Application Development Agreement

Exhibit 10.1


A-I-NET(R) SCN APPLICATION DEVELOPMENT AGREEMENT


THIS AGREEMENT ("Agreement"),dated as of 4/4/96, ("Effective Date") is between Lucent Technologies Inc. (Lucent) with offices at 2000 N. Naperville Road., Naperville, Illinois 60566-7033 and TeleCommunication Systems, Inc. ("TCS") a Maryland corporation, with offices at Suite 400, 275 West Street, Annapolis, Maryland 21401.


WHEREAS, TCS is in the business of providing a full range of information technology services, including consulting, systems development, systems integration, systems installation and implementation and systems management for a variety of industries; and


WHEREAS Lucent is in the business of providing products to enable the development of advanced telecommunications services, generally known as Advanced Intelligent Network Services ("AIN"); and


WHEREAS, Lucent has developed and owns certain Software and Hardware known as Lucent A-I-Net(R) products, consisting of, without limitation, the Service Circuit Node ("SCN"),the Service Control Point ("SCP"), the Service Creation Environment ("SCE"), and the Service Management System ("SMS"), which include modules or subsystems which it has developed and/or acquired licensing rights from various vendors, being referred to collectively herein as "AIN Products Group",


NOW, THEREFORE, Lucent and TCS hereby agree as follows:


1. DEFINITIONS


For the purposes of this Agreement, the following terms and their definitions shall apply:


"Affiliate" of a corporation means its subsidiaries, any company of
which it is a subsidiary, and other subsidiaries of such company
controlled by such party. For the purposes of this Agreement
"controlled" means having directly or indirectly a majority of the
voting rights of such entity.


1 * Confidential materials submitted and filed separately with the Securities and Exchange Commission. Asterisk denotes omissions. 2
"Applications" means any software and associated documentation produced
using Lucent's SCE (with or without additional outside components) that
provides utility to either Lucent, TCS, or users of SCNs.


"Application Development Plan," means the mutually agreed upon plan for
development of each Application pursuant to this Agreement, including,
but not limited to, time frames for development, lab time requirements,
procedures for modifications to the Application Development Plan, joint
marketing and sales arrangements, Application maintenance and
warranties, Application revenue projections, billing procedures,
Application updates and Application acceptance criteria. Each
Application Development Plan shall be included as addenda to this
Agreement.


"Development Start Date" means the mutually agreed upon date to
commence Application development at TCS premises.


"Documentation" means Lucent's AIN Products Group documentation,
technical specifications and such other information which is
customarily provided to Lucent's commercial customers. Such
documentation shall encompass one (1) hard copy (if available) and one
(1) MS/DOS CD-ROM version (software only), with updates and releases as
applicable.


"Firmware" means a combination of (1) Hardware and (2) Software
represented by a pattern of bits contained in such Hardware.


"Hardware" means the equipment components of the SCE (i.e., Compile
Server) as described in this Agreement and provided by Lucent to TCS as
specified in this Agreement.


"Revenues" are the proceeds from the sale of the software only
component of Applications l and 2 either by Lucent, TCS or jointly.
It does not include the proceeds from the sale of maintenance
agreements on the Applications, any future enhancements done by TCS
on the Applications, or any hardware and other software that may be
associated with the total sale.


2


* Confidential materials submitted and filed separately with the Securities and Exchange Commission. Asterisk denotes omissions. 3
"SCE" means Lucent's Service Creation Environment Software, including a
Compile Server, and the necessary number of tokens required by TCS to
complete the development of the Applications as specified in each of
the Application Development Plans.


"SCE Documentation" means a subset of documentation within the AIN
Products Group, pertaining to the Service Creation Environment.


"SCE Release" means a new release of SCE for the purpose of introducing
new features or functions to the SCE.


"SCE Tokens" means licensing authority granted by Lucent to TCS in
order to allow TCS employees to utilize the SCE for Application
development.


"SCE Update" means a change to an existing SCE Release to correct
problems found by customers in the field.


"SCN" means Lucent's Service Circuit Node in any of Lucent's then
current configurations.


"SCN Lab Time" means time allocated to TCS in an operational SCN lab
configuration in support of TCS Application development and testing
pursuant to this Agreement.


"SCP" means Lucent's Service Control Point in any of Lucent's then
current configurations.


"SMS" means Lucent's Service Management System in any of Lucent's then
current configurations.


"Software" means the computer programs and Documentation excluding
Source Code for which licenses are granted by Lucent under this
Agreement.


"Source Code" means any version of Software incorporating high-level or
assembly language that generally is not directly executable by a
processor.


3 * Confidential materials submitted and filed separately with the Securities and Exchange Commission. Asterisk denotes omissions. 4
"Specifications" means Lucent's or its vendor's technical
specifications, which are normally provided to Lucent's commercial
customers.


"Territory" means the United States and the District of Columbia.


"Use" with respect to Software means loading the Software, or any
portion thereof, into a processor for execution of the instructions and
tables contained in such Software.


2. SCOPE


Lucent and TCS wish to enter into an agreement for the development of Applications. To aid in the development, Lucent has provided TCS the use of the SCE, SCE Documentation, SCE Updates, SCE Releases and SCN Lab Time, and a complete set of Documentation. TCS will utilize the Hardware, Software and Documentation provided under this Agreement to design and develop two Applications which shall be owned by Lucent. In consideration for such development, Lucent agrees to share equally the revenue from both Applications with TCS.


Lucent and TCS shall mutually agree upon and identify the two Applications to be developed pursuant to this Agreement. Lucent and TCS will specify the terms and conditions associated with each Application agreed to in the appropriate Application Development Plan, incorporated as addenda hereto. Such terms and conditions include but are not limited to: (1) billing/collection; (2) procedures for modifications to the Application Development Plan; (3) Application delivery deadlines; (4) acceptance criteria; (5) lab time requirements; (6) ongoing Application maintenance support; (7) joint marketing/sales arrangements, and (8) revenue projections. Any further Applications to be developed by TCS shall covered by a separate agreement between the parties


3. AGREEMENT


During the term of this Agreement, TCS and Lucent will have the respective rights and obligations set out in this Agreement.


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* Confidential materials submitted and filed separately with the Securities and Exchange Commission. Asterisk denotes omissions. 5 4. TERM


The term of this Agreement will commence, subject to execution by each party, on the Effective Date and will end two years from the Effective date, unless previously terminated in accordance with the provisions of this Agreement or extended by mutual consent of the parties.


5. TCS RESPONSIBILITIES


A. TCS shall design and develop two (2) Applications using the
SCE and SCN Lab Time for the A-I-Net SCN, as well as the
associated documentation for the Applications in accordance
with the following:


(i) Pursuant to the Application Development Plans jointly
developed between TCS and Lucent, TCS personnel shall
develop the Applications on TCS' premises and will be
supported by reasonable assistance from Lucent in the
areas of Application requirements refinement and test
plan coverage.


(ii) The completed Applications shall undergo acceptance
testing by: (1) *(2) *. Upon acceptance of the first
Application by Lucent, which acceptance shall not
unreasonably be withheld pursuant to satisfaction of
the Application acceptance criteria, TCS shall be
recognized by Lucent as an approved A-I-Net
Application Developer. TCS shall not represent or
imply to customers or others that Lucent is
certifying or in any way warranting that the
Applications will operate properly.


(III) TCS has the right to reject the first and second
Applications identified by Lucent based on TCS'
determination that said Application will not reach
mutually agreeable revenue thresholds within nine
(9) months of commencement of the Application
development or expand its overall knowledge of the
AIN Product Group; however, agreement on the
choice of Application shall not be unreasonably
withheld. Once TCS and Lucent have agreed upon an
Application and the associated Application
Development Plan,


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* Confidential Materials Submitted and filed separately with the Securities and Exchange Commission. Asterisk denotes omissions. 6
changes to the development of that Application by TCS
shall not be permitted without written consent from
Lucent. Where Lucent desires to change an Application
pursuant to this agreement, such change shall require
mutual written consent and an Application Development
Plan must be constructed for the new Application.


(iv) Lucent shall provide training for up to * TCS
personnel either at Lucent Training centers or
suitcased at TCS sites whichever Lucent deems
economical. For classes conducted at Lucent's sites,
Lucent offers to provide the recommended training
courses and seat allocation listed below. Lucent
waives the course fees on the allocated seats as
indicated. TCS will be responsible for the: 1) Travel
and living expenses of the trainees, 2) Differential
costs associated with class suitcasing (e.g. travel
and living for instructor etc.), 3) any additional
courses/training required beyond the listed courses
and seat allocation. The courses are non transferable
and must be completed during the term of this
Agreement. The following table identifies the
A-I-Net(R) courses required:


COURSE ID COURSE NAME SEATS
--------- ----------- -----
ES0713 SCN/SCP/SCE INTRODUCTION *
ES0714 SCN NODE OPERATION MAINTENANCE *
ES0718 SCN/SCP ENGINEERING *
ES0723 SCP - OPERATIONS AND MAINTENANCE *
ES0731 SCE PROGRAMMING *


(v) TCS shall dedicate at all times the equivalent of at
least * full time developers working on the
applications.


(vi) TCS shall deliver Source Code and related
documentation for two Applications to Lucent.


B. TCS shall complete design and development activities related
to the first Application within twelve (12) calendar months
from the mutually agreed upon Development Start Date. Any
changes to this delivery schedule shall be delineated in the
Application Development Plan. If TCS fails to develop the
first Application within twelve (12) months from the
Development Start Date Lucent


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* Confidential materials submitted and filed separately with the Securities and Exchange Commission. Asterisk denotes omissions. 7
may terminate this Agreement and TCS shall immediately return
the Software, Hardware not purchased but provided by Lucent,
and Documentation provided under this Agreement. TCS shall
forfeit all unused training offered and future revenues from
such first Application. Subject to termination of the
Agreement, Lucent and TCS may negotiate the delivery of any
work in progress on the first Application to Lucent at a
negotiated price.


C. If TCS has not completed development of the second Application
within twenty-four (24) months from the Effective Date, of
this Agreement Lucent may terminate this Agreement in which
case TCS shall immediately return the Software, Hardware not
purchased but provided by Lucent, and Documentation to Lucent
and forfeit all unused training offered and future revenues
from such second Application. Subject to termination of the
Agreement, Lucent and TCS may negotiate the delivery of any
work in progress on the second Application at a negotiated
price.


D. The terms and conditions by which Application software and
documentation versions and updates would be provided to Lucent
or a mutual customer shall be delineated in the Application
Development Plan.


E. Non-performance criteria, if any, placed upon TCS and Lucent
shall be specified as part of the Application Development
Plan. Incentives and penalties, if any, placed upon TCS and
Lucent associated with Application delivery and sales shall
also be specified as part of the Application Development Plan.


F. TCS will be responsible for warranty and ongoing maintenance
support on the Applications developed pursuant to this
Agreement with terms and conditions reflected in the
appropriate Application Development Plan. In any case that
this may not apply, the terms and conditions shall be agreed
upon and specified in the Application Development Plan.


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* Confidential materials submitted and filed separately with the Securities and Exchange Commission. Asterisk denotes omissions. 8 6. LUCENT RESPONSIBILITIES


A. Pursuant to the terms of this Agreement, Lucent shall provide
one (1) copy of the SCE to include the required number of SCE
Tokens as specified in the Application Development Plan, a
Compile Server and related SCE Documentation; (2) SCN Lab Time
which shall be identified in each Application Development
Plan; (3) all SCE Updates and new SCE Releases with
appropriate Documentation during the term of this Agreement,
and (4) Other Documentation relevant to the AIN Products
Group, including updates and releases. Lucent shall also
provide engineering and installation services for the SCE as
requested by TCS upon terms and conditions to be agreed upon
by the parties at the time of such request.


B. For each Application provided by this Agreement, Lucent will
support TCS's Application development efforts by providing a
"hotline" consultative service from its customer support
organizations in accordance with Lucent's then current
offerings *. The duration of the * will be mutually agreed
upon based on the complexity of the Application and will be
specified in the Application Development Plan. For
Consultation hours in excess of the specified duration, TCS
will be charged at a *. The consultancy service will answer
questions concerning the SCN Platform, Service Creation
Environment, language support for SLL, SPA architecture,
design guidelines and SPA debugging support. In addition to
the consultancy services, Lucent will provide TCS with
technical reviewers on requirements definition and test plan
coverage.


C. Lucent shall upon its acceptance of the first Application, in
good faith, promote TCS as an approved A-T-Net Applications
developer, the extent of such promotion to be determined at
Lucent's sole discretion.


D. Lucent shall deliver the SCE to TCS and provide telephone
assistance during installation as needed.


E. Lucent shall bill, collect and distribute the Revenues from
the first and second Applications developed pursuant to this
Agreement in accordance with a mutually agreed upon
billing/collection and Revenue distribution plan between TCS
and Lucent. Such billing/ collection and Revenue terms and
conditions for each Application will be established for each
Application in the appropriate Application Development Plan.


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* Confidential materials submitted and filed separately with the Securities and Exchange Commission. Asterisk denotes omissions. 9


F. Lucent Revenue distributions to TCS shall be executed no later
than thirty (30) days after Lucent invoices the customer.


G. Lucent shall provide TCS with SCN Lab Time during the
development phase of the Application as specified in the
Application Development Plan. Lucent agrees to waive the fees
associated with the development and testing of each
Application pursuant to this agreement. The Lab Time will be
allocated to TCS according to the prevailing allocation
practices. After the acceptance of the Application by Lucent,
SCN Lab Time used by TCS for the support and maintenance of
the Application will be charged to TCS at a mutually agreed
upon rate.


7. USE OF TRADEMARKS


A. TCS and Lucent shall cooperate with each other in preparing
materials to promote the Applications developed hereunder,
including, but not limited to, brochures, slides, and other
presentation materials.


B. Neither party will, without the other's express written
permission, use in marketing, advertising, publicity, or
otherwise any trade name, trademark, trade device, service
mark, symbol, code, or specification or any abbreviation,
contraction, or simulation thereof ("Mark") of the other
party. Nor shall a party claim any ownership therein. The
parties shall not remove, deface, alter or otherwise obscure
any Mark of the other party or their Affiliated companies
which is on Products sold and/or licensed under this
Agreement; nor shall the parties place any Mark of any other
company on any such Products. Any such usage shall inure to
the benefit of the Mark owner.


C. Notwithstanding Subsection B immediately above, both parties
may use the name of the other party


9


* Confidential materials submitted and filed separately with the Securities and Exchange Commission. Asterisk denotes omissions. 10
in its promotional materials to make factually correct
statements for the purpose of informing the purchasing public
that TCS Applications developed pursuant to this agreement are
compatible with Products. TCS understands that it may not use
the Mark "Lucent" to identify its Applications or to suggest
that the source of such Applications is Lucent. In order to
ensure that either party's promotional materials use the name
of the other party in a factually correct way and in keeping
with each party's reputation, both parties agree to submit all
such materials to each other for approval prior to use and
both parties further agree not to use the Mark of the other
party on any materials for which it does not have written
approval from the other party. If either party, in its sole
discretion, believes that the other is misusing its Mark, that
party reserves the right to withdraw all permission to use its
Mark upon written notice to the other party.


D. In consideration of the mutual benefits anticipated from a
successful relationship, each party shall bear its own
respective costs and expenses incurred in marketing the
Applications, any future Applications and related services
except as otherwise agreed in this Agreement.


B. SOFTWARE WARRANTY


A. Lucent warrants to TCS only, that Software provided by Lucent
will substantially conform to Lucent specifications referenced
in the order and Lucent further warrants that it has the right
to grant the licenses to Use Software it grants under this
Agreement.


B. Lucent makes no warranty with respect to defective conditions
or nonconformities resulting from the following: TCS
modifications, misuse, neglect, or accident; events outside
Lucent's control; use, or maintenance in a manner not in
accordance with Lucent's specifications, operating
instructions, or license-to-use; or failure of TCS to apply
previously applicable Lucent modifications and corrections. In
addition, Lucent makes no warranty with respect to defects
related to TCS' data base errors. Moreover, no warranty is
made that Software will run error free or without
interruption.


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* Confidential materials submitted and filed separately with the Securities and Exchange Commission. Asterisk denotes omissions. 11
C. THE FOREGOING SOFTWARE WARRANTIES ARE EXCLUSIVE AND ARE IN
LIEU OF ALL OTHER EXPRESS AND IMPLIED WARRANTIES, INCLUDING
BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE. TCS' SOLE AND EXCLUSIVE REMEDY SHALL
BE LUCENT'S OBLIGATION TO CORRECT OR REPLACE DEFECTIVE
SOFTWARE.


9. TITLE/RISK OF LOSS


Title to Software and Hardware shall not pass to TCS, but shall remain with Lucent or its vendors, as the case may be. Risk of loss to the Software and Hardware shall pass upon delivery.


10. OWNERSHIP OF FURTHER APPLICATIONS


It is the intent of the parties that further Applications developed beyond the first two Applications under this Agreement shall be the property of the developer (TCS or Lucent, as the case may be) unless mutually agreed otherwise in writing. Notwithstanding any other provision in this Agreement, TCS and Lucent retain all in and to any and all software, software development tools, know how, methodologies, processes, technologies or algorithms used in providing services under this Agreement or under any other agreement which are based upon trade secrets or proprietary information of TCS or Lucent, respectively, or otherwise owned or licensed by TCS or Lucent.


11. PATENTS, TRADEMARKS, AND COPYRIGHTS


In the event of any claim, action, proceeding or suit by a third party against TCS alleging an infringement of any United States patent, United States copyright, or United States trademark, or a violation in the United States of any trade secret or proprietary rights by reason of the use, in accordance with Lucent's specifications, of any Software furnished by Lucent to TCS under this Agreemen ...