<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 9, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------------
SCC COMMUNICATIONS CORP.
(Exact name of Registrant as specified in its charter)
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DELAWARE 7374 84-0796285
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
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6285 LOOKOUT ROAD
BOULDER, COLORADO 80301
(303) 581-5600
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
------------------------------
MR. GEORGE K. HEINRICHS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SCC COMMUNICATIONS CORP.
6285 LOOKOUT ROAD
BOULDER, COLORADO 80301
(303) 581-5600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
Copies to:
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JEREMY W. MAKARECHIAN, ESQ. MARK L. JOHNSON, ESQ.
BROBECK, PHLEGER & HARRISON LLP FOLEY, HOAG & ELIOT LLP
1125 SEVENTEENTH STREET ONE POST OFFICE SQUARE
SUITE 2525 BOSTON, MASSACHUSETTS 02109
DENVER, COLORADO 80202 (617) 832-1000
(303) 293-0760
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
------------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1993, as amended (the "Securities Act"), check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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=========================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT OFFERING PRICE AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED TO BE REGISTERED(1) PER SHARE(2) PRICE(2) FEE
- -------------------------------------------------------------------------------------------------------------------------
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Common Stock, $.001 par value 3,795,000 shares $15.00 $56,925,000 $16,793
=========================================================================================================================
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(1) Includes 495,000 shares which the Underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(a).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED APRIL 9, 1998
SCC LOGO
3,300,000 SHARES
COMMON STOCK
------------------------------
Of the 3,300,000 shares of Common Stock offered hereby, 2,100,000 shares
are being sold by SCC Communications Corp. ("SCC" or the "Company"), and
1,200,000 shares are being sold by the Selling Stockholders. See "Principal and
Selling Stockholders." The Company will not receive any of the proceeds from the
sale of shares by the Selling Stockholders. Prior to this offering, there has
been no public market for the Common Stock of the Company. See "Underwriting"
for information relating to the method of determining the initial public
offering price. It is currently estimated that the initial public offering price
will be between $13.00 and $15.00 per share. Application has been made to have
the Common Stock quoted on the Nasdaq National Market under the proposed symbol
"SCCX."
------------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 7.
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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============================================================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO PROCEEDS TO
PUBLIC COMMISSIONS COMPANY(1) SELLING STOCKHOLDERS
- ----------------------------------------------------------------------------------------------------------------------------
Per Share....................... $ $ $ $
- ----------------------------------------------------------------------------------------------------------------------------
Total(2)........................ $ $ $ $
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(1) Before deducting expenses payable by the Company estimated at $800,000.
(2) The Company and certain Selling Stockholders have granted the Underwriters a
30-day option to purchase up to an additional 495,000 shares of Common Stock
solely to cover over-allotments, if any. See "Underwriting." If such option
is exercised in full, the total Price to Public, Underwriting Discounts and
Commissions, Proceeds to Company and Proceeds to Selling Stockholders will
be $ , $ , $ and $ , respectively. See
"Underwriting."
------------------------------
The Common Stock is offered by the Underwriters as stated herein, subject
to receipt and acceptance by them and subject to their right to reject any order
in whole or in part. It is expected that delivery of such shares will be made
through the offices of BancAmerica Robertson Stephens, San Francisco,
California, on or about , 1998.
BANCAMERICA ROBERTSON STEPHENS HAMBRECHT & QUIST
THE DATE OF THIS PROSPECTUS IS , 1998
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CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET FOR THE COMMON STOCK OF
THE COMPANY, INCLUDING ENTERING STABILIZING BIDS EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
<PAGE> 4
Inside Panel:
SCC Solution Set
SCC offers a comprehensive suite of transaction support services and products
designed to enable ILECs, CLECs, wireless carriers, and other alternative
service providers to efficiently manage databases of information critical to the
processing of 9-1-1 calls.
NDSC Services
SCC provides 9-1-1 data management services for wireline and wireless
telecommunications carriers. Services include system preparation and
administration, routine data administration, event transaction processing,
performance management, mapping services, and clearinghouse services.
Enhanced Public Safety Services
A suite of service offerings for the public safety telecommunications
environment which add value to the traditional 9-1-1 infrastructure. Services
currently include 9-1-1 Connect, 9-1-1 Net, and Private Switch ALI. It is
expected that Subscriber ALI and Early Warning & Evaluation will be introduced
by late 1998.
Commercial Services
SCC is leveraging its expertise in database management services and data quality
to offer improved source address information for business support systems of
telecommunications carriers.
Tag Line Above Map:
The Leading Provider of 9-1-1 OSS Services in North America...
Continued Tag Line Below Map:
and Growing Beyond 9-1-1...
Words Surrounding Map:
[Map of United States Communications Network]
Focus on Data Integrity
Survivability and Reliability
Leading Edge Technology
Flexible Business Model
System Preparation & Administration
Routine Data Administration
Event Transaction Processing
Performance Management
Mapping Services
Clearinghouse Services
Customer Names Below Map:
Ameritech AT&T Wireless Bell Canada Nextel 360 degrees
Communications Sprint PCS Time Warner Telcom US West Communications Vanguard
Cellular
SCC Strategy -- Key Elements
Maintain and Extend Leadership Position in Wireline 9-1-1 Data Management Market
Capitalize on Emerging Wireless Carrier Opportunities
Maintain and Extend Leadership Position in National Clearinghouse Services
Provide Additional Services to Telecommunications Carriers
Develop Applications for New Commercial Products
Expand International Operations
<PAGE> 5
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES
OR AN OFFER TO, OR A SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH
AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
------------------------------
TABLE OF CONTENTS
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PAGE
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Summary..................................................... 4
Risk Factors................................................ 7
Use of Proceeds............................................. 17
Dividend Policy............................................. 17
Capitalization.............................................. 18
Dilution.................................................... 19
Selected Financial Data..................................... 20
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 21
Business.................................................... 29
Management.................................................. 40
Certain Transactions........................................ 46
Principal and Selling Stockholders.......................... 47
Description of Capital Stock................................ 49
Shares Eligible for Future Sale............................. 51
Underwriting................................................ 53
Legal Matters............................................... 55
Experts..................................................... 55
Additional Information...................................... 55
Glossary of Terms........................................... 56
Index to Financial Statements............................... F-1
</TABLE>
------------------------------
9-1-1 Extended Architecture, 9-1-1NRC, 9-1-1XA, 9-1-1 National Reference
Center, 9-1-1 Net and 9-1-1 Connect are trademarks of the Company. This
Prospectus contains other product names, trade names and trademarks of the
Company and of other organizations.
3
<PAGE> 6
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and Financial Statements and Notes thereto appearing elsewhere in
this Prospectus. This Prospectus contains forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from the results discussed in the forward-looking statements. Factors
that could cause or contribute to such differences include those discussed under
"Risk Factors," as well as those discussed elsewhere in this Prospectus. Certain
terms used herein are defined under the heading "Glossary of Terms."
THE COMPANY
SCC is the leading provider of 9-1-1 operations support systems ("OSS")
services to incumbent local exchange carriers ("ILECs"), competitive local
exchange carriers ("CLECs") and wireless carriers in the United States. The
Company has redefined the U.S. market for 9-1-1 OSS by creating the first and
largest 9-1-1 service bureau, the SCC National Data Services Center ("NDSC"),
with over 70 million subscriber data records under management throughout North
America. The Company manages the data that enable a 9-1-1 call to be routed to
the appropriate public safety agency along with accurate and timely information
about the caller's identification and location. Through SCC's NDSC, the Company
offers a comprehensive, cost-effective solution to the 9-1-1 service
provisioning needs of ILECs, CLECs and wireless carriers by enabling them to
outsource virtually all aspects of the operations of their 9-1-1 data management
services, including system activation, routine data administration, event
transaction processing and performance management, with a high level of security
and survivability. In addition, the Company licenses its 9-1-1 OSS software to
carriers that wish to manage the delivery of 9-1-1 data management services
in-house. Representative carriers using SCC's 9-1-1 OSS solution include
Ameritech, AT&T Wireless Services, BellSouth, MCI, Sprint PCS and Worldcom
Network SVCS.
Today, 9-1-1 is a fundamental element of local exchange service and
carriers' OSS infrastructure. 9-1-1 service involves the routing of emergency
calls to the appropriate public safety answering point ("PSAP") responsible for
dispatching police, fire and other emergency services. When a caller dials
9-1-1, information about the caller's location, telephone number and the
jurisdictionally appropriate PSAP must be quickly accessed from carriers'
network and mission-critical data servers. Thus, delivery of 9-1-1 service
presents a difficult OSS challenge for carriers because it requires the
coordination of data from multiple sources, the review and processing of the
data, the resolution of data errors and conflicts, and the insertion of the data
into network and mission-critical data servers. ILECs, CLECs and wireless
carriers require a 9-1-1 solution that addresses these OSS challenges and cost
effectively provides a high degree of data integrity and reliability, allows
them to comply with regulatory mandates, and addresses their need to provide
additional value-added services. ILECs are seeking to reduce the significant
capital expenditures associated with supporting rapidly evolving 9-1-1
infrastructure and upgrading their 9-1-1 data management and network control
services to meet PSAP requirements and technological advancements. CLECs and
wireless carriers, many of which are relatively small and new to the markets in
which they are now competing, are seeking to increase their own subscriber bases
while minimizing their investment in OSS technology infrastructure and
personnel, as well as the relationships with PSAPs necessary to provide 9-1-1
service. Carriers with these requirements may choose to develop their own
proprietary solutions, to license the 9-1-1 software and manage the delivery of
9-1-1 service themselves, or to outsource their 9-1-1 OSS needs.
Through SCC's NDSC, the Company provides the data management services that
ILECs, CLECs and wireless carriers need to deliver 9-1-1 calls to the
appropriate PSAP, along with critical information such as caller location and
call-back number that PSAPs need to respond effectively to emergencies. Complex
data screening and preparation are completed to initialize properly the
underlying systems necessary for 9-1-1 call routing and information display for
the call taker. SCC's NDSC frequently receives and processes electronic
transmissions from ILECs, CLECs and wireless carriers detailing subscriber and
coverage updates and public safety jurisdiction boundary changes from PSAPs.
Records identified as potentially having problems are automatically separated
for manual review and analysis by SCC data integrity analysts. Using the updated
4
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information, SCC's 9-1-1 OSS then provides the information to route the 9-1-1
call and transmit essential information to the emergency service provider.
The Company's objective is to be the leading national provider of 9-1-1 OSS
and other complementary services to ILECs, CLECs and wireless carriers. SCC
focuses on developing innovative and automated solutions to provide customers
with a comprehensive system for managing large amounts of dynamic subscriber
information. Key elements of the Company's strategy are to: (i) maintain and
extend its leadership position in the 9-1-1 wireline data management market;
(ii) capitalize on emerging wireless carrier opportunities; (iii) maintain and
extend its leadership position in national clearinghouse services; (iv) provide
additional services to telecommunications carriers; (v) develop applications for
new commercial products; and (vi) expand international operations.
The Company was incorporated in July 1979 in the State of Colorado under
the name of Systems Concepts of Colorado, Inc., and was reincorporated in
September 1993 in the State of Delaware under the name SCC Communications Corp.
The Company's principal executive offices are located at 6285 Lookout Road,
Boulder, Colorado 80301. Its telephone number is (303)581-5600.
THE OFFERING
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Common Stock Offered by the Company................ 2,100,000 shares
Common Stock Offered by the Selling Stockholders... 1,200,000 shares
Common Stock to be Outstanding after the
Offering......................................... 10,442,007 shares(1)
Use of Proceeds.................................... For repayment of certain indebtedness, working
capital and other general corporate purposes,
and possible acquisitions. See "Use of
Proceeds."
Proposed Nasdaq National Market Symbol............. SCCX
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(1) Based on shares outstanding as of April 9, 1998. Includes 6,383,723 shares
of Common Stock to be issued upon conversion of convertible preferred stock
and exercise of a warrant concurrently with the closing of the offering made
hereby. Excludes 1,113,613 shares of Common Stock issuable upon exercise of
stock options outstanding as of April 9, 1998 at a weighted average exercise
price of $3.12 per share, and 287,442 shares of Common Stock reserved for
grant of future options as of April 9, 1998, under the Company's 1990 Stock
Option Plan. On the effective date of the Registration Statement of which
this Prospectus is a part, an additional 500,000 share reserve will be
created under the Company's 1998 Stock Incentive Plan. See
"Management -- Benefit Plans -- 1998 Stock Incentive Plan."
5
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SUMMARY FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
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YEAR ENDED DECEMBER 31,
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1995 1996 1997
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STATEMENT OF OPERATIONS DATA:
Revenue..................................................... $ 7,413 $14,802 $27,072
Costs and expenses.......................................... 6,727 13,329 23,738
Other expense, net.......................................... 368 527 879
Income from continuing operations before income taxes....... 318 946 2,455
Provision for income taxes.................................. 16 9 172
Net income from continuing operations....................... 302 937 2,283
Loss from operations and disposal of discontinued division,
net of tax................................................ (1,746) (562) (2,908)
Net income (loss)........................................... (1,444) 375 (625)
Net income (loss) from continuing operations per share(1):
Basic..................................................... $ (0.02) $ 0.15 $ 0.83
Diluted................................................... $ (0.02) $ 0.11 $ 0.26
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DECEMBER 31, 1997
------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(2) AS ADJUSTED(3)
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BALANCE SHEET DATA:
Cash and cash equivalents............................... $ 2,503 $ 2,503 $23,935
Working capital......................................... (3,970) (3,970) 18,412
Total assets............................................ 18,606 18,606 40,038
Long-term debt.......................................... 6,891 6,891 4,321
Total stockholders' equity (deficit).................... (14,367) 1,694 26,646
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(1) See Note 2 of Notes to Financial Statements for an explanation of the
determination of shares used in computing net income (loss) from continuing
operations per share.
(2) Reflects the conversion of convertible preferred stock into an aggregate of
6,188,575 shares of Common Stock and the exercise of an outstanding warrant
to acquire 195,148 shares of Common Stock. See Note 4 of Notes to Financial
Statements.
(3) Reflects the conversion of convertible preferred stock into an aggregate of
6,188,575 shares of Common Stock, the exercise of an outstanding warrant to
acquire 195,148 shares of Common Stock, the sale of 2,100,000 shares of
Common Stock by the Company and the application of the estimated net
proceeds therefrom (assuming an initial public offering price of $14.00).
See "Use of Proceeds," "Capitalization" and Note 4 of Notes to Financial
Statements.
------------------------------
Except as otherwise indicated herein, all information presented in this
Prospectus (i) gives effect to a 1-for-3 reverse stock split, (ii) reflects the
conversion of all outstanding shares of the Company's mandatorily redeemable,
convertible preferred stock, par value $.001 (the "Convertible Preferred
Stock"), into an aggregate of 6,188,575 shares of Common Stock and the exercise
of an outstanding warrant to acquire 195,148 shares of Common Stock, (iii) gives
effect to the filing of an Amended and Restated Certificate of Incorporation
upon the closing of this offering to, among other things, create a new class of
undesignated preferred stock and (iv) assumes no exercise of the Underwriters'
over-allotment option.
6
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RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. The following factors, in addition to the other information
contained in this Prospectus, should be carefully considered in evaluating the
Company and its business before purchasing shares of the Common Stock offered
hereby. This Prospectus contains forward-looking statements that involve risks
and uncertainties. The Company's actual results may differ significantly from
the results discussed in the forward-looking statements. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed below as well as that discussed elsewhere in this Prospectus.
SIGNIFICANT FLUCTUATIONS IN QUARTERLY RESULTS OF OPERATIONS
The Company has experienced fluctuations in its quarterly operating results
and anticipates that such fluctuations will continue and could intensify.
Fluctuations in operating results may result in volatility in the price of the
Company's Common Stock. Although the Company was profitable in seven of its last
eight quarters, there can be no assurance that the Company's profitability will
continue in the future or that the Company's levels of profitability will not
vary significantly between quarters. The Company's operating results may
fluctuate as a result of many factors, including the length of the sales cycle
for new or existing customers, the size, timing or duration of significant
customer contracts, fluctuations in the number of subscriber records under
management, timing of new service offerings, demand by license customers for new
development services, customer acceptance of service offerings, ability of the
Company to hire, train and retain qualified personnel, increased competition,
changes in operating expenses, changes in the Company's strategy, the financial
performance of the Company's customers, changes in telecommunications
legislation and regulations that may affect the competitive environment for the
Company's services, and general economic factors. The Company's contracts for
data management services generally include a non-recurring initial fee, and
therefore, the Company may recognize significantly increased revenue for a short
period of time upon commencing services for a new customer.
The Company's expense levels are based in significant part on its
expectations regarding future revenue. The Company's revenue is difficult to
forecast because the market for the Company's services is evolving rapidly and
the length of the Company's sales cycle, the size and timing of significant
customer contracts and license fees and the timing of recognition of
non-recurring initial fees vary substantially among customers. Accordingly, the
Company may be unable to adjust spending in a timely manner to compensate for
any unexpected shortfall in revenue. Any significant shortfall could therefore
have a material adverse effect on the Company's business, financial condition
and results of operations. In addition, the Company hired a significant number
of employees in 1996, 1997 and the first quarter of 1998, and expects to
continue hiring additional employees during the remainder of 1998. The Company
expects that this increase will affect the Company's operating margins for the
short term. There can be no assurance that the Company can continue to report
operating profits, and failure to do so could have a material adverse effect on
the Company's business, financial condition and results of operations.
Based on all of the foregoing, the Company believes that future revenue,
expenses and operating results are likely to vary significantly from quarter to
quarter. As a result, quarter-to-quarter comparisons of operating results are
not necessarily meaningful or indicative of future performance. Furthermore, the
Company believes it is likely that in some future quarter the Company's
operating results will be below the expectations of public market analysts or
investors. In such event, or in the event that adverse conditions prevail, or
are perceived to prevail, with respect to the Company's business or generally,
the market price of the Company's Common Stock would likely be materially
adversely affected. See "Selected Financial Data" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
LENGTHY SALES CYCLE
Potential customers of the Company typically commit significant resources
to the technical evaluation of the Company's services and products and the
Company typically spends substantial time, effort and money providing education
regarding the Company's 9-1-1 OSS solution. The evaluation process often results
in an
7
<PAGE> 10
extensive and lengthy sales cycle, typically ranging between six months and two
years, making it difficult for the Company to forecast the timing and magnitude
of sales contracts. Delays associated with customers' internal approval and
contracting procedures, procurement practices, and testing and acceptance
processes are common. For example, customers' budgetary constraints and internal
acceptance reviews may cause potential customers to delay or forego a purchase.
The delay or failure to complete one or more large contracts could have a
material adverse effect on the Company's business, financial condition and
results of operations and cause the Company's operating results to vary
significantly from quarter to quarter. See "-- Significant Fluctuations in
Quarterly Results of Operations" and "Business -- Sales and Marketing."
RELIANCE ON SIGNIFICANT CUSTOMERS
The Company historically has depended on, and expects to continue to depend
on, large contracts from a limited number of significant customers. During the
year ended December 31, 1996, the Company recognized approximately 82% of its
total revenue from continuing operations from two customers, each of which
accounted for greater than 10% of the Company's revenue in such year. During the
year ended December 31, 1997, the Company recognized approximately 81% of its
total revenue from continuing operations from three customers, each of which
accounted for greater than 10% of the Company's revenue in such year. The
Company believes that these customers will continue to represent a substantial
portion of the Company's total revenue in the future. Certain of the Company's
contracts with these customers allow them to cancel their contracts with the
Company in the event of changes in regulatory, legal, labor or business
conditions. The loss of any of these customers would have a material adverse
effect on the Company's business, financial condition and results of operations.
None of the Company's major customers has any obligation to purchase additional
products or additional services beyond those currently contemplated by their
existing contracts. Consequently, the failure by the Company to develop
relationships with significant new customers could have a material adverse
effect on the rate of growth in the Company's revenue, if any. If the Company
fails to monitor and maintain adequately the quality and expand the breadth of
its services and products, advance its technology or continue to price its
services and products competitively, one or more of its major customers may
select alternative providers or seek to develop services and products
internally. See "Business -- Customers."
RATE OF ADOPTION BY PUBLIC SAFETY ANSWERING POINTS
A growing percentage of the Company's revenue is derived from the
management of 9-1-1 data records for wireless carriers. Recognizing the public
safety need for improved wireless 9-1-1 service, the Federal Communications
Commission (the "FCC") issued Report & Order 94-102 (the "Order") on June 12,
1996, a directive that mandated the adoption of 9-1-1 technology by wireless
carriers in two phases. Phase I required wireless carriers to provide to
requesting PSAPs at the time of a 9-1-1 call, the caller's telephone number and
location of the receiving cell site. Wireless carriers had to comply with Phase
I mandates by the later of April 1, 1998, or six months after the PSAP request.
Phase II requires wireless carriers to locate a 9-1-1 caller to within 125
meters, subject to FCC guidelines. Wireless carriers must comply with Phase II
mandates for requesting PSAPs by October 1, 2001. The Company believes that the
technological challenges confronting wireless carriers attempting to comply with
the Order will encourage them to outsource their 9-1-1 services. If many
wireless carriers decide not to outsource such services, the Company's business,
financial condition and results of operations could be materially and adversely
affected. If PSAPs delay demanding services complying with the Order from
wireless carriers, the Company would experience a delay in receiving revenue
under its current wireless contracts that, because the Company has already
incurred costs in expectation of such revenue, could have a material adverse
effect on the Company's business, financial condition and results of operations.
DEPENDENCE ON NEW PRODUCTS AND SERVICES; RAPID TECHNOLOGICAL CHANGE
The market for the Company's services is characterized by rapid
technological change, frequent new product or service introductions, evolving
industry standards and changing customer needs. The Company currently intends to
begin offering in late 1998 both its Subscriber ALI product, which will allow
subscribers to enter personal information into their 9-1-1 records, and its
Emergency Warning and Evacuation System,
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which will allow PSAP's to call all numbers in a given area and warn of imminent
danger. The introduction of products and services embodying new technologies and
the emergence of new industry and technology standards can render existing
products and services obsolete and unmarketable in short periods of time. The
Company expects other vendors regularly to introduce new products and services,
as well as enhancements to their existing products and services, that will
compete with the services and products offered by the Company. As a result, the
life cycles of the Company's services and products are difficult to estimate.
The Company believes that its future success will depend in large part on its
ability to maintain and enhance its current service and product offerings, to
develop and introduce regularly new services and products that will keep pace
with technological advances and satisfy evolving customer requirements, and to
achieve acceptable levels of sales of its new services and products through its
current customers that resell the Company's solutions to their subscribers.
However, there can be no assurance that the Company will not experience
difficulties that could delay or prevent the successful development,
introduction or marketing of such new services and products or that its new
services and products will adequately meet the requirements of the marketplace
and achieve market acceptance. Announcements of currently planned or other new
service and product offerings by the Company or its competitors may cause
customers to defer the purchase of existing Company services and products. The
Company's inability to develop on a timely basis new services or products, or
the failure of such new services or products to achieve market acceptance, could
have a material adverse effect on the Company's business, financial condition
and results of operations. The development of new, technologically advanced
products and services is a complex and uncertain process requiring high levels
of innovation, as well as the accurate anticipation of technological and market
trends. There can be no assurance that the Company will successfully develop,
introduce or manage the transition to new services and products. Furthermore,
services and products such as those offered by the Company may contain
undetected or unresolved errors when they are first introduced or as new
versions are released. There can be no assurance that, despite extensive testing
by the Company, errors will not be found in new services and products after
commencement of commercial availability, resulting in delay in or loss of market
acceptance and sales, diversion of development resources, injury to the
Company's reputation or increased service and warranty costs, any of which could
have a material adverse effect on the Company's business, financial condition
and results of operations. Significant delays in meeting deadlines for announced
service or product introductions or performance problems with such products or
upgrades could result in an undermining of customer confidence in the Company's
services and products, which would materially adversely affect its customer
relationships as well.
In addition, the Company plans to introduce transaction-based services and
software products to industries different from those the Company has
traditionally supported. There can be no assurance that the Company will be
successful in developing and marketing these new services and products or that
its current or new services and products will adequately meet the demands of its
new markets. Because it is generally not possible to predict the time required
and costs involved in reaching certain research, development and engineering
objectives related to entering new markets, actual development costs could
exceed budgeted amounts and estimated development schedules could require
extensions. Furthermore, there can be no assurance that the Company will not
experience difficulties that could delay or prevent the successful development,
introduction and marketing of these services and products. If the Company is
unable to develop and introduce new services and products to these new markets
in a timely manner, or if a new release of a product or service to such new
markets does not achieve market acceptance, the Company's business, financial
condition and results of operations could be materially adversely affected.
DEPENDENCE ON A SINGLE SERVICE OFFERING; SUSTAINABILITY OF GROWTH
The Company currently derives substantially all of its revenue from the
provision of its 9-1-1 OSS solution to ILECs, CLECs and wireless carriers.
Accordingly, the Company is susceptible to adverse trends affecting this market
segment, such as government regulation, technological obsolescence and the entry
of new competition. The Company expects that this market will continue to
account for substantially all of its revenue in the near future. As a result,
the Company's future success will depend on its ability to continue to sell its
9-1-1 OSS solution to ILECs, CLECs and wireless carriers, maintain and increase
its market share by providing other value-added services to the market, and
successfully adapt its technology and services to other related markets. There
can be no assurance that markets for the Company's existing services and
products will
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continue to expand or that the Company will be successful in its efforts to
penetrate new markets. See "Business -- Strategy."
FIXED PRICE CONTRACTS AND OTHER PROJECT RISKS
During 1997, approximately 75% of the Company's revenue was generated on a
fixed price per subscriber basis. The Company generally enters into contracts
with a ten-year term for wireline data management services and with a
two-to-five-year term for wireless data management services for which the
Company generally receives a fixed monthly fee based upon the number of
subscribers and upon the services selected by the customer. Therefore, the
Company's failure to estimate accurately the resources required for a fixed
price per subscriber contract could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview."
The Company provides 9-1-1 OSS services that are critical to the public's
perception of its customers. The Company's failure to meet a customer's
expectations in the performance of its services could damage the Company's
reputation and adversely affect its ability to attract new business, and may
have a material adverse effect upon its business, financial condition and
results of operations. The Company has undertaken, and in the future may
undertake, projects in which the Company guarantees performance based upon
defined operating specifications. Unsatisfactory performance may result in
client dissatisfaction and a reduction in payment to, or payment of damages by,
SCC, any of which could have a material adverse effect on the Company's
business, financial condition and results of operations.
Because the Company's services and products are utilized by its customers
to provide critical 9-1-1 services, the provision of services and licensing of
software by the Company may entail the risk of product liability and related
claims. The Company's agreements with its customers typically require the
Company to indemnify its customers for the Company's own acts of negligence. The
Company currently has product liability insurance that, subject to liability
limitations and customary exclusions, covers claims resulting from the failure
of the Company's services or products to perform the function or serve the
purpose intended. To the extent that any claims are not covered by such
insurance, the Company's business, financial condition and results of operations
may be materially and adversely affected by a successful product liability
claim.
EMERGING TELECOMMUNICATIONS MARKET AND NEW CARRIERS; REGULATORY UNCERTAINTY
The Company provides its 9-1-1 OSS solution to telecommunications carriers
in the wireline and wireless markets. Although these markets have experienced
significant growth and have been characterized by increased deregulation and
competition in recent years, there can be no assurance that such trends will
continue at similar rates or that the Company will be able to market and sell
effectively its products and services in such markets. In addition, many of the
new entrants in the telecommunications market are companies that lack
significant financial and other resources. To cultivate relationships with such
new market entrants, the Company may be required to offer alternative pricing
arrangements, which may provide for deferred payments. However, there can be no
assurance that the Company will be able to develop such relationships or that
new carriers that become customers of the Company will gain market acceptance
for their telecommunications services. If the Company permits customers that do
not have adequate financial resources to pay the Company for its services on a
deferred basis, the Company ultimately may be unable to collect payments for
such services. Because the Company historically depended on a limited number of
long-term customer relationships, the failure of the Company to develop
relationships with, make sales to, or collect payments from new
telecommunications carriers, or the failure of the Company's customers to
compete effectively in the telecommunications market, could have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, the telecommunications industry is experiencing
substantial consolidations and changes that are unpredictable, and any such
consolidation or change could have a material adverse effect on the Company's
business, financial condition and results of operations.
9-1-1 services generally are funded by a locally imposed fee per subscriber
per month. A portion of this tax is paid to the local carrier providing the
9-1-1 services. The Company generally receives a monthly fee per
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subscriber from its customers for management of 9-1-1 data records, allowing the
carrier to match its fixed revenue stream for 9-1-1 services with a fixed cost
for record management. Changes by local governments in the funding mechanism for
9-1-1 services or the parties responsible for the provision of such services
could have a material adverse effect on the Company's business, financial
condition and results of operations.
The market for the Company's services and products has been influenced by
the adoption of regulations under the Telecommunications Act of 1996 (the "1996
Act"), the new duties imposed on ILECs by the 1996 Act to open the local
telephone markets to competition, and the new requirements imposed on wireless
carriers by the Order. Therefore, any changes to such legal requirements, the
adoption of new regulations by federal or state regulatory authorities under the
1996 Act or any legal challenges to the 1996 Act could have a material adverse
effect upon the market for the Company's services and products. Although the
1996 Act was designed to expand competition in the telecommunications industry,
the realization of the objectives of the 1996 Act is subject to many
uncertainties, including judicial and administrative proceedings designed to
define rights and obligations pursuant to the 1996 Act, actions or inactions by
ILECs and other carriers that affect the pace at which changes contemplated by
the 1996 Act occur, resolution of questions concerning which parties will
finance such changes, and other regulatory, economic and political factors.
The Company is aware of certain litigation challenging the validity of the
1996 Act and the local telephone competition rules adopted by the FCC to
implement the 1996 Act. The U.S. Eighth Circuit Court of Appeals has invalidated
the pricing methodology and unbundling requirements adopted by the FCC while
upholding a portion of the FCC's local competition rules, and both the U.S.
federal government and ILECs have filed petitions for review with the U.S.
Supreme Court. In a recent decision, a U.S. District Court in Texas declared
unconstitutional the provisions of the 1996 Act requiring the Regional Bell
Operating Companies (the "RBOCs") to comply with certain conditions, including
local number portability ("LNP"), in order to receive regulatory approval to
enter long distance markets. The U.S. Department of Justice, representing the
FCC, has appealed this decision. Such litigation may serve to delay
implementation of the 1996 Act, which could adversely affect demand for the
Company's services and products. Any delays in the deadlines imposed by the 1996
Act, the FCC or the Order, or any invalidation, repeal or modification in the
requirements imposed by the 1996 Act, the FCC or the Order, could have a
material adverse effect on the Company's business, financial condition and
results of operations. Moreover, customers may require, or the Company otherwise
may deem it necessary or advisable, that the Company modify its services and
products to address actual or anticipated changes in the regulatory environment.
Any other delays in implementation of the 1996 Act, or other regulatory changes,
could materially adversely affect the Company's business, financial condition
and results of operations.
RISK OF SYSTEM FAILURES
The Company's operations are dependent upon its ability to maintain its
computer and telecommunications equipment and systems in effective working
order, and to protect its systems against damage from fire, natural disaster,
power loss, telecommunications failure or similar events. Although all of the
Company's mission-critical systems and equipment are designed with built-in
redundancy and security, there can be no assurance that a fire, natural
disaster, power loss, telecommunications failure or similar event would not
result in an interruption of the Company's services. Any damage, failure or
delay that causes interruptions in the Company's operations could have a
material adverse effect on the Company's business, financial condition and
results of operations. Furthermore, any future addition or expansion of the
Company's facilities to increase capacity could increase the Company's exposure
to damage from fire, natural disaster, power loss, telecommunications failure or
similar events. There can be no assurance that the Company's property and
business interruption insurance will be adequate to compensate the Company for
any losses that may occur in the event of a system failure or that such
insurance will continue to be available to the Company at all or, if available,
that it will be available on commercially reasonable terms. See
"Business -- Products and Services."
MANAGEMENT OF CHANGE
The Company has expanded its operations rapidly over the past several
years, placing significant demands on its administrative, operational and
financial personnel and systems. Additional expansion by the Company
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may further strain its management, operational, financial reporting, and other
systems and resources. There can be no assurance that the Company's systems,
resources, procedures, controls and existing space will be adequate to support
such expansion of the Company's operations. The Company's future operating
results will depend substantially on the ability of its officers and key
employees to manage changing business conditions and to implement and improve
its management, operational, financial control and other reporting systems. In
addition, the Company's future operating results depend on its ability to
attract, train and retain qualified consulting, technical, sales, financial,
marketing and management personnel. Failure to hire, train or retain qualified
personnel necessary to keep pace with the Company's development of products and
services could have a material adverse effect on the Company's business,
financial condition and results of operations. Continued expansion will require
the Company's management to: enhance management information and reporting
systems; standardize implementation methodologies of SCC's NDSC; further develop
its infrastructure; and continue to maintain customer satisfaction. If the
Company is unable to respond to and manage changing business conditions, the
quality of the Company's products and services, its ability to retain key
personnel and its business, financial condition and results of operation could
be materially adversely affected. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Management."
HIGHLY COMPETITIVE MARKET; COMPETITION
The market for 9-1-1 OSS solutions is intensely competitive and the Company
expects competition to increase in the future. The Company believes that the
principal competitive factors affecting the market for 9-1-1 OSS services
include flexibility, reliability, manageability, technical features, wireless
support, performance, ease of use, price, scope of product offerings, and
customer service and support. Although the Company believes that its solution
competes favorably with respect to such factors, there can be no assurance that
the Company can maintain its competitive position against current and potential
competitors, especially those with significantly greater financial, marketing,
support service, technical and other competitive resources.
The Company's principal competitors generally fall within one of three
categories: internal development departments of major carriers or consulting
firms that support such departments; relatively smaller companies that offer
applications with limited scope; and larger companies that are either in the
process of entering the Company's market or have the potential to develop
products and services that compete with the Company's service offerings.
A number of companies currently market or have under development software
products and services to provide 9-1-1 administration. The Company competes with
a few smaller companies, including XYPoint Corporation, for the provision of
9-1-1 data management services to wireless carriers, although the Company
expects more significant competition in the future. Mergers or consolidations
among these competitors or acquisitions of these companies by larger competitors
would make them more formidable competitors to the Company. There can be no
assurance that the Company's current and potential competitors will not develop
products and services that may be more effective than the Company's current or
future 9-1-1 solutions or that the Company's technologies and offerings will not
be rendered obsolete by such developments.
Finally, there are a number of companies that market and sell various
products and services to telecommunications carriers, such as billing software
and advanced telecommunications equipment, that have been broadly adopted by the
Company's customers and potential customers. In addition, vendors of
telecommunications software and hardware in the future may enhance their
products to include functionality that is currently provided by the Company's
solutions. The widespread inclusion of the functionality of the Company's
service offerings as standard features of other telecommunications software or
hardware could render the Company's services obsolete and unmarketable,
particularly if the quality of such functionality were comparable to that of the
Company's services. Furthermore, even if the 9-1-1 functionality provided as
standard features by telecommunications software or networking hardware is more
limited than that of the Company's services, there can be no assurance that a
significant number of customers would not elect to accept more limited
functionality in lieu of purchasing additional products or services. For
example, Lucent Technologies offers carriers software systems with functionality
similar to the Company's services. Many of these larger companies have longer
operating histories, greater name recognition, access to larger customer
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<PAGE> 15
bases and significantly greater financial, technical and marketing resources
than the Company. As a result, they may be able to adapt more quickly to new or
emerging technologies and changes in customer requirements, or to devote greater
resources to the promotion and sale of their products and services, than the
Company. If these companies were to introduce products or services that
effectively compete with the Company's service offerings, they could be in a
position to substantially lower the price of their 9-1-1 products and services
or to bundle such products and services with their other product and service
offerings.
For the foregoing reasons, there can be no assurance that the Company will
be able to compete successfully against its current and future competitors.
Increased competition may result in price reductions, reduced gross margins and
loss of market share, any of which could materially and adversely affect the
Company's business, financial condition and results of operations. See
"Business -- Competition."
DEPENDENCE ON KEY PERSONNEL
The Company's future success depends in large part on the continued service
of its key management, sales, product development and operational personnel,
including George Heinrichs, President and Chief Executive Officer, John Sims,
Chief Operating Officer, and Nancy Hamilton, Chief Financial Officer, and on the
Company's ability to continue to attract, motivate and retain highly qualified
employees, including technical, managerial and sales and marketing personnel.
Additionally, the Company expects to continue to expand the number of employees
engaged in sales, marketing and product development. However, competition in the
recruitment of highly qualified personnel in the software and telecommunications
services industry is intense and has become particularly significant in the
Denver metropolitan area. The inability to hire and retain qualified personnel
or the loss of the services of key personnel could have a material adverse
effect upon the Company's current business, development efforts and future
business prospects. If such personnel do not remain active in the Company's
business, the Company's operations could be materially adversely affected. The
Company currently maintains key person life insurance policies only with respect
to Mr. Heinrichs, Mr. Sims and Ms. Hamilton. See "Business -- Employees" and
"Management."
DEPENDENCE ON PROPRIETARY RIGHTS
The Company's success and its ability to compete depends significantly upon
its proprietary rights. The Company relies primarily on a combination of
copyright, trademark and trade secret laws, as well as confidentiality
procedures and contractual restrictions to establish and protect its proprietary
rights. There can be no assurance that such measures will be adequate to protect
the Company's proprietary rights. Further, the Company may be subject to
additional risks as it enters into transactions in foreign countries where
intellectual property laws are not well developed or are difficult to enforce.
Legal protections of the Company's proprietary rights may be ineffective in such
countries. Litigation to defend and enforce the Company's intellectual property
rights could result in substantial costs and diversion of resources, and could
have a material adverse effect on the Company's business, financial condition
and results of operations, regardless of the final outcome of such litigation.
Despite the Company's efforts to safeguard and maintain its proprietary rights,
there can be no assurance that the Company will be successful in doing so or
that the steps taken by the Company in this regard will be adequate to deter
misappropriation or independent third-party development of the Company's
technology, or to prevent an unauthorized third party from copying or otherwise
obtaining and using the Company's technology. There also can be no assurance
that others will not independently develop similar technologies or duplicate any
technology developed by the Company. Any such events could have a material
adverse effect on the Company's business, financial condition and results of
operations.
As the number of entrants to the Company's markets increases and the
functionality of the Company's services and products increases and overlaps with
the products and services of other companies, the Company may become subject to
claims of infringement or misappropriation of the intellectual property rights
of others. In certain of its customer agreements, the Company agrees to
indemnify its customers for any expenses or liabilities resulting from claimed
infringements of patents, trademarks or copyrights of third parties. In certain
limited instances, the amount of such indemnities may be greater than the
revenue the Company may have received from the customer. There can be no
assurance that third parties will not assert infringement or misappropriation
claims against the Company in the future with respect to current or future
product or service
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offerings. Any claims or litigation, with or without merit, could be time
consuming, result in costly litigation or require the Company to enter into
royalty or licensing arrangements. Such royalty or licensing arrangements, if
required, may not be available on terms acceptable to the Company, if at all,
and could have a material adverse effect on the Company's business, financial
condition and results of operations.
RISKS ASSOCIATED WITH INTERNATIONAL SALES
Although substantially all of the Company's revenue is generated from sales
to customers in the United States, the Company has generated revenue in Canada
and intends to enter additional international markets, which will require
significant management attention and financial resources. International sales
are subject to a variety of risks, including difficulties in establishing and
managing international distribution channels, and in translating products and
related materials into foreign languages. International operations are also
subject to difficulties in collecting accounts receivable, staffing, managing
personnel and enforcing intellectual property rights. Other factors that can
adversely affect international operations include fluctuations in the value of
foreign currencies and currency exchange rates, changes in import/export duties
and quotas, introduction of tariff or non-tariff barriers and economic or
political changes in international markets. There can be no assurance that these
factors will not have a material adverse effect on the Company's future
international sales and, consequently, on the Company's business, financial
condition and results of operations. Furthermore, any inability to obtain
foreign regulatory approvals on a timely basis could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview" and "Business -- Strategy."
RISKS RELATING TO POTENTIAL ACQUISITIONS
Although the Company has no present commitments or agreements with respect
to acquisitions, the Company may pursue, from time to time, the acquisition of
other companies, assets, products and technologies. Acquisitions involve a
number of operating risks that could materially adversely affect the Company's
business, financial condition and results of operations, including the diversion
of management's attention to assimilate the operations, products and personnel
of the acquired companies, the amortization of acquired intangible assets, and
the potential loss of key employees of the acquired companies. Furthermore,
acquisitions may involve businesses in which the Company lacks experience.
Because management has limited experience in acquisitions and the Company has no
experience in integrating acquired companies or technologies into its
operations, there can be no assurance that the Company will be able to manage
one or more acquisitions successfully, or that the Company will be able to
integrate the operations, products or personnel gained through any such
acquisitions without a material adverse effect on the Company's business,
financial condition and results of operations. See "Use of Proceeds."
YEAR 2000 CAPABILITY
Many currently installed computer and software products are coded to accept
only two digit entries in the date code field. These date code fields will need
to accept four digit entries to distinguish twenty-first century dates from
twentieth century dates. As a result, in less than two years, computer systems
and/or software used by many companies may need to be upgraded to comply with
such "Year 2000" requirements. Significant uncertainty exists in the software
industry concerning the potential effects associated with such compliance.
The Company believes that the purchasing patterns of customers and
potential customers may be significantly affected by Year 2000 issues. Many
companies are expending significant resources to correct or patch their current
software systems for Year 2000 compliance. These expenditures may result in
reduced funds available to purchase services such as those offered by the
Company. Additionally, Year 2000 issues could cause a significant number of
companies, including current customers of the Company, to re-evaluate their
current system needs, and as a result, consider switching to other systems or
suppliers. This could have a material adverse effect on the Company's business,
financial condition and results of operations.
Certain of the Company's current contracts with its customers require that
the Company warrant Year 2000 capability by a certain date. Any failure to
achieve Year 2000 compliance by such date could have a
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<PAGE> 17
material adverse effect on the Company's business, financial condition and
results of operations. Although the Company is designing its services and
products to be Year 2000 capable and tests third-party software that is
incorporated with the Company's services and products, there can be no assurance
that the Company's services and products, particularly when such products and
services incorporate third-party software, will contain all necessary date code
changes in time. The Company does not expect to incur substantial costs in
making its services and products Year 2000 compliant, but any unanticipated
expenses could have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company utilizes off-the-shelf and custom software developed internally
and by third parties. To the extent that such software and systems do not comply
with Year 2000 requirements, there can be no assurance that potential systems
interruptions or the cost necessary to update such software will not have a
material adverse effect on the Company's business, financial condition and
results of operations.
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE; DILUTION
Prior to this offering there has been no public market for the Company's
Common Stock, and there can be no assurance that an active public market for the
Company's Common Stock will develop or be sustained after the offering. The
initial offering price will be determined by negotiation among the Company and
the Underwriters based upon several factors. See "Underwriting" for a discussion
of the method of determining the initial public offering price. The trading
price of the Company's Common Stock could be subject to wide fluctuations in
response to variations in operating results, announcements of technological
innovations or new products by the Company or its competitors, changes in
financial estimates by securities analysts, and other events or factors. In
addition, the stock market has experienced volatility that has particularly
affected the market prices of equity securities of many high technology
companies and that often has been unrelated to the operating performance of such
companies. These broad market fluctuations may materially adversely affect the
market price of the Company's Common Stock. In addition, investors participating
in this offering will incur immediate, substantial dilution. To the extent
outstanding options and warrants to purchase the Company's Common Stock are
exercised, there will be further dilution. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sales of a substantial number of shares of Common Stock in the public
market following this offering could adversely affect the market price for the
Company's Common Stock. The number of shares of Common Stock available for sale
in the public market is limited by restrictions under the Securities Act of
1933, as amended (the "Securities Act"), and lock-up agreements under which the
holders of such shares have agreed not to sell or otherwise dispose of any of
their shares for a period of 180 days after the date of this Prospectus without
the prior written consent of the BancAmerica Robertson Stephens. However,
BancAmerica Robertson Stephens, in its sole discretion and at any time without
notice, may release all or any portion of the securities subject to lock-up
agreements. When determining whether or not to release shares from the lock-up
agreements, BancAmerica Robertson Stephens may consider, among other factors,
the holder's reasons for requesting the release, the number of shares for which
the release is being requested and market conditions at the time. As a result of
these restrictions, based on shares outstanding and options granted as of April
9, 1998, assuming no options are exercised between April 9, 1998 and the date of
this Prospectus, the following shares of Common Stock will be eligible for
future sale: on the date of this Prospectus, 3,361,469 shares (including the
3,300,000 shares offered hereby) will be eligible for sale; an additional
6,774,435 shares will be eligible for sale 180 days after the date of this
Prospectus. In addition, the Company intends to register on a registration
statement on Form S-8, approximately 90 days following the effective date of
this offering, a total of 1,901,055 shares of Common Stock subject to
outstanding options or reserved for issuance under the 1998 Stock Incentive
Plan. Upon expiration of the lock-up agreements referred to above, holders of
approximately 6,383,723 shares of Common Stock will be entitled to certain
registration rights with respect to such shares. If such holders, by exercising
their registration rights, cause a large number of shares to be registered and
sold in the public market, such sales could have a material adverse effect on
the market price for the Company's Common Stock. See "Shares Eligible for Future
Sale."
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CONTROL BY EXISTING STOCKHOLDERS; EFFECTS OF CERTAIN ANTI-TAKEOVER PROVISIONS
Following the completion of this offering, members of the Board of
Directors and the executive officers of the Company, together with members of
their families and entities that may be deemed affiliates of or related to such
persons or entities, will beneficially own approximately 52.7% of the
outstanding shares of Common Stock of the Company. Accordingly, these
stockholders will be able to elect all members of the Company's Board of
Directors and determine the outcome of corporate actions requiring stockholder
approval, such as mergers and acquisitions. This level of ownership by such
persons and entities may have a significant effect in delaying, deferring or
preventing a change in control of the Company and may adversely affect the
voting and other rights of other holders of Common Stock. Certain provisions of
the Company's Amended and Restated Certificate of Incorporation, Amended and
Restated Bylaws, Delaware law and equity incentive plans also may discourage
certain transactions involving a change in control of the Company. This level of
ownership by such persons and entities, when combined with the ability of the
Board of Directors to issue "blank check" preferred stock without further
stockholder approval, may have the effect of delaying, deferring or preventing a
change in control of the Company. See "Management -- Directors and Executive
Officers," "Certain Transactions," "Principal and Selling Stockholders" and
"Description of Capital Stock."
MANAGEMENT'S DISCRETION OVER PROCEEDS OF THE OFFERING
The primary purposes of this offering are to create a public market for the
Common Stock, to facilitate future access by the Company to public equity
markets and to obtain additional equity capital. As of the date of this
Prospectus, the Company has no specific plans as to the use of the net proceeds
from this offering, other than to pay $4,610,000 of outstanding bank
indebtedness and a related prepayment premium; accordingly, the Company's
management will have broad discretion as to the application of such net
proceeds. Pending any such uses, the Company plans to invest the net proceeds in
short-term, investment grade, interest-bearing securities. See "Use of
Proceeds."
NO DIVIDENDS
The Company has not paid any cash or other dividends on its Common Stock,
nor does it expect to pay dividends in the foreseeable future. See "Dividend
Policy."
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USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,100,000 shares of
Common Stock offered by the Company hereby, assuming an initial public offering
price of $14.00 and after deducting estimated expenses payable in connection
with this offering and estimated underwriting discounts and commissions, are
estimated to be approximately $26,542,000 ($30,643,000 if the Underwriters'
over-allotment option is exercised in full). The Company will not receive any
proceeds from the sale of Common Stock by the Selling Stockholders. The
principal purposes of this offering are to create a public market for the
Company's Common Stock, to facilitate future access by the Company to public
equity markets and to increase the Company's equity capital.
The Company intends to use a portion of the proceeds to prepay $4.0 million
of outstanding indebtedness and to pay a prepayment premium of $160,000,
pursuant to the Company's loan agreement with a bank. Such indebtedness
currently bears interest at the rate of 11% per annum and requires principal
payments of $250,000 beginning on March 31, 2001 and each subsequent quarter end
through December 31, 2002. Thereafter, principal payments of $500,000 are due on
March 31, 2003 and each subsequent quarter end, with the final payment becoming
due on November 30, 2003. Additionally, the Company intends to use a portion of
the proceeds to repay $450,000 outstanding under its line of credit. Borrowings
under the line of credit bear interest at prime rate plus 1% (9.5% at March 31,
1998) and are due on April 15, 1998. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
The Company expects to use the balance of the net proceeds for product
development and general corporate purposes, including working capital. A portion
of the net proceeds also may be used for the acquisition of businesses, products
and technologies that are complementary to those of the Company. No material
transactions of this nature are currently planned or being negotiated as of the
date of this Prospectus. Pending such uses, the Company intends to invest the
net proceeds from this offering in short-term, investment-grade,
interest-bearing securities.
DIVIDEND POLICY
The Company has never declared or paid dividends on its capital stock and
does not anticipate paying cash dividends within the foreseeable future. Certain
covenants contained in the Company's line of credit agreement and a loan
agreement restrict the payment of any dividends without the lender's prior
consent. Payments of future dividends, if any, will be at the discretion of the
Company's Board of Directors, subject to the restrictions discussed above, after
taking into account various factors, including the Company's financial
condition, operating results, cash needs and expansion plans. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
17
<PAGE> 20
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1997: (i) on an actual basis; (ii) on a pro forma basis giving
effect to the conversion of all outstanding shares of Convertible Preferred
Stock and the exercise of an outstanding warrant to purchase shares of Common
Stock, all upon the closing of this offering; and (iii) on a pro forma basis, as
further adjusted to reflect the receipt of the estimated net proceeds from the
sale of 2,100,000 shares of Common Stock offered by the Company hereby at an
assumed initial public offering price of $14.00 and the application of the net
proceeds therefrom as described under "Use of Proceeds." This table should be
read in conjunction with the Financial Statements and Notes thereto appearing
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt............................................ $ 6,891 $ 6,891 $ 4,321
======== ======== ========
Mandatorily redeemable, convertible preferred stock
(Series A, B, C, D, E and F), $.001 par value; 6,188,575
shares authorized; 6,188,575 shares issued and
outstanding, actual; none issued or outstanding, pro
forma or pro forma as adjusted.......................... 14,589 -- --
Putable common stock warrant.............................. 1,472 -- --
Stockholders' equity (deficit):
Preferred stock, $.001 par value; 15,000,000 shares
authorized; none issued or outstanding............... -- -- --
Common stock, $.001 par value; 30,000,000 shares
authorized; 1,958,031 shares outstanding, actual;
8,341,754 shares outstanding, pro forma; 10,441,754
shares outstanding, pro forma as adjusted(1)......... 2 8 10
Additional paid-in capital.............................. 452 16,507 43,047
Treasury stock, 36,250 shares, at cost.................. (3) (3) (3)
Stock subscriptions receivable.......................... (99) (99) (99)
Accumulated deficit..................................... (14,719) (14,719) (16,309)
-------- -------- --------
Total stockholders' equity (deficit)............ (14,367) 1,694 26,646
-------- -------- --------
Total capitalization............................ $ (7,476) $ 8,585 $ 30,967
======== ======== ========
</TABLE>
- ------------
(1) Excludes 1,106,610 shares of Common Stock issuable upon exercise of stock
options outstanding as of December 31, 1997 at a weighted average exercise
price of $3.03 per share, and 128,085 shares of Common Stock reserved for
grant of future options as of December 31, 1997, under the 1990 Stock Option
Plan. From January 1, 1998 to April 9, 1998, the Company issued 253 shares
of Common Stock upon the exercise of outstanding options and granted options
to purchase 14,498 shares of Common Stock pursuant to the 1990 Stock Option
Plan. In addition, the number of shares reserved for issuance under the 1990
Stock Option Plan was increased by 166,667 shares effective April 7, 1998.
On the effective date of the Registration Statement of which this Prospectus
is a part, an additional 500,000 share reserve will be created under the
Company's 1998 Stock Incentive Plan. See "Management -- Benefit
Plans -- 1998 Stock Incentive Plan."
18
<PAGE> 21
DILUTION
The pro forma net tangible book value of the Company at December 31, 1997
was approximately $1,263,000, or $0.15 per share. Pro forma net tangible book
value per share represents the total amount of the Company's tangible assets
less total liabilities, divided by the number of shares of Common Stock
outstanding after giving effect to the conversion of all outstanding Convertible
Preferred Stock and the exercise of an outstanding warrant. After giving effect
to the sale of 2,100,000 shares of Common Stock offered hereby by the Company at
an assumed initial public offering price of $14.00 per share and after deducting
estimated offering expenses payable by the Company and estimated underwriting
discounts and commissions, the Company's pro forma net tangible book value at
December 31, 1997, would have been $27,805,000, or $2.66 per share. This
represents an immediate dilution of $11.34 per share to new investors purchasing
shares of Common Stock in this offering. The following table illustrates this
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $ 14.00
Pro forma net tangible book value per share as of December
31, 1997............................................... $ 0.15
Increase per share attributable to new investors.......... 2.51
--------
Pro forma net tangible book value per share after the
offering.................................................. 2.66
--------
Net tangible book value dilution per share to new
investors................................................. $ 11.34
========
</TABLE>
The following table summarizes, on a pro forma basis as of December 31,
1997, the number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the average price per share paid by
existing stockholders and to be paid by new investors at an assumed initial
public offering price of $14.00 per share (before deducting estimated
underwriting discounts and commissions and other expenses of this offering):
<TABLE>
<CAPTION>
SHARES PURCHASED(1) TOTAL CONSIDERATION
--------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1).... 8,341,754 79.9% $12,931,000 30.5% $ 1.55
New investors(1)............ 2,100,000 20.1 29,400,000 69.5 $14.00
---------- ----- ----------- -----
Total............. 10,441,754 100.0% $42,331,000 100.0%
========== ===== =========== =====
</TABLE>
- ------------
(1) Sales by the Selling Stockholders in this offering will reduce the number of
shares held by the existing stockholders to 7,141,754 or approximately 68.4%
of the total number of shares of Common Stock outstanding after this
offering, and will increase the number of shares to be purchased by new
investors to 3,300,000 or approximately 31.6% of the total number of shares
of Common Stock outstanding after the offering. See "Principal and Selling
Stockholders."
The foregoing tables assume no exercise of outstanding options. As of
December 31, 1997, there were outstanding stock options to purchase an aggregate
of 1,106,610 additional shares of Common Stock at a weighted average exercise
price of $3.03 per share. To the extent that these options are exercised, there
will be further dilution to new investors. See "Management -- Benefit
Plans -- 1998 Stock Incentive Plan" and Note 5 of Notes to Financial Statements.
19
<PAGE> 22
SELECTED FINANCIAL DATA
The following selected financial data are qualified by reference to and
should be read in conjunction with the Company's Financial Statements and Notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus. The statement of
operations data for the years ended December 31, 1995, 1996 and 1997 and the
balance sheet data at December 31, 1996 and 1997 are derived from, and are
qualified by reference to, the audited Financial Statements and Notes included
elsewhere in this Prospectus. The statement of operations data for the years
ended December 31, 1994 and 1993 and the balance sheet data at December 31,
1993, 1994 and 1995 are derived from audited financial statements not included
in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1993 1994 1995 1996 1997
------ ------- ------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Data management services......................... $ -- $ 170 $ 3,531 $13,165 $24,005
Licenses and implementation services............. 4,799 1,830 3,882 1,637 3,067
------ ------- ------- ------- -------
Total revenue............................. 4,799 2,000 7,413 14,802 27,072
Costs and expenses:
Cost of data management services................. -- 1,137 2,840 7,996 15,378
Cost of licenses and implementation services..... 2,148 789 1,041 596 1,283
Sales and marketing.............................. 1,080 1,262 2,016 3,204 3,850
General and administrative....................... 439 227 830 1,533 3,227
------ ------- ------- ------- -------
Total costs and expenses.................. 3,667 3,415 6,727 13,329 23,738
------ ------- ------- ------- -------
Income (loss) from operations...................... 1,132 (1,415) 686 1,473 3,334
Other expenses, net................................ 8 10 368 527 879
------ ------- ------- ------- -------
Income (loss) from continuing operations before
income taxes..................................... 1,124 (1,425) 318 946 2,455
Provision for income taxes......................... 298 53 16 9 172
------ ------- ------- ------- -------
Net income (loss) from continuing operations....... 826 (1,478) 302 937 2,283
Income (loss) from operations of discontinued
division, net of tax............................. 103 (1,956) (1,746) (562) (876)
Loss from disposal of discontinued division, net of
tax.............................................. -- -- -- -- (2,032)
------ ------- ------- ------- -------
Net income (loss).................................. $ 929 $(3,434) $(1,444) $ 375 $ (625)
====== ======= ======= ======= =======
PER SHARE DATA(1):
Net income (loss) from continuing operations per
share:
Basic............................................ $ 0.68 $ (1.36) $ (0.02) $ 0.15 $ 0.83
====== ======= ======= ======= =======
Diluted.......................................... $ 0.15 $ (1.36) $ (0.02) $ 0.11 $ 0.26
====== ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents....................... $ 1,139 $ 721 $ 1,004 $ 32 $ 2,503
Working capital (deficit)....................... (3,729) (7,468) (8,135) (7,345) (3,970)
Total assets.................................... 6,150 6,422 11,755 18,482 18,606
Long-term debt.................................. 230 494 1,934 3,318 6,891
Total stockholders' deficit(2).................. (2,547) (5,845) (4,614) (13,068) (14,367)
</TABLE>
- ------------
(1) See Note 2 of Notes to Financial Statements for an explanation of the
determination of the shares used in computing net income (loss) per share.
(2) The Company has never declared or paid dividends on any of its capital
stock.
20
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors" and elsewhere in this Prospectus.
The following discussion should be read in conjunction with the Financial
Statements and Notes thereto included elsewhere in this Prospectus.
OVERVIEW
SCC is the leading provider of 9-1-1 OSS services to ILECs, CLECs and
wireless carriers in the United States. The Company manages the data that enable
a 9-1-1 call to be routed to the appropriate public safety agency with accurate
and timely information about the caller's identification and location. The
Company was incorporated in July 1979 in the State of Colorado under the name
Systems Concepts of Colorado, Inc. and was reincorporated in September 1993 in
the State of Delaware under the name SCC Communications Corp. Prior to 1995,
substantially all of the Company's revenue was derived from the sale of software
licenses and related implementation services to ILECs and public safety
agencies. During 1994, the Company began investing in infrastructure to provide
its 9-1-1 OSS solution to telephone operating companies seeking to outsource
such operations. The Company signed its first 9-1-1 data management services
contract in December 1994 and added to the number of records under management
during 1995, 1996 and 1997. The Company began to recognize revenue from wireless
carriers in the third quarter of 1997, and a growing percentage of the Company's
revenue has been derived from the management of 9-1-1 data records for wireless
carriers.
SCC's data management services revenue is derived from contracts with
ILECs, CLECs and wireless carriers pursuant to which the Company provides an
outsourcing solution for its customers' 9-1-1 data management. Revenue included
in data management services generally includes a non-recurring initial fee for
the design and implementation of the 9-1-1 OSS, conversion of the customer's
data to the Company's systems, hiring and training of personnel, and other costs
required to prepare for the processing of customer data. Non-recurring fees are
recognized on the percentage-of-completion method over the period required to
perform the tasks necessary to prepare for the processing of customer data. The
Company also generally receives a monthly service fee based on the number of
subscriber records under management, which is recognized in the period in which
the services are rendered. Data management services revenue also may include
revenue from enhanced products and services, which are recognized in the period
to which the services are performed. Related costs are expensed as they are
incurred. Data management services revenue comprised 48%, 89% and 89% of the
Company's total revenue in the years ended December 31, 1995, 1996 and 1997,
respectively.
SCC's licenses and implementation services revenue is derived from
contracts with ILECs pursuant to which the Company provides a 9-1-1 software
license or related products and services such as implementation, training,
software enhancements and interfaces to its customers' systems. Licenses and
implementation services revenue is recognized using the percentage-of-completion
method. The related costs include third-party licenses, direct labor and related
expenses, and are expensed as incurred. Subsequent to system installation, the
Company provides its customers with maintenance services that are recognized
ratably over the related contract period on a straight-line basis. The Company's
licenses and implementation services revenue is derived from a limited number of
customers and consequently the concentration of customers can result in
quarterly fluctuations based on the timing of the signing of new contracts and
completion of existing contracts. Margins on such contracts also may fluctuate
based on the elements included in the contract. Licenses and implementation
services revenue comprised 52%, 11% and 11% of the Company's total revenue in
the years ended December 31, 1995, 1996 and 1997, respectively.
During the year ended December 31, 1996, the Company recognized
approximately 82% of total revenue from continuing operations from two
customers, each of which accounted for greater than 10% of the Company's total
revenue in such periods. During the year ended December 31, 1997, the Company
recognized
21
<PAGE> 24
approximately 81% of total revenue from three customers, each of which accounted
for greater than 10% of the Company's total revenue in such periods. See "Risk
Factors -- Reliance on Significant Customers."
As of December 31, 1997, the Company had net operating loss carryforwards
of $9.6 million available to offset future net income for U.S. federal income
tax purposes. Thus, the Company's income tax provision for past fiscal years
consisted of alternative minimum taxes, state income taxes in states where the
Company has not had net operating loss carryforwards to offset net income, and
foreign taxes. There is no assurance that the Company's existing net operating
loss carryforwards will not be restricted in the future due to transactions
entered into by the Company or changes in tax legislation.
In June 1997, the Company sold the net assets of its Premise Products
Division. The sale of the Company's Premise Products Division resulted in a net
loss from the sale of $2.0 million. Net losses from operations of this division
totaled $1.7 million, $562,000 and $876,000 in 1995, 1996 and 1997,
respectively, and are presented in the Company's financial statements as loss
from operations of discontinued division.
Historically, substantially all of the Company's revenue has been generated
from sales to customers in the United States. However, the Company has generated
revenue in Canada and intends to enter additional international markets, which
may require significant management attention and financial resources.
International sales are subject to a variety of risks. See "Risk
Factors -- Risks Associated with International Sales."
The Company's quarterly and annual operating results have varied
significantly in the past. The variation in operating results will likely
continue and may intensify. Although the Company was profitable in seven of its
last eight quarters, there can be no assurance that the Company's profitability
will continue in the future or that the Company's levels of profitability will
not vary significantly between quarters. Accordingly, the Company believes that
period to period comparisons of results of operations are not necessarily
meaningful and should not be relied upon as indications of future performance.
The Company's operating results may fluctuate as a result of many factors,
including the length of the sales cycles for new or existing customers, the
size, timing or duration of significant customer contracts, fluctuations in
number of subscriber records under management, timing or duration of service
offerings, ability of the company to hire, train and retain qualified personnel,
increased competition, changes in operating expenses, changes in Company
strategy, the financial performance of the Company's customers, changes in
telecommunications legislation and regulations that may affect the competitive
environment for the Company's services, and general economic factors. The
Company's contracts for 9-1-1 OSS services generally include a non-recurring
initial charge, and therefore, the Company may recognize significantly increased
revenue for a short period of time upon commencing services for a new customer.
The Company's expense levels are based in significant part on its
expectations regarding future revenue. The Company's revenue is difficult to
forecast because the market for the Company's 9-1-1 OSS services is rapidly
evolving. In addition, the Company's sales cycle and the size and timing of
significant customer contracts, license fees and non-recurring initial fees vary
substantially among customers depending on the level of service provided.
Accordingly, the Company may be unable to adjust spending in a timely manner to
compensate for any unexpected shortfall in revenue. Any significant shortfall
could therefore have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, the Company hired
additional employees in 1996 and 1997, and expects to continue hiring additional
employees during 1998. The Company expects that this increase will affect the
Company's operating margins for the short term. There can be no assurance that
the Company can continue to report operating profits, and failure to do so is
likely to have a material adverse effect on the Company's financial results. See
"Risk Factors -- Significant Fluctuations in Quarterly Results of Operations"
and "-- Management of Change."
22
<PAGE> 25
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data of the
Company expressed as a percentage of total revenue for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Data management services.................................. 47.6% 88.9% 88.7%
Licenses and implementation services...................... 52.4 11.1 11.3
----- ----- -----
Total revenue..................................... 100.0 100.0 100.0
Costs and expenses:
Cost of data management services.......................... 38.3 54.0 56.8
Cost of licenses and implementation services.............. 14.0 4.0 4.7
Sales and marketing....................................... 27.2 21.6 14.2
General and administrative................................ 11.2 10.4 11.9
----- ----- -----
Total costs and expenses.......................... 90.7 90.0 87.6
----- ----- -----
Income from operations...................................... 9.3 10.0 12.4
Other expenses, net......................................... 5.0 3.6 3.2
----- ----- -----
Net income from continuing operations before income taxes... 4.3 6.4 9.2
Provision for income taxes.................................. 0.2 -- 0.6
----- ----- -----
Net income from continuing operations....................... 4.1 6.4 8.6
Loss from operations of discontinued division, net of tax... (23.6) (3.8) (3.2)
Loss from disposal of discontinued division, net of tax..... -- -- (7.5)
----- ----- -----
Net income (loss)........................................... (19.5)% 2.6% (2.1)%
===== ===== =====
Cost of data management services as a percent of data
management services revenue............................... 80.4% 60.7% 64.1%
===== ===== =====
Cost of licenses and implementation services as a percent of
licenses and implementation services revenue.............. 26.8% 36.4% 41.8%
===== ===== =====
</TABLE>
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Revenue
Total Revenue. Total revenue increased 83%, from $14.8 million in 1996 to
$27.1 million in 1997.
Data Management Services Revenue. Revenue from data management services
increased 82%, from $13.2 million in 1996 to $24.0 million in 1997, representing
approximately 89% of total revenue in both years. This increase resulted from an
increase in non-recurring and monthly fees from existing customers, increased
sales of new services to existing customers, and the realization of
non-recurring and monthly fees from both wireline and wireless customers.
Licenses and Implementation Services Revenue. Revenue from licenses and
implementation services increased 87%, from $1.6 million in 1996 to $3.1 million
in 1997. The increase resulted from the addition of a new contract in 1997.
Costs and Expenses
Cost of Data Management Services. Cost of data management services consists
primarily of labor and networking costs to maintain the related systems. Cost of
data management services increased 92%, from $8.0 million in 1996 to $15.4
million in 1997, representing 54% and 57%, respectively, of total revenue and
61% and 64%, respectively, of data management services revenue. The increase as
a percentage of total
23
<PAGE> 26
revenue and data management services revenue resulted from the addition of
employees and other resources in early 1997 in anticipation of wireless
contracts, although the Company did not begin recognizing revenue from such
contracts until the third quarter of 1997.
Cost of Licenses and Implementation Services. Cost of licenses and
implementation services consists primarily of labor and related expenses. Costs
of licenses and implementation services increased 115%, from $596,000 in 1996 to
$1.3 million in 1997, representing 4% and 5%, respectively, of total revenue and
36% and 42%, respectively, of licenses and implementation services revenue. The
increase as a percentage of associated revenue was due to the inclusion of
higher cost elements, including third-party software, in contracts performed in
1997.
Sales and Marketing. Sales and marketing expenses consist primarily of
expenses related to salaries and commissions, travel, trade shows and sales
collateral. Sales and marketing expenses increased 20%, from $3.2 million in
1996 to $3.9 million in 1997, representing 22% and 14%, respectively, of total
revenue. The increase in dollar amount was primarily due to increases in
salaries, recruiting, relocation and travel costs caused by an increase in the
sales force and increased marketing activities in 1997. The remaining increase
was due to the reassignment of marketing resources and related expenses to the
Company's continuing operations.
General and Administrative. General and administrative expenses consist
primarily of expenses related to the Company's information systems, finance,
human resources, legal, executive and financial planning departments. General
and administrative expense increased 111%, from $1.5 million in 1996 to $3.2
million in 1997, representing 10% and 12%, respectively, of total revenue.
Approximately $1.0 million of the increase is related to the reassignment of
certain continuing resources, infrastructure and related general and
administrative expenses applicable to the Company's continuing operations. The
remaining dollar and percentage increases resulted primarily from increased
costs necessary to develop and maintain the internal and customer support
information systems, increased depreciation expense in 1997, increased executive
bonuses paid and accrued in 1997, and expansion of the Company's facilities to
accommodate the Company's growth.
Other Expenses, Net. Net other expenses consist primarily of interest
expense from the Company's borrowings and leases for capital equipment, offset
by interest income earned on the Company's cash balances. Other expenses
increased 67%, from $527,000 in 1996 to $879,000 in 1997, representing 4% and 3%
of total revenue in 1996 and 1997, respectively. The increase in dollar amount
resulted from an increase in interest expense caused by an increase in capital
leases, a higher average balance outstanding on the Company's line of credit in
1997, and interest expense related to a $4.0 million borrowing in November 1997.
This increase was partially offset by an increase in interest income recognized,
as the Company's average cash balance increased in 1997.
Provision for Income Taxes. The Company's income tax provision increased
from $9,000 in 1996 to $172,000 in 1997. This increase was due to a foreign
income tax refund received in 1996. In addition, the Company's state income tax
provision increased in 1997, as the Company generated more income in states in
which the Company did not have net operating loss carryforwards available to
offset net income.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Revenue
Total Revenue. Total revenue increased 100%, from $7.4 million in 1995 to
$14.8 million in 1996.
Data Management Services Revenue. Revenue from data management services
increased 273%, from $3.5 million in 1995 to $13.2 million in 1996, representing
48% and 89%, respectively, of total revenue. The increase in dollar amount
resulted from increased revenue from non-recurring and monthly fees in 1996 from
both existing and new wireline customers.
License and Implementation Services Revenue. Revenue from licenses and
implementation services decreased 58%, from $3.9 million in 1995 to $1.6 million
in 1996, representing 52% and 11%, respectively, of
24
<PAGE> 27
total revenue. The decrease resulted from the implementation of a large project
in 1995 without a comparable amount of new business in 1996.
Costs and Expenses
Cost of Data Management Services. Cost of data management services
increased 182%, from $2.8 million in 1995 to $8.0 million in 1996, representing
38% and 54%, respectively, of total revenue and 80% and 61%, respectively, of
data management services revenue. Cost of data management services was greater
as a percentage of the related revenue in 1995 because the Company was building
the infrastructure for its data management services business, including hiring
and training employees, building the network infrastructure, preparing
facilities and converting data to the Company's systems. Cost of data management
services was higher as a percentage of total revenue in 1996 due to the
increased percentage of data management services revenue.
Cost of Licenses and Implementation Services. Cost of licenses and
implementation services decreased 43%, from $1.0 million in 1995 to $596,000 in
1996, representing 14% and 4%, respectively, of total revenue and 27% and 36%,
respectively, of licenses and implementation services revenue. The increase as a
percentage of associated revenue was due to the inclusion of higher cost
elements, including third-party software, on contracts in 1996.
Sales and Marketing. Sales and marketing expense increased 59%, from $2.0
million in 1995 to $3.2 million in 1996, representing 27% and 22%, respectively,
of total revenue. The increase in dollar amount was primarily due to increased
salary, travel and related facilities costs caused by an increase in the sales
force, increased sales commissions and bonuses due to increased revenue, and
increased costs for trade shows. The remaining increase was due to an increase
in certain marketing expenses from the growth of continuing operations of the
Company.
General and Administrative. General and administrative expense increased
85%, from $830,000 in 1995 to $1.5 million in 1996, representing 11% and 10%,
respectively, of total revenue. This increase in dollar amount was primarily due
to salaries, travel and other costs related to the hiring of management and
other personnel in anticipation of growth in 1996. The increase was partially
offset by decreased relocation, bad debt and consulting expenses.
Other Expenses, Net. Net other expenses increased 43%, from $368,000 in
1995 to $527,000 in 1996, representing 5% and 4%, respectively, of total
revenue. The increase in dollar amount was due to an increase in interest
expense primarily related to additional capital leases for equipment required to
operate the Company's data management services business. This increase was
partially offset by a decrease in interest expense caused by the conversion to
equity and repayment of certain notes payable in 1996.
Provision for Income Taxes. The income tax provision decreased 44%, from
$16,000 in 1995 to $9,000 in 1996. This decrease was primarily due to a foreign
income tax refund received in 1996, offset by additional income generated in
1996 in states in which the Company did not have net operating loss
carryforwards available to offset net income.
25
<PAGE> 28
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth quarterly results of operations data in
dollars and as a percentage of total revenue for each of the eight quarters in
the period ended December 31, 1997. This quarterly information is unaudited, has
been prepared on the same basis as the annual financial statements and, in the
opinion of the Company's management, reflects all normal recurring adjustments
necessary for a fair presentation of the information for the periods presented,
when read in conjunction with the Company's Financial Statements and Notes
thereto appearing elsewhere in this Prospectus. Operating results for any
quarter are not necessarily indicative of results for any future period. See
"Risk Factors -- Significant Fluctuations in Quarterly Operating Results of
Operations."
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEP. 30, DEC. 31, MAR. 31, JUNE 30, SEP. 30, DEC. 31,
1996 1996 1996 1996 1997 1997 1997 1997
-------- -------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Data management services................ $2,253 $3,241 $3,573 $4,098 $4,861 $ 5,241 $6,394 $7,509
Licenses and implementation services.... 567 596 238 236 271 536 834 1,426
------ ------ ------ ------ ------ ------- ------ ------
Total revenue..................... 2,820 3,837 3,811 4,334 5,132 5,777 7,228 8,935
Costs and expenses:
Cost of data management services........ 1,435 1,732 2,236 2,593 3,123 3,434 4,174 4,647
Cost of licenses and implementation
services.............................. 258 207 120 11 98 254 457 474
Sales and marketing..................... 539 949 752 964 933 1,067 901 949
General and administrative.............. 309 370 419 435 485 525 930 1,287
------ ------ ------ ------ ------ ------- ------ ------
Total costs and expenses.......... 2,541 3,258 3,527 4,003 4,639 5,280 6,462 7,357
------ ------ ------ ------ ------ ------- ------ ------
Income from operations.................... 279 579 284 331 493 497 766 1,578
Other expenses, net....................... 102 112 150 163 150 208 193 328
------ ------ ------ ------ ------ ------- ------ ------
Income from continuing operations before
income taxes............................ 177 467 134 168 343 289 573 1,250
Provision for income taxes................ 12 34 (53) 16 24 20 40 88
------ ------ ------ ------ ------ ------- ------ ------
Net income from continuing operations..... 165 433 187 152 319 269 533 1,162
Loss from operations of discontinued
division, net of tax.................... (30) (366) (39) (127) (253) (623) -- --
Loss from disposal of discontinued
division, net of tax.................... -- -- -- -- -- (2,032) -- --
------ ------ ------ ------ ------ ------- ------ ------
Net income (loss)......................... $ 135 $ 67 $ 148 $ 25 $ 66 $(2,386) $ 533 $1,162
====== ====== ====== ====== ====== ======= ====== ======
AS A PERCENTAGE OF TOTAL REVENUE:
REVENUE:
Data management services................ 79.9% 84.5% 93.8% 94.6% 94.7% 90.7% 88.5% 84.0%
License and implementation services..... 20.1 15.5 6.2 5.4 5.3 9.3 11.5 16.0
------ ------ ------ ------ ------ ------- ------ ------
Total revenue..................... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Costs and expenses:
Cost of data management services........ 50.9 45.1 58.7 59.8 60.9 59.4 57.7 52.0
Cost of licenses and implementation
services.............................. 9.1 5.4 3.1 0.3 1.9 4.4 6.3 5.3
Sales and marketing..................... 19.1 24.7 19.7 22.2 18.2 18.5 12.5 10.6
General and administrative.............. 11.0 9.7 11.0 10.0 9.4 9.1 12.9 14.4
------ ------ ------ ------ ------ ------- ------ ------
Total costs and expenses.......... 90.1 84.9 92.5 92.3 90.4 91.4 89.4 82.3
------ ------ ------ ------ ------ ------- ------ ------
Income from operations.................... 9.9 15.1 7.5 7.7 9.6 8.6 10.6 17.7
Other expenses, net....................... 3.6 2.9 3.9 3.8 2.9 3.6 2.7 3.7
------ ------ ------ ------ ------ ------- ------ ------
Income from continuing operations before
income taxes............................ 6.3 12.2 3.6 3.9 6.7 5.0 7.9 14.0
Provision for income taxes................ 0.4 0.9 (1.4) 0.4 0.5 0.3 0.6 1.0
------ ------ ------ ------ ------ ------- ------ ------
Net income from continuing operations..... 5.9 11.3 5.0 3.5 6.2 4.7 7.3 13.0
Loss from operations of discontinued
division, net of tax.................... (1.1) (9.5) (1.0) (2.9) (4.9) (10.8) -- --
Loss from disposal of discontinued
division, net of tax.................... -- -- -- -- -- (35.2) -- --
------ ------ ------ ------ ------ ------- ------ ------
Net income (loss)......................... 4.8% 1.8% 4.0% 0.6% 1.3% (41.3)% 7.3% 13.0%
====== ====== ====== ====== ====== ======= ====== ======
Cost of data management services as a
percent of data management services
revenue................................. 63.7% 53.4% 62.6% 63.3% 64.2% 65.5% 65.3% 61.9%
====== ====== ====== ====== ====== ======= ====== ======
Cost of licenses and implementation
services as a percent of licenses and
implementation services revenue......... 45.5% 34.7% 50.4% 4.7% 36.2% 47.4% 54.8% 33.2%
====== ====== ====== ====== ====== ======= ====== ======
</TABLE>
26
<PAGE> 29
LIQUIDITY AND CAPITAL RESOURCES
Since its inception the Company has funded its operations through cash
provided by operations, supplemented by equity and debt financing and leases on
capital equipment. As of December 31, 1997, the Company had $2.5 million in cash
and cash equivalents and $2.3 million in net accounts receivable. In 1996, the
Company generated cash from financing activities through the issuance of shares
of Convertible Preferred Stock for $4.0 million. In addition, the Company
borrowed $4.0 million in 1997 from a bank. The loan bears interest at 11%
through May 31, 1999, and at 12% thereafter through maturity. Principal payments
of $250,000 are due beginning on March 31, 2001, and will be payable at each
subsequent quarter end through December 31, 2002. Principal payments of $500,000
are due on March 31, 2003 and at each subsequent quarter end, with the final
payment due November 30, 2003. The Company may prepay the loan after June 30,
1998; however, a prepayment premium will be due equal to 4% of the amount
outstanding if prepaid between June 30, 1998 and November 30, 1998, 3% if
prepaid between December 1, 1998 and November 30, 1999 and 2% if prepaid between
December 1, 1999 and November 30, 2000. The loan is secured by a first priority
security interest in substantially all of the Company's assets. As of the date
of this Prospectus, the Company was in compliance with all covenants related to
this debt. The Company intends to use a portion of the proceeds from this
offering to prepay the $4.0 million of borrowings and to pay a prepayment
premium of $160,000.
The Company used cash in 1996 and 1997 of $2.4 million and $2.6 million,
respectively, for the purchase of capital assets, primarily for use in the
delivery of its data management services. The Company also paid $2.5 million and
$3.6 million in 1996 and 1997, respectively, toward its lease obligations for
capital equipment.
The Company has a line of credit with a bank equal to the lesser of 75% of
qualifying accounts receivable or $2.0 million available to meet operating
needs. Amounts borrowed under the line of credit bear interest at prime rate
plus 1% (9.5% at March 31, 1998) and are due April 15, 1998. The Company intends
to renew this line of credit. The credit line is collateralized by certain
assets of the Company. As of March 31, 1998, $450,000 was outstanding on the
line of credit. During 1996 and 1997, the Company had net borrowings under its
bank notes and line of credit of $623,000 and $2.8 million, respectively. The
Company intends to use a portion of the proceeds from this offering to repay the
$450,000 outstanding under its line of credit.
The Company is designing its services and products to be Year 2000 capable
and tests third-party software that is incorporated with the Company's services
and products. There can be no assurance, however, that the Company's services
and products, particularly when such services and products incorporate third-
party software, will contain all necessary date code changes in time. The
Company does not expect to incur substantial costs in making its services and
products Year 2000 compliant, but any unanticipated expenses could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Risk Factors -- Year 2000 Capability."
The Company believes that the remaining net proceeds from this offering,
together with cash generated from operations, will be sufficient to fund its
anticipated working needs, capital expenditures and any potential future
acquisitions for at least the next 12 months. Changes in the Company's plans or
other events affecting the Company's operations may result in accelerated or
unexpected expenditures that would affect the Company's cash requirements.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting
Comprehensive Income." This statement, effective for fiscal years beginning
after December 15, 1997, would require the Company to report components of
comprehensive income in a financial statement that is displayed with the same
prominence as other financial statements. Comprehensive income is defined by
Concepts Statement No. 6, "Elements of Financial Statements," as the change in
equity of a business enterprise during a period from transactions and other
events and circumstances from nonowner sources. It includes all changes in
equity during a period except those resulting from investments by owners and
distributions to owners. The Company expects to adopt SFAS 130 for applicable
transactions in the first quarter of 1998.
27
<PAGE> 30
Also in June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131 ("SFAS 131"), "Disclosures about Segments of an Enterprise and
Related Information." This statement, effective for financial statements for
periods beginning after December 15, 1997, requires that a public business
enterprise report financial and descriptive information about its reportable
operating segments. Generally, financial information is required to be reported
on the basis that it is used internally for evaluation of segment performance
and deciding how to allocate resources to segments. The adoption of SFAS 131 is
not expected to have a material impact on the Company's financial statements.
28
<PAGE> 31
BUSINESS
THE COMPANY
SCC Communications Corp. ("SCC" or the "Company") is the leading provider
of 9-1-1 operations support systems ("OSS") services to incumbent local exchange
carriers ("ILECs"), competitive local exchange carriers ("CLECs") and wireless
carriers in the United States. The Company has redefined the U.S. market for
9-1-1 OSS by creating the first and largest 9-1-1 service bureau, the SCC
National Data Services Center ("NDSC"), with over 70 million subscriber data
records under management throughout North America. The Company manages the data
that enable a 9-1-1 call to be routed to the appropriate public safety agency
with accurate and timely information about the caller's identification and
location. Through SCC's NDSC, the Company offers a comprehensive, cost-effective
solution to the 9-1-1 service provisioning needs of ILECs, CLECs and wireless
carriers by enabling them to outsource virtually all aspects of the operations
of their 9-1-1 data management services, including system activation, routine
data administration, event transaction processing and performance management,
with a high level of security and survivability. In addition, the Company
licenses its 9-1-1 OSS software to carriers that wish to manage the delivery of
9-1-1 data management services in-house. Representative carriers using SCC's
solution include Ameritech, AT&T Wireless Services, BellSouth, MCI, Sprint PCS
and Worldcom Network SVCS.
ILECs, CLECs and wireless carriers require a 9-1-1 solution that cost
effectively provides a high degree of data integrity and reliability, allows
them to comply with regulatory mandates, and addresses their need to provide
additional value-added services. Through SCC's NDSC, the Company provides the
data management services that ILECs, CLECs and wireless carriers need to deliver
9-1-1 calls to the appropriate PSAP, along with critical information such as the
caller's location and call-back number that PSAPs need to respond effectively to
emergencies. Complex data screening and preparation are completed to initialize
properly the underlying systems necessary for 9-1-1 call routing and information
display for the call taker. SCC's NDSC frequently receives and processes
electronic transmissions from ILECs, CLECs and wireless carriers detailing
subscriber and coverage updates and public safety jurisdiction boundary changes
from PSAPs. Records identified as potentially having problems are automatically
separated for manual review and analysis by SCC data integrity analysts. Using
the updated information, SCC's 9-1-1 OSS then provides the information to route
the 9-1-1 call and transmit essential information to the emergency service
provider.
INDUSTRY BACKGROUND
Historically, telecommunications carriers in the United States operated in
a highly regulated environment, with both local and long distance service
providers operating as monopolies. The U.S. telecommunications market opened to
competition with the 1984 breakup of AT&T into seven independent Regional Bell
Operating Companies ("RBOCs"). In the early 1990's, the RBOCs and other ILECs,
anticipating regulatory changes that would introduce competition in their local
exchange markets, began restructuring their service models to provide increased
operating efficiencies and new revenue opportunities. Competitive pressures on
the ILECs intensified with the passage of the Telecommunications Act of 1996
(the "1996 Act"), which allowed CLECs, long distance carriers and wireless
carriers to enter local exchange markets. In addition, the regulatory mandates
of the 1996 Act also required each carrier to modify its technical
infrastructure to allow for fair and equal access by other carriers. ILECs,
CLECs and wireless carriers began to seek competitive advantages by
differentiating their service offerings, improving service quality, decreasing
time to market, introducing new services and increasing cost efficiencies. To
gain these advantages, carriers streamlined their business practices, in part by
updating technological infrastructure.
Previously, carriers operated effectively using closed and proprietary
systems to provision and manage their networks. Today, service providers require
more advanced ordering, service provisioning, service assurance and billing
systems to deliver services demanded by an increasingly competitive market.
These systems that collectively constitute a carrier's OSS directly support the
routine processes and procedures of a carrier's telecommunications operating
infrastructure. Historically, carriers' OSS have typically been "legacy"
mainframe-based systems that in many cases utilized incompatible and inflexible
software and technologies.
29
<PAGE> 32
These OSS were further strained by the many incremental changes that had been
made in order to accommodate new technologies, such as new advanced switching
capabilities, and the proliferation of value-added services, such as greater
consumer choice in mix of services. Recent improvements in OSS, however, have
allowed carriers to offer more advanced services by incorporating new
technologies to improve the reliability of existing infrastructure and to comply
with the regulatory requirements of the 1996 Act. For example, next-generation
billing systems, which interact with multiple carriers' systems across the
increasingly complex telecommunications network environment, collect and process
customer usage data and generate invoices, enhance the billing collection
process, and provide information regarding customer behavior. 9-1-1, another
essential OSS service, similarly requires close coordination of data and network
elements, because changes in customer service information usually affect the
data needed for 9-1-1 services.
9-1-1 service involves the routing of emergency calls to the appropriate
public safety answering point ("PSAP") responsible for dispatching police, fire
and other emergency services. Most jurisdictions in the United States now
provide enhanced 9-1-1 services ("Enhanced 9-1-1 or E9-1-1"), which also provide
the caller's telephone number and location to the call taker at the PSAP. When a
caller dials 9-1-1, information about the caller's location, telephone number
and the jurisdictionally appropriate PSAP must be quickly accessed from
carriers' network and mission-critical data servers. Carriers need current,
accurate information about their subscribers in order to facilitate a prompt
response to a 9-1-1 call. Each service order received by a carrier and each
change in PSAP jurisdiction, including expansion to accommodate new addresses,
may affect the information required for the proper handling of a 9-1-1 call.
Thus, delivery of 9-1-1 service presents a difficult OSS challenge for carriers
because it requires the coordination of data from multiple sources, the review
and processing of the data, the resolution of data errors and conflicts and the
insertion of the data into network and mission-critical data servers.
Today, 9-1-1 is a fundamental element of local exchange service and
carriers' OSS infrastructure. According to the National Emergency Number
Association, more than 85% of the current wireline telephone subscribers in the
United States are covered by some type of 9-1-1 service and 95% of that coverage
is E9-1-1 service. The provisioning of 9-1-1 services presents even greater
challenges for wireless carriers, since the mobility of wireless callers makes
the callers' locations difficult to determine. The Cellular Telephone
Information Association estimates that approximately 83,000 9-1-1 calls are made
each day from wireless phones, representing approximately 25% of all 9-1-1
calls. The Company believes that approximately 25% of wireless callers cannot
identify their locations. Most of the existing wireless infrastructure requires
modification to enhance the location data so that wireless calls can be
accurately routed to the appropriate PSAP. Recognizing the public safety need
for improved wireless 9-1-1 services, the Federal Communications Commission (the
"FCC") issued Report & Order 94-102 (the "Order") on June 12, 1996, a directive
that mandated the adoption of 9-1-1 technology by wireless carriers in two
phases. Phase I required wireless carriers to provide to requesting PSAPs at the
time of a 9-1-1 call, the caller's telephone number and location of the
receiving cell site. Wireless carriers had to comply with Phase I mandates by
the later of April 1, 1998, or six months after the PSAP request. Phase II
requires wireless carriers to locate a 9-1-1 caller to within 125 meters,
subject to FCC guidelines. Wireless carriers must comply with Phase II mandates
for requesting PSAPs by October 1, 2001. The FCC wireless mandates, the wireless
industry's desire to continue to improve emergency services and increasing
pressure from public safety agencies have rapidly accelerated the demand for
E9-1-1 wireless services.
ILECs, CLECs and wireless carriers require a 9-1-1 solution that cost
effectively provides a high degree of data integrity and reliability, allows
them to comply with regulatory mandates, and addresses their need to provide
additional value-added services. ILECs are seeking to reduce the significant
capital expenditures associated with supporting rapidly evolving 9-1-1
infrastructure and upgrading their 9-1-1 data management and network control
services to meet PSAP requirements and technological advancements. CLECs and
wireless carriers, many of which are relatively small and new to the markets in
which they are now competing, are seeking to increase their own subscriber bases
while minimizing their investment in OSS technology infrastructure and
personnel, as well as in the relationships with PSAPs necessary to provide 9-1-1
service. ILECs, CLECs and wireless carriers are also seeking a comprehensive
9-1-1 solution that effectively operates in multiple geographic locations over a
wide variety of legacy systems. In addition, the 9-1-1 OSS services
30
<PAGE> 33
offered by carriers and other service providers increasingly include
complementary add-on products and services, such as public warning services,
that enable them to reduce costs and generate value-added services for their
customers. Carriers with these requirements may choose to develop their own
proprietary solutions, to license the 9-1-1 OSS software and manage the delivery
of the 9-1-1 services themselves, or to outsource their 9-1-1 OSS needs.
THE SCC SOLUTION
The Company has redefined the U.S. market for 9-1-1 OSS by creating the
first and largest 9-1-1 service bureau, the SCC National Data Services Center,
with over 70 million subscriber data records under management throughout North
America. Through its NDSC, the Company offers a comprehensive, cost-effective
solution to the 9-1-1 service provisioning needs of ILECs, CLECs and wireless
carriers by enabling them to outsource virtually all aspects of the operations
of their 9-1-1 data management services, including system activation, routine
data administration, event transaction processing and performance management,
with a high level of security and survivability. The Company delivers an
outsourcing solution that can interface with each carrier's proprietary or open
system. In addition, the Company licenses its 9-1-1 OSS software to carriers
that wish to control the delivery of 9-1-1 services in-house. The Company
believes that its solution offers the following principal features and benefits:
Focus on Data Integrity. The accuracy of subscriber records that
identify and provide location information regarding the caller is an
essential element of 9-1-1 service. Using its software solution, SCC
conducts more than 60 logical tests to prepare the data for use in 9-1-1
operations. The Company's systems interface with other elements of a
carrier's OSS to provide timely and accurate subscriber location
information. Transactions identified by the system as requiring further
analysis are researched and resolved by a team of data integrity analysts.
Survivability and Reliability. SCC offers large scale,
mission-critical transaction processing through reliable, scalable
operating platforms. To provide high assurance of continued service, SCC
has designed systems that provide critical 9-1-1 data with multiple layers
of redundancy by deploying over 20 fault-tolerant, geographically dispersed
servers to provide multiple sources of 9-1-1 data. Since the launch of its
NDSC more than three years ago, SCC's systems for 9-1-1 information
delivery have provided uninterrupted service to its customers. SCC has also
developed a comprehensive disaster recovery program for its central data
administration operations.
Leading-Edge Technology. The Company believes it is the technological
leader in the 9-1-1 data management services industry based on its advances
in the areas of systems architecture, spatial data management and advanced
network integration. The Company's innovations include advance intelligent
call routing support, local number portability ("LNP") data transaction
support, technologies that improve 9-1-1 availability, a transaction-based
map maintenance system, a spatial coordinate-based E9-1-1 management system
and large-scale Internet applications for E9-1-1. The Company was the first
to demonstrate data management support capable of interfacing with wireless
systems that complied with both the Phase I and Phase II mandates of the
Order, and also has developed systems for the use of spatial coordinate
data for use in managing and routing non-address specific 9-1-1 calls.
Flexible Business Model. PSAPs generally pay carriers a capitated rate
based on the number of subscribers located in a particular PSAP's
jurisdiction. By outsourcing its data management and service provisioning
needs to the Company, a carrier can avoid costly capital expenditures and
fix its expenses for 9-1-1 services on a per subscriber basis.
Additionally, outsourcing allows carriers to customize their service
packages both to meet the needs of their subscribers and to comply with
regulatory mandates. The Company provides CLECs and wireless carriers with
clearinghouse services to format and insert subscriber data into the
appropriate 9-1-1 systems. Alternatively, carriers may elect to license
9-1-1 OSS software directly from the Company and manage the 9-1-1 data
themselves.
31
<PAGE> 34
STRATEGY
The Company's objective is to be the leading national provider of 9-1-1 OSS
and other complementary services to ILECs, CLECs and wireless carriers. SCC
focuses on developing innovative and automated solutions to provide customers
with a comprehensive system for managing large amounts of dynamic subscriber
information. Key elements of the Company's strategy are to:
Maintain and Extend Leadership Position in Wireline 9-1-1 Data
Management Market. SCC currently manages more than 70 million wireline
subscriber data records out of an estimated 178 million total wireline
telephone subscriber records in the United States. The Company intends to
maintain and extend its market leadership in the wireline 9-1-1 OSS systems
market by adding new service and license customers, increasing the number
of subscriber data records under management, enhancing its existing 9-1-1
services and supporting the evolving telecommunications infrastructure.
Capitalize on Emerging Wireless Carrier Opportunities. The Company
believes there is a significant opportunity to offer outsourcing services
to wireless carriers given the growing public demand for effective wireless
9-1-1 services and the FCC mandates for minimum service performance. The
Company intends to take advantage of this opportunity by leveraging its
position as the first company to offer both Phase I and Phase II compliant
solutions and its large market share in both the wireline and wireless data
management services industry.
Maintain and Extend Leadership Position in National Clearinghouse
Services. The Company believes opportunities exist to sell 9-1-1
clearinghouse services to CLECs which, in order to activate 9-1-1 service
for their customers, must provide subscriber and network information that
is compatible with an ILEC's 9-1-1 OSS. CLECs and wireless carriers, many
of which are relatively small and new to the markets in which they are now
competing, are seeking to grow their own subscriber bases while minimizing
their investment in OSS technology infrastructure and personnel, as well as
in the relationships with PSAPs and other service providers necessary to
provide 9-1-1 services. SCC plans to build upon its position as a neutral,
carrier-independent service provider by working cooperatively with newly
emerging dial tone providers, including CLECs, fixed-position wireless
carriers and cable television carriers, to increase its sales of 9-1-1
clearinghouse services.
Provide Additional Services to Telecommunications Carriers. ILECs,
CLECs and wireless carriers are seeking to apply emerging technologies in
response to competitive pressures and regulatory mandates. For example, the
Company has developed off-switch routing capabilities for carriers that
have deployed the advanced intelligent network and created LNP transaction
sets in response to the LNP mandates of the 1996 Act. By leveraging the
experience and economies of scale it has obtained in managing the 9-1-1 OSS
infrastructure for multiple carriers, the Company is well-positioned to
continue to develop and offer flexible, scalable solutions that allow
carriers to cost-effectively support new technological developments and
regulatory mandates.
Develop Applications for New Commercial Products. By leveraging its
core competency of managing dynamic subscriber location information, the
Company believes that it is well-positioned to expand into additional
markets outside 9-1-1 OSS services. The Company currently has under
development new products and services such as dynamic call routing for
multi-location call centers for both telecommunications carriers and others
and improved address information for operations areas of telecommunications
carriers such as their billing, ordering and provisioning departments.
Expand International Operations. SCC believes that a significant
opportunity to generate additional long-term revenues may be created by
partnering with established telecommunications carriers and systems
integration firms to design, implement, maintain and operate effective,
reliable emergency communications systems in countries other than the
United States or Canada. The Company intends to expand internationally to
address the needs of this market for telecommunications emergency services.
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<PAGE> 35
SERVICES AND PRODUCTS
SCC's 9-1-1 OSS solution enables a 9-1-1 call to be routed to the
appropriate PSAP along with accurate and timely information about the caller's
identification and location. Complex data screening and preparation is completed
to initialize properly the underlying systems necessary for 9-1-1 call routing
and information display for the call taker. SCC's NDSC frequently receives and
processes electronic transmissions from ILECs, CLECs and wireless carriers
detailing subscriber and coverage updates and public safety jurisdiction
boundary changes from PSAPs. Records identified as potentially having problems
are automatically separated for manual review and analysis by SCC data integrity
analysts. Using the updated information, SCC's 9-1-1 OSS then provides the
information to route the 9-1-1 call and transmit essential information to the
emergency service provider.
DIAGRAM OF TYPICAL 9-1-1 CALL
(1) When a caller dials 9-1-1, the call is directed to the 9-1-1 voice switch.
(2) The 9-1-1 switch queries SCC's dispersed 9-1-1 servers to determine the
jurisdictionally appropriate PSAP. The 9-1-1 OSS automatically responds with
call routing information.
(3) The 9-1-1 voice switch routes the call to the appropriate PSAP.
(4) Simultaneously, SCC's 9-1-1 OSS directs subscriber information, including
caller's address and call-back number, to call taker's screen at the PSAP.
(5) PSAP dispatches personnel and equipment to assist.
BASE SERVICES OF SCC NATIONAL DATA SERVICES CENTER
Through SCC's NDSC, the Company provides the data management services that
ILECs, CLECs and wireless carriers need to deliver 9-1-1 calls to the
appropriate PSAP, along with critical information such as caller location and
call-back number that PSAPs need to respond effectively to emergencies. Services
include:
System Preparation and Administration. Before providing 9-1-1 data
management services to its customers, SCC must collect, organize, review
and analyze the data necessary to initialize the system properly. Data
preparation includes collecting information on PSAP jurisdictional
boundaries, performing a full inventory of addresses located in an area and
loading the subscriber information into the Company's systems. To improve
data quality and, therefore, 9-1-1 service, the Company performs diagnostic
reviews
33
<PAGE> 36
and analyses of information loaded into the NDSC systems. SCC employs over
80 data integrity analysts to facilitate the creation, maintenance and
transition of key information.
Routine Data Administration. SCC's NDSC receives and automatically
processes service order updates from ILECs, CLECs and wireless carriers on
a regular basis, in order to maintain current data in the 9-1-1 OSS.
Service order updates include address changes, telephone number changes and
other information pertinent to 9-1-1 call processing. To maintain reliable
9-1-1 service, SCC usually receives between 100,000 and 500,000 service
orders per day and frequently receives boundary updates from PSAPs
reflecting changes in jurisdiction boundaries for PSAP responses. When SCC
receives a service order update or jurisdiction change, information
received must be checked for complete and appropriate data, and then
distributed throughout SCC's network of geographically dispersed servers.
Event Transaction Processing. When a caller dials 9-1-1 in an area
served by the Company, a request for information is automatically generated
by the PSAP answering the call and sent to one of the Company's
fault-tolerant servers. The server rapidly responds to the call taker with
information from the OSS database regarding the caller's location and
call-back number. Automated support is also available for real-time switch
control to direct the routing of the call.
Performance Management. SCC monitors and reports the performance of
its service operations by measuring response time, systems availability,
data accuracy and error resolution intervals, among other performance
measurements. Using these measurements as a basis, SCC designs and
implements programs to improve continuously the 9-1-1 OSS services provided
by its NDSC.
Mapping Services. Since traditional mapping services do not provide
the frequent updates necessary for the provision of emergency services, SCC
maintains a team of geographic information system experts, who work with
carriers and public safety officials to document, review and analyze call
routing boundaries and specific address information. The mapping services
department uses advanced tools to improve existing mapping information with
new and more detailed geographical information for optimal management of
9-1-1 call records. The mapping services department also assists in system
preparation and quality control programs to provide the SCC's NDSC with
current geographical information.
Clearinghouse Services. SCC's clearinghouse department provides a
single point of contact to process and format 9-1-1 data for CLECs and
independent telephone companies. CLECs and independent telephone companies
can utilize the services of the Company's clearinghouse department to offer
service in numerous localities without having to independently develop the
9-1-1 OSS systems, procedures and expertise necessary for each community.
CLECs and independent telephone companies electronically transmit
subscriber information to the clearinghouse department. The information is
then reformatted to comply with the destination community's local
standards, tested for detectable errors and delivered to the appropriate
9-1-1 data systems. The Company can process information for its
clearinghouse customers even if the data will be inserted in a system
operated by a carrier that does not utilize the Company's services or
products.
ENHANCED SERVICES OF SCC NATIONAL DATA SERVICES CENTER
The Company offers enhancements to its 9-1-1 OSS services that provide
additional features and functionality. These services are targeted to specific
markets and are sold directly by the Company or indirectly through the Company's
customers.
9-1-1Net. 9-1-1Net, an online tool, creates an active communication channel
serving the NDSC, carriers and PSAPs. Through 9-1-1Net, users can view live
address routing rules, send address updates, review inbound call load, error
statistics and ALI discrepancy reports, and receive new product updates.
Private Switch ALI. Private telephone switches, commonly known as PBX's,
create a challenge for E9-1-1 operations because information describing the
individual caller's phone station or extension within a PBX may not be available
to the network receiving the 9-1-1 call. In the case of large facilities such as
campuses, hotels and hospitals, emergency response personnel may not have
adequate information to quickly
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<PAGE> 37
determine the location of the caller. Private Switch ALI allows PBX system
managers to create and transmit appropriate data records that identify a
caller's extension or location within a facility for the 9-1-1 OSS.
9-1-1Connect. SCC provides wireless carriers with 9-1-1 OSS services that
are similar to those provided to wireline customers and that fully comply with
Phase I of the Order. Once a wireless carrier receives a request from a PSAP to
activate wireless 9-1-1 services, SCC's program managers develop a plan with the
wireless carrier to activate service, including development of ILEC network
interconnections for both data and voice that are specific to the local wireless
network configuration and interface requirements. The program managers develop
graphic coverage area maps that are superimposed on maps of current public
safety agency boundaries. Routing recommendations can then be made and
coordinated with the appropriate PSAP.
Subscriber ALI. The Company is currently preparing to test Subscriber ALI,
which is designed to allow subscribers to supply personal information in their
9-1-1 records such as medical condition, disability and language of choice. When
a subscriber calls 9-1-1, data previously provided by the subscriber will be
displayed along with traditional 9-1-1 information to the PSAP. A subscriber
also can designate a third party to be notified in the event a 9-1-1 call is
initiated from the subscriber's telephone. For example, parents away from home
would be notified when a child or babysitter calls 9-1-1 from their telephone.
The Company currently anticipates that this service will be available by late
1998.
Emergency Warning and Evacuation System. The Company is currently
developing its Emergency Warning and Evacuation System to initiate outbound
calls selectively in the event of potential disasters such as flash flooding,
hazardous materials incidents, industrial accidents and localized weather
events. The Emergency Warning and Evacuation System will utilize spatially
classified location information and up-to-date telephone subscriber data and
will be able to deliver voice or fax warnings to a geographically targeted
population. SCC intends to offer its Emergency Warning and Evacuation System by
late 1998.
LICENSE PRODUCTS
The Company offers 9-1-1 OSS software to customers that elect to manage
their own 9-1-1 data records rather than outsourcing such operations to SCC. SCC
also provides custom software development services to customers with specific or
local requirements through its engineering department. The engineering
department develops, customizes and enhances the software using a structured
approach to perform requirements analysis, software development and quality
assurance.
COMMERCIAL SERVICES
Many of the underlying elements used by the Company in managing large
volumes of dynamic subscriber information have commercial applications in other
industries. For instance, the Company has developed and is testing a dynamic
call routing system that will allow telecommunications carriers to support
real-time assignment of routing destinations for calls processed in public
telecommunications networks. Historically, calls have been routed pursuant to
preplanned and preprogrammed routing instructions. The Company's dynamic call
assignment will allow greater flexibility in call routing to respond to call
load or other complex non-network factors. The Company also intends to offer
improved address information to other operations areas of telecommunications
carriers such as their billing, ordering and provisioning departments. Carriers
can increase efficiencies and improve customer service by responding to service
calls with more accurate subscriber location information.
SERVICE AND PRODUCT PRICING
Pricing for SCC's NDSC services usually includes a non-recurring initial
fee due upon execution of a contract with a customer. Thereafter, customers
generally pay a monthly fee based on the number of subscriber records maintained
by the NDSC and upon the services selected by the customer. The Company
typically enters into ten-year agreements for wireline base services and two to
five-year agreements for wireless base services. During the contract term, SCC
may offer customers enhanced services, which may be provided on a revenue
sharing basis. SCC also licenses software, hardware and professional services
necessary for the
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<PAGE> 38
management of 9-1-1 services to its customers in exchange for license and
implementation services fees and maintenance fees.
SERVICE INFRASTRUCTURE AND ARCHITECTURE
The Company's operations include central data administration and
distributed systems for real-time 9-1-1 transaction support. Based on large
scale, fault-tolerant Tandem computers, the Company's major processing systems
are configured to provide high reliability. They are also designed to provide
significant capacity for continued growth using the Tandem NSK scalable
message-based architecture.
The Company's central data administration systems, located in Boulder,
Colorado, are a key element of its 9-1-1 OSS, and are used to perform routine
data maintenance and to support new customer transition and initial system
loads. SCC's NDSC also maintains a central monitoring facility in Boulder that
operates 24 hours a day, seven days a week. Data network access for the central
administration systems is provided using traditional T-1 connectivity to the
networks operated by SCC and its customers. To improve reliability and
survivability, the primary links are designed to have three or more backup paths
to access SCC's distributed networks, including VSAT satellite links. A
"hot-site" emergency business recovery facility has been established in New York
and can be activated to continue routine operations in the event of a disaster
at the Boulder site. Electronic processing necessary to handle actual 9-1-1
calls is geographically distributed and remains a local service for each region,
so SCC's central data administration systems are not in the actual 9-1-1 call
path.
Distributed throughout the U.S., the Company's real-time 9-1-1 OSS servers
are located in shared, hardened computer facilities. The systems are deployed in
pairs or quads. System pairs are intentionally distributed to different
geographic locations to provide an additional level of reliability. These
systems provide data display for thousands of public safety agencies throughout
the service areas of SCC's customers. Direct interface to telephone control
switches is also supported on these platforms, providing the information
necessary to route calls to the jurisdictionally appropriate PSAP. The Company
also uses a number of Microsoft NT servers for internal administrative
processing and extranet support.
CUSTOMERS
The Company provides its services to a range of telecommunications service
providers, including ILECs, CLECs and wireless carriers. The Company also
licenses its software and provides 9-1-1 data clearinghouse services directly
and indirectly to over 600 independent telephone companies. During the year
ended December 31, 1996, the Company recognized approximately 82% of total
revenue from continuing operations from two customers, each of which accounted
for greater than 10% of the Company's revenue in such periods. During the year
ended December 31, 1997, the Company recognized approximately 81% of total
revenue from three customers, each of which accounted for greater than 10% of
the Company's revenue in such period. No other customers accounted for more than
10% of the Company's total revenue in 1996 or 1997. See "Risk
Factors -- Reliance on Significant Customers."
The Company typically enters into contracts with carriers and their
affiliates to provide services to some or all of the carrier's operating
entities. Set forth below is a partial list of carriers utilizing the Company's
services or products, which the Company believes are representative of the
Company's overall customer base.
ILECs. The Company's customers include Ameritech, BellSouth Inc. and U.S.
WEST.
CLECs. The Company's customers include ICG Telecom, MCI and Worldcom
Network SVCS.
Wireless Carriers. The Company's customers include 3608 Communications
Company, AT&T Wireless Services, Sprint PCS, U.S.WEST Wireless and Vanguard
Cellular Systems.
License Customers. The Company's license customers include Bell Atlantic,
Bell Canada, Pacific Bell and GTE Network Services.
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<PAGE> 39
SALES AND MARKETING
The Company's marketing efforts are focused on targeting key carriers and
PSAPs in each geographical market through advertising in telecommunications
industry publications, participation in trade shows, presentations at technical
conferences and other initiatives. Additionally, SCC employees serve as the
chairpersons and members of key standards committees related to emergency
communications services. The Company's sales strategy relies on direct channels
of distribution for its services. The Company has dedicated account teams to
work with each existing and potential customer. The Company's account teams
develop relationships with 9-1-1 service providers through a consultative,
problem-solving sales process and work closely with customers and potential
customers to determine how their needs can be fulfilled by the Company's
services. At March 31, 1998, the Company employed 18 persons in its sales and
marketing organization. Sales cycles range from six months to over two years.
See "Risk Factors -- Significant Fluctuations in Quarterly Results of
Operations" and "-- Lengthy Sales Cycle."
RESEARCH AND DEVELOPMENT
The Company directs its research and development efforts toward providing
highly scalable applications that enable a more efficient 9-1-1 OSS process that
improves data quality. Development efforts currently in process are focused on
further embedding and using spatial coordinate data to manage geographic
assignment and other data, further enhancing the Company's wireless offerings.
These offerings include improving the Company's software, integrating standard
Web browser technology, and the development of decision support systems. By late
1998, the Company expects to introduce Subscriber ALI, which will allow
subscribers to append medical and other important data to their ALI record, and
Emergency Warning and Evacuation System, which will allow PSAPs to call all
numbers in a given area and warn of imminent danger. See "-- Products and
Services -- Enhanced Services of SCC National Data Services Center" and "Risk
Factors -- Dependence on New Products; Rapid Technological Change."
COMPETITION
The market for 9-1-1 OSS solutions is intensely competitive and the Company
expects competition to increase in the future. The Company believes that the
principal competitive factors affecting the market for 9-1-1 OSS solutions
include effectiveness with existing infrastructure, reliability, manageability,
technical features, wireless support, performance, ease of use, price, scope of
product offerings, and customer service and support. Although the Company
believes that its solution competes favorably with respect to such factors,
there can be no assurance that the Company can maintain its competitive position
against current and potential competitors, especially those with significantly
greater financial, marketing, service support, technical and other competitive
resources.
The Company's principal competitors generally fall within one of three
categories: internal development departments of major carriers or consulting
firms that support such departments; relatively smaller companies that offer
applications with limited scope; and larger companies that are either in the
process of entering the Company's market or have the potential to develop
products and services that compete with the Company's service offerings.
Potential customers sometimes rely on their own internal development teams to
formulate 9-1-1 OSS systems or to retain consultants to undertake such a
project. The Company believes that 9-1-1 OSS solution competes favorably with
internally developed systems, which are expensive to develop and maintain, may
not provide a comprehensive, reliable approach to 9-1-1 OSS services, and may
not provide the flexibility to adapt readily to regulatory, technological and
market changes.
In addition, a number of companies currently market or have under
development software products and services to provide 9-1-1 administration. The
Company competes with a few smaller companies, including XYPoint Corporation,
for the provision of 9-1-1 OSS services to wireless carriers, although the
Company expects more significant competition to emerge in the future. The
Company believes that, to date, none of these relatively smaller companies offer
products or services that are as robust in features or as comprehensive in scope
as the Company's products and services. Although it is likely that the product
development efforts of these companies eventually will enable them to offer a
line of products or services to compete with the
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<PAGE> 40
Company's current service offerings, the Company intends to continue to dedicate
significant resources for product and service development in order to expand the
Company's capabilities ahead of these competitors. Notwithstanding, the Company
expects additional competition from these established competitors and from other
emerging companies. Mergers or consolidations among these competitors or
acquisitions of these companies by larger competitors would make them more
formidable competitors to the Company. There can be no assurance that the
Company's current and potential competitors will not develop products and
services that may be more effective than the Company's current or future 9-1-1
data management solutions or that the Company's technologies and offerings will
not be rendered obsolete by such developments.
Finally, there are a number of companies that currently market and sell
various products and services to telecommunications carriers, such as billing
software and advanced telecommunications equipment, that have been broadly
adopted by the Company's customers and potential customers. In addition, vendors
of telecommunications software and hardware in the future may enhance their
products to include functionality that is currently provided by the Company's
solutions. The widespread inclusion of the functionality of the Company's
service offerings as standard features of other telecommunications software or
hardware could render the Company's services obsolete and unmarketable,
particularly if the quality of such functionality were comparable to that of the
Company's services. Furthermore, even if the 9-1-1 functionality provided as
standard features by telecommunications software or networking hardware is more
limited than that of the Company's services, there can be no assurance that a
significant number of customers would not elect to accept more limited
functionality in lieu of purchasing additional products or services. For
example, Lucent Technologies offers carriers software systems with functionality
similar to the Company's services. Many of these larger companies have longer
operating histories, greater name recognition, accesses to larger customer bases
and significantly greater financial, technical and marketing resources than the
Company. As a result, they may be able to adapt more quickly to new or emerging
technologies and changes in customer requirements, or to devote greater
resources to the promotion and sale of their products and services, than the
Company. The Company believes that the entry of these larger companies into its
market will require them to undertake operations that are currently not within
their core areas of expertise, and thus expose them to significant uncertainties
in the product development process or in providing a range of products and
services to comprehensively address the 9-1-1 requirements which the Company's
services addresses. However, if these companies were to introduce products or
services that effectively compete with the Company's service offerings, they
could be in a position to substantially lower the price of their 9-1-1 products
and services or to bundle such products and services with their other product
and service offerings.
For the foregoing reasons, there can be no assurance that the Company will
be able to compete successfully against its current and future competitors.
Increased competition may result in price reductions, reduced gross margins and
loss of market share, any of which would materially and adversely affect the
Company's business, financial condition and results of operations. See "Risk
Factors -- Highly Competitive Market; Competition."
PROPRIETARY RIGHTS
The Company's success and its ability to compete depends significantly upon
its proprietary rights. The Company relies primarily on a combination of
copyright, trademark and trade secret laws, as well as confidentiality
procedures and contractual restrictions to establish and protect its proprietary
rights. There can be no assurance that such measures will be adequate to protect
the Company's proprietary rights. Further, the Company may be subject to
additional risks as it enters into transactions in foreign countries where
intellectual property laws are not well developed or are difficult to enforce.
Legal protections of the Company's proprietary rights may be ineffective in such
countries. Litigation to defend and enforce the Company's intellectual property
rights could result in substantial costs and diversion of resources, and could
have a material adverse effect on the Company's business, financial condition
and results of operations, regardless of the final outcome of such litigation.
Despite the Company's efforts to safeguard and maintain its proprietary rights
both in the United States and abroad, there can be no assurance that the Company
will be successful in doing so or that the steps taken by the Company in this
regard will be adequate to deter misappropriation or independent third-party
development of the Company's technology, or to prevent an unauthorized third
party from copying or
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<PAGE> 41
otherwise obtaining and using the Company's technology. There also can be no
assurance that others will not independently develop similar technologies or
duplicate any technology developed by the Company. Any such events could have a
material adverse effect on the Company's business, financial condition and
results of operations.
As the number of entrants to the Company's markets increases and the
functionality of the Company's products and services increases and overlaps with
the products and services of other companies, the Company may become subject to
claims of infringement or misappropriation of the intellectual property rights
of others. In certain of its customer agreements, the Company agrees to
indemnify its customers for any expenses or liabilities resulting from claimed
infringements of patents, trademarks or copyrights of third parties. In certain
limited instances, the amount of such indemnities may be greater than the
revenue the Company may have received from the customer. There can be no
assurance that third parties will not assert infringement or misappropriation
claims against the Company in the future with respect to current or future
products or services. Any claims or litigation, with or without merit, could be
time consuming, result in costly litigation or require the Company to enter into
royalty or licensing arrangements. Such royalty or licensing arrangements, if
required, may not be available on terms acceptable to the Company, if at all,
and could have a material adverse effect on the Company's business, financial
condition and results of operations.
EMPLOYEES
At March 31, 1998, the Company employed 247 full-time employees in seven
states. Of these employees, 34 were involved in research and development, 18 in
sales and marketing, 158 in technical support and operations and 37 in
administration and finance. No employees are covered by any collective
bargaining agreements. The Company believes that its relationships with its
employees are good.
FACILITIES
The Company's principal administrative, sales and marketing, research and
development and support facilities consist of approximately 80,000 square feet
of office space in Boulder, Colorado. The Company occupies these premises under
a lease expiring December 31, 2002. As of March 31, 1998, the annual base rent
for this facility was approximately $670,000; however, the lease agreement
provides for periodic defined increases in rent through the lease term.
LEGAL PROCEEDINGS
The Company is not a party to any litigation that it believes could have a
material adverse effect on the Company or its business.
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<PAGE> 42
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Company's directors and executive officers and their ages as of March
31, 1998, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
George K. Heinrichs.............. 40 President, Chief Executive Officer and Director
John J. Sims..................... 42 Chief Operating Officer
Nancy K. Hamilton................ 45 Chief Financial Officer
John G. Hill(1).................. 56 Director
Darrell A. Williams(1)(2)........ 38 Director
David Kronfeld(2)................ 50 Director
</TABLE>
- ------------
(1) Member of Compensation Committee
(2) Member of Audit Committee
George K. Heinrichs has been the President and a Director of the Company
since he cofounded the Company in 1979, and also has served as Chief Executive
Officer since February 1995. Prior to founding the Company, Mr. Heinrichs served
in a variety of public safety and criminal justice positions.
John J. Sims has been Chief Operating Officer of the Company since November
1995. From 1977 until October 1995, Mr. Sims was employed by Tandem Computers,
Inc., where he held a number of positions including Vice President of Sales and
General Manager for Worldwide Telecommunications, Director of Materials
Management, Vice President of Management Information Systems and Vice President
of the Tandem Alliance Group.
Nancy K. Hamilton has been the Chief Financial Officer and Senior Vice
President of the Company since December 1993. Prior to joining the Company, Ms.
Hamilton was Vice President and Chief Financial Officer of Fischer Imaging
Corp., a manufacturer of medical imaging systems, from January 1993 to November
1993. Prior to January 1993, Ms. Hamilton served in a variety of senior
management positions, including Chief Financial Officer, at NBI, Incorporated,
which at that time was a developer of hardware and software and a systems
integrator.
John G. Hill has been a Director of the Company since January 1990. Since
1989, Mr. Hill has been a general partner of Hill, Carman Ventures, a limited
partnership which is the general partner of The Hill Partnership III, a venture
capital fund and a stockholder of the Company. Since 1981, Mr. Hill has been the
General Partner of Hill Ventures. Mr. Hill currently serves as a director of
Genicom Corporation, a provider of midrange printer solutions, network
integration and multivendor services.
David Kronfeld has been a Director of the Company since March 1998 and
previously served as a Director of the Company from February 1992 until July
1996. Mr. Kronfeld has been a manager of JK&B Management L.L.C. since its
founding in October 1995. Since 1989, Mr. Kronfeld has been a general partner of
Boston Capital Ventures Limited Partnership, Boston Capital Ventures II Limited
Partnership, Boston Capital Ventures III, L.P. and Business Development
Partners, L.P., all of which are venture capital funds and stockholders of the
Company, and a general partner of Boston Capital Ventures, a venture capital
fund.
Darrell A. Williams has been a Director of the Company since February 1998.
Mr. Williams is Vice President, Venture Capital in the Ameritech Development
Corporation, which he joined in January 1995. From 1992 to 1995, Mr. Williams
was Director, Investment Acquisitions and Divestitures of Ameritech Corporation.
BOARD COMMITTEES
The Company has a standing Audit Committee currently composed of Darrell A.
Williams and David Kronfeld. The Audit Committee reviews and supervises the
Company's financial controls, including selecting the Company's auditors,
reviewing the books and accounts of the Company, meeting with the officers of
the Company regarding the Company's financial controls, acting upon
recommendations of auditors, and taking
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<PAGE> 43
such further action as the Committee deems necessary to complete an audit of the
books and accounts of the Company, as well as other matters that may come before
it or as directed by the Board of Directors of the Company.
The Company has a standing Compensation Committee currently composed of
John G. Hill and Darrell A. Williams. The Compensation Committee reviews and
acts on matters relating to compensation levels and benefits plans for the
Company's executive officers and key employees. The Compensation Committee is
also responsible for granting stock awards, stock options, stock appreciation
rights and other awards to be made under the Company's existing incentive
compensation plans.
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned during the 1997
fiscal year for services rendered in all capacities to the Company and its
subsidiaries during such fiscal year by the Company's Chief Executive Officer
and each of the two other executive officers whose annual bonus and salary for
such fiscal year exceeded $100,000 (collectively, the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SHARES
-------------------- UNDERLYING
NAME AND PRESENT PRINCIPAL POSITION SALARY BONUS OPTIONS(1)
- ----------------------------------- -------- -------- ------------
<S> <C> <C> <C>
George K. Heinrichs................................... $173,746 $180,000 66,667
President and Chief Executive Officer
John J. Sims.......................................... 225,000 100,000 120,000
Chief Operating Officer
Nancy K. Hamilton..................................... 148,750 100,000 57,333
Chief Financial Officer and Senior Vice President
</TABLE>
- ------------
(1) The options listed in the table were granted under the 1990 Stock Option
Plan. See "-- Option Grants During Last Fiscal Year."
OPTION GRANTS DURING LAST FISCAL YEAR
The following table sets forth information concerning the stock option
grants made to each of the Named Officers in the 1997 fiscal year.
OPTION GRANTS DURING LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF
NUMBER OF TOTAL STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO PRICE OPTION TERM(2)
OPTIONS EMPLOYEES IN PER EXPIRATION ---------------------
NAME GRANTED(1) FISCAL YEAR SHARE DATE 5% 10%
---- ---------- ------------ -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
George K. Heinrichs........ 66,667 19.6% $7.50 10/21/07 $314,449 $776,875
John J. Sims............... 66,666 19.7 4.50 02/18/07 251,555 637,491
53,334 15.7 7.50 10/21/07 251,561 637,505
Nancy K. Hamilton.......... 15,666 4.6 6.00 02/18/07 44,335 112,354
41,667 12.3 7.50 10/21/07 196,531 498,049
</TABLE>
- ------------
(1) The options were granted to each of the Named Officers pursuant to the 1990
Stock Option Plan. Each option vests 24% one year from the date of grant and
2% each month thereafter.
(2) The five percent and ten percent assumed annual rates of compounded stock
price appreciation are mandated by the rules of the Securities and Exchange
Commission. There can be no assurance provided to the option holder or any
other holder of the Company's
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<PAGE> 44
securities that the actual stock price appreciation over the ten-year option
term will be at the assumed five percent and ten percent levels or at any
other defined level.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning option exercises and
option holdings for the 1997 fiscal year with respect to each of the Named
Officers. None of the Named Officers exercised any options during the 1997
fiscal year.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN-THE-MONEY
NUMBER OF SECURITIES UNDERLYING OPTIONS AT
UNEXERCISED OPTIONS AT DECEMBER 31, 1997 DECEMBER 31, 1997(1)
---------------------------------------- ----------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
George K. Heinrichs....... 220,785 115,514 $2,151,736 $572,356
John J. Sims.............. 54,558 175,501 461,185 924,256
Nancy K. Hamilton......... 96,483 78,667 894,624 395,501
</TABLE>
- ------------
(1) Based on the deemed fair value of the Company's Common Stock at fiscal
year-end, $10.50 per share (as determined by the Board of Directors), less
the exercise price payable for such shares.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board was formed in 1995, and
the current members of the Compensation Committee are John G. Hill and Darrell
Williams. Prior to April 1998, George K. Heinrichs and Mr. Hill were the members
of the Compensation Committee. Throughout the year ended December 31, 1997, Mr.
Heinrichs was an officer of the Company. No executive officer of the Company
serves as a member of the Board of Directors or Compensation Committee of any
entity that has one or more executive officers serving as a member of the
Company's Board of Directors or Compensation Committee.
DIRECTOR COMPENSATION
Directors currently are not compensated for serving on the Board of
Directors. The Company reimburses its directors for all reasonable and necessary
travel and other incidental expenses incurred in connection with their
attendance at meetings of the Board of Directors. The Company has not previously
granted non-employee Board members options to purchase shares of Common Stock,
although the Company may grant options to its non-employee directors in the
future at the discretion of the Board. See "-- Benefit Plans -- 1998 Stock
Incentive Plan."
BENEFIT PLANS
1998 Stock Incentive Plan
The Company's 1998 Stock Incentive Plan (the "1998 Plan") is intended to
serve as the successor equity incentive program to the Company's 1990 Stock
Option Plan, as amended (the "Predecessor Plan"). The 1998 Plan was adopted by
the Board and the stockholders on April 7, 1998. The 1998 Plan is to become
effective on the date the Underwriting Agreement for this offering is executed
(the "Plan Effective Date").
A total of 1,901,055 shares of Common Stock have been authorized for
issuance under the 1998 Plan. Such share reserve consists of (i) the number of
shares available for issuance under the Predecessor Plan on the Plan Effective
Date, including the shares subject to outstanding options and (ii) an additional
increase of approximately 500,000 shares. In addition, the share reserve will
automatically be increased on the first trading day of each calendar year,
beginning with the 1999 calendar year, by (i) an amount equal to 3% of the
number of shares of Common Stock outstanding on the last trading day of the
immediately preceding calendar year or (ii) a lesser amount determined by the
Board. To the extent any unvested shares of Common Stock issued under the
Predecessor Plan are repurchased by the Company after the Plan Effective Date,
at the exercise price paid per share, in connection with the holder's
termination of service, those repurchased shares will be added to the reserve of
Common Stock available for issuance under the 1998 Plan. In no event may any one
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<PAGE> 45
participant in the 1998 Plan receive option grants, separately exercisable stock
appreciation rights or direct stock issuances for more than 500,000 shares of
Common Stock in the aggregate per calendar year.
On the Plan Effective Date, outstanding options issued under the
Predecessor Plan will be incorporated into the 1998 Plan, and no further option
grants will be made under the Predecessor Plan. The incorporated options will
continue to be governed by their existing terms, unless the Plan Administrator
elects to extend one or more features of the 1998 Plan to those options. Except
as otherwise noted below, the incorporated options have substantially the same
terms as will be in effect for grants made under the Discretionary Option Grant
Program of the 1998 Plan.
The 1998 Plan is divided into five separate components: (i) the
Discretionary Option Grant Program, under which eligible individuals in the
Company's employ or service (including officers, non-employee Board members and
consultants) may, in the Plan Administrator's discretion, be granted options to
purchase shares of Common Stock at an exercise price not less than 100% of their
fair market value on the grant date; (ii) the Stock Issuance Program, under
which such individuals may, in the Plan Administrator's discretion, be issued
shares of Common Stock directly, through the purchase of such shares at a price
not less than 100% of their fair market value at the time of issuance or as a
bonus tied to the performance of services; (iii) the Salary Investment Option
Grant Program, which may, in the Plan Administrator's discretion, be activated
for one or more calendar years and, if so activated, will allow executive
officers and other highly compensated employees the opportunity to apply a
portion of their base salary to the acquisition of special below-market stock
option grants; (iv) the Automatic Option Grant Program, which may, in the
Board's sole discretion, be activated for one or more calendar years and under
which option grants would automatically be made at periodic intervals to
eligible non-employee Board members to purchase shares of Common Stock at an
exercise price equal to 100% of their fair market value on the grant date; and
(v) the Director Fee Option Grant Program, which may, in the Plan
Administrator's discretion, be activated for one or more calendar years and, if
so activated, would allow non-employee Board members the opportunity to apply a
portion of the annual retainer fee, if any, otherwise payable to them in cash
each year to the acquisition of special below-market option grants.
The Discretionary Option Grant Program and the Stock Issuance Program will
be administered by the Compensation Committee. The Compensation Committee as
Plan Administrator will have complete discretion to determine which eligible
individuals are to receive option grants or stock issuances under those
programs, the time or times when such option grants or stock issuances are to be
made, the number of shares subject to each such grant or issuance, the status of
any granted option as either an incentive stock option or a non-statutory stock
option under the Federal tax laws, the vesting schedule to be in effect for the
option grant or stock issuance, and the maximum term for which any granted
option is to remain outstanding. The Compensation Committee will also have the
exclusive authority to select the executive officers and other highly
compensated employees who may participate in the Salary Investment Option Grant
Program in the event that program is activated for one or more calendar years,
but neither the Compensation Committee nor the Board will exercise any
administrative discretion with respect to option grants under the Salary
Investment Option Grant Program or under the Automatic Option Grant or Director
Fee Option Grant Program for the non-employee Board members.
In the event the Plan Administrator elects to activate the Salary
Investment Option Grant Program for one or more calendar years, each executive
officer and other highly compensated employee of the Company selected for
participation may elect, prior to the start of the calendar year, to reduce his
or her base salary for that calendar year by a specified dollar amount not less
than $10,000 nor more than $50,000. If such election is approved by the Plan
Administrator, the individual will automatically be granted, on the first
trading day in January of the calendar year for which that salary reduction is
to be in effect, a non-statutory option to purchase that number of shares of
Common Stock determined by dividing the salary reduction amount by two-thirds of
the fair market value per share of Common Stock on the grant date. The option
will be exercisable at a price per share equal to one-third of the fair market
value of the option shares on the grant date. As a result, the total spread on
the option shares at the time of grant (the fair market value of the option
shares on the grant date less the aggregate exercise price payable for those
shares) will be equal to the amount of salary invested in that option. The
option will vest in a series of 12 equal monthly installments over the
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<PAGE> 46
calendar year for which the salary reduction is to be in effect and will be
subject to full and immediate vesting upon certain changes in the ownership or
control of the Company.
The Company has not previously granted non-employee Board members options
to purchase shares of Common Stock. However, should the Automatic Option Grant
Program be activated in the future, each individual who first becomes a
non-employee Board member at any time after such date will receive an option
grant on the date such individual joins the Board. In addition and on the date
of each Annual Stockholders Meeting held after the Plan Effective Date, each
non-employee Board member who is to continue to serve as a non-employee Board
member will automatically be granted an option to purchase shares of Common
Stock, provided such individual has served on the Board for at least six months.
Each automatic grant for the non-employee Board members will have a term of
10 years, subject to earlier termination following the optionee's cessation of
Board service. Each automatic option will be immediately exercisable for all of
the option shares; however, any unvested shares purchased under the option will
be subject to repurchase by the Company, at the exercise price paid per share,
should the optionee cease Board service prior to vesting in those shares. The
shares subject to each initial automatic option grant will vest over a four-year
period, as follows: (i) 25% of the option shares upon the optionee's completion
of one year of Board service measured from the grant date and (ii) the balance
of the option shares in a series of 36 successive equal monthly installments
upon the optionee's completion of each additional month of service measured from
the first anniversary of the grant date. The shares subject to each annual grant
will vest upon the optionee's completion of one year of Board service measured
from the grant date. However, the shares subject to each automatic option grant
will immediately vest in full upon certain changes in control or ownership of
the Company or upon the optionee's death or disability while a Board member.
Should the Director Fee Option Grant Program be activated in the future,
each non-employee Board member will have the opportunity to apply all or a
portion of any annual retainer fee otherwise payable in cash to the acquisition
of a below-market option grant. The option grant will automatically be made on
the first trading day in January in the year for which the retainer fee would
otherwise be payable in cash. The option will have an exercise price per share
equal to one-third of the fair market value of the option shares on the grant
date, and the number of shares subject to the option will be determined by
dividing the amount of the retainer fee applied to the program by two-thirds of
the fair market value per share of Common Stock on the grant date. As a result,
the total spread on the option (the fair market value of the option shares on
the grant date less the aggregate exercise price payable for those shares) will
be equal to the portion of the retainer fee invested in that option. The option
will become exercisable for the option shares in a series of 12 equal monthly
installments over the calendar year for which the election is to be in effect.
However, the option will become immediately exercisable for all the option
shares upon (i) certain changes in the ownership or control of the Company or
(ii) the death or disability of the optionee while serving as a Board member.
The Board may amend or modify the 1998 Plan at any time, subject to any
required stockholder approval. The 1998 Plan will terminate on the earliest of
(i) April 7, 2008, (ii) the date on which all shares available for issuance
under the 1998 Plan have been issued as fully vested shares or (iii) the
termination of all outstanding options in connection with certain changes in
control or ownership of the Company.
1998 Employee Stock Purchase Plan
The Company's Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors in March 1998 and approved by the Company's
stockholders in April 1998. A total of 200,000 shares of Common Stock have been
reserved for issuance under the Purchase Plan. There is automatically added to
the Purchase Plan at January 1 of each year (i) that number of shares needed to
restore the maximum aggregate shares available to 200,000 shares or (ii) a
lesser amount determined by the Board. The Purchase Plan, which is intended to
qualify under Section 423 of the Code, provides for two six-month offering
periods each year beginning on the first of January and the first of July;
however, the initial offering period began on March 1, 1998 and continues
through December 31, 1998. The Purchase Plan may be administered by the Board of
Directors or a committee appointed by the Board. Employees (including officers
and employee directors) of the Company are eligible to participate if they are
employed by the Company for at least
44
<PAGE> 47
20 hours per week. The Purchase Plan permits eligible employees to purchase
shares of Common Stock through periodic payroll deductions at a price equal to
the lower of 85% of the fair market value of the Company's Common Stock at the
beginning or end of the offering period. Employees may end their participation
in the offering at any time during the offering period, and participation ends
automatically on termination of employment with the Company. The Board of
Directors has the power to amend or terminate the Purchase Plan as long as such
action does not adversely affect any outstanding rights to purchase stock
thereunder.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION MATTERS
The Company's Amended and Restated Certificate of Incorporation eliminates,
subject to certain exceptions, directors' personal liability to the Company or
its stockholders for monetary damages for breaches of fiduciary duties. The
Amended and Restated Certificate of Incorporation does not, however, eliminate
or limit the personal liability of a Director for (i) any breach of the
Director's duty of loyalty to the Company or its stockholders, (ii) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) unlawful payments of dividends or unlawful stock
repurchases or redemptions as provided in Section 174 of the Delaware General
Corporation Law or (iv) any transaction from which the Director derived an
improper personal benefit.
The Company's Amended and Restated Bylaws, which will become effective upon
the closing of this offering, provide that the Company shall indemnify its
Directors and executive officers to the fullest extent permitted under the
Delaware General Corporation Law and may indemnify its other officers, employees
and other agents as set forth in the Delaware General Corporation Law. In
addition, the Company plans to enter into indemnification agreements (the
"Indemnification Agreements") with each of its Directors and executive officers,
effective upon the effectiveness of the Registration Statement of which this
Prospectus forms a part. The indemnification agreements will contain provisions
that require the Company, among other things, to indemnify its Directors and
executive officers against certain liabilities (other than liabilities arising
from intentional or knowing and culpable violations of law) that may arise by
reason of their status or service as Directors or executive officers of the
Company or other entities to which they provide service at the request of the
Company and to advance expenses they may incur as a result of any proceeding
against them as to which they could be indemnified. The Company believes that
these provisions and agreements are desirable to attract and retain qualified
Directors and officers. The Company has obtained an insurance policy covering
Directors and officers for claims that such Directors and officers may otherwise
be required to pay or for which the Company is required to indemnify them,
subject to certain exclusions.
EMPLOYMENT AGREEMENTS AND COMPENSATION PLAN
Employment Agreements
The Company does not presently have any employment contracts with the Named
Officers.
Management Incentive Compensation Plan
In early 1998, the Compensation Committee of the Board of Directors
approved a Management Incentive Compensation Plan, under which selected key
employees, including executive officers, are eligible to receive bonus payments.
At the beginning of the year, financial objectives were established and approved
by the Compensation Committee for each participant in the program. A minimum
performance level must be achieved by the Company before any bonus may be earned
by a participant. Thereafter, an established progression rewards higher levels
of achievement with greater bonus payments. Aggregate bonuses payable under the
Management Incentive Compensation Plan in any one year will be limited to a
pre-determined percentage of each participant's salary.
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<PAGE> 48
CERTAIN TRANSACTIONS
In connection with the Company's Series F Preferred Stock Financing on
March 5, 1996, the Company and the holders of Convertible Preferred Stock
entered into a Fourth Amended and Restated Registration Rights Agreement (the
"Registration Rights Agreement"). Pursuant to the Registration Rights Agreement,
holders of Convertible Preferred Stock that will be converted into Common Stock
in connection with this offering have the right, beginning six months after the
date of this offering and subject to certain limitations and conditions, to
require the Company to file registration statements under the Securities Act to
register all or a part of their shares of Common Stock. The Company, in certain
circumstances, may defer such registrations, and the Underwriters have the
right, subject to certain limitations, to limit the number of shares included in
such registrations. In the event that the Company proposes to register any of
its securities under the Securities Act, either for its own account or for the
account of other securities holders, the holders of Convertible Preferred Stock
are entitled to include their shares of Common Stock in such registration,
subject to marketing and other limitations. Generally, the Company is required
to bear all of the expenses of such registration. Ameritech Development Corp.,
which holds in the aggregate 23.5% of the outstanding capital stock of the
Company (on an as-converted basis), The Hill Partnership III, L.P. (the "Hill
Partnership"), which holds in the aggregate 25.7% of the outstanding capital
stock of the Company (on an as-converted basis), Boston Capital Ventures Limited
Partnership and its affiliates, which hold in the aggregate 25.0% of the
outstanding capital stock of the Company (on an as-converted basis), are parties
to the Registration Rights Agreement. John G. Hill, an affiliate of The Hill
Partnership, and Darrell A. Williams, an affiliate of Ameritech Development
Corp., are Directors of the Company.
The Company provides 9-1-1 OSS services pursuant to a 9-1-1 Services
Agreement dated as of August 31, 1994, as amended, between Ameritech Information
Systems, Inc. and the Company. Pursuant to a Master Lease dated as of March 11,
1996, with Ameritech Credit Corporation, the Company leases certain personal
property. Additionally, the Company is a party to a Consulting Agreement dated
October 27, 1997 with Ameritech Mobile Communications, Inc. pursuant to which
the Company performed a market survey regarding the provision of 9-1-1 service
to cellular telephone subscribers. Ameritech Information Systems, Inc.,
Ameritech Credit Corporation and Ameritech Mobile Communications, Inc. are
affiliates of Ameritech Development Corp. The Company received net proceeds of
approximately $3,226,000, $6,606,000 and $6,959,000 in 1995, 1996 and 1997,
respectively, pursuant to these agreements.
The Company believes that the terms of the transactions described above
were no less favorable to the Company than would have been obtained from an
unaffiliated third party. Any future transactions between the Company and any of
its officers, Directors or principal stockholders will be on terms no less
favorable to the Company than could be obtained from unaffiliated third parties
and will be approved by a majority of the independent and disinterested members
of the Board of Directors.
The Company plans to enter into the Indemnification Agreements with its
Directors and executive officers, effective upon the effectiveness of the
Registration Statement of which this Prospectus forms a part. Subject to the
provisions of the Indemnification Agreements, the Company shall indemnify and
advance expenses to such Directors and executive officers in connection with
their involvement in any event or occurrence that arises in their capacity as,
or as a result of, their positions with the Company. See
"Management -- Limitations on Liability and Indemnification Matters."
46
<PAGE> 49
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of February 28, 1998, and as adjusted
to reflect the sale of 3,300,000 shares of the Company's Common Stock offered
hereby by (i) each person who is known by the Company to beneficially own more
than 5% of the Company's Common Stock, (ii) each of the Company's Directors,
(iii) each of the Named Officers, (iv) all current executive officers and
Directors as a group and (v) other Selling Stockholders.
<TABLE>
<CAPTION>
SHARES SHARES
5% STOCKHOLDERS, DIRECTORS, BENEFICIALLY OWNED NUMBER BENEFICIALLY OWNED
NAMED OFFICERS AND PRIOR TO OFFERING(1) OF AFTER OFFERING(1)
ALL DIRECTORS AND -------------------- SHARES -------------------
EXECUTIVE OFFICERS AS A GROUP NUMBER PERCENT OFFERED NUMBER PERCENT
----------------------------- ---------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
The Hill Partnership III(2)............... 2,139,516 25.7% 363,442 1,776,074 17.0%
A Limited Partnership 885 Arapahoe
Boulder, Colorado 80302
John G. Hill(2)........................... 2,139,516 25.7 363,442 1,776,074 17.0
Boston Capital Ventures Limited
Partnership(3).......................... 2,083,945 25.0 354,692 1,729,253 16.6
45 State Street Boston, Massachusetts
02109
David Kronfeld(3)......................... 2,083,945 25.0 354,692 1,729,253 16.6
Ameritech Development Corporation(4)...... 1,961,054 23.5 333,126 1,627,928 15.6
30 S. Wacker Drive, 37th Floor Chicago,
Illinois 60606
Darrell A. Williams(4).................... 1,961,054 23.5 333,126 1,627,928 15.6
George K. Heinrichs(5).................... 452,970 5.3 28,481 424,489 4.0
Nancy K. Hamilton(6)...................... 106,295 1.3 8,757 97,538 *
John J. Sims(7)........................... 80,363 1.0 11,502 68,861 *
All Directors and executive officers as a
group (6 persons)(8).................... 6,824,143 77.9 1,100,000 5,724,143 52.7
</TABLE>
- ------------
* Less than 1%
(1) Except as otherwise indicated, the persons named in the table have sole
voting and investment power with respect to the shares of Common Stock shown
as beneficially owned by them, subject to community property laws where
applicable. Beneficial ownership as reported in the above table has been
determined in accordance with Rule 13d-3 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), based on information furnished by
the persons listed, and represents the number of shares of Common Stock for
which a person, directly or indirectly, through any contract, management,
understanding, relationship or otherwise, has or shares voting power,
including the power to vote or direct the voting of such shares, or
investment power, including the power to dispose or to direct the
disposition of such shares, and includes shares which may be acquired upon
the exercise of options within 60 days following February 28, 1998. However,
shares that may be acquired upon the exercise of options are not deemed
outstanding for the purposes of computing the percentage ownership of any
other person. The address for Messrs. Heinrichs, Sims, Hill, Williams and
Kronfeld and Ms. Hamilton is c/o SCC Communications Corp., 6285 Lookout
Road, Boulder, Colorado 80301. This table assumes no exercise of the
Underwriters' over-allotment option. Percentage of ownership is based on
8,341,754 shares of Common Stock outstanding on December 31, 1997, and
10,442,007 shares of Common Stock to be outstanding after completion of this
offering.
(2) The general partner of the Hill Partnership III, L.P., is Hill Carman
Ventures, L.P. John G. Hill, a Director of the Company, and Carl D. Carman
are the general partners of Hill Carman Ventures, L.P., and have joint
voting and investment control over the shares held by the Hill Partnership
III, L.P. Mr. Hill and Mr. Carman disclaim beneficial ownership of such
shares except to the extent of their pecuniary interest in Hill Carman
Ventures, L.P.
(3) Includes 314,818 shares held by Boston Capital Ventures, Limited
Partnership, 314,818 shares held by Boston Capital Ventures II, Limited
Partnership, 635,912 shares held by Business Development Partners, L.P. and
818,397 shares held by Boston Capital Ventures III Limited Partnership. The
general partner of Boston Capital Ventures Limited Partnership is BC&V
Limited Partnership. The general partner of Boston Capital Ventures II
Limited Partnership is Boston Capital Partners II. The general partner of
Business Development Partners, L.P. and Boston Capital Ventures III Limited
Partnership is BD Partners Limited
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<PAGE> 50
Partnership. David Kronfeld, a Director of the Company, is a general partner
of certain of the entities associated with the Boston Capital Ventures
entities. Mr. Kronfeld disclaims beneficial ownership of any of the shares
owned by Boston Capital Ventures Limited Partnership, Boston Capital
Ventures II Limited Partnership, Business Development Partners, L.P. and
Boston Capital Ventures III Limited Partnership, except to the extent of his
pecuniary interest in certain Boston Capital Ventures entities.
(4) Ameritech Development Corporation is a wholly-owned subsidiary of Ameritech
Corporation, a publicly traded company. Darrell A. Williams, a Director of
the Company, is a Vice President of Ameritech Development Corporation, the
board of directors of which has voting and investment control over the
shares held by Ameritech Development Corporation. Mr. Williams disclaims
beneficial ownership of such shares.
(5) Includes options to purchase 229,637 shares of Common Stock, all of which
were immediately exercisable or exercisable within 60 days of February 28,
1998.
(6) Includes options to purchase 106,295 shares of Common Stock, all of which
were immediately exercisable or exercisable within 60 days of February 28,
1998.
(7) Includes options to purchase 80,363 shares of Common Stock, all of which
were immediately exercisable or exercisable within 60 days of February 28,
1998.
(8) See Notes (2) through (7). Includes options to purchase 416,295 shares of
Common Stock, all of which were immediately exercisable or exercisable
within 60 days of February 28, 1998.
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<PAGE> 51
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue 30,000,000 shares of Common Stock, $.001
par value, and 15,000,000 shares of undesignated preferred stock, $.001 par
value (the "Preferred Stock").
COMMON STOCK
As of April 9, 1998, there were 8,342,007 shares of Common Stock
outstanding held of record by 122 stockholders. As of April 9, 1998, options to
purchase an aggregate of 1,113,613 shares of Common Stock were also outstanding.
See "Management -- Stock Plans."
The holders of Common Stock are entitled to one vote per share on all
matters to be voted on by shareholders and have cumulative voting rights with
respect to the election of directors. Subject to the prior rights of holders of
Preferred Stock, if any, the holders of Common Stock are entitled to receive
such dividends, if any, as may be declared from time to time by the Board of
Directors in its discretion from funds legally available therefor. Upon
liquidation or dissolution of the Company, the remainder of the assets of the
Company will be distributed ratably among the holders of Common Stock after
payment of liabilities and the liquidation preferences of any outstanding shares
of Preferred Stock. The Common Stock has no preemptive or other subscription
rights and there are no conversion rights or redemption or sinking fund
provisions with respect to such shares. All of the outstanding shares of Common
Stock are, and the shares to be sold in this offering will be, fully paid and
nonassessable.
PREFERRED STOCK
The Company is authorized to issue 15,000,000 shares of undesignated
Preferred Stock. The Board of Directors has the authority to issue the Preferred
Stock in one or more series and to fix the price, rights, preferences,
privileges and restrictions thereof, including dividend rights, dividend rates,
conversion rights, voting rights, terms of redemption, redemption prices,
liquidation preferences and the number of shares constituting a series or the
designation of such series, without any further vote or action by the Company's
stockholders. The issuance of Preferred Stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of delaying, deferring or preventing a change in
control of the Company without further action by the shareholders and may
adversely affect the market price of, and the voting and other rights of, the
holders of Common Stock. The Company has no current plans to issue any shares of
Preferred Stock.
REGISTRATION RIGHTS
Under the Registration Rights Agreement, the holders of approximately
6,188,575 shares of Common Stock and their permitted transferees (the "Holders")
are entitled to certain rights with respect to the registration of such shares
("Registrable Securities") under the Securities Act. Under the terms of the
Registration Rights Agreement, the holders of at least 50% of the Registrable
Securities may require, on two occasions after six months from the effective
date of this offering, that the Company use its best efforts to register the
Registrable Securities for public resale. In addition, if the Company proposes
to register any of its securities under the Securities Act, either for its own
account or for the account of other security holders exercising registration
rights, the Holders are entitled to notice of such registration and are entitled
to include shares of such Common Stock therein. The Holders may also require the
Company on an unlimited number of occasions to register all or a portion of
their Registrable Securities on Form S-3 under the Securities Act when use of
such form becomes available to the Company. All such registration rights are
subject to certain conditions and limitations, including the right of the
underwriters of an offering to limit the number of shares to be included in such
registration. In addition, the Company need not effect a registration within six
months following a previous registration, or after such time as all Holders may
sell under Rule 144(k) all shares of Common Stock to which such registration
rights apply. See "Certain Transactions."
Additionally, the holder of a warrant to purchase 195,148 shares of Common
Stock is entitled to request registration of such shares pursuant to a separate
registration rights agreement. In addition, if the Company proposes to register
any of its securities under the Securities Act, either for its own account or
for the account
49
<PAGE> 52
or for other security holders exercising registration rights, the warrant holder
is entitled to notice of such registration and is entitled to include shares of
such Common Stock therein. The warrant will be exercised in full upon the
closing of this offering.
POSSIBLE ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS
Amended and Restated Certificate of Incorporation and Bylaws
The Company's Amended and Restated Certificate of Incorporation authorizes
the Board to establish one or more series of undesignated Preferred Stock, the
terms of which can be determined by the Board at the time of issuance. See
"-- Preferred Stock." The Amended and Restated Certificate of Incorporation also
provides that all stockholder actions must be effected at a duly called meeting
of stockholders and not by a consent in writing. In addition, effective upon the
closing of this offering, the Company's Amended and Restated Bylaws will not
permit stockholders of the Company to call a special meeting of stockholders;
only the Company's Chief Executive Officer, President or Chairman of the Board
or a majority of the Board will be permitted to call a special meeting of
stockholders. The Amended and Restated Bylaws also will require that
stockholders give advance notice to the Company's Secretary of any nominations
for Director or other business to be brought by stockholders at any
stockholders' meeting and require a supermajority vote of members of the Board
or stockholders to amend certain provisions of the Amended and Restated Bylaws.
These provisions of the Amended and Restated Certificate of Incorporation and
the Amended and Restated Bylaws could discourage potential acquisition proposals
and could delay or prevent a change in control of the Company. Such provisions
also may have the effect of preventing changes in the management of the Company.
Delaware Anti-Takeover Statute
The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203"), which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder (defined as any person or entity that is the beneficial owner of at
least 15% of a corporation's voting stock) for a period of three years following
the time that such stockholder became an interested stockholder, unless: (i)
prior to such time, the board of directors of the corporation approved either
the business combination or the transaction that resulted in the stockholder's
becoming an interested stockholder; (ii) upon consummation of the transaction
that resulted in the stockholder's becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding, for purposes of
determining the number of shares outstanding, those shares owned (x) by persons
who are directors and also officers and (y) by employee stock plans in which
employee participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange offer;
or (iii) at or subsequent to such time, the business combination is approved by
the Board and authorized at an annual or special meeting of stockholders, and
not by written consent, by the affirmative vote of at least two-thirds of the
outstanding voting stock that is not owned by the interested stockholder.
Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii) any
sale, lease, exchange, mortgage, transfer, pledge or other disposition involving
the interested stockholder and 10% or more of the assets of the corporation;
(iii) subject to certain exceptions, any transaction which results in the
issuance or transfer by the corporation of any stock of the corporation to the
interested stockholder; (iv) any transaction involving the corporation that has
the effect of increasing the proportionate share of the stock of any class or
series of the corporation beneficially owned by the interested stockholder; or
(v) the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or through
the corporation.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is
.
50
<PAGE> 53
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, there will be 10,442,007 shares of Common
Stock of the Company outstanding. There were also approximately 625,129 shares
covered by vested options outstanding, which are not considered to be
outstanding shares. Of the outstanding shares, 3,361,469 shares, including the
3,300,000 shares of Common Stock sold in this offering, will be immediately
eligible for resale in the public market without restriction under the
Securities Act, except that any shares purchased in this offering by affiliates
of the Company ("Affiliates"), as that term is defined in Rule 144 under the
Securities Act ("Rule 144"), may generally only be resold in compliance with
applicable provisions of Rule 144. Beginning approximately 90 days after the
date of this Prospectus, approximately 16,665 additional shares of Common Stock
will become eligible for immediate resale in the public market, subject to
compliances to certain of such shares with applicable provisions of Rules 144
and Rule 701 under the Securities Act ("Rule 701").
The Company, the executive officers and Directors of the Company, and
certain security holders have agreed pursuant to lock-up agreements that they
will not, without the prior written consent of BancAmerica Robertson Stephens,
offer, sell or otherwise dispose of the shares of Common Stock beneficially
owned by them for a period of 180 days from the date of this Prospectus. Each
holder who signed a lock-up agreement has agreed, subject to certain limited
exceptions, not to sell or otherwise dispose of any of the shares held by them
as of the date of this Prospectus for a period of 180 days after the date of
this Prospectus without the prior written consent of BancAmerica Robertson
Stephens. At the end of such 180-day period, approximately 8,706,944 shares of
Common Stock (including approximately 671,040 shares issuable upon exercise of
vested options) will be eligible for immediate resale, subject to compliance
with Rule 144 and Rule 701. The remainder of the approximately 110,068 shares of
Common Stock outstanding will become eligible for sale at various times over a
period of less than two years and could be sold earlier if the holders exercise
any available registration rights or upon vesting pursuant to the Company's
standard four year vesting schedule. Approximately an additional 442,573 shares
issuable upon exercise of existing options will become eligible for sale at
various times over a period of less than four years.
In general, under Rule 144 beginning approximately 90 days after the
effective date of the Registration Statement of which this Prospectus is a part,
a stockholder, including an Affiliate, who has beneficially owned his or her
restricted securities (as that term is defined in Rule 144) for at least one
year from the later of the date such securities were acquired from the Company
or (if applicable) the date they were acquired from an Affiliate is entitled to
sell, within any three-month period, a number of such shares that does not
exceed the greater of one percent of the then outstanding shares of Common Stock
(approximately 104,420 shares immediately after the offering) or the average
weekly trading volume in the Common Stock during the four calendar weeks
preceding the date on which notice of such sale was filed under Rule 144,
provided certain requirements concerning availability of public information,
manner of sale and notice of sale are satisfied. In addition, under Rule 144(k),
if a period of at least two years has elapsed between the later of the date
restricted securities were acquired from the Company or (if applicable) the date
they were acquired from an Affiliate of the Company, a stockholder who is not an
Affiliate of the Company at the time of sale and has not been an Affiliate of
the Company for at least three months prior to the sale is entitled to sell the
shares immediately without compliance with the foregoing requirements under Rule
144.
Securities issued in reliance on Rule 701 (such as shares of Common Stock
that may be acquired pursuant to the exercise of certain options granted prior
to this offering) are also restricted securities and, beginning 90 days after
the date of this Prospectus, may be sold by stockholders other than an Affiliate
of the Company subject only to the manner of sale provisions of Rule 144 and by
an Affiliate under Rule 144 without compliance with its one-year holding period
requirement.
Prior to this offering, there has been no public market for the Common
Stock. No prediction can be made as to the effect, if any, that market sales of
shares or the availability of shares for sale will have on the market price of
the Common Stock prevailing from time to time. The Company is unable to estimate
the number of shares that may be sold in the public market pursuant to Rule 144,
since this will depend on the market price of the Common Stock, the personal
circumstances of the sellers and other factors. Nevertheless, sales of
significant amounts of the Common Stock of the Company in the public market
could adversely affect the
51
<PAGE> 54
market price of the Common Stock and could impair the Company's ability to raise
capital through an offering of its equity securities.
In addition, the Company intends to register approximately 90 days after
the effective date of this offering a total of 1,901,055 shares of Common Stock
subject to outstanding options or reserved for issuance under the Company's 1998
Plan or outstanding shares that are subject to repurchase by the Company plus
200,000 shares of Common Stock reserved for issuance under the Purchase Plan.
Furthermore, upon expiration of lock-up agreements described above, holders of
approximately 6,383,723 shares of Common Stock will be entitled to certain
registration rights with respect to such shares. If such holders, by exercising
their registration rights, cause a large number of shares to be registered and
sold in the public market, such sales could have a material adverse effect on
the market price of the Common Stock.
52
<PAGE> 55
UNDERWRITING
The Underwriters named below (the "Underwriters"), acting through their
representatives, BancAmerica Robertson Stephens and Hambrecht & Quist LLC (the
"Representatives"), have severally agreed with the Company and the Selling
Stockholders, subject to the terms and conditions of the Underwriting Agreement,
to purchase from the Company and the Selling Stockholders the number of shares
of Common Stock set forth opposite names below. The Underwriters are committed
to purchase and pay for all such shares if any are purchased.
<TABLE>
<CAPTION>
NUMBER
OF
UNDERWRITER SHARES
- ----------- ---------
<S> <C>
BancAmerica Robertson Stephens.......................
Hambrecht & Quist LLC................................
---------
Total............................................. 3,300,000
=========
</TABLE>
The Company and the Selling Stockholders have been advised by the
Representatives that the Underwriters propose to offer the shares of Common
Stock to the public at the initial public offering price set forth on the cover
page of this Prospectus and to certain dealers at such price less a concession
not in excess of $ per share, of which $ may be reallowed to
other dealers. After the initial public offering, the public offering price,
concession and reallowance to dealers may be reduced by the Representatives. No
such reduction shall change the amount of proceeds to be received by the Company
and the Selling Stockholders as set forth on the cover page of this Prospectus.
The Company and certain Selling Stockholders have granted to the
Underwriters an option, exercisable during the 30-day period after the date of
this Prospectus, to purchase up to and additional shares of
Common Stock, respectively, at the same price per share as the Company and the
Selling Stockholders will receive for the 3,300,000 shares that the Underwriters
have agreed to purchase. To the extent that the Underwriters exercise such
option, each of the Underwriters will have a firm commitment to purchase
approximately the same percentage of such additional shares that the number of
shares of Common Stock to be purchased by it shown in the above table represents
as a percentage of the 3,300,000 shares offered hereby. If purchased, such
additional shares will be sold by the Underwriters on the same terms as those on
which the 3,300,000 shares are being sold. The Company will be obligated,
pursuant to the option, to sell shares to the extent the option is exercised.
The Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of shares of Common Stock offered hereby.
The Underwriting Agreement contains covenants of indemnity among the
Underwriters, the Company and the Selling Stockholders against certain civil
liabilities, including liabilities under the Securities Act and liabilities
arising from breaches of representations and warranties contained in the
Underwriting Agreement.
Each officer and director and certain holders of shares of the Company's
Common Stock have agreed with the Representatives, for a period of 180 days
after the date of this Prospectus (the "Lock-Up Period"), subject to certain
exceptions, not to offer to sell, contract to sell, or otherwise sell, dispose
of, loan, pledge or grant any rights with respect to any shares of Common Stock,
any options or warrants to purchase any shares of Common Stock, or any
securities convertible into or exchangeable for shares of Common Stock owned as
of the date of this Prospectus or thereafter acquired directly by such holders
or with respect to which they have or
53
<PAGE> 56
hereafter acquire the power of disposition, without the prior written consent of
BancAmerica Robertson Stephens. However, BancAmerica Robertson Stephens may, in
its sole discretion and at any time without notice, release all or any portion
of the securities subject to lock-up agreements. There are no agreements between
the Representatives and any of the Company's stockholders providing consent by
the Representatives to the sale of shares prior to the expiration of the Lock-Up
Period. The Company has agreed that during the Lock-Up Period, the Company will
not, subject to certain exceptions, without the prior written consent of
BancAmerica Robertson Stephens, (i) consent to the disposition of any shares
held by stockholders prior to the expiration of the Lock-Up Period or (ii)
issue, sell, contract to sell or otherwise dispose of, any shares of Common
Stock, any options or warrants to purchase any shares of Common Stock or any
securities convertible into, exercisable for or exchangeable for shares of
Common Stock, other than the Company's sale of shares in this offering, the
issuance of Common Stock upon the exercise of outstanding options and warrants
and the Company's issuance of options and stock under the existing stock option
and stock purchase plans. See "Shares Eligible for Future Sale."
The Underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
Prior to this offering, there has been no public market for the Common
Stock of the Company. Consequently, the initial public offering price for the
Common Stock offered hereby will be determined through negotiations between the
Company and the Representatives. Among the factors to be considered in such
negotiations are prevailing market conditions, certain financial information of
the Company, market valuations of other companies that the Company and the
Representatives believe to be comparable to the Company, estimates of the
business potential of the Company, the present state of the Company's
development and other factors deemed relevant.
The Representatives have advised the Company that, pursuant to Regulation M
under the Securities Act, certain persons participating in the offering may
engage in transactions, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids, that may have the effect of
stabilizing or maintaining the market price of the Common Stock at a level above
that which might otherwise prevail in the open market. A "stabilizing bid" is a
bid for or the purchase of the Common Stock on behalf of the Underwriters for
the purpose of fixing or maintaining the price of the Common Stock. A "syndicate
covering transaction" is the bid for or the purchase of the Common Stock on
behalf of the Underwriters to reduce a short position incurred by the
Underwriters in connection with the offering. A "penalty bid" is an arrangement
permitting the Representatives to reclaim the selling concession otherwise
accruing to an Underwriter or syndicate member in connection with the offering
if the Common Stock originally sold by such Underwriter or syndicate member is
purchased by the Representatives in a syndicate covering transaction and has
therefore not been effectively placed by such Underwriter or syndicate member.
The Representatives have advised the Company that such transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
54
<PAGE> 57
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Brobeck, Phleger & Harrison LLP, Denver, Colorado. Certain legal
matters in connection with the offering will be passed upon for the Underwriters
by Foley, Hoag & Eliot LLP, Boston, Massachusetts.
EXPERTS
The Financial Statements of the Company as of December 31, 1996 and 1997,
and for each of the three years in the period ended December 31, 1997, included
in this Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated by their report with respect thereto, and are included
in reliance upon the authority of said firm as experts in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act,
with respect to the Common Stock offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. For further information with respect to the
Company and such Common Stock, reference is made to the Registration Statement
and the exhibits and schedules filed as a part thereof. Statements contained in
this Prospectus as to the contents of any contract or any other document
referred to are not necessarily complete. In each instance, reference is made to
the copy of such contract or document filed as an exhibit to the Registration
Statement, and each such statement is qualified in all respects by such
reference. Copies of the Registration Statement, including exhibits and
schedules thereto, may be inspected without charge at the Commission's principal
office in Washington, D.C., or obtained at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. The Commission maintains a World Wide Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The address of the site is
http://www.sec.gov.
The Company is subject to the informational requirements of the Exchange
Act and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices
located at 7 World Trade Center, Suite 1300, New York, New York 10048 and 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission also makes electronic filings publicly available on the
Internet within 24 hours of acceptance. The Commission's Web site is located at
http://www.sec.gov. The Commission's Web site also contains reports, proxy and
information statements, and other information regarding registrants that file
electronically with the Commission. The Company has applied to have its Common
Stock quoted on the Nasdaq National Market. Reports, proxy and information
statements and other information concerning the Company may be inspected at the
National Association of Securities Dealers, Inc. at 1735 K Street, N.W.,
Washington, D.C. 20006.
55
<PAGE> 58
GLOSSARY OF TERMS
"AIN" -- Advanced Intelligent Network. A system of interconnected telephone
switches and specialized computers that provides advanced telephone
functionality based on computer software rather than software in the telephone
switch.
"ALI" -- Automatic Location Information. The location information
associated with the number of the telephone used to dial 9-1-1. ALI Data may
include address information, subaddress information (such as office number) and
information about the appropriate emergency response organization for the
jurisdiction.
"ANI" -- Automatic Number Identification. The number associated with the
telephone from which a 9-1-1 call is placed.
"cellular" -- Cellular Mobile Telephone System (or CMTS). A wireless
telephone system based on a grid of cell sites. Each cell site serves a limited
geographic area and contains transmitters, receivers and antennae. Each cell
site is connected to centrally-located switching gear and control equipment.
Each cellular telephone has a unique identification number which allows the
central switch to track and coordinate all mobile phones in the service area,
including the hand-offs from one cell site to another.
"CLECs" -- Competitive Local Exchange Carriers. A company that provides its
customers with an alternative to an ILEC for local transport of private line,
special access and interstate and local transport of switched access
telecommunications services.
"E9-1-1" -- Enhanced 9-1-1 service. An emergency telephone response service
that provides ANI and ALI to the PSAP responsible for dispatching police, fire
and other emergency services.
"FCC" -- Federal Communications Commission.
"ILECs" -- Incumbent Local Exchange Carriers. A company that provides its
customers with local transport of private line, special access and interstate
and local transport of switched access telecommunications services. These
companies typically are RBOCS or independent companies that were the only
suppliers before competition.
"LNP" -- Local Number Portability. LNP, which enables customers to retain
their local phone number when changing service providers, was mandated by the
Telecommunications Act of 1996 and regulations promulgated thereunder in order
to facilitate a level playing field for local telephone service competition. The
implementation of LNP utilizes a new ten-digit telephone number, known as the
Location Routing Number, or LRN. The LRN is used by the originating carrier to
determine the identity and location of the terminating carrier's switch.
"NDSC" -- The Company's National Data Services Center. Through the NDSC,
the Company offers comprehensive and cost-effective data management services to
ILECs, CLECs and wireless carriers, including system activation, routine data
administration, transaction processing and performance management with a high
level of security and survivability.
"1996 Act" -- The Telecommunications Act of 1996, which imposed, among
other things, new duties on local exchange carriers in order to open local
telephone markets to competition.
"Order" -- Report & Order 94-102 issued by the FCC on June 12, 1996, which
mandated the adoption of 9-1-1 technology by wireless carriers in Phase I and
Phase II.
"OSS" -- Operational Support Systems. The systems and procedures that
directly support the daily operation of the telecommunications infrastructure.
The average local exchange carrier has hundreds of OSS, which typically are
categorized into ordering, provisioning, service assurance and billing.
"PBX" -- Private Branch Exchange. Privately owned switch systems typically
used in office buildings, college campuses and apartment complexes that connect
calls to a phone company.
"Phase I" -- Mandate pursuant to the Order that required wireless carriers
to provide to requesting PSAP's, at the time of a 9-1-1 call, the caller's
telephone number and location of the receiving cell site.
56
<PAGE> 59
Wireless carriers had to comply with Phase I mandates by the later of April 1,
1998, or six months after the PSAP request.
"Phase II" -- Mandate pursuant to the Order requiring wireless carriers to
locate a 9-1-1 caller to within 125 meters, subject to FCC guidelines. Wireless
carriers must comply with Phase II mandates for requesting PSAPs by October 1,
2001.
"PSAP" -- Public Safety Answering Point. A public agency responsible for
receiving 9-1-1 calls in a jurisdiction.
"RBOCs" -- Regional Bell Operating Companies. The seven local exchange
carriers that were created in 1984 as a result of the breakup of AT&T.
"switch" -- A central facility capable of establishing, routing and
releasing connections on a per call basis between two or more circuits, services
or systems. Switches are used for both wireline and wireless communications
networks.
"VSAT" -- Very Small Aperture Terminal. A data communication system that
utilizes high power geosynchronous satellites and small diameter antenna earth
stations for communications.
57
<PAGE> 60
SCC COMMUNICATIONS CORP.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Balance Sheets as of December 31, 1996 and 1997............. F-3
Statements of Operations for the years ended December 31,
1995, 1996 and 1997....................................... F-5
Statements of Stockholders' Equity (Deficit) for the years
ended December 31, 1995, 1996 and 1997.................... F-6
Statements of Cash Flows for the years ended December 31,
1995, 1996 and 1997....................................... F-7
Notes to Financial Statements............................... F-8
</TABLE>
F-1
<PAGE> 61
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of SCC Communications Corp.:
We have audited the accompanying balance sheets of SCC Communications Corp.
(a Delaware corporation) as of December 31, 1996 and 1997, and the related
statements of operations, stockholders' equity (deficit) and cash flows for each
of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of SCC Communications Corp. as
of December 31, 1996 and 1997, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
February 20, 1998 (except with
respect to the matters in
Notes 2 and 4 as to which the
dates are March 18, 1998 and
April 8, 1998)
F-2
<PAGE> 62
SCC COMMUNICATIONS CORP.
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
----------------- DECEMBER 31,
1996 1997 1997
------- ------- ------------
(UNAUDITED)
(NOTE 2)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 32 $ 2,503
Accounts receivable, net of allowance for doubtful
accounts of approximately $25 and $50 in 1996 and 1997,
respectively........................................... 1,376 2,328
Unbilled project revenue.................................. 806 996
Prepaids and other........................................ 46 40
Current assets from discontinued operations (Note 3)...... 4,778 184
------- -------
Total current assets.............................. 7,038 6,051
------- -------
PROPERTY AND EQUIPMENT, at cost:
Computer hardware and equipment........................... 13,377 18,844
Furniture and fixtures.................................... 581 709
Leasehold improvements.................................... 552 621
Property and equipment from discontinued operations (Note
3)..................................................... 384 --
------- -------
14,894 20,174
Less -- Accumulated depreciation.......................... (4,613) (8,136)
Less -- Accumulated depreciation from discontinued
operations (Note 3).................................... (163) --
------- -------
Total property and equipment...................... 10,118 12,038
------- -------
OTHER ASSETS................................................ 62 86
SOFTWARE DEVELOPMENT COSTS:
From continuing operations, net of accumulated
amortization of $97 and $201 in 1996 and 1997,
respectively........................................... 397 431
From discontinued operations (Note 3), net of accumulated
amortization of $968 in 1996........................... 867 --
------- -------
Total software development costs.................. 1,264 431
------- -------
$18,482 $18,606
======= =======
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-3
<PAGE> 63
SCC COMMUNICATIONS CORP.
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
----------------- DECEMBER 31,
1996 1997 1997
------- ------- ------------
(UNAUDITED)
(NOTE 2)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable.......................................... $ 729 $ 965
Payroll-related accruals.................................. 324 780
Other accrued liabilities................................. 1,410 2,213
Current portion of notes payable (Note 6)................. 2,005 986
Current portion of capital lease obligations (Note 6)..... 3,346 1,638
Deferred contract revenue................................. 2,310 3,439
Current liabilities from discontinued operations (Note
3)..................................................... 4,259 --
------- -------
Total current liabilities......................... 14,383 10,021
LONG-TERM DEBT:
Notes payable, net of current portion (Note 6)............ 145 4,000
Discount on long-term note payable (Note 4)............... -- (1,430)
Capital lease obligations, net of current portion (Note
6)..................................................... 3,173 4,321
------- -------
Total liabilities................................. 17,701 16,912
------- -------
COMMITMENTS AND CONTINGENCIES (Notes 1, 8 and 12)
MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK (Note 4)
(Series A, B, C, D, E and F) $.001 par value; 6,188,575
shares authorized; 6,188,575 and 6,188,575 shares
issued and outstanding; entitled to $13,849 and $14,589
in 1996 and 1997, respectively, in liquidation or upon
redemption if requested by the holders after September
1, 1998, stated at redemption value (none outstanding
pro forma)............................................. 13,849 14,589 --
PUTABLE COMMON STOCK WARRANT (Note 4)....................... -- 1,472 --
STOCKHOLDERS' EQUITY (DEFICIT) (Note 5):
Preferred stock, $.001 par value; 15,000,000 shares
authorized; none issued or outstanding (Note 2)........ -- -- --
Common stock, $.001 par value; 30,000,000 shares
authorized; 1,840,899 and 1,994,281 shares issued in
1996 and 1997, respectively, 8,378,004 shares issued
pro forma.............................................. 2 2 8
Additional paid-in capital................................ 298 452 16,507
Treasury stock, 36,250 shares, at cost.................... (3) (3) (3)
Stock subscriptions receivable............................ (19) (99) (99)
Accumulated deficit....................................... (13,346) (14,719) (14,719)
------- ------- --------
Total stockholders' equity (deficit).............. (13,068) (14,367) $ 1,694
------- ------- ========
$18,482 $18,606
======= =======
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-4
<PAGE> 64
SCC COMMUNICATIONS CORP.
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
REVENUE:
Data management services................................ $ 3,531 $ 13,165 $ 24,005
Licenses and implementation services.................... 3,882 1,637 3,067
--------- --------- ---------
Total revenue................................... 7,413 14,802 27,072
COSTS AND EXPENSES:
Cost of data management services........................ 2,840 7,996 15,378
Cost of licenses and implementation services............ 1,041 596 1,283
Sales and marketing..................................... 2,016 3,204 3,850
General and administrative.............................. 830 1,533 3,227
--------- --------- ---------
Total costs and expenses........................ 6,727 13,329 23,738
--------- --------- ---------
INCOME FROM OPERATIONS.................................... 686 1,473 3,334
OTHER INCOME (EXPENSE):
Interest and other income............................... 41 34 88
Interest and other expense.............................. (409) (561) (967)
--------- --------- ---------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES..... 318 946 2,455
PROVISION FOR INCOME TAXES (Note 7)....................... 16 9 172
--------- --------- ---------
NET INCOME FROM CONTINUING OPERATIONS..................... 302 937 2,283
DISCONTINUED OPERATIONS (Note 3):
Loss from operations of discontinued division, net of
tax.................................................. (1,746) (562) (876)
Loss from disposal of discontinued division, net of
tax.................................................. -- -- (2,032)
--------- --------- ---------
NET INCOME (LOSS)......................................... $ (1,444) $ 375 $ (625)
========= ========= =========
NET INCOME (LOSS) FROM CONTINUING OPERATIONS PER SHARE
(Note 2):
Basic................................................... $ (0.02) $ 0.15 $ 0.83
========= ========= =========
Diluted................................................. $ (0.02) $ 0.11 $ 0.26
========= ========= =========
SHARES USED IN COMPUTING NET INCOME (LOSS) FROM CONTINUING
OPERATIONS PER SHARE (Note 2):
Basic................................................... 1,652,379 1,790,230 1,857,413
========= ========= =========
Diluted................................................. 1,652,379 8,299,362 8,788,816
========= ========= =========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-5
<PAGE> 65
SCC COMMUNICATIONS CORP.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
TOTAL
COMMON STOCK ADDITIONAL STOCK TREASURY STOCK STOCKHOLDERS
------------------ PAID-IN SUBSCRIPTIONS ---------------- ACCUMULATED EQUITY
SHARES AMOUNT CAPITAL RECEIVABLE SHARES AMOUNT DEFICIT (DEFICIT)
--------- ------ ---------- ------------- ------- ------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES, at December 31,
1994...................... 1,296,260 $ 1 $231 $(14) (36,250) $(3) $(11,276) $(11,061)
Series E mandatorily
redeemable convertible
preferred stock
("Convertible Preferred
Stock") issued at $2.55
per share in exchange
for notes payable and
cancellation of
warrants................ -- -- (28) -- -- -- -- (28)
Dividends accrued on
Series D, E and F
Convertible Preferred
Stock................... -- -- -- -- -- -- (329) (329)
Exercise of stock options,
at various prices per
share ranging from $0.12
to $0.30................ 525,188 1 75 (5) -- -- -- 71
Net loss.................. -- -- -- -- -- -- (1,444) (1,444)
--------- --- ---- ---- ------- --- -------- --------
BALANCES, at December 31,
1995...................... 1,821,448 2 278 (19) (36,250) (3) (13,049) (12,791)
Dividends accrued on
Series D, E and F
Convertible Preferred
Stock................... -- -- -- -- -- -- (672) (672)
Exercise of stock options,
at various prices per
share ranging from $0.12
to $1.50................ 19,451 -- 20 -- -- -- -- 20
Net income................ -- -- -- -- -- -- 375 375
--------- --- ---- ---- ------- --- -------- --------
BALANCES, at December 31,
1996...................... 1,840,899 2 298 (19) (36,250) (3) (13,346) (13,068)
Dividends accrued on
Series D, E and F
Convertible Preferred
Stock................... -- -- -- -- -- -- (740) (740)
Exercise of stock options,
including stock issued
at $0.12 and $3.00 per
share in exchange for
notes receivable........ 153,382 -- 154 (80) -- -- -- 74
Common stock warrant put
price adjustment
(Note 4)................ -- -- -- -- -- -- (8) (8)
Net loss.................. -- -- -- -- -- -- (625) (625)
--------- --- ---- ---- ------- --- -------- --------
BALANCES, at December 31,
1997...................... 1,994,281 $ 2 $452 $(99) (36,250) $(3) $(14,719) $(14,367)
========= === ==== ==== ======= === ======== ========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-6
<PAGE> 66
SCC COMMUNICATIONS CORP.
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $(1,444) $ 375 $ (625)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities --
Amortization and depreciation........................... 1,062 2,242 3,534
Amortization of note payable discount................... 5 -- 33
Gain on disposal of assets.............................. (7) -- (40)
Loss on disposal of discontinued division............... -- -- 2,032
Provision for estimated losses on contracts............. 82 (321) (196)
Provision (recovery) of doubtful accounts............... (16) -- 25
Change in --
Accounts receivable................................... (1,370) 102 (977)
Unbilled project revenue.............................. 235 (778) (190)
Prepaids and other.................................... (116) 327 (18)
Accounts payable...................................... (108) 309 236
Accrued liabilities................................... (46) 477 1,337
Deferred contract revenue............................. 1,916 (1,932) 303
Decrease in current assets and liabilities from
discontinued operations............................... (162) (1,257) (74)
------- ------- -------
Net cash provided by (used in) operating
activities....................................... 31 (456) 5,380
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment..................... (455) (2,361) (2,646)
Proceeds from sale of net assets.......................... 14 -- 603
Software development costs................................ (159) (226) (142)
------- ------- -------
Net cash used in investing activities.............. (600) (2,587) (2,185)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable................... 800 2,150 4,275
Proceeds from issuance of convertible notes payable....... 1,000 -- --
Principal payments on notes payable....................... (552) (1,527) (1,439)
Principal payments on capital lease obligations........... (467) (2,528) (3,634)
Exercise of stock options................................. 71 20 74
Proceeds from issuance of Series F Convertible Preferred
Stock................................................... -- 3,956 --
------- ------- -------
Net cash provided by (used in) financing
activities....................................... 852 2,071 (724)
------- ------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 283 (972) 2,471
CASH AND CASH EQUIVALENTS, beginning of year................ 721 1,004 32
------- ------- -------
CASH AND CASH EQUIVALENTS, end of year...................... $ 1,004 $ 32 $ 2,503
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest.................... $ 400 $ 611 $ 942
======= ======= =======
Cash paid during the year for taxes....................... $ 17 $ 4 $ 18
======= ======= =======
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING AND INVESTING
ACTIVITIES:
Conversion of debt and accrued interest thereon to Series
E Convertible Preferred Stock........................... $ 2,633 $ -- $ --
======= ======= =======
Dividends accrued on Series D, E and F Convertible
Preferred Stock......................................... $ 329 $ 673 $ 740
======= ======= =======
Common stock issued to employees in exchange for employee
notes receivable........................................ $ 5 $ -- $ 80
======= ======= =======
Property acquired with capital leases..................... $ 3,735 $ 5,327 $ 3,074
======= ======= =======
Cancellation of common stock warrants..................... $ 101 $ -- --
======= ======= =======
Conversion of debt and accrued interest thereon to Series
F Convertible Preferred Stock........................... $ -- $ 1,044 $ --
======= ======= =======
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-7
<PAGE> 67
SCC COMMUNICATIONS CORP.
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION, BUSINESS AND LIQUIDITY
SCC Communications Corp., doing business as SCC (the "Company"), is a
Delaware corporation. The Company is the leading provider of 9-1-1 operations
support systems services to incumbent local exchange carriers, competitive local
exchange carriers and wireless carriers in the United States. The Company
manages the data which enables 9-1-1 calls to be routed to the appropriate
public safety agency with accurate and timely information about the caller's
identification and location. In addition, the Company licenses its 9-1-1
software to carriers that wish to manage the delivery of 9-1-1 data management
services in-house.
LIQUIDITY
Although the Company had a working capital deficit at December 31, 1997,
the Company generated net income from continuing operations before income taxes
of approximately $2,455,000 while also generating positive operating cash flows
of approximately $5,400,000 in 1997. The Company believes that its operating
cash and its line of credit, which management intends to renew, will be adequate
to meet its cash requirements for operations for the next twelve months.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
OPERATING CYCLE
Assets and liabilities related to contracts are included in current assets
and liabilities in the accompanying balance sheets since they will be liquidated
in the normal course of contract completion, although this may require more than
one year.
PROPERTY AND EQUIPMENT
Depreciation of property and equipment is computed using the straight-line
method over estimated useful lives of three to five years for computer hardware
and equipment, five years for furniture and fixtures and the life of the lease
for leasehold improvements. The costs of repairs and maintenance are expensed
while enhancements to existing assets are capitalized.
SOFTWARE DEVELOPMENT COSTS
The Company expenses the costs of developing computer software until
technological feasibility is established and capitalizes all costs incurred from
that time until the software is available for general customer release.
Technological feasibility for the Company's computer software products is based
upon the earlier of the achievement of (a) a detail program design free of
high-risk development issues or (b) completion of a working model. Costs of
major enhancements to existing products with a wide market are capitalized while
routine maintenance of existing products is charged to expense as incurred. The
establishment of technological feasibility and the ongoing assessment of the
recoverability of capitalized computer software development costs requires
considerable judgment by management with respect to certain external factors,
including, but not limited to, technological feasibility, anticipated future
gross revenues, estimated economic life and changes in software and hardware
technology.
Capitalized software costs are amortized on a product-by-product basis.
Capitalized software is amortized using the straight-line method over five
years. Accumulated amortization of capitalized software costs from continuing
operations totaled $38,000, $97,000 and $201,000, respectively, for the years
ended December 31, 1995, 1996 and 1997, and is included in cost of data
management services and licenses and implementation services in the statements
of operations.
F-8
<PAGE> 68
SCC COMMUNICATIONS CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
REVENUE RECOGNITION
The Company's revenue is derived from 9-1-1 data management services and
certain license fees and related implementation services that the Company
provides to telephone companies. Revenue from data management services generally
consists of a non-recurring initial fee and monthly recurring revenue. The non-
recurring initial fee is recognized using the percentage-of-completion method
over the period required to convert the customer's data to the Company's system
and otherwise prepare for implementation. Revenue from recurring monthly
services is recognized in the period the services are rendered. Related expenses
are recognized as they are incurred and are included in cost of data management
services in the accompanying statements of operations.
Revenue related to software license fees and implementation of the
Company's 9-1-1 systems at customer sites is recognized using the
percentage-of-completion method. Such contracts include a license fee for the
use of the Company's software and service fees for the installation and
customization of the system. The Company's costs to install its systems include
direct labor and expenses. Such costs are included in cost of licenses and
implementation services.
In applying the percentage-of-completion method, revenue and related costs
are recognized based on the percentage that labor hours incurred to date bear to
total estimated labor hours. Revenue recognized in excess of amounts billed is
reflected as unbilled project revenue and amounts billed in excess of revenue
recognized are reflected as deferred contract revenue in the accompanying
balance sheets. The Company recognizes any known or anticipated loss on
contracts in process when such losses are determined to exist.
Revenue from licenses and implementation services includes customer support
revenue which is recognized ratably over the related contract period on a
straight-line basis. Costs related to customer support revenue are included in
cost of licenses and implementation services in the accompanying statements of
operations.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily accounts receivable. The Company's
customers are generally telecommunications service providers; accordingly, the
Company's accounts receivable are concentrated in the telecommunications
industry. The Company's principal customers (Note 11) accounted for 86% and 40%
of the Company's accounts receivable as of December 31, 1996 and 1997,
respectively. The Company has no significant financial instruments with
off-balance sheet risk of accounting loss, such as foreign exchange contracts,
option contracts or other foreign currency hedging arrangements.
RESEARCH AND DEVELOPMENT
Research and development efforts consist of salaries, supplies and other
related costs. These costs are expensed as incurred and totaled approximately
$388,000, $230,000 and $738,000 for the years ended December 31, 1995, 1996 and
1997, respectively. These costs are included in cost of data management services
and licenses and implementation services in the accompanying statements of
operations and do not include development costs incurred as part of the efforts
performed under licenses and implementation services contracts with the
Company's customers.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include
highly liquid investments with original maturities of 90 days or less.
F-9
<PAGE> 69
SCC COMMUNICATIONS CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions. These estimates affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS
Financial instruments include cash and cash equivalents, accounts
receivable and debt obligations. The carrying amounts for cash and cash
equivalents and accounts receivable approximate fair market value because of the
short maturity of these instruments. The fair value of notes and capital lease
obligations are estimated based on current rates available for similar debt with
maturities and securities, and at December 31, 1996 and 1997, approximates the
carrying value.
INCOME TAXES
The Company follows Statement of Financial Accounting Standards No. 109
("SFAS 109"), which requires recognition of deferred income tax assets and
liabilities for the expected future income tax consequences, based on enacted
tax laws, of temporary differences between the financial reporting and tax bases
of assets and liabilities. SFAS 109 also requires recognition of deferred tax
assets for the expected future tax effects of loss carryforwards and tax credit
carryforwards. Deferred tax assets are then reduced, if deemed necessary, by a
valuation allowance for the amount of any tax benefits which, on a more likely
than not basis, are not expected to be realized (Note 7).
STOCK BASED COMPENSATION PLANS
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees," in accounting for its stock option and other stock-based
compensation plans for employees and directors. The Company has adopted the
disclosure provisions of Statement of Financial Accounting Standards No. 123
("SFAS 123"), "Accounting for Stock-Based Compensation," for such options and
stock-based plans for employees and directors (Note 5).
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable from future undiscounted cash flows. Impairment losses are
recorded for the excess, if any, of the carrying value over the fair value of
the long-lived assets.
EARNINGS PER SHARE
The Company has adopted Statement of Financial Accounting Standards No.
128, "Earnings Per Share," by retroactively restating loss per share amounts for
all periods presented. "Basic income (loss) per share" is determined by dividing
net income (loss) available to common shareholders by the weighted average
number of common shares outstanding during each period. "Diluted earnings per
share" includes the effects of potentially issuable common stock, but only if
dilutive (i.e., a loss per share is never reduced). The treasury stock method,
using the average price of the Company's common stock for the period, is applied
to determine dilution from options and warrants. The if-converted method is used
for convertible securities. Potentially dilutive common stock options that were
excluded from the calculation of diluted income per share because their effect
is antidilutive totaled 230,316 and 298,017 in 1996 and 1997, respectively.
Because of the reported
F-10
<PAGE> 70
SCC COMMUNICATIONS CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
net loss available to common shareholders in 1995, 4,920,954 shares of
mandatorily redeemable convertible preferred stock ("Convertible Preferred
Stock") and 497,078 common stock options were excluded from the calculation of
diluted net loss per share because their effect is antidilutive.
A reconciliation of the numerators and denominators used in computing per
share net income (loss) from continuing operations is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Numerator:
Net income from continuing operations
(numerator for diluted loss per share for
1996 and 1997)............................ $ 302,000 $ 937,000 $2,283,000
Dividends on Convertible Preferred Stock..... (329,000) (673,000) (740,000)
Common stock warrant put price adjustment.... -- -- (8,000)
---------- ---------- ----------
Numerator for basic income (loss) per
share from continuing operations
(and, for 1995, diluted loss per
share)............................. $ (27,000) $ 264,000 $1,535,000
========== ========== ==========
Denominator for basic income (loss) per share:
Weighted average common shares outstanding... 1,652,379 1,790,230 1,857,413
========== ========== ==========
Denominator for diluted income (loss) per
share:
Convertible Preferred Stock.................. -- 5,970,710 6,188,575
Weighted average common shares outstanding... 1,652,379 1,790,230 1,857,413
Options issued to employees.................. -- 538,422 720,605
Putable common stock warrant................. -- -- 22,223
---------- ---------- ----------
Denominator for diluted income (loss)
per share.......................... 1,652,379 8,299,362 8,788,816
========== ========== ==========
</TABLE>
Income (loss) per common share was computed as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Basic income (loss) per share:
Income (loss) per share from continuing operations..... $(0.02) $ 0.15 $ 0.83
Net loss per share from discontinued operations........ (1.05) (0.32) (1.57)
------ ------ ------
Basic loss per share........................... $(1.07) $(0.17) $(0.74)
====== ====== ======
Diluted income (loss) per share:
Income (loss) per share from continuing operations..... $(0.02) $ 0.11 $ 0.26
Net loss per share from discontinued operations........ (1.05) (0.06) (0.33)
------ ------ ------
Diluted income (loss) per share................ $(1.07) $ 0.05 $(0.07)
====== ====== ======
</TABLE>
REVERSE STOCK SPLIT AND INCREASE IN AUTHORIZED SHARES
On March 18, 1998, the Company's Board of Directors authorized a
one-for-three reverse stock split to be effective upon the effective date of a
Registration Statement on Form S-1 filed by the Company with the Securities and
Exchange Commission. All share amounts, equivalent share amounts and per share
amounts have been adjusted retroactively to reflect the reverse stock split. The
Company's Board of Directors also authorized an increase in authorized common
stock to 30,000,000 shares and authorized 15,000,000 shares of undesignated
preferred stock.
F-11
<PAGE> 71
SCC COMMUNICATIONS CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting
Comprehensive Income." This statement, effective for fiscal years beginning
after December 15, 1997, would require the Company to report components of
comprehensive income in a financial statement that is displayed with the same
prominence as other financial statements. Comprehensive income is defined by
Concepts Statement No. 6, "Elements of Financial Statements," as the change in
equity of a business enterprise during a period from transactions and other
events and circumstances from nonowner sources. It includes all changes in
equity during a period except those resulting from investments by owners and
distributions to owners. The Company expects to adopt SFAS 130 for applicable
transactions in the first quarter of 1998.
Also in June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131 ("SFAS 131"), "Disclosures about Segments of an Enterprise and
Related Information." This statement, effective for financial statements for
periods beginning after December 15, 1997, requires that a public business
enterprise report financial and descriptive information about its reportable
operating segments. Generally, financial information is required to be reported
on the basis that it is used internally for evaluation of segment performance
and deciding how to allocate resources to segments. The adoption of SFAS 131 is
not expected to have a material impact on the Company's financial statements.
UNAUDITED PRO FORMA INFORMATION
The Company is contemplating a public offering of its common stock. If such
an offering is consummated, all of the Convertible Preferred Stock (Note 4)
outstanding as of the closing date will be converted into shares of common
stock. In addition, the put option related to common stock warrants will expire
upon completion of the offering and the common stock warrants will be exercised
for $100 into shares of common stock. The pro forma stockholders' equity in the
balance sheet as of December 31, 1997 reflects the conversion of all outstanding
Convertible Preferred Stock and the exercise of the common stock warrant to
stockholders' equity (deficit). Had the conversion of the Convertible Preferred
Stock occurred on January 1, 1997, basic and diluted net income per share from
continuing operations would have been $0.28 and $0.26, respectively for the year
ended December 31, 1997.
RECLASSIFICATIONS
Certain reclassifications have been made to prior year balances to conform
to the current year presentation.
(3) DISCONTINUED OPERATIONS
On June 30, 1997, the Company sold the net assets of its Premise Products
Division. The sale resulted in a net loss of $2,032,000. The net losses of this
division are included in the statements of operations as loss from operations of
discontinued division. Revenue from the division for the years ended December
31, 1995 and 1996 and the six months ended June 30, 1997, were $8,798,000,
$12,274,000 and $5,785,000, respectively.
F-12
<PAGE> 72
SCC COMMUNICATIONS CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(4) MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK AND PUTABLE COMMON STOCK
WARRANT
MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK
The Company has the following Convertible Preferred Stock authorized,
issued and outstanding at December 31, 1997, with the following liquidation or
redemption prices:
<TABLE>
<CAPTION>
SHARES
AUTHORIZED, LIQUIDATION OR ORIGINAL
ISSUED AND REDEMPTION PURCHASE
OUTSTANDING PRICE PRICE
----------- -------------- -----------
<S> <C> <C> <C>
Series A................................... 1,515,152 $ 1,500,000 $ 1,500,000
Series B................................... 1,010,101 1,000,000 1,000,000
Series C................................... 442,328 730,000 730,000
Series D................................... 912,123 2,371,000 1,614,458
Series E................................... 1,083,381 3,255,000 2,632,617
Series F................................... 1,225,490 5,733,000 5,000,000
--------- ----------- -----------
6,188,575 $14,589,000 $12,477,075
========= =========== ===========
</TABLE>
The activity of Series A through Series F Convertible Preferred Stock
issued and outstanding for the years ended December 31, 1995, 1996 and 1997, is
as follows:
<TABLE>
<CAPTION>
SHARES ISSUED AND OUTSTANDING
-------------------------------------------------------------------------------
SERIES A SERIES B SERIES C SERIES D SERIES E SERIES F TOTAL
--------- --------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, at December 31,
1994....................... 1,515,152 1,010,101 442,328 912,123 -- -- 3,879,704
Series E Convertible
Preferred Stock issued at
$2.43 per share in
exchange for notes
payable and cancellation
of warrants.............. -- -- -- -- 1,083,381 -- 1,083,381
--------- --------- ------- ------- --------- --------- ---------
BALANCES, at December 31,
1995....................... 1,515,152 1,010,101 442,328 912,123 1,083,381 -- 4,963,085
Series F Convertible
Preferred Stock issued at
$4.08 per share in
exchange for cash and
notes payable............ -- -- -- -- -- 1,225,490 1,225,490
--------- --------- ------- ------- --------- --------- ---------
BALANCES, at December 31,
1996 and 1997.............. 1,515,152 1,010,101 442,328 912,123 1,083,381 1,225,490 6,188,575
========= ========= ======= ======= ========= ========= =========
</TABLE>
F-13
<PAGE> 73
SCC COMMUNICATIONS CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The activity related to the liquidation or redemption value of Series A
through Series F Convertible Preferred Stock for the years ended December 31,
1995, 1996 and 1997 is as follows:
<TABLE>
<CAPTION>
LIQUIDATION OR REDEMPTION VALUE
---------------------------------------------------------------------------------------
SERIES A SERIES B SERIES C SERIES D SERIES E SERIES F TOTAL
---------- ---------- -------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES, at December 31,
1994................... $1,500,000 $1,000,000 $730,000 $1,984,000 $ -- $ -- $ 5,214,000
Series E Convertible
Preferred Stock
issued at $2.43 per
share in exchange for
notes payable and
cancellation of
warrants............. -- -- -- -- 2,633,000 -- 2,633,000
Dividends accrued on
Series D and E
Convertible Preferred
Stock................ -- -- -- 129,000 200,000 -- 329,000
---------- ---------- -------- ---------- ---------- ---------- -----------
BALANCES, at December 31,
1995................... 1,500,000 1,000,000 730,000 2,113,000 2,833,000 -- 8,176,000
Series F Convertible
Preferred Stock
issued at $4.08 per
share in exchange for
cash and notes
payable.............. -- -- -- -- -- 5,000,000 5,000,000
Dividends accrued on
Series D, E and F
Convertible Preferred
Stock................ -- -- -- 129,000 211,000 333,000 673,000
---------- ---------- -------- ---------- ---------- ---------- -----------
BALANCES, at December 31,
1996................... 1,500,000 1,000,000 730,000 2,242,000 3,044,000 5,333,000 13,849,000
Dividends accrued on
Series D, E and F
Convertible Preferred
Stock................ -- -- -- 129,000 211,000 400,000 740,000
---------- ---------- -------- ---------- ---------- ---------- -----------
BALANCES, at December 31,
1997................... $1,500,000 $1,000,000 $730,000 $2,371,000 $3,255,000 $5,733,000 $14,589,000
========== ========== ======== ========== ========== ========== ===========
</TABLE>
In March 1996, the Company authorized and issued 1,225,490 shares of Series
F Convertible Preferred Stock, with a liquidation or redemption price of
$5,000,000. The Company received cash proceeds of $3,956,000 and converted its
$1,000,000 note payable and accrued interest thereon of $44,000 to a stockholder
of the Company to Series F Convertible Preferred Stock in this offering.
In the event of any liquidation, holders of Convertible Preferred Stock
would be entitled to preference in the amounts stated above. Any remaining
assets would be distributed to common and convertible preferred stockholders as
defined. At the request of the convertible preferred stockholders on any date
after March 1, 1998 (on March 18, 1998, the Convertible Preferred Stockholders
agreed to extend the date to September 1, 1998), the Convertible Preferred Stock
is redeemable at the above amounts. Such redemption, if requested, will be paid
in three installments as follows: first, the Company will redeem 50% of the
then-outstanding Convertible Preferred Stock ten days subsequent to the
redemption request (the "Optional Redemption Date"); then 25% on the first
anniversary of the Optional Redemption Date; and finally, 25% on the second
anniversary of the Optional Redemption Date.
Annual dividends of 8% accrue on Series A, B, C, D, E and F Convertible
Preferred Stock when and if declared by the Board of Directors. Upon redemption
or liquidation, a dividend of 8% per annum will accrue from the original
issuance date of the Series D, E and F Convertible Preferred Stock. Accordingly,
the
F-14
<PAGE> 74
SCC COMMUNICATIONS CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Series D, E and F Convertible Preferred Stock in the accompanying balance sheets
include the accrual of such dividends through December 31, 1997. No
distributions may be made to common stockholders until declared and accrued
preferred stock dividends have been distributed. Common stock dividends may not
be made at a rate higher than the Convertible Preferred Stock dividends.
Each share of Series A, B, C, D, E and F is convertible at the option of
the holder into one share of common stock. The conversion rate is subject to
adjustment if sales of common stock, or equivalent options, excluding sales to
employees under provisions of the stock option plan (see below), are made at a
price lower than the original issue price of the Convertible Preferred Stock.
Each share of Convertible Preferred Stock will be automatically converted into
common stock upon completion of a $10 million firmly underwritten public
offering at a minimum price of at least $6.00 per share or immediately upon
conversion of 75% of the Convertible Preferred Stock into common stock.
During 1994, the Company issued notes payable to three of its existing
investors totaling $2,558,000. The notes were convertible into Series E at $3.00
per share and were interest bearing at 4% per annum. The investors received
warrants to purchase 200,000 shares of the Company's common stock for $600. The
warrants, exercisable for $.03 per share, were recorded at their estimated fair
market value of $100,000 and this amount was reflected as additional paid-in
capital. The notes payable were discounted by this amount and the discount was
being amortized as interest expense over the term of the debt. The notes were
due upon a public offering of the Company's common stock with a per share price
of at least $6.00 and aggregate proceeds of at least $10 million. Absent a
public offering prior to maturity, the notes were due or convertible into Series
E Convertible Preferred Stock, at the Company's option, on May 1, 1995. The
warrants had an expiration date of May 1, 1995. In January 1995, the debt and
accrued interest was replaced with new debt of $2,633,000 with similar terms,
convertible into 1,083,381 shares of Series E Convertible Preferred Stock (at
$2.43 per share). The warrants were canceled. The new debt was immediately
converted into 1,083,381 shares of Series E Convertible Preferred Stock, with a
liquidation or redemption price at that date of $2,633,000.
PUTABLE COMMON STOCK WARRANT
In November 1997, the Company borrowed $4,000,000 from Banc One Capital
Partners II, LLC (the "Lender") (Note 6). In connection with the loan, the
Lender received a warrant to purchase 195,148 shares of the Company's common
stock for $100. Under the warrant, if the Company does not complete a qualified
public offering as defined in the related agreement within twelve months of the
date of the agreement, the number of shares under the warrant is increased by an
additional 97,574 shares of the Company's common stock. If the Company does not
complete a qualified public offering as defined in the related agreement within
eighteen months of the date of the agreement, the number of shares under the
warrant is increased by another 97,574 shares of the Company's common stock. The
Company recorded $1,464,000 for the estimated value of the shares exercisable
under the warrant as a discount on long-term note payable in the accompanying
balance sheets and is amortizing the discount into interest expense over the
six-year term of the note. The warrant expires on the date which is the earliest
of (i) the date on which a qualified initial public offering is completed, (ii)
the date on which a disposition or non-surviving combination is consummated,
(iii) the date on which the Lender exercises its rights under a co-sale
agreement to sell all of its warrant shares or (iv) 90 days after the maturity
date of the related note.
In addition, at any time after the occurrence of a put trigger event and
prior to a qualified public offering, as defined, the Lender may require the
Company to purchase all, but not less than all, of the common shares underlying
the warrant. A put trigger event is defined as the first to occur of any of the
following events: (1) the sixth anniversary date of the agreement; (2) a
disposition as defined in the agreement; (3) a non-surviving combination as
defined in the agreement; (4) the date upon which the Company prepays in full
the outstanding principal, interest and assessments, if any, on the note; or (5)
an acceleration event caused by a default of the note. The put price is
calculated as the greater of the market determined value amount as
F-15
<PAGE> 75
SCC COMMUNICATIONS CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
defined in the agreement or an amount equal to six times earnings before
interest, taxes, depreciation and amortization for the preceding twelve months,
reduced by current outstanding indebtedness, increased by the fair market value
of all marketable securities, and divided by the number of fully diluted common
shares outstanding. On December 31, 1997, the Company recorded an amount equal
to the number of shares under the warrant times the difference between the
current market value, as defined, and the market value of the shares at the time
the warrant was issued. This amount of $8,000 was recorded as an increase in the
value of the putable common stock warrant and charged to accumulated deficit in
the accompanying financial statements.
The Lender is entitled to request registration of such shares pursuant to a
registration rights agreement. In addition, if the Company proposes to register
any of its securities under the Securities Act, either for its own account or
for the account or for other security holders exercising registration rights,
the warrant holder is entitled to notice of such registration and is entitled to
include shares of such common stock therein.
Pursuant to an agreement with the Lender, dated April 8, 1998, the warrant
will be exercised automatically just before or contemporaneously with the
effectiveness of a qualified initial public offering.
(5) STOCKHOLDERS' EQUITY (DEFICIT)
STOCK SUBSCRIPTIONS RECEIVABLE
In September 1997, in connection with the sale of the Company's Premise
Products Division, several former employees of the Company signed full recourse
promissory notes to the Company to exercise their vested stock options. The
notes accrue interest at 6.07% per annum. The principal and accrued interest
thereon are due the earlier of September 28, 2000 or ninety days after the
Company becomes subject to the reporting requirements under Section 13 of the
Securities Exchange Act of 1934, as amended.
STOCK OPTION PLAN
The Company's 1990 Stock Option Plan (the "1990 Option Plan"), as amended
by the Company's Board of Directors, provides officers and employees options to
purchase up to 2,262,205 shares of common stock of the Company. Under the terms
of the 1990 Option Plan, the Board of Directors may grant officers and employees
either nonqualified or incentive stock options, as defined by the Internal
Revenue Service. The purchase price of the shares subject to incentive stock
options will be the fair market value of the common stock on the date the option
is granted. Options granted under the 1990 Option Plan are exercisable up to ten
years from the date of the grant and are contingent upon continued employment
with the Company.
In October 1995, the Company granted an option to purchase 66,666 shares of
common stock to an officer of the Company. The option is exercisable at $6.00
per share and was issuable contingent on the attainment of certain objectives.
During 1997, the Company's Board of Directors determined that the officer had
met the objectives required under the agreement, causing the options to be
issued. No compensation expense was recorded on this option because the exercise
price exceeded the fair market value of the shares.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 123 ("SFAS 123")
SFAS 123, "Accounting for Stock-Based Compensation," defines a fair value
based method of accounting for employee stock options or similar equity
instruments. However, SFAS 123 allows the continued measurement of compensation
cost for such plans using the intrinsic value based method prescribed by APB
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), provided
that pro forma disclosures are made of net income or loss assuming the fair
value based method of SFAS 123 had been applied. The Company has elected to
account for its stock-based compensation plans under APB 25; accordingly, for
purposes of the pro forma disclosures presented below, the Company has computed
the fair
F-16
<PAGE> 76
SCC COMMUNICATIONS CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
values of all options granted under the 1990 Option Plan during 1995, 1996 and
1997, using the Black-Scholes pricing model and the following weighted average
assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Risk-free interest rate............................ 6.41% 6.16% 5.85%
Expected dividend yield............................ 0.00% 0.00% 0.00%
Expected lives outstanding......................... 5.0 years 5.0 years 5.0 years
Expected volatility................................ 0.00% 0.00% 0.00%
</TABLE>
To estimate lives of options for this valuation, it was assumed options
will be exercised upon becoming fully vested. All options are initially assumed
to vest. Cumulative compensation costs recognized in pro forma net income or
loss with respect to options that are forfeited prior to vesting is adjusted as
a reduction of pro forma compensation expense in the period of forfeiture.
Because the Company's common stock is not yet publicly traded, the expected
market volatility was assumed to be zero. Actual volatility of the Company's
common stock may vary. Fair value computations are highly sensitive to the
volatility factor assumed; the greater the volatility, the higher the computed
fair value of options granted.
The total fair value of options granted under the 1990 Option Plan was
computed to be approximately $260,000, $187,000 and $499,000 for the years ended
December 31, 1995, 1996 and 1997, respectively. These amounts are amortized
ratably over the vesting periods of the options or recognized at date of grant
if no vesting period is required. Pro forma stock-based compensation, net of the
effect of forfeitures, was $26,000, $80,000 and $232,000 for 1995, 1996 and
1997, respectively.
A summary of stock options under the 1990 Option Plan as of December 31,
1995, 1996 and 1997 and changes during the years then ended are presented below:
<TABLE>
<CAPTION>
1995 1996 1997
-------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year............... 1,470,386 $0.81 919,958 $1.35 1,073,908 $1.68
Granted............... 403,666 2.34 231,983 3.12 270,016 6.93
Exercised............. (525,188) 0.15 (19,450) 0.99 (153,382) 1.00
Canceled.............. (428,906) 1.35 (58,583) 1.92 (83,932) 2.46
--------- --------- ---------
Outstanding at end of
year.................. 919,958 $1.35 1,073,908 $1.68 1,106,610 $3.03
========= ========= =========
Weighted average fair
value of options
granted............... $ 0.63 $ 0.81 $ 1.80
========= ========= =========
</TABLE>
F-17
<PAGE> 77
SCC COMMUNICATIONS CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information about the options outstanding at
December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ ----------------------
WEIGHTED
AVERAGE WEIGHTED NUMBER WEIGHTED
NUMBER REMAINING AVERAGE EXERCISABLE AVERAGE
RANGE OF OUTSTANDING CONTRACTUAL EXERCISE AT EXERCISE
EXERCISE PRICES AT 12/31/97 LIFE PRICE 12/31/97 PRICE
- --------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
$0.12 -- 0.30........................ 239,325 3.2 years $0.18 239,325 $0.18
$0.75 -- 1.80........................ 365,000 7.0 years 1.47 260,540 1.41
$3.00 -- 6.00........................ 287,018 8.7 years 4.02 71,501 3.03
$7.50 -- 9.00........................ 215,267 9.8 years 7.53 -- --
--------- -------
1,106,610 7.2 years $3.03 571,366 $1.11
========= =======
</TABLE>
If the Company had accounted for its stock-based compensation plan in
accordance with SFAS 123, the Company's net income from continuing operations
would have been reported as follows:
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- ----------
<S> <C> <C> <C>
Net income from continuing operations:
As reported...................................... $302,000 $937,000 $2,283,000
Pro forma........................................ $276,000 $857,000 $2,051,000
Basic income (loss) from continuing operations per
share:
As reported...................................... $ (0.02) $ 0.15 $ 0.83
Pro forma........................................ $ (0.03) $ 0.10 $ 0.70
Diluted net income (loss) from continuing
operations per share:
As reported...................................... $ (0.02) $ 0.11 $ 0.26
Pro forma........................................ $ (0.03) $ 0.10 $ 0.23
</TABLE>
(6) LONG-TERM DEBT
At December 31, 1996 and 1997, notes payable and long-term debt consisted
of the following:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Borrowings on revolving line of credit bearing interest at
prime plus 1.0% (9.50% at December 31, 1997), due April
15, 1998. Collateralized by certain assets of the
Company. Maximum borrowing amount of 75% of qualified
accounts receivable up to $2,000,000..................... $ 1,950,000 $ 950,000
Secured promissory note to a bank, bearing interest at
prime plus 1% (9.50% at December 31, 1997), minimum
monthly payments in varying amounts, currently $16,000,
including imputed interest of 9.50% per annum due
February 1998 with a final payment of $20,000,
collateralized by certain assets of the Company.......... 200,000 36,000
Note payable to Banc One Capital Partners II, LLC, bearing
interest at 11% through May 31, 1999, and 12% thereafter,
interest is payable the last day of each month. Quarterly
principal payments of $250,000 from March 31, 2001
through December 31, 2002, then $500,000 per quarter due
at each subsequent quarter, thereafter. The final payment
is due November 30, 2003. (Note 4)....................... -- 4,000,000
</TABLE>
F-18
<PAGE> 78
SCC COMMUNICATIONS CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Capitalized lease obligations for equipment due on various
dates through October 1, 2002, minimum monthly payments
in varying amounts, currently $397,000 including imputed
interest ranging from 3.75% to 10.25% per annum,
collateralized by the related assets with a net book
value of $7,366,000 and $8,101,000, respectively......... 6,519,000 5,959,000
----------- -----------
8,669,000 10,945,000
Less -- Current portion.................................... (5,351,000) (2,624,000)
----------- -----------
$ 3,318,000 $ 8,321,000
=========== ===========
</TABLE>
The Company may prepay the $4,000,000 note payable with Banc One Capital
Partners II, LLC after June 30, 1998, however, a prepayment premium will be due
equal to 4% of the amount outstanding if prepaid between June 30, 1998 and
November 30, 1998, 3% if prepaid between December 1, 1998 and November 30, 1999
and 2% if prepaid between December 1, 1999 and November 30, 2000.
Debt maturities of notes payable and long-term debt as of December 31,
1997, are as follows:
<TABLE>
<CAPTION>
CAPITAL NOTES
LEASES PAYABLE TOTAL
----------- ---------- -----------
<S> <C> <C> <C>
1998.......................................... $ 2,105,000 $ 986,000 $ 3,091,000
1999.......................................... 1,912,000 -- 1,912,000
2000.......................................... 1,651,000 -- 1,651,000
2001.......................................... 1,059,000 1,000,000 2,059,000
2002.......................................... 304,000 1,250,000 1,554,000
Thereafter.................................... -- 1,750,000 1,750,000
----------- ---------- -----------
7,031,000 4,986,000 12,017,000
Less -- Amount related to interest............ (1,072,000) -- (1,072,000)
----------- ---------- -----------
Principal portion of future obligations....... 5,959,000 4,986,000 10,945,000
Less -- Current portion....................... (1,638,000) (986,000) (2,624,000)
----------- ---------- -----------
$ 4,321,000 $4,000,000 $ 8,321,000
=========== ========== ===========
</TABLE>
(7) INCOME TAXES
The Company has operated in three countries, the United States, Canada and
Australia. For income tax return reporting purposes, the Company has
approximately $9,600,000 of net operating loss carryforwards; approximately
$364,000 of research and development tax credit carryforwards and $39,000 of
alternative minimum tax credit carryforwards available to offset future federal
taxable income or federal tax liabilities in the United States. The research and
development credit and net operating loss carryforwards expire at various dates
through 2011. The Company also has $208,000 of foreign tax credit carryforwards.
The Tax Reform Act of 1986 contains provisions which may limit the net
operating loss and credit carryforwards available to be used in any given year
upon the occurrence of certain events including significant changes in ownership
of the Company. In accordance with certain provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), a greater than 50% change in ownership of
a company within a three year period results in an annual limitation on the
Company's ability to utilize its net operating loss carryforwards from tax
periods prior to the ownership change.
F-19
<PAGE> 79
SCC COMMUNICATIONS CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income tax assets and liabilities at December 31, 1996 and 1997,
were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1997
----------- -----------
<S> <C> <C>
Depreciation differences.................................. $ (377,000) $ (630,000)
Accrued liabilities and other............................. 374,000 656,000
Deferred revenue.......................................... 596,000 438,000
Net operating loss carryforwards.......................... 3,312,000 3,564,000
Tax credit carryforwards.................................. 647,000 611,000
Less -- Valuation allowance............................... (4,552,000) (4,639,000)
----------- -----------
$ -- $ --
=========== ===========
</TABLE>
Management believes the tax benefits of $4,552,000 and $4,639,000 as of
December 31, 1996 and 1997, respectively, do not satisfy the realization
criteria set forth in SFAS No. 109 and has recorded a valuation allowance for
the entire net tax asset.
The components of the provision for federal income taxes attributable to
income from operations as of December 31, 1995, 1996 and 1997, were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1995 1996 1997
------- -------- --------
<S> <C> <C> <C>
Current provision --
State............................................. $ 2,000 $ 69,000 $172,000
Foreign........................................... 14,000 (60,000) --
------- -------- --------
Income tax provision................................ $16,000 $ 9,000 $172,000
======= ======== ========
</TABLE>
The components of the provision for federal income taxes attributable to
income from discontinued operations as of December 31, 1995, 1996 and 1997, were
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1995 1996 1997
------- -------- --------
<S> <C> <C> <C>
Current provision --
Foreign........................................... $ -- $146,000 $100,000
======= ======== ========
</TABLE>
A reconciliation of income tax provision computed by applying the federal
income tax rate of 34% to income from continuing operations before income taxes
as of December 31, 1995, 1996 and 1997, is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Computed normal tax provision................... $ 108,000 $ 322,000 $ 835,000
Tax effect of permanent differences............. 11,000 21,000 34,000
State tax, net of federal tax impact............ 15,000 44,000 113,000
Canada tax...................................... 14,000 -- --
Change in valuation allowance attributable to
continuing operations......................... (132,000) (378,000) (810,000)
--------- --------- ---------
Income tax provision............................ $ 16,000 $ 9,000 $ 172,000
========= ========= =========
</TABLE>
F-20
<PAGE> 80
SCC COMMUNICATIONS CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The provision for income taxes is attributable to continuing operations and
discontinued operations as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Provision attributable to continuing
operations.................................... $ 148,000 $ 387,000 $ 982,000
Change in valuation allowance attributable to
continuing operations......................... (132,000) (378,000) (810,000)
--------- --------- ---------
Net provision attributable to continuing
operations.................................... 16,000 9,000 172,000
--------- --------- ---------
Benefit attributable to discontinued
operations.................................... (705,000) (432,000) (797,000)
Change in valuation allowance attributable to
discontinued operations....................... 705,000 578,000 897,000
--------- --------- ---------
Net provision attributable to discontinued
operations.................................... -- 146,000 100,000
--------- --------- ---------
Total income tax provision............ $ 16,000 $ 155,000 $ 272,000
========= ========= =========
</TABLE>
(8) COMMITMENTS
The Company leases its office and research facilities and certain equipment
under operating lease agreements which expire through December 2002. Rent
expense for the years ended December 31, 1995, 1996 and 1997 was approximately
$505,000, $621,000 and $718,000, respectively. Future minimum lease obligations
under these agreements are as follows:
<TABLE>
<S> <C>
1998..................................................... $1,716,000
1999..................................................... 1,662,000
2000..................................................... 1,388,000
2001..................................................... 1,385,000
2002..................................................... 1,407,000
----------
Total.......................................... $7,558,000
==========
</TABLE>
(9) EMPLOYEE BENEFIT PLAN
The Company has a 401(k) plan under which eligible employees may defer up
to 15% of their compensation. The Company may make matching contributions and
discretionary contributions if approved by the Board of Directors. For 1995,
1996 and 1997, no employer matching or discretionary contributions were made to
the 401(k) plan.
(10) RELATED PARTY TRANSACTION
The Company provides data management and certain consulting services to and
leases equipment from entities in which a stockholder of the Company has an
ownership interest. A representative of the stockholder is a member of the
Company's Board of Directors. The Company received net proceeds of approximately
$3,226,000, $6,606,000 and $6,959,000 in 1995, 1996 and 1997, respectively,
pursuant to these agreements. The leases have interest rates ranging from 9.25%
to 9.50% and expiration dates varying through October 2002.
(11) MAJOR CUSTOMERS
Revenue from certain customers exceeded 10% of total revenue for the
respective year as follows: 44%, 20% and 24% in 1995; 47% and 35% in 1996; and
30%, 29% and 22% in 1997. Contracts with certain of these
F-21
<PAGE> 81
SCC COMMUNICATIONS CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
customers have a ten-year duration and provide for fixed monthly fees based upon
the number of subscriber records managed and upon the services selected by the
customer.
(12) LEGAL MATTERS
The Company is subject to various claims and business disputes in the
ordinary course of business. While the outcome of these matters cannot be
predicted with certainty, management anticipates that the ultimate outcome of
the issues will not have a material impact on the financial statements.
(13) SUBSEQUENT EVENTS (UNAUDITED)
On March 18, 1998, the Company's Board of Directors authorized the filing
of a Registration Statement with the Securities and Exchange Commission covering
the proposed sale of shares of its common stock to the public.
On March 18, 1998, the Company adopted an employee stock purchase plan
("ESPP") under which eligible employees may contribute up to 10% of their
salaries through payroll deductions to purchase shares of the Company's common
stock. The first offering period of the ESPP began March 1, 1998 and will end
December 31, 1998. Thereafter, offering periods will be successive six month
periods. At the end of each offering period, amounts contributed by employees
will be used to purchase shares of the Company's common stock at a price equal
to 85% of the lower of the closing price of the common stock on the first day or
last day of the offering period. The Company's Board of Directors has authorized
the issuance of up to 200,000 shares under the ESPP and may terminate the ESPP
at any time. At January 1 of each year, the shares available under the ESPP will
be restored to 200,000, although the Company's Board of Directors may elect to
restore a lesser number of shares.
On April 7, 1998, the Company adopted the 1998 Stock Incentive Plan ("1998
Plan"), which is a successor to the 1990 Option Plan, to become effective upon a
qualified initial public offering. A total of 1,901,055 shares have been
authorized for issuance under the 1998 Plan, including shares authorized under
the 1990 Option Plan. The shares reserved for issuance will increase
automatically on the first trading day of each calendar year, beginning with the
1999 calendar year, by 3% of the number of shares of common stock outstanding on
the last trading day of the immediately preceding calendar year. The 1998 Plan
allows for issuances of options to officers, non-employee Board members and
consultants, as provided for under the terms of the 1998 Plan.
F-22
<PAGE> 82
SCC LOGO
[BACK COVER]
<PAGE> 83
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the Common Stock being registered. All the amounts shown are estimates,
except for the registration fee, the Nasdaq National Market filing fee and the
NASD fee.
<TABLE>
<CAPTION>
<S> <C>
Registration fee............................................ $ 16,793
Nasdaq National Market fee.................................. 78,875
NASD fee.................................................... 6,193
Blue Sky fees and expenses.................................. 7,500
Printing and engraving expenses............................. 125,000
Legal fees and expenses..................................... 300,000
Accounting fees and expenses................................ 126,000
Transfer Agent and Registrar fees........................... 2,500
Miscellaneous expenses...................................... 137,139
--------
TOTAL............................................. $800,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the Delaware General Corporation Law permits indemnification
of officers and directors of the Company under certain conditions and subject to
certain limitations. Section 145 of the Delaware General Corporation Law also
provides that a corporation has the power to purchase and maintain insurance on
behalf of its officers and directors against any liability asserted against such
person and incurred by him or her in such capacity, or arising out of his or her
status as such, whether or not the corporation would have the power to indemnify
him or her against such liability under the provisions of Section 145 of the
Delaware General Corporation Law.
Effective as of the closing of this offering, Article VII, Section 1 of the
Restated Bylaws of the Company will provide that the Company shall indemnify its
Directors and executive officers to the fullest extent not prohibited by the
Delaware General Corporation Law. The rights to indemnity thereunder will
continue as to a person who has ceased to be a Director, officer, employee or
agent and inure to the benefit of the heirs, executors and administrators of the
person. In addition, expenses incurred by a Director or executive officer in
defending any civil, criminal, administrative or investigative action, suit or
proceeding by reason of the fact that he or she is or was a Director or officer
of the Company (or was serving at the Company's request as a Director or officer
of another corporation) will be paid by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such Director or officer to repay such amount if it shall
ultimately be determined that he or she is not entitled to be indemnified by the
Company as authorized by the relevant section of the Delaware General
Corporation Law.
As permitted by Section 102(b)(7) of the Delaware General Corporation Law,
effective as of the closing of this offering, Article V, Section (A) of the
Company's Amended and Restated Certificate of Incorporation will provide that a
Director of the Company shall not be personally liable for monetary damages for
breach of fiduciary duty as a Director, except for liability (i) for any breach
of the Director's duty of loyalty to the Company or its stockholders, (ii) for
acts or omissions not in good faith or acts or omissions that involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware General Corporation Law or (iv) for any transaction from which the
Director derived any improper personal benefit.
The Company intends to enter into indemnification agreements with each of
its Directors and executive officers, effective upon the effectiveness of this
Registration Statement. Generally, the indemnification agreements will attempt
to provide the maximum protection permitted by Delaware law as it may be amended
from time to time. Moreover, the indemnification agreements will provide for
certain additional indemnification. Under such additional indemnification
provisions, however, an individual will not receive indemnification
II-1
<PAGE> 84
for judgments, settlements or expenses if he or she is found liable to the
Company (except to the extent the court determines he or she is fairly and
reasonably entitled to indemnity for expenses), for settlements not approved by
the Company, or for settlements and expenses if the settlement is not approved
by the court. The indemnification agreements will provide for the Company to
advance to the individual any and all reasonable expenses (including legal fees
and expenses) incurred in investigating or defending any such action, suit or
proceeding. In order to receive an advance of expenses, the individual must
submit to the Company copies of invoices presented to him or her for such
expenses. Also, the individual must repay such advances upon a final judicial
decision that he or she is not entitled to indemnification.
The Company has purchased directors' and officers' liability insurance.
The Underwriting Agreement (Exhibit 1.1 hereto) contains provisions by
which the Underwriters have agreed to indemnify the Company, each person, if
any, who controls the Company within the meaning of Section 15 of the Securities
Act, each Director of the Company, and each officer of the Company who signs
this Registration Statement, with respect to information furnished in writing by
or on behalf of the Underwriters for use in this Registration Statement.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since March 31, 1995, the Company has sold and issued the following
unregistered securities.
(1) From March 31, 1995 to March 31, 1998, the Company issued an
aggregate of 749,078 options to purchase Common Stock with exercise prices
ranging from $0.30 to $12.75 per share under the 1990 Option Plan and an
aggregate of 235,066 shares of Common Stock were issued through the
exercise of options granted under the 1990 Option Plan for an aggregate
exercise price of $157,368. For additional information concerning these
transactions, reference is made to the information contained under the
caption "Management -- Benefit Plans" in the form of the Prospectus
included herein.
(2) On March 5, 1996, the Company issued an aggregate of 1,225,490
shares of Series F Preferred Stock to three investors for an aggregate
consideration of $5,000,000.
(3) On November 20, 1997, the Company issued a warrant to purchase
that number of Common Shares of the Company representing between two
percent and four percent of the fully diluted Common Stock of the Company,
depending upon certain circumstances, to Banc One Capital Partners II, LLC
in connection with a loan agreement.
The sales and issuances of securities in the above transactions were deemed
to be exempt under the Act by virtue of Section 4(2) thereof and/or Regulation D
and Rule 701 promulgated thereunder as transactions not involving any public
offering. The purchasers in each case represented their intention to acquire the
securities for investment only and not with a view to the distribution thereof.
Appropriate legends were affixed to the stock certificates issued in such
transactions. Similar representations of investment intent were obtained and
similar legends imposed in connection with any subsequent transfers of any such
securities. The Company believes that all recipients had adequate access,
through employment or other relationships, to information about the Company to
make an informed investment decision.
II-2
<PAGE> 85
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1* -- Form of Underwriting Agreement.
3.1* -- Form of Amended and Restated Certificate of Incorporation
of the Company to become effective immediately prior to
the closing of the offering.
3.2* -- Form of Restated Bylaws of the Company to be effective
upon the closing of the offering.
4.1* -- Form of Certificate for Common Stock.
4.2 -- Reference is made to Exhibits 3.1 and 3.2.
5.1* -- Opinion of Brobeck, Phleger & Harrison LLP with respect
to the Common Stock being registered.
10.1 -- Fourth Amended and Restated Registration Rights
Agreement, dated March 5, 1996.
10.2 -- 1990 Stock Option Plan.
10.3* -- 1998 Stock Incentive Plan.
10.4* -- 1998 Employee Stock Purchase Plan.
10.5* -- Form of Directors' and Officers' Indemnification
Agreement.
10.6+ -- 9-1-1 Services Agreement between Ameritech Information
Systems, Inc. and SCC Communications Corp., signed August
31, 1994.
10.7+ -- Agreement for Services between SCC Communications Corp.
and U S West Communications, Inc. dated December 28,
1995.
10.8+ -- Services Agreement No. PR-9026-L between SCC
Communications Corp. and BellSouth Telecommunications,
Inc. dated October 13, 1995.
10.9+ -- Wireless E9-1-1 Agreement between SCC Communications
Corp. and Ameritech Mobile Communications, Inc. dated
April 1998.
10.10+ -- Asset Purchase Agreement between SCC Communications Corp.
and Printrak International, Inc., dated July 18, 1997.
10.11 -- Amendment One to Asset Purchase Agreement between SCC
Communications Corp. and Printrak International, Inc.
10.12 -- Bank One Loan Agreement dated April 15, 1997, effective
as of July 1, 1996.
10.13 -- Banc One Capital Partners and SCC Communications Corp.
Senior Subordinated Note and Warrant Purchase Agreement,
dated November 20, 1997.
10.14 -- Banc One Senior Subordinated Note due November 30, 2003.
10.15 -- Banc One Warrant Certificate.
10.16 -- Banc One and SCC Communications Corp. Option Agreement,
dated November 20, 1997.
10.17 -- Banc One and SCC Communications Corp. Registration Rights
Agreement, dated November 20, 1997.
10.18 -- Co-Sale Agreement, dated November 20, 1997, between SCC
Communications Corp., George Heinrichs, John Sims, Nancy
Hamilton, The Hill Partnership III, Ameritech Development
Corporation and Boston Capital Ventures Limited
Partnership and Banc One Capital Partners.
10.19 -- Preemptive Rights Agreement between Banc One Capital
Partners and SCC Communications Corp.
</TABLE>
II-3
<PAGE> 86
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.20 -- Master Lease Agreement Between Ameritech Credit
Corporation and SCC Communications Corp., dated March 11,
1996.
10.21+ -- Consulting Agreement Between SCC Communications Corp. and
Ameritech Mobile Communications, Inc. dated October 27,
1997
23.1* -- Consent of Brobeck, Phleger & Harrison LLP (contained in
their opinion filed as Exhibit 5.1).
23.2 -- Consent of Arthur Andersen LLP, Independent Public
Accountants.
24.1 -- Power of Attorney. Reference is made to Page II-5.
27.1 -- Financial Data Schedule.
</TABLE>
- ------------
* To be filed by amendment.
+ Confidential treatment has been requested for a portion of these exhibits.
(b) Financial Statement Schedules included separately in the Registration
Statement.
All financial statement schedules have been omitted because they are not
required, are not applicable or the information is included in the Financial
Statements or Notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to Directors, officers and controlling persons of the Company
pursuant to the provisions described in Item 14, or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a Director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
Director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 87
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Denver, County of Denver,
State of Colorado, on this ninth day of April, 1998.
SCC COMMUNICATIONS CORP.
By: /s/ GEORGE K. HEINRICHS
----------------------------------
George K. Heinrichs
President and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints George K. Heinrichs and Nancy K. Hamilton, or
either of them, as his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement and any
registration statement related to this Registration Statement and filed pursuant
to Rule 462 under the Securities Act of 1933, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ GEORGE K. HEINRICHS President, Chief Executive Officer April 9, 1998
- ----------------------------------------------------- and Director (Principal
George K. Heinrichs Executive Officer)
/s/ NANCY K. HAMILTON Chief Financial Officer and Senior April 9, 1998
- ----------------------------------------------------- Vice President (Principal
Nancy K. Hamilton Financial and Accounting
Officer)
/s/ JOHN J. SIMS Chief Operating Officer April 9, 1998
- -----------------------------------------------------
John J. Sims
/s/ JOHN G. HILL Director April 9, 1998
- -----------------------------------------------------
John G. Hill
/s/ DARRELL A. WILLIAMS Director April 9, 1998
- -----------------------------------------------------
Darrell A. Williams
/s/ DAVID KRONFELD Director April 9, 1998
- -----------------------------------------------------
David Kronfeld
</TABLE>
II-5
<PAGE> 88
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1* -- Form of Underwriting Agreement.
3.1* -- Form of Amended and Restated Certificate of Incorporation
of the Company to become effective immediately prior to
the closing of the offering.
3.2* -- Form of Restated Bylaws of the Company to be effective
upon the closing of the offering.
4.1* -- Form of Certificate for Common Stock.
4.2 -- Reference is made to Exhibits 3.1 and 3.2.
5.1* -- Opinion of Brobeck, Phleger & Harrison LLP with respect
to the Common Stock being registered.
10.1 -- Fourth Amended and Restated Registration Rights
Agreement, dated March 5, 1996.
10.2 -- 1990 Stock Option Plan.
10.3* -- 1998 Stock Incentive Plan.
10.4* -- 1998 Employee Stock Purchase Plan.
10.5* -- Form of Directors' and Officers' Indemnification
Agreement.
10.6+ -- 9-1-1 Services Agreement between Ameritech Information
Systems, Inc. and SCC Communications Corp., signed August
31, 1994.
10.7+ -- Agreement for Services between SCC Communications Corp.
and U S West Communications, Inc. dated December 28,
1995.
10.8+ -- Services Agreement No. PR-9026-L between SCC
Communications Corp. and BellSouth Telecommunications,
Inc. dated October 13, 1995.
10.9+ -- Wireless E9-1-1 Agreement between SCC Communications
Corp. and Ameritech Mobile Communications, Inc. dated
April 1998
10.10+ -- Asset Purchase Agreement between SCC Communications Corp.
and Printrak International, Inc., dated July 18, 1997.
10.11 -- Amendment One to Asset Purchase Agreement between SCC
Communications Corp. and Printrak International, Inc.
10.12 -- Bank One Loan Agreement dated April 15, 1997, effective
as of July 1, 1996.
10.13 -- Banc One Capital Partners and SCC Communications Corp.
Senior Subordinated Note and Warrant Purchase Agreement,
dated November 20, 1997.
10.14 -- Banc One Senior Subordinated Note due November 30, 2003.
10.15 -- Banc One Warrant Certificate.
10.16 -- Banc One and SCC Communications Corp. Option Agreement,
dated November 20, 1997.
10.17 -- Banc One and SCC Communications Corp. Registration Rights
Agreement, dated November 20, 1997.
10.18 -- Co-Sale Agreement, dated November 20, 1997, between SCC
Communications Corp., George Heinrichs, John Sims, Nancy
Hamilton, The Hill Partnership III, Ameritech Development
Corporation and Boston Capital Ventures Limited
Partnership and Banc One Capital Partners.
10.19 -- Preemptive Rights Agreement between Banc One Capital
Partners and SCC Communications Corp.
</TABLE>
<PAGE> 89
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.20 -- Master Lease Agreement Between Ameritech Credit
Corporation and SCC Communications Corp., dated March 11,
1996.
10.21+ -- Consulting Agreement Between SCC Communications Corp. and
Ameritech Mobile Communications, Inc. dated October 27,
1997.
23.1* -- Consent of Brobeck, Phleger & Harrison LLP (contained in
their opinion filed as Exhibit 5.1).
23.2 -- Consent of Arthur Andersen LLP, Independent Public
Accountants.
24.1 -- Power of Attorney. Reference is made to Page II-5.
27.1 -- Financial Data Schedule.
</TABLE>
- ------------
* To be filed by amendment.
+ Confidential treatment has been requested for a portion of these Exhibits.
<PAGE> 1
EXHIBIT 10.1
FOURTH AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
This Agreement is made and entered into as of this 5th day of
March, 1996, among SCC COMMUNICATIONS CORP., a Delaware corporation (the
"Company"), and certain undersigned holders (the "Holders") of the Company's
Series A Convertible Preferred Stock, Series B Convertible Preferred Stock,
Series C Convertible Preferred Stock, Series D Convertible Preferred Stock,
Series E Convertible Preferred Stock and Series F Convertible Preferred Stock.
RECITALS
A. Certain of the Holders and the Company are parties to
the Third Amended and Restated Registration Rights Agreement dated April 27,
1994 (the "Existing Registration Agreement").
B. Certain of the Holders and the Company are parties to
a certain Series F Convertible Preferred Stock Purchase Agreement of even date
herewith and as it may be amended from time to time (the "Purchase Agreement"),
whereby such Holders were issued shares of the Company's Series F Convertible
Preferred Stock.
C. It is a condition to the willingness of such Holders
to enter into the Purchase Agreement that the Company and the Holders amend and
restate the Existing Registration Agreement.
D. The Holders are willing to have all of their rights
with respect to registration of their Registrable Securities (as defined below)
under the Securities Act of 1933 governed by this Fourth Amended and Restated
Registration Rights Agreement, and hereby agree to the amendment and
restatement of the Existing Registration Agreement.
COVENANTS
NOW THEREFORE, in consideration of the above recitals and the
mutual promises contained herein, the parties hereto agree as follows:
<PAGE> 2
1. REGISTRATION UNDER THE SECURITIES ACT OF 1933.
(a) Certain Definitions. As used in this Section 1, the
following terms shall have the following respective meanings:
"Blue Sky laws" shall mean the securities regulation
laws of any political subdivision of the United States.
"Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
"Holder" shall mean any holder of Registrable
Securities. For purposes of Section 1(g) entitled "Indemnification," "Holder"
includes each of the Holder's officers, directors, general partners, limited
and general partners of such general partners, and each person controlling the
Holder.
"Initiating Holders" shall mean, unless otherwise
provided, the holders of at least a majority of the aggregate of all the
outstanding Registrable Securities requesting a registration under Section
1(d) below.
The terms "register," "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and the declaration or
ordering of the effectiveness of such registration statement.
"Registrable Securities" means (i) any shares of the
Company's Common Stock, $.001 par value (the "Common Stock") issued or issuable
upon conversion of Series A Convertible Preferred Stock, Series B Convertible
Preferred Stock, Series C Convertible Preferred Stock, Series D Convertible
Preferred Stock, Series E Convertible Preferred Stock and Series F Convertible
Preferred Stock; and (ii) any other securities issued with respect to any of
the above securities by way of dividends, stock-splits, recapitalization,
merger, consolidation or other reorganization. Registrable Securities do not
include any of the above securities which have been registered pursuant to a
registration statement under the Act and sold pursuant thereto or which may be
sold pursuant to Rule 144(k).
"Registration Expenses" shall mean all expenses
incurred by the Company in complying with this Agreement, including, by way of
illustration only and without limitation, all registration, qualification and
filing fees, printing expenses, fees and disbursements of counsel for the
Company, underwriting expenses not included in Selling Expenses, the expense of
any audits or financial statement reviews incident to or required by any such
registration (including the expense of any cold comfort letters), and Blue Sky
fees and expenses (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company).
- 2 -
<PAGE> 3
"Securities Act" shall mean the Securities Act of
1933, as amended.
"Selling Expenses" shall mean the underwriting
discounts and selling commissions applicable to the sale of Registrable
Securities.
(b) Limitations on Disposition. The Holder of each
certificate representing Registrable Securities, by accepting those
securities, agrees to comply in all respects with the following provisions:
(1) Prior to any proposed disposition of any
Registrable Securities (other than under circumstances described in Sections
1(c) and 1(d) below), the Holder of those Registrable Securities shall give
written notice to the Company of the proposed disposition and shall have
furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition; provided, however, that the Holder need
not provide such notice with respect to Registrable Securities for which the
Company has previously issued unlegended certificates.
(2) Except with respect to transactions not
involving a change in beneficial ownership or transactions involving the
distribution without consideration of Registrable Securities by any of the
Holders to any of its partners, retired partners, or any estate of its partners
or retired partners, or transfer by gift, will or intestate succession by any
partner to his spouse or lineal descendants or ancestors, or to any
stockholder, affiliate or affiliated venture capital partnership, such notice
shall, if reasonably requested by the Company, also be accompanied by a written
opinion of legal counsel (who shall be reasonably satisfactory to the Company
and its counsel) stating that the proposed disposition of the Registrable
Securities may be effected without registration under the Act and without blue
sky qualification. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(3) Having satisfied Subsection 1(b)(2) above,
the Holder of such Registrable Securities shall be entitled to transfer the
Registrable Securities in accordance with the terms of the notice delivered by
the Holder to the Company.
(4) Each certificate evidencing the Registrable
Securities shall (unless otherwise permitted by the provisions of this
Agreement) be stamped or otherwise imprinted with a legend substantially in the
following form in addition to any legend required under applicable state
securities laws:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. SUCH STOCK MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED, UNLESS THERE IS AN
- 3 -
<PAGE> 4
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH
SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 OR ITS
SUCCESSOR RULE UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION
OF COUNSEL FOR THE HOLDER OF THESE SECURITIES WHO IS REASONABLY
SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
The Company shall remove such restrictive legend upon the request of any Holder
if (i) the Company has received an opinion of counsel who is reasonably
acceptable to it and its counsel to the effect that registration of any and all
future transfers is not required, (ii) an appropriate registration statement
with respect to such Registrable Securities has been filed by the Company with
the Commission and been declared effective by the Commission, or (iii) such
transfer may be made in compliance with the requirements of Rule 144 or its
successor. In these events, the Company shall cause new certificates without
the above legend to be issued promptly to the Holder in exchange for
outstanding legended certificates.
(c) Company Registration.
(1) Notice and Piggyback Rights. If at any time
the Company shall decide to register any of its securities, the Company shall:
A. promptly give to each Holder written
notice of the registration (which shall include a list of the jurisdictions in
which the Company intends to attempt to qualify such securities under the
applicable Blue Sky laws); and
B. include in such registration (and
any related Blue Sky qualification or other compliance reasonably requested by
Holders in order to sell such securities), and in any underwriting involved,
all the Registrable Securities specified in a written request, made within 30
days after receipt of such written notice from the Company, by any Holder or
Holders, except as set forth in Subsection 1(c)(2) below.
- 4 -
<PAGE> 5
The provisions of this subsection do not apply to any of the
following: (i) a registration on any registration form which would not permit
secondary sales by a Holder, (ii) a registration which relates solely to
employee benefit plans, or (iii) a registration which relates solely to a
Commission Rule 145 transaction.
(2) Underwriting; Limits. If the registration of
which the Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as a part of the written
notice given pursuant to Subsection 1(c)(1). All Holders proposing to
distribute their Registrable Securities through such underwriting shall enter
into an underwriting agreement in customary form with the underwriters selected
by the Company. Notwithstanding any other provision of this Section (c), if
the underwriter determines that marketing factors require a limitation of the
amount of securities to be registered, the Company shall include in such
registration, prior to the inclusion of any other securities which are not
Registrable Securities (except those held by the Company), the number of
Registrable Securities requested to be included which in the opinion of such
underwriters can be sold, pro rata among the respective Holders on the basis of
the amount of Registrable Securities requested to be registered by each Holder.
In any event, all limitations on the number of Registrable Securities to be
included in the applicable underwriting shall be pro rata with respect to the
number of Registrable Securities requested to be registered as between Holders
as of the date of the notice provided pursuant to Subsection 1(c)(1)(A). If
any Holder disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the underwriter within
five (5) days after receipt of such notice, and any Registrable Securities
excluded or withdrawn from such underwriting shall be withdrawn from
registration.
(d) Registration at the Request of the Holders.
(1) Two Requests; Mechanics. At any time after
the effective date of the Company's initial public offering, Initiating Holders
may, upon delivery of written notice to the Company specifying this Section
1(d), require the Company to use its best efforts to prepare and file a
registration statement and other qualifications or compliances with respect to
all or part of the Registrable Securities; provided, however, that for the
second request for registration under this Section 1(d)(1), Initiating Holders
shall mean the holders of at least 30% of the Registrable Securities.
In the event of such a request, the Company shall:
A. Promptly give written notice of the
proposed registration, qualification, or compliance to all other Holders.
B. Use its diligent best efforts to
file as soon as practicable, but in any event within ninety (90) days after
receipt of the request or requests of the Initiating Holders, all such
registrations, qualifications, and compliances as may be so requested and as
would facilitate the sale and distribution of all or such portion of the
Holders' Registrable Securities as are specified in their request.
- 5 -
<PAGE> 6
C. Include in such registrations,
qualifications, and compliances the Registrable Securities of any Holders who
ask in writing, within thirty (30) days after receipt of notice under
Subsection 1(d)(1)(A), to join in such request.
D. The Company may be required to
prepare, file, and keep effective a registration statement under this Section
1(d) on no more than two (2) occasions.
(2) Exceptions. The Company shall not be
obligated to effect any registration, qualification, or compliance requested by
a Holder with respect to a proposed distribution of Registrable Securities by a
Holder under this Section 1(d):
A. if the Company has not previously
effected an initial public offering; or
B. in any particular jurisdiction in
which the Company would be required to execute a general consent to service of
process in effecting such registration, qualification or compliance; or
C. within six (6) months following the
effective date of any public offering to the general public of the Company's
securities for its own account, or
D. the Company has effected two (2)
such registrations pursuant to this Section 1(d) and such registrations have
been declared and ordered effective.
If the Company shall furnish to such Holders a certificate
signed by the President of the Company stating that in the good faith judgment
of the Board of Directors it would be seriously detrimental to the Company and
its shareholders for a registration statement to be filed in the near future,
then the Company's obligation to use its best efforts to file a registration
statement under this Section 1(d) shall be deferred for a period during which
such filing of a registration statement would be seriously detrimental,
provided that this period will not exceed ninety (90) days, and provided
further that the Company shall not defer its obligations in this manner more
than once in any twelve-month period.
(3) Underwriting. If the Initiating Holders
intend to distribute the Registrable Securities covered by their request by
means of an underwriting, they shall so advise the Company as a part of their
request made pursuant to Section 1(d).
A. The Company shall include such
information in the written notice referred to in Subsection 1(d)(1)(A).
- 6 -
<PAGE> 7
B. The Initiating Holders shall
negotiate with an underwriter selected by the Initiating Holders and reasonably
approved by the Company, with regard to the underwriting of the requested
registration. But if a majority in interest of the Initiating Holders have not
agreed with the underwriter as to the terms and conditions of the underwriting
within ten (10) days following commencement of such negotiations, a majority in
interest of the Initiating Holders may select another underwriter of their
choice.
C. The right of any Holder to include
his Registrable Securities in a registration pursuant to Section 1(d) shall be
conditioned upon the Holder's participation in such underwriting, on the terms
and conditions of such underwriting and upon the inclusion of the Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder).
D. The Company shall (together with all
Holders proposing to distribute their securities through such underwriting)
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for the underwriting by a majority in interest of the
Initiating Holders.
E. Notwithstanding any other provision
of this Section 1(d), if the underwriter advises the Initiating Holders in
writing that marketing factors require a limitation of the number of shares to
be underwritten, the Initiating Holders shall so advise all holders of
Registrable Securities. The Company shall then include in such registration,
prior to the inclusion of any other securities which are not Registrable
Securities, the number of shares of Registrable Securities that the underwriter
believes may be included in the registration in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held at that
time by such Holders.
F. If any Holder of Registrable
Securities disapproves of the terms of the underwriting, he may elect to
withdraw from the underwriting by written notice to the Company, the
underwriter and the Initiating Holders within five (5) days of notice to such
Holder of the terms of the underwriting. Any Registrable Securities which are
excluded from the underwriting by reason of the underwriter's marketing
limitation or withdrawn from the underwriting shall be withdrawn from the
registration.
(4) Form S-3. The Company shall use its best
efforts to qualify for registration on Form S-3 (including any equivalent
successor form) after one (1) year from the effective date of its first
registration statement filed with the Commission.
A. After the Company has qualified for
the use of Form S-3, Holders of Registrable Securities shall have the right to
request an unlimited number of registrations on Form S-3, provided that the
Registrable Securities requested to be so registered shall represent
Registrable Securities having an anticipated market value of no less than
$500,000. Such request shall be in writing and shall state the number of
shares of Registrable Securities to be disposed of and the intended method of
disposition of shares by such Holders.
- 7 -
<PAGE> 8
The Company shall not be required to effect a registration pursuant to this
paragraph within 90 days of the effective date of any registration referred to
in Section 1(c) and Subsection 1(d)(1) or of the last registration effected
pursuant to this Subsection 1(d)(4).
B. The Company shall give written
notice to all Holders of Registrable Securities of the receipt of a request for
registration pursuant to this Subsection 1(d)(4) and shall provide a reasonable
opportunity for other Holders to participate in the registration. If the
registration is for an underwritten offering, the terms of Subsection 1(d)(3)
shall apply to all participants in such offering.
C. The Company will use its best
efforts to effect promptly the registration and qualification for sale of all
shares of Registrable Securities on Form S-3 to the extent requested by the
Holders for purposes of disposition.
(e) Expenses of Registration.
(1) Registration Expenses. All Registration
Expenses incurred in connection with registration, filing, qualification, and
compliance under Section 1(c) and 1(d)(4) and both registrations under Section
1(d)(1) shall be borne by the Company provided that Holders of securities being
registered pursuant to Section 1(c) agree that they will pay (on a pro rata
basis among those Holders selling Registrable Securities in a particular state)
all Blue Sky fees associated with the registration of Registrable Securities in
those states in which the Company is not otherwise registering or qualifying
shares of its stock for sale in such registration.
(2) Selling Expenses. All Selling Expenses
incurred in connection with these transactions shall be borne by the Holders of
the securities so registered pro rata on the basis of the amount of Common
Stock so registered.
(3) Legal Expenses. Each Holder shall bear its
own expenses, if any, for the fees and disbursements of counsel to such Holder
incurred in connection with these transactions, except that the Company will
pay for one special counsel to Selling Holders in connection with one
registration effected under Section 1(d)(1).
(4) Ineffective Requested Registration. The
Company shall not be required to pay any Registration Expenses if the
registration statement does not become effective as a result of the withdrawal
of a request for registration by the Initiating Holders pursuant to Subsection
1(d)(1), which withdrawal was not caused by the Company's failure to comply
with applicable registration requirements and regulations, or by the Company's
failure to disclose to Initiating Holders information about the existence of a
Material Adverse Event (as that term is defined in the Purchase Agreement). In
such case, the Initiating Holders shall bear such Registration Expenses pro
rata on the basis of the number of shares of each Initiating Holder included in
the registration request, and such registration shall not be counted as a
registration pursuant to Subsection 1(d)(1), or the Initiating Holders will not
bear such expenses and such registration shall be counted as a registration
pursuant to Subsection 1(d)(1).
- 8 -
<PAGE> 9
(f) Registration Procedures. In the case of each
registration, qualification, or compliance effected by the Company pursuant to
this Agreement, the Company shall keep each Holder advised in writing as to the
initiating of each registration, qualification, and compliance and as to the
completion thereof. At its expense the Company shall:
(1) Keep such registration statement effective
until the Holders have completed the distribution described in the registration
statement but for not more than one hundred twenty (120) days (or, if the
registration is underwritten, ninety (90) days).
(2) Furnish such number of prospectuses
(including preliminary prospectuses) and other documents incident to the
registration as a Holder from time to time may reasonably request.
(3) At the time when any registration statement
becomes effective, and at the time when any post-effective amendment becomes
effective, furnish to the Holders registering securities, an opinion of counsel
satisfactory to the Holders to the effect that:
A. To the best of Counsel's knowledge,
no stop order suspending the effectiveness of the registration statement has
been issued, and no proceedings for that purpose have been instituted or are
pending or contemplated under the Securities Act.
B. The registration statement and the
prospectus, and each amendment or supplement to the Registration Statement, as
of their respective effective or issue dates, comply as to form in all material
respects with the requirements of the Securities Act and the rules and
regulations of the Commission.
C. Counsel has no reason to believe
that the registration statement, the prospectus, or any amendment or supplement
thereto, contained any untrue statement of material fact or omitted to state a
material fact necessary to make the statements in the documents not misleading.
D. The descriptions in the registration
statement, the prospectus and any amendment or supplement, of statutes, legal
and government proceedings, and contracts and other documents are accurate and
fairly present the information required to be shown, and include all required
statutes, proceedings, contracts, and documents.
(4) Notify each Holder of Registrable Securities,
at any time when a prospectus relating thereto is required to be delivered
under the Securities Act, of the happening of any event as a result of which
the prospectus included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make the statements
therein not misleading, and at the request of any such Holder, the Company will
prepare a supplement or
- 9 -
<PAGE> 10
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Registrable Securities, such prospectus will not contain an untrue
statement of a material fact or omit to state any fact necessary to make the
statements therein not misleading.
(5) Cause all such Registrable Securities to be
listed on each securities exchange on which similar securities issued by the
Company are then listed and, if not so listed, to be listed on the NASD
automated quotation system.
(6) Provide a transfer agent and registrar for
all such Registrable Securities not later than the effective date of such
registration statement.
(7) Obtain a cold comfort letter from the
Company's independent public accountants in customary form and covering such
matters of the type customarily covered by cold comfort letters as the Holders
may reasonably request (provided that such Registrable Securities constitute at
least 10% of the securities covered by such registration statement).
(g) Indemnification.
(1) Company's Obligation to Indemnify.
A. Generally. With respect to any
registration, qualification, or compliance which has been effected pursuant to
this Agreement, the Company shall indemnify each Holder, its officers,
directors, and partners and each person controlling such Holder, each legal
counsel, and each underwriter, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue or alleged untrue statement of, or omission or alleged omission of a
material fact contained in, or required to be stated in, any registration
statement, including any preliminary or final prospectus, offering circular or
other document incident to any such registration, qualification, or
compliance. The Company shall further indemnify them against any violation or
alleged violation by the Company of any rule or regulation promulgated under
the Securities Act or any applicable state securities law in connection with
any such registration, qualification, or compliance.
B. Reimbursement. The Company shall
promptly reimburse each such Holder, and each of its officers, directors,
partners, and controlling persons, each legal counsel and each such
underwriter, for any legal and any other expenses reasonably incurred, as such
expenses are incurred, in connection with investigating or defending any such
claim, loss, damage, liability, or action.
C. Limits of Obligation. The Company
shall not be liable in any such case to the extent that any claim, loss,
damage, liability, or expense arises out of any untrue statement (or alleged
untrue statement) or omission (or alleged omission) made in such registration
statement, including any preliminary or final prospectus, offering circular or
other document, is based upon written information furnished to the Company by
an instrument duly executed by such Holder or underwriter, and which is stated
to be specifically for use therein.
- 10 -
<PAGE> 11
D. Survival of Obligation. The
obligations of the Company under this Section 1(g) shall survive the redemption
and conversion, if any, of the Preferred Stock, the completions of the
offerings of Registrable Securities under the registration statements, and
otherwise.
(2) Holder's Obligation to Indemnify.
A. Generally. If Registrable
Securities held by any Holder are included in the securities as to which the
registration, qualification, or compliance is being effected, each such Holder
shall indemnify the Company, each of its officers and directors, each legal
counsel and independent accountant of the Company, each underwriter of the
Company's securities covered by such a registration statement, each person who
controls the Company within the meaning of the Act and each other such Holder,
each of its officers, directors and partners, each person controlling such
Holder, and each legal counsel against all claims, losses, damages, and
liabilities (or actions in respect thereof) arising out of or based on any
untrue or alleged untrue statement of, or omission or alleged omission of a
material fact contained in, or required to be stated in, any registration
statement, including any preliminary or final prospectus, offering circular, or
other document.
B. Reimbursement. Furthermore, each
such Holder shall promptly reimburse the Company, such Holders, underwriters,
legal counsel and independent accountants and all of their respective officers,
directors, partners, and controlling persons for any legal or any other
expenses reasonably incurred, as such expenses are incurred, in connection with
investigating or defending any such claim, loss, damage, liability, or action.
- 11 -
<PAGE> 12
C. Limits of Obligation. In any case,
(i) any Holder's obligation under this Subsection 1(g)(2) shall extend only so
far as the untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, including any
preliminary or final prospectus, offering circular, or other document in
reliance upon written information furnished to the Company by an instrument
duly executed by such Holder and which is stated to be specifically for use
therein; and (ii) any Holder's liability under this Section 1(g)(2) shall not
exceed the amount of proceeds to the Holder from the sale of its Registrable
Securities in that offering.
D. Survival of Obligation. The
obligations of the Holders under this Section 1(g) shall survive the
completions of the offerings of Registrable Securities under the registration
statements and otherwise.
(3) Indemnifying Party May Assume Defense.
A. Generally. Each party entitled to
indemnification under this Section 1(g) (the "Indemnified Party") shall give
written notice to the party required to provide indemnification (the
"Indemnifying Party") promptly after such Indemnified Party has actual
knowledge of any claim as to which indemnity may be sought. Unless in such
Indemnified Party's reasonable judgment a conflict of interest between such
Indemnified and Indemnifying Parties may exist with respect to such claim, the
Indemnified Party shall permit the Indemnifying Party to assume the defense of
any such claim or any resulting litigation; provided, however, that counsel for
the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval shall
not be unreasonably withheld), and the Indemnified Party may participate in
such defense at its own expense. Failure by the Indemnified Party to provide
such written notice shall not relieve the Indemnifying Party from its
obligation under this Section 1(g).
- 12 -
<PAGE> 13
B. Settlement Approval, Release
Required. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term the giving by the claimant or plaintiff to the
Indemnified Party of a release from all liability in respect to such claim or
litigation. Furthermore, the failure of any Indemnified Party to give notice
as provided herein shall not relieve the Indemnifying Party of its obligations
under this Agreement.
(4) Contribution.
A. If recovery is not available under
the foregoing indemnification provisions of this section for any reason other
than as specified therein, the parties entitled to indemnification by the terms
thereof shall be entitled to contribution for liabilities and expenses, except
to the extent that contribution is not permitted under the Securities Act. In
determining the amount of contribution to which the respective parties are
entitled, there shall be considered the relative benefits received by each
party from the offering of the securities (taking into account the portion of
the proceeds of the offering realized by each), the parties' relative knowledge
and access to information concerning the matter with respect to which the claim
was asserted, the party who supplied or failed to supply the information as to
which the claim is asserted, the opportunity to correct and prevent any
statement or omission, and any other equivalent considerations appropriate
under the circumstances; provided that in no event will any Holder be required
to contribute an amount in excess of the proceeds to the Holder from the sale
of its Registrable Securities included in that offering. The Company and the
Holders agree that it would not be equitable if the amount of such contribution
were determined by pro rata or per capita allocations.
(h) Information by Holder. The Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding the Holders and the distribution proposed by the Holders,
as the Company may request in writing and as shall be required in connection
with any registration, qualification, or compliance referred to in this
Agreement.
(i) Rule 144 Reporting. With a view to making available
the benefits of certain rules and regulations of the Commission which may
permit the sale of the Registrable Securities to the public without
registration, the Company agrees that at all times after 90 days after the
effective date of the first registration statement filed by the Company for a
public offering of its securities the Company shall:
(1) Make and keep public information available,
as those terms are understood and defined in Rule 144 under the Securities
Act.
(2) Use its best efforts to file with the
Commission in a timely manner all reports and other documents required of the
Company under the Securities Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
- 13 -
<PAGE> 14
(3) So long as a Holder owns any Registrable
Securities, furnish to such Holder upon request: (i) a written statement by the
Company as to its compliance with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act; (ii) a copy of the most recent annual or
quarterly report of the Company; and (iii) such other reports and documents so
filed by the Company as such person may reasonably request in availing itself
of any rule or regulation of the Commission allowing that person to sell any
such securities without registration.
(j) Transfer of Registration Rights. The right to cause
the Company to register Registrable Securities pursuant to this Section may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities who (1) is a partner, shareholder, affiliate,
equity holder or officer of the transferor Holder; or (2) after such assignment
or transfer, holds at least 125,000 shares of Registrable Securities (subject
to appropriate adjustment for stock splits, stock dividends, combinations and
other recapitalizations), provided the Company is, within ten (10) business
days after such transfer, furnished with written notice of the name and address
of such transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act.
(k) Limitations on Subsequent Registration Rights. From
and after the date hereof, the Company will not, without the prior written
consent of Holders of at least 75% of the voting power of the then outstanding
Registrable Securities, enter into any agreement with any holder or prospective
holder of any securities of the Company providing for registration rights more
favorable than those granted to the Holders hereunder or which allows such
holder or prospective holder of any securities of the Company to include such
securities in any registration filed under Sections 1(c) or 1(d) hereof, unless
under the terms of such agreement, such holder or prospective holder may
include such securities in any such registration only to the extent that the
inclusion of his securities will not diminish the amount of Registrable
Securities which are included.
(l) Termination of Registration Rights. The registration
rights granted pursuant to this Section 1 shall terminate with respect to any
particular Registrable Securities upon the later to occur of: (i) ten (10)
years after the closing of the Company's initial public offering; or (ii) the
date on which all of such Registrable Securities may be resold pursuant to the
provisions of Rule 144(k) of the Commission.
(m) Lock-Up. Upon the request of the Company or any
underwriter's representative in connection with the public offering of the
Company's Common Stock pursuant to registration statements filed with, and
declared effective by, the Commission under the Securities Act, the Holders
agree not to sell or otherwise transfer any securities of the Company for a
period of 90 days following the effective date of the applicable registration
statements.
- 14 -
<PAGE> 15
2. MISCELLANEOUS
(a) Survival of Covenants; Successors and Assigns. All
covenants, agreements, representations and warranties made by the parties in
this Agreement shall survive the closing of the transactions contemplated by
this Agreement. All such covenants, agreements, representations and warranties
will inure to the benefit of, and be binding upon, any successors, assigns,
heirs, transferees, executors, and administrators of the parties hereto.
(b) Assignability of Rights. The Company may not assign
any of its rights or delegate any of its duties under this Agreement without
the written consent of Holders of 75% of the voting power of the then
outstanding Registrable Securities.
(c) Communications and Notices. Except as otherwise
provided for in this Agreement, all communications and notices provided for in
this Agreement shall be in writing and will be given by telegram, facsimile
(with delivery confirmed by the party giving notice), express courier holding
itself out as able to make delivery within one business day of receipt, hand
delivery receipted by the addressee, or by mail (postage-paid, certified mail,
return receipt requested) to such address and for such attention, as any party
may from time to time designate by notice in writing to the Company or to the
Holders, as the case may be. Notice will be effective one business day after
delivery to a telegraph company or express courier, three business days after
deposit in the U.S. Mail as provided above, or upon receipt if hand-delivered
or facsimile-delivered, as the case may be.
(d) Law Governing. This Agreement shall be governed by
the Laws of the State of Colorado in all respects, as such laws are applied to
agreements among Colorado residents entered into and to be performed entirely
within Colorado.
(e) Subsequent Instruments and Acts. The parties agree
that they will execute any further instruments and perform any acts that may
become necessary to carry out this Agreement.
- 15 -
<PAGE> 16
(f) Severability. If any term, provision, covenant, or
condition of this Agreement, or its application to any person or circumstance,
shall be held by a court of competent jurisdiction to be invalid,
unenforceable, or void, the remainder of this Agreement and such term,
provision, covenant, or condition as applied to other persons or circumstances
shall remain in full force and effect.
(g) Entire Agreement; Amendments.
(1) This Agreement and the other documents and
agreements delivered pursuant hereto constitute the full and entire agreement
and understanding among the parties with regard to the subjects hereof and
thereof.
(2) This Agreement may not be amended orally.
Amendment to this Agreement, or of any supplement, and of the rights and
obligations of the Company and of the Holders, may be made with the consent of
the Company and the affirmative vote or written consent of the holders of not
less than 75% of the voting power of the Registrable Securities then
outstanding; provided that (i) no such amendment shall alter the provisions of
this Agreement so as to reduce the percentage of Registrable Securities which
is required to consent to any such amendment, without the vote or consent of
the Holders of all of the then outstanding Registrable Securities and (ii) no
such amendment shall adversely affect the rights of some, but not all, holders
of Registrable Securities.
(h) Delays, Omissions, and Waivers. No delay or omission
to exercise any right, power or remedy (with the exception of a delay by an
Indemnified Party in providing notice to the Indemnifying Party pursuant to
Section 1(g)(3) hereof) accruing to the Company or any Holder, upon any breach
or default of any party hereto under this Agreement, will impair any such
right, power or remedy of the Company or such Holder nor will it be construed
to be a waiver of any such breach or default, or an acquiescence therein, nor
will any similar breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring; nor will any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore
or thereafter occurring. Any waiver, permit, consent or approval of any kind
or character on the part of the Company or any Holder of any breach or default
under this Agreement or any waiver on the part of the Company or any Holder of
any provisions or conditions of this Agreement, must be in writing and will be
effective only to the extent specifically set forth in such writing. No waiver
by the Holders of any provision of this Agreement will be effective without a
written consent signed by Holders of at least 75% of the voting power of the
then outstanding Registrable Securities.
(i) Authorization. Each of the undersigned
representatives of the parties warrants and represents that he is duly
authorized to execute this Agreement on behalf of the respective party for
which he signs, that the organization on whose behalf he signs is currently in
good standing in the jurisdiction where organized.
- 16 -
<PAGE> 17
(j) Gender. Throughout this Agreement, as the context
may require, the masculine gender includes the feminine and neuter, and the
neuter gender includes the masculine and feminine.
(k) Headings. The headings of the Sections and
Subsections of this Agreement are inserted for convenience only and shall not
be deemed to constitute a part of this Agreement.
(l) Counterparts. 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.
(m) Remedies. No remedy herein conferred upon the
parties hereto is intended to be exclusive of any other remedy herein or
provided by law, but each shall be cumulative and shall be in addition to every
other remedy set forth in this Agreement or existing at law, in equity, or by
statute. The parties specifically acknowledge that under certain circumstances
the parties may be entitled to specific performance and/or injunctive relief
where without such remedies the damage to the injured parties may be
irreparable and money damages inadequate. Moreover, in any suit between or
among the parties hereto for such breach of the provisions hereof, the
prevailing party in such suit shall be entitled to receive from the breaching
party, reasonable attorneys' fees and disbursements incurred in the prosecution
of such suit.
- 17 -
<PAGE> 18
Registration Agreement Signature Page
IN WITNESS WHEREOF, the parties hereto
have caused this Agreement to be executed as of the day and year first written
above.
THE COMPANY: SCC COMMUNICATIONS CORP.,
a Delaware corporation
By: /s/ GEORGE K. HEINRICHS
----------------------------------------
George K. Heinrichs, President
THE HOLDERS: THE HILL PARTNERSHIP III,
A LIMITED PARTNERSHIP
By: Hill, Carman Ventures,
Its General Partner
By: /s/ JOHN HILL
----------------------------------------
General Partner
AMERITECH DEVELOPMENT CORP.
By: /s/ THOMAS TOUTON
----------------------------------------
Its: VICE PRESIDENT, VENTURE CAPITALIST
----------------------------------------
BOSTON CAPITAL VENTURES LIMITED
PARTNERSHIP
By: BC&V Limited Partnership,
Its General Partner
By: Boston Capital Partners,
Its General Partner
By: /s/
----------------------------------------
General Partner
<PAGE> 19
Registration Agreement Signature Page
BOSTON CAPITAL VENTURES II LIMITED
PARTNERSHIP
By: Boston Capital Partners II
Its General Partner
By: /s/
----------------------------------------
General Partner
BUSINESS DEVELOPMENT PARTNERS, L.P.
By: BD Partners, Its General Partner
By: /s/
----------------------------------------
General Partner
BOSTON CAPITAL VENTURES III LIMITED
PARTNERSHIP
By: Boston Capital Partners III
Its General Partner
By: /s/
----------------------------------------
General Partner
<PAGE> 1
[SCC COMMUNICATIONS CORP. LOGO] Exhibit 10.2
SCC COMMUNICATIONS CORP.
1990 STOCK OPTION PLAN
1. PURPOSE
The SCC 1990 STOCK OPTION PLAN ("Plan") provides for the grant of Stock
Options, Stock Appreciation Rights and Supplemental Bonuses to employees,
directors and consultants of Systems Concepts of Colorado, Inc. (the
"Company"), and such of its subsidiaries (as defined in Section 425(f) of the
Internal Revenue Code of 1986 (the "Code") as the Board of Directors of the
Company shall from time to time designate ("Participating Subsidiaries") in
order to advance the interests of the Company and its Participating
Subsidiaries through the motivation, attraction and retention of key personnel.
2. INCENTIVE STOCK OPTIONS AND NON-INCENTIVE STOCK OPTIONS
The Stock Options granted under the Plan may be either:
a) Incentive Stock Options ("ISOs") which are intended to be
"Incentive Stock Options" as that term is defined in Section 422A of
the Code; or
b) Nonstatutory Stock Options ("NSOs") which are intended to be
options that do not qualify as "Incentive Stock Options" under Section
422A of the Code.
All Stock Options shall be ISOs unless the Option Agreement clearly designates
the Stock Options granted thereunder, or a specified portion thereof, as NSOs.
Subject to the other provisions of the Plan, a Participant may receive ISOs and
NSOs at the same time, provided that the ISOs and NSOs are clearly designated
as such.
Except as otherwise expressly provided herein, all of the provisions and
requirements of the Plan relating to Stock Options shall apply to ISOs and
NSOs.
3. ADMINISTRATION
3.1. COMMITTEE. With respect to grants of Stock Options to Employees
(other than Employees who are directors of the Company) and grants of Stock
Appreciation Rights and Supplemental Bonuses to Employees (other than Employees
who are officers or directors of the Company), the Plan shall be administered
by a committee ("Committee") composed of at least three members of the Board of
Directors. With respect to grants of Stock Options to directors and
consultants and grants of Stock Appreciation Rights and Supplemental Bonuses to
officers and directors, the Plan shall be administered by the Board of
Directors, a majority of whom are Disinterested Persons, or by a committee of
three or more persons, all of whom are Disinterested Persons. Such committee
may be the Committee if all of the members thereof are Disinterested Persons,
or a special committee appointed by the Board of Directors composed of at least
three Disinterested Persons. The Committee or the Board of Directors, as the
case may be, shall have full authority to administer the Plan, including
authority to interpret and construe any provision of the Plan and any Stock
Options, Stock Appreciation Rights or Supplemental Bonus granted thereunder,
and to adopt such rules and regulations for administering the Plan as it may
deem necessary in order to comply with the requirements of the Code or in order
that Stock Options that are intended to be ISOs will be classified as incentive
stock options under the Code, or in order to conform to any regulation or to
any change in any law or regulation applicable thereto. The Committee or the
Board may delegate any of its responsibilities under the Plan, other than its
responsibility to grant Stock Options, to determine whether the Stock
Appreciation Rights or Supplemental Bonuses, if any, payable to a Participant
shall be paid in cash, in shares of Common Stock or a combination thereof, or
to interpret and construe the Plan. The Board of
1990 Stock Option Plan Confidential Page 1
<PAGE> 2
Directors may reserve to itself any of the authority granted to the Committee
as set forth herein, and it may perform and discharge all of the functions and
responsibilities of the Committee at any time that a duly constituted Committee
is not appointed and serving. All references in this Plan to the "Committee"
shall be deemed to refer to the Board of Directors whenever it is discharging
the powers and responsibilities of the Committee, and to any special committee
appointed by the Board of Directors to administer particular aspects of the
Plan.
3.2. ACTIONS OF COMMITTEE. All actions taken and all interpretations
and determinations made by the Committee in good faith (including
determinations of Fair Market Value) shall be final and binding upon all
Participants, the Company and all other interested persons. No member of the
Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan, and all members of
the Committee shall, in addition to their rights as directors, be fully
protected by the Company with respect to any such action, determination or
interpretation.
4. DEFINITIONS
4.1. "Stock Option." A Stock Option is the right granted under the
Plan to an Employee, director, or consultant to purchase, at such time or times
and at such price or prices ("Option Price") as are determined by the
Committee, the number of shares of Common Stock determined by the Committee.
4.2. "Stock Appreciation Right." A Stock Appreciation Right is the
right to receive payment, in shares of Common Stock, cash or a combination of
shares of Common Stock and cash, of the Redemption Value of a specified number
of shares of Common Stock then purchasable under a Stock Option.
4.3. "Redemption Value." The Redemption Value of shares of Common
Stock purchasable under a Stock Option shall be the amount, if any, by which
the Fair Market Value of one share of Common Stock on the date on which the
Stock Option is exercised exceeds the Option Price for such share.
4.4. "Common Stock." A share of Common Stock means a share of
authorized but unissued or reacquired common stock of the Company.
4.5. "Fair Market Value." If the Common Stock is not traded
publicly, the Fair Market Value of a share of Common Stock on any date shall be
determined in good faith by the Board of Directors or the Committee after such
consultations with outside legal, accounting and other experts as the Board of
Directors or the Committee may deem advisable, and the Board of Directors or
the Committee shall maintain a written record of its method of determining such
value. If the Common Stock is traded publicly, the Fair Market Value of a
share of Common Stock on any date shall be the average of the representative
closing bid and asked prices, as quoted by the National Association of
Securities Dealers through NASDAQ (its automated system for reporting quotes),
for the date in question, or, if the Common Stock is listed on the NASDAQ
National Market System or is listed on a national stock exchange, the
officially quoted closing price on NASDAQ or such exchange, as the case may be,
on the date in question.
4.6. "Employee." An Employee is an employee of the Company or any
Participating Subsidiary.
4.7. "Participant." A Participant is an Employee, director or
consultant to whom a Stock Option is granted, or an Employee to whom a Stock
Appreciation Right, or Supplemental Bonus is granted.
4.8. "Disinterested Person." A Disinterested Person is a person who,
at the time he exercises discretion in administering the Plan, is not eligible,
and has not at any time within one year prior thereto been eligible for
selection as a person to whom Stock Options, Stock Appreciation Rights or
Supplemental Bonuses may be granted under this Plan or any similar plan of the
Company.
4.9. "Supplemental Bonus." A Supplemental Bonus is the right to
receive payment, in shares of Common Stock, cash or a combination of shares of
Common Stock and cash, of an amount determined under Section 7.7.
1990 Stock Option Plan Confidential Page 2
<PAGE> 3
5. ELIGIBILITY AND PARTICIPATION
Grants of Stock Options, Stock Appreciation Rights and Supplemental Bonuses may
be made to Employees of the Company or any Participating Subsidiary. Grants of
NSOs may be made to directors of or consultants to the Company or any
Participating Subsidiary. Any director of the Company or of a Participating
Subsidiary who is also an Employee shall also be eligible to receive Stock
Options, Stock Appreciation Rights and Supplemental Bonuses. The Committee
shall from time to time determine the Participants to whom Stock Options shall
be granted, the number of shares of Common Stock subject to each Stock Option
to be granted to each such Participant, the Option Price of such Stock Options,
all as provided in this Plan. The Option Price of any ISO shall be not less
than the Fair Market Value of a share of Common Stock on the date on which the
Stock Option is granted, but the Option Price of an NSO may be less than the
Fair Market Value on the date the NSO is granted if the Committee so
determines. If an ISO is granted to an Employee who then owns stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company or any parent or subsidiary corporation of the Company, the Option
Price of such ISO shall be at least 110% of the Fair Market Value of the Common
Stock subject to the ISO at the time such ISO is granted, and such ISO shall
not be exercisable after five years after the date on which it was granted.
Each Stock Option shall be evidenced by a written agreement ("Option
Agreement") containing such terms and provisions as the Committee may
determine, subject to the provisions of this Plan.
6. SHARES OF COMMON STOCK SUBJECT TO THE PLAN
6.1. MAXIMUM NUMBER. The maximum aggregate number of shares of
Common Stock that may be made subject to Stock Options shall be 850,000
authorized but unissued shares. The aggregate Fair Market Value (determined as
of the time the ISO is granted) of the stock as to all ISOs granted to an
individual which may first become exercisable in a particular calendar year may
not exceed $100,000. If any shares of Common Stock subject to Stock Options
are not purchased or otherwise paid for before such Stock Options expire, such
shares may again be made subject to Stock Options.
6.2. CAPITAL CHANGES. In the event any changes are made to the
shares of Common Stock (whether by reason of merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, combination of
shares, exchange of shares, change in corporate structure or otherwise),
appropriate adjustments shall be made in: (i) the number of shares of Common
Stock theretofore made subject to Stock Options, and in the purchase price of
said shares; and (ii) the aggregate number of shares which may be made subject
to Stock Options. If any of the foregoing adjustments shall result in a
fractional share, the fraction shall be disregarded, and the Company shall have
no obligation to make any cash or other payment with respect to such a
fractional share.
7. EXERCISE OF STOCK OPTIONS
7.1 TIME OF EXERCISE. Subject to the provisions of the Plan,
including without limitation Section 7.3, the Committee, in its discretion,
shall determine the time when a Stock Option, or a portion of a Stock Option,
shall become exercisable, and the time when a Stock Option, or a portion of a
Stock Option, shall expire. Such time or times shall be set forth in the
Option Agreement evidencing such Stock Options. A Stock Option shall expire,
to the extent not exercised, no later than the tenth anniversary of the date on
which it was granted. The Committee may accelerate the vesting of any
Participant's Stock Option by giving written notice to the Participant. Upon
receipt of such notice, the Participant and the Company shall amend the Option
Agreement to reflect the new vesting schedule. The acceleration of the
exercise period of a Stock Option shall not affect the expiration date of that
Stock Option.
7.2 EXCHANGE OF OUTSTANDING STOCK. The Committee, in its sole
discretion, may permit a Participant to surrender to the Company shares of the
Common Stock previously acquired by the Participant as part of full payment for
the exercise of a Stock Option. Such surrendered shares shall be valued at
their Fair Market Value on the date of exercise. Unless otherwise determined
by the Committee, any such shares surrendered by the Participant shall have
been held by him for at least six months prior to surrender.
7.3. USE OF PROMISSORY NOTE; EXERCISE LOANS. The Committee may, in
its sole discretion, impose terms and conditions, including conditions relating
to the manner and timing of payments, on the exercise of Stock Options. Such
terms and conditions may include, but are not limited to, permitting a
Participant to deliver to the Company his
1990 Stock Option Plan Confidential Page 3
<PAGE> 4
promissory note as full or partial payment for the exercise of a Stock Options;
provided that, with respect to any promissory note given as payment or partial
payment for the exercise of an ISO, all terms of such note shall be determined
at the time a Stock Option is granted and set forth in the Option Agreement.
The Committee, in its sole discretion, may authorize the Company to make a loan
to a Participant in connection with the exercise of Stock Options, or authorize
the Company to arrange or guarantee loans to a Participant by a third party.
7.4. STOCK RESTRICTION AGREEMENT. The Committee may provide that a
share of Common Stock issuable upon exercise of a Stock Options shall, under
certain conditions, be subject to restrictions whereby the Company has a right
of first refusal with respect to such share or a right or obligation to
repurchase all or a portion of such shares, which restrictions may survive a
Participant's term of employment with the Company. The acceleration of time or
times at which the option becomes exercisable may be conditioned upon the
Participant's agreement to such restrictions.
7.5. TERMINATION OF EMPLOYMENT BEFORE EXERCISE. If a Participant's
employment with the Company or a Participating Subsidiary shall terminate for
any reason other than the Participant's death or disability, any Stock Options
then held by the Participant, to the extent then exercisable under the
applicable Option Agreement(s), shall remain exercisable after the termination
of his employment for a period of three months (but not later than the
specified expiration date). If the Participant's employment is terminated
because the Participant is disabled within the meaning of Section 22(e)(3) of
the Code, any Stock Option then held by the Participant, to the extent then
exercisable under the applicable Option Agreement(s), shall remain exercisable
after the termination of his employment for a period of twelve months (but not
later than the specified expiration date). If the Participant dies while
employed by the Company or a Participating Subsidiary, or during the
three-month or twelve-month periods referred to above, his Stock Options may be
exercised to the extent that they were exercisable on the date of his death or
cessation of his employment, whichever occurred first, by his estate, or duly
appointed representative, or beneficiary who acquires the Stock Options by will
or by the laws of descent and distribution, but no further installments of his
Stock Options will become exercisable and each of his Stock Options shall
terminate on the first anniversary of the date of his death (but not later than
the specified expiration dates). If a Stock Option is not exercised during the
applicable period, it shall be deemed to have been forfeited and of no further
force or effect.
7.6. DISPOSITION OF FORFEITED STOCK OPTIONS. Any shares of Common
Stock subject to Stock Options forfeited by a Participant shall not thereafter
be eligible for purchase by the Participant, but may be made subject to Stock
Options granted to other Participants.
7.7 GRANT OF SUPPLEMENTAL BONUSES. The Committee, either at the time
of grant or at any time prior to exercise of any Stock Options or Stock
Appreciation Right, may provide for a Supplemental Bonus from the Company or
Participating Subsidiary in connection with a specified number of shares of
Common Stock then purchasable, or which may become purchasable, under a Stock
Option, or a specified number of Stock Appreciation Rights which may be or
become exercisable. Such Supplemental Bonus shall be payable upon the exercise
of the NSO or Stock Appreciation Right with regard to which such Supplemental
Bonus was granted; provided, that if the Participant is subject to Section
16(b) of the Securities Exchange Act of 1934, as amended, the Committee may
provide that such Supplemental Bonus will be calculated and paid six months
after such exercise. A Supplemental Bonus shall not exceed the amount
necessary to reimburse the Participant for the income tax liability incurred by
him upon the exercise of the Stock Option or upon the exercise of such Stock
Appreciation Right, calculated using the maximum combined federal and
applicable state income tax rates then in effect and taking into account the
tax liability arising from the Participant's receipt of the Supplemental Bonus.
The Company may, in its discretion, elect to pay any part or all of the
Supplemental Bonus in: (i) cash; (ii) shares of Common Stock; or (iii) any
combination of cash and shares of Common Stock. The provisions of Section 8.3
shall apply to the giving of notice, the determination of the number of shares
to be delivered, and the time for delivering shares. In applying Section 8.3,
the Supplemental Bonus shall be treated as if it were a Stock Appreciation
Right that the Participant exercised on the day the Supplemental Bonus became
payable. Shares of Common Stock issued pursuant to this Section 7.7 shall not
be deemed to have been issued upon the exercise of a Stock Option for purposes
of the limitations imposed by Section 6.1 of the Plan.
1990 Stock Option Plan Confidential Page 4
<PAGE> 5
8. STOCK APPRECIATION RIGHTS
8.1 GRANT OF STOCK APPRECIATION RIGHTS. The Committee may, from time
to time, grant Stock Appreciation Rights to a Participant with respect to not
more than the number of shares of Common Stock which are or may become,
purchasable under any Stock Options held by the Participant. The Committee
may, in its sole discretion, specify the terms and conditions of such rights,
including without limitation the time period or time periods during which such
rights may be exercised and the date or dates upon which such rights shall
expire and become void and unexercisable; provided, however, that in no event
shall such rights expire and become void and unexercisable later than the time
when the related Stock Option is exercised, expires or terminates. Each
Participant to whom Stock Appreciation Rights are granted shall be given
written notice advising him of the grant of such rights and specifying the
terms and conditions of the rights, which shall be subject to all the
provisions of this Plan.
8.2. EXERCISE OF STOCK APPRECIATION RIGHTS. Subject to Section 8.3,
and in lieu of purchasing shares of Common Stock upon the exercise of a Stock
Option held by him, a Participant may elect to exercise the Stock Appreciation
Rights, if any, he has been granted and receive payment of the Redemption Value
of all or a portion of the number of shares of Common Stock subject to such
Stock Option with respect to which he has been granted Stock Appreciation
Rights; provided, however, that the Stock Appreciation Rights may be exercised
only when the Fair Market Value exceeds the exercise price of the Stock Option.
A Participant shall exercise his Stock Appreciation Rights by delivering a
written notice to the Committee specifying the number of shares with respect to
which he exercises Stock Appreciation Rights and agreeing to surrender the
right to purchase an equivalent number of shares of Common Stock subject to his
Stock Options. If a Participant exercises Stock Appreciation Rights, payment
of his Stock Appreciation Rights shall be made in accordance with Section 8.3
on or before the 90th day after the date of exercise of the Stock Appreciation
Rights.
8.3. FORM OF PAYMENT. If a Participant elects to exercise Stock
Appreciation Rights as provided in Section 8.2, the Committee may, in its
absolute discretion, elect to pay any part or all of the Redemption Value of
the shares with respect to which the Participant has exercised Stock
Appreciation Rights in: (i) cash; (ii) shares of Common Stock; or (iii) any
combination of cash and shares of Common Stock. The Committee's election
pursuant to this Section 8.3 shall be made by giving written notice to the
Participant within said 90-day period, which notice shall specify the portion
which the Committee elects to pay in cash, shares of Common Stock or a
combination thereof. In the event any portion is to be paid in shares of
Common Stock, the number of shares to be delivered shall be determined by
dividing the amount which the Committee elects to pay in shares of Common Stock
by the Fair Market Value of one share of Common Stock on the date of exercise
of the Stock Appreciation Rights. Any fractional share resulting from any such
calculation shall be disregarded. Said shares, together with any cash payable
to the Participant, shall be delivered within said 90-day period.
9. NO CONTRACT OF EMPLOYMENT
Nothing in this Plan shall confer upon the Participant the right to continue in
the employ of the Company, or any Participating Subsidiary, nor shall it
interfere in any way with the right of the Company, or any such Participating
Subsidiary, to discharge the Participant at any time for any reason whatsoever,
with or without cause. Nothing in this Article 9 shall affect any rights or
obligations of the Company or any Participant under any written contract of
employment.
10. NO RIGHTS AS A STOCKHOLDER
A Participant shall have no rights as a stockholder with respect to any shares
of Common Stock subject to a Stock Option. Except as provided in Section 6.2,
no adjustment shall be made in the number of shares of Common Stock issued to a
Participant, or in any other rights of the Participant upon exercise of a Stock
Option by reason of any dividend, distribution or other right granted to
stockholders for which the record date is prior to the date of exercise of the
Participant's Stock Option.
1990 Stock Option Plan Confidential Page 5
<PAGE> 6
11. ASSIGNABILITY
No Stock Option, Stock Appreciation Right or Supplemental Bonus right granted
under this Plan, nor any other rights acquired by Participant under this Plan,
shall be assignable or transferable by a Participant, other than by will or the
laws of descent and distribution, and are exercisable during his lifetime, only
by him. Notwithstanding the preceding sentence, the Committee may, in its sole
discretion, permit the assignment or transfer of an NSO and the exercise
thereof by a person other than a Participant, on such terms and conditions as
the Committee in its sole discretion may determine. Any such terms shall be
determined at the time the NSO is granted, and shall be set forth in the Option
Agreement. In the event of his death, the Stock Option or any Stock
Appreciation Right or Supplemental Bonus right may be exercised by the Personal
Representative of the Participant's estate or, if no Personal Representative
has been appointed, by the successor or successors in interest determined under
the Participant's will or under the applicable laws of descent and
distribution.
12. MERGER OR LIQUIDATION OF THE COMPANY
12.1 If within the duration of a stock option there shall be a
corporate merger, consolidation, acquisition of assets, or other reorganization
and if such transaction shall affect the Common Stock, the Participant shall
thereafter be entitled to receive upon the exercise of his Stock Option those
shares or securities that he would have received had the Stock Option been
exercised prior to such transaction and had the Participant been a stockholder
of the Company with respect to such shares.
12.2 If the Company or its stockholders enter into an agreement to
dispose of all, or substantially all, of the assets or outstanding capital
stock of the Company by means of a sale or liquidation, or a merger or
reorganization in which the Company is not the surviving corporation, the
vesting schedule of all Stock Options shall be accelerated so that all Stock
Options outstanding under the Plan as of the day before the consummation of
such sale, liquidation, merger or reorganization, to the extent not exercised,
shall for all purposes under this Plan become exercisable as of such date to
the extent they would otherwise be exercisable ten (10) years after such date,
unless the Board, with the consent of certain Participants, shall have
prescribed other terms and conditions to the exercise of the Stock Options held
by said consenting Participants.
13. AMENDMENT
The Board of Directors may from time to time alter, amend, suspend or
discontinue the Plan, including, where applicable, any modifications or
amendments as it shall deem advisable in order that ISOs will be classified as
incentive stock options under the Code, or in order to conform to any
regulation or to any change in any law or regulation applicable thereto;
provided, however, that no such action shall adversely affect the rights and
obligations with respect to Stock Options at any time outstanding under the
Plan; and provided further that no such action shall, without the approval of
the stockholders of the Company, (i) increase the maximum number of shares of
Common Stock that may be made subject to Stock Options (unless necessary to
effect the adjustments required by Section 6.2), (ii) materially increase the
benefits accruing to Participants under the Plan, or (iii) materially modify
the requirements as to eligibility for participation in the Plan.
14. REGISTRATION OF OPTIONED SHARES
The Stock Options shall not be exercisable unless the purchase of such optioned
shares is pursuant to an applicable effective registration statement under the
Securities Act of 1933, as amended, or unless, in the opinion of counsel to the
Company, the proposed purchase of such optioned shares would be exempt from the
registration requirements of the Securities Act of 1933, as amended, and from
the registration or qualification requirements of applicable state securities
laws.
15. WITHHOLDING TAXES
The Company or Participating Subsidiary may take such steps as it may deem
necessary or appropriate for the withholding of any taxes which the Company or
the Participating Subsidiary is required by any law or regulation of any
governmental authority, whether federal, state or local, domestic or foreign to
withhold in connection with any Stock Options, Stock Appreciation Rights or
Supplemental Bonus, including, but not limited to, the withholding of all or
any
1990 Stock Option Plan Confidential Page 6
<PAGE> 7
portion of any payment issued upon the exercise of any Stock Option or Stock
Appreciation Rights or upon payment of any Supplemental Bonus, until the
Participant reimburses the Company or Participating Subsidiary for the amount
the Company or Participating Subsidiary is required to withhold with respect to
such taxes, or canceling any portion of such payment or issuance in an amount
sufficient to reimburse itself for the amount it is required to so withhold.
16. BROKERAGE ARRANGEMENTS
The Committee, in its discretion, may enter into arrangements with one or more
banks, brokers, or other financial institutions to facilitate the disposition
of shares acquired upon exercise of Stock Options, Stock Appreciation Rights or
Supplemental Bonuses, including, without limitation, arrangements for the
simultaneous exercise of Stock Options, Stock Appreciation Rights or
Supplemental Bonuses, and the sale of shares acquired upon exercise.
17. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board of Directors nor the submission
of the Plan to stockholders of the Company for approval shall be construed as
creating any limitations on the power or authority of the Board of Directors to
adopt such other or additional incentive or other compensation arrangements of
whatever nature as the Board of Directors may deem necessary or desirable or
preclude or limit the continuation of any other plan, practice or arrangement
for the payment of compensation or fringe benefits to employees generally, or
to any class or group of employees, which the Company or any Subsidiary now has
lawfully put into effect, including, without limitation, any retirement,
pension, savings and stock purchase plan, insurance, death and disability
benefits and executive short-term incentive plans.
18. EFFECTIVE DATE
This Plan was adopted by the Board of Directors and became effective on April
15, 1990 and was approved by the Company's stockholders on April 17, 1990. No
Stock Options shall be granted subsequent to ten years after the effective date
of the Plan. Stock Options outstanding subsequent to ten years after the
effective date of the Plan shall continue to be governed by the provisions of
the Plan.
1990 Stock Option Plan Confidential Page 7
<PAGE> 1
Confidential Treatment Request
EXHIBIT 10.6
9-1-1 SERVICES AGREEMENT
BETWEEN
AMERICTECH INFORMATION SYSTEMS, INC.
AND
SCC COMMUNICATIONS CORPORATION
<PAGE> 2
SCC/AMERITECH SERVICES AGREEMENT
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. DESCRIPTION OF SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.1. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2. PROJECT IMPLEMENTATION PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.3. PROJECT MANAGEMENT AND OTHER PERSONNEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.4. TRAINING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.5. NETWORK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.6. SUPPORT SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.7. SYSTEM EFFICIENCY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.8. REGIONAL UNIFORMITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4. JOINT RESPONSIBILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.1. INTERNSHIP EXCHANGE PROGRAM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.2. ELECTRONIC EXCHANGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5. AMERITECH RESPONSIBILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
6. TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7. PRICE AND PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
8. PURCHASE OPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
9. EXCLUSIVITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
9.1. AMERITECH'S EXCLUSIVE RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
9.2. SCC'S RIGHT OF FIRST REFUSAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
9.3. EXCLUSIVE DISTRIBUTORSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
10. OWNERSHIP/NO LICENSES GRANTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
11. CONFIDENTIALITY AND NONDISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
11.1. NONDISCLOSURE AND SYSTEM SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
11.2. CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
12. ACCEPTANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
13. WARRANTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
13.1. WARRANTIES, RELATED REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
13.2. SOFTWARE "VIRUSES" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
14. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
14.1. GENERAL INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
14.2. INTELLECTUAL PROPERTY INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
15. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
16. LIABILITY AND LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
<PAGE> 3
SCC/AMERITECH SERVICES AGREEMENT
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
17. ADD-ON ORDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
18. FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
19. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
19.1. TERMINATION BY AMERITECH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
19.2. TERMINATION BY SCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
19.3. CANCELLATION BY AMERITECH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
20. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
21. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
21.1. INDEPENDENT CONTRACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
[ ] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
21.3. ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
21.4. UNBUNDLING OF SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
21.5. ESCALATION PROCEDURES AND NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
21.6. FAIR MARKET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
21.7. RECORDS AND AUDITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
21.8. EQUAL OPPORTUNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
21.9. COMPANY RULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
21.10. ADVERTISING OR PUBLICITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
21.11. NON-WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
21.12. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
21.13. LAWS AND REGULATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
21.14. TIME OF THE ESSENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
21.15. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
21.16. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
21.17. JOINT WORK PRODUCT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
21.18. AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
22. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
EXHIBIT A: SCOPE OF WORK
EXHIBIT B: FEES, DISCOUNTS AND PAYMENT SCHEDULE
EXHIBIT C: PURCHASE OPTION
EXHIBIT D: ADD-ON ORDERS
</TABLE>
PAGE ii
<PAGE> 4
SCC/AMERITECH SERVICES AGREEMENT
- --------------------------------------------------------------------------------
9-1-1 SERVICES AGREEMENT
THIS AGREEMENT is made as of ___________________, ("Effective Date")
between Ameritech Information Systems, Inc., a corporation having its principal
office at 225 West Randolph Street, Chicago, Illinois 60606 ("Ameritech") and
SCC Communications Corporation, having its principal office at 6285 Lookout
Road, Boulder, Colorado 80301-3343 ("SCC").
1. RECITALS
WHEREAS, this 9-1-1 Services Agreement contains all the terms,
conditions, and understandings between SCC and Ameritech for the establishment
of an Agreement between the parties; and
WHEREAS, Ameritech desires to enter into an Agreement with SCC for the
purpose of procuring 9-1-1 call handling data services (the "9-1-1 Services")
on a per record basis; and
WHEREAS, Ameritech requires the flexibility to acquire the 9-1-1
Services either throughout the entire "Ameritech Region" (as defined below) or
only within certain states therein; and
WHEREAS, Ameritech further requires the flexibility to be able to
acquire software and related services from SCC if such are required by
Ameritech either throughout the entire Ameritech Region or only within certain
states in the Ameritech Region if Ameritech does not outsource the 9-1-1
calling handling data services to SCC through the acquisition of 9-1-1 Services
under this Agreement; and
WHEREAS, SCC desires to enter into the Agreement in order to provide
such services and is qualified to provide 9-1-1 Services;.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, SCC and Ameritech, the "Parties",
agree as follows:
2. DEFINITIONS
The following definitions apply to this Agreement:
A. "9-1-1 Services" means the "Base Services" plus "New
Services", both of which are defined below and further described in Exhibit A
of this Agreement
B. "Add-on Order" means the document, signed by authorized
representatives of both Parties, that adds New Services to this Agreement. The
Add-on Order will specify the applicable fees and payments and other pertinent
information. A sample Add-on Order is set forth in Exhibit D. Article 17,
"Add-on Orders" describes the Add-on Order process.
C. "Ameritech Region" means the five state geographic region of
Illinois, Wisconsin, Michigan, Ohio, and Indiana, including both Ameritech
franchised and non-franchised territories.
D. "Base Record" means the database record which includes the
name, address or address equivalent, and telephone number of subscribers.
E. "Base Services" means the Management Systems (MS) and
Selective Routing (SR)/Automatic Location Identification (ALI) services both of
which are further defined in Exhibit A.
AGREEMENT PAGE 1
<PAGE> 5
SCC/AMERITECH SERVICES AGREEMENT
- --------------------------------------------------------------------------------
F. "Agreement" shall mean and include this document, completed
and executed by Ameritech and SCC, and all Exhibits attached hereto and
incorporated herein.
G. "New Services" means enhancements to the Base Services that
incorporate significant additional functionality, or which Ameritech's
customers are willing to pay for on a stand-alone basis, or separate
out-of-scope 9-1-1 Services. New Services will be periodically offered to
Ameritech by SCC hereunder, based on additional products SCC develops, and
added to this Agreement via an "Add-on Order" should Ameritech elect to
purchase New Services from SCC. New Services does not include periodic
improvements and updates to the Base Services or adaptations to the Base
Services due to changes in technology or the operating environment that do not
incorporate significant additional functionality.
H. "MSAG" means the Master Street Address Guide.
I. "SIP Interface" means the Service Order Input Process
subsystem which accepts and parses on-line updates from the host service order
system.
J. "Project" means all the work efforts included in the
"Implementation Plan", which plan is set forth in Exhibit A, up through and
including "Acceptance" (described in Article 12). The Project does not include
the ongoing provisioning by SCC of 9-1-1 Services following Acceptance, the
scope of which are described separately in this Agreement and Exhibit A.
K. "Network" means the transport facilities from the tandem
office to the SR/ALI and the SR/ALI to MS as provided by SCC.
3. DESCRIPTION OF SERVICES
3.1. GENERAL
The Parties agree to jointly develop and in good faith negotiate, by September
1, 1994, a detailed Exhibit A, "Scope of Work" (SOW), to replace the SOW
outline presently included as Exhibit A. The SOW will be a complete and
detailed description of all the work SCC will perform for Ameritech hereunder
for the fees specified herein. The SOW will include all those "Parts" listed
on the Table of Contents page of Exhibit A, "Scope of Work". The SOW outline
and content presently set forth in Exhibit A will be followed by the Parties
unless they later mutually agree not to. During the development of the SOW,
both Parties recognize that through the process, and in light of the experience
gained in the process, there may be changes or modifications requested to be
made to this Agreement by either Party. Such requests shall be considered and
negotiated in good faith by both Parties and incorporated, if mutually agreed
to, in writing into this Agreement.
3.2. PROJECT IMPLEMENTATION PLAN
An Implementation Plan shall be mutually developed and agreed to by both
Parties by September 1, 1994 and incorporated into this Agreement as part of
Exhibit A. The fully detailed Implementation Plan shall define the process for
conversion of data handling services to SCC under the terms of this Agreement,
the specific tasks, responsibilities, and performance dates of each party, the
specific services to be provided, and the performance requirements and
objectives for the provisioning of the 9-1-1 Services, and remedies and
consequences for non-performance according to the Performance Metrics to be
contained in Exhibit A. SCC is responsible for demonstrating that the 9-1-1
Services meet the acceptance criteria set forth in Exhibit A, the Scope of
Work.
Exhibit A shall also contain the Ameritech performance requirements and
objectives for the SIP Interface data. If these requirements are not met,
incremental charges as set forth in Exhibit B, "Fees and Payment Schedule", may
be assessed by SCC.
Any changes or modifications of the Scope of Work shall be mutually agreed to
in writing.
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3.3. PROJECT MANAGEMENT AND OTHER PERSONNEL
SCC and Ameritech shall each designate an individual, the "Project Manager",
who shall act as the primary interface between the Parties. The Project
Managers shall be responsible for insuring the continuity of communications
between the Parties as the Project proceeds.
SCC will provide office facilities and working space for an Ameritech employee,
the "Database Manager", designated to be on site at SCC's corporate offices in
Boulder, Colorado to assist with the Project. All Database Manager expenses,
except for the associated facilities and administrative costs, shall be paid by
Ameritech. The Ameritech Database Manager shall remain on site as long as it
is mutually determined to be necessary.
On a mutually agreed to periodic basis the Project Managers shall meet in order
for SCC and Ameritech to inform each other of the status of the Project and its
respective tasks and responsibilities. Such meetings shall include each
Party's Project Manager as well as appropriate additional personnel such as
Ameritech's Database Manager, and each Party shall provide a written status
report on the work being performed by it. Alternatively, Ameritech may elect
to forego all or some of such meetings and may direct SCC to provide it with
periodic written reports on the status of the Scope of Work being undertaken by
SCC under this Agreement. The specific Project responsibilities of SCC and
Ameritech are set forth in Exhibit A.
SCC and Ameritech recognize the need to provide and maintain qualified
personnel involved in all aspects of the 9-1-1 Services described in this
Agreement. In order to achieve continued high quality services through its
personnel, SCC shall establish and implement a mutually agreed to plan to
certify its personnel. SCC is responsible for the costs associated with the
certification of its employees.
All requests for additional services, conversion of additional records,
training, enhancements, and New Services shall be coordinated through the
Project Managers and handled in accordance with Article 17, "Add-on Orders".
SCC and Ameritech shall mutually develop, as part of the SOW, a policy
statement describing a Code of Conduct to be endorsed in writing by all SCC
personnel involved in providing 9-1-1 Services under this Agreement.
3.4. TRAINING
Any training required as part of the SOW shall be indicated in the SOW.
In addition to the training set forth in the SOW, from time to time, at
Ameritech's request, SCC shall provide training classes at sites and at times
agreed upon by the Parties. Such additional training classes shall be billed
to Ameritech at SCC's published rates as shown in Exhibit B, Personnel Rates
minus any discounts to which Ameritech is entitled under this Agreement or
otherwise. In addition, Ameritech shall be responsible for all reasonable
expenses incurred by SCC for travel, meals, and lodging in connection with
rendering training services in accordance with this Section. Airplane fares
shall not exceed the coach rates then prevailing, and SCC shall use its best
efforts to plan its travel in advance in order to maximize its use of air
travel discounts. SCC also shall use its best efforts to obtain lodging and
other travel-related discounts. SCC shall provide Ameritech with invoices
detailing any such expenses.
All training provided by SCC shall include written course materials that may be
kept, reproduced, and distributed by Ameritech so that Ameritech can
subsequently train its own personnel, provided that any reproductions of such
materials shall include any copyright or similar proprietary notices contained
in the materials.
Ameritech may cancel a training course scheduled by SCC upon fourteen (14) days
prior written notice to SCC. For cancellations with less than fourteen (14)
days prior written notice, Ameritech shall be liable to SCC for all reasonable
expenses incurred by SCC in preparation for the course that are not otherwise
recoverable by SCC.
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3.5. NETWORK
SCC shall design, develop, purchase, own or lease, implement, manage, maintain
and monitor all the Network hardware and software components further defined in
Exhibit A so the Network can be demonstrated to meet the performance
requirements as mutually established in Exhibit A. SCC acknowledges and agrees
that the participation of Ameritech personnel in all phases of the Network
implementation is necessary to the ongoing success of the provision of 9-1-1
Services.
3.6. SUPPORT SERVICES
SCC shall provide "Support Services" as described in Exhibit A to maintain the
Performance Metrics mutually agreed to and contained in Exhibit A.
3.7. SYSTEM EFFICIENCY
SCC is committed to improving and exceeding the standards and requirements of
this Agreement in the provision of 9-1-1 Services. This includes improvements
in the automation procedures, software products, hardware products, personnel
training and qualifications, and all other services. Therefore, performance
and efficiency of the "System" will be maintained and periodically improved by
SCC without charge to Ameritech. Such changes in the provision of Base
Services shall be considered usual and customary and not New Services. The
System is described in Exhibit A.
3.8. REGIONAL UNIFORMITY
The 9-1-1 Services and Support Services shall be provided under regionally
consistent terms and shall not be state- specific unless it is legally mandated
by the state or other legally governing body.
4. JOINT RESPONSIBILITIES
4.1. INTERNSHIP EXCHANGE PROGRAM
Ameritech and SCC agree that the success of this Agreement is dependent upon
the knowledge of the organization and operations of the other Party. To
optimize the provisioning of 9-1-1 Services, the Parties shall develop a
program designed to strengthen the ability to create, acquire, and transfer
knowledge, the "Internship Exchange Program". An individual (the "Intern")
shall be selected from each Party to relocate and participate in the other
Party's organization for a period of time to be mutually determined. During
such time, the Intern shall participate in the organization's positioning,
structure, systems, management practices, culture, mission and strategy. Each
Party shall be responsible for its own costs associated with this program.
4.2. ELECTRONIC EXCHANGE
To the extent possible, and as it becomes available, both Parties will use and
implement automation procedures to facilitate communication, coordination,
maintenance, and management of the 9-1-1 Services.
5. AMERITECH RESPONSIBILITIES
Ameritech's responsibilities are those stated in this Agreement and the
Exhibits hereto. As the mutually agreed to SOW is completed, specific
responsibilities shall be further defined.
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6. TERM
Unless earlier terminated or cancelled in accordance with Section 19,
"Termination/Cancellation", the term of this Agreement shall begin upon the
Effective Date as first stated herein and continue for [ ] following
expiration of the "Option Period" set forth in Section 8 below. If either
Party terminates this Agreement, or Ameritech cancels this Agreement, according
to the provisions of Section 19, then both Parties agree to participate in the
orderly shutdown and transition of products and services as provided for in
Exhibit A, the De-Implementation Plan. Following this initial [ ]
term, the Agreement shall automatically renew for continuous [ ]
unless terminated at the end of a renewal term upon no less than 180 days
advance written notification by the terminating Party.
7. PRICE AND PAYMENT
9-1-1 Service charges shall consist of an initial non-recurring engineering set
up charge ("NRE") followed by monthly invoices for recurring charges based on
per record fees. The NRE charge of [ ] shall be paid upon the date of
execution by Ameritech of this Agreement. All 9-1-1 Service charges, volume
commitments, and regularly scheduled audit procedures are outlined in Exhibit
B. Recurring charges for the 9-1-1 Services provided by SCC shall be on a per
record basis in committed to incremental blocks ("Thresholds") as outlined in
Exhibit B. Invoices for the recurring 9-1-1 Services will be submitted to
Ameritech monthly, on or about the first of the month (for the month being
billed for) and will be paid by Ameritech within 30 days of their receipt.
Other than for mutually agreed to exceptions and the addition of New Services
to expand Base Services, there will be no other initial NRE charges associated
with the addition of records.
The Monthly Base Service Charge per Base Record outlined in Exhibit B is based
on a [ ] Agreement term.
Services that are provided on a time-and-materials or other non-fixed-fee basis
shall be billed in arrears, after provision of the services, and Ameritech
shall pay any such charges within thirty (30) days of receipt of an invoice
that describes such charges. SCC's current published rates are shown in
Exhibit B, Personnel Rates, with the applicable discounts Ameritech is entitled
to hereunder.
If services are provided on a time-and-materials basis, SCC shall specify a
not-to-exceed billable amount. Billings for services shall not exceed this
amount without Ameritech's prior written approval.
8. PURCHASE OPTION
For a period commencing upon the Effective Date and continuing for ninety (90)
days after Ameritech's Acceptance of 9-1- 1 Services in Ohio ("Option Period"),
Ameritech shall have the option, at no additional fee, of not buying 9-1-1
Services from SCC and, instead, purchasing software licenses, developed
software and software maintenance services from SCC in accordance with the
prices and other terms and conditions set forth in Exhibit C, the "Purchase
Option" (except that the acquisition timeframes set forth in Exhibit C shall be
modified as appropriate). Ameritech may also purchase equipment from SCC at
prices, and other terms and conditions mutually agreed upon by the Parties at
such time. Notwithstanding anything to the contrary in Exhibit C, or elsewhere
in this Agreement, Ameritech shall have the right to exercise this Purchase
Option on a state-by-state basis or for the entire Ameritech Region. The
state-by-state purchase price during the Option Period will be determined on a
pro-rated basis. If Ameritech elects to exercise its Purchase Option for the
entire Ameritech Region, it shall be entitled to a full credit from SCC of all
unexpended NRE amounts which shall be used, as directed by Ameritech, to credit
subsequent SCC invoices to Ameritech for Ameritech's purchase of said software
licenses, developed software and software maintenance services. If Ameritech
elects to exercise its Purchase Option on a state-by-state basis, it shall be
entitled to a partial refund of the NRE as set forth in Exhibit B, associated
with each particular state the Purchase Option is exercised for, which shall be
used, as directed by Ameritech, to credit subsequent SCC invoices to
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Ameritech for Ameritech's purchase of said software licenses, developed
software and software maintenance services. If Ameritech elects to exercise its
Purchase Option, it shall have no liability for paying SCC any further "Monthly
Base Service Charges per Base Record", as specified in Exhibit B, following the
last date 9-1-1 Services are purchased from SCC.
If the Purchase Option is not exercised, Ameritech may amend this Agreement and
purchase 9-1-1 Services from SCC for the City of Chicago/State of Illinois
9-1-1 project under the terms, conditions set forth in this Agreement.
Tangible and intangible assets (excluding software license rights) may be
transferred to SCC upon mutual agreement based upon the Fair Market Value,
defined below, as of the date of exchange. Software license rights previously
purchased by Ameritech from SCC, and unexpended services already paid for by
Ameritech, shall be repurchased by SCC from Ameritech based upon the Fair
Market Value of such as of the date the City of Chicago/State of Illinois 9-1-1
project is added to this Agreement. Any amounts owing to Ameritech for such
asset transfer and prepaid maintenance fees for unused portions may be credited
against future billings to Ameritech, or refunded to Ameritech, at Ameritech's
option.
9. EXCLUSIVITY
9.1. AMERITECH'S EXCLUSIVE RIGHTS
SCC hereby agrees to grant Ameritech the exclusive right of distribution for
9-1-1 Services for the state(s) in which Amertiech is paying Monthly Base
Service Charges, and SCC further agrees not to distribute services directly in
these states. SCC further agrees to grant to Ameritech non-exclusive rights
for the distribution of 9-1-1 Services world-wide for the term of this
Agreement. If during the term of this Agreement, Ameritech elects to purchase
SCC products per Section 8 or Section 19, exhibit B8 of Exhibit C will be in
effect.
9.2. SCC'S RIGHT OF FIRST REFUSAL
Ameritech hereby grants SCC the right of first refusal as Ameritech's sole
provider of 9-1-1 Services world-wide (with the exception of provision of such
services by Ameritech itself) for the term of this Agreement. SCC shall
provide Ameritech notice in writing of its intent to exercise this right within
a reasonable period, but in no event more than forty-five (45) days of receipt
of notification of an opportunity from Ameritech.
9.3. EXCLUSIVE DISTRIBUTORSHIP
SCC and Ameritech may expand their present business relationship in the future
and amend this Agreement to incorporate the expanded business relationship or
execute a separate agreement as mutually agreed to in writing. to provide for
the exclusive distributorship by Ameritech of all SCC products in the Ameritech
Region.
10. OWNERSHIP/NO LICENSES GRANTED
Nothing in this Agreement shall be construed to grant any ownership or license
to Ameritech, except as provided for in Section 8 above.
Nothing in this Agreement shall be construed to grant to SCC any ownership of
any data provided to it for use in the provision of 9-1-1 Services to
Ameritech.
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11. CONFIDENTIALITY AND NONDISCLOSURE
11.1. NONDISCLOSURE AND SYSTEM SECURITY
SCC and Ameritech acknowledge the importance of maintaining the security and
integrity of the Network and the Ameritech Network (together, the "Networks")
and data of each Party as a result of their access to them. In order to
protect the data and Networks, each Party shall strictly adhere to the
nondisclosure and System security policies in the performance of its own tasks
and the services related to this Agreement. SCC understands and acknowledges
the confidential nature of Ameritech's telephone subscriber information: it
shall not disclose data to which it has access under this Agreement to any
person or entity without the prior written consent of Ameritech, and shall
require each SCC employee to acknowledge in writing the confidential nature of
the data and agree to abide by the terms and conditions of this Section 11.
11.2. CONFIDENTIAL INFORMATION
During the course of this Agreement, either Party may receive or have access to
confidential information of the other. "Confidential Information" means any
information or data disclosed by a Party (the "Disclosing Party") to the other
Party (the "Recipient") under or in contemplation of this Agreement which (i)
if in tangible form or other media that can be converted to readable form is
clearly marked as proprietary, confidential or private when disclosed, or (b)
if oral or visual, is identified as proprietary, confidential or private on
disclosure.
The terms "Disclosing Party" and "Recipient" include each Party's corporate
affiliates that disclose or receive Confidential Information. The rights and
obligations of the Parties shall therefore also inure to such affiliates and
may be directly enforced by or against such affiliates.
The Recipient acknowledges the economic value of the Disclosing Party's
Confidential Information. The Recipient shall:
(i) use the Confidential Information only in connection with the
Recipient's performance of its obligations or exercise of its rights under this
Agreement;
(ii) restrict disclosure of the Confidential Information to employees
of the Recipient and its affiliates with a "need to know" and not disclose it
to any other person or entity without the prior written consent of the
Disclosing Party;
(iii) advise those employees who access the Confidential Information
of their obligations with respect thereto; and
(iv) copy the Confidential Information only as necessary for those
employees who are entitled to receive it, and ensure that all confidentiality
notices are reproduced in full on such copies.
For the purposes of this Agreement only, "employees" includes third parties
retained by the Parties for temporary administrative or clerical or programming
support. A "need to know" means that the employee requires the Confidential
Information to perform his or her responsibilities in connection with this
Agreement.
The obligations of this Section shall not apply to any Confidential Information
which the Recipient can demonstrate:
(i) is or becomes available to the public through no breach of
this or any other agreements;
(ii) was previously known by the Recipient without any obligation
to hold it in confidence;
(iii) is received from a third party free to disclose such
information without restriction;
(iv) is independently developed by the Recipient without the use of
Confidential Information of the Disclosing Party;
(v) is approved for release by written authorization of the
Disclosing Party, but only to the extent of such authorization and without any
disassembly, reverse engineering, or similar undertaking by Recipient;
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(vi) is required by law or regulation to be disclosed, but only to
the extent and for the purposes of such required disclosure, and only if the
Recipient first notifies the Disclosing Party of the order and permits the
Disclosing Party to seek an appropriate protective order; or
(vii) is disclosed in response to a valid order of a court or other
governmental body of the United States or any political subdivisions thereof,
but only to the extent of and for the purposes of such order, and only if the
Recipient first notifies the Disclosing Party of the order and permits the
Disclosing Party to seek an appropriate protective order.
Confidential Information, including permitted copies, shall be deemed the
property of the Disclosing Party. The Recipient shall, within twenty (20) days
of a written request by the Disclosing Party, return all Confidential
Information (or any designated portion thereof), including all copies thereof,
to the Disclosing Party or, if so directed by the Disclosing Party, destroy
such Confidential Information. The Recipient shall also, within ten (10) days
of a written request by the Disclosing Party, certify in writing that it has
satisfied its obligations under this Section.
If the Recipient fails to abide by its obligations under this Section, the
Disclosing Party shall be entitled to immediate injunctive relief, in addition
to any other rights and remedies available to it at law or in equity.
12. ACCEPTANCE
Prior to the phased conversion (per the Project milestone schedule set forth in
Exhibit A) of 9-1-1 Services that will be performed by SCC, SCC shall conduct
the acceptance tests, described in Exhibit A, that reasonably demonstrate that
the 9-1-1 Services will be performed by SCC in accordance with the Performance
Metrics and the Acceptance Test Plan, both of which are also included in
Exhibit A. Ameritech customer specific requirements, that are different than
the Base Services, will be communicated by Ameritech to SCC, with the
Acceptance Test Plan modified accordingly on a customer-by-customer basis. New
Services, if added to this Agreement, shall be similarly tested prior to
Ameritech's acceptance of such in accordance with the New Services acceptance
criteria mutually agreed upon at such time by the Parties. In the event SCC is
unable to demonstrate, within thirty (30) days of commencing the Acceptance
Test Plan, that the 9-1-1 Services will perform in accordance with the
Performance Metrics and that the Acceptance Test Plan criteria have been
successfully met, Ameritech shall have the option of extending the acceptance
testing period or of terminating this Agreement in accordance with Section
19.1. In the event Ameritech elects to terminate this Agreement due to
non-acceptance of the 9-1-1 Services for Ohio, Ameritech shall be entitled to a
full and immediate refund of the NRE.
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13. WARRANTY
13.1. WARRANTIES, RELATED REMEDIES
SCC warrants and represents to Ameritech that: any support and services that
SCC provides to Ameritech under this Agreement shall be provided by personnel
who are trained and skilled in the provision of such services and shall be
provided in a professional, effective and efficient manner that equals or
exceeds the then-current industry standard for such services. SCC further
warrants that the 9-1-1 Services provided hereunder shall equal or exceed the
Performance Metrics criteria set forth in Exhibit A.
EXCEPT AS PROVIDED, INCORPORATED INTO, OR REFERRED TO IN THIS AGREEMENT, THERE
ARE NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, REGARDING THE SERVICES
PROVIDED BY SCC HEREUNDER.
13.2. SOFTWARE "VIRUSES"
SCC warrants that it has no knowledge of any existing software viruses. If SCC
becomes aware of any viruses in its products used in the performance of the
9-1-1 Services ordered by Ameritech, it shall so advise Ameritech in writing
immediately. SCC shall be responsible for the consequences of its failure to
notify Ameritech in a timely fashion of a software virus of which SCC has
notice. Upon learning of a virus in its software, SCC shall use its best
efforts to remedy it as soon as possible.
14. INDEMNIFICATION
14.1. GENERAL INDEMNIFICATION
Each Party shall defend, indemnify and hold harmless the other and the other's
corporate affiliates and their officers, directors, employees, and agents and
their successors and assigns against and from any and all losses, damages,
expenses, (including, without limitation, attorneys' fees and costs), claims,
suits and liabilities, whether based in contract or tort (including strict
liability), to the extent that such losses, damages, expenses, demands, claims,
suits and liabilities arise out of or in connection with (a) the indemnifying
Party's negligent or intentional acts or omissions, or those of persons
furnished by it, (b) the failure of the indemnifying Party to fully comply with
the terms and conditions of this Agreement, (c) assertions under Worker's
Compensation or similar laws made by persons furnished by the indemnifying
Party, or (d) the performance or nonperformance of the 9-1-1 Services under
this Agreement by the indemnifying Party. The indemnified Party shall promptly
notify the indemnifying Party of any written claim, loss, or demand for which
the indemnifying Party is responsible under this Section.
14.2. INTELLECTUAL PROPERTY INDEMNIFICATION
SCC shall defend, at its sole cost and expense, any claim or action of any kind
against Ameritech for alleged violation, infringement or misappropriation of
any patent, copyright, trade secret or other intellectual property right based
on the use of SCC products or services under this Agreement. SCC shall have the
right to conduct the defense of any such claim or action and all negotiations
for settlement or compromise, unless otherwise mutually agreed to in writing by
the Parties hereto. However, Ameritech, at its own expense, shall have the
right to participate in the defense of any such suit or proceeding through
counsel of its choosing. SCC shall indemnify and hold harmless Ameritech and
its officers, directors, employees, and agents and their successors and assigns
against and from any and all losses, liabilities, damages, claims, demands and
expenses (including, without limitation, reasonable attorneys' fees) arising
out of or related to any such claim or action.
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If any SCC product used to provide the 9-1-1 Services under this Agreement
becomes involved in any claim or action described above, or is held to
constitute a violation, infringement or misappropriation of a third party's
intellectual property rights and the use thereof is enjoined, then SCC shall,
at SCC's expense and option:
(i) procure the right to continue using said product so that its use
by SCC for Ameritech is lawful;
(ii) modify such product so that its use by SCC for Ameritech is
lawful (provided that such modification does not adversely affect the 9-1-1
Services provided); or
(iii) replace such product, at no charge to Ameritech, with equally
suitable, compatible and functionally equivalent products that lawfully may be
used by SCC for Ameritech.
15. INSURANCE
SCC must maintain: (a) Worker's Compensation insurance as prescribed by the law
of the applicable state, (b) employer's liability insurance with limits of at
least $[ ] each occurrence, (c) commercial general liability insurance
(including contractual liability and products liability coverage) with combined
single limits of at least $[ ] per occurrence for bodily injury and
property damage, and (d) if the use of motor vehicles is required,
comprehensive automobile liability insurance with combined single limits of at
least $[ ] per occurrence for bodily injury and property damage. Neither
SCC nor SCC's insurer(s) shall have a claim, right of action or right of
subrogation against Ameritech based on any loss or liability insured against
under the foregoing insurance. SCC's policy must be endorsed to name Ameritech
Information Systems, Inc. and its corporate affiliates as additional insureds
and state: "Ameritech Information Systems, Inc. is to be notified in writing
at least ten (10) days prior to cancellation of or any material change in this
policy". Also, SCC must furnish certificates evidencing the foregoing
insurance coverage prior to commencement of performance.
If SCC fails to maintain the insurance required by this Section, Ameritech may
procure such insurance. In such event, SCC shall promptly reimburse Ameritech
for any premiums and other charges paid by Ameritech for such coverage.
16. LIABILITY AND LIMITATION OF LIABILITY
SCC shall be responsible for any loss of or damage to property owned or used by
Ameritech caused by the grossly negligent acts or omissions of SCC or its
agents and subcontractors during the course of performing the 9-1-1 Services
rendered under this Agreement.
Neither Party shall require waivers or releases of any personal rights from
representatives of the other in connection with visits to its premises and both
Parties agree that no such releases or waivers shall be pleaded by them or
third persons in any action or proceeding.
EXCEPT FOR EACH PARTY'S INDEMNIFICATION OBLIGATIONS UNDER THIS AGREEMENT,
NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY INDIRECT, SPECIAL,
CONSEQUENTIAL, INCIDENTAL OR PUNITIVE DAMAGES, WHETHER BASED UPON LOST
GOODWILL, LOST PROFITS, LOSS OF USE OR PERFORMANCE OF ANY PRODUCTS OR SERVICES
OR OTHER PROPERTY, LOSS OR IMPAIRMENT OF DATA OR SOFTWARE, OR OTHERWISE, AND
WHETHER ARISING OUT OF BREACH OF EXPRESS OR IMPLIED WARRANTY, CONTRACT
(INCLUDING THE FURNISHING, PERFORMANCE OR USE OF ANY SOFTWARE OR OTHER
PRODUCTS, MATERIALS OR SERVICES PROVIDED PURSUANT TO THIS AGREEMENT OR THE
PERFORMANCE OR NONPERFORMANCE OF OBLIGATIONS UNDERTAKEN IN THIS AGREEMENT),
TORT (INCLUDING NEGLIGENCE), STRICT PRODUCT LIABILITY OR OTHERWISE, REGARDLESS
OF WHETHER SUCH PARTY HAS BEEN NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES OR
IF SUCH DAMAGES COULD HAVE BEEN REASONABLY FORESEEN.
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EXCEPT FOR PERSONAL INJURY AND PROPERTY DAMAGE AND FOR ITS INDEMNIFICATION
OBLIGATIONS UNDER THIS AGREEMENT, SCC'S ENTIRE LIABILITY FOR ANY CLAIM
CONCERNING ITS PERFORMANCE IN CONNECTION WITH THIS AGREEMENT, INCLUDING ANY
NEGLIGENCE, BREACH OF CONTRACT, WARRANTY OR OTHER CLAIM, SHALL BE LIMITED TO
[ ].
17. ADD-ON ORDERS
Ameritech may request in writing specific modifications or improvements to the
Base Services at any time. SCC shall consider each in good faith and provide
to Ameritech a quotation to include at a minimum the description of the new
service, date of availability, proposed implementation schedule, and initial
charges and/or additional recurring charges, other fees as are reasonably
required. Ameritech and SCC shall negotiate final terms which shall be
attached to this Agreement as a written Add-on Order signed by both parties
before it becomes effective and any associated work shall begin.
18. FORCE MAJEURE
Neither Party shall be liable to the other for any delay or failure to perform
under this Agreement if the delay or failure to perform is without the fault or
negligence of the Party claiming excusable delay and is due to causes beyond
the control of said Party, including, but not limited to: acts of God, war,
acts of the government, fires, floods, epidemics, quarantine restrictions,
strikes, labor disputes (including collective bargaining issues), work
stoppages, and freight embargoes.
19. TERMINATION/CANCELLATION
19.1. TERMINATION BY AMERITECH
This Agreement (including the Purchase Option set forth as Exhibit C) may be
terminated by Ameritech in whole or part for any of the following reasons:
(1) if SCC defaults in its performance of any material obligation
required to be performed by SCC under this Agreement (including, but not
limited to, a failure by SCC to meet the specific acceptance or performance
requirements set forth in Exhibit A, or the warranties set forth in Section
13), and such default is not cured (or, in Ameritech's opinion, satisfactory
progress has not been made) within a thirty (30) day "cure period" following
receipt of Ameritech's written notice which describes the default; or
(2) in the event of any acquisition, or takeover of a controlling
interest in SCC by another entity, or a merger or other consolidation of SCC
into or with another entity, if the other or surviving entity, at Ameritech's
discretion is or could be deemed a competitor of Ameritech, or if the entity in
Ameritech's reasonable discretion is not financially or operationally capable
of assuming the services being provided hereunder; or
(3) if prior to the acceptance of 9-1-1 Services in Ohio Ameritech
is unable to reach appropriate accomodations with its union-represented
employees, on terms that are satisfactory to it, as determined at Ameritech's
sole discretion, in order to be able to undertake the commitments set forth in
this Agreement; or
(4) in the event continued performance under this Agreement would
cause Ameritech to be in violation of any court order or regulatory agency
having jurisdiction, or of any law, statute, ordinance or regulation; or
(5) in the event a mutually acceptable SOW, including all the
"Parts" listed on the Table of Contents of the SOW (Page A-1), is not developed
by September 1, 1994.
AGREEMENT PAGE 11
<PAGE> 15
SCC/AMERITECH SERVICES AGREEMENT
- --------------------------------------------------------------------------------
In the event this Agreement is terminated by Ameritech in whole or part for any
of the reasons set forth above in this Section 19.1, SCC agrees, at Ameritech's
option, to sell Ameritech those SCC products and services desired by Ameritech,
under prices and terms consistent with the "Most Favored Customer" provisions
set forth in Section 21.2 below and those included in sections 1 to 41 of
Exhibit C, excluding the exhibits thereto. The exhibits thereto will be
replaced with then current exhibits as mutually agreed upon by the Parties at
that time.In the event of an Ameritech termination as described above, SCC
further agrees to ensure an orderly transition of 9-1-1 Services back to
Ameritech, with minimal disruption to Ameritech's customers, in accordance with
the De-Implementation Plan set forth in Exhibit A. SCC agrees to refund
Ameritech all unexpended NRE funds as of the effective termination date. If
Ameritech partially (less than all five states) terminates this Agreement, it
shall be entitled to a partial refund of the NRE as set forth in Exhbit B
associated with each particular state for which this Agreement is terminated.
In the event of an Ameritech termination as described above, Ameritech will
have no payment obligations to SCC beyond the effective termination date and
will not be obligated to pay SCC, and will be entitled to a refund if already
paid, for any 9-1-1 Services, or other services, which fail to meet the
acceptance criteria, Performance Metrics or the warranties set forth in this
Agreement. In the event of a conflict between this Section and Section 12,
Section 12 shall govern.
A termination of this Agreement by Ameritech does not in any way obligate
Ameritech to purchase any other SCC products and services following such
termination. Only an exercise by Ameritech of its "Purchase Option", as
described in Section 8 above, obligates Ameritech to purchase SCC products and
services if 9-1-1 Services are not acquired from SCC hereunder.
Even if any of the above reasons (that allow Ameritech to terminate) may be
isolated to a particular state(s), Ameritech retains its right to terminate the
entire Agreement if it so chooses.
19.2. TERMINATION BY SCC
This Agreement may be terminated by SCC if Ameritech defaults in its
performance of any material obligation required to be performed by Ameritech
under this Agreement (including, but not limited to, a failure by Ameritech to
pay SCC's undisputed invoices for services performed), and such default is not
cured (or, in SCC's opinion, satisfactory progress has not been made) within a
thirty (30) day "cure period" following receipt by Ameritech of SCC's written
notice which describes the default.
19.3. CANCELLATION BY AMERITECH
In the event the regulatory, legal, labor or business conditions, ("business
conditions" being defined as market share, profitability, ability to grow
revenue, and the allocation of internal resources) under which this Agreement
is based upon change so that it would no longer be in Ameritech's best
interests to continue with the full term as stated herein, Ameritech shall have
the ability to cancel this Agreement in its entirety, or on a state-by-state
basis, at any time upon providing SCC prior written notice of its intention to
cancel, and the scope (i.e., # of states) of the cancellation, at least 180
days in advance of the Ameritech designated cancellation date. Exhibit B, Part
3, "Cancellation Fee Schedule", sets forth Ameritech's cancellation fee payment
obligations to SCC in the event of such cancellation. Payment by Ameritech of
the cancellation fee shall be the extent of Ameritech's liability to SCC in the
event of a cancellation hereunder.
In the event this Agreement is cancelled by Ameritech in whole or part in
accordance with this Section 19.3, SCC agrees, at Ameritech's option, to sell
Ameritech those SCC products and services desired by Ameritech, under prices
and terms consistent with the "Most Favored Customer" provisions set forth in
Section 21.2 below and those included in sections 1 to 41of Exhibit C,
excluding the exhibits thereto. The exhibits thereto will be replaced with
then current exhibits as mutually agreed upon by the Parties at that time. In
the event of an Ameritech cancellation, SCC further agrees to ensure an orderly
transition of 9-1-1 Services back to Ameritech, with minimal disruption to
AGREEMENT PAGE 12
<PAGE> 16
SCC/AMERITECH SERVICES AGREEMENT
- --------------------------------------------------------------------------------
Ameritech's customers, in accordance with the De-Implementation Plan set forth
in Exhibit A. SCC agrees to refund Ameritech all unexpended NRE funds as of
the effective cancellation date. If Ameritech partially (less than all five
states) cancels this Agreement, it shall be entitled to a partial refund of the
NRE as set forth in Exhibit B associated with each particular state this
Agreement is cancelled for. In the event of an Ameritech cancellation,
Ameritech will have no payment obligations to SCC beyond the effective
cancellation date for that portion of the Agreement cancelled.
A cancellation of this Agreement by Ameritech does not in any way obligate
Ameritech to purchase any other SCC products and services following such
cancellation. Only an exercise by Ameritech of its "Purchase Option", as
described in Section 8 above, obligates Ameritech to purchase SCC products and
services if 9-1-1 Services are not acquired from SCC hereunder.
20. TAXES
The fees and charges under this Agreement do not include any sales, use,
excise, transaction or other similar taxes levied against or upon the
furnishing or receipt of services pursuant to this Agreement. If such taxes
are applicable, they shall be separately stated on the invoice to Ameritech and
Ameritech shall pay them. Ameritech shall have no obligation to pay any taxes
or fees:
(a) that are based upon SCC's net or gross income or gross
receipts;
(b) that are franchise taxes or other taxes based on SCC's
corporate existence or status;
(c) that are personal property taxes on licensed software; and
(d) that are due in whole or in part because of any failure by SCC
or its agents to file any return or information required by law, rule or
regulation.
Ameritech shall reimburse SCC for any penalties or interest actually
levied upon SCC only if Ameritech's acts or omissions solely caused such
interest or penalty to be levied.
21. GENERAL PROVISIONS
21.1. INDEPENDENT CONTRACTORS
The Parties are performing pursuant to this Agreement only as independent
contractors. Each Party has the sole obligation to supervise, manage,
contract, direct, procure, perform, or cause to be performed its obligations
set forth in this Agreement, except as otherwise provided herein or agreed upon
by the Parties. Except as specified in this Agreement, nothing set forth in
this Agreement shall be construed to create the relationship of principal and
agent between SCC and Ameritech. Neither Party shall act or attempt to act or
represent itself, directly or by implication, as an agent of the other Party or
its affiliates or in any manner assume or create, or attempt to assume or
create, any obligations on behalf of, or in the name of the other Party unless
so instructed by the other Party in writing or allowed under this Agreement.
Nothing herein is intended or shall be construed to create any partnership,
agency, or joint venture relationship between the Parties. Neither Party or a
Party's subcontractor, or the employees of any of them, shall be deemed for any
purpose to be employees of the other Party. Each Party shall be solely
responsible for the withholding or payment of all applicable federal, state,
and local personal income taxes, social security taxes, unemployment and
sickness disability insurance, and other payroll taxes with respect to its own
employees.
AGREEMENT PAGE 13
<PAGE> 17
SCC/AMERITECH SERVICES AGREEMENT
- --------------------------------------------------------------------------------
21.2. [
]
21.3. ASSIGNMENT
Except as provided otherwise in this Section, neither Party shall assign,
subcontract, out-source, or otherwise transfer any rights or obligations under
this Agreement without the other Party's prior written consent, which consent
shall not be unreasonably withheld.
Notwithstanding the above, Ameritech may, at no charge and without SCC's prior
written consent, assign its rights and delegate its duties under this
Agreement, either in whole or part, to any Ameritech's Affiliate. For purposes
of this Agreement, "Ameritech Affiliate" shall mean any affiliate of the
Ameritech Corporation, or any company which is greater than fifty percent (50%)
directly or indirectly owned by the Ameritech Corporation. Upon the acceptance
of such rights and the assumption of such duties by the assignee, the assignor
shall be released and discharged, to the extent of the assignment, from all
further duties and liability under this Agreement, except for Ameritech's
obligations under Section 11, entitled "Confidentiality and Nondisclosure".
This Agreement shall be binding upon the Parties' respective successors and
assigns.
21.4. UNBUNDLING OF SERVICES
Both Parties will commit to ensuring the integrity of 9-1-1 Services throughout
the term of this Agreement and will work to minimize the impacts to customers
as telecommunications networks are further disaggregated through unbundling and
the introduction of numerous competitive access providers. The focus of the
Parties shall be on working cooperatively with each other and with all
alternative providers to facilitate the saving of lives and property.
21.5. ESCALATION PROCEDURES AND NOTICES
Any dispute between the Parties under the terms of this Agreement shall attempt
to be resolved first by the Project Managers. It is the understanding of both
Parties that in the event a dispute cannot be resolved by the Project Managers,
then it shall be escalated up the levels of management as shown in Exhibit A.
All notices or other communications required or permitted to be given under
this Agreement shall be in writing (unless otherwise specifically provided
herein) and delivered or addressed as follows:
AGREEMENT PAGE 14
<PAGE> 18
SCC/AMERITECH SERVICES AGREEMENT
- --------------------------------------------------------------------------------
If to Ameritech:
Ameritech Information Systems, Inc.
225 West Randolph Street
Floor 25B
Chicago, Illinois 60606
Attention: Director - Contracts
If to SCC:
SCC Communications Corporation
6285 Lookout Road
Boulder, Colorado 80301-3343
Attention: CFO
All notices or other communications shall be deemed effectively given: (i)
when delivered, if personally delivered (except that notices received after
3:00 p.m. local time will be deemed received on the following business day);
(ii) on the date of delivery (or, if refused, the refusal date shown on the
return receipt) if mailed certified or registered mail, return receipt
requested; (iii) four (4) days after mailing if mailed first class; or (iv)
when received by the Party for which notice is intended if given in any other
manner (except that notices received after 3:00 p.m. local time will be deemed
received on the following business day).
21.6. FAIR MARKET VALUE
The price for the purchase of the tangible and intangible assets referred to in
this Agreement shall be the Fair Market Value as agreed upon by Ameritech and
SCC. If Ameritech and SCC are unable to agree upon a price, each shall select
an appraiser knowledgeable in the valuation of those types of assets and the
two appraisers shall attempt to reach agreement on the Fair Market Value. If
the two appraisers are unable to reach agreement, they shall select a third
appraiser who also shall be knowledgeable in the valuation of such assets. The
three appraisers shall then determine the Fair Market Value, but if they are
unable to agree, the Fair Market Value shall be set by the third appraiser.
Each Party shall bear the expense of the appraiser selected by it, and the
Parties shall split the expense of the third appraiser.
21.7. RECORDS AND AUDITS
With five days prior written notice, Ameritech shall have the right to perform
on-site audits and reviews of the Project records used for providing the 9-1-1
Services including the billings of Monthly Base Record charges, the data
protection and security measures, etc.
21.8. EQUAL OPPORTUNITY
To the extent Ameritech is required by law to extend any Equal Opportunity
Employment requirements to suppliers or vendors, and such is required to
include SCC as a provider of 9-1-1 Services, SCC shall comply with all
applicable portions of such requirements and the nondiscrimination compliance
provisions. Ameritech shall inform SCC of such requirements in writing as soon
as it becomes known to Ameritech.
21.9. COMPANY RULES
SCC's employees and agents shall comply with all of Ameritech's, governmental
security, and plant requirements, rules and regulations provided to SCC while
on Ameritech's premises and Ameritech's employees shall comply with all of
SCC's, governmental security, and plan requirements, rules and regulations
provided to Ameritech while on SCC's premises.
AGREEMENT PAGE 15
<PAGE> 19
SCC/AMERITECH SERVICES AGREEMENT
- --------------------------------------------------------------------------------
21.10 ADVERTISING OR PUBLICITY
SCC shall not disclose, use or refer to this Agreement or any of its terms, or
the names, trademarks or service marks of Ameritech or its Affiliates, in any
advertising, publicity releases or materials distributed to prospective
customers, without the prior written consent of Ameritech.
21.11. NON-WAIVER
No course of dealing or failure of either Party to enforce strictly any term,
right, obligation or provision of this Agreement or to exercise any option
provided hereunder or thereunder shall be construed as a waiver of such
provision.
21.12. GOVERNING LAW
The validity of this Agreement, the construction and enforcement of their
terms, and the interpretation of the rights and duties of the parties shall be
governed by the domestic laws of the State of Illinois.
21.13. LAWS AND REGULATIONS
Each Party shall comply, at its own expense, with all applicable federal,
state, county, and local laws, ordinances, regulations, and codes in the
performance of its obligations under this Agreement (including procurement of
required permits and certificates), including the Fair Labor Standards Act and
the Occupational Safety and Health Act.
21.14 TIME OF THE ESSENCE
Time is of the essence in performance under this Agreement.
21.15. REMEDIES
The rights and remedies provided herein shall be cumulative and, except as
limited herein, in addition to any other remedies available at law or in
equity.
21.16. SEVERABILITY
If any provision of this Agreement shall be held invalid or unenforceable, such
provision shall be deemed deleted from the Agreement and replaced by a valid
and enforceable provision which so far as possible achieves the Parties' intent
in agreeing to the original provision. The remaining provisions of the
Agreement shall continue in full force and effect.
21.17. JOINT WORK PRODUCT
This Agreement is the joint work product of representatives of Ameritech and
SCC; accordingly, in the event of ambiguities, no inferences will be drawn
against either Party, including the Party that drafted the Agreement in its
final form.
21.18. AUTHORITY
Each Party represents to the other that it has full authority to enter into and
secure performance of this Agreement and that the person signing this Agreement
on behalf of the Party has been properly authorized to enter into this
Agreement. Each Party further acknowledges that it has read this Agreement,
understands it, and agrees to be bound by all of its terms, conditions and
provisions.
AGREEMENT PAGE 16
<PAGE> 20
SCC/AMERITECH SERVICES AGREEMENT
- --------------------------------------------------------------------------------
22. ENTIRE AGREEMENT
This Agreement, when fully executed, together with any exhibits or other
attachments appended hereto, constitutes the entire agreement between the
parties and supersedes all previous agreements, (including the License
Agreement dated March 31, 1994 except to the extent it allows Ameritech to
provide for services to the City of Chicago/State of Illinois), promises and
representations, whether written or oral, between the Parties with respect to
the subject matter hereof. No modification, amendment, supplement to or waiver
of this Agreement or any of its provisions shall be binding upon the Parties
unless made in writing and duly signed by authorized representatives of both
Parties.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized representatives.
AMERITECH INFORMATION SYSTEMS, INC. SCC COMMUNICATIONS CORP.
/s/ RICHARD H. BROWN /s/ ROBERT B. LOUTHAN
- ----------------------------------- -----------------------------------
Signature Signature
RICHARD H. BROWN
VICE CHAIRMAN ROBERT B. LOUTHAN/CEO
- ----------------------------------- -----------------------------------
Printed Name/Title Printed Name/Title
AUGUST 31, 1994 AUGUST 31, 1994
- ----------------------------------- -----------------------------------
Date Date
AGREEMENT PAGE 17
<PAGE> 1
Confidential Treatment Request
EXHIBIT 10.7
AGREEMENT FOR SERVICES
BETWEEN
SCC COMMUNICATIONS CORP. (SCC)
AND
U S WEST COMMUNICATIONS, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS:..........................................................1
2. TERM:.................................................................1
3. TERMINATION:..........................................................2
4. SCOPE OF SERVICES:....................................................2
5. SERVICES FEE(S):......................................................2
6. INVOICES AND PAYMENTS:................................................2
7. ORDER(S):.............................................................2
8. SERVICE SPECIFICATIONS; WARRANTIES:...................................3
9. INSPECTION AND ACCEPTANCE:............................................3
10. FURNISHING OF LABOR, TOOLS, EQUIPMENT, AND MATERIAL:.................3
11. HAZARDOUS MATERIALS AND SAFETY:......................................3
12. OCCUPATIONAL SAFETY AND HEALTH ACT:..................................4
13. CONFIDENTIAL INFORMATION:............................................4
14. RECORDS:.............................................................5
15. INDEPENDENT CONTRACTOR:..............................................7
16. INDEMNITY:...........................................................7
17. PATENT, TRADEMARK, COPYRIGHT OR TRADE SECRET INDEMNIFICATION:........7
18. INSURANCE:...........................................................8
19. SUBCONTRACTORS:......................................................9
20. ADVERTISING; PUBLICITY:..............................................9
21. PLANT AND WORK RULES:................................................9
22. SETOFF:..............................................................9
23. TIME IS OF ESSENCE:..................................................9
24. ASSIGNMENT:..........................................................9
25. FORCE MAJEURE:.......................................................9
26. WAIVER:.............................................................11
27. COMPLIANCE WITH LAWS:...............................................11
28. SEVERABILITY:.......................................................11
29. ESCALATION:.........................................................12
30. DISPUTE RESOLUTION:.................................................12
31. SEVERAL LIABILITY:..................................................12
32. NONEXCLUSIVE AGREEMENT:.............................................12
33. REMEDIES CUMULATIVE:................................................13
34. AMENDMENTS:.........................................................13
35. LIMITATION OF LIABILITY.............................................13
36. SURVIVAL:...........................................................13
37. BUSINESS CONDUCT:...................................................13
38. NOTICES:............................................................13
39. OWNERSHIP AND LICENSE OF SOFTWARE:..................................14
40. M/WBE SUBCONTRACTING PLAN:..........................................14
41. OTHER PROVISIONS:...................................................14
42. ENTIRE AGREEMENT:...................................................14
</TABLE>
Confidential. Disclose and distribute solely to those
individuals who have a need to know.
<PAGE> 3
EXHIBIT A - Scope of Work
EXHIBIT B - Pricing and Payment
EXHIBIT C - Nondiscrimination and Compliance Agreement
EXHIBIT D - M/WBE Subcontracting Plan
Confidential. Disclose and distribute solely to
those individuals who have a need to know.
<PAGE> 4
AGREEMENT FOR SERVICES
This Agreement is made by and between U S WEST COMMUNICATIONS, INC.
("Customer"), with offices for transaction of business located at 150 South
Fifth Street, Suite 700 Minneapolis, Minnesota 55402, and SCC COMMUNICATIONS
CORP., ("SCC") a Delaware Corporation, having its corporation offices located at
6285 Lookout Road, Boulder, Colorado 80301. This Agreement may be extended to
any Customer "Affiliate" as that term is defined herein.
In consideration of the promises, mutual covenants and agreements contained
herein, the receipt and sufficiency of which are hereby acknowledged, Customer
and SCC agree as follows:
1. DEFINITIONS:
The terms defined in this Article shall have the meanings set forth below
whenever they appear in this Agreement, unless (a) the context in which they are
used clearly requires a different meaning; or (b) a different definition is
described for a particular Article or provision: This list is not inclusive.
Exhibits attached to this Agreement may also contain additional defined terms.
1.1. "Affiliate" means any entity within North America directly providing
communications services which directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control
with Customer. For the purposes of this subsection, "control" means (i) in
the case of corporate entities, direct or indirect ownership of twenty
percent (20%) or more of the stock or shares entitled to vote for the
election of the board of directors or other governing body of the entity;
and (ii) in the case of non-corporate entities, direct or indirect
ownership of twenty percent (20%) or greater of the equity interest.
1.2. "Agreement" means this written contract between Customer and SCC
covering the purchase of Services (defined herein) together with the Scope
of Work(s) (defined herein), attached exhibits, any Order(s) (defined
herein), any addenda, and amendments to this Agreement issued in accordance
with the Article entitled "Amendments".
1.3. "Customer" means U S WEST Communications, Inc. and shall also include
any Affiliate that places any Order(s) or obtains any Services under this
Agreement.
1.4. "New Service(s)" means an enhancement or enhancements to the Services
that incorporates significant additional functionality or separate out of
scope Services.
1.5. "Order(s)" means a written or electronic request by Customer for
Services which shall be deemed to incorporate all provisions of this
Agreement.
1.6. "Services" means the work to be performed by SCC under this Agreement,
as more fully described and set forth in Exhibit A to this Agreement.
1.7. "Scope of Work(s)" means the description and definition of the
Services to be performed by SCC, the task and responsibilities of Customer,
and the fees for the Services provided under this Agreement, all as more
fully described and set forth in Exhibit A and B to this Agreement.
2. TERM:
This Agreement shall commence on DECEMBER 28, 1995, and expire on [
], unless earlier terminated under the terms of this Agreement. Following
this initial term, the Agreement shall be extended for continuous five year
terms, unless terminated at the end of the initial or any renewal term upon no
less than one hundred and eighty (180) days prior written notice. The parties
may extend the
Confidential. Disclose and distribute solely to
those individuals who have a need to know.
<PAGE> 5
initial term or any subsequent term by executing a separate written agreement of
extension prior to the expiration of the term.
3. TERMINATION:
3.1. If either party shall at any time commit any breach of any material
covenant or warranty contained herein or otherwise materially default of
its or their respective obligations under this Agreement, and the defaulted
party gives written notice thereof, and if such material breach or default
is not cured or remedied within sixty (60) days from said notice of breach
or default, or if a failure to commence cure or remedy has not occurred
within such sixty (60) days of said notice, the defaulted party, upon
written notification and at its discretion may extend the 60 day cure
period to the party in default, provided the party in default submits to
the defaulted party a satisfactory plan to remedy the default. If such
default is not curable, the defaulted party may, at its option, and in
addition to any other remedies that it may be entitled to, terminate this
Agreement by notice in writing to such effect. The failure of the defaulted
party to exercise such right for any one default shall not be deemed a
waiver of said right if the party in default persists in such default or
commits any other default.
3.2. If for any reason, this Agreement is to be terminated, the Parties
agree to follow the procedures outlined in the De-Implementation Plan to be
incorporated into Exhibit A to this Agreement.
4. SCOPE OF SERVICES:
The description of the Services, together with the location(s), time(s) of
performance, and service specifications are described in this Agreement,
including the attached Exhibit A, Scope of Work. The Services shall be performed
upon such terms as set forth in the Scope of Work and this Agreement.
5. SERVICES FEE(S):
As consideration for SCC's satisfactory performance of the Services, Customer
agrees to pay SCC the Services Fee(s) set forth in Exhibit B, the Price and
Payment Schedule attached to this Agreement.
6. INVOICES AND PAYMENTS:
6.1. SCC shall issue invoices in the format required by Customer within
thirty (30) days following the completion of the Services to the address
stated on any Order(s).
6.2. Invoices for completed Services shall be payable upon receipt of a
correct invoice. Customer is not required to pay invoiced amounts in
dispute until such dispute is resolved. Once the dispute is resolved the
invoice shall be paid within thirty days following such resolution.
6.3. Customer reserves the right, before making payments, to require SCC to
furnish sufficient evidence that all claims, liens and causes of action, if
any, for the payment of wages or salaries or the payment of charges for
materials, tools, machinery or supplies have been satisfied, released or
settled. If satisfactory evidence is not furnished, the amount of such
claims, liens and causes of action may be withheld from any monies
otherwise payable to SCC hereunder until such evidence of payment or a bond
to indemnify Customer against any such claims, liens, and causes of action
has been furnished.
7. ORDER(S):
Any attempted acknowledgment of any Order(s) by SCC containing terms and
conditions inconsistent with or in addition to the terms and conditions of this
Agreement or any Order(s) are hereby objected to by Customer and shall not be
binding upon Customer. This Article shall not be waived, modified or amended
except by a writing in accordance with the Article entitled "Amendments". 8.
Confidential. Disclose and distribute solely to
those individuals who have a need to know.
<PAGE> 6
8. SERVICE SPECIFICATIONS; WARRANTIES:
8.1. SCC warrants and agrees that the Services shall be performed according
to the specifications contained in the Scope of Work and they shall be
performed in a professional manner consistent with reasonable industry
standards. SCC shall, at no expense to Customer, correct any failure to
fulfill the above warranty which may appear at any time during the term of
this Agreement.
8.2. When a need arises for Services to be covered under this warranty,
Customer shall follow the Support Procedures described in Exhibit A.
8.3. SCC further warrants that it has no knowledge of any existing software
viruses, worms, trap doors, etc., ("disorder"). If SCC becomes aware of any
such disorder in its products used in the performance of Services ordered
by Customer, it shall so advise Customer in writing immediately. Upon
learning of such disorder in its products or software, SCC shall use its
best efforts to remedy it as soon as possible.
8.4. Customer shall also warrant that it has no knowledge of any existing
software viruses, worms trap doors, etc. ("disorder"). If Customer becomes
aware of such disorder in its products or data provided to SCC, it shall so
advise SCC in writing immediately. Upon learning of a disorder in its
products or data, Customer shall use its best efforts to remedy it as soon
as possible and reimburse SCC for efforts expended by SCC in order to
restore other SCC customer's data if it has been affected by any such
disorder. Customer shall not be liable for any indirect, special,
consequential, incidental or punitive damages due to such disorder to SCC
or any of SCC's customers or other third parties.
9. INSPECTION AND ACCEPTANCE:
Customer shall be provided regular performance statistics, the Performance
Metrics, as defined and described in Exhibit A as a means to determine if the
Services provided by SCC conform to the specifications contained in Exhibit A.
SCC shall correct such nonconforming Services in an expeditious manner at its
own expense.
10. FURNISHING OF LABOR, TOOLS, EQUIPMENT, AND MATERIAL:
SCC shall furnish, at its own cost and expense, all labor, supervision,
machinery, tools, equipment, fuel, power, materials, expendable supplies,
transportation, licenses, permits, bonds, and all other items that may be
required or appropriate in the performance of the Services except items which
Customer specifically agrees to furnish. All materials, supplies, and other
items purchased by SCC shall be in SCC's own name and account. SCC shall be
responsible for all freight and delivery, costs of materials, supplies,
equipment, and other items on the work site and shall be responsible for
in-transit loss or damage.
11. HAZARDOUS MATERIALS AND SAFETY:
11.1. "Hazardous Materials" means any hazardous, radioactive, or toxic
substance, material, or waste defined or regulated as such in or under any
environmental, health or safety law including without limitation asbestos,
and those hazardous materials, substances, and wastes defined by the United
States Department of Transportation ("DOT"), Occupational Safety and Health
Administration ("OSHA"), Environmental Protection Agency ("EPA") or the
Nuclear Regulatory Commission ("NRC") through their enabling statutes, or
regulations, orders or rules.
11.2. In connection with its activities under this Agreement and all
Services under this Agreement, SCC shall comply with all applicable
provisions of The Hazardous Materials Transportation Act (49 USC 1801, et
seq.), the Resource Conservation and Recovery Act (42 USC 6901, et seq.),
the Toxic Substances Control Act of 1976 (15 USC 2601, et seq.), the
Comprehensive Environmental Response, Compensation, and Liability Act of
1980 (42 USC 9601
Confidential. Disclose and distribute solely to
those individuals who have a need to know.
<PAGE> 7
et seq.), the Occupational Safety and Health Act of 1970 and any other
applicable federal, state, and local laws and regulations governing
Hazardous Materials or safety, including but not limited to state and
federal motor carrier safety regulations, the DOT Hazardous Materials
regulations and any regulations governing conveyance, packaging, marking,
identification, storage, handling and/or disposition of Hazardous
Materials, or governing any accidents or incidents in connection with such
activities involving Hazardous Materials, all as they may be amended or
supplemented from time to time.
11.3. To the extent applicable, SCC shall furnish Customer with Material
Safety Data Sheets that comply with the requirements of the OSHA Hazard
Communication Standard (29 CFR 1910.1200), as the same may be amended or
supplemented from time to time.
11.4. SCC shall indemnify and hold Customer harmless in accordance with the
Article entitled "Indemnity" for any claims, liabilities and damages,
including but not limited to reasonable attorneys' fees, costs of defense,
clean-up costs, response costs, costs of corrective action, costs of
financial assurance, and/or natural resource damages, that may arise, be
imposed on, be incurred by, be asserted against or be sustained by Customer
by reason of SCC's failure to comply with the terms of this Article.
12. OCCUPATIONAL SAFETY AND HEALTH ACT:
12.1. SCC shall be responsible for its safety, the safety of its employees,
its subcontractors, and the worksite in general, and shall comply with all
applicable provisions of local, state, and federal laws, regulations and
orders affecting safety and health, including but not limited to the
Occupational Safety and Health Act of 1970 (hereinafter collectively
referred to as ("the OSH Act"). All Services and related deliverables under
this Agreement shall be such that when received and/or used by Customer,
they are in compliance with the OSH Act and other laws, regulations, rules
and standards relating to safety. SCC shall be solely responsible for any
violation of the OSH Act by it or its subcontractors, shall immediately
remedy any conditions giving rise to such violations, and shall defend and
hold Customer harmless from any penalty, fine, or liability in connection
therewith. SCC is expressly authorized to correct any violations of the OSH
Act that come to its attention where said violations are within the scope
of SCC's work. Upon request of Customer, SCC shall provide Customer with
written assurances that SCC and its subcontractors have a written safety
plan in effect and the OSH Act training appropriate for the work has been
conducted for SCC and its subcontractors. SCC shall be responsible for
coordinating its safety plan with its subcontractors, other independent
contractors and Customer, where appropriate. This clause shall appear in
all of SCC's subcontracts.
12.2. While working on Customer's premises, SCC agrees that it and its
subcontractors shall give access to the authorized representatives of the
Secretary of Labor or any state or local official for the purpose of
inspecting, investigating, or carrying out any duties under the OSH Act at
Customer's premises or facilities and SCC shall immediately notify Customer
prior to allowing access to Customer premises or facilities.
13. CONFIDENTIAL INFORMATION:
13.1. As used herein, "Confidential Information" shall mean any and all
technical or business information, including third party information,
furnished, in whatever tangible form or medium, or disclosed by one party
to the other (including, but not limited to, product/service
specifications, prototypes, computer programs, models, drawings, marketing
plans, financial data and personnel statistics), which is marked as
confidential or proprietary; or for information which is orally disclosed,
the disclosing party indicates to the other at the time of disclosure the
confidential or proprietary nature of the information and reduces orally
disclosed Confidential Information to
Confidential. Disclose and distribute solely to
those individuals who have a need to know.
<PAGE> 8
writing and provides it to the receiving party within twenty days after
such disclosure which is also marked as confidential.
13.2. Customer does not wish to receive the Confidential Information of
SCC, and SCC agrees that it will first provide or disclose information
which is not confidential. Only to the extent that Customer requests
Confidential Information from SCC will SCC furnish or disclose Confidential
Information.
13.3. Notwithstanding the termination, expiration or cancellation of this
Agreement, each party agrees to treat such Confidential Information as
confidential for a period of three years from the date of receipt of same
unless otherwise agreed to in writing by both parties, and that during such
period each party will use same solely for the purposes of this Agreement
unless otherwise allowed herein or by written permission of the disclosing
party. In handling the Confidential Information, each party agrees: (1) not
to copy such Confidential Information of the other unless specifically
authorized; (2) not to make disclosure of any such Confidential Information
to anyone except employees and independent contractors and subcontractors
of such party to whom disclosure is necessary for the purposes set forth
above; (3) to appropriately notify such employees and independent
contractors and subcontractors that the disclosure is made in confidence
and shall be kept in confidence in accordance with this Agreement; and (4)
to make requests for Confidential Information of the other only if
necessary to accomplish the purposes set forth in this Agreement. The
obligations set forth herein shall be satisfied by each party through the
exercise of at least the same degree of care used to restrict disclosure of
its own information of like importance but not less than a reasonable
degree of care. Notwithstanding any other provisions of this Article,
Confidential Information may be disclosed as may be required by law,
regulation or court or agency order or demand, after prompt prior
notification to the other party of such required disclosure.
13.4. Each party agrees that in the event permission is granted by the
other to copy Confidential Information, or that copying is otherwise
permitted hereunder, each such copy shall contain and state the same
confidential or proprietary notices or legends, if any, which appear on the
original. Nothing herein shall be construed as granting to either party any
right or license under any copyrights, inventions, or patents now or
hereafter owned or controlled by the other party. Upon termination,
cancellation or expiration of this Agreement for any reason or upon request
of the disclosing party, all Confidential Information, together with any
copies of same as may be authorized herein, shall be returned to the
disclosing party or certified destroyed by the receiving party.
13.5. The obligations imposed in this Article shall not apply to any
information that: (1) is already in the possession of, is known to, or is
independently developed by the receiving party; or (2) is or becomes
publicly available through no fault of the receiving party; or (3) is
obtained by the receiving party from a third person without breach by such
third person of an obligation of confidence with respect to the
Confidential Information disclosed; or (4) is disclosed without restriction
by the disclosing party; or (5) is required to be disclosed pursuant to the
lawful order of a government agency or disclosure is required by operation
of the law.
13.6. The requirements of use and confidentiality set forth herein shall
survive the expiration, termination or cancellation of this Agreement.
14. RECORDS:
14.1. SCC shall maintain complete and accurate records of all amounts
billable to and payments made by Customer hereunder in accordance with
recognized accounting practices. SCC shall retain such records for a period
of four years from the date of final payment for Services covered hereby.
SCC agrees to provide reasonable supporting documentation concerning any
disputed amount of an invoice to Customer within thirty days after Customer
provides written notification of the dispute to SCC. 14.2.
Confidential. Disclose and distribute solely to
those individuals who have a need to know.
<PAGE> 9
14.2. During the term of this Agreement and the respective periods in which
SCC is required to maintain such records, Customer and its authorized
agents and representatives shall have access to such records for purposes
of audit during SCC's normal business hours, and upon prior written notice.
15. INDEPENDENT CONTRACTOR:
SCC HEREBY DECLARES AND AGREES THAT IT IS ENGAGED IN AN INDEPENDENT BUSINESS AND
WILL PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT AS AN INDEPENDENT CONTRACTOR
AND NOT AS THE AGENT OR EMPLOYEE OF CUSTOMER; THAT THE PERSONS PERFORMING
SERVICES HEREUNDER ARE NOT AGENTS OR EMPLOYEES OF CUSTOMER; THAT SCC HAS AND
HEREBY RETAINS THE RIGHT TO EXERCISE FULL CONTROL OF AND SUPERVISION OVER THE
PERFORMANCE OF SCC'S OBLIGATIONS HEREUNDER AND FULL CONTROL OVER THE EMPLOYMENT,
DIRECTION, COMPENSATION AND DISCHARGE OF ALL EMPLOYEES ASSISTING IN THE
PERFORMANCE OF SUCH OBLIGATIONS; THAT SCC WILL BE SOLELY RESPONSIBLE FOR ALL
MATTERS RELATING TO PAYMENT OF SUCH EMPLOYEES, INCLUDING COMPLIANCE WITH
WORKERS' COMPENSATION, UNEMPLOYMENT, DISABILITY INSURANCE, SOCIAL SECURITY
WITHHOLDING, AND ALL OTHER FEDERAL, STATE AND LOCAL LAWS, RULES AND REGULATIONS
GOVERNING SUCH MATTERS; AND THAT SCC WILL BE RESPONSIBLE FOR SCC'S OWN ACTS AND
THOSE OF SCC'S AGENTS, EMPLOYEES AND SUBCONTRACTORS DURING THE PERFORMANCE OF
SCC'S OBLIGATIONS UNDER THIS AGREEMENT. SCC AND ITS EMPLOYEES ARE NOT ENTITLED
TO UNEMPLOYMENT INSURANCE BENEFITS AS A RESULT OF PERFORMING UNDER THIS
AGREEMENT. SCC IS RESPONSIBLE FOR AND SHALL PAY ALL ASSESSABLE FEDERAL AND STATE
INCOME TAX ON AMOUNTS PAID UNDER THIS AGREEMENT.
16. INDEMNITY:
Each Party shall defend, indemnify and hold harmless the other and the other's
corporate owners, parents, affiliates, subsidiaries, agents, directors
employees, their successors and assigns against and from any and all losses,
damages, expenses (including but not limited to, court costs and reasonable
attorneys' fees), claims, suits, judgments, orders,, awards, and "liabilities",
whether based in contract or tort, including strict liability, to the extent
that such losses, damages, expenses, demands, claims, suits, and liabilities
arise out of or in connection with (a) the indemnifying Party's gross
negligence, negligent acts, omissions, or willfulness , or those persons
furnished by it, (b) the failure of the indemnifying Party to fully comply with
the terms and conditions of this Agreement, or (c) assertions under Worker's
Compensation or similar laws or employee benefit acts made by persons furnished
by the indemnifying Party. "Liabilities" as provided in this Section, shall
include only direct liabilities, but not be limited to those which are
attributable to personal injury, sickness, disease or death; and/or result from
injury to or destruction of real or personal property including loss of use
thereof, theft, misuse or misappropriation. The indemnified Party shall promptly
notify the indemnifying Party of any written claim, loss or demand for which the
indemnifying Party is responsible for under this Section.
16.1. Neither party shall be liable for any incidental and consequential
damages, loss, anticipated profit, or unabsorbed indirect costs or
overheads or any other losses or claims whatsoever on account of or arising
out of this Agreement.
17. PATENT, TRADEMARK, COPYRIGHT OR TRADE SECRET INDEMNIFICATION:
17.1. SCC shall indemnify and hold harmless Customer, its owners, parents,
affiliates, subsidiaries, agents, directors and employees from and against
all Liabilities that may result by reason of any infringement or claim of
infringement of any patent, trademark, copyright, trade secret or other
proprietary right relating to Services and/or deliverables or materials
used in or arising from provision of Services ("Deliverables or Materials")
and/or the use thereof. SCC will defend and/or settle at its own expense
any action brought against Customer to the extent that it is based on a
claim that Services, Deliverables or Materials and/or the use thereof,
infringe any patent, trademark, copyright, trade secret or other
proprietary right.
17.2. If a preliminary or final judgment shall be obtained against
Customer's use of any Services, Deliverables or Materials or any part
thereof by reason of alleged infringement or if in SCC's opinion, such
Services, Deliverables or Materials and/or the use thereof are likely to
Confidential. Disclose and distribute solely to
those individuals who have a need to know.
<PAGE> 10
become subject to a claim for infringement, SCC shall, at its expense and
option, either: (1) procure for Customer the right to continue using such
Services, Deliverables or Materials; or (2) replace or modify the Services,
Deliverables or Materials so that they become non-infringing but only if
the modification or replacement does not adversely affect Customer's rights
or ability to use same as specified herein. If neither of those options is
reasonably possible, SCC and Customer shall negotiate in good faith a new
price for Services which reflects any reduction in the extent of the
Services being provided or, if SCC cannot provide any of the Services
previously provided, SCC shall pay related direct expenses incurred by
Customer for the De-Implementation of Services.
18. INSURANCE:
SCC shall at all times during the term of this Agreement, at its own cost and
expense, carry and maintain the insurance coverage listed below with insurers
having a "Best's" rating of B+XIII.
18.1. Workers' Compensation and/or (when exposure exists) United States
Longshoremen and Harbor workers insurance with (1) statutory limits as
required in the state(s) of operation; and (2) although not required by
statute, coverage for any SCC employee entering onto Customer premises.
18.2. Employers' Liability or "Stop Gap" insurance with limits of not less
than $[ ] each accident.
18.3. Commercial General Liability insurance covering claims for bodily
injury, death, personal injury or property damage occurring or arising out
of the performance of this Agreement, including coverage for independent
contractor's protection (required if any work will be subcontracted),
premises-operations, products/completed operations and contractual
liability with respect to the liability assumed by SCC hereunder. The
limits of insurance shall not be less than:
Each Occurrence $[ ]
General Aggregate Limit $[ ]
Products-Completed Operations Limit $[ ]
Personal and Advertising Injury Limit $[ ]
18.4. Should performance of this Agreement involve any use of automobiles,
comprehensive automobile liability insurance covering the ownership,
operation and maintenance of all owned, non-owned and hired motor vehicles
with limits of not less than $[ ] per occurrence for bodily injury
and property damage.
18.5. Errors and Omissions/Professional Liability insurance covering errors
and omissions of SCC with limits of not less than $[ ] per
occurrence, with an aggregate of $[ ], and endorsed to provide
coverage for contractual liability with respect to liability assumed by SCC
hereunder. Such insurance shall provide a retroactive date prior to the
date of this agreement and an extended claims reporting period of not less
than 3 years after the termination of this agreement.
18.6. Blanket Employee Dishonesty Insurance covering losses due to SCC
employee's dishonest acts in an amount not less than $[ ] per
occurrence. Such insurance shall be endorsed to provide coverage to
Customer for losses arising from dishonest acts of SCC's employees while
providing services hereunder.
18.7. The insurance limits required in this Section 18 may be obtained
through any combination of primary and excess or umbrella liability
insurance. SCC shall forward to Customer certificates of such insurance
upon execution of this Agreement and upon any renewal of such insurance
during the term of this Agreement. The certificate(s) shall provide that
(1) the Customer (and its
Confidential. Disclose and distribute solely to
those individuals who have a need to know.
<PAGE> 11
participating subsidiaries) be named as an additional insured(s) as their
interest may appear with respect to this Agreement under insurance required
in Section 18.3; (2) thirty (30) days prior written notice of cancellation
of, material change or exclusions in the policy to which certificate(s)
relate shall be given to the Customer; (3) coverage is primary and not
excess of, or contributory with, any other valid and collectible insurance
purchased or maintained by the Customer. SCC shall not commence any work
hereunder until the obligations of the SCC with respect to insurance have
been fulfilled. The fulfillment of such obligations, however, shall not
otherwise relieve the SCC of any liability assumed hereunder or in any way
modify the SCC's obligations to indemnify the Customer.
18.8. SCC shall require its subcontractors who may enter upon Customer's
premises to maintain insurance as described above.
19. SUBCONTRACTORS:
SCC shall obtain Customer's written consent prior to subcontracting any
obligations hereunder. Such requirement shall not apply to purchases of
incidental, standard commercial supplies or raw materials.
20. ADVERTISING; PUBLICITY:
No references to Customer or any party affiliated with Customer or references to
Customer's names, marks, codes, drawings or specifications will be used in any
of SCC's advertising, promotional efforts or any publicity of any kind without
Customer's prior written permission.
21. PLANT AND WORK RULES:
SCC and Customer, while on the premises of the other, shall comply with all
plant rules and regulations including, where required by governmental
regulation, submission of satisfactory clearance from the appropriate
governmental authorities.
22. SETOFF:
All claims for money due or to become due from Customer shall be subject to
deduction or setoff by Customer by reason of any amounts due as the result of
Escalation or Arbitration Procedures pursuant to this Agreement, or other money
due by mutual agreement arising out of this or any other transaction with SCC.
23. TIME IS OF ESSENCE:
Time of performance is of the essence in this Agreement and a substantial and
material term hereof.
24. ASSIGNMENT:
No rights or interests in this Agreement shall be assigned by either Party
without the written permission of the other, which permission shall not be
unreasonably withheld or delayed. No delegation for the performance of Services
or other obligations of SCC shall be made without written permission of
Customer, including the hiring of subcontractors to perform any part of the
Services. Customer reserves the right to assign this Agreement without SCC's
permission to any Affiliate or successor company of Customer, and SCC may assign
the Agreement, with the prior consent of Customer which consent shall not be
unreasonably withheld, to a third party acquiring all or substantially all of
SCC's assets or stock, or by a merger of SCC and a third party.
25. FORCE MAJEURE:
Neither party shall be liable for failure to perform when such failure is caused
by unforeseeable force majeure circumstances. If such circumstances occur, the
party injured by the other's inability to perform may elect to (1) terminate
this Agreement and/or any Order(s) immediately; and/or (2) suspend this
Agreement and/or any Order(s) for the duration of the force majeure
circumstances, and then resume performance under this Agreement and/or any
Order(s). The party experiencing the force majeure circumstances shall cooperate
with and assist the injured party in all reasonable ways to minimize the impact
of such circumstances on the injured party, including assisting in locating and
arranging for substitute performance of the Services.
Confidential. Disclose and distribute solely to
those individuals who have a need to know.
<PAGE> 12
26. WAIVER:
Either party's failure to insist on performance of any of the terms or
conditions herein or to exercise any right or privilege, or either party's
waiver of any breach hereunder shall not be construed to be a waiver, or waive
any other terms, conditions, or privileges, whether of the same or similar type.
27. COMPLIANCE WITH LAWS:
27.1. This Agreement and the parties' actions under this Agreement shall
comply with all applicable federal, state, and local laws, rules,
regulations, court orders, and governmental or regulatory agency orders
including the Modification of Final Judgment ("MFJ"), as issued in United
States v. Western Electric Co., et al., Civil Action No. 82-0192, U.S.
District Court for the District of Columbia, and all subsequent orders
issued in or related to that proceeding. Customer is also subject to a
Civil Enforcement Consent Order (CECO).
27.2. Customer's E9-1-1 service is regulated by local Public Service
Commissions ("PUC"). These commissions can change service requirements that
may impact the way E9-1-1 Services are delivered. SCC acknowledges this and
agrees to be responsive to PUC inquiries, hearings, and demands for
information and testimony, and will support Customer in its dealings with
PUCs as it pertains to any aspect of the E9-1-1 Services provided under
this Agreement.
27.3. Unless exempt under the rules and regulations of the Secretary of
Labor or other proper authority, this Agreement is subject to applicable
laws and orders relating to equal opportunity and nondiscrimination in
employment as shown in the attached Exhibit C, entitled "Nondiscrimination
and Compliance Agreement."
27.4. SCC shall obtain and maintain at its own expense all permits and
licenses required by law with respect to any portion of the Services, and
shall give all notices, pay all fees and comply with all laws, ordinances,
rules and regulations relating to its performance obligations specified
herein.
27.5. SCC shall be solely responsible for the payment of all payroll and
other taxes applicable to it. Customer will pay only applicable sales or
use taxes on Services and personal property furnished in accordance with
this Agreement. All such taxes shall be separately stated on SCC's invoice.
27.6. Both parties shall adhere to the U.S. Export Administration Laws and
Regulations and shall not export or re-export any Confidential Information,
technical data, products or software received from the other party, or any
direct product of such Confidential Information, technical data, products
or software; to any person or company who is a legal resident of or is
controlled by a legal resident of any proscribed country listed in Section
779.4(f) of the U.S. Export Administration Regulations (as the same may be
amended from time to time), unless properly authorized by the U.S.
Government. This requirement shall survive the expiration, termination or
cancellation of this Agreement.
28. SEVERABILITY:
In the event that a court or a governmental or regulatory agency with proper
jurisdiction determines that this Agreement or a provision of this Agreement is
unlawful respectively, this Agreement, or that provision of this Agreement, to
the extent it is unlawful, shall terminate. Further, if Customer determines that
this Agreement or a provision of this Agreement is inconsistent with the MFJ or
CECO, this Agreement or that provision shall terminate upon written notice to
SCC to that effect. If a provision of this Agreement is terminated but the
parties can continue legally, commercially and practicably without the
terminated provision, the remainder of this Agreement shall continue in effect.
No additional liability shall attach to either party as a result of any such
termination. 29.
Confidential. Disclose and distribute solely to
those individuals who have a need to know.
<PAGE> 13
29. ESCALATION:
Any dispute between the parties under the terms of this Agreement shall attempt
to be resolved first by the Project Managers as defined in Exhibit A to the
Agreement. It is the understanding of both parties that in the event of a
dispute that cannot be resolved by the Project Managers, then it shall be
escalated up the levels of management for each party. If the senior management
of both parties cannot resolve the dispute, then Section 30 of this Agreement
shall become effective.
30. DISPUTE RESOLUTION:
30.1. If any claim, controversy or dispute of any kind or nature whatsoever
arises between the parties, their agents, employees, officers, directors or
affiliated agents ("Dispute") and such Dispute cannot be settled through
negotiation as required by Section 29, Escalation, the parties agree to
attempt to settle the Dispute through nonbinding mediation under the
Commercial Mediation Rules of the American Arbitration Association ("AAA").
If the parties cannot settle the matter through mediation, then any Dispute
shall be resolved by arbitration as provided in this Article. Federal law
shall govern the arbitrability of all claims. Notwithstanding the
foregoing, the parties may cancel or terminate this Agreement in accordance
with its terms and conditions without being required to follow the
procedures set forth in this Article.
30.2. A single arbitrator engaged in the practice of law, who is
knowledgeable about the subject matter of this Agreement and the matter in
Dispute, shall conduct the arbitration under the then current rules of the
AAA, unless otherwise provided herein. The arbitrator shall be selected in
accordance with AAA procedures from a list of qualified people maintained
by the AAA. The arbitration shall be conducted at Denver, Colorado and all
expedited procedures prescribed by the AAA rules shall apply. The laws of
Colorado shall govern the construction and interpretation of this
Agreement.
30.3. Either party may request from the arbitrator injunctive relief to
maintain the status quo until such time as the arbitration award is
rendered or the Dispute is otherwise resolved. The arbitrator shall not
have authority to award punitive damages.
30.4. Each party shall bear its own costs and attorneys' fees, and the
parties shall share equally the fees and expenses of the arbitrator. The
arbitrator's decision and award shall be final and binding, and judgment
upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof.
30.5. If any party files a judicial or administrative action asserting
claims subject to arbitration, as prescribed herein, and another party
successfully stays such action and/or compels arbitration of said claims,
the party filing said action shall pay the other party's costs and expenses
incurred in seeking such stay and/or compelling arbitration, including
reasonable attorneys' fees.
31. SEVERAL LIABILITY:
The term Customer as used herein may be applicable to one or more parties and
the singular shall include the plural. If more than one party is referred to as
Customer herein, then their obligations and liabilities shall be joint and
several. Notwithstanding the foregoing, any and all applicable discounts and/or
credits shall be based upon the combined forecasts and/or purchases made by all
Customers under this Agreement.
32. NONEXCLUSIVE AGREEMENT:
It is expressly understood and agreed that this Agreement does not grant to SCC
any exclusive privileges or rights and Customer may contract with other
suppliers for the procurement of comparable services.
Confidential. Disclose and distribute solely to
those individuals who have a need to know.
<PAGE> 14
33. REMEDIES CUMULATIVE:
The remedies provided herein shall be cumulative and in addition to any other
remedies provided by law or equity.
34. AMENDMENTS:
No change or modifications of any terms or conditions herein shall be valid or
binding on either party unless made in writing and signed by U S WEST Business
Resources, Inc., as agent for Customer and an authorized representative of SCC.
35. LIMITATION OF LIABILITY
35.1. U S WEST Business Resources, Inc. is acting as agent in the
negotiation, execution and administration of this Agreement, but U S WEST
Business Resources, Inc. shall not in any event be liable for the
performance or nonperformance of this Agreement or any Order(s) by
Customer, except to the extent that U S WEST Business Resources, Inc. is
Customer.
35.2. SCC's liability on any claim for damages arising out of SCC's
performance or non-performance under this Agreement, except as provided in
Section 17, Patent, Trademark, Copyright or Trade Secrets Indemnification,
shall be limited to direct damages and shall not exceed $[ ]
36. SURVIVAL:
The provisions of this Agreement that, by their sense and context, are intended
to survive performance by either or both parties shall also survive the
completion, expiration, termination or cancellation of this Agreement or any
Order(s).
37. BUSINESS CONDUCT:
Customer has adopted and follows a Code of Business Ethics and Conduct which
imposes on itself and its employees an obligation to deal with all suppliers and
contractors in a fair and open manner in accordance with the highest standards
of integrity. SCC and Customer each represents and warrants that it shall
perform to the highest level of business and professional ethics, and that it
has not made or received and shall not make or receive any payments, gifts,
favors, entertainment, secret commissions or hidden gratuities for the purpose
of securing preferential treatment or action from or to any party in connection
with this Agreement or the Services. Any breach or failure with respect to this
representation and warranty by either party shall constitute a material breach
of this Agreement.
38. NOTICES:
Where written notices, demands, or other communications are required under this
Agreement to be made in writing, they shall be deemed duly given when made in
writing and delivered in hand, or upon receipt when properly addressed
return-receipt-requested and delivered by United States Postal Service or other
delivery service to the following addresses:
Customer: U S WEST Communications, Inc.
Director Public Safety Group
150 South Fifth Street, Suite 700
Minneapolis, Minnesota 55402
with a copy to:
[ ]
U S WEST Communications, Inc.
7800 E. Orchard, Suite 390
Englewood, Colorado 80111
Confidential. Disclose and distribute solely to
those individuals who have a need to know.
<PAGE> 15
SCC: SCC COMMUNICATIONS CORP.
6285 Lookout Road
Boulder, Colorado 80301-3343
Attn: Chief Financial Officer
FAX: 303-581-0900
Addresses may be changed by written notice to the parties.
39. OWNERSHIP AND LICENSE OF SOFTWARE:
39.1. Nothing in this Agreement shall be construed to grant any ownership
or license to Customer of the SCC provided hardware and software products
used in providing the Services under this Agreement. Nothing in this
Agreement shall be construed to grant to SCC any ownership or rights to any
Customer provided data provided to SCC for use in the provision of Services
to Customer.
39.2. Any programs, processes, or technical information which is developed
by SCC as a result of providing Services to Customer, shall be owned by
SCC. Nothing in this Agreement shall be construed to grant to Customer any
ownership of such information, unless otherwise agreed to in writing,
signed by both parties, and made a part of this Agreement.
40. M/WBE SUBCONTRACTING PLAN:
40.1. Support of Minority and Women Businesses is part of Customer's
ongoing business strategy. To effectively carry out policy objectives in
this area, Customer has instituted the Minority and Women Business
Enterprise (M/WBE) Subcontracting Plan.
40.2. In compliance with such plan, SCC agrees and commits to subcontract
in accordance with the subcontracting plan components and requirements
attached to and made part of this Agreement as Exhibit D. SCC's specific
subcontracting plan shall be attached to and made part of this Agreement as
an attachment to the same Exhibit D identified above.
41. OTHER PROVISIONS:
Both parties agree that any additional negotiations with regard to New Services,
Orders, etc., not explicitly covered under this Agreement, including the
attached Exhibits, will be conducted with fairness and to the mutual benefit of
both parties.
42. ENTIRE AGREEMENT:
42.1. This Agreement, together with all referenced attachments and Exhibits
shall constitute the entire Agreement between the parties with respect to
the subject matter of this Agreement. This Agreement supersedes all prior
oral and written communications, agreements and understandings of the
parties with respect to the subject of this Agreement.
42.2. The final Scope of Work shall include a detailed project plan,
detailed service plan with Service thresholds and penalties, a detailed
network design, a detailed data security plan, and other documented
agreements between the parties. In the event such final Scope of Work is
not completed and mutually agreed to by January 31, 1996, or another
mutually agreed extension, then either party may terminate this Agreement.
In the event of a termination pursuant to this Section 42, SCC shall refund
to Customer the NRE Fee paid pursuant to Exhibit B, less reasonable direct
costs incurred by SCC to the date of termination. Upon completion, the
final Scope of Work shall be attached to and made a part of this Agreement
as an attachment to Exhibit A.
Confidential. Disclose and distribute solely to
those individuals who have a need to know.
<PAGE> 16
The parties intending to be legally bound have caused this Agreement to be
executed by their duly authorized representatives.
U S WEST COMMUNICATIONS, INC. SCC COMMUNICATIONS CORP.
/s/ S. D. TRUJILLO /s/ GEORGE HEINRICHS
- --------------------------------- ---------------------------------
(Authorized Signature) (Authorized Signature)
S. D. TRUJILLO George Heinrichs
- --------------------------------- ---------------------------------
(Print or Type Name of Signatory) (Print or Type Name of Signatory)
PRESIDENT AND CEO President and CEO
- --------------------------------- ---------------------------------
(Title) (Title)
DECEMBER 29, 1995 December 28, 1995
- --------------------------------- ---------------------------------
(Execution Date) (Execution Date)
Confidential. Disclose and distribute solely to
those individuals who have a need to know.
<PAGE> 1
Confidential Treatment Request
EXHIBIT 10.8
SERVICES AGREEMENT NO. PR-9026-L
BETWEEN
SCC COMMUNICATIONS CORP.
AND
BELLSOUTH TELECOMMUNICATIONS, INC.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION NAME PAGE NUMBER
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<S> <C> <C> <C>
SECTION 1. AFFILIATED COMPANIES 1
SECTION 2. TERM OF AGREEMENT 1
SECTION 3. EMERGENCY SERVICES 4
SECTION 4. TERMS OF PAYMENT 4
SECTION 5. PAYMENT AND RECORDS 4
SECTION 6. INVOICING 5
SECTION 7. REPRESENTATIVES 5
SECTION 8. REPORTS 5
SECTION 9. RECORDS AND AUDITS 6
SECTION 10. BUYER'S INFORMATION 6
SECTION 11. SELLER'S INFORMATION 7
SECTION 12. PATENT AND OTHER PROPRIETARY
RIGHTS INFRINGEMENT 7
SECTION 13. TAX 7
SECTION 14. ASSIGNMENT BY SELLER 8
SECTION 15. ASSIGNMENT BY BUYER 9
SECTION 16. LICENSES 9
SECTION 17. SUPPLIER OVERDEPENDENCY 9
SECTION 18. WARRANTY FOR EMERGENCY SERVICES 10
SECTION 19. NON-EXCLUSIVE RIGHTS 10
SECTION 20. PUBLICITY 10
SECTION 21. PERFORMANCE OF WORK 10
SECTION 22. INDEPENDENT CONTRACTOR 11
SECTION 23. SECURITY 11
SECTION 24. NONDISCRIMINATION COMPLIANCE 12
SECTION 25. CONFLICT OF INTEREST 12
SECTION 26. CHOICE OF LAW/VENUE 13
SECTION 27. FACILITY RULES AND GOVERNMENT CLEARANCE 14
SECTION 28. RIGHT OF ACCESS 14
SECTION 29. DEFAULT 14
SECTION 30. COMPLIANCE WITH LAWS 14
SECTION 31. RELEASES VOID 15
SECTION 32. NON-WAIVER 15
SECTION 33. SEVERABILITY 15
SECTION 34. CONTINGENCY 15
SECTION 35. INSURANCE 16
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION NAME PAGE NUMBER
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<S> <C> <C>
SECTION 36. INDEMNITY 16
SECTION 37. SURVIVAL OF OBLIGATIONS 18
SECTION 38. NOTICES 18
SECTION 39. SECTION HEADINGS 19
SECTION 40. INCORPORATION BY REFERENCE 20
SECTION 41. ENTIRE AGREEMENT 20
</TABLE>
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This agreement (hereinafter "Agreement") is made by and between
BELLSOUTH TELECOMMUNICATIONS, INC., a Georgia corporation,
(hereinafter "Buyer"), and SCC COMMUNICATIONS CORP., a Delaware
corporation, (hereinafter "Seller").
Whereas desirous of obtaining advice and assistance for
E9-1-1 associated consultant, professional, or database management
services (the "Emergency Services") to be provided by Seller which has
sufficient expertise and experience in rendering such Emergency
Services to meet the particular needs of Buyer. The scope of this
agreement does not include software and/or software products
acquisition or software development.
NOW, THEREFORE, Buyer and Seller enter into this Agreement on the
following terms and conditions.
SECTION 1. AFFILIATED COMPANIES
1.01 An Affiliated Company is defined herein as BellSouth corporation
or any company that is owned in whole or in part by BellSouth
Corporation or by one or more of its direct or indirect
subsidiaries. Any Affiliated Company may place orders under
this Agreement to buy Emergency Services as hereinafter defined.
All references to "Buyer" in this Agreement shall be deemed to
include the Affiliated Company placing the order. Such orders
are subject to the terms and conditions of this Agreement and as
to such orders, the Affiliated Company becomes "Buyer"
hereunder. Each order shall constitute a separate, distinct and
independent contract between Seller and the Buyer placing the
order and each Buyer shall be the sole obligor with regard to
meeting the obligations of any order placed by such Buyer.
SECTION 2. TERM OF AGREEMENT
2.01 The term of this Agreement shall commence on August 1, 1995, and
shall, except as otherwise provided herein, continue in effect
thereafter through [ ] inclusive.
2.02 This Agreement contemplates the future execution by Buyer and
Seller of one or more written Letter Purchase Orders. Each
Letter Purchase Order shall be executed by both parties and
shall contain at a minimum the information specified in this
Agreement. All transactions between Buyer and Seller during the
term of this Agreement shall be covered by this Agreement and
any applicable Letter Purchase Order unless the parties agree
otherwise in writing.
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2.03 Each properly executed Letter Purchase Order shall be deemed,
upon its execution, to be incorporated into this Agreement. If
the Letter Purchase Order conflicts with the terms and
conditions of this Agreement, the terms and conditions of this
Agreement shall control unless otherwise agreed to under a
"Special Considerations" section of the Letter Purchase Order.
2.04 Seller will furnish Emergency Services to Buyer as specified in
Letter Purchase Orders. Said Orders, at a minimum, shall
specify the information outlined below:
2.04.1 A reference to this Agreement.
2.04.2 A detailed description of the Emergency Services to be performed
by Seller.
2.04.3 A statement defining all deliverables and their associated due
dates.
2.04.4 For each project identified in a Letter Purchase Order, Buyer
and Seller shall each designate an individual, (the "Project
Manager"), who will act as the primary interface between the
parties. The Project Managers shall be responsible for
insuring the continuity of communications between the parties
as the project proceeds. Each Letter Purchase order shall
include the address and telephone number of each Project
Manager.
2.04.5 An enumeration of any items of expense authorized for
reimbursement to Seller, as well as the basis for such
reimbursement.
2.04.6 If for consultant and/or professional services only, the Letter
Purchase Order should state the maximum total expenditure
authorized, which is understood to mean (1) a dollar amount or
time limit beyond which Seller may not invoice for consultant
and/or professional services under the specific Letter Purchase
Order, and (2) a dollar amount or time limit beyond which Seller
is not required to expend effort or provide consultant and/or
professional services under a specific Letter Purchase Order
without prior written agreement to a revised amount. When this
specification of a maximum total expenditure is not
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feasible, at the Buyer's option, the hourly, daily or unit rate
of Seller may be substituted.
2.04.7 A statement defining the commencement and completion dates for
Emergency Services to be performed.
2.04.8 Invoicing instructions.
2.04.9 Signatures of representatives authorized by Buyer and Seller to
execute the Letter Purchase Order.
2.04.10 Specifications for the Emergency Services to be provided as it
applies to Section 18. "WARRANTY FOR EMERGENCY SERVICES".
2.05 The terms by which either party may terminate an individual
Letter Purchase order shall be stated in the Letter Purchase
Order. The completion of Emergency Services identified in each
Letter Purchase Order which is being terminated shall also be
stated in the Letter Purchase Order.
2.06 The specifications for the Emergency Services to be provided.
2.07 Buyer, without prejudice to any right or remedy on account of
any failure of Seller to perform its obligations under this
Agreement, may at any time terminate the performance of the work
under any Letter Purchase Order, in whole or in part, by written
notice to Seller specifying the extent to which the performance
of the work is terminated and the date upon which such
termination becomes effective. In the event of such
termination, other than for the failure of Seller to perform its
obligations under this Agreement, Seller shall be entitled to
payment for Emergency Services rendered prior to the effective
date of termination and for expenses properly reimbursable under
this Agreement; provided, however, that payment of any such
amounts by Buyer shall be subject to any provision for the limit
of expenditures set forth in the Letter Purchase Order. The
payment of such amounts by Buyer shall be in full settlement of
any and all claims of Seller of every description, including
profit.
2.08 In the event of termination of this Agreement or any Letter
Purchase Order issued hereunder, affected Buyer property and
work in Seller's possession shall be forwarded promptly to
Buyer. Any transfer of ownership of property acquired by Seller
to perform the requirements identified in a Letter Purchase
Order will be addressed in the Letter Purchase Order.
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SECTION 3. EMERGENCY SERVICES
3.01 "Emergency Services" as used herein shall mean Seller's
consultant and or professional services as described in properly
executed Letter Purchase Orders. Such Emergency Services may
include the furnishing by Seller of tangible goods as a part of
Seller's deliverable hereunder.
SECTION 4. TERMS OF PAYMENT
4.01 Net 30 days
SECTION 5. PAYMENT AND RECORDS
5.01 Buyer shall pay Seller for Emergency Services under this
Agreement in accordance with prices and/or rates, whichever is
applicable, to be specified in Letter Purchase Orders issued
hereunder. If work is performed on Buyer's premises, Seller's
working hours when working on Buyer's premises, in conjunction
with any Letter Purchase Order, shall coincide with the Buyer's
working hours as they may be established from time to time
unless otherwise defined in the Letter Purchase Order.
5.02 When required, Buyer shall furnish Seller with information
relative to Buyer's applicable standards and specifications, all
of which is subject to Section 10 entitled " BUYER'S INFORMATION"
and is to be returned to Buyer at the expiration, cancellation
or termination of the Agreement or Letter Purchase Order, as the
case may be. All information furnished by Buyer to Seller, or
obtained by Seller hereunder or in contemplation hereof, shall
remain Buyer's property. Should Buyer desire to alter such
standards or specifications with respect to any Letter Purchase
Order after such Letter Purchase Order has been issued and
accepted, Seller shall advise Buyer in the event adjustment of
the payment rate or time schedule referred to in the original
Letter Purchase Order
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is necessitated by such alterations. In the event such
adjustment is acceptable to Buyer, Buyer shall issue a new or
revised Letter Purchase Order.
5.03 If computer machine time is required in the performance of any
Emergency Services and a charge for such use will be billed to
Buyer, prior written approval of such arrangements shall be
obtained from Buyer.
SECTION 6. INVOICING
6.01 Invoices shall reference Letter Purchase order number and this
Agreement number, PR-9026-A.
SECTION 7. REPRESENTATIVES
7.01 Emergency Services performed under this Agreement are subject to
contract administration activities by Buyer's Representative(s).
Such activities include, but are not limited to, monitoring
supplier performance, Agreement interpretation and amendment,
maintenance of Agreement information in Buyer's database,
inspecting and accepting work performed, verifying work
completion, and validating charges rendered on Seller's
invoices. All Emergency Services provided by Seller under this
Agreement are subject to such activities. In addition to or in
lieu of Buyer's Representative, contract administration
activities may be performed by the individual(s) designated as
Buyer's Delegate, or others as may be delegated by Buyer in
writing.
7.02 Buyer's Representative and Alternate shall be the Contract
Administrator and Buyer's Project Manager listed in Item 3 of
each individual Letter Purchase Order.
SECTION 8. REPORTS
8.01 Seller shall render annual reports detailing Buyer's total
expenditures under this Agreement on or before the tenth (10)
working day after the anniversary of the effective date of this
Agreement. Annual reports shall be submitted to the following:
BellSouth Telecommunications, Inc.
Senior Contracting Manager
Procurement Services
38P40 Southern Bell Center
675 West Peachtree Street, N.E.
Atlanta, Georgia 30375
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SECTION 9. RECORDS AND AUDITS
9.01 Seller shall maintain complete and accurate records of all
amounts billable to and payments made by Buyer under each Letter
Purchase Order in accordance with generally accepted accounting
practices. Seller shall retain such records for a period of
three (3) years from the date of final payment for Emergency
Services covered by each Letter Purchase Order. Seller agrees
to provide reasonable supporting documentation concerning any
disputed amount of invoice to Buyer within thirty (30) days
after Buyer provides written notification of the dispute to
Seller.
9.02 Buyer and its authorized agents and representatives shall have
the right to audit such records of Seller during the respective
periods in which Seller is required to maintain such records,
including, without limitation, the right of access to such
records on Seller's premises, rights to inspect and photocopy
same, and the right to retain copies of such records outside of
Seller's premises with appropriate safeguards, if such retention
is deemed necessary by Buyer, in its sole discretion. The
correctness of Seller's billing shall be determined from the
result of such audits. Buyer shall also have such above
described auditing rights with respect to Seller's agents,
contractors, or subcontractors.
10. BUYER'S INFORMATION
10.01 All Buyer's Specifications, drawings, sketches, schematics,
models, samples, tools, computer or other apparatus programs,
technical or business information or data, written, oral, or
otherwise (all hereinafter designated "Buyer's Information")
obtained by Seller hereunder or in contemplation hereof shall
remain Buyer's property. All copies of such Buyer's Information
in written, graphic, or other tangible form shall be returned to
Buyer upon request. Unless such Buyer's Information was
previously known to Seller free of any obligation to keep it
confidential or has been or is subsequently made public by Buyer
or, lawfully, a third party, it shall be kept confidential by
Seller, shall be used only in the filling of Letter Purchase
Orders or in performing under this Agreement, and may not be
used for other purposes except upon such terms as may be agreed
upon between Buyer and Seller in writing.
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SECTION 11. SELLER'S INFORMATION
11.01 Unless marked as such, no Seller's Specifications, drawings,
sketches, schematics, models, samples, tools, computer programs,
technical or business information or data, written, oral or
otherwise (hereinafter "Seller's Information"), furnished by
Seller to Buyer under this Agreement, or in contemplation of
this Agreement, shall be considered by Seller to be confidential
or proprietary.
SECTION 12. PATENT AND OTHER PROPRIETARY RIGHTS INFRINGEMENT
12.01 Seller shall indemnify Buyer for any loss, damage, expense or
liability including reasonable costs and attorneys' fees that
may result by reason of any infringement, or claim of
infringement, of any patent, trademark, copyright, trade
secret or other proprietary interest based upon the
manufacture, use or resale of any material, Emergency Services
furnished to Buyer under this Agreement or in contemplation of
this Agreement. Seller shall defend or settle, at its own
expense, any action or suit against Buyer for which it is
responsible under this Section. Buyer shall notify Seller
promptly of any claim of infringement for which Seller is
responsible, and shall cooperate with Seller in every
reasonable way to facilitate the defense of any such claim.
SECTION 13. TAX
13.01 There shall be added to the purchase price set forth herein an
amount equal to any applicable taxes, local, state or federal,
however designated, which may be validly levied or based upon
this Agreement or upon the Emergency Services furnished
hereunder, excluding, however, ad valorem personal property
taxes, state and local privilege and excise taxes based on
gross revenue, taxes based on or measured by Seller's net
income, and any taxes or amounts in lieu thereof paid or
payable by Seller in respect of the foregoing excluded items.
Taxes payable by Buyer shall be billed as separate items on
Seller's invoices and shall not be included in Seller's
prices. Buyer shall have the right to have Seller contest
with the imposing jurisdiction, at Buyer's expense, any such
taxes that Buyer deems are improperly levied.
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13.02 Buyer shall not be required to pay or otherwise be liable or
responsible for, and Seller hereby indemnities, defends and
holds Buyer harmless against, any penalty, additional tax,
costs or interest that may be assessed or levied by any taxing
authority as a result of the failure of the Seller to file any
return, form, or information statement that may be required by
such taxing authority.
SECTION 14. ASSIGNMENT BY SELLER
14.01 Except for Seller's assignment to a third party acquiring all or
substantially all of Seller's assets or stock, or by merger of
Seller and a third party, Seller shall not assign or otherwise
delegate any work to be performed by it under this Agreement, in
whole or in part, or any of its right, interest or obligation
hereunder without first obtaining Buyer's prior written consent,
which consent shall not be unreasonably withheld. Seller shall
deliver to Buyer written notice of Seller's intent to assign, at
least thirty (30) days prior to assignment. Any assignment not
consented to by Buyer shall be deemed void; except that Seller
may assign its rights to receive monies pursuant to this
Agreement upon delivering the required notice to Buyer, without
Buyer's prior consent. No assignment of monies due or to become
due to Seller shall be made by Seller if such assignment
attempts to transfer to the assignee any other rights or
obligations of Seller hereunder or attempts to prevent Buyer
from dealing solely and directly with Seller on all matters
pertaining to this Agreement, including the negotiation of
amendments to this Agreement or the settlement of amounts due
either party by the other hereunder.
14.02 Seller agrees not to subcontract the Emergency Services to be
performed, in whole or in part, without written request to and
the prior written consent of Buyer's Project Manager designated
in individual Letter Purchase Orders. Seller shall remain
primarily liable to Buyer for the performance of all
subcontracted Emergency Services provided pursuant to this
Agreement.
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SECTION 15. ASSIGNMENT BY BUYER
15.01 Buyer shall have the right to assign this Agreement and to
assign its rights and delegate its duties under this Agreement
either in whole or in part, at any time and without Seller's
consent, to any present or future Affiliated Company or
successor company of Buyer. Buyer shall give Seller written
notice of such assignment or delegation. The assignment shall
neither affect nor diminish any rights or duties that Seller or
Buyer may then or thereafter have as to Emergency Services
ordered by Buyer prior to the effective date of the assignment.
Upon the written notice to the Seller, Buyer shall be released
and discharged, to the extent of the assignment, from all
further duties under this Agreement, except with respect to
Emergency Services ordered by Buyer prior to the effective date
of the assignment.
SECTION 16. LICENSES
16.01 Except as otherwise provided in this Agreement, no licenses
under any patents, copyrights, trademarks, trade secrets or any
other intellectual property, express or implied, are granted by
Buyer to Seller under this Agreement.
SECTION 17. SUPPLIER OVERDEPENDENCY
17.01 Because Buyer has no way of ascertaining Seller's dependency
on Buyer for revenues from sales in proportion to revenues
from Seller's other customers and in order to protect Buyer
from a situation in which Seller is over-dependent on Buyer
for said sales, Seller agrees to release and hold harmless
Buyer from any and all claims relating to Seller's financial
stability, which may result from Buyer's termination of this
Agreement for any reason whatsoever.
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SECTION 18. WARRANTY FOR EMERGENCY SERVICES
18.01 Seller warrants to Buyer that the Emergency Services provided
under this Agreement shall be in accordance with the
specifications set forth in each Letter Purchase order, and be
performed in a fully professional, effective, and efficient
manner that equals or exceeds the then-current industry
standard for such services. Buyer's Project Manager
designated in any Letter Purchase Order shall in his/her sole
discretion determine the quality and acceptability of the
Emergency Services performed pursuant to this Agreement.
SECTION 19. NON-EXCLUSIVE RIGHTS
19.01 It is expressly understood and agreed that this Agreement does
not grant Seller an exclusive privilege to sell to Buyer any
or all Emergency Services of the type described in Section 3
entitled "EMERGENCY SERVICES" which Buyer may require. Buyer
reserves the right to contract with other suppliers for the
procurement of comparable services. In addition, Buyer shall
determine, at Buyer's sole discretion, the extent to which
Buyer will market, advertise, promote, support, or otherwise
assist in further offerings of the Emergency Services.
SECTION 20. PUBLICITY
20.01 Seller agrees to submit to Buyer all advertising, sales
promotion, press releases, and other publicity matters
relating to this Agreement or mentioning or implying the trade
names, logos, trademarks or service marks (hereinafter
"Marks") of BellSouth Corporation and/or any of its Affiliated
Companies or language from which the connection of said Marks
therewith may be inferred or implied, or mentioning or
implying the names of any personnel of BellSouth Corporation
and/or any of its Affiliated Companies, and Seller further
agrees not to publish or use such advertising, sales
promotions, press releases, or publicity matters without
Buyer's prior written consent.
SECTION 21. PERFORMANCE OF WORK
21.01 All work performed by Seller under any Letter Purchase Order
may be monitored through the use of status reports. Contents
of such status reports,
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frequency and the Seller's employees required to submit such
status reports shall be specified in the Letter Purchase
Order.
21.02 Seller shall supply the appropriate personnel to investigate
any reported deficiencies found by Buyer during the duration
of the Letter Purchase Order. Deficiencies found to be of
Seller's causing shall be corrected by Seller at its expense.
Such correcting activities shall commence immediately and be
completed as quickly as is reasonably possible.
21.03 If the deficiencies are found to be not of Seller's causing,
Buyer shall reimburse Seller for the time and material charges
of (1) its investigation, and (2) such correcting activities
Seller performs, if requested by Buyer.
SECTION 22. INDEPENDENT CONTRACTOR
22.01 All work performed by Seller in connection with the Emergency
Services described in the Agreement shall be performed by
Seller as an independent contractor and not as the agent or
employee of Buyer. All persons furnished by Seller shall be
for all purposes solely the Seller's employees or agents and
shall not be deemed to be employees of Buyer for any purpose
whatsoever. Seller shall furnish, employ, and have exclusive
control of all persons to be engaged in performing Emergency
Services under this Agreement and shall prescribe and control
the means and methods of performing such Emergency Services by
providing adequate and proper supervision. Seller shall be
solely responsible for compliance with all rules, laws, and
regulations relating to employment of labor, hours of labor,
working conditions, payment of wages, and payment of taxes,
such as employment, Social Security, and other payroll taxes,
including applicable contributions from such person when
required by law. Seller shall not subcontract work to be
performed without Buyer's written permission.
SECTION 23. SECURITY
23.01 Buyer reserves the right to conduct, for security reasons, a
background investigation on the Seller and its principal
parties or personnel, and Seller agrees to cooperate with the
Buyer in this endeavor and to provide any necessary
information. Seller acknowledges that under no
obligation to provide a copy of the background investigation
to Seller, and Seller waives any and all rights it may have in
any information it provides to Buyer.
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23.02 Seller shall conduct, at Seller's expense, background
investigations on Seller's personnel performing work on
Buyer's premises prior to supplying such personnel to Buyer.
At Buyer's request, Seller shall provide copies of the
background investigations to Buyer.
23.03 Seller shall not assign any personnel with records of criminal
conviction(s) to Buyer's premises without advising Buyer of
the nature and gravity of the offense.
23.04 In fulfilling the obligations under this Section, both parties
shall comply with all laws, rules, and regulations relating to
the making of investigative reports and the disclosure of the
information contained therein. Each party shall indemnify,
defend, and hold the other party harmless against any wrongful
disclosure by the offending party, its employees, and/or agents
of said reports and the information contained therein.
23.05 At Buyer's request, Seller shall promptly remove from Buyer's
premises any employee of Seller to whom Buyer does not wish to
grant access to its premises, or who, in Buyer's opinion, has
been unacceptable, negligent, dishonest, or otherwise
unsatisfactory in performing his/her duties hereunder. Such a
request for removal from Buyer's premises shall in no way be
interpreted as a request by Buyer for Seller to discipline the
employee in any way.
SECTION 24. NONDISCRIMINATION COMPLIANCE
24.01 Seller agrees to comply with the applicable provisions of the
"NONDISCRIMINATION COMPLIANCE AGREEMENT" set forth in Appendix
A.
SECTION 25. CONFLICT OF INTEREST
25.01 Buyer and its affiliated companies do business with many
contractors and suppliers. It is a fundamental policy of
Buyer that such dealings shall be conducted on a fair and
non-discriminatory basis, free from improper influences, so
all participating contractors and suppliers may be considered
on the basis of the quality and overall cost of their product
or service.
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25.02 Buyer's policy is to seek out and obtain technically suitable
products and services at the lowest overall cost. Accordingly,
Buyer will not recognize any oral agreement; any conversations
with Buyer's employees or representatives shall not be construed
to imply a commitment or obligation on behalf of Buyer. Any
information disclosed or made known to Buyer shall be deemed as
public and nonproprietary. Information shall not be received in
confidence, unless a prior written agreement authorizing such
exchange of information has been executed by an authorized
representative of Buyer.
25.03 committed to doing business with contractors and
suppliers in an atmosphere in keeping with the highest standards
of business ethics. Therefore, it is Buyer's policy that our
employees shall not accept from customers; from suppliers of
property, goods, or services; or from other persons any gifts,
benefits, or unusual hospitality that may in any way tend to
influence or have the appearance of influencing them in the
performance of their jobs.
25.04 Those employees of Buyer authorized to make purchases or
negotiate contracts are aware of this policy, and your
cooperation is solicited in order to forestall any embarrassing
situations.
SECTION 26. CHOICE OF LAW/VENUE
26.01 The validity, construction, interpretation, and performance of
this Agreement shall be governed by and construed in accordance
with the domestic laws of the State of Georgia.
26.02 The jurisdictional venue for any legal proceedings involving
this Agreement shall be held in any applicable state or
federal court located in Fulton County, State of Georgia.
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SECTION 27. FACILITY RULES AND GOVERNMENT CLEARANCE
27.01 Seller's employees and representatives and those of Buyer shall,
while on the premises of the other, comply with all internal
rules and regulations, including where required by Government
Regulations, submission of satisfactory clearance from the U. S.
Department of Defense and other federal authorities concerned.
SECTION 28. RIGHT OF ACCESS
28.01 Both Seller and Buyer shall permit reasonable access to the
other's facilities in connection with work hereunder. No
charge shall be made for such visits. It is agreed that prior
notification will be given when access is required. Seller
agrees to remove any of its employees at Buyer's request.
SECTION 29. DEFAULT
29.01 In the event Seller shall be in breach or default of any of the
terms, conditions, or covenants of this Agreement or any Letter
Purchase Orders, and such breach or default shall continue for a
period of thirty (30) days after the giving of written notice to
Seller thereof by Buyer, then in addition to all other rights
and remedies of law or equity or otherwise, Buyer shall have the
right to cancel this Agreement or any such Letter Purchase
Orders placed by Buyer without any charge, obligation, or
liability whatsoever, except as to the payment for Emergency
Services already received and accepted by Buyer.
SECTION 30. COMPLIANCE WITH LAWS
30.01 Seller shall comply with the provisions of all applicable
federal, state, county and local laws, ordinances,
regulations, and codes, including, but not limited to,
Seller's obligations as an employer with regard to the health,
safety and payment of its employees, and identification and
procurement of required permits, certificates, approvals, and
inspections of Seller's performance of this Agreement.
Notwithstanding of whether a specification is furnished, if
Emergency Services furnished are required to be registered in
a prescribed manner, Seller shall comply with federal law and
applicable state or local law. Seller shall indemnify Buyer
for, and defend Buyer against, any loss or damage sustained
because of Seller's noncompliance.
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SECTION 31. RELEASES VOID
31.01 Neither party shall require waivers or releases of any personal
rights from representatives of the other in connection with
visits to Seller's and Buyer's respective premises. Neither
party shall require any representative of the other party to
sign a personal "nondisclosure agreement." No such releases or
waivers shall be pleaded by Seller or Buyer or third persons in
any action or proceeding.
SECTION 32. NON-WAIVER
32.01 No waiver or failure to exercise any option, right or privilege
under the terms of this Agreement on any occasion or occasions
shall be construed to be a waiver of the same or any other
option, right, or privilege on any other occasion.
SECTION 33. SEVERABILITY
33.01 If any of the provisions of this Agreement shall be invalid or
unenforceable under the laws of the jurisdiction applicable to
the entire Agreement, 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, and the rights and obligations of
Seller and Buyer shall be construed and enforced accordingly.
SECTION 34. CONTINGENCY
34.01 Neither Seller nor Buyer shall be held responsible for any delay
or failure in performance of any part of this Agreement to the
extent that such delay or failure is caused by fire, flood,
explosion, war, strike, embargo, government requirement, civil
or military authority, act of God, or other similar causes
beyond Seller's or Buyer's control (hereinafter "Condition(s)").
If any such Condition occurs, the party delayed or unable to
perform shall give immediate notice to the other party, and the
party affected by the other's delay or inability to perform may
elect to: (1) terminate this Agreement or part thereof as to
Emergency Services not already received; (2) suspend this
Agreement for the duration of the Condition, buy or sell
elsewhere material or services comparable to those to be
obtained under this Agreement, and deduct from any commitment
the quantity bought or for which commitments with other
suppliers have been made; or (3) resume performance of this
Agreement once the Condition ceases with an option in the
affected party to extend the period of this Agreement up to the
length of time the Condition endured. Unless written notice is
given within thirty (30) days after the affected party is
notified of the Condition, option 11(2)" shall be deemed
selected.
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SECTION 35. INSURANCE
35. 01 Seller, at Seller's expense, shall maintain during the term of
this Agreement, all insurance and/or bonds required by law or
this Agreement, including, but not limited to: (1) adequate
Worker's Compensation and related insurance as required by
Buyer and prescribed by the law of any state in which the work
is to be performed; (2) employer's liability insurance with
limits of at least $[ ] each occurrence; and (3)
commercial general liability insurance, including contractual
liability, products liability and completed operations
coverage, (4) professional liability insurance covering the
acts, errors and omissions of Seller, its employees, agents and
subcontractors, in an amount not less than $[ ] per
claim/$[ ] aggregate, and, if the use of motor vehicles
is required, comprehensive motor vehicle liability insurance,
each with limits of at least $[ ] for bodily injury,
including death, to any one person, and $[ ] on account
of any one occurrence and $[ ] for each occurrence of
property damage. Seller shall, prior to the start of work and
upon the renewal of each coverage required herein, furnish
certificates of insurance or adequate proof of the foregoing
insurance to the Buyer.
35.02 Seller shall also require its agents or subcontractors, if any,
who may enter upon Buyer's premises to maintain the insurance
coverage required herein, and to furnish Buyer certificates of
insurance or adequate proof of such insurance. All insurance
policies required of Seller and Seller's agents and
subcontractors shall contain a clause stating the name and
address of Buyer and that to be notified in writing by
the insurer at least thirty (30) days prior to cancellation, or
any material change in, of the policy.
35.03 All liability policies required herein shall name the Buyer as
an additional insured with respect to work performed under this
Agreement.
35.04 All policies required herein shall be maintained with insurers
acceptable to the Buyer. Buyer retains the right to disallow
coverage from any insurer that does not maintain a rating from
A. M. Best Company of B+ X or higher.
SECTION 36. INDEMNITY
36.01 Seller agrees to indemnify and hold Buyer harmless from any
and all liabilities, causes of action, lawsuits, penalties,
claims or demands (including the costs, expenses and
reasonable attorneys' fees on account thereof) that may
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be made: (1) by anyone for injuries of any kind, including but
not limited to personal injury, death, property damage and
theft, resulting from Seller's negligent or willful acts or
omissions under this Agreement, or those of persons furnished
by Seller, its agents or subcontractors; (2) by any of either
Seller's, its agent's or subcontractor's employees or former
employees for which the Seller's, its agents' or
subcontractors' liability to such employee or former employee
would otherwise be subject to payments under the state
Worker's Compensation laws, premises liability principles or
any other law or form of legal duty or obligation; or (3) by
either Seller's, its agent's or subcontractor's employees or
former employees, including applicants at Buyer's job site for
any and all claims arising out of the employment relationship
with respect to performing under this Agreement, including but
not limited to, employment discrimination charges and actions
arising under Title VII of The Civil Rights Act of 1964, as
amended; The Equal Pay Act; The Age Discrimination Act, as
amended; The Rehabilitation Act; The Americans with
Disabilities Act; The Fair Labor Standards Act; The National
Labor Relations Act; and any other applicable law. Seller, at
its own expense, agrees to defend Buyer, at Buyer's request,
against any such liability, cause of action, penalty, claim,
demand, administrative proceeding or lawsuit, including any in
which named as an "employer" or "joint employer" with
Seller. Buyer agrees to notify Seller promptly of any written
claims or demands against Buyer for which Seller is
responsible hereunder.
36.02 The foregoing indemnity shall be in addition to any other
indemnity obligations of Seller set forth in this Agreement.
36.03 SELLER SHALL NOT BE LIABLE TO BUYER FOR ANY INDIRECT, SPECIAL,
PUNITIVE, INCIDENTAL OR CONSEQUENTIAL DAMAGES RELATED TO THIS
AGREEMENT, WHETHER FORESEEABLE OR NOT, INCLUDING BUT NOT LIMITED
TO LOST PROFITS, LOSS OF DATA, OR RESULTING FROM BUYER'S OR
BUYER'S CUSTOMER'S USE OR INABILITY TO USE SELLER'S EMERGENCY
SERVICES, ARISING FROM ANY CAUSE OF ACTION WHATSOEVER, INCLUDING
CONTRACT, WARRANTY, STRICT LIABILITY OR NEGLIGENCE.
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36.04 Except as provided for in Section 12 "PATENT AND OTHER
PROPRIETARY RIGHTS INFRINGEMENT" or as otherwise required by
governing law, Seller's aggregate and entire liability with
respect to any single claim arising from performance or
nonperformance of obligations set forth under this Agreement, an
executed Letter Purchase Order, or any subject matter of this
Agreement, in tort, including any negligence, in contract or
otherwise, shall be limited to $[ ]
SECTION 37. SURVIVAL OF OBLIGATIONS
37.01 Any respective obligations of Buyer and Seller hereunder which
by their nature would continue beyond the termination,
cancellation or expiration of this Agreement or any Letter
Purchase Order, including, by way of example but not limited to,
the obligations provided in the Sections " BUYER'S INFORMATION";
INDEMNITY"; "PATENT AND OTHER PROPRIETARY RIGHTS INFRINGEMENT";
"PUBLICITY"; and "WARRANTY FOR EMERGENCY SERVICES" shall survive
such termination, cancellation or expiration.
SECTION 38. NOTICES
38. 01 Except as otherwise provided herein, any notices or demands
which are required by law or under the terms of this Agreement
shall be given or made by Seller or Buyer in writing and shall
be given by hand delivery, telegram or similar communications,
or by certified or registered mail, and addressed to the
respective parties set forth below. Such notices shall be
deemed to have been given in the case of telegrams or similar
communications when sent, and in the case of certified or
registered mail when deposited in the United States mail with
postage prepaid.
To Buyer: BellSouth Telecommunications, Inc.
Director - Procurement Services
38P40 Southern Bell Center
675 West Peachtree Street, N.E.
Atlanta, Georgia 30375
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To Seller: SCC Communications Corp.
6285 Lookout Road
Boulder, Colorado 80301
Attn: Chief Financial Officer
38. 02 The above addresses may be changed at any time by giving thirty
(30) days prior written notice as above provided.
38.03 In addition to the foregoing, any notices of a legal nature
shall be copied to:
Legal Department
BellSouth Telecommunications, Inc.
4300 Southern Bell Center
675 West Peachtree Street, N.E.
Atlanta, Georgia 30375
Attention: General Attorney -
Contracting
SECTION 39. SECTION HEADINGS
39.01 The headings of the Sections included in this Agreement are
inserted for convenience only and are not intended to affect the
meaning or interpretation of this Agreement.
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SECTION 40. INCORPORATION BY REFERENCE
40.01 The terms and conditions contained in Appendix A, referred to
in this Agreement and attached hereto, is an integral part of
this Agreement and is fully incorporated herein by this
reference.
SECTION 41. ENTIRE AGREEMENT
41.01 This Agreement, and any Letter Purchase order placed
hereunder, shall constitute the entire agreement between Buyer
and Seller relating to this Agreement or a particular Letter
Purchase Order and may not be modified or amended other than
by a written instrument executed by both parties. With the
exception of those pre-printed provisions included as a part
of this Agreement, any other pre-printed provisions on
Seller's and Buyer's forms shall be deemed deleted. A Letter
Purchase Order placed by Buyer hereunder shall incorporate the
typed, stamped, or written provisions or data found thereon
and in subordinated documents (such as shipping releases) so
long as the typed, stamped, or written provisions or data
merely supplement but do not vary the provisions of this
Agreement. Whenever typed, stamped, or written provisions of
an accepted Letter Purchase Order conflict with this
Agreement, this Agreement shall control unless otherwise
agreed to under a "Special Considerations" section of the
Letter Purchase Order.
IN WITNESS WHEREOF, the parties have executed this Agreement by their duly
authorized representatives in one or more counterparts, each of which shall
constitute an original, on the dates set forth below.
SCC COMMUNICATIONS CORP. BELLSOUTH TELECOMMUNICATIONS, INC.
By /s/ NANCY K. HAMILTON By /s/ STEPHANIE COLEMAN
----------------------------------- -----------------------------------
(Authorized Signature) (Authorized Signature)
Name NANCY K. HAMILTON Name STEPHANIE COLEMAN
--------------------------------- ---------------------------------
(Print or Type) (Print or Type)
Title CFO Title DIRECTOR-PROCUREMENT SERVICES
-------------------------------- --------------------------------
Date OCTOBER 17, 1995 Date OCTOBER 13, 1995
--------------------------------- ---------------------------------
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Confidential Treatment Request
EXHIBIT 10.9
WIRELESS E9-1-1 AGREEMENT
CONTENTS
<TABLE>
<S> <C> <C>
1. DEFINITIONS..................................................... 3
1.1 SCP......................................................... 3
1.2 Services.................................................... 3
1.3 Initial Market Area Survey.................................. 3
1.4 New Services................................................ 3
1.5 Add-On Service.............................................. 3
1.6 Modification Order.......................................... 4
1.7 Project..................................................... 4
1.8 PSAP........................................................ 4
1.9 Qualified PSAP.............................................. 4
1.10 AMCI's Region............................................... 4
1.11 Ameritech Wireline Regions.................................. 4
1.12 AMCI Affiliate.............................................. 4
1.13 Subscriber.................................................. 5
2. PROJECT......................................................... 5
2.1 Scope Of Work............................................... 5
2.2 Cancellation Fee Schedule................................... 6
2.3 Modification Orders......................................... 6
2.4 Letter of Agency............................................ 6
2.5 Orderly Transition.......................................... 6
3. TERM AND TERMINATION............................................ 8
3.1 Term........................................................ 8
3.2 Termination................................................. 8
4. FEES AND PAYMENT................................................ 11
4.1 Fees For Service............................................ 11
4.2 Other Charges............................................... 14
4.3 Disputed Invoices........................................... 14
4.4 Taxes....................................................... 15
5. LICENSES AND DEVELOPED INFORMATION.............................. 15
5.1 Licenses.................................................... 15
5.2 Developed Information-Definitions........................... 16
5.3 Developed Information-Rights................................ 17
6. CONFIDENTIALITY................................................. 18
6.1 Confidential Information.................................... 18
6.2 Exceptions.................................................. 19
6.3 Ownership of Confidential Information....................... 19
7. WARRANTIES...................................................... 19
7.1 Warranty By SCC............................................. 19
7.2 Warranty By AMCI............................................ 20
8. INDEMNIFICATION................................................. 21
8.1 General Indemnification..................................... 21
8.2 Intellectual Property Indemnification....................... 21
9. LIMITATION OF LIABILITY......................................... 22
10. INSURANCE...................................................... 22
</TABLE>
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<TABLE>
<S> <C> <C>
11. GENERAL PROVISIONS............................................. 23
11.1 Exhibits.................................................... 23
11.2 Electronic Exchange......................................... 23
11.3 Staffing Level.............................................. 23
11.4 Advertising and Publicity................................... 23
11.5 Assignment and Delegation................................... 24
11.6 Company Rules............................................... 24
11.7 Escalation Procedures....................................... 24
11.8 Force Majeure............................................... 24
11.9 Governing Law............................................... 25
11.10 Independent Contractors..................................... 25
11.11 Subcontracting.............................................. 25
11.12 Joint Work Product.......................................... 25
11.13 Laws, Regulations, Permits.................................. 25
11.14 Notices..................................................... 25
11.15 Non-Waiver.................................................. 26
11.16 Severability................................................ 26
11.17 Binding Effect.............................................. 26
11.18 Time Is Of The Essence...................................... 27
11.19 Equal Opportunity........................................... 27
11.20 Remedies.................................................... 27
11.21 Authority................................................... 27
11.22 Entire Agreement............................................ 27
EXHIBIT A SCOPE OF WORK
EXHIBIT B CANCELLATION FEE SCHEDULE
EXHIBIT C SAMPLE MODIFICATION ORDER
EXHIBIT D LETTER OF AGENCY
EXHIBIT E AMCI/SIGNALSOFT LICENSE
</TABLE>
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WIRELESS E9-1-1 SERVICES AGREEMENT
THIS AGREEMENT ("this Agreement") is made this day of ,
1998, (the "Effective Date") between SCC COMMUNICATIONS CORPORATION, ("SCC") a
Delaware Corporation, having its corporate offices located at 6285 Lookout Road,
Boulder, Colorado 80301, and AMERITECH MOBILE COMMUNICATIONS, INC. ("AMCI") a
Delaware corporation having its corporate offices located at 2000 West Ameritech
Center Drive, Hoffman Estates, Illinois 60195, who are collectively referred to
herein as "the Parties" or individually as "Party."
In consideration of the promises and covenants set forth herein, and for
good and valuable consideration, the sufficiency of which is hereby
acknowledged, the Parties agree as follows:
1. DEFINITIONS
1.1 SCP.
"SCP" means Service Control Point.
1.2 SERVICES.
"Services" or "Wireless E9-1-1 Services" means the basic wireless enhanced
9-1-1 services described in the "Scope Of Work" ("SOW"), attached hereto and
marked as Exhibit A (which Services do not include provision of "SCP" equipment)
which Services are intended to enable AMCI to implement and maintain a wireless
E9-1-1 system, in AMCI's Region (as defined herein below) in its entirety and
for all of AMCI's Subscribers (as defined herein below), in compliance with FCC
Docket Number 94-102 for Phase I service.
1.3 INITIAL MARKET SURVEY
"Initial Market Area Survey" or "Initial Market Survey", "IMAS" or "Market
Area Survey" means the report prepared by SCC, and associated tasks performed by
SCC, as described in Exhibit A, which identifies certain information that is
specific to AMCI's E9-1-1 networks and infrastructures and such other
information as is expressly stated in Exhibit A.
1.4 NEW SERVICES.
"New Service" means those services developed by SCC in its sole discretion
which modify, improve or add functionality, of any level, kind or version, to
the Services and which are offered to and accepted by AMCI pursuant to
subsequent agreement of the Parties.
1.5 ADD-ON SERVICES.
"Add-On Service" means services that are customized to AMCI's particular
needs and that are not New Services or Services initially contemplated herein,
but which are developed by SCC as a result of AMCI's explicit request for
specific modifications, improvements or additional functionality to the Services
or New Services and which are added to same pursuant to subsequent agreement of
the Parties.
1.6 MODIFICATION ORDER.
"Modification Order" means a document which, by its formal execution,
obligates the Parties with respect to the addition, or modification, of New
Services or Add-On Services described in such document. Such Modification Order
shall be subject to the terms and conditions hereof, shall be prepared in
substantially the same form as that set forth in Exhibit C and shall become
effective only when fully executed by the authorized representatives of each
Party as evidenced thereon.
1.7 PROJECT.
"Project" means the undertaking of the tasks and duties set forth in
Section 2 hereof.
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1.8 PSAP.
"PSAP" means Public Safety Answering Point as that phrase is commonly known
in the telecommunications industry.
1.9 QUALIFIED PSAP.
"Qualified PSAP" means a PSAP which, in connection with the FCC's Order in
Docket Number 94-102, has requested E9-1-1 service from AMCI, has put in place a
cost recovery plan and is technologically capable of providing E9-1-1 service .
1.10 AMCI'S REGION.
"AMCI's Region" means the geographic region in which AMCI or one of its
Affiliates, as defined herein, is licensed to provide personal wireless
communications services.
1.11 AMERITECH WIRELINE REGIONS.
"Ameritech Wireline Region" means the geographic region in which Ameritech
is licensed to offer wireline telecommunications service.
1.12 AMCI AFFILIATE.
"AMCI Affiliate" means any entity that directly or indirectly, through one
or more intermediaries, controls or is controlled by or is under common control
with AMCI, as well as any successor to AMCI, whether by change of name,
dissolution, merger, consolidation, reorganization or otherwise.
1.13 SUBSCRIBER.
"Subscriber" means each AMCI wireless customer having an assigned Mobile
Directory Number (MDN) whose address falls within the municipal, county or other
jurisdictional boundary served by a Qualified PSAP in AMCI's Region which
Qualified PSAP has requested and is being provided wireless E9-1-1 Services by
SCC on behalf of AMCI. Such wireless customers shall include wireless customers
whose service is delivered by AMCI via so-called "analog" or "digital"
technology.
2. PROJECT
2.1 SCOPE OF WORK (EXHIBIT A).
The Scope of Work set forth in Exhibit A constitutes a complete and
detailed description of SCC's obligations to perform the Services to be
performed in connection with the Project, which shall be performed exclusively
by SCC in Ameritech's Wireline Regions, and non-exclusively in all other AMCI
Regions, subject to AMCI's rights expressly stated herein, and which shall apply
to the entire AMCI Region, to all Qualified PSAPs therein, and to all of AMCI's
Subscribers. SCC acknowledges that its Services represent a portion of combined
effort on the part of other critical third party vendors who themselves, along
with SCC, are participating in an integrated effort to deploy AMCI's Phase I
E9-1-1 wireless service; and in this regard, SCC will reasonably cooperate with
such other vendors as set forth in Exhibit A. AMCI will timely perform its
obligations as set forth in Exhibit A.
2.1.1 MARKET AREA SURVEY.
SCC shall not be responsible for providing a Market Area Survey under the
terms and conditions of this Agreement. The Parties have already executed a
"Consulting Agreement" dated October 27, 1997, which is hereby ratified, which
agreement will govern the terms and conditions under which SCC will perform a
"Market Area Survey And Analysis". SCC will ensure that its work related to said
Market Area Survey And
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Analysis will be performed in a manner consistent with the terms and conditions
of this Agreement and Exhibit A.
2.1.2 SYSTEM EFFICIENCY.
SCC is devoted to improving and exceeding the standards and requirements of
this Agreement in the provision of Services. This includes improvement in the
automation procedures, software products, hardware products, personnel training
and qualifications, and all other services. Therefore, performance and
efficiency of the system for delivery of the Services will be maintained and
periodically improved by SCC without charge to AMCI. Such changes in the
provision of Services shall be considered usual and customary and not New
Services. The system for delivery of the Services is described in Exhibit A.
2.1.3 REGIONAL UNIFORMITY.
Except as may otherwise be described herein, the Services will be provided
under regionally consistent terms and shall not be state-specific unless it is
legally mandated by the state or other legally governing body.
2.2 CANCELLATION FEE SCHEDULE (EXHIBIT B).
The Cancellation Fee Schedule, attached hereto and marked as Exhibit B and
incorporated herein, sets forth the cancellation fee, if any, that would be
payable by AMCI to SCC in the event AMCI exercises its right to cancel this
Agreement pursuant to section 3.2.3 hereunder.
2.3 MODIFICATION ORDER (EXHIBIT C).
If AMCI elects to purchase from SCC New Services or Add-On Services, AMCI
will deliver to SCC a completed form substantially similar to that which is set
forth in Section 1.7 of Exhibit A. The parties will negotiate in good faith the
terms and conditions relating to the provision of such services, which shall
include at a minimum: (a) a description of the requested service; (b) a
projected date of its availability; (c) a proposed implementation schedule; (d)
the initial non-recurring charges and/or additional recurring charges associated
with the service; and (e) any other information deemed appropriate by the
Parties. Modification Orders will not be effective or binding upon the parties
unless signed by an authorized individual from AMCI who occupies a position at
AMCI of director level or above.
2.4 LETTER OF AGENCY (EXHIBIT D).
AMCI shall provide SCC with a Letter of Agency ("LOA") similar in form and
substance to that which is set forth in Exhibit D, which letter will enable SCC
to perform the Services as a limited agent for AMCI. The LOA shall: (a) not be
released by SCC or used except as authorized by this Agreement; (b) be deemed
revoked upon termination of this Agreement or delivery to SCC of written notice
of AMCI's election in this regard; and (c) be returned to AMCI upon AMCI's
request, or destroyed by SCC upon termination of this Agreement or the
revocation notice described herein.
2.5 ORDERLY TRANSITION.
2.5.1 TRANSITIONED SERVICES -- SUBSTITUTION FOR SCC.
In AMCI's sole discretion, AMCI may elect to perform, or have its agents
perform, the Services (described below in subparagraphs 2.5.1(a) and 2.5.1(b)
which are more fully described in Exhibit A) in whole or in part, in each or any
of AMCI's Regions ("Transitioned Services"). AMCI may not exercise said option
earlier than one (1) year after the date on which a particular Qualified PSAP,
which has requested Phase I E9-1-1 Service, is turned-up and Services are
deployed by SCC. In the event AMCI properly makes such an election, and to the
extent determined by AMCI in its sole discretion, AMCI shall substitute its
performance for that of SCC. Thereafter AMCI shall be responsible for the
Transitioned Services in lieu of SCC, and except as otherwise expressly provided
herein, SCC shall be relieved of its obligations therefore.
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The pricing discounts related to AMCI's exercise of this option are described in
section 4 hereunder. Transitioned Services include:
(a) network engineering, design and pANI Translations, including
identification of specific network interconnections required from AMCI to
specific E9-1-1 networks, Qualified PSAPs, appropriate engineering of
connections for traffic capacity and coordination of pANI translations into
the required AMCI network elements;
(b) LEC/CLEC and pANI coordination and pANI assignment, including
coordination of network ordering, installation testing and turn-up as well
as coordination of all pANI assignments and confirmation with all LEC/CLEC
interconnect requirements and pANI assignments;
2.5.2 ORDERLY TRANSITION.
In the event AMCI properly exercises its options related to sections 2.5.1
or 2.5.2, then to the extent it is relevant and applicable thereto, SCC will
cooperate in the orderly transition of the Transitioned Services to AMCI or its
agent and will make reasonable efforts to minimize any disruption of AMCI's
wireless 9-1-1 service. At such time that AMCI exercises any option in this
regard, and with respect to the AMCI-relevant data and databases that SCC
legally controls hereunder, SCC will deliver to AMCI such data contained in such
databases, and other information, that is necessary to allow SCC to be
substituted in this regard; provided, however that SCC shall not be obligated to
do so if such delivery or other performance would violate the provisions of the
confidentiality provisions contained herein, result in a breach of contract to
which SCC is a party as of the date hereof, violate any other law or private
right, would convey to AMCI any intellectual property or other right to which
AMCI is otherwise unentitled hereunder, or would otherwise unreasonably subject
SCC to civil or criminal prosecution. Such data and information shall include
but not be limited to "AMCI Results", as defined herein below, along with the
data needed to perform said Services in a readable file that is convertible with
commercially available software which data is current as of the date of such
substitution. Upon AMCI's request, and subject to the above limitations, SCC
will provide to AMCI whatever explanatory information or functional tools in
SCC's possession or legitimate control which are reasonably necessary for AMCI
to fully exploit the database contents.
Unless otherwise agreed by the Parties, after such time as AMCI becomes
responsible for the Transitioned Services as contemplated herein, SCC would
continue to upload to AMCI's SCP(s) on AMCI's behalf the mapping files which
operate in connection with the location-based application software being
utilized by the Parties as of that date, or a reasonable substitute therefore,
which SCC is capable of and willing to support.
Following termination, cancellation or expiration of this Agreement, or in
connection with an Orderly Transition, if AMCI requests that SCC continue to
provide any portion or all of the Services, for which SCC would not otherwise be
contractually obligated to provide under the terms and conditions of this
Agreement, AMCI shall compensate SCC for such Services at the same rate as that
set forth herein for such Services.
3. TERM AND TERMINATION
3.1 TERM.
Unless earlier terminated or canceled in accordance with this section, the
term of this Agreement shall begin upon the Effective Date as first stated
herein and continue until [ ] if either Party terminates this
Agreement according to the provisions of this section, then both Parties agree
to participate in the orderly shutdown and transition of products and services
as provided herein. Following this initial term, the Agreement shall
automatically renew for continuous [ ] terms unless terminated at
the end of a renewal term upon no less than sixty (60) days advance written
notification by the terminating Party.
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3.2 TERMINATION AND CANCELLATION.
3.2.1 TERMINATION BY AMCI.
This Agreement may be terminated by AMCI in whole or part for any of the
following reasons:
(1) if SCC defaults in its performance of any material obligation
required to be performed by SCC under this Agreement (including, but not
limited to, a failure by SCC to meet the specific acceptance or performance
requirements set forth in Exhibit A, or the warranties set forth herein),
and such default is not cured (or, in AMCI's reasonable opinion,
satisfactory progress has not been made as part of the escalation
procedures described in Exhibit A) within a thirty (30) day "cure period"
following receipt of AMCI's written notice which describes the default; or
(2) in the event of any acquisition, or takeover of a controlling
interest in SCC by another entity, or a merger or other consolidation of
SCC into or with another entity, if the other or surviving entity, at
AMCI's discretion is or could be deemed a competitor of AMCI or its
Affiliates in the telecommunications industry, or if the entity in AMCI's
reasonable discretion is not financially or operationally capable of
assuming the services being provided hereunder; or
(3) in the event continued performance under this Agreement would
cause AMCI to be in violation of any court order or regulatory agency
having jurisdiction, or of any law, statute, ordinance or regulation,
except that any failure of the Tandem, Signal Soft, SCC solution
contemplated herein shall not be deemed such a cause which circumstance is
addressed in and controlled by section 3.2.2 herein below.
In the event of an AMCI termination as described above, AMCI will have no
payment obligations to SCC beyond the effective termination date and will not be
obligated to pay SCC.
In the event of an AMCI termination as described above, SCC will cooperate
in the orderly transition of such terminated services in accordance with the
applicable provisions of section 2.5.2 herein.
A termination of this Agreement by AMCI does not in any way obligate AMCI
to purchase any other SCC products and services following such termination.
Even if any of the above reasons (that allow AMCI to terminate) may be
isolated to a particular state(s), AMCI retains its right to terminate the
entire Agreement if it so chooses.
3.2.2 TERMINATION BY AMCI -- NON-INTEGRATION WITH SCP NETWORK.
SCC understands that AMCI's E9-1-1 network must operate in combination with
equipment, hardware and software provided by Tandem, Signal Soft and Lucent to
AMCI. SCC agrees to cooperate fully with such other suppliers to the extent
necessary to assure that AMCI's E9-1-1 network will function in accordance with
the specifications and requirements of this Agreement, any applicable TIA or
Bellcore standards and specifications, and any standards for E9-1-1, Phase I
services mandated by federal, state or local laws, ordinances, rules and
regulations. In the event that the SCC, Tandem, Signal Soft and Lucent solution
cannot perform in an integrated manner in the AMCI network and thereby process
E9-1-1 calls per the applicable standards for Phase I E9-1-1, AMCI shall provide
SCC with written notice of said non-integration. Immediately after SCC's receipt
of such notice, the Parties will, in good faith, jointly explore an alternative,
compliant solution for processing E9-1-1 calls which solution would, to the
extent practical, designate SCC as the provider of the database management
services defined in the SOW, subject to the terms and conditions described below
in this subsection. AMCI will give due consideration to the opinions and
recommendations of SCC in connection with the selection of an alternative,
compliant solution, but AMCI will have sole discretion as to its final choice.
If said alternative solution contemplates an E9-1-1 call processing
platform whereby said database management services, as defined in the SOW, can
be performed as a "stand alone" functionality and not bundled with other
services, then SCC will have the right to provide those database services at the
same costs and under terms and conditions that are no less favorable to AMCI
than those set forth in this Agreement.
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If such alternative solution is provided by a third party and involves a
platform whereby the third party vendor providing such solution uses database
management services as a bundled offering with SCP(s) and location-based
software to accomplish E9-1-1 call processing functionality, then SCC would only
have the right to provide such database management services if: (a) SCC and AMCI
jointly obtain consent from said third party vendor to un-bundle said database
management services; (b) using SCC would not deprive AMCI of its options for
selecting an alternative, compliant solution as described herein; (c) SCC would
agree to provide such services under terms and conditions that are no less
favorable to AMCI than that set forth herein; (d) SCC would agree to provide
such services at a cost that, when added to the third party vendor's total cost
to provide the bundled service, minus the price at which said third party would
otherwise provide database management services, would not exceed the third party
vendor's total original cost for the bundled services; and (e) SCC would agree
to provide such services in a manner that equals or exceeds the quality of
database management services offered as part of the bundled service.
If SCC and AMCI cannot provide or mutually agree to a plan to provide an
alternate, compliant functionality within a thirty (30) day period, measured
from the date on which SCC receives said notice of non-integration, which period
may be extended by mutual agreement of the Parties, then AMCI may terminate the
portion of this Agreement affected by such non-integration upon written notice
of AMCI's desire to terminate, which notice shall state the effective date of
such termination and the reasons supporting such termination. Such a termination
shall not be deemed a default by SCC. AMCI may exercise its termination rights
hereunder for a period up to one hundred twenty (120) days after successful
completion of the First Office Application (FOA). For the purposes of this
clause, successful completion of the FOA means successful completion of the
testing based upon the Signal Soft Acceptance test document "W911-TP-Acceptance
Test" dated December 16, 1997 and the commercial deployment of the SCC, Tandem,
Signal Soft and Lucent solution with a Qualified PSAP and live AMCI customer
traffic on a duplex SCP configuration. In the event AMCI exercises its right of
termination in this regard, AMCI shall be responsible for paying SCC all the
fees otherwise payable in accordance with the provisions of section 4 herein for
Services rendered as of the date of said termination.
Appendix A-1 is an E9-1-1 System Supplier Responsibility Matrix that lists
the start-up and ongoing system responsibilities as between the various parties
involved in the SCC, Tandem, Signal Soft, Lucent and AMCI solution. For purposes
of this Agreement, said matrix shall govern any disputes regarding E9-1-1
supplier responsibility as between SCC, Tandem, Signal Soft, Lucent and AMCI. In
the event of a dispute not involving any one or more of such third parties but
which is solely between SCC and AMCI over SCC's and AMCI's respective
responsibilities as set forth in said matrix as opposed to that which is set
forth in Exhibit A, that which is set forth in Exhibit A will control said
dispute. SCC shall provide for those responsibilities described in Exhibit A at
no additional charge beyond the contracted Non-recurring and Recurring fees
listed in section 4 herein below.
3.2.3 CANCELLATION BY AMCI.
In the event the regulatory, legal, labor or business conditions,
("business conditions" being defined as market share, profitability, ability to
grow revenue, and the allocation of internal resources) under which this
Agreement is based upon change so that it would no longer be in AMCI's best
interests to continue with the full term as stated herein, AMCI shall have the
ability to cancel this Agreement in its entirety, or on a state-by-state basis,
at any time upon providing SCC prior written notice of its intention to cancel,
and the scope (i.e., # of states) of the cancellation, at least 180 days in
advance of the AMCI designated cancellation date. Exhibit B, "Cancellation Fee
Schedule", sets forth AMCI's cancellation fee payment obligations to SCC in the
event of such cancellation. Payment by AMCI of the cancellation fee shall be the
extent of AMCI's liability to SCC in the event of a cancellation hereunder.
The Parties acknowledge and agree that the cancellation fee is not a
penalty and is, and shall be deemed, liquidated damages which damages are
reasonably based on the Parties' best estimate of what SCC's damages would be as
a result of AMCI's cancellation for Business Conditions.
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In the event this Agreement is cancelled by AMCI in whole or part in
accordance with this Section, SCC agrees, at AMCI's option, to sell AMCI those
SCC products and services, to which SCC has the ability and legal capacity to
sell, and which are desired by AMCI, under prices and terms consistent with the
"Most Favored Customer" provisions set forth herein. Except as may otherwise be
provided hereunder, in the event of an AMCI cancellation, AMCI will have no
payment obligations to SCC beyond the effective cancellation date for that
portion of the Agreement cancelled.
A cancellation of this Agreement by AMCI does not in any way obligate AMCI
to purchase any other SCC products and services following such cancellation.
3.2.4 TERMINATION BY SCC.
This Agreement may be terminated by SCC if AMCI defaults in its performance
of any material obligation required to be performed by AMCI under this Agreement
(including, but not limited to, a failure by AMCI to pay SCC's undisputed
invoices for services performed), and such default is not cured (or, in SCC's
reasonable opinion, satisfactory progress has not been made) within a thirty
(30) day "cure period" following receipt by AMCI of SCC's written notice which
describes the default.
4. FEES AND PAYMENT
4.1 FEES FOR SERVICES.
4.1.1
AMCI will pay SCC the fees and charges in the amounts and in the manner set
forth below:
A. NON-RECURRING ENGINEERING FEE ("NRE") FOR EACH MOBILE SWITCHING CENTER
("MSC") MARKET
The Mobile Switching Center ("MSC") market Non-Recurring Engineering
("NRE") Fee, of [ ] dollars ($[ ]) per Mobile Switching
Center ("MSC"), is a one time charge per MSC which will cover the work
associated with MSC network interconnection analysis and coordination,
market-specific Cell/ Face coverage mapping, selective router assignment and
location description assignment; initial pANI data build & validation with
Qualified PSAPs in each market area served by the MSC; delivery of validated
pANIs to appropriate ALI databases; MSC market wireless 9-1-1 test coordination,
as described in Exhibit A. Said NREs will be due upon execution of a
Modification Order, Request Form or such other documentation that accompanies
AMCI's request that SCC initiate the work related to turning up an MSC with the
Services.
B. MONTHLY RECURRING FEES ("MRF") FOR SERVICES
The Monthly Recurring Fees ("MRF") for Services are itemized below and are
each charged on a per Subscriber per month basis. MRF shall commence at such
time as Service is deployed to the Qualified PSAP in AMCI's Region which
Qualified PSAP is the first in time to be deployed by AMCI.
The MRF for Services, provided on an exclusive basis by SCC during the term
of this Agreement in the Ameritech Wireline Region, and on a non-exclusive basis
in all other AMCI Regions, and will be billed at a rate of $[ ] per
Subscriber per month. This rate shall be fixed for the term of this Agreement
unless modified pursuant to this Agreement and the following adjustments:
Any time after 12 months from the date on which a particular Qualified
PSAP, which has requested Phase I E9-1-1 Service, is turned-up and Services
are deployed by SCC in accordance with the terms of this Agreement, if AMCI
elects to exercise its option to perform all of the "Transitioned Services"
described in subparagraph 2.5.1(a) of the Agreement, then only as to those
particular Qualified PSAPs in those market(s) in which AMCI performs such
Transitioned Services, the above MRF of $[ ] will be discounted by
$[ ]; and
Any time after 12 months from the date on which a particular Qualified
PSAP, which has requested Phase I E9-1-1 Service, is turned-up and Services
deployed by SCC in accordance with the terms of this
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Agreement, if AMCI elects to exercise its option to perform all of the
"Transitioned Services" described in subparagraph 2.5.1(b) of the
Agreement, then only as to those Qualified PSAPs in those market(s) in
which AMCI performs such Transitioned Services, another discount in the
amount of $[ ] will be applied to further reduce said MRF.
For those markets in which AMCI does not perform all of the applicable
Transitioned Services, no discount will apply. AMCI may exercise either or both
of such options in any order, regardless of whether done consecutively,
non-consecutively or concurrently.
Unless otherwise mutually agreed by the parties in writing, an increase in
the fees, rates and prices referenced herein, if any, which occur beyond the
initial term of this Agreement will not exceed four percent (4%) of the relevant
fee, rate or price in effect during the immediately-preceding twelve (12) month
period.
C. REPORTING
The Parties will cooperate monthly as follows in calculating the number of
Subscribers as follows:
1. Not later than the 15th day of each month, commencing the first
month that Services have been deployed, and continuing for the duration of
this Agreement, SCC will provide to AMCI, in an agreed-upon electronic
format, a list of zip codes falling with a given Qualified PSAP boundary
for which such Qualified PSAP has deployed Services. Unless otherwise
modified in connection with a mutually agreed-upon "true-up" process, as
described in paragraph 3 herein below, said list will only include those
zip codes in which at least fifty percent (50%) of a given zip code area
falls within a Qualified PSAP boundary.
2. No later than seven (7) business days after AMCI's receipt of such
list of zip codes, AMCI will provide to SCC, in an agreed-upon electronic
format, with the number of Subscribers in each zip code, broken down by
Qualified PSAP.
3. Recognizing that this method of calculating Subscribers leaves open
the possibility that AMCI could be under-charged or over-charged in any
given month and that another method may be appropriate, the Parties will
work together and will mutually agree upon an acceptable method to
"true-up" the number of Subscribers and related MRFs on a calendar quarter
basis. Until such time, the above calculation shall govern the number of
Subscribers.
D. BILLING & PAYMENT
MRF for Services performed in a given month will be invoiced in arrears on
or about the first day of each month commencing the first month following the
date on which Services are first provided. MRF invoices will be payable by AMCI
without interest or penalty not later than thirty (30) days after AMCI's receipt
of said invoice. SCC will prepare invoices broken out by AMCI Market (which may
be modified from time to time by AMCI with reasonable advance written notice to
SCC).
SCC shall not be entitled to reimbursement by AMCI for SCC's costs of
travel or any expense directly related to any non-recurring engineering fees
(NRE).
4.1.2 FAIR MARKET VALUE.
The Parties agree that the price of tangible and intangible assets referred
to in this Agreement fair market value for same. With respect to any other fees,
charges, payments or purchases prospectively negotiated or determined by the
Parties which related to the Project, the same will likewise reflect fair market
value. If the Parties are unable to agree upon a price for same, each shall
select an appraiser knowledgeable in the valuation of the types of items at
issue, and the two appraisers shall attempt to reach agreement on the fair
market value. If the two appraisers are unable to reach agreement, they shall
select a third appraiser who also shall be knowledgeable in the valuation of
such matters. The three appraisers shall then determine the fair market value,
but if they are unable to agree, the fair market value shall be set by the third
appraiser. Each Party shall bear the expense of the appraiser selected by it,
and the Parties shall split the expense of the third appraiser.
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4.1.3 [
]
4.1.4 AUDITS.
At its sole expense, SCC shall maintain complete and accurate books and
records with respect to the Project, and said books and records shall be
maintained in accordance with generally accepted accounting principles. Each
Party shall have the right to audit the books and records of the other which
books and records relate specifically to the calculation of the number of
Subscribers and related Monthly Recurring Fees (referred to as "MRF" in Exhibit
B). In addition, AMCI shall have the right to audit the books and records of SCC
which relate to prices charged to AMCI hereunder in connection with AMCI's "Most
Favored Customer" status, or which relate to billing for Fees and Charges
described in this section 4 as well as that which is relevant to SCC's
data-protection and security obligations hereunder. Such audits may be performed
at the premises of the other Party, shall be limited to once per calendar year
and shall only be allowed with not less than fifteen (15) days advance written
notice to the audited Party. Each Party will be responsible for its own costs
related to such audits. "Undisputed" invoices, as defined herein, which are not
adjusted within 12 months of the date of such invoice shall be deemed accepted
by the Parties, regardless of whether such invoice was included in a prior or
subsequent audit.
4.2 OTHER CHARGES.
Charges for miscellaneous services not contemplated in Exhibit A or section
4 hereunder, which services do not include Services, SCP Services, Add-On
Services or New Services ("Other Charges"), will be offered to AMCI on a
time-and-materials basis using SCC's then-current rates for same, less AMCI
discounts, if any, that may be applicable. In the event AMCI requests that SCC
provide such services, SCC shall first furnish AMCI with an estimate of the
amount of the Other Charges, which, upon written agreement of the Parties, may
include travel and other related expenses, and specify a reasonable
"not-to-exceed" billable amount. Billings of Other Charges for the requested
services shall not exceed the specified amount without AMCI's prior written
approval. Other Charges shall be billed in arrears, after provision of the
relevant services, and AMCI shall pay Other Charges within thirty (30) days of
the date of invoices related to such services.
4.3 DISPUTED INVOICES.
In the event of a disputed invoice, AMCI shall notify SCC within sixty (60)
days of the receipt of any such invoice and identify the nature of the dispute
or inaccuracy. AMCI shall pay any undisputed amounts set forth in said invoice
in accordance with the provisions hereof pertaining to normal payment of
invoices, and both parties shall in good faith investigate and attempt to
resolve the outstanding disputed amount.
4.4 TAXES.
Fees and charges payable hereunder shall not include any sales, use,
excise, transaction or other similar taxes levied against or upon the furnishing
or receipt of Service or SCP Services. Further, the amounts payable by AMCI
hereunder are exclusive of all federal, state and local taxes, taxes that are
based on SCC's net or
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gross receipts, franchise taxes or other taxes based on SCC's corporate
existence or status, personal property taxes on licensed software and taxes that
may be due in whole or in part because of any failure by SCC or its agents to
file any return or information required by law, rule or regulation. If any sales
or other taxes related to SCC's provision of Services are payable or mandated by
current or prospective application of law, they shall be separately stated on
the monthly invoice to AMCI, and AMCI shall be responsible for paying same in
accordance with the terms and conditions set forth in this section 4 for payment
of invoices. AMCI shall reimburse SCC for any penalties or interest actually
levied upon SCC only if AMCI's acts or omissions solely caused such penalty or
interest to be levied.
5. LICENSES AND DEVELOPED INFORMATION
5.1 LICENSES.
Notwithstanding any conflicting provision herein, nothing in this Agreement
shall be construed to grant AMCI any right, title or interest in or license to
any SCC Furnished Technology, as defined herein below, SCC hardware or software
products used in the provision of Services, New Services, Add-On Services, any
other SCC proprietary information or intellectual property or SCC-owned
Proprietary Rights (defined herein below). Nothing in this Agreement shall be
construed to grant SCC any right, title or interest in AMCI Furnished
Technology, as defined herein below, AMCI proprietary information, intellectual
property, any data being provided to SCC by AMCI for use in the provision of
Services, New Services, Add-On Services or AMCI-owned Proprietary Rights.
Notwithstanding the above, AMCI shall be entitled to quiet enjoyment of the
benefits of the software made available to AMCI hereunder during the Initial
Term and any Renewal Terms.
5.1.1 SOURCE CODE -- ESCROW.
With respect only to that SCC-owned software utilized by SCC in connection
with the provision of the Services, SCC shall arrange to place a copy of the
most recent version of such software, and the related source code and any
documentation, in escrow with an escrow agent selected by SCC. Said source code
shall be in the form of magnetic medium compatible with equipment the same or
similar to that which provides the Services. Pursuant to a written agreement
between SCC and said escrow agent, said agent will be under a duty to release
the Source Code to AMCI only after sufficient evidence has been demonstrated to
said agent that: (a) SCC makes an assignment for the benefit of creditors,
admits in writing its inability to pay debts as they mature, has a trustee or
receiver appointed to manage all or a substantial part of its assets, or
commences or has commenced against it a proceeding under the United States
Bankruptcy Code and such proceeding is acquiesced in or not dismissed within
sixty (60) days; or (b) SCC ceases, for any reason, to do business or to provide
maintenance and support for such software and or Services.
Such software, source code and documentation shall only be released after
said agent has provided SCC not less than thirty (30) days written notice of the
escrow agent's intent to release same to AMCI.
If the software is modified during the term of this Agreement, SCC shall be
responsible for ensuring that an updated copy thereof, and updated source code
and documentation, is deposited with said escrow agent not less than ten (10)
days after SCC's receipt of such modification, or fifteen (15) days after such
modification occurs, whichever is later. The costs related to said escrow
agreement and any release of the source code shall be borne by SCC and AMCI
equally.
5.1.2 LOCATION-BASED SOFTWARE.
SCC agrees to utilize the software of Signal Soft in connection with SCC's
provision of Services and will maintain said software in its most current form
and will provide AMCI with support of the mapping functionality for the
location-based software as described in Exhibit A. At no cost to SCC, AMCI shall
provide SCC with a copy of MAPs Software ("Licensed Software") which AMCI has
licensed from SignalSoft Corp. ("SignalSoft") for use by SCC in its provision of
database management services for AMCI pursuant to the terms of this Agreement.
SCC agrees to abide by the restrictions on disclosure and copying of
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the Licensed Software contained in Section 4 of AMCI's agreement with
SignalSoft, a copy of which Section is attached hereto as Exhibit E, and agrees
to return such copy of the Licensed Software retaining no copies, to AMCI upon
termination of SCC's Agreement with AMCI. SCC agrees that SignalSoft shall be a
third party beneficiary of the agreements contained in this paragraph and that
SignalSoft may enforce them directly against SCC.
5.2 DEVELOPED INFORMATION -- DEFINITIONS.
5.2.1 PROPRIETARY RIGHT.
"Proprietary Right" means any patent, copyright, trade secret, trademark or
other intellectual property right that is protected or protectable under the
laws of any governmental authority having jurisdiction.
5.2.2 AMCI FURNISHED TECHNOLOGY.
"AMCI Furnished Technology" means any design, specification, know-how,
computer program, computer software, computer hardware, device, technique,
algorithm, method, procedure, discovery or invention, whether or not reduced to
practice, or enhancement, improvement or derivative works thereof that (a) is
protected or protectable under any Proprietary Right, (b) is owned or controlled
(by license or otherwise) by AMCI or any of its affiliates, and (c) is furnished
or to be furnished by AMCI or any of its affiliates to SCC under this Agreement.
AMCI represents that any of its employees or agents who have or may have a right
of interest in or to AMCI Furnished Technology have executed proper waivers
granting all right, title and interest in same to AMCI.
5.2.3 SCC FURNISHED TECHNOLOGY.
"SCC Furnished Technology" means any design, specification, know-how,
computer program, computer software, computer hardware, device, technique,
algorithm, method, procedure, discovery or invention, whether or not reduced to
practice, or enhancements, improvements or derivative works thereof that (a) is
protected or protectable under any Proprietary Right, (b) is owned or controlled
(by license or otherwise) by SCC or any of its affiliates, and (c) is furnished
or to be furnished by SCC or any of its affiliates to AMCI under this Agreement.
SCC represents that any of its employees or agents who have or may have a right
of interest in or to SCC Furnished Technology, or those who are performing
Services hereunder, have executed appropriate waivers granting all right, title
and interest in same to SCC.
5.2.4 AMCI RESULTS.
"AMCI Results" means any information or data that (a) does not fall within
the definition herein of Services or New Services, and (b) is not public
information, and (c) is not SCC Furnished Technology or the property of any
third party, and (d) is protected or protectable as a Proprietary Right, and (e)
is created, compiled, conceived, developed, discovered, invented, or made by SCC
specifically for the benefit of AMCI. Results shall include all AMCI-specific
network data, including MSC, cell site, routing information and data, the most
recent data and map files which use the relevant location-based application
software.
5.3 DEVELOPED INFORMATION -- RIGHTS.
5.3.1 AMCI RESERVATION OF RIGHTS.
AMCI reserves all of its right, title and interest in all AMCI Furnished
Technology and all Proprietary Rights in same.
5.3.2 SCC RESERVATION OF RIGHTS.
SCC reserves all of its right, title and interest in all SCC Furnished
Technology and all Proprietary Rights in same.
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5.3.3 OWNERSHIP OF AMCI RESULTS.
AMCI will be the exclusive owner of all right, title and interest in the
AMCI Results and all Proprietary Rights in same. To the extent permitted under
the United States Copyright Act (17 U.S.C. sec. 101 et seq. and any successor
statutes thereto), the AMCI Results will constitute "works made for hire" and
the ownership of such AMCI Results will vest in AMCI at the time they are
created. In any event, SCC hereby assigns and transfers, and promises to assign
and transfer, to AMCI all SCC's right, title and interest in the AMCI Results
and Proprietary Rights thereto.
6. CONFIDENTIALITY AND NONDISCLOSURE
6.1 NON-DISCLOSURE AND SYSTEM SECURITY.
The Parties each recognize and acknowledge the importance of maintaining
the security and integrity of the other Party's systems and data as well as the
confidential and proprietary nature of same, including such items as AMCI's
operating information and RF coverage areas, AMCI Results, AMCI Furnished
Technology and AMCI's network and data. To protect such data and systems, , each
Party shall strictly adhere to the confidentiality provisions contained herein
during the performance of the Parties' respective obligations hereunder. SCC
understands and acknowledges the confidential nature of AMCI's telephone
subscriber information: it shall not disclose data to which it has access under
this Agreement to any person or entity without the prior written consent of
AMCI, and shall require each SCC employee to acknowledge in writing the
confidential nature of the data and agree to abide by the terms and conditions
of this section.
During the course of this Agreement, either party may receive or have
access to confidential information of the other. "Confidential Information"
means any confidential, private, or proprietary information or data disclosed by
a Party (the "Disclosing Party") to the other Party (the "Recipient") under or
in contemplation of this Agreement which: (a) if in tangible form or other media
that can be converted to readable form is clearly marked as confidential,
proprietary or private when disclosed; or (b) if oral or visual, is identified
as confidential or proprietary upon its disclosure. The terms "Disclosing Party"
and "Recipient" include each Party's corporate affiliates that disclose or
receive Confidential Information. The rights and obligations of the Parties
shall therefore also inure to such affiliates and may be directly enforced by or
against such affiliates. The Recipient acknowledges the economic value of the
Disclosing Party's Confidential Information.
Except as otherwise provided herein or agreed in writing by the Parties,
the Recipient acknowledges the economic value of the Disclosing Party's
Confidential Information and shall:
(a) use the Confidential Information only in connection with the
Recipient's performance of its obligations or in exercising its rights
under this Agreement;
(b) restrict disclosure of the Confidential Information to employees
of the Recipient and its affiliates with a "need to know" and not disclose
it to any other person or entity without the prior written consent of the
Disclosing Party;
(c) advise those employees who access the Confidential Information of
their obligations with respect thereto; and
(d) copy the Confidential Information only as necessary for those
employees who are entitled to receive it and ensure that all
confidentiality notices are reproduced in full on such copies.
6.2 EXCEPTIONS.
The obligations of this section shall not apply to any Confidential
Information which the Recipient can demonstrate:
(a) is or becomes available to the public through no breach of this
Agreement or any other agreement;
(b) was previously known by the Recipient without any obligation to
hold it in confidence;
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(c) is received from a third party free to disclose such information
without restriction;
(d) is independently developed by the Recipient without the use of
Confidential Information of the Disclosing Party;
(e) is approved for release by written authorization of the Disclosing
Party but only to the extent of such authorization and without any
disassembly, reverse engineering, or similar undertaking by Recipient; or
(f) is required by law or regulation to be disclosed, but only to the
extent and for the purposes of such required disclosure, and only if the
Recipient first notifies the Disclosing Party of the order which permits
the Disclosing Party a reasonable opportunity to seek an appropriate
protective order;
(g) is disclosed in response to a valid order of court or other
governmental body of the United States or any political subdivisions
thereof, but only to the extent of and for the purpose of such order, and
only if the Recipient first notifies the Disclosing Party of the order and
permits the Disclosing Party to seek an appropriate protective order.
6.3 OWNERSHIP OF CONFIDENTIAL INFORMATION.
Confidential Information, including permitted copies, shall remain vested
in, and be deemed the property of the Disclosing Party. The Recipient shall,
within twenty (20) days of a written request by the Disclosing Party, return all
Confidential Information (or any designated portion thereof), including all
copies thereof, to the Disclosing Party or if so directed by the Disclosing
Party, destroy such Confidential Information. The Recipient shall also, within
thirty (30) days of receipt of a written request by the Disclosing Party,
certify in writing that it has satisfied its obligations under this section. If
the Recipient fails to abide by its obligations under this section, the
Disclosing Party shall be entitled to immediate injunctive relief in addition to
any other rights and remedies available to it at law or in equity.
7. WARRANTIES
7.1 WARRANTY BY SCC.
SCC warrants and represents to AMCI that: any support and services that SCC
provides to AMCI under this Agreement shall be provided by personnel who are
trained and skilled in the provision of such services and shall be provided in a
professional, effective and efficient manner that equals or exceeds the
then-current industry standard for such services. SCC further warrants that the
Services provided hereunder shall equal or exceed the Performance Metrics
criteria set forth in Exhibit A.
EXCEPT AS PROVIDED, INCORPORATED INTO, OR REFERRED TO IN THIS AGREEMENT,
THERE ARE NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, REGARDING THE SERVICES
PROVIDED BY SCC HEREUNDER.
If AMCI fails to meet its obligations hereunder, or if AMCI is negligent in
its performance hereunder or willfully commits an act or omission with regard to
the provisions hereof, and such failure, negligence or willful conduct
proximately causes a circumstance where SCC is unable to meet one or more of its
warranty obligations hereunder, then performance by SCC under such warranties
shall be suspended as of the date of such failure, negligence or willful
conduct, as the case may be until cured by AMCI. If the nature of the affected
warranty is such that it can not be cured, then such warranty shall be void.
SCC has all requisite power and authority and all material licenses,
permits and other authorization necessary to own an operate its business and to
perform the obligations imposed upon it hereunder and to provide the Services
and SCP Services;
Any computer software or routing services supplied or delivered hereunder
by or for SCC will: (1) accept date information before, during and after January
1, 2000, including but not limited to accepting date input,
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providing date output and performing calculations on dates or portions of dates;
(2) function accurately, without disruption or abnormal ending-scenario or with
any change in the operation of such software or routing services associated with
the advent of the new century, (3) respond to two-digit year and date input in a
way that resolves the ambiguity as to century in a disclosed, defined and
predetermined manner, and (iv) store and provide output of date information in a
way that is unambiguous as to the twentieth or twenty-first century;
SCC warrants that it has no knowledge of any existing software viruses that
would materially impact SCC's performance hereunder. If SCC becomes aware of any
such viruses in its products used in the performance of the Services ordered by
AMCI, it will advise AMCI in writing immediately. If AMCI's performance
hereunder is negatively impacted by SCC's failure to notify AMCI in a timely
fashion of a software virus of which SCC has notice, SCC shall be responsible
for such consequences. Upon learning of a virus in its software, SCC shall use
its best efforts to remedy it as soon as possible.
In the event of any breach of the above warranties, SCC will, at its sole
expense, take appropriate corrective action, including repair or replacement of
the system component not meeting such warranty with respect to hardware or
software and with respect to personnel and business operations, re-performance
of Services or SCP Services or such remedial action as will bring such warranty
into compliance
7.2 WARRANTY BY AMCI.
(a) AMCI warrants that it has all requisite power and authority and all
material licenses, permits and other authorization necessary to own and operate
its business and to perform the obligations imposed upon it hereunder;
(b) AMCI has no knowledge of any existing software viruses that would
materially impact AMCI's performance hereunder. If AMCI becomes aware of any
such viruses in its software used in connection with its performance hereunder,
it will advise SCC in writing immediately. If SCC's performance hereunder is
negatively impacted by AMCI's failure to notify SCC in a reasonably timely
fashion of its knowledge of such viruses, AMCI shall be responsible for such
consequences. Upon learning of such a virus, AMCI shall use its best efforts to
remedy same as soon as possible, at no cost to SCC.
8. INDEMNIFICATION
8.1 GENERAL INDEMNIFICATION.
Each Party shall indemnify and hold harmless the other and the other's
corporate affiliates and their officers, directors, employees, and agents and
their successors and assigns against and from any and all losses, damages,
expenses (including, without limitation, attorneys' fees and costs), claims,
suits and liabilities, whether based in contract or tort (including strict
liability), to the extent that such losses, damages, expenses, demands, claims,
suits and liabilities arise out of or in connection with (a) the indemnifying
Party's negligent or intentional acts or omissions, or those of persons
furnished by it, (b) the failure of the indemnifying Party to fully comply with
the terms and conditions of this Agreement, (c) assertions under Worker's
Compensation or similar laws made by persons furnished by the indemnifying
Party, or (d) the performance or nonperformance of the Services under this
Agreement by the indemnifying Party. The indemnified Party shall promptly notify
the indemnifying Party of any written claim, loss or demand for which the
indemnifying Party is responsible under this Section
8.2 INTELLECTUAL PROPERTY INDEMNIFICATION.
SCC shall defend, at its sole cost and expense, any claim or action of any
kind against AMCI for alleged violation, infringement or misappropriation of any
patent, copyright, trade secret or other intellectual property right based on
the use of SCC products or services under this Agreement. SCC shall have the
right to conduct the defense of any such claim or action and all negotiations
for settlement or compromise, unless otherwise mutually agreed to in writing by
the Parties hereto. However, AMCI, at its own expense, shall have the right
14
<PAGE> 17
to participate in the defense of any such suit or proceeding through counsel of
its choosing. SCC shall indemnify and hold harmless AMCI and its officers,
directors, employees, and agents and their successors and assigns against and
from any and all losses, liabilities, damages, claims, demands and expenses
(including, without limitation, reasonable attorneys' fees) arising out of or
related to any such claim or action.
If any SCC product used to provide the Services under this Agreement
becomes involved in any claim or action described above, or is held to
constitute a violation, infringement or misappropriation of a third party's
intellectual property rights and the use thereof is enjoined, then SCC shall, at
SCC's expense and option:
(i) procure the right to continue using said product so that its use
by SCC for AMCI is lawful;
(ii) modify such product so that its use by SCC for AMCI is lawful
(provided that such modification does not adversely affect the Services
provided); or
(iii) replace such product, at no charge to AMCI, with equally
suitable, compatible and functionally equivalent products that lawfully may
be used by SCC for AMCI.
9. LIMITATION OF LIABILITY
EXCEPT WITH RESPECT TO SCC'S OBLIGATION TO INDEMNIFY AMCI IN CONNECTION
WITH THIRD PARTY CLAIMS AND IN CONNECTION WITH INTELLECTUAL PROPERTY
INFRINGEMENT AS SET FORTH IN SECTION 8 HEREIN ABOVE, NEITHER PARTY SHALL BE
LIABLE TO THE OTHER FOR ANY INDIRECT, SPECIAL, CONSEQUENTIAL, INCIDENTAL, OR
PUNITIVE DAMAGES, WHETHER BASED UPON LOST GOODWILL, LOST PROFITS, LOSS OF USE OR
PERFORMANCE OF ANY PRODUCTS, SERVICES, OR OTHER PROPERTY, LOSS OR IMPAIRMENT OF
DATA OR SOFTWARE, OR OTHERWISE, AND WHETHER ARISING OUT OF BREACH OF EXPRESS OR
IMPLIED WARRANTY, CONTRACT (INCLUDING THE FURNISHING, PERFORMANCE, OR USE OF ANY
HARDWARE, SOFTWARE OR OTHER PRODUCTS, MATERIALS, OR SERVICES PROVIDED PURSUANT
TO THIS AGREEMENT OR THE PERFORMANCE OR NONPERFORMANCE OF OBLIGATIONS UNDERTAKEN
IN THIS AGREEMENT), TORT, (INCLUDING NEGLIGENCE), STRICT PRODUCT LIABILITY OR
OTHERWISE, REGARDLESS OF WHETHER SUCH PARTY HAS BEEN NOTIFIED OF THE POSSIBILITY
OF SUCH DAMAGES OR IF SUCH DAMAGES COULD HAVE BEEN REASONABLY FORESEEN.
To the extent not otherwise governed by federal, state or local law, and
except with respect to SCC's obligation to indemnify AMCI in connection with
third party claims and in connection with intellectual property infringement set
forth in section 8 herein above, SCC's entire liability to AMCI shall be limited
to that which is directly related to its alleged negligent performance or
non-performance of its obligations hereunder, and in any event shall be limited
to the payment of a sum not to exceed [ ].
10. INSURANCE
During the Term hereof, including any extensions, SCC must maintain not
less than the same insurance coverages as that described in SCC's agreement with
Ameritech Information Systems, Inc. dated August 31, 1994. Neither SCC nor SCC's
insurer(s) shall have a claim, right of action or right of subrogation against
AMCI based on any loss or liability insured against under the foregoing
insurance. SCC's policy must be endorsed to name AMCI and its corporate
affiliates as additional insureds and state: "AMCI is to be notified in writing
at least ten (10) days prior to cancellation of or any material change in this
policy". Also, SCC must furnish certificates evidencing the foregoing insurance
coverage prior to commencement of performance.
If SCC fails to maintain the insurance required by this Section, AMCI may
procure such insurance. In such event, SCC shall promptly reimburse AMCI for any
premiums and other charges paid by AMCI for such coverage.
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<PAGE> 18
11. GENERAL PROVISIONS
11.1 EXHIBITS.
Exhibits A, B, C and D shall be deemed incorporated herein and an integral
part of this Agreement. Any AMCI requests for proposal, SCC's responses thereto,
marketing or sales material or any other similar documentation, as well as any
written or verbal representations concerning the Services, SCP Services, New
Services or Add-On Services are specifically excluded from this Agreement and
shall have no relevance, value or binding effect hereon.
11.2 ELECTRONIC EXCHANGE.
To the extent possible, as determined by subsequent, mutual agreement of
the Parties, the Parties will endeavor to use and implement automation
procedures, such as electronic data interchange (EDI), electronic mail and "Web
pages", to facilitate communication, coordination, maintenance, and management
of the Services. If implemented, each Party will be responsible for its
respective costs associated with such exchange.
11.3 STAFFING LEVEL.
SCC will, at all times relevant hereto, maintain a sufficient number of
employees in its discretion to adequately perform the Services, and if
applicable, New Services and Add-On Services.
11.4 ADVERTISING AND PUBLICITY.
SCC shall not prepare or distribute any news releases, articles, brochures,
speeches, Advertisements or other informational releases concerning this
Agreement and the activities performed hereunder without the prior written
consent of AMCI. In addition, SCC shall not use the "Ameritech" or AMCI name or
mark (or any variation thereof) without the prior written consent of AMCI, which
shall not be unreasonably withheld.
11.5 ASSIGNMENT AND DELEGATION.
Neither party shall assign any right or obligation under this Agreement
without the other party's prior written consent. Any attempted assignment shall
be void, except that either party may assign monies due or to become due to it,
provided that (a) the assigning party gives the other party at least ten (10)
days prior written notice of such assignment and (b) such assignment does not
impose upon the other party obligations to the assignee other than the payment
of such monies.
Notwithstanding the foregoing, AMCI may assign this Agreement, in whole or
in part, to any of its Affiliates. SCC may assign this Agreement, in whole or in
part, to any of its Affiliates; provided, however, that SCC may not assign this
Agreement to any entity that directly or indirectly through that entity itself
or one of its Affiliates provides two-way cellular voice communication services
or other wireless communication or data services. With respect to assignments by
either Party, any purported assignment may be rejected by the non-assigning
Party, and therefore deemed void, if such Party determines that the assignee is
incapable of substantially performing the assigning Party's obligations
hereunder. Upon such permitted assignment and written assumption of liability
thereto by the assignee, the assignor shall be discharged of any liability under
this Agreement.
11.6 COMPANY RULES.
SCC's employees and agents shall comply with all of AMCI's, governmental
security and plan requirements, rules and regulations provide to SCC while on
AMCI's premises, and AMCI's employees shall comply with all of SCC's,
governmental security and plan requirements, rules and regulations provided to
AMCI while on SCC's premises.
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<PAGE> 19
11.7 ESCALATION PROCEDURES.
The Parties shall attempt to resolve any dispute between them that may
arise under this Agreement through their respective Project Managers as
described in Exhibit A. If after attempting to do so, either Party determines
that the dispute is irresolvable and so notifies the other Party, no further
obligation to escalate the matter shall exist by either Party, in which case,
the Parties are free to pursue any and all remedies available at law or in
equity.
11.8 FORCE MAJEURE.
Neither Party shall be liable to the other for any delay or failure to
perform under this Agreement if the delay or failure to perform is without the
fault or negligence of the Party claiming excusable delay and is due to causes
beyond the control of said Party, including, but not limited to acts of God,
war, acts of the government (where neither Party is itself a governmental body),
fires, floods, epidemics, quarantine restrictions, civil disobedience, criminal
acts by a third party, strikes, labor disputes (including collective bargaining
disputes), work stoppages, and freight embargoes.
11.9 GOVERNING LAW.
The validity of this Agreement, the construction and enforcement of its
terms and the interpretation of the rights and duties of the Parties shall be
governed by the domestic laws of the State of Illinois.
11.10 INDEPENDENT CONTRACTORS.
The Parties are performing pursuant to this Agreement only as independent
contractors. Each Party has the sole obligation to supervise, manage, contract,
direct, procure, perform, or cause to be performed its obligations set forth in
this Agreement, except as otherwise provided herein or agreed upon by the
Parties. Except as specified in this Agreement, nothing set forth in this
Agreement shall be construed to create the relationship of principal and agent
between SCC and AMCI. Neither Party shall act or attempt to act or represent
itself, directly or by implication, as an agent of the other Party or its
affiliates or in any manner assume or create, or attempt to assume or create,
any obligations on behalf of, or in the name of the other Party unless so
instructed by the other Party in writing or allowed under this Agreement.
Nothing herein is intended or shall be construed to create any partnership,
agency, or joint venture relationship between the Parties. Neither Party or a
Party's subcontractor, or the employees of any of them, shall be deemed for any
purpose to be employees of the other Party. Each Party shall be solely
responsible for the withholding or payment of all applicable federal, state, and
local personal income taxes, social security taxes, unemployment and sickness
disability insurance, and other payroll taxes with respect to its own employees.
11.11 SUBCONTRACTING.
SCC shall not subcontract any portion of the work required to be performed
as part of the Project without the prior written consent of AMCI.
11.12 JOINT WORK PRODUCT.
This Agreement is the joint work product of representatives of AMCI and
SCC. Accordingly, in the event of ambiguities, no inferences will be drawn
against either party, including the Party that drafted the Agreement in its
final form
11.13 LAWS, REGULATIONS AND PERMITS.
Each Party shall comply, at its own expense, with all applicable federal,
state, county, and local ordinances, regulations and codes in the performance of
its obligations hereunder, including procurement of required permits and
certificates, the Fair Labor Standards Act, and the Occupational Safety and
Health Act.
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<PAGE> 20
11.14 NOTICES.
All notices or other communications required or permitted to be given under
this Agreement shall be in writing (unless otherwise specifically provided
herein) and delivered or addressed as follows:
To AMCI: Ameritech Mobile Communications, Inc.
2000 West Ameritech Center Drive
Hoffman Estates, IL 60195
Attn: Manager Network Planning, LOC. 3F25D
with a copy to:
Ameritech Mobile Communications, Inc.
2000 West Ameritech Center Drive
LOC. 3H78
Hoffman Estates, IL 60195
Attn: Vice President, General Counsel
To SCC: SCC Communications Corp.
Attn: General Counsel
6285 Lookout Road
Boulder, Colorado 80301
with a copy to:
SCC Communications Corp.
Attn: Chief Financial Officer
6285 Lookout Road
Boulder, Colorado 80301
All notices or other communications shall be deemed effectively given: (i)
when delivered, if personally delivered (except that notices received after 3:00
p.m. local time will be deemed received on the following business day); (ii) on
the date of delivery (or, if refused, the refusal date shown on the return
receipt) if mailed certified or registered mail, return receipt requested; (iii)
four (4) days after mailing if mailed first class; or (iv) when received by the
Party for which notice is intended if given in any other manner (except that
notices received after 3:00 p.m. local time will be deemed on the following
business day).
11.15 NON-WAIVER.
No course of dealing or failure of either Party to strictly enforce any
term, right, obligation, or provisions of this Agreement or to exercise any
option provided hereunder shall be construed as a waiver of such or any other
provision.
11.16 SEVERABILITY.
If any provision of this Agreement shall be held invalid or unenforceable,
such provision shall be deemed deleted from this Agreement and replaced by a
valid and enforceable provision which, so far as possible, achieves the Parties'
intent in agreeing to the original provision. The remaining provisions of the
Agreement shall continue in full force and effect.
11.17 BINDING EFFECT.
This Agreement shall be binding on, and inure to the benefit of, the
Parties and their respective successors and permitted assigns.
11.18 TIME IS OF THE ESSENCE.
Time is of the essence the performance under this Agreement.
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<PAGE> 21
11.19 EQUAL OPPORTUNITY.
To the extent AMCI is required by law to extend any Equal Opportunity
Employment requirements to suppliers or vendors, and such is required to include
SCC, as a provider of Services or SCP Services, SCC shall comply with all
applicable portions of such requirements including any applicable
non-discrimination compliance provisions. AMCI shall inform SCC of such
requirements in writing as soon as same become known to AMCI.
11.20 REMEDIES.
The rights and remedies provided herein shall be cumulative and, except as
limited herein, in addition to any other remedies available at law or in equity.
11.21 AUTHORITY.
Each Party represents to the other that it has full authority to enter into
and secure performance of this Agreement and that the person signing this
Agreement on behalf of the Party has been properly authorized to enter into this
Agreement. Each Party further acknowledges that it has read this Agreement,
understands it, and agrees to be bound by all of its terms, conditions and
provisions.
11.22 ENTIRE AGREEMENT.
This Agreement, when fully executed, together with any Exhibits or other
attachments appended hereto, constitutes the entire agreement between the
parties and supersedes all promises and representations, if any, whether written
or oral between the Parties with respect to the subject matter hereof. No
modification, amendment, supplement or waiver of this Agreement or any of its
provisions shall be binding upon the Parties unless made in writing and duly
signed by an authorized representative of each Party.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their duly authorized representatives.
<TABLE>
<CAPTION>
<S> <C>
SCC COMMUNICATIONS CORPORATION AMERITECH MOBILE COMMUNICATIONS, INC.
- ----------------------------------------------------- -----------------------------------------------------
Signature Signature
- ----------------------------------------------------- -----------------------------------------------------
Title Title
- ----------------------------------------------------- -----------------------------------------------------
Date Date
</TABLE>
19
<PAGE> 1
EXHIBIT 10.10
Confidential Treatment Request
ASSET PURCHASE AGREEMENT
SELLER
SCC Communications Corp.
BUYER
Printrak International Inc.
<PAGE> 2
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is made as of July 18,
1997, by and between Printrak International Inc., a Delaware corporation
("Buyer"), and SCC Communications Corp., a Delaware corporation ("SCC" or
"Seller").
R E C I T A L S
A. Seller owns and operates the Computer-Aided Dispatch and Records
Management Division (the "CAD/RMS Division") of SCC and its foreign subsidiary,
Public Safety Technologies of Australia (Pty), Ltd., which develop and market a
computer-aided dispatch and records management software product line (the
"Business").
B. Buyer desires to purchase, and Seller desires to sell and transfer to
Buyer, substantially all of the assets of the CAD/RMS Division and all of the
stock of the Foreign Subsidiary all upon the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the foregoing premises, the terms,
covenants, and conditions hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1. ASSETS AND LIABILITIES BEING PURCHASED AND ASSUMED.
1.1 PURCHASED ASSETS. Buyer hereby agrees to purchase from Seller,
and Seller hereby agrees to sell, transfer and assign to Buyer, free and clear
of any and all mortgages, liens, security interests, encumbrances, pledges,
leases, equities, claims, charges, restrictions, conditions, conditional sale
contracts and any other adverse interests of any kind whatsoever (other than
those securing any Assumed Obligations), all of the assets, wherever located,
which are owned by Seller, or in which Seller has any right, title or interest,
and used in connection with the Business (collectively referred to herein as the
"Purchased Assets"). The Purchased Assets shall include, but shall not be
limited to, the following:
(a) The tangible personal property, machinery, equipment, hones,
tools, machine and electric parts, supplies and computers, wherever located,
owned or used by Seller solely or primarily in connection with the Business
(collectively, the "Tangible Assets"), all the items of which are identified in
Schedule 1.1(a) attached hereto;
(b) All of the rights, tangible and intangible, and leasehold
interests in personal property, of Seller existing under any contracts,
agreements, leases, licenses, instruments or commitments, all of which are
listed on Schedule 4.6 attached hereto, and under any contracts, agreements,
leases, licenses, instruments and commitments which are entered into by Seller
in connection with the Business after the date hereof and prior to the "Closing"
(as defined below) with the prior written consent of Buyer (collectively, the
"Assumed Contracts");
(c) All rights in and to any governmental and private permits,
licenses, franchises and authorizations, to the extent assignable, used in
connection with the Business;
<PAGE> 3
(d) All rights in and to any requirements, processes,
formulations, methods, technology, know-how, formulae, trade secrets, trade
dress, designs, inventions and other proprietary rights and all documentation
embodying, representing or otherwise describing any of the foregoing, owned or
held by Seller in connection with the Business (the assets described in Sections
1.1(d) through 1.1(g) are referred to as the "Intangible Property Rights");
(e) All patents, copyrights, tradenames, trademarks and service
marks of Seller used in the Business (other than "SCC" or "SCC Communications
Corp."), all of which are set forth on Schedule 1.1(e), and all applications
therefor, and all documentation embodying, representing or otherwise describing
any of the foregoing;
(f) All rights in and to the customer lists, promotion lists,
marketing data and other compilations of names and data developed in connection
with the Business, and which shall be delivered by or on behalf of Seller to
Buyer at or prior to the Closing;
(g) All of Seller's rights in and to the computer software
programs (including software licensed to Seller) used in connection with the
Business or developed or under development by, or on behalf of, Seller in
connection with the Business, all of which are identified on Schedule 4.15,
including the source code, object code and documentation for such software, in
each case to the extent that Seller possesses and has a right to possess and
transfer the same;
(h) All accounts and notes receivable and unbilled project
revenues generated in connection with the Business from and after July 1, 1997
(other than the account receivable from Ramsey County, which is excluded), and
all cash received upon the billing and collection thereof, whether on hand, in
banks or other depository accounts, or transit, and all negotiable instruments
of or made payable to Seller, advanced payments, claims for refunds and deposits
and other prepaid items of Seller;
(i) All accounts receivable schedules, lists, files, books,
publications, and other records and data used in connection with the Business;
and
(j) All causes of action, claims, suits, proceedings, judgments
or demands, of whatsoever nature, of or held by Seller against any third parties
with respect to the Business.
1.2 ASSUMED OBLIGATIONS. Buyer hereby agrees to assume, honor and
discharge when due only: (a) those liabilities, obligations and commitments
(including bonding obligations) specifically set forth on Schedule 1.2 (the
"Assumed Liabilities"); and (b) those liabilities and obligations arising after
the "Closing Date" (as defined below) under the Assumed Contracts (which,
together with the Assumed Liabilities, shall sometimes be referred to herein
collectively as the "Assumed Obligations"). The Assumed Obligations shall not
include, and Seller covenants that Buyer shall not be liable or responsible for,
any obligations or liabilities to the extent arising out of any act or omission
of Seller under any Assumed Contract, regardless of when such liability or
obligation is asserted. Seller represents and warrants that, except as set forth
on Schedule 1.2, Seller is not in default under any Assumed Obligation, and
Buyer shall not be obligated to assume any Assumed Obligation which is in
default as of the Closing Date, or any obligation relating to periods prior to
the Closing Date.
2
<PAGE> 4
1.3 OPTION TO PURCHASE STOCK OF SUBSIDIARY. Seller hereby grants to
Buyer an option to purchase all of the issued and outstanding stock of
Subsidiary (the "Subsidiary Stock") for a purchase price of One Hundred Dollars
($100.00). Such option shall be exercisable by written notice to Seller within
thirty (30) days following the Closing Date, and Seller shall deliver to Buyer
certificates representing the Subsidiary Stock, duly endorsed for transfer, as
well as all corporate records of Subsidiary, within ten (10) days following
receipt of such notice (the "Option Closing Date"). In the event that such
option is exercised, the representations and warranties contained in this
Agreement with respect to Subsidiary shall be deemed to have been made again as
of the Option Closing Date, and Seller shall deliver to Buyer a certificate of
an officer of Seller, certifying as to the accuracy thereof. The Subsidiary
Stock shall be transferred to Buyer, free and clear of any and all mortgages,
liens, securing interests, encumbrances, pledges, claims and any other adverse
interests of any kind whatsoever.
2. LIABILITIES NOT ASSUMED.
Except for the Assumed Obligations, Seller agrees that Buyer will not
assume or perform, and Seller shall remain responsible for and shall indemnify,
hold harmless and defend Buyer from and against, any and all liabilities and
obligations of Seller, whether known or unknown, and regardless of when such
liabilities or obligations arise or are asserted, including, without limitation,
any obligations or liabilities of Seller with respect to the following:
(a) Any compensation or benefits payable to employees of Seller,
including, but not limited to, any liabilities arising under any employee
pension or profit sharing plan or other employee benefit plan, any severance pay
or other termination costs due to employees of Seller as a result of the
transactions contemplated by this Agreement or any of Seller's obligations to
its employees for salaries and vacation and holiday pay accrued and unpaid as of
the Closing Date;
(b) All federal, state, local, foreign or other taxes applicable
to Seller for periods prior to the Closing Date;
(c) Injuries to or the death of any person, or any employee of
Seller, that has occurred or may occur, prior to Closing, in connection with the
Business or any other operations engaged in by Seller, even if not discovered
until after the Closing Date;
(d) All liens, claims and encumbrances on any of the Purchased
Assets and all obligations and liabilities secured thereby;
(e) All obligations of Seller for borrowed money, or incurred in
connection with the purchase, lease or acquisition of any assets, and any
obligations of a similar nature incurred by Seller;
(f) Any accounts or notes payable or similar indebtedness
incurred by Seller;
(g) Any claims, demands, actions, suits, legal proceedings,
obligations or liabilities arising from Seller's operation of the Business prior
to the Closing, or arising from any other business or operations of Seller
conducted prior to the Closing, whether such claims, demands,
3
<PAGE> 5
actions, suits, legal proceedings, obligations or liabilities are presently
pending or threatened or are threatened or asserted at any time after the date
hereof and whether before or after the Closing; and
(h) Any liabilities arising out of the termination by Seller of
any of its employees in anticipation or as a consequence of, or following,
consummation of the transactions contemplated hereby.
3. PURCHASE PRICE AND TERMS OF PAYMENT.
3.1 PURCHASE PRICE. As consideration for the sale to Buyer of the
Purchased Assets, Buyer agrees to pay to Seller the aggregate sum of [ ],
representing the net book value of the Purchased Assets as of June 30, 1997,
(calculated in accordance with GAAP, provided that the reserve for anticipated
project losses has been increased to [ ] and all capitalized software has
been written off), and to assume the Assumed Obligations in Section 1.2 (the
"Purchase Price"). The Purchase Price shall be paid by wire transfer of
immediately available funds to Seller's bank account per written instructions of
Seller.
3.2 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated among the Purchased Assets as determined by Buyer in its sole
discretion. The parties hereto shall report consistent with Buyer's allocation
on all income tax returns, and will comply with, and furnish the information
required by Section 1060 of the Internal Revenue Code of 1986, as amended (the
"Code"), and any regulations thereunder.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLER. Except as disclosed in
the Schedules delivered concurrently herewith by reference to the specific
Section or Sections hereof to which the disclosure pertains, Seller hereby
represents and warrants to Buyer, as of the date hereof and as of the Closing
Date, as follows:
4.1 AUTHORITY AND BINDING EFFECT. Seller has the full corporate power
and authority to execute and deliver this Agreement and each agreement
referenced herein (the "Related Agreements") to which it is a party and to
consummate the transactions contemplated by, and comply with its obligations
under, such agreements. This Agreement and the Related Agreements to which
Seller is a party, and the consummation by Seller of its obligations herein and
therein, have been duly authorized by all necessary corporate action of Seller,
including, without limitation, the approval of its shareholders in accordance
with applicable law. This Agreement and the Related Agreements have been duly
executed and delivered by the Seller and upon their execution and delivery will
be, the binding and valid agreements of the Seller. This Agreement and the
Related Agreements shall be enforceable against the Seller, in each such case in
accordance with their respective terms, except as such enforceability may be
limited by (i) bankruptcy, insolvency, moratorium or other similar laws
affecting creditors' rights generally and (ii) general principles of equity
relating to the availability of equitable remedies. No further action is
required to be taken by the Seller, nor is it necessary for the Seller to obtain
any action, approval or consent by or from any third persons, governmental or
other, to enable the Seller to enter into or perform its obligations under this
Agreement and the Related Agreements to which it is a party, except for the
consents of third parties to the assignment and assumption of the Assumed
Contracts which Seller shall use its best efforts to obtain following the
Closing (unless waived in writing by Buyer). Such consents are set forth in
Schedule 4.6 hereto.
4
<PAGE> 6
4.2 ORGANIZATION AND GOOD STANDING. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Subsidiary is a company duly organized, validly existing and in good
standing under the laws of Australia. Each of Seller and Subsidiary is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which such qualification is necessary under applicable law
as a result of the conduct of its business or the ownership or leasing of its
assets and the failure to be so qualified would have a material adverse effect
on such entity or the Business. Seller has the legal right, corporate power and
authority, and all licenses and other permits, required to operate the Business
as now conducted and to own, use and sell the Purchased Assets. Seller has
delivered to, or made available for inspection by, Buyer or its counsel true,
correct and complete copies of (i) Seller's and Subsidiary's charter documents
and all amendments thereto; (ii) Seller's and Subsidiary's Bylaws and all
amendments thereto, duly certified by its corporate secretary; and (iii)
Seller's and Subsidiary's minute and stock books. No actions, proceedings or
transactions have been commenced or undertaken by the Seller which give or would
give rights to any person, other than Buyer, in any of the Purchased Assets or
Purchased Stock or interfere with the consummation of the transactions
contemplated by this Agreement.
4.3 FINANCIAL STATEMENTS. Seller has delivered to Buyer unaudited
financial statements of Seller and Subsidiary relating to the Business
consisting of (i) an unaudited balance sheet as of June 30, 1997 (the "June
Balance Sheet"), and (ii) an unaudited balance sheet, and a related statement of
operating expenses, as of and for the period ended December 31, 1996, (the
"December 31, 1996 Financial Statements") (the June Balance Sheet and the
December 31, 1996 Financial Statements are collectively referred to herein as
the "Financial Statements"). True, correct and complete copies of the Financial
Statements are attached as Schedule 4.3A hereto. The Financial Statements fairly
present the financial condition of the Business and the results of its
operations as of the relevant dates thereof and for the respective periods
covered thereby, and have been prepared in accordance with generally accepted
accounting principles. Except as set forth in Schedule 4.3B, Schedule 1.2 and
Schedule 4.6 neither Seller nor Subsidiary has any debts, obligations,
liabilities or commitments of any nature relating to the Business, whether due
or to become due, absolute, contingent or otherwise, that, in accordance with
GAAP, are required to be disclosed in a balance sheet or the footnotes thereto,
and are not shown on the June Balance Sheet delivered pursuant hereto, other
than liabilities incurred after June 30, 1997 in the ordinary course of business
and consistent with past practice. Such post-June 30, 1997 liabilities have not
had, and are not expected to have, individually or in the aggregate, a material
adverse effect on the financial condition or results of operations or prospects
of Subsidiary or the Business. As to each liability, debt, obligation or
commitment, fixed or contingent, that is set forth on Schedule 4.3B and is
included in the Assumed Obligations, Seller shall provide the following
information, in writing as an attachment to such Schedule: (i) a summary
description of the liability, debt, obligation or commitment, together with
copies of all relevant documentation relating thereto, the amounts claimed and
any other action or relief sought and, if in connection with a claim, suit or
proceeding, the name of the claimant and all other parties involved therewith
and the identity of the court or agency in which such claim, suit or proceeding
is being prosecuted, and (ii) the best estimate of Seller of the maximum amount,
if any, which is likely to become payable with respect to any contingent
liability. For purposes hereof, if no written estimate is provided, such best
estimate shall be deemed to be zero.
4.4 ABSENCE OF CERTAIN CHANGES. During the period from June 30, 1997
to the date hereof, there has not been with respect to or affecting Seller,
Subsidiary or the Business: (i) any
5
<PAGE> 7
amendment, termination or revocation, or any threat known to the Seller of any
amendment, termination, or revocation, of any material contract or agreement to
which Seller or Subsidiary is, or was, a party which relates to Subsidiary or
the Business, or of any license, permit or franchise required for the continued
operation of the Business in substantially the same manner as it has been
conducted since its incorporation; (ii) except for the transactions contemplated
hereby, any sale, transfer, mortgage, pledge or subjection to lien, charge or
encumbrance of any kind, of, on or affecting any of the Purchased Assets, except
sales that have been made in the ordinary course of the Business and consistent
with past practices, and liens for current taxes not yet due and payable; (iii)
other than as contemplated in connection with the transactions contemplated
hereby, any increase in the compensation paid or payable or in the fringe
benefits provided to any employees of the CAD/RMS Division or Subsidiary; (iv)
any damage, destruction or loss, whether or not covered by insurance, of any of
the Purchased Assets; (v) the incurrence of any indebtedness, either for
borrowed money or in connection with any purchase of assets, or otherwise on
behalf of the Business, that is not reflected in the June 30, 1997 balance sheet
and individually or in the aggregate involves more than $5,000; (vi) any
purchase or lease, or commitment for the purchase or lease, of equipment,
machinery, leasehold improvements or other capital items for use in the Business
not disclosed in the June 30, 1997 Financial Statements which involves amounts
exceeding $5,000 individually or $10,000 in the aggregate or which is in excess
of or represents a departure from the normal, ordinary and usual requirements of
the Business; (vii) the execution by Seller or Subsidiary of any agreement or
contract relating to the Business that obligates Seller or Subsidiary to pay
more than $10,000 per year or which is materially disadvantageous to Seller,
Subsidiary or the Business; or (viii) the occurrence subsequent to June 30, 1997
of any other event or circumstance which, could reasonably be expected to
materially and adversely affect the Subsidiary, any of the Purchased Assets, the
Business, or the ability of the Seller to consummate the transactions
contemplated hereby.
4.5 THE PURCHASED ASSETS.
(a) TITLE TO AND ADEQUACY OF PURCHASED ASSETS. Except as
disclosed on Schedule 4.5 hereto, Seller has, and at the Closing Seller will
convey and transfer to Buyer, good, complete and marketable title to all of the
Purchased Assets, free and clear of all mortgages, liens, security interests,
encumbrances, pledges, leases, equities, claims, charges, restrictions,
conditions, conditional sale contracts and any other adverse interests. Except
as set forth on Schedule 4.5, all of the Purchased Assets are in the exclusive
possession and control of Seller and Seller has the unencumbered right to use
and sell to Buyer all of the Purchased Assets without interference from others.
The Purchased Assets constitute all the assets, properties, rights, privileges
and interests necessary for Buyer to own and operate the Business substantially
in the same manner as it has been conducted by Seller during the period
immediately preceding the execution of this Agreement.
(b) TANGIBLE ASSETS. Schedule 1.1(b) is a list of all of the
Tangible Assets used in the Business, other than any Tangible Asset the
replacement cost of which would be less than $1,000.00 and which is not of
material importance to Seller's operations. The Tangible Assets are in good
working order and condition, ordinary wear and tear excepted, have been
maintained in accordance with generally accepted industry standards, are
suitable for the uses for which they are being utilized in the Business and
comply with all requirements under applicable laws, regulations and licenses
which govern the use and operation thereof.
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(c) INTANGIBLE PROPERTY RIGHTS. The Intangible Property Rights
are the only material intangible property used by Seller in the Business, and
from and after the Closing Date, Buyer shall have the right to use all of the
Intangible Property Rights in the Business consistent with Seller's use of the
Intangible Property Rights in the Business. Seller owns, or holds adequate
licenses, or other rights to use, all of the Intangible Property Rights, such
use does not conflict with, infringe on or otherwise violate any rights of any
other person. Except as disclosed in Schedule 4.5, all of such licenses and
rights are transferable to Buyer without cost or liability to Buyer and will be
included in the Purchased Assets being sold to Buyer hereunder. Except as set
forth on Schedule 4.5, Seller has not granted, transferred or assigned any
right, license or interest in any of its Intangible Property Rights. In no
instance has the eligibility of any copyright to any material property included
in the Intangible Property Rights been forfeited to the public domain by
omission of any required notice or any other action. All personnel, including
employees, agents, consultants and contractors, who have contributed to or
participated in the conception and development of any of the Intangible Property
Rights on behalf of Seller either (i) in the case of any copyright, have been
party to a "work-for-hire" arrangement or agreement with Seller, in accordance
with applicable federal and state law, that has accorded Seller full, effective,
exclusive and original ownership of all United States copyrights thereby arising
or (ii) shall, prior to the Closing, have executed appropriate instruments of
assignment in favor of Seller as assignee that convey to Seller full, effective
and exclusive ownership of all Intangible Property Rights thereby arising.
Except as set forth in Schedule 4.5, Seller has not infringed, is not now
infringing and has not received notice of any infringement, on any patent, trade
name, trademark, service mark, copyright, trade secret, trade dress, design,
invention, technology, know-how, process or other proprietary right belonging to
any other person, firm or corporation, which infringement would have an adverse
effect on any of the Purchased Assets or the Business. To the best of Seller's
knowledge, there is no infringement by any other person of any Intangible
Property Right.
(d) LEASES. Schedule 4.5(d) is a list of each of the facilities
or real properties used in the Business. Schedule 4.5(d) also contains a list of
all leases under which Seller possesses or uses personal property in connection
with the conduct or operation of the Business. The personal property leases set
forth in Schedule 4.5(d) are sometimes collectively referred to as the "Personal
Property Leases." True, correct and complete copies of the real property leases
set forth in Schedule 4.5(d), the Real Property Leases and Personal Property
Leases (collectively, the "Leases") have been delivered to Buyer. Seller is not,
and as of the Closing Date will not be, in default, and no facts or
circumstances have occurred, or on or prior to the Closing will occur, which
through the passage of time or the giving of notice, or both, would constitute a
default, under any of the Leases. Subject to any consents required therefor, the
assignment of any of the Real Property Leases and the personal property leases
set forth in Schedule 4.5(d) shall not adversely affect Buyer's quiet enjoyment
and use, without disturbance, of all real and personal properties and assets
that are the subject of such leases. None of the Leases contains any provisions
which, after the Closing Date, would (i) hinder or prevent Buyer from continuing
to use any of the properties or assets which are the subject of the personal
property leases set forth in Schedule 4.5(d) in the manner in which they are
currently used or (ii) impose any additional costs (other than scheduled rental
increases) or additional burdensome requirements as a condition to their
continued use. Except as otherwise set forth in Schedule 4.5(d) hereto, none of
the Purchased Assets are held under, or used by Seller in connection with the
Business pursuant to, any lease or conditional sales contract.
(e) ACCOUNTS RECEIVABLE. Attached hereto as Schedule 4.5(e) are
(i) an accurate list of all accounts and notes
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receivable of Seller, including any accounts or notes receivable not reflected
in the June 30, 1997 balance sheet, and (ii) an aging of all such accounts and
notes receivable showing amounts due in 30-day aging categories. All such
accounts and notes receivable on such listing arose from, and all accounts and
notes receivable of Seller created between June 30, 1997 and the Closing will
have arisen from, the sale of Seller's products or the provision of services by
Seller in the ordinary course of business. The Seller has not received any
notice or knows of any counterclaim or set-off with respect to any such accounts
or notes receivable, or any facts or circumstances that would be the basis for
any such counterclaim or set-off, which is not reflected or taken into account
in the contractual allowance or bad debt reserves set forth in the June 30, 1997
balance sheet.
4.6 CONTRACTS, AGREEMENTS AND COMMITMENTS. Schedule 4.6 hereto
contains an accurate and complete list of all contracts, agreements, leases,
licenses and instruments to which Seller or Subsidiary is a party or is bound or
which relate to or affect any of the Purchased Assets or the Business. Schedule
4.6 includes, without limitation, all contracts and agreements and all leases,
licenses and instruments, which (i) grant a security interest or permit or
provide for the imposition of any lien, mortgage, security interest or other
encumbrance on, or provide for the disposition of, any of the Purchased Assets;
(ii) require the consent of any third party to the consummation by Seller of the
transactions contemplated by this Agreement, as noted on such schedule; (iii)
would restrict the use or disposition by Buyer after the Closing of any of the
Purchased Assets; or (iv) pertain to the sale or lease of CAD/RMS Products to
third parties (including the status of the contract, the contract price, the
amount collected to date and whether the CAD/RMS Product has been accepted.
True, correct and complete copies of all items so listed in Schedule 4.6 have
been furnished to Buyer. Each of such contracts, agreements, leases, licenses
and instruments so listed, or required to be so listed, in Schedule 4.6 is a
valid and binding obligation of Seller and/or Subsidiary and the other parties
thereto, enforceable in accordance with its terms, except as may be affected by
bankruptcy, insolvency, moratorium or similar laws affecting creditors' rights
generally and general principles of equity relating to the availability of
equitable remedies. Except as otherwise set forth in Schedule 4.6 hereto, there
have not been any defaults by Seller or Subsidiary or, to the best knowledge of
the Seller, defaults or any claims of default or claims of nonenforceability by
the other party or parties which, individually or in the aggregate, would have a
material adverse effect on Subsidiary, the Business or any of the Purchased
Assets, and there are no facts or conditions that have occurred or that are
anticipated to occur which, through the passage of time or the giving of notice,
or both, would constitute a default by Seller, or to the best knowledge of the
Seller, by the other party or parties, under any of such contracts, agreements,
leases, licenses and instruments or would cause a creation of a lien, security
interest or encumbrance upon any of the Purchased Assets or otherwise materially
and adversely affect Subsidiary, any of the Purchased Assets or the Business.
4.7 LABOR AND EMPLOYMENT AGREEMENTS; FRINGE BENEFIT PLANS.
(a) Schedule 4.7 sets forth the name of each director and officer
of Subsidiary and of each employee of Seller or Subsidiary who is engaged in the
Business, together with a description of all compensation and benefits that are
payable to such individuals as a result of their employment by or association
with Seller or Subsidiary. Schedule 4.7 includes a description of all employment
or personnel policies of Seller relating to vacation or other employee benefits.
(b) Schedule 4.7 hereto contains a list of any collective
bargaining or other labor, employment, deferred compensation, bonus, retainer,
consulting, or incentive agreement, plan or contract, and all written or other
personnel policies, of Seller or Subsidiary or to
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which Seller or Subsidiary is subject or bound. True, correct and complete
copies of any such agreements, plans, contracts and policies listed in Schedule
4.7 hereto have been furnished to Buyer. Except to the extent set forth in
Schedule 4.7, (i) there has been no strike or other work stoppage by, nor to the
best knowledge of Seller has there been any union organizing activity among, any
of the employees of Seller or Subsidiary; (ii) Seller and Subsidiary are in
compliance in all material respects with all applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and is not engaged in any unfair labor practice; and (iii)
there is no unfair labor practice complaint pending or, to the best knowledge of
the Seller, threatened against Seller or Subsidiary, nor, to the best knowledge
of the Seller, is there any factual basis for any such complaint.
(c) Schedule 4.7 hereto also contains a complete list of Seller's
and Subsidiary's Employee Plans. True, correct and complete copies or
descriptions of such Employee Plans have been delivered to Buyer. For purposes
of this Section 4.7, the term "Employee Plan" includes all past or present
plans, programs, agreements, arrangements, and methods of contribution or
compensation (including all amendments to and components of the same, such as a
trust with respect to a plan) maintained by Seller or Subsidiary or to which
Seller or Subsidiary has an obligation to contribute which provide any
remuneration or benefits, other than current cash compensation, to any current
or former employee of Seller or Subsidiary or to any other person who provides
services to Seller or Subsidiary. The term Employee Plan includes, but is not
limited to, pension, retirement, profit sharing, stock option, stock bonus, and
nonqualified deferred compensation plans and includes any Employee Plan that is
a multiemployer plan as defined in Section 3(37) of ERISA. The term Employee
Plan also includes, but is not limited to, disability, medical, dental, health
insurance, life insurance, incentive plans, vacation benefits, and fringe
benefits. Except as set forth on Schedule 4.7, none of the Employee Plans are
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA") or are qualified under the Code. Except as set forth in Schedule 4.7,
all Employee Plans are now, and have always been, established, maintained and
operated in all material respect in accordance with all applicable laws
(including, but not limited to, ERISA and the Code) and all regulations and
governing guidelines promulgated thereunder and in accordance with their plan
documents. Each funded Employee Plan providing for payment of deferred
compensation (a "Qualified Plan") is and always has been qualified under Section
401 of the Code. The Internal Revenue Service has issued one or more
determination letters with respect to each Qualified Plan stating that each such
Qualified Plan is qualified under Section 401 of the Code and each trust
maintained in connection with each such Qualified Plan has been and is exempt
under Section 501 of the Code. Except as set forth in Schedule 4.7, there is no
unfunded liability for vested or nonvested benefits under any funded Employee
Plan, and all contributions required to be made to or with respect to each
Employee Plan have been completely and timely paid. All reports, forms and other
documents required to be filed with any governmental entity with respect to any
Employee Plan have been timely filed and, to the best knowledge of the Seller,
are accurate. There have been no filings with respect to any Employee Plan with
the Pension Benefit Guaranty Corporation ("PBGC"). No liability to the PBGC has
been incurred or is expected with respect to any Employee Plan except for
insurance premiums, and all insurance premiums incurred or accrued up to and
including the Closing Date have been or will be timely paid by Seller. No amount
is, and as of the Closing Date no amount will be, due or owing from Seller or
Subsidiary to any "multiemployer plan" (as defined in Section 3(37) of ERISA) on
account of any withdrawal therefrom. There has been no event or condition, nor
is any event or condition expected, that would present a risk of termination of
any Employee Plan, or which would constitute a "reportable event" within the
meaning of Section 4043 of ERISA and the regulations and
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interpretations thereunder. There has been no merger, consolidation, or transfer
of assets or liabilities (including, but not limited to, a split-up or
split-off) with respect to any Employee Plan. There is and there has been no
actual or, to the best knowledge of the Seller, anticipated, threatened or
expected litigation or arbitration concerning or involving any Employee Plan. No
complaints to or by any governmental entity have been filed or, to the best
knowledge of the Seller, have been threatened or are expected with respect to
any Employee Plan. No Employee Plan or any other person has any liability to any
plan participant, beneficiary or other person under any provision of ERISA, the
Code or any other applicable law by reason of any action or failure to act in
connection with any Employee Plan. There has been no prohibited transaction as
described in Section 406 of ERISA and Section 4975 of the Code with respect to
any Employee Plan. No Employee Plan provides medical benefits to one or more
former employees (including retirees), other than benefits required to be
provided under Section 4980B of the Code. There is no contract, agreement or
benefit arrangement covering any employee of Seller or Subsidiary, the payments
under which, individually or collectively, would constitute an "excess parachute
payment" under Section 280G of the Code.
4.8 CONFLICTS. Except as described on Schedule 4.6 hereto, neither
the execution and delivery of, nor the consummation of the transactions
contemplated by, this Agreement or the Related Agreements to which Seller is a
party will or could result in any of the following: (i) a default or an event
that, with notice or lapse of time, or both, would be a default, breach or
violation of the respective charter, bylaws or other governing instruments of
Seller or Subsidiary, or any contract, lease, license, franchise, promissory
note, conditional sales contract, commitment, indenture, mortgage, deed of
trust, security or pledge agreement, or other agreement, instrument or
arrangement to which the Seller or Subsidiary is a party or is bound which
relates to the Business or which affects any of the Purchased Assets; (ii) the
termination of any contract, lease, agreement, or commitment, or the
acceleration of the maturity of any indebtedness or other obligation of the
Seller or Subsidiary; (iii) the creation or imposition of any lien, charge or
encumbrance on any of the respective assets or properties of the Seller or
Subsidiary, including any of the Purchased Assets; (iv) a violation or breach of
any writ, injunction or decree of any court or governmental instrumentality to
which the Seller or Subsidiary is a party or is bound or which affects any of
their respective properties or any of the Purchased Assets or the Business; (v)
a loss or adverse modification of any license, franchise, permit, other
authorization or right (contractual or other) to operate, granted to or
otherwise held by Seller or Subsidiary or used in the Business, which would have
a material adverse effect on the Business or Buyer; or (vi) the cessation or
termination of any other business relationship or arrangement between Seller or
Subsidiary and any third party that is material to the Business, or its
operating results, condition (financial or other) or prospects or any of the
Purchased Assets. Except as set forth in Schedule 4.6 hereto, the Seller does
not know of any business relationship or arrangement between it or Subsidiary
and any third party (governmental or other) that is material to the Business,
its operating results, condition or prospects and that will cease or is likely
to be terminated as a result of the consummation of the transactions
contemplated by this Agreement.
4.9 INSURANCE. Schedule 4.9 contains an accurate list (including
liability limits, deductibles and coverage exclusions) of all policies of
insurance maintained by or on behalf of Seller or Subsidiary in connection with
the Business as protection for the Purchased Assets and the Business. Except as
set forth in Schedule 4.9 hereto, all of such policies are now in full force and
effect and policies covering the same risks and in substantially the same
amounts have been in full force and effect continuously since inception. Neither
Seller nor Subsidiary has received any notice
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of cancellation or material amendment of any such policies; no coverage
thereunder is being disputed; and all material claims thereunder have been filed
in a timely fashion.
4.10 TAXES AND TAX RETURNS. Each of Seller and Subsidiary has duly
filed all tax reports and returns which are required by law to be filed by it
and has duly paid all foreign, federal, state and local taxes due or claimed to
be due from such authorities, and there are no assessments or claims for payment
of taxes now pending or, to the best knowledge of the Seller, threatened, nor is
any audit of Seller's or Subsidiary's records presently being made by any taxing
authority. Each of Seller and Subsidiary has properly withheld and paid, or
accrued for payment when due, to appropriate state and/or federal authorities,
all amounts required to be withheld from its employees' wages, salaries and
other compensation and has also paid all employment taxes as required under
applicable laws.
4.11 COMPLIANCE WITH LAW/PERMITS.
(a) Seller and Subsidiary are in compliance with all, and are not
in violation of any, law, ordinance, order, decree, rule or regulation of any
governmental agency or authority, the violation of or noncompliance with which
could reasonably be expected to have a material adverse effect on the Business
or any of the Purchased Assets. Without limiting the generality of this Section
4.11(a), there are no unresolved (i) proceedings or investigations instituted
or, to the best knowledge of the Seller, threatened, by any such governmental
authorities against Seller or Subsidiary relating to the Business, or (ii)
citations issued or, to the best knowledge of the Seller, threatened against
Seller, Subsidiary or the Business by any governmental authorities, or (iii)
other notices of deficiency or charges of violation brought or, to the best
knowledge of the Seller, threatened against Seller, Subsidiary or the Business,
including under any federal or state regulation or otherwise, which could
reasonably be expected to have, individually or in the aggregate, a material
adverse effect on the Business or any of the Purchased Assets, or interfere with
the maintenance, or the transfer or reissuance to Buyer, of the permits,
licenses, franchises, certificates, authorizations or any right to operate held
by Seller or Subsidiary; and, to the best knowledge of Seller, there are no
facts or circumstances upon which any such proceedings, investigations,
citations, notices, disallowances or charges may be instituted, issued or
brought hereafter.
(b) Schedule 4.11(b) contains a true, correct and complete list
of all governmental licenses, permits, authorizations, franchises, or
certificates or rights (contractual or other) to operate the Business, that are
held by Seller or Subsidiary (collectively, "Licenses and Permits"). Such
Licenses and Permits are the only licenses, permits, authorizations, franchises,
certificates and rights to operate required for operation of the Business, as it
has been conducted since its inception, and all of such Licenses and Permits are
in full force and effect at the date hereof and will be as of the Closing. The
Seller has provided Buyer with true, correct and complete copies of each License
and Permit listed in Schedule 4.11(b). Seller and Subsidiary are in compliance
in all material respects with all conditions or requirements imposed by or in
connection with such Licenses and Permits and with respect to its use of the
Purchased Assets and operation of the Business, and neither Seller nor
Subsidiary has received any notice, nor does Seller have any knowledge or reason
to believe, that any governmental authority intends to cancel, terminate or
materially modify any of such Licenses or Permits or that valid grounds for any
such cancellation, termination or material modification currently exist, except
that, by reason of change of ownership of the Business, certain
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of the Licenses and Permits listed in Schedule 9.1 will have to be transferred
or reissued to Buyer, and certain of such Licenses and Permits will have to be
reapplied for by Buyer.
4.12 LITIGATION AND PROCEEDINGS. There is neither (a) any action,
suit, proceeding or investigation, nor (b) any counter or cross-claim in an
action brought by or on behalf of the Seller or Subsidiary, whether at law or in
equity, or before or by any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or before any arbitrator of any
kind, that is pending or, to the best knowledge of the Seller, threatened,
against Seller or Subsidiary, which (i) could reasonably be expected to affect
adversely Seller's ability to perform its obligations under this Agreement or
the Related Agreements or complete any of the transactions contemplated hereby
or thereby, or (ii) involves the reasonable possibility of any judgment or
liability, or which may become a claim, against Buyer, the Business, the
Purchased Stock or any of the Purchased Assets prior to or subsequent to the
Closing Date. Neither Seller nor Subsidiary is subject to any judgment, order,
writ, injunction, decree or award of any court, arbitrator or governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over Seller, any of its assets, Subsidiary or the Business, which
may reasonably be expected to affect the Business.
4.13 CERTAIN TRANSACTIONS. Except as set forth in Schedule 4.13 ,
there are no existing or pending transactions, nor are there any agreements or
understandings, with any shareholders, officers, directors, or employees of
Seller or Subsidiary, or any person or entity affiliated with any of them
(collectively, "Affiliates"), relating to, arising from or affecting the
Business, or any of the Purchased Assets, including, without limitation, any
transactions, arrangements or understandings relating to the purchase or sale of
goods or services, the lending of monies, or the sale, lease or use of any of
the Purchased Assets, with or without adequate compensation, in any amount
whatsoever. Except as set forth in Schedule 4.13 , no existing or former
shareholder, director, officer or employee of Seller or Subsidiary has any
claims against or disputes with Seller which could result in the imposition of
any liability or judgment against the Business or any of the Purchased Assets.
4.14 ENVIRONMENTAL AND SAFETY MATTERS. Seller and Subsidiary have
complied with, and the operation of the Business and the use of the Purchased
Assets are in compliance with, in all material respects, all federal, state,
local and regional statutes, laws, ordinances, rules, regulations and orders
relating to the protection of human health and safety, natural resources or the
environment, including, but not limited to, air pollution, water pollution,
noise control, on-site or off-site hazardous substance discharge, disposal or
recovery, toxic or hazardous substances, training, information and warning
provisions relating to toxic or hazardous substances, and employee safety
relating to or adversely affecting any of the Purchased Assets (collectively the
"Environmental Laws"); and no notice of violation of any Environmental Laws or
of any permit, license or other authorization relating thereto has been
received, nor is any such notice pending or, to the best knowledge of the
Seller, threatened.
4.15 INTELLECTUAL PROPERTY.
(a) Attached hereto as Schedule 4.15 is an accurate list and
description of all patents, patent applications, patent licenses, copyrights,
copyright licenses, trademarks, trademark applications and trademark licenses,
and other trade secrets, know-how or intellectual property rights (the
"Intellectual Property") owned, held, utilized or applied for by Seller in
connection with the
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Business, other than the "SCC" and "SCC Communications" trademarks, and other
than as set forth on Schedule 1.1(e). Except as set forth on Schedule 4.15
hereto:
(i) Seller owns all right, title and interest in and to all
Intellectual Property used in or necessary for, and as to Third Party Technology
(as defined below) has sufficient rights necessary for, the conduct of the
Business as presently conducted, or as planned to be conducted, including,
without limitation, all Intellectual Property developed or discovered in
connection with or contained in or related to the CAD/RMS Products (as defined
below), free and clear of all liens, mortgages, charges, pledges, claims and
encumbrances (including without limitation any distribution rights and royalty
rights) (including Third Party Technology, the "Seller Rights").
(ii) Solely as to Third Party Technology (as defined below),
the representations in Section 4.15 are limited to Seller's interest pursuant to
the Third Party Licenses (as defined below), all of which are valid and
enforceable and in full force and effect. "Third Party Licenses" means all
licenses and other agreements with third parties relating to any Intellectual
Property or products that Seller is licensed or otherwise authorized by such
third parties to use, market, distribute or incorporate into products marketed
and distributed by Seller in connection with the Business. "Third Party
Technology" means all Intellectual Property and products owned by third parties
and licensed pursuant to Third Party Licenses. Notwithstanding the foregoing,
Third Party Technology shall not include any "off-the-shelf" software program if
the use of such program by Seller is in accordance with any applicable shrink
wrap license and no portion of such program is distributed or licensed by Seller
to third parties or incorporated into products distributed by Seller or licensed
to third parties.
(iii) For purposes of this Agreement, the term "CAD/RMS
Products" shall mean the computer assisted dispatch and records management
systems and related products developed by the business, including any
Intellectual Property related thereto.
(iv) All of the Intellectual Property which is in the public
domain and is used in or necessary for the conduct of Seller's business as
presently conducted or contemplated is listed on Schedule 4.15, attached hereto.
(b) Except as set forth in Schedule 4.15, Seller has the
exclusive right to use, sell, license and dispose of, and has the right to bring
actions for infringement of, all Seller Rights, other than Third Party
Technology.
(c) Schedule 4.15 contains an accurate and complete description
of: (i) all patents, trademarks, servicemarks (with separate listings of
registered and unregistered trademarks and servicemarks), tradenames, and
registered copyrights in or related to the Seller Rights, all applications and
registration statements therefor, and a list of all licenses and other
agreements relating thereto.
(d) All of Seller's copyright registrations related to any and
all of Seller's copyrights are valid and in full force and effect. If the
copyright has not been registered, then it is not part of the foregoing
representation. Seller has valid copyrights in all material copyrightable
material whether or not registered with the U.S. copyright office, including all
copyrights in all
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CAD/RMS Products containing material copyrightable material. Consummation of the
transactions contemplated hereby will not alter or impair the validity of any
copyrights or copyright registrations.
(e) No claims have been asserted against Seller by any person
challenging Seller's use or distribution (including manufacture, marketing
license, or sale) of any Seller Right or products utilized by Seller (including,
without limitation, the CAD/RMS Products and Third Party Technology) or
challenging or questioning the validity or effectiveness of any license or
agreement relating thereto (including, without limitation, the Third Party
Licenses). There is no valid basis for any claim of the type specified in this
Section 4.15(e).
(f) The execution, delivery and performance of this Agreement and
the consummation of the Merger and the transactions contemplated hereby and by
the other Transaction Documents will not (i) breach, violate or conflict with
any instrument, agreement or other right governing any Seller Right or portion
thereof, (ii) cause the forfeiture or termination, or give rise to a right of
forfeiture or termination, of any Seller Right or portion thereof, (iii) in any
way impair the right of Seller to use (including distribute, manufacture,
marketing, license, sale or other disposition) of any Seller Right or portion
thereof, or (iv) give rise to any right to bring any action for infringement of,
any Seller Right or any portion thereof.
(g) Except as set forth on Schedule 4.15, there are no royalties,
honoraria, fees or other payments that would be payable by Seller to any person
by reason of the ownership, use, license, sale, distribution, or disposition of
any Seller Right, other than sales commissions that would be payable in the
ordinary course of business
(h) No Seller Right and no use by Seller of any Seller Right in
its prior, current or contemplated business (including distribution,
manufacture, marketing, license or sale), violates any rights of any third
party, including (i) infringement of or misappropriation of Intellectual
Property, (ii) unfair competition, (iii) defamation, (iv) contractual rights, or
(v) rights of privacy or publicity. Solely with respect to claims of
infringement of a third party patent or unregistered trademark or infringement
of Third Party Technology, the foregoing representations in this Section are
made to the best knowledge of Seller.
(i) To the best knowledge of Seller, no third party is violating,
infringing, or misappropriating any Seller Right or contract of Seller.
(j) Seller is not in default under or in breach or violation of,
nor, is there, to the best of Seller's knowledge, any valid basis for any claim
of default by Seller under, or breach or violation by Seller of, any contract,
commitment or restriction relating to any Seller Right, including any Third
Party License (each, an "Intellectual Property Contract"). No other party is in
default under or in breach or violation of, nor, to the best of Seller's
knowledge, is there any valid basis for any claim of default by any other party
under or any breach or violation by any other party of, any Intellectual
Property Contract. Each Intellectual Property Contract is valid, binding, in
full force and effect, and enforceable by Seller in accordance with its terms.
To the best knowledge of Seller, no party to any Intellectual Property Contract
intends to cancel, withdraw, modify or amend such contract.
(k) No shareholder or employee of Seller, nor any of their
respective affiliates, has any right, title or interest in or to any Seller
Right, other than rights pertaining to Third
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Party Technology obtained from the third party licensor, and other than a
nonexclusive right to use CAD/RMS Products pursuant to Seller's standard
end-user license terms.
(l) Except as set forth in Schedule 4.15: (i) no third party
(including any OEM or site license customer) has any right to manufacture,
reproduce, distribute, sell, sublicense, market or exploit any of the Seller
Rights or any adaptations, translations, or derivative works based on the Seller
Rights, or any portion thereof, other than rights pertaining to Third Party
Technology obtained from the third party licensor; (ii) Seller has no
agreements, contracts or commitments that provide for the manufacture,
reproduction, distribution, sale, sublicensing, marketing, development,
exploitation, or supply by Seller of any Seller Right or any adaptation,
translation, or derivative work based on the Seller Rights, or any portion
thereof or otherwise material to the continued business of Seller; (iii) Seller
has not granted to any third party any exclusive rights of any kind with respect
to any of the Seller Rights, including territorial exclusivity or exclusivity
with respect to particular versions, implementations or translations of any of
the Seller Rights; and (iv) Seller has not granted any third party any right to
market any product utilizing any Seller Right under any "private label"
arrangements pursuant to which Seller is not identified as the source of such
goods. Each document or instrument identified pursuant to this Section is listed
in Schedule 4.15 and true and correct copies of such documents or instruments
have been furnished to Buyer. Except with respect to the rights of third parties
to the Third Party Technology, no third party has any right to manufacture,
reproduce, distribute, sublicense, market or exploit any works or materials of
which any of the Seller Rights are a derivative work.
(m) Each CAD/RMS Product: (i) substantially complies with all
specifications set forth therefor in any contract, agreement, advertisement or
other promotional material for such products and with all other warranty
requirements, other than bugs or fixes required or expected in the ordinary
course of business as historically experienced in the Business; (ii) has been
created in a professional manner considering its present stage of development;
and (iii) can be recreated from its associated source code without undue burden.
(n) All designs, drawings, specifications, source code, object
code, documentation, flow charts and diagrams incorporating, embodying or
reflecting any Seller Rights, other than Third Party Technology, at any stage of
their development were written, developed and created solely and exclusively by
employees of Seller without the assistance of any third party or entity.
(o) Seller has not knowingly altered its data, or any Seller
Rights, in a manner that may damage data, whether stored in electronic, optical,
or magnetic or other form.
(p) Seller has furnished Buyer with true and accurate copies of
all end user documentation relating to the use, maintenance or operation of each
CAD/RMS Product.
(q) Seller has not disclosed or otherwise dealt with any aspect
of any Seller Rights, other than Third Party Technology, that would constitute a
trade secret if not injected into the public domain or if treated as secret, in
such a manner as to cause such aspect not to constitute a trade secret.
(r) No employee of Seller is in violation of any term of any
employment contract, patent disclosure agreement or any other contract or
agreement relating to the relationship
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of any such employee with Seller or, to Seller's best knowledge, any other party
because of the nature of the business conducted by Seller or proposed to be
conducted by Seller. Neither the execution or delivery of any of the foregoing
agreements, nor the carrying on of Seller's business as employees by such
persons, nor the conduct of Seller's business as currently anticipated, will
conflict with or result in a breach of the terms, conditions or provisions of or
constitute a default under any contract, covenant or instrument under which any
of such persons is obligated; provided that, solely as the foregoing
representation relates to any agreement between an employee and any party other
than Seller, such representation is limited to Seller's best knowledge.
(s) No product liability or warranty claims have been
communicated to or threatened against Seller nor, to the best of Seller's
knowledge, is there any specific situation, set of facts or occurrence that
provides a basis for such claim.
(t) Each employee or contractor of Seller at any time engaged in
the Business has executed and delivered to the Seller a proprietary information
and invention assignment agreement in the form provided to the Buyer.
4.16 OPERATIONAL RESTRICTIONS. Neither the Seller nor Subsidiary is a
party to any undisclosed agreement or instrument or subject to any undisclosed
charter or other corporate restriction or any undisclosed judgment, order, writ,
injunction, decree, or order, which materially adversely affects, or in the
future could adversely affect, the Business, or any of the Purchased Assets or
the ability of Seller to transfer the Purchased Assets to Buyer pursuant to the
terms of this Agreement. The Seller does not know knows of any facts,
circumstances or events which result, or with the passage of time may result, in
any material adverse change in the condition (financial or other), operating
results, business or prospects of the Business or which might adversely affect
any of the Purchased Assets.
4.17 ILLEGAL OR IMPROPER PAYMENTS. To the best knowledge of the
Seller, neither Seller, Subsidiary nor any of their respective directors,
officers or employees have, in connection with the operation of the Business:
(i) made any illegal political contribution from assets; (ii) been involved in
the disbursement or receipt of corporate funds outside normal internal control
systems of accountability; (iii) made or received payments, whether direct or
indirect, to or from government officials, employees or agents for purposes
other than the satisfaction of lawful obligations, or been involved in any
transaction that has or had as its intended effect the transfer of funds or
assets of Seller or Subsidiary other than for the satisfaction of lawful
obligations of Seller or Subsidiary; or (iv) been involved in the willfully
inaccurate recording of payments and receipts on the books of Seller or
Subsidiary or any other matter of a similar nature involving disbursements of
funds or assets, and they are not aware of any material inaccurate recording of
any payment or receipt on the books of Seller or Subsidiary.
4.18 TITLE TO PURCHASED STOCK. Seller has, and at the Closing Seller
will convey and transfer to Buyer, good, complete and marketable title to all of
the Purchased Stock, free and clear of all mortgages, liens, security interests,
encumbrances, pledges, leases, equities, claims, charges, restrictions,
conditions, conditional sale contracts and any other adverse interests. There
are no outstanding options or warrants to purchase, nor any securities
convertible or exercisable into, shares of capital stock of Subsidiary, nor are
there any agreements, commitments or understandings, oral or written, providing
for the grant of, subscriptions, options or other rights to purchase or
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receive, or obligating Subsidiary to issue, sell or otherwise transfer or to
repurchase or redeem, any shares of capital stock of Subsidiary.
4.19 BULK SALE NOTICES. Seller represents and warrants that the
Purchased Assets will bet transferred to the Buyer free and clear of any
encumbrances or transferee liability that may be imposed by the Bulk Sales Law
or such similar laws.
4.20 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Seller contained herein and the materials contained in the
Schedules attached hereto do not contain any statement of a material fact that
was untrue when made nor, to the best knowledge of Seller, do they omit any
material fact necessary to make the information contained therein not
misleading. For purposes of this Section 4, wherever there is a reference to
"knowledge" or "best knowledge" of Seller, Seller will be charged with knowledge
of facts, circumstances, conditions, occurrences and events known to any of the
individuals named on Schedule 4.20 attached hereto. Information in any one
Schedule delivered pursuant hereto need not be repeated in any other Schedule;
provided, that an appropriate specific cross-reference is made in the other
Schedule to such information contained elsewhere in the Schedules.
5. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby represents and
warrants to the Seller, as of the date hereof and again as of the Closing Date,
as follows:
5.1 ORGANIZATION AND RELATED MATTERS. a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Buyer has the requisite corporate power and authority to carry on its
business as now being conducted and to execute and deliver Agreement and the
Related Agreements and each of the agreements referenced herein to which Buyer
is a party.
5.2 NECESSARY ACTIONS; BINDING EFFECT. Prior to the Closing Date,
Buyer will have taken all corporate action necessary to authorize the execution
and delivery of, and the performance of its obligations under, this Agreement
and the Related Agreements to which a party. This Agreement and the
Related Agreements constitutes, and upon their execution and delivery each of
the Related Agreements will constitute, valid obligations of Buyer that are
legally binding on and enforceable against Buyer in accordance with their
respective terms, except as such enforceability may be limited by (i)
bankruptcy, insolvency, moratorium or other similar laws affecting creditors'
rights, and (ii) general principles of equity relating to the availability of
equitable remedies.
5.3 NO CONFLICTS. Neither the execution and delivery, nor the
performance of, this Agreement or the Related Agreements by Buyer will result in
any of the following: (i) a default or an event that, with notice or lapse of
time, or both, would constitute a default, breach or violation of the Articles
of Incorporation or Bylaws of Buyer; or (ii) a violation or breach of any writ,
injunction or decree of any court or governmental instrumentality to which Buyer
is a party or by which any of its properties are bound or a violation of any
laws or regulations applicable to Buyer, where the violation would have a
material adverse effect on Buyer.
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6. CONDUCT OF BUSINESS PENDING THE CLOSING. Between the date hereof and
the Closing, and except as otherwise consented to by Buyer in writing, or
permitted pursuant to Section 7 below, Seller covenants as follows:
6.1 FULL ACCESS. Subject to the provisions of Section 14 below,
Seller shall afford to Buyer, its counsel, accountants, lenders and investors
(and their respective accounting and legal and other authorized
representatives), upon reasonable prior notice by Buyer of the identity of such
representatives, full access during normal business hours to all properties,
personnel and information of Seller involved with the Business, including,
without limitation, financial statements and records, leases and agreements and
tax returns of Seller, to determine that the purchase of the Purchased Assets
can be consummated in accordance with applicable statutes and regulations, to
verify the accuracy of the representations and warranties made herein and to
fully investigate the affairs of the Business as fully as Buyer may desire.
Seller shall furnish to Buyer and its representatives such information and data
concerning the Purchased Assets and the operation of Business as Buyer or any
such representative shall reasonably request.
6.2 CONDUCT OF SELLER'S BUSINESS. Unless Buyer gives its prior
written consent for actions to be taken to the contrary, from the date of
execution of this Agreement and until the Closing or termination of this
Agreement, whichever first occurs, Seller shall:
(a) OPERATION OF BUSINESS. Operate and conduct the Business
diligently and only in the ordinary course of business consistent with past
practices. Seller shall not: (i) incur any new indebtedness on behalf of the
Business; (ii) increase the compensation or benefits of any employee,
independent contractor or agent of the Business, or adopt or amend any
commission plan or arrangement or any employee benefit plan or arrangement of
any type, affecting any employee, independent contractor or agent of the
Business, which results or may result in an increase in costs or liabilities
thereunder above those existing on the date hereof; or (iii) lend or advance any
sum or extend credit to any employee, director or shareholder of the Business or
any of their respective affiliates;
(b) VENDORS. Use commercially reasonable efforts to retain the
services of all vendors, suppliers, manufacturers, agents and consultants used
in the Business, commensurate with the requirements of the Business;
(c) INSURANCE. Maintain all insurance polices set forth in
Schedule 4.9, consistent with past practices and, unless comparable insurance is
substituted therefor, not take any action to terminate or modify, nor permit the
lapse or termination of, the present insurance policies and coverages of Seller
as set forth in Schedule 4.9 hereto;
(d) LAWSUITS, CLAIMS. Promptly notify Buyer of, and diligently
defend against, all lawsuits, claims, proceedings or investigations that are, or
which any officers of the Seller, as a result of events or circumstances
actually known to them, has reason to believe may be, threatened, brought,
asserted or commenced against Seller or any of its shareholders, officers or
directors, involving or affecting in any way the Business, any of the Purchased
Assets or the transactions contemplated hereby; and not settle any action or
proceeding which would materially adversely affect the Business or any of the
Purchased Assets or the consummation of the transactions contemplated hereby;
and not release, settle, compromise or relinquish any claims, causes of action
or rights of the Business involving more than $5,000 individually or $15,000 in
the aggregate which
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Seller may have against any other persons;
(e) CERTAIN CHANGES. Not sell or otherwise dispose, or enter into
any agreement for the sale, of any of the Purchased Assets, except for sales of
inventory and obsolete equipment in the ordinary course of business and
consistent with past practices, and not permit or allow, or enter into any
agreements providing for or permitting, any of the Purchased Assets to be
subjected to any mortgage, security interest, pledge, option, lien, charge or
encumbrance ;
(f) CONDITION OF ASSETS. Maintain in good working order and
condition, ordinary wear and tear excepted, and in compliance in all material
respects with all applicable laws and regulations, all of the Purchased Assets;
(g) AGREEMENTS AND COMMITMENTS. Observe and perform, in all
material respects, all terms, conditions, covenants and obligations contained in
all existing agreements between Seller and third parties the violation of which
would have, individually or in the aggregate, a material adverse effect on the
Business or any of the Purchased Assets; not take any action which would cause a
breach or violation of or default under any material agreement, lease, contract,
or other written instrument, commitment or arrangement, or under any License or
Permit, judgment, writ or order, applicable to or affecting the Business or any
of the Purchased Assets, and promptly notify Buyer in writing of the occurrence
of any such breach or default; and not enter into any transaction with any
shareholder, director or officer or any person or entity related to or
affiliated with any Selling Party;
(h) CONSENTS; COMPLIANCE WITH LAWS. Use its best efforts to
obtain and maintain all consents, assignments or approvals of, and Licenses and
Permits granted by, governmental authorities and agencies and other third
parties, in form and substance reasonably satisfactory to Buyer, the absence or
loss of which would have a material adverse effect on the Business or any of the
Purchased Assets either prior to or following the Closing; and not take any
action which would result in a violation of or the noncompliance with any laws,
regulations, consents or approvals applicable to the Business or any of the
Purchased Assets, where such violation or noncompliance could have a material
adverse effect on the Business or any of the Purchased Assets, or result in the
incurrence of any material liability against the Business or any of the
Purchased Assets or in the revocation, modification or loss of any License or
Permit or other right needed for the operation of the Business as presently
conducted by Seller;
(i) TAXES. Pay all federal, state, local and foreign taxes
assessed against Seller, the Business or any of the Purchased Assets, when due,
and in any event prior to the imposition or assessment of any liens against the
Business or any of the Purchased Assets, unless Seller is contesting such taxes
or the imposition of any such liens in good faith, it being understood that
not assuming any liability for such taxes and that Seller shall cause
any such liens to be removed prior to the Closing;
(j) CORPORATE MATTERS. No change or amendment shall be made in
the Articles of Incorporation, Bylaws or other governing instruments of Seller
or in the ownership of the outstanding capital stock or other equity interests
of Seller in a manner which could interfere with the consummation of the
transactions contemplated by this Agreement, nor shall Seller terminate or
modify, or take any actions which it has reason to believe would result in
termination or
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modification of, any of the material agreements, contracts, leases, licenses or
rights included in the Purchased Assets;
(k) LIABILITIES AND EXPENSES. Not create or incur (whether as
principal, surety or otherwise) any actual or contingent liabilities or expenses
of the Business other than liabilities and expenses incurred in the ordinary
course of business consistent with past practices.
6.3 FURNISHING OF CERTAIN INFORMATION. If requested by Buyer, Seller
(i) shall make, or cause to be made, available to Buyer true, correct and
complete copies of the historical financial statements of the Business for any
periods prior to the Closing Date and such other information concerning Seller
or the Business as Buyer may request; (ii) shall permit Buyer's independent
public accountants to have access to the books and records of the Business so
that any unaudited historical financial statements and other financial
information of the Business and Subsidiary, if any, can be reviewed or audited;
and (iii) shall permit such financial statements and other information
concerning the Business to be disclosed in any public filing by Buyer under or
pursuant to the Securities Act or the Securities Exchange Act of 1934, as
amended ("Securities Filings"). In addition, the Seller shall use commercially
reasonable efforts to cause Seller's independent public accountants to provide
such information and assistance, including the execution and delivery of
opinions and consents with respect to the historical financial statements of the
Business, as may be required by Buyer for inclusion in any such Securities
Filings, and the reasonable out-of-pocket expenses of the Seller and such
accountants in connection therewith shall be paid by Buyer, provided the
incurring of such expenses has been approved in advance and in writing by Buyer.
Disclosure of such financial statements and information furnished hereunder in
any Securities Filing shall not constitute a breach or violation of the
confidentiality provisions of Section 14 of this Agreement.
7. OBLIGATIONS PENDING AND FOLLOWING THE CLOSING.
7.1 TERMINATION OF SECURITY INTERESTS AND LIENS. At no cost or
expense to Buyer, Seller shall cause, as of the Closing Date, all security
interests, liens, claims, encumbrances and adverse interests to which any of the
Purchased Assets are subject (other than those securing any of the Assumed
Obligations) to be terminated and all indebtedness or obligations secured
thereby (other than the Assumed Obligations) to be paid.
7.2 CONSENTS. Except as may otherwise be agreed by the parties, each
party to this Agreement shall use commercially reasonable efforts to obtain or
cause to be obtained at the earliest practicable date, all consents, approvals
and Licenses and Permits, if any, which such party requires to permit it to
consummate the transactions contemplated hereby without violating any agreement,
contract, instrument or applicable law or regulation or any License or Permit to
which it is a party or to which it or its assets are subject. The parties hereto
shall cooperate with each other in their efforts to obtain all such consents,
approvals and Licenses and Permits.
7.3 FURTHER ASSURANCES. Each party hereto shall execute and deliver,
both before and after the Closing, such instruments and take such other actions
as the other party or parties, as the case may be, may reasonably request in
order to carry out the intent of this Agreement or to better evidence or
effectuate the transactions contemplated herein.
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7.4 NOTICE OF BREACH. Each party to this Agreement will notify the
other parties of the occurrence of any event, or the failure of any event to
occur, that results in or constitutes a breach by it of any representation or
warranty or a failure by it to comply with or fulfill any covenant, condition or
agreement contained herein, within two (2) business days after learning of such
breach or failure.
7.5 EXCLUSIVITY/OTHER OFFERS. Unless and until this Agreement has
been terminated in accordance with Section 12 below, the Seller or its
respective representatives, agents, officers, directors, shareholders, partners
or employees, will not solicit or accept offers from, provide information or
assistance to, or negotiate or enter into any agreement or understanding
(written or oral) with, any other person or entity regarding (i) the sale,
merger or reorganization of Seller, where such transaction does not contemplate
the earlier consummation of the transactions set forth in this Agreement; (ii)
the sale or other disposition of, or the granting of any security interest, lien
or encumbrance on, any of the Purchased Assets; or (iii) any other transaction
which would cause or result in any change, other than of an immaterial nature,
in or adversely affect the Business or any of the Purchased Assets or otherwise
interfere with the consummation of the transactions contemplated herein.
7.6 EMPLOYEES.
(a) Seller hereby authorizes Buyer to offer employment to any or
all of its employees associated with the Business, conditioned on the
consummation of the sale of the Purchased Assets pursuant hereto; and waives any
rights Seller may have to prohibit such employees from being employed by Buyer;
(b) Seller will use its best efforts to retain all current
employees of the CAD/RMS division during the transition period, including
resolution of stock option issues;
(c) Seller will not solicit any current employees of the CAD/RMS
division who are offered employment by Buyer for a period of one year after the
Closing Date, without the prior written consent of Buyer; and
(d) Buyer shall offer employment to each of the employees of the
Business listed on Schedule 7.6 hereto.
7.7 TAXES. Seller shall pay all taxes (other than income taxes of
Buyer) of any kind or nature arising from (i) the conduct of Seller's business
or operations, whether prior to or after the Closing Date, and (ii) the
consummation of the transactions contemplated hereby, including, without
limitation, all sales, use or similar taxes, if any, that may arise from or be
assessed by reason of the sale of the Purchased Assets by Seller to Buyer. If
any taxes required under this Section 7.7 to be borne by Seller are assessed
against Buyer, Buyer shall notify Seller in writing promptly thereafter and
Seller shall be entitled to contest, in good faith, such assessment or charge.
Notwithstanding the foregoing, Buyer may, but shall not be obligated to, pay any
such taxes assessed against it but payable by Seller pursuant hereto, if Buyer's
failure to do so, in the reasonable judgment of Buyer, could result in the
imposition of a lien or attachment on any of the Purchased Assets or any other
assets of Buyer or would constitute a violation of any agreement to which Buyer
is subject, or if Seller fails to contest such assessment or charge in good
faith. In the event Buyer
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pays any taxes which pursuant hereto are required to be borne by Seller, Buyer
shall be entitled to reimbursement thereof from Seller, on demand.
7.8 SCHEDULE OF ACCOUNTS RECEIVABLE. At the Closing, Seller shall
deliver or cause to be delivered to Buyer a detailed schedule of all unpaid
accounts receivable of Seller as of the close of business on June 30, 1997. This
schedule shall set forth all of the accounts receivable of Seller outstanding as
of the end of such day, together with an aging thereof setting forth the amounts
due in respect of such receivables in 30-day aging categories up to 180 days.
The Seller represents and warrants that the schedule to be delivered pursuant to
this Section 7.8 shall be a true, correct and accurate representation of the
facts set forth in such schedule.
7.9 ACCOUNTS AND NOTES RECEIVABLE COLLECTIONS. In the event the
Seller receives any payment after the Closing of or in respect of any accounts
or notes receivable included in the Purchased Assets, such Selling Party shall
promptly deliver such payment to Buyer, after subtracting from the amount of
such payment any amounts paid by Seller on behalf of Buyer in payment of
accounts payable of the Business following July 1, 1997. The Seller further
agrees to cooperate with Buyer in notifying account obligors of the transfer of
such accounts and notes receivable and instructing them to make all payments in
respect thereof following the Closing to Buyer.
7.10 SUBLEASE OF SCC FACILITY. SCC will permit the Buyer to conduct
the Business from the existing premises occupied by the Business (the "Business
Premises") through October 31, 1997 at a rental rate not to exceed $20,000 per
month (prorated for partial months), plus expenses such as phone charges and
other similar items, which shall be billed separately by Seller, without
mark-up. Buyer may cause employees to vacate all or any portion of the Business
Premises at any time and in one or more stages, and its rental obligation shall
cease upon its full vacation of the Business premises.
7.11 MAPPING SERVICES AND SOFTWARE LICENSE AGREEMENT. As soon as
practicable following the Closing, Buyer and Seller shall negotiate in good
faith and shall enter into a Mapping Services and Software License Agreement,
which shall reflect the terms set forth in EXHIBIT D, among others (the "Service
Agreement").
7.12 9-1-1/CAD INTEGRATION AGREEMENT. As soon as practicable
following the Closing, Buyer and Seller shall negotiate in good faith and shall
enter into a 9-1-1 XA/CAD Integration Agreement, which shall reflect the terms
set forth in EXHIBIT E, among others (the "Integration Agreement").
8. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All of the
representations and warranties set forth in this Agreement or in any
certificates delivered pursuant hereto, as the same have been modified by the
information contained in the Schedules to this Agreement delivered on the date
hereof by Seller to Buyer, or by Buyer to Seller, and all covenants which by
their terms require performance or compliance following the Closing, shall
remain in full force and effect and shall survive the Closing until (i) in the
case of the representations and warranties, the expiration of the periods
following the Closing Date applicable to such representations and warranties as
set forth in Section 13(d) hereof, regardless of any investigation or
verification by any party hereto or by anyone or on behalf of any party hereto,
and (ii) in the case of any such covenants, until they have been fully performed
and no further performance is required
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with respect thereto pursuant to this Agreement, unless the party for whose
benefit such covenant, representation or warranty was made waives the same in
writing.
9. CONDITIONS TO OBLIGATIONS OF BUYER. The obligation of Buyer to
consummate the transactions contemplated by this Agreement shall be subject to
the satisfaction, or the waiver in writing by Buyer, at or before the Closing,
of all the conditions set out below in this Section 9.
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES/COMPLIANCE WITH
COVENANTS. All of the representations and warranties of Seller contained in this
Agreement and the Schedules hereto, were true and correct when made and remain
true and correct as of the Closing Date. The Seller shall, in all material
respects, have performed, satisfied and complied with all covenants, agreements
and conditions required by this Agreement to have been performed or complied
with by any or all of them on or before the Closing Date.
9.2 NO MATERIAL ADVERSE CHANGES. Subsequent to June 30, 1997 there
shall not have occurred nor shall there exist (i) any material adverse change in
the financial condition, properties, assets, business or operating results or
prospects of the Business from that reflected in the June 30, 1997 Balance
Sheet, except for changes disclosed in this Agreement or in the Schedules hereto
delivered with this Agreement on the date hereof; (ii) any material breach or
default by any party thereto of any of the Assumed Contracts or Assumed
Liabilities or any other material contracts or agreements relating to or
affecting any of the Purchased Assets or the Business, the existence of which
breach or default is not disclosed in this Agreement or in the Schedules
delivered with this Agreement on the date hereof; (iii) any damage or loss,
whether or not insured, to any of the Purchased Assets; or (iv) any other event
or condition or state of facts of any character which could reasonably be
expected to materially adversely affect the Business or any of the Purchased
Assets.
9.3 ABSENCE OF LITIGATION. No action, suit, investigation or other
proceeding before any court or by any governmental body or other authority,
whether brought against the Seller or Buyer, shall have been instituted or
threatened, seeking to prevent the consummation of the transactions contemplated
by this Agreement, and no such litigation shall have been threatened nor shall
there be in effect any order restraining or prohibiting the consummation of the
transactions contemplated by this Agreement nor any proceedings pending with
respect thereto. There shall be no pending or threatened litigation, or asserted
or unasserted claims, assessments, or other loss contingencies, materially and
adversely affecting the Business or any of the Purchased Assets, other than as
disclosed in the Schedules delivered pursuant hereto as of the date of this
Agreement.
9.4 CERTIFICATES. Buyer shall have received the following:
(a) Certificates of Good Standing, as of a recent date, from the
Delaware and Colorado Secretaries of State , indicating that Seller is not
delinquent in the payment of income, franchise, sales or other state taxes or
the filing of any tax returns;
(b) A certificate signed by Seller, dated as of the Closing Date,
certifying that (i) all representations and warranties of the Seller were true
and correct in all material respects when made and remain true and correct in
all material respects as of the Closing Date; (ii) all of the respective
covenants, agreements, obligations and conditions of the Seller required to have
been performed as of or prior to the Closing have been fully performed and
complied with; and (iii) all of
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<PAGE> 25
the conditions to Buyer's obligations under this Agreement required to be
satisfied by the Seller by the Closing Date have been satisfied and fulfilled;
and
(c) A certificate signed by the Secretary of Seller, and dated as
of the Closing Date, as to the incumbency of each officer of Seller executing
this Agreement and the other agreements being delivered pursuant hereto, and
certifying the effectiveness, accuracy and completeness of the copies attached
to such certificate of resolutions duly adopted by Seller's Board of Directors
and all of its shareholders, as the case may be, authorizing the execution and
delivery of this Agreement by Seller, and the performance by Seller of its
obligations hereunder and the consummation of the transactions contemplated
hereby.
9.5 UCC TERMINATION STATEMENTS. Seller shall have delivered or caused
to be delivered to Buyer, at or before the Closing, UCC Termination Statements
and such other releases as Buyer may reasonably request, duly completed and
executed by each person having any security interest, lien, claim or other
encumbrances or adverse interests in or on any of the Purchased Assets which are
required to be terminated pursuant to Section 7.1 above, in order to evidence
the termination thereof.
9.6 LEGAL OPINION. On the Closing Date, Seller shall have delivered
or caused to be delivered to Buyer a legal opinion of Ireland, Stapleton, Pryor
& Pascoe, P.C., counsel to Seller, in the form of EXHIBIT F hereto.
9.7 OTHER CONSENTS AND APPROVALS. Receipt of all consents and
approvals required for the consummation of the transactions contemplated by this
Agreement and to permit Buyer in writing to acquire all of the Purchased Assets
pursuant hereto, without thereby violating any laws, government regulations or
agreements to which subject or is a party, in form and substance
acceptable to Buyer.
9.8 BILL OF SALE. Seller shall have executed and delivered to Buyer a
Bill of Sale, in the form attached hereto as EXHIBIT A, transferring title to
the Purchased Assets to Buyer.
9.9 ASSIGNMENT AND ASSUMPTION AGREEMENT. Seller shall have executed
and delivered to Buyer an Assignment and Assumption Agreement in the form of
EXHIBIT B hereto with Buyer (the "Assignment Agreement"), pursuant to which
Seller shall assign, and Buyer shall assume, all of the Assumed Obligations.
9.10 OTHER DOCUMENTS. Seller shall have delivered to Buyer all
instruments, consents, deeds, assignments and other documents called for in this
Agreement, including, without limitation, assignments and certificates of title
for any and all vehicles included in the Purchased Assets, properly executed and
acknowledged for transfer, and such other documents and instruments as Buyer or
its counsel reasonably requests to better evidence or effectuate the
transactions contemplated hereby.
9.11 NON-COMPETITION AGREEMENT. The Seller shall have executed and
delivered to the Buyer a Non-Competition Agreement substantially in the form
attached hereto as EXHIBIT C.
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<PAGE> 26
10. CONDITIONS TO THE OBLIGATIONS OF SELLER. The obligations of Seller
to consummate the transactions contemplated by this Agreement shall be subject
to the satisfaction, or the waiver by Seller, at or before the Closing, of each
of the following conditions:
10.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES/COMPLIANCE WITH
COVENANTS. All of the representations and warranties of Buyer contained in this
Agreement and in the Schedules hereto were true and correct when made and remain
true and correct as of the Closing Date. Buyer shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by this Agreement to be performed or complied with by them
on or prior to the Closing.
10.2 ABSENCE OF LITIGATION. No action, suit, investigation or other
proceeding before any court or by any governmental body or other authority,
whether brought against the Seller or Buyer, shall have been instituted or
threatened, seeking to prevent the consummation of the transactions contemplated
by this Agreement, and no such litigation shall have been threatened nor shall
there be in effect any order restraining or prohibiting the consummation of the
transactions contemplated by this Agreement nor any proceedings pending with
respect thereto.
10.3 CERTIFICATES. Seller shall have received the following:
(a) Good Standing Certificates of Buyer, as of a recent date,
from the Delaware and California Secretaries of State;
(b) A certificate signed by the President or Chief Financial
Officer of Buyer, dated as of the Closing Date, certifying that (i) all
representations and warranties of Buyer were true and correct when made and
remain, in all material respects, true and correct as of the Closing; (ii) all
of the respective covenants, agreements, obligations and conditions of Buyer
required to have been performed by Buyer as of or prior to the Closing have been
fully performed and complied with; and (iii) all of the conditions to Seller's
obligations under this Agreement and the Related Agreements required to be
satisfied by the Closing Date by Buyer have been satisfied and fulfilled; and
(c) A certificate signed by the Secretary of Buyer, dated as of
the Closing Date, as to the incumbency of each officer of Buyer that has
executed this Agreement or the Related Agreements being delivered pursuant
hereto, and certifying the effectiveness, accuracy and completeness of the
copies attached to such certificate of resolutions duly adopted by the Board of
Directors of Buyer authorizing the execution and delivery of this Agreement and
the performance by Buyer of its obligations hereunder and the consummation of
the transactions contemplated hereby.
10.4 OTHER DOCUMENTS. Buyer shall have delivered to Seller all
instruments, consents, deeds, assignments and other documents called for in this
Agreement and the Related Agreements.
10.5 ASSIGNMENT AND ASSUMPTION AGREEMENT. Buyer shall have executed
and delivered to Seller an Assignment and Assumption Agreement in the form of
EXHIBIT B hereto with Buyer (the "Assignment Agreement"), pursuant to which
Seller shall assign, and Buyer shall assume, all of the Assumed Obligations.
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<PAGE> 27
11. CLOSING.
11.1 TIME, DATE AND PLACE OF CLOSING. The closing of the sale and
purchase of the Purchased Assets contemplated by this Agreement (the "Closing")
shall take place at the offices of Stradling, Yocca, Carlson & Rauth, in Newport
Beach, California at 1:00 P.M., on July 18, 1997, or at such other location or
time or on such other date as the parties may agree to in writing (the "Closing
Date").
11.2 SELLER'S OBLIGATIONS AT CLOSING. Subject to the satisfaction, or
Seller's waiver, of the conditions precedent contained in Section 9 hereof, at
the Closing, the Seller shall deliver, or cause to be delivered to Buyer, the
following documents and instruments, in form and substance satisfactory to Buyer
and its counsel:
(a) Each of the certificates, opinions and other documents and
instruments required to be delivered by the Seller to satisfy the conditions set
forth in Section 10 above;
(b) The UCC Termination Statements, and such instruments and
other documents as Buyer may request, from all persons holding security
interests, liens, claims or encumbrances or any other adverse interests on any
of the Purchased Assets, terminating and discharging all of such security
interests, liens, claims, encumbrances and adverse interests;
(c) All checks and other negotiable instruments in the possession
of Seller evidencing or constituting payment of any accounts or notes receivable
included in the Purchased Assets, endorsed for payment to Buyer; and
(d) Such other documents and instruments as Buyer or Buyer's
counsel may reasonably request to better evidence or effectuate the transactions
contemplated hereby.
11.3 OBLIGATIONS OF BUYER AT THE CLOSING. Subject to the
satisfaction, or Buyer's written waiver, of the conditions precedent contained
in Section 9 hereof, at the Closing, Buyer shall do the following:
(a) Buyer shall deliver each of the certificates and other
documents and instruments required to be delivered by Buyer to Seller pursuant
to Section 10 above; and
(b) Buyer shall deliver such other documents and instruments as
Seller or Seller's counsel may reasonably request to better evidence or
effectuate the transactions contemplated hereby.
12. TERMINATION.
12.1 METHODS OF TERMINATION. This Agreement may be terminated and the
transactions herein contemplated may be abandoned at any time, without liability
to the terminating party:
(a) By mutual written consent of Buyer and Seller; or
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<PAGE> 28
(b) By either Buyer or Seller, if the Closing has not occurred by
August ___, 1997; provided, that the party so terminating is not in breach of
any of its material obligations under this Agreement.
12.2 PROCEDURE UPON TERMINATION. In the event of termination of this
Agreement by Buyer or Seller or by both Buyer and Seller pursuant to Section
12.1 hereof, written notice thereof shall forthwith be given to the other party
or parties hereto and the transactions contemplated herein shall be abandoned
without further action by Buyer or the Seller. In addition, if this Agreement is
terminated as provided herein:
(a) Each party will redeliver all documents, workpapers and other
material of any other party relating to the transactions contemplated hereby,
whether so obtained before or after the execution hereof, to the party
furnishing the same;
(b) The confidentiality of all information of a confidential
nature received by any party hereto with respect to the business of any other
party (other than information which is a matter of public knowledge or which has
heretofore been or is hereafter published in any publication for public
distribution or filed as public information with any governmental authority)
shall be maintained in accordance with Section 14 hereof which shall survive
termination of this Agreement; and
(c) Except as hereinabove provided in this Section 12.2, the
respective obligations of the parties hereto under this Agreement shall
terminate; provided, that if any party hereto has breached any of its material
obligations or representations or warranties under this Agreement prior to the
termination of this Agreement, termination of this Agreement shall not release
such party from liability therefor to the other party. For purposes this
Section, the Seller shall be deemed to be a single and the same party.
13. INDEMNIFICATION.
(a) Seller (in the case of indemnification obligations of the
Seller, Seller shall hereinafter be referred to in this Section 13 as the
"Indemnifying Party") hereby agrees that it will indemnify, hold harmless and
defend Buyer and its directors, officers, shareholders, employees, agents and
successors and assigns (in the case of indemnification obligations of Seller,
such persons shall hereinafter be referred to collectively in this Section 13 as
the "Indemnified Parties") from and against any and all Liabilities (as
hereinafter defined) that arise from or are in connection with: (i) any facts,
circumstances or events, the existence or happening of which constitutes a
breach of or inaccuracy in any of the representations or warranties of Seller
contained in this Agreement or in any Exhibits or Schedules hereto or any
certificates or other documents delivered hereunder by or on behalf of Seller;
(ii) any breach or default by Seller of any of its covenants or agreements
contained in this Agreement; and (iii) any legal actions or proceedings that
have arisen or may hereafter arise out of the business or operations of Seller,
whether before or after the Closing, including, without limitation, any of the
pending or threatened legal actions described in Schedule 4.13 hereto; and (iv)
any and all liabilities of Seller which may be asserted by third parties against
Buyer as a result of non-compliance with the Bulk Sales laws of any
jurisdiction. The liability of the Seller to the Indemnified Parties pursuant to
this Section 13(a) shall be limited, in the aggregate, to the Purchase Price.
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<PAGE> 29
(b) Buyer (in the case of indemnification obligations of Buyer,
Buyer shall hereinafter be referred to in this Section 13 as the "Indemnifying
Party") hereby agrees that it will indemnify, hold harmless and defend the
Seller and its directors, officers, shareholders, employees, agents and
successors and assigns (in the case of indemnification obligations of Buyer,
such persons shall hereinafter be referred to collectively in this Section 13 as
the "Indemnified Parties") from and against any and all Liabilities that arise
from or are in connection with: (i) any facts, circumstances or events, the
existence or happening of which constitutes a breach of or inaccuracy in any of
the representations or warranties of Buyer contained in this Agreement or in any
Exhibits or Schedules hereto or any certificates or other documents delivered
hereunder by or on behalf of Buyer; or (ii) any breach or default by Buyer of
any of its covenants or agreements contained in this Agreement, including its
agreement to assume and perform the Assumed Obligations. The liability of the
Buyer to the Indemnified Parties pursuant to this Section 13(b), other than
liability arising out of Buyer's failure to perform the Assumed Obligations
(which shall be limited to the amounts set forth on Schedule 1.3 plus any legal
fees and expenses payable pursuant to subsection (d) below) shall be limited, in
the aggregate, to $100,000.
(c) "Liabilities," as used in this Agreement, shall mean: (i)
demands, claims, actions, suits, and legal or other proceedings brought against
any "Indemnified Party" (as hereinafter defined), and any judgments rendered
therein or settlements thereof, and (ii) all liabilities, damages, losses,
taxes, costs and expenses, including, without limitation, reasonable attorneys'
fees, incurred by any Indemnified Party, whether or not they have arisen from or
were incurred in or as a result of any demand, claim, action, suit, assessment
or other proceeding or any settlement or judgment, and whether sustained before
or after the Closing Date.
(d) No claim for indemnification under this Section 13 may be
made by an Indemnified Party (i) until the aggregate amount of such claims
exceeds $25,000, or (ii) more than eighteen (18) months after the Closing Date;
provided, that any claim by an Indemnified Party for indemnification relating to
any taxes or tax returns or reports may be made at any time within the statute
of limitations relating to such taxes or tax returns or reports. To be
effective, any claim for indemnification under this Section 13 by an Indemnified
Party must be made by a written notice (a "Notice of Claim") to the Indemnifying
Party, given in accordance with the provisions of Section 16 hereof, accompanied
by documentation supporting the claim; provided, however, that if the
Indemnified Party has made such claim prior to such expiration date, such
Indemnified Party shall be entitled to recover the full amount of the
Liabilities incurred by it even if that amount is not finally determined until
after such expiration date. In the event of the assertion, in writing, of a
third-party claim or dispute which, if adversely determined would entitle an
Indemnified Party to indemnification hereunder, the Indemnified Party shall
promptly notify the Indemnifying Party thereof in writing. The Indemnifying
Party may elect, by written notice to the Indemnified Party, to assume and
direct, at their sole expense, the defense of any such third-party claim, and
may, at their sole expense, retain counsel in connection therewith, provided
that such counsel is reasonably acceptable to the Indemnified Party. After the
assumption of such defense by the Indemnifying Party with counsel reasonably
acceptable to the Indemnified Party, and for so long as the Indemnifying Party
conduct such defense on a diligent and timely basis, the Indemnifying Party
shall not be responsible for the payment of legal fees incurred thereafter by
the Indemnified Party (who may, however, continue to participate in the defense
thereof with separate counsel); provided, that, the Indemnifying Party shall be
responsible for paying the fees and expenses of one separate counsel for the
Indemnified Party if the Indemnifying Party and the Indemnified Party have
conflicting positions with respect to such third-party claim or dispute or if
the Indemnifying Party, on the one hand, or the
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Indemnified Party, on the other hand, have defenses not available to the other.
If the Indemnifying Party fail to and until the Indemnifying Party undertake the
defense of any such third-party claim or dispute, or if the Indemnifying Party
discontinue the diligent and timely conduct thereof, the Indemnified Party may
undertake such defense and the Indemnifying Party shall be responsible for
reimbursing the Indemnified Party for its legal fees and expenses as and when
incurred by the Indemnified Party. No Indemnifying Party hereto may settle or
compromise any such third-party claim or dispute without the prior written
consent of the Indemnified Parties hereto, which consent shall not be
unreasonably withheld.
(e) Upon receipt of a Notice of Claim, the Indemnifying Party
shall have fifteen (15) calendar days to contest their indemnification
obligation with respect to such claim, or the amount thereof, by written notice
to the Indemnified Party (a "Contest Notice"); provided, however, that if, at
the time a Notice of Claim is submitted to the Indemnifying Party the amount of
the Liability in respect thereof has not yet been determined, such fifteen (15)
day period shall not commence until a further written notice (a "Notice of
Liability") has been sent or delivered by the Indemnified Party to the
Indemnifying Party setting forth the amount of the Liability incurred by the
Indemnified Party that was the subject of the earlier Notice of Claim. Such
Contest Notice shall specify the reasons or bases for the objection of the
Indemnifying Party to the claim, and if the objection relates to the amount of
the Liability asserted, the amount, if any, which the Indemnifying Party believe
is due the Indemnified Party. If no such Contest Notice is given with such
15-day period, the obligation of the Indemnifying Party to pay to the
Indemnified Party the amount of the Liability set forth in the Notice of Claim,
or subsequent Notice of Liability, shall be deemed established and accepted by
the Indemnifying Party. If, on the other hand, the Indemnifying Party contest a
Notice of Claim or Notice of Liability (as the case may be) within such 15-day
period, the Indemnified Party and the Indemnifying Party shall thereafter
attempt in good faith to resolve their dispute by agreement. If they are unable
to so resolve their dispute within the immediately succeeding thirty (30) days,
such dispute shall be resolved by binding arbitration in Los Angeles County,
California, as provided in Section 17(i) below. The award of the arbitrator
shall be final and binding on the parties and may be enforced in any court of
competent jurisdiction. Upon final determination of the amount of the Liability
that is the subject of an indemnification claim (whether such determination is
the result of the Indemnifying Party's acceptance of, or failure to contest, a
Notice of Claim or Notice of Liability, or of a resolution of any dispute with
respect thereto by agreement of the parties or binding arbitration), such amount
shall be payable, in cash by the Indemnifying Party to the Indemnified Party who
have been determined to be entitled thereto within five (5) days of such final
determination of the amount of the Liability due by the Indemnifying Party. Any
amount that becomes due hereunder and is not paid when due shall bear interest
at the maximum legal rate per annum from the date due until paid.
14. CONFIDENTIALITY. Each party acknowledges that it may have access to
various items of proprietary and confidential information of the other in the
course of investigations and negotiations prior to Closing. Except as otherwise
provided in Section 6.3 above, each party agrees that any such confidential
information received from the other party shall be kept confidential and shall
not be used for any purpose other than to facilitate the arrangement of
financing for and the consummation of the transactions contemplated herein.
Confidential information shall include any business or other information which
is specifically marked by the party claiming confidentiality as being
confidential, unless such information (i) is already public knowledge, (ii)
becomes public knowledge through no fault, action or inaction of the receiving
party, or (iii) was known by the receiving party, or any of its directors,
officers, employees, representatives, agents or advisors prior to
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<PAGE> 31
the disclosure of such information by the disclosing party to the receiving
party. No party hereto, nor its respective officers, directors, employees,
accountants, attorneys, or agents shall intentionally disclose the existence or
nature of, or any of the terms and conditions relating to, the transaction
referred to herein, to any third person; provided, however, that such
information may be disclosed in applications or requests required to be made to
obtain any Licenses and Permits, approvals or consents needed to consummate the
transactions contemplated herein or in any Securities Filings.
15. EXPENSES AND BROKER'S FEES.
15.1 EXPENSES/PRORATIONS. Each of the parties shall pay all costs and
expenses incurred or to be incurred by it in connection with the negotiation,
preparation, execution, delivery and performance of its respective obligations
under this Agreement and the Related Agreements.
15.2 BROKER'S FEES. Each party represents and warrants that it has
not utilized the services of, and that it does not and will not have any
liability to, any broker or finder in connection with this Agreement or the
transactions contemplated hereby. The Seller jointly and severally agree to
indemnify and hold harmless Buyer, and Buyer agrees to hold harmless Seller,
against any loss, liability, damage, cost, claim or expense incurred by reason
of any brokerage commission or finder's fee alleged to be payable as a result
of, or in connection with, this Agreement or the transactions contemplated
hereby by reason of any act, omission or statement of the indemnifying party.
16. NOTICES. All notices, requests, demands or other communications
hereunder shall be in writing and shall be deemed to have been duly given, if
delivered in person or by a nationally recognized courier service, if sent by
facsimile machine ("fax") or mailed, certified, return-receipt requested,
postage prepaid:
If to Printrak to:
Printrak International Inc.
1250 North Tustin Avenue
Anaheim, CA 92807
Attention: Mr. Kevin P. McDonnell
With a copy to:
Stradling, Yocca, Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Attention: Bruce Feuchter, Esq.
If to SCC to:
SCC Communications Corp.
6285 Lookout Road
Boulder, Colorado 80301-3343
Attention: Ms. Nancy Hamilton
With a copy to:
Ireland, Stapleton, Pryor & Pascoe
1675 Broadway, Suite 2600
Denver, Colorado 80202
Attention: Jack Lewis, Esq.
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Any party hereto may from time to time, by written notice to the other parties,
designate a different address, which shall be substituted for the one specified
above for such party. If any notice or other document is sent by certified or
registered mail, return receipt requested, postage prepaid, properly addressed
as aforementioned, the same shall be deemed served or delivered seventy-two (72)
hours after mailing thereof. If any notice is sent by fax to a party, it will be
deemed to have been delivered on the date the fax thereof is actually received,
provided the original thereof is sent by certified or registered mail, in the
manner set forth above, within twenty-four (24) hours after the fax is sent. If
the notice is delivered in person or is sent by a nationally recognized courier
service, it shall be deemed to have been delivered on the date received by the
recipient of such notice.
17. MISCELLANEOUS.
17.1 BINDING EFFECT. Subject to the terms of Section 17.2 below, this
Agreement shall be binding upon the heirs, executors, representatives,
successors and assigns of the respective parties hereto.
17.2 ASSIGNMENT. No party may assign this Agreement, or assign their
respective rights or delegate their respective duties hereunder, without the
prior written consent of the other party.
17.3 COUNTERPARTS. This Agreement may be executed in facsimile and in
any number of counterparts, each of which shall be deemed to be an original and
all of which together shall be deemed to be one and the same instrument.
17.4 HEADINGS. The subject headings of the sections and subsections
of this Agreement are included for purposes of convenience only and shall not
affect the construction or interpretation of any of its provisions.
17.5 WAIVERS. Any party to this Agreement may waive any right, breach
or default which it has the right to waive; provided, that such waiver will not
be effective against the waiving party unless it is in writing and specifically
refers to this Agreement and notice thereof is promptly given to all parties in
the manner provided in Section 16 of this Agreement. No waiver will be deemed to
be a waiver of any other matter, whenever occurring and whether identical,
similar or dissimilar to the matter waived.
17.6 ENTIRE AGREEMENT. This Agreement, including the Schedules,
Exhibits and other documents referred to herein which form a part hereof,
embodies the entire agreement and understanding of the parties hereto, and
supersedes all prior or contemporaneous agreements or understandings (whether
written or oral) among the parties, in respect to the subject matter contained
herein, including, without limitation, the Letter Agreement.
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17.7 GOVERNING LAW. This Agreement is deemed to have been made in the
State of California, and its interpretation, its construction and the remedies
for its enforcement or breach are to be applied pursuant to, and in accordance
with, the laws of California for contracts made and to be performed in that
state.
17.8 ARBITRATION. All disputes between the parties hereto shall be
determined solely and exclusively by arbitration under, and in accordance with
the rules then in effect of, the American Arbitration Association, or any
successors thereto ("AAA"), in Los Angeles, California, unless the parties
otherwise agree in writing. The parties shall, in connection with such
arbitration, in addition to any discovery permitted under AAA rules, be
permitted to conduct discovery in accordance with Section 1283.05 of the
California Code of Civil Procedure, the provisions of which are incorporated
herein by this reference. The parties shall jointly select an arbitrator. In the
event the parties fail to agree upon an arbitrator within ten (10) days, then
each party shall select an arbitrator and such arbitrators shall then select a
third arbitrator to serve as the sole arbitrator; provided, that if either
party, in such event, fails to select an arbitrator within seven (7) days, such
arbitrator shall be selected by the AAA upon application of either party.
Judgment upon the award of the agreed upon arbitrator or the so chosen third
arbitrator, as the case may be, shall be binding and shall be entered into by a
court of competent jurisdiction.
17.9 SEVERABILITY. Any provision of this Agreement which is illegal,
invalid or unenforceable shall be ineffective to the extent of such illegality,
invalidity or unenforceability, without affecting in any way the remaining
provisions hereof.
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IN WITNESS WHEREOF, the undersigned corporations have caused this
Agreement to be executed by officers thereunto duly authorized, on the date
first above stated.
SELLER:
SCC COMMUNICATIONS CORP.,
a Delaware corporation
By: /s/ NANCY K. HAMILTON
-------------------------------------
Its: CFO
-------------------------------------
BUYER:
PRINTRAK INTERNATIONAL INC., a Delaware
corporation
By: /s/
-------------------------------------
Its: PRESIDENT AND CEO
-------------------------------------
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EXHIBITS
<TABLE>
<S> <C>
Exhibit A Form of Bill of Sale
Exhibit B Form of Assignment and Assumption Agreement
Exhibit C Form of Non-Competition Agreement
Exhibit D Form of Mapping Services and Software License Agreement
Exhibit E Form of Demonstration Site Agreement
Exhibit F Form of Opinion of Counsel for the Seller
Exhibit G Form of Opinion of Counsel for Buyer
SCHEDULES
Schedule 1.1(a) Tangible Assets
Schedule 1.1(b) Personal Property Contracts
Schedule 1.1(d) Intangible Property Rights
Schedule 1.1(g) Computer Software Programs
Schedule 1.2 Assumed Liabilities
Schedule 4.3A Financial Statements
Schedule 4.3B Financial Statement Exceptions
Schedule 4.4 Certain Changes
Schedule 4.5 Exceptions to Title
Schedule 4.5(d) Leases
Schedule 4.6 Contracts and Commitments
Schedule 4.7 Labor and Employment Matters
Schedule 4.8 Conflicts
Schedule 4.9 Insurance Policies
Schedule 4.11(a) Compliance With Laws
Schedule 4.11(b) Permits and Licenses
Schedule 4.12 Litigation
Schedule 4.13 Certain Transactions
Schedule 4.14 Environmental and Safety Matters
Schedule 4.15 Intellectual Property Rights
Schedule 4.16 Operational Restrictions
Schedule 4.18 Individuals with Knowledge of Seller's Operations
Schedule 5.3 Conflicts of Buyer
</TABLE>
<PAGE> 1
EXHIBIT 10.11
AMENDMENT ONE
ASSET PURCHASE AGREEMENT
SCC/PRINTRAK
- --------------------------------------------------------------------------------
AMENDMENT ONE
TO THE
ASSET PURCHASE AGREEMENT BETWEEN
PRINTRAK INTERNATIONAL INC. AND
SCC COMMUNICATIONS CORPORATION
This Amendment One, effective December 1, 1997, amends and modifies certain
terms and conditions of the Asset Purchase Agreement ("Agreement") dated July
18, 1997, between PRINTRAK INTERNATIONAL INC. ("Printrak") and SCC
COMMUNICATIONS CORPORATION ("SCC").
WHEREAS, Printrak and SCC have entered into the Agreement to consummate
Printrak's acquisition of the Computer Automated Dispatch ("CAD") and Records
Management System ("RMS") business unit of SCC; and
WHEREAS, pursuant to the Agreement, Printrak acquired certain rights to
sublicense and use the Graphic Geofile Management ("GGM") products and services
as stated in Exhibit D ("Mapping Services") of the Agreement; and
WHEREAS, the copyright and other intellectual property rights in and to the
GGM product are mutually owned by SCC and Signal Soft Corporation ("Signal
Soft"), and the right to license and sublicense same is also shared by such
parties; and
WHEREAS, both Parties to the Agreement wish to further define and clarify
the GGM product and service rights and obligations addressed within Exhibit D of
the Agreement.
NOW THEREFORE, in consideration of the mutual terms and conditions,
promises and covenants hereinafter set forth, Printrak and SCC agree as follows:
1. GGM SOFTWARE APPLICATION - LICENSE RIGHTS
In addition to the sublicense rights granted to Printrak in Exhibit D of the
Agreement, the Parties agree that object code and source code for the GGM
Software Application shall be provided to Printrak employees on a "need to know"
basis. Except for the limited rights granted to Printrak herein, nothing herein
shall be deemed to have conveyed any right, title or interest, including but not
limited to copyright, in or to the GGM Product or its related intellectual
property.
1.1 SOURCE CODE RIGHTS
Printrak shall be allowed to modify and enhance Source Code. Any Printrak
modifications, enhancements or improvements to the Source Code shall be made
available by Printrak to SCC and Signal Soft within a reasonable time after the
same is available. SCC and Signal Soft shall own such modifications, enhancement
and improvements and shall be permitted hereby to utilize same for their
respective business purposes, and Printrak shall have a non-exclusive,
perpetual, paid-up license to exploit same in accordance with the terms and
conditions of the Agreement as amended hereby. Updated Source Code for the GGM
products shall be shared by Printrak, SCC and Signal Soft for the purposes of
conducting each parties' respective independent business operations.
- --------------------------------------------------------------------------------
<PAGE> 2
AMENDMENT ONE
ASSET PURCHASE AGREEMENT
SCC/PRINTRAK
- --------------------------------------------------------------------------------
Printrak is granted the right to provide Source Code in third party escrow
accounts to Printrak's CAD and RMS customers. Any such arrangement shall occur
with the guidance of a third party escrow agent who shall utilize a written
escrow agreement in connection therewith. All third party escrow agreements
shall mandate that: (i) the escrow agent shall not release the Source Code until
sufficient evidence has been demonstrated to said agent that Printrak is unable
to protect the interests of such customer related to the GGM product absent the
release of the GGM product Source Code; and (ii) the escrow agent is obligated
to release the Source Code only after providing SCC and Signal Soft with not
less than 30 days written notice of the agent's intent to release same; and
(iii) the costs related to said escrow agreement or the release of the Source
Code shall in no way be borne by SCC or Signal Soft. Any non-conforming escrow
agreement shall be void and shall result in the automatic revocation of any
sublicense granted to Printrak's CAD or RMS customers.
1.2 GGM APPLICATION LICENSES
The grant of license rights to Printrak from SCC provided in Exhibit D of the
Agreement is further clarified herein to include all code necessary to build
complete GGM, TMD and CAD workstation applications, inclusive but not limited to
the following SCC GGM Software Applications in the version level available as of
June 30, 1997:
* GGM System License
* GGM PC License
* GGM System Admin Kit
* GCi License
* Federation Transfer License
* GMi License
* Pin Mapping License
2. DOCUMENTATION
The initial release of each GGM product Source Code to Printrak for Printrak's
business usage shall include one electronic and one hard copy media of the
documentation materials for said GGM product. Thereafter, Printrak shall be
responsible for updating the documentation to reflect any Printrak
modifications, enhancements or improvements to functionality resulting from
Printrak's changes to the Source Code.
SCC and Signal Soft shall be responsible for updating the documentation to
reflect any SCC or Signal Soft modifications, enhancements or improvements to
functionality resulting from either parties' changes to the Source Code.
All such updated documentation shall be shared between Printrak, SCC and Signal
Soft in electronic and hard copy media format for the purposes of conducting
each parties' independent business operations.
3. SUPPORT AND IMPLEMENTATION SERVICES
Printrak is granted the right to conduct Support and Implementation Services of
the GGM products on an independent basis.
- --------------------------------------------------------------------------------
2
<PAGE> 3
AMENDMENT ONE
ASSET PURCHASE AGREEMENT
SCC/PRINTRAK
- --------------------------------------------------------------------------------
SCC will not be obligated to offer Printrak the GGM services listed in Exhibit D
and referenced in subparagraph 7.11 of the Agreement. However, if SCC should
elect to do so, such services will be billed on a time and materials basis using
the same rates stated in paragraph 4 herein regarding Printrak's services. SCC
reserves its right to increase said rates by not more than ten percent (10%) per
year.
4. EXHIBIT D CLARIFICATION
SCC and Printrak agree that the subcontract services for GGM services listed in
Exhibit D of the Agreement may be conducted independently by Printrak, without
obligation to SCC. Further, the parties recognize that SCC may wish to obtain
GGM related services from Printrak for support of SCC customers. The parties
agree that the following labor rates shall apply for each parties' applicable
services provided to the other party, which rates shall apply in the event a
prior or subsequently fixed price agreement for specific services has not been
mutually agreed upon between the parties.
<TABLE>
<CAPTION>
================================================================================
LABOR TYPE HOURLY RATE
- --------------------------------------------------------------------------------
<S> <C>
Geofile Application Engineer $ 84.00
- --------------------------------------------------------------------------------
Geofile Technician $ 58.00
- --------------------------------------------------------------------------------
Mapping Application Engineer $ 89.00
- --------------------------------------------------------------------------------
Mapping Software Engineer $100.00
================================================================================
</TABLE>
All other surviving terms and conditions in the Agreement which do not conflict
with this Amendment or its Exhibits, if any, shall be unmodified and shall
continue in full force and effect. Printrak and SCC accept and agree to the
terms and conditions of this Amendment One, as indicated by the signatures of
their respective, duly authorized representatives, as executed on the date shown
below.
PRINTRAK INTERNATIONAL INC. SCC COMMUNICATIONS CORP.
/s/ Mike Lyons /s/ George Heinrichs
- --------------------------------- ---------------------------------
(Signature) (Signature)
Mike Lyons / GM Boulder George Heinrichs / CEO
- --------------------------------- ---------------------------------
(Printed Name/Title) (Printed Name/Title)
12/3/97 11/26/97
- --------------------------------- ---------------------------------
(Date) (Date)
- --------------------------------------------------------------------------------
3
<PAGE> 1
EXHIBIT 10.12
[BANKONE LOGO]
LOAN AGREEMENT
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$2,000,000.00 4-15-1998 8760310127 410
- ----------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this
document to any particular loan or item.
- ----------------------------------------------------------------------------------------------------
</TABLE>
Borrower: SCC COMMUNICATIONS CORP., Lender: BANK ONE, COLORADO, N.A.
A DELAWARE CORPORATION DOWNTOWN BOULDER BANKING CENTER
6285 LOOKOUT ROAD 2696 SOUTH COLORADO BLVD.
BOULDER, CO 80301 DENVER, CO 80222
================================================================================
THIS LOAN AGREEMENT BETWEEN SCC COMMUNICATIONS CORP., A DELAWARE CORPORATION
("BORROWER") AND BANK ONE, COLORADO, N.A. ("LENDER") IS MADE AND EXECUTED ON THE
FOLLOWING TERMS AND CONDITIONS. BORROWER HAS RECEIVED PRIOR COMMERCIAL LOANS
FROM LENDER OR HAS APPLIED TO LENDER FOR A COMMERCIAL LOAN OR LOANS AND OTHER
FINANCIAL ACCOMMODATIONS, INCLUDING THOSE WHICH MAY BE DESCRIBED ON ANY EXHIBIT
OR SCHEDULE ATTACHED TO THIS AGREEMENT. ALL SUCH LOANS AND FINANCIAL
ACCOMMODATIONS, TOGETHER WITH ALL FUTURE LOANS AND FINANCIAL ACCOMMODATIONS FROM
LENDER TO BORROWER, ARE REFERRED TO IN THIS AGREEMENT INDIVIDUALLY AS THE "LOAN"
AND COLLECTIVELY AS THE "LOANS." BORROWER UNDERSTANDS AND AGREES THAT: (a) IN
GRANTING, RENEWING, OR EXTENDING ANY LOAN, LENDER IS RELYING UPON BORROWER'S
REPRESENTATIONS, WARRANTIES, AND AGREEMENTS, AS SET FORTH IN THIS AGREEMENT; (b)
THE GRANTING, RENEWING, OR EXTENDING OF ANY LOAN BY LENDER AT ALL TIMES SHALL BE
SUBJECT TO LENDER'S SOLE JUDGMENT AND DISCRETION; AND (c) ALL SUCH LOANS SHALL
BE AND SHALL REMAIN SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS OF THIS
AGREEMENT.
TERM. This Agreement shall be effective as of July 1, 1996, and shall continue
thereafter until all indebtedness of Borrower to Lender has been performed in
full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
AGREEMENT. The word "Agreement" means this Loan Agreement, as this Loan
Agreement may be amended or modified from time to time, together with all
exhibits and schedules attached to this Loan Agreement-from time to time.
ACCOUNT. The word "Account" means a trade account, account receivable, or
other right to payment for goods sold or services rendered owing to Borrower
(or to a third party grantor acceptable to Lender).
ACCOUNT DEBTOR. The words "Account Debtor" mean the person or entity
obligated upon an Account.
ADVANCE. The word "Advance" means a disbursement of Loan funds under this
Agreement.
BORROWER. The word "Borrower" means SCC COMMUNICATIONS CORP., A DELAWARE
CORPORATION. The word "Borrower" also includes, as applicable, all
subsidiaries and affiliates of Borrower as provided below in the paragraph
titled "Subsidiaries and Affiliates."
BORROWING BASE. The words "Borrowing Base" mean, as determined by Lender from
time to time, the lesser of (a) $2,000,000.00; or (b) 75.000% of the
aggregate amount of Eligible Accounts.
CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
COLLATERAL. The word "Collateral" means and includes without limitation all
property and assets granted as collateral security for a Loan, whether real
or personal property, whether granted directly or indirectly, whether granted
now or in the future, and whether granted in the form of a security interest,
mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel trust,
factor's lien, equipment trust, conditional sale, trust receipt, lien,
charge, lien or title retention contract, lease or consignment intended as a
security device, or any other security or lien interest whatsoever,whether
created by law, contract, or otherwise. The word "Collateral" includes
without limitation all collateral described below in the section titled
"COLLATERAL."
ELIGIBLE ACCOUNTS. The words "Eligible Accounts" mean, at any time, all of
Borrower's Accounts which contain selling terms and conditions acceptable to
Lender. The net amount of any Eligible Account against which Borrower may
borrow shall exclude all returns, discounts, credits, and offsets of any
nature. Unless otherwise agreed to by Lender in writing, Eligible Accounts do
not include:
(a) Accounts with respect to which the Account Debtor is an officer, an
employee or agent of Borrower.
(b) Accounts with respect to which the Account Debtor is a subsidiary of,
or affiliated with or related to Borrower or its shareholders, officers,
or directors.
(c) Accounts with respect to which goods are placed on consignment,
guaranteed sale, or other terms by reason of which the payment by the
Account Debtor may be conditional.
(d) Accounts with respect to which Borrower is or may become liable to the
Account Debtor for goods sold or services rendered by the Account Debtor
to Borrower.
(e) Accounts which are subject to dispute, counterclaim, or setoff.
(f) Accounts with respect to which the goods have not been shipped or
delivered, or the services have not been rendered, to the Account Debtor.
(g) Accounts with respect to which Lender, in its sole discretion, deems
the creditworthiness or financial condition of the Account Debtor to be
unsatisfactory.
(h) Accounts of any Account Debtor who has filed or has had filed against
it a petition in bankruptcy or an application for relief under any
provision of any state or federal bankruptcy, insolvency, or
debtor-in-relief acts; or who has had appointed a trustee, custodian, or
receiver for the assets of such Account Debtor; or who has made an
assignment for the benefit of creditors or has become insolvent or fails
generally to pay its debts (including its payrolls) as such debts become
due.
(i) Accounts with respect to which the Account Debtor is the United States
government or any department or agency of the United States.
(j) Accounts which have not been paid in full within NINETY (90) DAYS from
the invoice date.
ERISA. The word "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
EVENT OF DEFAULT. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section titled
"EVENTS OF DEFAULT."
EXPIRATION DATE. The words "Expiration Date" mean the date of termination of
Lender's commitment to lend under this Agreement.
GRANTOR. The word "Grantor" means and includes without limitation each and
all of the persons or entities granting a Security Interest in any Collateral
for the indebtedness, including without limitation all Borrowers granting
such a Security Interest.
GUARANTOR. The word "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties in connection
with any indebtedness.
INDEBTEDNESS. The word "Indebtedness" means and includes without limitation
all Loans, together with all other obligations, debts and liabilities of
Borrower to Lender, or any one or more of them, as well as all claims by
Lender against Borrower, or any one or more of them; whether now or hereafter
existing, voluntary or involuntary, due or not due, absolute or contingent,
liquidated or unliquidated; whether Borrower may be liable individually or
jointly with others; whether Borrower may be obligated as a guarantor,
surety, or otherwise; whether recovery upon such Indebtedness may be or
hereafter may become barred by any statute of limitations; and whether such
Indebtedness may be or hereafter may become otherwise unenforceable.
LENDER. The word "Lender" means BANK ONE, COLORADO, N.A., its successors and
assigns.
LINE OF CREDIT. The words "Line of Credit" mean the credit facility described
in the Section titled "LINE OF CREDIT" below.
LOAN. The word "Loan" or "Loans" means and includes without limitation any
and all commercial loans and financial accommodations from Lender to
Borrower, whether now or hereafter existing, and however evidenced, including
without limitation those loans and financial accommodations described herein
or described on any exhibit or schedule attached to this Agreement from time
to time.
NOTE. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan obligations in
favor of Lender, as well as any substitute, replacement or refinancing note
or notes therefor.
<PAGE> 2
04-15-1997 LOAN AGREEMENT Page 2
Loan No (Continued)
================================================================================
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds
of trust, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.
SECURITY AGREEMENT. The words "Security Agreement" mean and include without
limitation any agreements, promises, covenants, arrangements, understandings
or other agreements, whether created by law, contract, or otherwise,
evidencing, governing, representing, or creating a Security Interest.
SECURITY INTEREST. The words "Security Interest" mean and include without
limitation any type of collateral security, whether in the form of a lien,
charge, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien or title retention contract, lease or consignment intended as a
security device, or any other security or lien interest whatsoever, whether
created by law, contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and Reauthorization Act
of 1986 as now or hereafter amended.
LINE OF CREDIT. Lender agrees to make Advances to Borrower from time to time
from the date of this Agreement to the Expiration Date, provided the aggregate
amount of such Advances outstanding at any time does not exceed the Borrowing
Base. Within the foregoing limits, Borrower may borrow, partially or wholly
prepay, and reborrow under this Agreement as follows.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make any Advance
to or for the account of Borrower under this Agreement is subject to the
following conditions precedent, with all documents, instruments, opinions,
reports, and other items required under this Agreement to be in form and
substance satisfactory to Lender:
(a) Lender shall have received evidence that this Agreement and all
Related Documents have been duly authorized, executed, and delivered by
Borrower to Lender.
(b) Lender shall have received such opinions of counsel, supplemental
opinions, and documents as Lender may request.
(c) The security interests in the Collateral shall have been duly
authorized, created, and perfected with first lien priority and shall be
in full force and effect.
(d) All guaranties required by Lender for the Line of Credit shall have
been executed by each Guarantor, delivered to Lender, and be in full force
and effect.
(e) Lender, at its option and for its sole benefit, shall have conducted
an audit of Borrower's Accounts, books, records, and operations, and
Lender shall be satisfied as to their condition.
(f) Borrower shall have paid to Lender all fees, costs, and expenses
specified in this Agreement and the Related Documents as are then due and
payable.
(g) There shall not exist at the time of any Advance a condition which
would constitute an Event of Default under this Agreement, and Borrower
shall have delivered to Lender the compliance certificate called for in
the paragraph below titled "Compliance Certificate."
MAKING LOAN ADVANCES. Advances under the credit facility, as well as
directions for payment from Borrower's accounts, may be requested orally or
in writing by authorized persons. Lender may, but need not, require that all
oral requests be confirmed in writing. Each Advance shall be conclusively
deemed to have been made at the request of and for the benefit of Borrower
(a) when credited to any deposit account of Borrower maintained with Lender
or (b) when advanced in accordance with the instructions of an authorized
person. Lender, at its option, may set a cutoff time, after which all
requests for Advances will be treated as having been requested on the next
succeeding Business Day.
MANDATORY LOAN REPAYMENTS. If at any time the aggregate principal amount of
the outstanding Advances shall exceed the applicable Borrowing Base,
Borrower, immediately upon written or oral notice from Lender, shall pay to
Lender an amount equal to the difference between the outstanding principal
balance of the Advances and the Borrowing Base. On the Expiration Date,
Borrower shall pay to Lender in full the aggregate unpaid principal amount of
all Advances then outstanding and all accrued unpaid interest, together with
all other applicable fees, costs and charges, if any, not yet paid.
LOAN ACCOUNT. Lender shall maintain on its books a record of account in which
Lender shall make entries for each Advance and such other debits and credits
as shall be appropriate in connection with the credit facility. Lender shall
provide Borrower with periodic statements of Borrower's account, which
statements shall be considered to be correct and conclusively binding on
Borrower unless Borrower notifies Lender to the contrary within thirty (30)
days after Borrower's receipt of any such statement which Borrower deems to
be incorrect.
COLLATERAL. To secure payment of the Line of Credit and performance of all other
Loans, obligations and duties owed by Borrower to Lender, Borrower (and others,
if required) shall grant to Lender Security Interests in such property and
assets as Lender may require (the "Collateral"), including without limitation
Borrower's present and future Accounts and general intangibles. Lender's
Security Interests in the Collateral shall be continuing liens and shall include
the proceeds and products of the Collateral, including without limitation the
proceeds of any insurance. With respect to the Collateral, Borrower agrees and
represents and warrants to Lender:
PERFECTION OF SECURITY INTERESTS. Borrower agrees to execute such financing
statements and to take whatever other actions are requested by Lender to
perfect and continue Lender's Security Interests in the Collateral. Upon
request of Lender, Borrower will deliver to Lender any and all of the
documents evidencing or constituting the Collateral, and Borrower will note
Lender's Interest upon any and all chattel paper if not delivered to Lender
for possession by Lender. Contemporaneous with the execution of this
Agreement, Borrower will execute one or more UCC financing statements and any
similar statements as may be required by applicable law, and will file such
financing statements and all such similar statements in the appropriate
location or locations. Borrower hereby appoints Lender as its irrevocable
attorney-in-fact for the purpose of executing any documents necessary to
perfect or to continue any Security Interest. Lender may at any time, and
without further authorization from Borrower, file a carbon, photograph,
facsimile, or other reproduction of any financing statement for use as a
financing statement. Borrower will reimburse Lender for all expenses for the
perfection, termination, and the continuation of the perfection of Lender's
security interest in the Collateral. Borrower promptly will notify Lender of
any change in Borrower's name including any change to the assumed business
names of Borrower. Borrower also promptly will notify Lender of any change in
Borrower's Social Security Number or Employer Identification Number. Borrower
further agrees to notify Lender in writing prior to any change in address or
location of Borrower's principal governance office or should Borrower merge
or consolidate with any other entity.
COLLATERAL RECORDS. Borrower does now, and at all times hereafter shall, keep
correct and accurate records of the Collateral, all of which records shall be
available to Lender or Lender's representative upon demand for inspection and
copying at any reasonable time. With respect to the Accounts, Borrower agrees
to keep and maintain such records as Lender may require, including without
limitation information concerning Eligible Accounts and Account balances and
agings.
COLLATERAL SCHEDULES. Concurrently with the execution and delivery of this
Agreement, Borrower shall execute and deliver to Lender a schedule of
Accounts and Eligible Accounts, in form and substance satisfactory to the
Lender. Thereafter and at such frequency as Lender shall require, Borrower
shall execute and deliver to Lender such supplemental schedules of Eligible
Accounts and such other matters and information relating to Borrower's
Accounts as Lender may request.
REPRESENTATIONS AND WARRANTIES CONCERNING ACCOUNTS. With respect to the
Accounts, Borrower represents and warrants to Lender: (a) Each Account
represented by Borrower to be an Eligible Account for purposes of this
Agreement conforms to the requirements of the definition of an Eligible
Account; (b) All Account Information listed on schedules delivered to Lender
will be true and correct, subject to immaterial variance; and (c) Lender, its
assigns, or agents shall have the right at any time and at Borrower's expense
to inspect, examine, and audit Borrower's records and to confirm with Account
Debtors the accuracy of such Accounts.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
ORGANIZATION. Borrower is a corporation which is duly organized, validly
existing, and in good standing under the laws of the state of Borrower's
incorporation and is validly existing and in good standing in all states in
which Borrower is doing business. Borrower has the full power and authority
to own its properties and to transact the businesses in which it is presently
engaged or presently proposes to engage. Borrower also is duly qualified as a
foreign corporation and is in good standing in all states in which the
failure to so qualify would have a material adverse effect on its businesses
or financial condition.
AUTHORIZATION. The execution, delivery, and performance of this Agreement
and all Related Documents by Borrower, to the extent to be executed,
delivered or performed by Borrower, have been duly authorized by all
necessary action by Borrower; do not require the consent or approval of any
other person, regulatory authority or governmental body; and do not conflict
with, result in a violation of, or constitute a default under (a) any
provision of its articles of incorporation or organization, or bylaws, or any
agreement or other instrument binding upon Borrower or (b) any law,
governmental regulation, court decree, or order applicable to Borrower.
FINANCIAL INFORMATION. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as of
the date of the statement, and there has been no material adverse change in
Borrower's financial condition subsequent to the date of the most recent
financial statement supplied to Lender. Borrower has no material contingent
obligations except as disclosed in such financial statements.
<PAGE> 3
04-15-1997 LOAN AGREEMENT Page 3
Loan No (Continued)
================================================================================
LEGAL EFFECT. This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will constitute,
legal, valid and binding obligations of Borrower enforceable against Borrower
in accordance with their respective terms.
PROPERTIES. Except for Permitted Liens, Borrower owns and has good title to
all of Borrower's properties free and clear of all Security Interests, and
has not executed any security documents or financing statements relating to
such properties. All of Borrower's properties are titled in Borrower's legal
name, and Borrower has not used, or filed a financing statement under, any
other name for at least the last five (5) years.
HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous substance,"
"disposal," "release," and "threatened release," as used in this Agreement,
shall have the same meanings as set forth in the "CERCLA," "SARA," the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or
other applicable state or Federal laws, rules, or regulations adopted
pursuant to any of the foregoing. Except as disclosed to and acknowledged by
Lender in writing, Borrower represents and warrants that: (a) During the
period of Borrower's ownership of the properties, there has been no use,
generation, manufacture, storage, treatment, disposal, release or threatened
release of any hazardous waste or substance by any person on, under, about
or from any of the properties. (b) Borrower has no knowledge of, or reason to
believe that there has been (i) any use, generation, manufacture, storage,
treatment, disposal, release, or threatened release of any hazardous waste or
substance on, under, about or from the properties by any prior owners or
occupants of any of the properties, or (ii) any actual or threatened
litigation or claims of any kind by any person relating to such matters. (c)
Neither Borrower nor any tenant, contractor, agent or other authorized user
of any of the properties shall use, generate, manufacture, store, treat,
dispose of, or release any hazardous waste or substance on, under, about or
from any of the properties; and any such activity shall be conducted in
compliance with all applicable federal, state, and local laws, regulations,
and ordinances, including without limitation those laws, regulations and
ordinances described above. Borrower authorizes Lender and its agents to
enter upon the properties to make such inspections and tests as Lender may
deem appropriate to determine compliance of the properties with this section
of the Agreement. Any inspections or tests made by Lender shall be at
Borrower's expense and for Lender's purposes only and shall not be construed
to create any responsibility or liability on the part of Lender to Borrower
or to any other person. The representations and warranties contained herein
are based on Borrower's due diligence in investigating the properties for
hazardous waste and hazardous substances. Borrower hereby (a) releases and
waives any future claims against Lender for indemnity or contribution in the
event Borrower becomes liable for cleanup or other costs under any such laws,
and (b) agrees to indemnify and hold harmless Lender against any and all
claims, losses, liabilities, damages, penalties, and expenses which Lender
may directly or indirectly sustain or suffer resulting from a breach of this
section of the Agreement or as a consequence of any use, generation,
manufacture, storage, disposal, release or threatened release occurring prior
to Borrower's ownership or interest in the properties, whether or not the
same was or should have been known to Borrower. The provisions of this
section of the Agreement, including the obligation to indemnify, shall
survive the payment of the indebtedness and the termination or expiration of
this Agreement and shall not be affected by Lender's acquisition of any
interest in any of the properties, whether by foreclosure or otherwise.
LITIGATION AND CLAIMS. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against
Borrower is pending or threatened, and no other event has occurred which may
materially adversely affect Borrower's financial condition or properties,
other than litigation, claims, or other events, if any, that have been
disclosed to and acknowledged by Lender in writing.
TAXES. To the best of Borrower's knowledge, all tax returns and reports of
Borrower that are or were required to be filed, have been filed, and all
taxes, assessments and other governmental charges have been paid in full,
except those presently being or to be contested by Borrower in good faith in
the ordinary course of business and for which adequate reserves have been
provided.
LIEN PRIORITY. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or
permitted the filing or attachment of any Security Interests on or affecting
any of the Collateral directly or indirectly securing repayment of Borrower's
Loan and Note, that would be prior or that may in any way be superior to
Lender's Security Interests and rights in and to such Collateral.
BINDING EFFECT. This Agreement, the Note, all Security Agreements directly or
indirectly securing repayment of Borrower's Loan and Note and all of the
Related Documents are binding upon Borrower as well as upon Borrower's
successors, representatives and assigns, and are legally enforceable in
accordance with their respective terms.
COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes.
EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which Borrower may
have any liability complies in all material respects with all applicable
requirements of law and regulations, and (i) no Reportable Event nor
Prohibited Transaction (as defined in ERISA) has occurred with respect to any
such plan, (ii) Borrower has not withdrawn from any such plan or initiated
steps to do so, (iii) no steps have been taken to terminate any such plan,
and (iv) there are no unfunded liabilities other than those previously
disclosed to Lender in writing.
LOCATION OF BORROWER'S OFFICES AND RECORDS. Borrower's place of business, or
Borrower's Chief executive office, if Borrower has more than one place of
business, is located at 6285 LOOKOUT ROAD, BOULDER, CO 80301. Unless Borrower
has designated otherwise in writing this location is also the office or
offices where Borrower keeps its records concerning the Collateral.
INFORMATION. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all information
hereafter furnished by or on behalf of Borrower to Lender will be, true and
accurate in every material respect on the date as of which such information
is dated or certified; and none of such information is or will be incomplete
by omitting to state any material fact necessary to make such information not
misleading.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and agrees
that Lender, without independent investigation, is relying upon the above
representations and warranties in extending Loan Advances to Borrower.
Borrower further agrees that the foregoing representations and warranties
shall be continuing in nature and shall remain in full force and effect until
such time as Borrower's indebtedness shall be paid in full, or until this
Agreement shall be terminated in the manner provided above, whichever is the
last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
LITIGATION. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial condition, and (b) all existing and all
threatened litigation, claims, investigations, administrative proceedings or
similar actions affecting Borrower or any Guarantor which could materially
affect the financial condition of Borrower or the financial condition of any
Guarantor.
FINANCIAL RECORDS. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent basis, and
permit Lender to examine and audit Borrower's books and records at all
reasonable times.
FINANCIAL STATEMENTS. Furnish Lender with, as soon as available, but in no
event later than one hundred twenty (120) days after the end of each fiscal
year, Borrower's balance sheet and income statement for the year ended,
audited by a certified public accountant satisfactory to Lender, and, as soon
as available, but in no event later than thirty five (35) days after the end
of each month, Borrower's balance sheet and profit and loss statement for the
period ended, prepared and certified as correct to the best knowledge and
belief by Borrower's chief financial officer or other officer or person
acceptable to Lender. All financial reports required to be provided under
this Agreement shall be prepared in accordance with generally accepted
accounting principles, applied on a consistent basis, and certified by
Borrower as being true and correct.
ADDITIONAL INFORMATION. Furnish such additional information and statements,
lists of assets and liabilities, agings of receivables and payables,
inventory schedules, budgets, forecasts, tax returns, and other reports with
respect to Borrower's financial condition and business operations as Lender
may request from time to time.
INSURANCE. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect to
Borrower's properties and operations, in form, amounts, coverages and with
insurance companies reasonably acceptable to Lender. Borrower, upon request
of Lender, will deliver to Lender from time to time the policies or
certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished without at
least ten (10) days' prior written notice to Lender. Each insurance policy
also shall include an endorsement providing that coverage in favor of Lender
will not be impaired in any way by any act, omission or default of Borrower
or any other person. In connection with all policies covering assets in which
Lender holds or is offered a security interest for the Loans, Borrower will
provide Lender with such loss payable or other endorsements as Lender may
require.
INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports on each
existing insurance policy showing such information as Lender may reasonably
request, including without limitation the following: (a) the name of the
insurer; (b) the risks insured; (c) the amount of the policy; (d) the
properties insured; (e) the then current property values on the basis of
which insurance has been obtained, and the manner of determining those
values; and (f) the expiration date of the policy. In addition, upon request
of Lender (however not more often than annually), Borrower will have an
independent appraiser satisfactory to Lender determine, as applicable, the
actual cash value or replacement cost of any Collateral. The cost of such
appraisal shall be paid by Borrower.
OTHER AGREEMENTS. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any other
party and notify Lender immediately in writing of any default in connection
with any other such agreements.
LOAN PROCEEDS. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
TAXES, CHARGES AND LIENS. Pay and discharge when due all of its indebtedness
and obligations, including without limitation all assessments, taxes,
governmental charges, levies and liens, of every kind and nature, imposed
upon Borrower or its properties, income, or profits, prior to the
<PAGE> 4
04-15-1997 LOAN AGREEMENT Page 4
Loan No (Continued)
================================================================================
date on which penalties would attach, and all lawful claims that, if unpaid,
might become a lien or charge upon any of Borrower's properties, income, or
profits. Provided however, Borrower will not be required to pay and discharge
any such assessment, tax, charge, levy, lien or claim so long as (a) the
legality of the same shall be contested in good faith by appropriate
proceedings, and (b) Borrower shall have established on its books adequate
reserves with respect to such contested assessment, tax, charge, levy, lien,
or claim in accordance with generally accepted accounting practices.
Borrower, upon demand of Lender, will furnish to Lender evidence of payment
of the assessments, taxes, charges, levies, liens and claims and will
authorize the appropriate governmental official to deliver to Lender at any
time a written statement of any assessments, taxes, charges, levies, liens
and claims against Borrower's properties, income, or profits.
PERFORMANCE. Perform and comply with all terms, conditions, and provisions
set forth in this Agreement and in the Related Documents in a timely manner,
and promptly notify Lender if Borrower learns of the occurrence of any event
which constitutes an Event of Default under this Agreement or under any of
the Related Documents.
OPERATIONS. Maintain executive and management personnel with substantially
the same qualifications and experience as the present executive and
management personnel; provide written notice to Lender of any change in
executive and management personnel; conduct its business affairs in a
reasonable and prudent manner and in compliance with all applicable federal,
state and municipal laws, ordinances, rules and regulations respecting its
properties, charters, businesses and operations, including without
limitation, compliance with the Americans With Disabilities Act and with all
minimum funding standards and other requirements of ERISA and other laws
applicable to Borrower's employee benefit plans.
INSPECTION. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records
and to make copies and memoranda of Borrower's books, accounts, and records.
If Borrower now or at any time hereafter maintains any records (including
without limitation computer generated records and computer software programs
for the generation of such records) in the possession of a third party,
Borrower, upon request of Lender, shall notify such party to permit Lender
free access to such records at all reasonable times and to provide Lender
with copies of any records it may request, all at Borrower's expense.
COMPLIANCE CERTIFICATE. Unless waived in writing by Lender, provide Lender
monthly and at the time of each disbursement of Loan proceeds with a
certificate executed by Borrower's chief financial officer, or other officer
or person acceptable to Lender, certifying that the representations and
warranties set forth in this Agreement are true and correct as of the date of
the certificate and further certifying that, as of the date of the
certificate, no Event of Default exists under this Agreement.
ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in all respects
with all environmental protection federal, state and local laws, statutes,
regulations and ordinances; not cause or permit to exist, as a result of an
intentional or unintentional action or omission on its part or on the part of
any third party, on property owned and/or occupied by Borrower, any
environmental activity where damage may result to the environment, unless
such environmental activity is pursuant to and in compliance with the
conditions of a permit issued by the appropriate federal, state or local
governmental authorities; shall furnish to Lender promptly and in any event
within thirty (30) days after receipt thereof a copy of any notice, summons,
lien, citation, directive, letter or other communication from any
governmental agency or instrumentality concerning any intentional or
unintentional action or omission on Borrower's part in connection with any
environmental activity whether or not there is damage to the environment
and/or other natural resources.
ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, financing statements,
instruments, documents and other agreements as Lender or its attorneys may
reasonably request to evidence and secure the Loans and to perfect all
Security Interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
INDEBTEDNESS AND LIENS. (a) Except for trade debt incurred in the normal
course of business and indebtedness to Lender contemplated by this Agreement,
create, incur or assume indebtedness for borrowed money, including capital
leases, (b) sell, transfer, mortgage, assign, pledge, lease, grant a security
interest in, or encumber any of Borrower's assets, or (c) sell with recourse
any of Borrower's accounts, except to Lender.
CONTINUITY OF OPERATIONS. (a) Engage in any business activities substantially
different than those in which Borrower is presently engaged, (b) cease
operations, liquidate, merge, transfer, acquire or consolidate with any other
entity, change ownership, change its name, dissolve or transfer or sell
Collateral out of the ordinary course of business, (c) pay any dividends on
Borrower's stock (other than dividends payable in its stock), provided,
however that notwithstanding the foregoing, but only so long as no Event of
Default has occurred and is continuing or would result from the payment of
dividends, if Borrower is a "Subchapter S Corporation" (as defined in the
Internal Revenue Code of 1986, as amended), Borrower may pay cash dividends
on its stock to its shareholders from time to time in amounts necessary to
enable the shareholders to pay income taxes and make estimated income tax
payments to satisfy their liabilities under federal and state law which arise
solely from their status as Shareholders of a Subchapter S Corporation
because of their ownership of shares of stock of Borrower, or (d) purchase or
retire any of Borrower's outstanding shares or alter or amend Borrower's
capital structure.
LOANS, ACQUISITIONS AND GUARANTIES. (a) Loan, invest in or advance money or
assets, (b) purchase, create or acquire any interest in any other enterprise
or entity, or (c) incur any obligation as surety or guarantor other than in
the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs a material adverse change in Borrower's financial
condition, in the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; or (d) any Guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any
other loan with Lender.
EXHIBIT "A". An exhibit, titled "EXHIBIT A," is attached to this Agreement and
by this reference is made a part of this Agreement just as if all the
provisions, terms and conditions of the Exhibit had been fully Set forth in this
Agreement.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
Interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on the Indebtedness against
any and all such accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Borrower to make any payment when due on
the Loans.
OTHER DEFAULTS. Failure of Borrower or any Grantor to comply with or to
perform when due any other term, obligation, covenant or condition contained
in this Agreement or in any of the Related Documents, or failure of Borrower
to comply with or to perform any other term, obligation, covenant or
condition contained in any other agreement between Lender and Borrower.
DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor default
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's property or Borrower's or any
Grantor's ability to repay the Loans or perform their respective obligations
under this Agreement or any of the Related Documents.
FALSE STATEMENTS. Any warranty, representation or statement made or furnished
to Lender by or on behalf of Borrower or any Grantor under this Agreement or
the Related Documents is false or misleading in any material respect at the
time made or furnished, or becomes false or misleading at any time
thereafter.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any Security
Agreement to create a valid and perfected Security Interest) at any time and
for any reason.
INSOLVENCY. The dissolution or termination of Borrower's existence as a going
business, the insolvency of Borrower, the appointment of a receiver for any
part of Borrower's property, any assignment for the benefit of creditors, any
type of creditor workout, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Borrower, any creditor of any Grantor
against any collateral securing the Indebtedness, or by any governmental
agency. This includes a garnishment, attachment, or levy on or of any of
Borrower's deposit accounts with Lender.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect
to any Guarantor of any of the indebtedness or any Guarantor dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, any
Guaranty of the indebtedness.
<PAGE> 5
04-15-1997 LOAN AGREEMENT Page 5
Loan No (Continued)
================================================================================
CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent (25%) or
more of the common stock of Borrower.
ADVERSE CHANGE. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make
Loan Advances or disbursements), and, at Lender's option, all indebtedness
immediately will become due and payable, all without notice of any kind to
Borrower, except that in the case of an Event of Default of the type described
in the "Insolvency," subsection above, such acceleration shall be automatic and
not optional. In addition, Lender shall have all the rights and remedies
provided in the Related Documents or available at law, in equity, or otherwise.
Except as may be prohibited by applicable law, all of Lender's rights and
remedies shall be cumulative and may be exercised singularly or concurrently.
Election by Lender to pursue any remedy shall not exclude pursuit of any other
remedy, and an election to make expenditures or to take action to perform an
obligation of Borrower or of any Grantor shall not affect Lender's right to
declare a default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents, constitutes
the entire understanding and agreement of the parties as to the matters set
forth in this Agreement. No alteration of or amendment to this Agreement
shall be effective unless given in writing and signed by the party or parties
sought to be charged or bound by the alteration or amendment.
APPLICABLE LAW. This Agreement has been delivered to Lender and accepted by
Lender in the State of Colorado. If there is a lawsuit, Borrower agrees upon
Lender's request to submit to the jurisdiction of the courts of BOULDER
County, the State of Colorado. Lender and Borrower hereby waive the right to
any jury trial in any action, proceeding, or counterclaim brought by either
Lender or Borrower against the other. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado.
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
MULTIPLE PARTIES; CORPORATE AUTHORITY. All obligations of Borrower under this
Agreement shall be joint and several, and all references to Borrower shall
mean each and every Borrower. This means that each of the Borrowers signing
below is responsible for all obligations in this Agreement.
CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to Lender's sale
or transfer, whether now or later, of one or more participation Interests in
the Loans to one or more purchasers, whether related or unrelated to Lender.
Lender may provide, without any limitation whatsoever, to any one or more
purchasers, or potential purchasers, any information or knowledge Lender may
have about Borrower or about any other matter relating to the Loan, and
Borrower hereby waives any rights to privacy it may have with respect to such
matters. Borrower additionally waives any and all notices of sale of
participation interests, as well as all notices of any repurchase of such
participation interests. Borrower also agrees that the purchasers of any such
participation interests will be considered as the absolute owners of such
interests in the Loans and will have all the rights granted under the
participation agreement or agreements governing the sale of such
participation interests. Borrower further waives all rights of offset or
counterclaim that it may have now or later against Lender or against any
purchaser of such a participation interest and unconditionally agrees that
either Lender or such purchaser may enforce Borrower's obligation under the
Loans irrespective of the failure or insolvency of any holder of any interest
in the Loans. Borrower further agrees that the purchaser of any such
participation interests may enforce its interests irrespective of any
personal claims or defenses that Borrower may have against Lender.
COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's
expenses, including without limitation attorneys' fees, incurred in
connection with the preparation, execution, enforcement, modification and
collection of this Agreement or in connection with the Loans made pursuant to
this Agreement. Lender may pay someone else to help collect the Loans and to
enforce this Agreement, and Borrower will pay that amount. This includes,
subject to any limits under applicable law, Lender's attorneys' fees and
Lender's legal expenses, whether or not there is a lawsuit, including
attorneys' fees for bankruptcy proceedings (including efforts to modify or
vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Borrower also will pay any court costs, in
addition to all other sums provided by law.
NOTICES. All notices required to be given under this Agreement shall be given
in writing, may be sent by telefacsimile and shall be effective when actually
delivered or when deposited with a nationally recognized overnight courier or
deposited in the United States mail, first class, postage prepaid, addressed
to the party to whom the notice is to be given at the address shown above.
Any party may change its address for notices under this Agreement by giving
formal written notice to the other parties, specifying that the purpose of
the notice is to change the party's address. To the extent permitted by
applicable law, it there is more than one Borrower, notice to any Borrower
will constitute notice to all Borrowers. For notice purposes, Borrower will
keep Lender informed at all times of Borrower's current address(es).
SEVERABILITY. If a court of competent jurisdiction finds any provision of
this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. It feasible, any such
offending provision shall be deemed to be modified to be within the limits of
enforceability or validity; however, if the offending provision cannot be so
modified, it shall be stricken and all other provisions of this Agreement in
all other respects shall remain valid and enforceable.
SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of any
provisions of this Agreement makes it appropriate, including without
limitation any representation, warranty or covenant, the word "Borrower" as
used herein shall include all subsidiaries and affiliates of Borrower.
Notwithstanding the foregoing however, under no circumstances shall this
Agreement be construed to require Lender to make any Loan or other financial
accommodation to any subsidiary or affiliate of Borrower.
SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or on
behalf of Borrower shall bind its successors and assigns and shall inure to
the benefit of Lender, its successors and assigns. Borrower shall not,
however, have the right to assign its rights under this Agreement or any
interest therein, without the prior written consent of Lender.
SURVIVAL. All warranties, representations, and covenants made by Borrower
in this Agreement or in any certificate or other instrument delivered by
Borrower to Lender under this Agreement shall be considered to have been
relied upon by Lander and will survive the making of the Loan and delivery to
Lander of the Related Documents, regardless of any investigation made by
Lander or on Lender's behalf.
TIME IS OF THE ESSENCE. Time is of the essence in the performance of this
Agreement.
WAIVER. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall operate
as a waiver of such right or any other right. A waiver by Lender of a
provision of this Agreement shall not prejudice or constitute a waiver of
Lender's right otherwise to demand strict compliance with that provision or
any other provision of this Agreement. No prior waiver by Lender, nor any
course of dealing between Lender and Borrower, or between Lender and any
Grantor, shall constitute a waiver of any of Lender's rights or of any
obligations of Borrower or of any Grantor as to any future transactions.
Whenever the consent of Lender is required under this Agreement, the granting
of such consent by Lender in any instance shall not constitute continuing
consent in subsequent instances where such consent is required, and in all
cases such consent may be granted or withheld in the sole discretion of
Lender.
<PAGE> 6
04-15-1997 LOAN AGREEMENT Page 6
Loan No (Continued)
================================================================================
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS LOAN AGREEMENT, AND
BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF APRIL 15, 1997.
BORROWER:
SCC COMMUNICATIONS CORP., A DELAWARE CORPORATION
By: /s/ GEORGE HEINRICHS, PRESIDENT By: /s/ NANCY K. HAMILTON
---------------------------------- ---------------------------------
GEORGE HEINRICHS, PRESIDENT NANCY K. HAMILTON, CFO
LENDER:
BANK ONE, COLORADO, N.A.
By: /s/ [ILLEGIBLE]
----------------------------------
AUTHORIZED OFFICER
================================================================================
<PAGE> 7
EXHIBIT "A"
THIS EXHIBIT "A" IS ATTACHED TO AND BY THIS REFERENCE IS MADE A PART OF LOAN
AGREEMENT DATED APRIL 15, 1997, AND EXECUTED IN CONNECTION WITH A LOAN OR OTHER
FINANCIAL ACCOMMODATIONS BETWEEN BANK ONE, COLORADO, N.A. AND SCC COMMUNICATIONS
CORP., A DELAWARE CORPORATION.
================================================================================
ADDITIONAL AFFIRMATIVE COVENANTS. BORROWER COVENANTS AND AGREES WITH LENDER
THAT, WHILE THIS AGREEMENT IS IN EFFECT, BORROWER WILL:
FINANCIAL REPORTING. In addition to the requirements set forth in the Loan
Agreement, provide Lender with a Borrowing Base/Compliance Certificate and
Listing and Aging of all Accounts Receivable as soon as available, but in no
event later than 35 days after the end of each month.
FINANCIAL COVENANTS AND RATIOS. Comply with the following financial covenants
and ratios.
CURRENT RATIO. Maintain a ratio of Current Assets to Current Liabilities
less Deferred Income of .60 to 1.00.
DEBT COVERAGE RATIO. Maintain a ratio of Net Income plus Depreciation and
Amortization for the quarter divided by Current Maturities of Long Term
Debt repaid in the quarter in excess of 1.00 to 1.00 at the end of the
second quarter and '1.20 to 1.00 at the end of each quarter thereafter.
PROFITABILITY. Maintain Profitability on a quarterly basis.
STOCKHOLDER EQUITY. Maintain Stockholder Equity in excess of $750,000.00
at 12/31/96 plus 50% of interim net income each month thereafter.
Except as may be provided above, all computations made to determine
compliance with the requirements listed above will be made in accordance
with generally accepted accounting principles, applied on a consistent
basis, and certified by Borrower as being true and correct.
BORROWER:
SCC COMMUNICATIONS CORP.
A DELAWARE CORPORATION
BY: /s/ GEORGE HEINRICHS
--------------------------------------
GEORGE HEINRICHS, PRESIDENT
BY: /s/ NANCY K. HAMILTON
--------------------------------------
NANCY K. HAMILTON, CFO
LENDER:
BY: /s/ [ILLEGIBLE]
--------------------------------------
AUTHORIZED OFFICER
<PAGE> 8
[BANK ONE LOGO]
CHANGE IN TERMS AGREEMENT
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$2,000,000.00 4-15-1998 8760310127 410
- ----------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this
document to any particular loan or Item.
- ----------------------------------------------------------------------------------------------------
</TABLE>
Borrower: SCC COMMUNICATIONS CORP., Lender: BANK ONE, COLORADO, N.A.
A DELAWARE CORPORATION DOWNTOWN BOULDER BANKING CENTER
6285 LOOKOUT ROAD 2696 SOUTH COLORADO BLVD.
BOULDER, CO 80301 DENVER, CO 80222
================================================================================
PRINCIPAL AMOUNT: $2,000,000.00 DATE OF AGREEMENT: APRIL 15, 1997
DESCRIPTION OF EXISTING INDEBTEDNESS. A PROMISSORY NOTE DATED JULY 1, 1996,
IN THE ORIGINAL PRINCIPAL AMOUNT OF $2,000,000.00.
DESCRIPTION OF CHANGE IN TERMS. THE MATURITY DATE WILL NOW BE APRIL 15, 1998.
PROMISE TO PAY. SCC COMMUNICATIONS CORP., A DELAWARE CORPORATION ("Borrower")
promises to pay to BANK ONE, COLORADO, N.A. ("Lender"), or order, in lawful
money of the United States of America, the principal amount of Two Million
&00/100 Dollars ($2,000,000.00) or so much as may be outstanding, together
with interest on the unpaid outstanding principal balance of each advance.
Interest shall be calculated from the date of each advance until repayment of
each advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding
principal plus all accrued unpaid interest on April 15, 1998. In addition,
Borrower will pay regular monthly payments of accrued unpaid interest
beginning May 15, 1997, and all subsequent interest payments are due on the
same day of each month after that. Interest on this Agreement is computed on
a 365/360 simple interest basis; that is, by applying the ratio of the annual
interest rate over a year of 360 days, multiplied by the outstanding
principal balance, multiplied by the actual number of days the principal
balance is outstanding. Borrower will pay Lender at Lender's address shown
above or at such other place as Lender may designate in writing. Unless
otherwise agreed or required by applicable law, payments will be applied
first to accrued unpaid interest, then to principal, and any remaining amount
to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Agreement is subject to
change from time to time based on changes in an index which is the LENDER'S
PRIME RATE (the "Index"). PRIME RATE IS THE LENDER'S BASE LENDING RATE AS
ANNOUNCED BY THE LENDER FROM TIME TO TIME AT ITS SOLE DISCRETION. AT ANY
GIVEN TIME, THE LENDER MAY MAKE LOANS, AT, ABOVE, OR BELOW ITS PRIME RATE.
Lender will tell Borrower the current Index rate upon Borrower's request.
Borrower understands that Lender may make loans based on other rates as well.
The interest rate change will not occur more often than each DAY. The Index
currently is 8.500% per annum. The interest rate to be applied to the unpaid
principal balance of this Agreement will be at a rate of 1.000 percentage
point over the Index, resulting in an initial rate of 9.500% per annum.
NOTICE: Under no circumstances will the interest rate on this Agreement be
more than the maximum rate allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. Borrower agrees that all loan fees and
other prepaid finance charges are earned fully as of the date of the loan and
will not be subject to refund upon early payment (whether voluntary or as a
result of default), except as otherwise required by law. In any event, even
upon full prepayment of this Agreement, Borrower understands that Lender is
entitled to a minimum interest charge of $25.00. Other than Borrower's
obligation to pay any minimum interest charge, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments of accrued unpaid
interest. Rather, they will reduce the principal balance due.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform
when due any other term, obligation, covenant, or condition contained in this
Agreement or any agreement related to this Agreement, or in any other
agreement or loan Borrower has with Lender. (c) Borrower defaults under any
loan, extension of credit, security agreement, purchase or sales agreement,
or any other agreement, in favor of any other creditor or person that may
materially affect any of Borrower's property or Borrower's ability to repay
this Note or perform Borrower's obligations under this Note or any of the
Related Documents. (d) Any representation or statement made or furnished to
Lender by Borrower or on Borrower's behalf is false or misleading in any
material respect either now or at the time made or furnished. (a) Borrower
becomes insolvent, a receiver is appointed for any part of Borrower's
property, Borrower makes an assignment for the benefit of creditors, or any
proceeding is commenced either by Borrower or against Borrower under any
bankruptcy or Insolvency laws. (f) Any creditor tries to take any of
Borrower's property on or in which Lender has a lien or security interest.
This includes a garnishment of any of Borrower's accounts with Lender. (g)
Any guarantor dies or any of the other events described in this default
section occurs with respect to any guarantor of this Agreement. (h) A
material adverse change occurs in Borrower's financial condition, or Lender
believes the prospect of payment or performance of the indebtedness is
impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Agreement and all accrued unpaid interest immediately due,
without notice, and then Borrower will pay that amount. Upon default,
including failure to pay upon final maturity, Lender, at its option, may
also, if permitted under applicable law, do one or both of the following: (a)
increase the variable interest rate on this Agreement to 25.000% per annum,
and (b) add any unpaid accrued interest to principal and such sum will bear
interest therefrom until paid at the rate provided in this Agreement
(including any increased rate). The interest rate will not exceed the
maximum rate permitted by applicable law. Lender may hire or pay someone else
to help collect this Agreement if Borrower does not pay. Borrower also will
pay Lender that amount. This includes, subject to any limits under applicable
law, Lender's attorneys' fees and Lender's legal expenses whether or not
there is a lawsuit, including attorneys' fees and legal expenses for
bankruptcy proceedings (including efforts to modify or vacate any automatic
stay or injunction), appeals, and any anticipated post-judgment collection
services. If not prohibited by applicable law, Borrower also will pay any
court costs, in addition to all other sums provided by law. THIS AGREEMENT
HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY LENDER IN THE STATE OF COLORADO.
IF THERE IS A LAWSUIT, BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF BOULDER COUNTY, THE STATE OF COLORADO. LENDER
AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY TRIAL IN ANY ACTION,
PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER OR BORROWER AGAINST THE
OTHER. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF COLORADO.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's
accounts with Lender (whether checking, savings, or some other account),
including without limitation all accounts held jointly with someone else and
all accounts Borrower may open in the future, excluding however all IRA and
Keogh accounts, and all trust accounts for which the grant of a security
interest would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on
this Agreement against any and all such accounts.
LINE OF CREDIT. This Agreement evidences a revolving line of credit. Advances
under this Agreement, as well as directions for payment from Borrower's
accounts, may be requested orally or in writing by Borrower or by an
authorized person. Lender may, but need not, require that all oral requests
be confirmed in writing. Borrower agrees to be liable for all sums either:
(a) advanced in accordance with the instructions of an authorized person or
(b) credited to any of Borrower's accounts with Lender. The unpaid principal
balance owing on this Agreement at any time may be evidenced by endorsements
on this Agreement or by Lender's internal records, including daily computer
print-outs. Lender will have no obligation to advance funds under this
Agreement if: (a) Borrower or any guarantor is in default under the terms of
this Agreement or any agreement that Borrower or any guarantor has with
Lender, including any agreement made in connection with the signing of this
Agreement; (b) Borrower or any guarantor ceases doing business or is
insolvent; (c) any guarantor seeks, claims or otherwise attempts to limit,
modify or revoke such guarantor's guarantee of this Agreement or any other
loan with Lender; or (d) Borrower has applied funds provided pursuant to this
Agreement for purposes other than those authorized by Lender.
CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms
of the original obligation or obligations, including all agreements evidenced
or securing the obligations(s), remain unchanged and in full force and
effect. Consent by Lender to this Agreement does not waive Lender's right to
strict performance of the obligation(s) as changed, nor obligate Lender to
make any future change in terms. Nothing in this Agreement will constitute a
satisfaction of the obligation(s). It is the intention of Lender to retain as
liable parties all makers and endorsers of the original obligation(s),
including accommodation parties, unless a party is expressly released by
Lender in writing. Any maker or endorser, including accommodation makers,
will not be released by virtue of this Agreement, if any person who signed
the original obligation does not sign this Agreement below, then all persons
signing below acknowledge that this Agreement is given conditionally, based
on the representation to Lender that the non-signing party consents to the
changes and provisions of this Agreement or otherwise will not be released by
it. This waiver applies not only to any initial extension, modification or
release, but also to all such subsequent actions.
<PAGE> 9
04-15-1997 CHANGE IN TERMS AGREEMENT Page 2
Loan No (Continued)
MISCELLANEOUS PROVISIONS. Lender may delay or forgo enforcing any of its
rights or remedies under this Agreement without losing them. Borrower and any
other person who signs, guarantees or endorses this Agreement, to the extent
allowed by law, waive presentment, demand for payment, protest and notice of
dishonor. Upon any change in the terms of this Agreement, and unless
otherwise expressly stated in writing, no party who signs this Agreement,
whether as maker, guarantor, accommodation maker or endorser, shall be
released from liability. All such parties agree that Lender may renew or
extend (repeatedly and for any length of time) this loan, or release any
party or guarantor or collateral; or impair, fail to realize upon or perfect
Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone. All
such parties also agree that Lender may modify this loan without the consent
of or notice to anyone other than the party with whom the modification Is
made.
PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE
PROVISIONS. BORROWER AGREES TO THE TERMS OF THE AGREEMENT AND ACKNOWLEDGES
RECEIPT OF A COMPLETED COPY OF THE AGREEMENT.
BORROWER:
SCC COMMUNICATIONS CORP., A DELAWARE CORPORATION
By: /s/ GEORGE HEINRICHS By: /s/ NANCY K. HAMILTON
-------------------------------- -------------------------------
GEORGE HEINRICHS, PRESIDENT NANCY K. HAMILTON, CFO
================================================================================
<PAGE> 1
EXHIBIT 10.13
-------------------------------------------------------
SCC COMMUNICATIONS CORP.
SENIOR SUBORDINATED NOTE AND WARRANT
PURCHASE AGREEMENT
-------------------------------------------------------
DATED AS OF NOVEMBER 20, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION A. SELLER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION B. SENIOR LOAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION C. PURCHASE AND SALE OF NOTE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION D. PURCHASE AND SALE OF WARRANT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
STATEMENT OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1 DEFINED TERMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2 PURCHASE AND SALE OF THE NOTE. . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3 PURCHASE AND SALE OF THE WARRANT . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 4 CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 5 REPRESENTATIONS AND WARRANTIES OF
SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 6 REPRESENTATIONS AND WARRANTIES OF THE
PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 7 FINANCIAL REPORTING. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 8 AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 9 NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 10 FINANCIAL TESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 11 EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 12 INDEMNIFICATION BY THE SELLER . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 13 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Glossary of Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exhibit A
Form of Note Between Seller and Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . Exhibit B
Exceptions to Representations and Warranties . . . . . . . . . . . . . . . . . . . Schedule 5.1 et seq.
</TABLE>
i
<PAGE> 3
SENIOR SUBORDINATED NOTE AND WARRANT
PURCHASE AGREEMENT
This is a SENIOR SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT
dated as of November 20, 1997 ("Agreement") by and between SCC COMMUNICATIONS
CORP. ("SCC"), a Delaware corporation, and BANC ONE CAPITAL PARTNERS II, LLC
("BOCP"), a Delaware limited liability company, as purchaser.
SCC, together with its successors and assigns, is referred to as the
"Seller". BOCP, together with its successors and assigns, is referred to as
the "Purchaser". The Seller and the Purchaser are referred to collectively as
the "Parties", and individually as a "Party".
BACKGROUND
SECTION A. SELLER.
SCC is a Delaware corporation engaged in the business of providing
database access and maintenance services to wireline and wireless service
providers ("Business").
SECTION B. SENIOR LOAN.
Pursuant to a Loan Agreement dated as of July 1, 1996 (as amended, the
"Senior Loan Agreement") by and between Bank One Colorado, NA ("Senior Lender")
and the Seller, the Senior Lender has agreed to provide to the Seller on a
revolving credit basis up to a maximum aggregate principal amount of $2,000,000
or 75% of the borrowing base as defined therein at any one time outstanding
(the "Senior Loan"). The Senior Loan is secured by a first priority security
interest in substantially all of the Seller's assets. The Purchaser and the
Senior Lender are parties to an Intercreditor Agreement dated as of the date
hereof ("as amended, restated, modified or supplemented and in effect from time
to time, the Intercreditor Agreement").
SECTION C. PURCHASE AND SALE OF NOTE.
Upon the terms and subject to the conditions set forth in this
Agreement, the Seller shall issue and sell to Purchaser a Senior Subordinated
Note in the aggregate principal amount of $4,000,000 due November 30, 2003 (as
amended, restated, modified or supplemented and in effect from time to time,
the "Note").
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<PAGE> 4
SECTION D. PURCHASE AND SALE OF WARRANT.
Upon the terms and subject to the conditions set forth in this
Agreement, the Seller shall issue and sell to Purchaser warrants to purchase
that number of shares of Common Stock of the Seller representing between 2% and
4% of the Fully Diluted Common Stock of the Seller, depending upon certain
circumstances ("Warrant"). The shares of Common Stock issued or issuable upon
exercise of the Warrant are referred to as the "Warrant Shares".
STATEMENT OF AGREEMENT
In consideration of their mutual promises set forth in this Agreement,
the Parties hereby agree as follows:
SECTION 1 DEFINED TERMS.
Certain capitalized terms used in this Agreement and the Related
Documents are defined in the Glossary of Defined Terms attached as Exhibit A.
Unless otherwise expressly provided or unless the context otherwise requires,
such defined terms shall have the meaning specified in the Glossary of Defined
Terms when used in this Agreement and the Related Documents and in any other
document related to this transaction which expressly incorporates such Glossary
by reference.
SECTION 2 PURCHASE AND SALE OF THE NOTE.
Upon the terms and subject to the conditions set forth in this
Agreement, the Seller shall issue and sell the Note to Purchaser and Purchaser
shall purchase the Note from the Seller for a purchase price of $4,000,000.
The Note shall be due November 30, 2003, shall be dated as of the Closing Date,
shall be made payable by the Seller to the Purchaser in the principal amount of
$4,000,000, and shall otherwise be substantially in the form of Exhibit B.
Such purchase and sale shall be consummated on the Closing Date as
provided for in this Agreement, and on such date the Purchaser shall make
payment of the purchase price of the Note by wire transfer to an account
designated by the Company.
SECTION 3 PURCHASE AND SALE OF THE WARRANT
Upon the terms and subject to the conditions set forth in this
Agreement, the Seller shall issue and sell to the Purchaser and the Purchaser
shall purchase from the Seller for a purchase price of $100, a Warrant to
purchase that number of Common Shares of the Seller representing between 2%
and 4% of the Fully Diluted Common Stock of the Seller, depending upon certain
circumstances. Such purchase and sale shall be consummated on the Closing Date
as provided
2
<PAGE> 5
for in this Agreement, and on such date the Purchaser shall make payment of the
purchase price for the Warrant by wire transfer to an account designated by the
Company.
SECTION 4 CONDITIONS TO CLOSING.
The obligations of the Purchaser to purchase the Note and Warrant on
the Closing Date is subject to the fulfillment, in a manner reasonably
satisfactory to the Purchaser and its counsel, of each of the following
conditions precedent.
4.1 SENIOR LOANS. The Senior Loan Agreement shall be in full
force and effect, and:
(i) no event of default or event which with
notice, lapse of time or both would constitute
an event of default under the Senior Loan
Agreement shall have occurred and be
continuing;
(ii) to the best knowledge of the Seller each of
the representations and warranties of the
Seller set forth in the Senior Loan Agreement
shall be true and correct in all material
respects as of the Closing Date;
(iii) the Senior Lender shall not have waived
compliance with any covenant set forth in the
Senior Loan Agreement or waived the breach of
any representation or warranty set forth in
the Senior Loan Agreement as of the Closing
Date; and
(iv) the Senior Lender and the Purchaser shall
have executed and delivered the Intercreditor
Agreement.
4.2 EXECUTION AND DELIVERY OF RELATED DOCUMENTS. Each of the
following Related Documents, each dated and effective as of the Closing Date,
shall have been duly executed and delivered by the Parties:
(i) the Note;
(ii) the Warrant;
(iii) the Option Agreement;
(iv) the Registration Rights Agreement;
(v) the Co-Sale Agreement; and
(vi) the Preemptive Rights Agreement.
3
<PAGE> 6
4.3 CERTIFICATES, OPINIONS, AND OTHER DOCUMENTS. The following
certificates, opinions and other documents shall be delivered by or on behalf
of the Seller:
(i) a certificate of the Seller executed by the
President of the Seller certifying compliance
with the closing conditions set forth in this
Section;
(ii) certified copies of the corporate resolutions
of Seller authorizing the execution, delivery
and performance of its obligations under this
Agreement, the Note, the Related Documents and
any other documents to be delivered pursuant
to this Agreement duly certified by the
Seller's corporate secretary;
(iii) a copy of Seller's Articles of Incorporation,
including any and all amendments thereto
certified by the Delaware Secretary of State,
and a copy of the bylaws of Seller as in
effect on the Closing Date certified by the
Seller's corporate Secretary;
(iv) a certificate of the Secretary of Seller
certifying the names of the officers of the
Seller authorized to sign this Agreement, the
Related Documents and any other documents or
certificates to be delivered pursuant to this
Agreement by the Seller, together with the
true signatures of such officers;
(v) an opinion of counsel for the Seller,
addressed to the Purchaser, in a form
satisfactory to Purchaser's counsel; and
(vi) such other opinions, certificates,
affidavits, documents and filings, including
any and all UCC filings, as the Purchaser may
deem reasonably necessary or appropriate.
4.4 DISBURSEMENTS AND DELIVERIES. The following disbursements
shall have been made out of the proceeds of the sale of the Note:
(i) $35,000 paid to the Purchaser as a closing
fee in addition to the $30,000 previously
paid; and
(ii) transaction expenses not to exceed $10,000
paid to the Purchaser as reimbursement of
expenses as provided for in Section 13.
4
<PAGE> 7
4.5 POST-CLOSING ITEMS. The following actions shall be taken
after the Closing:
(i) the Seller shall timely make appropriate
notice filings with respect to the issuance
and sale of the Warrant and the Note under
Regulation D of the Securities Exchange Act
and the state securities laws of Colorado and
Ohio; and
(ii) within 10 Business Days after the Closing
Date the Seller shall furnish or cause to be
furnished all post-closing items required to
be delivered pursuant to Section 13.19.
SECTION 5 REPRESENTATIONS AND WARRANTIES OF SELLER.
The representations and warranties of the Seller set forth in this
Section 5 shall survive the purchase and sale of the Note and Warrant, and any
investigation made by the Purchaser shall not diminish the right of the
Purchaser to rely upon such representations and warranties. Seller represents
and warrants to the Purchaser as follows.
5.1 ORGANIZATION AND STANDING.
Seller is a corporation duly organized and validly existing
under the laws of the State of Delaware and is in good standing under such
laws. The Seller is not qualified to do business as a foreign corporation in
any jurisdiction, except as set forth in Schedule 5.1. Such qualification is
not presently required in any other jurisdiction where a failure to qualify
would have a material adverse effect on the Company.
The Seller has furnished to the Purchaser true and correct
copies of the Articles of Incorporation, By-laws, (each with amendments
thereto) and any close corporation, shareholders, or voting trust agreement or
similar agreement reflecting the governance of the Seller, all as in effect as
of the date of this Agreement.
5.2 CORPORATE POWER.
Seller has all requisite corporate power to own and operate
its properties and assets, and to carry on its business as presently conducted.
Seller has all requisite corporate power to execute and deliver this Agreement
and the Related Documents and any other instruments or documents provided for
herein, to sell and issue the Note and Warrant, to issue the Warrant Shares, to
satisfy each of the conditions precedent set forth in Section 5 which are to be
satisfied by the Seller and to make each of the Representations and Warranties,
and to carry out and perform its obligations under the terms of this Agreement.
5
<PAGE> 8
5.3 SUBSIDIARIES.
Except as set forth on Schedule 5.3, Seller has no
Subsidiaries and does not otherwise own or control, directly or indirectly, any
other Person.
5.4 CAPITALIZATION.
(a) The entire authorized Capital Stock of the Seller
consists of 30,000,000 shares of Common Stock and 18,565,726 shares of
Preferred Stock. Of the authorized Capital Stock, 4,545,455 shares of Series A
Convertible Preferred Stock; 3,030,304 shares of Series B Convertible Preferred
Stock; 1,326,983 shares of Series C Convertible Preferred Stock; 2,736,369
shares of Series D Convertible Preferred Stock; 3,250,145 shares of Series E
Preferred Stock, 3,676,471 Shares of Series F Preferred Stock and 5,799,905
Common Shares are issued and outstanding, and 4,906,656 Common Shares are
reserved for issuance upon the exercise of stock options and the Warrant, and
18,565,727 Common Shares are reserved for issuance upon conversion of the
Preferred Stock.
(b) The outstanding Common Shares and Preferred Shares
have been, and upon exercise of the Warrant in accordance with its terms, the
Warrant Shares will have been (i) duly and validly authorized and issued, fully
paid and non-assessable, and (ii) issued in full compliance with applicable
registration or qualification provisions of applicable federal securities laws
and state securities laws, including the anti-fraud provisions thereof, and
(iii) issued in compliance with any applicable preemptive, preferential or
contractual right of any Person.
(c) Except as set forth in Schedule 5.4 and except for
such provisions included in this Agreement and the Related Documents, there are
no subscription or purchase rights, registration rights, options, warrants,
other rights, preemption, conversion, redemption, co-sale, buy-sell rights,
rights of refusal or similar rights, agreements or undertakings in effect or
committed to by the Seller or its stockholders with respect to the Capital
Stock of the Seller.
(d) Except as set forth in Schedule 5.4, there is no
agreement, irrevocable proxy, voting trust, shareholders agreement, close
corporation agreement or similar agreement or arrangement with respect to the
exercise of the Voting Power of the Seller.
5.5 AUTHORIZATION; ENFORCEABILITY.
The execution and delivery of this Agreement and the Related
Documents by the Seller and the performance of its obligations hereunder and
thereunder, including the sale, issuance and delivery of the Note and Warrant
and the issuance of the Warrant Shares upon the exercise of the Warrant have
been duly authorized by appropriate corporate action. This
6
<PAGE> 9
Agreement and each Related Document to which the Seller is a party, when
executed and delivered by Seller, will constitute valid and legally binding
obligations of the Seller, enforceable in accordance with their respective
terms, subject to (a) laws of general application relating to bankruptcy,
insolvency, and the relief of debtors, (b) rules of law governing specific
performance, injunctive relief, or other equitable remedies, and (c) the extent
that the indemnification provisions in Section 12 may be limited by principles
of public policy. The Seller has reserved 1,170,892 Common Shares for issuance
upon exercise of the Warrant. The Securities, when issued, will be duly
authorized, validly issued, fully paid and non-assessable and will be free of
any liens or encumbrances created by the Seller; provided, however, that the
Securities will be subject to restrictions on transfer under federal and state
securities laws and as set forth herein.
5.6 NONCONTRAVENTION.
The execution and delivery of this Agreement and the Related
Documents will not (a) violate any statute, regulation, rule, judgment, order,
decree, stipulation or injunction to which the Seller is subject, (b) conflict
with or result in a breach of the provisions of the Charter Documents of the
Seller, (c) conflict with, result in the breach of, constitute a default under,
result in the acceleration of, create in any Person the right to accelerate,
terminate, modify or cancel, or require any notice under, any contract, lease,
license, indenture, agreement, mortgage, instrument of Indebtedness or other
agreement to which the Seller is a party or by which the Seller or any property
of the Seller is bound or result in the creation or imposition of any Lien or
encumbrance on any of such property.
5.7 GOVERNMENTAL CONSENT.
No consent, approval, or authorization of or designation,
declaration, or filing with any governmental authority on the part of the
Seller is required in connection with the valid execution and delivery of this
Agreement and the Related Documents, or the consummation of any other
transaction contemplated by this Agreement and the Related Documents.
5.8 TITLE TO AND CONDITION OF PROPERTIES AND ASSETS.
Except as disclosed in Schedule 5.8, the Seller has good and
marketable title to all its properties (both real and personal) and assets.
The real and personal property owned and/or leased by the Seller is in good
condition and repair, ordinary wear and tear excepted, and routine maintenance
has been performed thereon.
5.9 FINANCIAL STATEMENTS.
The Financial Statements of the Seller for the years ended
December 31, 1994, 1995 and 1996, audited in each case by the Accountants, and
the nine months ended September
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<PAGE> 10
30, 1997, copies of which have been previously made available to Purchaser, (a)
have been prepared from the books and records of the Seller in accordance with
generally accepted accounting principles applied on a consistent basis, and (b)
fairly present the financial position of the Seller as of the respective dates
thereof and the results of operations, changes in equity and cash flows of the
Seller for the respective periods covered by such Financial Statements, except
that the Financial Statements as at September 30, 1997 and for the nine months
then ended omit footnote disclosure and are subject to normal year-end
adjustments.
5.10 UNDISCLOSED LIABILITIES.
Except as set forth in Schedule 5.10, the Seller has no
liability (whether known or unknown, absolute or contingent, liquidated or
unliquidated and whether due or to become due), including any liability for
Taxes, except for (a) liabilities set forth on the balance sheet of the Seller
as of September 30, 1997, included in the Financial Statements, (b) liabilities
incurred since that date in the ordinary course of business, and (c) costs and
expenses incurred in connection with the transactions contemplated by this
Agreement. Except as set forth in Schedule 5.10, the Seller is not liable upon
or with respect to or obligated in any other way to provide funds in respect of
or to guaranty or assume in any manner (including, without limitation, under or
pursuant to any agreement, arrangement, commitment or understanding, whether
written or oral), any debt, obligation or dividend of any other Person.
5.11 EVENTS SINCE DECEMBER 31, 1996
Since December 31, 1996, except as disclosed on Schedule 5.11,
there has not been:
(a) any casualty affecting any material property or asset
of the Seller;
(b) any indebtedness for borrowed money incurred by the
Seller, other than Indebtedness incurred to Purchaser and Indebtedness incurred
under the Senior Loan Agreement;
(c) any change in any accounting policies, procedures or
practices employed with respect to the Seller;
(d) any sale or license of any of the assets of the
Seller, other than sales of inventory in the ordinary course of business;
(e) any acceleration, termination, cancellation or
adverse modification of any material agreement, contract, lease or license to
which the Seller is a party or by which it is bound;
(f) any dividend, payment or other distribution with
respect to any of the Capital Stock of the Seller;
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(g) any redemption or purchase of any Common Shares or
Preferred Shares or any option or warrant to purchase Common Shares or
Preferred Shares; or
(j) any other material transaction other than in the
ordinary course of business consistent with past practices.
5.12 TAXES.
(a) TAX RETURNS. The Seller has filed all Tax Returns
relating to Taxes which the Seller was required to file prior to the date of
this representation. The Seller has paid all Taxes and assessments which are
due. The provision for Taxes of the Seller as shown in the current Financial
Statements of the Seller is adequate for Taxes due or accrued as of the date
thereof.
(b) NO WAIVER OF STATUTES OF LIMITATION. The Seller has
not waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency.
(c) AUDITS AND DEFICIENCIES. None of the Tax Returns
have been audited or are currently the subject of an audit by a governmental
agency. The Seller has not received any notice of a deficiency or proposed
deficiency in any of the Taxes paid by the Seller.
5.13 INTELLECTUAL PROPERTY.
(a) INTELLECTUAL PROPERTY. The Seller owns or is licensed
to use all Software which is used in Seller's Business. All Intellectual
Property owned by the Seller is described in Schedule 5.13. A copy of each
registration, or pending application for registration, of the Intellectual
Property has previously been made available to Purchaser.
(b) USE AND OWNERSHIP. No Person other than the Seller
has any ownership interest in any Intellectual Property, product, technology or
process developed or sold by the Seller. The Seller has not disclosed to any
other Person any information relating to any of the Intellectual Property used
in or necessary for the conduct of any of the Seller's business in a manner
which would permit such Person to compete with the Seller. Except as set forth
on Schedule 5.13, the Seller has not granted any Person the exclusive right to
use any of its Intellectual Property.
(c) INFRINGEMENT. There are no interference, oppositions
or cancellation proceedings or infringement suits pending or, to the knowledge
of the Seller, threatened with respect to any of the Intellectual Property. To
the knowledge of the Seller, no Person is
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interfering with or infringing on any of the Intellectual Property. The Seller
has not interfered with, infringed upon, misappropriated or otherwise come into
conflict with any patent, trademark, service mark, trade name, copyright, trade
dress or other proprietary right of any Person, and the Seller has not received
any claim alleging such interference, infringement, misappropriation or
conflict.
(d) EXCLUSIVE USE. The Seller owns or has the right to
use, license and exploit, without restriction or adverse claim, all know-how,
trade secrets, inventions, methods and other proprietary rights which are
necessary or appropriate for the Seller to conduct its business.
5.14 MATERIAL CONTRACTS.
Schedule 5.14 fully and accurately lists all of the Material
Contracts in effect to which the Seller is a party and the Purchaser will be
furnished with access to all Material Contracts. With respect to each Material
Contract, except as otherwise disclosed in Schedule 5.14: (i) such agreement
is in full force and effect and constitutes the legal, valid and binding
obligation of the Seller and, to the knowledge of the Seller, the other parties
thereto, enforceable in accordance with its terms, except as may be limited by
bankruptcy, insolvency, moratorium and other similar laws affecting creditors'
rights generally and by general principles of equity, (ii) such agreement will
not be terminated as a result of this Agreement, (iii) the Seller is not in
default in any material respect under such agreement and no event has occurred
which, with the passage of time, would constitute such a material default, and
(iv) to the knowledge of the Seller, no other party is in default in any
material respect under such agreement.
5.15 LITIGATION.
The Seller is not (i) subject to any outstanding injunction,
judgment, order, decree or ruling, or (ii) a party or, to the knowledge of the
Seller, threatened to be made a party, to any action, suit, proceeding,
hearing, audit or investigation, of or before any court, quasi-judicial agency,
administrative agency or arbitrator.
5.16 INSURANCE.
The Seller maintains such insurance as is required by law.
5.17 COMPLIANCE WITH LAWS.
The Seller has complied with all Applicable Laws where the
failure so to comply could have a material adverse effect on the Seller's
financial or business condition, and no notice has been received by the Seller
alleging non-compliance of any Applicable Law which could have such a material
adverse effect which remains uncured as of the date hereof.
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5.18 LICENSES AND PERMITS.
The Seller has obtained all material licenses and permits and other
governmental authorizations required in order for it to conduct its business as
presently conducted. All of such licenses and permits are in full force and
effect. No material violation exists in respect of any such license or permit.
No proceeding is pending, or to the knowledge of the Seller, threatened to
revoke or limit any such license or permit.
5.19 SPECIFIC ENVIRONMENTAL WARRANTIES.
(a) ENVIRONMENTAL AUDITS. Except as set forth on Schedule
5.19, no environmental audits, assessments or occupational health studies or
analyses of any groundwater, soil, air or asbestos samples have been taken from
any facility now or in the past leased or owned by the Seller undertaken by, or
at the direction of, the Seller, any employees or counsel to the Seller or, to
the knowledge of the Seller, any governmental agency.
(b) HAZARDOUS MATERIALS AND ACMS. Except as used in the
normal course of the Seller's business and in compliance with Environmental
Laws, no Hazardous Materials, asbestos or asbestos containing materials
("ACMs") are, or to the knowledge of the Seller have been, located in or about
any real properties owned by the Seller or, with respect to any real property
leased by the Seller as a lessee, or have been released by the Seller into the
environment, or discharged, treated, managed, recycled, placed or disposed of
by the Seller or, to the knowledge of the Seller, anyone else, at, on or under
any real properties or owned by the Seller, or with respect to any real
property leased by the Seller as a lessee, and to the knowledge of Seller, no
Hazardous Materials or ACMs formerly located on the real properties or owned by
the Seller or, with respect to any real property leased by the Seller as a
lessee, have been disposed of at any off-site waste disposal.
(c) DISPOSAL, STORAGE, RECYCLING, TREATMENT, ETC. Except
as used in the normal course of the Seller's business and in compliance with
Environmental Laws, no portion of any real properties owned by the Seller or,
with respect to any real property leased by the Seller as a lessee, is being
used, or to the knowledge of the Seller, has been used, for the disposal,
storage, recycling, treatment, processing or other handling of Hazardous
Materials, where the same could have a material adverse effect on the business,
financial condition or prospects of the Seller.
(d) STORAGE TANKS. Except as used in the normal course of
the Seller's business and in compliance with Environmental Laws, to the
knowledge of the Seller, no storage tanks (whether above the ground or
underground) are located on or under any real properties currently or
previously owned by the Seller, or with respect to any real property leased by
the Seller as a lessee, have been located on such real property during the
period when the Seller was
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the lessee of such real property, where the same could have a material adverse
effect on the business, financial condition or prospects of the Seller .
(e) PLUMBING OR SEPTIC TANKS. Except as used in the
normal course of the Seller's business and in compliance with Environmental
Laws, the Seller is not disposing of, and has not in the past disposed of, any
Hazardous Materials into the plumbing or septic tank on property which the
Seller owns or leases or which the Seller has owned or leased where the same
could have a material adverse effect on the business, financial condition or
prospects of the Seller.
(f) ENVIRONMENTAL LAWS. The Seller is and has been
operating in compliance with all applicable Environmental Laws where the
failure so to comply could have a material adverse effect on the business,
financial condition or prospects of the Seller.
(g) LEGAL PROCEEDINGS AND INVESTIGATIONS. To the
knowledge of the Seller, no investigation, administrative order or notice,
consent order and agreement, litigation, settlement or environmental claim or
lien with respect to Hazardous Materials is proposed, threatened or in
existence with respect to any real properties now or previously owned or leased
by the Seller, or with respect to any off-site waste disposal to which waste of
the Seller has been taken. The Seller has not received any summons, citation or
written notice from any Person whomsoever concerning any violation or alleged
violation of Environmental Laws or the unpermitted or illegal storage, dumping
or discharge of any Hazardous Materials arising out of or with respect to any
real properties now or previously owned or leased by the Seller or the
operations of its business.
5.20 LABOR RELATIONS.
The Seller is not a party to or bound by any collective
bargaining agreement. No allegation, charge or complaint of unfair labor
practices or similar charge has been made to the National Labor Relations Board
or to the knowledge of the Seller, threatened against the Seller.
5.21 EMPLOYEE BENEFIT PLANS.
Each Welfare Plan and Pension Plan that the Seller maintains or
contributes to, or has maintained or contributed to during the past five years,
is listed and described on Schedule 5.21. The Pension Plans that are intended
to qualify under Section 401(a) of the Code are referred to on Schedule 5.21 as
"Qualified Plans."
(a) ERISA AND CODE COMPLIANCE. Each Benefit Plan has met the
applicable requirements of, and is and has been at all times administered in
all material respects in compliance with, the requirements of ERISA and the
Code. All Tax Returns, information returns, and reports required to be filed
with respect to each Benefit Plan pursuant to ERISA or
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the Code have been accurately, timely, and properly filed. All notices,
statements, reports and other disclosure required to be given or made to
participants and beneficiaries under each Benefit Plan pursuant to ERISA or the
Code have been accurately, timely, and properly given or made.
(b) PLAN LIABILITIES. The Seller does not have, or expect to
have, any liability, directly or indirectly, for any "accumulated funding
deficiency" (as such term is defined in ERISA or the Code), with respect to
any Qualified Plan or any other employee pension benefit plan. The Seller has
no liability for any post-retirement medical or life insurance benefits, except
pursuant to the COBRA Requirements. The Seller has no obligation to contribute
to a "welfare benefit fund" within the meaning of Section 419(e) of the Code.
(c) PROHIBITED TRANSACTIONS. No Person has engaged in any
transaction with respect to any Benefit Plan that is prohibited under ERISA or
the Code nor have there been any breaches of fiduciary duty under ERISA that
could subject the Seller, any employee or member of the Board of Directors, or
any Person indemnified by the Seller to any material liability, including
liability for any civil penalty under ERISA or the Code.
(d) PBGC LIABILITY. The Seller has no, nor expects to have any,
liability, directly or indirectly, to the Pension Benefit Guaranty Corporation
with respect to any employee pension benefit plan.
(e) MULTI EMPLOYER PLANS. The Seller has not contributed and has
no obligation to contribute to any "Multi Employer Plan", as such term is
defined in ERISA.
(f) CLAIMS. Except for routine claims for benefits arising in the
ordinary course of the administration of the Benefit Plans, there are no
pending or threatened claims, investigations, or audits for benefits under a
Benefit Plan or of violations of the requirements of ERISA or the Code, nor is
there any reasonable basis for any such claim, investigation, or audit.
(g) PAYMENTS MADE. All (i) insurance premiums required with
respect to, (ii) benefits, expenses, and other amounts due and payable under,
and (iii) contributions, transfers, or payments required to be made to or with
respect to, any Benefit Plan have been paid, made or accrued.
(h) NON-ACCELERATION. The execution and performance of this
Agreement or the Related Documents will not (i) constitute a stated triggering
event under any Benefit Plan that will result in any payment (whether of
severance pay or otherwise) becoming due from the Seller to any officer,
employee or former employee (or dependents of such employee), or (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation due to any employee, officer or director of the Seller.
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5.22 CUSTOMERS.
The Seller has not been advised that any of its customers intend to
cease doing business with the Seller or reduce the amount of goods or services
purchased on a regular on-going basis from the Seller, which cessation or
reduction in the aggregate could have a material adverse effect on the Seller's
financial or business condition.
5.23 REGISTRATION RIGHTS.
Except as set forth on Schedule 5.23 or in the Related Documents, the
Seller is not under any obligation to register any of its presently outstanding
securities or any of its Capital Stock.
5.24 DISTRIBUTIONS.
Except as set forth on Schedule 5.24, there has been no declaration or
payment by the Seller of dividends, or any distribution by the Seller of any
assets of any kind to any of its shareholders in redemption of or as the
purchase price for any of the Seller's Capital Stock.
5.25 SECURITIES ACT.
Subject to the accuracy of Purchaser's representations in Section 6,
the offer, sale, and issuance of the Securities in conformity with the terms of
this Agreement and the Warrant, constitute or will constitute transactions
exempt from the registration requirements of the federal and state securities
laws.
5.26 FULL DISCLOSURE.
To the knowledge of the Seller, the Financial Statements and documents
provided to the Purchaser and the representations and warranties of the Seller
contained in this Agreement, and the Related Documents taken as a whole, do not
contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements contained herein or therein, in
light of the circumstances under which they were made, not misleading.
SECTION 6 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The representations and warranties of the Purchaser set forth in this
Section 6 shall survive the purchase and sale of the Note and Warrant, and any
investigation made by the Seller shall not diminish the right of the Seller to
rely upon such representations and warranties. The Purchaser represents and
warrants to the Seller as follows.
6.1 ORGANIZATION. The Purchaser represents and warrants that it
is a limited liability company duly organized and validly existing under the
laws of the state of its formation and the
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execution, delivery and performance by the Purchaser of this Agreement, each of
the Related Documents to which it is a party and of any instrument or agreement
required by this Agreement and the Related Documents to which it is a party are
within its powers, have been duly authorized, and are not in conflict with the
terms of any provision of its partnership agreement or other organizational
documents.
6.2 NO CONFLICTS. The execution, delivery and performance of this
Agreement, the Related Documents and any other instrument or agreement required
by this Agreement to which the Purchaser is a party have been duly authorized
by all requisite action on the part of the Purchaser and are not in conflict
with any law or any material indenture, agreement or undertaking to which the
Purchaser is a party or by which the Purchaser is bound or affected.
6.3 ENFORCEABILITY. This Agreement is a legal, valid and binding
agreement of the Purchaser, enforceable against the Purchaser in accordance
with its terms and the Related Documents and any other instrument or agreement
required under this Agreement, when executed or delivered by the Purchaser,
will be legal, valid, binding and enforceable in accordance with their
respective terms, subject to (a) laws of general application relating to
bankruptcy, insolvency, and the relief of debtors, (b) rules of law governing
specific performance, injunctive relief, or other equitable remedies, and (c)
the extent that the indemnification provisions in Section 12 may be limited by
principles of public policy.
6.4 AUTHORIZATION AND CONSENTS. No approval, consent, compliance,
exemption, authorization or other action by, or notice to, or filing with, any
governmental authority or any other Person pursuant to Applicable Law, and no
lapse of the waiting period under the Applicable Law, is necessary or required
in connection with the execution, delivery and performance by the Purchaser or
enforcement against the Purchaser of this Agreement and the Related Documents
to which the Purchaser is a party or the transactions contemplated hereby or
thereby.
6.5 EXPERIENCE. The Purchaser is an accredited investor within
the meaning of Rule 501(a) of Regulation D promulgated under the Securities Act
and has substantial experience in evaluating and investing in securities of
companies similar to the Seller and has made investments of securities other
than those of the Seller. The Purchaser acknowledges that by reason of its
business or financial experience and financial condition, it has the ability to
analyze and bear the entire risk of its investment pursuant to this Agreement,
the Note and the Warrant.
6.6 INVESTMENT INTENT. The Purchaser is acquiring the Note and
the Warrant for investment for its own account, not as a nominee or agent and
not with a view to, or for resale in connection with, any distribution thereof.
The Purchaser may sell a beneficial interest (but not of record) in the Note
and a proportionate share of the Warrant Shares to Accredited Investors. The
Purchaser understands that the issuance and sale of the Securities purchased by
it hereunder (and
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the issuance of Warrant Shares upon the exercise of the Warrant) have not been,
and will not be, subject to a registration statement filed under the Securities
Act or any applicable state securities law by reason of a specific exemption
from the registration provisions of the Securities Act and such state
securities laws, which exemption depends upon, among other things, the bona
fide nature of the investment intent and the accuracy of the Purchaser's
representation as expressed herein.
6.7 RULE 144. The Purchaser acknowledges that the securities
which are or could be acquired hereunder are restricted securities within the
meaning of Rule 144 promulgated under the Securities Act and must be held
indefinitely unless subsequently registered under the Securities Act and
applicable state securities laws or unless an exemption from such registration
is available. The Purchaser is aware of the provisions of Rule 144 promulgated
under the Securities Act which permits the limited resale of securities
purchased in a private placement subject to the satisfaction of certain
conditions.
6.8 KNOWLEDGE OF PURCHASER. The Purchaser is aware of and has
investigated the Seller's business, management and financial condition, has had
the opportunity to inspect the Seller's facilities and meet with the Seller's
management and has had access to such other information about the Seller as the
Purchaser has deemed necessary and desirable to reach an informed and
knowledgeable decision to acquire the Securities to be purchased by it
hereunder. The purchase of such Securities is not a result of an advertisement
of an offering in connection with the sale of such Securities.
SECTION 7 FINANCIAL REPORTING.
The obligations and covenants of the Seller set forth in this Section 7
shall terminate upon the later to occur of (i) payment in full of the Note, or
(ii) the Purchaser no longer holds Warrant Shares.
7.1 FINANCIAL AND CORPORATE REPORTS.
The Seller shall deliver, or shall cause to be delivered, to the
Purchaser the following financial and corporate reports within the applicable
time periods specified in this Section.
(a) Annual Financial Statements. The Annual Financial Statements
shall be delivered within ninety (90) days after the end of each Fiscal Year,
and shall be accompanied by the applicable Audit Report, Accountant's
Statement, CFO Certificate and Compliance Certificate.
(b) Quarterly Financial Statements. The Quarterly Financial
Statements shall be delivered within forty-five (45) days after the end of
each Quarter (other than the fourth Quarter) of each Fiscal Year, and shall be
accompanied by the applicable CFO Certificate and Compliance Certificate.
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(c) Monthly Financial Statements. The Monthly Financial
Statements shall be delivered promptly upon their dissemination to management
of the Seller, but in no event later than 30 days after the end of each
calendar month.
(d) Projected Financial Statements. The projected Financial
Statements with respect to each succeeding Fiscal Year shall be delivered
within ninety (90) days after the end of the preceding Fiscal Year.
(e) Securities Reports. Any Securities Reports shall be delivered
promptly upon their delivery to security holders or the SEC.
(f) Lender Reports. Any Lender Reports shall be delivered
promptly upon their delivery to any lender or note holder.
(g) Management Letters. Any Management Letters shall be delivered
promptly after receipt thereof.
7.2 OTHER INFORMATION.
Promptly upon reasonable written request therefor, the Seller shall
furnish (or cause to be furnished) to the Purchaser other financial or other
information (including Minutes) with respect to the Seller available in the
books, records and files of the Seller; provided, however, that if such
information cannot be furnished without undue expense, the Seller may require
the Purchaser to reimburse it for all reasonable out-of-pocket expenses
incurred in connection with furnishing such information.
7.3 RULE 144A.
The Seller shall, upon the reasonable written request of the Purchaser,
furnish to any qualified institutional buyer (as such term is defined in Rule
144A under the Securities Act) designated by the Purchaser, such financial or
other information as the Purchaser reasonably determines is necessary in order
to afford compliance with the applicable information requirements under Rule
144A under the Securities Act in connection with any proposed sale of the
Securities except at such times as the Seller is subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act.
7.4 PREPARATION OF FINANCIAL STATEMENTS IN ACCORDANCE WITH GAAP.
The Seller shall maintain adequate books, accounts and records, and
prepare all Annual, Quarterly and Monthly Financial Statements in accordance
with GAAP applied in a manner consistent with the practices, policies and
procedures applied in connection with the preparation
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of the Financial Statements of the Seller initially delivered to the Purchaser,
except for any changes in such practices, policies and procedures permitted or
approved in the manner provided for in this Section.
7.5 CHANGES IN GAAP AND IN PRACTICES, POLICIES AND PROCEDURES.
(a) Notice of Proposed Change. In the event that the Seller
proposes to make any material change in any of the practices, policies or
procedures applied in connection with the preparation of its Annual or
Quarterly Financial Statements, the Seller shall:
(i) notify the Purchaser in writing of such proposed
change at least forty-five (45) days prior to the
required delivery date of the first Annual or
Quarterly Financial Statement that will be effected
by such proposed change;
(ii) state in reasonable detail in such notice the reason
for such change, including, if applicable, a
description of any change in GAAP that occasions such
change;
(iii) submit with such notice a written statement by the
chief financial officer of the Seller describing the
anticipated effect, if any, of the proposed change to
the computation of the Financial Tests, or stating
that in his opinion such proposed change will have no
material effect on the computation of such Financial
Tests; and
(iv) in the event such proposed change will have a
material effect on the computation of such Financial
Tests, submit with each Compliance Certificate a
written reconciliation in reasonable detail
demonstrating the computation of the Financial Tests
as if such change had not been made.
(b) Consent to Change. Unless such change in practices, policies
or procedures is required by a change in GAAP, the Seller shall not adopt any
such proposed change without the written consent of the Purchaser, which
consent shall not be unreasonably withheld by the Purchaser.
(c) Effect of Change on Financial Tests. In the event that any
such change in policies, practice or procedures would materially affect the
computation of any Financial Test, and unless this Agreement is amended to make
appropriate modifications to such Financial Test, compliance with all such
Financial Test shall be determined on a proforma basis without giving effect to
any such change.
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7.6 NOTICE OF CERTAIN EVENTS.
The Seller shall give prompt written notice to the Purchaser of the
occurrence of any of the following events:
(a) a Default or Event of Default;
(b) the occurrence of any event which with notice, lapse of time
or both would constitute an event of default under any Senior Indebtedness;
(c) all litigation affecting the Seller where the amount claimed
is Two Hundred Thousand Dollars ($200,000) or more;
(d) any substantial dispute which may exist between the Seller and
any governmental regulatory body or law enforcement authority;
(e) Any other matter which has resulted or is likely to result in
a material adverse change in the Seller's financial condition or operations;
(f) the entering into any agreement or letter of intent with
respect to any Put Trigger Event; and
(g) the occurrence of any Put Trigger Event.
7.7 BOOKS, RECORDS, AUDITS AND INSPECTIONS.
The Seller shall permit employees or agents of the Purchaser upon
reasonable advance notice and at reasonable times and in a manner that does not
disrupt the Seller's business operations, to inspect Seller's properties, and
to examine or audit the Seller's books, accounts and records and make copies
and memoranda thereof. In the event any properties, books, accounts or records
are in the possession of or under the control of a third party, the Seller
shall direct (and hereby authorizes) such third party to permit access, upon
reasonable advance notice and at reasonable times, to the Purchaser's employees
or agents for the purpose of performing the inspections, appraisals,
examinations or audits permitted under this Section, and to respond to any
reasonable requests from the Purchaser for information concerning the amount,
status or condition of any assets in a third party's possession or control.
7.8 LATE DELIVERY OF ACCOUNTING STATEMENTS.
In the event that Seller fails to deliver to Purchaser any Financial
Report required to be delivered pursuant to clause (a), (b), (c) or (d) of
Section 7.1 within ten Business Days after the required delivery date, the
Purchaser may, in the exercise of its discretion, by Notice to the Seller,
assess a late delivery fee of $1,000 with respect to each such late delivery
plus $100 per
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Business Day from the date of such Notice continuing until such Financial
Report has been delivered; provided, however, that the maximum assessment with
respect to the delivery of any one Financial Report shall be $2,500. The
Seller shall pay any such assessment upon demand. The assessment of any such
late delivery fee shall not constitute a waiver of the associated Default.
SECTION 8 AFFIRMATIVE COVENANTS.
Until the later to occur of (i) repayment of the Note or (ii) expiration
of the Warrant, the Seller shall, unless the Purchaser waives compliance
therewith in writing:
8.1 INSURANCE. Insure and maintain insurance upon all of its
assets and business properties and public and product liability insurance with
responsible and reputable insurers of such character and in such amounts as are
usually maintained by companies engaged in like business.
8.2 PAYMENT OF TAXES AND CLAIMS. Pay all Taxes, assessments and
other governmental charges imposed upon its properties or assets or in respect
of its franchises, business, income or profits before any material penalty or
interest accrues thereon, and all claims (including, without limitation, claims
for labor, services, materials and supplies) for sums which have become due and
payable and which by law have or might become due and payable or become a lien
or charge upon its properties or assets, provided that (unless any material
item of property would be lost, forfeited or materially damaged as a result
thereof) no such charge, Tax, assessment or claim need be paid if the amount,
applicability or validity thereof is currently being contested in good faith
and if such reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made therefor.
8.3 COMPLIANCE WITH LAWS. Comply in all material respects with
all applicable statutes, laws, ordinances and governmental rules, regulations
and orders including, but not limited to, all Environmental Laws, to which it
is subject or which are applicable to its business, properties and assets if
noncompliance therewith would materially adversely affect such business.
8.4 PRESERVATION OF EXISTENCE AND LICENSES. Preserve and
maintain its corporate existence and its rights, franchises and privileges in
the jurisdiction of its incorporation and qualify and remain qualified as a
foreign corporation in each jurisdiction in which the failure to do so would
have a material adverse affect on the Seller's financial condition or
operations; and obtain, preserve and maintain all material permits and licenses
necessary for the conduct of its business.
8.5 MAINTENANCE OF ASSETS. Maintain its tangible assets in good
condition and repair in accordance with the requirements of its business and
shall not permit any action or omission
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which might materially impair the value thereof, normal wear and tear excepted;
provided, however, that the Seller may discard or sell assets no longer used in
its business operations; maintain all material items of its Intellectual
Property and its rights to use and exploit or license such Intellectual
Property, and defend all interferences or infringements therewith.
8.6 PERFORMANCE OF CONTRACTS. Perform and comply with, in
accordance with its terms, all material provisions of each and every material
contract, agreement or instrument now or hereafter binding upon it, except to
the extent it may contest the provisions thereof in good faith and by proper
proceedings.
8.7 EMPLOYEE BENEFIT PLANS.
(a) ERISA AND CODE COMPLIANCE. The Seller will cause each of its
Benefit Plans to be administered in all material respects in compliance with
the requirements of ERISA and the Code except where failure to do so could not
reasonably be expected to have a material adverse effect on the Seller's
business or financial condition. The Seller will cause all Tax Returns,
information returns, and reports required to be filed with respect to each of
its Benefit Plans be to accurately, timely, and properly filed as required
under ERISA or the Code except where failure to do so could not reasonably be
expected to have a material adverse effect on the Seller's business or
financial condition.
(b) CREATION AND TERMINATION. The Seller will not create, enter
into or provide any or make any direct or indirect commitment to create, enter
into or provide any Benefit Plan (other than those identified on Schedule 5.21)
or terminate or materially amend any of such plans without the consent of the
Purchaser, which consent shall not be unreasonably withheld; provided that the
Purchaser may, in the sole exercise of its discretion, withhold its consent to
the creation of any Multi Employer Plan or any defined benefit plan as defined
in Section 414 of the Code or any Deferred Plan that provides for payments or
distributions prior to the payment in full of the Note.
(c) LIABILITIES AND OBLIGATIONS. The Seller shall not incur any
material liability, directly or indirectly, for any "accumulated funding
deficiency" (as defined in ERISA or the Code), whether or not waived, or incur
any liability for any post-retirement medical or life insurance benefits,
except pursuant to the COBRA Requirements. The Seller shall not incur any
obligation to contribute to any "welfare benefit fund" within the meaning of
Section 419(e) of the Code.
(d) PROHIBITED TRANSACTION. The Seller shall not permit any
Person under its control to engage in any transaction with respect to any
Benefit Plan that could subject the Seller, or any Person indemnified by the
Seller to any material liability for any civil penalty under the Code.
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(e) PBGC LIABILITY. The Seller shall not incur any material
liability, directly or indirectly, to the Pension Benefit Guaranty Corporation,
with respect to any of its Benefit Plans.
SECTION 9 NEGATIVE COVENANTS.
Until the later to occur of (i) repayment of the Note or (ii) the
expiration of the Warrant, the Seller shall not, unless the prior written
consent of the Purchaser is obtained:
9.1 OTHER INDEBTEDNESS. Create or incur, contract, assume, have
outstanding, guarantee or otherwise be or become directly or indirectly liable
in respect of any Indebtedness; provided, however, that this Section shall not
be deemed to prohibit:
(a) Senior Indebtedness;
(b) Lease financing or purchase money financing for equipment or
other property which is secured by the equipment or property so leased or
purchased; and
(c) Indebtedness set forth on the Seller's most recent Financial
Statements, other than the Senior Indebtedness.
9.2 PREPAYMENTS. Pay any Indebtedness prior to its scheduled
maturity or scheduled payment date other than the Note or Senior Indebtedness.
9.3 LIENS. Grant, create, incur, assume, permit or suffer to
exist any Lien upon any of its properties or assets, whether now owned or
hereafter acquired, except, to the extent not otherwise prohibited hereunder:
(a) Liens incidental to the conduct of its business or the
ownership of its property and assets which do not secure Indebtedness and which
do not in the aggregate materially detract from the value of its property or
assets or materially impair the use thereof in the operation of its business;
and
(b) Permitted Liens.
9.4 LEASES. Enter into or permit to remain in effect any
operating lease as lessee, other than operating leases entered into in the
ordinary course of the Seller's business.
9.5 LOANS, ADVANCES AND INVESTMENTS. Make any Investment or
otherwise acquire any interest in, or control of, another Person, except for
the following:
(a) Cash Equivalents;
(b) Any acquisition of securities or evidences of indebtedness of
others when acquired by the Seller in settlement of accounts receivable or
other debts arising in the ordinary
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course of its business, so long as the aggregate amount of any such securities
or evidences of indebtedness is not material to the business or condition
(financial or otherwise) of the Seller;
(c) Travel and other advances to officers and employees of the
Seller in the ordinary course of business; and
(d) Investments not exceeding $100,000 per Investment and
$1,000,000 in the aggregate.
9.6 NO ACQUISITIONS OR MERGERS. Acquire all or substantially all
of the assets of any Person or enter into a merger or consolidation with or
into any Person wherein the Seller is not the surviving entity or wherein a
Change of Control of the Seller occurs.
9.7 SUBSIDIARIES. The Seller shall not have any Subsidiaries
except as set forth on Schedule 5.3.
9.8 SALES AND LEASEBACKS. Dispose of any of its assets except for
full, fair and reasonable consideration or enter into any sale and leaseback
agreement covering any of its fixed or capital assets.
9.9 RESTRICTIONS ON DIVIDENDS. Directly or indirectly declare or
make, or incur any liability to make any Dividend.
9.10 TRANSFERS, LIQUIDATIONS AND DISPOSITIONS OF SUBSTANTIAL
ASSETS. Dissolve or liquidate or sell, transfer, lease or otherwise dispose of
any material portion of its property or assets or business, other than in the
ordinary course of business.
9.11 CAPITAL STOCK; REGISTRATION RIGHTS. The Seller shall not
grant any registration rights with regard to the Seller's Capital Stock other
than registration rights in effect on the date hereof or take action which
would materially adversely affect the Purchaser's ownership interest in the
Seller.
9.12 RESTRICTED PAYMENTS. Make, pay or declare, or commit to make,
pay or declare, any Restricted Payment without the prior written consent of the
Purchaser, provided, however, Seller may make Restricted Payments that are less
than $100,000 which do not exceed, in the aggregate, $1,000,000.
9.13 BUSINESS ACTIVITIES. Engage in any business activities or
operations substantially different from or unrelated to the Business.
9.14 TRANSACTIONS WITH AFFILIATES. Enter into any transaction,
including without limitation, the purchase, sale or exchange of property or the
rendering of any services, with any
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Affiliate or any partner, officer or director thereof, enter into, assume or
suffer to exist any employment or consulting contract with any Affiliate or any
partner, officer or director thereof or any former or current officer or
director of the Seller, except any transaction or contract which is in the
ordinary course of the Seller's business and which is upon fair and reasonable
terms no less favorable to the Seller than it would obtain in a comparable
arms-length transaction with a Person not an Affiliate.
9.15 SENIOR LOANS. Amend or modify the Senior Loan Agreement or
any other senior credit document in any manner that is materially adverse to
the Purchaser or that would violate any provision of the Intercreditor
Agreement.
SECTION 10 FINANCIAL TESTS.
Until payment in full of the Note and the performance by the Seller of
all its obligations hereunder, the Seller shall, unless the Purchaser waives
compliance therewith in writing, meet the following Financial Tests.
10.1 MINIMUM DEBT SERVICE COVERAGE. The Seller shall maintain,
determined as of the end of each Fiscal Quarter, a Debt Service Coverage Ratio
of at least 1:00 to 1:00.
10.2 MAXIMUM LEVERAGE. The Seller shall maintain, determined as of
the end of each Fiscal Quarter, a ratio of Total Debt to EBITDA of no greater
than 3:50 to 1:00.
10.3 ADJUSTED TANGIBLE NET WORTH. The Seller shall maintain
Adjusted Tangible Net Worth of at least $2,500,000 from the date of closing
through March 31, 1999, plus 50% of net income, determined as of the end of
each Fiscal Quarter.
SECTION 11 EVENTS OF DEFAULT.
The Events of Default are stated in the form of the Note which is
attached as Exhibit B.
SECTION 12 INDEMNIFICATION BY THE SELLER
12.1 INDEMNIFICATION. The Seller shall indemnify and hold the
Purchaser harmless from and against any and all Indemnified Losses related to,
caused by or arising from any misrepresentation, breach of warranty or failure
to fulfill any covenant or agreement contained herein, except to the extent
that any such loss, damage, expense, suit, action, claim, liability or
obligation arises from the Purchaser's gross negligence or willful misconduct,
and provided that in no event shall this Section 12 be construed to require the
Seller to indemnify the Purchaser with respect to any litigation or dispute
between the parties to the extent that the same is ultimately resolved in favor
of the Seller.
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12.2 PROCEDURES FOR INDEMNIFIED LOSSES. In order to claim
Indemnified Losses under this Section:
(a) Purchaser shall give written Notice to the Seller of any
claimed Indemnified Losses, which Notice shall set forth a reasonably detailed
statement of the Indemnified Losses, including the cost, expense, loss, damage
and liability Purchaser has incurred and expects to incur by reason thereof.
(b) Such Indemnified Loss shall be effected on the last to occur
of (i) the expiration of 30 days from the date of such Notice (the "Notice of
Contest Period"); (ii) if such claim is contested as hereinafter provided, the
date the dispute is resolved in accordance with this Section, or (iii) the date
such claim becomes liquidated in amount.
(c) If, prior to the expiration of the Notice of Contest Period,
the Seller notifies Purchaser in writing of the Seller's intention to dispute
the claim for Indemnified Losses, and if such dispute is not resolved with 30
days after the expiration of such Notice of Contest Period ("Resolution
Period"), then the matter may be submitted by Purchaser and the Seller to a
Person recognized in the field of alternate dispute resolution agreed upon by
the Parties ("Mediator") within 10 days after the expiration of the Resolution
Period. The Mediator shall be requested to recommend to the Parties in writing
a procedure for non-binding mediation ("Mediation") to resolve such dispute.
The Parties shall cooperate and diligently pursue resolution through Mediation
within 45 days after the Mediator has been agreed upon. If the dispute cannot
be resolved within such period as the Mediator deems reasonable, the Mediator
shall, upon the request of Purchaser or the Seller, certify to the Parties that
the dispute is incapable of resolution through the Mediation process. The
expenses of such Mediation (excluding expenses incurred solely by Purchaser or
the Seller in such Mediation, which shall be borne by the party incurring such
expenses) shall be borne 50% by Purchaser and 50% by the Seller. Since the
Mediation is conducted for the purpose of settling the dispute, all proposals
and settlement offers shall be inadmissible for any purpose (including
arbitration) by virtue of Rule 408 of the Federal Rules of Evidence and the
principles expressed in such rule.
(d) If Purchaser and the Seller are unable to agree upon a
Mediator within 10 days after the Resolution Period or the Mediator certifies
to the Parties that the dispute is incapable of resolution through the
Mediation process, then such dispute shall be resolved by a committee of three
arbitrators (one appointed by the Seller, one appointed by Purchaser and one
appointed by the other two so appointed), who shall be appointed within 60 days
after such inability to agree or such certification by the Mediator. The
arbitrators shall be located in, and the arbitration shall take place, in
Columbus, Ohio in accordance with the rules of the American Arbitration
Association and their decision shall be final and binding on the Seller and
Purchaser. The expenses of such arbitration (excluding expenses incurred
solely by Purchaser or the Seller in bringing or defending such proceeding,
which shall be borne by the party incurring such expenses) shall be borne
one-half by Purchaser and one-half by the Seller. The Parties shall
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cooperate and diligently pursue the arbitration of such claim for offset in
order for a decision to be made by the arbitrators within 45 days after their
appointment.
SECTION 13 MISCELLANEOUS.
13.1 RELATED DOCUMENTS.
(a) "Related Documents" include the executed, delivered and filed,
as appropriate:
(i) Note;
(ii) Warrant Certificate;
(iii) Option Agreement;
(iv) Registration Rights Agreement;
(v) Co-Sale Agreement; and
(vi) Preemptive Rights Agreement;
together with each other agreement or document, whether executed before, after
or on the date of this Agreement, which expressly states that it is a "Related
Document subject to the terms and conditions of [this Agreement]."
(b) To the extent applicable, the definitions set forth in this
Agreement or the Glossary of Defined Terms are incorporated by referenced in
each Related Document and each term specifically defined in this Agreement
shall have the same definition in each Related Document, unless the context
clearly provides otherwise.
(c) The miscellaneous provisions set forth in this Section 12 are
incorporated by reference in and shall be applicable to each of the Related
Documents.
13.2 AMENDMENT, MODIFICATION OR RESTATEMENT.
(a) The Parties may, by mutual agreement, amend, modify or restate
any provision or the entirety of this Agreement or any Related Document at any
time; provided, that each such amendment, modification or restatement shall:
(i) be in writing;
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(ii) refer specifically to this Agreement and (if
applicable) the Related Document(s) to be amended,
modified or restated;
(iii) state specifically that it is an amendment,
modification or restatement of this Agreement or such
Related Documents (as applicable), any such amendment
or modification shall be described as "Amendment No.
___" to this Agreement or any Related Document (as
applicable), and any such restatement shall be
designated as "Restatement No. ____" to this
Agreement or any Related Document (as applicable);
and
(iv) be executed and delivered by each Party and (if
applicable) each other Person that was a party to or
signed any Related Document to be amended, modified
or restated.
(b) Unless otherwise specified in such a written amendment,
modification or restatement:
(i) the amended or modified provisions of this Agreement
or (if applicable) any Related Document shall be
effective as of the date of such amendment;
(ii) such amendment, modification or restatement shall not
be deemed to constitute a waiver of any Default that
has occurred and is continuing as of the effective
date thereof;
(iii) except to the extent modified thereby, the Seller
shall be deemed to have reconfirmed each of the
Representations and Warranties as of the effective
date of such amendment, modification or restatement;
(iv) all terms defined in this Agreement shall have the
same definition in such amendment, modification or
restatement;
(v) such amendment, modification or restatement shall be
deemed to be a Related Document and the provisions of
this Section shall be applicable to such amendment,
modification or restatement; and
(vi) this Agreement and each Related Document shall be
deemed to remain in full force and effect, as so
amended, modified or restated.
(c) Unless otherwise specified in such amendment, modification or
restatement of any Note, including any change in the maturity date, interest
rate or payment terms shall for all purposes be deemed to be a novation
thereof.
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(d) At any time after the execution and delivery of any amendment
or modification of this Agreement or any Related Document adopted pursuant to
this Section, the Purchaser may, in the exercise of its discretion, cause this
Agreement or any Related Document to be restated in its entirety to reflect
such amendment or modification adopted by furnishing a copy of such restatement
to each Party and (if applicable) each other party to such Related Document.
Each such party shall promptly acknowledge such restatement. Any such
restatement shall refer to the amendments or modifications being incorporated
therein, and shall be designated as "Restatement No. ___" to this Agreement or
any Related Documents (as applicable).
(e) The Purchaser may, in its sole discretion, condition its
agreement to any amendment, modification or restatement of this Agreement or
any other Related Document upon the payment of money, the granting of security,
providing additional guarantees or other acts or concessions by any other
Party.
(f) The Seller shall reimburse the Purchaser for its reasonable
legal fees and expenses (including the fees and expenses of the BOCC Legal
Department) in connection with the preparation and review of any such
amendment, modification or restatement.
13.3 WAIVER OF COMPLIANCE.
(a) The Parties may, by mutual agreement, waive compliance by any
Party or any other Person bound by any Related Document with any provision of
this Agreement or any other Related Document or waive any Default or Event of
Default; provided that each such waiver shall:
(i) be in writing;
(ii) refer specifically to this Agreement and (if
applicable) the other Related Document(s) compliance
with the terms of which is to be waived; and
(iii) state specifically that it is a waiver of compliance
with specified provisions of this Agreement or such
other Related Documents (as applicable); and
(iv) be executed and delivered by each Party and (if
applicable) each other Person that is bound by the
provisions compliance with which is being waived.
(b) Each such waiver shall be effective only in the specific
instance and for the specific purpose for which it is given.
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(c) The Purchaser may, in its sole discretion, for any reason
whatsoever, refuse to agree to any such waiver or condition any such waiver
upon the payment of money, the granting of security, the providing of
guarantees or other acts or concessions by the Seller or any other Person.
(d) The Seller shall pay to the Purchaser a fee of $1,500 in lieu
of reimbursement for expenses incurred in connection with the preparation and
review of any such waiver.
13.4 CONSENT OR APPROVAL OF PURCHASER.
(a) Whenever this Agreement or any Related Document provides that
an action may be taken by the Seller or any other Person bound by any Related
Document with the "consent" or "approval" of the Purchaser or its agents, such
action shall not be taken unless such "consent" or "approval":
(i) is in writing signed by the Purchaser or its
designated agent;
(ii) refers specifically to this Agreement and (if
applicable) the Related Document which contains the
provision providing for such consent or approval; and
(iii) states specifically what action is being consented to
or approved, and sets forth any limitations or
conditions with respect thereto.
(b) Each such consent or approval shall be effective only in the
specific instance and for the specific purpose for which it is given.
(c) Unless this Agreement or the Related Document providing for
such consent or approval specifically provides that the Purchaser shall not
"unreasonably withhold" such consent or approval, the Purchaser or its
designated agents may, in its sole discretion and for any reason whatsoever,
refuse to grant any such consent or approval, or condition any such grant of
consent or approval upon the payment of money, the granting of security, the
providing of guarantees or other acts or concessions by the Seller or any other
Person.
(d) Where this Agreement or any Related Agreement provides that
the Purchaser shall not "unreasonably withhold" any consent or approval, any of
the following shall by way of example and not limitation, constitute an
appropriate reason to withhold such consent or approval:
(i) imposing material additional unreimbursed cost,
expense or liability upon the Purchaser or its
Affiliates;
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(ii) releasing any Person liable for any material
obligation under this Agreement or any Related
Document unless the Seller provides a substitute
obligor whose debt obligations are reasonably
acceptable to the Purchaser;
(iii) limiting in any material respect the practical
ability of the Purchaser to enforce any of its rights
or remedies under this Agreement or any Related
Document;
(iv) materially diminishing or potentially materially
diminishing the value of the Warrant Shares as
determinable for purposes of the Option Agreement;
(v) causing or potentially causing the Purchaser or its
Affiliates to breach in any material respect any
agreement by which it is bound or the terms of its
Charter Documents or to violate any Applicable Law;
(vi) subordinating or further subordination of any of the
rights or obligations of the Purchaser under this
Agreement or any Related Document to the rights and
obligations of any other Person, other than to Senior
Indebtedness to the extent of such subordination on
the Closing Date; or
(vii) reducing the Purchaser's percentage of the fully
diluted ownership of Common Shares.
(e) The Seller shall reimburse the Purchaser for any reasonable
fees or expenses (including the legal fees and expenses of the BOCC Legal
Department) incurred in connection with the review of the grant or denial of
any request for any such consent or approval.
13.5 FORBEARANCE.
(a) The Purchaser may, in the sole exercise of its discretion, for
any reason whatsoever and with or without Notice to the Seller, forbear from
(1) declaring an Event of Default under this Agreement or any Related Document,
or (2) exercising or enforcing any right or remedy under this Agreement or any
Related Document.
(b) Unless the Parties otherwise agree in writing, no such
forbearance shall be deemed to: (1) toll the passage of any time period, (2)
waive the Purchaser's right to declare such Event of Default or exercise or
enforce any such right or remedy at any time, (3) suspend the accrual of
Interest at the Stated or Default Rate (as applicable) or waive any Assessment
that would otherwise accrue or become due, (4) constitute a basis for laches or
estoppel with respect
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to any such declaration, exercise or enforcement, or (5) preclude the exercise
or enforcement of any other right or remedy or declaration of any other Event
of Default under this Agreement or any Related Document.
(c) The Purchaser may, in the sole exercise of its discretion,
condition the granting of any such forbearance upon the payment of money, the
granting of security, the providing of guarantees or other acts or concessions
by the Seller or any other Person.
(d) The Seller shall reimburse the Purchaser for any reasonable
fees or expenses (including the legal fees and expenses of the BOCC Legal
Department) incurred in connection with the review of the granting or denial of
any request for any such forbearance.
13.6 NO IMPLIED RIGHTS OR WAIVERS.
Except as otherwise expressly stated herein or in any Related
Document, no Notice to or demand on the Seller in any case shall entitle the
Seller to any other or further Notice or demand in the same, similar and other
circumstances. Neither any failure nor any delay on the part of the Purchaser
in exercising any right, power or privilege under this Agreement or any other
Related Document shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of the same or
the exercise of any other right, power or privilege.
13.7 EXPENSES.
(a) The Seller has paid to the Purchaser $30,000 as a
non-accountable due diligence expense allowance in for its out of pocket
expenses incurred in connection with its due diligence review and the
negotiation of the transactions contemplated by this Agreement.
(b) The Seller shall pay to the BOCC Legal Department, as counsel
for the Purchaser, a non-accountable fee of $10,000 in lieu of reimbursing the
Purchaser for legal fees and expenses incurred in connection with the
negotiation, preparation and closing of the Transactions.
(c) The Seller shall bear all of its own expenses, including legal
and accounting fees.
(d) The Seller shall reimburse the Purchaser for all expenses
incurred by it in connection with the investigation and determination of an
Event of Default (assuming an Event of Default exists), the enforcement of this
Agreement, the Related Documents and the collection of all accounts due under
this Agreement and the Related Documents, including the reasonable fees and
expenses of the BOCC Legal Department or other legal counsel.
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13.8 SECTIONS, SUBSECTIONS, CLAUSES.
For convenience of reference in this Agreement and the Related
Documents: (i) "Sections" refer to the whole number subdivisions (for example,
Section 13 or Section 13) and reference to a Section includes all of the
Subsections thereof; (ii) "Subsections" refer to the decimal numbered
subdivisions of a Section (for example, Section 13.1 or Section 13.1) and
reference to a Subsection includes all of the Clauses thereof; (iii) "Clause"
refers to the lower-case lettered subdivisions of a Subsection (for example,
Section 13.1(a) or Section 13.1(a)); and (iv) "Items" refer to lower-cased
Roman numeral or upper-case lettered items within a Subsection or Clause.
13.9 ENTIRE AGREEMENT.
This Agreement and the Related Documents including the Exhibits or
Schedules hereto and thereto, constitutes the entire agreement relating to the
subject matter hereof among the Parties hereto and thereto. Each Party
acknowledges that no representation, inducement, promise or agreement has been
made, orally or otherwise, by any other Party, or anyone acting on behalf of
any other Party, unless such representation, inducement, promise or agreement
is embodied in this Agreement or the Related Documents expressly or by
incorporation.
13.10 SEVERABILITY.
If any provision of this Agreement or any Related Document is held to
be invalid, void or unenforceable for any reason, the remaining provisions of
this Agreement shall nevertheless continue in full force and effect; provided,
however, that nothing in this Section shall be construed to limit or waive any
breach of the representation with respect to the enforceability of this
Agreement set forth in Section 5. Any such determination of invalidity,
voidness or unenforceability which would, in the aggregate, materially reduce
the principal benefits of any breach or security provided by the Agreement or
any Related Document to the Purchaser or make the remedies generally afforded
thereby inadequate for the practical realization of such benefits or security
shall constitute an Event of Default.
13.11 THIRD PARTY BENEFICIARIES.
Except as otherwise expressly provided for herein or therein, the
obligations of each Party under this Agreement or any Related Documents shall
inure solely to the benefit of the other Parties, and no other Person shall be
a third party beneficiary of this Agreement or have any right to enforce or
benefit from any provisions of this Agreement or any Related Documents.
13.12 LEGAL REPRESENTATION.
Each of the Parties has been represented by independent legal counsel in
connection with the negotiation, drafting an execution of this Agreement and
the Related Documents, and each Party intends that the rights, duties, and
obligations of the Parties with respect to the subject matter of this Agreement
and the Related Documents shall be determined solely by reference to the
express terms of this Agreement and the Related Documents, and each Party
expressly waives to the fullest extent permitted by Applicable Law:
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(a) any claim that this Agreement or any Related Document
constitutes a contract of adhesion;
(b) the protection of any Applicable Law designed to protect
individual or consumers in credit transactions;
(c) any usury or similar law limiting interest or other fees or
compensation in a credit transaction;
(d) any claim that this Agreement or any Related Document
constitutes a partnership, joint venture, trust or similar arrangement among
any of the Parties;
(e) any claim that this Agreement or any Related Document imposes
any fiduciary or agency duty upon the Purchaser or any of its agents; and
(f) any implied representation, warranty or covenant, including
representation, warranty or covenant of "good faith" or "fair dealing" by any
Party.
13.13 RULES OF CONSTRUCTION.
Unless otherwise specified, the following rules shall be applied in
construing the provisions of this Agreement and the Related Documents.
(a) All accounting terms not specifically defined herein shall be
construed in accordance with their respective definitions under GAAP.
(b) Terms that imply gender shall be construed to apply to all
genders.
(c) References to Sections, Schedules and Exhibits refer to the
numbered Sections of, the Schedules of and the Exhibits attached to this
Agreement or any Related Documents (as applicable).
(d) Headings to the various Sections of this Agreement or any
Related Documents (as applicable) are included solely for purposes of reference
and shall be ignored in construing the provisions of this Agreement or any
Related Documents (as applicable).
(e) The Exhibits, Schedules and Glossary of Defined Terms attached
to this Agreement or any Related Documents (as applicable) are incorporated
herein and in each Related Document by reference.
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(f) "Herein", "hereto", "hereof" and words of similar import refer
to this Agreement or any other Related Document (as applicable).
(g) The word "and" connotes "each and every", and the word "or"
connotes "any one or more".
(h) The word "including" connotes "including without limitation".
(i) When used in connection with a specific date or time, (A) the
word "from" connotes "from and including" such date or time (B) the word
"through" connotes "through and including" such date or time, (C) "before"
connotes "on or before such date or time", (D) "after" connotes "on or after
such date or time", (E) "next" day or Business Day (as applicable) connotes the
"first day or Business Day (as applicable) immediately succeeding" such date,
and (F) "prior" or "preceding" day or Business Day (as applicable) connotes the
"first day or Business Day (as applicable) immediately proceeding" such date.
(j) In counting a number of days or Business Days (A) "after" or
"following" a specific date, counting commences with the first day or Business
Day (as applicable) following such date and ends on and includes the last day
or Business Day (as applicable) counted, and (B) "before" or "prior to" a
specified date, counting commences with the first day or Business Day (as
applicable) preceding such date and ends on and includes the last day or
Business Day (as applicable) counted.
(k) Unless otherwise specified, all references to time refer to
Eastern Standard Time or Eastern Daylight Time (as in effect).
(l) Unless otherwise specified, an event or act is deemed to occur
on a specified day or Business Day only if it occurs before 4:00 p.m. on that
day or Business Day (as applicable) and, if it occurs after that time, is
deemed to occur on the next day or Business Day (as applicable).
(m) Any reference to any law or regulation refers to that law or
regulation as amended from time-to-time after the date of this Agreement or any
Related Documents (as applicable) and to the corresponding provision of any
successor law or regulation.
(n) Any reference to any agreement or other document in this
Agreement or any Related Documents (as applicable) refers to that agreement or
other document as amended from time-to-time after the date of this Agreement or
any Related Documents (as applicable).
(o) The recitals included in this Agreement or any Related
Documents (as applicable) are the mutual representations of the Parties and are
a part of this Agreement or any Related Documents (as applicable).
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(p) Unless otherwise specified, any reference to any Person shall
be construed, as applicable, to be a reference to that Person's successors,
assigns, heirs or estate or personal representative.
(q) Each of the Parties has been represented by independent legal
counsel in connection with the negotiation, drafting and execution of this
Agreement and Related Documents, and in construing this Agreement and the other
Related Documents. No consideration or evidentiary weight shall be given to:
(A) any prior draft or mark-up (including any marginal notes thereon) of this
Agreement or any other Related Document produced in the course of such
negotiation; (B) the identity of the Party (or its legal counsel) drafting or
proposing any provision of this Agreement or any Related Document; (C) any
summary or description of any term or provision proposed to be included in this
Agreement that was set forth in any term sheet, commitment letter or written
presentation produced prior to the date of this Agreement and the other Related
Documents; (D) perceived or alleged differences among the Parties with respect
to bargaining advantage, sophistication in financial affairs or access to
information.
13.14 NOTICE.
(a) Any Notice or other communication required or permitted to be
given or made under this Agreement or any Related Document (i) shall be in
writing, (ii) shall refer specifically to this Agreement or such Related
Document (as applicable), (iii) may be delivered by (A) hand delivery, (B)
First Class U.S. Mail (regular, certified, registered or expedited delivery),
(C) Federal Express, UPS Overnight, Airborne or other nationally recognized
delivery service, (D) fax, or (E) e-mail or other electronic transmission, and
(iv) shall be delivered or transmitted to the appropriate address as set forth
in Clause (b) below.
(b) Each Notice or other communication shall be delivered or
addressed to a Party at its address set forth below. A Party's address for
Notice may be changed from time-to-time only by Notice given to each of the
other Parties.
SELLER:
SCC Communications Corporation
6285 Lookout Road
Boulder, CO 80301
Attention: Nancy Hamilton
Telephone No. (303) 581-5600
Fax No. (303) 581-0900
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<PAGE> 38
PURCHASER:
Banc One Capital Partners II, LLC
c/o Banc One Capital Corporation
150 East Gay Street
Columbus, OH 43215
Attention: General Counsel
Telephone No. (614) 217-1100
Fax No. (614) 217-1217
(c) Absent fraud or manifest error, a receipt signed by the
Addressee or authorized representative of the addressee, a certified or
registered mail receipt, a signed delivery service confirmation of delivery or
a fax or e-mail confirmation of transmission shall constitute proof of delivery
of a Notice. Any Notice actually received by the addressee shall constitute
delivery of such Notice notwithstanding the failure to comply with any
provisions of this Subsection.
(d) A Notice delivered by regular First Class U.S. Mail shall be
deemed to have been delivered on the third Business Day after its post-mark.
Any other Notice shall be deemed to have been received on the date and time of
the signed receipt or confirmation of delivery or transmission thereof, unless
that receipt or confirmation date and time is not a Business Day or is after
5:00 p.m. local time on a Business Day, in which case such Notice shall be
deemed to have been received on the next succeeding Business Day.
13.15 INTEREST AND PRESENT VALUE.
For the purpose of computing interest, discount or similar accruals
over a specified period of time, (A) quantities expressed as a percentage (%)
connote a "percentage rate per annum", (B) a year shall be deemed to consist of
360 days divided into 12 months consisting of 30 days each and four quarters
consisting of three months (90 days) each, and (C) unless otherwise specified,
unpaid accruals will compound on each Payment Date or at the end of each
accrual period (as applicable).
13.16 MANNER OF PAYMENTS.
All payments required or permitted to be made pursuant to this
Agreement or any Related Document shall (i) be paid only in United States
Dollars, (ii) by wire transfer of federal funds or by certified, official bank
or other check representing immediately available funds on the date and at the
place of receipt, and (iii) to be deemed to have been paid if received before
2:00 p.m. on a Business Day or, if received on a non-Business Day or after such
time on a Business Day, on the next Business Day.
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<PAGE> 39
13.17 ASSIGNMENT.
(a) The Seller shall not, and shall not attempt or purport, to
assign or transfer to any Person or permit any other Person to assume or
undertake any of its rights, duties or obligations under this Agreement or any
of the Related Documents, without the prior written consent of the Purchaser,
which consent may be granted or waived in its sole discretion.
(b) The Purchaser may: (i) in the sole exercise of its discretion
(A) assign (with or without recourse) all (but not less than all) of its
rights, duties and obligations under this Agreement and the Related Document to
any Person which is a direct or indirect wholly owned subsidiary of BANC ONE
CORPORATION or whose sole general partner or sole managing member is a direct
or indirect wholly owned subsidiary of BANC ONE CORPORATION ("BOC Entities");
(B) sell or transfer all or any part of the Note or Warrant Shares to any BOC
Entity; (C) sell a participation in the Note to any BOC Entity, any partners or
members of the Purchaser or any Accredited Institutional Investor; or (D)
distribute all or any part of the Note or Warrant Shares to the partners or
members of the Purchaser as an in-kind distribution. The Purchaser shall not be
required to notify the Seller of any of the foregoing assignments,
participations or distributions; provided, however, that until the Seller
receives Notice of any such assignment, participation or distribution the
Seller shall be entitled to continue to treat the Purchaser as the sole owner
of the Note and Warrant Shares and the sole Purchaser to this Agreement and the
Related Documents; and (ii) (A) assign (with or without recourse) all (but not
less than all) of its rights, duties and obligations under this Agreement and
the Related Documents to any Accredited Institutional Investor, or (B) sell or
assign (with or without recourse) all or any part of the Note or Warrant Shares
to any other Person. The Purchaser shall give Notice to the Seller of any such
assignment, sale or transfer.
13.18 FURTHER ACTS AND DOCUMENTS.
Each of the Parties hereby agrees to execute and deliver such further
instruments and to do such further acts and things as may be necessary or
desirable to carry out the purposes of this Agreement.
13.19 CLOSING OF THE TRANSACTION.
(a) It is anticipated that the transactions contemplated by this
Agreement and the Related Documents may be closed and consummated by the
transmission of documents, signature pages of documents and funds by mail,
delivery service, fax or other electronic transmission.
(b) The Parties agree that for the purpose of facilitating any
such closing, legal counsel for each Party:
37
<PAGE> 40
(i) shall act as the agent for each of the Parties and for
that purpose shall receive and hold documents, signature
pages or documents and funds received by it from any
Party, subject to written or oral instructions from that
Party; and
(ii) may, in such capacity and in accordance with written or
oral instruction from such Party, date or complete other
blank items, in such documents, attach signature pages
or attachments to such documents, deliver such documents
or funds to other Parties or accept delivery of such
documents on behalf of any Parties.
(c) The Parties agree that the attachment of original or faxed
signature pages of any document by any such legal counsel acting in such
capacity and in accordance with such instructions, shall constitute the
execution and delivery of such documents by such Party.
(d) The Parties agree that any such closing shall, for all
purposes, be deemed to have occurred and this Agreement and the Related
Documents shall be deemed to have been simultaneously executed and delivered by
all Parties on the date designated by the Parties as the "Closing Date".
(e) As a condition of funding its purchase obligation at the
Closing, the Purchaser may require that the Seller acknowledge a list of items
to be completed or documents to be delivered post-closing (including the
originals of documents delivered at closing in photocopy or faxed form).
Unless otherwise specified on such list, all such items or documents shall be
completed or delivered within 20 days after the Closing Date. The Purchaser
may, in its discretion, impose an Assessment of $100 per day per item or
document which is not completed or delivered with such period.
13.20 FAXED SIGNATURES.
(a) By executing and delivering this Agreement (or any counterpart
hereof), each Party hereby irrevocably agrees that the faxed delivery of a
counterpart signature page of any Related Document or any amendment,
modification or restatement of this Agreement or any Related Documents to the
other Parties or their representatives shall for all purposes constitute such
Party's execution and delivery thereof.
(b) Any Party may agree by a written instrument executed and
delivered by it to the other Parties or their representatives that the faxed
delivery of a counterpart signature page of this Agreement to the other Parties
or their representatives constitutes the execution and delivery of this
Agreement for all purposes, including the purposes of clause (a) above.
38
<PAGE> 41
13.21 COUNTERPARTS.
This Agreement and any Related Document may be executed in multiple
counterparts or multiple signature pages, and it is not necessary for
effectiveness hereof or thereof that all Parties execute the same counterpart
or signature page. Each such counterpart or signature page shall be deemed to
be an original and all of such counterparts or signatures shall constitute one
and the same agreement or signature page.
13.22 CLOSING TRANSCRIPT.
(a) It is anticipated that the Purchaser (i) will cause this
Agreement, the Related Documents and other transaction documents (or copies
thereof), including documents delivered or completed post-closing, to be bound
and delivered to each of the Parties and their legal counsel, together with a
certification of the BOCC Legal Department that the documents contained therein
are either originally executed documents or photocopies thereof, which bound
document as so certified shall constitute a Closing Transcript, and (ii) may
cause one or more copies of the Closing Transcript to be made in electronic
medium and delivered in that medium to each of the Parties.
(b) When such Closing Transcripts (or copies in electronic medium
thereof) have been received and receipted for by each Party, absent fraud or
manifest error, (i) each such Closing Transcript shall be deemed for all
purposes to contain an original of this Agreement and each Related Document,
and (ii) no Party shall be required or compelled to provide any other original
document to prove the existence and the execution and delivery of such
documents contained in the Closing Transcript.
(c) The BOCC Legal Department will furnish to the Seller at no
additional cost two copies of the Closing Transcript. Additional copies of the
Closing Transcript will be furnished to the Seller upon written request to the
BOCC Legal Department, for $100 per copy plus shipping.
13.23 GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL APPLICABLE LAWS OF THE STATE OF OHIO AND ITS GOVERNMENTAL
AUTHORITIES, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES, EXCEPT TO THE
EXTENT THAT GOVERNANCE OF THE INTERNAL AFFAIRS OF THE PERSONS THAT ARE PARTIES
TO THIS AGREEMENT OR THE RELATED DOCUMENTS ARE GOVERNED BY THE LAWS OF THE
JURISDICTION OF THEIR RESPECTIVE INCORPORATIONS OR ORGANIZATIONS, AND SUCH
APPLICABLE LAWS ARE SUPERSEDED OR PREEMPTED BY THE APPLICABLE LAWS OF THE
UNITED STATES AND ITS GOVERNMENTAL AUTHORITIES.
13.24 WAIVER OF JURY TRIAL.
THE PARTIES, EACH AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO
CONSULT WITH LEGAL COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY
RIGHT THEY MAY HAVE TO A
39
<PAGE> 42
TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS AGREEMENT,
ANY RELATED DOCUMENT OR ANY RELATED INSTRUMENT OR AGREEMENT, OR ANY OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, ANY RELATED DOCUMENT, OR ANY
COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OR
ANY OF THEM ("LITIGATION"). NO PARTY SHALL SEEK TO CONSOLIDATE, BY
COUNTERCLAIM OR OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED
WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.
THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR
RELINQUISHED BY ANY PARTY EXCEPT BY WRITTEN INSTRUMENT EXECUTED BY ALL PARTIES.
13.25 CONSENT TO JURISDICTION, VENUE AND SERVICE OF PROCESS.
THE PARTIES, EACH AFTER HAVING CONSULTED OR HAVING HAD THE OPPORTUNITY
TO CONSULT WITH LEGAL COUNSEL, HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY:
(i) CONSENT TO THE JURISDICTION OF THE COMMON PLEAS COURT OF FRANKLIN COUNTY,
OHIO AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF OHIO,
EASTERN DIVISION WITH RESPECT TO ANY LITIGATION; (ii) WAIVE ANY OBJECTIONS TO
THE VENUE OF ANY LITIGATION IN EITHER SUCH COURT; (iii) AGREE NOT TO COMMENCE
ANY LITIGATION EXCEPT IN ONE OR THE OTHER OF SUCH COURTS AND AGREE NOT TO
CONTEST THE REMOVAL OF ANY LITIGATION COMMENCED IN ANY OTHER COURT TO ONE OR
THE OTHER OF SUCH COURTS; (iv) AGREE NOT TO SEEK TO REMOVE, BY CONSOLIDATION OR
OTHERWISE, ANY LITIGATION COMMENCED IN EITHER OF SUCH COURTS TO ANY OTHER
COURT; AND (v) WAIVE PERSONAL SERVICE OF PROCESS IN CONNECTION WITH ANY
LITIGATION AND CONSENTS TO SERVICE OF PROCESS BY REGISTERED OR CERTIFIED MAIL
IN ACCORDANCE WITH APPLICABLE LAW. THESE PROVISIONS SHALL NOT BE DEEMED TO
HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY ANY PARTY EXCEPT BY
WRITTEN INSTRUMENT EXECUTED BY ALL PARTIES.
The Parties have caused this Agreement to be executed and delivered
effective as of the date first written above.
SELLER: PURCHASER:
SCC COMMUNICATIONS CORP. BANC ONE CAPITAL PARTNERS II, LLC
By: /s/ NANCY K. HAMILTON By: Banc One Capital Partners
------------------------- Holdings, Ltd., Manager
Name: NANCY K. HAMILTON
----------------------- By /s/
Its: CHIEF FINANCIAL OFFICER ------------------------
------------------------
Its Authorized Signer
40
<PAGE> 43
GLOSSARY OF DEFINED TERMS
Unless otherwise expressly provided for or unless the context
otherwise requires, the terms defined in this Glossary of Defined Terms are
used in the Purchase Agreement and the Related Documents. This Glossary of
Defined Terms is a part of and is incorporated by reference in the Purchase
Agreement and the Related Documents.
"Accelerated" (and correlative terms such as "Acceleration", "Accelerating" and
"Accelerated") means with respect to the Note that the entire unpaid Principal
Amount, together with all accrued but unpaid Interest and Assessments, become
immediately due and payable prior to the Maturity Date, without, except as
expressly provided for in the Note, notice of intent to accelerate, notice of
acceleration of maturity, presentment, demand, protest, notice of protest or
other notice of default or dishonor of any type whatsoever, all of which are
expressly waived by the Seller.
"Acceleration Event" means that payment of the Note has been Accelerated upon
the occurrence and continuation of an Event of Default.
"Acceleration Notice" is defined in the Note.
"Accredited Investor" means an "accredited investor," as that term is defined
under Rule 501(a) of Regulation D of the Securities Act.
"Accredited Institutional Investor" means a financial institution or other
business entity that is an "accredited investor" with the meaning of clauses
(1), (2), (3) or (7) of Rule 501(a) under Regulation D of the Securities
Exchange Act.
"Accountant" means the Seller's independent public accountant selected and
approved in the manner provided for in the Purchase Agreement.
"Accountant's Statement" means, with respect to each Annual Financial
Statement, a written statement of the Accountant stating in effect that in the
course of the Audit with respect to such Financial Statement, no Default has
come to their attention, or, if a Default has come to their attention, stating
the nature and period of existence of such Default.
"Accounting Periods" means the Fiscal Year, Quarter or Month, as applicable.
"Accounting Statements" means collectively, with respect to any Accounting
Period, statements of income, statements of cash flow and shareholders' equity
for such Accounting Period and a statement of financial condition as at the end
of such Accounting Period.
<PAGE> 44
"ACM(s)" means asbestos containing materials.
"Additional Common Shares" means all Common Shares issued by the Seller after
the Closing Date (which is the Original Issue Date) other than the Warrant
Shares.
"Adjusted Tangible Net Worth" of any Person shall mean, as of any date, the
total assets which would appear on a balance sheet of such Person prepared as
of such date in accordance with GAAP, less all amounts appearing on the balance
sheet of such Person related to (i) goodwill; (ii) patents, trademarks,
tradenames, copyrights and franchises, (iii) all other similar assets that
would be classified as intangible assets under GAAP, and (iv) Total
Liabilities, excluding the Note.
"Adjustment Event" means any of the following events occurring prior to a
Qualified Initial Public Offering:
i. the Seller declares a dividend or makes a distribution on its
Outstanding Common Stock in Common Stock or Convertible Securities,
or
ii. the Seller subdivides or reclassifies any of its Outstanding Common
Stock into a greater number of shares, or
iii. the Seller combines or reclassifies any of its Outstanding Common
Stock into a smaller number of shares.
"Affiliate" means any Person directly or indirectly controlling, controlled by,
or under direct or indirect common control with, the Seller or another
specified Person. A Person shall be deemed to control a corporation if such
Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such corporation, whether through
the ownership of voting securities, by contract or otherwise.
"Affirmative Covenants" means the covenants of the Seller set forth in Section
8 of the Purchase Agreement.
"Amortization Commencement Date," if applicable, is set forth in the Note.
"Annual Financial Statements" means, with respect to each Fiscal Year, the
Accounting Statements of the Seller with respect to such Fiscal Year, presented
with corresponding Accounting Statements for the preceding Fiscal Year, which
Accounting Statements shall be Audited, prepared in accordance with GAAP and
presented in reasonable detail (including appropriate footnotes).
"Applicable Law" means, with respect to any Person, any and all federal,
national, state, regional,
<PAGE> 45
local, municipal or foreign laws, statutes, rules, regulations, guidelines,
ordinances, licenses, permits, judicial or administrative decisions of any
country, or any political subdivision, agency, commission, official or court
thereof having jurisdiction over such Person.
"Appraisal Determined Value Amount"means, as of the date of exercise of the Put
Option, a per share valuation amount equal to (A) the Appraised Value of all of
the Capital Stock of the Seller, divided by (B) the number of Outstanding
Shares.
"Appraised Value" means, as of the date of exercise of the Put Option, the fair
market value of all of the outstanding Capital Stock of the Seller as of such
date as determined by the Appraiser assuming: (i) a cash purchase by a willing
buyer from willing sellers of all such Capital Stock as of such date; (ii) the
full exercise or conversion of all the then outstanding Convertible Securities
in accordance with their respective terms; (iii) the payment in full of the
Note out of the proceeds of such sale; (iv) an acquisition of the Seller as a
going concern; (v) no adjustment or discount with respect to minority interest,
voting rights or rights to control management of the Seller; (vi) no adjustment
for any employment, bonus, non-competition, deferred compensation, severance or
other employment or compensation arrangement between the Seller and its
employees having a term of more than one year; and (vii) no adjustment for the
tax consequences of such sale.
"Appraiser" means, with respect to any determination of the Market Determined
Value Amount or Appraisal Determined Value Amount, an independent appraiser
(which shall be an investment banking firm that is not an Affiliate of either
the Seller or the Purchaser) selected in the manner provided for in the Option
Agreement.
"Assessments" means fees charged by the Purchaser for processing late payments
of the Note and other fees charged pursuant to the Purchase Agreement and
Related Documents.
"Audit" or "Audited" means, with respect to the Annual Financial Statements, an
examination without limitation as to scope by the Accountant in accordance with
generally accepted auditing standards for the purpose of expressing an opinion
of such Accounting Statements.
"Audit Report" means, with respect to the Annual Financial Statements, the
report of the Accountant indicating the scope of the Audit with respect to such
Annual Financial Statements and setting forth the opinion of such Accountant
with respect to such Annual Financial Statements as a whole, or an assertion to
the effect that an overall opinion cannot be expressed. The Audit Report shall
set forth any qualification to such opinion and, when such an overall opinion
cannot be expressed, set forth the reasons therefor.
"Benefit Plans" means collectively, the Welfare Plans and the Pension Plans.
"Board of Directors" means the board of directors of the Seller and, as
applicable and to the extent permitted by law, any committee of such board of
directors authorized to exercise the
<PAGE> 46
powers of the board of directors.
"Business" is defined in Background - Paragraph A of the Purchase Agreement.
"BOCC Legal Department" means the internal legal staff of Banc One Capital
Corporation, or one of its Affiliates.
"Business Day" means any day other than a Saturday, Sunday or day upon which
banking institutions are authorized or required by law or executive order to be
closed in the City of Columbus, Ohio.
"Capitalized Earnings Determined Value Amount" means, as of the date of
exercise of the Put Option, a per share valuation amount equal to (A) the
Capitalized Earnings Value divided by (B) the number of Outstanding Shares.
"Capitalized Earnings Value" means, as of any date of determination, an amount
equal to six (6) times EBITDA for the preceding twelve months (i) reduced by an
amount sufficient to pay in full all of the then outstanding Permitted
Indebtedness (including all accrued but unpaid interest with respect thereto),
and (ii) increased by the amount of cash and the fair market value of all
marketable securities reflected on the most recent Financial Statements of the
Seller as of the date of determination.
"Capital Expenditures" means, with respect to the Seller, expenditures for
tangible business assets with a useful life in excess of one year, the
acquisition cost of which is, in accordance with GAAP, depreciated over the
useful life of such asset.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock,
including each class of common stock and preferred stock of such Person or
partnership interests and any warrants, options or other rights to acquire such
stock or interests.
"Cash Equivalents" means (i) securities issued or directly and fully guaranteed
or insured by the United States Government or any agency or instrumentality
thereof which mature within 90 days from the date of acquisition, and (ii) time
deposits and certificates of deposit, which mature within 90 days from the date
of acquisition, of any domestic commercial bank having capital and surplus in
excess of $200,000,000, which has, or the holding company of which has, a
commercial paper rating of at least A-1 or the equivalent thereof by Standard &
Poors Corporation or P-1 or the equivalent thereof by Moody's Investor
Services.
"CFO Certificate" means, with respect to the Quarterly Financial Statements and
the Annual Financial Statements, a certificate signed by the chief financial
officer of the Seller stating in effect that such Financial Statements, when
delivered, (i) were, to the best of her knowledge, complete and correct in all
material respects, (ii) were prepared in accordance with GAAP, and
<PAGE> 47
(iii) fairly present the results of operations for the applicable Accounting
Period and the financial condition as at the end of such Accounting Period.
The CFO Certificate shall be presented in a standard form reasonably
satisfactory to the Purchaser.
"Charter Documents" mean a Person's formation documents, including but not
limited to, as applicable, its articles of incorporation, by-laws, code of
regulations, articles of organization, operating agreement, certificate of
limited partnership and partnership agreement.
"Closing Date" means November 20, 1997, or such later date as the Parties shall
mutually agree.
"Closing Transcript" means one copy of the Purchase Agreement and each Related
Document, including schedules, exhibits, legal opinions and similar documents.
"COBRA Requirements" means the requirements of Section 601 et seq. of ERISA or
Section 4980 of the Code.
"Code" means the Internal Revenue Code of 1986, as amended from time to time.
"Commission" means the Securities and Exchange Commission or any other federal
agency at the time administering the Securities Act.
"Common Shares" means the shares of Voting Stock and Non-Voting Stock, if any,
of the Seller, treated as a single class of stock, at any time outstanding.
"Compliance Certificate" means, with respect to each Fiscal Year and each
Quarter, a certificate signed by the chief financial officer of the Seller (i)
stating that no Default has occurred and is continuing, (ii) stating that, to
the best of her knowledge, the Seller is in compliance with each of the
Affirmative Covenants and each of the Negative Covenants, and (iii) setting
forth in reasonable detail a computation of each of the Financial Tests as of
the end of the applicable Fiscal Year or Quarter. The Compliance Certificate
shall be presented in a standard form reasonably satisfactory to the Purchaser.
"Convertible Securities" means evidences of indebtedness, shares of stock or
other securities that are convertible into or exchangeable for, with or without
payment of additional consideration in cash or property, or options, warrants
or other rights that are exercisable for, Common Shares that, when issued,
would constitute Additional Common Shares, either immediately or upon the
occurrence of a specified date or a specified event.
"Co-Sale Agreement" means the Co-Sale Agreement dated as of the date hereof by
and among the Seller, George K. Heinrichs, John Simms, Nancy Hamilton, The
Hill Partnership III, a Limited Partnership, Ameritech Development Corporation
and Boston Capital Ventures Limited Partnership and the Purchaser.
<PAGE> 48
"Debt Service Coverage Ratio" means for the period ending on a particular date,
the ratio of the sum of the Seller's net income (excluding discontinued
operations relating to CAD System) plus depreciation and amortization expense
for the twelve month period ended immediately prior to the date of
determination, divided by current maturities of long term debt, determined in
accordance with GAAP.
"Default" means any event which is not an Event of Default as of a specified
date, but which with the lapse of time, notice, or both, would constitute an
Event of Default.
"Default Interest Rate" is defined in the Note.
"Default Rate Election" is defined in the Note.
"Deferred Plans" means Pension Plans that are designed to defer compensation
for a select group of key or highly compensated employees and that are exempt
from the funding, participation and vesting requirements of ERISA.
"Disposition" means (i) a merger, consolidation or other business combination
in which the Seller is not the surviving entity and the Seller's stockholders
receive cash or non-cash consideration in exchange for or in respect of their
shares of Capital Stock of the Seller or (ii) the sale, lease, conveyance,
transfer or other disposition (other than the grant of a security interest) in
any single transaction or series of related transactions of all or
substantially all of the assets of the Seller.
"Dividends" in respect of any corporation means:
(1) Cash distributions or any other distributions on, or in
respect of, any class of equity security of such corporation,
except for distributions made solely in shares of securities
of the same class; and
(2) Any and all funds, cash or other payments made in respect of
the redemption, repurchase or acquisition of such securities.
"EBITDA" means, as determined as of any date, earnings of the Seller (as
reflected on the most recent Financial Statements) for the twelve-month period
ended immediately prior to any such date of determination, determined excluding
all amounts expended as reflected on such Financial Statements during such
twelve-month period with respect to (i) interest expense with respect to
Permitted Indebtedness, (ii) federal and state income tax expense, (iii)
depreciation expense, (iv) amortization expense, and (v) discontinued
operations relating to CAD Systems.
"Environmental Laws" means the Federal Air Pollution Control Act, Water
Pollution Act,
<PAGE> 49
Resource Conservation and Recovery Act, Solid Waste Disposal Act, Toxic
Substance Control Act and Comprehensive Environmental Response, Compensation
and Liability Act, the Occupational Safety and Health Act and any other
Federal, state or local laws, regulations or other requirements regulating or
otherwise concerning Hazardous Materials or the environment.
"ERISA" means the Employee Retirement Security Act of 1974, as amended from
time to time.
"ERISA Affiliate" means all members of the group of corporations and trades or
businesses (whether or not incorporated) which, together with the Seller, are
treated as a single employer under Section 414 of the Code.
"ERISA Plan" means any pension benefit plan subject to Title IV of ERISA or
Section 412 of the Code maintained or contributed to by the Seller or any ERISA
Affiliate with respect to which the Seller has a fixed or contingent liability.
"Event of Default" is defined in the Note.
"Exercise Price" means $100.
"Excess Compensation Amount" means, with respect to any Put Trigger Event, the
Present Value of (i) all compensation payable or, if non-cash compensation,
estimated by the Appraiser to be paid by the Seller or any acquiror of the
Seller to any executive employee of the Seller whose employment with the Seller
or any acquiror of the Seller is not expected to continue for more than one
year after the consummation of such Put Trigger Event, plus (ii) the excess, if
any, of all compensation payable or, if non-cash compensation, estimated by the
Appraiser to be paid by the Seller or any acquiror of the Seller (other than
cost of living adjustments) to any executive employee of the Seller under any
employment arrangement entered into or to be entered into in connection with
such Put Trigger Event, whose employment with the Seller or any acquiror of the
Seller is expected to continue for more than one year after the consummation of
such Put Trigger Event, over such executive employee's compensation for the 12
months then most recently ended.
"Financial Statements" means the Annual Financial Statements, Monthly Financial
Statements and Quarterly Financial Statements of the Seller.
"Financial Tests" means the financial tests with respect to the Seller set
forth in Section 10 of the Purchase Agreement, which tests are based upon the
Annual and Quarterly Financial Statements and determined as provided for
therein.
"Fiscal Year" means each year ended on December 31, or other fiscal year of the
Seller adopted in the manner provided for in the Purchase Agreement. Each
Fiscal Year consists of four Quarters.
<PAGE> 50
"Fully Diluted Common Stock" means all Common Shares outstanding plus the
maximum number of shares issuable in respect of Convertible Securities and
warrants and options to purchase Convertible Securities (whether or not the
right to convert, exchange or exercise are at the time exercisable).
"GAAP" means those generally accepted accounting principles and practices which
are recognized as such by the Financial Accounting Standards Board (or any
generally recognized successor), consistently applied.
"Hazardous Materials" means any hazardous, toxic or dangerous substance,
pollutant, contaminant, waste or other material regulated under Environmental
Laws; ACM's; oil and petroleum products and natural gas, natural gas liquids;
liquefied natural gas, and synthetic gas usable for fuel; chemicals subject to
the OSHA Hazard Communication Standard; and industrial process and pollution
control wastes whether or not hazardous within the meaning of the Federal
Resource Conservation and Recovery Act.
"Holder's Prorata Share" means as of any date of determination the quotient of
(A) the Holder's Shares as of such date, divided by (B) the Outstanding Common
Shares as of such date.
"Holder's Shares" means as of any date of determination the sum of (i) all
Common Shares then owned of record by the Purchaser which were acquired
pursuant to any Related Document and (ii) the maximum number of Common Shares
then issuable to the Purchaser upon the full conversion or exercise of all
Convertible Securities then owned by the Purchaser which were acquired pursuant
to any Related Document, assuming the full convertibility or exercisability of
the Convertible Securities as of that date.
"Indebtedness" means with respect to the Seller, as of any date of
determination, the sum (without duplication) at such date of (i) all
indebtedness of the Seller for borrowed money or for the deferred purchase
price of property or services or which is evidenced by a note, bond, debenture,
or similar instrument, reflected on the most recent Financial Statements, (ii)
all obligations of the Seller under any financing lease, (iii) all obligations
of the Seller in respect of letters of credit, acceptances, or similar
obligations issued or created for the account of the Seller, (iv) all guaranty
obligations of the Seller, and (v) all liabilities secured by any Lien on any
property owned by the Seller, whether or not the Seller has assumed or
otherwise become liable for the payment thereof.
"Indemnified Losses" means all losses, damages, expenses (including court
costs, amounts paid in settlement, judgments, reasonable attorneys' fees or
other investigative or defense expenses), liabilities, claims, suits,
obligations, penalties, actions, interest and demands of any kind or nature
whatsoever.
<PAGE> 51
"Initial Public Offering" means the first offer and sale to the public by the
Seller or any holders of shares of any class of its Capital Stock subsequent to
the date of the Purchase Agreement on a firm commitment basis, pursuant to a
registration statement that has been declared effective by the Commission.
"Insolvency Law" means Title 11 of the United States Code (or any successor
law) or any similar Applicable Law providing for bankruptcy, insolvency,
conservatorship, receivership or other similar debtor's relief.
"Insolvency Order" means any order, judgment or decree entered in any
Insolvency Proceeding granting any Insolvency Relief.
"Insolvency Proceeding" means a proceeding before a court of competent
jurisdiction or other duly authorized authority under any Insolvency Law
seeking Insolvency Relief.
"Insolvency Relief" means discharge of indebtedness, liquidation,
reorganization or arrangement, appointment of a receiver, trustee, conservator,
custodian or liquidator or the granting of any stay or restraining order
against creditors under any Insolvency Law or other similar debtor's relief
under any Insolvency Law.
"Intangible Assets" means (1) all loans or advances to, and other receivables
owing from any officers, employees, Subsidiaries and other Affiliates, (2) all
investments, whether in a Subsidiary or otherwise, (3) goodwill and (4) any
other assets deemed intangible under GAAP.
"Intellectual Property" means all Software, patents, trademarks, service marks,
trade names, copyrights and applications therefor.
"Interest" is defined in the Note.
"Interest Rate"is defined in the Note.
"Intercreditor Agreement" is defined in Background - Section B.
"Investment" means any loan, advance or capital contribution to, or investment
in, (including any investment in any corporation, joint venture or partnership)
or purchase or otherwise acquisition of any Capital Stock, securities or
evidences of indebtedness of, any Person.
"Involuntary Insolvency Default" is defined in the Note.
"Lender Reports" means, without duplication, statements, certificates, notices
or reports furnished to the Purchaser pursuant to the Purchase Agreement,
copies of all financial statements, certificates, notices, reports or other
information furnished to any bank, financial
<PAGE> 52
institution or note purchaser pursuant to the requirements of any loan or note
purchase or similar agreement with respect to any material Indebtedness of the
Seller.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (whether statutory or otherwise), or preference,
priority or other security agreement or similar preferential arrangement of any
kind or nature whatsoever (including, without limitation, any conditional sale
or other title retention agreement, any financing lease having substantially
the same economic effect as any of the foregoing, and the filing of any
financing statement under the Uniform Commercial Code or comparable law of any
jurisdiction in respect of any of the foregoing).
"Litigation" is defined in Section 13.24 of the Purchase Agreement.
"Management Letters" means any letter or report furnished by the Accountants to
management of the Seller in connection with any Audit or otherwise describing
findings or recommendations with respect to the accounting or management
practices or procedures of the Seller and, including all reports submitted to
the Seller by the Accountant in connection with any interim or special audit
made by the Accountant
"Market Determined Value Amount" means, as of the date of exercise of the Put
Option, a per share valuation amount equal to (without duplication) (A) sum of
the Trigger Value, plus the Excess Compensation Amount, if any, divided by (B)
the number of Outstanding Shares.
"Material Contracts" means with respect to the Seller, each of the following
types of agreements, leases, arrangements and understandings in effect as of
the date of the Purchase Agreement:
(1) any agreement for the lease, as lessee, of vehicles;
(2) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for rent in
excess of $50,000 during any twelve month period;
(3) any agreement for the lease of real property;
(4) any agreement (or group of related agreements) under which the
Seller has created, incurred, assumed or guaranteed any
Indebtedness for borrowed money, or any capitalized lease or
purchase money obligation;
(5) any agreement under which the Seller has granted a Lien, pledge,
<PAGE> 53
security interest or other encumbrance upon any of its assets;
(6) any agreement under which the Seller has an obligation to indemnify
a director, officer or employee or an obligation to indemnify a
Person with respect to any representation, warranty or covenant
made by the Seller (other than product warranties);
(7) any agreement concerning confidentiality or noncompetition given by
the Seller;
(8) guaranty or suretyship, performance bond or contribution
agreements;
(9) distribution, marketing, sales representative or dealership
agreements;
(10) any agreement between any shareholder, director or officer of the
Seller and the Seller; and
(11) any other material contracts or commitments not made in the
ordinary course of business of the Seller.
"Maturity Date" means November 30, 2003.
"Minutes" means all minutes, minutes of written action or reports (including
schedules and exhibits thereto) of a shareholders' meeting or actions and all
meetings or actions of the board of directors or any committee thereof or
appointed thereby of the Seller or any Subsidiary.
"Month" means a calendar month, and "Monthly" means each Month.
"Monthly Financial Statements" means, with respect to each Month, the
Accounting Statements of the Seller with respect to such Month, which
Accounting Statements shall be prepared and presented in the manner customary
for purposes of dissemination for management of the Seller.
"Negative Covenants" means the covenants of the Seller set forth in Section 9
of the Purchase Agreement.
"Non-Surviving Combination" means any merger, consolidation or other business
combination by the Seller with one or more other entities in a transaction in
which the Seller is not the surviving entity.
"Non-Voting Stock" means the shares of non-voting common stock, if any, of the
Seller at any
<PAGE> 54
time outstanding.
"Note" means the Senior Subordinated Note due November 30, 2003 in the
original principal amount of $4,000,000 issued and sold to the Purchaser by the
Seller pursuant to the terms of the Purchase Agreement.
"Notice" means any notice required to be given to any Party under the Purchase
Agreement or any of the Related Documents in the manner provided in Section 13
of the Purchase Agreement.
"Obligations" means (i) all amounts owed by the Seller to the Purchaser
evidenced by the Note, and (ii) all other present and future Indebtedness and
obligations of the Seller to the Purchaser however created, arising or
evidenced, direct or indirect, absolute or contingent, due or to become due,
now or hereafter existing (other than under the Warrant, the Option Agreement
and Registration Rights Agreement).
"Original Issue Date" means the date on which the Warrant was first issued
pursuant to the Purchase Agreement.
"Outstanding Common Shares" means, as of any date, all Common Shares then
outstanding plus the maximum number of Common Shares issuable in respect of
Convertible Securities and options and warrants to purchase Convertible
Securities outstanding on such date (whether or not the rights to convert,
exchange or exercise thereunder are presently exercisable), including the
maximum number of shares issuable under the Warrant.
"Parties" means the Seller and the Purchaser collectively, and "Party" means
any one of the Parties.
"Payment Date" is defined in the Note.
"Payment Default" is defined in the Note.
"Pay Off Date" is defined in the Note.
"Pension Plans" means an "employee pension benefit plan" as that term is
defined in Section 3(2) of ERISA.
"Permitted Indebtedness" means, as of any date of determination the aggregate
principal amount of all Indebtedness of the Seller outstanding as of such date
of determination, but only to the extent that the amount of such Indebtedness
does not exceed the amounts permitted under the Purchase Agreement.
"Permitted Liens" means:
<PAGE> 55
(1) Liens incurred pursuant to the Purchase Agreements and Related
Documents;
(2) Liens securing Senior Indebtedness;
(3) Liens securing Taxes, assessments or governmental charges or levies
or the claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons;
(4) Liens incurred or deposits made in the ordinary course of business
(A) in connection with workers' compensation, unemployment
insurance, social security and other like laws, or (B) to secure
the performance of letters of credit, bids, tenders, sales
contracts, leases, statutory obligations, surety, appeal and
performance bonds and other similar obligations not incurred in
connection with the borrowing of money, the obtaining of advances
or the payment of the deferred purchase price of property;
(5) attachment, judgment and other similar Liens arising in connection
with court proceedings, provided the execution or other enforcement
of such Liens is effectively stayed and the claims secured thereby
do not constitute Defaults or Events of Default or are being
actively contested in good faith and by appropriate proceedings;
(6) purchase money security interests granted to secure the purchase
price of assets, the purchase of which does not violate the
Purchase Agreement or any Related Document; and
(7) Liens granted with respect to Indebtedness specifically permitted
in Section 9.1 of the Purchase Agreement.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization, governmental authority or any other form of
entity.
"Preemption Offering" means any offering of Common Shares, Convertible
Securities or other shares of Capital Stock of the Company by or on behalf of
the Company other than:
(a) the issuance or sale of Common Shares after the date
hereof pursuant to any employee or director stock
option plan or incentive stock plan of the Company
approved by the Board of Directors of Company;
provided, that (i) options or incentive stock grants
are granted only with respect to Common Shares, (ii)
the maximum number of Common
<PAGE> 56
Shares issued pursuant to options is 3,735,764 with
respect to options authorized on November 20, 1997 and
500,000 with respect to options authorized thereafter,
(iii) the minimum exercise price per Common Share for
such shares is not less than the fair market value per
share, and (iv) no options or incentive stock grants
are granted to Persons other than officers, directors
and employees of the Company or its subsidiaries; and
(b) the sale and issuance of Common Shares or Convertible
Securities pursuant to an Initial Public Offering.
"Preemptive Rights Agreement" means the Preemptive Rights Agreement dated as of
the date hereof, by and between the Seller and the Purchaser.
"Preferred Shares" means the shares of $0.001 par value preferred stock of the
Seller, treated as a single class of stock, at any time outstanding.
"Prepayment Premium" means the premium that must be paid by the Seller to the
Purchaser upon the payment of any or all of the Principal Amount of the Note
prior to the Maturity Date.
"Present Value" means the value on any date of determination of a future
payment or stream of payments.
"Principal Amount" means the principal amount of the Note at any time
outstanding.
"Prohibited Transfer" means the sale of any Common Shares or Convertible
Securities in contravention of the participation rights of the Purchaser under
the Co-Sale Agreement.
"Purchase Agreement" means the Senior Subordinated Note and Warrant Purchase
Agreement, dated as of November 20, 1997 between the Seller as seller and the
Purchaser, as purchaser, as amended, restated, modified or supplemented and in
effect from time to time.
"Purchase Offer" means one or more bona fide offers from any Person to
purchase Common Shares or Convertible Securities.
"Purchased Shares" means, as of any date of determination, any Common Shares
purchased by the Purchaser prior to such date of determination pursuant to the
Preemptive Rights Agreement, or directly from the Seller in any other
transaction after the Original Issue Date.
"Purchaser" means Banc One Capital Partners II, LLC, a Delaware limited
liability company, together with its successors and assigns.
<PAGE> 57
"Put Option"s defined in the Option Agreement.
"Option Agreement" means the Option Agreement dated as of the date hereof by
and between the Seller and the Purchaser.
"Put Price" means, as of any date of determination, a per share purchase price
equal to the Capitalized Earnings Determined Value Amount, unless a greater
Market Determined Value Amount or Appraisal Determined Value Amount is
determinable with respect to such date of determination, in which case "Put
Price" means such greater amount.
"Put Trigger Event" means the first to occur of any of the following events:
(i) the sixth anniversary of the Closing Date; (ii) a Disposition; (iii) a
Non-Surviving Combination; (iv) the date upon which the Company prepays in full
the outstanding principal, interest and assessments, if any, on the Note or (v)
an Acceleration Event.
"Qualified Initial Public Offering" means an Initial Public Offering by the
Seller of shares of its Common Stock in which the proceeds to the Seller (net
of underwriting discounts) equals or exceeds $25,000,000, and in which the
Company is valued (based on the number of Outstanding Common Shares multiplied
by the offering price per share) at $100,000,000 or more.
"Qualified Plans" shall have the meaning set forth in Section 5.21 of the
Purchase Agreement.
"Quarter" means each quarter annual period of the Fiscal Year, and "Quarterly"
means each Quarter. Each Quarter consists of three Months.
"Quarterly Financial Statements" means, with respect to each Quarter, the
Accounting Statements of the Seller with respect to such Quarter and the
current Fiscal Year to date, presented with corresponding Accounting Statements
for the same Quarter and Fiscal Year to date period for the preceding Fiscal
Year, which Accounting Statements shall be prepared in accordance with GAAP
(subject to applicable year end adjustments) and presented in reasonable detail
(but omitting footnotes that would substantially duplicate footnotes contained
in the most recent Annual Financial Statements).
"Registrable Securities" means: (a) any of the Warrant Shares and the Common
Shares of the Seller issued pursuant to the Preemptive Rights Agreement or
Warrant, and (b) any securities issued or issuable with respect to any such
securities described in (a) above, by way of dividend or distribution or in
connection with a recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Securities, once
issued such securities shall cease to be Registrable Securities when (i) a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such
<PAGE> 58
securities shall have been sold in accordance with such registration statement,
(ii) such securities shall have been distributed to the public pursuant to Rule
144 (or any successor provision) promulgated under the Securities Act, (iii)
such securities shall have been otherwise transferred, new certificates for
them not bearing a legend restricting further transfer shall have been
delivered by the Seller and subsequent disposition of them shall not require
registration or qualification under the Securities Act or any similar state law
then in force, or (iv) such securities shall have ceased to be outstanding.
"Registration Expenses" means all expenses incident to the Seller's performance
of or compliance with Section 2 of the Registration Rights Agreement,
including, without limitation, all registration, filing and National
Association of Securities Dealers fees, all fees and expenses of complying with
securities or blue sky laws, all word processing, duplicating and printing
expenses, messenger and delivery expenses, the fees and disbursements of
counsel for the Seller and of its independent public accountants, including the
expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance, the fees and disbursements
incurred by the holders of Registrable Securities to be registered (including
the fees and disbursements of any counsel and accountants retained by the
Purchaser), premiums and other costs of policies of insurance against
liabilities arising out of the public offering of the Registrable Securities
and any fees and disbursements of underwriters customarily paid by issuers or
sellers of securities, but excluding underwriting discounts and commissions and
transfer taxes, if any.
"Registration Rights Agreement" means the Registration Rights Agreement dated
as of the date hereof, by and between the Seller and the Purchaser.
"Regulations" means the federal Income Tax Regulations (including without
limitation, Temporary Regulations) promulgated under the Code, as the same may
be amended from time to time (including corresponding provisions of successor
regulations).
"Related Documents" is defined in Section 13.1 of the Purchase Agreement.
"Representation(s) and Warranty(ies)" means the representations and warranties
of the Seller set forth in Section 5 of the Purchase Agreement and in the
Related Documents and in any certificate of the Seller delivered pursuant
thereto.
"Reorganization Event" means any of the following events:
(c) any capital reorganization or reclassification or
recapitalization of the Capital Stock of the Seller
(other than any Adjustment Event);
(d) any merger or consolidation of the Seller
with or into another
<PAGE> 59
Person; and
(e) the sale or transfer of the property of the Seller as
an entirety or substantially as an entirety.
"Reporting Covenants" means the covenants of the Seller set forth in Section 7
of the Purchase Agreement.
"Restricted Payments" means any of the following:
(1) any dividend on any class of the Seller's Capital Stock;
(2) any other distribution on account of any class of the Seller's
Common Shares; and
(3) any redemption, purchase or other acquisition, direct or
indirect, of any shares of the Seller's Capital Stock (other
than pursuant to the Put Option).
"Restricted Securities" means (a) any Warrant bearing the applicable legend set
forth in Section 4.1 of the Warrant, (b) any Warrant Shares which are evidenced
by a certificate or certificates bearing such legend, and (c) unless the
context otherwise requires, any Common Shares which are at the time issuable
upon the exercise of any Warrant and which, when so issued, will be evidenced
by a certificate or certificates bearing such legend.
"Rights Offering" means any offering of Common Shares, Convertible Securities
or other shares of Capital Stock of the Company or any distribution of rights
to purchase Common Shares, Convertible Securities or other shares of Capital
Stock of the Company by or on behalf of the Company that is made substantially
on a prorata basis among the holders of Common Shares.
"Securities" means collectively, the Note, the Warrant and the Warrant Shares.
"Securities Act" means the Securities Act of 1933, or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as of
the same shall be in effect at the time. References to a particular section of
the Securities Act of 1933 shall include a reference to the comparable section,
if any, of any such similar federal statute.
"Securities Exchange Act" means the Securities Exchange Act of 1934, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934 shall include a
reference to the comparable section, if any, of any such similar federal
statute.
"Security Reports" means all financial statements, proxy statements, notices
and reports furnished to the shareholders or securities holders of the Seller
and all registration statements and reports (including reports on Forms 10-K,
10-Q and 8-K) filed with the Commission.
<PAGE> 60
"Seller" means SCC Communications Corp., a Delaware corporation, and includes
any Person which shall succeed to or assume the obligations of the Seller.
"Selling Shareholder" is defined in the Co-Sale Agreement.
"Senior Indebtedness" means all monetary obligations of the Seller (including,
without limitation, obligations with respect to the principal of, premium, if
any, and interest on, fees and claims arising under, or with respect to, the
Senior Loan Agreement.
"Senior Lender" means Bank One Colorado, NA and its successors and assigns
thereunder.
"Senior Loan" has the meaning set forth in Background- Paragraph B of the
Purchase Agreement.
"Software" means all software, including all related copyrights, databases and
documentation.
"Stated Interest Rate" is defined in the Note.
"Subordinated Debt" means Indebtedness of the Seller which is subordinated, in
a manner satisfactory to and approved in writing by the Purchaser, to the
Indebtedness of the Seller evidenced by the Note.
"Subsidiary" means any corporation, all of the stock of every class of which,
except directors' qualifying shares, shall at the time as of which any
determination is being made, be owned by the Seller either directly or through
Subsidiaries.
"Taxes" means any federal, state, local or foreign income, gross receipts,
franchise, payroll, employment, excise, unemployment, personal property, sales,
use, value added, alternative, estimated or other tax of any kind whatsoever,
including any interest, penalty or addition thereto. The Seller has previously
made available to Purchaser copies of all federal income tax returns filed by
the Seller in the past five years.
"Tax Returns" means all returns relating to Taxes.
"Total Debt" of any Person shall mean, as of any date, all amounts which would
be included as debt on a balance sheet of such Person as of such date prepared
in accordance with GAAP, consistently applied.
"Total Liabilities" of any Person shall mean, as of any date, all amounts which
would be included as liabilities on a balance sheet of such Person as of such
date prepared in accordance with GAAP, consistently applied.
<PAGE> 61
"Transfer" means, with respect to any item, the sale, exchange, pledge,
conveyance, lease, transfer or other disposition of such item or any interest
therein.
"Trigger Value" means, with respect to any date, the fair market value of the
Company determined by the Appraiser based solely upon a Put Trigger Event the
closing of which has occurred within six (6) months immediately preceding the
date or exercise of the Put Option, or that will occur pursuant to an agreement
or letter of intent in effect as of the date or exercise of the Put Option, and
assuming: (i) the full exercise or conversion of all of the then outstanding
Convertible Securities in accordance with their respective terms; (ii) the
payment in full of the Note out of the proceeds of such Put Trigger Event;
(iii) no adjustment or discount with respect to minority interest, voting
rights or rights to control management of the Company, and (iv) no adjustment
for the tax consequences of such Put Trigger Event.
"Voluntary Insolvency Default" is defined in the Note.
"Voting Power" means with respect to any corporation the power to vote for or
designate members of the board of directors of such corporation, whether
exercised by virtue of the record ownership of stock, under a close corporation
or similar agreement or under an irrevocable proxy.
"Voting Stock" means the shares of voting common stock, $0.001 par value, of
the Seller at any time outstanding.
"Warrant Exercise Expiration Date" means that date which is the earliest of (i)
the date on which an Initial Public Offering is completed, (ii) the date on
which a Disposition or Non-Surviving Combination is consummated, (iii) the date
on which the Purchaser exercises its rights under the Co-Sale Agreement to sell
all of its Warrant Shares or (iv) 90 days after the Maturity Date of the Note.
"Warrant Shares" is defined in Background - Section D.
"Warrants" mean the Warrant.
"Welfare Plans" means an "employee welfare benefit plan" as such term is
defined in Section 3(1) of ERISA.
<PAGE> 1
EXHIBIT 10.14
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED
OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
SENIOR SUBORDINATED NOTE
DUE NOVEMBER 30, 2003
<TABLE>
<S> <C>
MAKER SCC COMMUNICATIONS CORP. ("Company")
PAYEE BANC ONE CAPITAL PARTNERS II, LLC
("BOCP")
ORIGINAL PRINCIPAL AMOUNT $4,000,000
AMORTIZATION COMMENCEMENT DATE MARCH 31, 2001
STATED INTEREST RATE 11% PER ANNUM UNTIL MAY 31, 1999
12% PER ANNUM THEREAFTER
DEFAULT INTEREST RATE 18% PER ANNUM
DATE OF NOTE NOVEMBER 20, 1997
MADE AT COLUMBUS, OHIO
MATURITY DATE NOVEMBER 30, 2003
PAYMENT DATES INTEREST: LAST DAY OF EACH MONTH
PRINCIPAL: MARCH 31, JUNE 30,
SEPTEMBER 30, DECEMBER 31
</TABLE>
<PAGE> 2
This is the SENIOR SUBORDINATED NOTE DUE NOVEMBER 30, 2003 ("Note")
provided for in the SENIOR SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT
DATED AS OF NOVEMBER 20, 1997, as amended, restated, supplemented or otherwise
modified and in effect from time to time ("Purchase Agreement") by and between
BOCP, as purchaser, and the COMPANY, as seller. BOCP, together with its
successors and assigns, is referred to as the "Payee." The Company, together
with its successors and assigns, is referred to as the "Maker".
THIS NOTE IS ONE OF THE RELATED DOCUMENTS REFERRED TO IN THE PURCHASE
AGREEMENT.
FOR VALUE RECEIVED, THE MAKER HEREBY PROMISES TO PAY TO THE ORDER OF
THE PAYEE THE PRINCIPAL AMOUNT OF FOUR MILLION DOLLARS ($4,000,000), TOGETHER
WITH INTEREST, PREPAYMENT PREMIUMS AND ASSESSMENTS, UPON THE TERMS AND SUBJECT
TO THE CONDITIONS SET FORTH IN THIS NOTE.
SECTION 1. DEFINITIONS AND MISCELLANEOUS PROVISIONS.
All capitalized terms not otherwise defined in this Note shall have the
definitions set forth in the Glossary of Defined Terms attached to the Purchase
Agreement as in effect from time to time, which definitions are, to the extent
applicable, incorporated herein by reference.
The provisions of Section 13 of the Purchase Agreement are applicable to
this Note and are, to the extent applicable, incorporated by reference in this
Agreement.
SECTION 2. MATURITY AND PAY OFF.
The unpaid Principal Amount of this Note, together with all accrued but
unpaid Interest and Assessments shall be due and payable in full on the
Maturity Date. Payment of the Principal Amount and all accrued but unpaid
Interest and Assessments may be Accelerated upon the occurrence of an Event of
Default as provided for in Section 8 of this Note.
The date upon which the Principal Amount and all accrued but unpaid
Interest and Assessments is paid or discharged in full is referred to as the
"Pay Off Date." Upon written Notice by the Maker to the Payee, the Payee will
furnish to
<PAGE> 3
the Maker a pay off letter setting forth the amount of the payment of Principal
Amount, Interest and Assessments required to pay this Note in full as of a
specified Pay Off Date.
SECTION 3. INTEREST.
Interest shall accrue from the date of this Note through and including
the Pay Off Date on the unpaid Principal Amount at the Interest Rate,
("Interest"). All accrued but unpaid Interest shall be paid monthly in arrears
on each Payment Date specified above, commencing December 31, 1997.
Upon the occurrence of an Event of Default and the election by the
Payee, in the sole exercise of its discretion, to impose the Default Interest
Rate specified herein by giving Notice of that election to the Maker ("Default
Rate Election"), the "Interest Rate" shall be a fixed rate per annum equal to
the Default Interest Rate, and the Default Interest Rate shall continue to be
the "Interest Rate" until the first Payment Date after the Default Rate
Election at which such Event of Default has been remedied or waived and no
other Default or Event of Default is continuing unremedied or unwaived,
provided that the Note has not been Accelerated. At all times that the Default
Interest Rate is not in effect, the "Interest Rate" shall be a fixed rate per
annum equal to the Stated Interest Rate specified above.
Notwithstanding any provision of this Note to the contrary: (i) in no
event shall the Interest Rate be a rate per annum in excess of the maximum
interest rate permissible under Applicable Law, and (ii) to the extent that
Interest or other amounts paid with respect to this Note which are deemed to be
interest under Applicable Law result in interest payments in excess of those
permitted under Applicable Law, such excess payments shall be applied to the
payment of the unpaid Principal Amount or, if the Principal Amount has been
paid in full, shall be refunded to the Maker.
Interest shall be calculated based upon the actual number of days
elapsed over each month, including any additional days elapsed because the
scheduled Payment Date fell on a non-Business Day, and otherwise in
accordance with Section 13.15 of the Purchase Agreement.
SECTION 4. PRINCIPAL AMOUNT.
The Principal Amount shall be paid in installments as set forth on
Schedule 1 hereto, payable Quarterly on each Payment Date, commencing on the
Amortization Commencement Date and continuing until the earlier of the Pay Off
Date or the Maturity Date. In the event of any partial prepayment of Principal
<PAGE> 4
Amount, each such partial prepayment shall be applied to pay the scheduled
installments of Principal Amount in inverse order of the Payment Dates on which
such installments are due and payable.
SECTION 5. PREPAYMENTS.
The Maker may prepay the Principal Amount in whole at any time or in
part from time to time after June 30, 1998; provided, that (i) each partial
prepayment of Principal Amount shall be in an amount equal to $500,000 or an
integral multiple thereof, and (ii) Maker pays any Prepayment Premiums as
provided for below.
The Maker shall pay as a Prepayment Premium the percent shown below of
the Principal Amount of such prepayment.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
IF PREPAYMENT IS MADE
ON OR AFTER BUT BEFORE PREPAYMENT PREMIUM
- -------------------------------------------------------------------------------
<S> <C> <C>
June 30, 1998 November 30, 1998 4%
November 30, 1998 November 30, 1999 3%
November 30, 1999 November 30, 2000 2%
- -------------------------------------------------------------------------------
</TABLE>
All prepayments of Principal Amount shall be accompanied by the payment
of (i) all Interest accrued but unpaid through the date of prepayment with
respect to the Principal Amount prepaid, and (ii) all unpaid Assessments.
SECTION 6. LATE PAYMENTS
A payment of Principal Amount, Interest or Assessment shall be deemed to
be in default if such payment is not made in the manner provided for in Section
7 of this Note prior to 2:00 p.m., Columbus, Ohio time on the fifth day
following Notice of such default. The Payee may, in the sole exercise of its
discretion, by Notice to the Maker, assess a fee of $1,000 per Payment Date
with respect to which there is a late payment to reimburse the Payee for the
cost of processing such late payment. Such fee shall be deemed to be an
"Assessment" for purposes of this Note. The Payee may not assess such fee with
respect to any Payment Default after payment of this Note is Accelerated.
<PAGE> 5
SECTION 7. PAYMENTS AND WIRING INSTRUCTIONS.
All payments of Principal Amount, Interest, Prepayment Premium or
Assessments shall be made by wire transfer of immediately available funds to
the account of the Payee at or before 2:00 p.m. Columbus, Ohio time on the
Business Day that such payment is due. Any wire transfer received by the Payee
after 2:00 p.m. Columbus, Ohio time on any Business Day shall be deemed to have
been received by the Payee prior to such time on the next Business Day.
Unless otherwise specified in a Notice by the Payee to the Maker, all
such payments shall be wired in accordance with the following instruction:
Bank One, Columbus, OH
ABA #044-000-037
FAO Banc One Capital Corporation
Account #981039134
In the event that any scheduled Payment Date falls on a non - Business
Day, such Payment Date shall be deemed to be the next Business Day following
such scheduled Payment Date, and such additional days shall be deemed to have
elapsed for purposes of computing the accrued Interest payable on such Payment
Date.
SECTION 8. EVENTS OF DEFAULT.
(a) Enumeration of Defaults. Each of the following events shall be
an "Event of Default" for the purposes of this Note. An Event of Default shall
be deemed to continue until waived by Notice by the Payee to the Maker or
remedied by action of the Maker to the reasonable satisfaction of the Payee.
(b) Payment Default. The Maker defaults in the payment when due of
any installment of Principal Amount, Interest or Assessment, and such default
is not remedied in the manner (including the payment of any Assessment) and
within in the grace period provided for in Section 6 of this Note ("Payment
Default"). A Payment Default shall be deemed to have occurred notwithstanding
the fact that the default in payment resulted from compliance with or
enforcement of the Intercreditor Agreement.
(c) Affirmative Covenant Default. The Maker fails to observe or
perform any Affirmative Covenant and such default is not remedied in the manner
and within the applicable grace period after Notice of such default provided
for in the Purchase Agreement.
<PAGE> 6
(d) Reporting Covenant Default. The Maker fails to observe or
perform any Reporting Covenant and such default is not remedied in the manner
and within the applicable grace period after Notice of such default provided
for in the Purchase Agreement.
(e) Negative Covenant Default. The Maker fails to observe or perform
any Negative Covenant and such default is not remedied in the manner and within
the applicable grace period after Notice of such default provided for in the
Purchase Agreement.
(f) Warranty Default. Any Representation or Warranty proves to have
been untrue, incomplete or misleading in any material respect when made or when
deemed to have been made and such breach is not remedied within 30 days after
Notice by the Payee to the Maker of such breach.
(g) Financial Test Default. As of any applicable date of
determination, the Maker fails to satisfy any of the Financial Tests.
(h) Cross Default. The Maker defaults in the payment of any
Indebtedness with an unpaid principal amount in excess of $100,000, (but
specifically excluding any purchase money obligation the payment of which is
being actively contested in good faith by the Maker (as guarantor, surety or
principal)) and such default, acceleration or action remains unremedied or
unrescinded for a period of 20 days, regardless of whether (i) such default is
waived by the obligee unless such waiver constitutes full satisfaction of all
amounts then due and payable, (ii) payment of any Indebtedness of the Maker is
accelerated, (iii) the contractual right of the Maker to borrow money under any
loan, credit or similar agreement or arrangement is suspended as a result of
any default by the Maker with respect to such agreement or arrangement or (iv)
any action to enforce payment of any Indebtedness of the Maker is commenced
against the Maker or with respect to any collateral securing such Indebtedness.
(i) Subordination Default. Any agreement with respect to the Senior
Indebtedness is amended or modified in violation of the Intercreditor
Agreement, the blocking period as provided for in the Intercreditor Agreement
is commenced, Payment of any amount due under this Note is prevented due to
compliance with or the enforcement of the Intercreditor Agreement, or any
amounts previously paid with respect to this Note are repaid or held in
constructive trust by the Payee due to compliance with or the enforcement of
the Intercreditor Agreement or the Maker seeks forebearance with respect to the
payment of any principal or interest
<PAGE> 7
due under the Senior Indebtedness.
(j) Document Default. The Maker defaults in the observance or
performance of any covenant or agreement required under the Related Documents
and such default continues for a period of 30 days after Notice by the Payee to
the Maker of such default.
(k) Voluntary Insolvency Default. The Maker: (i) discontinues the
conduct of its business; (ii) applies for or consents to the imposition of any
Insolvency Relief; (iii) voluntarily commences or consents to the commencement
of an Insolvency Proceeding; (iv) files an answer admitting the material
allegations of any involuntary commencement of an Insolvency Proceeding; (v)
makes a general assignment for the benefit of its creditors; or (vi) is unable
or admits in writing its inability to pay its debts as they become due
("Voluntary Insolvency Default").
(l) Insolvency Order. Any Insolvency Order is entered against the
Maker and such Insolvency Order is not dismissed within 60 days of its entry
("Involuntary Insolvency Default").
(m) Fraudulent Conveyance Default. The Maker: (i) conceals, removes
or permits to be concealed or removed all or any part of its property with the
intent to hinder, delay or defraud any of its creditors; (ii) makes or permits
any conveyance of its material properties that would be deemed fraudulent to
creditors under any Insolvency Law or fraudulent conveyance provision of
Applicable Law; (iii) engages in a bulk transfer of any of its property without
complying with the bulk transfer provisions of Applicable Law; (iv) has, while
it is insolvent, caused or permitted any of its creditors to obtain a Lien on
any of its property by legal proceedings or otherwise which is not vacated
within 30 days.
(n) Judgments. A final, nonappealable judgment or judgments is or
are entered against the Maker in the aggregate amount of $100,000 or more on a
claim or claims not covered by insurance.
(o) Material Adverse Change. In the reasonable judgment of the
Purchaser, any material adverse change occurs in the financial condition or
results of operations of the Maker or the Maker's ability to perform its
obligations under this Note, the Purchase Agreement or the Related Documents.
(p) Redemptions. Maker redeems any shares of any of its Capital
Stock, except for redemptions not to exceed, in the aggregate, 100,000 shares.
SECTION 9. REMEDIES AND ACCELERATION.
<PAGE> 8
(a) Remedies. After payment of this Note is Accelerated, the Payee
shall have (i) all rights and remedies granted to it under this Note and the
Purchase Agreement, and (ii) all rights of a creditor under Applicable Law
(including the UCC). All such rights and remedies and the exercise thereof
shall be cumulative. No exercise of any such rights and remedies shall be
deemed to be exclusive or constitute an election of remedies.
(b) Acceleration of Payment. Upon the occurrence of a Voluntary
Insolvency Default or Involuntary Insolvency Default, payment of this Note
shall be Accelerated automatically and without Notice. Upon the occurrence and
during the continuation of any other Event of Default, the Payee may, in the
sole exercise of its discretion, elect to cause payment of this Note to be
Accelerated by giving Notice of such election to the Maker ("Acceleration
Notice"). Once payment of this Note has been properly Accelerated as provided
for in this section, such Acceleration may be revoked only by the Payee, in
the sole exercise of its discretion, by giving Notice of revocation to the
Maker, regardless whether the Event of Default giving rise to such Acceleration
has been remedied by action of the Maker.
(c) Waiver of Default. No Default or Event of Default may be waived
nor shall be deemed to have been waived except by an express Notice by the
Payee to the Maker, and any such grant of waiver shall be applicable only to
the specific Defaults or Events of Default expressly identified in such Notice
and shall not be deemed to apply to any other or subsequent Default or Event of
Default. The Payee may grant or withhold any such waiver in the sole exercise
of its discretion, which may be conditioned upon the payment by the Maker of a
premium, the grant of collateral to secure the payment of this Note or the
acceptance of other terms and conditions under this Note or the Purchase
Agreement. No course of dealing by the Payee or its agents and employees, or
the failure, forebearance or delay by the Payee in exercising any of its rights
or remedies under this Note or the Purchase Agreement or any other Related
Document shall operate as a waiver of any Default or Event of Default or of any
right of the Payee under this Note.
<PAGE> 9
SECTION 10. WAIVERS BY MAKER.
To the full extent permitted by Applicable Law, Maker waives with
respect to this Note: presentment; protest and demand; notice of protest,
demand and dishonor; and diligence in collection. Maker agrees that the Payee
may release all or any part of any collateral securing the payment of this
Note; any guarantor or surety with respect to this Note; or any other Maker
from its obligation with respect to this Note, all without notice to Maker and
without affecting in any way the obligation of Maker under this Note.
SECTION 11. INTENTIONALLY BLANK.
SECTION 12. INTERCREDITOR AGREEMENT.
The Payee and the Senior Lender are parties to an Intercreditor
Agreement dated as of the date hereof, pursuant to which certain of the Payee's
rights under this Note are subordinated to the Senior Lender. Nothing in this
Note, the Purchase Agreement or such Intercreditor Agreement shall grant to
Maker any rights as a beneficiary under such Intercreditor Agreement nor any
right to enforce against the Payee any provision of such Intercreditor
Agreement.
SECTION 13. COLLECTION AND ASSESSMENT FOR COSTS.
The Maker shall reimburse the Payee for all reasonable costs and
expenses (including legal fees and disbursements) incurred by the Payee in
connection with the collection or attempted collection of the payment of this
Note through legal proceedings or otherwise except to the extent that such
costs and expenses are incurred in an action in which it is ultimately
determined that the Maker was not in breach of its obligations to the Payee.
All such amounts shall be deemed to be "Assessments" for purposes of this Note.
SECTION 14. AMENDMENT.
This Note may not be amended, restated, supplemented or otherwise
modified except by an express written agreement executed and delivered by the
Maker and the Payee. Compliance with the covenants and other provisions of
this Note may not be waived except by an express written waiver signed and
delivered by the Payee.
<PAGE> 10
SECTION 15. GOVERNING LAW.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PAYEE AND MAKER UNDER
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE STATE OF
OHIO, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
SECTION 16. WAIVER OF JURY TRIAL.
THE PAYEE AND THE MAKER, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY
TO CONSULT WITH LEGAL COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON
OR ARISING OUT OF THIS NOTE OR ANY RELATED INSTRUMENT OR AGREEMENT, OR ANY OF
THE TRANSACTIONS CONTEMPLATED BY THIS NOTE, OR ANY COURSE OF CONDUCT, DEALING,
STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY OF THEM ("LITIGATION").
NEITHER THE PAYEE NOR THE MAKER SHALL SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR
OTHERWISE, ANY ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER
ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE PROVISIONS
SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY
EITHER THE PAYEE OR THE MAKER EXCEPT BY WRITTEN INSTRUMENT EXECUTED BY ALL OF
THEM.
SECTION 17. CONSENT TO JURISDICTION, VENUE AND SERVICE OF PROCESS.
THE PAYEE AND THE MAKER, EACH AFTER HAVING CONSULTED OR HAVING HAD THE
OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL, HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY: (I) CONSENTS TO THE JURISDICTION OF THE COMMON PLEAS COURT OF
FRANKLIN COUNTY, OHIO AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF OHIO, EASTERN DIVISION WITH RESPECT TO ANY LITIGATION; (II) WAIVES
ANY OBJECTIONS TO THE VENUE OF ANY LITIGATION IN EITHER SUCH COURT; (III)
AGREES NOT TO COMMENCE ANY LITIGATION EXCEPT IN ONE OR THE OTHER OF SUCH
COURTS AND AGREES NOT TO CONTEST THE REMOVAL OF ANY LITIGATION COMMENCED IN ANY
OTHER COURT TO ONE OR THE OTHER OF SUCH COURTS; (IV) AGREES NOT TO SEEK TO
REMOVE, BY CONSOLIDATION OR OTHERWISE, ANY LITIGATION COMMENCED IN EITHER OF
SUCH COURTS TO ANY OTHER COURT; AND (V) WAIVES PERSONAL SERVICE OF PROCESS IN
CONNECTION WITH ANY LITIGATION AND CONSENTS TO SERVICE OF PROCESS BY REGISTERED
OR CERTIFIED MAIL IN ACCORDANCE WITH APPLICABLE LAW. THESE PROVISIONS SHALL
NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY EITHER
THE PAYEE OR THE MAKER EXCEPT BY WRITTEN INSTRUMENT EXECUTED BY ALL OF THEM.
<PAGE> 11
IN WITNESS WHEREOF, this Note has be executed and delivered by and on
behalf of Maker by its duly authorized officer, effective as of the Date of
Note set forth above.
MAKER:
SCC COMMUNICATIONS CORP.
By: /s/ NANCY K. HAMILTON
---------------------------
Its: CHIEF FINANCIAL OFFICER
--------------------------
<PAGE> 12
SCHEDULE 1
LOAN PRINCIPAL AMORTIZATION SCHEDULE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
DATE PRINCIPAL PAYMENT DUE AMOUNT DUE
- ---------------------------------------------------------------------------
<S> <C>
December 31, 1997-December 31, 2000 $0
March 31, 2001 $250,000
June 30, 2001 $250,000
September 30, 2001 $250,000
December 31, 2001 $250,000
March 31, 2002 $250,000
June 30, 2002 $250,000
September 30, 2002 $250,000
October 31, 2002 $250,000
December 31, 2002 $250,000
March 31, 2003 $500,000
June 30, 2003 $500,000
September 30, 2003 $500,000
November 30, 2003 Remaining Outstanding Balance
- ---------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 10.15
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND
MAY NOT BE DISTRIBUTED, SOLD, TRANSFERRED, ASSIGNED, HYPOTHECATED OR OFFERED
UNLESS THERE IS IN EFFECT A REGISTRATION STATEMENT UNDER SUCH ACT AND LAWS
COVERING SUCH SECURITIES OR THE ISSUER RECEIVES AN OPINION OF COUNSEL FOR THE
HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE ISSUER OR A NO-ACTION
LETTER FROM THE SECURITIES EXCHANGE COMMISSION STATING THAT SUCH DISTRIBUTION,
SALE, TRANSFER, ASSIGNMENT, HYPOTHECATION OR OFFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND LAWS.
----------------------------------------
SCC COMMUNICATIONS CORPORATION
WARRANT CERTIFICATE
COMMON STOCK PURCHASE WARRANT
OF
BANC ONE CAPITAL PARTNERS II, LLC
----------------------------------------
DATED AS OF NOVEMBER 20, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. DURATION AND EXERCISE OF WARRANT . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 WARRANT EXERCISE PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 MANNER OF EXERCISE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 WHEN EXERCISE EFFECTIVE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 DELIVERY OF STOCK CERTIFICATES, ETC. . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3. ANTIDILUTION ADJUSTMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.1 NUMBER OF WARRANT SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 ADJUSTMENT OR PREEMPTION EVENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.3 REORGANIZATION EVENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.4 OTHER EVENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 4. RESTRICTIONS ON TRANSFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.1 RESTRICTIVE LEGENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.2 NOTICE OF PROPOSED TRANSFER; OPINIONS OF COUNSEL . . . . . . . . . . . . . . . . . . 3
SECTION 5. AVAILABILITY OF INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 6. RESERVATION OF STOCK, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 7. DUE ORGANIZATION; NO VIOLATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 8. OWNERSHIP; REGISTRATION OF TRANSFER; EXCHANGE AND SUBSTITUTION OF WARRANT . . . . . . 5
8.1 OWNERSHIP OF WARRANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
8.2 REGISTRATION OF TRANSFERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
8.3 REPLACEMENT OF WARRANT CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . . . . 6
8.4 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 9. OTHER RIGHTS OF HOLDER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 10. NO RIGHTS OR LIABILITIES AS STOCKHOLDER . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
<PAGE> 3
WARRANT CERTIFICATE
Dated as of November 20, 1997
This certifies that, for value received, BANC ONE CAPITAL PARTNERS II,
LLC (the "Holder"), is entitled to purchase from SCC COMMUNICATIONS CORP., a
Delaware corporation (the "Company"), in a single exercise that number of
shares of the Common Stock of the Company equal to four percent (4%) of the
Fully Diluted Common Stock of the Company on the date hereof, subject to
adjustment as provided herein, in the manner and subject to the terms and
conditions set forth herein.
This Warrant is being issued by the Company pursuant to the Senior
Subordinated Note and Warrant Purchase Agreement dated as of November 20, 1997,
by and between the Company, as seller, and the Holder, as purchaser (the
"Purchase Agreement").
THIS WARRANT CERTIFICATE IS ONE OF THE "RELATED DOCUMENTS" REFERRED TO
IN THE PURCHASE AGREEMENT.
SECTION 1. DEFINITIONS.
All capitalized terms not otherwise defined herein shall have the
definitions set forth in the Glossary of Defined Terms attached to the Purchase
Agreement, which definitions are, to the extent applicable, incorporated in
this Warrant by reference.
SECTION 2. DURATION AND EXERCISE OF WARRANT.
2.1 WARRANT EXERCISE PERIOD. This Warrant shall be
exercisable in a single exercise at any time on or after the date hereof but on
or before the Warrant Exercise Expiration Date.
2.2 MANNER OF EXERCISE. This Warrant shall be
exercisable for shares of Voting Stock. This Warrant may be exercised by the
Holder in a single exercise upon surrender of this Warrant and Notice of
Exercise attached hereto duly completed and executed on behalf of the Holder,
at the principal office of the Company (or at such other office or agency of
the Company as it may designate by Notice in writing to the Holder at the
address of the Holder appearing on the books of the Company), upon payment of
the Exercise Price by wire transfer or delivery of a certified or cashier's
check payable to the Company. The Holder may, in lieu of paying the Exercise
Price by wire transfer or delivery of a certified or cashier's check to the
Company, reduce the unpaid principal amount of the Note by an amount equal to
the funds which would otherwise have been delivered.
<PAGE> 4
2.3 WHEN EXERCISE EFFECTIVE. Subject to the
requirements of any state or federal laws or regulations to which the Company
may be subject, the exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the Business Day on
which this Warrant shall have been surrendered and the Company receives payment
of the Exercise Price as provided in Section 2.2, and immediately prior to the
close of business on such Business Day the Holder shall be deemed to have
become the holder of record of the Warrant Shares.
2.4 DELIVERY OF STOCK CERTIFICATES, ETC. As soon as
practicable after the exercise of this Warrant, and in any event within five
(5) Business Days thereafter, the Company at its expense (including the payment
by it of any applicable issue taxes) will cause to be issued in the name of and
delivered to the Holder a certificate or certificates for the number of Warrant
Shares to which the Holder shall be entitled upon such exercise, rounded up to
the nearest whole share.
SECTION 3. ADJUSTMENTS TO NUMBER OF WARRANT SHARES.
The number of Warrant Shares that may be purchased by the Holder in
consideration of the payment of the Exercise Price is the Initial Number of
shares of Common Stock; provided, however, that such number of shares is
subject to adjustment as provided for in this Section 3. The Exercise Price is
not subject to adjustment.
3.1 PREFERRED SHARE EQUIVALENT ADJUSTMENT. For so long
as any Preferred Shares remain outstanding, the number of Warrant Shares that
may be purchased upon exercise of this Warrant shall be as follows.
Thereafter, such number shall be subject to adjustment only as provided in
Section 3.2.
(a) The number of Warrant Shares that may be purchased
upon exercise of this Warrant shall be the Initial Number multiplied by a
fraction, the denominator of which is the Applicable Conversion Price and the
numerator of which is the Applicable Original Conversion Price.
(b) As used in this Agreement, (i) "Applicable Original
Conversion Price" means $1.36 if any Series F Preferred Shares are outstanding,
$0.81 if any Series E Preferred Shares are outstanding, or $0.59 if no Series E
Preferred Shares are outstanding or $0.55 if no Series D or E Preferred Shares
are outstanding or $0.33 if no Series C, D or E Preferred Shares are
outstanding; (ii) "Applicable Conversion Price" means the highest Conversion
Price per share then in effect with respect to outstanding Series A, B, C, D or
E Preferred Shares as adjusted pursuant to paragraph 6 of Article Fourth of the
Company's Amended Certificate of Incorporation; (iii) "Initial Number" means
that number of shares of Common Stock equal to
<PAGE> 5
four percent (4%) of the Fully Diluted Common Stock of the Company on the date
hereof, as adjusted pursuant to Section 3.2, if applicable. On the date
hereof, the Initial Number is 1,170,892.
3.2 ANTIDILUTION ADJUSTMENT. After no Preferred Shares
remain outstanding, the number of Warrant Shares that may be purchased upon
exercise of this Warrant shall be the number of Warrant Shares that would have
been issuable upon exercise of this Warrant had it been exercised on the last
day that any Preferred Shares remain outstanding; provided, that upon any
subsequent occurrence of an Adjustment Event, such number of Warrant Shares
shall be adjusted immediately after the applicable record date with respect to
such Adjustment Event as follows. The adjusted number of Warrant Shares shall
be a number equal to the number of Warrant Shares immediately prior to such
record date multiplied by a fraction (i) the numerator of which is the number
of shares of Outstanding Common Stock immediately after such Adjustment Event,
and (ii) the denominator of which is the number of shares of Outstanding Common
Stock immediately prior to such record date. Any such adjustment shall be
calculated to the nearest 0.001 Warrant Share.
3.3 REORGANIZATION EVENT. Upon the occurrence of a
Reorganization Event, there shall thereafter be issuable upon the exercise of
this Warrant (in lieu of the Warrant Shares), as appropriate, the number of
shares of stock, other securities or property to which the Holder of the number
of shares of Common Stock equal to the number of Warrant Shares at the date of
the Reorganization Event would have been entitled to as a result of such
Reorganization Event.
Prior to and as a condition of the consummation of any Reorganization
Event, the Company shall cause effective provisions to be made to effect the
purposes of this Section 3.3, including, if appropriate, an agreement among the
Company, any successor to the Company and the Holder.
3.4 OTHER ADJUSTMENTS.
(a) QUALIFIED OFFERING WITHIN EIGHTEEN MONTHS. If the
Seller completes a Qualified Public Offering within eighteen (18) months of the
date hereof, the number of Warrant Shares that may be purchased by the Holder
in consideration of the payment of the Exercise Price shall be reduced to the
Initial Number multiplied by 75%, subject to adjustment as provided for in
Section 3.1 or Section 3.2, if applicable.
(b) QUALIFIED OFFERING WITHIN TWELVE MONTHS. If the
Seller completes a Qualified Public Offering within twelve (12) months of the
date hereof, the number of Warrant Shares that may be purchased by the Holder
in consideration of the payment of the Exercise Price shall be reduced to the
Initial Number multiplied by 50%, subject to adjustment as provided for in
Section 3.1 or Section 3.2, if applicable.
<PAGE> 6
SECTION 4. RESTRICTIONS ON TRANSFER.
4.1 RESTRICTIVE LEGENDS. Except as otherwise permitted
by this Section 4, this Warrant and each Warrant issued in exchange or
substitution for any Warrant, and each Warrant issued upon the registration of
transfer of any Warrant and each certificate representing Warrant Shares and
each certificate issued upon the registration of Transfer of any Warrant
Shares, shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE,
AND MAY NOT BE DISTRIBUTED, SOLD, TRANSFERRED, ASSIGNED, HYPOTHECATED OR
OFFERED UNLESS THERE IS IN EFFECT A REGISTRATION STATEMENT UNDER SUCH ACT AND
LAWS COVERING SUCH SECURITIES OR THE ISSUER RECEIVES AN OPINION OF COUNSEL FOR
THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE ISSUER OR A
NO-ACTION LETTER FROM THE SECURITIES EXCHANGE COMMISSION STATING THAT SUCH
DISTRIBUTION, SALE, TRANSFER, ASSIGNMENT, HYPOTHECATION OR OFFER IS EXEMPT FROM
THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND LAWS."
4.2 NOTICE OF PROPOSED TRANSFER; OPINIONS OF COUNSEL.
Prior to any Transfer of any Restricted Securities, the Holder will give
written Notice to the Company of the Holder's intention to effect such Transfer
and to comply in all other respects with this Section 4.2. Each such Notice of
a proposed Transfer (a) shall describe the manner and circumstances of the
proposed Transfer in sufficient detail to enable counsel to render the opinion
referred to below, and (b) shall designate counsel for the Holder. The Holder
will submit a copy thereof to the counsel designated in such Notice and the
Company will promptly submit a copy thereof to its counsel. The following
provisions shall then apply:
(i) If in the opinion of counsel to the Company
the proposed Transfer may be effected without
registration of such Restricted Securities
under the Securities Act, the Company will
promptly notify the Holder and the Holder
shall thereupon be entitled to Transfer such
Restricted Securities in accordance with the
terms of the Notice delivered by the Holder
to the Company. Each Warrant or certificate,
if any, issued upon or in connection with
such Transfer shall bear the applicable
restrictive legend set forth in section 4.1,
unless in the opinion of such counsel such
legend is no longer
<PAGE> 7
required to ensure compliance with the
Securities Act. If for any reason counsel
for the Company (after having been furnished
with the information required to be furnished
by clause (a) of this Section 4.2) shall fail
to deliver an opinion to the Company, or the
Company shall fail to notify the Holder as
aforesaid, within thirty (30) days after
receipt of Notice of the Holder's intention
to effect a Transfer, then for all purposes
of this Warrant the opinion of counsel for
the Holder shall be sufficient to authorize
the proposed Transfer and the opinion of
counsel for the Company shall not be required
in connection with such proposed Transfer;
and
(ii) If in the opinion of counsel to the Company
the proposed Transfer may not be effected
without registration of such Restricted
Securities under the Securities Act, the
Company will promptly so notify the Holder
and the Holder shall not be entitled to
Transfer such Restricted Securities until
receipt of a further notice from the Company
under clause (i) above or until registration
of such Restricted Securities under the
Securities Act has become effective.
(iii) Holder agrees to provide or cause the
proposed transferee to provide any additional
information and cooperation that the Company
may reasonably request in connection with
such proposed Transfer, including
representations and warranties from the
proposed transferee in the event such
securities are not registered under the
Securities Act.
SECTION 5. AVAILABILITY OF INFORMATION.
The Company will comply with the reporting requirements of Sections 13
and 15(d) of the Securities Exchange Act insofar as they are applicable to the
Company and will comply with all other public information reporting
requirements of the Commission (including the requirements of Rule 144
promulgated by the Commission under the Securities Act) from time to time in
effect and relating to the availability of an exemption from the Securities Act
for the sale of any Restricted Securities or the sale of securities by
Affiliates. The Company will also cooperate with the Holder at the Holder's
expense to complete and file any information reporting forms presently or
hereafter required by the Commission as a condition to the availability of an
exemption from the Securities Act for the sale of any Restricted Securities or
the sale of securities by affiliates.
<PAGE> 8
SECTION 6. RESERVATION OF STOCK, ETC.
The Company will at all times reserve and keep available, solely for
issuance and delivery upon the exercise of this Warrant and free from
preemptive rights, a sufficient number of shares of Common Stock to cover the
Warrant Shares issuable or exchangeable upon the exercise of this Warrant. All
such shares shall be duly authorized and, when issued upon such exercise, shall
be validly issued, fully paid and non-assessable with no liability on the part
of the holders thereof.
SECTION 7. OWNERSHIP; REGISTRATION OF TRANSFER; EXCHANGE AND
SUBSTITUTION OF WARRANT.
7.1 OWNERSHIP OF WARRANT. Until due presentment for
registration, the Company may treat the Person in whose name this Warrant is
registered on the register kept at the Company's principal office as the owner
and holder thereof for all purposes, notwithstanding any Notice to the
contrary, except that, if and when this Warrant is properly assigned to another
Person, the Company may (but shall not be obligated to) treat such Person as
the owner of this Warrant for all purposes, notwithstanding any Notice to the
contrary. Subject to the foregoing provisions and to Section 4, this Warrant,
if properly assigned, may be exercised by the assignee without first having a
new Warrant issued.
7.2 REGISTRATION OF TRANSFERS. Subject to Section 4
hereof, the Company shall register the Transfer of this Warrant permitted under
the terms hereof upon records to be maintained by the Company for that purpose,
upon surrender of this Warrant, with the Form of Assignment attached hereto
duly completed and signed, to the Company at the Company's principal office.
Upon any such registration of Transfer, a new Warrant, in substantially the
form of this Warrant, shall be issued to the transferee.
7.3 REPLACEMENT OF WARRANT CERTIFICATE. Upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Warrant and upon delivery of indemnity reasonably
satisfactory to the Company in form and amount, or, in the case of any such
mutilation, upon surrender of this Warrant for cancellation at the Company's
principal office, the Company at its expense will promptly execute and deliver,
in lieu thereof, a new Warrant of like tenor.
7.4 EXPENSES. The Company will pay all expenses, taxes
(other than transfer and income taxes) and other charges payable by the Holder
in connection with the preparation, issuance and delivery from time to time of
this Warrant or the Warrant Shares. The Holder will pay all costs and expenses
associated with the transfer of this Warrant or the Warrant Shares by the
Holder.
<PAGE> 9
SECTION 8. OTHER RIGHTS OF HOLDER.
The Warrant Shares shall be subject to the terms and conditions of the
Preemptive Rights Agreement, Option Agreement, Registration Rights Agreement
and Co-Sale Agreement.
SECTION 9. NO RIGHTS OR LIABILITIES AS STOCKHOLDER.
Nothing contained in this Warrant shall be construed as conferring
upon the Holder any rights as a stockholder of the Company or as imposing any
liabilities on the Holder to purchase any securities or as a stockholder of the
Company, whether such liabilities are asserted by the Company or by creditors
of the Company.
The undersigned confirms that the representations and Warranties set
forth in Section 5 of the Purchase Agreement are true and correct in all
material respects as of the date hereof and the exercise date.
SCC COMMUNICATIONS
CORP.
By: /s/ NANCY K. HAMILTON
------------------------------
Its: CHIEF FINANCIAL OFFICER
-----------------------------
<PAGE> 10
NOTICE OF EXERCISE
SCC COMMUNICATIONS CORP.
The undersigned hereby elects to exercise the Warrant evidenced by
this Warrant Certificate, and to purchase thereunder, covered by said Warrant
Certificate and herewith makes payment in full therefor [by delivery herewith
of a certified or official bank check payable to the order of the Company in
the amount of $_________________] [by agreeing hereby to reduce the outstanding
principal balance of the Company's Senior Subordinated Note payable to the
undersigned by the amount of $___________] and requests that certificates for
such shares be issued in the name of and delivered to ______, whose address is
____________.
------------------------------
Signature guaranteed:
Dated:
------------------------
<PAGE> 11
FORM OF ASSIGNMENT
FOR VALUED RECEIVED, __________________ hereby sells, assigns and
transfers to the ___________________ all of the rights of the undersigned in
and to this Warrant in and to the foregoing Warrant Certificate with respect to
said Warrant and the shares of Common Stock issuable upon exercise of said
Warrant.
Name of
Holder
(Print):
---------------------------
Dated:
---------------------------------
(By:)
---------------------------------
(Title:)
-------------------------------
<PAGE> 1
EXHIBIT 10.16
----------------------------------------
SCC COMMUNICATIONS CORP.
OPTION AGREEMENT
----------------------------------------
DATED AS OF NOVEMBER 20, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. PUT OPTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 PUT OPTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 MANNER OF EXERCISE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 CLOSING AND PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 APPOINTMENT OF APPRAISER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
</TABLE>
<PAGE> 3
OPTION AGREEMENT
This is the OPTION AGREEMENT dated as of November 20, 1997
("Agreement") by and between SCC COMMUNICATIONS CORP. ("SCC"), a Delaware
corporation, and BANC ONE CAPITAL PARTNERS II, LLC ("BOCP"), a Delaware limited
liability company, provided for in and entered into pursuant to the SENIOR
SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT dated as of the date hereof,
as amended, restated, supplemented or otherwise modified and in effect from
time to time ("Purchase Agreement"), by and among BOCP, as purchaser, and SCC,
as seller.
SCC, together with its successors and assigns, is referred to as the
"Company". BOCP, together with its successors and assigns, is referred to as
the "Holder." The Company and the Holder are referred to collectively as the
"Parties" and individually as a "Party."
THIS AGREEMENT IS ONE OF THE "RELATED DOCUMENTS" REFERRED TO IN THE
PURCHASE AGREEMENT.
In consideration of their mutual promises set forth in this Agreement
and the Purchase Agreement, the Parties hereby agree as follows.
Section 1. DEFINITIONS.
All capitalized terms not otherwise defined in this Agreement
shall have the definitions set forth in the Glossary of Defined Terms attached
to the Purchase Agreement, which definitions are, to the extent applicable,
incorporated in this Agreement by reference.
Section 2. PUT OPTION.
2.1 PUT OPTION. At any time after the occurrence of a Put
Trigger Event and prior to the occurrence of an Initial Public Offering, the
Holder shall have the option to require the Company to purchase from the Holder,
upon the terms and subject to the conditions set forth in this Agreement, all,
but not less than all, of the Warrant Shares and Purchased Shares then owned by
the Holder. The purchase price for the Warrant Shares and Purchased Shares to
be purchased shall be the Put Price.
2.2 MANNER OF EXERCISE. The option provided for in this
Section ("Put Option") may be exercised by the Holder by giving Notice to the
Company that the Holder elects to exercise such Put Option at the applicable Put
Price and upon the terms and subject to the conditions set forth in this
Agreement. Such Notice of election by the Holder shall be irrevocable. Upon
final determination of the applicable Put Price as provided for in this
Agreement, the Company shall be required to purchase all of the Warrant and
Purchased Shares
<PAGE> 4
then owned by the Holder. The Company shall not be obligated to purchase the
Warrant Shares or Purchased Shares then owned by the Holder to the extent that
the Company shall be unable to do so without a breach or violation of the
provisions of Applicable Law or any agreement with respect to its Senior
Indebtedness. Notwithstanding the foregoing, the Company shall use all
reasonable efforts to remove all limitations upon its ability to purchase the
Warrant Shares or Purchased Shares then owned by the Holder, if any, and such
obligation shall remain a continuing obligation of the Company and the Company
shall purchase the Warrant Shares or Purchased Shares then owned by the Holder
immediately after and to the extent all such limitations have been removed.
2.3 CLOSING AND PAYMENT. The closing for the purchase of
the Warrant Shares and Purchased Shares by the Company pursuant to this
Agreement shall occur within thirty (30) days following the date of the
determination of the Put Price, which shall be payable by the Company by
delivery of a certified or cashiers' check payable to the Holder against
delivery by the Holder of the Warrant Shares and Purchased Shares.
2.4 APPOINTMENT OF APPRAISER. If the appointment of an
Appraiser is required or permitted in connection with the determination of the
Put Price under this Section 2, then within ten (10) days after the exercise of
the Put Option, the Company and the Holder shall endeavor in good faith to
select a mutually acceptable Appraiser. If no such Appraiser is mutually
selected within such time period or such longer time period as the Company and
the Holder shall mutually agree upon, then within ten (10) days thereafter, the
Company and the Holder shall each designate an investment banking firm that is
not an Affiliate of either the Company or the Holder, and within (10) ten days
thereafter, such investment banking firms shall mutually select the Appraiser.
The Company and Holder shall each pay one-half of the reasonable fees and
expenses of the Appraiser, and, if applicable, the Company and the Holder shall
each pay the fees and expenses of the investment banking firm designated by each
of them for the purpose of selecting the Appraiser.
Section 3. MISCELLANEOUS.
The provisions of Section 13 of the Purchase Agreement are applicable
to this Agreement and are, to the extent applicable, incorporated by reference
in this Agreement.
<PAGE> 5
The parties have executed and delivered this Agreement effective as of
the day and year first above written.
COMPANY: HOLDER:
SCC COMMUNICATIONS BANC ONE CAPITAL PARTNERS II,
CORP. LLC
By: /s/ NANCY K. HAMILTON By: Banc One Capital Partners
---------------------------- Holdings, Ltd., Manager
By: /s/ LEONARD H. LILLARD
----------------------------
Leonard H. Lillard
Its: Authorized Signer
<PAGE> 1
EXHIBIT 10.17
--------------------------------------------------
SCC COMMUNICATIONS CORP.
REGISTRATION RIGHTS AGREEMENT
--------------------------------------------------
DATED AS OF NOVEMBER 20, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SECTION 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. REGISTRATION RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 DEMAND REGISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 "PIGGYBACK" REGISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 REGISTRATION PROCEDURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 UNDERWRITTEN OFFERINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.5 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.6 ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. . . . . . . . . . . . . . . . . . . . 9
SECTION 3. RULE 144. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 4. INFORMATION REQUIRED BY RULE 144A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 5. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 6. TERMINATION OF REGISTRATION RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 7. SPECIFIC PERFORMANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 6. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
This is the REGISTRATION RIGHTS AGREEMENT, dated as of November 20,
1997 ("Agreement"), by and among SCC COMMUNICATIONS CORP. ("SCC"), a Delaware
corporation, and BANC ONE CAPITAL PARTNERS II, LLC, a Delaware limited
liability company ("BOCP"), provided for and entered into pursuant to the
Senior Subordinated Note and Warrant Purchase Agreement dated as of November
20, 1997, ("Purchase Agreement") by and between BOCP, as purchaser, and SCC,
as seller. SCC, together with its successors and assigns, is referred to as
the "Company". BOCP, together with its successors and assigns, is referred to
as the "Holder".
THIS AGREEMENT IS ONE OF THE "RELATED DOCUMENTS" REFERRED TO IN THE
PURCHASE AGREEMENT.
In consideration of their mutual promises set forth in this Agreement
and the Purchase Agreement, the Parties hereby agree as follows:
SECTION 1. DEFINITIONS. All capitalized terms not otherwise
defined in this Agreement shall have the definitions set forth in the Glossary
of Defined Terms attached to the Purchase Agreement which definitions are, to
the extent applicable, incorporated in this Agreement by reference.
SECTION 2. REGISTRATION RIGHTS.
2.1 DEMAND REGISTRATION.
(a) At any time after the earlier to occur of an Initial
Public offering or November 20, 2003, upon the written request of the Holder
requesting that the Company effect the registration under the Securities Act of
all or part of the Holder's Registrable Securities (specifying the intended
method of disposition thereof) and whether or not such requested registration
is to be an underwritten offering, the Company will promptly give written
notice of such requested registration to all other holders of Registrable
Securities and thereupon the Company will use its best efforts to effect the
registration under the Securities Act of:
(i) the Registrable Securities which the Company
has been so requested to register by the Holder; and
(ii) all other Registrable Securities which the
Company has been requested to register by the holders thereof
by written request to the Company within thirty (30) days
after the date of such written notice by the Company (which
request shall specify the intended method of disposition of
such Registrable Securities), all to the extent necessary to
permit the disposition (in accordance with the intended
methods thereof) of the Registrable Securities to be so
registered.
<PAGE> 4
The Company shall not be required to effect more than one
registration pursuant to request made pursuant to this Section 2.1(a).
(b) Registration of Other Securities. Whenever the
Company shall effect a registration pursuant to this Section 2.1 in connection
with an underwritten offering, no securities other than Registrable Securities
shall be included among the securities covered by such registration unless (i)
the managing underwriter of such offering shall have advised each holder of
Registrable Securities to be covered by such registration in writing that the
inclusion of such other securities would not adversely affect such offering or
(ii) the holders of all Registrable Securities to be covered by such
registration shall have consented in writing to the inclusion of such other
securities.
(c) Registration Statement Form. Registrations under
this Section 2.1 shall be on such appropriate registration form as shall be
selected by the Company and as shall permit the disposition of such
Registrable Securities in accordance with the intended method or methods of
disposition specified in any request for such registration. The Company agrees
to include in any such registration statement all information which holders of
Registrable Securities being registered shall reasonably request.
(d) Expenses. The Company will pay all Registration
Expenses in connection with any registration requested pursuant to this Section
2.1. If a registration begun pursuant to a request made under Section 2.1 is
withdrawn by the holders of the Registrable Securities making such request
because information concerning the Company is disclosed that is materially and
adversely different from the information known to such holders at the time such
request was made, the Company will pay all Registration Expenses in connection
with such request without reducing the number of registrations which the Holder
has a right to cause the Company to effect under Section 2.1 hereof.
(e) Effective Registration Statement. A registration
requested pursuant to this Section 2.1 shall not be deemed to have been
effected (i) unless a registration statement with respect thereto has become
effective, (ii) if after it has become effective, such registration becomes the
subject of any stop order, injunction or other order or requirement of the
Commission or other governmental agency or court for any reason, or (iii) if
the conditions to closing specified in the purchase agreement or underwriting
agreement entered into in connection with such registration are not satisfied.
(f) Selection of Underwriters. If a requested
registration pursuant to this Section 2.1 involves an underwritten offering,
the underwriter or underwriters thereof shall be selected by the Company.
(g) Priority in Requested Registrations. If a requested
registration pursuant to this Section 2.1 involves an underwritten offering,
and the managing underwriter shall advise the
<PAGE> 5
Company in writing that, in its opinion, the number of securities requested to
be included in such registration exceeds the number which can be sold in such
offering within a price range acceptable to the Holder, the Company will so
advise the Holder in writing and will include in such registration first the
number of Registrable Securities held by the Holder that the Company is so
advised can be sold in such offering, and second, such Registrable Securities
requested to be included in such registration by other holders and all other
Capital Stock proposed to be sold by the Company pro rata.
2.2 "PIGGYBACK" REGISTRATION.
(a) Right to Include Registrable Securities. If the
Company at any time proposes to register any of its Capital Stock under the
Securities Act (other than by a registration on Form S-4 or Form S-8 or any
successor or similar form and other than pursuant to Section 2.1), whether or
not for sale for its own account, it will each such time give prompt written
Notice to the Holder. Upon the written request of the Holder made within 30
days after the receipt of any such Notice (which request shall specify the
Registrable Securities intended to be disposed of by the Holder and the
intended method of disposition thereof), the Company will use its best efforts
to effect the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the Holder,
to the extent necessary to permit the disposition (in accordance with the
intended methods thereof) of the Registrable Securities to be registered. If,
at any time after giving written notice of its intention to register any
Capital Stock and prior to the effective date of the registration statement
filed in connection with such registration, the Company shall determine for any
reason not to register or to delay registration of such Capital Stock, the
Company may, at its election, give written notice of such determination to each
holder of Registrable Securities and, thereupon, (i) in the case of a
determination not to register, shall be relieved of its obligations to register
any Registrable Securities in connection with such registration (but not from
its obligation to pay the Registration Expenses in connection therewith),
without prejudice, however, to the rights of the Holder to request that such
registration be effected as a registration under Section 2.1 subject to the
terms of that Section, and (ii) in the case of a determination to delay
registration, shall be permitted to delay registering any Registrable
Securities for the same period as the delay in registering such other Capital
Stock. No registration effected under this Section 2.2 shall relieve the
Company of its obligation to effect any registration under Section 2.1. The
Company will pay all Registration Expenses in connection with each registration
of Registrable Securities requested pursuant to this Section 2.2.
(b) Priority in Registrations. If (i) a registration
pursuant to this Section 2.2 involves an underwritten offering of the Capital
Stock, and (ii) the managing underwriter shall inform the Company and the
holders of the Registrable Securities requesting such registration of its
belief that the number of securities requested to be included in such
registration exceeds the number that can be sold in such offering, then the
Company will include in such registration, to the extent to which the Company
is advised can be sold in such offering, securities as follows:
<PAGE> 6
(1) if such registration is for an offering of
Capital Stock for the account of the Company, first,
all Capital Stock proposed by the Company to be sold
for its own account, second, such Registrable
Securities requested by the Holder to be included in
such registration, and third, all other Capital Stock
of the Company requested to be included in such
registration pro rata on the basis of the number of
shares of such Capital Stock so requested to be
included;
(2) if such registration is for other than an
offering described in (1), such Registrable
Securities requested to be included in such
registration and all other Capital Stock proposed by
the Company to be sold for its own account shall be
included in such registration pro rata on the basis
of the number of shares of such Registrable
Securities and such other Capital Stock so proposed
to be sold.
2.3 REGISTRATION PROCEDURES. If the Company is required
to use its best efforts to effect the registration of any Registrable
Securities as provided in Sections 2.1 and 2.2, the Company will as
expeditiously as possible:
(i) prepare and as soon thereafter as reasonably
practicable file with the Commission the registration
statement to effect such registration and thereafter use its
best efforts to cause such registration statement to become
effective, provided that the Company may discontinue any
registration of its Capital Stock which are not Registrable
Securities (and, under the circumstances specified in Section
2.2(a), its securities which are Registrable Securities) at
any time prior to the effective date of the registration
statement relating thereto;
(ii) prepare and file with the Commission such
amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be
necessary to keep such registration statement effective and to
comply with the provisions of the Securities Act with respect
to the disposition of all Capital Stock covered by such
registration statement until such time as all of such
securities have been disposed of in accordance with the
intended methods of disposition by the Holder set forth in
such registration statement;
(iii) furnish to Holder such number of prospectuses
and copies of each such amendment and supplement thereto and
such other documents as Holder may reasonably request;
(iv) use its best efforts to register or qualify all
Registrable Securities and other Capital Stock covered by such
registration statement under such other securities or blue sky
laws of such jurisdictions as the Holder shall reasonably
<PAGE> 7
request, to keep such registration or qualification in effect
for so long as such registration statement remains in effect,
and take any other action which may be reasonably necessary or
advisable to enable the Holder to consummate the disposition
in such jurisdictions of the securities owned by the Holder,
except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not but for
the requirements of this subdivision (iv) be obligated to be
so qualified or to consent to general service of process in
any such jurisdiction;
(v) use its best efforts to cause all Registrable
Securities covered by such registration statement to be
registered with or approved by such other governmental
agencies or authorities as may be necessary to enable the
Holder to consummate the disposition of such Registrable
Securities;
(vi) furnish to the Holder a signed counterpart,
addressed to the Holder (and underwriters, if any) of:
(1) an opinion of counsel for the Company,
dated the effective date of such registration
statement (and, if such registration includes
an underwritten public offering, dated the
date of the closing under the underwriting
agreement), reasonably satisfactory in form
and substance to the Holder, and
(2) a "comfort" letter, dated the effective
date of such registration statement (and, if
such registration includes an underwritten
public offering, dated the date of the
closing under the underwriting agreement),
signed by the independent public accountants
who have certified the Company's financial
statements included in such registration
statement,
covering substantially the same matters as
are customarily covered in opinions of
issuer's counsel and in accountants' letters
delivered to the underwriters in underwritten
public offerings and such other matters as
the Holder may reasonably request;
(vii) notify Holder upon discovery that, or upon the
happening of any event as a result of which, the prospectus
included in such registration statement includes an untrue
statement of any material fact or omits to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the
circumstances under which they were made, and at
<PAGE> 8
the request of the Holder promptly prepare and furnish to
Holder a reasonable number of copies of a supplement to or an
amendment to such prospectus as may be necessary;
(viii) otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission, and
furnish to Holder prior to the filing thereof a copy of any
amendment or supplement to such registration statement or
prospectus;
(ix) provide and cause to be maintained a transfer
agent and registrar for all Registrable Securities covered by
such registration statement from and after a date not later
than the effective date of such registration statement;
(x) use its best efforts to list all Registrable
Securities covered by such registration statement on any
securities exchange on which any of the Registrable Securities
is then listed; and
(xi) enter into such agreements and take such other
actions as the Holder shall reasonably request in order to
expedite or facilitate the disposition of such Registrable
Securities.
The Company many require the Holder to furnish the Company such
information regarding the Holder and the distribution of such securities as the
Company may from time to time reasonably request in writing.
Holder agrees that upon receipt of any Notice from the Company of the
happening of any event of the kind described in the subdivision (vii) of this
Section 2.3, the Holder will forthwith discontinue the disposition of
Registrable Securities pursuant to the registration statement until Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
subdivision (vii) of this Section 2.3 and, if so directed by the Company, will
destroy all copies, other than permanent file copies, then in Holder's
possession of the prospectus relating to such Registrable Securities.
2.4 UNDERWRITTEN OFFERINGS.
(a) Demand Underwritten Offerings. If requested by the
underwriters for any underwritten offering, the Company will enter into an
underwriting agreement with such underwriters, such agreement to be
satisfactory is substance and form to the Company and the underwriters and to
contain such terms as are generally prevailing in agreements of this type. If
the Holder is a party to such underwriting agreement it may, at its option,
require that any or all of the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of the Holder. Holder
shall not be required to make any representations and warranties to or
agreements with
<PAGE> 9
the Company or the underwriters other than representations, warranties or
agreements regarding the Holder, the Holder's Registrable Securities and the
Holder's intended method of distribution and any other representation required
by law.
(b) Piggyback Underwritten Offerings. If the Company at
any time proposes to register any of its Capital Stock as contemplated by
Section 2.2 and such securities are to be distributed by or through one or more
underwriters, the Company will, if requested by the Holder, arrange for such
underwriters to include all the Registrable Securities to be offered and sold
by the Holder among the securities to be distributed to such underwriters. The
Holder shall be a party to the underwriting agreement and may, at its option,
require that any or all of the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of the Holder. Holder
shall not be required to make any representations or warranties to or agreement
with the Company or the underwriters other than representations, warranties or
agreements regarding the Holder, the Holder's Registrable Securities and the
Holder's intended method of distribution and any other representation required
by law.
2.5 INDEMNIFICATION.
(a) Indemnification by the Company. In the event of any
registration pursuant to Section 2.1 or 2.2, the Company will, and hereby does,
indemnify and hold harmless the Holder, its directors, partners, members and
officers, each other Person who participates as an underwriter in the offering
on behalf of the Holder and each other Person, if any, who controls such seller
or underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which any one of them may
become subject under the Securities Act or otherwise, and the Company will
reimburse the Holder and each other Person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding; provided that (i) the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or
expenses arises out of or is based upon any statement or material omission
furnished in writing to the Company by the Holder or other Person in connection
with the preparation of the registration statement, and (ii) the Company shall
not be liable to any Person who participates as an underwriter or any other
Person who controls such underwriter within the meaning of the Securities Act,
to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arise out of such Person's failure to
provide a copy of the final prospectus, as the same may be then supplemented or
amended, to the purchaser at or prior to the written confirmation of the sale
of Registrable Securities, if such final prospectus differs from the
preliminary prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Holder or other
Person and shall survive the transfer of such securities by the Holder.
(b) Indemnification by the Holder. The Company may
require, as a condition to including any Registrable Securities in any
registration statement filed pursuant to Section 2.1 or 2.2,
<PAGE> 10
that the Company shall have received an undertaking satisfactory to it from the
Holder to indemnify and hold harmless (in the same manner and to the same
extent as set forth in subdivision (a) of this Section 2.5) the Company, each
director and officer of the Company and each other Person, if any, who controls
the Company within the meaning of the Securities Act, with respect to any
statement, or alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company by the Holder specifically stating that it is for use in preparation of
such registration statement. Such indemnity shall remain in full force and
effect, regardless of any investigation made by or on behalf of the Company or
any such director, officer or controlling Person and shall survive the transfer
of such Registrable Securities by the Holder. Notwithstanding the foregoing,
the aggregate liability of any Holder for any indemnification under this
Section 2.5(b) shall be limited to the aggregate net proceeds received by the
Holder from the sale of Registrable Securities pursuant to such registration
statement.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of Notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section
2.5, such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, give written Notice to the latter of the
commencement of such action, provided that the failure of any indemnified party
to give Notice as provided herein shall not relieve the indemnifying party of
its obligation under the preceding subdivisions of this Section 2.5, except to
the extent that the indemnifying party is actually prejudiced by such failure.
Unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying party may exist in respect of such
claim, the indemnifying party shall be entitled to participate in and to assume
the defense thereof, jointly with any other indemnifying party, with counsel
reasonably satisfactory to such indemnified party. After Notice from the
indemnifying party of its election to assume the defense, the indemnifying
party shall not be liable to such indemnified party for any legal or other
expenses subsequently incurred by the latter in connection with the defense
thereof other than reasonable costs of investigation. No indemnifying party
shall, without the consent of the indemnified party, consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
2.6 ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The
Company will not effect or permit to occur any combination or subdivision of
Registrable Securities which would adversely affect the ability of the Holder
to include such Registrable Securities in any registration contemplated by
this Section 2 or the marketability of such Registrable Securities under any
such registration.
SECTION 3. RULE 144. If the Company shall have filed a
registration statement, the Company will file the reports required to be filed
by it under the Securities Act and the Securities
<PAGE> 11
Exchange Act and the rules and regulations adopted by the Commission thereunder
(or, if the Company is not required to file such reports, will, upon the
request of any Holder, make publicly available other information) and will take
such further action as such Holder may reasonably request, all to the extent
required from time to time to enable such Holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may
be amended from time to time or (b) any similar rule or regulation hereafter
adopted by the Commission.
SECTION 4. INFORMATION REQUIRED BY RULE 144A. The Company
covenants that it will, upon the request of the Holder, provide the Holder, and
any institutional investor designated by such Holder, such financial and other
information as such Holder may reasonably determine to be necessary in order to
permit the Holder's compliance with the informational requirements of Rule 144A
under the Securities Act in connection with the resale of any Registrable
Securities, except at such time as the Company is subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act.
SECTION 5. COVENANTS. The Company covenants and agrees that:
(a) it shall not sell any shares of the Capital Stock of
the Company except in an offering subject to (i) registration under the
Securities Act, and (ii) the terms of this Agreement;
(b) it shall not participate in or cooperate with any
offering of the Capital Stock of the Company, either directly or indirectly, by
any shareholder of the Company under Regulation S of the Securities Act; and
(c) no other shareholder of the Company owns any share of
Capital Stock which has registration rights, and the Company shall not, without
the prior written consent of Holder, which may be withheld in it sole
discretion, grant registration rights to any Person.
SECTION 6. TERMINATION OF REGISTRATION RIGHTS. The registration
rights granted pursuant to this Agreement shall terminate at the earlier of (i)
the time neither the Holder nor any Affiliate of the Holder owns any of the
Capital Stock of the Company, or (ii) all shares of Capital Stock of the
Company held by the Holder or any affiliate thereof can be sold pursuant to
Rule 144(k), provided, however, that the average weekly reported volume of
trading in such securities on all national securities exchanges and/or reported
through the automated quotation system of a registered securities association
for the past twelve months is greater than one percent of the class of shares
so registered.
SECTION 7. SPECIFIC PERFORMANCE. The Parties recognize and
agree that money damages may be insufficient to compensate the Holder for
breaches by the Company of terms hereof and, consequently, that the equitable
remedy of specific performance of the terms hereof will be available in the
event of any such breach
<PAGE> 12
SECTION 8. MISCELLANEOUS.
The provisions of Section 13 of the Purchase Agreement are applicable
to this Agreement and are, to the extent applicable, incorporated by reference
in this Agreement.
IN WITNESS WHEREOF, the parties have caused the Agreement to be
executed and delivered by their respective officers thereunto duly authorized
as of the date first above written.
COMPANY: HOLDER:
SCC COMMUNICATIONS BANC ONE CAPITAL PARTNERS II,
CORP. LLC
By: Banc One Capital Partners Holdings,
By: /s/ NANCY K. HAMILTON Ltd., Manager
-------------------------------
By: /s/ LEONARD H. LILLARD
Name: NANCY K. HAMILTON ----------------------------------
-----------------------------
Name: Leonard H. Lillard
Title: CHIEF FINANCIAL OFFICER
---------------------------- Title: Authorized Signer
<PAGE> 1
EXHIBIT 10.18
_____________________________________________________
SCC COMMUNICATIONS CORP.
CO-SALE AGREEMENT
________________________________________________________
DATED AS OF NOVEMBER 20, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . 1
SECTION 2. SALES BY SHAREHOLDER. . . . . . . . . . . . . . 1
2.1 NOTICE OF PURCHASER OFFERS. . . . . . . . 1
2.2 RIGHT TO PARTICIPATE. . . . . . . . . . . 2
2.3 CONSUMMATION OF SALE. . . . . . . . . . . 2
2.4 ONGOING RIGHTS. . . . . . . . . . . . . . 2
2.5 PERMITTED EXEMPTIONS. . . . . . . . . . . 2
SECTION 3. PROHIBITED TRANSFERS . . . . . . . . . . . . . . 3
3.1 TREATMENT OF PROHIBITED TRANSFERS . . . . 3
3.2 PUT OPTION . . . . . . . . . . . . . . . 3
SECTION 4. LEGENDED CERTIFICATE . . . . . . . . . . . . . . 3
4.1 LEGEND . . . . . . . . . . . . . . . . . 3
4.2 LEGEND REMOVAL . . . . . . . . . . . . . 4
SECTION 5. TERMINATION OF CO-SALE RIGHTS . . . . . . . . . 4
SECTION 6. OTHER OBLIGATIONS OF COMPANY . . . . . . . . . . 4
SECTION 7. MISCELLANEOUS . . . . . . . . . . . . . . . . . 4
</TABLE>
<PAGE> 3
CO-SALE AGREEMENT
This is a CO-SALE AGREEMENT dated as of November 20, 1997 ("Agreement")
by and among SCC COMMUNICATIONS CORP. ("SCC"), a Delaware corporation, GEORGE
K. HEINRICHS, JOHN SIMS, NANCY HAMILTON, THE HILL PARTNERSHIP III, A LIMITED
PARTNERSHIP, AMERITECH DEVELOPMENT CORPORATION AND BOSTON CAPITAL VENTURES
LIMITED PARTNERSHIP and BANC ONE CAPITAL PARTNERS II, LLC ("BOCP"), a Delaware
limited liability company, provided for in and entered into pursuant to the
SENIOR SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT dated the date hereof,
as amended, restated, supplemented or otherwise modified from time to time
("Purchase Agreement") by and between BOCP, as purchaser, and SCC, as seller.
ASI, together with its successors and assigns, is referred to as the
"Company." The individuals named in the first paragraph hereof, together with
their respective successors and assigns, are referred to individually as a
"Shareholder" and collectively as the "Shareholders," and BOCP, together with
its successors and assigns, is referred to as the "Holder." The Company, the
Shareholders and the Holder are referred to collectively as the "Parties" and
individually as a "Party."
THIS AGREEMENT IS ONE OF THE "RELATED DOCUMENTS" REFERRED TO IN THE
PURCHASE AGREEMENT.
In consideration of their mutual promises set forth in this Agreement
and the Purchase Agreement, the Parties hereby agree as follows.
SECTION 1. DEFINITIONS
All capitalized terms not otherwise defined in this Agreement shall have the
definitions set forth in the Glossary of Defined Terms attached to the Purchase
Agreement, which definitions are, to the extent applicable, incorporated in
this Agreement by reference.
SECTION 2. SALES BY SHAREHOLDERS.
2.1 NOTICE OF PURCHASER OFFERS. Should one or more
Shareholders propose to accept one or more Purchase Offers, then each such
Shareholder shall promptly notify the Holder of the terms and conditions of
such Purchase Offer.
2.2 RIGHT TO PARTICIPATE. The Holder shall have the right,
exercisable upon written Notice to such selling Shareholder within fifteen (15)
Business Days after receipt of the notice of the Purchase Offer, to participate
in such selling Shareholder's sale of Common Shares or Convertible Securities
on the same (or, in the case of Convertible Securities, equivalent) terms
1
<PAGE> 4
and conditions. To the extent that the Holder exercises such right of
participation, the number of Common Shares or Convertible Securities which such
selling Shareholder may sell pursuant to such Purchase Offer shall be
correspondingly reduced. The right of participation of the Holder shall be
subject to the following terms and conditions:
(a) The Holder may sell all or any part of that number of
Holder's Shares equal to the product obtained by multiplying (i) the aggregate
number of Common Shares (including the Common Share equivalent of any
Convertible Securities) covered by the Purchase Offer by (ii) a fraction (A)
the numerator of which is the number of Holder's Shares at the time owned by
the Holder, and (B) the denominator of which is the sum of (x) the number of
such Common Shares (including the Common Share equivalent of Convertible
Securities) at the time owned by the Selling Shareholder, and (y) the number of
Holder's Shares at that time owned by the Holder. For purposes of making such
computation, the Holder shall be deemed to own the number of Common Shares as
if its Warrant Shares had been converted into Common Shares.
(b) The Holder may participate in the sale by (i) exercising
the Warrant in accordance with its terms, if Warrant Shares are to be sold, and
(ii) delivering to the selling Shareholder for transfer to the purchase offeror
one or more certificates, properly endorsed for transfer, free and clear of all
adverse claims, which represent that number of Holder's Shares which the Holder
elects to sell pursuant to this Section 2.2.
2.3 CONSUMMATION OF SALE. The stock certificate or
certificates which Holder delivers to the Selling Shareholder pursuant to
Section 2.2 shall be transferred by the selling Shareholder to the purchase
offeror in consummation of the sale pursuant to the terms and conditions
specified in the Section 2.1 Notice to the Holder, and such Selling Shareholder
shall promptly thereafter remit to the Holder that portion of the sale proceeds
to which the Holder is entitled by reason of its participation in such sale.
2.4 ONGOING RIGHTS. The exercise or non-exercise of the
rights of the Holder pursuant to Section 2.1 hereof to participate in one or
more sales made by any selling Shareholder shall not adversely affect the
Holder's right to participate in subsequent sales by any selling Shareholder.
2.5 PERMITTED EXEMPTIONS. The participation rights of the
Holder shall not apply to (i) any bona fide gift, transfers to family members
or trusts established for the benefit thereof, or transfers upon death or
disability; provided that a Shareholder shall inform the Holder of such gift
prior to effecting it and the donee shall furnish the Holder with a written
agreement to be bound by, and comply with, all provisions of this Agreement
applicable to such Shareholder; (ii) the sale of up to 200,000 Common Shares,
in the aggregate, by George K. Heinrichs, John Sims and Nancy Hamilton; and
(iii), the sale or transfer of Common Shares to partners, stockholders or
affiliates of a Shareholder.
2
<PAGE> 5
SECTION 3. PROHIBITED TRANSFERS.
3.1 TREATMENT OF PROHIBITED TRANSFERS. In the event a
Shareholder should engage in a Prohibited Transfer, the Holder, in addition to
such other remedies as may be available at law, in equity or hereunder, shall
have the put option provided in Section 3.2.
3.2 PUT OPTION. In the event of a Prohibited Transfer, the
Holder shall have the right to sell to the Shareholder engaging in such
Prohibited Transfer that number of Common Shares or Convertible Securities
owned by the Holder equal to the number of shares the Holder would have been
entitled to transfer to the purchase offeror in the Prohibited Transfer
pursuant to the terms hereof. Such sale shall be made on the following terms
and conditions:
(a) The price per share at which such Common Shares or
Convertible Securities are to be sold to the Shareholder shall be equal or
equivalent to the price per share paid by the purchase offeror to the
Shareholder in the Prohibited Transfer. The Shareholder shall also reimburse
the Holder for any and all reasonable fees and expenses, including legal fees
and expenses, incurred pursuant to the exercise or the attempted exercise of
the Holder's rights under this Section 3.
(b) Within thirty (30) days after the earlier of the date on
which the Holder (i) receives Notice from a Shareholder of a Prohibited
Transfer, or (ii) otherwise becomes aware of a Prohibited Transfer, the Holder
shall, if exercising the put option created hereby, deliver to such Shareholder
the certificate or certificates representing Common Shares or Convertible
Securities to be sold hereunder, each certificate to be properly endorsed for
transfer.
(c) Such Shareholder shall, upon receipt of the certificate or
certificates for the Common Shares or Convertible Securities to be sold by a
Holder pursuant to Section 3.2, free and clear of all adverse claims, pay the
aggregate purchase price therefor and the amount of reimbursable fees and
expenses, as specified in Section 3.2(a), by certified or cashier's check made
payable to the order of the Holder.
(d) Notwithstanding the foregoing, any attempt to Transfer
shares of the Company in violation of the terms of this Agreement shall be void
and the Company agrees it will not effect such a Transfer nor will it treat any
alleged transferee as the holder of such Securities without the written consent
of the Holder.
SECTION 4. LEGENDED CERTIFICATE.
4.1 LEGEND. Each certificate representing Common Shares now
or hereafter
3
<PAGE> 6
owned by any Shareholder shall be endorsed with the following legend:
THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN CO-SALE AGREEMENT BY
AND BETWEEN THE SHAREHOLDER, THE COMPANY AND BANC ONE CAPITAL PARTNERS
II, LLC. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST
TO THE SECRETARY OF THE COMPANY.
4.2 LEGEND REMOVAL. The Section 4.1 legend shall be removed
upon the earlier of the termination of this Agreement or the date upon which
the provisions of this Agreement are no longer applicable to such shares in
accordance with the provisions of Section 5.
SECTION 5. TERMINATION OF CO-SALE RIGHTS.
The rights of the Holder under this Agreement and the obligations of the
Shareholders with respect to the Holder shall terminate at such time as BOCP or
any of its Affiliates does not own any Common Shares. Unless sooner terminated
in accordance with the preceding sentence, this Agreement shall terminate upon
the occurrence of the earliest to occur of any of the following events:
(a) The liquidation, dissolution or indefinite cessation of
the business operations of the Company;
(b) The execution by the Company of a general assignment for
the benefit of creditors or the appointment of a receiver or trustee to take
possession of the property and assets of the Company;
(c) The consummation of an Initial Public Offering; or
(d) The consummation of a Disposition.
SECTION 6. OTHER OBLIGATIONS OF COMPANY.
The Company agrees to use all reasonable efforts to enforce the terms of
this Agreement, to inform the Holder of any breach hereof and to assist the
Holder in the exercise of its rights and performance of its obligations under
Section 3 hereof.
SECTION 7. MISCELLANEOUS.
The provisions of Section 13 of the Purchase Agreement are applicable to
this Agreement
4
<PAGE> 7
and are, to the extent applicable, incorporated by reference in this Agreement.
The parties have executed and delivered this Agreement effective as of
the day and year first above written.
<TABLE>
<S> <C>
COMPANY:
SCC COMMUNICATIONS CORP.
By: /s/ NANCY K. HAMILTON AMERITECH DEVELOPMENT
--------------------------- CORPORATION
By: /s/ THOMAS TOUTON
---------------------------
Its: CHIEF FINANCIAL OFFICER Its: DIRECTOR
-------------------------- --------------------------
SHAREHOLDERS: BOSTON CAPITAL VENTURES
LIMITED PARTNERSHIP
/s/ GOERGE K. HEINRICHS
- ------------------------------
GEORGE K. HEINRICHS By: BC&V Limited Partnership, Its
General Partner
/s/ JOHN SIMS
- ------------------------------ By: Boston Capital Partners, Its
JOHN SIMS General Partner
/s/ NANCY HAMILTON
- ------------------------------ By: /s/
NANCY HAMILTON -----------------------------
Its: General Partner
THE HILL PARTNERSHIP III, A
LIMITED PARTNERSHIP
By: Hill, Carman Ventures, a Limited
Partnership, Its General Partner
By: /s/ JOHN HILL
-------------------------------
General Partner
</TABLE>
5
<PAGE> 8
HOLDER:
BANC ONE CAPITAL PARTNERS II,
LLC
By: Banc One Capital Partners
Holdings, Ltd. Manager
By: /s/ LEONARD H. LILLARD
--------------------------------
Leonard H. Lillard
Its: Authorized Signer
--------------------------------
6
<PAGE> 1
EXHIBIT 10.19
----------------------------------------------------------
SCC COMMUNICATIONS CORP.
PREEMPTIVE RIGHTS AGREEMENT
----------------------------------------------------------
DATED AS OF NOVEMBER 20, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. RIGHTS OFFERING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 NOTICE OF RIGHTS OFFERING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 MANNER OF EXERCISE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 PARTICIPATION BY HOLDER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 3. PREEMPTIVE RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.1 NOTICE OF PREEMPTION OFFERING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 MANNER OF EXERCISE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.3 PARTICIPATION BY HOLDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.4 UNSOLD SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.5 TERMINATION OF RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 4. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
</TABLE>
<PAGE> 3
PREEMPTIVE RIGHTS AGREEMENT
This is the PREEMPTIVE RIGHTS AGREEMENT dated as of November 20, 1997
("Agreement") by and between SCC COMMUNICATIONS CORP. ("Company"), a Delaware
corporation and BANC ONE CAPITAL PARTNERS II, LLC (the "Holder"), a Delaware
limited liability company, provided for in and entered into pursuant to the
SENIOR SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT, as amended, restated,
supplemented or otherwise modified and in effect from time to time ("Purchase
Agreement") by and between BOCP, as purchaser, and THE COMPANY, as seller. The
Company and the Holder are referred to collectively as the "Parties" and
individually as a "Party."
THIS AGREEMENT IS ONE OF THE "RELATED DOCUMENTS" REFERRED TO IN THE
PURCHASE AGREEMENT.
In consideration of their mutual promises set forth in this Agreement
and the Purchase Agreement, the Parties hereby agree as follows.
SECTION 1. DEFINITIONS
All capitalized terms not otherwise defined in this Agreement shall
have the definitions set forth in the Glossary of Defined Terms attached to the
Purchase Agreement, which definitions are, to the extent applicable
incorporated in this Agreement by reference.
SECTION 2. RIGHTS OFFERING
At any time after the earlier of (i) the Holder exercises the Warrant
purchased pursuant to the Purchase Agreement or (ii) no Preferred Shares of the
Company remain outstanding and until the termination of this Agreement, the
Holder shall have the right to participate in any Rights Offering upon the
terms and subject to the conditions set forth in this section.
2.1 NOTICE OF RIGHTS OFFERING. The Company shall give
the Holder at least 30 days' prior Notice of each Rights Offering. Such Notice
shall set forth: (i) the proposed commencement date for such Rights Offering;
(ii) the number and description of the securities to be offered pursuant to the
Rights Offering; (iii) the purchase price for such securities, and (iv) other
material terms of the Rights Offering.
2.2 MANNER OF EXERCISE. The Holder may, in the sole
exercise of its discretion, elect to participate in any such Rights Offering by
giving Notice of its irrevocable election to participate to the Company at
least five days prior to the proposed commencement date of such Rights
Offering.
2.3 PARTICIPATION BY HOLDER. If it elects to participate
in such Rights
1
<PAGE> 4
Offering, the Holder shall have the right to purchase, pursuant to such Rights
Offering, securities of each type issued in such Rights Offering in a maximum
number or amount equal to the Holder's Prorata Share of the total number or
amount of each such type of security offered pursuant to such Rights Offering.
SECTION 3. PREEMPTIVE RIGHTS
At any time after the earlier of (i) the Holder exercises the Warrant
purchased pursuant to the Purchase Agreement or (ii) no Preferred Shares of the
Company remain outstanding and until the termination of this Agreement, the
Holder shall have the right to participate in any Preemption Offering upon the
terms and subject to the conditions set forth in this section.
3.1 NOTICE OF PREEMPTION OFFERING. The Company shall give
the Holder at least 30 days' prior Notice of each Preemption Offering. Such
Notice shall set forth: (i) the proposed commencement date for such Preemption
Offering; (ii) the number and description of the securities to be offered
pursuant to the Preemption Offering; (iii) the purchase price for such
securities; and (iv) other material terms of the Preemption Offering.
3.2 MANNER OF EXERCISE. The Holder may, in the sole
exercise of its discretion, elect to participate in any such Preemption
Offering by giving Notice of its election to participate to the Company at
least 5 days prior to the proposed commencement date of such Preemption
Offering.
3.3 PARTICIPATION BY HOLDER. If it elects to participate
in such Preemption Offering, the Holder shall have the right to purchase, upon
the same terms and condition as those provided for in such Preemption Offering,
securities of each type issued in such Preemption Offering in a maximum number
or amount equal to the Holder's Prorata Share of the total number or amount of
each such type of security offered pursuant to such Preemption Offering.
3.4 UNSOLD SECURITIES. The Company may, for a period of
not more than 60 days after the commencement date for any Preemption Offering,
offer and sell the securities subject to such Preemption Offering, which were
not sold to the Holder pursuant to this Agreement, to any Person or Persons
upon the terms and subject to the conditions of such Preemption Offering.
3.5 TERMINATION OF RIGHTS. The rights of the Holder under
this Agreement and the obligations of the Company hereunder shall terminate
upon the earliest to occur of the following events:
(a) a Voluntary Insolvency Default or Involuntary
Insolvency Default with respect to the Company;
(b) consummation of an Initial Public Offering;
2
<PAGE> 5
(c) exercise of the Put Option; and
(d) there are no Holder's Shares existing.
SECTION 4. MISCELLANEOUS.
The provisions of Section 13 of the Purchase Agreement are applicable
to this Agreement and are, to the extent applicable, incorporated by reference
in this Agreement.
The parties have executed and delivered this Agreement effective as of
the day and year first above written.
COMPANY: HOLDER:
SCC COMMUNICATIONS BANC ONE CAPITAL PARTNERS II, LLC
CORP.
By: Banc One Capital Partners Holdings,
Ltd., Manager
By: /s/ NANCY K. HAMILTON
--------------------------------
Its: CHIEF FINANCIAL OFFICER By: /s/ LEONARD H. LILLARD
------------------------------- ------------------------------------
Leonard H. Lillard
Its: Authorized Signer
3
<PAGE> 1
EXHIBIT 10.20
MASTER LEASE
LESSOR: Ameritech Credit Corporation
P.O. Box 59113
Schaumburg, IL 60159
(800) 323-7311
LESSEE: Date 3 /11/96 - Lease Number 001 - 0000855
Name: SCC COMMUNICATIONS CORP.
------------------------------------------------------------------------
Address 6285 LOOKOUT ROAD
----------------------------------------------------------------------
City BOULDER State CO Zip 80301
-------------------- -------------------- ------------------
TERMS AND CONDITIONS OF LEASE
Lessee (which term shall include the co-Lessee, whose obligations
hereunder shall be joint and several with those of Lessee) and Lessor agree and
acknowledge that this Master Lease (the Lease) is being executed in conjunction
with one or more written schedules (Supplementary Schedules) which, by specific
reference to this Lease and upon execution by Lessee and Lessor, become subject
to all the terms and conditions contained herein. The Equipment that is the
subject of this Lease, is described on the Supplementary Schedules and shall
further include, without limitation, such other items, though not specifically
identified on such Supplementary Schedules, as relate to the Equipment and are
financed by Lessor, such as wiring. Upon such execution of a Supplementary
Schedule, any and all additional or specific terms and conditions therein shall
be, with respect to such Supplementary Schedule, incorporated herein and shall
have the same force and effect as if such terms and conditions were expressly
set forth herein. The terms and conditions contained herein shall apply to
each Supplementary Schedule that is properly executed and made subject to such
terms and conditions, as if a separate Lease were executed for each
Supplementary Schedule. The invalidation, fulfillment, waiver, termination, or
other disposition of any rights or obligations of either the Lessee or Lessor
or both of them arising from the execution of this Lease in conjunction with
any one Supplementary Schedule shall not affect the status of the rights or
obligations of either or both of those parties arising from the execution of
this Lease in conjunction with any other Supplementary Schedule, except in the
event of default by Lessee as provided in Section 14 herein. The parties agree
that this Lease is a Finance Lease as defined by Section 2A-103(g) of the
Uniform Commercial Code.
Subsequent wording of this Lease notwithstanding, this Lease is
effective with respect to any Supplementary Schedule executed in conjunction
herewith for the lease term (as subsequently defined herein) provided in such
Supplementary Schedule. Additional Supplementary Schedules may be executed
from time to time by the Lessee and the Lessor, and if such Supplementary
Schedules refer by date and contracting parties to this Lease, such
Supplementary Schedules shall be deemed to be executed in conjunction herewith
and to be subject hereto regardless of the date upon which such Supplementary
Schedules are executed and notwithstanding that a prior period of effectiveness
hereof has lapsed through termination of all previous lease terms.
Lessor hereby leases to Lessee and Lessee hereby hires from Lessor the
Equipment described on any Supplementary Schedules executed in conjunction
herewith and declared to be and to constitute a part of the Equipment leased
hereunder (such Equipment together with all parts, replacements, repairs,
additions, and accessories incorporated therein and/or affixed thereto
hereinafter referred to as the Equipment) on the terms and conditions set forth
herein and in such Supplementary Schedules. If more than one Lessee is named
in this Lease, the liability of each named Lessee shall be joint and several.
Because the Equipment may include not only tangible property but also the right
to use technology and/or the right to receive services, it is understood that
the term 'Equipment' covers all of the following: hardware, printers, modems,
cables, peripherals and other tangible
<PAGE> 2
equipment, all documentation, such as technical documentation or user manuals,
operating system software (object and/or source code form), application software
(object and/or source code form) and other technologies, training aids such as
training manuals, training software, and training videotapes; data, databases,
bulletin boards and other collections of information, in tangible or intangible
form; and installation, training, conversion, customization, development,
support, maintenance, and other services, as more specifically described in this
Lease or in any Supplementary Schedule. Further, the term 'lease,' whenever it
is used as a noun in the Lease with reference to the technology or other
intangible properties that are part of the Equipment, shall be deemed to mean,
assignment and/or sub-license of all of Lessor's license to or interest in, and
rights to use, such technology and properties; whenever it is so used with
reference to benefits or services, it shall be deemed to mean, assignment of all
of Lessor's rights to receive such benefits and services. ('To lease,' or any
other inflectional form of its usage as a verb, shall mean 'to sublicense' or
'to assign' (as the context may require), or the appropriate inflectional form
thereof.)
1. LEASE TERM. The lease term is the period of time which
includes the lease term as specified in the block so entitled on Supplementary
Schedules executed hereunder from time to time. The lease term commences on
the earlier of: the date the Equipment is accepted by the Lessee, or the date
designated as the billing date on the first rental invoice received by, or as
mutually agreed upon by Lessor and Lessee ('Lease Commencement Date').
2. NO WARRANTIES. LESSEE ACKNOWLEDGES THAT LESSOR IS NOT THE
MANUFACTURER OR LICENSOR, THE AGENT OF THE MANUFACTURER OR LICENSOR, OR THE
DISTRIBUTOR OF THE EQUIPMENT. LESSEE AGREES THAT LESSOR HAS NOT MADE AND MAKES
NO REPRESENTATIONS OR WARRANTIES OF WHATSOEVER NATURE DIRECTLY OR INDIRECTLY,
EXPRESS OR IMPLIED, AS TO THE SUITABILITY, DURABILITY, FITNESS FOR USE,
MERCHANTABILITY, CONDITION, OR QUALITY OF THE EQUIP AND OF ANY UNIT THEREOF.
LESSEE SPECIFICALLY WAIVES ALL RIGHTS TO CLAIM AGAINST LESSOR AND ANY ASSIGNEES
OF LESSOR FOR BREACH OF ANY WARRANTY OF ANY KIND WHATSOEVER; AND WITH RESPECT
TO LESSOR OR LESSOR'S ASSIGNEE, LESSEE LEASES EQUIPMENT "AS IS". LESSOR AND
LESSOR'S ASSIGNEE SHALL NOT BE LIABLE TO LESSEE FOR ANY LOSS, DAMAGE OR EXPENSE
OF ANY KIND OR NATURE CAUSED DIRECTLY OR INDIRECTLY BY ANY EQUIPMENT LEASED
HEREUNDER, OR BY THE USE OR MAINTENANCE THEREOF, OR BY THE REPAIRS SERVICE, OR
ADJUSTMENT THERETO OR ANY DELAY OR FAILURE TO PROVIDE ANY THEREOF, OR BY ANY
INTERRUPTION OF SERVICE OR LOSS OF USE THEREOF, OR FOR ANY LOSS OF BUSINESS OR
DAMAGE WHATSOEVER AND HOWSOEVER CAUSED. WITHOUT IN ANY WAY IMPLYING THAT ANY
SUCH WARRANTY EXISTS AND WITHOUT MAKING ANY REPRESENTATIONS AS TO THE EXTENT OF
ANY SUCH WARRANTY, LESSOR AGREES, TO THE EXTENT OF ITS LEGAL POWER TO MAKE SUCH
ASSIGNMENT AND WITHOUT INCREASING IT'S LIABILITY HIEREUNDER, TO ASSIGN TO
LESSEE UPON LESSEE'S REQUEST THEREFOR ANY WARRANTY OF A MANUFACTURER OR
LICENSOR OR SELLER RELANNG TO THE EQUIPMENT THAT MAY HAVE BEEN GIVEN TO LESSOR.
THE ADDMONAL PROVISIONS OF THIS LEASE ARE INCLUDED IN AND MADE A PART OF THIS
LEASE, WHICH LESSEE ACKNOWLEDGES THAT IT HAS READ. WITH RESPECT TO ANY
SUPPLEMENTARY SCHEDULE EXECUTED IN CONJUNCTION HEREWITH, THIS IS A NON-
CANCELLABLE LEASE FOR THE LEASE TERM INDICATED ON THIS SUPPLEMENTARY SCHEDULE
AND ANY RENEWAL TERM(S).
3. RENT. During the Term of Lease, Lessee agrees to pay Lessor
total rent equal in amount to the number of rent payments specified in the
Supplementary Schedules multiplied by the amount of each rent payment specified
therein. Lessee shall make rental payments in the amount and on the due dates
specified in the Supplementary Schedules until the total rent and all other
amounts due under the Lease have been paid in full. If the Lease Commencement
Date is other than the first day of a month, Lessee shall make an initial
payment on the Lease Commencement Date in an amount equal to one-thirtieth of
the rental payments specified in the Supplementary Schedules for each day from
the Lease Commencement Date (including the Lease Commencement
<PAGE> 3
Date) through the last day of such month (including that day). Any amounts
received by Lessor from the Lessee in excess of rental and any other sums
required to be paid by the Lessee shall be held as non-interest bearing security
for Lessee's faithful performance of the conditions of this Lease or any
Supplementary Schedule. All rental payments shall be paid to the Lessor at the
address stated above or such other place as the Lessor or its assigns may
hereafter direct. Lessee's obligation to pay rent shall not be abated, reduced
or subject to offset or diminished as a result of any event, including without
limitation damage, destruction, defect, malfunction, loss of use, or
obsolescence of the Equipment, or any other event, except such as is
specifically provided for in Section 9 of this Lease. The lease payments shall
be adjusted proportionately upward or downward if the actual cost of the
Equipment exceeds or is less than the estimate (original proposal or Equipment
Agreement), and in that event the Lessee authorizes Lessor to adjust the lease
payments upward or downward not to exceed twenty percent (20%).
4. SELECTION OF EQUIPMENT. Lessee requests Lessor to purchase or
to cause to be purchased (or, in the case of technology or services, obtain the
appropriate license or contract for) Equipment of the type and quantity
specified in the Supplementary Schedules and has selected the supplier named
therein. By its execution and delivery of each Supplementary Schedule, hereby
(a) consents and agrees to all of the terms and conditions of any such
purchases, licenses or contracts whereby Lessor acquires any or all of the
Equipment, (b) assigns and transfers to Lessor all Lessee's right, title and
interest in and to any purchase order, license, contract or arrangement entered
into by with any supplier for the Equipment, (c) promises and agrees to perform
all of the duties and obligations of Lessee and/or Lessor under any and all
such purchases, licenses, contracts or arrangements with the suppliers of the
Equipment and (d) confirms that to the extent of any inconsistency between the
provisions of this Lease and the provisions of any such purchase order or
arrangement, the provisions of this Lease shall govern. Lessee has reviewed
and approved any written supply contract (as defined by section 2A-103(y) of
the Uniform Commercial Code) or purchase order or contract covering the
Equipment purchased. Lessor is not and shall not be liable for specific
performance of this Lease or for damages if for any reason the supplier delays
or fails to fill the order or if the Lessee negotiates in bad faith prior to
payment by Lessor to the supplier. Any delay in delivery by the supplier shall
not affect the validity of this Lease. Lessee acknowledges that neither its
dissatisfaction with any unit of Equipment, nor the failure of any unit of
Equipment to remain in useful condition for the term of this Lease, nor the
termination of any contract with a supplier regarding the Equipment, nor the
loss of possession or the right of possession of the Equipment or any part
thereof by the, shall relieve Lessee from the obligations under this Lease.
Lessee shall have no right, title or interest in or to the Equipment except the
right to use the same upon the terms and conditions herein contained. The
Equipment shall remain the sole and exclusive personal property of Lessor and
not be deemed a fixture whether or not it becomes attached to any real
property. Any labels supplied by Lessor to Lessee describing the ownership of
the Equipment shall be affixed by Lessee upon a prominent place on each item of
Equipment.
5. PURCHASE AND RENEWAL OPTION; LOCATION AND SURRENDER OF
EQUIPMENT. (a) Prior to the expiration of the initial term hereof, Lessee shall
have the option to: (i) renew this Lease, or (ii) purchase the Equipment for
cash upon the last business day on or prior to the expiration of the lease term
therefor for a price equal to the amount set forth in the Supplementary
Schedule. If the Fair Market Value Purchase Option was selected on the
Supplementary Schedule, the fair market value shall be determined on the basis
of and shall be equal in amount to, the value which would be obtained in an
arms-length transaction between an informed and willing buyer-user (other than
a used Equipment dealer), who would be retaining the Equipment as part of its
current operations, in continuing and consistent use, and an informed and
willing seller under no compulsion to sell and, in such determination, costs of
removal from the location of current use shall not be a deduction from such
value. If Lessee desires to exercise either option, it shall give to Lessor
irrevocable written notice of its intention to exercise option at least 120
days (and not more than 180 days) before the expiration of such lease term. In
the event that Lessee exercises the purchase option described herein, upon
payment by Lessee to Lessor of the purchase price for the Equipment, together
with all rent and any other amounts owing to Lessor hereunder, Lessor shall
transfer to Lessee without any representation or warranty of any kind, express
or implied, title to such Equipment. Notwithstanding anything herein to the
contrary, if Lessee fails to notify Lessor of its intent with respect to the
exercise or the Options described in this Section 5 within the time frames
contemplated hereby, this Lease shall automatically be renewed for an
additional ninety (90) day period(s) upon the same terms and conditions. Any
<PAGE> 4
notice of termination during an automatic extension shall be effective on the
last day of the month ninety (90) days after the receipt of such notice.
(b) The Equipment shall be delivered to and thereafter kept at the
location specified in the Supplementary Schedules and shall not be removed
therefrom without Lessors prior written consent. Upon the expiration or
earlier termination of this Lease, Lessee at its cost and expense, shall
immediately return the Equipment to Lessor in good repair, working order, with
unblemished physical appearance and with no defects which affect the operation
or performance of the Equipment ("Return Condition"). Return Condition also
indicates that the Equipment will be eligible at termination of this Agreement
for acceptance by the manufacturer, or a manufacturer certified third party
maintenance organization approved by Lessor, under contract maintenance at the
above mentioned organizations then standard rates. If the Equipment is not in
Return Condition, Lessee shall remain liable for any and all reasonable costs
required to restore the Equipment including, without limitation, service
records and user manuals properly packed, subject to Lessor's instructions,
adequately insured at no less than its maximum insurable value, to the address
specified by Lessor. The deinstallation of the Equipment shall be performed by
manufacturer certified technicians, approved by Lessor and the Lessor shall
have the right to supervise and direct the preparation of the Equipment for
return. If, upon termination of this Lease for any reason, Lessee fails or
refuses forthwith to return and deliver the Equipment to Lessor, Lessee shall
remain liable for any rent accrued and unpaid with respect to the Equipment up
to the date that the Equipment is returned to the address specified by Lessor.
Notwithstanding the foregoing, Lessor shall have the right, without notice or
demand, to enter Lessee's premises or any other premises where the Equipment
may be found and to take possession of and to remove the Equipment without
legal process. Lessee understands that it may have a right under law to notice
and a hearing prior to repossession of the Equipment. As an inducement to
Lessor and its Assigns to enter into this transaction, Lessee hereby expressly
waives all rights conferred by Rating or future law to notice and a hearing
prior to such repossession by Lessor, its Assigns, or any officer authorized by
law to effect repossession and hereby releases Lessor and its Assigns from all
liability in connection with such repossession. Lessee's obligation to return
the Equipment may, at Lessors option be specifically enforced by Lessor.
6. USE OF EQUIPMENT - INSPECTION. Lessee shall use the Equipment
in compliance with all laws, rules, and regulation of the jurisdictions wherein
the Equipment is located and solely in the conduct of Lessee's business.
Lessee agrees at its expense to obtain all permits and licenses necessary for
the operation of the Equipment. Lessee at its expense shall take good and
proper care of the Equipment and make all repairs and replacements to
maintain and preserve the Equipment and keep it in good order and condition.
Unless Lessor shall otherwise consent in writing, shall, at its own expense,
enter into and maintain in force a contract with the manufacturer or other
maintenance organization approved by Lessor covering maintenance of each unit
of Equipment. Lessee shall furnish Lessor with a copy of such contract. Lessee
shall pay all costs to install and dismantle the Equipment. Lessee shall not
make any alterations, additions, or improvements, or add attachments to the
Equipment without the prior written consent of Lessor, except for (i) additions
or attachments to the Equipment consisting solely of telephone terminal
Equipment and (ii) additions or attachments to the Equipment purchased by
Lessee from the original supplier of the Equipment or any other person, or
entity, approved by Lessor. If desires to lease any such additions or
attachments, Lessee hereby grants to Lessor the right of first refusal to
provide such lease financing to Lessee for such items. Subject to the
provisions of Section 5(b) hereof, Lessee agrees to restore the Equipment to
Return Condition prior to its return to the Lessor and Lessee agrees that any
addition, alteration, improvement or attachment shall belong to and become a
part of the property of Lessor. Any software upgrade will become the property
of the Lessor, and Lessee hereby represents and warrants to Lessor, that has
the right to convey such software to Lessor. Lessor shall have the right, upon
reasonable prior notice to Lessee and during normal business hours, to inspect
the Equipment at its location. Lessee shall not permit its rights or interest
hereunder to be subject to any lien, charge, or encumbrance. Lessee shall not
permit the Equipment to become or remain a fixture to any real estate or an
accession to any personalty not leased hereunder. Lessee shall not be
responsible for any liens, charges, or encumbrances on the Equipment caused by
Lessor.
<PAGE> 5
LESSEE SHALL NOT ASSIGN OR IN ANY WAY DISPOSE OF ALL OR ANY PART OF ITS RIGHTS
OR OBLIGATIONS UNDER THIS LEASE OR ENTER INTO ANY SUBLEASE OF ALL OR ANY PART
OF THE EQUIPMENT WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR.
7. LIENS; TAXES. Lessee shall keep the Equipment free and clear
of all levies, liens and security interests, and shall give Lessor immediate
notice of any attachment or other judicial process affecting any item of
Equipment. Lessee shall pay all charges and local, state, and Federal taxes
(and reimburse Lessor for any such payments made by Lessor) which may now or
hereafter be imposed upon the ownership, leasing, rental, sale, purchase,
possession or use of the Equipment, excluding, however, all taxes on or
measured by Lessor's net income. Further, Lessor may in its sole discretion
require to make payments in amounts and at intervals satisfactory to Lessor to
be held by Lessor in a non-interest bearing tax reserve account as security for
Lessee's faithful performance of its obligations herein. The obligations of
Lessee to pay such sums shall be in addition to all other obligations of under
this Lease and shall continue in full force and effect notwithstanding the
termination of this Lease whether by expiration of time, by operation of law,
or otherwise.
8. INSURANCE. Lessee will at its own expense maintain physical
damage and liability insurance with companies acceptable to Lessor covering the
Equipment in the name of Lessor and in such form as is commonly maintained on
comparable Equipment by companies similarly situated. In all events Lessee
will cause to be carried and maintained in the names of Lessor and insurance
against all risks of physical damage to the Equipment as provided under a
standard all-risk policy in an amount from time to time not less than the
amount payable by Lessee under Section 9 hereof as the result of an Event of
Loss to the Equipment. Lessee shall be liable for any loss not covered by
insurance. AU said insurance shall be in form and amount satisfactory to
Lessor and shall provide the losses, if any, shall be payable to Lessor.
Lessee shall pay the premiums therefore and deliver to Lessor the policies of
insurance or duplicates thereof or other evidence satisfactory to Lessor of
such insurance coverage. Each insurer shall agree by endorsement upon the
policy or policies issued by it or by independent instrument furnished to
Lessor that it will give Lessor thirty (30) days prior written notice of the
effective date of any alteration or cancellation of such policy. Lessee hereby
irrevocably appoints Lessor as Lessee's attorney-in-fact to make claim for,
receive payment of, and execute and endorse all documents, check or drafts
received in payment for loss or damage under any said insurance policy. In
case of the failure of to procure or maintain said insurance, Lessor shall have
the right, but shall not be obligated, to effect such insurance or compliance
on behalf of Lessee. In that event, all moneys spent by and expenses of Lessor
in effecting such insurance or compliance shall be deemed to be additional
rent, and shall become due and owed forthwith with interest at 18% per annum or
such other maximum lawful contract rate as is otherwise allowed by law if less
than 18% and Lessee will pay the same with the periodic payment of rent next
due after receipt of notice from Lessor.
9. RISK OF LOSS AND DAMAGE. Lessee shall bear the entire risk of
loss, theft, damage or destruction of the Equipment from any cause whatsoever.
In the event that any item of Equipment is lost, stolen or destroyed beyond
repair (an 'Event of Loss'), Lessee shall pay to Lessor the greater of (a) the
value of such Equipment immediately prior to the Event of Loss, as determined
in a manner satisfactory to the Lessor, or (b) the unpaid balance of rentals
for the Term of Lease allocable to such Equipment (discounted to present value
at the New York Federal Reserve Bank Discount Rate less two percent, in effect
at the date of payment to Lessor for such Event of Loss) or according to the
attached casualty or amortization schedule, if applicable, plus any residual
value of such Equipment established by the Lessor and any other charges due
under the Lease and allocable to such Equipment.
10. TAX BENEFITS - TRUE LEASE. The parties hereto intend that
this Lease be treated as a lease for Federal income tax purposes, and Lessor
and/or the lessor of the Equipment to Lessor, as applicable (Lessor and/or such
lessor of the Equipment to Lessor being in this Section 10 referred to as the
'Taxpayer'), shall be entitled to such deductions, credits and other benefits
(all of which shall herein be referred to as the 'Tax Benefits') with respect
to the Equipment as are provided to an owner of property by the Internal
Revenue Code of 1986, as amended to the date hereof (the 'Code'), including
without limitation any accelerated cost recovery system deductions and
investment tax credit with respect to the Equipment. In the event that any of
the expected Tax Benefits under any Federal, State or local law shall be lost
by, recaptured, not claimed, not available for claim or disallowed to Taxpayer
because of (i) any act or failure to act of Lessee and/or any sublessee or
assignee of (ii) any change in the
<PAGE> 6
legal or tax status of Lessee and/or any sublessee or assignee of Lessee, (iii)
breach by Lessee of any of its representations or warranties contained in this
Lease (iv) an Event of Loss, or (v) any change in or amendment to tax law,
congressional judicially, or administratively promulgated, shall promptly pay to
Lessor a revised rental or lump sum amount which, in the reasonable judgment of
Lessor (and after deduction of all taxes to be paid by Lessor with respect to
such payment), shall have the same net after tax rate of return on a discounted
cash flow basis as would have been realized by Lessor were Lessor entitled
and/or able to use the expected tax deductions, credits or other benefits based
on the maximum Federal Income Tax Rate applicable to Lessor, in effect during
the term of the Lease. The obligation to pay such sums to Lessor shall be in
addition to all other obligations of Lessee under this Lease and shall continue
in full force and effect notwithstanding the termination of this Lease whether
by expiration of time, by operation of law or otherwise.
11. SECURITY INTEREST AND ADDITIONAL TERMS. Lessor reserves and
Lessee hereby grants to Lessor a continuing security interest in the Equipment
and any and all additions, replacements, substitutions, and repairs thereto, as
well as any products and proceeds of the foregoing for the purpose of securing
payments due hereunder and all other promises and obligations of Lessee to
Lessor arising under this Lease. agrees to promptly execute and deliver to
Lessor such UCC financing statements, collateral assignments for
recordation/filing with the U.S. Copyright or U.S. Patent and Trademark
offices, and other documents needed to perfect Lessor's security interest, and
such copies of any technology-components of the Equipment, as may be requested
from time to, time by Lessor. When all of Lessee's promises and obligations
under this Lease have been fully paid and satisfied, Lessor's security interest
shall terminate. Nothing contained herein shall in any way diminish Lessor's
right, title or interest in or to the Equipment.
12. INDEMNIFICATION. Lessee does indemnify, protect, save and
keep harmless Lessor, its agents, servants, successors and assigns from and
against all losses, damages, injuries, claims, demands and expenses, including
legal expenses and attorney's fees, of whatsoever nature, arising out of the
use, misuse, condition, repair, storage, return or operation (including, but
not limited to, latent and other defects, whether or not discoverable by it) of
any unit of Equipment, regardless of where, how and by whom operated, and
arising out of negligence, whether of Lessor, its agents, servants, successors
or assigns, tort, strict liability in tort, warranty, contract or any other
cause of action with respect to Lessee or a party herein indemnified. is liable
for the expenses of the defense or the settlement of any suit or suits or other
legal proceedings brought to enforce any such losses, damages, injuries,
claims, demands and expenses and shall pay all judgments entered in any such
suit or suits or other legal proceedings. The indemnities and assumptions of
liabilities and obligations herein provided for shall continue in full force
and effect notwithstanding the termination of the Lease whether by expiration
of time, by operation of law or otherwise. With respect to Lessor, Lessee is
an independent contractor, and nothing contained herein authorizes Lessee or
any other person to operate the Equipment so as to impose or incur any
liability or obligation for or on behalf of Lessor.
13. ASSIGNMENTS BY LESSOR. Lessor may at any time and from time
to time assign its rights under this Lease to the Equipment and to the rents
and other sums at any time due or to become due or at any time owing or payable
by Lessee to Lessor under any of the provisions of this Lease. Lessee further
acknowledges and agrees that the rights of any such Assignee in and to the sums
payable by Lessee under any provisions of this Lease shall not be subject to
any abatement whatsoever and shall not be subject to any defense, set-off,
counterclaim or recoupment whatsoever by reason of any damage to or loss or
destruction of the Equipment, or any part thereof, or by reason of any other
indebtedness or liability, howsoever and whenever arising, of the Lessee by
Lessor. This Lease inures to the benefit of and is binding upon the heirs,
legatees, personal representatives, survivors, successors and assigns of the
parties hereto. Lessee acknowledges that any assignment or transfer by Lessor
shall not materially change 's duties or obligations under this Lease nor
materially increase the burdens or risks imposed on Lessee.
14. DEFAULT. In the event Lessee shall default in the payment of
any rent, additional rent, or any other sums due hereunder or to Lessor under
any other obligation, for a period of five (5) days or in the event of any
default or breach by Lessee of the terms and conditions of this Lease or any
other agreement between the parties hereto, or in the event of a
misrepresentation or breach of warranty by Lessee or any guarantor hereof or if
any
<PAGE> 7
execution or other writ or process shall be issued in any action or proceeding,
against Lessee, whereby the Equipment may be taken or distrained, or if a
proceeding in bankruptcy, receivership or insolvency shall be instituted by or
against Lessee or its property, or if Lessee shall enter into any agreement of
composition with its creditors, or if the condition of Lessee's affairs shall
so change as to in Lessor's good faith opinion, impair the Equipment or
increase the credit risk involved or if Lessee ceases doing business or
transfers a major part in value of its assets, then in any such event Lessor,
at its option may, (a) proceed by appropriate court action or actions either at
law or in equity to enforce performance by Lessee of the applicable covenants
and terms of this Lease or to recover damages for the breach thereof and/or (b)
retake immediate possession of the Equipment without a Court Order or other
process of law and for such purpose Lessee consents that Lessor, directly or by
its agents, may enter upon any premises where the Equipment may be and may
remove the same therefrom with or without notice of its intention to do same
without being liable to any suit or action or other proceeding by Lessee and/or
(c) declare all sums owing hereunder and/or all rentals immediately due and
payable not as a penalty, but as liquidated damages and/or (d) by notice in
writing to Lessee terminate this Lease, whereupon all right and interest of
Lessee in or to the possession or use of the Equipment shall absolutely cease
and terminate, but Lame shall remain liable as hereinafter provided and Lessor
shall have the rights under the preceding subsections (a), (b) and (c) of this
section.
Further, Lessor: (i) shall be entitled to retain all rents and
additional sums paid by hereunder in respect of the Equipment as well as all
resale proceeds, refunds and other if any, paid or received by Lessor prior to
or after default, including any such then in its possession which, had this
Lease not been declared in default, would otherwise be payable to Lessee
hereunder and any other money or property of Lessee in Lessor's possession, and
(ii) may, but shall not be obligated to, re-let all or any part of the
Equipment for such rentals and upon such terms as Lessor shall elect or may,
but shall not be obligated to, sell the Equipment at public or private sale and
either for cash or upon credit, and (iii) shall be entitled to recover from
Lessee all rents and additional sums accrued and unpaid under the terms hereof
prior to Lessor's retaking possession of the Equipment, and as partial damages
for breach, a sum equal to the unpaid balance of rentals for the Term of this
Lease (discounted to present value at the prime rate in effect at the time of
such default), less only the net proceeds of any such reletting or sale, and
(iv) shall be entitled to recover from Lessee any and all damages which Lessor
shall sustain by reason of any such default, failure or breach of Lease,
together with a reasonable sum for attorneys' fees and such expenses as shall
be expended or incurred in the seizure, rental, storage, transportation, sale
of Equipment, enforcement of any right or privilege hereunder, collection of
any sums due hereunder or in any consultation or action in such connection.
The remedies herein provided in favor of Lessor in the event of
default as hereinabove set forth shall not be deemed to be exclusive, but shall
be cumulative and shall be in addition to all other remedies in its favor
existing in law, in equity or in bankruptcy.
If any sum due to Lessor hereunder is unpaid after its due date,
Lessor may, at Lessor's option, collect a delinquency charge of up to the
greater of ten dollars or interest at the rate of 18% per annum or at the
highest rate permitted by law if less than 18%, provided however, that Lessor
may not charge any amounts in excess of those permitted by law. All such
charges shall be payable forthwith as additional rent hereunder.
15. NOTICES AND WAIVERS. All notices relating to this Lease shall be
delivered in person to an officer of the Lessor or Lessee or shall be mailed
certified or registered to Lessor or Lessee at its respective address shown
herein or to another address subsequently specified in writing by the
appropriate party hereto. A waiver of a specific default shall not be a waiver
of any other subsequent default. No waiver of any provision of this Lease sham
be a waiver of any other provision or matter, and all such waivers shall be in
writing and executed by an officer of Lessor. No failure on the part of Lessor
to exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof. To the extent permitted by applicable law, Lessee hereby
waives any and all rights and remedies conferred upon Lessee by Sections 2A-508
through 2A-522 of the Uniform Commercial Code.
16. ENTIRE AGREEMENT, MODIFICATION. This Agreement, and any
exhibit, Supplementary Schedules, supplement or addendum attached hereto are
intended as a full and complete expression of and constitute the entire
Agreement of the parties with respect to the subject matter hereof, and all
prior and contemporaneous
<PAGE> 8
understandings, agreements, promises, representations, warranties, terms and
conditions, both oral and written are merged and incorporated into this
Agreement, and no such oral or written understanding, agreement, promise,
representation, warranty, term or condition not specifically set forth herein
shall be binding upon the parties. No agent or employee of any third party
(including without limitation the supplier of the Equipment, sales
representatives or any agent of such supplier) is authorized to bind Lessor to
this Agreement, or to waive, modify or add to the terms, and conditions printed
herein. Lessee acknowledges and agrees that neither the manufacturer, the
supplier, nor any salesman, representative or other agent of the manufacturer or
supplier, is an agent of Lessor. No representations as to the Equipment or any
other matter by the supplier shall in any way affect the Lessee's obligations to
perform including the payment of the Lease obligations set forth herein. This
Agreement and any waiver, modification or an addition to any of its provisions
shall not be valid unless in writing and signed by an authorized officer or
manager of Lessor. Lessee hereby authorizes Lessor, without further notice, to
complete the description of the Equipment to be leased, the quantity thereof and
to fill in any blank spaces and make corrections on this lease or in the related
Supplementary Schedules and to date same.
17. LESSEE'S FINANCIAL INFORMATION. Upon request of Lessor or any
Assignee of Lessor, agrees to furnish from time to time such information
regarding the business affairs and financial condition of Lessee as Lessor or
any such Assignee may reasonably request.
18. MISCELLANEOUS. This Lease shall be governed by the internal
laws of the State of Illinois. Any litigation arising out of or relating to
this Lease or any transaction contemplated hereby may be instituted in any
federal or state court in Illinois, and Lessee waives any objection that it may
now or hereafter have to venue in any such court and irrevocably submits to the
jurisdiction of any federal or state court in Illinois in any such litigation.
This submission to jurisdiction shall be irrevocable until this Lease has been
terminated and all amounts due and payable and obligations to be performed by
the Lessee hereunder have been paid and performed in full. Lessee hereby
waives a trial by jury in any litigation between Lessee and Lessor with respect
to this Lease. Lessee shall execute and deliver to Lessor, upon Lessor's
request, such instruments and documents as Lessor deems necessary or advisable
for the confirmation or perfection of this Lease and Lessor's rights hereunder
and grants to Lessor a power of attorney to execute such instruments and
documents in 's name. Where so provided by law, Lessor may execute and file
evidence of its ownership to said Equipment. Any provision of this Lease
prohibited by law in any state shall, as to such state, be ineffective to the
extent of such prohibition without invalidating the remaining provisions of
this Lease. Lessee hereby authorizes Lessor or any Assignee hereof to file a
financing statement signed only by Lessor or such assignee in all places where
necessary to perfect a security interest in the Equipment in all jurisdictions
where such authorization is permitted by the Uniform Commercial Code. Lessee
represents that the Equipment is being leased hereunder for business purposes
and agrees that under no circumstances shall this Lease be construed as a
consumer contract.
ATTEST FOR WITNESS
SCC COMMUNICATIONS CORP.
/s/ (Name of Leasee)
- -------------------------------------
(Signature) (Title)
By /s/ NANCY K. HAMILTON CFO
--------------------------------
(Signature) (Title)
----------------------------------
(Name of Co-Lessee; if applicable)
By
--------------------------------
(Signature) (Title)
Accepted: Ameritech Credit Corporation
By /s/
----------------------------------------------
(Signature) (Title)
<PAGE> 1
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT 10.21
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is made as of the 27th day
of October, 1997 (the "Effective Date"), by and between Ameritech Mobile
Communications, Inc., a Delaware corporation ("Ameritech"), and SCC
Communications, Corp., a Delaware corporation (the "Consultant," and with
Ameritech, sometimes referred to collectively herein as the "parties" or
individually as a "party").
WITNESSETH
WHEREAS, Ameritech has retained the services of Consultant in connection
with Ameritech's plan to provide 911 emergency service to its cellular telephone
customers to conduct an initial market survey, including among other things, a
market analysis, network inventory and network design recommendations as further
described in Exhibit A to this Agreement (the "Initial Market Survey") and
Consultant desires to perform such services for Ameritech;
NOW, THEREFORE, in consideration of the mutual covenants and promises
set forth herein and for good and valuable consideration, the sufficiency of
which is hereby acknowledged, the parties hereby agree as FOLLOWS:
1. APPOINTMENT OF CONSULTANT.
Ameritech hereby retains Consultant to conduct the Initial Market Survey
described in Exhibit A to this Agreement for Ameritech (the "Project").
Consultant hereby accepts such appointment subject to the terms and conditions
set forth herein.
2. PERFORMANCE AND DUTIES.
a) Consultant agrees to perform the services required hereunder
in a diligent and professional manner no later than forty-five
(45) days from the Effective Date, provided, however, that
information that is requested by Consultant in connection with
the Project is provided to Consultant by Ameritech within a
reasonable amount of time. Consultant further agrees to devote
such time, energy and attention to the performance of such
services as are reasonably necessary to complete them in the
manner contemplated hereby. In addition to the foregoing,
Consultant shall perform the services under this Agreement in
compliance with all applicable laws, rules and regulations and
further agrees to observe the business
<PAGE> 2
policies, procedures and security requirements of Ameritech
(as defined herein). While on the premises of Ameritech,
Consultant will be responsible for any personal injury or
property damage caused by the negligent or intentional acts of
Consultant, its employees, agents or representatives.
b) Consultant acknowledges and agrees that Ameritech may, from time to
time, expand the scope of services required from Consultant under this
Agreement. To the extent that such changes affect the time of
performance or the cost of services to be performed by Consultant,
Ameritech and Consultant shall amend the provisions hereof upon mutually
agreeable terms.
3. CONSULTANT'S FEE AND INVOICING
As a Non-Recurring Engineering fee ("NRE"), Ameritech agrees to pay to
Consultant an aggregate amount of , which
shall be paid within forty-five (45) days receipt of an invoice which shall be
provided by Consultant to Ameritech upon the completion of the Project in a
manner satisfactory to Ameritech or January 9, 1998, whichever is later. Payment
of the NRE fee shall be considered payment in full for the Initial Market
Survey. In the event that Ameritech requests, in its sole discretion, that
Consultant provide SCP services at a later date, an additional NRE fee in the
amount of will be charged by Consultant to
Ameritech for additional market survey services related to such SCP services.
Ameritech shall not reimburse Consultant for travel or any other expenses
incurred by Consultant.
4. TERMINATION.
Subject to the provisions hereof, this Agreement shall commence on the Effective
Date set forth above and shall terminate upon completion of the Project.
Notwithstanding the foregoing, this Agreement may be terminated for cause, if
one party breaches this Agreement and fails to cure such breach within ten (1 0)
calendar days after delivery of written notice of such breach in which case, the
injured party may then terminate this Agreement immediately upon delivery to the
other party of an additional written termination notice.
<PAGE> 3
5. STATUS OF CONSULTANT.
a) It is expressly understood and agreed by the parties to this
Agreement that Consultant is acting as an independent
contractor under the Agreement and shall have no right or
authority to make any contracts or commitments for or on
behalf of Ameritech, to sign or endorse on behalf of Ameritech
any contracts, advertisements or instruments of any nature or
to enter into any obligation binding upon Ameritech.
b) The parties further acknowledge and agree that as an
independent contractor, Consultant shall not be entitled to
any of the benefits, fringe or otherwise, available to
Ameritech employees. In addition to the foregoing, the parties
agree that no taxes will be withheld from the fees remitted to
Consultant and no Internal Revenue Service Forms W2 or
comparable federal, state or local tax returns shall be issued
by Ameritech with respect to the arrangements contemplated by
this Agreement (except for such returns and tax forms as may
be required pursuant to federal, state and local tax laws
applicable to consultants and independent contractors).
6. PERSONNEL.
a) Robert Tyler and such other person or party as Ameritech may
from time to time designate in writing, shall be available to
consult with and assist Consultant in the performance of the
Project. Notwithstanding anything herein to the contrary, no
representative from Ameritech shall exercise any control or
direction over Consultant or Consultant's employees, if any,
in the performance of the services required under this
Agreement.
b) Consultant agrees that Beth Ozanich shall act as Consultant's
project manager with respect to the Project. Any changes to
Ms. Ozanich's Project staff will be subject to the prior
review of Ameritech.
7. AFFILIATES.
a) With respect to Ameritech, an "Affiliate" shall mean any
entity that directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under
common control with Ameritech. "Affiliate" also means any
successor to
<PAGE> 4
Ameritech, whether by change of name, dissolution, merger,
consolidation, reorganization or otherwise.
b) With respect to Consultant, an "Affiliate" shall mean any
entity that directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under
common control with Consultant. "Affiliate" also means any
successor to Consultant, whether by change of name,
dissolution, merger, consolidation, reorganization or
otherwise.
c) With respect to an entity other than Ameritech or Consultant,
an "Affiliate" shall mean any entity that directly or
indirectly, through one or more intermediaries, controls or is
controlled by or is under common control with such entity.
"Affiliate" also means any successor to such entity, whether
by change of name, dissolution, merger, consolidation,
reorganization or otherwise.
8. CONFIDENTIAL INFORMATION.
a) Any information, including but not limited to, specifications,
drawings, computer programs, technical or business information
or other data in whatever form (hereinafter "Information"),
which is proprietary to Ameritech and furnished by Ameritech
to Consultant, whether in writing, orally or visually, under
or in contemplation of this Agreement or to which Consultant
has access from Ameritech through its performance hereunder
shall be considered confidential and shall be subject to the
following:
i) Consultant shall restrict disclosure of the Information to Consultant's
employees with a "need to know" (i.e., employees that require the
Information to perform their responsibilities in connection with this
Agreement) and shall not disclose it to any other person or entity
without the prior written consent of Ameritech;
ii) Consultant shall use the Information only for purposes of performing
under this Agreement;
iii) Consultant shall advise those employees who access the Information of
their obligations with respect thereto;
<PAGE> 5
iv) Consultant shall copy the Information only as necessary for those
employees who are entitled to receive it and shall ensure that all
confidentiality notices are reproduced in full on such copies; and
v) Unless the parties agree otherwise in writing, Consultant shall return
all copies of such Information to Ameritech at Ameritech's request.
b) Consultant recognizes and agrees that the unauthorized use or
disclosure of the Information would cause irreparable harm to
Ameritech for which it would have no adequate remedy at law, and
that an actual or contemplated breach of this Clause shall
entitle Ameritech to obtain immediate injunctive relief
prohibiting such breach, in addition to any other rights
available to it. This Agreement shall be deemed confidential
Information. The obligations herein contained shall expressly
survive the termination or expiration of this Agreement.
c) The Information shall not be considered confidential and shall
not be subject to the foregoing if Consultant can demonstrate
that the Information:
i) is or becomes available to the public through no breach of this
Agreement;
ii) was previously known by Consultant without any obligation to hold it in
confidence;
iii) is received from a third party free to disclose such Information without
restriction;
iv) is independently developed by Consultant without the use of Ameritech's
Information;
<PAGE> 6
v) is APPROVED FOR RELEASE BY written authorization OF Ameritech, BUT ONLY
TO THE EXTENT of such authorization;
vi) is required by law or regulation to be disclosed, but only to the
extent and for purposes of such required disclosure; or
vii) IS disclosed in response to a valid order of a court or lawful request
of a governmental agency, but only to the extent of and for the
purposes of such order or request, provided that Consultant first
notifies Ameritech of the order or request ten (1 0) days prior to
disclosure and permits Ameritech to seek an appropriate protective
order.
d) No Information furnished by Consultant to Ameritech hereunder
or in contemplation hereof shall be treated as confidential by
Ameritech unless specifically labeled as such by Consultant in
advance of its disclosure to Ameritech. In such event,
Ameritech shall safeguard and protect Consultant's
confidential Information in accordance with the provisions
above, except Ameritech may disclose such Information to its
employees and its Affiliates with a need to know.
9. RIGHT IN MATERIALS AND INDEMNITY.
a) The Initial Market Survey prepared by or for Consultant in the
course of performing services under this Agreement shall be
promptly furnished to Ameritech upon completion of the
Project. The Initial Market Survey shall be the exclusive
property of Ameritech, including title to copyright in all
copyrightable material (to the extent derived from employees
and subcontractors of Consultant), and may be used by
Ameritech in any manner whatsoever so long as such use is not
in violation of this Agreement; shall be considered a "work
made for hire" consistent with U.S. copyright laws; and shall
be deemed and treated by Consultant as Ameritech's
confidential Information as described in Section 7 of this
Agreement. If any such materials were previously copyrighted
by Consultant and not originally prepared hereunder,
Consultant hereby grants to Ameritech an unrestricted
royalty-free license to copy such materials and the rights to
sublicense such materials to its Affiliates. Such materials do
not include Consultant's own proprietary and confidential
Information and property including but not limited to source
code, databases and software systems not originally designed,
created or implemented for Ameritech. Consultant warrants that
all
<PAGE> 7
persons performing services hereunder are employees of
Consultant and the services performed and work product thereof
have been prepared by such employees within the scope of their
employment; or if not employees, Consultant has received from
such persons an assignment of copyright covering all services
performed hereunder. To the extent such materials shall not be
considered a "work made for hire," Consultant hereby assigns
all right, title, and interest in such materials to Ameritech.
Consultant agrees to cooperate with Ameritech and to execute
all documents reasonably necessary for the transfer,
maintenance and protection of these rights for the benefit of
Ameritech.
b) Consultant agrees to indemnify, defend and hold Ameritech
harmless against any claim, demand, cause of action, suit
liability, damage, loss, judgment, award, cost and expense
(including reasonable attorneys' fees and expenses) relating
to or arising out of a claim or assertion that any materials
produced or used by Consultant for Ameritech or otherwise
produced or used by Consultant in performing services
hereunder infringe or violate any patent, copyright or other
proprietary right (including, but not limited to,
misappropriation of trade secrets) of any third party.
Consultant shall defend and settle at its sole expense all
suits and proceedings arising out of the foregoing. No
settlement which prevents Ameritech from continuing to use
materials related to the services provided hereunder, shall be
made without Ameritech's prior written consent.
10. INSURANCE.
Consultant shall purchase and maintain general liability insurance as is
reasonable under the circumstances to protect the Consultant and Ameritech from
claims which may arise out of the Consultant's performance of services
hereunder. All such insurance shall be purchased from and issued by insurance
companies reasonably satisfactory to Ameritech. All such insurance shall name
Ameritech as an additional named insured. Certificates of Insurance, evidencing
such coverage, shall be provided to Ameritech upon request. The minimum coverage
and limits to be maintained by Consultant shall be written for not less than the
limits of liability specified by further agreement of the parties, or as
required by law, whichever is greater.
<PAGE> 8
11. PUBLICITY.
Consultant shall not prepare or distribute any news releases, articles,
brochures, advertisements, speeches or other information releases concerning
this Agreement and the activities performed hereunder without the prior written
consent of Ameritech. In addition, Consultant shall not use the "Ameritech" or
"Bell" name or mark (or any variation thereof) or refer to the Project, without
the prior written consent of Ameritech.
12. SUBCONTRACTING.
Consultant shall not, without the prior written consent of Ameritech,
subcontract any portion of the work required to be performed under this
Agreement.
13. INDEMNIFICATION.
a) Ameritech agrees that it will indemnify, defend and hold harmless
Consultant from and against claims, liabilities, obligations,
suits, judgments, damages, expenses or costs (including
reasonable attorneys' fees) (collectively, "Consultant's
Damages") which may be asserted against or incurred by Consultant
which arise out of Ameritech's performance or failure to perform
its obligations under this Agreement; provided, however, that the
foregoing indemnity shall not apply to Consultant's Damages
resulting from or relating to Consultant's negligence or
misconduct.
b) Consultant agrees that it will indemnify, defend and hold
harmless Ameritech from and against any and all claims,
liabilities, obligations, suits, judgments, damages, expenses or
costs (including reasonable attorneys' fees) (collectively,
"Ameritech's Damages") which may be asserted against or incurred
by Ameritech and which arise out of Consultant's performance or
failure to perform its obligations under this Agreement;
provided, however, that the foregoing indemnity shall not apply
to Ameritech's Damages resulting from or relating to Ameritech's
negligence or misconduct.
14. INCORPORATION OF EXHIBITS.
Each of the exhibits attached to this Agreement is by this reference
incorporated herein and made a part of this Agreement.
<PAGE> 9
15. HEADINGS.
The headings set forth herein are for convenience only and shall not be used in
interpreting the text of the sections in which they appear.
16. NOTICES.
Any notice or other communication required, permitted or desirable under this
Agreement, shall be sufficiently given if sent by United States mail, postage
prepaid, addressed as follows:
To Ameritech: Ameritech Mobile Communications, Inc. 2000 West
Ameritech Center Drive Hoffman Estates, IL 60196
Attn: Robert Tyler Manager, Network Planning
with a copy to:
Ameritech Mobile Communications, Inc.
2000 West Ameritech Center Drive
LOC. 3H890
Hoffman Estates, IL 60196
Attn: Legal Department
To Consultant: SCC Communications Corp.
6285 Lookout Road
Boulder, Colorado 80301
Attn: Chief Financial Officer
with a copy to:
SCC Communications Corp.
6285 Lookout Road
Boulder, Colorado 80301
Attn: Contracts Manager
<PAGE> 10
or such other address as shall be furnished in writing by either party
to the other party. Any such notice or communication shall be deemed to have
been given as of the date so mailed.
17. ASSIGNMENT.
a) Neither party shall assign any right or obligation under this
Agreement without the other party's prior written consent. Any
attempted assignment shall be void, except that either party
may assign monies due or to become due to it, provided that
(a) the assigning party gives the other party at least ten
(10) days prior written notice of such assignment and (b) such
assignment does not impose upon the other party obligations to
the assignee other than the payment of such monies.
b) Notwithstanding the foregoing, Ameritech may assign this
Agreement, in whole or in part, to any of its Affiliates.
Consultant may assign this Agreement, in whole or in part, to
any of its Affiliates; provided, however, that Consultant may
not assign this Agreement to any entity that directly or
indirectly through that entity itself or one of its Affiliates
provides two-way cellular voice communication services or
other wireless communication or data services. Upon such
permitted assignment and assumption of liability thereto by
the assignee, the assignor shall be discharged of any
liability under this Agreement.
18. ENTIRE AGREEMENT.
This Agreement sets forth the entire agreement and understanding of the parties,
and there are no other prior or contemporaneous written or oral agreements,
undertakings, promises, warranties or covenants not specifically referred to,
attached to this Agreement or contained in this Agreement. This Agreement may be
amended, modified or terminated only by a written instrument signed by the
parties hereto.
19. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, all of which shall
be considered one Agreement.
20. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Illinois.
<PAGE> 11
21. BINDING EFFECT.
Except as otherwise stated herein, this Agreement shall be binding upon and
shall inure to the benefit of the parties' respective successors in interest and
assigns.
22. SURVIVAL.
Sections 8, 9, 11, 13 and 21 shall survive the termination of this Agreement.
IN WITNESS WHEREOF, each of the parties has executed this Agreement.
AMERITECH:
CONSULTANT:
Ameritech Mobile
Communications, Inc.
SCC Communications Corp.
By: By:
Its: Its:
Date: Date:
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and all references to our Firm) included in or made a part of this registration
statement.
ARTHUR ANDERSEN LLP
/s/ ARTHUR ANDERSEN LLP
Denver, Colorado
April 9, 1998.
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<PERIOD-START> JAN-31-1997
<PERIOD-END> DEC-31-1997
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<SECURITIES> 0
<RECEIVABLES> 2,378,000
<ALLOWANCES> 50,000
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<CURRENT-ASSETS> 6,051,000
<PP&E> 20,174,000
<DEPRECIATION> 8,136,000
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<BONDS> 6,891,000
14,589,000
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<INCOME-CONTINUING> 2,283,000
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