;
(2) has all or any substantial portion of its capital stock or assets
expropriated by government authority; or
(3) is dissolved or liquidated (except as a consequence of a merger,
consolidation, or other corporate reorganization not involving the
insolvency or expropriation of that party).
If either party is involved in any of the events described in
subsections (1), (2) or (3), it shall promptly notify the other party.
9.4. RIGHTS IN TERMINATION
At the time of termination and to the extent of the termination, each party
shall return all of the other party's Confidential Information and the
parties shall be released from any and all obligations (except as set
forth in Section 19.5 hereof entitled "Survival") under this Contract
provided that (i) SUPPLIER shall be paid for PRODUCT, DOCUMENTATION,
LICENSED MATERIALS and/or SERVICES which have been provided to BELL
ATLANTIC under this Agreement prior to the date of termination and (ii)
BELL ATLANTIC shall reimburse SUPPLIER for all non-recoverable expenses
incurred by SUPPLIER on ORDER(s) in process that have not been provided
to BELL ATLANTIC prior to termination provided that SUPPLIER shall
provide BELL ATLANTIC with an itemized summary of expenses attributable
to such ORDER(s) and in no event shall BELL ATLANTIC be obligated to pay
more than the cost of such ORDER(s). Title to items for which BELL
ATLANTIC reimburses SUPPLIER under this section for ORDERs in process
shall rest with SUPPLIER. If for SOFTWARE or SERVICES for which
SUPPLIER's fee has been specified on the basis of a definite sum for the
completion of such SOFTWARE or SERVICES, the sum payable by BELL
ATLANTIC upon termination will be based upon the percent of services or
programs completed at the time of the notice of termination. In the
event of termination, BELL ATLANTIC shall continue to hold a perpetual,
world-wide, non-sublicensable, non-transferable, non-exclusive license
to all SOFTWARE previously paid for and accepted hereunder by BELL
ATLANTIC. Notwithstanding the foregoing sentence, in the event SUPPLIER
terminates this AGREEMENT due to BELL ATLANTIC's breach of Section A,
7.3 or 7.4, all licenses granted to BELL ATLANTIC hereunder shall
terminate and BELL ATLANTIC shall discontinue all use of the LICENSED
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MATERIALS and all portions thereof (whether or not modified or
incorporated into other software or hardware) and so certify to SUPPLIER
in writing.
10. DELIVERY AND SHIPPING
10.1. FOB POINT
PRODUCT and SOFTWARE shall be delivered FOB origin Prepaid or FOB origin
Freight Collect ("OC") in accordance with instructions provided on the
ORDER. BELL ATLANTIC's designated location to which the PRODUCT and
SOFTWARE are to be delivered shall be indicated on the ORDER.
10.2. COSTS AND ROUTING
For all Prepaid shipments, SUPPLIER shall be responsible for all
transportation, warehousing, distribution and delivery costs and BELL
ATLANTIC shall reimburse these costs within thirty (30) days of receipt
of invoice for such costs. For all OC shipments, SUPPLIER shall ship
all PRODUCT and SOFTWARE Freight Collect (OC) according to BELL
ATLANTIC's instructions, which will be given to SUPPLIER by Freight
Traffic Services at the 800 number below, and have bills sent to the
following address (which address BELL ATLANTIC may change upon providing
SUPPLIER with written Notice).
Telesector Resources Group
c/o Freight Traffic Services (FTS)
P.O. Box 1259
Somerville, New Jersey 08876
1-800-891-6218
If SUPPLIER fails to follow BELL ATLANTIC's shipping instructions, or if
SUPPLIER fails to request instructions when directed to in an ORDER,
then SUPPLIER shall be solely responsible for the associated freight
bill and freight costs in excess of BELL ATLANTIC's contract rates that
are incurred due to SUPPLIER'S non-conformance. If the freight bill is
paid by BELL ATLANTIC, SUPPLIER shall be required to reimburse BELL
ATLANTIC accordingly within 30 days.
10.3. SCHEDULES
In order to facilitate acquisition planning for PRODUCT, SYSTEM, and
SOFTWARE, SUPPLIER shall establish standard delivery schedules for the
PRODUCT, SYSTEM and SOFTWARE to be furnished under this AGREEMENT.
10.3.A. SCHEDULES ARO
These schedules will be from receipt of BELL ATLANTIC's ORDER until
delivery to BELL ATLANTIC's specified location. Such schedules,
which are contained in Appendix A, shall apply to all routine
ORDERs placed under this AGREEMENT.
10.3.B. ACCELERATED SCHEDULES
In the event that an accelerated delivery schedule is required by
BELL ATLANTIC, SUPPLIER shall make a reasonable effort to comply
with such requirements.
10.3.C. NOTICE OF DELIVERY
SUPPLIER shall give written notice of delivery to BELL ATLANTIC
fifteen (15) days prior to the scheduled date of delivery of
PRODUCT, SOFTWARE and SERVICES.
10.3.D. KEEPING SCHEDULES
If SUPPLIER determines that the scheduled date of delivery will not
be met, SUPPLIER shall promptly notify BELL ATLANTIC as stated
herein in the clause entitled "NOTICES."
10.4. SHIPPING AND BILLING
Unless instructed otherwise by BELL ATLANTIC, SUPPLIER shall, for ORDERs
placed and accepted by SUPPLIER hereunder:
1. Use commercially reasonable efforts to deliver entire quantity of
items ordered;
2. ship to the destination designated in the ORDER in accordance with
specific shipping instructions;
3. ensure that all subordinate documents bear BELL ATLANTIC's ORDER
number;
4. enclose a packing memorandum with each shipment and when more than one
package is shipped, identify the one containing the memorandum;
5. mark BELL ATLANTIC's ORDER number on all packages and shipping papers;
6. render itemized invoices in duplicate, or as otherwise specified,
showing ORDER number;
7. render separate invoices for each shipment or ORDER;
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8. invoice BELL ATLANTIC by mailing or otherwise transmitting invoices,
bills and notices to the billing address on the ORDER after shipment
of PRODUCT.
Shipping and routing instructions may be altered in writing, as mutually
agreed by SUPPLIER and BELL ATLANTIC.
In addition, SUPPLIER agrees to provide invoices that include priced units
of PRODUCT.
10.5. SHIPPING SCHEDULE
The shipping schedule applicable to each ORDER will be that set forth in
the ORDER accepted by SUPPLIER or any Change Order, if applicable.
SUPPLIER agrees not to ship PRODUCT or SOFTWARE prior to the agreed-upon
shipping schedule. Any variation from the foregoing must be agreed upon
by the parties in writing.
10.6. NOTICE OF DELAY
SUPPLIER, having agreed to the delivery date and/or completion date,
whichever is applicable, for any combination of PRODUCT, SOFTWARE or
SERVICES incorporated into BELL ATLANTIC's ORDER, further agrees to
notify BELL ATLANTIC in accordance with Section 19.7, entitled NOTICES,
hereof, as soon as any foreseeable delay in that date becomes known to
SUPPLIER's management.
11. ORDERS
11.1. ORDER FORMAT AND PROCESSING
Any written order or statement of work ("ORDER") issued by BELL
ATLANTIC(s) for a SYSTEM, PRODUCT, SOFTWARE, SERVICES, DOCUMENTATION,
and LICENSED MATERIALS specified herein, or which reference this
AGREEMENT, shall be deemed to be placed under and incorporate the terms
and conditions of this AGREEMENT.
An ORDER for the purchase of a SYSTEM, PRODUCT, SOFTWARE, and SERVICES
shall be written on a BELL ATLANTIC's purchase order form and shall contain
the following:
A. The incorporation by reference of this AGREEMENT;
B. A complete list of the SYSTEM, PRODUCT, SOFTWARE, and SERVICES
to be purchased specifying SUPPLIER's part number, CLEI Code
(if applicable), quantity, type, model, feature, description
and purchase price;
C. The locations at which the SYSTEM, PRODUCT, SOFTWARE, and
SERVICES will be delivered or installed and to which invoices
shall be forwarded;
D. The dates by which the SYSTEM, PRODUCT, SOFTWARE and SERVICES
are (a) to be shipped or performed and (b) installed or
completed and ready for use;
E. Any other special terms and conditions agreed upon by the
parties.
ORDERs placed for SYSTEM(S), PRODUCT, SERVICES, SOFTWARE which are
consistent with the terms and conditions of this AGREEMENT, shall be
deemed accepted by SUPPLIER unless written notice to the contrary is
received by BELL ATLANTIC(s) within ten (10) business days of
SUPPLIER's receipt of ORDER.
SUPPLIER will review each BELL ATLANTIC ORDER for completeness and accuracy
with respect to PRODUCTs and part numbers and, prior to submitting the
ORDER to a sub-contractor, will notify BELL ATLANTIC as to any inaccuracies
or known deficiencies or incompatibility with any related ORDER.
BELL ATLANTIC shall have the right to change the locations at which
the SYSTEM, PRODUCT, SOFTWARE, and SERVICES will be delivered or
installed and/or to which invoices shall be forwarded at least
three (3) business days prior to shipment at no additional cost to
BELL ATLANTIC. SUPPLIER shall accept such changes and forward a
written acknowledgment of such changes to BELL ATLANTIC.
11.2. VARIATION IN QUANTITY
BELL ATLANTIC assumes no liability for any PRODUCT or SOFTWARE produced
or processed in excess of the amount specified in an ORDER issued
pursuant to this AGREEMENT.
11.3. TERMINATION OF ORDER
BELL ATLANTIC may, upon written notice to SUPPLIER, * prior to shipment,
terminate any or all ORDERs, or portions thereof, placed by BELL
ATLANTIC hereunder, except with respect to SYSTEM(S), PRODUCT, and/or
SOFTWARE which has already been delivered or SERVICES which have already
been completed. Unless otherwise specified herein, BELL ATLANTIC's
liability to SUPPLIER with respect to such terminated ORDER(s) shall be
limited to SUPPLIER's purchase price of all components which are not
purchased within * of cancellation by SUPPLIER's other customers.
* Confidential portion has been omitted and filed separately with the
Secretary of the Commission.
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11.4. CHANGE ORDER
11.4.A. REQUEST AND ISSUANCE
BELL ATLANTIC may at any time upon thirty (30) days written notice
to SUPPLIER, by written order, request a change within the scope of
this AGREEMENT or any ORDER(s), including, without limitation, the
addition or deletion of SYSTEM(s), PRODUCT, SOFTWARE covered, the
Service(s) to be performed, the time and/or place of performance,
delivery or installation thereof. In the event BELL ATLANTIC
desires to make such a change, BELL ATLANTIC shall request SUPPLIER
to provide a written proposal stating the additional requirements
or reduction of existing requirements and the cost and schedule
implications incident thereto. If BELL ATLANTIC is in agreement
with the terms, conditions and charges specified in the proposal,
BELL ATLANTIC will issue a Change ORDER pursuant to this AGREEMENT
reflecting the requested change and the terms specified in
SUPPLIER's proposal. Any such order shall be specifically
identified as a Change ORDER pursuant to this Section 11.4. All
SERVICES and PRODUCTs covered hereunder shall be performed in
accordance with this AGREEMENT and such changes thereto as are
subsequently authorized by a written Change Order issued by BELL
ATLANTIC and accepted by SUPPLIER. If BELL ATLANTIC is not in
agreement with the terms, conditions and charges specified in the
SUPPLIER's proposal, then the parties shall agree to negotiate in
good faith to come up with mutually agreeable terms for the Change
Order. Nothing in this clause shall excuse the SUPPLIER from
proceeding with the AGREEMENT as then in effect until it has
accepted a Change Order.
11.4.B. ADJUSTMENT LIMITATIONS
Before the issuance of a Change Order under this AGREEMENT, BELL
ATLANTIC may request SUPPLIER's written agreement as to the maximum
(in case of an increase) or minimum (in case of a decrease)
adjustments to be made in the price and/or in the time of
performance, by reason of the change. BELL ATLANTIC may also
request a written agreement limiting the adjustments to any other
provisions of the AGREEMENT which may be subject to equitable
adjustment by reason of the change. Any such written agreement
shall then be cited in the Change Order, and upon its issuance
shall be deemed to become part of this AGREEMENT. In making
equitable adjustments pursuant to this clause, in no event shall
the definitive adjustment exceed the maximum or be less than the
minimum price and/or time of performance adjustments so
established, nor otherwise be inconsistent with other adjustment
limitations so established. Except with respect to such
limitations, nothing contained in this paragraph B shall affect the
SUPPLIER's rights to equitable adjustment by reason of the change
pursuant to this clause.
11.4.C. BELL ATLANTIC ASSISTANCE/ADVICE
BELL ATLANTIC's engineering, technical, and administrative
personnel may from time to time render assistance or give technical
advice to, or effect an exchange of information with, SUPPLIER's
personnel in a liaison effort concerning the SYSTEM, PRODUCTS,
SOFTWARE or SERVICES to be furnished hereunder. However, such
exchange of information or advise shall not vest SUPPLIER with the
authority to change the PRODUCT, SOFTWARE or SERVICE(S) hereunder
or the provisions of the AGREEMENT, and no change in the PRODUCT or
SERVICE(S) or the provisions of the AGREEMENT shall be binding upon
BELL ATLANTIC unless incorporated as a change in accordance with
this Section or a written amendment to this AGREEMENT signed by the
parties.
11.4.D. REQUEST FOR INFORMATION
Requests for information related to Change Orders shall be directed
to both Mr. Thomas Trempy, BELL ATLANTIC, Corporate Sourcing, 240
East 38th Street, 22d Floor, New York, N.Y. 10016; (212) 338- 6576,
and to the Bell Atlantic Engineer identified on the applicable
Order.
11.5. STOP CHANGE ORDER
11.5.A. ISSUANCE
BELL ATLANTIC may, at any time, by written order to the SUPPLIER (a
"Stop Work Order"), delivered in accordance with the notice
provisions of Section 19.7 hereof, require the SUPPLIER to stop all
or any part of the WORK called for by this AGREEMENT or applicable
ORDER(s) for a period of up to ninety (90) days after the Stop Work
Order is delivered to the SUPPLIER, and for any further period to
which the parties may agree not to exceed ninety (90) additional
days. Any such order shall be specifically identified as a Stop
Work Order issued pursuant to this clause and shall automatically
extend the time of performance or the delivery date of such WORK
for a period equal to the period of the Stop Work Order.
11.5.B. COMPLIANCE
Upon receipt of a Stop Work Order, the SUPPLIER shall forthwith
comply with its terms and take reasonable steps to minimize the
occurrence of costs allocable to the WORK covered by the Stop Work
Order during the
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period of work stoppage. Within a period of ninety (90) days after a
Stop Work Order is delivered to the SUPPLIER, or within any extension
of that period to which the parties shall have agreed, BELL ATLANTIC
shall either:
(i) cancel the Stop Work Order, or
(ii) terminate the WORK covered by such Stop Work Order as provided in
Article 9, entitled TERMINATION.
11.5.C. CANCELLATION OR EXPIRATION
If a Stop Work Order issued under this clause is canceled or the
period of the Stop Work Order or any extension thereof expires, the
SUPPLIER shall resume WORK. An equitable adjustment shall be made in
delivery schedule or the period of performance and in any other
provisions of the AGREEMENT that may be affected, and the AGREEMENT
shall be modified in writing accordingly, if:
(i) the Stop Work Order results in an increase in the time required
for, or in the SUPPLIER's cost properly allocable to the
performance of any part of this AGREEMENT, and
(ii) the SUPPLIER asserts a claim for such adjustment within thirty
(30) days after the end of the period of work stoppage.
11.5.D. TERMINATION OF WORK
If a Stop Work Order is not canceled, the WORK covered by such Order
shall be deemed terminated pursuant to Article 9, TERMINATION, of this
AGREEMENT.
11.6. EDI (ELECTRONIC DATA INTERCHANGE)
SUPPLIER is committed to implementing an EDI solution in 1998. SUPPLIER has
installed an integrated financial and manufacturing system. The independent
supplier has an EDI module that will be available for installation in 1998.
SUPPLIER is currently in the process of evaluating the EDI transactions
which its software vendor includes in their EDI module, and the new system
requirements to support them. However, because the software is in the
initial stage of deployment, SUPPLIER is unable to commit to a firm date for
implementation. Preliminary evaluation of the EDI product module, the
resources required for the implementation, and any customization is
currently underway. In an effort to accelerate an EDI implementation with
BELL ATLANTIC, SUPPLIER would like to have BELL ATLANTIC name a resource
that could be made available to discuss and review the transaction data
transfer process. SUPPLIER will update BELL ATLANTIC as more information
becomes available.
12. QUALITY ASSURANCE
12.1. QUALITY SYSTEM
The SUPPLIER shall maintain a quality system which assures that the
SYSTEM(s), PRODUCT, SOFTWARE or SERVICES provided to BELL ATLANTIC meet
in all material respects all performance standards and requirements
referenced in this Section 12, and perform in all material respects as
intended. In addition, subject to the exceptions noted in Appendix I,
the SUPPLIER'S quality system shall satisfy the requirements in
TR-NWT-001252, Bell Communications Research Technical Reference, Quality
System Generic Requirements, Issue 1, December 1992 for hardware design and
manufacturing; and TR-TSY-000179, Bell Communications Research Technical
Reference, Quality System Generic Requirements for SOFTWARE, Issue 2, June
1993 for SOFTWARE design and development.
SUPPLIER shall remain updated on all such performance standards and
requirements referenced in this Section 12 and shall, at the discretion of
BELL ATLANTIC, meet those updated standards and requirements upon ninety
(90) days prior written notice, or if compliance is not possible within
ninety (90) days using commercially reasonable efforts, SUPPLIER will draft
a plan for compliance within the ninety (90) day period that in BELL
ATLANTIC's reasonable judgment has a reasonable opportunity of success.
The SUPPLIER shall also adhere in all material respects to the following
standards and requirements, as applicable, throughout the life of this
AGREEMENT:
TR-TSY-000078, Bell Communications Research Technical Reference, Physical
Design and Test Requirements for Telecommunications PRODUCTS and
Equipment, Issue 3, December 1991.
FR-NWT-000796, Bell Communications Research Framework, Reliability and
Quality Generic Requirements (RQGR), Issue 3, June 1993 with the
exceptions noted in Appendix I.
TR-NWT-000870, Bell Communications Research Technical Reference,
Electrostatic Discharge Control in the Manufacture of Telecommunication
Equipment, Issue 1, February 1991.
TR-NWT-001037, Bell Communications Research Technical Reference,
Statistical Process Control Program Generic Requirements, Issue 1,
November 1990.
For SOFTWARE design, development and delivery under this AGREEMENT, the
SUPPLIER shall adhere in all material respects to the following
requirements:
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GR-282-CORE, Bell Communications Research Generic Requirements, SOFTWARE
Reliability and Quality Acceptance Criteria (SRQAC), Issue 1, December
1994 with the exceptions noted in Appendix I.
GR-1315-CORE, Bell Communications Research Generic Requirements, In-
Process Quality Metrics (IPQM), Issue 1, September 1995 with the
exceptions noted in Appendix I.
SUPPLIER will review specific requirements for QPS 88.010, Bell
Communications Research Quality Program Specification, Quality Assurance
Surveillance Program for SOFTWARE - General, Issue 6, November 1991 when
requested by BELL ATLANTIC.
12.2. QUALITY PERFORMANCE REPORTING
The SUPPLIER agrees to provide on request from BELL ATLANTIC, at no cost to
BELL ATLANTIC, regular data reports satisfying the requirements of
TR-NWT-1323. SUPPLIER will review the requirement for all other reports when
specifically requested by BELL ATLANTIC. The following requirements for
collecting, calculating and reporting data shall be followed in all material
respects:
GR-929-CORE, Bell Communications Research Generic Requirements,
Reliability and Quality Measurements for Telecommunications SYSTEMS
(RQMS), Issue 1 - Revision 1, December 1995. Note: the Conditional
Requirements of Sections 3.4.9.1, 3.4.9.2, 3.4.9.3 , shall be required.
TR-NWT-001323, Bell Communications Research Technical Reference, SUPPLIER
Data - Comprehensive Generic Requirements, Issue 1 November 1993.
TR-NWT-001359, Bell Communications Research Technical Reference, SUPPLIER
Data -Basic Generic Requirements, Issue 1, June 1993.
All required reports and data shall be delivered to BELL ATLANTIC's Supplier
Quality Organization at:
Supplier Quality Leader
240 E 38 ST., 14th floor
New York, NY 10016
SUPPLIER agrees to render other reasonable periodic reports for service
affecting conditions or other conditions that affect the operations and
administrative procedures of BELL ATLANTIC or its AFFILIATES, or as
otherwise reasonably requested by BELL ATLANTIC. SUPPLIER will review
specific requirements when requested by BELL ATLANTIC.
All provided information shall be classified as proprietary to BELL ATLANTIC
and SUPPLIER.
12.3. SOURCE INSPECTION
BELL ATLANTIC shall have the right to conduct reasonable due diligence
inspection and testing of any PRODUCT and/or SOFTWARE at the SUPPLIER's
facilities during business hours upon reasonable prior written notice.
SUPPLIER shall use commercially reasonable efforts to provide BELL ATLANTIC
with similar access to the facilities of its subcontractors. When requested
by BELL ATLANTIC, SUPPLIER will furnish BELL ATLANTIC with the appropriate
documentation regarding the PRODUCT's conformance to all contractual
specifications, and the SUPPLIER'S projected failure rate, along with the
test data that substantiates the conformance of PRODUCT and/or SOFTWARE
prior to shipment. BELL ATLANTIC does reserve the right to perform
confirmation of data submitted at the SUPPLIER's facility at a mutually
agreeable time. In such case, SUPPLIER shall provide, without charge, any
production testing facilities and personnel reasonably required to inspect
and test the PRODUCT and/or SOFTWARE as described in QPS 70.001-N, BELL
ATLANTIC Quality Program Specification, "Quality Assurance Procedures
Applicable to PRODUCT as Specified on the Order", Issue 2, June 1993,
to determine that the PRODUCT and/or SOFTWARE meets the requirements of the
applicable contractual specification and/or ORDER.
Where BELL ATLANTIC Supplier Quality Management finds received PRODUCTS do
not substantially meet contractual requirements, the actual and reasonable
out-of-pocket costs of inspection and testing, replacement and shipping
such non-conforming PRODUCTS shall be reimbursed by SUPPLIER.
BELL ATLANTIC reserves the right to have the SUPPLIER inspect 100% of its
PRODUCT for some mutually agreeable period of time at its cost in cases
where PRODUCT does not substantially meet contractual specifications.
12.4. PACKING
Adequate protective packing and any special packing required by law or
governmental regulation for domestic shipment shall be furnished by SUPPLIER
at no additional charge for PRODUCT purchased, repaired, replaced or
refurbished hereunder.
The SUPPLIER shall adhere in all material respects to the following
requirements for packaging of PRODUCTS and or SOFTWARE:
ME-000047NX, NYNEX Specification, Packing, Packaging and Palletization,
Issue 7, November 1991.
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Page 17 of 38
GR-1421-CORE, Bell Communications Research Generic Requirements, ESD-
Protective Circuit Pack Containers, Issue 2, June 1995. *Note that
Conditional/Objective Requirements CR4-33, O4-34, O4-41, O4-42, O4-54,
CR4-56, and O4-57 shall be required.
12.5. MARKING
All PRODUCT and/or related packaging furnished hereunder shall be marked for
identification purposes with part number, or Comcode number, and/or
SUPPLIER's Model/Serial number as applicable.
In addition SUPPLIER agrees to adhere in all material respects to the
following:
NX-00008TRG, NYNEX Specification, Marking Specification, Issue 7,
September 1993.
ST-STS-000124, Bell Communications Research Technical Reference, Common
Language Codes for Frame Identification, Issue 1, February 1989.
TR-STS-000383, Bell Communications Research Technical Reference, Generic
Requirements for Common Language Bar Code Labels, Issue 5, January 1991.
GR-485-CORE, Bell Communications Research Generic Requirements, Common
Language Equipment Coding Processes and Guidelines, Issue 2, October
1995.
QPS 94.890, Bell Communications Research Quality Program Specification,
Common Language Equipment Identification (CLEI)/Bar Code Labels, Issue
4, February 1990.
12.6. TECHNICAL SUPPORT
Technical Support shall include at least the following: field service and
assistance, replacement and repair parts and/or repair SERVICES or PRODUCT,
SERVICES and SOFTWARE; provided however, that the availability or
performance of this Technical Support SERVICE shall not be construed as
reducing SUPPLIER's obligations as set forth in the clause entitled
"WARRANTIES" or elsewhere provided for in this AGREEMENT.
12.6.A. FULL CUSTOMER SUPPORT DURING ENGINEERING, INSTALLATION AND
CONVERSION PERIODS
Prior to installation and during installation, testing and acceptance
periods, subject to the terms of Appendix E hereof, entitled
ENGINEERING, INSTALLATION AND INSTALLATION SUPPORT, BELL ATLANTIC
and/or BELL ATLANTIC's agent shall be provided installation and
technical support SERVICES and DOCUMENTATION as specified below:
1. Twenty-four (24) hours per day, seven (7) days per week, SUPPLIER
shall provide telephonic technical support SERVICES from its
Technical Assistance Center (TAC) utilizing SUPPLIER's technical
information for installation, testing, operation, maintenance,
use, and analysis, all at no charge to BELL ATLANTIC. SUPPLIER
shall provide, upon request, on-site technical personnel during
cutover/in-service weekend 24 hours post cutover/in-service to
ensure SYSTEM performance, at no charge to BELL ATLANTIC.
2. SUPPLIER agrees that in the event PRODUCT and/or SOFTWARE does
not perform substantially in accordance with the SPECIFICATIONS,
then SUPPLIER will provide on-site technical support, at no
charge to BELL ATLANTIC.
3. SUPPLIER shall provide at no charge, as requested by BELL
ATLANTIC, a project manager to represent SUPPLIER on all
installation and technical support matters.
4. Requests by BELL ATLANTIC for non-emergency acceptance assistance
must be made at least five (5) days prior to the scheduled date.
12.6.B. CUSTOMER SUPPORT POST ACCEPTANCE
After acceptance of PRODUCT and/or SOFTWARE by BELL ATLANTIC,
SUPPLIER shall provide on-going, in-service technical support
SERVICES and DOCUMENTATION as specified below:
1. IN WARRANTY
a. SUPPLIER shall make available telephonic Technical
Assistance Center (TAC) SERVICE, twenty-four (24)
hours per day, seven (7) days per week, utilizing
SUPPLIER's technical information for installation,
testing, operation, maintenance, use, and
analysis, all at no charge to BELL ATLANTIC.
b. In the event of an emergency or service-affecting
condition involving the SYSTEM, SUPPLIER shall
provide immediate technical support and shall work
continuously until such emergency and/or service-
affecting condition is remedied. On-site
technical support within twenty four (24) hours
shall be provided by SUPPLIER upon request of BELL
ATLANTIC. On-site assistance required to correct a
problem or defect under warranty shall be at no
charge to BELL ATLANTIC. Notwithstanding the
foregoing, in the event
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that on-site technical support is provided for a
non-warranty defect, BELL ATLANTIC will be charged
for such on-site technical support at the standard
On-Site Technical Support rate as shown in
Appendix A.
2. OUT OF WARRANTY
a. SUPPLIER shall make available telephonic Technical
Assistance Center (TAC) SERVICE, twenty-four (24)
hours per day, seven (7) days per week, utilizing
SUPPLIER's technical information for installation,
testing, operation, maintenance, use, and
analysis, at the Supplier Technical Support rates
set forth in Appendix A.
b. Non-warranty technical support SERVICE charges
shall be as shown in Appendix A. On site
technical assistance within twenty four (24) hours
shall be provided by SUPPLIER upon request by BELL
ATLANTIC.
c. In the event of an emergency or service-affecting
condition involving the SYSTEM, SUPPLIER shall
provide immediate Technical support and shall work
continuously until such emergency and/or
servicing-affecting condition is remedied.
BELL ATLANTIC may call the following telephone
number(s) for emergency technical assistance or TAC
Support, or to escalate any problem at any time
interval: 1-800-774-8327. In furtherance of this
procedure, SUPPLIER shall provide BELL ATLANTIC with an
escalation procedure and list within thirty (30) days
of execution of this AGREEMENT by BELL ATLANTIC and
SUPPLIER, that is agreed upon and satisfactory, as well
as keep BELL ATLANTIC updated as to all changes to such
procedure and list. For additional technical
information, BELL ATLANTIC may contact SUPPLIER's
technical assistance SERVICES on 1-800-774-8327.
In addition to SUPPLIER's obligations under Article 13
entitled WARRANTIES hereof, BELL ATLANTIC shall be
entitled to technical maintenance and support at
Supplier's then current fees and charges for a period
of *after expiration or termination of this AGREEMENT.
12.7. ENGINEERING COMPLAINTS
The SUPPLIER shall handle all engineering complaints ("ECs") submitted by
BELL ATLANTIC in accordance with Bell Communications Research Generic
Requirements, GR-230-CORE, "Generic Requirements for Engineering
Complaints", Issue 1, September 1994.
Upon receipt of an EC identified as a fire or safety hazard, SUPPLIER
agrees to acknowledge receipt of such EC immediately. This response shall
be followed up promptly with an additional response outlining the
implementation and execution of the accepted resolution of or corrective
action to resolve the stated problem, or the date when the accepted solution
will be completed.
In the event that a BELL ATLANTIC EC is marked "SERVICE EMERGENCY," then
SUPPLIER agrees to exert effort which goes beyond that which is customarily
provided to resolve the EC. Such effort will be consistent with the level
of effort SUPPLIER will furnish to support BELL ATLANTIC under Section 12.9
entitled REPAIRS AND REPLACEMENT, and Section 18.2 entitled EXTRAORDINARY
SUPPORT.
In the event the SUPPLIER anticipates that the solution to the EC will
exceed thirty (30) days, then SUPPLIER shall issue bi-weekly EC Interim
Reports to BELL ATLANTIC, reporting actions taken and progress made during
the reporting period. In addition, such reports will indicate the date by
which SUPPLIER anticipates that the ongoing EC study will be successfully
concluded. This requirement modifies GR-230-CORE, Section 2.3.2.2.
Upon acceptance of SUPPLIER's resolution by BELL ATLANTIC, SUPPLIER shall
implement necessary changes within thirty (30) days or if changes cannot be
implemented in the time period, mutually agree on a proposal for resolution
within thirty (30) days, whereas such approval will not be unreasonably
withheld.
If BELL ATLANTIC disagrees with SUPPLIER on the implementation schedule
and/or resolution of an EC, BELL ATLANTIC shall have the right to escalate
the matter for review and/or resolution to higher management in accordance
with the Alternate Dispute Resolution clause of this AGREEMENT.
BELL ATLANTIC's point of contact for all EC information and correspondence
shall be:
Supplier Quality Leader
BELL ATLANTIC
240 East 38th Street, 14th Floor
New York, New York 10016
* Confidential portion has been omitted and filed separately with the
Secretary of the Commission.
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Page 19 of 38
12.8. CHANGES TO PRODUCT OR SOFTWARE CHANGE NOTICES ("PCNS")
SUPPLIER shall notify BELL ATLANTIC in writing of any changes to PRODUCT
and/or SOFTWARE in accordance with Bell Communications Research,
GR-209-CORE, "Generic Requirements for PRODUCT Change Notices", Issue 2,
January 1996. In addition, the following provisions shall apply:
- SUPPLIER shall propose a schedule for the application of these changes
at all PRODUCT or SOFTWARE locations, which schedule shall be mutually
agreed upon with BELL ATLANTIC and its AFFILIATE prior to
implementation.
- If SUPPLIER develops a Method Of Procedure (MOP) for the change, the
MOP shall be provided to BELL ATLANTIC with the PCN.
- Any related Engineering Complaint Number shall be included on the PCN
form.
- If BELL ATLANTIC disagrees with the nature of, or with the
classification which SUPPLIER assigns to, a change in PRODUCT or
SOFTWARE, BELL ATLANTIC shall have the right to escalate the matter
for review, reclassification, and resolution to higher levels of
management in accordance with the Alternate Dispute Resolution clause
of this AGREEMENT.
- SUPPLIER shall provide all changed PRODUCT, SOFTWARE, and DOCUMENTATION
for Class A and AC changes caused by a material defect in the PRODUCT
OR SOFTWARE for a period of *from the date of last shipment of the
affected PRODUCT or SOFTWARE, at no charge to BELL ATLANTIC.
- DOCUMENTATION changes, required to satisfy SUPPLIER's obligations to
provide Class A and AC changes to PRODUCT or SOFTWARE as specified
herein, shall be provided by SUPPLIER at no charge to BELL ATLANTIC.
- For those changes classified as "B" or "D", SUPPLIER shall notify BELL
ATLANTIC in writing sixty (60) days prior to the effective date of such
change to be made in the PRODUCT or SOFTWARE furnished under an ORDER.
- SUPPLIER shall notify BELL ATLANTIC in writing when implementation of
each field change has been completed at all affected locations.
All correspondence relating to changes to PRODUCT or SOFTWARE shall be sent
to the following individual or his successor(s) as appointed by BELL
ATLANTIC and identified to SUPPLIER in writing in accordance with Section
19.7:
Ms. Deborah Eury
Supplier Quality Leader
BELL ATLANTIC
240 East 38th St., 14th. Floor
New York, N.Y. 10016
12.9. REPAIRS AND REPLACEMENT
12.9.A. REPAIR AND REPLACEMENT PROCEDURES
SUPPLIER shall adhere in all material respects to QPS 82.061, Bell
Communications Research Quality Program Specification, Repair and
Return Operations of Telecommunications PRODUCTS - General, Issue 2,
March 1985, or the most current issue of Bell Communications Research
Quality Program Specification relating thereto, when repairing
PRODUCT and/or SOFTWARE.
BELL ATLANTIC shall furnish the following information with PRODUCT or
SOFTWARE returned to SUPPLIER for repair:
(1) BELL ATLANTIC's name and complete address;
(2) name(s) and telephone number(s) of BELL ATLANTIC's employee(s)
to contact in case of questions about the PRODUCT or SOFTWARE
to be repaired;
(3) reference to BELL ATLANTIC's ORDER number, if applicable;
(4) ship to address for return of repaired or replacement PRODUCT
or SOFTWARE if different from (1);
(5) a complete list of PRODUCT or SOFTWARE returned;
(6) the nature of the defect or failure, if known.
PRODUCT or SOFTWARE repaired by SUPPLIER shall have the repair
completion date stenciled or otherwise identified in a permanent
manner at a readily visible location on the PRODUCT or SOFTWARE
to the extent practicable; otherwise it shall be indicated in
DOCUMENTATION accompanying the PRODUCT and/or SOFTWARE. The repaired
PRODUCT and/or SOFTWARE shall be returned with a tag or other
DOCUMENTATION affirming that the required repairs have been made.
* Confidential portion has been omitted and filed separately with
the Secretary of the Commission.
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SUPPLIER shall maintain a record of all No Trouble Founds ("NTFs")
which permits tracking of NTFs to assure that any PRODUCT or SOFTWARE
that has been categorized as an NTF for the third time is not
returned to BELL ATLANTIC of its AFFILIATES for future deployment.
When requested in the ORDER, SUPPLIER shall hold replaced parts for
inspection and resale to BELL ATLANTIC at prices and terms to be
agreed upon.
SUPPLIER acknowledges that this AGREEMENT does not grant SUPPLIER an
exclusive privilege to repair any or all of the PRODUCT or SOFTWARE
purchased and/or licensed hereunder for which BELL ATLANTIC may
require repair. BELL ATLANTIC acknowledges that repair of any or all
of the PRODUCT or SOFTWARE by anyone other than SUPPLIER may void the
warranties set forth in Section 13.
12.9.B. PRE-ACCEPTANCE
During the installation of PRODUCT and SOFTWARE ordered under this
AGREEMENT or after installation, but before notification of
acceptance by BELL ATLANTIC, defective PRODUCT or SOFTWARE will be
replaced with new PRODUCT or SOFTWARE, at no charge to BELL ATLANTIC
(provided that any such defect shall not have been caused by the
installation of the PRODUCT or SOFTWARE by BELL ATLANTIC, one of
its AFFILIATES or AFFILIATE'S agents). SUPPLIER shall ship such new
PRODUCT or SOFTWARE to a location specified by BELL ATLANTIC within
five (5) business days of receipt of notice by SUPPLIER. For
purposes of this AGREEMENT, "new PRODUCT" or "new SOFTWARE" shall
mean PRODUCT or SOFTWARE directly from the manufacturing assembly
line or from SUPPLIER's finished goods inventory, provided that said
PRODUCT has not been previously repaired or reconditioned.
BELL ATLANTIC shall return any such defective new PRODUCT or SOFTWARE
within thirty (30) days after receipt of replacement PRODUCT or
SOFTWARE. If defective new PRODUCT or SOFTWARE is not received at
SUPPLIER's repair facility within forty-five (45) days after shipment
of replacement PRODUCT or SOFTWARE, SUPPLIER will invoice for the
PRODUCT or SOFTWARE.
All transportation charges for new PRODUCT or SOFTWARE returned to
SUPPLIER for repair/replacement shall be borne by SUPPLIER. All risk
of in-transit loss or damage to new PRODUCT or SOFTWARE returned to
SUPPLIER for repair/replacement shall be borne by BELL ATLANTIC.
12.9.C. IN WARRANTY
The following provisions define the obligations of the parties in the
event a breach of warranty occurs in PRODUCT or SOFTWARE during the
applicable Warranty Period, as described in Article 13, entitled
WARRANTIES.
(1) BELL ATLANTIC must notify SUPPLIER in writing of the claimed
defect or non-conformity not later than ten (10) days after the
expiration of the applicable Warranty Period.
(2) SUPPLIER shall provide written instructions covering return of
such defective PRODUCT or SOFTWARE.
(3) SUPPLIER shall:
a) at SUPPLIER's option, either repair, replace or correct the
PRODUCT or SOFTWARE without charge at its manufacturing or
repair facility within fifteen (15) working days from the
date the PRODUCT or SOFTWARE is received at SUPPLIER's
repair facility. Where defective or nonconforming PRODUCT
or SOFTWARE is readily returnable, it shall be removed and
sent to SUPPLIER by BELL ATLANTIC in accordance with
instructions for return of PRODUCT or SOFTWARE provided by
SUPPLIER in (B) (2) above, at BELL ATLANTIC's expense. If
repaired or replaced, SUPPLIER shall return the PRODUCT or
SOFTWARE to BELL ATLANTIC at a destination within the
contiguous forty-eight United States designated by BELL
ATLANTIC at SUPPLIER's expense; or
b) if the PRODUCT or SOFTWARE is not repairable or
replaceable, or is not correctable, at the option of BELL
ATLANTIC or BELL ATLANTIC's AFFILIATE provide a refund or
credit of all monies paid for the PRODUCT or SOFTWARE.
c) Notwithstanding the provisions of (b) above, if the PRODUCT
and SOFTWARE subject to defect or non-conformity is
determined to be repairable but not readily returnable for
repair, SUPPLIER shall, at BELL ATLANTIC's option, either
repair the PRODUCT or SOFTWARE at BELL ATLANTIC's or its
AFFILIATE's site without charge, or remove the PRODUCT or
SOFTWARE from BELL ATLANTIC's or its AFFILIATE's site and
replace the PRODUCT or SOFTWARE at no charge to BELL
ATLANTIC.
d) If requested, SUPPLIER shall ship to BELL ATLANTIC
replacement PRODUCT or SOFTWARE within five (5) business
days of such request to BELL ATLANTIC's designated location.
BELL ATLANTIC shall return defective PRODUCT or SOFTWARE
within thirty (30) days after receipt
<PAGE>
Page 21 of 38
of replacement PRODUCT or SOFTWARE. At the time of the
request, BELL ATLANTIC will provide SUPPLIER with a Purchase
ORDER for the purchase price of the replacement PRODUCT or
SOFTWARE to be shipped. If defective PRODUCT or SOFTWARE is
not received at SUPPLIER's repair facility within forty-five
(45) days after shipment of replacement PRODUCT or SOFTWARE,
SUPPLIER will invoice for the PRODUCT or SOFTWARE.
12.9.D. OUT OF WARRANTY
The following provisions define the obligations of the parties in
the event repairs or replacements of PRODUCT or SOFTWARE are
necessary after the applicable Warranty Period has expired.
SUPPLIER agrees to provide repair or replacement SERVICES and
replacement parts for all PRODUCT and SOFTWARE ordered hereunder
at the prices in Appendix A hereto, entitled PRICES, SCHEDULES,
DISCOUNTS, for the effective period of the AGREEMENT and
thereafter at SUPPLIER's current list prices, as long as SUPPLIER
is still furnishing such PRODUCT and SOFTWARE; or repair parts
therefor, but in no event for less than the minimum support periods
set forth in Section 18.1 hereof entitled CONTINUING AVAILABILITY.
(1) BELL ATLANTIC must notify SUPPLIER in writing of the claimed
defect or non-conformity.
(2) SUPPLIER shall provide written instructions covering return of
such defective PRODUCT or SOFTWARE.
(3) If the defective PRODUCT or SOFTWARE is readily returnable, it
shall be removed and sent to SUPPLIER by BELL ATLANTIC in
accordance with instructions for return of PRODUCT or SOFTWARE
provided by SUPPLIER, at BELL ATLANTIC's or its AFFILIATE's
expense and BELL ATLANTIC's or its AFFILIATE's risk of loss or
damage. SUPPLIER shall repair, replace or correct the PRODUCT or
SOFTWARE at its manufacturing or repair facility within fifteen
(15) working days from the date the PRODUCT or SOFTWARE is
received at SUPPLIER's facility or pursuant to such other
mutually agreeable schedule. If the defective PRODUCT or SOFTWARE
is repaired or replaced, SUPPLIER shall return the PRODUCT or
SOFTWARE to BELL ATLANTIC at a destination within the contiguous
forty-eight United States designated by BELL ATLANTIC at
SUPPLIER's expense.
(4) If the PRODUCT and SOFTWARE subject to defect or non-conformity
is determined to be repairable but not readily returnable for
repair (or either party requests that the repair of readily
returnable PRODUCT or SOFTWARE be performed on-site), SUPPLIER
shall, at its option, either repair the PRODUCT or SOFTWARE at
BELL ATLANTIC's or its AFFILIATE's site at prices specified in
Appendix A hereto entitled PRICES, SCHEDULES, DISCOUNTS for the
on-site repair SERVICE plus travel and living expenses for the
repair personnel, or remove the PRODUCT or SOFTWARE from BELL
ATLANTIC's site and replace and install the replacement PRODUCT
or SOFTWARE at prices specified in Appendix A hereto entitled
PRICES, SCHEDULES, DISCOUNTS. All on-site repairs or
replacements shall be made pursuant to mutually agreed upon
schedules.
(5) If PRODUCT or SOFTWARE is returned to SUPPLIER for repair as
provided for in this clause, and is determined to be beyond
repair, or repair costs are expected to exceed fifty percent
(50%) of the cost of replacement, SUPPLIER shall so notify BELL
ATLANTIC prior to making the repair.
Invoices originated by SUPPLIER for repair SERVICES for PRODUCT or
SOFTWARE out of warranty must be clearly identified as such, and must
contain:
a) a reference to BELL ATLANTIC's ORDER for these repair
SERVICES;
b) a description of SERVICES rendered by SUPPLIER; and
c) an itemized listing of parts and labor charges, when repairs
are done on a time and materials basis.
If requested by BELL ATLANTIC, SUPPLIER shall dispose of unrepairable
PRODUCT or SOFTWARE, consistent with sound commercial practices, and
remit to BELL ATLANTIC the net salvage value received by SUPPLIER, if
any.
12.9.E. EMERGENCY "OUT OF SERVICE" CONDITIONS.
So long as SUPPLIER is providing regular repair service as set forth
in (C) and (D) above, SUPPLIER shall provide emergency replacement
service and on-site repairs, in the event of an emergency out of
service condition caused by defective PRODUCT or SOFTWARE. SUPPLIER
will start repairs or ship a new, or functionally equivalent
replacement, within twenty four (24) hours or as soon as is
reasonably possible after receipt of verbal notification. If BELL
ATLANTIC is not satisfied with the emergency replacement service
and/or on site repairs, BELL ATLANTIC shall have the right to
escalate the matter for review and expeditious resolution to higher
levels of management pursuant to the Alternate Dispute Resolution
clause of this AGREEMENT.
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12.10 DETAIL ENGINEERING, OFFICE RECORDS
When detail engineering is performed by the SUPPLIER as part of the
SERVICES, the SUPPLIER shall be responsible for all detail
engineering and agrees to use a BELL ATLANTIC certified or approved
detail engineering sub-contractor to provide full detail engineering
SERVICES, consisting of writing a detailed specification, creating
and/or updating central office drawings and records, including the
Equipment Inventory Update ("EIU") form and the ordering of all
PRODUCTs and equipment needed to complete the job in compliance to
BELL ATLANTIC requirements, methods, procedures and standards.
When detail engineering is performed by BELL ATLANTIC, its AFFILIATES
and/or its AFFILIATE agents in connection with the SERVICES to be
rendered by SUPPLIER hereunder, the SUPPLIER shall provide
engineering support by making available to BELL ATLANTIC, its
AFFILIATES and/or its AFFILIATE agents, all DOCUMENTATION and
drawings as may be necessary to engineer the equipment into the
network, at no additional cost.
12.11 INSTALLATION BY SUPPLIER
If requested in an ORDER, SUPPLIER shall provide full installation
SERVICES as described in Appendix E (Engineering, Installation and
Installation Support) using a certified supplier as a sub-contractor.
During installation, BELL ATLANTIC shall be given the opportunity to
observe, witness and review the tests performed by SUPPLIER's
installation forces, and review all test results and trouble reports
to ensure conformity to SPECIFICATIONS. BELL ATLANTIC shall have
early access to the SYSTEM to perform joint testing with SUPPLIER, as
well as BELL ATLANTIC's and/or its AFFILIATES' own independent
testing of work completed by SUPPLIER.
When SUPPLIER completes installation SERVICES hereunder, SUPPLIER
shall provide to BELL ATLANTIC a Notice of Installation Completion,
in writing, which may include electronic transmission or similar
communications.
12.12 INSTALLATION BY BELL ATLANTIC, ITS AFFILIATES OR AFFILIATE'S
AGENTS
12.12.A INSTALLATION INTERVAL AND DOCUMENTATION
Except for those installation SERVICES which are to be
performed by SUPPLIER as identified in Appendix E hereto,
entitled ENGINEERING, INSTALLATION AND INSTALLATION SUPPORT
or as would be performed under Article 11.4 of this
AGREEMENT, entitled CHANGE ORDER, all Installation will be
performed by BELL ATLANTIC or a certified supplier
contracted by BELL ATLANTIC.
When installation of PRODUCT and/or SOFTWARE is performed by BELL
ATLANTIC and/or its AFFILIATE's agent, BELL ATLANTIC, its AFFILIATE
and/or AFFILIATE's agent will be granted an installation interval
equal to SUPPLIER's standard installation interval for such PRODUCT
and/or SOFTWARE. At the completion of the installation interval,
the Acceptance Period will begin (as defined in 12.13 below).
SUPPLIER shall furnish at no charge to BELL ATLANTIC SUPPLIER's
customary and current, updated relevant and complete DOCUMENTATION
to support BELL ATLANTIC, its AFFILIATE's and/or agent's
installation, acceptance, turnover, cutover/in-service, and
maintenance.
12.12.B INSTALLATION PROCEDURES
SUPPLIER shall meet with BELL ATLANTIC (Early Job
Conferences, contact meetings, test and analysis meetings)
to collect all essential information needed and to jointly
prepare a Method of Procedure (MOP) regarding the
installation. SUPPLIER, BELL ATLANTIC and/or its AFFILIATE's
agent shall plan all aspects of the job and a sequence of
performance to complete the job on schedule, which is
understood and mutually agreeable to both parties. All job
requirements should be discussed, resolved and approved by
BELL ATLANTIC at these preliminary meetings, including
schedules (ordering, installation start, in-progress job
status, completion, etc.), quality, technical and
performance issues, workmanship, and acceptance testing.
12.13. ACCEPTANCE
The SYSTEM(s), PRODUCT, SOFTWARE and SERVICES to be furnished or
delivered pursuant to ORDER(s) issued under this AGREEMENT shall be
subject to acceptance as follows:
Upon completion of the installation, BELL ATLANTIC will be granted
up to a thirty (30) day period (Acceptance Period) to test for
substantial conformance with SPECIFICATIONS utilizing SUPPLIER's
standard acceptance test procedures and BELL ATLANTIC's and/or its
AFFILIATE's own independent requirements, standards and testing
procedures. Upon successful completion of such testing, BELL
ATLANTIC will issue a Notice of Acceptance to SUPPLIER. In the event
a Notice of Defects has been issued by BELL ATLANTIC, SUPPLIER shall
start to correct defects within ninety-six (96) hours of such Notice,
as set forth in Section 12.9 hereof entitled REPAIRS AND REPLACEMENT.
Upon completion of such corrective actions by SUPPLIER, BELL ATLANTIC
shall have the
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opportunity to retest the new or replacement PRODUCT and/or SOFTWARE.
Time required by SUPPLIER to correct deficiencies and for BELL
ATLANTIC to retest the new PRODUCT and/or SOFTWARE shall not apply to
the thirty (30) day Period of Acceptance.
12.14. INFORMATION KEPT CURRENT
On a continuing basis SUPPLIER shall provide, at no charge to BELL
ATLANTIC, Installation Alerts and Broadcast Warnings, PRODUCT Change
Notices, and DOCUMENTATION for changes to PRODUCT, SOFTWARE,
non-conformance to SPECIFICATIONS, service affecting items,
acceptance and installation issues. SUPPLIER will review specific
requirements for additional notices when requested by BELL ATLANTIC.
SUPPLIER shall establish and maintain a list of BELL ATLANTIC's
and/or its AFFILIATES and/or AFFILIATE's agent's personnel and
organizations responsible for each SYSTEM installation and shall
promptly provide Installation Alerts and Broadcast Warnings necessary
to support PRODUCT and SOFTWARE supplied by SUPPLIER during the
Acceptance Period and thereafter for a period of *at no charge to
BELL ATLANTIC.
For each ORDER placed, SUPPLIER shall be accountable to BELL ATLANTIC
to advise them of the shipping and delivery status of each ORDER
placed, to maintain shipping intervals, and to provide repairs and
replacement for PRODUCT and/or SOFTWARE, as set forth in this
AGREEMENT. If BELL ATLANTIC is not satisfied with such shipping and
delivery status and/or on-site repairs, BELL ATLANTIC shall have the
right to escalate the matter for review and expeditious resolution to
higher levels of management in accordance with the Alternate Dispute
Resolution provision of this AGREEMENT.
12.15 CORRECTIVE ACTION
In any case where a material portion of any particular PRODUCT or
SERVICE does not substantially meet the SPECIFICATIONS, the SUPPLIER
shall respond with a documented Corrective Action plan. The plan
shall address the unacceptable condition with a root cause analysis
of the problem, the proposed solution, the process modification to
prevent reoccurrence, the time frame for the changes, and the
person(s) responsible for the implementation of the plan.
The Corrective Action plan shall be presented to BELL ATLANTIC's
Supplier Quality Organization for concurrence prior to
implementation.
12.16. CONTINUOUS IMPROVEMENT PLAN [SOFTWARE QUALITY IMPROVEMENT PLAN
("SQIP")
SUPPLIER shall have a documented plan for continuously assessing and
improving the quality and reliability of PRODUCT and SOFTWARE used in
network applications. SUPPLIER's Software Quality Improvement Plan
(SQIP) shall (i) incorporate a documented set of metrics, reasonably
acceptable to BELL ATLANTIC, that will assess internal development
data and field performance data in order to improve SUPPLIER's
on-line performance for PRODUCTS deployed in BELL ATLANTIC and (ii)
conduct metric collection, analysis and reporting on a continual
basis.
SUPPLIER also shall perform a Post Mortem analysis after each major
SOFTWARE release. Such analysis should determine which development
stage activities were accomplished smoothly and which activities
contributed to problems that effected quality or scheduling. Results
of the analysis should yield documented process improvement plans
which will be implemented before development of the next release
begins.
All information in SUPPLIER's SQIP shall be made available for
semi-annual review by BELL ATLANTIC. This includes, but is not
limited to, plans, procedures and results.
13. WARRANTIES
13.1 WARRANTY OF TITLE
SUPPLIER warrants that it shall have as of the Acceptance Date of
each PRODUCT free and clear title to, and the right to possess, use,
sell, transfer, assign, any and all PRODUCTS that are sold or
otherwise provided to BELL ATLANTIC by SUPPLIER pursuant to this
AGREEMENT. SUPPLIER warrants that it shall have as of the Acceptance
Date of any LICENSED MATERIALS, and throughout any applicable license
term hereunder, including any renewals or extensions hereof, free and
clear title to, and the right to possess, license or sublicense any
and all LICENSED MATERIALS that are licensed or otherwise provided to
BELL ATLANTIC by SUPPLIER pursuant to this AGREEMENT. Except as
permitted in this AGREEMENT or in an ORDER, SUPPLIER shall not create
or permit the creation of any lien, encumbrance, or security interest
in any PRODUCT licensed to BELL ATLANTIC, or sold to BELL ATLANTIC
and for which title has not yet passed to BELL ATLANTIC, without the
prior written consent of BELL ATLANTIC. Title to any PRODUCT
licensed by BELL ATLANTIC hereunder shall remain with SUPPLIER or its
third party licensors through the applicable license term, unless
otherwise specified in this AGREEMENT or related ORDER(s).
* Confidential portion has been omitted and filed separately with the
Secretary of the Commission.
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13.2 PRODUCT
SUPPLIER warrants to BELL ATLANTIC that PRODUCT will be free from
material defects in product and workmanship, will materially
conform to and perform materially in accordance with the
SPECIFICATIONS, as set forth in this AGREEMENT, except as
modified by an ORDER. All warranties shall survive inspection,
acceptance and payment.
13.3 SOFTWARE
SUPPLIER warrants to BELL ATLANTIC that the SOFTWARE media
delivered hereunder will be free from material defects and that the
SOFTWARE licensed under this AGREEMENT shall properly function in the
specific applicable SYSTEM environment, and shall conform, function and
perform materially in accordance with the DOCUMENTATION provided with
the SOFTWARE and SUPPLIER's published specifications for that specific
SOFTWARE release licensed hereunder, in all material respects,
including, but not limited to, operating performance, memory
requirements, response and run times and timing characteristics,
compatibility and modularity. In the event the SOFTWARE fails to
perform as described above during the Warranty Period, SUPPLIER shall
promptly correct or replace the SOFTWARE, without charge to BELL
ATLANTIC. Where the defect is service affecting the Warranty Period
shall be temporarily suspended during the period needed to correct
the defect and upon correction shall restart for the remaining
Warranty Period or *whichever is greater.
The warranty shall apply to the initial SOFTWARE delivery for each
SYSTEM. Subsequent to the applicable Warranty Period, each SYSTEM is
eligible for participation in the Software Upgrade Program, and BELL
ATLANTIC may request SUPPLIER continue maintenance in accordance with
Appendix J entitled SOFTWARE UPGRADE PROGRAM.
SUPPLIER further warrants to BELL ATLANTIC that, for a period of
*following the Acceptance Date for any SYSTEM: (i) No release by
SUPPLIER of any operating SOFTWARE for such SYSTEM shall eliminate,
reduce, or degrade the performance capabilities of such SYSTEM from
the corresponding level of performance at the Acceptance Date for
such SYSTEM; and (ii) any applications SOFTWARE licensed at such time
will function on such SYSTEM, unless specifically noted in the
appropriate ORDER; (iii) SUPPLIER shall maintain the previous two (2)
dot release levels of any SOFTWARE, or all levels released over the
previous *, whichever is longer.
13.4 WARRANTY PERIOD
13.4.A COMMENCEMENT
The term "Warranty Period" as used in this AGREEMENT and any
supplemental terms and conditions, means the period of time
listed below unless the parties have agreed in writing to a
different warranty period. The warranty period for commences
on:
1. if installed by SUPPLIER, on the date PRODUCT and/or SOFTWARE
is accepted by BELL ATLANTIC;
2. if not installed by SUPPLIER and the PRODUCT and/or SOFTWARE is
offered by SUPPLIER on an Engineer (E), Furnish (F), and
Install (I), an E and F, or an F basis, on the earlier of (i)
the Acceptance Date and (ii) the last day of the Acceptance
Period, unless otherwise agreed in writing; and
3. for other PRODUCT, but only if specifically noted, on the date
of receipt of the PRODUCT at the location specified by BELL
ATLANTIC.
13.4.B. PRODUCT
The warranty period for PRODUCT is as follows:
WARRANTY PERIOD
PRODUCT TYPE NEW PRODUCT REPAIR/REPLACEMENT PRODUCT
------------ ----------- --------------------------
T3AS PRODUCT * *
TEST EQUIPMENT * *
APPARATUS * *
PARTS * *
PICS ITEMS DESIGNATED * *
IN APPENDIX A
The *warranty shall apply to the *units of *ordered under P.O.
N3165089 and the quantity of *units of *ordered under PO
N3109161.
* Confidential portion has been omitted and filed separately with
the Secretary of the Commission.
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13.4.C SOFTWARE
The warranty period for SOFTWARE is as follows:
WARRANTY PERIOD
PRODUCT TYPE NEW PRODUCT REPAIR/REPLACEMENT PRODUCT
------------ ----------- --------------------------
* *.
13.4.D. THIRD PARTY PRODUCTS AND SOFTWARE
Third party PRODUCTs (other than SYSTEM (including extensions
or additions)), and limited to PRODUCTs purchased by SUPPLIER
at the specific written request of BELL ATLANTIC which are not
normally furnished by SUPPLIER as part of the specified
PRODUCT), will have the remainder of the manufacturer's
warranty. If the manufacturer's warranty cannot be passed
through to BELL ATLANTIC, SUPPLIER will be responsible for
providing the same warranty protection as the manufacturer's
warranty. With respect to third party SOFTWARE, SUPPLIER will
assign to BELL ATLANTIC all warranties allowed by the
manufacturer.
13.4.E. CONSUMABLE COMPONENTS
The warranties set forth in this clause shall not apply to
components of the PRODUCT which are normally consumed in
operation or which have a normal life inherently shorter than
the applicable warranty period such as light bulbs and fuses.
13.4.F. IDENTICAL SYSTEM(s), PRODUCT, OR SOFTWARE
Once acceptance occurs, for record keeping purposes, the Warranty
Period on all subsequently furnished identical SYSTEM(s), PRODUCT,
SOFTWARE or SERVICES shall begin upon shipment of the SYSTEM(s),
PRODUCT, SOFTWARE or completion of the SERVICES, as applicable, and
shall continue thereafter for the period of time specified in this
Section 13.4; provided, however, the parties agree that the
initiation of and coverage by the warranty is entirely independent of
acceptance, including BELL ATLANTIC's rights and remedies in
acceptance, and is not intended to nor shall it be construed as in
any way precluding, limiting or otherwise affecting BELL ATLANTIC's
acceptance rights which shall be and remain as set forth in the
Section 12.13 entitled ACCEPTANCE.
13.4.G. EXTENSION FOR NON-CONFORMING PRODUCT OR SOFTWARE
In all instances where the repair or replacement of SYSTEM(s),
PRODUCT and/or SOFTWARE is not completed within twenty-one (21) days
of SUPPLIER's receipt of non-compliant PRODUCT or receipt of
notification of non-compliant SOFTWARE, the warranty period shall be
extended for a period equivalent to the time required by SUPPLIER to
complete the repair or replacement.
13.5 YEAR 2000
13.5.A. YEAR 2000 TESTING
SUPPLIER commits to complete its internal Year 2000 testing by the
end of the *. SUPPLIER will submit its internal test plans and test
results to a third party for independent verification. This includes
a compliance audit of SUPPLIER's test criteria, test plans, test
cases, and test results against GR-2945-CORE Year 2000 regression
set. SUPPLIER agrees that Year 2000 system testing will be performed
at BELL ATLANTIC. SUPPLIER shall solicit customer input and
participation in the creation of the BELL ATLANTIC Y2K system test
plan and subsequent testing. SUPPLIER shall rpovide the first office
application of the Year 2000 version of the SOFTWARE to BELL ATLANTIC
by no later than *.
13.5.B. SOFTWARE
SUPPLIER represents and warrants that, upon completion of its
internal Year 2000 testing of the applicable SOFTWARE, such SOFTWARE
delivered hereunder shall record, store, process, and present
calendar dates falling on or after January 1, 2000, in the same
manner, and with the same functionality, as such SOFTWARE record,
store, process and present calendar dates falling on or before
December 31, 1999. SUPPLIER further represents and warrants that in
all other respects such SOFTWARE shall not in any way lose
functionality or degrade in performance as a consequence of such
SOFTWARE operating at a date later than December 31, 1999. Without
limitation of the foregoing, SUPPLIER's representatives will consult
with BELL ATLANTIC's or its AFFILIATE's designated representative for
century date change requirements, to ensure that such SOFTWARE will
lose no functionality with respect to the introduction of records
containing dates falling on or after January 1, 2000, and to use
commercially reasonable efforts to ensure that such SOFTWARE will be
interoperable with other software used by BELL ATLANTIC or its
AFFILIATE which may deliver records to such SOFTWARE, receive records
from such SOFTWARE, or interact with such SOFTWARE in the course of
processing data.
* Confidential portion has been omitted and filed separately with
the Secretary of the Commission.
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13.5.C SYSTEMS
SUPPLIER represents and warrants that, upon completion of its
internal Year 2000 testing of the applicable SYSTEM, such SYSTEMS
delivered hereunder will record, store, process, and present calendar
dates falling on or after January 1, 2000, and with the same
functionality, as such SYSTEMS record, store, process and present
calendar dates falling on or before December 31, 1999. SUPPLIER
further represents and warrants that in all other respects such
SYSTEMS shall not in any way lose functionality or degrade in
performance as a consequence of such SYSTEMS operating at a date
later than December 31, 1999. Without limitation of the foregoing,
SUPPLIER's representatives will consult with BELL ATLANTIC's or its
AFFILIATE's designated representative for century date change
requirements, to ensure that such SYSTEMS will lose no functionality
nor will they degrade in performance with respect to the introduction
of records containing dates falling on or after January 1, 2000, and
to use commercially reasonable efforts to ensure that such SYSTEMS
will be interoperable with other SYSTEMS used by BELL ATLANTIC which
may deliver records to such SYSTEMS, receive records from such
SYSTEMS, or interact with such SYSTEMS, in the course of processing
data.
Notwithstanding the foregoing, SUPPLIER shall have no responsibility for
any loss of functionality or degradation or failure to record, store,
process or present calendar dates falling on or after January 1, 2000
caused by the failure to so perform of any SOFTWARE or SYSTEMs, other than
SUPPLIER's, used by BELL ATLANTIC or any of its Affiliates or any other
supplier.
13.6 ILLICIT CODE
SUPPLIER warrants to the best of the knowledge of its management as of
the Effective Date of this Agreement, unless (a) authorized in writing
by BELL ATLANTIC or (b) necessary to perform valid duties under this
AGREEMENT, any SOFTWARE provided to BELL ATLANTIC by SUPPLIER hereunder
shall:
(a) contain no hidden files;
(b) not replicate, transmit, or activate itself without control of a
person operating computing equipment on which it resides; (
(c) not alter, damage, or erase any data or computer programs without
control of a person operating the computing equipment on which it
resides, except, and to the extent, required by BELL ATLANTIC .
Notwithstanding anything elsewhere in this AGREEMENT to the contrary, in
the event of SUPPLIER's breach of this Section 13.6, SUPPLIER shall be
in default of this AGREEMENT, and no cure period shall apply. In
addition to any other remedies available to it under this AGREEMENT,
BELL ATLANTIC reserves the right to pursue any civil and/or criminal
penalties available to it against the SUPPLIER.
13.7 SERVICES
SUPPLIER warrants to BELL ATLANTIC and BELL ATLANTIC's AFFILIATES that
SERVICES provided hereunder shall be performed in a professional and
workman-like manner, and in accordance with applicable SPECIFICATIONS.
All warranties shall survive inspection, acceptance and payment.
13.8 EMPLOYEES AND SUBCONTRACTORS BOUND
SUPPLIER represents that it has and will maintain appropriate
agreement(s) with its employees, or (without altering the restrictions
against subcontracting set forth elsewhere in this AGREEMENT) others
whose services SUPPLIER may require, sufficient to enable it to comply
with all provisions of this AGREEMENT, including, without limitation,
the provisions relating to intellectual property. Upon request by BELL
ATLANTIC and if permitted by the terms of any such agreement, SUPPLIER
shall make such agreements available for inspection by BELL ATLANTIC.
13.9 LIMITATIONS ON WARRANTIES
SUPPLIER'S PERFORMANCE UNDER WARRANTY AS SET FORTH IN THIS ARTICLE 13
SHALL NOT REQUIRE SUPPLIER TO REPAIR OR REPLACE ANY DEFECTIVE SYSTEM,
PRODUCT, SOFTWARE, LICENSED MATERIALS OR DOCUMENTATION WHERE IT CAN BE
SHOWN THAT (I) THE DEFECT WAS CAUSED DIRECTLY BY THE MODIFICATION OR
ALTERATION OF THE SYSTEM, PRODUCT, SOFTWARE, LICENSED MATERIALS OR
DOCUMENTATION BY ANYONE OTHER THAN SUPPLIER, (II) THE DEFECT WAS CAUSED
DIRECTLY BY A FAILURE TO MAINTAIN THE SYSTEM, PRODUCT, SOFTWARE,
LICENSED MATERIALS OR DOCUMENTATION IN ACCORDANCE WITH SUPPLIER'S
MAINTENANCE RECOMMENDATIONS, (III) THE DEFECT WAS CAUSED DIRECTLY BY A
FAILURE TO INSTALL THE SYSTEM, PRODUCT, SOFTWARE, LICENSED MATERIALS OR
DOCUMENTATION IN ACCORDANCE WITH SUPPLIER'S INSTALLATION PROCEDURES,
(IV) THE DEFECT WAS CAUSED DIRECTLY BY OPERATING THE SYSTEM, PRODUCT,
SOFTWARE, LICENSED MATERIALS OR DOCUMENTATION IN A MANNER OTHER THAN
THAT SPECIFIED BY SUPPLIER, (VI) THE DEFECT WAS CAUSED DIRECTLY BY
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THE ABUSE, NEGLIGENCE OR OTHER IMPROPER TREATMENT (INCLUDING, WITHOUT
LIMITATION, USE OUTSIDE THE RECOMMENDED ENVIRONMENT) TO WHICH THE
SYSTEM, PRODUCT, SOFTWARE, LICENSED MATERIALS OR DOCUMENTATION HAS BEEN
SUBJECTED OR V)THE SYSTEM, PRODUCT, SOFTWARE, LICENSED MATERIALS OR
DOCUMENTATION HAS HAD ITS SERIAL NUMBER REMOVED OR ALTERED. BELL
ATLANTIC'S SOLE REMEDY UNDER THIS PROVISION FOR A BREACH OF WARRANTY IS
AS STATED IN SECTION 12.9 (REPAIRS AND REPLACEMENT) ABOVE. EXCEPT AS
SET FORTH IN THIS AGREEMENT AND ANY ATTACHMENTS THERETO, SUPPLIER MAKES
NO OTHER WARRANTIES WITH RESPECT OT THE SYSTEM, PRODUCTS, MATERIALS,
SOFTWARE, LICENSED MATERIALS, OR DOCUMENTATION, OR ANY SERVICES AND
DISCLAMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WARRANTIES
OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND
NON-INFRINGEMENT. FURTHER, EXCEPT AS SET FORTH IN THIS AGREEMENT AND
ANY ATTACHMENTS THERETO, SUPPLIER DOES NOT WARRANT, GUARANTEE OR MAKE
ANY REPRESENTATIONS REGARDING THE USE, OR THE RESULTS OF THE USE, OF THE
PRODUCTS, SYSTEM SOFTWARE, LICENSED MATERIALS OR DOCUMENTATION IN TERMS
OF CORRECTNESS, ACCURACY, RELIABILITY OR OTHERWISE.
14. COMPLIANCE WITH REGULATIONS
14.1 COMPLIANCE WITH LAWS
SUPPLIER and all persons furnished by SUPPLIER shall comply in all
material respects with the applicable EEO, Fair Labor Standards Act
and all other applicable federal, state, county and local laws,
ordinances, regulations and codes (including procurement of required
permits or certificates) in its or their performance under this
AGREEMENT or an ORDER issued pursuant hereto.
This AGREEMENT is subject to applicable laws and executive orders
relating to equal opportunity and nondiscrimination in employment.
SUPPLIER and all persons furnished by SUPPLIER shall not unlawfully
discriminate in its employment practices against any person by reason
of race, religion, color, sex, disability or national origin and
agrees to comply with the provisions of said laws and orders to the
extent applicable in the performance of this AGREEMENT and as set
forth in the attached Non-Discrimination Compliance Undertaking.
SUPPLIER agrees to indemnify and hold harmless BELL ATLANTIC for,
from and against and defend BELL ATLANTIC against, any loss or damage
sustained because of SUPPLIER's non-compliance of this Section 14.1.
14.2 RADIO FREQUENCY ENERGY STANDARDS
PRODUCT furnished hereunder shall, at time of shipment, comply to the
extent applicable with the requirements of Subpart J of Part 15 of
the Federal Communications Commission's Rules and Regulations, as
they may be amended from time to time, including those Sections
concerning the labeling of such PRODUCT and the suppression of radio
frequency and electro-magnetic radiation to the specified levels.
Should the PRODUCT during use fail to meet relevant parts of the FCC
Rules and Regulations for spurious emission and interference to radio
communications, SUPPLIER shall provide to BELL ATLANTIC information
relating to methods of suppressing such interference. In the event
such interference cannot reasonably be suppressed, then all remedies
as provided by Section 13 entitled WARRANTIES shall apply.
14.3 REGISTRATION
When PRODUCT furnished under this AGREEMENT is subject to
registration under Part 68 of the Federal Communications Commission's
Rules and Regulations as they may be amended from time to time ("Part
68"), SUPPLIER warrants that such PRODUCT furnished under this
AGREEMENT is registered under and complies with Part 68 including,
but not limited to, all labeling and customer instruction
requirements unless such PRODUCT is furnished as part of a technical
field trial or unless the PRODUCT is provided for SERVICES not
covered or exempt under Part 68. SUPPLIER agrees to defend and hold
BELL ATLANTIC harmless from any liability, claim or demand (including
the costs, expenses and reasonable attorney's fees on account
thereof) that may arise solely out of SUPPLIER's non-compliance with
Part 68. BELL ATLANTIC agrees to promptly notify SUPPLIER of any
liability, claim or demand against BELL ATLANTIC for which SUPPLIER
is responsible under this clause and gives SUPPLIER full opportunity
and authority to assume the defense, including appeals, and to settle
such liability, claims and demands.
14.4. GOVERNMENT CONTRACT PROVISIONS
ORDERs placed pursuant to this AGREEMENT containing a notation that
the PRODUCT is intended for use under government contracts shall,
upon acceptance by SUPPLIER, be subject to the then current
government provisions referenced thereon or in attachments thereto.
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14.5. ENVIRONMENTAL COMPLIANCE
A. SUPPLIER hereby warrants, represents and certifies that SUPPLIER's
performance of this AGREEMENT, SUPPLIER's PRODUCTS and the result
of SUPPLIER's SERVICES rendered hereunder conform to and shall
conform and comply in all material respects with all applicable
Federal, State, County and Municipal laws, statutes, regulations,
and codes which relate to environmental protection and employee
protection including, but not limited to, the Atomic Energy Act,
Clean Air Act, Clean Water Act, Comprehensive Environmental
Response, Compensation and Liability Act, Federal Insecticide,
Fungicide and Rodenticide Act, Hazardous Materials Transportation
Act, Marine Protection, Research and Sanctuaries Act, National
Environmental Policy Act, Noise Control Act, Occupational Safety
and Health Act, Safe Drinking Water Act, Solid Waste Disposal Act,
Toxic Substances Control Act, and any equivalent or similar state,
county, or local law, regulation, statute, code, or ordinance.
B. "State" refers to the State of New York, the state where, or in which,
SUPPLIER'S performance occurs and any other state or subdivision of a
state asserting jurisdiction over SUPPLIER'S performance hereunder.
C. "Performance" as used herein refers to SUPPLIER'S installation,
dismantling, segregation, staging, loading, removal, processing,
transportation, disposal, treatment, reclamation or other handling
methods used in performing under this AGREEMENT.
D. SUPPLIER further agrees to recertify compliance herewith at BELL
ATLANTIC's request. SUPPLIER will indemnify and save BELL ATLANTIC
and its CUSTOMER harmless from any material violation or breach of
this Section 14.5 entitled ENVIRONMENTAL COMPLIANCE.
E. SUPPLIER certifies that it shall obtain all licenses, permits, and
authorizations necessary to perform this AGREEMENT from the
appropriate State, Federal and Local governments and agencies prior to
commencement (performance) of WORK hereunder.
F. SUPPLIER shall use commercially reasonable efforts to exercise every
reasonable safety precaution and best management practice, whether or
not required by law, in dealing with the PRODUCT.
G. SUPPLIER shall notify BELL ATLANTIC immediately if any permit,
license, certificate or identification number required for working on
the PRODUCT shall have been revoked, not been renewed, expired or been
suspended.
14.6. HAZARDOUS CHEMICAL INFORMATION.
SUPPLIER shall provide Material Safety Data Sheet(s) in the event that
the PRODUCT, equipment, or PRODUCT (including electronic components) to
be provided is or contains any substance designated:
A. as a toxic/hazardous substance, as defined by the Occupational Safety
and Health Administration, Environmental Protection Agency, and/or all
state "Right to Know" laws; and/or
B. as a carcinogen or potential carcinogen by the National Toxicology
Program or the International Agency for Research on Cancer; and/or
C. a hazardous PRODUCT as defined in the Hazardous Material
Transportation Act; and/or
D. a regulated PRODUCT under the Federal Insecticide, Fungicide and
Rodenticide Act; and/or
E. as a hazardous waste in the Resource Conservation and Recovery Act or
the Superfund Amendment Reauthorization Act; and/or
F. as radioactive; and/or
G. under the Clean Air Act or Clean Water Act.
A Material Safety Data Sheet must also be provided if the equipment or
PRODUCT (including components) could be a hazard to human health and/or the
environment in a fire/combustion or spill situation.
14.7. OCCUPATIONAL SAFETY AND HEALTH ACT (O.S.H.A.)
SUPPLIER in performing work under this AGREEMENT will comply in all
material respects with the applicable provisions of the Federal
Occupational Safety and Health Act of 1970 and with any and all
applicable rules and regulations issued pursuant to the Act.
14.8. EXPORT
A. BELL ATLANTIC shall comply with all export laws, restrictions,
national security controls and regulations of the United States and
all other applicable foreign agencies and authorities, and shall
not export or re-export or allow the export or re-export, of the
PRODUCTS, LICENSED MATERIALS, DOCUMENTATION, SUPPLIER CONFIDENTIAL
INFORMATION or other technical data or any copy, portion or direct
product thereof (i) in violation of any such restrictions, laws or
regulations, or (ii) without all required authorization to Cuba,
Libya,
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North Korea, Iran, Iraq or Rwanda or to any Group D:1 or E:2
country (or any national of such country) specified in the then
current Supplement No 1 to part 740 of the U.S. Export
Administration Regulations (or any successor supplement or
regulations). BELL ATLANTIC shall, at its own expense, obtain all
necessary customs, import, or other governmental authorizations and
approvals. This paragraph shall survive termination of this
AGREEMENT.
B. SUPPLIER covenants and agrees with BELL ATLANTIC that in performing
under this AGREEMENT SUPPLIER will, at all times, comply in all
material respects with all applicable provisions of the Export
Administration Amendments Act of 1985 (P.L. 99-64); the Department of
Defense Authorizations Act of 1984 (P.L. 98-94); the Arms Export
Control Act (22 USC 1234 Sections 2751 et seq.); the Department of
State International Traffic in Arms Regulations (22 CFR Sections 121
et seq.); the Department of Commerce Technical Data Regulations (15
CFR Pt. 179) and all Regulations promulgated under any of the
foregoing Acts.
15. WORKAROUND
15.1. SCHEDULING
In the event SUPPLIER fails to furnish any SYSTEM, PRODUCT, SOFTWARE or
SERVICES, or any combination thereof, that conform to approved
SPECIFICATIONS by the agreed upon original delivery date, or an amended
delivery or completion date, for reasons other than FORCE MAJEURE, or
delays caused directly by BELL ATLANTIC's failure to meet their
obligations to SUPPLIER, and BELL ATLANTIC determines that SUPPLIER's
failure to meet its obligations will cause BELL ATLANTIC to incur
additional costs to meet commitments to their customers, then BELL
ATLANTIC may notify SUPPLIER in writing , in accordance with Section
19.7 hereof, that a WORKAROUND condition exists. SUPPLIER and BELL
ATLANTIC shall promptly participate in the joint preparation of a
WORKAROUND plan to resolve the problem.
16. DOCUMENTATION AND RECORD KEEPING
16.1. DOCUMENTATION
SUPPLIER agrees to furnish DOCUMENTATION, as set forth or otherwise
identified in Appendix B and the terms and conditions stated within this
AGREEMENT, for the SYSTEM hereunder, and any succeeding changes thereto,
at no additional charge. The cost of DOCUMENTATION shall be included at
no additional cost to BELL ATLANTIC.
For each ORDER placed under this AGREEMENT, SUPPLIER shall furnish to BELL
ATLANTIC appropriate DOCUMENTATION including, but not limited to, items of
installation, engineering, planning, acceptance testing, operation and
maintenance of PRODUCT and SOFTWARE.
SUPPLIER shall be responsible for updating the DOCUMENTATION for any
subsequent updates and changes to DOCUMENTATION. SUPPLIER shall maintain a
list of persons and organizations of BELL ATLANTIC, to whom the updates
shall be provided. The updates and any subsequent changes shall contain a
SUPPLIER identification reference number and date of issue to facilitate
administration. Such subsequent changes and updates shall be provided
within a reasonable time, at no charge to BELL ATLANTIC.
SUPPLIER grants BELL ATLANTIC the right to make copies of any documents
furnished under this AGREEMENT for the exclusive internal use of BELL
ATLANTIC in accordance with the terms of this AGREEMENT. If any document
that is to be copied bears a copyright or proprietary notice, BELL
ATLANTIC and its AFFILIATE shall reproduce the copyright or proprietary
notice on all copies.
16.2. PERIODIC REPORTS
SUPPLIER agrees to render at no charge to BELL ATLANTIC on a quarterly
basis, unless otherwise mutually agreed upon, and in formats acceptable
to BELL ATLANTIC, the following reports (by way of example and not
limitation):
a. Material Back Order Report
b. Activity Report for the prior fiscal quarter
c. M/WBE Reports as required by Appendix _.
SUPPLIER agrees to render other reasonable periodic reports for service
affecting conditions or other conditions that affect the operational and
administrative procedures of BELL ATLANTIC, or as otherwise reasonably
requested by BELL ATLANTIC.
16.3. RECORDS AND AUDIT
BELL ATLANTIC and SUPPLIER shall mutually agree upon an independent
auditor who, at BELL ATLANTIC's option but no more than once per
calendar year, may audit SUPPLIER'S records of (i) SUPPLIER'S
transactions with
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its other commercial customers for the same SERVICES SUPPILER is
providing BELL ATLANTIC, provided such records are not subject to
restrictions on disclosure by SUPPLIER and (ii) SUPPLIER'S billing
records for the SERVICES furnished under this AGREEMENT, for
verification of comparable pricing in accordance with Section 19.9
hereof entitled MOST FAVORED CUSTOMER. BELL ATLANTIC shall be
responsible for all audit/verification expenses provided that SUPPLIER
shall reimburse BELL ATLANTIC for any actual and reasonable
out-of-pocket expenses if a material non-compliance with the provisions
in Section 19.9 is determined by the auditor".
The independent auditor shall not disclose the identity of any of
SUPPLIER's other commercial customers any such audit may be conducted only
during normal business hours during the term of this AGREEMENT and during
the respective periods in which SUPPLIER is required to maintain such
records. The accuracy of SUPPLIER'S billing shall be determined from the
results of such audits. Notwithstanding the foregoing, BELL ATLANTIC
shall provide not less than thirty (30) days notice prior to a requested
Audit, and both parties shall mutually determine the date of the Audit.
17. PROFESSIONAL SERVICES
17.1. TRAINING SERVICES
If requested by BELL ATLANTIC, SUPPLIER agrees to provide training in
the courses referenced in Appendix D, entitled TRAINING, training in any
courses subsequently developed by SUPPLIER, and any training equipment
and instructional DOCUMENTATION required in support of PRODUCT,
SOFTWARE, and/or SERVICES to be furnished by SUPPLIER under this
AGREEMENT.
The training, training equipment and instructional DOCUMENTATION to be
furnished by SUPPLIER under this AGREEMENT shall be in the area of SYSTEMS
planning, application engineering, practices, operation, installation,
maintenance and repair, as well as marketing of SYSTEM features as
required.
Such training, training equipment and instructional DOCUMENTATION shall be
configured to provide at BELL ATLANTIC's option, either/or both of the
following:
A. Instructors, training equipment and instructional DOCUMENTATION
suitable to train BELL ATLANTIC's and/or its AFFILIATE's personnel
at either SUPPLIER's or BELL ATLANTIC's and/or its AFFILIATE's
location.
B. Instructor training, training equipment and instructional
DOCUMENTATION suitable to train BELL ATLANTIC's and/or its AFFILIATE's
training staff, so that they, in turn, may conduct training programs
related to the SYSTEM and qualify other BELL ATLANTIC personnel in the
appropriate use, or application of the SYSTEM.
The training, training equipment and instructional DOCUMENTATION furnished
by SUPPLIER under this AGREEMENT, shall be developed and furnished in
accordance with the requirements, formats and procedures set forth in
Appendix D entitled TRAINING.
17.2. TRAINING CREDITS
SUPPLIER agrees to provide BELL ATLANTIC with *tuition credits for
each *dollars *in Orders under this Agreement which are redeemable
as follows:
* required per person for a *course at SUPPLIER's training facility in
San Diego.
or
* credits required per person for a suitcase course offered in
BELL ATLANTIC's region (at BELL ATLANTIC's training facility or a
central office with the necessary equipment).
or
* credits required per person for the 'Train the Trainer' course.
*.
All tuition credits expire *after the end of the calendar year in which
they were earned. Each party shall pay its own travel expenses to and from
the tuition credit courses.
17.3. CONSULTING SERVICES
BELL ATLANTIC shall have the option to contract for specialized
consulting assistance from SUPPLIER on a project basis to be described
in documents specifying the consulting SERVICES and deliverables to be
provided by SUPPLIER ("Statement(s) of Work"). Statements of Work will
be executed from time to time, and upon acceptance by
* Confidential portion has been omitted and filed separately with
the Secretary of the Commission.
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both parties will be incorporated into this AGREEMENT by reference thus
describing the specifications for each engagement ("Engagement"). If
there are any terms or conditions specified in a Statement of Work that
conflict with this AGREEMENT, the terms and conditions of this AGREEMENT
will prevail unless those terms are expressly noted as overriding the
terms and conditions of the AGREEMENT and then only for that specific
Statement of Work.
18. SUPPORT
18.1. CONTINUING AVAILABILITY
SUPPLIER agrees to offer for sale maintenance, support, replacement and
repair parts for PRODUCT ordered pursuant to this AGREEMENT for
*commencing from SUPPLIER's last shipment of such PRODUCT to BELL
ATLANTIC. In addition to SUPPLIER's obligation to offer PRODUCT support
for *from SUPPLIER's last shipment of PRODUCT, SUPPLIER agrees to offer
for sale SOFTWARE support for maintenance, replacement or updates for
*from SUPPLIER's last shipment of SOFTWARE listed in Appendix A hereof,
as applicable.
SUPPLIER shall also give BELL ATLANTIC one (1) year prior written notice of
the discontinuance of the sale of maintenance, replacement and repair parts
for PRODUCT. Charges for support SERVICES provided pursuant to this
paragraph shall be mutually agreed upon at time of discontinuance notice.
When SUPPLIER has given BELL ATLANTIC such discontinuance notice, or if for
any other reason SUPPLIER is unable to provide such PRODUCT, or SOFTWARE,
SUPPLIER shall, if requested by BELL ATLANTIC, endeavor to arrange for a
third party to continue to furnish the discontinued maintenance,
replacement and repair parts to BELL ATLANTIC. In the event SUPPLIER is
not requested or, if requested, is unable to find a third party to furnish
such parts to BELL ATLANTIC, SUPPLIER shall, upon request by BELL ATLANTIC,
to the extent SUPPLIER has such rights, grant BELL ATLANTIC an exclusive
nontransferable license upon mutually agreeable terms and license fees to
use existing technical information and rights, including SOURCE CODE and
DOCUMENTATION, for BELL ATLANTIC to manufacture, or have manufactured, the
discontinued parts. In no event shall the provision of such rights and
technical information to a third party or to BELL ATLANTIC be delayed
beyond six (6) months after SUPPLIER's date of notice of discontinuance.
SUPPLIER shall protect against the loss or damage of the existing technical
information required for the manufacture of the discontinued parts with the
same degree of care that SUPPLIER uses to protect its own valuable
technical information. In addition, SUPPLIER shall advise BELL ATLANTIC in
writing at least six (6) months in advance of its decision to discontinue
maintenance of any technical information, so that BELL ATLANTIC may acquire
such technical information in accordance with the provisions of this
clause.
The technical information includes, by example and not by way of
limitation: (a) manufacturing drawings and specifications of raw materials
and components comprising such parts; (b) manufacturing drawings and
specifications covering special tooling and the operation thereof; and (c)
a detailed list of all commercially available parts and components
purchased by the SUPPLIER on the open market disclosing the part number,
name, and location of the SUPPLIER and price lists for the purchase
thereof, including SOURCE CODE and DOCUMENTATION.
18.2. EXTRAORDINARY SUPPORT
In addition to the provisions for repair or replacement of PRODUCT
and/or SOFTWARE set forth in Articles 13, entitled WARRANTIES, and 12.9,
entitled REPAIRS AND REPLACEMENTS, SUPPLIER agrees, in any event, if any
natural or other disaster or emergency causes an out of service
condition, SUPPLIER shall use extraordinary effort to locate or provide
(i.e. procure or manufacture) and ship to BELL ATLANTIC replacement
PRODUCT or SOFTWARE, and make available necessary manpower within twenty
four (24) hours of verbal notification by BELL ATLANTIC.
Such emergency support shall be available twenty four (24) hours a day,
seven (7) days a week during the term of this AGREEMENT and for a period of
* after the expiration of this AGREEMENT.
Charges for replacement PRODUCT, SOFTWARE, AND SERVICES shall be at the
then current prices contained in Appendix A hereof, entitled PRICES,
SCHEDULES, DISCOUNTS, for the term of this AGREEMENT, and thereafter at
SUPPLIER's then current published prices, plus a reasonable charge for the
extraordinary support effort provided, for the term of this AGREEMENT.
This clause shall not be construed to require SUPPLIER to maintain any
inventories whatsoever nor maintain any position of readiness to perform in
the future nor require breach of SUPPLIER's contractual obligations to
third parties.
18.3. REGULATORY ASSISTANCE
If requested by BELL ATLANTIC, SUPPLIER shall, to the best of its
ability, provide reasonable assistance by supplying an expert witness,
if required, with regard to regulatory matters in connection with
SYSTEMS, PRODUCT, SOFTWARE and/or SERVICES provided hereunder, provided
that BELL ATLANTIC shall pay SUPPLIER for such
* Confidential portion has been omitted and filed separately with the
Secretary of the Commission.
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assistance at a reasonable rate to be specified and shall reimburse
SUPPLIER for all travel and per-diem living expenses reasonably incurred
by the expert witness.
19. GENERAL PROVISIONS
19.1. SEVERABILITY
If any of the provisions of this AGREEMENT shall be invalid or
unenforceable, such invalidity or unenforceability shall not invalidate
or render unenforceable the entire AGREEMENT, but rather the entire
AGREEMENT shall be construed as if not containing the particular invalid
or unenforceable provision or provisions. If the invalid or
unenforceable provision or provisions shall be considered an essential
element of this AGREEMENT, the parties shall promptly attempt to
negotiate a substitute therefor.
19.2. CHOICE OF LAW
The construction, interpretation and performance of this AGREEMENT shall
be governed by and construed in accordance with the domestic laws of the
State of New York.
19.3. MINORITY AND WOMEN-OWNED BUSINESS ENTERPRISES
SUPPLIER agrees to provide equal opportunity to Minority and Women-Owned
Business Enterprises (M/WBE) in accordance to requirements set forth in
Appendix K within three months of the execution of this AGREEMENT and on
a quarterly basis thereafter.
SUPPLIER's compliance with this clause shall be subject, at BELL ATLANTIC's
option to independent verification in accordance with the clause hereof
entitled "Records and Audit."
19.4. TAXES
BELL ATLANTIC shall be liable for and shall reimburse SUPPLIER only for
the following tax payments, including related charges, except for any
related charges that may be imposed as a result of SUPPLIER's failure to
timely file an accurate tax return required to be filed by it, with
respect to transactions under this AGREEMENT: Federal manufacturers and
retailers excise and New York state and local sales or use taxes,
including any privilege or excise taxes in the nature of sales or use
taxes, as applicable. Such taxes shall be billed to BELL ATLANTIC as
separate items on SUPPLIER's invoices, unless a valid exemption
certificate is furnished by BELL ATLANTIC to SUPPLIER. BELL ATLANTIC
shall have the right to have SUPPLIER cooperate with BELL ATLANTIC in
contesting with the imposing jurisdiction, at BELL ATLANTIC's expense,
any such taxes that BELL ATLANTIC deems are improperly levied.
19.5. SURVIVAL
All rights and obligations hereunder granted or incurred prior to and
which by their nature would continue beyond the cancellation,
termination, or expiration of this AGREEMENT or any ORDER placed
hereunder by BELL ATLANTIC shall survive such cancellation, termination,
or expiration, including without limitation Sections 7.3, 7.4, 7.5, 7.9,
9.4 and 19.
19.6. NON-WAIVER
No course of dealing or failure of either party to strictly enforce any
term, right or condition of this AGREEMENT shall be construed as a
waiver of such term, right or condition.
19.7. NOTICES
Any Notice or demand which under the terms of this AGREEMENT or under
any statute must or may be given or made by SUPPLIER or BELL ATLANTIC,
shall be in writing and shall be given or made by facsimile or similar
communication shall be made by SUPPLIER or BELL ATLANTIC in writing
which may take the form of facsimile, electronic transfer, overnight
courier or certified or registered mail, with return receipt requested,
addressed to the respective parties as follows:. A Notice shall be
deemed delivered upon record of transmission receipt or return receipt,
as applicable, or one (1) day after shipment via overnight courier or
three (3) days after mailing by certified or registered mail.
Notices to BELL ATLANTIC shall be addressed to the following (unless this
AGREEMENT provides otherwise):
BELL ATLANTIC
240 East 38th Street, 14th Floor
New York, New York 10016
Attn: Mr Thomas Trempy
Telecopier No.: 212-476-5181
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with a copy to:
BELL ATLANTIC
1095 Avenue of the Americas, 38th Floor
New York, New York 10016
Attn.: Legal Department
Telecopier No.: 212-840-1110
Notices to SUPPLIER shall be addressed to:
Applied Digital Access, Inc.
9855 Scranton Rd.
San Diego, CA 92121
Attn: T3AS Product Manager
Telecopier No.: 619-623-2208
with a copy to:
Applied Digital Access, Inc.
9855 Scranton Rd.
San Diego, CA 92121
Attn: Corporate Counsel
Telecopier No.: 619-623-2208
Such notice or demand shall be deemed to have been given or made when
sent in the case of facsimile or other similar communication, subject to
written confirmation of actual receipt, or when deposited postage
prepaid in the U.S. Mail. Notices to SUPPLIER shall be addressed to:
19.8. FORCE MAJEURE
Neither party shall be held responsible for any delay or failure in
performance of this AGREEMENT caused by fires, strikes, labor disputes,
embargoes, requirements imposed by government regulations, civil or
military authorities, acts of God or by the public enemy, inability to
secure raw materials or transportation facilities, acts or omissions of
carriers or other causes similarly beyond the control of SUPPLIER or
BELL ATLANTIC and which could not have been avoided through the
application of reasonable foresight or diligent effort. If such
contingency occurs, the party delayed or unable to perform shall provide
notice to the other party and if the delaying causes continue for a
period of sixty (60) days, the party injured by the other's inability to
perform may elect to:
(a) terminate such order or part thereof as to PRODUCT and/or SOFTWARE
not already shipped or SERVICES not already performed;
(b) suspend such order for the duration of the delaying causes, buy or
sell elsewhere PRODUCT and/or SOFTWARE to be bought or sold hereunder
and deduct from any order commitment the quantity bought or sold or
for which such commitments have been made elsewhere; or
(c) resume performance under such order once the delaying cause ceases
with an option in the injured party to extend the delivery or
performance date up to the length of time the contingency endures.
Unless written notice is given no later than fifteen (15) days from when
the injured party is notified, (b) shall be deemed selected.
19.9 MOST FAVORED CUSTOMER
SUPPLIER represents that all of the prices, rates, charges or fees,
granted to BELL ATLANTIC by SUPPLIER hereunder will be as or more
favorable than the equivalent prices, warranties, benefits, terms and
conditions granted to SUPPLIER's other commercial customers under like
or similar circumstances.
If at any time during the term of this AGREEMENT, SUPPLIER shall offer more
favorable prices, rates, charges or fees, for substantially the same or
similar PRODUCT, SERVICES, DOCUMENTATION, or LICENSED MATERIALS as those
provided to other commercial customers under like or similar circumstances,
then:
A. SUPPLIER shall, within thirty (30) calendar days after the effective
date of such offering, notify BELL ATLANTIC(s) of such fact in
accordance with Section 19.7 hereof, entitled Notices, and offer BELL
ATLANTIC(s) the more favorable offering; and
B. this AGREEMENT and all applicable ORDERs shall be deemed to be
automatically amended, effective the date this contract is executed,
and SUPPLIER shall provide the same prices, rates, charges or fees, to
BELL ATLANTIC; and
C. BELL ATLANTIC shall have the right to decline to accept the offering,
in which event such automatic amendment shall be deemed to be void;
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Provided, however, that (i) any consideration provided to SUPPLIER
hereunder shall be non-refundable and non-creditable and (ii) BELL ATLANTIC
adopts all of the additional restriction, obligations and limitations
imposed in connection with such more favorable offering.
SUPPLIER's compliance with this clause shall be subject, at BELL ATLANTIC's
option, to independent verification in accordance with Section 16.3 hereof
entitled "RECORDS AND AUDIT."
19.10. RELEASES VOID
Neither party shall require waivers or releases of any personal rights
from representatives of the other in connection with visits to their
respective premises and no such releases or waivers shall be pleaded by
SUPPLIER or BELL ATLANTIC in any action or proceeding.
19.11. ALTERNATE DISPUTE RESOLUTION
19.11.A. REFERRAL
Should any disagreement, dispute, disputed claim of breach,
nonperformance, or repudiation arising from, related to or
connected with this AGREEMENT or any of the terms or conditions
hereof, or any transactions hereunder ("Dispute"), arise between
BELL ATLANTIC and SUPPLIER either during this AGREEMENT or after
termination or expiration of this AGREEMENT, either party may give
to the other notice of the Dispute, specifically referencing this
provision and request resolution of the Dispute. At the expiration
of ten (10) business days, unless it shall have been settled,
either party may refer such Dispute to the BELL ATLANTIC's
Director, Corporate Sourcing - PICS, Power and Test Equipment and
the SUPPLIER's T3AS Product Manager for resolution.. If within an
additional ten (10) business days such Dispute shall not have been
settled, then either party may refer it to BELL ATLANTIC's
Vice-President/Corporate Sourcing and SUPPLIER's Vice President,
Customer Support for resolution.. The parties agree to exchange
relevant information and cooperate in good faith to resolve the
Dispute under this provision. If within an additional ten (10)
business days, such dispute shall not have been settled, the
parties agree to resort to the dispute mediation remedies set forth
below. Notwithstanding anything to the contrary, either party
shall be entitled to petition a court of competent jurisdiction for
the specific, limited purpose of requesting injunctive relief.
19.11.B. MEDIATION
A formal mediation procedure may be commenced by either party under
the then current Public Resources ("CPR") Model Procedure for
Mediation of Business Disputes by notice to CPR to select an
experienced neutral mediator and a proposed time and date for
mediation. All mediators shall be selected from the CPR Panel of
Neutrals unless the parties mutually agree to a different neutral
mediator. All mediator fees shall be equally shared by the
parties. Each party will pay its own costs and other expenses
associated with the mediation, except that the reasonable travel
expenses, as outlined in the BELL ATLANTIC Travel Guidelines,
incurred by the party, which is more distant from the site of the
mediation, shall be shared equally by SUPPLIER and BELL ATLANTIC.
The parties shall participate in good faith in the mediation and if
the parties reach a resolution of the Dispute, it shall be reduced
to writing and shall be enforceable in accordance with its terms.
If the procedures set forth above do not result in a resolution of the
dispute satisfactory to both parties within thirty-one (31) calendar days
of the first notice to CPR to select a mediator, either party may give
notice in writing to the other party that the mediation procedure is
terminated. Upon the issuance of such notice, either party shall have the
right to pursue such remedies as may be available at law or in equity or
under this AGREEMENT.
ALL DISCUSSIONS AND DOCUMENTS PREPARED PURSUANT TO ANY ATTEMPT TO RESOLVE A
DISPUTE UNDER THIS PROVISION ARE CONFIDENTIAL AND FOR SETTLEMENT PURPOSES
ONLY AND SHALL NOT BE ADMITTED IN ANY COURT OR OTHER FORUM AS AN ADMISSION
OR OTHERWISE AGAINST A PARTY FOR ANY PURPOSE INCLUDING THE APPLICABILITY OF
FEDERAL AND STATE COURT RULES.
19.12. INDEPENDENT OBLIGATION OF SUPPLIER TO CONTINUE PERFORMANCE
SUPPLIER assumes an independent obligation to continue performance of
its obligations hereunder in all respects regardless of any dispute
which may arise between BELL ATLANTIC and SUPPLIER in connection with
any claims by SUPPLIER that BELL ATLANTIC has materially breached its
obligations hereunder. Such independent obligation shall continue for
thirty-one (31) days from the date upon which BELL ATLANTIC receives
written notice of such alleged breach from SUPPLIER. SUPPLIER
undertakes this independent obligation without prejudice to any rights
or remedies it may otherwise have in connection with any dispute between
SUPPLIER and BELL ATLANTIC.
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19.13. LIABILITY
All work or SERVICES furnished by SUPPLIER or by persons furnished by
SUPPLIER, including its subcontractors (if any) pursuant to this
CONTRACT shall be as an Independent Contractor and not as the agent of
BELL ATLANTIC. All persons furnished by SUPPLIER and its subcontractors
(if any) shall be considered solely SUPPLIER's and its subcontractors'
(if any) employees or agents, and SUPPLIER and its subcontractors (if
any) shall be responsible for compliance with all applicable laws,
rules, and regulations including, but not limited to employment of
labor, hours of labor, working conditions, worker's compensation,
payment of wages, and payment of taxes, such as unemployment, social
security and other payroll taxes, including applicable contributions
from such persons when required by law. SUPPLIER and its subcontractors
(if any) shall indemnify, hold harmless, and defend BELL ATLANTIC from
and against any claim or lawsuits arising out of SUPPLIER's and its
subcontractors' (if any) failure to comply with any such laws, rules or
regulations.
SUPPLIER shall indemnify, hold harmless and defend BELL ATLANTIC from and
against any loss, cost, liabilities, claims or demands (including the
costs, expenses and attorney's fees) that may be made: (a) by anyone for
injuries including death to persons or damage to property including theft,
resulting from its acts or omissions or those of persons furnished by
SUPPLIER; (b) by persons furnished by SUPPLIER and its subcontractors (if
any) under Worker's Compensation or similar acts; (c) by any third party in
connection with work, PRODUCT, SOFTWARE, DOCUMENTATION, or SERVICES
provided by SUPPLIER or contemplated by this AGREEMENT; and (d) under any
federal securities laws or under any other statute, at common law or
otherwise arising out of or in connection with the performance by SUPPLIER
contemplated by this AGREEMENT or any information obtained in connection
with such performance; except, in each case, to the extent such losses are
caused by the negligence, recklessness or willful misconduct of BELL
ATLANTIC or any of its AFFILIATES. SUPPLIER shall not implead or bring any
action against BELL ATLANTIC and its BELL ATLANTIC Affiliates, their
respective directors, officers, employees, agents in connection with any
action by any of SUPPLIER's employees for any personal injury (including
death) or property damage that occurs in the course or scope of employment
of such person except to the extent such personal injury or property damage
is directly caused by the negligence, recklessness or willful misconduct of
BELL ATLANTIC, any of its AFFILIATES or their employees or agents. BELL
ATLANTIC will notify SUPPLIER of any written claims or demands against it
for which SUPPLIER is responsible hereunder.
Liability. Notwithstanding anything else in this contract or otherwise,
neither party shall be liable with respect to any subject matter of this
contract under any contract, negligence, strict liability, or other legal
or equitable theory for any amounts in excess of that amount which is the
greater of (i) the aggregate of the amounts paid by BELL ATLANTIC to
SUPPLIER under this contract during the *period prior to the date the cause
of action arose, or (ii) *.
NOTWITHSTANDING ANYTHING ELSE IN THIS CONTRACT OR OTHERWISE, NEITHER PARTY
SHALL BE LIABLE TO THE OTHER PARTY FOR ANY AMOUNTS REPRESENTING THEIR LOSS
OF PROFITS, LOSS OF BUSINESS, OR THEIR INDIRECT, SPECIAL, EXEMPLARY,
CONSEQUENTIAL OR PUNITIVE DAMAGES, ARISING FROM THE PERFORMANCE OR
NONPERFORMANCE OF THIS AGREEMENT OR ANY ACTS OR OMISSIONS ASSOCIATED
THEREWITH, WHETHER THE BASIS OF THE LIABILITY IS BREACH OF AGREEMENT, TORT
(INCLUDING NEGLIGENCE AND STRICT LIABILITY), STATUTES OR ANY OTHER LEGAL
THEORY REGARDLESS OF LEGAL THEORY OR FORESEEABILITY.
19.14. INSURANCE
SUPPLIER and its subcontractors (if any) agree to purchase and maintain
during the term hereof all insurance and/or bonds required by law or
this AGREEMENT including without limitation: (a) Workers' Compensation
and related insurance as prescribed by the law of the State in which the
work is performed; (b) Employers Liability insurance with limits of not
less than *per occurrence and in the aggregate; (c) Commercial General
Liability insurance, including PRODUCTS Liability and Completed
Operation endorsements for a combined single limit of not less than *
per occurrence and in the aggregate; and (d) if the use of a motor
vehicle is required, Automobile liability coverage for a combined single
limit of *. SUPPLIER shall furnish certificates of insurance evidencing
placement of such insurance. BELL ATLANTIC and BELL ATLANTIC
Corporation shall be named as Additional Insureds in the policies
referred to in (c) above.
Certificates furnished by SUPPLIER shall provide that BELL ATLANTIC is to
be notified in writing, in accordance with Section 19.7 hereof, at least
twenty (20) days prior to cancellation of, or any PRODUCT change in the
policy. SUPPLIER and its subcontractors (if any) shall assume
responsibility for such notification being given to:
Manager, Customer Support
BELL ATLANTIC
240 East 38th Street, 15th Floor
New York, New York 10016
* Confidential portion has been omitted and filed separately with
the Secretary of the Commission.
<PAGE>
Page 36 of 38
19.15. IMPLEADER AND LIMITED LIABILITY OF BELL ATLANTIC
SUPPLIER shall not implead or bring any action against BELL ATLANTIC or
its employees based on any claim by any person for personal injury or
death that occurs in the course or scope of employment of such person by
BELL ATLANTIC for which a claim may be filed under the Worker's
Compensation Act and that arises out of the business contemplated under
this AGREEMENT except if such personal injury or death is caused by the
negligence, recklessness or willful misconduct of BELL ATLANTIC.
19.16. WORK PERFORMED ON BELL ATLANTIC PREMISES
19.16.A. CLEAN UP
Upon completion of any work performed under this AGREEMENT or
pursuant to ORDERs placed hereunder, SUPPLIER shall promptly remove
all implements, surplus PRODUCTs and debris.
19.16.B. HARMONY
SUPPLIER shall be entirely responsible for all persons furnished by
it working in harmony with all others working on BELL ATLANTIC
premises or those of BELL ATLANTIC's AFFILIATE.
19.16.C. PLANT AND WORK RULES
SUPPLIER's employees, agents and contractors shall, while on BELL
ATLANTIC's premises, comply with all plant rules and regulations
which have been provided to SUPPLIER, including, where required by
government regulations, submission of satisfactory clearance from
the U.S. Department of Defense and other Federal authorities
concerned.
19.16.D. RIGHT OF ACCESS
Each party shall permit access to the other's respective facilities
as reasonably required in connection with work hereunder. No
charge shall be made for such access. It is agreed that reasonable
advance notice will be given when access is required.
19.16.E. TOOLS AND EQUIPMENT
Unless otherwise specifically provided in this AGREEMENT, SUPPLIER
shall provide labor, tools and equipment necessary for performance
pursuant to an ORDER under this AGREEMENT.
19.16.F. WORK HEREUNDER
It is understood that visits by SUPPLIER's representatives or
SUPPLIER's contractor's representatives to perform SUPPLIER's
obligations under this AGREEMENT shall for all purposes be deemed
"work hereunder" and shall be at no charge to BELL ATLANTIC unless
otherwise specifically provided in this AGREEMENT or in another
writing signed or duly acknowledged by authorized representatives
of both parties.
19.17. RIGHTS
The failure of either party to enforce it rights under this AGREEMENT at
any time for any period shall not be construed as a waiver of such
rights. The rights and remedies of each party shall not be exclusive and
are in addition to any other rights and remedies provided by law or
under this AGREEMENT.
19.18. HEADINGS AND CAPTIONS
Headings and captions are for convenience only and are not to be used in
the interpretation of this AGREEMENT.
20. NPRM
Telesector Resources Group, Inc., d/b/a Bell Atlantic Network Services,
on behalf of itself and for the benefit of its AFFILIATES (hereinafter,
"BELL ATLANTIC" ), has issued to Applied Digital Access ("SUPPLIER") a
Request for Proposal ("RFP") No. 97-7130GG dated July 31, 1997 and a
Request for Revised Proposal ("RRP") No. 97-7130GG - Revised dated
November 5, 1997 (hereinafter collectively, "RFP") setting forth certain
requirements and other information incident to the purchase and
deployment of T-1 Network Interface Units with Performance Monitoring
Capability. SUPPLIER has reviewed and analyzed the Bell Atlantic RFP
and has developed and submitted to Bell Atlantic its Response dated
September 3, 1997 (the "SUPPLIER's RFP Response") and its Response to
the Request for Revised Proposal dated November 13, 1997 (the
"SUPPLIER's RRP Response").
<PAGE>
Page 37 of 38
The SUPPLIER's responses set forth in Sections 1 (Executive Summary), 2
(Scope of Work/Generic Requirements), 3 (Interoperability with Nynex
Embedded Equipment), 6 (Manufacturing Capacity), 7 (Warranty), 10 (Quality
Assurance General Requirements), 11 (Product Documentation Requirements),
12 (OSMINE Process), 13 (Training), 14 (NYNEX NCTE Repair Program), 15
(Product Practices) and in the Supplier's Response are incorporated herein
by reference and SUPPLIER agrees to conform thereto.
Supplier commits to incorporate NPRM capability, as described and defined
in ANSI T1.403 - 1997, in accordance with the CTS/T3AS Support Matrix
attached as Appendix M.
21. ENTIRE AGREEMENT
This instrument, the Appendices and Schedules attached and the ORDER(s)
attached hereto, or hereafter issued under this AGREEMENT, constitute and
embody the entire AGREEMENT by and between the parties hereto and supersede
all prior oral or written agreements or understandings, if any, between
them with respect to the subject matter of this AGREEMENT. In the event of
a direct conflict between a specific term or condition of this AGREEMENT
and a specific term or condition in an ORDER, issued and accepted by the
parties, the specific term or condition in the ORDER shall take precedence
and control, but only for purposes of that individual ORDER. All ORDERs
placed by BELL ATLANTIC shall be deemed to incorporate and be subject to
the terms and conditions of this AGREEMENT as well as any supplemental
terms and conditions agreed to by the parties in writing. No provisions or
data on an ORDER or in subordinated documents (such as shipping releases)
or on any document unilaterally originated by either party shall be
incorporated in this AGREEMENT unless the provisions or data merely supply
information contemplated by this AGREEMENT.
The terms and conditions contained in this AGREEMENT supersede all prior
oral or written understandings between the parties with respect to the
subject matter of this AGREEMENT. This AGREEMENT shall not be modified or
amended except by a writing signed by authorized representatives of both
parties. This AGREEMENT may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have set their hand and seal intending to be
legally bound on the date indicated below.
Applied Digital Access, Inc. TELESECTOR RESOURCES GROUP, INC
(A BELL ATLANTIC Company)
By By
--------------------------------- ----------------------------------
Typed Name Typed Name
------------------------- --------------------------
Title Title
------------------------------ -------------------------------
Date
--------------------------------
<PAGE>
Appendix A - Section 1
Page 1 of 2
APPENDIX A
PRICES AND DISCOUNTS
This Appendix A is attached to and made part of that certain Agreement No.
X13938D effective March 1,1998 by and between Bell Atlantic ('Customer') and
Applied Digital Access, Inc. ('ADA').
1. NEW EQUIPMENT PRICES
Discounts will be taken from the unit List Prices stated in the attached
schedule.
T3AS/CTS EQUIPMENT PRICE DISCOUNT SCHEDULE
* DISCOUNT SCHEDULE
*Purchase Volume Discount Percentage
----------------------------------------------
($ in Millions)
* *
* *
* *
* *
*
* Purchase Volume * Discount Percentage *
----------------------------------------------
($ in Millions)
* *
The Discount Schedule is based on the following terms:
A) The Discount Schedule is based on *.
B) The discount percentage shall apply to ADA manufacured
equipment in the T3AS and CTS product lines only. The * and *
products are discounted separately. New products may be
included in this Appendix A after product standardization and
Customer and ADA mutual agreement to incorporate them under
the Agreement.
C) The Discount Schedule, once volume is obtained, * the Agreement.
D) Software and third party manufactured equipment that is resold by
ADA (i.e., kits, racks, communications bay equipment and hardware
options) are not subject to discounts.
2. OUT-OF-WARRANTY REPAIR PRICES
See attached schedule for detailed unit prices.
3. SUPPLIER TECHNICAL SUPPORT RATES AND CHARGES
Up to 15 days advance notice may be required for scheduling of
non-emergency service calls.
Telephone Technical Support
* per hour, weekdays
* per hour, weekends and statutory holidays
On-Site Technical Support
* per hour, weekdays
* per hour, weekends and statutory holidays
Plus direct travel and living expenses.
* Confidential portion has been omitted and filed separately with
the Secretary of the Commission.
<PAGE>
Appendix A - Section 1
Page 2 of 2
4. ENGINEERING, INSTALLATION AND INSTALLATION SUPPORT SERVICES
A) SOFTWARE UPGRADE INSTALLATION (AS DEFINED IN APPENDIX J)
1) Installation Assistance
-- *per session or system if ADA Field Service personnel
available in Customer Region.
-- * per session or system plus travel and living expenses if
ADA Field Service personnel not available in Customer Region.
2) ADA Installation
-- * per site with 1 system.
-- * per site with 2 systems.
-- * per site with 3 or more systems.
ADA installation pricing is subject to addition of travel and
living expenses for the ADA installer. Site is defined as
location CLLI code.
B) ALL OTHER ENGINEERING, INSTALLATION AND INSTALLATION SUPPORT SERVICES
1) Engineering and Installation Services (as defined in Appendix E)
-- Specific projects will be quoted upon request.
2) Installation Support Services (as defined in Appendix E)
-- *.
All prices for Engineering, Installation and Installation Support Services
can be quoted separately for large projects to provide Customer a volume
price which may be better than individual site/system prices.
* Confidential portion has been omitted and filed separately with
the Secretary of the Commission.
<PAGE>
CONFIDENTIAL
APPENDIX A - SECTION 2
PAGE 1
APPENDIX A
NEW EQUIPMENT PRICE LIST
LIST DISCOUNT LEVELS: MATERIAL
PART NUMBER DESCRIPTION CLEI PRICE * * * * WARRANTY
- ----------- ----------- ---- ----- --------
SUBSYSTEMS
02-0108-00 * * * * * * * *
02-0109-00 * * * * * * * *
02-0271-00 * * * * * * * *
02-0107-00 * * * * * * * *
02-0171-00 * * * * * * * *
ADMINISTRATION SHELF
02-0102-00 * * * * * * * *
02-0110-00 * * * * * * * *
02-0111-00 * * * * * * * *
02-0113-01 * * * * * * * *
02-0116-00 * * * * * * * *
COMMON PLUG-IN EQUIPMENT
02-0101-00 * * * * * * * *
02-0104-01 * * * * * * * *
02-0104-02 * * * * * * * *
02-0180-01 * * * * * * * *
02-0165-00 * * * * * * * *
02-0166-00 * * * * * * * *
02-0117-00 * * * * * * * *
02-0117-01 * * * * * * * *
IN-LINE CIRCUIT EQUIPMENT
High-Speed Equipment
02-0103-00 * * * * * * * *
02-0103-01 * * * * * * * *
02-0228-01 * * * * * * * *
Low-Speed Equipment
02-0172-00 * * * * * * * *
02-0173-00 * * * * * * * *
02-0175-00 * * * * * * * *
CIRCUIT TESTING AND DCS INTERFACE EQUIPMENT
02-0100-00 * * * * * * * *
02-0104-01 * * * * * * * *
02-0104-02 * * * * * * * *
02-0140-01 * * * * * * * *
02-0105-00 * * * * * * * *
02-0128-00 * * * * * * * *
T3AS SOFTWARE
System Software
02-0227-0422 * * * * * * * *
02-0227-0430 * * * * * * * *
02-0227-0440 * * * * * * * *
* Confidential portion has been omitted and filed separately with
the Secretary of the Commission.
<PAGE>
CONFIDENTIAL
APPENDIX A - SECTION 2
PAGE 2
APPENDIX A
NEW EQUIPMENT PRICE LIST
LIST DISCOUNT LEVELS: MATERIAL
PART NUMBER DESCRIPTION CLEI PRICE * * * * WARRANTY
- ----------- ----------- ---- ----- --------
Features Software
02-0162-00 * * * * * * * *
02-0278-00 * * * * * * * *
02-0182-00 * * * * * * * *
02-0232-00 * * * * * * * *
02-0249-00 * * * * * * * *
02-0247-00 * * * * * * * *
02-0248-00 * * * * * * * *
02-0250-00 * * * * * * * *
02-0230-00 * * * * * * * *
02-0244-H0 * * * * * * * *
02-0244-00 * * * * * * * *
02-0245-00 * * * * * * * *
02-0245-H0 * * * * * * * *
02-0246-00 * * * * * * * *
RACKS AND KITS
02-0193-02 * * * * * * * *
02-0193-03 * * * * * * * *
02-0193-04 * * * * * * * *
02-0197-01 * * * * * * * *
02-0197-02 * * * * * * * *
02-0197-03 * * * * * * * *
02-0268-01 * * * * * * * *
02-0268-02 * * * * * * * *
02-0268-03 * * * * * * * *
02-0131-00 * * * * * * * *
02-0132-00 * * * * * * * *
02-0177-00 * * * * * * * *
02-0168-4440 * * * * * * * *
02-0187-00 * * * * * * * *
02-0155-00 * * * * * * * *
02-0164-00 * * * * * * * *
COMMUNICATIONS BAY
02-0137-00 * * * * * * * *
14-0139-00 * * * * * * * *
14-0110-00 * * * * * * * *
13-0151-00 * * * * * * * *
14-0140-00 * * * * * * * *
14-0142-00 * * * * * * * *
02-0147-00 * * * * * * * *
14-0116-00 * * * * * * * *
02-0133-0020 * * * * * * * *
02-0133-0035 * * * * * * * *
02-0225-00 * * * * * * * *
05-0125-0035 * * * * * * * *
* Confidential portion has been omitted and filed separately with
the Secretary of the Commission.
<PAGE>
CONFIDENTIAL
APPENDIX A - SECTION 2
PAGE 3
APPENDIX A
NEW EQUIPMENT PRICE LIST
LIST DISCOUNT LEVELS: MATERIAL
PART NUMBER DESCRIPTION CLEI PRICE * * * * WARRANTY
- ----------- ----------- ---- ----- --------
OPTIONS
02-0215-0430 * * * * * * * *
02-0216-0430 * * * * * * * *
14-0128-0000 * * * * * * * *
14-0113-0000 * * * * * * * *
14-0129-0000 * * * * * * * *
14-0144-0000 * * * * * * * *
14-0130-0000 * * * * * * * *
13-0131-0000 * * * * * * * *
14-0131-0000 * * * * * * * *
14-0151-0000 * * * * * * * *
14-0106-0000 * * * * * * * *
02-0118-0000 * * * * * * * *
02-0119-0000 * * * * * * * *
65-0887-0000 * * * * * * * *
13-0114-0000 * * * * * * * *
REMOTE MODULE
Model 2021 * * * * * * * *
Model 2021 * * * * * * * *
02-0209-00 * * * * * * * *
02-0209-00 * * * * * * * *
02-0208-00 * * * * * * * *
02-0239-00 * * * * * * * *
02-0240-00 * * * * * * * *
* Confidential portion has been omitted and filed separately with
the Secretary of the Commission.
<PAGE>
CONFIDENTIAL
APPENDIX A - SECTION A
PAGE 1
OUT OF WARRANTY REPAIR PRICE LIST
REPAIR PRICE IF *
REPAIR DISCOUNT IS
PRODUCT NUMBER CLEI CODE DESCRIPTION PRICE ACHIEVED
- -------------- ------------- ------------- -------- ----------------
02-0100-00 * * * *
02-0101-00 * * * *
02-0102-00 * * * *
02-0103-00 * * * *
02-0103-00 * * * *
02-0104-00 * * * *
02-0104-00 * * * *
02-0105-00 * * * *
02-0107-00 * * * *
02-0108-00 * * * *
02-0109-00 * * * *
02-0110-00 * * * *
02-0111-00 * * * *
02-0113-00 * * * *
02-0113-00 * * * *
02-0116-00 * * * *
02-0117-00 * * * *
02-0117-00 * * * *
02-0128-00 * * * *
02-0137-00 * * * ** *
02-0140-00 * * * *
02-0140-00 * * * *
02-0165-00 * * * *
02-0166-00 * * * *
02-0171-00 * * * *
02-0172-00 * * * *
02-0173-00 * * * *
02-0174-00 * * * *
02-0175-00 * * * *
02-0180-00 * * * *
02-0180-00 * * * *
02-0228-00 * * * *
02-0271-00 * * * *
** The * (P/N 02-0137-00) is not a repairable item. The price indicated here
is for the purchase of a new unit.
* Confidential portion has been omitted and filed separately with
the Secretary of the Commission.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<CIK> 0000919048
<NAME> APPLIED DIGITAL ACCESS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 3,134
<SECURITIES> 9,876
<RECEIVABLES> 9,103
<ALLOWANCES> (100)
<INVENTORY> 5,924
<CURRENT-ASSETS> 30,448
<PP&E> 14,089
<DEPRECIATION> (7,829)
<TOTAL-ASSETS> 39,887
<CURRENT-LIABILITIES> 10,213
<BONDS> 0
0
0
<COMMON> 51,998
<OTHER-SE> 2,591
<TOTAL-LIABILITY-AND-EQUITY> 39,887
<SALES> 13,852
<TOTAL-REVENUES> 13,852
<CGS> 7,405
<TOTAL-COSTS> 7,405
<OTHER-EXPENSES> 14,515
<LOSS-PROVISION> 50
<INTEREST-EXPENSE> 2
<INCOME-PRETAX> (7,792)
<INCOME-TAX> 73
<INCOME-CONTINUING> (7,865)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,865)
<EPS-PRIMARY> (0.62)
<EPS-DILUTED> (0.62)
</TABLE>
