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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 18, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SYNCHRONICITY, INC. OF MASSACHUSETTS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 7372 04-3294799
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
201 FOREST STREET
MARLBORO, MA 01752
(508) 485-4122
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
DENNIS R. HARMON
CHIEF EXECUTIVE OFFICER
SYNCHRONICITY, INC. OF MASSACHUSETTS
201 FOREST STREET
MARLBORO, MA 01752
(508) 485-4122
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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COPIES TO:
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LINDA DE RENZO, ESQ. MARTIN CARMICHAEL III, P.C.
TESTA, HURWITZ & THIBEAULT, LLP GOODWIN, PROCTER & HOAR LLP
125 HIGH STREET EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02110 BOSTON, MASSACHUSETTS 02109
TELEPHONE: (617) 248-7000 TELEPHONE: (617) 570-1000
TELECOPY: (617) 248-7100 TELECOPY: (617) 523-1231
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date hereof.
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,
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, 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,
check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF SECURITIES PROPOSED MAXIMUM
TO BE REGISTERED AGGREGATE OFFERING PRICE(1) AMOUNT OF REGISTRATION FEE
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Common Stock, $0.01 par value per share................... $51,750,000 $13,662
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(1) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(o) under the Securities Act of
1933, as amended.
------------------------
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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. ALTHOUGH WE
ARE PERMITTED BY US FEDERAL SECURITIES LAW TO OFFER THESE SECURITIES USING
THIS PROSPECTUS, WE MAY NOT SELL THEM OR ACCEPT YOUR OFFER TO BUY THEM
UNTIL THE DOCUMENTATION FILED WITH THE SEC RELATING TO THESE SECURITIES
HAS BEEN DECLARED EFFECTIVE BY THE SEC. THIS PROSPECTUS IS NOT AN OFFER TO
SELL THESE SECURITIES OR OUR SOLICITATION OF YOUR OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THAT WOULD NOT BE PERMITTED OR LEGAL.
SUBJECT TO COMPLETION, DATED FEBRUARY 18, 2000
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PROSPECTUS
, 2000
[SYNCHRONICITY LOGO]
SHARES OF COMMON STOCK
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SYNCHRONICITY, INC. OF MASSACHUSETTS:
-- We provide internet-based software products that enable enterprise-wide and
business-to-business collaboration among participants in electronic product
development supply chains.
-- Synchronicity, Inc. of Massachusetts
201 Forest Street
Marlboro, Massachusetts 01752
(508) 485-4122
PROPOSED SYMBOL AND MARKET:
-- SNCY/Nasdaq National Market
THE OFFERING:
-- We are offering shares of our common stock.
-- The underwriters have an option to purchase up to
additional shares from Synchronicity to cover over-
allotments.
-- This is the initial public offering of our common stock.
-- We plan to use the proceeds from this offering for working capital and
other general corporate purposes.
-- Closing: , 2000
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PER SHARE TOTAL
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Public offering price: $ $
Underwriting fees:
Proceeds to Synchronicity:
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THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 5.
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Neither the SEC nor any state securities commission has determined whether this
prospectus is truthful or complete. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
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DONALDSON, LUFKIN & JENRETTE
ROBERTSON STEPHENS
DAIN RAUSCHER WESSELS
DLJdirect INC.
<PAGE> 3
TABLE OF CONTENTS
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PAGE
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Prospectus Summary................ 1
Risk Factors...................... 5
Special Note Regarding Forward-
Looking Statements; Market
Data............................ 18
Use of Proceeds................... 19
Dividend Policy................... 19
Corporate Information............. 19
Capitalization.................... 20
Dilution.......................... 21
Selected Financial Data........... 22
Management's Discussion and
Analysis of Financial Condition
and Results of Operations....... 23
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PAGE
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Business.......................... 33
Management........................ 48
Certain Relationships and Related
Transactions.................... 58
Principal Stockholders............ 59
Description of Capital Stock...... 61
Shares Eligible for Future Sale... 64
Underwriting...................... 66
Legal Matters..................... 68
Experts........................... 68
Where You Can Find More
Information..................... 68
Index to Financial Statements..... F-1
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PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information in this prospectus, including risk factors, regarding our company
and the common stock being sold in this offering.
THE COMPANY
We provide internet-based software products that enable enterprise-wide and
business-to-business collaboration among participants in electronic product
development supply chains. Our products are currently used by firms engaged in
the development of semiconductors and other electronic products. We believe that
our products enable companies to develop feature-rich, complex products at lower
cost and in less time. Since October 1997, when we shipped our first product, we
have licensed our products to approximately 50 companies worldwide, including
eight of the ten largest semiconductor companies.
The growth of the new digital economy has been fueled in large part by the
rapid development of new complex semiconductors, microelectronics and other
electronic products, which are essential to an increasing number of products
ranging from computers and mobile phones to personal digital assistants and
pagers. According to the Semiconductor Industry Association, the semiconductor
segment of the electronics industry alone was $140.8 billion in 1999.
Competition within the electronics industry has become more intense and has
expanded globally. In order to compete successfully, suppliers of electronic
products must develop complex, high quality, feature-rich products at a lower
cost and more quickly than their competitors. The competitive environment and
the increasing complexity of electronic products have compelled companies to
shift from traditional in-house product development processes to the outsourcing
of specialized design tasks. As a result, development teams are quickly evolving
into product development supply chains, often including many engineers from
different departments in a company as well as outside sources of specialized
design expertise. In addition, as the electronic development process has become
more design-specialized and reliant on outsourcing, companies have increasingly
utilized intellectual property (IP) cores, design elements that are frequently
reused within electronic product designs. The practice of design reuse allows
companies to focus on their primary design expertise and to shorten product
development cycles.
While the outsourcing of design tasks and the implementation of design
reuse practices enable companies to get to market quickly with reliable,
cost-effective products, electronic product development teams and their supply
chains face growing challenges including promoting and managing supply chain
collaboration, managing complex design iterations and coordinating the reuse of
intellectual property.
We have designed our products to address these new challenges confronting
participants in the electronic product development process. Our products create
an environment in which all members of an electronic product development supply
chain may collaborate as a single virtual project team. When using our products,
a virtual project team can function within a secure, internet-based environment
regardless of the corporate affiliation or geographic location of its members.
We have designed our products to handle the large volumes of simultaneous and
interactive changes which occur to design information during the development
process. Our products also enable and encourage design reuse and the use of
third-party IP cores. This allows companies to focus on their core competencies
while decreasing their development costs and time-to-market. In addition, our
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products are designed to integrate with and complement existing design tools and
preserve our customers' existing investments in technology.
We intend to be the leading provider of solutions that enable
enterprise-wide and business-to-business collaboration within complex product
development supply chains. Key elements of our growth strategy include enhancing
the functionality of supply chain collaboration, leveraging our installed
customer base and increasing the proliferation of our products through network
effects. We also aim to expand our strategic relationships, pursue additional
market opportunities and extend our global presence. While our software is
currently used in the development of electronic products, we believe that it may
be equally useful in the development of other complex products.
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THE OFFERING
Common stock offered.......... shares
Common stock to be outstanding
after the offering.......... shares
Use of proceeds............... We intend to use the net proceeds for working
capital and other general corporate purposes.
See "Use of Proceeds."
Proposed Nasdaq National
Market symbol............... SNCY
The number of shares of common stock to be outstanding after the offering
is based on the number of shares outstanding on February 16, 2000. This number
does not include:
- 1,360,598 shares of common stock issuable upon the exercise of stock
options outstanding on February 16, 2000 with a weighted average exercise
price of $0.85 per share;
- 150,000 shares of common stock issuable upon the exercise of a warrant
outstanding on February 16, 2000 with an exercise price of $4.30 per
share; or
- an aggregate of 783,745 shares reserved as of February 16, 2000 for
future stock option grants and purchases under our equity compensation
plans.
Except as otherwise noted, all information in this prospectus:
- reflects the automatic conversion of all of our outstanding shares of
convertible preferred stock into an aggregate of 7,021,002 shares of
common stock upon completion of the offering;
- reflects the effectiveness upon completion of the offering of our second
amended and restated certificate of incorporation, which sets the
authorized number of shares of common stock at 90,000,000 and sets the
authorized number of shares of preferred stock at 5,000,000; and
- assumes no exercise of the underwriters' over-allotment option.
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SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Set forth below are summary statements of operations data for the years
ended December 31, 1997, 1998 and 1999 and summary balance sheet data as of
December 31, 1999:
-- on an actual basis;
-- with respect to the statement of operations data, unaudited pro forma
basic and diluted net loss per share have been calculated assuming the
conversion of all outstanding shares of our convertible preferred
stock into shares of common stock, as if the shares had converted
immediately upon issuance; and
-- with respect to the balance sheet data, on a pro forma as adjusted
basis to give effect to the conversion of our convertible preferred
stock upon the consummation of this offering, our sale of
shares of common stock in this offering at an assumed
initial public offering price of $ per share, after deducting the
estimated underwriting discounts and commissions and offering expenses
payable by us, and the receipt of the net proceeds from this offering.
This information should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this prospectus. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
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YEAR ENDED DECEMBER 31,
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1997 1998 1999
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................................ $ 660 $ 1,809 $ 7,447
Gross profit........................................ 568 1,496 6,405
Loss from operations................................ (2,850) (4,073) (4,774)
Net loss............................................ (2,780) (3,948) (4,639)
Basic and diluted net loss per share................ $ (0.86) $ (1.21) $ (1.39)
Basic and diluted weighted average common shares
outstanding...................................... 3,247 3,284 3,372
Pro forma basic and diluted net loss per share...... $ (0.45)
Pro forma basic and diluted weighted average common
shares outstanding............................... 10,393
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AS OF DECEMBER 31, 1999
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PRO FORMA
ACTUAL AS ADJUSTED
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 3,652 $
Working capital........................................... 1,937
Total assets.............................................. 8,758
Redeemable convertible preferred stock.................... 12,483
Stockholders' equity (deficiency)......................... (9,631)
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RISK FACTORS
You should carefully consider the following risks before making an
investment decision. Our business, operating results and financial condition
could be adversely affected by any of the following risks. The risks described
below are not the only ones that we face. Additional risks and uncertainties
including those that are not yet identified or that we currently think are
immaterial may also adversely affect our business, results of operations and
financial condition. The trading price of our common stock could decline due to
any of these risks, and you could lose all or part of your investment. You
should also refer to the other information set forth in this prospectus,
including our financial statements and the related notes.
RISKS RELATED TO OUR OPERATIONS
OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT TO EVALUATE OUR BUSINESS AND
PROSPECTS.
We are still in the early stages of our development, therefore evaluating
our business operations and our prospects is difficult. We incorporated in 1996
and shipped our first product in October 1997. The revenues and income potential
of our business and markets are unproven. We will encounter risks and challenges
frequently encountered by early-stage companies in new and rapidly evolving
markets. These challenges include the following:
- we need to increase sales to achieve profitability, requiring us to sell
additional software licenses to our existing customers, expand our
customer base and expand our international operations;
- we need to expand our sales and marketing, customer support and
professional services organizations;
- we need to successfully introduce and promote new products and to enhance
our existing products;
- we need to maintain strategic relationships and build new ones; and
- we need to effectively manage our anticipated growth, which could lead to
management distractions and increased operating expenses, and will
require us to attract and retain key personnel.
Our business strategy may not be successful and we may not be able to
successfully address these risks. In addition, because of our limited operating
history, we have limited insight into trends that may emerge and affect our
business.
WE EXPECT TO INCUR LOSSES IN THE FUTURE.
We incurred net losses of approximately $2.8 million in 1997, $3.9 million
in 1998, and $4.6 million in 1999. As of December 31, 1999, we had an
accumulated deficit of approximately $12.5 million. Moreover, we expect to
continue to incur significant sales and marketing, research and development and
general and administrative expenses. We expect to incur losses for the
foreseeable future and cannot be certain if or when we will achieve
profitability. Even if we do achieve profitability, we may not be able to
sustain or increase profitability on a quarterly or annual basis in the future.
See "Selected Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our financial statements and
related notes for more detailed information about our operating results.
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OUR OPERATING RESULTS MAY FLUCTUATE ON A QUARTERLY BASIS AND FAIL TO MEET THE
EXPECTATIONS OF ANALYSTS OR INVESTORS, WHICH MAY NEGATIVELY IMPACT OUR STOCK
PRICE.
Our quarterly operating results have varied significantly in the past and
are likely to vary significantly in the future. This makes it difficult for us
to predict our future operating results. Fluctuations in our quarterly results
may be caused by a number of factors, including the following:
- fluctuations in demand for electronic product development software;
- size and timing of sales of our products;
- entry of new competitors into our market, or the announcement of new
products or product enhancements by competitors;
- our ability to successfully retain and expand our direct sales force and
our international sales organization;
- unexpected delays in developing or introducing new and enhanced products;
- unexpected declines in purchases by our existing customers;
- variability in the mix of our software licenses and services revenues;
- our ability to establish and maintain relationships with our third-party
partners; and
- general economic conditions.
Our software license revenues in any quarter can be difficult to forecast
because they depend on orders delivered in that quarter. Moreover, we typically
recognize a majority of our quarterly revenues in the last month of each
quarter. This disproportionate amount of revenues earned in the last month of
each quarter is driven by customer buying patterns. A high percentage of our
operating expenses are essentially fixed in the short term and we may be unable
to adjust spending to compensate for unexpected shortfalls in our revenues.
In addition, we expect our operating expenses to increase as we take the
following steps:
- expand our engineering and sales and marketing operations;
- broaden our customer support capabilities;
- develop new distribution channels and strategic alliances;
- fund increased levels of research and development; and
- build our operational infrastructure.
As a result, if we experience delays in recognizing revenue, or if our revenues
do not grow faster than our expenses, we could experience significant variations
in operating results from quarter to quarter. If, in response to market
pressures or other demands, we introduce new pricing structures for our existing
products, we could experience customer dissatisfaction and loss of sales. In
addition, if we introduce products that are sold in a manner different from how
we currently sell our products, we could recognize revenue differently than
under our current accounting policies. Depending on the manner in which we sell
existing or future products, this could have the effect of extending the length
of time over which we recognize revenues. Furthermore, our quarterly revenues
could be significantly affected by any future amendment or interpretation of
applicable accounting standards.
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Due to these and other factors, we believe that period-to-period
comparisons of our results of operations may not be meaningful and should not be
relied upon as indicators of our future performance. It is possible that in some
future periods our results of operations may be below the expectations of public
market analysts and investors. If this occurs, the price of our common stock may
decline. See "Selected Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our financial statements and
related notes for more detailed information about our operating results.
A SIGNIFICANT PORTION OF OUR REVENUES HAS BEEN DERIVED FROM A RELATIVELY SMALL
NUMBER OF CUSTOMERS. IF WE LOSE A MAJOR CUSTOMER OUR REVENUES COULD
SIGNIFICANTLY DECLINE.
We have derived a significant portion of our revenues from a relatively
small number of customers. Five customers individually accounted for 37.9%,
18.9%, 13.6%, 12.9 % and 11.4% of our total revenues in 1997. We had three
customers that individually accounted for 20.6%, 14.6% and 13.9% of our total
revenues in 1998 and one customer that accounted for 11.8% of our total revenues
in 1999. Although we believe that our customer concentration will decrease as we
continue to build our customer base, we expect that certain customers may
continue to account for a significant portion of revenues in the near term. As a
result, the loss of any one major customer or our inability to secure additional
customers in a given period could have an adverse effect on our business and
results of operations.
THE MARKET FOR OUR PRODUCTS IS EMERGING AND CUSTOMERS MAY NOT ACCEPT OUR
PRODUCTS.
The market for our products is emerging. We cannot be certain that this
market will continue to develop and grow or that companies will elect to use our
products rather than attempt to develop applications internally or through other
sources. In addition, the use of the internet, as well as corporate intranets,
has not yet been widely adopted for sharing product or design information or
collaborating on development projects. Companies that have already invested
substantial resources in other methods of collaborating during the development
process may be reluctant to adopt a new approach that would replace, limit, or
compete with their existing systems or methods. We intend to continue to pursue
intensive marketing and sales efforts to educate prospective customers about the
uses and benefits of our products. These efforts may not be successful.
Therefore, demand for and market acceptance of our products is subject to a high
level of uncertainty.
COMPETITION AMONG PROVIDERS OF SOFTWARE THAT IS COMPARABLE TO OURS MAY
INCREASE. THIS COULD CAUSE US TO REDUCE PRICES AND RESULT IN REDUCED REVENUES
OR LOSS OF MARKET SHARE.
The market for products that enable enterprise-wide and
business-to-business collaboration within electronic product development supply
chains through the internet is new, rapidly changing and increasingly
competitive. We expect that competition in this market will emerge and
intensify, and that new competitors may emerge to address the electronic product
development market specifically. This could result in price reductions, reduced
revenues and loss of market share. We believe that our primary current source of
competition is in-house development efforts by potential customers. In the
future, we may face potential competition from providers of configuration
management software and product data management software.
Some of our potential competitors may have a number of significant
advantages over us, including:
- longer operating histories;
- significantly greater financial, technical and marketing resources;
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- significantly greater name recognition and more extensive customer bases;
and
- established cooperative relationships among themselves or with third
parties.
These potential competitors may also be able to devote greater resources to
the development, promotion and sale of their products, than we can. Some of our
potential competitors have greater name recognition and more extensive customer
bases that could be leveraged to gain market share to our detriment.
Accordingly, we may not be able to maintain or increase our revenues if
competition increases and we are unable to respond effectively. See
"Business -- Competition" for further discussion of the competitive market in
which we operate.
IF WE DO NOT EXPAND THE NUMBER OF LICENSES AND ADD ENHANCED VERSIONS AND
UPDATES TO PRODUCTS USED BY OUR EXISTING CUSTOMERS, WE MAY NOT ACHIEVE GROWTH
IN OUR REVENUES.
The size of a customer's initial order is typically relatively small and
may include a limited number of user licenses. We have found that in later
orders, customers often purchase additional user licenses or new products which
significantly contribute to our revenues. In order to increase our revenues, we
depend on existing customers purchasing licenses for additional users as well as
sales of new licenses to new customers. Therefore, it is important that our
customers are satisfied with their initial product deployments and that they
believe that expanded use of our products will provide them with additional
benefits. Customers may choose not to purchase any new products or expand the
use of our products. If we do not increase sales to existing customers, we may
not be able to achieve revenue growth.
WE MAY EXPERIENCE DIFFICULTIES IN INTRODUCING NEW PRODUCTS AND UPDATES WHICH
COULD RESULT IN NEGATIVE PUBLICITY, LOSS OF SALES, DELAY IN MARKET ACCEPTANCE
OR CUSTOMER DISSATISFACTION.
Our future financial performance depends on our successful and timely
development, introduction and market acceptance of new and enhanced products. We
find it difficult to predict the life cycles of our products because the market
for our products is new and emerging and is characterized by rapid technological
change, changing customer needs and evolving industry standards. The
introduction of products or computer systems employing new technologies and
emerging industry standards could render our existing products obsolete and
unmarketable. The introduction of enhancements to our products may also cause
customers to defer orders for our existing products. We may experience
difficulties that could delay or prevent the successful development,
introduction or marketing of new or enhanced products in the future. In
addition, those products may not meet the requirements of the marketplace or
achieve market acceptance. We expect to introduce new products through internal
development or by acquisition and by developing enhancements to our existing
products. New products or updates may not be released according to schedule
which could result in negative publicity, loss of sales, delay in market
acceptance of our products, or customer claims against us.
DEPLOYMENT OF OUR PRODUCTS MAY BE COMPLEX, DIFFICULT, COSTLY OR
TIME-CONSUMING, CAUSING OUR CUSTOMERS TO BE DISSATISFIED.
Successful deployment of our products on our customers' existing computer
network configurations and hardware may be difficult, costly or time-consuming.
Because we are one of the first companies to offer products designed for
managing the development of electronic products, some customers may face these
deployment issues for the first time in the context of collaborating both
internally and externally with electronic product development supply chain
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partners. Customers could become dissatisfied with our products if deployments
prove to be difficult, costly or time-consuming.
WE MAY EXPERIENCE CUSTOMER DISSATISFACTION AND LOST SALES IF OUR PRODUCTS DO
NOT SCALE TO ACCOMMODATE SUBSTANTIAL INCREASES IN THE NUMBER OF CONCURRENT
USERS.
Our strategy requires that our software be highly scalable. While we have
performed product testing on the scalability of our products, the limits of
scalability have not been tested in the context of a customer deployment. If our
customers cannot successfully implement large-scale deployments, we may
experience customer dissatisfaction and find it more difficult to obtain new
customers or to sell additional products to our existing customers.
DEFECTS IN OUR SOFTWARE PRODUCTS COULD DIMINISH DEMAND FOR OUR PRODUCTS.
Our software products are complex and may contain errors that may be
detected at any point in the life of the product. We have in the past discovered
software errors in certain of our products, and as a result, have experienced
delays in shipment of products during the period required to correct these
errors. We cannot assure you that, despite testing by us, our partners and our
customers, errors will not be found in new products or releases after shipment.
Discovery of any errors may result in:
- loss of revenue;
- delay in market acceptance and sales;
- diversion of development resources;
- injury to our reputation; and
- increased service demands.
In addition, our products are generally used in systems with other vendors'
products, and as a result, our products must function successfully with these
existing systems. System errors, whether caused by our products or those of
another vendor, could adversely affect the market acceptance of our products,
and any necessary revisions could cause us to incur significant expenses.
IF WE BECOME SUBJECT TO PRODUCT LIABILITY LITIGATION, IT COULD BE TIME
CONSUMING AND COSTLY TO DEFEND.
Since our products are used for mission-critical applications in the
electronic product development supply chain, errors, defects or other
performance problems could result in financial or other damages to our
customers. For example, our products are designed to communicate information
relating to changes in product specifications during the development process. If
a developer or other participant receives inaccurate or erroneous data, a
customer could claim that it incurred damages based on its reliance on that
data. Although our license agreements generally contain provisions designed to
limit our exposure to product liability litigation, existing or future laws or
unfavorable judicial decisions could negate such limitation of liability
provisions. Product liability litigation, even if unsuccessful, would be
time-consuming and costly to defend and could harm our business and reputation.
OUR PRODUCTS MIGHT NOT BE COMPATIBLE WITH ALL MAJOR PLATFORMS, WHICH COULD
INHIBIT SALES.
We must continually modify and enhance our products to keep pace with
changes in computer hardware and software technology, as well as emerging
technical standards in the software industry.
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For example, we have designed our products to be compatible with specific
databases and servers such as Microsoft's Internet Information Server. Any
future changes to these platforms could require us to modify our products, and
could cause us to delay releasing a product until the updated version of that
platform has been released.
Furthermore, third parties may develop tools to integrate our products with
other design tools used by our customers. We would then rely on these third
parties to update such tools to reflect changes to our products as well as to
the targeted platform in order to maintain the functionality provided by our
products. As a result, uncertainties related to the timing and nature of new
product announcements, introductions or modifications by vendors of operating
systems and browsers and other internet-related applications could hurt our
business, as customers may not be certain how our products will operate with
their existing systems. Furthermore, some of our products do not run on certain
types of computers. If another platform becomes more widely used, we could be
required to convert our product to that platform. If we do not succeed in making
our products compatible with other platforms, potential customers may not choose
our products.
OUR LENGTHY AND VARIABLE SALES CYCLE MAKES IT DIFFICULT FOR US TO PREDICT WHEN
OR IF SALES WILL BE MADE.
Our products have an unpredictable sales cycle that contributes to the
uncertainty of our future operating results. Our customers often view the
purchase of our products as a significant and strategic decision. As a result,
customers often take time to evaluate our products, resulting in a sales cycle
that has historically ranged from approximately four to seven months. The sale
of our products may be subject to delays due to the lengthy internal budgeting,
approval and evaluation processes of our customers. We may expend significant
sales and marketing expenses during this evaluation period before the customer
places an order with us. Larger customers may purchase our products as part of
multiple simultaneous purchasing decisions, which may result in additional
unplanned administrative processing and other delays in our sales cycle. As a
result, we have only a limited ability to forecast the timing and size of sales
of our products. If sales forecasted for a specific customer for a particular
quarter are not realized, we may experience an unplanned shortfall in revenues.
THE SUCCESS OF OUR BUSINESS DEPENDS ON OUR KEY SENIOR MANAGEMENT, WHOSE
KNOWLEDGE OF OUR BUSINESS AND EXPERTISE WOULD BE DIFFICULT TO REPLACE.
Our success depends largely on the continued contributions of our key
senior management. We have key-man life insurance on certain of our executive
officers. None of our officers, including our founders, has employment
agreements. If one or more members of our senior management were to terminate
their employment, this could result in delays to product development, loss of
sales, and diversion of management resources.
BECAUSE OF COMPETITION FOR ADDITIONAL QUALIFIED PERSONNEL, WE MAY NOT BE ABLE
TO RECRUIT OR RETAIN NECESSARY PERSONNEL, WHICH COULD IMPACT DEVELOPMENT OR
SALES OF OUR PRODUCTS.
Our success depends on our ability to attract and retain qualified,
experienced employees. We currently face a shortage of engineering personnel and
substantial competition for experienced engineering, sales and marketing
personnel in our industry. If we are unable to retain our existing engineering
personnel, or attract and retain additional engineering personnel, our growth
could be limited due to our lack of capacity to develop our products, possible
deterioration in service levels or decreased customer satisfaction.
10
<PAGE> 14
We currently sell our products primarily through our direct sales force. It
takes time for our new sales personnel to become productive, particularly our
senior sales and services personnel who can take up to six months to become
fully productive. If we are unable to hire or retain qualified sales personnel,
or if newly hired personnel fail to develop necessary skills or productivity it
will be difficult for us to sell our products and we may experience a shortfall
in revenues.
IF WE ARE UNABLE TO CONTINUE TO EXPAND OUR INTERNATIONAL OPERATIONS, WE MAY
NOT ACHIEVE ANTICIPATED REVENUE GROWTH.
We believe that expansion of our international operations will be necessary
for our future success. Therefore, we believe that we will need to continue to
commit significant resources to expand our international operations. If we are
unable to successfully enter into and expand our presence in international
markets on a timely basis, we may not be able to achieve anticipated revenue
growth. This expansion may be more difficult or take longer than we anticipate,
and we may not be able to successfully market, sell, deliver and support our
products internationally.
In connection with our international expansion, we are subject to a number
of risks associated with international business activities. These risks include:
- difficulty in providing customer support for our software in multiple
time zones;
- greater difficulty in collecting accounts receivable from customers
located abroad;
- political and economic instability;
- difficulties in enforcing agreements through foreign legal systems; and
- unexpected changes in regulatory requirements.
To date, our revenues have been denominated in United States dollars. If we
recognize revenues denominated in foreign currencies, we may incur greater risks
in currency fluctuations. In the future, our European revenues could be
denominated in the Euro, the currency of the European Union. The Euro is an
untested currency and may be subject to economic risks that are not currently
contemplated. We currently do not engage in foreign exchange hedging activities,
and therefore our international expenses are currently subject to the risks of
foreign currency fluctuations.
IN ORDER TO MANAGE OUR GROWTH AND EXPANSION, WE WILL NEED TO IMPROVE AND
IMPLEMENT NEW SYSTEMS, PROCEDURES AND CONTROLS.
We have recently experienced a period of rapid growth and expansion that
has placed a significant strain on our management information systems and our
administrative, operational and financial resources. If we are unable to manage
our growth and expansion in an efficient or timely manner, our business may be
harmed. In addition, we have recently hired a significant number of employees
and plan to further increase our total headcount. We also plan to expand the
geographic scope of our operations. This expansion has resulted and will
continue to result in substantial demands on our management resources. To
accommodate continued anticipated growth and expansion, we will be required to:
- improve existing and implement new operational and financial systems,
procedures and controls;
- recruit, reward and retain qualified personnel; and
- enter into relationships with strategic partners.
11
<PAGE> 15
These measures may place additional burdens on our management and our internal
resources.
WE DEPEND ON TECHNOLOGY LICENSED FROM THIRD PARTIES AND THE LOSS OF, OR
INABILITY TO MAINTAIN, THESE TECHNOLOGY LICENSES COULD RESULT IN INCREASED
COST OR DELAYS IN SALES OF OUR PRODUCTS.
We license technology on a non-exclusive basis from several businesses for
use with our products, including licenses from RSA Security, Inc. for security
and encryption technology software, DuraSoft GmbH for revision control and
Bristol Technology, Inc. for platform portability. We expect to continue to
license technology from third parties in the future. Some of the software we
license from third parties would be difficult to replace. This software may not
continue to be available on commercially reasonable terms, if at all. The loss
of, or inability to maintain, any of these technology licenses could result in
delays in the licensing of our products until equivalent technology, if
available, is identified, licensed and integrated. In addition, the effective
deployment of our products depends upon the successful operation of products
licensed from third parties in conjunction with our products. Any undetected
errors in these licensed products may prevent the implementation or impair the
functionality of our products, delay new product introductions or injure our
reputation. The use of additional third-party software could require us to enter
into license agreements, which could result in royalty payments.
IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY WE MAY LOSE A VALUABLE
ASSET OR INCUR COSTLY LITIGATION TO PROTECT OUR RIGHTS.
Our success and ability to compete depend upon our intellectual property,
including our brands and the technology underlying our products. We rely on
trademark, trade secret and copyright laws to protect our intellectual property.
Despite our efforts to protect our intellectual property, a third party could
copy or otherwise obtain our software or other proprietary information without
authorization. Our means of protecting our proprietary rights may not be
adequate and our competitors may independently develop similar technology, or
duplicate our products or our other intellectual property. In addition, the laws
of some foreign countries do not protect our proprietary rights to as great an
extent as do the laws of the United States, and we expect that it will become
more difficult to monitor the use of our products if we increase our
international presence. We may have to resort to litigation to enforce our
intellectual property rights, to protect our trade secrets or know-how or to
determine their scope, validity or enforceability. Enforcing or defending our
proprietary technology is expensive, could cause the diversion of our resources,
and may not prove successful. Our protective measures may prove inadequate to
protect our proprietary rights, and any failure to enforce or protect our rights
could cause us to lose a valuable asset.
WE MAY BE SUBJECT TO INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS THAT, WITH OR
WITHOUT MERIT, COULD BE COSTLY TO DEFEND OR SETTLE.
We may be subject to claims of infringement of other parties' proprietary
rights, or claims that our own intellectual property rights are invalid. There
has been a substantial amount of litigation in the software and internet
industries regarding intellectual property rights. We expect that software
product developers and providers of electronic commerce solutions will
increasingly be subject to infringement claims as the number of products and
competitors in our industry segment grows and the functionality of products in
industry segments overlaps. It is possible that third parties may claim that we
or our current or potential future products infringe their intellectual
property. Any infringement claims made against us, with or without merit, could
be time-consuming, result in costly litigation, or cause product shipment delays
or negative publicity. In addition, if our products
12
<PAGE> 16
were found to infringe a third party's proprietary rights, we could be required
to enter into royalty or licensing agreements in order to continue to be able to
sell our products. Royalty or licensing agreements, if required, may not be
available on terms acceptable to us or at all.
YEAR 2000 COMPLIANCE COSTS AND RISKS ARE DIFFICULT TO ASSESS AND COULD RESULT
IN DELAY OR LOSS OF REVENUE, DIVERSION OF DEVELOPMENT RESOURCES, DAMAGE TO OUR
REPUTATION OR INCREASED SERVICE, WARRANTY OR LITIGATION COSTS.
The latest versions of our products are year 2000 tested and to the best of
our knowledge are free from any year 2000 problems. However, there may be latent
undiscovered defects that affect the operation of our products during the year
2000. Should such defects exist they may have a detrimental effect on the
operation of our products. Earlier versions of our products may not be year 2000
compliant, and we do not intend to make them year 2000 compliant. While we have
checked with third parties from whom we license software that they have taken
year 2000 readiness measures and we have not experienced any failures to date,
our assurances are only as good as their statements and any year 2000 defects in
our licensed software that have escaped detection, in both their and our
testing, may have adverse effects on the operation of our products.
Additionally, the year 2000 problem may affect us by causing disruptions in the
business operations of, or delay technology purchases by, companies with which
we do business causing a decrease in our revenues. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Year 2000
Readiness."
FUTURE ACQUISITIONS MAY BE DIFFICULT TO INTEGRATE, DISRUPT OUR BUSINESS,
DILUTE STOCKHOLDER VALUE OR DIVERT MANAGEMENT ATTENTION.
As part of our business strategy, we may seek to acquire or invest in
businesses, products or technologies that we believe could complement or expand
our business, augment our market coverage, enhance our technical capabilities or
otherwise offer growth opportunities. Acquisitions could create risks for us,
including:
- difficulties in assimilation of acquired personnel, operations,
technologies or products;
- unanticipated costs associated with acquisitions;
- diversion of management's attention from other business concerns;
- adverse effects on our existing business relationships with suppliers and
customers; and
- use of substantial portions of our available cash, including the proceeds
of this offering, to consummate the acquisitions.
In addition, if we consummate acquisitions through an exchange of our
securities, you could suffer significant dilution. Any future acquisitions, even
if successfully completed, may not generate any additional revenue or provide
any benefit to our business.
RISKS TO OUR BUSINESS AND PROSPECTS RELATED TO THE INTERNET
IF USE OF THE INTERNET DOES NOT CONTINUE TO DEVELOP AND RELIABLY SUPPORT THE
DEMANDS PLACED ON IT BY EBUSINESSES, WE MAY EXPERIENCE LOSS OF SALES.
Our success depends upon continued growth in the use of the internet as a
medium of communication and commerce. Although the internet is experiencing
rapid growth in the number of users, this growth is a recent phenomenon and may
not continue. Furthermore, despite this growth in usage, the use of the internet
for commerce is relatively new. As a result, a sufficiently broad
13
<PAGE> 17
base of companies may not adopt or continue to use the internet as a medium of
exchanging electronic product design information. Our business would be
seriously harmed if:
- use of the internet by electronic product development supply chain
members does not continue to increase or increases more slowly than
expected;
- the infrastructure for the internet does not effectively support
enterprises;
- the internet does not create a viable commercial marketplace, which would
inhibit the development of eBusiness and could reduce the demand for our
products; or
- concerns over the secure transmission of confidential information over
public networks inhibit the growth of the internet as a means of
collaborating among enterprises.
CAPACITY CONSTRAINTS MAY RESTRICT THE USE OF THE INTERNET AS A COMMERCIAL
MARKETPLACE, RESULTING IN DECREASED DEMAND FOR OUR PRODUCTS.
The internet infrastructure may not be able to support the demands placed
on it by increased usage or the limited capacity of networks to transmit large
amounts of data. Other risks associated with commercial use of the internet
could slow its growth, including:
- outages and other delays resulting from the inadequate reliability of the
network infrastructure;
- slow development of enabling technologies and complementary products; and
- limited availability of cost-effective, high-speed access.
Delays in the development or adoption of new equipment standards or
protocols required to handle increased levels of internet activity, or increased
governmental regulation, could cause the internet to lose its viability as a
means of communication between manufacturers and their supply chain partners,
resulting in decreased demand for our products.
INCREASING GOVERNMENTAL REGULATION OF THE INTERNET COULD LIMIT THE MARKET FOR
OUR PRODUCTS.
As internet commerce continues to evolve, we expect that federal, state and
foreign governments will adopt laws and regulations covering issues such as user
privacy, taxation of goods and services provided over the internet and pricing,
content and quality of products and services. It is possible that legislation
could expose companies involved in eBusiness to liability, taxation or other
increased costs, any of which could limit the growth of eBusiness generally.
Legislation could dampen the growth in internet usage and decrease its
acceptance as a communications and commercial medium. If enacted, these laws and
regulations could limit the market for our products.
RISKS RELATED TO THIS OFFERING
IF THE PUBLIC PERCEPTION OF THE VALUE OF OUR COMMON STOCK IS LOWER THAN THE
INITIAL PUBLIC OFFERING PRICE, THE PRICE OF OUR COMMON STOCK AFTER THIS
OFFERING MAY BE LOWER THAN THE PRICE YOU PAY.
Prior to this offering, there has been no public market for our common
stock. We, together with the underwriters, will determine the initial public
offering price, and this price may not be the price at which the common stock
will trade after this offering. The price of our common stock that will prevail
in the market after this offering may be higher or lower than the price you pay.
After this offering, an active trading market in our stock might not develop or
continue. We cannot assure
14
<PAGE> 18
you of the extent to which investor interest in our company will lead to the
development of an active trading market or how liquid that market may become.
BECAUSE OF THE NATURE OF OUR BUSINESS, THE MARKET PRICE OF OUR COMMON STOCK IS
PARTICULARLY SUBJECT TO VOLATILITY AND COULD DROP UNEXPECTEDLY.
The stock market in general has recently experienced extreme price and
volume fluctuations. In addition, the market prices of securities of technology
companies, software development firms and developers of electronic products,
including semiconductor companies, have been extremely volatile, and have
experienced fluctuations that have often been unrelated or disproportionate to
the operating performance of such companies. These broad market fluctuations
could adversely affect the market price of our common stock. The market price of
the common stock may fluctuate substantially due to a variety of factors,
including:
-- any actual or anticipated fluctuations in our financial condition and
operating results;
-- public announcements concerning us or our competitors, or the internet
industry;
-- the introduction or market acceptance of new service offerings by us
or our competitors;
-- changes in industry research analysts' earnings estimates;
-- changes in accounting principles;
-- sales of our common stock by existing stockholders; and
-- the loss of any of our key personnel.
WE COULD BECOME SUBJECT TO CLASS ACTION LITIGATION DUE TO STOCK PRICE
VOLATILITY; IF SUCH LITIGATION OCCURS, IT WILL DISTRACT OUR MANAGEMENT AND
COULD RESULT IN SUBSTANTIAL COSTS AND LARGE JUDGMENTS AGAINST US.
In the past, securities class action litigation has often been brought
against companies following periods of volatility in the market prices of their
securities. We may be the target of similar litigation in the future. Securities
litigation could result in substantial costs and divert our management's
attention and resources, which could cause serious harm to our business,
operating results and financial condition.
OUR EXECUTIVE OFFICERS, DIRECTORS AND MAJOR STOCKHOLDERS WILL RETAIN
SIGNIFICANT CONTROL OVER US AFTER THIS OFFERING, WHICH MAY LEAD TO CONFLICTS
WITH OTHER STOCKHOLDERS OVER CORPORATE GOVERNANCE MATTERS.
After this offering, executive officers, directors and holders of 5% or
more of our outstanding common stock will, in the aggregate, own approximately
% of our outstanding common stock. These stockholders would be able to
significantly influence all matters requiring approval by our stockholders,
including the election of directors and the approval of significant corporate
transactions. This concentration of ownership may also delay, deter or prevent a
change in our control and may make some transactions more difficult or
impossible to complete without the support of these stockholders.
OUR MANAGEMENT WILL RETAIN BROAD DISCRETION IN THE USE OF PROCEEDS FROM THIS
OFFERING AND MAY NOT OBTAIN A SIGNIFICANT RETURN ON THE USE OF THESE PROCEEDS.
We currently have no specific plans for a significant portion of our net
proceeds from this offering. Consequently, our management has complete
discretion as to how to spend the proceeds
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<PAGE> 19
from this offering. They may spend these proceeds in ways with which our
stockholders may not agree. Management's allocation of the proceeds of this
offering may not benefit our business and the investment of the proceeds may not
yield a favorable return.
SUBSTANTIAL FUTURE SALES OF OUR COMMON STOCK COULD CAUSE OUR STOCK PRICE TO
DECLINE.
Sales of a substantial number of shares of our common stock after this
offering could cause the market price of our common stock to decline by
potentially introducing a large number of sellers of our common stock into a
market in which our common stock price is already volatile. In addition, the
sale of these shares could impair our ability to raise capital through the sale
of additional equity securities. Based on shares outstanding as of February 16,
2000, we will have shares of our common stock outstanding upon completion
of the offering, or shares if the underwriters' over-allotment is exercised
in full. Our directors, executive officers and all stockholders have executed
lock-up agreements that limit their ability to sell shares of our common stock.
All stockholders have agreed not to sell or otherwise dispose of any shares of
our common stock for a period of 180 days after the date of this prospectus
without the prior written approval of Donaldson, Lufkin & Jenrette. When these
lock-up agreements expire, these shares and the shares of the common stock
underlying any options held by these individuals will become eligible for sale,
in some cases subject only to the volume, manner of sale and notice requirements
of Rule 144 of the Securities Act of 1933. See "Shares Eligible for Future Sale"
for further discussion of the shares that will be freely tradeable after the
date of this prospectus.
CERTAIN PROVISIONS OF OUR GOVERNING DOCUMENTS AND OF DELAWARE LAW COULD INHIBIT
OUR ABILITY TO SELL OUR BUSINESS, EVEN IF DOING SO WOULD BE FAVORED BY
STOCKHOLDERS SUCH AS YOU.
Certain provisions of our certificate of incorporation and bylaws, as well
as Section 203 of the Delaware General Corporation Law, may discourage, delay or
prevent a change in control of our company that you as a stockholder may
consider favorable. These provisions include:
-- authorizing the issuance of "blank check" preferred stock that could
be issued by our board of directors to increase the number of
outstanding shares and thwart a hostile takeover attempt;
-- providing for a classified board of directors with staggered,
three-year terms;
-- prohibiting cumulative voting in the election of directors, which will
allow a majority of stockholders to control the election of all
directors;
-- requiring super-majority voting to effect certain amendments to our
certificate of incorporation and bylaws;
-- limitations on who may call special meetings of stockholders;
-- prohibiting stockholder action by written consent, which requires all
actions to be taken at a meeting of the stockholders; and
-- establishing advance notice requirements for nominations of candidates
for election to the board of directors or for proposing matters that
can be acted upon by stockholders at stockholder meetings.
In addition, Section 203 of the Delaware General Corporation Law may
discourage, delay or prevent a change in control of our company. See
"Description of Capital Stock -- Delaware Law and Certain Charter and By-law
Provisions and Anti-Takeover Effects."
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<PAGE> 20
YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION IN THE BOOK VALUE OF
YOUR INVESTMENT.
If you purchase shares of our common stock in this offering, you will
experience immediate and substantial dilution, in that the price you pay will be
substantially greater than the net tangible book value per share of the shares
you acquire. This dilution is due in large part to the fact that our earlier
investors paid substantially less than the public offering price when they
purchased their shares of common stock. You will experience additional dilution
upon the exercise of outstanding stock options to purchase common stock.
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<PAGE> 21
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS; MARKET DATA
Some of the statements under "Summary," "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business," and elsewhere in this prospectus constitute forward-looking
statements. These statements relate to future events or other future financial
performance, and are identified by terminology such as "may," "will," "should,"
"expects," "scheduled," "plans," "intends," "anticipates," "believes,"
"estimates," "aims," "potential," or "continue" or the negative of such terms or
other comparable terminology. These statements are only predictions. Actual
events or results may differ materially. In evaluating these statements, you
should specifically consider various factors, including the risks outlined under
"Risk Factors." These factors may cause our actual results to differ materially
from any forward-looking statement.
This prospectus contains market data related to our business, the internet
and the electronic product development industry. This market data includes
projections that are based on a number of assumptions. If these assumptions turn
out to be incorrect, actual results may differ from the projections based on
these assumptions. As a result, our markets may not grow at the rates projected
by these data, or at all. The failure of these markets to grow at these
projected rates may have a material adverse effect on our business, results of
operations and financial condition, and the market price of our common stock.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot assure you that our future results, levels
of activity, performance, or goals will be achieved. We undertake no obligation
to update any of the forward-looking statements after the date of this
prospectus to conform such statements to reflect the occurrence of unanticipated
events.
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<PAGE> 22
USE OF PROCEEDS
The net proceeds we will receive from the sale of shares of
common stock offered by us are estimated to be $ ($ if the
underwriters' over-allotment option is exercised in full) after deducting the
estimated underwriting discounts and commissions and offering expenses payable
by us and assuming an initial public offering price of $ .
We expect to use the net proceeds from this offering for working capital
and other general corporate purposes. We have not identified specific uses for
such proceeds and management will have discretion over their use and investment.
Pending such uses, we will invest the net proceeds from this offering in
investment grade, interest-bearing securities.
The principal purposes of this offering are:
-- to increase our equity capital;
-- to create a public market for our common stock;
-- to facilitate future access by us to public equity markets;
-- to provide increased visibility and credibility in our marketplace;
and
-- to enhance our ability to use our common stock as a means of
attracting and retaining key employees.
A portion of the net proceeds may also be used for the acquisition of
complementary businesses or technologies. We are not currently a party to any
contracts, commitments or agreements with respect to any such acquisitions.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock. We
currently intend to retain any earnings to fund the development and expansion of
our business and do not anticipate paying cash dividends in the foreseeable
future. Payment of any future dividends will be at the discretion of our board
of directors after taking into account various factors, including our financial
condition, operating results, current and anticipated cash needs and plans for
expansion. In addition, under our current line of credit we may not declare or
pay any dividends without written consent from our bank.
CORPORATE INFORMATION
We were initially incorporated in Massachusetts in 1996 under the name
Synchronicity, Inc. We reincorporated in Delaware in May 1999 and changed our
name to Synchronicity, Inc. of Massachusetts. On February 16, 2000, our Board of
Directors, subject to stockholder approval, approved an amendment to our
certificate of incorporation to change our name to Synchronicity Software, Inc.
Our executive offices are located at 201 Forest Street, Marlboro, MA 01752, and
our telephone number is (508) 485-4122. Our website is www.synchronicity.com.
Information contained on our website does not constitute part of this
prospectus.
Synchronicity(TM), DesignSync(R), DesignSync(R)DFII, ProjectSync(R),
IPGear(TM), CatalogSync(TM) and the Synchronicity logo are our trademarks. All
other trademarks or tradenames referred to in this prospectus are the property
of their respective owners.
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<PAGE> 23
CAPITALIZATION
The following table describes our capitalization as of December 31, 1999 on
an actual basis and on a pro forma as adjusted basis to give effect to the
conversion of our convertible preferred stock upon the consummation of this
offering, the sale of our shares of common stock in this offering and our
receipt of the estimated net proceeds, after deducting the estimated
underwriting discounts and commissions and the estimated offering expenses that
we expect to pay in connection with this offering.
You should read this table along with "Management's Discussion and Analysis
of Financial Condition and Results of Operations," our financial statements and
related notes and the other financial information in this prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
----------------------------
PRO FORMA
ACTUAL AS ADJUSTED
<S> <C> <C>
Cash and cash equivalents................................... $ 3,652,124 $
============ ============
Redeemable convertible preferred stock:
Series B convertible preferred stock...................... 2,211,765
Series C convertible preferred stock...................... 3,069,115
Series D convertible preferred stock...................... 7,201,788
------------
Total redeemable convertible preferred stock.............. 12,482,668
Stockholders' equity (deficiency):
Preferred stock $0.01 par value; 5,000,000 shares
authorized pro forma as adjusted; no shares issued and
outstanding............................................ --
Series A convertible preferred stock, $0.01 par value;
200,000 shares authorized, issued and outstanding
actual; no shares authorized, issued and outstanding
pro forma as adjusted.................................. 2,000
Common stock, $0.01 par value; 13,088,942 shares
authorized, 3,786,018 shares issued and outstanding
actual; 90,000,000 shares authorized, shares
issued and outstanding pro forma as adjusted........... 37,860
Additional paid-in capital................................ 7,436,361
Deferred compensation..................................... (4,600,815)
Accumulated deficit....................................... (12,506,271)
------------ ------------
Total stockholders' equity (deficiency)................... (9,630,865)
------------ ------------
Total capitalization........................................ $ 2,851,803
============ ============
</TABLE>
The table above excludes:
- 1,520,377 shares of common stock issuable upon the exercise of stock
options outstanding on December 31, 1999 with a weighted average exercise
price of $0.58 per share;
- 150,000 shares of common stock issuable upon exercise of a warrant
outstanding on December 31, 1999 with an exercise price of $4.30 per
share.
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<PAGE> 24
DILUTION
Our net tangible book value per share immediately after this offering will
be substantially less than the initial public offering price because the initial
public offering price will be substantially higher than the current net tangible
book value per share. Our pro forma net tangible book value as of December 31,
1999 was approximately $2.9 million, or approximately $0.26 per share. Pro forma
net tangible book value per share represents assets less total liabilities,
divided by the number of shares of common stock outstanding.
After giving effect to the sale by us of shares of common stock in
this offering at an assumed initial public offering price of $ per share,
and deducting the estimated underwriting discounts and commissions and offering
expenses that we expect to pay, the pro forma net tangible book value as of
December 31, 1999 would have been $ million, or $ per share. This
represents an immediate increase in pro forma net tangible book value of $
per share to existing stockholders and an immediate dilution of $ per share
to investors purchasing common stock in this offering. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price....................... $
Pro forma net tangible book value per share as of
December 31, 1999.................................... 0.26
Increase per share attributable to this offering.......
------
Pro forma net tangible book value per share after this
offering..................................................
------
Dilution per share to new investors......................... $
======
</TABLE>
The following table summarizes, on a pro forma basis, as of December 31,
1999, the difference between the number of shares of common stock purchased from
us, the total consideration paid to us, and the average price per share paid by
existing stockholders and by new investors.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
<S> <C> <C> <C> <C> <C>
Existing stockholders........ 10,807,020 % $13,476,466 % $ 1.25
New investors................
---------- ----- ----------- ----- --------
Total............. 100.0% $ 100.0% $
========== ===== =========== ===== ========
</TABLE>
The discussion and the tables above assume no exercise of stock options or
warrants outstanding on December 31, 1999 and no issuance of shares granted or
reserved for future issuance under our equity plans. As of December 31, 1999,
there were options outstanding to purchase 1,520,377 shares of common stock at a
weighted average exercise price of $0.58 per share and a warrant outstanding to
purchase 150,000 shares of common stock at an exercise price of $4.30 per share.
To the extent that any of these options or warrant are exercised, there will be
further dilution to new investors.
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<PAGE> 25
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected financial data should be read in conjunction with
our financial statements including the accompanying notes and with "Management's
Discussion and Analysis of Financial Condition and Results of Operations". The
data as of December 31, 1999 and 1998 and for each of the three years in the
period ended December 31, 1999 have been derived from our financial statements
and accompanying notes contained in this prospectus. The Statement of Operations
Data for the year ended December 31, 1996 and the Balance Sheet Data at December
31, 1997 and 1996 have been derived from our audited financial statements which
are not contained in this prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1996 1997 1998 1999
<S> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Software licenses..................................... $ -- $ 410 $ 1,043 $ 5,224
Services.............................................. -- 250 766 2,223
------- ------- ------- -------
Total revenues................................... -- 660 1,809 7,447
Cost of revenues:
Software licenses..................................... -- 28 107 193
Services.............................................. -- 64 206 849
------- ------- ------- -------
Total cost of revenues........................... -- 92 313 1,042
------- ------- ------- -------
Gross profit.............................................. -- 568 1,496 6,405
Operating expenses:
Sales and marketing................................... 315 1,400 2,172 4,642
Research and development.............................. 390 1,581 2,618 3,696
General and administrative............................ 361 436 730 1,124
Stock-based compensation.............................. -- 1 49 624
Warrant expense....................................... -- -- -- 1,093
------- ------- ------- -------
Total operating expenses......................... 1,066 3,418 5,569 11,179
------- ------- ------- -------
Loss from operations...................................... (1,066) (2,850) (4,073) (4,774)
Interest income........................................... 43 135 125 195
Other expense............................................. -- -- -- (23)
------- ------- ------- -------
Loss before provision for income taxes.................... (1,023) (2,715) (3,948) (4,602)
Provision for income taxes................................ -- 65 -- 37
------- ------- ------- -------
Net loss.................................................. $(1,023) $(2,780) $(3,948) $(4,639)
======= ======= ======= =======
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Basic and diluted net loss per share...................... $(0.32) $(0.86) $(1.21) $(1.39)
Basic and diluted weighted average common shares
outstanding............................................. 3,226 3,247 3,284 3,372
Pro forma basic and diluted net loss per share(1)......... $ (0.45)
Pro forma basic and diluted weighted average common shares
outstanding(1).......................................... 10,393
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------
1996 1997 1998 1999
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 2,159 $ 2,232 $ 6,313 $ 3,652
Working capital........................................... 2,009 1,970 5,192 1,937
Total assets.............................................. 2,312 3,657 8,792 8,758
Redeemable convertible preferred stock.................... 2,168 5,241 12,445 12,483
Stockholders' equity (deficiency)......................... (17) (2,822) (6,742) (9,631)
</TABLE>
- ---------------
(1) See Note 1 to our financial statements.
22
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis together with our
financial statements, related notes and other financial information appearing
elsewhere in this prospectus. In addition to historical information, the
following discussion and other parts of this prospectus contain forward-looking
information that involves risks and uncertainties. Our actual results could
differ materially from those anticipated by such forward-looking information due
to competitive factors and other factors discussed under "Risk Factors" and
elsewhere in this prospectus.
OVERVIEW
We provide internet-based software that enables collaboration among team
members developing complex products regardless of location or company
affiliation. Our software is currently used primarily by firms engaged in the
development of semiconductors and other electronic products. Our products enable
our customers to track and manage communications, collaboration and design
information across geographically dispersed locations with a high level of
security. Our software further improves productivity by facilitating the reuse
of existing design elements. We were founded in January 1996 and in October 1997
we began licensing our first products and delivering related services.
Our revenues were $0.7 million, $1.8 million and $7.4 million in 1997, 1998
and 1999, respectively, and consisted of software license revenues and services
revenues. Software license revenues are derived from the license of our products
to our customers and the license of our products through our distributors.
Services revenues are attributable to consulting, training, maintenance and
other support services related to our products.
Software license revenues are recognized when products are delivered to
customers and collection is probable. When license agreements contain multiple
elements and vendor-specific objective evidence exists for all undelivered
elements of such agreements, revenue is allocated to the undelivered elements
based on such vendor-specific objective evidence and the remainder is allocated
to the delivered elements. When license agreements include maintenance and
unspecified updates to be delivered to customers on an if-and-when-available
basis and vendor-specific objective evidence does not exist, revenue is
recognized ratably over the term of the arrangement. Revenues from arrangements
that have payment terms extending beyond twelve months are recognized as the
payments become due. Software license revenues from sales to our distributors
are generally recognized at the time a distributor reports to us that they have
licensed our software and all revenue recognition criteria have been satisfied.
Services revenues for consulting and training are recognized as the
services are provided, and revenues from maintenance are recognized ratably over
the term of the maintenance period.
We license our products to customers in the United States, Canada, Europe
and Japan. Revenues from customers outside of the United States represented
0.0%, 25.2% and 36.8% of total revenues in fiscal 1997, 1998 and 1999. All of
our sales are denominated in U.S. dollars. We intend to increase our
international distribution by developing stronger relationships with
international distributors and by selectively expanding and establishing foreign
sales offices. We expect international revenues to continue to increase as a
percentage of our total revenues in the future.
We market and sell our products primarily through our direct sales force in
the United States and Europe, and through distributors in Japan and Europe. We
intend to continue to expand our domestic and international direct sales force
by expanding into additional geographic locations.
23
<PAGE> 27
Our cost of software license revenues consists of personnel costs and
royalties due to third parties for the licensing of technology embedded in our
software relating to security, revision control and portability across
platforms. Our cost of services revenues includes salaries and related expenses
for the consulting, training and support services organizations and an
allocation of our overhead expenses.
Although our total revenues have increased annually, we have incurred
significant costs to develop our products and to recruit and train personnel for
our research and development, sales and marketing and general and administrative
organizations. As a result, we have incurred significant losses since inception.
As of December 31, 1999, we had an accumulated deficit of $12.5 million. Our
loss from operations was $2.9 million, $4.1 million and $4.8 million in 1997,
1998 and 1999. We intend to continue to incur significant sales and marketing,
research and development and general and administrative expenses. We expect to
continue to incur operating losses for the foreseeable future. In order to
achieve profitability, we will need to increase our revenues significantly.
Therefore, we cannot assure you that we will ever attain or maintain
profitability. Our expansion will also place significant demands on our
management and operational resources. To manage our rapid growth and increased
demands, we must improve existing, and implement new, operational and financial
systems, procedures and controls. We must also hire, train, manage, retain and
motivate qualified personnel. We expect future expansion to continue to
challenge our ability to hire, train, manage, retain and motivate our employees.
In view of the rapidly changing nature of our market and our limited
operating history, we believe that period-to-period comparisons of our revenues
and other operating results are not necessarily meaningful and should not be
relied upon as indications of future performance. Our historical revenue growth
rates are not necessarily sustainable or indicative of our future growth.
24
<PAGE> 28
RESULTS OF OPERATIONS
The following table sets forth selected financial data for the periods
indicated, expressed as a percentage of total revenues:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1997 1998 1999
<S> <C> <C> <C>
Revenues:
Software licenses................................... 62.1% 57.7% 70.1%
Services............................................ 37.9 42.3 29.9
------ ------ -----
Total revenues................................ 100.0 100.0 100.0
Cost of revenues:
Software licenses................................... 4.3 5.9 2.6
Services............................................ 9.6 11.4 11.4
------ ------ -----
Total cost of revenues........................ 13.9 17.3 14.0
------ ------ -----
Gross profit............................................. 86.1 82.7 86.0
Operating expenses:
Sales and marketing................................. 212.0 120.1 62.3
Research and development............................ 239.6 144.7 49.6
General and administrative.......................... 66.1 40.4 15.1
Stock-based compensation............................ 0.1 2.7 8.4
Warrant expense..................................... -- -- 14.7
------ ------ -----
Total operating expenses...................... 517.9 307.9 150.1
------ ------ -----
Loss from operations..................................... (431.8) (225.2) (64.1)
Interest income.......................................... 20.4 6.9 2.6
Other expense............................................ -- -- (0.3)
------ ------ -----
Loss before provision for income taxes................... (411.4) (218.3) (61.8)
Provision for income taxes............................... 9.8 -- 0.5
------ ------ -----
Net loss................................................. (421.2)% (218.3)% (62.3)%
====== ====== =====
</TABLE>
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
REVENUES
Total Revenues. Total revenues were $0.7 million, $1.8 million and $7.4
million in 1997, 1998 and 1999, representing an increase of $1.1 million, or
174.0%, from 1997 to 1998 and $5.6 million, or 311.8%, from 1998 to 1999. Five
customers individually accounted for 37.9%, 18.9%, 13.6%, 12.9% and 11.4% of our
total revenues in 1997. We had three customers that individually accounted for
20.6%, 14.6% and 13.9% of our total revenues in 1998 and one customer that
accounted for 11.8% of our total revenues in 1999.
Software Licenses. Software license revenues were $0.4 million, $1.0
million and $5.2 million in 1997, 1998 and 1999, representing an increase of
$0.6 million, or 154.3%, from 1997 to 1998 and $4.2 million, or 401.0%, from
1998 to 1999. The increase in software license revenues from
25
<PAGE> 29
1997 to 1998 and 1998 to 1999 was due to increased market acceptance of our
products, including new versions of our products. Software license revenues as a
percentage of total revenues were 62.1%, 57.7% and 70.1% in 1997, 1998 and 1999.
Services. Services revenues were $0.3 million, $0.8 million and $2.2
million in 1997, 1998 and 1999, representing an increase of $0.5 million, or
206.3% from 1997 to 1998 and $1.4 million, or 190.3% from 1998 to 1999. The
increase in services revenues in 1998 and 1999 reflects the increased demand for
our post contract support, training and consulting offerings. Services revenues
as a percentage of total revenues were 37.9%, 42.3% and 29.9% in 1997, 1998 and
1999. The decrease in services revenues as a percentage of total revenues was
due to the proportionally greater increase in the volume of software license
revenues in 1999.
COST OF REVENUES
Software Licenses. Cost of software licenses was $28,000, $107,000 and
$194,000 in 1997, 1998 and 1999, representing an increase of $79,000, or 278.7%,
from 1997 to 1998 and $87,000, or 81.4% from 1998 to 1999. Cost of software
licenses as a percentage of software license revenues in 1997, 1998 and 1999 was
6.9%, 10.2% and 3.7% in the respective periods. The dollar increase in 1998 and
1999 was due to the increase in volume of license sales including an increased
volume of sales to large customers. Cost of software licenses as a percentage of
software license revenues decreased in 1999 as the per seat cost of third party
royalties decreased in proportion to the increase in volume of licenses. We
believe the cost of licenses may vary significantly in the future, depending on
the mix of internally developed and third-party products.
Services. Cost of services was $63,000, $206,000 and $849,000 in 1997, 1998
and 1999, representing an increase of $143,000, or 224.6% from 1997 to 1998 and
$643,000, or 312.0% from 1998 to 1999. Cost of services as a percentage of
services revenues in 1997, 1998 and 1999 was 25.4%, 26.9% and 38.2% of services
revenues in the respective periods. The increase was primarily due to the cost
of hiring additional services personnel and related costs to accommodate the
increase for our services offerings. The cost of services as a percentage of
services revenues may vary between periods due to the mix of services provided
and the resources used to provide these services.
OPERATING EXPENSES
Sales and Marketing. Sales and marketing expenses include specific expenses
related to public relations and advertising, trade shows, marketing materials,
customer meetings and expenditures specific to the sales group, such as
commissions. Sales and marketing expenses were $1.4 million, $2.2 million and
$4.6 million in 1997, 1998 and 1999, representing an increase of $0.8 million,
or 55.2%, from 1997 to 1998 and $2.4 million, or 113.7% from 1998 to 1999. Sales
and marketing expenses as a percentage of revenues in 1997, 1998 and 1999 was
212.0%, 120.1% and 62.3% in the respective periods. The dollar increase reflects
significant personnel-related expenses such as salaries, benefits and
commissions, recruiting fees, travel expenses and related costs of hiring sales
management, sales representatives, sales engineers and marketing personnel. The
number of employees in our sales and marketing departments increased from nine
in 1997 to 17 in 1998 and 28 in 1999. The decline in sales and marketing
expenses as a percentage of total revenues was primarily due to the growth in
total revenues. We anticipate that our sales and marketing expenses will
continue to increase in absolute dollars for the foreseeable future as we expand
our domestic and international sales forces.
26
<PAGE> 30
Research and Development. Research and development expenses consist
primarily of personnel and related expenses associated with the development of
new products, the enhancement of existing products and quality assurance and
testing costs incurred prior to commercial production. Research and development
expenses were $1.6 million, $2.6 million and $3.7 million in 1997, 1998 and
1999, representing an increase of $1.0 million, or 65.6%, from 1997 to 1998 and
$1.1 million, or 41.2%, from 1998 to 1999. Research and development expenses as
a percentage of revenues in 1997, 1998 and 1999 were 239.6%, 144.8% and 49.6% in
the respective periods. The dollar increases for each of the periods were due to
the increase in the number of software developers, quality assurance personnel
and outside contractors whom we hired to support our product development,
documentation and testing activities related to the development and release of
the latest versions of our products. Personnel in research and development
increased from 13 in 1997 to 22 in 1998 and 29 in 1999. The decline in research
and development expenses as a percentage of total revenues was primarily due to
the growth in total revenues. We anticipate that our research and development
expenses will continue to increase in absolute dollars for the foreseeable
future as we expand our research and development staff.
General and Administrative. General and administrative expenses consist
primarily of salaries and other related costs for finance and human resources
employees, as well as accounting, legal, other professional fees and allowance
for doubtful accounts. General and administrative expenses were $0.4 million,
$0.7 million and $1.1 million in 1997, 1998 and 1999, representing an increase
of $0.3 million, or 67.3%, from 1997 to 1998 and $0.4 million, or 54.0% from
1998 to 1999. General and administrative expenses as a percentage of revenues in
1997, 1998 and 1999 were 66.1%, 40.4% and 15.1% in the respective periods. The
dollar increase was primarily due to our hiring of additional finance, executive
and administrative personnel to support the growth of our business during that
period. We anticipate that our general and administrative expenses will continue
to increase in absolute dollars for the foreseeable future as we expand our
operations and incur the ongoing costs associated with being a public company.
Stock-Based Compensation. Stock-based compensation expense was $1,000,
$48,000 and $624,000 in 1997, 1998 and 1999. These non-cash expenses represent
either the difference between the exercise price and the estimated fair value of
the Company's common stock on the date the related stock options are granted or
the value of a particular grant as determined by the Black-Scholes valuation
model, and are expensed over the vesting period. Unearned compensation on the
unvested options is deferred and included as a component of stockholders'
equity. The deferred stock-based compensation totaled $4.6 million at December
31, 1999, and will result in additional charges to operations through 2003.
Warrant Expense. We granted to Intel Corporation a warrant to purchase
150,000 shares of our common stock at a price of $4.30 per share which vested in
1999 when Intel entered into a license agreement and issued to us a purchase
order in excess of $650,000. Warrant expense was $1.1 million in 1999 and
represents the estimated fair value calculated using the Black-Scholes valuation
model at the date the warrant became vested. There was no warrant expense in
1998 or 1997.
Interest Income. Interest income was $135,000, $125,000 and $195,000 in
fiscal 1997, 1998 and 1999. The decrease in 1998 was primarily due to lower
average interest rates and the increase in 1999 was due to higher average cash
balances from the sale of the Series D preferred stock in September 1998 and to
higher average interest rates.
Other Expense. Other expense was $23,000 in 1999 representing foreign
currency transaction losses.
27
<PAGE> 31
Income Taxes. Income taxes were $65,000 and $37,000 in fiscal 1997 and 1999
and represent foreign tax withholdings which we paid during the year. We had no
income tax provision in 1998.
As of December 31, 1999, we had net operating loss carryforwards for
federal and state income tax reporting purposes of approximately $10.1 million
that expire in various amounts beginning in 2011 and 2001, respectively. In
addition, we had federal and state tax credits related to research and
development activities of $371,000 and $146,000 which expire beginning in 2011.
The U.S. tax laws contain provisions that limit the use in any future period of
net operating loss and credit carryforwards upon the occurrence of certain
events, including a significant change in ownership interests. We had deferred
tax assets, including our net operating loss carryforwards and tax credits, of
approximately $5.2 million as of December 31, 1999. Due to our limited operating
history, we fully reserved the net deferred tax assets at December 31, 1999.
28
<PAGE> 32
QUARTERLY RESULTS OF OPERATIONS
The following tables set forth our unaudited statement of operations data
for each of the five quarters in the period ended December 31, 1999, as well as
that data expressed as a percentage of our total revenues for the quarters
presented. You should read this information in conjunction with our financial
statements and related notes appearing elsewhere in this prospectus. We have
prepared this unaudited information on a basis consistent with our audited
financial statements, and, in the opinion of our management, it reflects all
normal recurring adjustments that we consider necessary for a fair presentation
of our operating results for the quarters presented. You should not draw any
conclusions about our future results from the operating results for any quarter.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------
DEC 31, MARCH 31, JUNE 30, SEPT 30, DEC 31,
1998 1999 1999 1999 1999
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
Software licenses................................... $ 324 $ 416 $ 990 $1,463 $ 2,355
Services............................................ 182 470 518 572 663
------- ------- ------ ------ -------
Total revenues................................. 506 886 1,508 2,035 3,018
Cost of revenues:
Software licenses................................... 57 22 38 67 66
Services............................................ 47 134 153 213 349
------- ------- ------ ------ -------
Total cost of revenues......................... 104 156 191 280 415
------- ------- ------ ------ -------
Gross profit............................................ 402 730 1,317 1,755 2,603
Operating expenses:
Sales and marketing................................. 667 886 1,020 1,107 1,629
Research and development............................ 722 804 841 960 1,091
General and administrative.......................... 227 232 260 305 327
Stock-based compensation............................ 49 89 60 187 288
Warrant expense..................................... -- -- -- -- 1,093
------- ------- ------ ------ -------
Total operating expenses....................... 1,665 2,011 2,181 2,559 4,428
------- ------- ------ ------ -------
Loss from operations.................................... (1,263) (1,281) (864) (804) (1,825)
Interest income......................................... 72 59 50 44 42
Other expense........................................... -- (3) (5) (4) (11)
------- ------- ------ ------ -------
Loss before provision for income taxes.................. (1,191) (1,225) (819) (764) (1,794)
Provision for income taxes.............................. -- -- -- -- 37
------- ------- ------ ------ -------
Net loss................................................ $(1,191) $(1,225) $ (819) $ (764) $(1,831)
======= ======= ====== ====== =======
</TABLE>
29
<PAGE> 33
<TABLE>
<CAPTION>
AS A PERCENTAGE OF TOTAL REVENUES
---------------------------------------------------
DEC 31, MARCH 31, JUNE 30, SEPT 30, DEC 31,
1998 1999 1999 1999 1999
<S> <C> <C> <C> <C> <C>
Revenues:
Software licenses.................................. 64.0% 47.0% 65.6% 71.9% 78.0%
Services........................................... 36.0 53.0 34.4 28.1 22.0
------- ------- ------ ------ ------
Total revenues................................ 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Software licenses.................................. 11.3 2.5 2.5 3.3 2.2
Services........................................... 9.3 15.1 10.2 10.5 11.6
------- ------- ------ ------ ------
Total cost of revenues........................ 20.6 17.6 12.7 13.8 13.8
------- ------- ------ ------ ------
Gross profit........................................... 79.4 82.4 87.3 86.2 86.2
Operating expenses:
Sales and marketing................................ 131.7 100.1 67.6 54.3 54.1
Research and development........................... 142.7 90.7 55.8 47.2 36.1
General and administrative......................... 44.9 26.2 17.2 15.0 10.8
Stock-based compensation........................... 9.7 10.0 4.0 9.2 9.5
Warrant expense.................................... -- -- -- -- 36.2
------- ------- ------ ------ ------
Total operating expenses...................... 329.0 227.0 144.6 125.7 146.7
------- ------- ------ ------ ------
Loss from operations................................... (249.6) (144.6) (57.3) (39.5) (60.5)
Interest income........................................ 14.2 6.6 3.3 2.2 1.5
Other expense.......................................... -- (0.3) (0.3) (0.2) (0.4)
------- ------- ------ ------ ------
Loss before provision for income taxes................. (235.4) (138.3) (54.3) (37.5) (59.4)
Provision for income taxes............................. -- -- -- -- 1.3
------- ------- ------ ------ ------
Net loss............................................... (235.4)% (138.3)% (54.3)% (37.5)% (60.7)%
======= ======= ====== ====== ======
</TABLE>
Our total revenues increased in each of the five quarterly periods ended
December 31, 1999. The increase in revenues during these periods reflects an
increased market acceptance of our products as well as the introduction of new
products. Generally, we expect to experience a seasonal decrease from the fourth
quarter of one year to the first quarter of the subsequent year primarily due to
the budgeting cycle and buying patterns of our major customers. Cost of revenues
varied in each of the five quarterly periods ended December 31, 1999 as a result
of the changes in the mix of software license revenues and services rendered.
The relatively lower costs of software license revenues in 1999 as compared to
1998 was the result of a significant reduction in royalties that we paid for
licensing embedded technology. Additionally, the comparatively higher costs of
software license revenues during the fourth quarter of 1998 were the result of a
large strategic order to a significant customer at favorable pricing. Operating
expenses increased in each of the five quarterly periods ended December 31, 1999
as a result of our hiring additional personnel in all functional areas of the
company over those periods.
Our quarterly operating results have fluctuated significantly in the past
and will continue to fluctuate in the future as a result of a number of factors,
many of which are outside our control. As a result of our limited operating
history, we cannot forecast operating expenses based on historical results.
Accordingly, we base our anticipated level of expenses in part on future revenue
projections. Most of our expenses are fixed in the short term and we may not be
able to quickly reduce spending if revenues are lower than we have projected.
Our ability to forecast our quarterly revenues accurately is limited given our
short operating history, the length of our sales cycle and other uncertainties
in our business. If revenues in a particular quarter do not meet projections,
our net losses in a given quarter would be greater than expected. As a result,
investors should not rely on the results of one quarter as indicative of future
performance.
30
<PAGE> 34
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have primarily funded our operations through equity
financings. Our cash and cash equivalents at December 31, 1999 were $3.7
million. To a lesser extent, we have financed our operations through lending
arrangements.
At December 31, 1999, we had a line of credit, which allowed borrowings up
to $2.0 million through February 2000. Borrowings under the line may be used for
working capital ($1.5 million) and equipment purchases ($0.5 million). Interest
on the borrowings was charged at the bank's prime rate (8.5% at December 31,
1999) plus 0.5% and borrowings were collateralized by substantially all of our
tangible assets. We had no outstanding borrowings at December 31, 1998 or 1999.
The agreement required compliance with certain financial ratios and, among other
things, the maintenance of minimum levels of working capital and tangible net
worth. At December 31, 1999, we were not in compliance with certain financial
ratios and, as such, we obtained a waiver of the non-compliance from the bank.
In February 2000, we renegotiated the line of credit to include borrowings
up to $3.0 million through February 2001 as well as less restrictive financial
covenants. Under this new line of credit we would have been in compliance with
the financial covenants at December 31, 1999. Borrowings under the new line may
be used for working capital ($2.5 million) and equipment purchases ($0.5
million). The other terms of the new line of credit are similar to the former
line of credit. As of February 16, 2000, we had no borrowings outstanding under
the new line of credit.
Cash used in operating activities was $2.5 million, $2.8 million and $2.3
million in fiscal 1997, 1998 and 1999. Cash used in 1997 and 1998 was primarily
due to the increases in our operating losses. Our decrease in the use of cash
from 1998 to 1999 was due to lower operating losses when adjusted for the
stock-based compensation and warrant expense, both of which did not require
cash.
Cash used in investing activities was $434,000, $261,000 and $457,000 in
fiscal 1997, 1998 and 1999. Cash used in investing activities was primarily for
purchases of property and equipment in each period. Purchases of property and
equipment, including equipment purchased under capital leases, were $433,000,
$253,000 and $453,000 in 1997, 1998 and 1999. These expenditures were primarily
for computer hardware and software and furniture and fixtures. We expect that
capital expenditures will continue to increase to the extent we continue to
increase our headcount or expand our operations.
Cash provided by financing activities was $3.0 million, $7.2 million and
$70,000 in fiscal 1997, 1998 and 1999. Cash flows from financing activities in
1997 and 1998 were primarily attributable to the sales of our equity securities.
Cash provided by financing activities in 1999 resulted from net proceeds on the
exercise of common stock options.
We also have noncancelable operating leases for office space of
approximately $1.7 million at December 31, 1999, which are payable through 2004.
We intend to continue to incur significant sales and marketing, research
and development and general and administrative expenses including the hiring of
additional employees in the future. We expect to continue to incur operating
losses for the foreseeable future. In addition, we may utilize cash resources to
fund acquisitions or investments in complementary businesses, technologies or
product lines. We believe that our current cash and cash equivalents, together
with cash generated from operations and the net proceeds from this offering will
be sufficient to meet our foreseeable working capital and capital expenditure
requirements for at least the next 12 months. However,
31
<PAGE> 35
there can be no assurance that we will not require additional financings during
this time frame or that such additional financing, if needed, will be available
on terms acceptable to us, if at all.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB issued Statement of Financial Accounting Standard,
or SFAS, No. 133, "Accounting for Derivative Instruments and Hedging
Activities". This statement establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts and for hedging activities. SFAS No. 133 will be effective for
our year ending December 31, 2001. We have not determined the effects, if any,
that SFAS No. 133 will have on our financial statements.
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
We develop our products in the United States and market them in North
America, Europe and Japan. As a result, our financial results could be affected
by factors such as changes in foreign currency exchange rates or weak economic
conditions in foreign markets. Because all of our revenues are currently
denominated in U.S. dollars, a strengthening of the dollar could make our
products less competitive in foreign markets. In addition, we are exposed to the
impact of foreign currency fluctuations when we pay for European operating
expenses. We pay for these expenses using the local currency, primarily British
pounds or Euro dollars. During 1999 we did not engage in foreign currency
hedging activities. Our interest income is sensitive to changes in the general
level of U.S. interest rates, particularly since the majority of our investments
are in short-term instruments. Due to the short-term nature of our investments,
we believe that there is no material risk exposure.
YEAR 2000 READINESS
Computer systems and software must accept four digit entries to distinguish
21st century dates from 20th century dates. As a result, many software and
computer systems that accepted only two-digit entries needed to be upgraded in
order to accept dates beginning January 1, 2000. Based on a Year 2000 readiness
review that we have conducted, we believe the versions of our products that we
currently ship are Year 2000 compliant, when configured and used in accordance
with the related documentation, so long as the underlying operating system of
the host machine and any other software used with or in the host machine or with
our products are also Year 2000 compliant. We believe that some versions of our
products prior to DesignSync 2.1.2, DesignSync/DFII 1.3, ProjectSync 2.0.2 and
CatalogSync 1.01 may not be Year 2000 compliant. We have notified our customers
of this fact and encouraged users of these versions to upgrade to the latest
version. To date, all of our customers have maintenance agreements with us and
have the right to receive the latest version of our products without additional
charge.
To date, we have not experienced any date related problems with any
third-party software. In addition, we do not believe we will incur material
costs in the future because of date related problems.
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BUSINESS
The following description of our business should be read in conjunction
with the information included elsewhere in this prospectus. This description
contains forward-looking statements that involve risks and uncertainties. Our
actual results could differ significantly from the results discussed in the
forward-looking statements as a result of the factors set forth in "Risk
Factors" and elsewhere in this prospectus.
OVERVIEW
We provide internet-based software that enables collaboration among team
members developing complex products regardless of location or company
affiliation. Our products are currently used by firms engaged in the development
of semiconductors and other electronic products. Companies developing these
products face increasing design complexity, a shortage of engineers and other
technical personnel and competitive pressures to bring products to market more
quickly. As a result, collaboration within companies and among other
participants in the electronic product development supply chain is critical. Our
products enable our customers to track and manage communications, collaboration
and design information across geographically dispersed locations within a secure
internet-based environment. Our software further improves productivity by
facilitating the reuse of existing design elements. Although our software is
currently used in the development of electronic products, we believe that it may
be equally useful in the development of other complex products.
Since shipping our first product in 1997, we have licensed our products to
approximately 50 customers totaling approximately 7,500 end-user licenses. Our
customers include market leaders from the semiconductor, computer, computer
peripheral, consumer electronic, networking and telecommunications industries,
including Intel Corporation, Texas Instruments Incorporated, Philips
Semiconductors B.V., Lucent Technologies, Inc., Nortel Networks Corporation,
PMC-Sierra, Inc., Cypress Semiconductor Corporation and ARM Ltd.
INDUSTRY BACKGROUND
The growth of the new digital economy has been fueled in large part by the
rapid development of new, complex semiconductors, microelectronics and other
electronic products which are essential to an increasing number of products
ranging from computers and mobile phones to personal digital assistants and
pagers. According to the Semiconductor Industry Association, the semiconductor
segment of the electronics industry alone was $140.8 billion in 1999.
Competition within the electronics industry has become more intense and has
expanded globally. In order to compete successfully, suppliers of electronic
products must develop complex, high quality, feature-rich products at a lower
cost and more quickly than their competitors. These challenges, combined with
the increasing complexity of new electronic product designs, have strained
traditional product development processes. As a result of these market dynamics,
vendors of electronic products must shorten product development cycles so that
their products enter the market more efficiently and quickly, thereby providing
the vendors with first-mover advantages.
The competitive environment and the increasing complexity of electronic
products have compelled companies to shift from traditional product development
processes to the outsourcing of specialized design tasks. In the past, product
development processes have been conducted primarily by in-house teams working
together at the same site. The increasing complexity of electronic products has
led to an expansion and diversification of the participants in the product
development process as specialized skills and information are needed to develop
the products. In addition, companies face a chronic shortage of the highly
skilled engineers and other technical experts
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required to develop complex electronic products. Given this constraint on
resources, it is essential that companies efficiently utilize available
personnel and reuse existing designs whenever possible. Additionally, as
companies grow, both internally and through acquisitions, and as they seek
additional sources of expertise around the world, the participants in the design
process become more dispersed, both geographically and organizationally.
Development teams are thus evolving into product development supply chains,
often including many engineers from different departments in a company as well
as outside sources of specialized design expertise. This has resulted in virtual
teams dispersed across corporate and geographic boundaries and connected by
computers and telecommunications networks. In addition, as the electronic
product development process has become more specialized and reliant on
outsourcing, companies have increasingly utilized intellectual property (IP)
cores, design elements that are frequently reused within electronic product
designs. The practice of design reuse allows companies to focus on their primary
design expertise and shorten product development cycles.
While the outsourcing of design tasks and the implementation of design
reuse practices enable companies to get to market quickly with feature-rich,
reliable, cost-effective products, virtual product development teams and their
supply chains face growing challenges in:
Promoting and Managing Supply Chain Collaboration. The ability to
proactively manage real-time collaboration among the participants in the product
development process is a critical success factor for companies developing
electronic products. A virtual product development team consists of participants
performing specialized tasks and can include internal electronic and software
design teams, external design contractors and consultants, providers of external
IP cores and design tool suppliers. In order to effectively utilize the
resources within the supply chain, all members must have the ability to
collaborate freely. However, companies must also be able to control access to
complex design development and project information so that confidential and
proprietary data is protected and design integrity is maintained. For example, a
company may grant all experienced designers within the enterprise full access to
the design information, but restrict the access of less experienced designers
and third party contractors to only the design information which they require.
Such capabilities become even more crucial to the management of a design project
when a development team is geographically dispersed or crosses corporate
boundaries.
Managing Complex Design Iterations. To improve product development and
communication among product development team members, companies must be able to
manage and track the iterative design process. For example, the typical
development process can require the collaboration of 100 developers using as
many as 75 different design tools. The design process is highly iterative,
consisting of many interactive steps in which members of a development team
analyze, change and eventually transform a set of specifications into a
manufacturable design. The process creates a dynamic loop in which members of
the team make thousands of simultaneous changes to the design information every
day. Each change must be tracked, managed and immediately communicated to other
development team members. For example, when making a design change, an engineer
will perform a series of steps to determine whether the change has created the
desired effect. Often this analysis can span several days or even weeks, and if
other members of the development team do not know exactly which version of the
design files should be analyzed, they may perform tests on an obsolete version
of the design. This can lead to costly delays in getting the product to market.
Coordinating the Reuse of Intellectual Property. A feature-rich complex
product can be brought to market more rapidly by reusing internally or
externally supplied IP cores because less time is required to design and develop
the product. As a result, companies must be able to access internal catalogs of
IP cores and collaborate effectively with suppliers of IP cores to improve their
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productivity and shorten product development cycles. Additionally, companies
that incorporate reusable design information in their products can dedicate
limited resources to value added tasks. Companies are also seeking to implement
enterprise-wide design reuse initiatives to increase the amount of reusable
design data they develop internally.
To date, electronic product development companies have attempted to enable
supply chain collaboration using e-mail, web pages and internally developed ad
hoc collaboration systems to manage design data and perform tracking functions.
Some companies have also attempted to retrofit software configuration management
and product data management software applications for the electronic product
development process. These methods have produced only partially effective
results and are often costly to develop and maintain. In addition, these
solutions are often proprietary and company-specific, thereby limiting
business-to-business collaboration with external product development partners.
Consequently, a company employing these solutions cannot fully realize the
benefits associated with an outsourced supply chain. Moreover, none of these
technologies is designed to manage the complex design information typical of the
electronic product development process. Finally, these solutions are not capable
of integrating with the multiple design tools used in the design process.
Neither the development of a proprietary solution nor the retrofitting of
technologies designed for other purposes fully capitalizes on the real-time
collaboration capabilities of the internet or the investment companies have made
in their existing technologies.
THE SYNCHRONICITY SOLUTION
We provide internet-based software products that enable enterprise-wide and
business-to-business collaboration among participants in electronic product
development supply chains. Our products manage the interaction among supply
chain members and their design information in a highly dynamic environment where
supply chain members must be notified of design modifications in real-time. Our
products also enable and encourage the use of third-party and internally
developed IP cores, allowing companies to focus on their areas of expertise
while decreasing their development costs and time-to-market. In addition, our
products employ an open, standards-based architecture that is designed to
integrate with and complement existing design tools and preserve our customers'
investments in technology. We believe that our solution enables companies to
develop increasingly complex products at lower cost and in less time.
Our internet-based solutions provide companies involved in complex product
development with the capability to:
Effectively Promote and Manage Supply Chain Collaboration. Our products
create an environment in which all members of an electronic product development
supply chain may collaborate as a single virtual project team. When using our
products, a virtual project team can function within a secure, internet-based
environment regardless of the corporate affiliation or geographic location of
its members. In addition, our products permit companies to maintain privacy and
security with respect to internal communications and intellectual property while
providing external members of the supply chain with the access to design
information they require in order to collaborate effectively. Our products have
also been designed to be highly scalable and flexible to manage the varying user
demands and sizes of complex product development supply chains.
Proactively Manage Complex Design Iterations. We design our products to
handle large volumes of simultaneous and interactive changes which are made to
design information during the development process. Our products track,
coordinate and manage all changes and immediately notify those supply chain
members who need to know about the changes. Our products allow a
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member of the supply chain to freely interact with the design information while
automatically coordinating design changes with the numerous other members of the
team. All of these capabilities speed the design process and minimize the
opportunity for design related errors that significantly increase expenses and
delay product introductions. We believe that the use of our products results in
lower costs and decreased time-to-market for our customers.
Efficiently Coordinate the Reuse of Intellectual Property. Our products
enable companies to get to market quickly by promoting the implementation of
design reuse practices. Our solutions have specific capabilities that permit
companies to identify, catalog, publish and manage reusable portions of design
information from internal or external sources. A designer can simply browse a
catalog of reusable designs or IP cores, select and compare them, and then
download the selected IP core for use in a design. Third-party suppliers also
use our products to distribute IP cores, thereby effectively becoming members of
the electronic product development supply chain. Our products allow companies to
focus on their core competencies by utilizing third-party technology and
expertise, thereby improving the efficiency of the product development process.
OUR STRATEGY
We intend to be the leading provider of solutions that enable
enterprise-wide and business-to-business collaboration within complex product
development supply chains. Key elements of our strategy include:
Enhancing the Functionality of Supply Chain Collaboration. We intend to
lead technological innovation for improved internet-based electronic product
development supply chain collaboration, offering our customers software products
designed to enhance critical supply chain processes. We plan to extend the
functionality of our products to create and deliver new value-added applications
that enhance enterprise-wide and business-to-business collaboration. We plan to
develop additional software products to address new opportunities that result
from new business processes that are being created for internet-based
collaboration and interaction among supply chain members. For example, we intend
to develop an additional product to allow IP core suppliers to improve delivery
and support of their products. In addition, we expect to develop our products to
more tightly integrate with and complement third-party design automation
software applications.
Leveraging our Installed Customer Base. We believe that we have assembled a
customer base that is representative of the leaders within the electronics
industry and that their use of our products validates our technological
leadership. Approximately 50 companies worldwide, including eight of the ten
largest semiconductor companies, have purchased our products. Many of our
existing customers initially use our products in specific divisions or for
specific development projects. In many cases, this has led to repeat orders from
and purchases of complementary products by these customers. We believe we can
penetrate more deeply into existing customer sites by expanding deployments into
enterprise-wide implementations as well as cross-selling existing and additional
products.
Capitalizing on Network Effects to Expand Our Customer Base. As our
customers deploy our software across their electronic product development supply
chains, additional supply chain members are exposed to our solution and the
benefits provided by our products. We believe that this exposure, which allows
non-customer participants in the electronic product development supply chain to
benefit from our solution first hand, creates a network effect. We have
experienced incremental sales resulting from our customers' recommending the use
of our products to external product development partners and anticipate that
certain enterprises may require adoption of our products by their external
development partners. In addition, we believe that this network effect will
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increase the proliferation of our products as an industry standard and
strengthen our brand recognition.
Developing and Expanding Strategic and Other Industry Relationships. We
plan to continue to develop strategic technology and marketing relationships
with industry participants including third-party IP core providers, consultants,
contractors and design automation software companies. Our existing relationships
with Cadence Design Systems, Inc. and Synopsys, Inc., have allowed us to tightly
couple our products with the two most widely installed electronic design
automation solutions. We believe these relationships validate the use of our
technology within the electronic product development industry, help us create
brand recognition and increase sales of our products. In order to foster
additional industry relationships, we intend to offer a strategic marketing
program, Synchronicity Direct-Connect, through which new partners will gain
access to our products for the purpose of developing more tightly integrated
solutions between our software products and their product development tools or
services.
Pursuing Additional Market Opportunities. We intend to continue to pursue
the ample opportunities provided by the high growth electronic product
development markets and also address new market opportunities in the future. To
date, we have focused on several segments of the electronic product development
industry. We believe that this industry presents the most difficult challenges
in distributed development and design information management due to the specific
complexities of the electronic product development process, the large volumes of
design information and the large number of participants involved in the process.
Although we intend to continue our focus on the electronic product industry for
the foreseeable future, we believe that the experience we have gained in
developing our supply chain collaboration solution has applications in markets
developing other complex products.
Expanding Our Global Presence. We intend to continue to expand our global
presence to both enhance our competitive position worldwide and increase our
ability to better serve and support our customers. Our products are sold
worldwide and revenues outside of the United States represented 36.8% of total
revenues in 1999. We believe there is significant opportunity to expand sales of
our software products internationally. We intend to increase our international
distribution by developing stronger relationships with international
distributors and by selectively expanding and establishing foreign sales
offices.
PRODUCTS
Our internet-based products provide a comprehensive enterprise-wide and
business-to-business solution to the problem of managing collaboration among
electronic product development supply chain members. Our software has also been
designed to be highly scalable and flexible to manage the varying user demands
and sizes of product development supply chains. In addition, our products employ
an open, standards-based architecture that is designed to integrate with and
complement existing design tools and preserve our customers' existing
investments in technology. The foundation of our products is the SyncServer,
which creates a secure project collaboration portal and performs the following
functions:
-- serves as a project hub by storing design files and project
information;
-- enables the creation of access control rules and enforces these rules;
-- notifies supply chain members when changes are made to design
information; and
-- keeps track of the status of design changes.
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Members of a virtual project team collaborate and communicate using the
following products:
DESIGNSYNC. DesignSync manages the design information within electronic
product development supply chains. DesignSync allows users to:
-- access and retrieve design files from SyncServer;
-- review the history of design changes;
-- share changes with other supply chain members; and
-- receive real-time notices that changes are being made by other team
members.
DesignSync is easy to deploy because it provides support for various
methods of design collaboration commonly used in the design process and may also
complement or be embedded within other design tools. As an example, we created a
specialized version of DesignSync to work with Cadence Design Systems Inc.'s
Design Framework II family of integrated circuit design software so that
developers can access DesignSync directly from within Cadence's operating
environment.
PROJECTSYNC. ProjectSync enables and improves the communication among
members of the electronic product development supply chain. ProjectSync allows
users to:
-- track the lifecycle of design changes;
-- publish and manage design specifications;
-- establish continuous communication with other team members; and
-- create an audit trail of all project team communications.
Project leaders use ProjectSync to track the status of their design projects and
to gain visibility into project statistics, such as the rate at which defects
are found and fixed. While we license ProjectSync as a stand-alone product, our
ProjectSync and DesignSync products are typically used together to create a
comprehensive design and project management solution.
CATALOGSYNC. CatalogSync supports the implementation of design reuse and
enables access to third party design information and IP cores. Using standard
web browsers, members of a product development team can use CatalogSync to:
-- search for IP cores;
-- compare IP cores; and
-- download and incorporate IP cores into new designs.
CatalogSync can be employed both within the boundaries of an enterprise as well
as by third-party providers who make their IP cores available over the internet
to other businesses.
IPGEAR. IPGear is a bundled software solution configured to support the
needs of enterprises that seek to establish collaboration and design reuse
initiatives within and between companies. IPGear consists of CatalogSync,
DesignSync and ProjectSync and is used to implement centralized design reuse
portals for the preparation, storage, distribution and support of reusable IP
cores. The comprehensive solution provided by IPGear can significantly reduce
the amount of time companies spend establishing collaboration initiatives and
centralized, web-accessible design reuse libraries
We are currently developing enhancements to our existing products as well
as new products that will complement our CatalogSync product and add to our
IPGear internet-based design reuse applications.
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CUSTOMERS
To date, we have licensed our products to approximately 50 customers,
predominantly within the semiconductor, IP cores and tools and services market
segments. In 1999, Cadence Design Systems, Inc. accounted for approximately
11.8% of our revenues.
The following is a representative list of customers, each of which has
purchased approximately $50,000 or more of our products:
SEMICONDUCTORS
Conexant Systems, Inc.
Cypress Semiconductor Corporation
Dallas Semiconductor, Inc.
Fujitsu Microelectronics, Inc.
Hitachi Semiconductor Inc.
Intel Corporation
LSI Logic Corporation
PMC-Sierra, Inc.
ST Microelectronics N.V.
Texas Instruments Incorporated
VTC Inc.
Xilinx, Incorporated
IP CORES
ARM Ltd.
MIPS Technologies, Inc.
Pivotal Technologies, Corp.
OTHER ELECTRONIC PRODUCTS
Globespan Semiconductors, Inc.
Lucent Technologies Inc.
Motorola Incorporated
NEC Electronics, Inc
Nortel Networks Corporation
Philips Semiconductors B.V.
Qualcomm, Inc.
TOOLS/SERVICES
ASIC International, Inc.
Cadence Design Systems, Inc.
Synopsys, Inc.
The Virtual Component Exchange
The following case studies illustrate how some companies are using our
products:
INTEL CORPORATION
Intel, the world's largest chipmaker, designs, develops, manufactures and
markets computer components and related products.
Business Challenge. Intel's design organization contains thousands of
developers in numerous large sites distributed around the world, and many of
their product development projects require the collaboration of hundreds of
engineers from multiple sites. One of Intel's challenges is to maximize the
productivity and efficiency of their design teams as well as to encourage the
reuse of design information wherever possible. As a result of the need for
increased collaboration, Intel wanted to create an internet-based collaboration
system that enabled real-time management of the entire design process flow as
well as the tracking of communication across multiple design sites.
Solution. Intel licensed our DesignSync and ProjectSync solutions to
address its multi-site design and communications challenges. Our solutions have
enabled Intel to develop secure, seamless, internet-based access to all relevant
development information regardless of the location of product development team
members. Intel also licensed our IPGear product to build an internet-based
solution for corporate-wide access to, and management of, reusable design
information and intellectual property. Through the use of our solutions, Intel
expects to experience improvements in the productivity of its collaborative
design teams and accelerate the integration of its resources across its
distributed development organization.
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CYPRESS SEMICONDUCTOR CORPORATION
Cypress Semiconductor Corporation designs, develops, manufactures and
markets high-performance digital and mixed-signal integrated circuits for a
range of markets, including computers, data communications, telecommunications
and instrumentation systems.
Business Challenge. Cypress' complex product development processes
necessitate team collaboration across multiple locations and the reuse of
existing, value-added design information. Cypress required a solution to
implement an internet-based project management environment that would enhance
development team collaboration among its numerous engineers and improve the
consistency of management processes employed throughout the product design
process. In addition, Cypress wanted to develop an internet-based environment to
manage, catalog and communicate reusable design information to the entire design
organization.
Solution. Cypress licensed our DesignSync and ProjectSync products to
solve its multi-site design and project management challenges. Our solutions
have enabled Cypress to establish secure, real-time, internet-based access to
complex design information regardless of a team member's geographic location. In
connection with using DesignSync and ProjectSync, Cypress licensed our IPGear
product to implement an internet-based internal catalog to publish reusable
design information. Cypress' use of our products has resulted in increased
collaboration and productivity and Cypress expects to further increase
productivity and reduce product development cycles with the implementation of a
design reuse catalog.
PMC-SIERRA, INC.
PMC-Sierra designs, develops and markets high-performance semiconductor
networking components for use in high speed transmission and networking systems
and by customers including Cisco and Intel.
Business Challenge. After acquiring numerous companies specializing in
innovative networking systems architectures, PMC-Sierra faced the challenge of
quickly integrating inconsistent design and project management practices across
geographic locations and corporate information systems. In addition, PMC-Sierra
required real-time access to the design expertise and reusable design
information within its acquired companies. PMC-Sierra required a solution that
would enable its existing product development teams to interact with acquired
companies to enhance collaboration and share reusable design information.
Solution. PMC-Sierra licensed our DesignSync and ProjectSync products to
address their enterprise-wide, multi-site design and project management
challenges. Our products have enabled PMC-Sierra to establish an interactive
communication solution that has provided distributed development team members
from numerous enterprises with the ability to freely collaborate on product
development projects. In addition, PMC-Sierra licensed our IPGear product to
implement an internet-based catalog of reusable design information and
intellectual property contained within its acquired companies. As a result of
using our solutions, PMC-Sierra quickly integrated its existing and acquired
companies' development teams and design information to accelerate the transfer
of human and intellectual property resources across its enterprise.
CONEXANT SYSTEMS, INC./ARM LTD.
Conexant Systems is the world's largest independent company focused
exclusively on providing semiconductor products for communications electronics.
Conexant's products facilitate communications worldwide through wireline, voice
and data communications networks, cordless and
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cellular wireless telephony systems and emerging cable and wireless broadband
communications networks.
ARM is a leading intellectual property provider of low-cost,
power-efficient micro-processors, peripherals, and system-on-chip designs.
Conexant licenses some of ARM's most complex intellectual property for use
in its leading-edge designs as well as to add features to its products and
reduce its time-to-market.
Business Challenge. Conexant and ARM jointly decided that a new
internet-based collaboration system was needed to maximize the benefits that
Conexant receives from using ARM's design information as well as to enhance
ARM's revenue stream. Together, Conexant and ARM determined that a collaborative
system should be able to transfer ARM's intellectual property to Conexant,
validate the deliverable intellectual property and quickly incorporate such
intellectual property into Conexant's designs.
Solution. Both Conexant and ARM licensed our DesignSync, ProjectSync and
IPGear products to firmly establish real-time interaction and create a seamless
mechanism for the delivery, support and update of design information and
intellectual property. Our solutions have enabled ARM and Conexant to develop a
"virtual project team" in which both companies' team members interact as active
participants in the design of Conexant products. Conexant and ARM expect that
their business-to-business collaboration will improve the productivity of
Conexant's engineers and accelerate the resolution of support requests and
design changes between the companies, resulting in increased productivity and
reduced time-to-market for Conexant's products.
THE VIRTUAL COMPONENT EXCHANGE (VCX)
VCX, based in Scotland, is the first commercial endeavor to organize an
internet-based marketplace for the buying and selling of semiconductor
intellectual property.
Business Challenge. VCX's challenge was to bring together intellectual
property suppliers and customers to accelerate the exchange of semiconductor
intellectual property. VCX required an easy to use internet-based solution to
create a catalog that publishes available intellectual property and to enable
VCX to control access to intellectual property in a secure environment.
Solution. VCX licensed our IPGear product as a foundation for its
internet-based intellectual property catalog. We continue to provide consulting
services to VCX as it configures IPGear's capabilities in order to directly and
simply implement its evolving intellectual property exchange. VCX expects that
exchange members will have controlled access to intellectual property based upon
agreements that customers execute with the intellectual property suppliers. VCX
anticipates that its internet-based intellectual property exchange will be used
as a standard means to identify and incorporate third party intellectual
property into products developed by virtual project teams, thereby decreasing
users' time-to-market and design costs.
PARTNERSHIPS AND STRATEGIC RELATIONSHIPS
Creating and supporting long-term relationships with strategically
important partners is a key component of our strategy. These relationships
provide us with name recognition, industry acceptance, and access to third-party
tools and technological expertise. These relationships may contribute
beneficially to our product development efforts as well as to our sales and
marketing campaigns. To date, we have established strategic relationships with
Cadence Design Systems, Inc. and Synopsys, Inc.
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Our relationship with Cadence began in 1998 when we signed a joint
marketing agreement announcing our technology alliance. In 1999, we entered into
three-year original equipment manufacturer and joint development agreements with
Cadence under which we supply to Cadence electronic product development
collaboration and data management technology. This relationship led to the
development of our DesignSync DFII product, a specialized version of DesignSync
designed to work with Cadence's Design Framework II family of integrated circuit
design products, and has validated our position as the leading provider of
electronic product development supply chain software. In addition, we have
benefited from sponsored access to the installed base of the Cadence family of
products into which we sell the DesignSync DFII product.
Synopsys, Inc. licensed our technology in 1998 to create and publish an IP
core catalog for members of its IP Catalyst Program, a Synopsys customer
consortium. Later that year, Synopsys made an equity investment in us. We
believe our relationship with Synopsys has increased our visibility within the
Synopsys installed base of customers.
PRODUCT TECHNOLOGY AND ARCHITECTURE
We designed our products upon open systems standards used within the
software industry for internet applications. Our architecture is designed to be
scalable to accommodate the demands of an expanding product development supply
chain and adaptable to changing customer requirements. The result is a low cost,
low maintenance, high performance application that eliminates the need for
complex customization or in-house development efforts.
Our internet-based architecture utilizes the industry standard Hyper-Text
Transport Protocol (HTTP) to enable communication between application servers
and internet-based applications. Our application servers are based on the Apache
Web Server for UNIX and on the Microsoft Internet Information Server (IIS) for
the Windows NT platform. We selected these platforms for their broad industry
acceptance. We use licensed encryption technology from RSA Data Security to
maintain data and file security while information is transported over the
internet. Users of our products access the application servers through standard
web browsers such as Netscape Communicator and Microsoft Internet Explorer. In
addition, we supply UNIX and Windows-based versions of our applications. Our
application server products are available on Sun Solaris, HP-UX, and Windows NT.
At the core of our architecture is the Synchronicity Object Model which is
based on the Component Object Model standard from Microsoft. The Synchronicity
Object Model provides all of the functions for:
- database management;
- version control;
- change notification;
- event driven triggering of actions;
- access and privilege control;
- encryption;
- compression; and
- dynamic report generation.
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The Synchronicity Object Model contains specialized technology that allows it to
manage complex data formats. It also contains technology that allows our
applications to support workflows and workspace management models common to
complex product development processes.
We implement our software in the C++ language as well as portions in C,
Java, JavaScript, TCL and HTML. Our software may be ported to the various
operating systems without significant porting effort. We provide online
documentation for all of our products and we support the formats of Windows
Online Help, HTML and PDF. We enable our products for multi-byte localization to
support foreign languages.
We have entered into various alliances to ensure our products are based on
open industry standards and to enable us to take advantage of current and
emerging technologies. We are members of developer partnership programs with
Microsoft Corporation, Hewlett-Packard Company, IBM, Sun Microsystems, Inc.,
Rational Software Corporation, Cadence Design Systems, Inc. and Synopsys, Inc.
We are a member of relevant industry standards organizations. We actively
participate as a member in both the Virtual Socket Interface Alliance (VSIA) and
the Reusable Application-Specific Intellectual Property Developers (RAPID). We
have been active in the Virtual Component Exchange (VCX) as both a member and a
technology supplier for the implementation of VCX's internet-based marketplace
for IP cores.
PRODUCT DEVELOPMENT
We believe that innovation begins with the customer. We obtain extensive
feedback from our customers and field applications engineers. This provides us
with an in-depth understanding of our customers' needs and has led to the
development of technology and products which provide real solutions to complex
problems.
We divide our engineering staff into the following teams:
- software development;
- quality assurance;
- test automation;
- documentation;
- customer support; and
- training.
A cross-functional team with representatives from each of these groups and
marketing and sales provides input into our product planning process. We also
seek out and monitor industry sources for the latest technological advances and
market trends to ensure that our products remain current.
We use our products to facilitate collaboration and communication within
our engineering organization and our company at large and to test our products
before we release them to our customers. We use our products because we need to
collaborate in a secure fashion across multiple sites. We use our products to:
- track and manage source code development;
- manage the development of documentation; and
- analyze customer input/feedback.
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We have formed a technical advisory committee that includes representatives
from our leading customers and members of our product development team. We
consult with the members of our committee to obtain direct feedback on our
products, input on future product development and to help steer our technology
direction. Currently, this group consists of representatives from Cypress
Semiconductor Corporation, ST Microelectronics N.V., Cisco Systems, Inc.,
Fujitsu Microelectronics, Inc. and ARM Ltd.
We perform regular product releases, balancing the introduction of large
new features or new products, which inherently require more research and
development, with smaller releases containing minor enhancements and defect
fixes. We aim to perform at least one major software release and between three
and five minor releases each year. We are currently developing enhancements to
our existing products as well as several new products that will complement our
CatalogSync product and add to our IPGear suite of internet-based design reuse
applications.
SALES AND MARKETING
Our sales and marketing organizations develop our markets and generate
sales leads. Additionally, they position and promote our image and identify
customer product requirements. We market and sell our products primarily through
our direct sales force located in the United States and Europe and through
distributors in Europe and Japan. Our direct sales force consists of senior
account executives who focus on major opportunities in specific geographic
territories and sales applications engineers who provide pre-sales technical
support. We intend to continue to expand our domestic and international direct
sales force by expanding into additional geographic locations. We are also in
the early stages of complementing our direct sales force, particularly
internationally, with additional distribution channels, including non-exclusive
distributors and consulting partners.
To support our direct sales efforts and to actively promote our brand, we
engage in a variety of marketing activities. These include:
- co-marketing strategies with our existing business partners;
- targeting additional new strategic relationships;
- managing and maintaining our web site content;
- advertising in industry and other publications;
- conducting public relations campaigns; and
- establishing and maintaining relationships with recognized industry
analysts.
We promote our products and services through regional sales promotional seminars
for prospective customers. We also actively participate in electronic product
related trade shows.
We establish marketing alliances with strategic partners such as Cadence to
promote the distribution of our products and to increase our product
interoperability. We also pursue services alliances with consulting distribution
firms to:
- configure our software;
- provide customer support services;
- create customized customer presentations and demonstrations; and
- endorse our products during the evaluation stage of the sales cycle.
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<PAGE> 48
We believe that our relationships with these service providers may shorten our
sales cycle because these service providers have generated and qualified sales
leads, made initial customer contacts and assessed needs prior to our
introduction.
CONSULTING SERVICES, CUSTOMER SUPPORT AND TRAINING
Consulting. We offer fee-based consulting services to assist in:
- methodology selection and planning;
- initialization and setup; and
- loading of existing design data.
We intend to utilize our specialized expertise to facilitate and accelerate
wide-scale adoption of our products at the enterprise level. This approach
allows us to increase our revenues and provides us with opportunities to deepen
our knowledge of our customers' needs.
Customer Support. We believe that our success depends upon responsive
customer support and periodic product updates on a when-and-if available basis
through our annual maintenance program. Customers generally purchase the first
year of support at the time they initially license a product. We offer customer
support primarily through our internet-based customer problem reporting and
resolution system as well as by e-mail and telephone. Utilizing our web-site,
customers have access to product notices, updates, problem reporting and
tracking and self-help through our extensive online knowledge base. Our field
application force, in some instances, also provides end-user support.
Training. We offer our customers a variety of classes and related
materials on product functionality, system administration, updates and new
releases. We also offer these classes as part of our "Train the Trainer"
program. We have in the past conducted these training classes primarily at
customer sites but are increasingly conducting them at our training centers in
San Jose, California and Marlboro, Massachusetts.
COMPETITION
To date, companies have attempted to solve the problems addressed by our
products primarily by developing proprietary ad hoc solutions and retrofitting
elements of technology from other markets such as the software configuration
management market and the product data management market. These solutions
typically provide only some of the capabilities required to meet the needs of
virtual project teams and are generally not available to external supply chain
partners. Accordingly, we believe our primary current source of competition is
in-house development efforts by customers and potential customers. In the
future, we may face potential competition from providers of configuration
management software, such as Rational Software Corporation, and supply chain
management software, such as Agile Software Corporation.
We expect competition to emerge and intensify, which could result in price
reductions, reduced gross margins and loss of market share, any of which could
seriously harm our business.
We believe that our ability to compete depends on many factors both within
and outside our control, including:
- the performance, functionality, price, reliability and speed of our
solutions;
- the timing and market acceptance of new products or enhancements to our
existing suite of products;
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<PAGE> 49
- the quality of our customer service; and
- the effectiveness of our sales and marketing efforts.
We believe we currently are in a position to compete favorably with respect
to each of these factors. We believe our market is relatively new and our
software has created a new category of products. Therefore, we may not be able
to maintain our competitive position against potential competition, particularly
competitors that have longer operating histories and significantly greater
financial, technical, marketing and other resources than we do and therefore may
be able to respond more quickly to new or changing opportunities, technologies
and customer requirements. Also, many potential competitors have greater name
recognition and more extensive customer bases that could be leveraged to gain
market share to our detriment. These competitors may be able to undertake more
extensive promotional activities, adopt more aggressive pricing policies, and
offer more attractive terms to purchasers than we can. In addition, potential
competitors have established or may establish cooperative relationships among
themselves or with third parties to enhance their products. Accordingly, it is
possible that new competitors or alliances among potential competitors may
emerge and rapidly acquire significant market share.
PROPRIETARY RIGHTS
Our success and ability to compete depend upon our proprietary technology.
We have no patents. We rely on copyright, trade secret and trademark law to
protect our proprietary information. We also typically enter into agreements
with our employees, consultants and customers to control their access to and
distribution of our software, documentation and other proprietary information.
Nevertheless, a third party could copy or otherwise obtain our software or other
proprietary information without authorization, or could develop software
competitive to ours. Our means of protecting our proprietary rights may not be
adequate and our competitors may independently develop similar technology or
duplicate our products or our other intellectual property. In addition, the laws
of some foreign countries do not protect our proprietary rights to as great an
extent as do the laws of the United States. We expect that it will become more
difficult for us to monitor the use of our products if we increase our
international presence.
In addition, we integrate third-party software into our products from RSA
Security, Inc. for security and encryption technology, from Bristol
Technologies, Inc. for platform portability and from DuraSoft GmbH for revision
control. These third-party software components may not continue to be available
on commercially reasonable terms. If we cannot maintain licenses to such
third-party software at an acceptable cost, shipments of our products may be
delayed until equivalent software can be developed or licensed and integrated
into our products.
Certain of our significant customers have negotiated for our source code to
be held in escrow and to be released upon specific events such as our bankruptcy
or our failure to meet support obligations to such customers. The release of our
source code from escrow to such customers could seriously harm our business.
There has been a substantial amount of litigation in the software and
internet industries regarding intellectual property rights. It is possible that,
in the future, third parties may claim that we, or our current or potential
future products, infringe their intellectual property. We expect that software
product developers and providers of electronic commerce solutions will
increasingly be subject to infringement claims as the number of products and
competitors in our industry segment grows and the functionality of products in
industry segments overlaps. Any claims, with or without merit, could be
time-consuming, result in costly litigation, cause product shipment delays or
require us to enter into royalty or licensing agreements. If our products were
found to infringe a third
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<PAGE> 50
party's proprietary rights we could be required to enter into royalty or
licensing agreements in order to continue to be able to sell our products.
Royalty or licensing agreements, if required, may not be available on terms
acceptable to us or at all. This could seriously harm our business.
EMPLOYEES
As of December 31, 1999, we had a total of 69 employees. Of this total, 29
were in research and development, seven were in consulting, customer support and
training, eight in marketing, 20 in sales and five in finance and
administration. We also retain independent contractors to support activities
such as our consulting services and product development. Our success depends on
our ability to attract and retain qualified, experienced employees. None of our
employees is represented by a collective bargaining unit, and we have never
experienced a work stoppage. We consider our relations with our employees to be
good.
FACILITIES
Our headquarters are currently located in a leased facility in Marlboro,
Massachusetts, consisting of approximately 9,259 square feet under a lease
expiring in 2004 with expansion and renewal options. We also lease offices for
sales and service personnel in San Jose, California, Orlando, Florida and
Seattle, Washington. We believe our current facilities are adequate to meet our
needs for the foreseeable future.
LEGAL PROCEEDINGS
From time to time we have been and expect to continue to be subject to
legal proceedings and claims in the ordinary course of business. We currently
are not a party to any material legal proceeding.
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<PAGE> 51
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
Our directors, executive officers and key employees and their ages as of
February 16, 2000 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Dennis R. Harmon 39 Chairman of the Board, Chief Executive Officer and
President
Eugene C. Connolly 49 Executive Vice President, Chief Operating Officer,
Treasurer and Director
Onofrio Sozio 37 Vice President Product Development
Mitchel Mastellone 36 Vice President Research and Development, Chief
Technical Officer
Steve Robbins 40 Vice President Worldwide Sales
Mark Miller 43 Vice President Marketing & Business Development
Joseph A. Calo 47 Vice President Finance, Chief Financial Officer
Seth Lieber(1) 35 Director
James C. Furnivall(1)(2) 42 Director
Leigh Michl(2) 38 Director
Richard T. Finigan(1)(2) 60 Director
</TABLE>
- ------------------------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
Dennis R. Harmon co-founded Synchronicity and has served as our President
and Chief Executive Officer and a member of our board of directors since our
inception in January 1996. From 1994 to 1996, Mr. Harmon served as Manager of
Worldwide Strategic Account Services for Viewlogic Systems Inc., a developer of
engineering design automation software. From 1989 to 1994, Mr. Harmon served as
Manager of Worldwide Corporate Applications for Viewlogic Systems Inc. From 1986
to 1989, Mr. Harmon held various electrical engineering positions at Viewlogic.
Mr. Harmon received a B.S. in Electrical/Mechanical Engineering from the
University of Maine.
Eugene C. Connolly co-founded Synchronicity and has been a member of our
board of directors since our inception in January 1996. Since August 1999, Mr.
Connolly has served as Executive Vice President and Chief Operating Officer.
From 1996 to 1999, Mr. Connolly served as our Vice President of Operations. From
1985 to 1996, Mr. Connolly served as Vice President Human Resources for
Viewlogic Systems Inc. From 1980 to 1985, Mr. Connolly served as Vice President
of Human Resources for Telesis Systems Inc., a design automation software
company. Mr. Connolly received a B.A. in Business Administration from Kentucky
Wesleyan College.
Onofrio Sozio co-founded Synchronicity and has served as our Vice President
of Product Development since our inception in January 1996. From 1995 to 1996,
Mr. Sozio served as a Technology Consultant, Strategic Account Services, for
Viewlogic Systems, Inc. From 1994 to 1995 he served as a Corporation
Applications Consultant for Viewlogic and from 1993 to 1994, as an Applications
Engineer at Viewlogic. From 1986 to 1993, Mr. Sozio served as an electrical
engineer for Digital Equipment Corporation, a developer of computer hardware
products, which was acquired by Compaq Computer Corporation. Mr. Sozio received
a B.S. in Electrical Engineering from Northeastern University.
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<PAGE> 52
Mitchel Mastellone co-founded Synchronicity and has served as our Vice
President of Research and Development since our inception in January 1996 and as
our Chief Technical Officer since April 1997. From 1990 to 1996, Mr. Mastellone
served as a Technology Consultant, Strategic Account Services, for Viewlogic
Systems, Inc. From 1985 to 1990, Mr. Mastellone served as a Senior Member of
Technical Staff for Harris Semiconductor, a prior division of Harris
Corporation, a communications, semiconductor, office systems and advanced
electronic systems company. Mr. Mastellone received a B.S. in Computer Science
and Business from Rutgers University.
Steve Robbins has served as our Vice President of Worldwide Sales since
June 1996. From 1991 to 1996, Mr. Robbins served as Vice President of Eastern
Area Sales for Viewlogic Systems, Inc. From 1984 to 1991, Mr. Robbins served in
various senior sales management positions with Advanced Micro Devices, Inc., a
semiconductor manufacturer. From 1983 to 1984, Mr. Robbins served as District
Distributor Manager for Harris Semiconductor, a prior division of Harris
Corporation. Mr. Robbins received a B.S. in electrical engineering from
University of Central Florida.
Mark Miller has served as our Vice President of Marketing and Business
Development since October 1996. From 1993 to 1996, Mr. Miller served as Vice
President of Marketing for Escalade Corporation, an engineering design
automation company. From 1987 to 1993, Mr. Miller held sales and marketing
positions and was Director of the IC Technology Center for Mentor Graphics
Corporation, a provider of electronic hardware and software design systems,
electronic design automation and consulting services. From 1983 to 1987, Mr.
Miller was General Manager of Advanced VLSI Tools at Daisy Systems, Inc., an
engineering design automation company. Mr. Miller received a B.S. in electrical
engineering from Rensselaer Polytechnic Institute.
Joseph A. Calo has served as our Vice President of Finance and Chief
Financial Officer since August of 1999. From 1998 to 1999, Mr. Calo served as
Vice President of Finance. From 1989 to 1998, Mr. Calo served as Corporate
Controller and subsequently Vice President of Finance for Viewlogic Systems,
Inc. From 1980 to 1989, Mr. Calo served as International Controller for Prime
Computer, Inc., a minicomputer manufacturer. Mr. Calo received a B.S. in
Business from Western New England College and an M.B.A. from Babson College.
Seth Lieber has served a director of our company since 1996. Mr. Lieber has
served as a Vice President of GeoCapital LLC, an investment advisory firm, since
1991 and has been a Partner with Wheatley Partners, L.P., since 1996. From 1988
to 1991, Mr. Lieber worked for Donaldson, Lufkin & Jenrette, an investment
banking firm, in its investment services group. Mr. Lieber received his B.S. in
Finance from Boston University.
James Furnivall has served as a director of our company since 1997. Mr.
Furnivall has served as a Principal with Canaan Venture Partners, a venture
capital firm, since 1996 and a Partner since 1999. From 1995 to 1996, Mr.
Furnivall served as Managing Director for Comdisco Ventures, the venture capital
division of Comdisco, Inc., a technology management services company, and from
1991 to 1995, Mr. Furnivall served as an Associate Director in the Investment
Banking Group of Bear Stearns & Co., an investment banking firm. Mr. Furnivall
received a B.S. in Chemical Engineering from Princeton University and an M.B.A.
from The Wharton School at the University of Pennsylvania.
Leigh Michl has served as a director of our company since 1998. Since 1999,
Mr. Michl has served as the Managing Director for Ascent Venture Management,
Inc., a venture capital firm. From 1989 to 1999, Mr. Michl served as Vice
President and General Partner with Pioneer Capital Corporation, a venture
capital firm. From 1987 to 1989, Mr. Michl served as Audit and Business Analyst
for the Pioneer Group Inc., a diversified financial services company and from
1984 to
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<PAGE> 53
1987, Mr. Michl was an internal auditor with General Electric Company, a
conglomerate industrial corporation. Mr. Michl received a B.A. in Economics from
Bates College and an M.S. in Finance from Boston College. Mr. Michl also serves
as a director of SoftLock.com, Inc., a provider of security software and
services.
Richard T. Finigan has served as a director of Synchronicity since April of
1996. Mr. Finigan currently serves as Vice-Chairman of PADS Software, Inc., an
engineering design automation company, and served as its Chief Executive Officer
and Vice-Chairman from 1992 to 1999. From 1984 to 1992, Mr. Finigan served as
Vice President of Finance and Chief Financial Officer for Viewlogic Systems,
Inc. From 1981 to 1985, Mr. Finigan served as Vice President and Chief Financial
Officer for Iteco, an international training and education company. From 1976 to
1981, Mr. Finigan served as Vice President-Corporate Controller for Prime
Computer. Mr. Finigan is a C.P.A., graduated from Bentley School of Accounting &
Finance and received a B.A. in Business from Suffolk University and an M.B.A.
from Babson College.
BOARD COMPOSITION
Following this offering, our board of directors will be divided into three
staggered classes, each of whose members will serve for a three-year term. The
board will consist of two class I directors (Messrs. Connolly and Harmon), two
class II directors (Messrs. Furnivall and Lieber) and two class III directors
(Messrs. Finigan and Michl). At each annual meeting of stockholders, a class of
directors will be elected for a three-year term to succeed the directors of the
same class whose terms are then expiring. The terms of the class I directors,
class II directors and class III directors will expire upon the election and
qualification of successor directors at the annual meeting of stockholders to be
held during calendar years 2001, 2002 and 2003, respectively.
Each officer serves at the discretion of the board of directors and holds
office until his or her successor is elected and qualified or until his or her
earlier resignation or removal.
There are no family relationships among any of our directors or executive
officers.
BOARD COMMITTEES
Upon completion of our offering our board of directors' compensation
committee will be composed of Messrs. Finigan, Furnivall and Lieber. The
compensation committee makes recommendations concerning salaries and incentive
compensation of our management. In addition, our compensation committee
administers and grants equity incentives under our stock plans.
The board of directors also has an audit committee which, upon completion
of our offering, will be composed of Messrs. Finigan, Furnivall and Michl. The
audit committee is governed by a charter which requires that each member of the
committee be independent. The charter also identifies the roles and
responsibilities of the committee, which include:
-- oversight of the audit process performed by our independent auditors;
-- review of the scope, and results of, the audit process,
-- oversight of the integrity and accuracy of our financial reporting,
both internal and external; and
-- review of our annual and interim financial statements.
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<PAGE> 54
DIRECTOR COMPENSATION
We do not currently compensate directors for attending meetings of the
board of directors or committee meetings of the board of directors. Directors
are reimbursed for reasonable expenses incurred in attending board meetings. We
have made grants of stock options to certain directors in the past. In February
1996, Mr. Finigan was granted a non-qualified stock option under the 1996 Stock
Option Plan to purchase 50,000 shares of Common Stock at an exercise price of
$0.05 per share, which has vested and been exercised. In December 1996, Mr.
Lieber was granted a non-qualified stock option under the 1996 Stock Plan to
purchase 31,250 shares of common stock at an exercise price of $0.16 per share,
which has vested and been exercised. In June 1997, Mr. Furnivall was granted a
non-qualified stock option under the 1996 Stock Plan to purchase 28,250 shares
of common stock at an exercise price of $0.18 per share, which has vested and
been exercised. All option grants were made at the discretion of the board of
directors.
In addition, our 2000 Non-Employee Director Stock Option Plan will become
effective upon the completion of this offering. The plan provides for the grant
of stock options to purchase a maximum of 250,000 shares of our common stock.
See "Management -- Equity and Other Incentives -- 2000 Non-Employee Director
Stock Option Plan."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Upon completion of our offering, the members of our compensation committee
will be Messrs. Finigan, Lieber and Furnivall. No executive officer has served
as a director or member of the compensation committee, or other committee
serving an equivalent function, of any entity whose executive officers served as
a member of the compensation committee of our board of directors. The full board
of directors has in the past made all decisions regarding executive officer
compensation and the granting of stock options.
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<PAGE> 55
EXECUTIVE COMPENSATION
The following table sets forth information concerning the total
compensation paid or accrued during the fiscal year ended December 31, 1999 to
our chief executive officer and our six other most highly compensated executive
officers whose salary and bonus for such fiscal year equaled or exceeded
$100,000. We refer to all of these officers collectively as our named executive
officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
-------------------- ------------------
SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION(S) SALARY BONUS UNDERLYING OPTIONS COMPENSATION
<S> <C> <C> <C> <C>
Dennis R. Harmon......................... $135,000 $ 54,000 15,000 --
Chairman of the Board, President and
Chief Executive Officer
Eugene C. Connolly....................... 127,000 40,800 15,000 --
Executive Vice President and Chief
Operating Officer
Onofrio Sozio............................ 127,000 40,800 15,000 --
Vice President of Product
Development
Mitchel Mastellone....................... 127,000 40,800 15,000 --
Vice President of Research and
Development and Chief Technical
Officer
Steve Robbins............................ 110,000 229,248(1) 20,000 $6,000(2)
Vice President of Worldwide Sales
Mark Miller.............................. 131,000 52,800 20,000 --
Vice President of Marketing and
Business Development
Joseph A. Calo........................... 117,750 64,600 20,000 --
Vice President of Finance and Chief
Financial Officer
</TABLE>
- ------------------------------
(1) $209,248 represents sales commissions.
(2) Consists of an automobile allowance.
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<PAGE> 56
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information as to stock options granted to
each of our named executive officers during the year ended December 31, 1999.
The exercise price per share of each option grant was equal to the fair market
value of the common stock on the grant date as determined by the board of
directors at such time. We have never granted any stock appreciation rights.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT
--------------------------------------------------------- ASSUMED ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ---------------------
NAME GRANTED FISCAL YEAR(1) PER SHARE DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Dennis R. Harmon.......... 15,000 2.6% $0.75 9/21/09 $7,087 $17,930
Eugene C. Connolly........ 15,000 2.6 0.75 9/21/09 7,087 17,930
Onofrio Sozio............. 15,000 2.6 0.75 9/21/09 7,087 17,930
Mitchel Mastellone........ 15,000 2.6 0.75 9/21/09 7,087 17,930
Steve Robbins............. 20,000 3.4 0.75 9/21/09 9,433 23,850
Mark Miller............... 20,000 3.4 0.75 9/21/09 9,433 23,850
Joseph A. Calo............ 7,000 1.2 0.75 6/14/09 3,307 8,347
13,000 2.2 0.75 7/31/09 6,142 15,502
</TABLE>
- ------------------------------
(1) The percentage of total options granted to employees in the last fiscal year
is based on options to purchase an aggregate of 586,075 shares.
(2) Amounts that may be realized upon exercise of the options immediately before
the expiration of their term, assuming the specified compound rates of
appreciation (5% and 10%) on the market value of the common stock on the
date of option grant over the term of the options. These numbers are
calculated based on rules promulgated by the Securities and Exchange
Commission and do not reflect our estimate of future stock price growth.
Actual gains, if any, on stock option exercises and common stock holdings
are dependent on the timing of exercise and the future performance of the
common stock. There can be no assurance that the rates of appreciation
assumed in this table can be achieved or that the amounts reflected will be
received by the individuals.
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<PAGE> 57
FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to unexercised
options held as of December 31, 1999 by our chief executive officer and our six
most highly compensated executive officers, other than our chief executive
officer. During 1999 Steve Robbins exercised his options to purchase 150,000
shares of common stock, Mark Miller exercised his options to purchase 69,500
shares of common stock and Joseph A. Calo exercised his options to purchase
28,480 shares of common stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END(1)
-------------------------- -----------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Dennis R. Harmon................. 1,200 13,800
Eugene C. Connolly............... 1,200 13,800
Onofrio Sozio.................... 1,200 13,800
Mitchel Mastellone............... 1,200 13,800
Steve Robbins.................... 71,000 59,000
Mark Miller...................... 1,600 48,900
Joseph A. Calo................... 1,800 59,720
</TABLE>
- ------------------------------
(1) Calculated by determining the difference between the exercise price and the
estimated initial public offering price of $ per share.
EQUITY AND OTHER INCENTIVES
1996 STOCK OPTION PLAN
Our board of directors and stockholders adopted the 1996 Stock Option Plan
in January 1996. The aggregate number of shares of common stock which may be
issued under the 1996 Stock Option Plan is 531,350. Under the 1996 Stock Plan,
we were authorized to grant incentive stock options and non-qualified stock
options to employees, consultants, directors and officers. The 1996 Stock Option
Plan provides that the Board of Directors has the authority to select the
participants and determine the terms of the stock options, awards and purchase
rights granted under the 1996 Stock Option Plan. An incentive stock option is
not transferable by the recipient except by will or by the laws of descent and
distribution. Non-qualified stock options and other awards are transferable only
to the extent provided in the agreement relating to such option or award or in
response to a valid domestic relations order. Generally, no incentive stock
options may be exercised more than three months following termination of
employment. However, in the event that termination is due to death or
disability, the stock option is exercisable for a maximum of one year after such
termination. As of December 31, 1999, we had outstanding under the 1996 Stock
Option Plan incentive stock options to purchase 245,000 shares of common stock
and 5,000 non-qualified stock options. We no longer grant stock or options to
purchase stock under this plan.
1996 STOCK PLAN
Our board of directors adopted the 1996 Stock Plan in December 1996. Our
stockholders approved the 1996 Stock Plan in April 1997. The aggregate number of
shares of common stock which may be issued under the 1996 Stock Plan, as
amended, is 1,177,950. Under the 1996 Stock Plan, we were authorized to grant
incentive stock options and non-qualified stock options, as well as awards of
common stock and opportunities to make direct purchases of common stock to
employees, consultants, directors and officers. The 1996 Stock Plan provides
that the Board of
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<PAGE> 58
Directors or the compensation committee has the authority to select the
participants and determine the terms of the stock options, awards and purchase
rights granted under the 1996 Stock Plan. An incentive stock option is not
transferable by the recipient except by will or by the laws of descent and
distribution. Non-qualified stock options and other awards are transferable only
to the extent provided in the agreement relating to such option or award or in
response to a valid domestic relations order. Generally, no incentive stock
options may be exercised more than three months following termination of
employment. However, in the event that termination is due to death or
disability, the stock option is exercisable for a maximum of 180 days after such
termination. As of December 31, 1999, we had outstanding under the 1996 Stock
Plan incentive stock options to purchase 606,350 shares of common stock and
non-qualified stock options to purchase 183,500 shares of common stock. We no
longer grant stock or options to purchase stock under this plan.
1999 STOCK OPTION AND INCENTIVE PLAN
Our 1999 Stock Option and Incentive Plan was adopted by our board of
directors in April 1999 and approved by our stockholders in May 1999 and was
amended and restated on February 16, 2000. The 1999 plan provides for the grant
of stock-based awards to our employees, officers, directors, consultants or
advisors. Under the 1999 plan, we may grant options that are intended to qualify
as incentive stock options within the meaning of the Internal Revenue Code,
options not intended to qualify as incentive stock options, restricted stock and
other stock-based awards. Incentive stock options may be granted only to our
employees. A total of 1,325,000 shares of common stock have been reserved for
issuance under the 1999 plan. The 1999 plan provides that the number of shares
authorized for issuance will automatically increase by 5% of the issued and
outstanding number of shares of common stock on December 31, 2000, 2001, 2002,
2003 and 2004, provided, however, no more than 5,100,000 shares of common stock
may be cumulatively available for issuance pursuant to incentive stock options.
As of December 31, 1999, we had outstanding under the 1999 Stock Option and
Incentive Plan, incentive stock options to purchase 465,527 shares of common
stock and non-qualified stock options to purchase 15,000 shares of common stock.
The 1999 plan is administered by our board of directors or a committee
appointed by the board of directors. Subject to the provisions of the 1999 plan,
the board of directors (or the committee) has the authority to select the
persons to whom awards are granted and determine the terms of each award,
including the number of shares of common stock subject to the awards. Payment of
the exercise price of an award may be made by check or, if approved by the board
of directors (or the committee), shares of common stock, delivery of a
promissory note, or by any other method approved by the board of directors (or
the committee). Unless otherwise permitted by the board of directors (or the
committee), awards are not assignable or transferable except by will or the laws
of descent and distribution, and during the participant's lifetime, may be
exercised only by the participant.
2000 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The 2000 Non-Employee Director Stock Option Plan was adopted by the board
of directors in February 2000. The director plan will take effect upon
completion of this offering. The director plan provides for the grant of options
to purchase a maximum of 250,000 shares of our common stock to our non-employee
directors.
The director plan will be administered by a committee appointed by the
board of directors. In the event the board of directors does not appoint such a
committee, then the board shall have all power and authority to administer the
director plan. Under the director plan, each director who is
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<PAGE> 59
not also one of our employees or officers and who is not a director at the time
of this offering shall be automatically granted on the later of (i) the date
such person is first elected to the board of directors or (ii) the effective
date of this offering, without any further action, an option to purchase 5,000
shares of common stock. In addition, each non-employee director who is serving
on the board of directors on the last day of February and the last day of August
during the term of the plan shall be automatically granted an option to purchase
2,500 shares of Common Stock. Provided that the director continues to serve as a
member of the board of directors, one-twelfth ( 1/12) of the shares included in
each grant will become exercisable on the last day of each month over the year
after the date of the grant. All options granted under the director plan will
have an exercise price equal to the fair market value of the common stock on the
date of grant. The term of each option will be for a period of ten years from
the date of grant. Options may not be assigned or transferred except by will or
by the laws of descent and distribution and are exercisable to the extent vested
only while the optionee is serving as a director or within 90 days after the
optionee ceases to serve as a director (except that if a director dies or
becomes disabled while he or she is serving as a director, the option is
exercisable until the scheduled expiration date of the option). No options have
been granted to date under the director plan.
2000 EMPLOYEE STOCK PURCHASE PLAN
The 2000 Employee Stock Purchase Plan was adopted by the board of directors
in February 2000. The purchase plan will take effect upon completion of this
offering. The purchase plan provides for the issuance of a maximum of 500,000
shares of common stock. The purchase plan is administered by the board of
directors and the compensation committee. All employees whose customary
employment is for more than 20 hours per week and for more than five months in
any calendar year and who have completed more than 90 days of employment on or
before the first day of any six-month payment period are eligible to participate
in the purchase plan. Outside directors and employees who would own 5% or more
of the total combined voting power or value of our stock immediately after the
grant may not participate in the purchase plan.
To participate in the purchase plan, an employee must authorize us to
deduct an amount not less than one percent nor more than 10 percent of a
participant's total cash compensation from his or her pay during each six-month
payment periods. The first payment period will commence on the effective date of
this offering and end on August 31, 2000. Thereafter, the payment periods will
commence on the first day of September and March and end on the last day of the
following February and August, respectively, each year. In no case shall an
employee be entitled to purchase more than 500 shares in any one payment period.
The exercise price for the option granted in each payment period is 85% of the
lesser of the average market price of the common stock on the first or last
business day of the payment period, in either event rounded up to the nearest
cent. If an employee is not a participant on the last day of the payment period,
such employee is not entitled to exercise his or her option, and the unused
amount of his or her accumulated payroll deductions will be refunded.
Options granted under the purchase plan may not be transferred or assigned.
An employee's rights under the purchase plan terminate upon his or her voluntary
withdrawal from the plan at any time or upon termination or employment. No
options or shares have been granted to date under the purchase plan.
401(K) PLAN
We provide a tax-qualified employee savings and retirement plan, commonly
known as a 401(k) plan, which covers our eligible employees. Under the 401(k)
plan, our employees may elect
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<PAGE> 60
to reduce their current annual compensation up to the lesser of 12% or the
statutorily prescribed annual limit, which is $10,500 in calendar year 2000, and
have the amount of the reduction contributed to the 401(k) plan. We intend the
401(k) plan to qualify under Sections 401(a) and 401(k) of the Internal Revenue
Code, so that contributions by us or our employees to the 401(k) plan, and
income earned on such contributions, are not taxable to employees until
withdrawn from the 401(k) plan, and so that contributions by us, if any, will be
deductible by us when made. The trustee of the 401(k) plan invests the assets of
the 401(k) plan in the various investment options as directed by the
participants.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our second amended and restated certificate of incorporation provides that
our directors and officers shall be indemnified by us to the fullest extent
permitted by Delaware law, as it now exists or may in the future be amended,
against all expenses and liabilities reasonably incurred in connection with
their service for us or on our behalf. In addition, our second amended and
restated certificate of incorporation provides that our directors will not be
personally liable for monetary damages to us for breaches of their fiduciary
duty as directors, unless they:
- violated their duty of loyalty to us or our stockholders;
- acted in bad faith;
- knowingly or intentionally violated the law;
- authorized illegal dividends or redemptions; or
- derived an improper personal benefit from their action as directors.
We intend to obtain insurance which insures our directors and officers against
certain losses and which insures us against our obligations to indemnify our
directors and officers.
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<PAGE> 61
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 31, 1999, we entered into a license agreement with Intel
Corporation under which Intel licensed our DesignSync DFII product and engaged
in a collaborative project with us for a fee of $2.5 million. Under the License
Agreement, Intel Corporation may purchase licenses for the use of other products
and training and consulting services from us for additional fees. Prior to this
offering Intel Corporation was a 6.7% stockholder of our company.
We believe that the transactions set forth above were made on terms no less
favorable to us than could have been obtained from unaffiliated third parties.
We intend that all future transactions will be approved by a majority of the
board of directors, including a majority of the independent and disinterested
members of the board of directors, and will be on terms no less favorable to us
than those that could be obtained from unaffiliated third parties.
INDEMNIFICATION
We intend to enter into indemnification agreements with each of our
directors and officers. These indemnification agreements will require us to
indemnify our directors and officers to the fullest extent permitted by Delaware
law. See "Management -- Limitation of Liability and Indemnification" for
additional information regarding provisions in our charter documents requiring
us to indemnify our officers and directors.
CONFLICT OF INTEREST POLICY
We believe that all transactions with our directors, officers and principal
stockholders described above were made on terms no less favorable to us than
could have been obtained from unaffiliated third parties. A majority of the
disinterested outside directors on our board of directors approves all
transactions between us and our officers, directors, principal stockholders and
their affiliates. Any similar transactions will continue to be on terms no less
favorable to us than we could have obtained from unaffiliated third parties.
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<PAGE> 62
PRINCIPAL STOCKHOLDERS
The following table sets forth information known to us regarding the
beneficial ownership of our common stock as of February 16, 2000:
-- each person or entity who is known by us to beneficially own more than
5% of our common stock;
-- each of our directors and named executive officers; and
-- all of our directors and executive officers as a group.
Except as indicated below, none of these entities has a relationship with
us or, to our knowledge, any of the underwriters or their respective affiliates.
Unless otherwise indicated, the address of each person or entity named in the
table is c/o Synchronicity, Inc. of Massachusetts, 201 Forest Street, Marlboro,
MA 01752, and each person or entity has sole voting power and investment power
(or shares such power with his or her spouse) with respect to all shares of
capital stock listed as owned by such person or entity.
The number and percentage of shares beneficially owned is determined in
accordance with the rules of the Securities and Exchange Commission, and is not
necessarily indicative of beneficial ownership for any other purpose. Under such
rules, beneficial ownership includes any shares as to which a person has sole or
shared voting power or investment power and also any shares of common stock
underlying options or warrants that are exercisable by that person within 60
days of February 16, 2000. However, these shares underlying options or warrants
are not treated as outstanding for the purpose of computing the percentage
ownership of any other person or entity. Unless otherwise indicated in the
footnotes, each person has sole voting and investment power (or shares such
powers with his or her spouse) with respect to the shares shown as beneficially
owned. Percentage of beneficial ownership prior to the offering is based on
11,014,299 shares of common stock outstanding as of February 16, 2000 and
assumes the conversion of all outstanding shares of our convertible preferred
stock into shares of common stock. Percentage of beneficial ownership after the
offering assumes shares of common stock to be outstanding after
completion of this offering and no exercise of the underwriters' over-allotment
option to purchase up to an aggregate of additional shares.
<TABLE>
<CAPTION>
PERCENTAGE OF
OWNERSHIP
---------------------
SHARES PRIOR TO AFTER THE
BENEFICIALLY OWNED OFFERING OFFERING
<S> <C> <C> <C>
5% STOCKHOLDERS:
Wheatley Partners, L.P.(1)(5)....................... 2,120,008 19.2%
Canaan Partners and affiliates(2)(5)................ 1,825,942 16.6
Ascent Venture Partners II, L.P.(3)(5).............. 992,094 9.0
Intel Corporation(4)(5)............................. 742,885 6.7
DIRECTORS AND OFFICERS:
Dennis R. Harmon(6)................................. 796,150 7.2
Eugene C. Connolly(7)............................... 821,150 7.5
Onofrio Sozio(6).................................... 796,150 7.2
Mitchel A. Mastellone(6)............................ 796,150 7.2
Steve Robbins(8).................................... 233,400 2.1
Mark Miller(9)...................................... 80,700 1.0
Joseph A. Calo(10).................................. 62,480 1.0
Seth Lieber(1)...................................... 2,120,008 19.2
James C. Furnivall(2)............................... 1,825,942 16.6
Leigh Michl(3)...................................... 992,094 9.0
Richard T. Finigan.................................. 125,000 1.1
All executive officers and directors as a group (11
persons)(11)...................................... 8,649,224 77.7
</TABLE>
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<PAGE> 63
- ------------------------------
(1) Includes 1,940,481 shares held by Wheatley Partners, L.P., 137,861 shares
held by Wheatley Foreign Partners, L.P., 20,834 shares held by Seth Lieber
and 20,832 shares held by Jonathan Lieber. Both Seth Lieber and Jonathan
Lieber are General Partners of each of Wheatley Partners, L.P. and Wheatley
Foreign Partners, L.P. Both Seth Lieber and Jonathan Lieber disclaim
beneficial ownership with respect to any of these shares, except to the
extent of any pecuniary interest therein.
(2) Includes 7,255 shares held by Canaan Capital Limited Partnership, 60,540
shares held by Canaan Capital Offshore Limited Partnership, C.V., 1,288,140
shares held by Canaan S.B.I.C., L.P., 441,757 shares held by Canaan Equity,
L.P. and 28,250 shares held by James C. Furnivall. Mr. Furnivall is an
employee of the management company servicing each of these Canaan entities.
Mr. Furnivall disclaims beneficial ownership with respect to any of these
shares, except to the extent of any pecuniary interest therein.
(3) Includes 98,814 shares held by Ascent Venture Partners, L.P., 889,328
shares held by Ascent Venture Partners II, L.P., and 3,952 shares held by
Leigh Michl. Mr. Michl is a managing member of Ascent Venture Management,
LLC, which is the general partner of Ascent Venture Partners, L.P. Mr.
Michl is also a managing member of Ascent Venture Management SBIC Corp.,
which is the general partner of Ascent Venture Management II, L.P., which
is the general partner of Ascent Venture Partners II, L.P. Mr. Michl
disclaims beneficial ownership with respect to any of these shares, except
to the extent of any pecuniary interest therein.
(4) Includes 150,000 shares underlying a warrant which is exercisable within 60
days of February 16, 2000.
<TABLE>
<C> <S> <C> <C> <C>
(5) Addresses: Wheatley Partners, L.P. -- 80 Cuttermill Road, Suite 311, Great Neck, NY 11021.
Canaan Partners -- 105 Rowayton Avenue, Rowayton, CT 06853.
Ascent Venture Partners II, L.P. -- c/o Ascent Venture Management, Inc., 255 State
Street, 5th Floor, Boston, MA 02109.
Intel Corporation -- 2200 Mission College Blvd., Santa Clara, CA 95052.
</TABLE>
(6) Includes 2,400 shares underlying options which are exercisable within 60
days of February 16, 2000.
(7) Includes 2,400 shares underlying options which are exercisable within 60
days of February 16, 2000, and 25,000 shares held in the name of Mr.
Connolly's spouse.
(8) Includes 93,400 shares underlying options which are exercisable within 60
days of February 16, 2000.
(9) Includes 11,200 shares underlying options which are exercisable within 60
days of February 16, 2000.
(10) Includes 9,000 shares underlying options which are exercisable within 60
days of February 16, 2000.
(11) Includes 123,200 shares underlying options which are exercisable within 60
days of February 16, 2000.
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<PAGE> 64
DESCRIPTION OF CAPITAL STOCK
GENERAL
After this offering and the filing of our second amended and restated
certificate of incorporation, our authorized capital stock will consist of
90,000,000 shares of common stock, $0.01 par value per share, and 5,000,000
shares of preferred stock, $0.01 par value per share. As of February 16, 2000,
there were outstanding (i) 3,993,297 shares of common stock held by 40
stockholders of record, (ii) 3,694,870 shares of convertible preferred stock
held by 45 stockholders of record and (iii) options to purchase an aggregate of
1,360,598 shares of common stock.
The following summary of certain provisions of our securities and various
provisions of our amended and restated certificate of incorporation and our
amended and restated by-laws is not intended to be complete and is qualified by
reference to the provisions of applicable law and to our second amended and
restated certificate of incorporation and amended and restated by-laws included
as exhibits to the Registration Statement of which this prospectus is a part.
See "Where You Can Find More Information."
COMMON STOCK
As of February 16, 2000 there were 3,993,297 shares of common stock
outstanding held by approximately 40 stockholders of record. Based upon the
number of shares outstanding as of that date and giving effect to the issuance
of the shares of common stock offered by us in this offering and
the conversion of the outstanding shares of convertible preferred stock into
7,021,002 shares of common stock, there will be shares of common
stock outstanding upon the closing of this offering. In addition, as of February
16, 2000, there were outstanding stock options to purchase 1,360,598 shares of
common stock.
Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Directors are elected by a plurality of the votes of the shares present
in person or by proxy at the meeting and entitled to vote in such election.
Holders of common stock are entitled to receive ratably such dividends, if any,
as may be declared by the board of directors out of funds legally available
therefor, after provision has been made for any preferential dividend rights of
outstanding preferred stock. Upon our liquidation, dissolution or winding up,
the holders of common stock are entitled to receive ratably the net assets
available after the payment of all of our debts and other liabilities, and after
the satisfaction of the rights of any outstanding preferred stock. Holders of
the common stock have no preemptive, subscription, redemption or conversion
rights, nor are they entitled to the benefit of any sinking fund. The
outstanding shares of common stock are, and the shares offered by us in this
offering will be, when issued and paid for, validly issued, fully paid and
non-assessable. The rights, powers, preferences and privileges of holders of
common stock are subordinate to, and may be adversely affected by, the rights of
the holders of shares of any series of preferred stock which we may designate
and issue in the future.
PREFERRED STOCK
Upon the closing of this offering, all outstanding shares of convertible
preferred stock will automatically convert into an aggregate of 7,021,002 shares
of common stock. Thereafter, the board of directors will generally be
authorized, without further stockholder approval, to issue from time to time up
to an aggregate of 5,000,000 shares of preferred stock, in one or more series.
Each series
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<PAGE> 65
of preferred stock shall have such number of shares, designations, preferences,
voting powers, qualifications and special or relative rights or privileges as
shall be determined by the board of directors, which may include, among others,
dividend rights, voting rights, redemption and sinking fund provisions,
liquidation preferences, conversion rights and preemptive rights.
Our stockholders have granted the board of directors authority to issue the
preferred stock and to determine the rights and preferences of the preferred
stock in order to eliminate delays associated with a stockholder vote on
specific issuances. The rights of the holders of common stock will be
subordinate to the rights of holders of any preferred stock issued in the
future. The issuance of preferred stock, while providing desirable flexibility
in connection with possible acquisitions and other corporate purposes, could
adversely affect the voting power or other rights of the holders of common
stock, and could make it more difficult for a third party to acquire, or
discourage a third party from attempting to acquire, a majority of our
outstanding voting stock. We have not, to date, issued any shares of such
preferred stock, and we have no present plans to issue any shares of preferred
stock.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS AND ANTI-TAKEOVER EFFECTS
Upon completion of this offering, the provisions of Section 203 of the
General Corporation Law of Delaware will prohibit us from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
A "business combination" includes certain mergers, asset sales and other
transactions resulting in a financial benefit to the interested stockholder. An
"interested stockholder" is generally defined as a person who, together with
affiliates and associates, owns, or, if currently an affiliate or an associate
of the corporation, within three years did own, 15% or more of the corporation's
voting stock.
Our second amended and restated certificate of incorporation provides for
the division of the board of directors into three classes as nearly equal in
size as possible with staggered three-year terms. In addition, our second
amended and restated certificate of incorporation provides that directors may be
removed with cause only by the affirmative vote of the holders of a majority of
the shares of our capital stock entitled to vote and without cause only by the
affirmative vote of the holders of 75% of the shares of our capital stock
entitled to vote. Under our second amended and restated certificate of
incorporation, any vacancy on the board of directors, unless and until filled by
the stockholders, including a vacancy resulting from an enlargement of the
board, may only be filled by vote of a majority of the directors then in office.
The likely effect of the classification of the board of directors and the
limitations on the removal of directors and filling of vacancies is an increase
in the time required for the stockholders to change the composition of the board
of directors. For example, in general, at least two annual meetings of the
stockholders will be necessary for stockholders to effect a change in a majority
of the members of the board of directors.
Our second amended and restated certificate of incorporation also provides
that any action required or permitted to be taken by our stockholders at an
annual meeting or special meeting of stockholders may only be taken if it is
properly brought before the meeting and may not be taken by written action in
lieu of a meeting. Our amended and restated by-laws provide that special
meetings of the stockholders may only be called by the board of directors, the
chairman of the board of directors, the chief executive officer or the
president. Our amended and restated by-laws further provide that in order for
any matter to be considered "properly brought" before a meeting, a stockholder
must comply with requirements regarding advance notice to us. The foregoing
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<PAGE> 66
provisions could have the effect of delaying until the next stockholders meeting
actions which are favored by the holders of a majority of our outstanding voting
securities. These provisions may also discourage another person or entity from
making a tender offer for our common stock, because such person or entity, even
if it acquired a majority of our outstanding voting securities, would only be
able to take action as a stockholder, such as electing new directors or
approving a merger, at a duly called stockholders meeting, and not by written
consent.
The General Corporation Law of Delaware provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or by-laws,
unless a corporation's certificate of incorporation or by-laws, as the case may
be, requires a greater percentage. Our second amended and restated certificate
of incorporation requires the affirmative vote of the holders of at least 75% of
the shares of our capital stock that are issued and outstanding and entitled to
vote to amend or repeal any of the foregoing provisions of the amended and
restated certificate of incorporation. Our amended and restated by-laws may
generally be amended or repealed by a majority vote of the board of directors
and may also be amended or repealed by the affirmative vote of the holders of at
least 75% of the shares of our capital stock that are issued and outstanding and
entitled to vote. The 75% stockholder vote would be in addition to any separate
class vote that might in the future be required in accordance with the terms of
any series of preferred stock that might be outstanding at the time any such
amendments are submitted to stockholders.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is EquiServe Trust
Company.
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<PAGE> 67
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been any public market for our common
stock, and we make no prediction as to the effect, if any, that market sales of
shares of common stock or the availability of shares of common stock for sale
will have on the market price of the common stock prevailing from time to time.
Nevertheless, sales of substantial amounts of common stock in the public market,
or the perception that such sales could occur, could adversely affect the market
price of the common stock and could impair our future ability to raise capital
through the sale of equity securities. See "Risk Factors."
SALES OF RESTRICTED SHARES
Upon the closing of this offering, we will have an aggregate of
shares of common stock outstanding, assuming no exercise of the
underwriters' over-allotment option and no exercise of outstanding options. Of
the outstanding shares, all of the shares sold in this offering will be freely
tradable, except that any shares purchased by "affiliates" (as that term is
defined in Rule 144 under the Securities Act), may only be sold in compliance
with the limitations described below. The remaining 11,014,299 shares of common
stock will be deemed "restricted securities" as defined in Rule 144. Restricted
securities may be sold in the public market only if registered or if they
qualify for an exemption from registration under Rule 144, including Rule
144(k), or Rule 701 promulgated under the Securities Act, which rules are
summarized below. Subject to the lock-up agreements described below and the
provisions of Rule 144, including Rule 144(k), and Rule 701, shares will be
available for sale in the public market as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
<C> <S>
1,053,795 Immediately after the date of this prospectus
9,960,504 At various times after 90 days from the date of
this prospectus (Rules 144 and 701)
</TABLE>
In general, under Rule 144, as currently in effect, a person or persons
whose shares are required to be aggregated, including an affiliate of ours, who
has beneficially owned shares for at least one year is entitled to sell, within
any three-month period commencing 90 days after the date of this prospectus, a
number of shares that does not exceed the greater of 1% of the then outstanding
shares of common stock, approximately shares immediately after
this 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 is
filed, subject to restrictions. In addition, a person who is not deemed to have
been an affiliate at any time during the 90 days preceding a sale and who has
beneficially owned the shares proposed to be sold for at least two years would
be entitled to sell such shares under Rule 144(k) without regard to the
requirements described above. To the extent that shares were acquired from an
affiliate of ours, such person's holding period for the purpose of effecting a
sale under Rule 144 commences on the date of transfer from the affiliate.
Our directors, executive officers and all stockholders who hold 11,014,299
shares in the aggregate have agreed that they will not offer, sell or agree to
sell, directly or indirectly, or otherwise dispose of any shares of common stock
without the prior written consent of Donaldson, Lufkin & Jenrette for a period
of 180 days from the date of this prospectus.
OPTIONS
Any of our employees or consultants who purchased his or her shares
pursuant to a written compensatory plan or contract is entitled to rely on the
resale provisions of Rule 701, which permits nonaffiliates to sell their Rule
701 shares without having to comply with the public information, holding period,
volume limitation or notice provisions of Rule 144 and permits
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<PAGE> 68
affiliates to sell their Rule 701 shares without having to comply with the Rule
144 holding period restrictions, in each case commencing 90 days after the date
of this prospectus. As of February 16, 2000, the holders of options exercisable
for approximately 1,360,593 shares of common stock will be eligible to sell
their shares on the expiration of the 180-day lockup period or subject in some
cases to vesting of such options.
We intend to file one or more registration statements on Form S-8 under the
Securities Act to register all shares of common stock subject to outstanding
stock options and common stock issued or issuable under our stock plans. We
expect to file the registration statement covering shares offered pursuant to
the 1996 Stock Option Plan, 1996 Stock Plan, 1999 Stock Option and Incentive
Plan, the 2000 Non-Employee Director Stock Option Plan and the 2000 Employee
Stock Purchase Plan within 180 days after the date of this prospectus,
permitting the resale of such shares by nonaffiliates in the public market
without restriction under the Securities Act.
LOCK-UP AGREEMENTS
We, our executive officers and directors and all of our stockholders and
option holders have agreed not to sell or otherwise dispose of any shares of
common stock without the consent of Donaldson, Lufkin & Jenrette, during the
180-day period following the date of the prospectus. Donaldson, Lufkin &
Jenrette, in its sole discretion at any time, or from time to time, and without
notice may release for sale in the public market all or any portion of the
shares subject to the lock-up agreements. We may issue, and grant options to
purchase, shares of common stock under the 1999 Stock Option and Incentive Plan,
the 2000 Non-Employee Director Stock Option Plan and the 2000 Employee Stock
Purchase Plan. In addition, we may issue shares of common stock in connection
with any acquisition of another company if the terms of issuance provide that
such common stock shall not be resold prior to the expiration of the 180-day
period referenced in the preceding sentence.
WARRANT
As of February 16, 2000, we had an outstanding warrant exercisable for a
total of 150,000 shares of common stock, which is currently exercisable. These
shares are restricted by the terms of the lock-up agreements.
REGISTRATION RIGHTS
Upon the expiration of the contractual lock-up period with the
underwriters, certain stockholders will be entitled to require us to register
under the Securities Act up to a total of 6,174,502 shares of outstanding common
stock under the terms of an investor rights agreement between us and the rights
holders. The investor rights agreement provides that if we propose to register
in a public offering any of our securities under the Securities Act at any time
or times without obtaining waivers from the stockholders having registration
rights, the non-waiving stockholders will generally be entitled to include
shares of common stock held by them in such registration. However, the managing
underwriter of any offering may exclude for marketing reasons some or all of the
shares from the registration. These stockholders also have the right to require
us, on no more than two occasions, to prepare and file a registration statement
under the Securities Act registering the shares of common stock held by them.
Additionally, these stockholders may require us to file additional registration
statements on Form S-3. We are generally required to bear the expenses of all
such registrations, except underwriting discounts and commissions. These
registration rights terminate at the time that each of these stockholders may
sell all of their shares of our stock under Rule 144 of the Securities Act in
any three month period.
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UNDERWRITING
Subject to the terms and conditions contained in an underwriting agreement
dated , 2000, the underwriters named below, who are represented by
Donaldson, Lufkin & Jenrette Securities Corporation, FleetBoston Robertson
Stephens Inc., Dain Rauscher Incorporated and DLJdirect Inc., have severally
agreed to purchase from us the number of shares of common stock set forth
opposite their names below:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
<S> <C>
Donaldson Lufkin & Jenrette Securities Corporation..........
FleetBoston Robertson Stephens Inc..........................
Dain Rauscher Incorporated..................................
DLJdirect Inc...............................................
Total............................................
=========
</TABLE>
The underwriting agreement provides that the obligations of the
underwriters to purchase and accept delivery of the shares of common stock
offered by this prospectus are subject to approval by their counsel of legal
matters concerning the offering and to conditions that must be satisfied by us.
The underwriters are obligated to purchase and accept delivery of all of the
shares of common stock offered by this prospectus, other than those shares
covered by the over-allotment option described below, if any are purchased.
The underwriters initially propose to offer the shares of common stock in
part directly to the public at the initial public offering price set forth on
the cover page of this prospectus and in part to dealers, including the
underwriters, at such price less a concession not in excess of $ per share.
The underwriters may allow, and such dealers may re-allow, to other dealers a
concession not in excess of $ per share. After the initial offering of the
common stock, the public offering price and other selling terms may be changed
by the representatives at any time without notice. The underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.
An electronic prospectus will be available on the web site maintained by
DLJdirect Inc., an affiliate of Donaldson, Lufkin & Jenrette Securities
Corporation. Other than the prospectus in electronic format, the information on
this web site relating to the offering is not part of this prospectus and has
not been approved or endorsed by us or the underwriters, and should not be
relied on by prospective investors.
We have granted to the underwriters an option, exercisable for 30 days
after the date of this prospectus, to purchase, from time to time, in whole or
in part, up to an aggregate of additional shares of common stock at
the initial public offering price less underwriting discounts and commissions.
The underwriters may exercise the option solely to cover over-allotments, if
any, made in connection with the offering. To the extent that the underwriters
exercise the option, each underwriter will become obligated, subject to
conditions contained in the underwriting agreement, to purchase its pro rata
portion of such additional shares based on the underwriters' percentage
underwriting commitment as indicated in the above table.
We have agreed to indemnify the underwriters against liabilities which may
arise in connection with the offering, including liabilities under the
Securities Act of 1933, or to contribute to payments that the underwriters may
be required to make.
66
<PAGE> 70
We, our executive officers and directors and all of our stockholders and
option holders are subject to agreements providing that, with certain limited
exceptions, we will not:
-- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise transfer or dispose
of directly or indirectly any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock; or
-- enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
common stock, whether any such transaction described above is to be
settled by delivery of common stock or other securities, in cash or
otherwise
for a period of 180 days after the date of this prospectus. Donaldson, Lufkin
Jenrette Securities Corporation may release some or all of these shares from
such restrictions prior to the expiration of the 180 day period lock-up period,
although it has no current intention of doing so. See "Shares Eligible Per
Future Sale -- Lock-Up Agreements."
In addition, during such 180 day period, we have also agreed not to file
any registration statement with respect to the registration of any shares of
common stock or any securities convertible into or exercisable or exchangeable
for common stock, except for registration statements on Form S-8 registering
shares of common stock pursuant to our existing stock plans, without the prior
written consent of Donaldson, Lufkin & Jenrette Securities Corporation.
Prior to the offering, there has been no established trading market for our
common stock. The initial public offering price of the shares of common stock
offered by this prospectus will be determined by negotiation among us and the
underwriters. The factors to be considered in determining the initial public
offering price include:
-- the history of and the prospects for the markets in which we compete;
-- our past and present operations;
-- our historical results of operations;
-- our prospects for future financial performance;
-- recent market prices of securities of generally comparable companies;
and
-- the general condition of the securities markets at the time of the
offering.
The underwriters have reserved up to shares of our common stock
to be sold in this offering for sale to some of our employees and associates of
our employees and directors, and to other individuals or companies who have
commercial arrangements or personal relationships with us. Through this directed
share program, we intend to ensure that those individuals and companies that
have supported us, or who are in a position to support us in the future, have
the opportunity to purchase our common stock at the same price that we are
offering our shares to the general public. Prospective participants will not
receive any investment materials other than a copy of this prospectus, and will
be permitted to participate in this offering at the initial public offering
price presented on the cover page of this prospectus. No commitment to purchase
shares by any participant in the directed share program will be accepted until
after the registration statement of which this prospectus is part is effective
and an initial public offering price has been established. The number of shares
available for sale to the general public will be reduced by the number of shares
sold through the directed share program. Any shares reserved for the directed
share program
67
<PAGE> 71
which are not so purchased will be offered by the underwriters to the general
public on the same basis as the other shares offered hereby.
Other than in the United States, no action has been taken by us or the
underwriters that would permit a public offering of the shares of common stock
offered in any jurisdiction where action for that purpose is required. The
shares of common stock offered may not be offered or sold, directly or
indirectly, nor may this prospectus or any other offering material or
advertisements in connection with the offer and sale of any such shares of
common stock be distributed or published in any jurisdiction, except under
circumstances that will result in compliance with the applicable rules and
regulations of such jurisdiction. Persons into whose possession this prospectus
comes are advised to inform themselves about and observe any restrictions
relating to the offering and the distribution of this prospectus. This
prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any shares of common stock offered in any jurisdiction in which such an
offer or a solicitation is unlawful.
In connection with the offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
common stock. Specifically, the underwriters may over-allot the offering,
creating a syndicate short position. The underwriters may bid for and stabilize
the price of the common stock. In addition, the underwriting syndicate may
reclaim selling concessions from syndicate members and selected dealers if they
repurchase previously distributed common stock in syndicate covering
transactions, in stabilizing transactions or otherwise. These activities may
stabilize or maintain the market price of the common stock above independent
market levels. The underwriters are not required to engage in these activities,
and may end any of these activities at any time.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for us by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts. Certain
legal matters in connection with this offering will be passed upon for the
underwriters by Goodwin, Procter & Hoar LLP.
EXPERTS
The financial statements included in this prospectus have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report appearing
herein (which report expresses an unqualified opinion and includes an
explanatory paragraph referring to a change in accounting), and have been so
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1. This prospectus, which constitutes a part of the
registration statement, does not contain all of the information included in the
registration statement. Certain information is omitted and you should refer to
the registration statement and its exhibits. With respect to references made in
this prospectus to any contract, agreement or other document of Synchronicity,
such references are not necessarily complete and you should refer to the
exhibits attached to the registration statement for copies of the actual
contract, agreement or other document. You may review a copy of the registration
statement, including exhibits, at the Securities and Exchange Commission's
public reference room at Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 or Seven World
68
<PAGE> 72
Trade Center, 13th Floor, New York, New York 10048 or Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Please call the Commission
at 1-800-SEC-0330 for further information on the operation of the public
reference rooms.
We will also file annual, quarterly and current reports, proxy statements
and other information with the Securities and Exchange Commission. You may read
and copy any reports, statements or other information on file at the public
reference rooms. You can also request copies of these documents, for a copying
fee, by writing to the Securities and Exchange Commission.
Our Securities and Exchange Commission filings and the registration
statement can also be reviewed by accessing the Securities and Exchange
Commission's internet site at http://www.sec.gov, which contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the Securities and Exchange Commission.
69
<PAGE> 73
SYNCHRONICITY, INC. OF MASSACHUSETTS
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Independent Auditors' Report................................ F-2
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statements of Stockholders' Equity (Deficiency)............. F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 74
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Synchronicity, Inc. of Massachusetts
We have audited the accompanying balance sheets of Synchronicity, Inc. of
Massachusetts (the "Company") as of December 31, 1998 and 1999, and the related
statements of operations, stockholders' equity (deficiency), and cash flows for
each of the three years in the period ended December 31, 1999. 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 audits 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, such financial statements present fairly, in all material
respects, the financial position of Synchronicity, Inc. of Massachusetts at
December 31, 1998 and 1999, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999 in conformity
with generally accepted accounting principles.
As discussed in Note 1, in 1998 the Company changed its method of
accounting for revenue.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 17, 2000
F-2
<PAGE> 75
SYNCHRONICITY, INC. OF MASSACHUSETTS
BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
AS OF DECEMBER 31, DECEMBER 31, 1999
--------------------------- -----------------
1998 1999 (UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents.................... $ 6,312,910 $ 3,652,124
Accounts receivable, net of allowance of
$44,000 in 1999....................... 1,579,000 3,100,139
Prepaid commissions..................... 278,148 940,735
Prepaid expenses and other current
assets................................ 110,171 149,781
----------- ------------
Total current assets............... 8,280,229 7,842,779
----------- ------------
PROPERTY AND EQUIPMENT, Net.................. 463,741 579,373
OTHER ASSETS (Net of accumulated amortization
of $3,477 and $8,491 in 1998 and 1999,
respectively).............................. 12,256 10,552
PREPAID COMMISSIONS.......................... 35,795 325,296
----------- ------------
Total.............................. $ 8,792,021 $ 8,758,000
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable........................ $ 294,038 $ 364,580
Accrued payroll and commissions......... 486,052 1,679,812
Deferred revenues....................... 2,307,965 3,861,805
----------- ------------
Total current liabilities.......... 3,088,055 5,906,197
----------- ------------
COMMITMENTS (NOTE 8)
REDEEMABLE CONVERTIBLE PREFERRED STOCK
(aggregate liquidation preference,
$12,594,248)............................... 12,445,473 12,482,668 --
----------- ------------ ------------
STOCKHOLDERS' EQUITY (DEFICIENCY):
Preferred stock, $0.01 par value, 5,000,000
shares authorized pro forma; no shares
issued and outstanding.................. -- -- --
Convertible preferred stock, Series A,
$0.01 par value, 200,000 shares
authorized, issued and outstanding
(liquidation preference $1,000,000)..... 2,000 2,000 --
Common stock, $0.01 par value, 13,088,942
shares authorized (12,605,302 authorized
in 1998); 3,786,018 shares issued and
outstanding (3,299,900 in 1998);
90,000,000 shares authorized pro forma;
10,807,020 issued and outstanding....... 32,999 37,860 108,070
Additional paid-in capital................. 1,383,539 7,436,361 19,850,819
Deferred compensation...................... (330,289) (4,600,815) (4,600,815)
Accumulated deficit........................ (7,829,756) (12,506,271) (12,506,271)
----------- ------------ ------------
Total stockholders' equity
(deficiency)..................... (6,741,507) (9,630,865) $ 2,851,803
----------- ------------ ============
Total.............................. $ 8,792,021 $ 8,758,000
=========== ============
</TABLE>
See notes to financial statements.
F-3
<PAGE> 76
SYNCHRONICITY, INC. OF MASSACHUSETTS
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1997 1998 1999
<S> <C> <C> <C>
REVENUES:
Software licenses..................... $ 410,000 $ 1,042,783 $ 5,224,133
Services.............................. 250,000 765,751 2,223,072
----------- ----------- -----------
Total revenues.................. 660,000 1,808,534 7,447,205
----------- ----------- -----------
COST OF REVENUES:
Software licenses..................... 28,200 106,792 193,707
Services.............................. 63,472 206,020 848,771
----------- ----------- -----------
Total cost of revenues.......... 91,672 312,812 1,042,478
----------- ----------- -----------
Gross profit............................... 568,328 1,495,722 6,404,727
----------- ----------- -----------
OPERATING EXPENSES:
Sales and marketing................... 1,399,364 2,172,136 4,641,774
Research and development.............. 1,581,355 2,618,274 3,695,893
General and administrative............ 436,349 730,075 1,124,151
Stock-based compensation.............. 866 48,428 624,011
Warrant expense....................... -- -- 1,092,714
----------- ----------- -----------
Total operating expenses........ 3,417,934 5,568,913 11,178,543
----------- ----------- -----------
Loss from operations....................... (2,849,606) (4,073,191) (4,773,816)
Interest income............................ 134,617 124,919 195,369
Other expense.............................. -- -- (23,448)
----------- ----------- -----------
Loss before provision for income taxes..... (2,714,989) (3,948,272) (4,601,895)
Provision for income taxes................. 65,000 -- 37,425
----------- ----------- -----------
Net loss................................... $(2,779,989) $(3,948,272) $(4,639,320)
=========== =========== ===========
Net loss per share:
Basic and diluted..................... $ (0.86) $ (1.21) $ (1.39)
=========== =========== ===========
Weighted-average shares............... 3,247,172 3,283,730 3,372,069
=========== =========== ===========
Pro forma net loss per share (unaudited):
Basic and diluted..................... $ (0.45)
===========
Weighted-average shares............... 10,393,071
===========
</TABLE>
See notes to financial statements.
F-4
<PAGE> 77
SYNCHRONICITY, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
CONVERTIBLE
PREFERRED STOCK
SERIES A COMMON STOCK ADDITIONAL
---------------- ------------------- PAID-IN DEFERRED ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION DEFICIT
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997....... 200,000 $2,000 3,226,350 $32,264 $ 998,308 $ -- $ (1,049,088)
Exercise of common stock
options................. -- -- 25,000 250 1,000 -- --
Stock-based
compensation............ -- -- -- -- 866 -- --
Accretion of preferred
stock issuance costs.... -- -- -- -- -- -- (27,258)
Net loss.................. -- -- -- -- -- -- (2,779,989)
------- ------ --------- ------- ---------- ----------- ------------
Balance, December 31, 1997..... 200,000 2,000 3,251,350 32,514 1,000,174 -- (3,856,335)
Exercise of common stock
options................. -- -- 48,550 485 4,648 -- --
Stock-based
compensation............ -- -- -- -- 378,717 (330,289) --
Accretion of preferred
stock issuance costs.... -- -- -- -- -- -- (25,149)
Net loss.................. -- -- -- -- -- -- (3,948,272)
------- ------ --------- ------- ---------- ----------- ------------
Balance, December 31, 1998..... 200,000 2,000 3,299,900 32,999 1,383,539 (330,289) (7,829,756)
Exercise of common stock
options................. -- -- 486,118 4,861 65,571 -- --
Warrant expense........... -- -- -- -- 1,092,714 -- --
Stock-based
compensation............ -- -- -- -- 4,894,537 (4,270,526) --
Accretion of preferred
stock issuance costs.... -- -- -- -- -- -- (37,195)
Net loss.................. -- -- -- -- -- -- (4,639,320)
------- ------ --------- ------- ---------- ----------- ------------
Balance, December 31, 1999..... 200,000 $2,000 3,786,018 $37,860 $7,436,361 $(4,600,815) $(12,506,271)
======= ====== ========= ======= ========== =========== ============
TOTAL
<S> <C>
Balance, January 1, 1997....... $ (16,516)
Exercise of common stock
options................. 1,250
Stock-based
compensation............ 866
Accretion of preferred
stock issuance costs.... (27,258)
Net loss.................. (2,779,989)
-----------
Balance, December 31, 1997..... (2,821,647)
Exercise of common stock
options................. 5,133
Stock-based
compensation............ 48,428
Accretion of preferred
stock issuance costs.... (25,149)
Net loss.................. (3,948,272)
-----------
Balance, December 31, 1998..... (6,741,507)
Exercise of common stock
options................. 70,432
Warrant expense........... 1,092,714
Stock-based
compensation............ 624,011
Accretion of preferred
stock issuance costs.... (37,195)
Net loss.................. (4,639,320)
-----------
Balance, December 31, 1999..... $(9,630,865)
===========
</TABLE>
See notes to financial statements.
F-5
<PAGE> 78
SYNCHRONICITY, INC. OF MASSACHUSETTS
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1997 1998 1999
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss....................................... $(2,779,989) $(3,948,272) $(4,639,320)
----------- ----------- -----------
Adjustments to reconcile net loss to cash used
for operating activities:
Depreciation and amortization............. 128,754 233,947 342,770
Warrant expense........................... -- -- 1,092,714
Stock-based compensation.................. 866 48,428 624,011
(Decrease) increase in cash from:
Accounts receivable................. (967,500) (611,500) (1,521,139)
Prepaid commissions................. -- (313,943) (952,088)
Prepaid expenses and other current
assets............................ 310 (100,931) (39,610)
Accounts payable.................... 175,265 9,448 70,542
Accrued payroll and commissions..... 52,559 382,678 1,193,760
Deferred revenues................... 850,000 1,457,965 1,553,840
----------- ----------- -----------
Total adjustments................... 240,254 1,106,092 2,364,800
----------- ----------- -----------
Cash used for operating
activities........................ (2,539,735) (2,842,180) (2,274,520)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment............ (433,185) (252,523) (453,388)
Other assets................................... (889) (8,646) (3,310)
----------- ----------- -----------
Cash used for investing
activities........................ (434,074) (261,169) (456,698)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of common stock
options...................................... 1,250 5,133 70,432
Proceeds from issuance of preferred stock, net
of issuance costs............................ 3,045,091 7,179,550 --
----------- ----------- -----------
Cash provided by financing
activities........................ 3,046,341 7,184,683 70,432
----------- ----------- -----------
Increase (decrease) in cash and equivalents.... 72,532 4,081,334 (2,660,786)
Cash and equivalents, beginning of year........ 2,159,044 2,231,576 6,312,910
----------- ----------- -----------
Cash and equivalents, end of year.............. $ 2,231,576 $ 6,312,910 $ 3,652,124
=========== =========== ===========
NONCASH FINANCING ACTIVITY -- Accretion of
preferred stock issuance costs............... $ 27,258 $ 25,149 $ 37,195
=========== =========== ===========
</TABLE>
See notes to financial statements.
F-6
<PAGE> 79
SYNCHRONICITY, INC. OF MASSACHUSETTS
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS -- Synchronicity, Inc. of Massachusetts (the
"Company") provides internet-based software products that enable enterprise-wide
and business-to-business collaboration among participants in electronic product
development supply chains.
SEGMENTS -- The Company has a single operating segment, the development and
marketing of internet-based software products. The Company's organizational
structure is not dictated by product lines, geography or customer type.
PRO FORMA BALANCE SHEET INFORMATION (UNAUDITED) -- Upon the closing of the
Company's public offering, all of the outstanding shares of preferred stock as
of December 31, 1999 will automatically convert into 7,021,002 shares of common
stock. The unaudited pro forma presentation of the balance sheet has been
prepared assuming the conversion of all shares of preferred stock into common
stock at December 31, 1999. All references to pro forma information in the notes
to the financial statements are unaudited.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
CASH AND EQUIVALENTS -- The Company considers all highly liquid investments
with remaining maturities of three months or less when purchased to be cash
equivalents.
PREPAID COMMISSIONS -- Commissions directly related to revenue transactions
are deferred and charged to sales and marketing expense when the related revenue
is recognized.
PROPERTY AND EQUIPMENT -- Property and equipment are stated at cost.
Depreciation and amortization are provided using the straight-line method over
the useful lives (three years) of the related assets. The Company periodically
evaluates the recoverability of its long-lived assets based on expected
undiscounted cash flows and recognizes impairments, if any, based on discounted
cash flows.
OTHER ASSETS -- Other assets consist primarily of capitalized costs
incurred to register trademarks. Such costs are being amortized over five years.
REVENUE RECOGNITION -- Beginning in 1998, the Company recognized revenue
under Statement of Position ("SOP") 97-2, "Software Revenue Recognition," and
SOP 98-9, "Modification of SOP 97-2, Software Revenue Recognition, with Respect
to Certain Transactions." Prior to 1998, revenue was recognized in accordance
with SOP 91-1, "Software Revenue Recognition".
Revenue from licenses of software products is recognized when products are
delivered to customers and collection is probable. When arrangements contain
multiple elements and vendor-specific objective evidence exists for all
undelivered elements, revenue is allocated to the delivered elements using the
residual method as prescribed by SOP 98-9. When arrangements include post-
contract support and unspecified updates to be delivered on a
if-and-when-available basis, and where vendor-specific objective evidence does
not exist for the allocation of revenue to the various
F-7
<PAGE> 80
SYNCHRONICITY, INC. OF MASSACHUSETTS
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 -- (CONTINUED)
elements of the arrangement, revenue is recognized ratably over the term of the
arrangement. Revenue recognized under these arrangements is included in software
license revenues and amounted to approximately $27,000 and $989,000 in 1998 and
1999, respectively. Revenue from arrangements that have payment terms extending
beyond twelve months is recognized as the payments become due. Software license
revenues from sales to distributors are generally recognized at the time a
distributor reports that the software has been licensed and all revenue
recognition criteria have been satisfied.
Revenue from consulting and training is recognized as services are
provided. Revenue from post-contract support is recognized ratably over the term
of the service agreement.
STOCK-BASED COMPENSATION -- The Company accounts for stock-based employee
compensation arrangements in accordance with provisions of Accounting Principles
Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees" and
complies with the disclosure provisions of Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation." Under APB
No. 25, compensation cost is recognized on a straight-line basis over the
vesting period based on the difference, if any, on the date of grant between the
fair value of the Company's stock and the exercise price.
The Company accounts for stock issued to nonemployees in accordance with
the provisions of SFAS No. 123 and Emerging Issues Task Force No. 96-18,
"Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services."
SOFTWARE DEVELOPMENT COSTS -- Software development costs are included in
research and development and are expensed as incurred. After technological
feasibility is established, material software development costs are capitalized.
The capitalized cost is then amortized on a straight-line basis over the
estimated product life or in the ratio of current revenues to total projected
product revenues, whichever is greater. To date, the period between achieving
technological feasibility, which the Company has defined as the establishment of
a working model which typically occurs when the beta testing commences, and the
general availability of such software has been short, and software development
costs qualifying for capitalization have been insignificant. Accordingly, the
Company has not capitalized any software development costs.
INCOME TAXES -- Deferred tax assets and liabilities are recorded to measure
the taxes expected to be paid or recovered in future periods due to differences
between the book and tax bases of assets and liabilities and operating loss
carryforwards. The Company records a valuation allowance of 100% for all
deferred tax assets.
CONCENTRATION OF CREDIT RISK -- Financial instruments that potentially
subject the Company to significant concentrations of credit risk consist
principally of cash and cash equivalents, short-term investments and accounts
receivable. Cash and cash equivalents are deposited with financial institutions
that management believes are creditworthy.
The Company performs ongoing credit evaluations of its customers' financial
condition and requires no collateral from its customers. The Company maintains
an allowance for doubtful accounts receivable based on the expected
collectibility of accounts receivable.
F-8
<PAGE> 81
SYNCHRONICITY, INC. OF MASSACHUSETTS
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 -- (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS -- The Company's financial instruments,
including cash, cash equivalents, accounts receivable and accounts payable, are
carried at cost, which approximates their fair value because of the short-term
nature of these instruments.
NET LOSS PER SHARE AND PRO FORMA NET LOSS PER SHARE -- Net loss per share
is computed under SFAS No. 128, "Earnings Per Share." Basic net loss per share
is computed using the weighted-average number of shares of common stock
outstanding. Net loss used in the calculation is increased by the accretion of
preferred stock in each year to arrive at the net loss available to common
shareholders. Diluted loss per share does not differ from basic loss per share
since potential common shares from conversion of preferred stock, stock options
and warrants are antidilutive for all periods presented and, therefore, are
excluded from the calculation. During the years ended December 31, 1997, 1998
and 1999, options to purchase 1,116,500, 1,449,500, and 1,520,377 shares of
common stock and preferred stock convertible into 4,157,665, 7,021,002 and
7,021,002 shares of common stock, respectively, were not included in the
computation of diluted earnings per share since their inclusion would be
antidilutive. Additionally, a warrant to purchase 150,000 shares of common stock
granted in 1998 was not included in the computation of diluted earnings per
share for 1998 and 1999 since its inclusion would be antidilutive. Pro forma
basic and diluted net loss per share have been calculated assuming the
conversion of all outstanding shares of preferred stock into common stock, as if
the shares had converted immediately upon their issuance.
COMPREHENSIVE INCOME -- There are no other elements of comprehensive income
(loss) other than net income (loss).
FUTURE ADOPTION OF ACCOUNTING PRONOUNCEMENTS -- In 1998, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
The provisions of SFAS No. 133 are effective for periods beginning after June
15, 2000. The Company has not determined the effect, if any, that SFAS No. 133
will have on its financial statements.
2. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
ESTIMATED -----------------------
USEFUL LIFE 1998 1999
----------- --------- ----------
<S> <C> <C> <C>
Office and computer equipment........................ 3 years $ 585,277 $ 903,277
Computer software.................................... 3 years 220,846 314,005
Furniture and fixtures............................... 3 years 45,533 85,826
--------- ----------
Total property and equipment.................... 851,656 1,303,108
Less accumulated depreciation and amortization....... (387,915) (723,735)
--------- ----------
Property and equipment -- net........................ $ 463,741 $ 579,373
========= ==========
</TABLE>
F-9
<PAGE> 82
SYNCHRONICITY, INC. OF MASSACHUSETTS
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 -- (CONTINUED)
3. LINE OF CREDIT
At December 31, 1999, the Company had a line of credit, which allowed
borrowings up to $2.0 million through February 2000. Borrowings under the line
may be used for working capital ($1.5 million) and equipment purchases ($0.5
million). Interest on the borrowings was charged at the bank's prime rate (8.5%
at December 31, 1999) plus 0.5% and borrowings were collateralized by
substantially all of our tangible assets. There were no outstanding borrowings
at December 31, 1998 or 1999. The agreement required compliance with certain
financial ratios and, among other things, the maintenance of minimum levels of
working capital and tangible net worth. The agreement also prohibited the
declaration or payment of dividends. At December 31, 1999, the Company was not
in compliance with certain financial ratios; waivers of the non-compliance have
been obtained from the bank.
In February 2000, the line of credit was renegotiated to include borrowings
up to $3.0 million through February 2001 as well as less restrictive financial
covenants. Under this new line of credit, the Company would have been in
compliance with the financial covenants at December 31 1999. Borrowings under
the new line may be used for working capital ($2.5 million) and equipment
purchases ($0.5 million). The other terms of the new line of credit are similar
to the former line of credit, including the restriction on the declaration and
payment of dividends.
The Company has an outstanding letter of credit in the amount of $70,590,
which was provided in lieu of a security deposit to a holder of one of the
Company's office leases. The letter of credit expires on December 31, 2000.
4. REDEEMABLE CONVERTIBLE PREFERRED STOCK
At December 31, 1998 and 1999, the Company had 281,250 authorized, issued
and outstanding shares of Series B Convertible Preferred Stock, $0.01 par value
(the "Series B Preferred Stock"); 350,283 authorized, issued and outstanding
shares of Series C Convertible Preferred Stock, $0.01 par value (the "Series C
Preferred Stock"); and 2,863,337 authorized, issued and outstanding shares of
Series D Convertible Preferred Stock, $0.01 par value (the "Series D Preferred
Stock") (collectively, the "Redeemable Preferred Stock").
Redeemable Preferred Stock was comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1998 1999
----------- -----------
<S> <C> <C>
Series B Preferred Stock, at redemption value
(liquidation preference, $2,250,000).................. $ 2,199,017 $ 2,211,765
Series C Preferred Stock, at redemption value
(liquidation preference, $3,100,005).................. 3,058,819 3,069,115
Series D Preferred Stock, at redemption value
(liquidation preference, $7,244,243).................. 7,187,637 7,201,788
----------- -----------
Total redeemable convertible preferred
stock...................................... $12,445,473 $12,482,668
=========== ===========
</TABLE>
CONVERSION -- Holders of the Redeemable Preferred Stock have the right and
option to convert all or any portion of the preferred shares into shares of
common stock at any time. Shares of the
F-10
<PAGE> 83
SYNCHRONICITY, INC. OF MASSACHUSETTS
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 -- (CONTINUED)
Redeemable Preferred Stock will be automatically converted into common stock at
the then applicable conversion rate in the event of a public offering in which
the aggregate net proceeds are at least $20,000,000 and the per share price is
at least $5.06. Each Series B and C share is convertible on a five-for-one basis
into common stock, and each share of Series D is convertible on a one-for-one
basis. The conversion rate will be adjusted for stock splits, combinations,
stock dividends and distributions.
REDEMPTIONS AND DIVIDENDS -- The Series B, Series C and Series D Preferred
Stock are subject to redemption, at the option of holders of 66 2/3% of the
combined Series B, C and D Preferred Stock, at any time after September 28,
2003, at redemption prices of $8.00 per share, $8.85 per share and $2.53 per
share, respectively, plus accrued and unpaid dividends. Dividends on the
Redeemable Preferred Stock accrue and are payable when and if declared by the
Company's Board of Directors (the "Board"). No dividends have been declared
through December 31, 1999.
LIQUIDATION PREFERENCE -- In the event of liquidation, dissolution, or
winding up of the Company, holders of the Series B, C and D Preferred Stock are
entitled to receive, in preference to the holders of common stock but pari-passu
to the Series A Preferred Stock, an amount equal to $8.00 per share, $8.85 per
share and $2.53 per share, respectively, plus accrued and unpaid dividends.
VOTING RIGHTS -- The holders of Redeemable Preferred Stock are entitled to
vote, together with holders of the common stock and Series A Preferred Stock, on
all matters. Each share of preferred stock is entitled to vote on an
as-converted basis.
F-11
<PAGE> 84
SYNCHRONICITY, INC. OF MASSACHUSETTS
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 -- (CONTINUED)
5. STOCKHOLDERS' EQUITY (DEFICIENCY)
1999 STOCK OPTION AND INCENTIVE PLAN -- The Company has a stock option plan
under which options to purchase up to a maximum of 575,000 shares of common
stock may be granted to employees, directors, or consultants. The exercise price
of incentive stock options cannot be less than 100% of the fair market value of
the stock at the date of grant; the exercise price of nonqualified stock options
is determined by the Board. Options vest over periods determined by the Board,
generally four years.
The following table sets forth the option activity for the years ended
December 31 under the 1999 Stock Option and Incentive Plan and predecessor
plans:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
---------------------------
WEIGHTED-
NUMBER OF AVERAGE
SHARES EXERCISE PRICE
<S> <C> <C>
Outstanding, January 1, 1997...................... 753,750 $0.11
Granted...................................... 387,750 0.17
Exercised.................................... (25,000) 0.05
---------
Outstanding, December 31, 1997.................... 1,116,500 0.13
Granted...................................... 444,000 0.19
Exercised.................................... (48,550) 0.11
Forfeited.................................... (62,450) 0.17
---------
Outstanding, December 31, 1998.................... 1,449,500 0.15
Granted...................................... 586,075 1.27
Exercised.................................... (486,118) 0.14
Forfeited.................................... (29,080) 0.29
---------
Outstanding, December 31, 1999.................... 1,520,377 0.58
=========
Exercisable, December 31, 1999.................... 564,383 0.22
=========
Exercisable, December 31, 1998.................... 639,771 0.13
=========
Exercisable, December 31, 1997.................... 318,518 0.12
=========
</TABLE>
The estimated weighted-average fair value of option grants made during
1997, 1998 and 1999 was $0.08, $0.90 and $8.01 per option, respectively.
Included in the table above are options to five nonemployees to purchase an
aggregate of 47,000 shares of common stock at a weighted-average exercise price
of $0.16 per share with actual exercise prices ranging from $0.10 to $0.18 per
share. Compensation expense of $866, $48,428, and $46,395 was recognized in
1997, 1998 and 1999 respectively, for these nonemployee options in accordance
with SFAS No. 123 and EITF No. 96-18.
Under APB No. 25, stock-based compensation is based on the difference, if
any, on the date of the grant, between the fair value of the Company's stock and
the exercise price. Stock-based compensation is amortized to expense in
accordance with FASB Interpretation No. 28. In
F-12
<PAGE> 85
SYNCHRONICITY, INC. OF MASSACHUSETTS
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 -- (CONTINUED)
connection with certain stock option grants during the years ended December 31,
1998 and 1999, the Company recorded unearned stock-based compensation cost
totaling $5,178,431, which is being recognized over the vesting period.
The following table summarizes information about stock options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
------------------------------------------------------ ----------------------------------
WEIGHTED- WEIGHTED-AVERAGE
NUMBER WEIGHTED- AVERAGE NUMBER EXERCISE PRICE
RANGE OF OUTSTANDING AVERAGE REMAINING EXERCISABLE OF CURRENTLY
EXERCISE AT DECEMBER 31, EXERCISE LIFE AT DECEMBER 31, EXERCISABLE
PRICES 1999 PRICE (IN YEARS) 1999 OPTIONS
<S> <C> <C> <C> <C> <C>
$ 0.05 35,000 $0.05 6 30,500 $0.05
0.10 215,000 0.10 7 160,750 0.10
0.16 200,050 0.16 7 146,013 0.16
0.18 464,800 0.18 8 156,990 0.18
0.25 31,000 0.25 9 9,240 0.25
0.75 481,227 0.75 10 58,870 0.75
4.00 93,300 4.00 10 2,020 4.00
--------- -------
0.05 - 4.00 1,520,377 0.58 564,383 0.22
========= =======
</TABLE>
PRO FORMA DISCLOSURES -- SFAS No. 123 requires the disclosure of pro forma
information as if the Company adopted the fair value method for grants or awards
made to employees. For purposes of the pro forma disclosures, the fair value of
options on their grant date was measured using the Black-Scholes option pricing
model with the following weighted-average assumptions: expected life of four
years; risk free interest rate of 6.0%, 5.5% and 6.0% in 1997, 1998 and 1999,
respectively; and no dividends during the expected term. The Company's 1997,
1998 and 1999 calculations assumed a volatility factor of 52%, 68% and 83%,
respectively. Forfeitures are recognized as they occur. If the computed fair
values of the 1997, 1998 and 1999 awards had been amortized to expense over the
vesting period of the awards, pro forma net loss and net loss per share would
have been as follows:
<TABLE>
<CAPTION>
1997 1998 1999
<S> <C> <C> <C>
Net loss as reported............... $(2,779,989) $(3,948,272) $(4,639,320)
Pro forma net loss................. (2,791,544) (3,972,149) (4,732,644)
Net loss per share as reported..... (0.86) (1.21) (1.39)
Pro forma net loss per share....... (0.87) (1.22) (1.41)
</TABLE>
CONVERTIBLE PREFERRED STOCK -- At December 31, 1998 and 1999, the Company
had 200,000 authorized issued and outstanding shares of Series A Preferred
Stock, $0.01 par value.
Conversion -- Holders of the Series A Preferred Stock have the right and
option to convert the preferred shares at any time into shares of common stock.
Each share of Series A Preferred Stock is convertible on a five-for-one basis
into common stock. The conversion rate will be adjusted for
F-13
<PAGE> 86
SYNCHRONICITY, INC. OF MASSACHUSETTS
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 -- (CONTINUED)
stock splits, combinations, stock dividends and distributions. Series A
Preferred Stock automatically converts into common stock upon the closing of a
public offering of the Company's stock.
Dividends -- Dividends accrue and are payable when and if declared by the
Board. No dividends have been declared through December 31, 1999.
Liquidation Preference -- In the event of liquidation or dissolution of the
Company, holders of the Series A Preferred Stock are entitled to receive, in
preference to the holders of common stock, an amount equal to $5.00 per share,
plus accrued and unpaid dividends.
WARRANT -- The Company granted to a customer a warrant to purchase 150,000
shares of common stock at a price of $4.30 per share which vested in 1999 when
the customer entered into a license agreement and issued a purchase order in
excess of $650,000. The Company valued the warrant at approximately $1,093,000
using the Black-Scholes model, an assumed volatility of 83%, a risk-free
interest rate of 6.0%, a weighted-average expected life of 12 months and a
dividend rate of 0.0%.
The warrant is exercisable at any time before the earlier of September 28,
2002, or upon the closing of a public offering of the Company's stock.
6. INCOME TAXES
At December 31, the deferred tax assets and liabilities consisted of the
following:
<TABLE>
<CAPTION>
1998 1999
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards............ $ 2,819,000 $ 4,018,000
Depreciation................................ 31,000 56,000
Start-up costs.............................. 189,000 129,000
Research and development credits............ 286,000 517,000
Warrant expense............................. -- 437,000
Stock-based compensation.................... 19,000 45,000
Other....................................... 17,000 15,000
----------- -----------
3,361,000 5,217,000
Less valuation allowance......................... (3,361,000) (5,217,000)
----------- -----------
$ -- $ --
=========== ===========
</TABLE>
Because of the Company's limited operating history, management has provided
a 100% reserve against the Company's net deferred tax assets. Federal and state
net operating loss carryforwards of approximately $10,050,000 expire beginning
in 2011 and 2001, respectively. Federal and state tax credits related to
research and development activities of approximately $371,000 and $146,000
expire beginning in 2011.
The 1997 and 1999 provisions for taxes relate to taxes withheld by foreign
governments for revenue generated in those foreign countries. Taxes paid were
$65,000 and $37,425 in 1997 and 1999, respectively. No taxes were paid in 1998.
F-14
<PAGE> 87
SYNCHRONICITY, INC. OF MASSACHUSETTS
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 -- (CONTINUED)
7. GEOGRAPHIC INFORMATION AND MAJOR CUSTOMERS
Revenues by geographic region for the years ended December 31 are as
follows:
<TABLE>
<CAPTION>
1997 1998 1999
<S> <C> <C> <C>
United States.......................... $660,000 $1,352,575 $4,704,805
Canada................................. -- 371,584 934,310
Europe................................. -- 28,125 1,095,356
Japan.................................. -- 56,250 712,734
</TABLE>
Three customers comprised 77% and 58% of accounts receivable at December
31, 1998 and 1999, respectively. The concentration of revenues by major customer
for the years ended December 31 is as follows:
<TABLE>
<CAPTION>
1997 1998 1999
<S> <C> <C> <C>
Customer A..................................... -- -- 12%
Customer B..................................... -- 21% 8%
Customer C..................................... -- 15% 5%
Customer D..................................... 19% 14% 3%
Customer E..................................... 14% 3% 2%
Customer F..................................... 13% 2% 5%
Customer G..................................... 38% -- --
Customer H..................................... 11% -- --
</TABLE>
8. COMMITMENTS
The Company has entered into three multi-year operating lease agreements
for office space, which expire in 2002, 2003 and 2004. One of the leases
contains a renewal option. Rental expense under these agreements was $44,000,
$58,500 and $372,927 in 1997, 1998 and 1999, respectively. The Company is
obligated to make the following minimum lease payments under these agreements:
<TABLE>
<S> <C>
YEAR ENDED DECEMBER 31,
2000................................................ $410,254
2001................................................ 418,783
2002................................................ 397,179
2003................................................ 407,354
2004................................................ 104,164
</TABLE>
9. RETIREMENT PLAN
On January 1, 1998, the Company established a savings and investment plan
for eligible employees. The plan is a defined contribution plan, which allows
for a compensation reduction feature under Section 401(k) of the Internal
Revenue Code. A matching employer contribution may be made to each employee's
account at the Company's discretion. For the years ended December 31, 1998 and
1999, the Company made no contributions to the plan.
F-15
<PAGE> 88
SYNCHRONICITY, INC. OF MASSACHUSETTS
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 -- (CONTINUED)
10. SUBSEQUENT EVENTS
On January 25, 2000, the Company's Board of Directors, subject to
shareholder approval, approved an increase of 750,000 in the number of shares
available for grant under the 1999 Stock Option and Incentive Plan.
On February 16, 2000, the Company's Board of Directors, subject to
shareholder approval, took the following actions:
- Changed the name of the Company to Synchronicity Software, Inc.
- Approved amendments to the Company's certificate of incorporation to be
effective upon the closing of a public offering of the Company's stock,
including an increase in authorized shares of the Company's common stock
to 90,000,000 shares and the authorization of 5,000,000 shares of
undesignated preferred stock.
- Approved the adoption of the 2000 Non-Employee Director Stock Option
Plan, to be effective upon the effectiveness of a public offering of the
Company's stock, pursuant to which options to purchase up to 250,000
shares of common stock may be granted to non-employee directors.
- Approved the 2000 Employee Stock Purchase Plan, to be effective upon the
effectiveness of a public offering of the Company's stock, pursuant to
which up to 500,000 shares of the Company's common stock may be sold to
employees.
- Approved a change in the 1999 Stock Option and Incentive Plan to increase
the number of shares available for grant on January 1 of each of the next
five years commencing with January 1, 2001 by an amount equal to 5% of
the Company's common shares outstanding on December 31 of the preceding
fiscal year, provided however, that no more than 5,100,000 shares of
common stock may be cumulatively available for issuance pursuant to
incentive stock options.
F-16
<PAGE> 89
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
, 2000
[SYNCHRONICITY LOGO]
SHARES OF COMMON STOCK
----------------------------
PROSPECTUS
----------------------------
DONALDSON, LUFKIN & JENRETTE
ROBERTSON STEPHENS
DAIN RAUSCHER WESSELS
DLJDIRECT INC.
- --------------------------------------------------------------------------------
We have not authorized any dealer, sales person or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of
Synchronicity have not changed since the date hereof.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Until , 2000 (25 days after the date of this prospectus), all dealers
that effect transactions in these shares of common stock may be required to
deliver a prospectus. This is in addition to the dealer's obligation to deliver
a prospectus when acting as an underwriter and with respect to its unsold
allotments or subscriptions.
- --------------------------------------------------------------------------------
<PAGE> 90
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses, all of which will be
borne by the Registrant, in connection with the sale and distribution of the
securities being registered, other than the underwriting discounts and
commissions. All amounts shown are estimates except for the Securities and
Exchange Commission registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 13,662
NASD filing fee............................................. 5,500
Nasdaq National Market listing fee.......................... 90,500
Blue Sky fees and expenses.................................. 5,000
Transfer Agent and Registrar fees........................... 5,500
Accounting fees and expenses................................ 350,000
Legal fees and expenses..................................... 500,000
Printing and mailing expenses............................... 225,000
Miscellaneous............................................... 54,838
----------
Total............................................ $1,250,000
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware General Corporation Law and our charter provide for
indemnification of directors and officers for liabilities and expenses that they
may incur in such capacities. In general, directors and officers are indemnified
with respect to actions taken in good faith in a manner reasonably believed to
be in, or not opposed to, our best interests, and with respect to any criminal
action or proceeding, actions that the indemnitee had no reasonable cause to
believe were unlawful. Reference is made to our corporate charter filed as
Exhibit 3.3 hereto.
The underwriting agreement provides that the underwriters are obligated,
under certain circumstances, to indemnify our directors, officers and
controlling persons against certain liabilities, including liabilities under the
Securities Act. Reference is made to the form of underwriting agreement filed as
Exhibit 1.1 hereto.
The registrant intends to apply for a directors' and officers' liability
insurance policy.
The effect of these provisions would be to permit indemnification by the
Company for, among other liabilities, liabilities arising out of the Securities
Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
STOCK SPLITS
On May 1, 1997, the registrant effected a five-for-one stock split of its
common stock in the form of a dividend of four shares of common stock for each
share of common stock outstanding and held of record by a stockholder as of May
1, 1997. In connection with such stock split, the registrant issued to its
stockholders of record as of May 1, 1997 an aggregate of 2,601,080 shares of
common stock. All common share amounts herein reflect the stock split.
II-1
<PAGE> 91
CERTAIN SALES OF SECURITIES
Set forth in chronological order is information regarding shares of common
stock issued and options granted by the registrant since February 16, 1997.
Further included is the consideration, if any, received by the Registrant for
such shares, warrants and options and information relating to the section of the
Securities Act, or rule of the Securities and Exchange Commission, under which
exemption from registration was claimed.
The securities issued in the foregoing transactions were either (i) offered
and sold in reliance upon exemptions from Securities Act registration set forth
in Section 4(2) of the Securities Act, or any regulations promulgated
thereunder, relating to sales by an issuer not involving any public offering, or
(ii) in the case of certain options to purchase shares of common stock and
shares of common stock issued upon the exercise of such options, such offers and
sales were made in reliance upon an exemption from registration under rule 701
of the Securities Act. No underwriters were involved in the foregoing sales of
securities.
(a) Issuances of Capital Stock.
On April 28, 1997, our predecessor, a Massachusetts corporation, issued and
sold to venture capital funds and other accredited investors 350,283 shares of
Series C convertible preferred stock in a private financing for an aggregate
purchase price of $3,100,004.55.
On September 28, 1998, our predecessor, a Massachusetts corporation, issued
and sold to venture capital funds and other accredited investors 2,863,337
shares of Series D convertible preferred stock in a private financing for an
aggregate purchase price of $7,244,242.61.
In connection with such transaction the registrant also issued a warrant to
purchase 150,000 shares of common stock to one of the investors, Intel
Corporation, which vested on December 31, 1999. The exercise price of such
warrant is $4.30 per share.
On May 12, 1999, the registrant effected a migratory merger in which its
predecessor, Synchronicity, Inc., a Massachusetts corporation, merged into and
with Synchronicity, Inc. of Massachusetts, a Delaware Corporation, the
registrant. In connection with such migratory merger, on April 15, 1999, the
registrant issued and sold 100 shares of common stock to its predecessor for an
aggregate purchase price of $1.00. The registrant cancelled such 100 shares on
May 12, 1999. Also in connection with such migratory merger, the registrant
re-issued 3,300,440 shares of common stock; 200,000 shares of Series A
convertible preferred stock; 281,250 shares of Series B convertible preferred
stock; 350,283 shares of Series C convertible preferred stock; and 2,863,337
shares of Series D convertible preferred stock in exchange for all of the
outstanding shares of stock of the registrant's predecessor.
(b) Certain Grants and Exercises of Stock Options.
On June 11, 1997, our predecessor issued to employees options to purchase
an aggregate of 113,250 shares of common stock at an exercise price of $0.18 per
share. As of February 16, 2000, options to purchase 22,800 shares were
outstanding, of which 3,600 were exercisable.
On August 5, 1997, our predecessor issued to employees options to purchase
an aggregate of 62,000 shares of common stock at an exercise price of $0.18 per
share. As of February 16, 2000, options to purchase 35,050 shares were
outstanding, of which were 15,900 exercisable.
On September 24, 1997, our predecessor issued to employees options to
purchase an aggregate of 15,000 shares of common stock at an exercise price of
$0.18 per share. As of February 16, 2000, options to purchase 15,000 shares were
outstanding, of which 9,000 were exercisable.
II-2
<PAGE> 92
On October 23, 1997, our predecessor issued to employees options to
purchase an aggregate of 55,000 shares of common stock at an exercise price of
$0.18 per share. As of February 16, 2000, options to purchase 24,000 shares were
outstanding, of which 3,000 were exercisable.
On December 18, 1997, our predecessor issued to employees options to
purchase an aggregate of 40,000 shares of common stock at an exercise price of
$0.18 per share. As of February 16, 2000, options to purchase 28,400 shares were
outstanding, of which 10,240 were exercisable.
On January 26, 1998, our predecessor issued to employees options to
purchase an aggregate of 95,000 shares of common stock at an exercise price of
$0.18 per share. As of February 16, 2000, options to purchase 80,400 shares were
outstanding, of which 34,800 were exercisable.
On March 2, 1998, our predecessor issued to employees options to purchase
an aggregate of 125,000 shares of common stock at an exercise price of $0.18 per
share. As of February 16, 2000, options to purchase 92,850 shares were
outstanding, of which 31,750 were exercisable.
On July 23, 1998, our predecessor issued to employees options to purchase
an aggregate of 84,000 shares of common stock at an exercise price of $0.18 per
share. As of February 16, 2000, options to purchase 54,400 shares were
outstanding, of which 9,460 were exercisable.
On September 25, 1998, our predecessor issued to employees options to
purchase an aggregate of 84,000 shares of common stock at an exercise price of
$0.18 per share. As of February 16, 2000, options to purchase 59,300 shares were
outstanding, of which 10,000 were exercisable.
On November 4, 1998, our predecessor issued to employees options to
purchase an aggregate of 56,000 shares of common stock at an exercise price of
$0.25 per share. As of February 16, 2000, options to purchase 30,100 shares were
outstanding, of which 9,580 were exercisable.
On January 21, 1999, our predecessor issued to employees options to
purchase an aggregate of 96,000 shares of common stock at an exercise price of
$0.75 per share. As of February 16, 2000, options to purchase 94,000 shares were
outstanding, of which 26,320 were exercisable.
On June 15, 1999, we issued to our employees options to purchase an
aggregate of 151,775 shares of common stock at an exercise price of $0.75 per
share. As of February 16, 2000, options to purchase 142,088 shares were
outstanding, of which 18,862 were exercisable.
On July 8, 1999, we issued to our employees options to purchase an
aggregate of 39,500 shares of common stock at an exercise price of $0.75 per
share. As of February 16, 2000, options to purchase 37,100 shares were
outstanding, of which 5,190 were exercisable.
On September 22, 1999, we issued to our employees options to purchase an
aggregate of 168,000 shares of common stock at an exercise price of $0.75 per
share. As of February 16, 2000, options to purchase 164,760 shares were
outstanding, of which 17,580 were exercisable.
On October 28, 1999, we issued to our employees options to purchase an
aggregate of 37,500 shares of common stock at an exercise price of $0.75 per
share. As of February 16, 2000, options to purchase 37,500 shares were
outstanding, of which 3,750 were exercisable.
On December 15, 1999, we issued to our employees options to purchase an
aggregate of 93,300 shares of common stock at an exercise price of $4.00 per
share. As of February 16, 2000, options to purchase 93,300 shares were
outstanding, of which 6,508 were exercisable.
On January 25, 2000, we issued to our employees options to purchase an
aggregate of 52,500 shares of common stock at an exercise price of $6.00 per
share. As of February 16, 2000, options to purchase 52,500 shares were
outstanding, of which 2,100 were exercisable.
II-3
<PAGE> 93
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Certificate of Incorporation of the registrant, as amended.
3.2 Form of First Amended and Restated Certificate of
Incorporation of the registrant to be effective upon
effectiveness of the registration statement.
3.3 Form of Second Amended and Restated Certificate of
Incorporation of the registrant, to be effective upon the
closing of the offering to which this registration statement
relates.
3.4 By-Laws of the registrant.
3.5 Form of Amended and Restated By-Laws of the registrant, to
be effective upon the closing of this offering.
4.1* Specimen certificate for shares of common stock.
5.1* Opinion of Testa, Hurwitz & Thibeault, LLP.
10.1 1996 Stock Option Plan.
10.2 1996 Stock Plan.
10.3 Amended and Restated 1999 Stock Option and Incentive Plan.
10.4 2000 Non-Employee Director Stock Option Plan.
10.5 2000 Employee Stock Purchase Plan.
10.6 Second Amended and Restated Registration Rights Agreement by
and among the registrant and certain stockholders of the
registrant, dated as of September 28, 1998.
10.7 Loan and Security Agreement by and between the registrant
and Silicon Valley Bank, dated as of February 20, 1998.
10.8 First Loan Modification Agreement by and between the
registrant and Silicon Valley Bank, dated as of April 15,
1999.
10.9 Second Loan Modification Agreement by and between the
registrant and Silicon Valley Bank, dated as of February 17,
2000.
10.10 Negative Pledge Agreement by and between the registrant and
Silicon Valley Bank, dated as of November 3, 1998.
10.11 Office Lease by and between the registrant and 201 Forest
Street Realty Trust, dated as of April 1, 1997.
10.12 Lease Agreement by and between the registrant and W9/PHC
Real Estate Limited Partnership, dated as of November 18,
1998.
10.13 Lease Agreement by and between the registrant and Koger
Equity, Inc. dated as of November 3, 1998.
10.14# International Software Distribution Agreement by and between
the registrant and ItochuTechno Science Group, dated as of
December 27, 1999.
10.15# License Agreement by and between the registrant and Intel
Corporation, dated as of December 31, 1999.
10.16# Software OEM License Agreement by and between the registrant
and Cadence Design Systems, Inc. dated as of May 7, 1999.
23.1 Consent of Deloitte & Touche LLP.
</TABLE>
II-4
<PAGE> 94
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
<C> <S>
23.2 Consent of Testa, Hurwitz & Thibeault, LLP (included in
Exhibit 5.1).
24.1 Power of Attorney (included on page II-6).
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
# Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Securities and Exchange Commission.
(B) FINANCIAL STATEMENT SCHEDULES
All other schedules have been omitted because they are not required or
because the required information is given in the Registrant's Financial
Statements or Notes thereto.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14 above or otherwise,
the registrant 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 registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant 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 registrant 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 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.
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-5
<PAGE> 95
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Marlboro, Massachusetts, on this 18th
day of February, 2000.
SYNCHRONICITY, INC. OF MASSACHUSETTS
By: /s/ DENNIS R. HARMON
------------------------------------
Dennis R. Harmon
President and Chief Executive
Officer
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Synchronicity, Inc. of
Massachusetts, hereby severally constitute and appoint Dennis R. Harmon and
Eugene C. Connolly, and each of them singly, our true and lawful attorneys with
full power to them, and each of them singly, to sign for us and in our names in
the capacities indicated below, the registration statement on Form S-1 filed
herewith and any and all pre-effective and post-effective amendments to said
registration statement, and any subsequent registration statement for the same
offering which may be filed under rule 462(b), and generally to do all such
things in our names and on our behalf in our capacities as officers and
directors to enable Synchronicity, Inc. of Massachusetts to comply with the
provisions of the Securities Act of 1933, as amended, and all requirements of
the Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorneys, or any of them, to said
registration statement and any and all amendments thereto or to any subsequent
registration statement for the same offering which may be filed under rule
462(b).
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ DENNIS R. HARMON President, Chief Executive February 18, 2000
- --------------------------------------------------- Officer and Director
Dennis R. Harmon (principal executive
officer)
/s/ EUGENE C. CONNOLLY Executive Vice-President, February 18, 2000
- --------------------------------------------------- Chief Operating Officer
Eugene C. Connolly and Director
/s/ JOSEPH A. CALO Chief Financial Officer and February 18, 2000
- --------------------------------------------------- Vice President Finance
Joseph A. Calo (principal financial and
accounting officer)
</TABLE>
II-6
<PAGE> 96
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ SETH LIEBER Director February 18, 2000
- ---------------------------------------------------
Seth Lieber
/s/ JAMES C. FURNIVALL Director February 18, 2000
- ---------------------------------------------------
James C. Furnivall
/s/ LEIGH MICHL Director February 18, 2000
- ---------------------------------------------------
Leigh Michl
/s/ RICHARD T. FINIGAN Director February 18, 2000
- ---------------------------------------------------
Richard T. Finigan
</TABLE>
II-7
<PAGE> 97
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Certificate of Incorporation of the registrant, as amended.
3.2 Form of First Amended and Restated Certificate of
Incorporation of the registrant to be effective upon the
effectiveness of the registration statement.
3.3 Form of Second Amended and Restated Certificate of
Incorporation of the registrant, to be effective upon the
closing of the offering to which this registration statement
relates.
3.4 By-Laws of the registrant.
3.5 Form of Amended and Restated By-Laws of the registrant, to
be effective upon the closing of this offering.
4.1* Specimen certificate for shares of common stock.
5.1* Opinion of Testa, Hurwitz & Thibeault, LLP.
10.1 1996 Stock Option Plan.
10.2 1996 Stock Plan.
10.3 Amended and Restated 1999 Stock Option and Incentive Plan.
10.4 2000 Non-Employee Director Stock Option Plan.
10.5 2000 Employee Stock Purchase Plan.
10.6 Second Amended and Restated Registration Rights Agreement by
and among the registrant and certain stockholders of the
registrant, dated as of September 28, 1998.
10.7 Loan and Security Agreement by and between the registrant
and Silicon Valley Bank, dated as of February 20, 1998.
10.8 First Loan Modification Agreement by and between the
registrant and Silicon Valley Bank, dated as of April 15,
1999.
10.9 Second Loan Modification Agreement by and between the
registrant and Silicon Valley Bank, dated as of February 17,
2000.
10.10 Negative Pledge Agreement by and between the registrant and
Silicon Valley Bank, dated as of November 3, 1998.
10.11 Office Lease by and between the registrant and 201 Forest
Street Realty Trust, dated as of April 1, 1997.
10.12 Lease Agreement by and between the registrant and W9/PHC
Real Estate Limited Partnership, dated as of November 18,
1998.
10.13 Lease Agreement by and between the registrant and Koger
Equity, Inc. dated as of November 3, 1998.
10.14# International Software Distribution Agreement by and between
the registrant and ItochuTechno Science Group, dated as of
December 27, 1999.
10.15# License Agreement by and between the registrant and Intel
Corporation, dated as of December 31, 1999.
10.16# Software OEM License Agreement by and between the registrant
and Cadence Design Systems, Inc. dated as of May 7, 1999.
23.1 Consent of Deloitte & Touche LLP.
</TABLE>
<PAGE> 98
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
<C> <S>
23.2 Consent of Testa, Hurwitz & Thibeault, LLP (included in
Exhibit 5.1).
24.1 Power of Attorney (included on page II-6).
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
# Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Securities and Exchange Commission.
<PAGE> 1
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
SYNCHRONICITY, INC. OF MASSACHUSETTS
* * * * * *
FIRST. The name of the corporation is Synchronicity, Inc. of
Massachusetts (the "Corporation").
SECOND. The address of the registered office of the Corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, New Castle County, Delaware 19801. The name of its registered
agent at such address is The Corporation Trust Company.
THIRD. The nature of the business or purposes to be conducted or
promoted by the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the State of
Delaware.
FOURTH. The total number of shares of all classes of capital stock
which the Corporation shall have authority to issue is 16,783,812 shares,
consisting of:
(i) Thirteen Million Eighty-Eight Thousand Nine Hundred
Forty-Two (13,088,942) shares of Common Stock, par value $.01 per share (the
"Common Stock");
(ii) Two Hundred Thousand (200,000) shares of Series A
Preferred Stock, par value $.01 per share (the "Series A Preferred Stock");
(iii) Two Hundred Eighty One Thousand Two Hundred and Fifty
(281,250) shares of Series B Preferred Stock, par value $.01 per share (the
"Series B Preferred Stock");
(iv) Three Hundred Fifty Thousand Two Hundred Eighty Three
(350,283) shares of Series C Preferred Stock, par value $.01 per share (the
"Series C Preferred Stock"); and
(v) Two Million Eight Hundred Sixty Three Thousand Three
Hundred Thirty Seven (2,863,337) shares of Series D Preferred Stock, par value
$.01 per share (the "Series D Preferred Stock").
<PAGE> 2
A description of the respective classes of stock and a statement of the
designations, preferences, voting powers (or no voting powers), relative,
participating, optional or other special rights and privileges and the
qualifications, limitations and restrictions of the Common Stock, Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, and Series
D Preferred Stock are as follows:
A. COMMON STOCK
1. Relative Rights of Preferred Stock and Common Stock. All
preferences, voting powers, relative, participating, optional or other special
rights and privileges, and qualifications, limitations, or restrictions of the
Common Stock are expressly made subject and subordinate to those fixed with
respect to the shares of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock.
2. Voting Rights. Except as otherwise required by law or this
Certificate of Incorporation, each holder of Common Stock shall have one vote in
respect of each share of stock held by him of record on the books of the
Corporation for the election of directors and on all matters submitted to a vote
of stockholders of the Corporation.
3. Dividends. Subject to any preferential rights of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock, the holders of shares of Common Stock shall be entitled to
receive, when and if declared by the Board of Directors, out of the assets of
the Corporation which are by law available therefor, dividends payable either in
cash, in property or in shares of capital stock.
4. Dissolution, Liquidation or Winding Up. In the event of any
dissolution, liquidation or winding up of the affairs of the Corporation, after
distribution in full of the preferential amounts, if any, to be distributed to
the holders of shares of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock, holders of Common Stock
shall be entitled, unless otherwise provided by law or this Certificate of
Incorporation, to receive all of the remaining assets of the Corporation of
whatever kind available for distribution to stockholders ratably in proportion
to the number of shares of Common Stock held by them respectively.
B. SERIES A PREFERRED STOCK
1. Designation, Number of Shares and Price. The Corporation has
authorized the issuance of up to a total of 200,000 shares of Series A Preferred
Stock, having the preferences, qualifications, rights and privileges hereinafter
set forth. The purchase price is $5 per share, with a minimum purchase for a
single investor of 5,000 shares.
2
<PAGE> 3
2. Liquidation Preference. Upon any liquidation, dissolution or winding
up of the Corporation, the holders of the Series A Preferred Stock will be
entitled to be paid pari passu with the Series B Preferred Stock, the Series C
Preferred Stock and the Series D Preferred Stock, an amount in cash equal to the
total of the purchase price of all Series A Preferred Stock then outstanding.
All such payments, whether or not they are sufficient to pay the full preference
to which each outstanding share of Series A Preferred Stock is entitled, will be
distributed among such holders so that an equal amount (rounded off to the
nearest whole cent) is paid with respect to each outstanding share of Series A
Preferred Stock.
3. Notice. The Corporation shall mail written notice to each holder of
Series A Preferred Stock, at his or her address as shown on the stock transfer
records of the Corporation, of such liquidation, dissolution or winding up, not
less than 60 days prior to the payment date stated therein.
4. Voting Rights Generally. On all matters submitted to a vote of
holders of Common Stock generally, each share of Series A Preferred Stock will
have the right to exercise one vote for each share of Common Stock issuable upon
conversion of the Series A Preferred Stock in accordance with the provisions of
Section 5 hereof and the holders of Series A Preferred Stock and the Common
Stock will vote together as a single class.
5. Conversion; Public Offering or other Events.
(a) Each Share of Series A Preferred Stock shall automatically be
converted into a number of shares of Common Stock determined in accordance with
the provisions of Section 5(d) below upon the occurrence of (i) the closing of a
firm commitment underwritten initial public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, or (ii) the
consummation of the sale of all, or substantially all, of the Corporation's
assets or capital stock or a merger, consolidation, reorganization or other
business combination.
(b) The Corporation will mail to each holder of Series A Preferred
Stock, at such holder's address as shown on the stock transfer records of the
Corporation, written notice of a conversion pursuant to this section not less
than 20 and not more than 90 days before the date on which the Series A
Preferred Stock is expected to be converted. Such notice will (i) make specific
reference to this Section, (ii) set forth the facts on which the conversion
hereunder is based, and (iii) state the expected date of the conversion (the
"Mandatory Conversion Date").
(c) Any share of Series A Preferred Stock not surrendered for
conversion on or prior to the Mandatory Conversion Date will be deemed to have
been converted on the Mandatory Conversion Date.
(d) Each share of Series A Preferred Stock shall initially be
convertible upon the events described in Section 5(a) above into five shares of
Common Stock. Such conversion mechanic reflects an adjustment for the
five-for-one stock split in the form of a dividend of four shares of Common
Stock for each outstanding share of Common Stock approved by the Company's
predecessor corporation's Board of directors which was effective as of May 1,
1997
3
<PAGE> 4
and accordingly shall not be further adjusted to reflect such split. If the
Corporation at any time subdivides (by any stock split, stock dividend,
recapitalization, or otherwise) its outstanding shares of Common Stock into a
greater number of shares, or if the Corporation at any time combines (by reverse
stock split or otherwise) its outstanding shares of Common Stock into a smaller
number of shares, the number of shares of Common Stock into which the Series A
Preferred Stock shall be convertible upon the events described in Section 5(a)
above shall be proportionately adjusted.
6. Delivery of Common Stock. The Corporation shall, within 20 days
after the Mandatory Conversion Date send or deliver to each holder, at such
holder's address as shown on the stock transfer records of the Corporation a
certificate or certificates representing the number of whole shares of Common
Stock issuable by reason of the conversion of such holder's shares of Series A
Preferred Stock, in such name or names and such denomination or denominations as
the converting holder has specified, or, if the converting holder has not so
specified, a single certificate representing such number of whole shares, in the
name of such holder.
C. SERIES B, SERIES C AND SERIES D PREFERRED STOCK
1. Rank. The Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock shall, with respect to rights upon liquidation, winding
up or dissolution, rank pari passu with each other, pari passu with the Series A
Preferred Stock and senior and prior in right to (a) each class of Common Stock
of the Corporation, (b) any series of preferred stock whether now existing or
hereafter created (other than the Series A Preferred Stock) and (c) any other
equity interests (including, without limitation, warrants, stock appreciation
rights, phantom stock rights, profit participation rights in debt instruments or
other rights with equity features, calls or options exercisable for or
convertible into such capital stock or equity interests, but excluding the
Series A Preferred Stock) in the Corporation (all of such classes or series of
capital stock and other equity interests referred to in Clauses (a), (b) and (c)
hereof are collectively referred to as "Junior Securities"). With respect to
dividend rights, the Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock shall rank pari passu with each other, and pari passu
with the Series A Preferred Stock, each class of Common Stock of the
Corporation, any series of preferred stock hereafter created, and any Junior
Securities.
2. Dividends. (a) The holders of Series B Preferred Stock, the holders
of Series C Preferred Stock and the holders of the Series D Preferred Stock
shall not be entitled to receive cumulative dividends, except equally and
ratably with any dividends paid on any Series A Preferred Stock, any series of
preferred stock hereafter created and any Junior Securities; provided, however,
the holders of the Series B Preferred Stock, Series C Preferred Stock and Series
D Preferred Stock shall be entitled to dividends declared on the Common Stock
(except for dividends of Common Stock on the Common Stock provided for in
Section 6(d) hereof), pari passu, as though such holders had converted their
shares of Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock into shares of Conversion Stock.
4
<PAGE> 5
(b) The dividends, if any, referred to in Subsection (a) hereof, shall
be paid in the manner, form and at such time as dividends are paid on the Series
A Preferred Stock or Common Stock, other preferred stock or Junior Securities,
as the case may be.
(c) If at any time the Corporation pays less than the total amount of
dividends then accrued with respect to the Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock required to be paid at such time,
such payment shall be distributed ratably among the holders thereof based upon
the aggregate accrued but unpaid dividends on the relevant Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock held by each
holder.
3. Repurchase. (a) Shares of Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock shall be entitled to the rights set
forth below in this Section 3 (with all references in this Section 3 to a
repurchase price per share to be adjusted proportionally in respect of
fractional shares, rounded to the nearest cent for each holder or group of
affiliated holders).
(b) Put Rights. At any time or from time to time on or after the date
five (5) years after the Series D Issue Date, the holder or holders of at least
sixty-six and two-thirds percent (66 2/3%) of the Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock, voting together (on an
"as if converted" basis), shall have the right to request the Corporation to
purchase all or any portion of the shares of Series B Preferred Stock, Series C
Preferred Stock and/or Series D Preferred Stock held by such holder or holders,
and upon the exercise of such right, the Corporation shall purchase such shares
of Series B Preferred Stock, Series C Preferred Stock and/or Series D Preferred
Stock out of funds legally available therefor (such rights being referred to as
the "Put"). Such holder or holders may exercise the Put by providing the
Corporation with notice of the exercise thereof specifying the number of shares
of Series B Preferred Stock, Series C Preferred Stock or Series D Preferred
Stock with respect to which it is exercising the Put (such notice being referred
to as a "Request Notice"). The Corporation shall, no later than sixty (60) days
after the date of receipt of such Request Notice, redeem all of the shares of
Series B Preferred Stock, Series C Preferred Stock and/or Series D Preferred
Stock with respect to which the Put has been exercised, paying out of funds
legally available therefor to the holder or holders of the Series B Preferred
Stock, Series C Preferred Stock and/or Series D Preferred Stock exercising the
Put an amount in cash for each such share equal to that share's applicable
Repurchase Price (as defined in Subsection (c) hereof).
(c) Repurchase Price: (i) The "Series B Repurchase Price" for each
share of Series B Preferred Stock repurchased pursuant to this Section 3 shall
be the Series B Liquidation Value plus all declared but unpaid dividends on such
shares from the Series B Issue Date to the date on which payment is made by the
Corporation, (ii) the "Series C Repurchase Price" for each share of Series C
Preferred Stock repurchased pursuant to this Section 3 shall be the Series C
Liquidation Value plus all declared but unpaid dividends on such shares from the
Series C Issue Date to the date on which payment is made by the Corporation and
(iii) the "Series D Repurchase Price" for each share of Series D Preferred Stock
repurchased pursuant to this Section 3 shall be the Series D Liquidation Value
plus all declared but unpaid dividends on such shares from the Series D Issue
Date to the date on which payment is made by the Corporation.
5
<PAGE> 6
(d) Upon the surrender of the certificate or certificates representing
(or a lost certificate affidavit together with indemnity reasonably satisfactory
to the Corporation relating to) the shares of Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock to be repurchased by the Corporation
pursuant to this Section 3 duly endorsed for transfer or accompanied by stock
powers duly executed in blank, the applicable Series B Repurchase Price, Series
C Repurchase Price or Series D Repurchase Price in respect of such shares shall
be paid to the order of the person whose name appears on such certificate or
certificates in immediately available funds. Each surrendered certificate shall
be canceled and retired.
4. Liquidation. Upon a liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, or at the option
of the holder or holders of at least sixty-six and two-third percent (66 2/3%)
of the Series B Preferred Stock, the Series C Preferred Stock and the Series D
Preferred Stock, voting together on an "as if converted" basis, a sale of all or
substantially all of the assets of the Corporation (whether in a single
transaction or a series of related transactions), a merger or consolidation (and
the Corporation is not the surviving entity) of the Corporation or any other
form of business combination or reorganization in which control of the
Corporation is transferred (a "Liquidation Event"), the holders of the Series B
Preferred Stock, the holders of the Series C Preferred Stock and the holders of
the Series D Preferred Stock shall be entitled, before any assets of the
Corporation shall be distributed among or paid over to the holders of Junior
Securities, to receive, pari passu, from the assets of the Corporation available
for distribution to stockholders, to be paid in cash by wire transfer of
immediately available funds, an amount per share equal to (a) the amount such
holders would be entitled to receive had they converted their shares of Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock into
shares of Conversion Stock, immediately prior to such Liquidation Event, in
accordance with Section 6 hereof, plus all declared but unpaid dividends on such
shares from either the Series B Issue Date, the Series C Issue Date or the
Series D Issue Date, as applicable, to the date of the Liquidation Event or (b)
if the holders of the Series B Preferred Stock, Series C Preferred Stock or
Series D Preferred Stock would not, upon a Liquidation Event, achieve an annual
compound internal rate of return (pro rated for partial years) of at least fifty
percent (50%) calculated on a daily basis from the Series B Issue Date, the
Series C Issue Date or the Series D Issue Date, as applicable, to the date of
such Liquidation Event (e.g., for each $8.00 share of Series B Preferred Stock
purchased, a return 6 months after the Series B Issue Date of $10.00, one (1)
year after the Series B Issue Date of $12.00, 18 months after the Series B Issue
Date of $15.00, two (2) years after the Series B Issue Date of $18.00, three (3)
years after the Series B Issue Date of $27.00, etc. or, for each $8.85 share of
Series C Preferred Stock purchased, a return 6 months after the Series C Issue
Date of $11.06, one (1) year after the Series C Issue Date of $13.27, 18 months
after the Series C Issue Date of $16.59, two (2) years after the Series C Issue
Date of $19.91, three (3) years after the Series C Issue Date of $29.86, etc.,
or for each $2.53 share of Series D Preferred Stock purchased, a return 6 months
after the Series D Issue Date of $3.16, one (1) year after the Series D Issue
Date of $3.80, 18 months after the Series D Issue Date of $4.74, two (2) years
after the Series D Issue Date of $5.69, three years after the Series D Issue
Date of $8.53, etc.), the holders shall be entitled to the sum of the amount
described in Subsection (a) above, plus the Series B Liquidation Value, the
Series C Liquidation Value or the Series D Liquidation Value, as applicable. For
purposes hereof, the term "Series B
6
<PAGE> 7
Liquidation Value" shall mean $8.00 per share, the term "Series C Liquidation
Value" shall mean $8.85 per share and the term "Series D Liquidation Value"
shall mean $2.53 per share. Both such liquidation values shall be proportionally
adjusted from time to time to reflect stock dividends, stock splits,
recapitalization or any other stock subdivision or combination. If the assets of
the Corporation legally available for distribution shall be insufficient to
permit the payment in full to the holders of the Series B Preferred Stock of the
Series B Liquidation Value, to the holders of the Series C Preferred Stock of
the Series C Liquidation Value and to the holders of the Series D Preferred
Stock of the Series D Liquidation Value, then the entire assets of the
Corporation legally available for distribution shall be distributed ratably
(based on the applicable Liquidation Values) among such holders and all other
classes and series of preferred stock ranking (as to any such distribution) on a
parity with the Series B Preferred Stock, the Series C Preferred Stock and the
Series D Preferred Stock.
5. Voting. (a) Except as otherwise provided by law or by subsection
5(b), the holders of the Series B Preferred Stock, the holders of Series C
Preferred Stock and the holders of Series D Preferred Stock shall be entitled to
vote on all matters submitted to the stockholders for a vote together with the
holders of the Common Stock voting together as a single class, with each holder
of Common Stock entitled to one (1) vote for each share of Common Stock held by
such holder and each holder of Series B Preferred Stock, Series C Preferred
Stock or Series D Preferred Stock entitled to one (1) vote for each share of
Conversion Stock issuable upon conversion of the Series B Preferred Stock,
Series C Preferred Stock or Series D Preferred Stock held by such holder at the
time the vote is taken.
(b) (i) As long as there are 100,000 shares of Series B Preferred
Stock, 100,000 shares of Series C Preferred Stock and 100,000 shares of Series D
Preferred Stock outstanding, the approval of the holders of sixty-six and
two-thirds percent (66 2/3%) of the Series B Preferred Stock, the Series C
Preferred Stock and the Series D Preferred Stock, voting together as a single
class (on an "as if converted" basis), shall be required on any matters which
may adversely affect, in any material respect, the Series B Preferred Stock, the
Series C Preferred Stock and the Series D Preferred Stock, including, but not
limited to those matters listed below in Section 5(b)(iv).
(ii) Notwithstanding Section 5(b)(i), if there are only
100,000 or more shares of any of Series B Preferred Stock, Series C Preferred
Stock or Series D Preferred Stock outstanding at any time, then the approval of
the holders of sixty-six and two-thirds percent (66 2/3%) of the shares of such
series, voting separately as a single class (on an "as if converted" basis),
shall be required on any matters which may adversely affect, in any material
respect, such series of stock, including, but not limited to those matters
listed below in Section 5(b)(iv).
(iii) Notwithstanding Sections 5(b)(i) and (ii), if there are
fewer than 100,000 shares of all of Series B Preferred Stock, Series C Preferred
Stock and Series D Preferred Stock outstanding at any time, then none of the
Series B Preferred Stock, the Series C Preferred Stock or the Series D Preferred
Stock will have the voting rights specified in Section 5(b) (iv).
(iv) As set forth in Sections 5(b)(i) and (ii) above, at
certain times the Series B Preferred Stock, the Series C Preferred Stock and/or
the Series D Preferred Stock shall have the
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right to vote on the following matters separately as a single class: (a) any
amendment to the Certificate of Incorporation, (b) the creation of any new
series of preferred stock or the issuance of additional shares of capital stock
of the Corporation ranking pari passu with or senior to the Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock, (c) the
declaration and payment of any dividend or distribution or repurchase,
redemption or other acquisition of any shares of capital stock of the
Corporation (except for repurchases of employee stock in connection with a
termination of employment or in connection with the exercise by the Corporation
of its right of first refusal on or other repurchase of shares of Series A
Preferred Stock, each as approved by a majority of the Board of Directors,
provided such majority includes the representative designated by the holders of
the Series B Preferred Stock, the representative designated by the holders of
the Series C Preferred Stock and the representative designated by the holders of
the Series D Preferred Stock), (d) any liquidation, dissolution, reorganization,
merger, combination, recapitalization, reconsolidation, acquisition or sale of
all or substantially all of the assets of the Corporation or any other form of
business combination or reorganization in which control of the Corporation is
transferred, (e) any change in the number of authorized directors on the Board
of Directors of the Corporation, (f) the issuance of bank loans or debt
securities in excess of the aggregate of $1,000,000, unless such issuance is
approved by a majority of the Board of Directors, provided such majority
includes the representative designated by the holders of the Series B Preferred
Stock, the representative designated by the holders of the Series C Preferred
Stock and the representative designated by the holders of the Series D Preferred
Stock, and (g) the issuance of 10% or more of the outstanding capital stock (on
a fully diluted basis, i.e., taking into account all shares of outstanding
preferred stock as if converted into Common Stock and including all shares of
Common Stock issuable upon exercise of outstanding warrants and options) of the
Corporation in a single transaction (or a series of transactions to related
individuals or entities) other than pursuant to a Qualified Public Offering (as
defined below).
6. Conversion of Series B, Series C and Series D Preferred Stock into
Common Stock.
(a) Conversion Procedure.
(i) At any time and from time to time, any holder of Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock may
convert all or any portion of the Series B Preferred Stock, Series C Preferred
Stock or Series D Preferred Stock, which shall include declared but unpaid
dividends on such shares, held by such holder into a number of shares of
Conversion Stock computed by (i) in the case of the Series B Preferred Stock,
multiplying the number of shares to be converted by 8.00 and dividing the
result by the Series B Conversion Price (as defined below), then in effect, (ii)
in the case of the Series C Preferred Stock, multiplying the number of shares to
be converted by $8.85 and dividing the result by the Series C Conversion Price
(as defined below), then in effect, and (iii) in the case of the Series D
Preferred Stock, multiplying the number of shares to be converted by $2.53 and
dividing the result by the Series D Conversion Price (as defined below), then in
effect, (the Series B Conversion Price, the Series C Conversion Price and the
Series D Conversion Price are each sometimes referred to herein as the
"Applicable Conversion Price"). The Series B Conversion Price and the Series C
Conversion Price reflect an adjustment for the five-for-one stock split in the
form of a dividend of four shares of Common Stock for each outstanding share of
Common Stock approved by the
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<PAGE> 9
Company's predecessor corporation's Board of Directors which was effective as of
May 1, 1997 and accordingly shall not be further adjusted to reflect such split.
(ii) Each conversion of Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock shall be deemed to have been
effected as of the close of business on the date on which notice of election of
such conversion is delivered to the Corporation by such holder. Until the
certificates representing the shares of Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock which are being converted have been
surrendered and new certificates representing shares of the Conversion Stock
shall have been issued by the Corporation, such certificate(s) evidencing the
shares of Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock being converted shall be evidence of the issuance of such shares
of Conversion Stock. At such time as such conversion has been effected, the
rights of the holder of such Series B Preferred Stock, Series C Preferred Stock
or Series D Preferred Stock as such holder shall cease and the Person or Persons
in whose name or names any certificate or certificates for shares of Conversion
Stock are to be issued upon such conversion shall be deemed to have become the
holder or holders of record of the shares of Conversion Stock represented
thereby.
(iii) Notwithstanding any other provision hereof, if a
conversion of shares is to be made in connection with a Public Offering, the
conversion of such shares may, at the election of the holder thereof, be
conditioned upon the consummation of the Public Offering, in which case such
conversion shall not be deemed to be effective until the consummation of the
Public Offering.
(iv) As soon as practicable after a conversion has been
effected in accordance with clause (ii) above (but in any event within five (5)
Business Days in the case of Subparagraph (I) below), the Corporation shall
deliver to the converting holder:
(I) a certificate or certificates representing, in the
aggregate, the number of shares of Conversion Stock issuable by reason of such
conversion, in the name or names and in such denomination or denominations as
the converting holder has specified; and
(II) a certificate representing any shares which were
represented by the certificate or certificates delivered to the Corporation in
connection with such conversion but which were not converted.
(v) The issuance of certificates for shares of Conversion
Stock upon conversion of Series B Preferred Stock, Series C Preferred Stock or
Series D Preferred Stock shall be made without charge to the holders of such
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock
for any issuance tax in respect thereof or other cost incurred by the
Corporation in connection with such conversion and the related issuance of
shares of Conversion Stock. Upon conversion of any shares of Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock, the Corporation
shall take all such actions as are necessary in order to insure that the
Conversion Stock issuable with respect to such conversion shall be validly
issued, fully paid and nonassessable.
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<PAGE> 10
(vi) The Corporation shall not close its books against the
transfer of Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock or of Conversion Stock issued or issuable upon conversion of
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock
in any manner which interferes with the timely conversion of Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock. The Corporation
shall assist and cooperate with any holder of shares of Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock required to make any
governmental filings or obtain any governmental approval prior to or in
connection with any conversion of shares hereunder (including, without
limitation, making any filings reasonably required to be made by the
Corporation).
(vii) No fractional shares of Common Stock or scrip
representing fractional shares shall be issued upon conversion of shares of
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock.
If more than one share of Series B Preferred Stock, Series C Preferred Stock or
Series D Preferred Stock shall be surrendered for conversion at one time by the
same record holder, the number of full shares of Common Stock issuable upon the
conversion thereof shall be computed on the basis of the aggregate number of
shares of Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock so surrendered by such record holder. Instead of any fractional
share of Common Stock otherwise issuable upon conversion of any shares of the
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock,
the Corporation shall pay a cash adjustment in respect of such fraction in an
amount equal to the same fraction of current per share fair market value of the
Common Stock as determined in good faith by the Board of Directors on such basis
as it considers appropriate.
(viii) The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares Conversion Stock, solely for
the purpose of issuance upon the conversion of the Series B Preferred Stock, the
Series C Preferred Stock or the Series D Preferred Stock such number of shares
of Conversion Stock, as are issuable upon the conversion of all outstanding
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock,
as applicable. All shares of Conversion Stock which are so issuable shall, when
issued, be duly and validly issued, fully paid and nonassessable. The
Corporation shall take all such actions as may be necessary to assure that all
such shares of Conversion Stock may be so issued without violation of any
applicable law or governmental regulation or any requirements of any domestic
securities exchange upon which shares of Conversion Stock may be listed (except
for official notice of issuance which shall be immediately delivered by the
Corporation upon each such issuance).
(b) Conversion Price.
(i) The Conversion Price.
(a) The "Series B Conversion Price" for the Series B
Preferred Stock shall be $1.60 per share.
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<PAGE> 11
(b) The "Series C Conversion Price" for the Series C
Preferred Stock shall be $1.77 per share.
(c) The initial "Series D Conversion Price" for the
Series D Preferred stock shall be $2.53 per share.
(d) The Series B Conversion Price and the Series C
Conversion Price reflect an adjustment for the five-for-one stock split in the
form of a dividend of four shares of Common Stock for each outstanding share of
Common Stock approved by the Company's predecessor corporation's Board of
Directors which was effective as of May 1, 1997 and accordingly shall not be
further adjusted to reflect such split.
(ii) Adjustment of Conversion Price.
(a) Series B Preferred Stock. If and whenever on or
after the Series B Issue Date the Corporation issues or sells, or in accordance
with Section 6(c) is deemed to have issued or sold, any shares of its Common
Stock or other instrument or security convertible into or exchangeable for
Common Stock for a consideration per share less than the initial or applicable
Series B Conversion Price, then forthwith upon such issue or sale the applicable
Series B Conversion Price shall be reduced to a price (calculated to the nearest
cent) determined by multiplying the Series B Conversion Price by a fraction. The
fraction shall be determined as follows: (x) the numerator shall be (1) the
number of shares of Common Stock Deemed Outstanding immediately prior to such
issue or sale, plus (2) the number of shares of Common Stock which the aggregate
consideration received or deemed received by the Corporation in accordance with
Section 6(c) for the total number of shares of Common Stock issued and sold or
deemed issued and sold in accordance with Section 6(c) would purchase at such
Series B Conversion Price as in effect immediately prior to such issue and sale,
and (y) the denominator shall be the number of shares of Common Stock Deemed
Outstanding immediately after such issue or sale.
(b) Series C Preferred Stock. If and whenever on or
after the Series C Issue Date the Corporation issues or sells, or in accordance
with Section 6(c) is deemed to have issued or sold, any shares of its Common
Stock or other instrument or security convertible into or exchangeable for
Common Stock for a consideration per share less than the initial or applicable
Series C Conversion Price, then forthwith upon such issue or sale the applicable
Series C Conversion Price shall be reduced to a price (calculated to the nearest
cent) determined by multiplying the Series C Conversion Price by a fraction. The
fraction shall be determined as follows: (x) the numerator shall be (1) the
number of shares of Common Stock Deemed Outstanding immediately prior to such
issue or sale, plus (2) the number of shares of Common Stock which the aggregate
consideration received or deemed received by the Corporation in accordance with
Section 6(c) for the total number of shares of Common Stock issued and sold or
deemed issued and sold in accordance with Section 6(c) would purchase at such
Series C Conversion Price as in effect immediately prior to such issue and sale,
and (y) the denominator shall be the number of shares of Common Stock Deemed
Outstanding immediately after such issue or sale.
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<PAGE> 12
(c) Series D Preferred Stock. If and whenever on or
after the Series D Issue Date the Corporation issues or sells, or in accordance
with Section 6(c) is deemed to have issued or sold, any shares of its Common
Stock or other instrument or security convertible into or exchangeable for
Common Stock for a consideration per share less than the initial or applicable
Series D Conversion Price, then forthwith upon such issue or sale the applicable
Series D Conversion Price shall be reduced to a price (calculated to the nearest
cent) determined by multiplying the Series D Conversion Price by a fraction. The
fraction shall be determined as follows: (x) the numerator shall be (1) the
number of shares of Common Stock Deemed Outstanding immediately prior to such
issue or sale, plus (2) the number of shares of Common Stock which the aggregate
consideration received or deemed received by the Corporation in accordance with
Section 6(c) for the total number of shares of Common Stock issued and sold or
deemed issued and sold in accordance with Section 6(c) would purchase at such
Series D Conversion Price as in effect immediately prior to such issue and sale,
and (y) the denominator shall be the number of shares of Common Stock Deemed
Outstanding immediately after such issue or sale.
(c) Effect on Conversion Prices of Certain Events. For purposes of
determining the applicable adjusted Series B Conversion Price, Series C
Conversion Price or Series D Conversion Price under Section 6(b), the following
shall be applicable:
(i) Issuance of Rights or Options. If the Corporation in any
manner grants any rights or options to subscribe for or to purchase Common Stock
("Options") (except for the grant of Options to employees, directors or
consultants of the Corporation pursuant to the Corporation's 1996 Stock Option
Plan, 1996 Stock Plan , 1999 Stock Option and Incentive Plan or future stock
plans approved by a majority of the Board of Directors provided such majority
includes the representative designated by the holders of the Series B Preferred
Stock, the representative designated by the holders of the Series C Preferred
Stock and the representative designated by the holders of the Series D Preferred
Stock) or any stock or other securities convertible into or exchangeable for
Common Stock ("Convertible Securities"), and the price per share for which
Common Stock is issuable upon the exercise of such Options or upon conversion or
exchange of such Convertible Securities is less than the applicable Series B
Conversion Price, the applicable Series C Conversion Price and/or the applicable
Series D Conversion Price, as the case may be, in effect immediately prior to
the time of the granting of such Options, then the total maximum number of
shares of Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total maximum amount of such Convertible
Securities shall be deemed to be outstanding and to have been issued and sold by
the Corporation at the time of the granting of such Options for such price per
share for purposes of the adjustments set forth in Section 6(b)(ii)(a),
6(b)(ii)(b) and/or 6(b)(ii)(c) above, as the case may be. For purposes of this
paragraph, the "price per share for which Common Stock is issuable" shall be
determined by dividing (a) the total amount, if any, received or receivable by
the Corporation as consideration for the granting of such Options, plus the
minimum aggregate amount of additional consideration payable to the Corporation
upon exercise of all such Options, plus in the case of such Options which relate
to Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the issuance or sale of
such Convertible
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Securities and the conversion or exchange thereof (such amount is the
consideration "deemed received" for purposes of Section 6(b) above), by (b) the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options. Upon the expiration of
any Option or termination of any conversion right of any Convertible Security
issuable upon exercise of any Option, the issuance of which resulted in an
adjustment of the Series B Conversion Price, the Series C Conversion Price
and/or the Series D Conversion Price, if any such Option shall expire or
conversion right of any Convertible Security shall terminate and shall not have
been exercised or converted, as applicable, the Applicable Conversion Price
shall be recalculated immediately upon such expiration and effective immediately
upon such expiration shall be increased to the price it would have been (but
reflecting any other adjustments to the Applicable Conversion Price made
pursuant to the provisions of this Section 6 after the issuance of such Options)
had the adjustment of the Applicable Conversion Price made upon the issuance of
such Options been made on the basis of the issuance of only those Options
actually exercised or Convertible Securities issuable upon exercise of such
Options actually converted, as applicable. No further adjustment of the
Applicable Conversion Price shall be made when Convertible Securities are
actually issued upon the exercise of such Options or when Common Stock is
actually issued upon the exercise of such Options or the conversion or exchange
of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the Corporation in
any manner issues or sells any Convertible Securities and the price per share
for which Common Stock is issuable upon conversion or exchange thereof is less
than the applicable Series B Conversion Price, the applicable Series C
Conversion Price and/or the applicable Series D Conversion Price, as the case
may be, in effect immediately prior to the time of such issue or sale, then the
maximum number of shares of Common Stock issuable upon conversion or exchange of
such Convertible Securities shall be deemed to be outstanding and to have been
issued and sold by the Corporation at the time of the issuance or sale of such
Convertible Securities for such price per share for purposes of the adjustments
set forth in Section 6(b)(ii)(a), 6(b)(ii)(b) and/or 6(b)(ii)(c) above, as the
case may be. For the purposes of this paragraph, the "price per share for which
Common Stock is issuable" shall be determined by dividing (a) the total amount
received or receivable by the Corporation as consideration for the issue or sale
of such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof (such amount is the consideration "deemed received" for
purposes of Section 6(b) above), by (b) the total maximum number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible
Securities. Upon the termination of any conversion right of any Convertible
Security, the issuance of which resulted in an adjustment of the Series B
Conversion Price, the Series C Conversion Price and/or the Series D Conversion
Price, if any such conversion right of any Convertible Security shall terminate
and shall not have been converted, the Applicable Conversion Price shall be
recalculated immediately upon such termination and effective immediately upon
such termination shall be increased to the price it would have been (but
reflecting any other adjustments to the Applicable Conversion Price made
pursuant to the provisions of this Section 6 after the issuance of such
Convertible Securities) had the adjustment of the Applicable Conversion Price
made upon the issuance of such Convertible Securities been made on the basis
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<PAGE> 14
of the issuance of only those Convertible Securities actually converted. No
further adjustment of the Applicable Conversion Price shall be made when Common
Stock is actually issued upon the conversion or exchange of such Convertible
Securities, and if any such issue or sale of such Convertible Securities is made
upon exercise of any Options for which adjustments of the Applicable Conversion
Price had been or are to be made pursuant to other provisions of this Section 6,
no further adjustment of the Applicable Conversion Price shall be made by reason
of such issue or sale.
(iii) Change in Option Price or Conversion Rate. If the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the conversion or exchange of any Convertible Securities, or
the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock change at any time, the Applicable Conversion
Price in effect at the time of such change shall be readjusted to the Applicable
Conversion Price which would have been in effect at such time had such Options
or Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold.
(d) Subdivision or Combination of Common Stock. If the Corporation at
any time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, or if the Corporation at any time combines (by reverse
stock split or otherwise) one or more classes of its outstanding shares of
Common Stock into a smaller number of shares, the Applicable Conversion Price in
effect immediately prior to such subdivision or combination shall be
proportionately adjusted. The Series B Conversion Price and the Series C
Conversion Price reflect an adjustment for the five-for-one stock split in the
form of a dividend of four shares of Common Stock for each outstanding share of
Common Stock approved by the Company's predecessor corporation's Board of
Directors which was effective as of May 1, 1997 and accordingly, shall not be
further adjusted to reflect such split.
(e) Reorganization, Reclassification, Consolidation, Merger or Sale.
Any recapitalization, reorganization, reclassification, consolidation, merger,
sale of all or substantially all of the Corporation's assets to another Person
or other transaction which is effected in such a manner that holders of Common
Stock are entitled to receive (either directly or upon subsequent liquidation)
stock, securities or assets with respect to or in exchange for Common Stock is
referred to herein as an "Organic Change." Prior to the consummation of any
Organic Change, the Corporation shall make appropriate provisions (in form and
substance reasonably satisfactory to the holders of a majority of each of the
shares of the Series B Preferred Stock, the shares of the Series C Preferred
Stock and the shares of the Series D Preferred Stock then outstanding) to insure
that each of the holders of Series B Preferred Stock, the holders of the Series
C Preferred Stock and the holders of the Series D Preferred Stock shall
thereafter have the right to acquire and receive, in lieu of or in addition to
(as the case may be) the shares of Conversion Stock immediately theretofore
acquirable and receivable upon the conversion of such holder's Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock, as the
case may be, such shares of stock, securities or assets as such holder would
have received in connection with such Organic Change if such holder had
converted its Series B Preferred Stock, Series C Preferred
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Stock or Series D Preferred Stock immediately prior to such Organic Change. In
each such case, the Corporation shall also make appropriate provisions (in form
and substance reasonably satisfactory to the holders of a majority of the shares
of Series B Preferred Stock then outstanding, the holders of a majority of the
shares of Series C Preferred Stock then outstanding and the holders of a
majority of the shares of Series D Preferred Stock then outstanding) to insure
that the provisions of this Section 6 shall thereafter be applicable to the
shares of stock, securities or assets received by each holder upon such Organic
Change. The Corporation shall not effect any Organic Change unless prior to the
consummation thereof, the successor corporation (if other than the Corporation)
resulting from consolidation or merger or the corporation purchasing such assets
assumes by written instrument (in form and substance reasonably satisfactory to
the holders of a majority of the shares the Series B Preferred Stock then
outstanding, the holders of a majority of the shares of the Series C Preferred
Stock then outstanding and the holders of a majority of the shares of Series D
Preferred Stock then outstanding), the obligation to deliver to each such holder
such shares of stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to acquire.
(f) Certain Events.
(i) If an event not specifically enumerated in this Section 6
occurs which has substantially the same economic effect on the Series B
Preferred Stock, the Series C Preferred Stock and/or the Series D Preferred
Stock as those specifically enumerated shall occur, then this Section 6 shall be
construed by the Board of Directors liberally, mutatis mutandis, in order to
give the Series B Preferred Stock, the Series C Preferred Stock and the Series D
Preferred Stock the benefit of the protections provided under this Section 6.
The Corporation's Board of Directors shall make an appropriate adjustment in the
then effective Applicable Conversion Price(s) so as to protect the rights of the
holders of Series B Preferred Stock, the holders of the Series C Preferred Stock
and/or the holders of the Series D Preferred Stock; provided that no such
adjustment shall increase the then effective Applicable Conversion Price(s) as
otherwise determined pursuant to this Section 6 or decrease the number of shares
of Conversion Stock issuable upon conversion of each share of Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock.
(ii) The determination of whether an adjustment is necessary
in accordance with this Section 6(f) shall be made by the Board of Directors, in
the exercise of its reasonable judgment (which shall be conclusively evidenced
by a vote or votes adopted by it). None of the representative on the Board of
Directors designated by the Series B Preferred Stock, the representative on the
Board of Directors designated by the Series C Preferred Stock or the
representative on the Board of Directors designated by the Series D Preferred
Stock shall participate in the deliberation or vote with respect to making the
foregoing judgment.
(g) Notices.
(i) Immediately upon any adjustment of the applicable Series B
Conversion Price, the applicable Series C Conversion Price and/or the applicable
Series D Conversion Price, the Corporation shall give written notice thereof to
all holders of Series B Preferred Stock, all
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<PAGE> 16
holders of the Series C Preferred Stock or all holders of the Series D Preferred
Stock, as the case may be, setting forth in reasonable detail and certifying the
calculation of such adjustment.
(ii) The Corporation shall give written notice to all holders
of Series B Preferred Stock, all holders of Series C Preferred Stock and all
holders of Series D Preferred Stock at least twenty (20) days prior to the date
on which the Corporation closes its books or takes a record (a) with respect to
any dividend or distribution upon Common Stock, except for stock splits effected
as dividends of Common Stock payable on shares of Common Stock, (b) with respect
to any pro rata subscription offer to holders of Common Stock or (c) for
determining rights to vote with respect to any Organic Change, dissolution or
liquidation.
(iii) The Corporation shall also give written notice to the
holders of Series B Preferred Stock, the holders of Series C Preferred Stock and
the holders of Series D Preferred Stock at least twenty (20) days prior to the
date on which any Organic Change shall take place.
(h) Mandatory Conversion. All of the outstanding shares of Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock will be
automatically converted in accordance with the terms of this Section 6 (h) at
(i) the closing of a Qualified Public Offering and (ii) the listing of such
shares of Common Stock on the Nasdaq National Market, the American Stock
Exchange or the New York Stock Exchange. Any such mandatory conversion shall be
effected only at the time of and subject to the closing of the sale of such
shares pursuant to such Public Offering and upon written notice of such
mandatory conversion delivered to all holders of Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock at least seven (7) days
prior to such closing.
(i) Elected Conversion. At any time the holders of eighty percent (80%)
of the Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock, voting together as a single class, may elect to convert all of the
outstanding shares of Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock then outstanding into the applicable number of shares
of Conversion Stock, in accordance with the terms of Section 6. Any such elected
conversion shall be effected only after such electing holders deliver written
notice of the election to the Company and all non-electing holders of Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock at least
fifteen (15) days prior to the effective date of such event.
7. Definitions. The following terms have the meanings specified below:
Board of Directors. The term "Board of Directors" shall mean
the Board of Directors of the Corporation.
Business Day. The term "Business Day" shall mean any day
(other than a day which is a Saturday, Sunday or a legal holiday in the
Commonwealth of Massachusetts) on which banks are authorized to be open for
business in the Commonwealth of Massachusetts.
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Common Stock. The term "Common Stock" shall mean the common
stock, par value $.01 per share, of the Corporation.
Common Stock Deemed Outstanding. The term "Common Stock Deemed
Outstanding" shall mean, at any given time, the number of shares of Common Stock
actually outstanding at such time, plus the number of shares of Common Stock
issuable upon conversion of the Series A Preferred Stock, the Series B Preferred
Stock, the Series C Preferred Stock and the Series D Preferred Stock plus the
number of shares of Common Stock deemed to be outstanding with respect to
Options and Convertible Securities pursuant to Section 6 hereof whether or not
the Options or Convertible Securities are actually exercisable at such time.
Conversion Stock. The term "Conversion Stock" shall mean the
shares of Common Stock issuable upon conversion of shares of Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock; provided that if
there is a change such that the securities issuable upon conversion of the
Series B Preferred Stock, the Series C Preferred Stock or the Series D Preferred
Stock are issued by an entity other than the Corporation or there is a change in
the class of securities so issuable, then the term "Conversion Stock" shall mean
shares of the security issuable upon conversion of the Series B Preferred Stock,
the Series C Preferred Stock or the Series D Preferred Stock if such security is
issuable in shares, or shall mean the smallest unit in which such security is
issuable if such security is not issuable in shares.
Series B Issue Date. The term "Series B Issue Date" shall mean
September 27, 1996.
Series C Issue Date. The term "Series C Issue Date" shall mean
April 28, 1997.
Series D Issue Date. The term "Series D Issue Date" shall mean
September 28, 1998.
Person. The term "Person" shall mean an individual,
corporation, partnership, association, trust, joint venture or unincorporated
organization or any government, governmental department or any agency or
political subdivision thereof.
Public Offering. The term "Public Offering" shall mean any
offering by the Corporation of its equity securities to the public pursuant to
an effective registration statement under the Securities Act or any comparable
statement under any similar federal statute then in force, other than an
offering in connection with an employee benefit plan.
Qualified Public Offering. The term "Qualified Public
Offering" shall mean the consummation of the Corporation's issuance and sale of
its Common Stock in a bona fide firm commitment underwriting pursuant to a
registration statement under the Securities Act of 1933, as amended, the public
offering shall be at least $20,000,000 and a price per share to the public of
which is not less than 200% of the then effective Series D Conversion Price,
provided, however, that in the event no shares of Series D Preferred Stock are
outstanding, no price per share limitation shall apply.
17
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Securities Act. The term "Securities Act" shall mean the
Securities Act of 1933, as amended, or any successor federal statute, and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder, all as the same shall be in effect from time to time.
FIFTH. The Corporation is to have perpetual existence.
SIXTH. In furtherance and not in limitation of the powers conferred by
the laws of the State of Delaware:
A. The Board of Directors of the Corporation is expressly authorized to
adopt, amend or repeal the By-Laws of the Corporation.
B. Elections of directors need not be by written ballot unless the
By-Laws of the Corporation shall so provide.
C. The books of the Corporation may be kept at such place within or
without the State of Delaware as the By-Laws of the Corporation may
provide or as may be designated from time to time by the Board of
Directors of the Corporation.
SEVENTH. The Corporation eliminates the personal liability of each
member of its Board of Directors to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided, however,
that, to the extent provided by applicable law, the foregoing shall not
eliminate the liability of a director (i) for any breach of such director's duty
of loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of Title 8 of the Delaware Code or (iv) for any
transaction from which such director derived an improper personal benefit. No
amendment to or repeal of this provision shall apply to or have any effect on
the liability or alleged liability of any director for or with respect to any
acts or omissions of such director occurring prior to such amendment or repeal.
EIGHTH. The Corporation reserves the right to amend or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon a stockholder
herein are granted subject to this reservation.
18
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NINTH. The name and mailing address of the sole incorporator is as
follows:
Name Mailing Address
---- ---------------
Eleanor R. Cornish Testa, Hurwitz & Thibeault, LLP
Oliver Street Tower
125 High Street
Boston, MA 02110
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
19
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I, THE UNDERSIGNED, being the sole incorporator hereinabove named, for
the purpose of forming a corporation pursuant to the General Corporation Law of
the State of Delaware, do make this certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 13th day of April, 1999.
------------------------------
Eleanor R. Cornish
Sole Incorporator
Continuation Page
20
<PAGE> 1
EXHIBIT 3.2
FIRST AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
SYNCHRONICITY SOFTWARE, INC.
(INCORPORATED APRIL 13, 1999)
* * * * * *
1. The name of the Corporation is Synchronicity Software, Inc. The
Corporation was originally incorporated under the name Synchronicity, Inc. of
Massachusetts. The original certificate of incorporation of the Corporation was
filed with the office of the Secretary of State of Delaware on April 13, 1999.
An amendment to the Certificate of Incorporation changing the name of the
Corporation to Synchronicity Software, Inc. was filed with the office of the
Secretary of State of Delaware on February __, 2000.
2. This First Amended and Restated Certificate of Incorporation was
recommended to the stockholders for approval as being advisable and in the best
interests of the Corporation by the action of the Board of Directors on February
16, 2000.
3. That in lieu of a meeting and vote of stockholders, consents in writing
have been signed by holders of outstanding stock having not less than the
minimum number of votes that is necessary to consent to this amendment and
restatement, and, if required, prompt notice of such action shall be given in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
4. This First Amended and Restated Certificate of Incorporation restates
and integrates and further amends the Amended and Restated Certificate of
Incorporation, as heretofore amended or supplemented.
The text of the Corporation's Certificate of Incorporation, as amended
and restated, is amended and restated in its entirety as follows:
FIRST. The name of the Corporation is Synchronicity Software, Inc.
SECOND. The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, Wilmington, County of New Castle,
Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD. The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of the State of Delaware.
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FOURTH. The total number of shares of all classes of capital stock
which the Corporation shall have authority to issue is Ninety Eight Million Six
Hundred Ninety Four Thousand Eight Hundred Seventy (98,694,870) shares,
consisting of Ninety Million (90,000,000) shares of Common Stock with a par
value of $.01 per share (the "Common Stock") and Eight Million Six Hundred
Ninety Four Thousand Eight Hundred Seventy shares of Preferred Stock with a par
value of $.01 per share, (the "Preferred Stock") of which Five Million
(5,000,000) are undesignated, Two Hundred Thousand (200,000) shares are
designated Series A Preferred Stock (the "Series A Preferred Stock"), Two
Hundred Eighty One Thousand Two Hundred and Fifty (281,250) shares are
designated Series B Preferred Stock (the "Series B Preferred Stock"), Three
Hundred Fifty Thousand Two Hundred Eighty Three (350,283) shares are designated
Series C Preferred Stock (the "Series C Preferred Stock"), and Two Million Eight
Hundred Sixty Three Thousand Three Hundred Thirty Seven (2,863,337) shares are
designated Series D Preferred Stock (the "Series D Preferred Stock ").
A description of the respective classes of stock and a statement of the
designations, powers, preferences and rights, and the qualifications,
limitations and restrictions of the Preferred Stock and Common Stock are as
follows:
A. COMMON STOCK
1. GENERAL. All shares of Common Stock will be identical and will
entitle the holders thereof to the same rights, powers and privileges. The
rights, powers and privileges of the holders of the Common Stock are subject to
and qualified by the rights of holders of the Preferred Stock.
2. DIVIDENDS. Dividends may be declared and paid on the Common Stock
from funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
3. DISSOLUTION, LIQUIDATION OR WINDING UP. In the event of any
dissolution, liquidation or winding up of the affairs of the Corporation,
whether voluntary or involuntary, each issued and outstanding share of Common
Stock shall entitle the holder thereof to receive an equal portion of the net
assets of the Corporation available for distribution to the holders of Common
Stock, subject to any preferential rights of any then outstanding Preferred
Stock.
4. VOTING RIGHTS. Except as otherwise required by law or this First
Amended and Restated Certificate of Incorporation, each holder of Common Stock
shall have one vote in respect of each share of stock held of record by such
holder on the books of the Corporation for the election of directors and on all
matters submitted to a vote of stockholders of the Corporation. Except as
otherwise required by law or provided herein, holders of Common Stock shall vote
together with holders of the Preferred Stock as a single class, subject to any
special or preferential voting rights of any then outstanding Preferred Stock.
There shall be no cumulative voting.
B. PREFERRED STOCK
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The Preferred Stock may be issued in one or more series at such time or
times and for such consideration or considerations as the Board of Directors of
the Corporation may determine. Each series shall be so designated as to
distinguish the shares thereof from the shares of all other series and classes.
Except as otherwise provided in this First Amended and Restated Certificate of
Incorporation, different series of Preferred Stock shall not be construed to
constitute different classes of shares for the purpose of voting by classes.
C. UNDESIGNATED PREFERRED STOCK
The Board of Directors is expressly authorized to provide for the
issuance of all or any shares of the undesignated Preferred Stock in one or more
series, each with such designations, preferences, voting powers (or special,
preferential or no voting powers), relative, participating, optional or other
special rights and privileges and such qualifications, limitations or
restrictions thereof as shall be stated in the resolution or resolutions adopted
by the Board of Directors to create such series, and a certificate of said
resolution or resolutions (a "Certificate of Designation") shall be filed in
accordance with the General Corporation Law of the State of Delaware. The
authority of the Board of Directors with respect to each such series shall
include, without limitation of the foregoing, the right to provide that the
shares of each such series may be: (i) subject to redemption at such time or
times and at such price or prices; (ii) entitled to receive dividends (which may
be cumulative or non-cumulative) at such rates, on such conditions, and at such
times, and payable in preference to, or in such relation to, the dividends
payable on any other class or classes or any other series; (iii) entitled to
such rights upon the dissolution of, or upon any distribution of the assets of,
the Corporation; (iv) convertible into, or exchangeable for, shares of any other
class or classes of stock, or of any other series of the same or any other class
or classes of stock of the Corporation at such price or prices or at such rates
of exchange and with such adjustments, if any; (v) entitled to the benefit of
such limitations, if any, on the issuance of additional shares of such series or
shares of any other series of Preferred Stock; or (vi) entitled to such other
preferences, powers, qualifications, rights and privileges, all as the Board of
Directors may deem advisable and as are not inconsistent with law and the
provisions of this First Amended and Restated Certificate of Incorporation.
D. SERIES A PREFERRED STOCK
1. DESIGNATION, NUMBER OF SHARES AND PRICE. The Corporation has
authorized the issuance of up to a total of 200,000 shares of Series A Preferred
Stock, having the preferences, qualifications, rights and privileges hereinafter
set forth. The purchase price is $5 per share, with a minimum purchase for a
single investor of 5,000 shares.
2. LIQUIDATION PREFERENCE. Upon any liquidation, dissolution or winding
up of the Corporation, the holders of the Series A Preferred Stock will be
entitled to be paid pari passu with the Series B Preferred Stock, the Series C
Preferred Stock and the Series D Preferred Stock, an amount in cash equal to the
total of the purchase price of all Series A Preferred Stock then outstanding.
All such payments, whether or not they are sufficient to pay the full preference
to which each outstanding share of Series A Preferred Stock is entitled, will be
distributed among
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such holders so that an equal amount (rounded off to the nearest whole cent) is
paid with respect to each outstanding share of Series A Preferred Stock.
3. NOTICE. The Corporation shall mail written notice to each holder of
Series A Preferred Stock, at his or her address as shown on the stock transfer
records of the Corporation, of such liquidation, dissolution or winding up, not
less than 60 days prior to the payment date stated therein.
4. VOTING RIGHTS GENERALLY. On all matters submitted to a vote of
holders of Common Stock generally, each share of Series A Preferred Stock will
have the right to exercise one vote for each share of Common Stock issuable upon
conversion of the Series A Preferred Stock in accordance with the provisions of
Section 5 hereof and the holders of Series A Preferred Stock and the Common
Stock will vote together as a single class.
5. CONVERSION; PUBLIC OFFERING OR OTHER EVENTS.
(a) Each Share of Series A Preferred Stock shall automatically be
converted into a number of shares of Common Stock determined in accordance with
the provisions of Section 5(d) below upon the occurrence of (i) the closing of a
firm commitment underwritten initial public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, or (ii) the
consummation of the sale of all, or substantially all, of the Corporation's
assets or capital stock or a merger, consolidation, reorganization or other
business combination.
(b) The Corporation will mail to each holder of Series A Preferred
Stock, at such holder's address as shown on the stock transfer records of the
Corporation, written notice of a conversion pursuant to this section not less
than 20 and not more than 90 days before the date on which the Series A
Preferred Stock is expected to be converted. Such notice will (i) make specific
reference to this Section, (ii) set forth the facts on which the conversion
hereunder is based, and (iii) state the expected date of the conversion (the
"Mandatory Conversion Date").
(c) Any share of Series A Preferred Stock not surrendered for
conversion on or prior to the Mandatory Conversion Date will be deemed to have
been converted on the Mandatory Conversion Date.
(d) Each share of Series A Preferred Stock shall initially be
convertible upon the events described in Section 5(a) above into five shares of
Common Stock. Such conversion mechanic reflects an adjustment for the
five-for-one stock split in the form of a dividend of four shares of Common
Stock for each outstanding share of Common Stock approved by the Company's
predecessor corporation's Board of directors which was effective as of May 1,
1997 and accordingly shall not be further adjusted to reflect such split. If the
Corporation at any time subdivides (by any stock split, stock dividend,
recapitalization, or otherwise) its outstanding shares of Common Stock into a
greater number of shares, or if the Corporation at any time combines (by reverse
stock split or otherwise) its outstanding shares of Common Stock into a smaller
number of shares, the number of shares of Common Stock into which the Series A
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Preferred Stock shall be convertible upon the events described in Section 5(a)
above shall be proportionately adjusted.
6. DELIVERY OF COMMON STOCK. The Corporation shall, within 20 days
after the Mandatory Conversion Date send or deliver to each holder, at such
holder's address as shown on the stock transfer records of the Corporation a
certificate or certificates representing the number of whole shares of Common
Stock issuable by reason of the conversion of such holder's shares of Series A
Preferred Stock, in such name or names and such denomination or denominations as
the converting holder has specified, or, if the converting holder has not so
specified, a single certificate representing such number of whole shares, in the
name of such holder.
E. SERIES B, SERIES C AND SERIES D PREFERRED STOCK
1. RANK. The Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock shall, with respect to rights upon liquidation, winding
up or dissolution, rank pari passu with each other, pari passu with the Series A
Preferred Stock and senior and prior in right to (a) each class of Common Stock
of the Corporation, (b) any series of preferred stock whether now existing or
hereafter created (other than the Series A Preferred Stock) and (c) any other
equity interests (including, without limitation, warrants, stock appreciation
rights, phantom stock rights, profit participation rights in debt instruments or
other rights with equity features, calls or options exercisable for or
convertible into such capital stock or equity interests, but excluding the
Series A Preferred Stock) in the Corporation (all of such classes or series of
capital stock and other equity interests referred to in Clauses (a), (b) and (c)
hereof are collectively referred to as "Junior Securities"). With respect to
dividend rights, the Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock shall rank pari passu with each other, and pari passu
with the Series A Preferred Stock, each class of Common Stock of the
Corporation, any series of preferred stock hereafter created, and any Junior
Securities.
2. DIVIDENDS. (a) The holders of Series B Preferred Stock, the holders
of Series C Preferred Stock and the holders of the Series D Preferred Stock
shall not be entitled to receive cumulative dividends, except equally and
ratably with any dividends paid on any Series A Preferred Stock, any series of
preferred stock hereafter created and any Junior Securities; provided, however,
the holders of the Series B Preferred Stock, Series C Preferred Stock and Series
D Preferred Stock shall be entitled to dividends declared on the Common Stock
(except for dividends of Common Stock on the Common Stock provided for in
Section 6(d) hereof), pari passu, as though such holders had converted their
shares of Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock into shares of Conversion Stock.
(b) The dividends, if any, referred to in Subsection (a) hereof, shall
be paid in the manner, form and at such time as dividends are paid on the Series
A Preferred Stock or Common Stock, other preferred stock or Junior Securities,
as the case may be.
(c) If at any time the Corporation pays less than the total amount of
dividends then accrued with respect to the Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock required to be paid at such time,
such payment shall be distributed ratably among
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the holders thereof based upon the aggregate accrued but unpaid dividends on the
relevant Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock held by each holder.
3. REPURCHASE. (a) Shares of Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock shall be entitled to the rights set
forth below in this Section 3 (with all references in this Section 3 to a
repurchase price per share to be adjusted proportionally in respect of
fractional shares, rounded to the nearest cent for each holder or group of
affiliated holders).
(b) Put Rights. At any time or from time to time on or after the date
five (5) years after the Series D Issue Date, the holder or holders of at least
sixty-six and two-thirds percent (66 2/3%) of the Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock, voting together (on an
"as if converted" basis), shall have the right to request the Corporation to
purchase all or any portion of the shares of Series B Preferred Stock, Series C
Preferred Stock and/or Series D Preferred Stock held by such holder or holders,
and upon the exercise of such right, the Corporation shall purchase such shares
of Series B Preferred Stock, Series C Preferred Stock and/or Series D Preferred
Stock out of funds legally available therefor (such rights being referred to as
the "Put"). Such holder or holders may exercise the Put by providing the
Corporation with notice of the exercise thereof specifying the number of shares
of Series B Preferred Stock, Series C Preferred Stock or Series D Preferred
Stock with respect to which it is exercising the Put (such notice being referred
to as a "Request Notice"). The Corporation shall, no later than sixty (60) days
after the date of receipt of such Request Notice, redeem all of the shares of
Series B Preferred Stock, Series C Preferred Stock and/or Series D Preferred
Stock with respect to which the Put has been exercised, paying out of funds
legally available therefor to the holder or holders of the Series B Preferred
Stock, Series C Preferred Stock and/or Series D Preferred Stock exercising the
Put an amount in cash for each such share equal to that share's applicable
Repurchase Price (as defined in Subsection (c) hereof).
(c) REPURCHASE PRICE: (i) The "Series B Repurchase Price" for each
share of Series B Preferred Stock repurchased pursuant to this Section 3 shall
be the Series B Liquidation Value plus all declared but unpaid dividends on such
shares from the Series B Issue Date to the date on which payment is made by the
Corporation, (ii) the "Series C Repurchase Price" for each share of Series C
Preferred Stock repurchased pursuant to this Section 3 shall be the Series C
Liquidation Value plus all declared but unpaid dividends on such shares from the
Series C Issue Date to the date on which payment is made by the Corporation and
(iii) the "Series D Repurchase Price" for each share of Series D Preferred Stock
repurchased pursuant to this Section 3 shall be the Series D Liquidation Value
plus all declared but unpaid dividends on such shares from the Series D Issue
Date to the date on which payment is made by the Corporation.
(d) Upon the surrender of the certificate or certificates representing
(or a lost certificate affidavit together with indemnity reasonably satisfactory
to the Corporation relating to) the shares of Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock to be repurchased by the Corporation
pursuant to this Section 3 duly endorsed for transfer or accompanied by stock
powers duly executed in blank, the applicable Series B Repurchase Price, Series
C Repurchase Price or Series D Repurchase Price in respect of such shares shall
be paid to
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the order of the person whose name appears on such certificate or certificates
in immediately available funds. Each surrendered certificate shall be canceled
and retired.
4. LIQUIDATION. Upon a liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, or at the option
of the holder or holders of at least sixty-six and two-third percent (66 2/3%)
of the Series B Preferred Stock, the Series C Preferred Stock and the Series D
Preferred Stock, voting together on an "as if converted" basis, a sale of all or
substantially all of the assets of the Corporation (whether in a single
transaction or a series of related transactions), a merger or consolidation (and
the Corporation is not the surviving entity) of the Corporation or any other
form of business combination or reorganization in which control of the
Corporation is transferred (a "Liquidation Event"), the holders of the Series B
Preferred Stock, the holders of the Series C Preferred Stock and the holders of
the Series D Preferred Stock shall be entitled, before any assets of the
Corporation shall be distributed among or paid over to the holders of Junior
Securities, to receive, pari passu, from the assets of the Corporation available
for distribution to stockholders, to be paid in cash by wire transfer of
immediately available funds, an amount per share equal to (a) the amount such
holders would be entitled to receive had they converted their shares of Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock into
shares of Conversion Stock, immediately prior to such Liquidation Event, in
accordance with Section 6 hereof, plus all declared but unpaid dividends on such
shares from either the Series B Issue Date, the Series C Issue Date or the
Series D Issue Date, as applicable, to the date of the Liquidation Event or (b)
if the holders of the Series B Preferred Stock, Series C Preferred Stock or
Series D Preferred Stock would not, upon a Liquidation Event, achieve an annual
compound internal rate of return (pro rated for partial years) of at least fifty
percent (50%) calculated on a daily basis from the Series B Issue Date, the
Series C Issue Date or the Series D Issue Date, as applicable, to the date of
such Liquidation Event (e.g., for each $8.00 share of Series B Preferred Stock
purchased, a return 6 months after the Series B Issue Date of $10.00, one (1)
year after the Series B Issue Date of $12.00, 18 months after the Series B Issue
Date of $15.00, two (2) years after the Series B Issue Date of $18.00, three (3)
years after the Series B Issue Date of $27.00, etc. or, for each $8.85 share of
Series C Preferred Stock purchased, a return 6 months after the Series C Issue
Date of $11.06, one (1) year after the Series C Issue Date of $13.27, 18 months
after the Series C Issue Date of $16.59, two (2) years after the Series C Issue
Date of $19.91, three (3) years after the Series C Issue Date of $29.86, etc.,
or for each $2.53 share of Series D Preferred Stock purchased, a return 6 months
after the Series D Issue Date of $3.16, one (1) year after the Series D Issue
Date of $3.80, 18 months after the Series D Issue Date of $4.74, two (2) years
after the Series D Issue Date of $5.69, three years after the Series D Issue
Date of $8.53, etc.), the holders shall be entitled to the sum of the amount
described in Subsection (a) above, plus the Series B Liquidation Value, the
Series C Liquidation Value or the Series D Liquidation Value, as applicable. For
purposes hereof, the term "Series B Liquidation Value" shall mean $8.00 per
share, the term "Series C Liquidation Value" shall mean $8.85 per share and the
term "Series D Liquidation Value" shall mean $2.53 per share. Both such
liquidation values shall be proportionally adjusted from time to time to reflect
stock dividends, stock splits, recapitalization or any other stock subdivision
or combination. If the assets of the Corporation legally available for
distribution shall be insufficient to permit the payment in full to the holders
of the Series B Preferred Stock of the Series B Liquidation Value, to the
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holders of the Series C Preferred Stock of the Series C Liquidation Value and to
the holders of the Series D Preferred Stock of the Series D Liquidation Value,
then the entire assets of the Corporation legally available for distribution
shall be distributed ratably (based on the applicable Liquidation Values) among
such holders and all other classes and series of preferred stock ranking (as to
any such distribution) on a parity with the Series B Preferred Stock, the Series
C Preferred Stock and the Series D Preferred Stock.
5. VOTING. (a) Except as otherwise provided by law or by subsection
5(b), the holders of the Series B Preferred Stock, the holders of Series C
Preferred Stock and the holders of Series D Preferred Stock shall be entitled to
vote on all matters submitted to the stockholders for a vote together with the
holders of the Common Stock voting together as a single class, with each holder
of Common Stock entitled to one (1) vote for each share of Common Stock held by
such holder and each holder of Series B Preferred Stock, Series C Preferred
Stock or Series D Preferred Stock entitled to one (1) vote for each share of
Conversion Stock issuable upon conversion of the Series B Preferred Stock,
Series C Preferred Stock or Series D Preferred Stock held by such holder at the
time the vote is taken.
(b) (i) As long as there are 100,000 shares of Series B Preferred
Stock, 100,000 shares of Series C Preferred Stock and 100,000 shares of Series D
Preferred Stock outstanding, the approval of the holders of sixty-six and
two-thirds percent (66 2/3%) of the Series B Preferred Stock, the Series C
Preferred Stock and the Series D Preferred Stock, voting together as a single
class (on an "as if converted" basis), shall be required on any matters which
may adversely affect, in any material respect, the Series B Preferred Stock, the
Series C Preferred Stock and the Series D Preferred Stock, including, but not
limited to those matters listed below in Section 5(b)(iv).
(ii) Notwithstanding Section 5(b)(i), if there are only
100,000 or more shares of any of Series B Preferred Stock, Series C Preferred
Stock or Series D Preferred Stock outstanding at any time, then the approval of
the holders of sixty-six and two-thirds percent (66 2/3%) of the shares of such
series, voting separately as a single class (on an "as if converted" basis),
shall be required on any matters which may adversely affect, in any material
respect, such series of stock, including, but not limited to those matters
listed below in Section 5(b)(iv).
(iii) Notwithstanding Sections 5(b)(i) and (ii), if there are
fewer than 100,000 shares of all of Series B Preferred Stock, Series C Preferred
Stock and Series D Preferred Stock outstanding at any time, then none of the
Series B Preferred Stock, the Series C Preferred Stock or the Series D Preferred
Stock will have the voting rights specified in Section 5(b) (iv).
(iv) As set forth in Sections 5(b)(i) and (ii) above, at
certain times the Series B Preferred Stock, the Series C Preferred Stock and/or
the Series D Preferred Stock shall have the right to vote on the following
matters separately as a single class: (a) any amendment to the Certificate of
Incorporation, (b) the creation of any new series of preferred stock or the
issuance of additional shares of capital stock of the Corporation ranking pari
passu with or senior to the Series B Preferred Stock, Series C Preferred Stock
and Series D Preferred Stock, (c) the declaration and payment of any dividend or
distribution or repurchase, redemption or other acquisition of any shares of
capital stock of the Corporation (except for repurchases of employee stock in
connection with a termination of employment or in connection with the exercise
by the
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Corporation of its right of first refusal on or other repurchase of shares of
Series A Preferred Stock, each as approved by a majority of the Board of
Directors, provided such majority includes the representative designated by the
holders of the Series B Preferred Stock, the representative designated by the
holders of the Series C Preferred Stock and the representative designated by the
holders of the Series D Preferred Stock), (d) any liquidation, dissolution,
reorganization, merger, combination, recapitalization, reconsolidation,
acquisition or sale of all or substantially all of the assets of the Corporation
or any other form of business combination or reorganization in which control of
the Corporation is transferred, (e) any change in the number of authorized
directors on the Board of Directors of the Corporation, (f) the issuance of bank
loans or debt securities in excess of the aggregate of $1,000,000, unless such
issuance is approved by a majority of the Board of Directors, provided such
majority includes the representative designated by the holders of the Series B
Preferred Stock, the representative designated by the holders of the Series C
Preferred Stock and the representative designated by the holders of the Series D
Preferred Stock, and (g) the issuance of 10% or more of the outstanding capital
stock (on a fully diluted basis, i.e., taking into account all shares of
outstanding preferred stock as if converted into Common Stock and including all
shares of Common Stock issuable upon exercise of outstanding warrants and
options) of the Corporation in a single transaction (or a series of transactions
to related individuals or entities) other than pursuant to a Qualified Public
Offering (as defined below).
6. CONVERSION OF SERIES B, SERIES C AND SERIES D PREFERRED STOCK INTO
COMMON STOCK.
(a) Conversion Procedure.
(i) At any time and from time to time, any holder of Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock may
convert all or any portion of the Series B Preferred Stock, Series C Preferred
Stock or Series D Preferred Stock, which shall include declared but unpaid
dividends on such shares, held by such holder into a number of shares of
Conversion Stock computed by (i) in the case of the Series B Preferred Stock,
multiplying the number of shares to be converted by $8.00 and dividing the
result by the Series B Conversion Price (as defined below), then in effect, (ii)
in the case of the Series C Preferred Stock, multiplying the number of shares to
be converted by $8.85 and dividing the result by the Series C Conversion Price
(as defined below), then in effect, and (iii) in the case of the Series D
Preferred Stock, multiplying the number of shares to be converted by $2.53 and
dividing the result by the Series D Conversion Price (as defined below), then in
effect, (the Series B Conversion Price, the Series C Conversion Price and the
Series D Conversion Price are each sometimes referred to herein as the
"Applicable Conversion Price"). The Series B Conversion Price and the Series C
Conversion Price reflect an adjustment for the five-for-one stock split in the
form of a dividend of four shares of Common Stock for each outstanding share of
Common Stock approved by the Company's predecessor corporation's Board of
Directors which was effective as of May 1, 1997 and accordingly shall not be
further adjusted to reflect such split.
(ii) Each conversion of Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock shall be deemed to have been
effected as of the close of business on the date on which notice of election of
such conversion is delivered to the Corporation by such
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holder. Until the certificates representing the shares of Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock which are being
converted have been surrendered and new certificates representing shares of the
Conversion Stock shall have been issued by the Corporation, such certificate(s)
evidencing the shares of Series B Preferred Stock, Series C Preferred Stock or
Series D Preferred Stock being converted shall be evidence of the issuance of
such shares of Conversion Stock. At such time as such conversion has been
effected, the rights of the holder of such Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock as such holder shall cease and the
Person or Persons in whose name or names any certificate or certificates for
shares of Conversion Stock are to be issued upon such conversion shall be deemed
to have become the holder or holders of record of the shares of Conversion Stock
represented thereby.
(iii) Notwithstanding any other provision hereof, if a
conversion of shares is to be made in connection with a Public Offering, the
conversion of such shares may, at the election of the holder thereof, be
conditioned upon the consummation of the Public Offering, in which case such
conversion shall not be deemed to be effective until the consummation of the
Public Offering.
(iv) As soon as practicable after a conversion has been
effected in accordance with clause (ii) above (but in any event within five (5)
Business Days in the case of Subparagraph (I) below), the Corporation shall
deliver to the converting holder:
(I) a certificate or certificates representing, in the
aggregate, the number of shares of Conversion Stock issuable by reason of such
conversion, in the name or names and in such denomination or denominations as
the converting holder has specified; and
(II) a certificate representing any shares which were
represented by the certificate or certificates delivered to the Corporation in
connection with such conversion but which were not converted.
(v) The issuance of certificates for shares of Conversion
Stock upon conversion of Series B Preferred Stock, Series C Preferred Stock or
Series D Preferred Stock shall be made without charge to the holders of such
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock
for any issuance tax in respect thereof or other cost incurred by the
Corporation in connection with such conversion and the related issuance of
shares of Conversion Stock. Upon conversion of any shares of Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock, the Corporation
shall take all such actions as are necessary in order to insure that the
Conversion Stock issuable with respect to such conversion shall be validly
issued, fully paid and nonassessable.
(vi) The Corporation shall not close its books against the
transfer of Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock or of Conversion Stock issued or issuable upon conversion of
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock
in any manner which interferes with the timely conversion of Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock. The Corporation
shall
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assist and cooperate with any holder of shares of Series B Preferred Stock,
Series C Preferred Stock or Series D Preferred Stock required to make any
governmental filings or obtain any governmental approval prior to or in
connection with any conversion of shares hereunder (including, without
limitation, making any filings reasonably required to be made by the
Corporation).
(vii) No fractional shares of Common Stock or scrip
representing fractional shares shall be issued upon conversion of shares of
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock.
If more than one share of Series B Preferred Stock, Series C Preferred Stock or
Series D Preferred Stock shall be surrendered for conversion at one time by the
same record holder, the number of full shares of Common Stock issuable upon the
conversion thereof shall be computed on the basis of the aggregate number of
shares of Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock so surrendered by such record holder. Instead of any fractional
share of Common Stock otherwise issuable upon conversion of any shares of the
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock,
the Corporation shall pay a cash adjustment in respect of such fraction in an
amount equal to the same fraction of current per share fair market value of the
Common Stock as determined in good faith by the Board of Directors on such basis
as it considers appropriate.
(viii) The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares Conversion Stock, solely for
the purpose of issuance upon the conversion of the Series B Preferred Stock, the
Series C Preferred Stock or the Series D Preferred Stock such number of shares
of Conversion Stock, as are issuable upon the conversion of all outstanding
Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock,
as applicable. All shares of Conversion Stock which are so issuable shall, when
issued, be duly and validly issued, fully paid and nonassessable. The
Corporation shall take all such actions as may be necessary to assure that all
such shares of Conversion Stock may be so issued without violation of any
applicable law or governmental regulation or any requirements of any domestic
securities exchange upon which shares of Conversion Stock may be listed (except
for official notice of issuance which shall be immediately delivered by the
Corporation upon each such issuance).
(b) Conversion Price.
(i) The Conversion Price.
(a) The "Series B Conversion Price" for the Series B
Preferred Stock shall be $1.60
per share.
(b) The "Series C Conversion Price" for the Series C
Preferred Stock shall be $1.77
per share.
(c) The initial "Series D Conversion Price" for the
Series D Preferred stock shall be
$2.53 per share.
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(d) The Series B Conversion Price and the Series C
Conversion Price reflect an adjustment for the five-for-one stock split in the
form of a dividend of four shares of Common Stock for each outstanding share of
Common Stock approved by the Company's predecessor corporation's Board of
Directors which was effective as of May 1, 1997 and accordingly shall not be
further adjusted to reflect such split.
(ii) Adjustment of Conversion Price.
(a) Series B Preferred Stock. If and whenever on or
after the Series B Issue Date the Corporation issues or sells, or in accordance
with Section 6(c) is deemed to have issued or sold, any shares of its Common
Stock or other instrument or security convertible into or exchangeable for
Common Stock for a consideration per share less than the initial or applicable
Series B Conversion Price, then forthwith upon such issue or sale the applicable
Series B Conversion Price shall be reduced to a price (calculated to the nearest
cent) determined by multiplying the Series B Conversion Price by a fraction. The
fraction shall be determined as follows: (x) the numerator shall be (1) the
number of shares of Common Stock Deemed Outstanding immediately prior to such
issue or sale, plus (2) the number of shares of Common Stock which the aggregate
consideration received or deemed received by the Corporation in accordance with
Section 6(c) for the total number of shares of Common Stock issued and sold or
deemed issued and sold in accordance with Section 6(c) would purchase at such
Series B Conversion Price as in effect immediately prior to such issue and sale,
and (y) the denominator shall be the number of shares of Common Stock Deemed
Outstanding immediately after such issue or sale.
(b) Series C Preferred Stock. If and whenever on or
after the Series C Issue Date the Corporation issues or sells, or in accordance
with Section 6(c) is deemed to have issued or sold, any shares of its Common
Stock or other instrument or security convertible into or exchangeable for
Common Stock for a consideration per share less than the initial or applicable
Series C Conversion Price, then forthwith upon such issue or sale the applicable
Series C Conversion Price shall be reduced to a price (calculated to the nearest
cent) determined by multiplying the Series C Conversion Price by a fraction. The
fraction shall be determined as follows: (x) the numerator shall be (1) the
number of shares of Common Stock Deemed Outstanding immediately prior to such
issue or sale, plus (2) the number of shares of Common Stock which the aggregate
consideration received or deemed received by the Corporation in accordance with
Section 6(c) for the total number of shares of Common Stock issued and sold or
deemed issued and sold in accordance with Section 6(c) would purchase at such
Series C Conversion Price as in effect immediately prior to such issue and sale,
and (y) the denominator shall be the number of shares of Common Stock Deemed
Outstanding immediately after such issue or sale.
(c) Series D Preferred Stock. If and whenever on or
after the Series D Issue Date the Corporation issues or sells, or in accordance
with Section 6(c) is deemed to have issued or sold, any shares of its Common
Stock or other instrument or security convertible into or exchangeable for
Common Stock for a consideration per share less than the initial or applicable
Series D
<PAGE> 13
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Conversion Price, then forthwith upon such issue or sale the applicable
Series D Conversion Price shall be reduced to a price (calculated to the nearest
cent) determined by multiplying the Series D Conversion Price by a fraction. The
fraction shall be determined as follows: (x) the numerator shall be (1) the
number of shares of Common Stock Deemed Outstanding immediately prior to such
issue or sale, plus (2) the number of shares of Common Stock which the aggregate
consideration received or deemed received by the Corporation in accordance with
Section 6(c) for the total number of shares of Common Stock issued and sold or
deemed issued and sold in accordance with Section 6(c) would purchase at such
Series D Conversion Price as in effect immediately prior to such issue and sale,
and (y) the denominator shall be the number of shares of Common Stock Deemed
Outstanding immediately after such issue or sale.
(c) Effect on Conversion Prices of Certain Events. For purposes of
determining the applicable adjusted Series B Conversion Price, Series C
Conversion Price or Series D Conversion Price under Section 6(b), the following
shall be applicable:
(i) Issuance of Rights or Options. If the Corporation in any
manner grants any rights or options to subscribe for or to purchase Common Stock
("Options") (except for the grant of Options to employees, directors or
consultants of the Corporation pursuant to the Corporation's 1996 Stock Option
Plan, 1996 Stock Plan , 1999 Stock Option and Incentive Plan or future stock
plans approved by a majority of the Board of Directors provided such majority
includes the representative designated by the holders of the Series B Preferred
Stock, the representative designated by the holders of the Series C Preferred
Stock and the representative designated by the holders of the Series D Preferred
Stock) or any stock or other securities convertible into or exchangeable for
Common Stock ("Convertible Securities"), and the price per share for which
Common Stock is issuable upon the exercise of such Options or upon conversion or
exchange of such Convertible Securities is less than the applicable Series B
Conversion Price, the applicable Series C Conversion Price and/or the applicable
Series D Conversion Price, as the case may be, in effect immediately prior to
the time of the granting of such Options, then the total maximum number of
shares of Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total maximum amount of such Convertible
Securities shall be deemed to be outstanding and to have been issued and sold by
the Corporation at the time of the granting of such Options for such price per
share for purposes of the adjustments set forth in Section 6(b)(ii)(a),
6(b)(ii)(b) and/or 6(b)(ii)(c) above, as the case may be. For purposes of this
paragraph, the "price per share for which Common Stock is issuable" shall be
determined by dividing (a) the total amount, if any, received or receivable by
the Corporation as consideration for the granting of such Options, plus the
minimum aggregate amount of additional consideration payable to the Corporation
upon exercise of all such Options, plus in the case of such Options which relate
to Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the issuance or sale of
such Convertible Securities and the conversion or exchange thereof (such amount
is the consideration "deemed received" for purposes of Section 6(b) above), by
(b) the total maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such Options. Upon the
expiration of any Option or termination of any conversion right of any
Convertible Security issuable upon exercise of any Option, the issuance of which
resulted in an adjustment of the
<PAGE> 14
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Series B Conversion Price, the Series C Conversion Price and/or the Series D
Conversion Price, if any such Option shall expire or conversion right of any
Convertible Security shall terminate and shall not have been exercised or
converted, as applicable, the Applicable Conversion Price shall be recalculated
immediately upon such expiration and effective immediately upon such expiration
shall be increased to the price it would have been (but reflecting any other
adjustments to the Applicable Conversion Price made pursuant to the provisions
of this Section 6 after the issuance of such Options) had the adjustment of the
Applicable Conversion Price made upon the issuance of such Options been made on
the basis of the issuance of only those Options actually exercised or
Convertible Securities issuable upon exercise of such Options actually
converted, as applicable. No further adjustment of the Applicable Conversion
Price shall be made when Convertible Securities are actually issued upon the
exercise of such Options or when Common Stock is actually issued upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
(ii) Issuance of Convertible Securities. If the Corporation in
any manner issues or sells any Convertible Securities and the price per share
for which Common Stock is issuable upon conversion or exchange thereof is less
than the applicable Series B Conversion Price, the applicable Series C
Conversion Price and/or the applicable Series D Conversion Price, as the case
may be, in effect immediately prior to the time of such issue or sale, then the
maximum number of shares of Common Stock issuable upon conversion or exchange of
such Convertible Securities shall be deemed to be outstanding and to have been
issued and sold by the Corporation at the time of the issuance or sale of such
Convertible Securities for such price per share for purposes of the adjustments
set forth in Section 6(b)(ii)(a), 6(b)(ii)(b) and/or 6(b)(ii)(c) above, as the
case may be. For the purposes of this paragraph, the "price per share for which
Common Stock is issuable" shall be determined by dividing (a) the total amount
received or receivable by the Corporation as consideration for the issue or sale
of such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof (such amount is the consideration "deemed received" for
purposes of Section 6(b) above), by (b) the total maximum number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible
Securities. Upon the termination of any conversion right of any Convertible
Security, the issuance of which resulted in an adjustment of the Series B
Conversion Price, the Series C Conversion Price and/or the Series D Conversion
Price, if any such conversion right of any Convertible Security shall terminate
and shall not have been converted, the Applicable Conversion Price shall be
recalculated immediately upon such termination and effective immediately upon
such termination shall be increased to the price it would have been (but
reflecting any other adjustments to the Applicable Conversion Price made
pursuant to the provisions of this Section 6 after the issuance of such
Convertible Securities) had the adjustment of the Applicable Conversion Price
made upon the issuance of such Convertible Securities been made on the basis of
the issuance of only those Convertible Securities actually converted. No further
adjustment of the Applicable Conversion Price shall be made when Common Stock is
actually issued upon the conversion or exchange of such Convertible Securities,
and if any such issue or sale of such Convertible Securities is made upon
exercise of any Options for which adjustments of the Applicable Conversion Price
had been or are to be made pursuant to other provisions of this
<PAGE> 15
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Section 6, no further adjustment of the Applicable Conversion Price shall be
made by reason of such issue or sale.
(iii) Change in Option Price or Conversion Rate. If the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the conversion or exchange of any Convertible Securities, or
the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock change at any time, the Applicable Conversion
Price in effect at the time of such change shall be readjusted to the Applicable
Conversion Price which would have been in effect at such time had such Options
or Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold.
(d) Subdivision or Combination of Common Stock. If the Corporation at
any time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, or if the Corporation at any time combines (by reverse
stock split or otherwise) one or more classes of its outstanding shares of
Common Stock into a smaller number of shares, the Applicable Conversion Price in
effect immediately prior to such subdivision or combination shall be
proportionately adjusted. The Series B Conversion Price and the Series C
Conversion Price reflect an adjustment for the five-for-one stock split in the
form of a dividend of four shares of Common Stock for each outstanding share of
Common Stock approved by the Company's predecessor corporation's Board of
Directors which was effective as of May 1, 1997 and accordingly, shall not be
further adjusted to reflect such split.
(e) Reorganization, Reclassification, Consolidation, Merger or Sale.
Any recapitalization, reorganization, reclassification, consolidation, merger,
sale of all or substantially all of the Corporation's assets to another Person
or other transaction which is effected in such a manner that holders of Common
Stock are entitled to receive (either directly or upon subsequent liquidation)
stock, securities or assets with respect to or in exchange for Common Stock is
referred to herein as an "Organic Change." Prior to the consummation of any
Organic Change, the Corporation shall make appropriate provisions (in form and
substance reasonably satisfactory to the holders of a majority of each of the
shares of the Series B Preferred Stock, the shares of the Series C Preferred
Stock and the shares of the Series D Preferred Stock then outstanding) to insure
that each of the holders of Series B Preferred Stock, the holders of the Series
C Preferred Stock and the holders of the Series D Preferred Stock shall
thereafter have the right to acquire and receive, in lieu of or in addition to
(as the case may be) the shares of Conversion Stock immediately theretofore
acquirable and receivable upon the conversion of such holder's Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock, as the
case may be, such shares of stock, securities or assets as such holder would
have received in connection with such Organic Change if such holder had
converted its Series B Preferred Stock, Series C Preferred Stock or Series D
Preferred Stock immediately prior to such Organic Change. In each such case, the
Corporation shall also make appropriate provisions (in form and substance
reasonably satisfactory to the holders of a majority of the shares of Series B
Preferred Stock then outstanding, the holders of a majority of the shares of
Series C Preferred Stock then outstanding and the holders of a majority of the
shares of Series D Preferred Stock then outstanding) to insure
<PAGE> 16
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that the provisions of this Section 6 shall thereafter be applicable to the
shares of stock, securities or assets received by each holder upon such Organic
Change. The Corporation shall not effect any Organic Change unless prior to the
consummation thereof, the successor corporation (if other than the Corporation)
resulting from consolidation or merger or the corporation purchasing such assets
assumes by written instrument (in form and substance reasonably satisfactory to
the holders of a majority of the shares the Series B Preferred Stock then
outstanding, the holders of a majority of the shares of the Series C Preferred
Stock then outstanding and the holders of a majority of the shares of Series D
Preferred Stock then outstanding), the obligation to deliver to each such holder
such shares of stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to acquire.
(f) Certain Events.
(i) If an event not specifically enumerated in this Section 6
occurs which has substantially the same economic effect on the Series B
Preferred Stock, the Series C Preferred Stock and/or the Series D Preferred
Stock as those specifically enumerated shall occur, then this Section 6 shall be
construed by the Board of Directors liberally, mutatis mutandis, in order to
give the Series B Preferred Stock, the Series C Preferred Stock and the Series D
Preferred Stock the benefit of the protections provided under this Section 6.
The Corporation's Board of Directors shall make an appropriate adjustment in the
then effective Applicable Conversion Price(s) so as to protect the rights of the
holders of Series B Preferred Stock, the holders of the Series C Preferred Stock
and/or the holders of the Series D Preferred Stock; provided that no such
adjustment shall increase the then effective Applicable Conversion Price(s) as
otherwise determined pursuant to this Section 6 or decrease the number of shares
of Conversion Stock issuable upon conversion of each share of Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock.
(ii) The determination of whether an adjustment is necessary
in accordance with this Section 6(f) shall be made by the Board of Directors, in
the exercise of its reasonable judgment (which shall be conclusively evidenced
by a vote or votes adopted by it). None of the representative on the Board of
Directors designated by the Series B Preferred Stock, the representative on the
Board of Directors designated by the Series C Preferred Stock or the
representative on the Board of Directors designated by the Series D Preferred
Stock shall participate in the deliberation or vote with respect to making the
foregoing judgment.
(g) Notices.
(i) Immediately upon any adjustment of the applicable Series B
Conversion Price, the applicable Series C Conversion Price and/or the applicable
Series D Conversion Price, the Corporation shall give written notice thereof to
all holders of Series B Preferred Stock, all holders of the Series C Preferred
Stock or all holders of the Series D Preferred Stock, as the case may be,
setting forth in reasonable detail and certifying the calculation of such
adjustment.
(ii) The Corporation shall give written notice to all holders
of Series B Preferred Stock, all holders of Series C Preferred Stock and all
holders of Series D Preferred Stock at least
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twenty (20) days prior to the date on which the Corporation closes its books or
takes a record (a) with respect to any dividend or distribution upon Common
Stock, except for stock splits effected as dividends of Common Stock payable on
shares of Common Stock, (b) with respect to any pro rata subscription offer to
holders of Common Stock or (c) for determining rights to vote with respect to
any Organic Change, dissolution or liquidation.
(iii) The Corporation shall also give written notice to the
holders of Series B Preferred Stock, the holders of Series C Preferred Stock and
the holders of Series D Preferred Stock at least twenty (20) days prior to the
date on which any Organic Change shall take place.
(h) Mandatory Conversion. All of the outstanding shares of Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock will be
automatically converted in accordance with the terms of this Section 6 (h) at
(i) the closing of a Qualified Public Offering and (ii) the listing of such
shares of Common Stock on the Nasdaq National Market, the American Stock
Exchange or the New York Stock Exchange. Any such mandatory conversion shall be
effected only at the time of and subject to the closing of the sale of such
shares pursuant to such Public Offering and upon written notice of such
mandatory conversion delivered to all holders of Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock at least seven (7) days
prior to such closing.
(i) Elected Conversion. At any time the holders of eighty percent (80%)
of the Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock, voting together as a single class, may elect to convert all of the
outstanding shares of Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock then outstanding into the applicable number of shares
of Conversion Stock, in accordance with the terms of Section 6. Any such elected
conversion shall be effected only after such electing holders deliver written
notice of the election to the Company and all non-electing holders of Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock at least
fifteen (15) days prior to the effective date of such event.
7. DEFINITIONS. The following terms have the meanings specified below:
Board of Directors. The term "Board of Directors" shall mean
the Board of Directors of the Corporation.
Business Day. The term "Business Day" shall mean any day
(other than a day which is a Saturday, Sunday or a legal holiday in the
Commonwealth of Massachusetts) on which banks are authorized to be open for
business in the Commonwealth of Massachusetts.
Common Stock. The term "Common Stock" shall mean the common
stock, par value $.01 per share, of the Corporation.
Common Stock Deemed Outstanding. The term "Common Stock Deemed
Outstanding" shall mean, at any given time, the number of shares of Common Stock
actually outstanding at such time, plus the number of shares of Common Stock
issuable upon conversion
<PAGE> 18
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of the Series A Preferred Stock, the Series B Preferred Stock, the Series C
Preferred Stock and the Series D Preferred Stock plus the number of shares of
Common Stock deemed to be outstanding with respect to Options and Convertible
Securities pursuant to Section 6 hereof whether or not the Options or
Convertible Securities are actually exercisable at such time.
Conversion Stock. The term "Conversion Stock" shall mean the
shares of Common Stock issuable upon conversion of shares of Series B Preferred
Stock, Series C Preferred Stock or Series D Preferred Stock; provided that if
there is a change such that the securities issuable upon conversion of the
Series B Preferred Stock, the Series C Preferred Stock or the Series D Preferred
Stock are issued by an entity other than the Corporation or there is a change in
the class of securities so issuable, then the term "Conversion Stock" shall mean
shares of the security issuable upon conversion of the Series B Preferred Stock,
the Series C Preferred Stock or the Series D Preferred Stock if such security is
issuable in shares, or shall mean the smallest unit in which such security is
issuable if such security is not issuable in shares.
Series B Issue Date. The term "Series B Issue Date" shall mean
September 27, 1996.
Series C Issue Date. The term "Series C Issue Date" shall mean
April 28, 1997.
Series D Issue Date. The term "Series D Issue Date" shall mean
September 28, 1998.
Person. The term "Person" shall mean an individual,
corporation, partnership, association, trust, joint venture or unincorporated
organization or any government, governmental department or any agency or
political subdivision thereof.
Public Offering. The term "Public Offering" shall mean any
offering by the Corporation of its equity securities to the public pursuant to
an effective registration statement under the Securities Act or any comparable
statement under any similar federal statute then in force, other than an
offering in connection with an employee benefit plan.
Qualified Public Offering. The term "Qualified Public
Offering" shall mean the consummation of the Corporation's issuance and sale of
its Common Stock in a bona fide firm commitment underwriting pursuant to a
registration statement under the Securities Act of 1933, as amended, the public
offering shall be at least $20,000,000 and a price per share to the public of
which is not less than 200% of the then effective Series D Conversion Price,
provided, however, that in the event no shares of Series D Preferred Stock are
outstanding, no price per share limitation shall apply.
Securities Act. The term "Securities Act" shall mean the
Securities Act of 1933, as amended, or any successor federal statute, and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder, all as the same shall be in effect from time to time.
<PAGE> 19
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FIFTH. The Corporation is to have perpetual existence.
SIXTH. The following provisions are included for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its Board of Directors and stockholders:
1. The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors of the Corporation.
2. The Board of Directors of the Corporation is expressly
authorized to adopt, amend or repeal the by-laws of the Corporation, subject to
any limitation thereof contained in the by-laws. The stockholders shall also
have the power to adopt, amend or repeal the by-laws of the Corporation;
provided, however, that, in addition to any vote of the holders of any class or
series of stock of the Corporation required by law or by this First Amended and
Restated Certificate of Incorporation, the affirmative vote of the holders of at
least seventy five (75%) of the voting power of all of the then outstanding
shares of the capital stock of the Corporation entitled to vote generally in the
election of directors, voting together as a single class, shall be required to
adopt, amend or repeal any provision of the By-laws of the Corporation.
3. Stockholders of the Corporation may not take any action by
written consent in lieu of a meeting.
4. Special meetings of stockholders may be called at any time
only by the Chief Executive Officer, President, the Chairman of the Board of
Directors (if any) or a majority of the Board of Directors. Business transacted
at any special meeting of stockholders shall be limited to matters relating to
the purpose or purposes stated in the notice of meeting.
5. The books of the Corporation may be kept at such place
within or without the State of Delaware as the By-laws of the Corporation may
provide or as may be designated from time to time by the Board of Directors of
the Corporation.
SEVENTH.
1. NUMBER OF DIRECTORS. The number of directors which shall constitute
the whole Board of Directors shall be determined by resolution of a majority of
the Board of Directors, but in no event shall the number of directors be less
than three. The number of directors may be decreased at any time and from time
to time by a majority of the directors then in office, but only to eliminate
vacancies existing by reason of the death, resignation, removal or expiration of
the term of one or more directors. The directors shall be elected at the annual
meeting of stockholders by such stockholders as have the right to vote on such
election. Directors need not be stockholders of the Corporation.
2. CLASSES OF DIRECTORS. The Board of Directors shall be and is divided
into three classes: Class I, Class II and Class III. No one class shall have
more than one director more than any other class.
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3. ELECTION OF DIRECTORS. Elections of directors need not be by written
ballot except as and to the extent provided in the by-laws of the Corporation.
4. TERMS OF OFFICE. Each director shall serve for a term ending on the
date of the third annual meeting following the annual meeting at which such
director was elected; provided, however, that each initial director in Class I
shall serve for a term ending on the date of the annual meeting next following
the end of the Corporation's fiscal year ending December 31, 2000; each initial
director in Class II shall serve for a term ending on the date of the annual
meeting next following the end of the Corporation's fiscal year ending December
31, 2001; and each initial director in Class III shall serve for a term ending
on the date of the annual meeting next following the end of the Corporation's
fiscal year ending December 31, 2002.
5. ALLOCATION OF DIRECTORS AMONG CLASSES IN THE EVENT OF INCREASES OR
DECREASES IN THE NUMBER OF DIRECTORS. In the event of any increase or decrease
in the authorized number of directors, (i) each director then serving as such
shall nevertheless continue as director of the class of which he or she is a
member until the expiration of such director's current term or his or her prior
death, removal or resignation and (ii) the newly created or eliminated
directorships resulting from such increase or decrease shall be apportioned by
the Board of Directors among the three classes of directors so as to ensure that
no one class has more than one director more than any other class. To the extent
possible, consistent with the foregoing rule, any newly created directorships
shall be added to those classes whose terms of office are to expire at the
earliest dates following such allocation. No decrease in the number of directors
constituting the whole Board of Directors shall shorten the term of an incumbent
Director.
6. TENURE. Notwithstanding any provisions to the contrary contained
herein, each director shall hold office until his or her successor is elected
and qualified, or until his or her earlier death, resignation or removal.
7. VACANCIES. Unless and until filled by the stockholders, any vacancy
in the Board of Directors, however occurring, including a vacancy resulting from
an enlargement of the Board of Directors, may be filled only by vote of a
majority of the directors then in office, even if less than a quorum, or by a
sole remaining director. A director elected to fill a vacancy shall be elected
for the unexpired term of his or her predecessor in office, if applicable, and a
director chosen to fill a position resulting from an increase in the number of
directors shall hold office until the next election of the class for which such
director shall have been chosen and until his or her successor is elected and
qualified, or until his or her earlier death, resignation or removal.
8. QUORUM. A majority of the total number of the whole Board of
Directors shall constitute a quorum at all meetings of the Board of Directors.
In the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such director
so disqualified; provided, however, that in no case shall less than one-third
(1/3) of the number so fixed constitute a quorum. In the absence of a quorum at
any such meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice other than announcement at the meeting,
until a quorum shall be present.
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9. ACTION AT MEETING. At any meeting of the Board of Directors at which
a quorum is present, the vote of a majority of those present shall be sufficient
to take any action, unless a different vote is specified by law or the
Corporation's By-laws.
10. REMOVAL. Any one or more or all of the directors may be removed (i)
with cause only by the holders of at least a majority of the shares then
entitled to vote at an election of directors or (ii) without cause only by the
holders of at least seventy-five percent (75%) of the shares then entitled to
vote at an election of directors.
11. STOCKHOLDER NOMINATIONS AND INTRODUCTION OF BUSINESS, ETC. Advance
notice of stockholder nominations for election of directors and other business
to be brought by stockholders before a meeting of stockholders shall be given in
the manner provided in the By-laws of the Corporation.
12. RIGHTS OF PREFERRED STOCK. The provisions of this Article are
subject to the rights of the holders of any series of Preferred Stock from time
to time outstanding.
EIGHTH. No director (including any advisory director) of the
Corporation shall be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director notwithstanding
any provision of law imposing such liability; provided, however, that, to the
extent provided by applicable law, this provision shall not eliminate the
liability of a director (i) for any breach of the director's duty of loyalty to
the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the General Corporation Law of the State of Delaware,
or (iv) for any transaction from which the director derived an improper personal
benefit. No amendment to or repeal of this provision shall apply to or have any
effect on the liability or alleged liability of any director for or with respect
to any acts or omissions of such director occurring prior to such amendment or
repeal.
NINTH. The Board of Directors of the Corporation, when evaluating any
offer of another party (a) to make a tender or exchange offer for any equity
security of the Corporation or (b) to effect a business combination, shall, in
connection with the exercise of its judgment in determining what is in the best
interests of the Corporation as whole, be authorized to give due consideration
to any such factors as the Board of Directors determines to be relevant,
including, without limitation:
(i) the interests of the Corporation's stockholders, including the
possibility that these interests might be best served by the continued
independence of the Corporation;
(ii) whether the proposed transaction might violate federal or state
laws;
(iii) not only the consideration being offered in the proposed
transaction, in relation to the then current market price for the
outstanding capital stock of the Corporation, but also to the market price
for the capital stock of the Corporation over a period of years, the
estimated
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price that might be achieved in a negotiated sale of the Corporation as a
whole or in part or through orderly liquidation, the premiums over market
price for the securities of other corporations in similar transactions,
current political, economic and other factors bearing on securities prices
and the Corporation's financial condition and future prospects; and
(iv) the social, legal and economic effects upon employees, suppliers,
customers, creditors and others having similar relationships with the
Corporation, upon the communities in which the Corporation conducts its
business and upon the economy of the state, region and nation.
In connection with any such evaluation, the Board of Directors is authorized to
conduct such investigations and engage in such legal proceedings as the Board of
Directors may determine.
TENTH.
1. ACTIONS, SUITS AND PROCEEDINGS OTHER THAN BY OR IN THE RIGHT OF THE
CORPORATION. The Corporation shall indemnify each person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) (all such persons being
referred to hereafter as an "Indemnitee"), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful. Notwithstanding
anything to the contrary in this Article, except as set forth in Section 6
below, the Corporation shall not indemnify an Indemnitee seeking indemnification
in connection with a proceeding (or part thereof) initiated by the Indemnitee
unless the initiation thereof was approved by the Board of Directors of the
Corporation.
2. ACTIONS OR SUITS BY OR IN THE RIGHT OF THE CORPORATION. The
Corporation shall indemnify any Indemnitee who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation,
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partnership, joint venture, trust or other enterprise (including any employee
benefit plan), or by reason of any action alleged to have been taken or omitted
in such capacity, against all expenses (including attorneys' fees) and amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with such action, suit or proceeding and any appeal therefrom, if he
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of Delaware or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of such liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses (including attorneys' fees) which the Court of
Chancery of Delaware or such other court shall deem proper.
3. INDEMNIFICATION FOR EXPENSES OF SUCCESSFUL PARTY. Notwithstanding
the other provisions of this Article, to the extent that an Indemnitee has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article, or in defense of any
claim, issue or matter therein, or on appeal from any such action, suit or
proceeding, he shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by him or on his behalf in connection
therewith. Without limiting the foregoing, if any action, suit or proceeding is
disposed of, on the merits or otherwise (including a disposition without
prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an
adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of
guilty or nolo contendere by the Indemnitee, (iv) an adjudication that the
Indemnitee did not act in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and (v) with
respect to any criminal proceeding, an adjudication that the Indemnitee had
reasonable cause to believe his conduct was unlawful, the Indemnitee shall be
considered for the purpose hereof to have been wholly successful with respect
thereto.
4. NOTIFICATION AND DEFENSE OF CLAIM. As a condition precedent to his
right to be indemnified, the Indemnitee must notify the Corporation in writing
as soon as practicable of any action, suit, proceeding or investigation
involving him for which indemnity will or could be sought. With respect to any
action, suit, proceeding or investigation of which the Corporation is so
notified, the Corporation will be entitled to participate therein at its own
expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to the Indemnitee. After notice from the
Corporation to the Indemnitee of its election so to assume such defense, the
Corporation shall not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with such claim,
other than as provided below in this Section 4. The Indemnitee shall have the
right to employ his own counsel in connection with such claim, but the fees and
expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of the Indemnitee
unless (i) the employment of counsel by the Indemnitee has been authorized by
the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded
that there may be a conflict of interest or position on any significant issue
between the Corporation and the Indemnitee in the conduct of the defense of such
action or (iii) the Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of
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counsel for the Indemnitee shall be at the expense of the Corporation, except
as otherwise expressly provided by this Article. The Corporation shall not be
entitled, without the consent of the Indemnitee, to assume the defense of any
claim brought by or in the right of the Corporation or as to which counsel for
the Indemnitee shall have reasonably made the conclusion provided for in clause
(ii) above.
5. ADVANCE OF EXPENSES. Subject to the provisions of Section 6 below,
in the event that the Corporation does not assume the defense pursuant to
Section 4 of this Article of any action, suit, proceeding or investigation of
which the Corporation receives notice under this Article, any expenses
(including attorneys' fees) incurred by an Indemnitee in defending a civil or
criminal action, suit, proceeding or investigation or any appeal therefrom shall
be paid by the Corporation in advance of the final disposition of such matter,
provided, however, that the payment of such expenses incurred by an Indemnitee
in advance of the final disposition of such matter shall be made only upon
receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts
so advanced in the event that it shall ultimately be determined that the
Indemnitee is not entitled to be indemnified by the Corporation as authorized in
this Article. Such undertaking may be accepted without reference to the
financial ability of such person to make such repayment.
6. PROCEDURE FOR INDEMNIFICATION. In order to obtain indemnification or
advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article, the
Indemnitee shall submit to the Corporation a written request, including in such
request such documentation and information as is reasonably available to the
Indemnitee and is reasonably necessary to determine whether and to what extent
the Indemnitee is entitled to indemnification or advancement of expenses. Any
such indemnification or advancement of expenses shall be made promptly, and in
any event within 60 days after receipt by the Corporation of the written request
of the Indemnitee, unless with respect to requests under Section 1, 2 or 5 the
Corporation determines, by clear and convincing evidence, within such 60-day
period that the Indemnitee did not meet the applicable standard of conduct set
forth in Section 1 or 2, as the case may be. Such determination shall be made in
each instance by (a) a majority vote of the directors of the Corporation who are
not at that time parties to the action, suit or proceeding in question
("disinterested directors"), even though less than a quorum, (b) by a committee
of disinterested directors designated by a majority vote of disinterested
directors, even though less than a quorum, (c) if there are no such
disinterested directors, or if such disinterested directors so direct, by
independent legal counsel (who may be regular legal counsel to the corporation)
in a written opinion, (d) a majority vote of a quorum of the outstanding shares
of stock of all classes entitled to vote for directors, voting as a single
class, which quorum shall consist of stockholders who are not at that time
parties to the action, suit or proceeding in question, or (e) a court of
competent jurisdiction.
7. REMEDIES. The right to indemnification or advances as granted by
this Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation denies such request, in whole or in part, or if
no disposition thereof is made within the 60-day period referred to above in
Section 6. Unless otherwise provided by law, the burden of proving that the
Indemnitee is not entitled to indemnification or advancement of expenses under
this
<PAGE> 25
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Article shall be on the Corporation. Neither the failure of the Corporation to
have made a determination prior to the commencement of such action that
indemnification is proper in the circumstances because the Indemnitee has met
the applicable standard of conduct, nor an actual determination by the
Corporation pursuant to Section 6 that the Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the Indemnitee has not met the applicable standard of conduct.
The Indemnitee's expenses (including attorneys' fees) incurred in connection
with successfully establishing his right to indemnification, in whole or in
part, in any such proceeding shall also be indemnified by the Corporation.
8. SUBSEQUENT AMENDMENT. No amendment, termination or repeal of this
Article or of the relevant provisions of the General Corporation Law of the
State of Delaware or any other applicable laws shall affect or diminish in any
way the rights of any Indemnitee to indemnification under the provisions hereof
with respect to any action, suit, proceeding or investigation arising out of or
relating to any actions, transactions or facts occurring prior to the final
adoption of such amendment, termination or repeal.
9. OTHER RIGHTS. The indemnification and advancement of expenses
provided by this Article shall not be deemed exclusive of any other rights to
which an Indemnitee seeking indemnification or advancement of expenses may be
entitled under any law (common or statutory), agreement or vote of stockholders
or disinterested directors or otherwise, both as to action in his official
capacity and as to action in any other capacity while holding office for the
Corporation, and shall continue as to an Indemnitee who has ceased to be a
director or officer, and shall inure to the benefit of the estate, heirs,
executors and administrators of the Indemnitee. Nothing contained in this
Article shall be deemed to prohibit, and the Corporation is specifically
authorized to enter into, agreements with officers and directors providing
indemnification rights and procedures different from those set forth in this
Article. In addition, the Corporation may, to the extent authorized from time to
time by its Board of Directors, grant indemnification rights to other employees
or agents of the Corporation or other persons serving the Corporation and such
rights may be equivalent to, or greater or less than, those set forth in this
Article.
10. PARTIAL INDEMNIFICATION. If an Indemnitee is entitled under any
provision of this Article to indemnification by the Corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with any action, suit, proceeding or investigation and any appeal
therefrom but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
11. INSURANCE. The Corporation may purchase and maintain insurance, at
its expense, to protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) against any expense,
liability or loss incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
such
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person against such expense, liability or loss under the General Corporation Law
of the State of Delaware.
12. MERGER OR CONSOLIDATION. If the Corporation is merged into or
consolidated with another corporation and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.
13. SAVINGS CLAUSE. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Corporation, to the fullest extent permitted by an applicable portion of this
Article that shall not have been invalidated and to the fullest extent permitted
by applicable law.
14. DEFINITIONS. Terms used herein and defined in Section 145(h) and
Section 145(i) of the General Corporation Law of the State of Delaware shall
have the respective meanings assigned to such terms in such Section 145(h) and
Section 145(i).
15. SUBSEQUENT LEGISLATION. If the General Corporation Law of the State
of Delaware is amended after adoption of this Article to expand further the
indemnification permitted to Indemnitees, then the Corporation shall indemnify
such persons to the fullest extent permitted by the General Corporation Law of
the State of Delaware, as so amended.
ELEVENTH. The Corporation reserves the right to amend or repeal any
provision contained in this First Amended and Restated Certificate of
Incorporation in the manner prescribed by the laws of the State of Delaware and
all rights conferred upon stockholders are granted subject to this reservation,
provided, however, that in addition to any vote of the holders of any class or
series of stock of the Corporation required by law, this First Amended and
Restated Certificate of Incorporation or a Certificate of Designation with
respect to a series of Preferred Stock, the affirmative vote of the holders of
shares of voting stock of the Corporation representing at least seventy-five
percent (75%) of the voting power of all of the then outstanding shares of the
capital stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to (i) reduce or
eliminate the number of authorized shares of Common Stock or the number of
authorized shares of Preferred Stock set forth in Article FOURTH or (ii) amend
or repeal, or adopt any provision inconsistent with, Parts A, B, C, D and E of
Article FOURTH and Articles FIFTH, SIXTH, SEVENTH, EIGHTH, NINTH, TENTH and this
Article ELEVENTH of this First Amended and Restated Certificate of
Incorporation.
[Signature Page Immediately Follows]
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IN WITNESS WHEREOF, the undersigned has hereunto signed his name and
affirms that the statements made in this First Amended and Restated Certificate
of Incorporation are true under the penalties of perjury this ____ day of
__________, 2000.
By:___________________________
Dennis R. Harmon
Chief Executive Officer
[SEAL]
Attest:
By:______________________________
Onofrio Sozio
Secretary
<PAGE> 1
Exhibit 3.3
SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
SYNCHRONICITY SOFTWARE, INC.
(INCORPORATED APRIL 13, 1999)
* * * * * *
1. The name of the Corporation is Synchronicity Software, Inc. The Corporation
was originally incorporated under the name Synchronicity, Inc. of Massachusetts.
The original certificate of incorporation of the Corporation was filed with the
office of the Secretary of State of Delaware on April 13, 1999. An amendment to
the Certificate of Incorporation changing the name of the Corporation to
Synchronicity Software, Inc. was filed with the office of the Secretary of the
State of Delaware on February __, 2000. A First Amended and Restated
Certificate of Incorporation was filed with the office of the Secretary of
State in Delaware on April __, 2000.
2. This Second Amended and Restated Certificate of Incorporation was recommended
to the stockholders for approval as being advisable and in the best interests of
the Corporation by the action of the Board of Directors on February 16, 2000.
3. That in lieu of a meeting and vote of stockholders, consents in writing have
been signed by holders of outstanding stock having not less than the minimum
number of votes that is necessary to consent to this amendment and restatement,
and, if required, prompt notice of such action shall be given in accordance with
the provisions of Section 228 of the General Corporation Law of the State of
Delaware.
4. This Second Amended and Restated Certificate of Incorporation restates and
integrates and further amends the Amended and Restated Certificate of
Incorporation, as heretofore amended or supplemented.
The text of the Corporation's Certificate of Incorporation, as amended
and restated, is amended and restated in its entirety as follows:
FIRST. The name of the Corporation is Synchronicity Software, Inc.
SECOND. The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, Wilmington, County of New Castle,
Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD. The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of the State of Delaware.
FOURTH. The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is ninety five million (95,000,000)
shares, consisting of ninety million (90,000,000) shares
<PAGE> 2
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of Common Stock with a par value of $.01 per share (the "Common Stock") and
five million (5,000,000) shares of Preferred Stock with a par value of $.01 per
share (the "Preferred Stock").
A description of the respective classes of stock and a statement of the
designations, powers, preferences and rights, and the qualifications,
limitations and restrictions of the Preferred Stock and Common Stock are as
follows:
A. COMMON STOCK
1. GENERAL. All shares of Common Stock will be identical and will
entitle the holders thereof to the same rights, powers and privileges. The
rights, powers and privileges of the holders of the Common Stock are subject to
and qualified by the rights of holders of the Preferred Stock.
2. DIVIDENDS. Dividends may be declared and paid on the Common Stock
from funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
3. DISSOLUTION, LIQUIDATION OR WINDING UP. In the event of any
dissolution, liquidation or winding up of the affairs of the Corporation,
whether voluntary or involuntary, each issued and outstanding share of Common
Stock shall entitle the holder thereof to receive an equal portion of the net
assets of the Corporation available for distribution to the holders of Common
Stock, subject to any preferential rights of any then outstanding Preferred
Stock.
4. VOTING RIGHTS. Except as otherwise required by law or this Amended
and Restated Certificate of Incorporation, each holder of Common Stock shall
have one vote in respect of each share of stock held of record by such holder on
the books of the Corporation for the election of directors and on all matters
submitted to a vote of stockholders of the Corporation. Except as otherwise
required by law or provided herein, holders of Common Stock shall vote together
with holders of the Preferred Stock as a single class, subject to any special or
preferential voting rights of any then outstanding Preferred Stock. There shall
be no cumulative voting.
B. PREFERRED STOCK
The Preferred Stock may be issued in one or more series at such time or
times and for such consideration or considerations as the Board of Directors of
the Corporation may determine. Each series shall be so designated as to
distinguish the shares thereof from the shares of all other series and classes.
Except as otherwise provided in this Second Amended and Restated Certificate of
Incorporation, different series of Preferred Stock shall not be construed to
constitute different classes of shares for the purpose of voting by classes.
The Board of Directors is expressly authorized to provide for the
issuance of all or any shares of the undesignated Preferred Stock in one or more
series, each with such designations, preferences, voting powers (or special,
preferential or no voting powers), relative, participating,
<PAGE> 3
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optional or other special rights and privileges and such qualifications,
limitations or restrictions thereof as shall be stated in the resolution or
resolutions adopted by the Board of Directors to create such series, and a
certificate of said resolution or resolutions (a "Certificate of Designation")
shall be filed in accordance with the General Corporation Law of the State of
Delaware. The authority of the Board of Directors with respect to each such
series shall include, without limitation of the foregoing, the right to provide
that the shares of each such series may be: (i) subject to redemption at such
time or times and at such price or prices; (ii) entitled to receive dividends
(which may be cumulative or non-cumulative) at such rates, on such conditions,
and at such times, and payable in preference to, or in such relation to, the
dividends payable on any other class or classes or any other series; (iii)
entitled to such rights upon the dissolution of, or upon any distribution of the
assets of, the Corporation; (iv) convertible into, or exchangeable for, shares
of any other class or classes of stock, or of any other series of the same or
any other class or classes of stock of the Corporation at such price or prices
or at such rates of exchange and with such adjustments, if any; (v) entitled to
the benefit of such limitations, if any, on the issuance of additional shares of
such series or shares of any other series of Preferred Stock; or (vi) entitled
to such other preferences, powers, qualifications, rights and privileges, all as
the Board of Directors may deem advisable and as are not inconsistent with law
and the provisions of this Amended and Restated Certificate of Incorporation.
FIFTH. The Corporation is to have perpetual existence.
SIXTH. The following provisions are included for the management of
the business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its Board of Directors and stockholders:
1. The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors of the Corporation.
2. The Board of Directors of the Corporation is expressly
authorized to adopt, amend or repeal the by-laws of the Corporation, subject to
any limitation thereof contained in the by-laws. The stockholders shall also
have the power to adopt, amend or repeal the by-laws of the Corporation;
provided, however, that, in addition to any vote of the holders of any class or
series of stock of the Corporation required by law or by this Amended and
Restated Certificate of Incorporation, the affirmative vote of the holders of at
least seventy five (75%) of the voting power of all of the then outstanding
shares of the capital stock of the Corporation entitled to vote generally in the
election of directors, voting together as a single class, shall be required to
adopt, amend or repeal any provision of the By-laws of the Corporation.
3. Stockholders of the Corporation may not take any action by
written consent in lieu of a meeting.
4. Special meetings of stockholders may be called at any time
only by the Chief Executive Officer, President, the Chairman of the Board of
Directors (if any) or a majority of the Board of Directors. Business transacted
at any special meeting of stockholders shall be limited to matters relating to
the purpose or purposes stated in the notice of meeting.
<PAGE> 4
-4-
5. The books of the Corporation may be kept at such place
within or without the State of Delaware as the By-laws of the Corporation may
provide or as may be designated from time to time by the Board of Directors of
the Corporation.
SEVENTH.
1. NUMBER OF DIRECTORS. The number of directors which shall constitute
the whole Board of Directors shall be determined by resolution of a majority of
the Board of Directors, but in no event shall the number of directors be less
than three. The number of directors may be decreased at any time and from time
to time by a majority of the directors then in office, but only to eliminate
vacancies existing by reason of the death, resignation, removal or expiration of
the term of one or more directors. The directors shall be elected at the annual
meeting of stockholders by such stockholders as have the right to vote on such
election. Directors need not be stockholders of the Corporation.
2. CLASSES OF DIRECTORS. The Board of Directors shall be and is divided
into three classes: Class I, Class II and Class III. No one class shall have
more than one director more than any other class.
3. ELECTION OF DIRECTORS. Elections of directors need not be by written
ballot except as and to the extent provided in the by-laws of the Corporation.
4. TERMS OF OFFICE. Each director shall serve for a term ending on the
date of the third annual meeting following the annual meeting at which such
director was elected; provided, however, that each initial director in Class I
shall serve for a term ending on the date of the annual meeting next following
the end of the Corporation's fiscal year ending December 31, 2000; each initial
director in Class II shall serve for a term ending on the date of the annual
meeting next following the end of the Corporation's fiscal year ending December
31, 2001; and each initial director in Class III shall serve for a term ending
on the date of the annual meeting next following the end of the Corporation's
fiscal year ending December 31, 2002.
5. ALLOCATION OF DIRECTORS AMONG CLASSES IN THE EVENT OF INCREASES OR
DECREASES IN THE NUMBER OF DIRECTORS. In the event of any increase or decrease
in the authorized number of directors, (i) each director then serving as such
shall nevertheless continue as director of the class of which he or she is a
member until the expiration of such director's current term or his or her prior
death, removal or resignation and (ii) the newly created or eliminated
directorships resulting from such increase or decrease shall be apportioned by
the Board of Directors among the three classes of directors so as to ensure that
no one class has more than one director more than any other class. To the extent
possible, consistent with the foregoing rule, any newly created directorships
shall be added to those classes whose terms of office are to expire at the
earliest dates following such allocation. No decrease in the number of directors
constituting the whole Board of Directors shall shorten the term of an incumbent
Director.
<PAGE> 5
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6. TENURE. Notwithstanding any provisions to the contrary contained
herein, each director shall hold office until his or her successor is elected
and qualified, or until his or her earlier death, resignation or removal.
7. VACANCIES. Unless and until filled by the stockholders, any vacancy
in the Board of Directors, however occurring, including a vacancy resulting from
an enlargement of the Board of Directors, may be filled only by vote of a
majority of the directors then in office, even if less than a quorum, or by a
sole remaining director. A director elected to fill a vacancy shall be elected
for the unexpired term of his or her predecessor in office, if applicable, and a
director chosen to fill a position resulting from an increase in the number of
directors shall hold office until the next election of the class for which such
director shall have been chosen and until his or her successor is elected and
qualified, or until his or her earlier death, resignation or removal.
8. QUORUM. A majority of the total number of the whole Board of
Directors shall constitute a quorum at all meetings of the Board of Directors.
In the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such director
so disqualified; provided, however, that in no case shall less than one-third
(1/3) of the number so fixed constitute a quorum. In the absence of a quorum at
any such meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice other than announcement at the meeting,
until a quorum shall be present.
9. ACTION AT MEETING. At any meeting of the Board of Directors at which
a quorum is present, the vote of a majority of those present shall be sufficient
to take any action, unless a different vote is specified by law or the
Corporation's By-laws.
10. REMOVAL. Any one or more or all of the directors may be removed (i)
with cause only by the holders of at least a majority of the shares then
entitled to vote at an election of directors or (ii) without cause only by the
holders of at least seventy-five percent (75%) of the shares then entitled to
vote at an election of directors.
11. STOCKHOLDER NOMINATIONS AND INTRODUCTION OF BUSINESS, ETC. Advance
notice of stockholder nominations for election of directors and other business
to be brought by stockholders before a meeting of stockholders shall be given in
the manner provided in the By-laws of the Corporation.
12. RIGHTS OF PREFERRED STOCK. The provisions of this Article are
subject to the rights of the holders of any series of Preferred Stock from time
to time outstanding.
EIGHTH. No director (including any advisory director) of the
Corporation shall be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director notwithstanding
any provision of law imposing such liability; provided, however, that, to the
extent provided by applicable law, this provision shall not eliminate the
liability of a director (i) for any breach of the director's duty of loyalty to
the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve
<PAGE> 6
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intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the General Corporation Law of the State of Delaware, or (iv) for any
transaction from which the director derived an improper personal benefit. No
amendment to or repeal of this provision shall apply to or have any effect on
the liability or alleged liability of any director for or with respect to any
acts or omissions of such director occurring prior to such amendment or repeal.
NINTH. The Board of Directors of the Corporation, when evaluating any
offer of another party (a) to make a tender or exchange offer for any equity
security of the Corporation or (b) to effect a business combination, shall, in
connection with the exercise of its judgment in determining what is in the best
interests of the Corporation as whole, be authorized to give due consideration
to any such factors as the Board of Directors determines to be relevant,
including, without limitation:
(i) the interests of the Corporation's stockholders, including the
possibility that these interests might be best served by the continued
independence of the Corporation;
(ii) whether the proposed transaction might violate federal or state
laws;
(iii) not only the consideration being offered in the proposed
transaction, in relation to the then current market price for the
outstanding capital stock of the Corporation, but also to the market price
for the capital stock of the Corporation over a period of years, the
estimated price that might be achieved in a negotiated sale of the
Corporation as a whole or in part or through orderly liquidation, the
premiums over market price for the securities of other corporations in
similar transactions, current political, economic and other factors
bearing on securities prices and the Corporation's financial condition and
future prospects; and
(iv) the social, legal and economic effects upon employees, suppliers,
customers, creditors and others having similar relationships with the
Corporation, upon the communities in which the Corporation conducts its
business and upon the economy of the state, region and nation.
In connection with any such evaluation, the Board of Directors is authorized to
conduct such investigations and engage in such legal proceedings as the Board of
Directors may determine.
TENTH.
1. ACTIONS, SUITS AND PROCEEDINGS OTHER THAN BY OR IN THE RIGHT OF THE
CORPORATION. The Corporation shall indemnify each person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) (all such persons being
referred to hereafter as an "Indemnitee"), or by reason of any action alleged to
have
<PAGE> 7
-7-
been taken or omitted in such capacity, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful. Notwithstanding
anything to the contrary in this Article, except as set forth in Section 6
below, the Corporation shall not indemnify an Indemnitee seeking indemnification
in connection with a proceeding (or part thereof) initiated by the Indemnitee
unless the initiation thereof was approved by the Board of Directors of the
Corporation.
2. ACTIONS OR SUITS BY OR IN THE RIGHT OF THE CORPORATION. The
Corporation shall indemnify any Indemnitee who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan), or by reason of any
action alleged to have been taken or omitted in such capacity, against all
expenses (including attorneys' fees) and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of such liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses (including attorneys' fees)
which the Court of Chancery of Delaware or such other court shall deem proper.
3. INDEMNIFICATION FOR EXPENSES OF SUCCESSFUL PARTY. Notwithstanding
the other provisions of this Article, to the extent that an Indemnitee has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article, or in defense of any
claim, issue or matter therein, or on appeal from any such action, suit or
proceeding, he shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by him or on his behalf in connection
therewith. Without limiting the foregoing, if any action, suit or proceeding is
disposed of, on the merits or otherwise (including a disposition without
prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an
adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of
guilty or nolo contendere by the Indemnitee, (iv) an adjudication that the
Indemnitee did not act in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests
<PAGE> 8
-8-
of the Corporation, and (v) with respect to any criminal proceeding, an
adjudication that the Indemnitee had reasonable cause to believe his conduct was
unlawful, the Indemnitee shall be considered for the purpose hereof to have been
wholly successful with respect thereto.
4. NOTIFICATION AND DEFENSE OF CLAIM. As a condition precedent to his
right to be indemnified, the Indemnitee must notify the Corporation in writing
as soon as practicable of any action, suit, proceeding or investigation
involving him for which indemnity will or could be sought. With respect to any
action, suit, proceeding or investigation of which the Corporation is so
notified, the Corporation will be entitled to participate therein at its own
expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to the Indemnitee. After notice from the
Corporation to the Indemnitee of its election so to assume such defense, the
Corporation shall not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with such claim,
other than as provided below in this Section 4. The Indemnitee shall have the
right to employ his own counsel in connection with such claim, but the fees and
expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of the Indemnitee
unless (i) the employment of counsel by the Indemnitee has been authorized by
the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded
that there may be a conflict of interest or position on any significant issue
between the Corporation and the Indemnitee in the conduct of the defense of such
action or (iii) the Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of counsel for the Indemnitee shall be at the expense of the Corporation, except
as otherwise expressly provided by this Article. The Corporation shall not be
entitled, without the consent of the Indemnitee, to assume the defense of any
claim brought by or in the right of the Corporation or as to which counsel for
the Indemnitee shall have reasonably made the conclusion provided for in clause
(ii) above.
5. ADVANCE OF EXPENSES. Subject to the provisions of Section 6 below,
in the event that the Corporation does not assume the defense pursuant to
Section 4 of this Article of any action, suit, proceeding or investigation of
which the Corporation receives notice under this Article, any expenses
(including attorneys' fees) incurred by an Indemnitee in defending a civil or
criminal action, suit, proceeding or investigation or any appeal therefrom shall
be paid by the Corporation in advance of the final disposition of such matter,
provided, however, that the payment of such expenses incurred by an Indemnitee
in advance of the final disposition of such matter shall be made only upon
receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts
so advanced in the event that it shall ultimately be determined that the
Indemnitee is not entitled to be indemnified by the Corporation as authorized in
this Article. Such undertaking may be accepted without reference to the
financial ability of such person to make such repayment.
6. PROCEDURE FOR INDEMNIFICATION. In order to obtain indemnification or
advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article, the
Indemnitee shall submit to the Corporation a written request, including in such
request such documentation and information as is reasonably available to the
Indemnitee and is reasonably necessary to determine whether and to what extent
the Indemnitee is entitled to indemnification or advancement of
<PAGE> 9
-9-
expenses. Any such indemnification or advancement of expenses shall be made
promptly, and in any event within 60 days after receipt by the Corporation of
the written request of the Indemnitee, unless with respect to requests under
Section 1, 2 or 5 the Corporation determines, by clear and convincing evidence,
within such 60-day period that the Indemnitee did not meet the applicable
standard of conduct set forth in Section 1 or 2, as the case may be. Such
determination shall be made in each instance by (a) a majority vote of the
directors of the Corporation who are not at that time parties to the action,
suit or proceeding in question ("disinterested directors"), even though less
than a quorum, (b) by a committee of disinterested directors designated by a
majority vote of disinterested directors, even though less than a quorum, (c) if
there are no such disinterested directors, or if such disinterested directors so
direct, by independent legal counsel (who may be regular legal counsel to the
corporation) in a written opinion, (d) a majority vote of a quorum of the
outstanding shares of stock of all classes entitled to vote for directors,
voting as a single class, which quorum shall consist of stockholders who are not
at that time parties to the action, suit or proceeding in question, or (e) a
court of competent jurisdiction.
7. REMEDIES. The right to indemnification or advances as granted by
this Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation denies such request, in whole or in part, or if
no disposition thereof is made within the 60-day period referred to above in
Section 6. Unless otherwise provided by law, the burden of proving that the
Indemnitee is not entitled to indemnification or advancement of expenses under
this Article shall be on the Corporation. Neither the failure of the Corporation
to have made a determination prior to the commencement of such action that
indemnification is proper in the circumstances because the Indemnitee has met
the applicable standard of conduct, nor an actual determination by the
Corporation pursuant to Section 6 that the Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the Indemnitee has not met the applicable standard of conduct.
The Indemnitee's expenses (including attorneys' fees) incurred in connection
with successfully establishing his right to indemnification, in whole or in
part, in any such proceeding shall also be indemnified by the Corporation.
8. SUBSEQUENT AMENDMENT. No amendment, termination or repeal of this
Article or of the relevant provisions of the General Corporation Law of the
State of Delaware or any other applicable laws shall affect or diminish in any
way the rights of any Indemnitee to indemnification under the provisions hereof
with respect to any action, suit, proceeding or investigation arising out of or
relating to any actions, transactions or facts occurring prior to the final
adoption of such amendment, termination or repeal.
9. OTHER RIGHTS. The indemnification and advancement of expenses
provided by this Article shall not be deemed exclusive of any other rights to
which an Indemnitee seeking indemnification or advancement of expenses may be
entitled under any law (common or statutory), agreement or vote of stockholders
or disinterested directors or otherwise, both as to action in his official
capacity and as to action in any other capacity while holding office for the
Corporation, and shall continue as to an Indemnitee who has ceased to be a
director or officer, and shall inure to the benefit of the estate, heirs,
executors and administrators of the Indemnitee.
<PAGE> 10
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Nothing contained in this Article shall be deemed to prohibit, and the
Corporation is specifically authorized to enter into, agreements with officers
and directors providing indemnification rights and procedures different from
those set forth in this Article. In addition, the Corporation may, to the extent
authorized from time to time by its Board of Directors, grant indemnification
rights to other employees or agents of the Corporation or other persons serving
the Corporation and such rights may be equivalent to, or greater or less than,
those set forth in this Article.
10. PARTIAL INDEMNIFICATION. If an Indemnitee is entitled under any
provision of this Article to indemnification by the Corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with any action, suit, proceeding or investigation and any appeal
therefrom but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
11. INSURANCE. The Corporation may purchase and maintain insurance, at
its expense, to protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) against any expense,
liability or loss incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
such person against such expense, liability or loss under the General
Corporation Law of the State of Delaware.
12. MERGER OR CONSOLIDATION. If the Corporation is merged into or
consolidated with another corporation and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.
13. SAVINGS CLAUSE. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Corporation, to the fullest extent permitted by an applicable portion of this
Article that shall not have been invalidated and to the fullest extent permitted
by applicable law.
14. DEFINITIONS. Terms used herein and defined in Section 145(h) and
Section 145(i) of the General Corporation Law of the State of Delaware shall
have the respective meanings assigned to such terms in such Section 145(h) and
Section 145(i).
15. SUBSEQUENT LEGISLATION. If the General Corporation Law of the State
of Delaware is amended after adoption of this Article to expand further the
indemnification permitted to Indemnitees, then the Corporation shall indemnify
such persons to the fullest extent permitted by the General Corporation Law of
the State of Delaware, as so amended.
<PAGE> 11
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ELEVENTH. The Corporation reserves the right to amend or repeal any
provision contained in this Second Amended and Restated Certificate of
Incorporation in the manner prescribed by the laws of the State of Delaware and
all rights conferred upon stockholders are granted subject to this reservation,
provided, however, that in addition to any vote of the holders of any class or
series of stock of the Corporation required by law, this Second Amended and
Restated Certificate of Incorporation or a Certificate of Designation with
respect to a series of Preferred Stock, the affirmative vote of the holders of
shares of voting stock of the Corporation representing at least seventy-five
percent (75%) of the voting power of all of the then outstanding shares of the
capital stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to (i) reduce or
eliminate the number of authorized shares of Common Stock or the number of
authorized shares of Preferred Stock set forth in Article FOURTH or (ii) amend
or repeal, or adopt any provision inconsistent with, Parts A and B of Article
FOURTH and Articles FIFTH, SIXTH, SEVENTH, EIGHTH, NINTH, TENTH and this Article
ELEVENTH of this Second Amended and Restated Certificate of Incorporation.
[Signature Page Immediately Follows]
<PAGE> 12
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IN WITNESS WHEREOF, the undersigned has hereunto signed his name and
affirms that the statements made in this Second Amended and Restated Certificate
of Incorporation are true under the penalties of perjury this ____ day of
__________, 2000.
By:___________________________
Dennis R. Harmon
Chief Executive Officer
[SEAL]
Attest:
By:______________________________
Onofrio Sozio
Secretary
<PAGE> 1
Exhibit 3.4
BY-LAWS OF
SYNCHRONICITY, INC. OF MASSACHUSETTS
A DELAWARE CORPORATION
Dated: April 13, 1999
<PAGE> 2
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I ............................................................... 1
MEETINGS OF STOCKHOLDERS ................................................ 1
Section 1. Place of Meetings ......................................... 1
Section 2. Annual Meeting ............................................ 1
Section 3. Special Meetings .......................................... 1
Section 4. Notice of Meetings ........................................ 1
Section 5. Voting List ............................................... 1
Section 6. Quorum .................................................... 2
Section 7. Adjournments .............................................. 2
Section 8. Action at Meetings ........................................ 2
Section 9. Voting and Proxies ........................................ 3
Section 10. Action Without Meeting ................................... 3
ARTICLE II .............................................................. 3
DIRECTORS ............................................................... 3
Section 1. Number, Election, Tenure and Qualification ................ 3
Section 2. Enlargement ............................................... 3
Section 3. Vacancies ................................................. 4
Section 4. Resignation and Removal ................................... 4
Section 5. General Powers ............................................ 4
Section 6. Chairman of the Board ..................................... 4
Section 7. Place of Meetings ......................................... 4
Section 8. Regular Meetings .......................................... 4
Section 9. Special Meetings .......................................... 4
Section 10. Quorum, Action at Meeting, Adjournments .................. 5
Section 11. Action by Consent ........................................ 5
Section 12. Telephonic Meetings ...................................... 5
Section 13. Committees ............................................... 5
Section 14. Compensation ............................................. 6
ARTICLE III ............................................................. 6
OFFICERS ................................................................ 6
Section 1. Enumeration ............................................... 6
Section 2. Election .................................................. 6
Section 3. Tenure .................................................... 6
Section 4. President ................................................. 7
Section 5. Vice-Presidents ........................................... 7
Section 6. Secretary ................................................. 7
Section 7. Assistant Secretaries ..................................... 8
Section 8. Treasurer ................................................. 8
Section 9. Assistant Treasurers ...................................... 8
Section 10. Bond ..................................................... 8
ARTICLE IV .............................................................. 9
NOTICES ................................................................. 9
Section 1. Delivery .................................................. 9
Section 2. Waiver of Notice .......................................... 9
ARTICLE V ............................................................... 9
INDEMNIFICATION ......................................................... 9
Section 1. Actions other than by or in the Right of the Corporation .. 9
Section 2. Actions by or in the Right of the Corporation ............. 10
Section 3. Success on the Merits ..................................... 10
Section 4. Specific Authorization .................................... 10
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
Section 5. Advance Payment ........................................... 10
Section 6. Non-Exclusivity ........................................... 11
Section 7. Insurance ................................................. 11
Section 8. Continuation of Indemnification and Advancement of Expenses 11
Section 9. Severability .............................................. 11
Section 10. Intent of Article ........................................ 11
ARTICLE VI .............................................................. 11
CAPITAL STOCK ........................................................... 11
Section 1. Certificates of Stock ..................................... 11
Section 2. Lost Certificates ......................................... 12
Section 3. Transfer of Stock ......................................... 12
Section 4. Record Date ............................................... 12
Section 5. Registered Stockholders ................................... 13
ARTICLE VII ............................................................. 13
CERTAIN TRANSACTIONS .................................................... 13
Section 1. Transactions with Interested Parties ...................... 13
Section 2. Quorum .................................................... 14
ARTICLE VIII ............................................................ 14
GENERAL PROVISIONS ...................................................... 14
Section 1. Dividends ................................................. 14
Section 2. Reserves .................................................. 14
Section 3. Checks .................................................... 14
Section 4. Fiscal Year ............................................... 14
Section 5. Seal ...................................................... 14
ARTICLE IX .............................................................. 15
AMENDMENTS .............................................................. 15
</TABLE>
Addendum
Register of Amendments to the By-Laws
(ii)
<PAGE> 4
* * * * *
BY-LAWS
* * * * *
ARTICLE I
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. All meetings of the stockholders shall be
held at such place within or without the State of Delaware as may be fixed from
time to time by the Board of Directors or the Chief Executive Officer, or if not
so designated, at the registered office of the Corporation.
Section 2. Annual Meeting. Unless directors are elected by written
consent in lieu of an annual meeting as permitted by law and these By-Laws, an
annual meeting of stockholders shall be held at such date and time as shall be
designated from time to time by the Board of Directors or the Chief Executive
Officer, at which meeting the stockholders shall elect by a plurality vote a
board of directors and shall transact such other business as may be properly
brought before the meeting. If no annual meeting is held in accordance with the
foregoing provisions, the Board of Directors shall cause the meeting to be held
as soon thereafter as convenient, which meeting shall be designated a special
meeting in lieu of annual meeting.
Section 3. Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, may, unless otherwise prescribed by statute or by the
certificate of incorporation, be called by the Board of Directors or the Chief
Executive Officer and shall be called by the Chief Executive Officer or
Secretary at the request in writing of a majority of the Board of Directors, or
at the request in writing of stockholders owning a majority in amount of the
entire capital stock of the Corporation issued and outstanding and entitled to
vote. Such request shall state the purpose or purposes of the proposed meeting.
Business transacted at any special meeting shall be limited to matters relating
to the purpose or purposes stated in the notice of meeting.
Section 4. Notice of Meetings. Except as otherwise provided by law,
written notice of each meeting of stockholders, annual or special, stating the
place, date and hour of the meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be given not less
than ten (10) or more than sixty (60) days before the date of the meeting, to
each stockholder entitled to vote at such meeting.
Section 5. Voting List. The officer who has charge of the stock ledger
of the Corporation shall prepare and make, at least ten (10) days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of
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each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place within
the city or town where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
Section 6. Quorum. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business, except as otherwise provided by statute, the
certificate of incorporation or these By-Laws. Where a separate vote by a class
or classes is required, a majority of the outstanding shares of such class or
classes, present in person or represented by proxy, shall constitute a quorum
entitled to take action with respect to that vote on that matter. If no quorum
shall be present or represented at any meeting of stockholders, such meeting may
be adjourned in accordance with Section 7 hereof, until a quorum shall be
present or represented.
Section 7. Adjournments. Any meeting of stockholders may be adjourned
from time to time to any other time and to any other place at which a meeting of
stockholders may be held under these By-Laws, which time and place shall be
announced at the meeting, by a majority of the stockholders present in person or
represented by proxy at the meeting and entitled to vote (whether or not a
quorum is present), or, if no stockholder is present or represented by proxy, by
any officer entitled to preside at or to act as Secretary of such meeting,
without notice other than announcement at the meeting. At such adjourned
meeting, any business may be transacted which might have been transacted at the
original meeting, provided that a quorum either was present at the original
meeting or is present at the adjourned meeting. If the adjournment is for more
than thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 8. Action at Meetings. When a quorum is present at any meeting,
the affirmative vote of the holders of a majority of the stock present in person
or represented by proxy, entitled to vote and voting on the matter (or where a
separate vote by a class or classes is required, the affirmative vote of the
majority of shares of such class or classes present in person or represented by
proxy at the meeting) shall decide any matter (other than the election of
Directors) brought before such meeting, unless the matter is one upon which by
express provision of law, the certificate of incorporation or these By-Laws, a
different vote is required, in which case such express provision shall govern
and control the decision of such matter. The stock of holders who abstain from
voting on any matter shall be deemed not to have been voted on such matter.
Directors shall be elected by a plurality of the votes of the shares present in
person or represented by proxy at the meeting, entitled to vote and voting on
the election of Directors.
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Section 9. Voting and Proxies. Unless otherwise provided in the
certificate of incorporation, each stockholder shall at every meeting of the
stockholders be entitled to one vote for each share of capital stock having
voting power held of record by such stockholder. Each stockholder entitled to
vote at a meeting of stockholders, or to express consent or dissent to corporate
action in writing without a meeting, may authorize another person or persons to
act for him by proxy, but no such proxy shall be voted or acted upon after three
years from its date, unless the proxy provides for a longer period.
Section 10. Action Without Meeting. Any action required to be taken at
any annual or special meeting of stockholders, or any action which may be taken
at any annual or special meeting of such stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be (1) signed and dated by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted and (2) delivered to
the Corporation within sixty days of the earliest dated consent by delivery to
its registered office in the State of Delaware (in which case delivery shall be
by hand or by certified or registered mail, return receipt requested), its
principal place of business, or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
ARTICLE II
DIRECTORS
Section 1. Number, Election, Tenure and Qualification. The number of
Directors which shall constitute the whole board shall be not less than one.
Within such limit, the number of Directors shall be determined by resolution of
the Board of Directors or by the stockholders at the annual meeting or at any
special meeting of stockholders. The directors shall be elected at the annual
meeting or at any special meeting of stockholders, or by written consent in lieu
of an annual or special meeting of the stockholders (provided, however, that if
such consent is less than unanimous, such action by written consent may be in
lieu of holding an annual meeting only if all of the directorships to which
directors could be elected at an annual meeting held at the effective time of
such action are vacant and are filled by such action), except as provided in
section 3 of this Article, and each director elected shall hold office until his
successor is elected and qualified, unless sooner displaced. Directors need not
be stockholders.
Section 2. Enlargement. The number of the Board of Directors may be
increased at any time by vote of a majority of the Directors then in office.
Section 3. Vacancies. Vacancies and newly created Directorships
resulting from any increase in the authorized number of Directors may be filled
by a majority of the Directors then
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in office, though less than a quorum, or by a sole remaining director, and the
Directors so chosen shall hold office until the next annual election and until
their successors are duly elected and shall qualify, unless sooner displaced. If
there are no Directors in office, then an election of Directors may be held in
the manner provided by statute. In the event of a vacancy in the Board of
Directors, the remaining Directors, except as otherwise provided by law or these
By-Laws, may exercise the powers of the full board until the vacancy is filled.
Section 4. Resignation and Removal. Any director may resign at any time
upon written notice to the Corporation at its principal place of business or to
the Chief Executive Officer or Secretary. Such resignation shall be effective
upon receipt unless it is specified to be effective at some other time or upon
the happening of some other event. Any director or the entire Board of Directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of Directors, unless otherwise
specified by law or the certificate of incorporation.
Section 5. General Powers. The business and affairs of the Corporation
shall be managed by its Board of Directors, which may exercise all powers of the
Corporation and do all such lawful acts and things as are not by statute or by
the certificate of incorporation or by these By-Laws directed or required to be
exercised or done by the stockholders.
Section 6. Chairman of the Board. If the Board of Directors appoints a
chairman of the board, he shall, when present, preside at all meetings of the
stockholders and the Board of Directors. He shall perform such duties and
possess such powers as are customarily vested in the office of the chairman of
the board or as may be vested in him by the Board of Directors.
Section 7. Place of Meetings. The Board of Directors may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 8. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and at such place as shall from time to
time be determined by the board; provided that any director who is absent when
such a determination is made shall be given prompt notice of such determination.
A regular meeting of the Board of Directors may be held without notice
immediately after and at the same place as the annual meeting of stockholders.
Section 9. Special Meetings. Special meetings of the board may be
called by the Chief Executive Officer, Secretary, or on the written request of
two (2) or more Directors, or by one director in the event that there is only
one director in office. Two (2) days' notice to each director, either personally
or by telegram, cable, telecopy, commercial delivery service, telex or similar
means sent to his business or home address, or three (3) days' notice by written
notice deposited in the mail, shall be given to each director by the Secretary
or by the officer or one of the Directors calling the meeting. A notice or
waiver of notice of a meeting of the Board of Directors need not specify the
purposes of the meeting.
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Section 10. Quorum, Action at Meeting, Adjournments. At all meetings of
the board a majority of Directors then in office, but in no event less than one
third of the entire board, shall constitute a quorum for the transaction of
business and the act of a majority of the Directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by law or by the certificate of
incorporation. For purposes of this section, the term "entire board" shall mean
the number of Directors last fixed by the stockholders or Directors, as the case
may be, in accordance with law and these By-Laws; provided, however, that if
less than all the number so fixed of Directors were elected, the "entire board"
shall mean the greatest number of Directors so elected to hold office at any one
time pursuant to such authorization. If a quorum shall not be present at any
meeting of the Board of Directors, a majority of the Directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 11. Action by Consent. Unless otherwise restricted by the
certificate of incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the board or committee.
Section 12. Telephonic Meetings. Unless otherwise restricted by the
certificate of incorporation or these By-Laws, members of the Board of Directors
or of any committee thereof may participate in a meeting of the Board of
Directors or of any committee, as the case may be, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the meeting.
Section 13. Committees. The Board of Directors may designate one or
more committees, each committee to consist of one or more of the Directors of
the Corporation. The board may designate one or more Directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. Any such committee, to the extent provided in the
resolution of the Board of Directors, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to (a) adopting, amending or repealing the
By-Laws of the Corporation or any of them or (b) approving or adopting, or
recommending to the stockholders any action or matter expressly required by law
to be submitted to stockholders for approval. Such committee or committees shall
have such name or names as may be determined from time to time by resolution
adopted by the Board of Directors. Each committee shall keep regular minutes of
its meetings and make such reports to the Board of Directors as the Board of
Directors may request. Except as the Board of Directors may otherwise determine,
any committee may make rules for the conduct of its business, but unless
otherwise provided by the Directors or in such rules, its business shall be
conducted as nearly as possible in the same manner as is provided in these
By-Laws for the conduct of its business by the Board of Directors.
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Section 14. Compensation. Unless otherwise restricted by the
certificate of incorporation or these By-Laws, the Board of Directors shall have
the authority to fix from time to time the compensation of Directors. The
Directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors and the performance of their responsibilities as
Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors and/or a stated salary as director. No such payment shall
preclude any director from serving the Corporation or its parent or subsidiary
corporations in any other capacity and receiving compensation therefor. The
Board of Directors may also allow compensation for members of special or
standing committees for service on such committees.
ARTICLE III
OFFICERS
Section 1. Enumeration. The officers of the Corporation shall be chosen
by the Board of Directors and shall be a President, a Secretary and a Treasurer
and such other officers with such titles, terms of office and duties as the
Board of Directors may from time to time determine, including a chairman of the
board, one or more Vice-Presidents, and one or more Assistant Secretaries and
assistant Treasurers. If authorized by resolution of the Board of Directors, the
Chief Executive Officer may be empowered to appoint from time to time Assistant
Secretaries and assistant Treasurers. Any number of offices may be held by the
same person, unless the certificate of incorporation or these By-Laws otherwise
provide.
Section 2. Election. The Board of Directors at its first meeting after
each annual meeting of stockholders shall choose a President, a Secretary and a
Treasurer. Other officers may be appointed by the Board of Directors at such
meeting, at any other meeting, or by written consent.
Section 3. Tenure. The officers of the Corporation shall hold office
until their successors are chosen and qualify, unless a different term is
specified in the vote choosing or appointing him, or until his earlier death,
resignation or removal. Any officer elected or appointed by the Board of
Directors or by the Chief Executive Officer may be removed at any time, with or
without cause, by the affirmative vote of a majority of the Board of Directors
or a committee duly authorized to do so, except that any officer appointed by
the Chief Executive Officer may also be removed at any time, with or without
cause, by the Chief Executive Officer. Any vacancy occurring in any office of
the Corporation may be filled by the Board of Directors, at its discretion. Any
officer may resign by delivering his written resignation to the Corporation at
its principal place of business or to the Chief Executive Officer or the
Secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
Section 4. President. The President shall be the Chief Operating
Officer of the Corporation. He shall also be the Chief Executive Officer unless
the Board of Directors otherwise provides. If no Chief Executive Officer shall
have been appointed by the Board of
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Directors, all references herein to the "Chief Executive Officer" shall be to
the President. The President shall, unless the Board of Directors provides
otherwise in a specific instance or generally, preside at all meetings of the
stockholders and the Board of Directors, have general and active management of
the business of the Corporation and see that all orders and resolutions of the
Board of Directors are carried into effect. The President shall execute bonds,
mortgages, and other contracts requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the Corporation.
Section 5. Vice-Presidents. In the absence of the President or in the
event of his or her inability or refusal to act, the Vice-President, or if there
be more than one Vice-President, the Vice-Presidents in the order designated by
the Board of Directors or the Chief Executive Officer (or in the absence of any
designation, then in the order determined by their tenure in office) shall
perform the duties of the President, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the President. The
Vice-Presidents shall perform such other duties and have such other powers as
the Board of Directors or the Chief Executive Officer may from time to time
prescribe.
Section 6. Secretary. The Secretary shall have such powers and perform
such duties as are incident to the office of Secretary. The Secretary shall
maintain a stock ledger and prepare lists of stockholders and their addresses as
required and shall be the custodian of corporate records. The Secretary shall
attend all meetings of the Board of Directors and all meetings of the
stockholders and record all the proceedings of the meetings of the Corporation
and of the Board of Directors in a book to be kept for that purpose and shall
perform like duties for the standing committees when required. The Secretary
shall give, or cause to be given, notice of all meetings of the stockholders and
special meetings of the Board of Directors, and shall perform such other duties
as may be from time to time prescribed by the Board of Directors or Chief
Executive Officer, under whose supervision the Secretary shall be. The Secretary
shall have custody of the corporate seal of the Corporation and the Secretary,
or an assistant Secretary, shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by his or her
signature or by the signature of such assistant Secretary. The Board of
Directors may give general authority to any other officer to affix the seal of
the Corporation and to attest the affixing by his or her signature.
Section 7. Assistant Secretaries. The assistant Secretary, or if there
be more than one, the assistant secretaries in the order determined by the Board
of Directors, the Chief Executive Officer or the Secretary (or if there be no
such determination, then in the order determined by their tenure in office),
shall, in the absence of the Secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the Secretary
and shall perform such other duties and have such other powers as the Board of
Directors, the Chief Executive Officer or the Secretary may from time to time
prescribe. In the absence of the Secretary or any assistant Secretary at any
meeting of stockholders or Directors, the person presiding at the meeting shall
designate a temporary or acting Secretary to keep a record of the meeting.
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Section 8. Treasurer. The Treasurer shall perform such duties and shall
have such powers as may be assigned to him or her by the Board of Directors or
the Chief Executive Officer. In addition, the Treasurer shall perform such
duties and have such powers as are incident to the office of Treasurer. The
Treasurer shall have the custody of the corporate funds and securities and shall
keep full and accurate accounts of receipts and disbursements in books belonging
to the Corporation and shall deposit all moneys and other valuable effects in
the name and to the credit of the Corporation in such depositories as may be
designated by the Board of Directors. He shall disburse the funds of the
Corporation as may be ordered by the Board of Directors, taking proper vouchers
for such disbursements, and shall render to the Chief Executive Officer and the
Board of Directors, when the Chief Executive Officer or Board of Directors so
requires, an account of all his or her transactions as Treasurer and of the
financial condition of the Corporation.
Section 9. Assistant Treasurers. The assistant Treasurer, or if there
shall be more than one, the assistant Treasurers in the order determined by the
Board of Directors, the Chief Executive Officer or the Treasurer (or if there be
no such determination, then in the order determined by their tenure in office),
shall, in the absence of the Treasurer or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the Treasurer
and shall perform such other duties and have such other powers as the Board of
Directors, the Chief Executive Officer or the Treasurer may from time to time
prescribe.
Section 10. Bond. If required by the Board of Directors, any officer
shall give the Corporation a bond in such sum and with such surety or sureties
and upon such terms and conditions as shall be satisfactory to the Board of
Directors, including without limitation a bond for the faithful performance of
the duties of his office and for the restoration to the Corporation of all
books, papers, vouchers, money and other property of whatever kind in his
possession or under his control and belonging to the Corporation.
ARTICLE IV
NOTICES
Section 1. Delivery. Whenever, under the provisions of law, or of the
certificate of incorporation or these By-Laws, written notice is required to be
given to any director or stockholder, such notice may be given by mail,
addressed to such director or stockholder, at his address as it appears on the
records of the Corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be deposited in the United
States mail. Unless written notice by mail is required by law, written notice
may also be given by telegram, cable, telecopy, commercial delivery service,
telex or similar means, addressed to such director or stockholder at his address
as it appears on the records of the corporation, in which case such notice shall
be deemed to be given when delivered into the control of the persons charged
with effecting such transmission, the transmission charge to be paid by the
Corporation
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or the person sending such notice and not by the addressee. Oral notice or other
in-hand delivery (in person or by telephone) shall be deemed given at the time
it is actually given.
Section 2. Waiver of Notice. Whenever any notice is required to be
given under the provisions of law or of the certificate of incorporation or of
these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE V
INDEMNIFICATION
Section 1. Actions other than by or in the Right of the Corporation.
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that such person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceedings, had no reasonable cause to
believe such person's conduct was unlawful. The termination of any action, suit
or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which such person
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that such person's conduct was unlawful.
Section 2. Actions by or in the Right of the Corporation. The
corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he or she is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if such person acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Corporation and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable unless and only to the extent that the Court of Chancery
of the State of Delaware or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for
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such expenses which the Court of Chancery of the State of Delaware or such other
court shall deem proper.
Section 3. Success on the Merits. To the extent that any person
described in Section 1 or 2 of this Article V has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in said
Sections, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
Section 4. Specific Authorization. Any indemnification under Section 1
or 2 of this Article V (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of any person described in said Sections is proper in the
circumstances because he has met the applicable standard of conduct set forth in
said Sections. Such determination shall be made (1) by the Board of Directors by
a majority vote of Directors who were not parties to such action, suit or
proceeding (even though less than a quorum), or (2) if there are no
disinterested Directors or if a majority of disinterested Directors so directs,
by independent legal counsel (who may be regular legal counsel to the
Corporation) in a written opinion, or (3) by the stockholders of the
Corporation.
Section 5. Advance Payment. Expenses incurred in defending a pending or
threatened civil or criminal action, suit or proceeding may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of any person
described in said Section to repay such amount if it shall ultimately be
determined that he or she is not entitled to indemnification by the Corporation
as authorized in this Article V.
Section 6. Non-Exclusivity. The indemnification and advancement of
expenses provided by, or granted pursuant to, the other Sections of this Article
V shall not be deemed exclusive of any other rights to which those provided
indemnification or advancement of expenses may be entitled under any By-Law,
agreement, vote of stockholders or disinterested Directors or otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office.
Section 7. Insurance. The Board of Directors may authorize, by a vote
of the majority of the full board, the Corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify him
against such liability under the provisions of this Article V.
Section 8. Continuation of Indemnification and Advancement of Expenses.
The indemnification and advancement of expenses provided by, or granted pursuant
to, this Article V
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shall continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Section 9. Severability. If any word, clause or provision of this
Article V or any award made hereunder shall for any reason be determined to be
invalid, the provisions hereof shall not otherwise be affected thereby but shall
remain in full force and effect.
Section 10. Intent of Article. The intent of this Article V is to
provide for indemnification and advancement of expenses to the fullest extent
permitted by Section 145 of the General Corporation Law of Delaware. To the
extent that such Section or any successor section may be amended or supplemented
from time to time, this Article V shall be amended automatically and construed
so as to permit indemnification and advancement of expenses to the fullest
extent from time to time permitted by law.
ARTICLE VI
CAPITAL STOCK
Section 1. Certificates of Stock. Every holder of stock in the
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by, the chairman or Vice-chairman of the Board of Directors,
or the President or a Vice-President and the Treasurer or an assistant
Treasurer, or the Secretary or an assistant Secretary of the Corporation,
certifying the number of shares owned by such holder in the Corporation. Any or
all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the Corporation with the same effect as if he were such officer, transfer
agent or registrar at the date of issue. Certificates may be issued for partly
paid shares and in such case upon the face or back of the certificates issued to
represent any such partly paid shares, the total amount of the consideration to
be paid therefor, and the amount paid thereon shall be specified.
Section 2. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to give
reasonable evidence of such loss, theft or destruction, to advertise the same in
such manner as it shall require and/or to give the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen or
destroyed or the issuance of such new certificate.
Section 3. Transfer of Stock. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares, duly endorsed or
accompanied by proper evidence
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of succession, assignment or authority to transfer, and proper evidence of
compliance with other conditions to rightful transfer, it shall be the duty of
the Corporation to issue a new certificate to the person entitled thereto,
cancel the old certificate and record the transaction upon its books.
Section 4. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the Board of Directors may fix a record date, which
shall not precede the date upon which the resolution fixing the record date is
adopted by the Board of Directors, and which shall not be more than sixty days
nor less then ten days before the date of such meeting. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day before the day on which notice is given, or, if
notice is waived, at the close of business on the day before the day on which
the meeting is held. In order that the Corporation may determine the
stockholders entitled to consent to corporate action in writing without a
meeting, the Board of Directors may fix a record date, which shall not precede
the date upon which the resolution fixing the record date is adopted by the
Board of Directors, and which shall not be more than ten days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. If no record date is fixed, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is required by statute,
shall be the first date on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the Corporation as provided
in Section 10 of Article I. If no record date is fixed and prior action by the
Board of Directors is required, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be at
the close of business on the date on which the Board of Directors adopts the
resolution taking such prior action. In order that the Corporation may determine
the stockholders entitled to receive payment of any dividend or other
distribution or allotment of any rights or the stockholders entitled to exercise
any rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which shall not precede the date upon which the resolution fixing the
record date is adopted, and which shall be not more than sixty days prior to
such action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating to such purpose.
Section 5. Registered Stockholders. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by the laws of Delaware.
<PAGE> 16
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ARTICLE VII
CERTAIN TRANSACTIONS
Section 1. Transactions with Interested Parties. No contract or
transaction between the Corporation and one or more of its Directors or
officers, or between the Corporation and any other corporation, partnership,
association, or other organization in which one or more of its Directors or
officers are Directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the board or committee thereof
which authorizes the contract or transaction or solely because his or their
votes are counted for such purpose, if:
(a) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested Directors, even though the disinterested
Directors be less than a quorum; or
(b) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified, by the Board of Directors, a
committee thereof, or the stockholders.
Section 2. Quorum. Common or interested Directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
corporation, if any, may be declared by the Board of Directors at any regular or
special meeting or by written consent, pursuant to law. Dividends may be paid in
cash, in property, or in shares of the capital stock, subject to the provisions
of the certificate of incorporation.
Section 2. Reserves. The Directors may set apart out of any funds of
the Corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve.
<PAGE> 17
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Section 3. Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 4. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 5. Seal. The Board of Directors may, by resolution, adopt a
corporate seal. The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the word "Delaware." The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise. The seal may be altered from time to time by the Board
of Directors.
ARTICLE IX
AMENDMENTS
These By-Laws may be altered, amended or repealed or new By-Laws may be
adopted by the stockholders or by the Board of Directors, when such power is
conferred upon the Board of Directors by the certificate of incorporation, at
any regular meeting of the stockholders or of the Board of Directors or at any
special meeting of the stockholders or of the Board of Directors provided,
however, that in the case of a regular or special meeting of stockholders,
notice of such alteration, amendment, repeal or adoption of new By-Laws be
contained in the notice of such meeting.
<PAGE> 18
Register of Amendments to the By-Laws
Date Section Affected Change
- ---- ---------------- ------
<PAGE> 1
Exhibit 3.5
AMENDED AND RESTATED
BY-LAWS
OF
SYNCHRONICITY SOFTWARE, INC.
Effective as of ________ __, 2000
2
<PAGE> 2
BY-LAWS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 - Stockholders 1
Section 1.1 Place of Meetings 1
Section 1.2 Annual Meeting 1
Section 1.3 Special Meetings
Section 1.4 Notice of Meetings 1
Section 1.5 Voting List 1
Section 1.6 Quorum 2
Section 1.7 Adjournments 2
Section 1.8 Voting and Proxies 2
Section 1.9 Action at Meeting 3
Section 1.10 Introduction of Business at Meeting 3
Section 1.11 Action without Meeting 6
ARTICLE 2 - Directors 6
Section 2.1 General Powers 6
Section 2.2 Number; Election and Qualification 7
Section 2.3 Classes of Directors 7
Section 2.4 Terms in Office 7
Section 2.5 Allocation of Directors Among
Classes in the Event of Increases
or Decreases in the Number of
Directors 7
Section 2.6 Tenure 8
Section 2.7 Vacancies 8
Section 2.8 Resignation 8
Section 2.9 Regular Meetings 8
Section 2.10 Special Meetings 8
Section 2.11 Notice of Special Meetings
Section 2.12 Meetings by Telephone Conference Calls 8
Section 2.13 Quorum 9
Section 2.14 Action at Meeting 9
Section 2.15 Action by Written Consent 9
Section 2.16 Removal 9
Section 2.17 Committees
Section 2.18 Compensation of Directors
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
Section 2.19 Amendments to Article 10
ARTICLE 3 - Officers 10
Section 3.1 Enumeration 10
Section 3.2 Election 10
Section 3.3 Qualification 10
Section 3.4 Tenure 10
Section 3.5 Resignation and Removal 11
Section 3.6 Vacancies 11
Section 3.7 Chairman of the Board and Vice-
Chairman of the Board 11
Section 3.8 President 11
Section 3.9 Vice Presidents 11
Section 3.10 Secretary and Assistant Secretaries 12
Section 3.11 Treasurer and Assistant Treasurers 12
Section 3.12 Salaries 12
Section 3.13 Action with Respect to Securities of
Other Corporations 13
ARTICLE 4 - Capital Stock 13
Section 4.1 Issuance of Stock 13
Section 4.2 Certificates of Stock 13
Section 4.3 Transfers 13
Section 4.4 Lost, Stolen or Destroyed Certificates 14
Section 4.5 Record Date 14
ARTICLE 5 - General Provisions 14
Section 5.1 Fiscal Year 14
Section 5.2 Corporate Seal 14
Section 5.3 Notices 14
Section 5.4 Waiver of Notice 15
Section 5.5 Evidence of Authority 15
Section 5.6 Facsimile Signatures 15
Section 5.7 Reliance upon Books, Reports and Records 15
Section 5.8 Time Periods 15
Section 5.9 Certificate of Incorporation 15
Section 5.10 Transactions with Interested Parties 16
Section 5.11 Severability 16
Section 5.12 Pronouns 16
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 6 - Amendments 16
Section 6.1 By the Board of Directors 16
Section 6.2 By the Stockholders 16
</TABLE>
iii
<PAGE> 5
AMENDED AND RESTATED
BY-LAWS
OF
SYNCHRONICITY SOFTWARE, INC. (the "Corporation")
ARTICLE 1 - STOCKHOLDERS
1.1 PLACE OF MEETINGS. All meetings of stockholders shall be held at
such place within or without the State of Delaware as may be designated from
time to time by the Chairman of the Board (if any), the board of directors of
the Corporation (the "Board of Directors") or the President or, if not so
designated, at the registered office of the Corporation.
1.2 ANNUAL MEETING. The annual meeting of stockholders for the election
of directors and for the transaction of such other business as may properly be
brought before the meeting shall be held on a date to be fixed by the Chairman
of the Board (if any), Board of Directors or the President (which date shall not
be a legal holiday in the place where the meeting is to be held) at the time and
place to be fixed by the Chairman of the Board, the Board of Directors or the
President and stated in the notice of the meeting.
1.3 SPECIAL MEETINGS. Special meetings of stockholders may be called at
any time by the Chairman of the Board (if any), a majority of the Board of
Directors or the President and shall be held at such place, on such date and at
such time as shall be fixed by the Board of Directors or the person calling the
meeting. Business transacted at any special meeting of stockholders shall be
limited to matters relating to the purpose or purposes stated in the notice of
meeting.
1.4 NOTICE OF MEETINGS. Except as otherwise provided by law, written
notice of each meeting of stockholders, whether annual or special, shall be
given not less than 10 nor more than 60 days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notices of all meetings
shall state the place, date and hour of the meeting. The notice of a special
meeting shall state, in addition, the purpose or purposes for which the meeting
is called. If mailed, notice is given when deposited in the United States mail,
postage prepaid, directed to the stockholder at his or her address as it appears
on the records of the Corporation.
1.5 VOTING LIST. The officer who has charge of the stock ledger of the
Corporation shall prepare, at least 10 days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
10 days prior to the meeting, either at a place within the metropolitan area of
the city where the meeting is to be held, which
<PAGE> 6
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place shall be specified in the notice of the meeting, or if not so specified,
at the place where the meeting is to be held. The list shall also be produced
and kept at the time and place of the meeting during the whole time of the
meeting, and may be inspected by any stockholder who is present. This list shall
presumptively determine the identity of the stockholders entitled to vote at the
meeting and the number of shares held by each of them.
1.6 QUORUM. Except as otherwise provided by law, the Corporation's
Certificate of Incorporation, as such may be amended from time to time, or these
Amended and Restated By-Laws, as such may be amended from time to time (the
"Restated By-laws"), the holders of a majority of the shares of the capital
stock of the Corporation issued and outstanding and entitled to vote at the
meeting, present in person or represented by proxy, shall constitute a quorum
for the transaction of business. Shares held by brokers which such brokers are
prohibited from voting (pursuant to their discretionary authority on behalf of
beneficial owners of such shares who have not submitted a proxy with respect to
such shares) on some or all of the matters before the stockholders, but which
shares would otherwise be entitled to vote at the meeting ("Broker Non-Votes")
shall be counted, for the purpose of determining the presence or absence of a
quorum, both (a) toward the total voting power of the shares of capital stock of
the Corporation and (b) as being represented by proxy. If a quorum has been
established for the purpose of conducting the meeting, a quorum shall be deemed
to be present for the purpose of all votes to be conducted at such meeting,
provided that where a separate vote by a class or classes, or series thereof, is
required, a majority of the voting power of the shares of such class or classes,
or series, present in person or represented by proxy shall constitute a quorum
entitled to take action with respect to that vote on that matter. If a quorum
shall fail to attend any meeting, the chairman of the meeting or the holders of
a majority of the voting power of the shares of stock entitled to vote who are
present, in person or by proxy, may adjourn the meeting to another place, date,
or time.
1.7 ADJOURNMENTS. Any meeting of stockholders may be adjourned to any
other time and to any other place at which a meeting of stockholders may be held
under these Restated By-Laws by the stockholders present or represented at the
meeting and entitled to vote, although less than a quorum, or, if no stockholder
is present, by any officer entitled to preside at or to act as Secretary of such
meeting. It shall not be necessary to notify any stockholder of any adjournment
of less than 30 days if the time and place of the adjourned meeting are
announced at the meeting at which adjournment is taken, unless after the
adjournment a new record date is fixed for the adjourned meeting. At the
adjourned meeting, the Corporation may transact any business which might have
been transacted at the original meeting.
1.8 VOTING AND PROXIES. At any meeting of the stockholders, each
stockholder shall have one vote for each share of stock entitled to vote at such
meeting held of record by such stockholder and a proportionate vote for each
fractional share so held, unless otherwise provided in the Certificate of
Incorporation. Each stockholder of record entitled to vote at a meeting of
stockholders, or to express consent or dissent to corporate action in writing
without a meeting (to the extent not otherwise prohibited by the Certificate of
Incorporation or these By-laws), may vote or express such consent or dissent in
person or may authorize another person or persons to vote or act for such
stockholder by written proxy executed by such stockholder or his or her
<PAGE> 7
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authorized agent or by a transmission permitted by law and delivered to the
Secretary of the Corporation. No such proxy shall be voted or acted upon after
three years from the date of its execution, unless the proxy expressly provides
for a longer period. Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant to this Section 1.8
may be substituted or used in lieu of the original writing or transmission for
any and all purposes for which the original writing or transmission could be
used, provided that such copy, facsimile telecommunication or reproduction shall
be a complete reproduction of the entire original writing or transmission.
In the election of directors, voting shall be by written ballot, and
for any other action, voting need not be by ballot.
The Corporation may, and to the extent required by law or the
Certificate of Incorporation, shall, in advance of any meeting of stockholders,
appoint one or more inspectors to act at such meeting and make a written report
thereof. The Corporation may designate one or more persons as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate is able to act at a meeting of stockholders, the person presiding at
such meeting may, and to the extent required by law or the Certificate of
Incorporation, shall, appoint one or more inspectors to act at such meeting.
Each inspector, before entering upon the discharge of his duties, shall take and
sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his or her ability.
1.9 ACTION AT MEETING. When a quorum is present at any meeting of
stockholders, the holders of a majority of the stock present or represented and
voting on a matter (or if there are two or more classes of stock entitled to
vote as separate classes, then in the case of each such class, the holders of a
majority of the stock of that class present or represented and voting on such
matter) shall decide any matter to be voted upon by the stockholders at such
meeting (other than the election of directors), except when a different vote is
required by express provision of law, the Certificate of Incorporation or these
Restated By-Laws. Any election of directors by the stockholders shall be
determined by a plurality of the votes cast by the stockholders entitled to vote
at such election, except as otherwise provided by the Certificate of
Incorporation. For the purposes of this paragraph, Broker Non-Votes represented
at the meeting but not permitted to vote on a particular matter shall not be
counted, with respect to the vote on such matter, in the number of (a) votes
cast, (b) votes cast affirmatively, or (c) votes cast negatively.
1.10 INTRODUCTION OF BUSINESS AT MEETINGS.
A. ANNUAL MEETINGS OF STOCKHOLDERS.
(1) Nominations of persons for election to the Board
of Directors and the proposal of business to be considered by the
stockholders may be made at an annual meeting of stockholders (a)
pursuant to the Corporation's notice of meeting, (b) by or at the
direction of the Board of Directors or (c) by any stockholder of
the Corporation who was a stockholder of record at the time of
giving of notice provided
<PAGE> 8
-4-
for in this Section 1.10, who is entitled to vote at the meeting
and who complies with the notice procedures set forth in this
Section 1.10.
(2) For nominations or other business to be properly
brought before an annual meeting by a stockholder pursuant to
clause (c) of paragraph (A)(1) of this Section 1.10, the
stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation and such other business must
otherwise be a proper matter for stockholder action. To be timely,
a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the
close of business on the one hundred twentieth (120th) day nor
earlier than the close of business on the one hundred fiftieth
(150th) day prior to the first anniversary of the date of the
proxy statement delivered to stockholders in connection with the
preceding year's annual meeting; provided, however, that if either
(i) the date of the annual meeting is more than thirty (30) days
before or more than sixty (60) days after the first anniversary
date of the preceding year's annual meeting or (ii) no proxy
statement was delivered to stockholders in connection with the
preceding year's annual meeting, notice by the stockholder to be
timely must be so delivered not earlier than the close of business
on the ninetieth (90th) day prior to such annual meeting and not
later than the close of business on the later of the sixtieth
(60th) day prior to such annual meeting or the close of business
on the tenth (10th) day following the day on which public
announcement of the date of such meeting is first made by the
Corporation. Such stockholder's notice shall set forth (a) as to
each person whom the stockholder proposes to nominate for election
or reelection as a director, all information relating to such
person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (including such
person's written consent to being named in the proxy statement as
a nominee and to serving as a director if elected); (b) as to any
other business that the stockholder proposes to bring before the
meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at
the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the
proposal is made; and (c) as to the stockholder giving the notice
and the beneficial owner, if any, on whose behalf the nomination
or proposal is made (i) the name and address of such stockholder,
as they appear on the Corporation's books, and of such beneficial
owner and (ii) the class and number of shares of capital stock of
the Corporation that are owned beneficially and held of record by
such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence
of paragraph (A)(2) of this Section 1.10 to the contrary, in the
event that the number of directors to be elected to the Board of
Directors of the Corporation is increased and there is no public
announcement by the Corporation naming all of the nominees for
director or specifying the size of the increased Board of
Directors at least seventy (70) days prior to the first
anniversary of the preceding year's annual meeting (or, if the
annual meeting is held more than thirty (30) days before or sixty
(60) days after such
<PAGE> 9
-5-
anniversary date, at least seventy (70) days prior to such annual
meeting), a stockholder's notice required by this Section 1.10
shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it
shall be delivered to the Secretary at the principal executive
office of the Corporation not later than the close of business on
the tenth (10th) day following the day on which such public
announcement is first made by the Corporation.
B. SPECIAL MEETINGS OF STOCKHOLDERS. Only such business shall
be conducted at a special meeting of stockholders as shall have
been brought before the meeting pursuant to the Corporation's
notice of meeting. Nominations of persons for election to the
Board of Directors may be made at a special meeting of
stockholders at which directors are to be elected pursuant to the
Corporation's notice of meeting (a) by or at the direction of the
Board of Directors or (b) provided that the Board of Directors has
determined that directors shall be elected at such meeting, by any
stockholder of the Corporation who is a stockholder of record at
the time of giving of notice of the special meeting, who shall be
entitled to vote at the meeting and who complies with the notice
procedures set forth in this Section 1.10. If the Corporation
calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such
stockholder may nominate a person or persons (as the case may be),
for election to such position(s) as specified in the Corporation's
notice of meeting, if the stockholder's notice required by
paragraph (A)(2) of this Section 1.10 shall be delivered to the
Secretary at the principal executive offices of the Corporation
not earlier than the ninetieth (90th) day prior to such special
meeting nor later than the later of (x) the close of business on
the sixtieth (60th) day prior to such special meeting or (y) the
close of business on the tenth (10th) day following the day on
which public announcement is first made of the date of such
special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting.
C. GENERAL.
(1) Only such persons who are nominated in accordance
with the procedures set forth in this Section 1.10 shall be
eligible to serve as directors and only such business shall be
conducted at a meeting of stockholders as shall have been brought
before the meeting in accordance with the procedures set forth in
this Section 1.10. Except as otherwise provided by law, the
Certificate of Incorporation or these Restated By-Laws, the
chairman of the meeting shall have the power and duty to determine
whether a nomination or any business proposed to be brought before
the meeting was made or proposed, as the case may be, in
accordance with the procedures set forth in this Section 1.10 and,
if any proposed nomination or business is not in compliance
herewith, to declare that such defective proposal or nomination
shall be disregarded.
(2) For purposes of this Section 1.10, "public
announcement" shall mean disclosure in a press release reported by
the Dow Jones News Service,
<PAGE> 10
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Associated Press, PR Newswire, Reuters or comparable national
news service or in a document publicly filed by the Corporation
with the Securities and Exchange Commission pursuant to Section
13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this
Section 1.10, a stockholder shall also comply with all applicable
requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth herein. Nothing
in this Section 1.10 shall be deemed to affect any rights (i) of
stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the
Exchange Act or (ii) of the holders of any series of Preferred
Stock to elect directors under specified circumstances.
1.11 ACTION WITHOUT MEETING. Stockholders of the Corporation may not
take any action by written consent in lieu of a meeting. Notwithstanding any
other provision of law, the Certificate of Incorporation or these Restated
By-Laws, and notwithstanding the fact that a lesser percentage may be specified
by law, the affirmative vote of the holders of at least seventy-five percent
(75%) of the votes which all the stockholders would be entitled to cast at any
annual election of directors or class of directors shall be required to amend or
repeal, or to adopt any provision inconsistent with, this Section 1.11.
ARTICLE 2 - DIRECTORS
2.1 GENERAL POWERS. The business and affairs of the Corporation shall
be managed by or under the direction of a Board of Directors, who may exercise
all of the powers of the Corporation except as otherwise provided by law or the
Certificate of Incorporation. In the event of a vacancy in the Board of
Directors, the remaining directors, except as otherwise provided by law or the
Certificate of Incorporation, may exercise the powers of the full Board of
Directors until the vacancy is filled. Without limiting the foregoing, the Board
of Directors may:
(a) declare dividends from time to time in accordance with law;
(b) purchase or otherwise acquire any property, rights or privileges on
such terms as it shall determine;
(c) authorize the creation, making and issuance, in such form as it may
determine, of written obligations of every kind, negotiable or
non-negotiable, secured or unsecured, to borrow funds and guarantee
obligations, and to do all things necessary in connection therewith;
(d) remove any officer of the Corporation with or without cause, and
from time to time to devolve the powers and duties of any officer upon any
other person for the time being;
<PAGE> 11
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(e) confer upon any officer of the Corporation the power to appoint,
remove and suspend subordinate officers, employees and agents;
(f) adopt from time to time such stock option, stock purchase, bonus or
other compensation plans for directors, officers, employees, consultants
and agents of the Corporation and its subsidiaries as it may determine;
(g) adopt from time to time such insurance, retirement, and other
benefit plans for directors, officers, employees, consultants and agents
of the Corporation and its subsidiaries as it may determine; and
(h) adopt from time to time regulations, not inconsistent herewith, for
the management of the Corporation's business and affairs.
2.2 NUMBER; ELECTION AND QUALIFICATION. The number of directors which
shall constitute the whole Board of Directors shall be determined by resolution
of the Board of Directors, but in no event shall be less than three. The number
of directors may be decreased at any time and from time to time by a majority of
the directors then in office, but only to eliminate vacancies existing by reason
of the death, resignation, removal or expiration of the term of one or more
directors. The directors shall be elected at the annual meeting of stockholders
(or, if so determined by the Board of Directors pursuant to Section 10 hereof,
at a special meeting of stockholders), by such stockholders as have the right to
vote on such election. Directors need not be stockholders of the Corporation.
2.3 CLASSES OF DIRECTORS. The Board of Directors shall be and is
divided into three classes: Class I, Class II and Class III. No one class shall
have more than one director more than any other class.
2.4 TERMS IN OFFICE. Each director shall serve for a term ending on the
date of the third annual meeting following the annual meeting at which such
director was elected; provided, however, that each initial director in Class I
shall serve for a term ending on the date of the annual meeting next following
the end of the Corporation's fiscal year ending December 31, 2000; each initial
director in Class II shall serve for a term ending on the date of the annual
meeting next following the end of the Corporation's fiscal year ending December
31, 2001; and each initial director in Class III shall serve for a term ending
on the date of the annual meeting next following the end of the Corporation's
fiscal year ending December 31, 2002.
2.5 ALLOCATION OF DIRECTORS AMONG CLASSES IN THE EVENT OF INCREASES OR
DECREASES IN THE NUMBER OF Directors. In the event of any increase or decrease
in the authorized number of directors, (i) each director then serving as such
shall nevertheless continue as a director of the class of which he or she is a
member until the expiration of such director's current term or his or her prior
death, removal or resignation and (ii) the newly created or eliminated
directorships resulting from such increase or decrease shall be apportioned by
the Board of Directors among the three classes of directors, subject to the
second sentence of Section 2.3. To the extent possible, consistent with the
foregoing rule, any newly created directorships shall be added to
<PAGE> 12
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those classes whose terms of office are to expire at the earliest dates
following such allocation, unless otherwise provided for from time to time by
resolution adopted by a majority of the directors then in office, although less
than a quorum. No decrease in the number of directors constituting the whole
Board of Directors shall shorten the term of an incumbent Director.
2.6 TENURE. Notwithstanding any provisions to the contrary contained
herein, each director shall hold office until his or her successor is elected
and qualified, or until his or her earlier death, resignation or removal.
2.7 VACANCIES. Unless and until filled by the stockholders, any vacancy
in the Board of Directors, however occurring, including a vacancy resulting from
an enlargement thereof, may be filled by vote of a majority of the directors
then in office, although less than a quorum, or by a sole remaining director. A
director elected to fill a vacancy shall be elected for the unexpired term of
his or her predecessor in office, if any, and a director chosen to fill a
position resulting from an increase in the number of directors shall hold office
until the next election of directors of the class for which such director was
chosen and until his or her successor is elected and qualified, or until his or
her earlier death, resignation or removal.
2.8 RESIGNATION. Any director may resign by delivering his or her
written resignation to the Corporation at its principal office or to the
President or Secretary. Such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the happening of some
other event.
2.9 REGULAR MEETINGS. Regular meetings of the Board of Directors may be
held without notice at such time and place, either within or without the State
of Delaware, as shall be determined from time to time by the Board of Directors;
provided that any director who is absent when such a determination is made shall
be given notice of the determination.
2.10 SPECIAL MEETINGS. Special meetings of the Board of Directors may
be held at any time and place, within or without the State of Delaware,
designated in a call by the Chairman of the Board (if any), the President, two
or more directors, or by one director in the event that there is only a single
director in office.
2.11 NOTICE OF SPECIAL MEETINGS. Notice of any special meeting of
directors shall be given to each director by the Secretary or by the officer or
one of the directors calling the meeting. Notice shall be duly given to each
director (i) by giving notice to such director in person or by telephone at
least 48 hours in advance of the meeting, (ii) by sending a telegram or
delivering written notice by facsimile transmission or by hand, to his or her
last known business or home address at least 48 hours in advance of the meeting,
or (iii) by mailing written notice to his or her last known business or home
address at least 72 hours in advance of the meeting. A notice or waiver of
notice of a meeting of the Board of Directors need not specify the purposes of
the meeting.
2.12 MEETINGS BY TELEPHONE CONFERENCE CALLS. Directors or any members
of any committee designated by the Board of Directors may participate in a
meeting of the Board of
<PAGE> 13
-9-
Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation by such means shall be deemed to
constitute presence in person at such meeting.
2.13 QUORUM. A majority of the total number of the whole Board of
Directors shall constitute a quorum at all meetings of the Board of Directors.
In the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such director
so disqualified; provided, however, that in no case shall less than one-third
(1/3) of the total number of the whole Board of Directors constitute a quorum.
In the absence of a quorum at any such meeting, a majority of the directors
present may adjourn the meeting from time to time without further notice other
than announcement at the meeting, until a quorum shall be present.
2.14 ACTION AT MEETING. At any meeting of the Board of Directors at
which a quorum is present, the vote of a majority of those present shall be
sufficient to take any action, unless a different vote is specified by law, the
Certificate of Incorporation or these Restated By-Laws.
2.15 ACTION BY WRITTEN CONSENT. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee of the Board
of Directors may be taken without a meeting, if all members of the Board of
Directors or committee, as the case may be, consent to such action in writing,
and the written consents are filed with the minutes of proceedings of the Board
of Directors or committee.
2.16 REMOVAL. Unless otherwise provided in the Certificate of
Incorporation, any one or more or all of the directors may be removed (i) with
cause only by the holders of at least a majority of the shares then entitled to
vote at an election of directors or (ii) without cause only by the holders of at
least seventy-five percent (75%) of the shares then entitled to vote at an
election of directors.
2.17 COMMITTEES. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. The Board of
Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
such committee. In the absence or disqualification of a member of a committee,
the member or members of such committee present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at such meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors
and subject to the provisions of the General Corporation Law of the State of
Delaware, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the Corporation
and may authorize the seal of the Corporation to be affixed to all papers which
may require it. Each such committee shall keep minutes and make such reports as
the Board of Directors may from time to time request. Except as the Board of
Directors may otherwise determine or as provided herein, any committee may make
rules for the conduct of its business, but unless otherwise provided by the
directors or in
<PAGE> 14
-10-
such rules, its business shall be conducted as nearly as possible in the same
manner as is provided in these Restated By-Laws for the Board of Directors.
Adequate provisions shall be made for notice to members of all meeting of
committees. One-third (1/3) of the members of any committee shall constitute a
quorum unless the committee shall consist of one (1) or two (2) members, in
which event one (1) member shall constitute a quorum; and all matters shall be
determined by a majority vote of the members present. Action may be taken by any
committee without a meeting if all members thereof consent thereto in writing,
and the writing or writings are filed with the minutes of the proceedings of
such committee.
2.18 COMPENSATION OF DIRECTORS. Directors may be paid such compensation
for their services and such reimbursement for expenses of attendance at meetings
as the Board of Directors may from time to time determine. No such payment shall
preclude any director from serving the Corporation or any of its parent or
subsidiary corporations in any other capacity and receiving compensation for
such service.
2.19 AMENDMENTS TO ARTICLE. Notwithstanding any other provisions of
law, the Certificate of Incorporation or these Restated By-Laws, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of a least seventy-five percent (75%) of the
votes which all the stockholders would be entitled to cast at any annual
election of directors or class of directors shall be required to amend or
repeal, or to adopt any provision inconsistent with, this Article 2.
ARTICLE 3 - OFFICERS
3.1 ENUMERATION. The officers of the Corporation shall consist of a
President, a Secretary, a Treasurer and such other officers with such other
titles as the Board of Directors shall determine, including, but not limited to,
a Chairman of the Board, a Vice-Chairman of the Board, and one or more Vice
Presidents, Assistant Treasurers and Assistant Secretaries. The Board of
Directors may appoint such other officers as it may deem appropriate.
3.2 ELECTION. The President, Treasurer and Secretary shall be elected
annually by the Board of Directors at its first meeting following the annual
meeting of stockholders. Other officers may be appointed by the Chief Executive
Officer, except that the Directors shall have the power to rescind any such
appointment by a vote of a majority of the Directors then in office.
3.3 QUALIFICATION. No officer need be a stockholder. Any two or more
offices may be held by the same person.
3.4 TENURE. Except as otherwise provided by law, by the Certificate of
Incorporation or by these Restated By-Laws, each officer shall hold office until
his or her successor is elected and qualified, unless a different term is
specified in the vote choosing or appointing such officer, or until his or her
earlier death, resignation or removal.
<PAGE> 15
-11-
3.5 RESIGNATION AND REMOVAL. Any officer may resign by delivering his
or her written resignation to the Chairman of the Board (if any), to the Board
of Directors at a meeting thereof, to the Corporation at its principal office or
to the President or Secretary. Such resignation shall be effective upon receipt
unless it is specified to be effective at some other time or upon the happening
of some other event.
Any officer may be removed at any time, with or without cause, by vote
of a majority of the entire number of directors then in office.
Except as the Board of Directors may otherwise determine, no officer
who resigns or is removed shall have any right to any compensation as an officer
for any period following his or her resignation or removal, or any right to
damages on account of such removal, whether his or her compensation be by the
month or by the year or otherwise, unless such compensation is expressly
provided in a duly authorized written agreement with the Corporation.
3.6 VACANCIES. The Board of Directors may fill any vacancy occurring in
any office for any reason and may, in its discretion, leave unfilled for such
period as it may determine any offices other than those of President, Treasurer
and Secretary. Each such successor shall hold office for the unexpired term of
his predecessor and until his or her successor is elected and qualified, or
until his or her earlier death, resignation or removal.
3.7 CHAIRMAN OF THE BOARD AND VICE-CHAIRMAN OF THE BOARD. The Chairman
of the Board, if any, shall preside at all meetings of the Board of Directors
and stockholders at which he or she is present and shall perform such duties and
possess such powers as are designated by the Board of Directors. If the Board of
Directors appoints a Vice-Chairman of the Board, he or she shall, in the absence
or disability of the Chairman of the Board, perform the duties and exercise the
powers of the Chairman of the Board and shall perform such other duties and
possess such other powers as may from time to time be designated by the Board of
Directors.
3.8 PRESIDENT. The President shall, subject to the direction of the
Board of Directors, have general charge and supervision of the business of the
Corporation. Unless otherwise provided by the Board of Directors, and provided
that there is no Chairman of the Board or that the Chairman and Vice-Chairman,
if any, are not available, the President shall preside at all meetings of the
stockholders, and, if a director, at all meetings of the Board of Directors.
Unless the Board of Directors has designated another officer as the Chief
Executive Officer, the President shall be the Chief Executive Officer of the
Corporation. The President shall perform such other duties and shall have such
other powers as the Board of Directors may from time to time prescribe. The
President shall have the power to enter into contracts and otherwise bind the
Corporation in matters arising in the ordinary course of the Corporation's
business.
3.9 VICE PRESIDENTS. Any Vice President shall perform such duties and
possess such powers as the Board of Directors or the President may from time to
time prescribe. In the event of the absence, inability or refusal to act of the
President, the Vice President (or if there shall be more than one, the Vice
Presidents in the order determined by the Board of Directors) shall perform the
duties of the President and, when so performing, shall have all the powers of
and be
<PAGE> 16
-12-
subject to all the restrictions upon the President. The Board of Directors may
assign to any Vice President the title of Executive Vice President, Senior Vice
President or any other title selected by the Board of Directors. Unless
otherwise determined by the Board of Directors, any Vice President shall have
the power to enter into contracts and otherwise bind the Corporation in matters
arising in the ordinary course of the Corporation's business.
3.10 SECRETARY AND ASSISTANT SECRETARIES. The Secretary shall perform
such duties and shall have such powers as the Board of Directors or the
President may from time to time prescribe. In addition, the Secretary shall
perform such duties and have such powers as are incident to the office of
secretary, including without limitation the duty and power to give notices of
all meetings of stockholders and special meetings of the Board of Directors, to
attend all meetings of stockholders and the Board of Directors and keep a record
of the proceedings, to maintain a stock ledger and prepare lists of stockholders
and their addresses as required, to be custodian of corporate records and the
corporate seal and to affix and attest to the same on documents.
Any Assistant Secretary shall perform such duties and possess such
powers as the Board of Directors, the President or the Secretary may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the Secretary, the Assistant Secretary (or if there shall be more than one, the
Assistant Secretaries in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any
meeting of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.
3.11 TREASURER AND ASSISTANT TREASURERS. The Treasurer shall perform
such duties and shall have such powers as the Board of Directors or the
President may from time to time prescribe. In addition, the Treasurer shall
perform such duties and have such powers as are incident to the office of
treasurer, including without limitation the duty and power to keep and be
responsible for all funds and securities of the Corporation, to deposit funds of
the Corporation in depositories selected in accordance with these Restated
By-Laws, to disburse such funds as ordered by the Board of Directors, to make
proper accounts for such funds, and to render as required by the Board of
Directors statements of all such transactions and of the financial condition of
the Corporation.
The Assistant Treasurers shall perform such duties and possess such
powers as the Board of Directors, the President or the Treasurer may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the Treasurer, the Assistant Treasurer (or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Treasurer.
3.12 SALARIES. Officers of the Corporation shall be entitled to such
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board of Directors.
<PAGE> 17
-13-
3.13 ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS. Unless
otherwise directed by the Board of Directors, the President or any officer of
the Corporation authorized by the President shall have power to vote and
otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of stockholders of or with respect to any action of stockholders of any
other corporation in which the Corporation may hold securities and otherwise to
exercise any and all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other corporation.
ARTICLE 4 - CAPITAL STOCK
4.1 ISSUANCE OF STOCK. Unless otherwise voted by the stockholders and
subject to the provisions of the Certificate of Incorporation, the whole or any
part of any unissued balance of the authorized capital stock of the Corporation
or the whole or any part of any issued, authorized capital stock of the
Corporation held in its treasury may be issued, sold, transferred or otherwise
disposed of by vote of the Board of Directors in such manner, for such
consideration and on such terms as the Board of Directors may determine.
4.2 CERTIFICATES OF STOCK. Every holder of stock of the Corporation
shall be entitled to have a certificate, in such form as may be prescribed by
law and by the Board of Directors, certifying the number and class of shares
owned by such stockholder in the Corporation. Each such certificate shall be
signed by, or in the name of the Corporation by, the Chairman or Vice-Chairman,
if any, of the Board of Directors, or the President or a Vice President, and the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary
of the Corporation. Any or all of the signatures on such certificate may be a
facsimile.
Each certificate for shares of stock which are subject to any
restriction on transfer pursuant to the Certificate of Incorporation, the
Restated By-Laws, applicable securities laws or any agreement among any number
of shareholders or among such holders and the Corporation shall have
conspicuously noted on the face or back of such certificate either the full text
of such restriction or a statement of the existence of such restriction.
4.3 TRANSFERS. Except as otherwise established by rules and regulations
adopted by the Board of Directors, and subject to applicable law, shares of
stock may be transferred on the books of the Corporation by the surrender to the
Corporation or its transfer agent of the certificate representing such shares,
properly endorsed or accompanied by a written assignment or power of attorney
properly executed, and with such proof of authority or the authenticity of
signature as the Corporation or its transfer agent may reasonably require.
Except as may be otherwise required by law, by the Certificate of Incorporation
or by these Restated By-Laws, the Corporation shall be entitled to treat the
record holder of stock as shown on its books as the owner of such stock for all
purposes, including the payment of dividends and the right to vote with respect
to such stock, regardless of any transfer, pledge or other disposition of such
stock, until the shares have been transferred on the books of the Corporation in
accordance with the requirements of these Restated By-Laws.
<PAGE> 18
-14-
4.4 LOST, STOLEN OR DESTROYED CERTIFICATES. The Corporation may issue a
new certificate of stock in place of any previously issued certificate alleged
to have been lost, stolen, or destroyed, upon such terms and conditions as the
President may prescribe, including the presentation of reasonable evidence of
such loss, theft or destruction and the giving of such indemnity as the
President may require for the protection of the Corporation or any transfer
agent or registrar.
4.5 RECORD DATE. The Board of Directors may fix in advance a date as a
record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders or, to the extent permitted by the
Certificate of Incorporation and these Restated By-laws, to express consent (or
dissent) to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action. Such record date shall not be more than 60 nor less
than 10 days before the date of such meeting, nor more than 60 days prior to any
other action to which such record date relates.
If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day before the day on which notice is given,
or, if notice is waived, at the close of business on the day before the day on
which the meeting is held. The record date for determining stockholders entitled
to express consent to corporate action in writing without a meeting (to the
extent permitted by the Certificate of Incorporation and these Restated By-laws)
when no prior action by the Board of Directors is necessary, shall be the day on
which the first written consent is expressed. The record date for determining
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating to such purpose.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
ARTICLE 5 - GENERAL PROVISIONS
5.1 FISCAL YEAR. The fiscal year of the Corporation shall be fixed by
resolution of the Board of Directors.
5.2 CORPORATE SEAL. The corporate seal shall be in such form as shall
be approved by the Board of Directors.
5.3 NOTICES. Except as otherwise specifically provided herein or
required by law or the Certificate of Incorporation, all notices required to be
given to any person pursuant to these Restated By-Laws shall be in writing and
may in every instance be effectively given by hand delivery to the recipient
thereof, by depositing such notice in the mails, postage paid, or by sending
such notice by prepaid telegram or facsimile transmission. Any such notice shall
be
<PAGE> 19
-15-
addressed to such person at his or her last known address as the same appears on
the books of the Corporation. The time when such notice is received shall be
deemed to be the time of the giving of the notice.
5.4 WAIVER OF NOTICE. Whenever any notice whatsoever is required to be
given by law, by the Certificate of Incorporation or by these Restated By-Laws,
a waiver of such notice either in writing signed by the person entitled to such
notice or such person's duly authorized attorney, or by telegraph, facsimile
transmission or any other available method, whether before, at or after the time
stated in such waiver, or the appearance of such person or persons at such
meeting in person or by proxy, shall be deemed equivalent to such notice.
5.5 EVIDENCE OF AUTHORITY. A certificate by the Secretary, or an
Assistant Secretary, or a temporary Secretary, as to any action taken by the
stockholders, directors, a committee or any officer or representative of the
Corporation shall, as to all persons who rely on the certificate in good faith,
be conclusive evidence of such action.
5.6 FACSIMILE SIGNATURES. In addition to the provisions for use of
facsimile signatures elsewhere specifically authorized in these Restated
By-Laws, facsimile signatures of any officer or officers of the Corporation may
be used whenever and as authorized by the Board of Directors or a committee
thereof.
5.7 RELIANCE UPON BOOKS, REPORTS AND RECORDS. Each director, each
member of any committee designated by the Board of Directors, and each officer
of the Corporation shall, in the performance of his or her duties, be fully
protected in relying in good faith upon the books of account or other records of
the Corporation and upon such information, opinions, reports or statements
presented to the Corporation by any of its officers or employees or committees
of the Board of Directors so designated, or by any other person as to matters
which such director or committee member reasonably believes are within such
other person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation.
5.8 TIME PERIODS. In applying any provision of these Restated By-Laws
that requires that an act be done or not be done a specified number of days
prior to an event or that an act be done during a period of a specified number
of days prior to an event, calendar days shall be used, the day of the doing of
the act shall be excluded, and the day of the event shall be included.
5.9 CERTIFICATE OF INCORPORATION. All references in these Restated
By-Laws to the Certificate of Incorporation shall be deemed to refer to the
Amended and Restated Certificate of Incorporation of the Corporation, as amended
and in effect from time to time.
5.10 TRANSACTIONS WITH INTERESTED PARTIES. No contract or transaction
between the Corporation and one or more of the directors or officers, or between
the Corporation and any other corporation, partnership, association, or other
organization in which one or more of the directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because such director or officer is present at or
participates in the
<PAGE> 20
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meeting of the Board of Directors or a committee of the Board of Directors which
authorizes the contract or transaction or solely because his, her or their votes
are counted for such purpose, if:
(1) The material facts as to his or her relationship or interest and
as to the contract or transaction are disclosed or are known to the Board
of Directors or the committee, and the Board or committee in good faith
authorizes the contract or transaction by the affirmative vote of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum;
(2) The material facts as to his or her relationship or interest and
as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the Corporation as of
the time it is authorized, approved or ratified, by the Board of Directors,
a committee of the Board of Directors, or the stockholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
5.11 SEVERABILITY. Any determination that any provision of these
Restated By-Laws is for any reason inapplicable, illegal or ineffective shall
not affect or invalidate any other provision of these Restated By-Laws.
5.12 PRONOUNS. All pronouns used in these Restated By-Laws shall be
deemed to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the persons or persons so designated may require.
ARTICLE 6 - AMENDMENTS
6.1 BY THE BOARD OF DIRECTORS. Except as is otherwise set forth in
these Restated By-Laws, these Restated By-Laws may be altered, amended or
repealed, or new by-laws may be adopted, by the affirmative vote of a majority
of the directors present at any regular or special meeting of the Board of
Directors at which a quorum is present.
6.2 BY THE STOCKHOLDERS. Except as otherwise set forth in these
Restated By-Laws, these Restated By-Laws may be altered, amended or repealed or
new by-laws may be adopted by the affirmative vote of the holders of
seventy-five percent (75%) of the shares of the capital stock of the Corporation
issued and outstanding and entitled to vote at any regular meeting of
stockholders, or at any special meeting of stockholders, provided notice of such
alteration, amendment, repeal or adoption of new by-laws shall have been stated
in the notice of such special meeting.
<PAGE> 1
Exhibit 10.1
SYNCHRONICITY SYSTEMS INC.
1996 STOCK OPTION PLAN
Adopted by the Board of Directors on January 16, 1996
1. Purpose.
The purpose of this plan (the "Plan") is to secure for Synchronicity
Systems, Inc. (the "Company") and its stockholders the benefits arising from
capital stock ownership by employees and officers of, and consultants or
advisors to, the Company and its parent and subsidiary corporations who are
expected to contribute to the Company's future growth and success. Except where
the context otherwise requires, the term "Company" shall include the parent and
all present and future subsidiaries of the Company as defined in Sections 424(e)
and 424(f) of the Internal Revenue Code of 1986, as amended or replaced from
time to time (the "Code"). Those provisions of the Plan which make express
reference to Section 422 of the Code shall apply only to Incentive Stock Options
(as that term is defined in the Plan).
The Plan shall apply to all options granted by the Company on or after
January 16th, 1996.
2. Type of Options and Administration.
(a) Types of Options. Options granted pursuant to the Plan shall be
authorized by action of the Board of Directors of the Company (or a Committee
designated by the Board of Directors) and may be either incentive stock options
("Incentive Stock Options") meeting the requirements of Section 422 of the Code
or non-qualified options which are not intended to meet the requirements of
Section 422 of the Code.
(b) Administration. The Plan will be administered by the Board of Directors
of the Company, whose construction and interpretation of the terms and
provisions of the Plan shall be final and conclusive. The Board of Directors may
in its sole discretion grant options to purchase shares of the Company's Common
Stock, ("Common Stock"), and issue shares upon exercise of such options as
provided in the Plan. The Board shall have authority, subject to the express
provisions of the Plan, to construe the respective option agreements and the
Plan, to prescribe, amend and rescind rules and regulations relating to the
Plan, to determine the terms and provisions of the respective option agreements,
which need not be identical, and to make all other determinations in the
judgment of the Board of Directors necessary or desirable for the administration
of the Plan. The Board of Directors may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any option agreement
in the manner and to the extent it shall deem expedient to carry the Plan into
effect and it shall be the sole and final judge of such expediency. No director
or person acting pursuant to authority delegated by the Board of Directors shall
be liable for any action or determination made in good faith. The Board of
Directors may, to the full extent permitted by or consistent with applicable
laws or regulations
-1-
<PAGE> 2
(including, without limitation, applicable state law and Rule 16b-3 promulgated
under the Securities Exchange Act of 1934 (the "Exchange Act"), or any successor
rule ("Rule 16b-3")), delegate any or all of its powers under the Plan to a
committee (the "Committee") appointed by the Board of Directors, and if the
Committee is so appointed all references to the Board of Directors in the Plan
shall mean and relate to such Committee.
(c) Applicability of Rule 16b-3. Those provisions of the Plan which make
express reference to Rule 16b-3 shall apply to the Company only at such time as
the Company's Common Stock or another class of equity security is registered
under the Exchange Act, and then only to such persons as are required to file
reports under Section 16(a) of the Exchange Act (a "Reporting Person").
3. Eligibility.
(a) General. Options may be granted to persons who are, at the time of
grant, employees or officers of, or consultants or advisors to, the Company;
provided, that Incentive Stock Options may be granted only to persons who are
eligible to receive such options under Section 422 of the Code. In addition, no
person shall be granted any Incentive Stock Option under the Plan who, at the
time such option is granted, owns, directly or indirectly, stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company, unless the requirements of Section 11(b) are satisfied. The attribution
of stock ownership provisions of Section 424(d) of the Code, and any successor
provisions thereto, shall be applied in determining the shares of stock owned by
a person for purposes of applying the foregoing percentage limitation. A person
who has been granted an option may, if he or she is otherwise eligible, be
granted an additional option or options if the Board of Directors shall so
determine.
(b) Grant of Options to Directors and Officers. From and after the
registration of the Common Stock of the Company under the Exchange Act, the
selection of an officer (as the term "officer" is defined for the purposes of
Rule 16b-3) as a recipient of an option, the timing of the option grant, the
exercise price of the option and the number of shares subject to the option
shall be determined either (i) by the Board of Directors, of which all members
shall be "disinterested persons" (as hereinafter defined), or (ii) by a
committee of two or more directors having full authority to act in the matter,
of which all members shall be "disinterested persons". For the purposes of the
Plan, a director shall be deemed to be a "disinterested person" only if such
person qualifies as a "disinterested person" within the meaning of Rule 16b-3,
as such term is interpreted from time to time.
-2-
<PAGE> 3
4. Stock Subject to Plan.
Subject to adjustment as provided in Section 15 below, the maximum number
of shares of Common Stock of the Company which may be issued and sold under the
Plan is 155,000 shares. Such shares may be authorized and unissued shares or may
be shares issued and thereafter acquired by the Company. If an option granted
under the Plan shall expire or terminate for any reason without having been
exercised in full, the unpurchased shares subject to such option shall again be
available for subsequent option grants under the Plan. If shares issued upon
exercise of an option under the Plan are tendered to the Company in payment of
the exercise price of an option granted under the Plan, such tendered shares
shall again be available for subsequent option grants under the Plan; provided,
that in no event shall (i) the total number of shares issued pursuant to the
exercise of Incentive Stock Options under the Plan, on a cumulative basis,
exceed the maximum number of shares authorized for issuance under the Plan
exclusive of shares made available for issuance pursuant to this sentence or
(ii) the total number of shares issued pursuant to the exercise of options by
persons who are required to file reports under Section 16(a) of the Exchange
Act, on a cumulative basis, exceed the maximum number of shares authorized for
issuance under the Plan exclusive of shares made available for issuance pursuant
to this sentence.
5. Forms of Option Agreements.
As a condition to the grant of an option under the Plan, each recipient of
an option shall execute an option agreement in such form not inconsistent with
the Plan as may be approved by the Board of Directors. Each option agreement
shall specifically state whether the options granted thereby are intended to be
Incentive Stock Options or nonqualified options. Such option agreements may
differ among recipients.
6. Purchase Price.
(a) General. The purchase price per share of stock deliverable upon the
exercise of an option shall be determined by the Board of Directors, provided,
however, that (i) in the case of an Incentive Stock Option, the exercise price
shall not be less than 100% of the fair market value of such stock, as
determined by the Board of Directors, at the time of grant of such option, or
less than 110% of such fair market value in the case of options described in
Section 11(b), and (ii) in the case of a non-qualified option, the exercise
price shall not be less than 50% of the fair market value of such stock, as
determined by the Board of Directors, at the time of grant of such option.
(b) Payment of Purchase Price. Options granted under the Plan may provide
for the payment of the exercise price by delivery of cash or a check to the
order of the Company in an amount equal to the exercise price of such options,
or, to the extent provided in the applicable option agreement, (i) by delivery
to the Company of shares of Common Stock of the Company already owned by the
optionee having a fair market value equal in amount to the exercise price of the
options being exercised, (ii) by any other means which the Board of Directors
determines are consistent with the purpose of the Plan and with applicable laws
and regulations (including, without limitation, the provisions of Rule 16b-3 and
Regulation T promulgated by the Federal
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<PAGE> 4
Reserve Board) or (iii) by any combination of such methods of payment. The fair
market value of any shares of the Company's Common Stock or other non-cash
consideration which may be delivered upon exercise of an option shall be
determined by the Board of Directors.
7. Option Period.
Each option and all rights thereunder shall expire on such date as the
Board of Directors shall determine, except that (i) in the case of an Incentive
Stock Option, such date shall not be later than ten years after the date on
which the option is granted, (ii) in the case of an Incentive Stock Option
described in Section 11(b), such date shall not be later than five years after
the date on which the option is granted and (iii) in all cases, options shall be
subject to earlier termination as provided in the Plan.
8. Exercise of Options.
Each option granted under the Plan shall be exercisable either in full or
in installments at such time or times and during such period as shall be set
forth in the agreement evidencing such option, subject to the provisions of the
Plan.
9. Nontransferability of Options.
Incentive Stock Options and options granted to Reporting Persons shall not
be assignable or transferable by the person to whom they are granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution, and, during the life of the optionee, shall be exercisable only by
the optionee; provided, however, that non-qualified stock options may be
transferred by Reporting Persons pursuant to a qualified domestic relations
order (as defined in Rule 16b-3).
10. Effect of Termination of Employment or Other Relationship.
Except as provided in Section 11(d) with respect to Incentive Stock
Options, the Board of Directors shall determine the period of time during which
an optionee may exercise an option following (i) the termination of the
optionee's employment or other relationship with the Company or (ii) the death
or disability of the optionee. Such periods shall be set forth in the agreement
evidencing such option.
11. Incentive Stock Options.
Options granted under the Plan which are intended to be Incentive Stock
Options shall be subject to the following additional terms and conditions:
(a) Express Designation. All Incentive Stock Options granted under the
Plan shall, at the time of grant, be specifically designated as such in the
option agreement covering such Incentive Stock Options.
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<PAGE> 5
(b) 10% Stockholder. If any employee to whom an Incentive Stock Option is
to be granted under the Plan is, at the time of the grant of such option, the
owner of stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company (after taking into account the attribution
of stock ownership rules of Section 424(d) of the Code), then the following
special provisions shall be applicable to the Incentive Stock Option granted to
such individual:
(i) The purchase price per share of the Common Stock subject to such
Incentive Stock Option shall not be less than 110% of the fair market value
of one share of Common Stock at the time of grant; and
(ii) The option exercise period shall not exceed five years from the
date of grant.
(c) Dollar Limitation. For so long as the Code shall so provide, options
granted to any employee under the Plan (and any other incentive stock option
plans of the Company) which are intended to constitute Incentive Stock Options
shall not constitute Incentive Stock Options to the extent that such options, in
the aggregate, become exercisable for the first time in any one calendar year
for shares of Common Stock with an aggregate fair market value (determined as of
the respective date or dates of grant) of more than $100,000.
(d) Termination of Employment, Death or Disability. No Incentive Stock
Option may be exercised unless, at the time of such exercise, the optionee is,
and has been continuously since the date of grant of his or her option, employed
by the Company, except that:
(i) an Incentive Stock Option may be exercised within the period of
three months after the date the optionee ceases to be an employee of the
Company (or within such lesser period as may be specified in the applicable
option agreement), provided, that the agreement with respect to such option
may designate a longer exercise period and that the exercise after such
three-month period shall be treated as the exercise of a non-qualified
option under the Plan;
(ii) if the optionee dies while in the employ of the Company, or
within three months after the optionee ceases to be such an employee, the
Incentive Stock Option may be exercised by the person to whom it is
transferred by will or the laws of descent and distribution within the
period of one year after the date of death (or within such lesser period as
may be specified in the applicable option agreement); and
(iii) if the optionee becomes disabled (within the meaning of Section
22(e)(3) of the Code or any successor provision thereto) while in the
employ of the Company, the Incentive Stock Option may be exercised within
the period of one year after the date the optionee ceases to be such an
employee because of such disability (or within such lesser period as may be
specified in the applicable option agreement).
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<PAGE> 6
For all purposes of the Plan and any option granted hereunder, "employment"
shall be defined in accordance with the provisions of Section 1.421-7(h) of the
Income Tax Regulations (or any successor regulations). Notwithstanding the
foregoing provisions, no Incentive Stock Option may be exercised after its
expiration date.
12. Additional Provisions.
(a) Additional Option Provisions. The Board of Directors may, in its sole
discretion, include additional provisions in any option agreement covering
options granted under the Plan, including without limitation restrictions on
transfer, repurchase rights, commitments to pay cash bonuses, to make, arrange
for or guaranty loans or to transfer other property to optionees upon exercise
of options, or such other provisions as shall be determined by the Board of
Directors; provided that such additional provisions shall not be inconsistent
with any other term or condition of the Plan and such additional provisions
shall not cause any Incentive Stock Option granted under the Plan to fail to
qualify as an Incentive Stock Option within the meaning of Section 422 of the
Code.
(b) Acceleration, Extension, Etc. The Board of Directors may, in its sole
discretion, (i) accelerate the date or dates on which all or any particular
option or options granted under the Plan may be exercised or (ii) extend the
dates during which all, or any particular option or options granted under the
Plan may be exercised; provided, however, that no such extension shall be
permitted if it would cause the Plan to fail to comply with Section 422 of the
Code or with Rule 16b-3.
13. General Restrictions.
(a) Investment Representations. The Company may require any person to whom
an option is granted, as a condition of exercising such option, to give written
assurances in substance and form satisfactory to the Company to the effect that
such person is acquiring the Common Stock subject to the option for his or her
own account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Company deems
necessary or appropriate in order to comply with federal and applicable state
securities laws, or with covenants or representations made by the Company in
connection with any public offering of its Common Stock.
(b) Compliance With Securities Laws. Each option shall be subject to the
requirement that if, at any time, counsel to the Company shall determine that
the listing, registration or qualification of the shares subject to such option
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental or regulatory body, or that the disclosure of
non-public information or the satisfaction of any other condition is necessary
as a condition of, or in connection with, the issuance or purchase of shares
thereunder, such option may not be exercised, in whole or in part, unless such
listing, registration, qualification, consent or approval, or satisfaction of
such condition shall have been effected or obtained on conditions acceptable to
the Board of Directors. Nothing herein shall be deemed to
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<PAGE> 7
require the Company to apply for or to obtain such listing, registration or
qualification, or to satisfy such condition.
14. Rights as a Stockholder.
The holder of an option shall have no rights as a stockholder with respect
to any shares covered by the option (including, without limitation, any rights
to receive dividends or non-cash distributions with respect to such shares)
until the date of issue of a stock certificate to him or her for such shares. No
adjustment shall be made for dividends or other rights for which the record date
is prior to the date such stock certificate is issued.
15. Adjustment Provisions for Recapitalizations and Related Transactions.
(a) General. If, through or as a result of any merger, consolidation, sale
of all or substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split, or other similar transaction, (i) the outstanding shares of Common Stock
are increased or decreased or are exchanged for a different number or kind of
shares or other securities of the Company, or (ii) additional shares or new or
different shares or other securities of the Company or other non-cash assets are
distributed with respect to such shares of Common Stock or other securities, an
appropriate and proportionate adjustment may be made in (x) the maximum number
and kind of shares reserved for issuance under the Plan, (y) the number and kind
of shares or other securities subject to then outstanding options under the
Plan, and (z) the price for each share subject to any then outstanding options
under the Plan, without changing the aggregate purchase price as to which such
options remain exercisable, provided that no adjustment shall be made pursuant
to this Section 15 if such adjustment would cause the Plan to fail to comply
with Section 422 of the Code or with Rule 16b-3.
(b) Board Authority to Make Adjustments. Any adjustments under this Section
15 will be made by the Board of Directors, whose determination as to what
adjustments, if any, will be made and the extent thereof will be final, binding
and conclusive. No fractional shares will be issued under the Plan on account of
any such adjustments.
16. Merger, Consolidation, Asset Sale, Liquidation, etc.
(a) General. In the event of a consolidation or merger or sale of all or
substantially all of the assets of the Company in which outstanding shares of
Common Stock are exchanged for securities, cash or other property of any other
corporation or business entity or in the event of a liquidation of the Company,
the Board of Directors of the Company, or the board of directors of any
corporation assuming the obligations of the Company, may, in its discretion,
take any one or more of the following actions, as to outstanding options: (i)
provide that such options shall be assumed, or equivalent options shall be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof), provided that any such options substituted for Incentive Stock Options
shall meet the requirements of Section 425(a) of the Code, (ii) upon written
notice to the optionees, provide that all unexercised options will terminate
immediately prior to the consummation of such transaction unless exercised by
the optionee within a specified period
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<PAGE> 8
following the date of such notice, (iii) in the event of a merger under the
terms of which holders of the Common Stock of the Company will receive upon
consummation thereof a cash payment for each share surrendered in the merger
(the "Merger Price"), make or provide for a cash payment to the optionees equal
to the difference between (A) the Merger Price times the number of shares of
Common Stock subject to such outstanding options (to the extent then exercisable
at prices not in excess of the Merger Price) and (B) the aggregate exercise
price of all such outstanding options in exchange for the termination of such
options, and (iv) provide that all or any outstanding options shall become
exercisable in full immediately prior to such event.
(b) Substitute Options. The Company may grant options under the Plan in
substitution for options held by employees of another corporation who become
employees of the Company, or a subsidiary of the Company, as the result of a
merger or consolidation of the employing corporation with the Company or a
subsidiary of the Company, or as a result of the acquisition by the Company, or
one of its subsidiaries, of property or stock of the employing corporation. The
Company may direct that substitute options be granted on such terms and
conditions as the Board of Directors considers appropriate in the circumstances.
17. No Special Employment Rights.
Nothing contained in the Plan or in any option shall confer upon any
optionee any right with respect to the continuation of his or her employment by
the Company or interfere in any way with the right of the Company at any time to
terminate such employment or to increase or decrease the compensation of the
optionee.
18. Other Employee Benefits.
Except as to plans which by their terms include such amounts as
compensation, the amount of any compensation deemed to be received by an
employee as a result of the exercise of an option or the sale of shares received
upon such exercise will not constitute compensation with respect to which any
other employee benefits of such employee are determined, including, without
limitation, benefits under any bonus, pension, profit sharing, life insurance or
salary continuation plan, except as otherwise specifically determined by the
Board of Directors.
19. Amendment of the Plan.
(a) The Board of Directors may at any time, and from time to time, modify
or amend the Plan in any respect, except that if at any time the approval of the
stockholders of the Company is required under Section 422 of the Code or any
successor provision with respect to Incentive Stock Options or under Rule 16b-3
or with respect to options held by persons who are required to file reports
pursuant to Section 16(a) of the Exchange Act, the Board of Directors may not
effect such modification or amendment without such approval.
(b) The termination or any modification or amendment of the Plan shall not,
without the consent of an optionee, affect his or her rights under an option
previously granted to him or her. With the consent of the optionee affected, the
Board of Directors may amend outstanding
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<PAGE> 9
option agreements in a manner not inconsistent with the Plan. The Board of
Directors shall have the right to amend or modify (i) the terms and provisions
of the Plan and of any outstanding Incentive Stock Options granted under the
Plan to the extent necessary to qualify any or all such options for such
favorable federal income tax treatment (including deferral of taxation upon
exercise) as may be afforded incentive stock options under Section 422 of the
Code and (ii) the terms and provisions of the Plan and of any outstanding option
to the extent necessary to ensure the qualification of the Plan under Rule
16b-3.
20. Withholding.
(a) The Company shall have the right to deduct from payments of any kind
otherwise due to the optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to any shares issued upon exercise
of options under the Plan. Subject to the prior approval of the Company, which
may be withheld by the Company in its sole discretion, the optionee may elect to
satisfy such obligations, in whole or in part, (i) by causing the Company to
withhold shares of Common Stock otherwise issuable pursuant to the exercise of
an option or (ii) by delivering to the Company shares of Common Stock already
owned by the optionee. The shares so delivered or withheld shall have a fair
market value equal to such withholding obligation. The fair market value of the
shares used to satisfy such withholding obligation shall be determined by the
Company as of the date that the amount of tax to be withheld is to be
determined. An optionee who has made an election pursuant to this Section 20(a)
may only satisfy his or her withholding obligation with shares of Common Stock
which are not subject to any repurchase, forfeiture, unfulfilled vesting or
other similar requirements.
(b) Notwithstanding the foregoing, in the case of a director or officer, no
election to use shares for the payment of withholding taxes shall be effective
unless made in compliance with any applicable requirements of Rule 16b-3.
21. Cancellation and New Grant of Options, Etc.
The Board of Directors shall have the authority to effect, at any time and
from time to time, with the consent of the affected optionees, (i) the
cancellation of any or all outstanding options under the Plan and the grant in
substitution therefor of new options under the Plan covering the same or
different numbers of shares of Common Stock and having an option exercise price
per share which may be lower or higher than the exercise price per share of the
cancelled options or (ii) the amendment of the terms of any and all outstanding
options under the Plan to provide an option exercise price per share which is
higher or lower than the then-current exercise price per share of such
outstanding options.
22. Effective Date and Duration of the Plan.
(a) Effective Date. The Plan shall become effective when adopted by the
Board of Directors, but no Incentive Stock Option granted under the Plan shall
become exercisable unless and until the Plan shall have been approved by the
Company's stockholders. If such stockholder approval is not obtained within
twelve months after the date of the Board's adoption of the Plan,
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<PAGE> 10
no options previously granted under the Plan shall be deemed to be Incentive
Stock Options and no further Incentive Stock Options shall be granted.
Amendments to the Plan not requiring stockholder approval shall become effective
when adopted by the Board of Directors; amendments requiring stockholder
approval (as provided in Section 19) shall become effective when adopted by the
Board of Directors, but no Incentive Stock Option granted after the date of such
amendment shall become exercisable (to the extent that such amendment to the
Plan was required to enable the Company to grant such Incentive Stock Option to
a particular optionee) unless and until such amendment shall have been approved
by the Company's stockholders. If such stockholder approval is not obtained
within twelve months of the Board's adoption of such amendment, any Incentive
Stock Options granted on or after the date of such amendment shall terminate to
the extent that such amendment to the Plan was required to enable the Company to
grant such option to a particular optionee. Subject to this limitation, options
may be granted under the Plan at any time after the effective date and before
the date fixed for termination of the Plan.
(b) Termination. Unless sooner terminated in accordance with Section 16,
the Plan shall terminate, with respect to Incentive Stock Options, upon the
earlier of (i) the close of business on the day next preceding the tenth
anniversary of the date of its adoption by the Board of Directors, or (ii) the
date on which all shares available for issuance under the Plan shall have been
issued pursuant to the exercise or cancellation of options granted under the
Plan. Unless sooner terminated in accordance with Section 16, the Plan shall
terminate with respect to options which are not Incentive Stock Options on the
date specified in (ii) above. If the date of termination is determined under (i)
above, then options outstanding on such date shall continue to have force and
effect in accordance with the provisions of the instruments evidencing such
options.
23. Provision for Foreign Participants.
The Board of Directors may, without amending the Plan, modify awards or
options granted to participants who are foreign nationals or employed outside
the United States to recognize differences in laws, rules, regulations or
customs of such foreign jurisdictions with respect to tax, securities, currency,
employee benefit or other matters.
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<PAGE> 1
Exhibit 10.2
SYNCHRONICITY, INC.
1996 STOCK PLAN, AS AMENDED
1. PURPOSE. The purpose of the Synchronicity, Inc. 1996 Stock Plan (the
"Plan") is to encourage key employees of Synchronicity, Inc. (the "Company") and
of any present or future parent or subsidiary of the Company (collectively,
"Related Corporations") and other individuals who render services to the Company
or a Related Corporation, by providing opportunities to participate in the
ownership of the Company and its future growth through (a) the grant of options
which qualify as "incentive stock options" ("ISOs") under Section 422(b) of the
Internal Revenue Code of 1986, as amended (the "Code"); (b) the grant of options
which do not qualify as ISOs ("Non-Qualified Options"); (c) awards of stock in
the Company ("Awards"); and (d) opportunities to make direct purchases of stock
in the Company ("Purchases"). Both ISOs and Non-Qualified Options are referred
to hereafter individually as an "Option" and collectively as "Options." Options,
Awards and authorizations to make Purchases are referred to hereafter
collectively as "Stock Rights." As used herein, the terms "parent" and
"subsidiary" mean "parent corporation" and "subsidiary corporation,"
respectively, as those terms are defined in Section 424 of the Code.
2. ADMINISTRATION OF THE PLAN.
A. BOARD OR COMMITTEE ADMINISTRATION. The Plan shall (be
administered by the Board of Directors of the Company (the "Board")
or, subject to paragraph 2(D) (relating to compliance with Section
162(m) of the Code), by a committee appointed by the Board (the
"Committee"). Hereinafter, all references in this Plan to the
"Committee" shall mean the Board if no Committee has been appointed.
Subject to ratification of the grant or authorization of each Stock
Right by the Board (if so required by applicable state law), and
subject to the terms of the Plan, the Committee shall have the
authority to (i) determine to whom (from among the class of employees
eligible under paragraph 3 to receive ISOs) ISOs shall be granted, and
to whom (from among the class of individuals and entities eligible
under paragraph 3 to receive Non-Qualified Options and Awards and to
make Purchases) Non-Qualified Options, Awards and authorizations to
make Purchases may be granted; (ii) determine the time or times at
which Options or Awards shall be granted or Purchases made; (iii)
determine the purchase price of shares subject to each Option or
Purchase, which prices shall not be less than the minimum price
specified in paragraph 6; (iv) determine whether each Option granted
shall be an ISO or a Non-Qualified Option; (v) determine (subject to
paragraph 7) the time or times when each Option shall become
exercisable and the duration of the exercise period; (vi) extend the
period during which outstanding Options may be exercised; (vii)
determine whether restrictions such as repurchase options are to be
imposed on shares subject to Options, Awards and Purchases
<PAGE> 2
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and the nature of such restrictions, if any, and (viii) interpret the
Plan and prescribe and rescind rules and regulations relating to it.
If the Committee determines to issue a Non-Qualified Option, it shall
take whatever actions it deems necessary, under Section 422 of the
Code and the regulations promulgated thereunder, to ensure that such
Option is not treated as an ISO. The interpretation and construction
by the Committee of any provisions of the Plan or of any Stock Right
granted under it shall be final unless otherwise determined by the
Board. The Committee may from time to time adopt such rules and
regulations for carrying out the Plan as it may deem advisable. No
member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Stock
Right granted under it.
B. COMMITTEE ACTIONS. The Committee may select one of its members
as its chairman, and shall hold meetings at such time and places as it
may determine. A majority of the Committee shall constitute a quorum
and acts of a majority of the members of the Committee at a meeting at
which a quorum is present, or acts reduced to or approved in writing
by all the members of the Committee (if consistent with applicable
state law), shall be the valid acts of the Committee. From time to
time the Board may increase the size of the Committee and appoint
additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies however
caused, or remove all members of the Committee and thereafter directly
administer the Plan.
C. GRANT OF STOCK RIGHTS TO BOARD MEMBERS. Stock Rights may be
granted to members of the Board. All grants of Stock Rights to members
of the Board shall in all respects be made in accordance with the
provisions of this Plan applicable to other eligible persons. Members
of the Board who either (i) are eligible to receive grants of Stock
Rights pursuant to the Plan or (ii) have been granted Stock Rights may
vote on any matters affecting the administration of the Plan or the
grant of any Stock Rights pursuant to the Plan, except that no such
member shall act upon the granting to himself or herself of Stock
Rights, but any such member may be counted in determining the
existence of a quorum at any meeting of the Board during which action
is taken with respect to the granting to such member of Stock Rights.
D. PERFORMANCE-BASED COMPENSATION. The Board, in its discretion,
may take such action as may be necessary to ensure that Stock Rights
granted under the Plan qualify as "qualified performance-based
compensation" within the meaning of Section 162(m) of the Code and
applicable regulations promulgated thereunder ("Performance-Based
Compensation"). Such action may include, in the Board's discretion,
some or all of the following (i) if the Board determines that Stock
Rights granted under the Plan generally shall constitute
Performance-Based Compensation, the Plan shall be administered, to the
extent required for such Stock Rights to constitute Performance-Based
Compensation, by a
<PAGE> 3
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Committee consisting solely of two or more "outside directors" (as
defined in applicable regulations promulgated under Section 162(m) of
the Code), (ii) if any Non-Qualified Options with an exercise price
less than the fair market value per share of Common Stock are granted
under the Plan and the Board determines that such Options should
constitute Performance-Based Compensation, such options shall be made
exercisable only upon the attainment of a pre-established, objective
performance goal established by the Committee, and such grant shall be
submitted for, and shall be contingent upon shareholder approval and
(iii) Stock Rights granted under the Plan may be subject to such other
terms and conditions as are necessary for compensation recognized in
connection with the exercise or disposition of such Stock Right or the
disposition of Common Stock acquired pursuant to such Stock Right, to
constitute Performance-Based Compensation.
3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted only to employees
of the Company or any Related Corporation. Non-Qualified Options, Awards and
authorizations to make Purchases may be granted to any employee, officer or
director (whether or not also an employee) or consultant of the Company or any
Related Corporation. The Committee may take into consideration a recipient's
individual circumstances in determining whether to grant a Stock Right. The
granting of any Stock Right to any individual or entity shall neither entitle
that individual or entity to, nor disqualify such individual or entity from,
participation in any other grant of Stock Rights.
4. STOCK. The stock subject to Stock Rights shall be authorized but
unissued shares of Common Stock of the Company, par value $.01 per share (the
"Common Stock"), or shares of Common Stock reacquired by the Company in any
manner. The aggregate number of shares which may be issued pursuant to the Plan
is 235,590, subject to adjustment as provided in paragraph 13. If any Option
granted under the Plan shall expire or terminate for any reason without having
been exercised in full or shall cease for any reason to be exercisable in whole
or in part or shall be repurchased by the Company, the unpurchased shares of
Common Stock subject to such Option shall again be available for grants of Stock
Rights under the Plan.
No employee of the Company or any Related Corporation may be granted
Options to acquire, in the aggregate, more than 100,000 of shares of Common
Stock under the Plan during any fiscal year of the Company. If any Option
granted under the Plan shall expire or terminate for any reason without having
been exercised in full or shall cease for any reason to be exercisable in whole
or in part or shall be repurchased by the Company, the shares subject to such
Option shall be included in the determination of the aggregate number of shares
of Common Stock deemed to have been granted to such employee under the Plan.
5. GRANTING OF STOCK RIGHTS. Stock Rights may be granted under the Plan
at any time on or after December 18, 1996 and prior to December 18, 2006. The
date of grant of a Stock Right under the Plan will be the date specified by the
Committee at the time it grants the Stock Right; provided, however, that such
date shall not be prior to the date on which the Committee acts to approve the
grant.
<PAGE> 4
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6. MINIMUM OPTION PRICE; ISO LIMITATIONS.
A. PRICE FOR NON-QUALIFIED OPTIONS, AWARDS AND PURCHASES. Subject to
paragraph 2(D) (relating to compliance with Section 162(m) of the Code),
the exercise price per share specified in the agreement relating to each
Non-Qualified Option granted, and the purchase price per share of stock
granted in any Award or authorized as a Purchase, under the Plan may be
less than the fair market value of the Common Stock of the Company on the
date of grant; provided that, in no event shall such exercise price or such
purchase price be less than the minimum legal consideration required
therefor under the laws of any jurisdiction in which the Company or its
successors in interest may be organized.
B. PRICE FOR ISOS. The exercise price per share specified in the
agreement relating to each ISO granted under the Plan shall not be less
than the fair market value per share of Common Stock on the date of such
grant. In the case of an ISO to be granted to an employee owning stock
possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, the
price per share specified in the agreement relating to such ISO shall not
be less than one hundred ten percent (110%) of the fair market value per
share of Common Stock on the date of grant. For purposes of determining
stock ownership under this paragraph, the rules of Section 424(d) of the
Code shall apply.
C. $100,000 ANNUAL LIMITATION ON ISO VESTING. Each eligible employee
may be granted Options treated as ISOs only to the extent that, in the
aggregate under this Plan and all incentive stock option plans of the
Company and any Related Corporation, ISOs do not become exercisable for the
first time by such employee during any calendar year with respect to stock
having a fair market value (determined at the time the ISOs were granted)
in excess of $100,000. The Company intends to designate any Options granted
in excess of such limitation as Non-Qualified Options, and the Company
shall issue separate certificates to the optionee with respect to Options
that are Non-Qualified Options and Options that are ISOs.
D. DETERMINATION OF FAIR MARKET VALUE. If, at the time an Option is
granted under the Plan, the Company's Common Stock is publicly traded,
"fair market value" shall be determined as of the date of grant or, if the
prices or quotes discussed in this sentence are unavailable for such date,
the last business day for which such prices or quotes are available prior
to the date of grant and shall mean (i) the average (on that date) of the
high and low prices of the Common Stock on the principal national
securities exchange on which the Common Stock is traded, if the Common
Stock is then traded on a national securities exchange; or (ii) the last
reported sale price (on that date) of the Common Stock on the Nasdaq
National Market, if the Common Stock is not then traded on a national
securities exchange; or (iii) the closing bid price (or average of bid
prices) last quoted (on
<PAGE> 5
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that date) by an established quotation service for over-the-counter
securities, if the Common Stock is not reported on the Nasdaq National
Market. If the Common Stock is not publicly traded at the time an Option is
granted under the Plan, "fair market value" shall mean the fair value of
the Common Stock as determined by the Committee after taking into
consideration all factors which it deems appropriate, including, without
limitation, recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.
7. OPTION DURATION. Subject to earlier termination as provided in
paragraphs 9 and 10 or in the agreement relating to such Option, each Option
shall expire on the date specified by the Committee, but not more than (i) ten
years from the date of grant in the case of Options generally and (ii) five
years from the date of grant in the case of ISOs granted to an employee owning
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, as determined
under paragraph 6(B). Subject to earlier termination as provided in paragraphs 9
and 10, the term of each ISO shall be the term set forth in the original
instrument granting such ISO, except with respect to any part of such ISO that
is converted into a Non-Qualified Option pursuant to paragraph 16.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9
through 12, each Option granted under the Plan shall be exercisable as follows:
A. VESTING. The Option shall either be fully exercisable on the
date of grant or shall become exercisable thereafter in such
installments as the Committee may specify.
B. FULL VESTING OF INSTALLMENTS. Once an installment becomes
exercisable, it shall remain exercisable until expiration or
termination of the Option, unless otherwise specified by the
Committee.
C. PARTIAL EXERCISE. Each Option or installment may be exercised
at any time or from time to time, in whole or in part, for up to the
total number of shares with respect to which it is then exercisable.
D. ACCELERATION OF VESTING. The Committee shall have the right to
accelerate the date that any installment of any Option becomes
exercisable; provided that the Committee shall not, without the
consent of an optionee, accelerate the permitted exercise date of any
installment of any Option granted to any employee as an ISO (and not
previously converted into a Non-Qualified Option pursuant to paragraph
16) if such acceleration would violate the annual vesting limitation
contained in Section 422(d) of the Code, as described in paragraph
6(C).
9. TERMINATION OF EMPLOYMENT. Unless otherwise specified in the
agreement relating to such ISO, if an ISO optionee ceases to be employed by the
Company and all Related
<PAGE> 6
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Corporations other than by reason of death or disability as defined in paragraph
10, no further installments of his or her ISOs shall become exercisable, and his
or her ISOs shall terminate on the earlier of (a) three months after the date of
termination of his or her employment, or (b) their specified expiration dates,
except to the extent that such ISOs (or unexercised installments thereof) have
been converted into Non-Qualified Options pursuant to paragraph 16. For purposes
of this paragraph 9, employment shall be considered as continuing uninterrupted
during any bona fide leave of absence (such as those attributable to illness,
military obligations or governmental service) provided that the period of such
leave does not exceed 90 days or, if longer, any period during which such
optionee's right to reemployment is guaranteed by statute or by contract. A bona
fide leave of absence with the written approval of the Committee shall not be
considered an interruption of employment under this paragraph 9, provided that
such written approval contractually obligates the Company or any Related
Corporation to continue the employment of the optionee after the approved period
of absence. ISOs granted under the Plan shall not be affected by any change of
employment within or among the Company and Related Corporations, so long as the
optionee continues to be an employee of the Company or any Related Corporation.
Nothing in the Plan shall be deemed to give any grantee of any Stock Right the
right to be retained in employment or other service by the Company or any
Related Corporation for any period of time.
10. DEATH; DISABILITY.
A. DEATH. If an ISO optionee ceases to be employed by the
Company and all Related Corporations by reason of his or her
death, any ISO owned by such optionee may be exercised, to the
extent otherwise exercisable on the date of death, by the estate,
personal representative or beneficiary who has acquired the ISO
by will or by the laws of descent and distribution, until the
earlier of (i) the specified expiration date of the ISO or (ii)
180 days from the date of the optionee's death.
B. DISABILITY. If an ISO optionee ceases to be employed by
the Company and all Related Corporations by reason of his or her
disability, such optionee shall have the right to exercise any
ISO held by him or her on the date of termination of employment,
for the number of shares for which he or she could have exercised
it on that date, until the earlier of (i) the specified
expiration date of the ISO or (ii) 180 days from the date of the
termination of the optionee's employment. For the purposes of the
Plan, the term "disability" shall mean "permanent and total
disability" as defined in Section 22(e)(3) of the Code or any
successor statute.
11. ASSIGNABILITY. No ISO shall be assignable or transferable by the
optionee except by will or by the laws of descent and distribution, and during
the lifetime of the optionee shall be exercisable only by such optionee. Stock
Rights other than ISOs shall be transferable to the extent set forth in the
agreement relating to such Stock Right.
<PAGE> 7
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12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. The Committee may specify that any
Non-Qualified Option shall be subject to the restrictions set forth herein with
respect to ISOs, or to such other termination and cancellation provisions as the
Committee may determine. The Committee may from time to time confer authority
and responsibility on one or more of its own members and/or one or more officers
of the Company to execute and deliver such instruments. The proper officers of
the Company are authorized and directed to take any and all action necessary or
advisable from time to time to carry out the terms of such instruments.
13. ADJUSTMENTS. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to such optionee hereunder
shall be adjusted as hereinafter provided, unless otherwise specifically
provided in the written agreement between the optionee and the Company relating
to such Option:
A. STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common
Stock shall be subdivided or combined into a greater or smaller
number of shares or if the Company shall issue any shares of
Common Stock as a stock dividend on its outstanding Common Stock,
the number of shares of Common Stock deliverable upon the
exercise of Options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the
purchase price per share to reflect such subdivision, combination
or stock dividend.
B. CONSOLIDATIONS OR MERGERS. If the Company is to be
consolidated with or acquired by another entity in a merger or
other reorganization in which the holders of the outstanding
voting stock of the Company immediately preceding the
consummation of such event, shall, immediately following such
event, hold, as a group, less than a majority of the voting
securities of the surviving or successor entity, or in the event
of a sale of all or substantially all of the Company's assets or
otherwise (each, an "Acquisition"), the Committee or the board of
directors of any entity assuming the obligations of the Company
hereunder (the "Successor Board"), shall, as to outstanding
Options, either (i) make appropriate provision for the
continuation of such Options by substituting on an equitable
basis for the shares then subject to such Options either (a) the
consideration payable with respect to the outstanding shares of
Common Stock in connection with the Acquisition, (b) shares of
stock of the surviving or successor corporation or (c) such other
securities as the Successor Board deems appropriate, the fair
market value of which shall not materially exceed the fair market
value of the shares of Common Stock subject to such Options
immediately preceding the Acquisition; or (ii) upon written
notice to the optionees, provide that all Options must be
exercised,
<PAGE> 8
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to the extent then exercisable or to be exercisable as a result
of the Acquisition, within a specified number of days of the date
of such notice, at the end of which period the Options shall
terminate; or (iii) terminate all Options in exchange for a cash
payment equal to the excess of the fair market value of the
shares subject to such Options (to the extent then exercisable or
to be exercisable as a result of the Acquisition) over the
exercise price thereof.
C. RECAPITALIZATION OR REORGANIZATION. In the event of a
recapitalization or reorganization of the Company (other than a
transaction described in subparagraph B above) pursuant to which
securities of the Company or of another corporation are issued
with respect to the outstanding shares of Common Stock, an
optionee upon exercising an Option shall be entitled to receive
for the purchase price paid upon such exercise the securities he
or she would have received if he or she had exercised such Option
prior to such recapitalization or reorganization.
D. MODIFICATION OF ISOS. Notwithstanding the foregoing, any
adjustments made pursuant to subparagraphs A, B or C with respect
to ISOs shall be made only after the Committee, after consulting
with counsel for the Company, determines whether such adjustments
would constitute a "modification" of such ISOs (as that term is
defined in Section 424 of the Code) or would cause any adverse
tax consequences for the holders of such ISOs. If the Committee
determines that such adjustments made with respect to ISOs would
constitute a modification of such ISOs or would cause adverse tax
consequences to the holders, it may refrain from making such
adjustments.
E. DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, each Option will
terminate immediately prior to the consummation of such proposed
action or at such other time and subject to such other conditions
as shall be determined by the Committee.
F. ISSUANCES OF SECURITIES. Except as expressly provided
herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any
class, shall affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of shares subject to
Options. No adjustments shall be made for dividends paid in cash
or in property other than securities of the Company.
G. FRACTIONAL SHARES. No fractional shares shall be issued
under the Plan and the optionee shall receive from the Company
cash in lieu of such fractional shares.
H. ADJUSTMENTS. Upon the happening of any of the events
described in subparagraphs A, B or C above, the class and
aggregate number of shares set
<PAGE> 9
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forth in paragraph 4 hereof that are subject to Stock Rights
which previously have been or subsequently may be granted under
the Plan shall also be appropriately adjusted to reflect the
events described in such subparagraphs. The Committee or the
Successor Board shall determine the specific adjustments to be
made under this paragraph 13 and, subject to paragraph 2, its
determination shall be conclusive.
14. MEANS OF EXERCISING OPTIONS. An Option (or any part or installment
thereof) shall be exercised by giving written notice to the Company at its
principal office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and specify the
number of shares as to which such Option is being exercised, accompanied by full
payment of the purchase price therefor either (a) in United States dollars in
cash or by check, (b) at the discretion of the Committee, through delivery of
shares of Common Stock having a fair market value equal as of the date of the
exercise to the cash exercise price of the Option, (c) at the discretion of the
Committee, by delivery of the grantee's personal recourse note bearing interest
payable not less than annually at no less than 100% of the lowest applicable
Federal rate, as defined in Section 1274(d) of the Code, (d) at the discretion
of the Committee and consistent with applicable law, through the delivery of an
assignment to the Company of a sufficient amount of the proceeds from the sale
of the Common Stock acquired upon exercise of the Option and an authorization to
the broker or selling agent to pay that amount to the Company, which sale shall
be at the participant's direction at the time of exercise, or (e) at the
discretion of the Committee, by any combination of (a), (b), (c) and (d) above.
If the Committee exercises its discretion to permit payment of the exercise
price of an ISO by means of the methods set forth in clauses (b), (c), (d) or
(e) of the preceding sentence, such discretion shall be exercised in writing at
the time of the grant of the ISO in question. The holder of an Option shall not
have the rights of a shareholder with respect to the shares covered by such
Option until the date of issuance of a stock certificate to such holder for such
shares. Except as expressly provided above in paragraph 13 with respect to
changes in capitalization and stock dividends, no adjustment shall be made for
dividends or similar rights for which the record date is before the date such
stock certificate is issued.
15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board on
December 18, 1996, subject, with respect to the validation of ISOs granted under
the Plan, to approval of the Plan by the stockholders of the Company at the next
Meeting of Stockholders or, in lieu thereof, by written consent. If the approval
of stockholders is not obtained prior to December 18, 1997, any grants of ISOs
under the Plan made prior to that date will be rescinded. The Plan shall expire
at the end of the day on December 17, 2006 (except as to Options outstanding on
that date). Subject to the provisions of paragraph 5 above, Options may be
granted under the Plan prior to the date of stockholder approval of the Plan.
The Board may terminate or amend the Plan in any respect at any time, except
that, without the approval of the stockholders obtained within 12 months before
or after the Board adopts a resolution authorizing any of the following actions:
(a) the total number of shares that may be issued under the Plan may not be
increased (except by adjustment pursuant to paragraph 13); (b) the provisions of
paragraph 3 regarding eligibility for grants of ISOs may not be modified; (c)
the provisions of paragraph 6(B) regarding the exercise price at which shares
may be offered pursuant to ISOs may
<PAGE> 10
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not be modified (except by adjustment pursuant to paragraph 13); and (d) the
expiration date of the Plan may not be extended. Except as otherwise provided in
this paragraph 15, in no event may action of the Board or stockholders alter or
impair the rights of a grantee, without such grantee's consent, under any Stock
Right previously granted to such grantee.
16. MODIFICATIONS OF ISOS; CONVERSION OF ISOS INTO NON-QUALIFIED
OPTIONS. Subject to paragraph 13(D), without the prior written consent of the
holder of an ISO, the Committee shall not alter the terms of such ISO (including
the means of exercising such ISO) if such alteration would constitute a
modification (within the meaning of Section 424(h)(3) of the Code). The
Committee, at the written request or with the written consent of any optionee,
may in its discretion take such actions as may be necessary to convert such
optionee's ISOs (or any installments or portions of installments thereof) that
have not been exercised on the date of conversion into Non-Qualified Options at
any time prior to the expiration of such ISOs, regardless of whether the
optionee is an employee of the Company or a Related Corporation at the time of
such conversion. Such actions may include, but shall not be limited to,
extending the exercise period or reducing the exercise price of the appropriate
installments of such ISOs. At the time of such conversion, the Committee (with
the consent of the optionee) may impose such conditions on the exercise of the
resulting Non-Qualified Options as the Committee in its discretion may
determine, provided that such conditions shall not be inconsistent with this
Plan. Nothing in the Plan shall be deemed to give any optionee the right to have
such optionee's ISOs converted into Non-Qualified Options, and no such
conversion shall occur until and unless the Committee takes appropriate action.
Upon the taking of such action, the Company shall issue separate certificates to
the optionee with respect to Options that are Non-Qualified Options and Options
that are ISOs.
17. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.
18. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By accepting an ISO
granted under the Plan, each optionee agrees to notify the Company in writing
immediately after such optionee makes a Disqualifying Disposition (as described
in Sections 421, 422 and 424 of the Code and regulations thereunder) of any
stock acquired pursuant to the exercise of ISOs granted under the Plan. A
Disqualifying Disposition is generally any disposition occurring on or before
the later of (a) the date two years following the date the ISO was granted or
(b) the date one year following the date the ISO was exercised.
19. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a
Non-Qualified Option, the transfer of a Non-Qualified Stock Option pursuant to
an arm's-length transaction, the grant of an Award, the making of a Purchase of
Common Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 18), the vesting or transfer of restricted
stock or securities acquired on the exercise of an Option hereunder, or the
making of a distribution or other payment with respect to such stock or
securities, the Company may withhold taxes in respect of amounts that constitute
compensation includible in gross income. The Committee in its discretion may
condition (i) the exercise of an
<PAGE> 11
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Option, (ii) the transfer of a Non-Qualified Stock Option, (iii) the grant of an
Award, (iv) the making of a Purchase of Common Stock for less than its fair
market value, or (v) the vesting or transferability of restricted stock or
securities acquired by exercising an Option, on the grantee's making
satisfactory arrangement for such withholding. Such arrangement may include
payment by the grantee in cash or by check of the amount of the withholding
taxes or, at the discretion of the Committee, by the grantee's delivery of
previously held shares of Common Stock or the withholding from the shares of
Common Stock otherwise deliverable upon exercise of a Option shares having an
aggregate fair market value equal to the amount of such withholding taxes.
20. GOVERNMENTAL REGULATION. The Company's obligation to sell and
deliver shares of the Common Stock under this Plan is subject to the approval of
any governmental authority required in connection with the authorization,
issuance or sale of such shares.
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
send tax information statements to employees and former employees that exercise
ISOs under the Plan, and the Company may be required to file tax information
returns reporting the income received by grantees of Options in connection with
the Plan.
21. GOVERNING LAW. The validity and construction of the Plan and the
instruments evidencing Stock Rights shall be governed by the laws of
Massachusetts, or the laws of any jurisdiction in which the Company or its
successors in interest may be organized.
<PAGE> 1
Exhibit 10.3
SYNCHRONICITY SOFTWARE, INC.
AMENDED AND RESTATED 1999 STOCK OPTION AND INCENTIVE PLAN
1. Purpose and Eligibility
The purpose of this 1999 Stock Option and Incentive Plan (the "Plan")
of Synchronicity Software, Inc. (the "Company") is to provide stock options and
other equity interests in the Company (each an "Award") to employees, officers,
directors, consultants and advisors of the Company and its Subsidiaries, all of
whom are eligible to receive Awards under the Plan. Any person to whom an Award
has been granted under the Plan is called a "Participant". Additional
definitions are contained in Section 8.
2. Administration
a. Administration by Board of Directors. The Plan will be administered
by the Board of Directors of the Company (the "Board"). The Board, in its sole
discretion, shall have the authority to grant and amend Awards, to adopt, amend
and repeal rules relating to the Plan and to interpret and correct the
provisions of the Plan and any Award. All decisions by the Board shall be final
and binding on all interested persons. Neither the Company nor any member of the
Board shall be liable for any action or determination relating to the Plan.
b. Appointment of Committees. To the extent permitted by applicable
law, the Board may delegate any or all of its powers under the Plan to one or
more committees or subcommittees of the Board (a "Committee"). All references in
the Plan to the "Board" shall mean such Committee or the Board.
c. Delegation to Executive Officers. To the extent permitted by
applicable law, the Board may delegate to one or more executive officers of the
Company the power to grant Awards and exercise such other powers under the Plan
as the Board may determine, provided that the Board shall fix the maximum number
of Awards to be granted and the maximum number of shares issuable to any one
Participant pursuant to Awards granted by such executive officers.
3. Stock Available for Awards
a. Number of Shares. Subject to adjustment under Section 3(c), the
aggregate number of shares of Common Stock of the Company (the "Common Stock")
that may be issued pursuant to the Plan is 1,325,000 shares which number shall
automatically increase on January 1, 2001, January 1, 2002, January 1, 2003,
January 1, 2004 and January 1, 2005 by such number of shares as is equal to five
percent (5%) of the total number of shares of Common Stock issued and
outstanding as of the close of business on December 31 of the preceding year.
Notwithstanding any other provision of the Plan, in no event shall more than
5,100,000 shares of Common Stock be cumulatively available for the issuance of
Common Stock pursuant to Incentive Stock Options (as defined in Section 4(b)
hereof) granted under the Plan (including shares issued pursuant to Incentive
Stock options granted under the Plan that are subject to disqualifying
dispositions within the meaning of Sections 421, 422 and 424 of the Code and
regulations thereunder). If any Award expires, or is terminated, surrendered or
forfeited, in whole or in part, the unissued Common Stock covered by such Award
shall again be available for the grant of Awards under the Plan. If shares of
Common Stock issued pursuant to the Plan are repurchased by, or are surrendered
or forfeited to, the Company at no more than cost, such shares of Common Stock
shall again be available for the grant of Awards (other than Incentive Stock
Options) under the Plan. Shares issued under the Plan may consist in whole or in
part of authorized but unissued shares or treasury shares.
<PAGE> 2
b. Per-Participant Limit. Subject to adjustment under Section 3(c), no
Participant may be granted Awards during any one fiscal year to purchase more
than 350,000 shares of Common Stock.
c. Adjustment to Common Stock. In the event of any stock split, stock
dividend, extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, combination, exchange of shares, liquidation, spin-off, split-up,
or other similar change in capitalization or event, (i) the number and class of
securities available for Awards under the Plan and the per-Participant share
limit, (ii) the number and class of securities, vesting schedule and exercise
price per share subject to each outstanding Option, (iii) the repurchase price
per security subject to repurchase, and (iv) the terms of each other outstanding
stock-based Award shall be adjusted by the Company (or substituted Awards may be
made) to the extent the Board shall determine, in good faith, that such an
adjustment (or substitution) is appropriate. If Section 7(e)(i) applies for any
event, this Section 3(c) shall not be applicable.
4. Stock Options
a. General. The Board may grant options to purchase Common Stock (each,
an "Option") and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option and the Common Stock
issued upon the exercise of each Option, including vesting provisions,
repurchase provisions and restrictions relating to applicable federal or state
securities laws, as it considers advisable.
b. Incentive Stock Options. An Option that the Board intends to be an
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall be granted only to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Board and the Company shall have no liability if an Option
or any part thereof that is intended to be an Incentive Stock Option does not
qualify as such. An Option or any part thereof that does not qualify as an
Incentive Stock Option is referred to herein as a "Nonstatutory Stock Option".
c. Exercise Price. The Board shall establish the exercise price (or
determine the method by which the exercise price shall be determined) at the
time each Option is granted and specify it in the applicable option agreement.
d. Duration of Options. Each Option shall be exercisable at such times
and subject to such terms and conditions as the Board may specify in the
applicable option agreement.
e. Exercise of Option. Options may be exercised only by delivery to the
Company of a written notice of exercise signed by the proper person together
with payment in full as specified in Section 4(f) for the number of shares for
which the Option is exercised.
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<PAGE> 3
f. Payment Upon Exercise. Common Stock purchased upon the exercise of
an Option shall be paid for by one or any combination of the following forms of
payment:
(i) by check payable to the order of the Company;
(ii) except as otherwise explicitly provided in the applicable
option agreement, and only if the Common Stock is then publicly traded, delivery
of an irrevocable and unconditional undertaking by a creditworthy broker to
deliver promptly to the Company sufficient funds to pay the exercise price, or
delivery by the Participant to the Company of a copy of irrevocable and
unconditional instructions to a creditworthy broker to deliver promptly to the
Company cash or a check sufficient to pay the exercise price; or
(iii) to the extent explicitly provided in the applicable option
agreement, by (x) delivery of shares of Common Stock owned by the Participant
valued at fair market value (as determined by the Board or as determined
pursuant to the applicable option agreement), (y) delivery of a promissory note
of the Participant to the Company (and delivery to the Company by the
Participant of a check in an amount equal to the par value of the shares
purchased), or (z) payment of such other lawful consideration as the Board may
determine.
5. Restricted Stock
a. Grants. The Board may grant Awards entitling recipients to acquire
shares of Common Stock, subject to (i) delivery to the Company by the
Participant of a check in an amount at least equal to the par value of the
shares purchased, and (ii) the right of the Company to repurchase all or part of
such shares at their issue price or other stated or formula price from the
Participant in the event that conditions specified by the Board in the
applicable Award are not satisfied prior to the end of the applicable
restriction period or periods established by the Board for such Award (each, a
"Restricted Stock Award").
b. Terms and Conditions. The Board shall determine the terms and
conditions of any such Restricted Stock Award. Any stock certificates issued in
respect of a Restricted Stock Award shall be registered in the name of the
Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). After the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or, if the Participant has died, to the
beneficiary designated by a Participant, in a manner determined by the Board, to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary"). In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.
6. Other Stock-Based Awards
The Board shall have the right to grant other Awards based upon the
Common Stock having such terms and conditions as the Board may determine,
including, without limitation, the
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<PAGE> 4
grant of shares based upon certain conditions, the grant of securities
convertible into Common Stock and the grant of stock appreciation rights,
phantom stock awards or stock units.
7. General Provisions Applicable to Awards
a. Transferability of Awards. Except as the Board may otherwise
determine or provide in an Award, Awards shall not be sold, assigned,
transferred, pledged or otherwise encumbered by the person to whom they are
granted, either voluntarily or by operation of law, except by will or the laws
of descent and distribution, and, during the life of the Participant, shall be
exercisable only by the Participant. References to a Participant, to the extent
relevant in the context, shall include references to authorized transferees.
b. Documentation. Each Award under the Plan shall be evidenced by a
written instrument in such form as the Board shall determine or as executed by
an officer of the Company pursuant to authority delegated by the Board. Each
Award may contain terms and conditions in addition to those set forth in the
Plan provided that such terms and conditions do not contravene the provisions of
the Plan.
c. Board Discretion. The terms of each type of Award need not be
identical, and the Board need not treat Participants uniformly.
d. Termination of Status. The Board shall determine the effect on an
Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, or the Participant's legal
representative, conservator, guardian or Designated Beneficiary, may exercise
rights under the Award.
e. Acquisition of the Company
(i) Consequences of an Acquisition. Unless otherwise expressly
provided in the applicable Option or Award, upon the occurrence of an
Acquisition, the Board or the board of directors of the surviving or acquiring
entity (as used in this Section 7(e)(i), also the "Board"), shall, as to
outstanding Awards (on the same basis or on different bases, as the Board shall
specify), make appropriate provision for the continuation of such Awards by the
Company or the assumption of such Awards by the surviving or acquiring entity
and by substituting on an equitable basis for the shares then subject to such
Awards either (a) the consideration payable with respect to the outstanding
shares of Common Stock in connection with the Acquisition, (b) shares of stock
of the surviving or acquiring corporation or (c) such other securities as the
Board deems appropriate, the fair market value of which (as determined by the
Board in its sole discretion) shall not materially differ from the fair market
value of the shares of Common Stock subject to such Awards immediately preceding
the Acquisition. In addition to or in lieu of the foregoing, with respect to
outstanding Options, the Board may, upon written notice to the affected
optionees, provide that one or more Options must be exercised, to the extent
then exercisable or to be exercisable as a result of the Acquisition, within a
specified number of days of the date of such notice, at the end of which period
such
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<PAGE> 5
Options shall terminate; or terminate one or more Options in exchange for a cash
payment equal to the excess of the fair market value (as determined by the Board
in its sole discretion) of the shares subject to such Options (to the extent
then exercisable or to be exercisable as a result of the Acquisition) over the
exercise price thereof.
(ii) Acquisition Defined. An "Acquisition" shall mean: (x) any
merger or consolidation after which the voting securities of the Company
outstanding immediately prior thereto represent (either by remaining outstanding
or by being converted into voting securities of the surviving or acquiring
entity) less than 50% of the combined voting power of the voting securities of
the Company or such surviving or acquiring entity outstanding immediately after
such event; or (y) any sale of all or substantially all of the assets or capital
stock of the Company (other than in a spin-off or similar transaction) or (z)
any other acquisition of the business of the Company, as determined by the
Board.
(iii) Assumption of Options Upon Certain Events. In connection
with a merger or consolidation of an entity with the Company or the acquisition
by the Company of property or stock of an entity, the Board may grant Awards
under the Plan in substitution for stock and stock-based awards issued by such
entity or an affiliate thereof. The substitute Awards shall be granted on such
terms and conditions as the Board considers appropriate in the circumstances.
(iv) Pooling-of Interests-Accounting. If the Company proposes
to engage in an Acquisition intended to be accounted for as a
pooling-of-interests, and in the event that the provisions of this Plan or of
any Award hereunder, or any actions of the Board taken in connection with such
Acquisition, are determined by the Company's or the acquiring company's
independent public accountants to cause such Acquisition to fail to be accounted
for as a pooling-of-interests, then such provisions or actions shall be amended
or rescinded by the Board, without the consent of any Participant, to be
consistent with pooling-of-interests accounting treatment for such Acquisition.
(v) Parachute Awards. Notwithstanding the provisions of
Section 7(e)(i), if, in connection with an Acquisition described therein, a tax
under Section 4999 of the Code would be imposed on the Participant (after taking
into account the exceptions set forth in Sections 280G(b)(4) and 280G(b)(5) of
the Code), then the number of Awards which shall become exercisable, realizable
or vested as provided in such section shall be reduced (or delayed), to the
minimum extent necessary, so that no such tax would be imposed on the
Participant (the Awards not becoming so accelerated, realizable or vested, the
"Parachute Awards"); provided, however, that if the "aggregate present value" of
the Parachute Awards would exceed the tax that, but for this sentence, would be
imposed on the Participant under Section 4999 of the Code in connection with the
Acquisition, then the Awards shall become immediately exercisable, realizable
and vested without regard to the provisions of this sentence. For purposes of
the preceding sentence, the "aggregate present value" of an Award shall be
calculated on an after-tax basis (other than taxes imposed by Section 4999 of
the Code) and shall be based on economic principles rather than the principles
set forth under Section 280G of the Code and the regulations promulgated
thereunder. All determinations required to be made under this Section 7(e)(v)
shall be made by the Company.
-5-
<PAGE> 6
f. Withholding. Each Participant shall pay to the Company, or make
provisions satisfactory to the Company for payment of, any taxes required by law
to be withheld in connection with Awards to such Participant no later than the
date of the event creating the tax liability. The Board may allow Participants
to satisfy such tax obligations in whole or in part by transferring shares of
Common Stock, including shares retained from the Award creating the tax
obligation, valued at their fair market value (as determined by the Board or as
determined pursuant to the applicable option agreement). The Company may, to the
extent permitted by law, deduct any such tax obligations from any payment of any
kind otherwise due to a Participant.
g. Amendment of Awards. The Board may amend, modify or terminate any
outstanding Award including, but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that, except as otherwise provided in Section 7(e)(iii), the
Participant's consent to such action shall be required unless the Board
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.
h. Conditions on Delivery of Stock. The Company will not be obligated
to deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.
i. Acceleration. The Board may at any time provide that any Options
shall become immediately exercisable in full or in part, that any Restricted
Stock Awards shall be free of some or all restrictions, or that any other
stock-based Awards may become exercisable in full or in part or free of some or
all restrictions or conditions, or otherwise realizable in full or in part, as
the case may be, despite the fact that the foregoing actions may (i) cause the
application of Sections 280G and 4999 of the Code if a change in control of the
Company occurs, or (ii) disqualify all or part of the Option as an Incentive
Stock Option.
8. Miscellaneous
a. Definitions.
(i) "Company," for purposes of eligibility under the Plan, shall
include any present or future subsidiary corporations of Synchronicity, Inc., as
defined in Section 424(f) of the Code (a "Subsidiary"), and any present or
future parent corporation of Synchronicity, Inc., as defined in Section 424(e)
of the Code. For purposes of Awards other than Incentive Stock
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<PAGE> 7
Options, the term "Company" shall include any other business venture in which
the Company has a direct or indirect significant interest, as determined by the
Board in its sole discretion.
(ii) "Code" means the Internal Revenue Code of 1986, as amended,
and any regulations promulgated thereunder.
(iii) "employee" for purposes of eligibility under the Plan shall
include a person to whom an offer of employment has been extended by the
Company.
b. No Right To Employment or Other Status. No person shall have any
claim or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan.
c. No Rights As Stockholder. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any rights
as a stockholder with respect to any shares of Common Stock to be distributed
with respect to an Award until becoming the record holder thereof.
d. Effective Date and Term of Plan. The Plan shall become effective on
the date on which it is adopted by the Board. No Awards shall be granted under
the Plan after the completion of ten years from the date on which the Plan was
adopted by the Board, but Awards previously granted may extend beyond that date.
e. Amendment of Plan. The Board may amend, suspend or terminate the
Plan or any portion thereof at any time.
f. Governing Law. The provisions of the Plan and all Awards made
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware, without regard to any applicable conflicts of law.
Adopted by the Board of Directors on
February 16, 2000
---------------
Approved by the stockholders on
---------------
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<PAGE> 1
Exhibit 10.4
SYNCHRONICITY SOFTWARE, INC.
2000 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. Purpose. This Non-Qualified Stock Option Plan, to be known as the 2000
Non-Employee Director Stock Option Plan (hereinafter, this "Plan") is intended
to promote the interests of Synchronicity Software, Inc. (hereinafter, the
"Company") by providing an inducement to obtain and retain the services of
qualified persons who are not employees or officers of the Company to serve as
members of its Board of Directors (the "Board").
2. Available Shares. The total number of shares of Common Stock, par value
$.01 per share, of the Company (the "Common Stock") for which options may be
granted under this Plan shall not exceed 250,000 shares, subject to adjustment
in accordance with paragraph 10 of this Plan. Shares subject to this Plan are
authorized but unissued shares or shares that were once issued and subsequently
reacquired by the Company. If any options granted under this Plan are
surrendered before exercise or lapse without exercise, in whole or in part, the
shares reserved therefor shall continue to be available under this Plan.
3. Administration. This Plan shall be administered by the Board or by a
committee appointed by the Board (the "Committee"). In the event the Board fails
to appoint or refrains from appointing a Committee, the Board shall have all
power and authority to administer this Plan. In such event, the word "Committee"
wherever used herein shall be deemed to mean the Board. The Committee shall,
subject to the provisions of the Plan, have the power to construe this Plan, to
determine all questions hereunder, and to adopt and amend such rules and
regulations for the administration of this Plan as it may deem desirable. No
member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to this Plan or any option granted
under it.
4. Automatic Grant of Options. Subject to the availability of shares under
this Plan, (a) each person who is or becomes a member of the Board and who is
not an employee or officer of the Company (a "Non-Employee Director") shall be
automatically granted on either (i) the effective date of an initial public
offering of Common Stock of the Company (the "Effective Date") or (ii) the date
such person is first elected to the Board, without further action by the Board,
an option to purchase 5,000 shares of the Common Stock, and (b) each person
receiving an option pursuant to clause (a) hereof who is a Non-Employee Director
on the last day of February and the last day of August during the term of this
Plan shall be automatically granted on each such date an option to purchase
2,500 shares of the Common Stock. The options to be granted under this paragraph
4 shall be the only options ever to be granted at any time to such member under
this Plan. The number of shares covered by options granted under this paragraph
4 shall be subject to adjustment in accordance with the provisions of paragraph
10 of this Plan.
<PAGE> 2
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Notwithstanding anything to the contrary set forth herein, if this Plan is not
approved by a majority of the Company's stockholders present, or represented,
and voting at a meeting of the Stockholders or consenting via written consent in
lieu of a meeting on such matter, then the Plan and the options granted pursuant
to this Section 4 shall terminate and become void, and no further options shall
be granted under this Plan.
5. Option Price. The purchase price of the stock covered by an option
granted pursuant to this Plan shall be 100% of the fair market value of such
shares on the day the option is granted. The option price will be subject to
adjustment in accordance with the provisions of paragraph 10 of this Plan. For
purposes of this Plan, if, at the time an option is granted under the Plan, the
Company's Common Stock is publicly traded, "fair market value" shall be
determined as of the last business day for which the prices or quotes discussed
in this sentence are available prior to the date such option is granted and
shall mean (i) the average (on that date) of the high and low prices of the
Common Stock on the principal national securities exchange on which the Common
Stock is traded, if the Common Stock is then traded on a national securities
exchange; or (ii) the last reported sale price (on that date) of the Common
Stock on the Nasdaq National Market, if the Common Stock is not then traded on a
national securities exchange; or (iii) the closing bid price (or average of bid
prices) last quoted (on that date) by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on the Nasdaq
National Market List. However, if the Common Stock is not publicly traded at the
time an option is granted under the Plan, "fair market value" shall be deemed to
be the fair value of the Common Stock as determined by the Committee after
taking into consideration all factors which it deems appropriate, including,
without limitation, recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length. For purposes of determining the "last
reported" sale price or the "last quoted" price for the foregoing provision, the
last reported or quoted prices shall mean as the case may be, at 4:00 p.m., New
York time, on that day.
6. Period of Option. Unless sooner terminated in accordance with the
provisions of paragraph 8 of this Plan, an option granted hereunder shall expire
on the date which is ten (10) years after the date of grant of the option.
7. (a) Vesting of Shares and Non-Transferability of Options. Options
granted under this Plan shall not be exercisable until they become vested.
Options granted under this Plan shall vest in the optionee and thus become
exercisable, in accordance with the following schedule, provided that the
optionee has continuously served as a member of the Board through such vesting
date:
<TABLE>
<CAPTION>
Fraction of Option
Shares for which
Option Will be Exercisable Date of Vesting
<S> <C>
1/12th Last date of each month
over the year after the date
of the grant
</TABLE>
<PAGE> 3
-3-
The number of shares as to which options may be exercised shall be
cumulative, so that once the option shall become exercisable as to any shares it
shall continue to be exercisable as to said shares, until expiration or
termination of the option as provided in this Plan.
(b) Non-transferability. Any option granted pursuant to this Plan
shall not be assignable or transferable other than by will or the laws of
descent and distribution or pursuant to a domestic relations order and shall be
exercisable during the optionee's lifetime only by him or her.
8. Termination of Option Rights.
(a) In the event an optionee ceases to be a member of the Board
for any reason other than death or permanent disability, any then unexercised
portion of options granted to such optionee shall, to the extent not then
vested, immediately terminate and become void; any portion of an option which is
then vested but has not been exercised at the time the optionee so ceases to be
a member of the Board may be exercised, to the extent it is then vested, by the
optionee within 90 days of the date the optionee ceased to be a member of the
Board; and all options shall terminate after such 90 days have expired.
(b) In the event that an optionee ceases to be a member of the
Board by reason of his or her death or permanent disability, any option granted
to such optionee shall be immediately and automatically accelerated and become
fully vested and all unexercised options shall be exercisable by the optionee
(or by the optionee's personal representative, heir or legatee, in the event of
death) until the scheduled expiration date of the option.
9. Exercise of Option. Subject to the terms and conditions of this Plan
and the option agreements, an option granted hereunder shall, to the extent then
exercisable, be exercisable in whole or in part by giving written notice to the
Company by mail or in person addressed to Synchronicity Software, Inc., 201
Forest Street, Marlboro, MA 01752, at its principal executive offices, stating
the number of shares with respect to which the option is being exercised,
accompanied by payment in full for such shares. Payment may be (a) in United
States dollars in cash or by check, (b) in whole or in part in shares of the
Common Stock of the Company already owned by the person or persons exercising
the option or shares subject to the option being exercised (subject to such
restrictions and guidelines as the Board may adopt from time to time), valued at
fair market value determined in accordance with the provisions of paragraph 5 or
(c) consistent with applicable law, through the delivery of an assignment to the
Company of a sufficient amount of the proceeds from the sale of the Common Stock
acquired upon exercise of the option and an authorization to the broker or
selling agent to pay that amount to the Company, which sale shall be at the
participant's direction at the time of exercise. There shall be no such exercise
at any one time as to fewer than one hundred (100) shares or all of the
remaining shares then purchasable by the person or persons exercising the
option, if fewer than one hundred (100) shares. The Company's transfer agent
shall, on behalf of the Company, prepare a certificate or certificates
representing such shares acquired pursuant to exercise of the option, shall
register the optionee as the owner of such shares on the books of the Company
and shall cause the fully executed certificate(s) representing such shares to be
delivered to the optionee as soon as
<PAGE> 4
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practicable after payment of the option price in full. The holder of an option
shall not have any rights of a stockholder with respect to the shares covered by
the option, except to the extent that one or more certificates for such shares
shall be delivered to him or her upon the due exercise of the option.
10. Adjustments Upon Changes in Capitalization and Other Events. Upon the
occurrence of any of the following events, an optionee's rights with respect to
options granted to him or her hereunder shall be adjusted as hereinafter
provided:
(a) Stock Dividends and Stock Splits. If the shares of Common
Stock shall be subdivided or combined into a greater or smaller number of
shares or if the Company shall issue any shares of Common Stock as a stock
dividend on its outstanding Common Stock, the number of shares of Common
Stock deliverable upon the exercise of options shall be appropriately
increased or decreased proportionately, and appropriate adjustments shall
be made in the purchase price per share to reflect such subdivision,
combination or stock dividend.
(b) Recapitalization Adjustments. If the Company is to be
consolidated with or acquired by another entity in a merger, sale of all
or substantially all of the Company's assets or otherwise, each option
granted under this plan which is outstanding but unvested as of the
effective date of such event shall become exercisable in full three (3)
business days prior to the effective date of such event. In the event of a
reorganization, recapitalization, merger, consolidation, or any other
change in the corporate structure or shares of the Company, to the extent
permitted by Rule 16b-3 under the Securities Exchange Act of 1934,
adjustments in the number and kind of shares authorized by this Plan and
in the number and kind of shares covered by, and in the option price of
outstanding options under this Plan necessary to maintain the
proportionate interest of the optionee and preserve, without exceeding,
the value of such option, shall be made. Notwithstanding the foregoing, no
such adjustment shall be made which would, within the meaning of any
applicable provisions of the Internal Revenue Code of 1986, as amended,
constitute a modification, extension or renewal of any Option or a grant
of additional benefits to the holder of an Option.
(c) Issuances of Securities. Except as expressly provided herein,
no issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of shares subject to options. No adjustments shall be made for
dividends paid in cash or in property other than securities of the
Company.
(d) Adjustments. Upon the happening of any of the foregoing
events, the class and aggregate number of shares set forth in paragraphs 2
and 4 of this Plan that are subject to options which previously have been
or subsequently may be granted under this Plan shall also be appropriately
adjusted to reflect such events. The Board shall determine the specific
adjustments to be made under this paragraph 10 and its determination shall
be conclusive.
<PAGE> 5
-5-
11. Restrictions on Issuance of Shares. Notwithstanding the provisions of
paragraphs 4 and 9 of this Plan, the Company shall have no obligation to deliver
any certificate or certificates upon exercise of an option until one of the
following conditions shall be satisfied:
(i) The issuance of shares with respect to which the option has been
exercised is at the time of the issue of such shares effectively
registered under applicable Federal and state securities laws as now in
force or hereafter amended; or
(ii) Counsel for the Company shall have given an opinion that the
issuance of such shares is exempt from registration under Federal and
state securities laws as now in force or hereafter amended; and the
Company has complied with all applicable laws and regulations with respect
thereto, including without limitation all regulations required by any
stock exchange upon which the Company's outstanding Common Stock is then
listed.
12. Legend on Certificates. The certificates representing shares issued
pursuant to the exercise of an option granted hereunder shall carry such
appropriate legend, and such written instructions shall be given to the
Company's transfer agent, as may be deemed necessary or advisable by counsel to
the Company in order to comply with the requirements of the Securities Act of
1933 or any state securities laws.
13. Representation of Optionee. If requested by the Company, the optionee
shall deliver to the Company written representations and warranties upon
exercise of the option that are necessary to show compliance with Federal and
state securities laws, including representations and warranties to the effect
that a purchase of shares under the option is made for investment and not with a
view to their distribution (as that term is used in the Securities Act of 1933).
14. Option Agreement. Each option granted under the provisions of this
Plan shall be evidenced by an option agreement, which agreement shall be duly
executed and delivered on behalf of the Company and by the optionee to whom such
option is granted. The option agreement shall contain such terms, provisions and
conditions not inconsistent with this Plan as may be determined by the officer
executing it.
15. Termination and Amendment of Plan. Options may no longer be granted
under this Plan after February __, 2010, and this Plan shall terminate when all
options granted or to be granted hereunder are no longer outstanding. The Board
may at any time terminate this Plan or make such modification or amendment
thereof as it deems advisable; provided, however, that the Board may not,
without approval of the stockholders, (a) increase the maximum number of shares
for which options may be granted under this Plan (except by adjustment pursuant
to Section 10), (b) materially modify the requirements as to eligibility to
participate in this Plan or (c) materially increase benefits accruing to option
holders under this Plan. Termination or any modification or amendment of this
Plan shall not, without consent of a participant, affect his or her rights under
an option previously granted to him or her.
16. Withholding of Income Taxes. Upon the exercise of an option, the
Company, in accordance with Section 3402(a) of the Internal Revenue Code, may
require the optionee to pay
<PAGE> 6
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withholding taxes in respect of amounts considered to be compensation includible
in the optionee's gross income.
17. Compliance with Regulations. It is the Company's intent that the Plan
comply in all respects with Rule 16b-3 under the Securities Exchange Act of 1934
(or any successor or amended provision thereof) and any applicable Securities
and Exchange Commission interpretations thereof. If any provision of this Plan
is deemed not to be in compliance with Rule 16b-3, the provision shall be null
and void.
18. Governing Law. The validity and construction of this Plan and the
instruments evidencing options shall be governed by the laws of the State of
Delaware, without giving effect to the principles of conflicts of law thereof.
Date Approved by Board of Directors of the Company: February 16, 2000
Date Approved by Stockholders of the Company: __________, 2000
<PAGE> 1
Exhibit 10.5
SYNCHRONICITY SOFTWARE, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
ARTICLE 1 - PURPOSE.
This 2000 Employee Stock Purchase Plan (the "Plan") is intended to encourage
stock ownership by all eligible employees of Synchronicity Software, Inc. (the
"Company"), a Delaware corporation, and its participating subsidiaries (as
defined in Article 17) so that they may share in the growth of the Company by
acquiring or increasing their proprietary interest in the Company. The Plan is
designed to encourage eligible employees to remain in the employ of the Company
and its participating subsidiaries. The Plan is intended to constitute an
"employee stock purchase plan" within the meaning of Section 423(b) of the
Internal Revenue Code of 1986, as amended (the "Code").
ARTICLE 2 - ADMINISTRATION OF THE PLAN.
The Plan may be administered by a committee appointed by the Board of
Directors of the Company (the "Committee"). The Committee shall consist of not
less than two members of the Company's Board of Directors. The Board of
Directors may from time to time remove members from, or add members to, the
Committee. Vacancies on the Committee, howsoever caused, shall be filled by the
Board of Directors. The Committee may select one of its members as Chairman, and
shall hold meetings at such times and places as it may determine. Acts by a
majority of the Committee, or acts reduced to or approved in writing by a
majority of the members of the Committee, shall be the valid acts of the
Committee.
The interpretation and construction by the Committee of any provisions of
the Plan or of any option granted under it shall be final, unless otherwise
determined by the Board of Directors. The Committee may from time to time adopt
such rules and regulations for carrying out the Plan as it may deem best,
provided that any such rules and regulations shall be applied on a uniform basis
to all employees under the Plan. No member of the Board of Directors or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any option granted under it.
In the event the Board of Directors fails to appoint or refrains from
appointing a Committee, the Board of Directors shall have all power and
authority to administer the Plan. In such event, the word "Committee" wherever
used herein shall be deemed to mean the Board of Directors.
<PAGE> 2
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ARTICLE 3 - ELIGIBLE EMPLOYEES.
All employees of the Company or any of its participating subsidiaries shall
be eligible to receive options under the Plan to purchase common stock of the
Company, and all eligible employees shall have the same rights and privileges
hereunder. Persons who are eligible employees on the first business day of any
Payment Period (as defined in Article 5) shall receive their options as of such
day. Persons who become eligible employees after any date on which options are
granted under the Plan shall be granted options on the first day of the next
succeeding Payment Period on which options are granted to eligible employees
under the Plan. In no event, however, may an employee be granted an option if
such employee, immediately after the option was granted, would be treated as
owning stock possessing five percent or more of the total combined voting power
or value of all classes of stock of the Company or of any parent corporation or
subsidiary corporation, as the terms "parent corporation" and "subsidiary
corporation" are defined in Section 424(e) and (f) of the Code. For purposes of
determining stock ownership under this paragraph, the rules of Section 424(d) of
the Code shall apply, and stock which the employee may purchase under
outstanding options shall be treated as stock owned by the employee.
For the purposes of this Article 3, the term "employee" shall mean an
employee whose customary employment is more than twenty (20) hours per week and
for more than five (5) months in any calendar year.
ARTICLE 4 - STOCK SUBJECT TO THE PLAN.
The stock subject to the options under the Plan shall be shares of the
Company's authorized but unissued common stock, par value $.01 per share (the
"Common Stock"), or shares of Common Stock reacquired by the Company, including
shares purchased in the open market. The aggregate number of shares which may be
issued pursuant to the Plan is 500,000, subject to adjustment as provided in
Article 12. If any option granted under the Plan shall expire or terminate for
any reason without having been exercised in full or shall cease for any reason
to be exercisable in whole or in part, the unpurchased shares subject thereto
shall again be available under the Plan.
ARTICLE 5 - PAYMENT PERIOD AND STOCK OPTIONS.
Payment Periods during which payroll deductions will be accumulated under
the Plan shall consist of the six-month periods from September 1 to the last day
of February and from March 1 to August 31 of each calendar year, beginning with
the first Payment Period. The first Payment Period under the Plan shall commence
on the effective date of an initial public offering of Common Stock of the
Company (the "Effective Date") and shall end on the following August 31st.
Payroll deductions made from bonus and commission payments will be deemed
accumulated under the Plan during the Payment Period during which such payments
are made. All other payroll deductions will be deemed accumulated under the Plan
during the Payment Period during which the regular payroll period to which it
relates ends.
<PAGE> 3
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Twice each year, on the first business day of each Payment Period, the
Company will grant to each eligible employee who is then a participant in the
Plan an option to purchase on the last day of such Payment Period, at the Option
Price hereinafter provided for, a maximum of 500 shares, on condition that such
employee remains eligible to participate in the Plan throughout the remainder of
such Payment Period. The participant shall be entitled to exercise the option so
granted only to the extent of the participant's accumulated payroll deductions
on the last day of such Payment Period. If the participant's accumulated payroll
deductions on the last day of the Payment Period would enable the participant to
purchase more than 500 shares except for the 500 share limitation, the excess of
the amount of the accumulated payroll deductions over the aggregate purchase
price of the 500 shares shall be promptly refunded to the participant by the
Company, without interest. The Option Price per share for each Payment Period
shall be the lesser of (i) 85% of the average market price of the Common Stock
on the first business day of the Payment Period and (ii) 85% of the average
market price of the Common Stock on the last business day of the Payment Period,
in either event rounded up to avoid fractions of a dollar other than 1/4, 1/2
and 3/4. The foregoing limitation on the number of shares subject to option and
the Option Price shall be subject to adjustment as provided in Article 12.
For purposes of the Plan, the term "average market price" on any date means
(i) the average (on that date) of the high and low prices of the Common Stock on
the principal national securities exchange on which the Common Stock is traded,
if the Common Stock is then traded on a national securities exchange; or (ii)
the last reported sale price (on that date) of the Common Stock on the Nasdaq
National Market, if the Common Stock is not then traded on a national securities
exchange; or (iii) the average of the closing bid and asked prices last quoted
(on that date) by an established quotation service for over-the-counter
securities, if the Common Stock is not reported on the Nasdaq National Market;
or (iv) if the Common Stock is not publicly traded, the fair market value of the
Common Stock as determined by the Committee after taking into consideration all
factors which it deems appropriate, including, without limitation, recent sale
and offer prices of the Common Stock in private transactions negotiated at arm's
length. For purposes of determining the "last reported" sale price or the "last
quoted" price for the foregoing provision, the last reported or quoted prices
shall mean as the case may be, at 4:00 p.m., New York time, on that day.
For purposes of the Plan, the term "business day" means a day on which there
is trading on the Nasdaq National Market or the aforementioned national
securities exchange, whichever is applicable pursuant to the preceding
paragraph; and if neither is applicable, a day that is not a Saturday, Sunday or
legal holiday in the Commonwealth of Massachusetts.
No employee shall be granted an option which permits the employee's right to
purchase stock under the Plan, and under all other Section 423(b) employee stock
purchase plans of the Company and any parent or subsidiary corporations, to
accrue at a rate which exceeds $25,000 of fair market value of such stock
(determined on the date or dates that options on such stock were granted) for
each calendar year in which such option is outstanding at any time. The purpose
of the limitation in the preceding sentence is to comply with Section 423(b)(8)
of the
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Code. If the participant's accumulated payroll deductions on the last day of the
Payment Period would otherwise enable the participant to purchase Common Stock
in excess of the Section 423(b)(8) limitation described in this paragraph, the
excess of the amount of the accumulated payroll deductions over the aggregate
purchase price of the shares actually purchased shall be promptly refunded to
the participant by the Company, without interest.
ARTICLE 6 - EXERCISE OF OPTION.
Each eligible employee who continues to be a participant in the Plan on the
last day of a Payment Period shall be deemed to have exercised his or her option
on such date and shall be deemed to have purchased from the Company such number
of full shares of Common Stock reserved for the purpose of the Plan as the
participant's accumulated payroll deductions on such date will pay for at the
Option Price, subject to the 500 share limit of the option and the Section
423(b)(8) limitation described in Article 5. If the individual is not a
participant on the last day of a Payment Period, then he or she shall not be
entitled to exercise his or her option. Only full shares of Common Stock may be
purchased under the Plan. Unused payroll deductions remaining in a participant's
account at the end of a Payment Period by reason of the inability to purchase a
fractional share shall be carried forward to the next Payment Period.
ARTICLE 7 - AUTHORIZATION FOR ENTERING THE PLAN.
An employee may elect to enter the Plan by filling out, signing and
delivering to the Company an authorization:
A. Stating the percentage to be deducted regularly from the
employee's pay;
B. Authorizing the purchase of stock for the employee in each Payment
Period in accordance with the terms of the Plan; and
C. Specifying the exact name or names in which stock purchased for the
employee is to be issued as provided under Article 11 hereof.
Such authorization must be received by the Company at least ten days before the
first day of the next succeeding Payment Period and shall take effect only if
the employee is an eligible employee on the first business day of such Payment
Period.
Unless a participant files a new authorization or withdraws from the Plan,
the deductions and purchases under the authorization the participant has on file
under the Plan will continue from one Payment Period to succeeding Payment
Periods as long as the Plan remains in effect.
The Company will accumulate and hold for each participant's account the
amounts deducted from his or her pay. No interest will be paid on these amounts.
ARTICLE 8 - MAXIMUM AMOUNT OF PAYROLL DEDUCTIONS.
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An employee may authorize payroll deductions in an amount (expressed as a
whole percentage) not less than one percent (1%) but not more than ten percent
(10%) of the employee's total compensation, including base pay or salary and any
overtime, bonuses or commissions.
ARTICLE 9 - CHANGE IN PAYROLL DEDUCTIONS.
Deductions may not be increased or decreased during a Payment Period.
However, a participant may withdraw in full from the Plan.
ARTICLE 10 - WITHDRAWAL FROM THE PLAN.
A participant may withdraw from the Plan (in whole but not in part) at any
time prior to the last day of a Payment Period by delivering a withdrawal notice
to the Company.
To re-enter the Plan, an employee who has previously withdrawn must file a
new authorization at least ten days before the first day of the next Payment
Period in which he or she wishes to participate. The employee's re-entry into
the Plan becomes effective at the beginning of such Payment Period, provided
that he or she is an eligible employee on the first business day of the Payment
Period.
ARTICLE 11 - ISSUANCE OF STOCK.
Certificates for stock issued to participants shall be delivered as soon as
practicable after each Payment Period by the Company's transfer agent.
Stock purchased under the Plan shall be issued only in the name of the
participant, or if the participant's authorization so specifies, in the name of
the participant and another person of legal age as joint tenants with rights of
survivorship.
ARTICLE 12 - ADJUSTMENTS.
Upon the happening of any of the following described events, a participant's
rights under options granted under the Plan shall be adjusted as hereinafter
provided:
A. In the event that the shares of Common Stock shall be subdivided or
combined into a greater or smaller number of shares or if, upon a
reorganization, split-up, liquidation, recapitalization or the like of the
Company, the shares of Common Stock shall be exchanged for other securities
of the Company, each participant shall be entitled, subject to the
conditions herein stated, to purchase such number of shares of Common Stock
or amount of other securities of the Company as were exchangeable for the
number of shares of Common Stock that such participant would have been
entitled to purchase except for such action, and appropriate adjustments
shall be made in the purchase price per share to reflect such subdivision,
combination or exchange; and
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B. In the event the Company shall issue any of its shares as a stock
dividend upon or with respect to the shares of stock of the class which
shall at the time be subject to option hereunder, each participant upon
exercising such an option shall be entitled to receive (for the purchase
price paid upon such exercise) the shares as to which the participant is
exercising his or her option and, in addition thereto (at no additional
cost), such number of shares of the class or classes in which such stock
dividend or dividends were declared or paid, and such amount of cash in lieu
of fractional shares, as is equal to the number of shares thereof and the
amount of cash in lieu of fractional shares, respectively, which the
participant would have received if the participant had been the holder of
the shares as to which the participant is exercising his or her option at
all times between the date of the granting of such option and the date of
its exercise.
Upon the happening of any of the foregoing events, the class and aggregate
number of shares set forth in Article 4 hereof which are subject to options
which have been or may be granted under the Plan and the limitations set forth
in the second paragraph of Article 5 shall also be appropriately adjusted to
reflect the events specified in paragraphs A and B above. Notwithstanding the
foregoing, any adjustments made pursuant to paragraphs A or B shall be made only
after the Committee, based on advice of counsel for the Company, determines
whether such adjustments would constitute a "modification" (as that term is
defined in Section 424 of the Code). If the Committee determines that such
adjustments would constitute a modification, it may refrain from making such
adjustments.
If the Company is to be consolidated with or acquired by another entity in a
merger, a sale of all or substantially all of the Company's assets or otherwise
(an "Acquisition"), the Committee or the board of directors of any entity
assuming the obligations of the Company hereunder (the "Successor Board") shall,
with respect to options then outstanding under the Plan, either (i) make
appropriate provision for the continuation of such options by arranging for the
substitution on an equitable basis for the shares then subject to such options
either (a) the consideration payable with respect to the outstanding shares of
the Common Stock in connection with the Acquisition, (b) shares of stock of the
successor corporation, or a parent or subsidiary of such corporation, or (c)
such other securities as the Successor Board deems appropriate, the fair market
value of which shall not materially exceed the fair market value of the shares
of Common Stock subject to such options immediately preceding the Acquisition;
or (ii) terminate each participant's options in exchange for a cash payment
equal to the excess of (a) the fair market value on the date of the Acquisition,
of the number of shares of Common Stock that the participant's accumulated
payroll deductions as of the date of the Acquisition could purchase, at an
option price determined with reference only to the first business day of the
applicable Payment Period and subject to the 500 share limit, Code Section
423(b)(8) and fractional-share limitations on the amount of stock a participant
would be entitled to purchase, over (b) the result of multiplying such number of
shares by such option price.
The Committee or Successor Board shall determine the adjustments to be made
under this Article 12, and its determination shall be conclusive.
<PAGE> 7
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ARTICLE 13 - NO TRANSFER OR ASSIGNMENT OF EMPLOYEE'S RIGHTS.
An option granted under the Plan may not be transferred or assigned and may
be exercised only by the participant.
ARTICLE 14 - TERMINATION OF EMPLOYEE'S RIGHTS.
Whenever a participant ceases to be an eligible employee because of
retirement, voluntary or involuntary termination, resignation, layoff,
discharge, death or for any other reason, his or her rights under the Plan shall
immediately terminate, and the Company shall promptly refund, without interest,
the entire balance of his or her payroll deduction account under the Plan.
Notwithstanding the foregoing, eligible employment shall be treated as
continuing intact while a participant is on military leave, sick leave or other
bona fide leave of absence, for up to 90 days, or for so long as the
participant's right to re-employment is guaranteed either by statute or by
contract, if longer than 90 days. If a participant's payroll deductions are
interrupted by any legal process, a withdrawal notice will be considered as
having been received from the participant on the day the interruption occurs.
ARTICLE 15 - TERMINATION AND AMENDMENTS TO PLAN.
Unless terminated sooner as provided below, the Plan shall terminate on
February __, 2010. The Plan may be terminated at any time by the Company's Board
of Directors but such termination shall not affect options then outstanding
under the Plan. It will terminate in any case when all or substantially all of
the unissued shares of stock reserved for the purposes of the Plan have been
purchased. If at any time shares of stock reserved for the purpose of the Plan
remain available for purchase but not in sufficient number to satisfy all then
unfilled purchase requirements, the available shares shall be apportioned among
participants in proportion to the amount of payroll deductions accumulated on
behalf of each participant that would otherwise be used to purchase stock, and
the Plan shall terminate. Upon such termination or any other termination of the
Plan, all payroll deductions not used to purchase stock will be refunded,
without interest.
The Committee or the Board of Directors may from time to time adopt
amendments to the Plan provided that, without the approval of the stockholders
of the Company, no amendment may (i) increase the number of shares that may be
issued under the Plan; (ii) change the class of employees eligible to receive
options under the Plan, if such action would be treated as the adoption of a new
plan for purposes of Section 423(b) of the Code; or (iii) cause Rule 16b-3 under
the Securities Exchange Act of 1934 to become inapplicable to the Plan.
ARTICLE 16 - LIMITS ON SALE OF STOCK PURCHASED UNDER THE PLAN.
The Plan is intended to provide shares of Common Stock for investment and
not for resale. The Company does not, however, intend to restrict or influence
any employee in the conduct of his or her own affairs. An employee may,
therefore, sell stock purchased under the Plan at any time the employee chooses,
subject to compliance with any applicable federal or
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state securities laws and subject to any restrictions imposed under Article 21
to ensure that tax withholding obligations are satisfied. THE EMPLOYEE ASSUMES
THE RISK OF ANY MARKET FLUCTUATIONS IN THE PRICE OF THE STOCK.
ARTICLE 17 - PARTICIPATING SUBSIDIARIES.
The term "participating subsidiary" shall mean any present or future
subsidiary of the Company, as that term is defined in Section 424(f) of the
Code, which is designated from time to time by the Board of Directors to
participate in the Plan. The Board of Directors shall have the power to make
such designation before or after the Plan is approved by the stockholders.
ARTICLE 18 - OPTIONEES NOT STOCKHOLDERS.
Neither the granting of an option to an employee nor the deductions from his
or her pay shall constitute such employee a stockholder of the shares covered by
an option until such shares have been actually purchased by the employee.
ARTICLE 19 - APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Common Stock pursuant
to options granted under the Plan will be used for general corporate purposes.
ARTICLE 20 - NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.
By electing to participate in the Plan, each participant agrees to notify
the Company in writing immediately after the participant transfers Common Stock
acquired under the Plan, if such transfer occurs within two years after the
first business day of the Payment Period in which such Common Stock was
acquired. Each participant further agrees to provide any information about such
a transfer as may be requested by the Company or any subsidiary corporation in
order to assist it in complying with the tax laws. Such dispositions generally
are treated as "disqualifying dispositions" under Sections 421 and 424 of the
Code, which have certain tax consequences to participants and to the Company and
its participating subsidiaries.
ARTICLE 21 - WITHHOLDING OF ADDITIONAL INCOME TAXES.
By electing to participate in the Plan, each participant acknowledges that
the Company and its participating subsidiaries are required to withhold taxes
with respect to the amounts deducted from the participant's compensation and
accumulated for the benefit of the participant under the Plan, and each
participant agrees that the Company and its participating subsidiaries may
deduct additional amounts from the participant's compensation, when amounts are
added to the participant's account, used to purchase Common Stock or refunded,
in order to satisfy such withholding obligations. Each participant further
acknowledges that when Common Stock is purchased under the Plan the Company and
its participating subsidiaries may be required to withhold taxes with respect to
all or a portion of the difference between the fair market value of the Common
Stock purchased and its purchase price, and each participant
<PAGE> 9
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agrees that such taxes may be withheld from compensation otherwise payable to
such participant. It is intended that tax withholding will be accomplished in
such a manner that the full amount of payroll deductions elected by the
participant under Article 7 will be used to purchase Common Stock. However, if
amounts sufficient to satisfy applicable tax withholding obligations have not
been withheld from compensation otherwise payable to any participant, then,
notwithstanding any other provision of the Plan, the Company may withhold such
taxes from the participant's accumulated payroll deductions and apply the net
amount to the purchase of Common Stock, unless the participant pays to the
Company, prior to the exercise date, an amount sufficient to satisfy such
withholding obligations. Each participant further acknowledges that the Company
and its participating subsidiaries may be required to withhold taxes in
connection with the disposition of stock acquired under the Plan and agrees that
the Company or any participating subsidiary may take whatever action it
considers appropriate to satisfy such withholding requirements, including
deducting from compensation otherwise payable to such participant an amount
sufficient to satisfy such withholding requirements or conditioning any
disposition of Common Stock by the participant upon the payment to the Company
or such subsidiary of an amount sufficient to satisfy such withholding
requirements.
ARTICLE 22 - GOVERNMENTAL REGULATIONS.
The Company's obligation to sell and deliver shares of Common Stock under
the Plan is subject to the approval of any governmental authority required in
connection with the authorization, issuance or sale of such shares.
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required to
identify shares of Common Stock issued under the Plan on its stock ownership
records and send tax information statements to employees and former employees
who transfer title to such shares.
ARTICLE 23 - GOVERNING LAW.
The validity and construction of the Plan shall be governed by the laws of
Delaware, without giving effect to the principles of conflicts of law thereof.
ARTICLE 24 - APPROVAL OF BOARD OF DIRECTORS AND STOCKHOLDERS OF THE COMPANY.
The Plan was adopted by the Board of Directors on February 16, 2000 and was
approved by the stockholders of the Company on [_____ ___, 2000].
<PAGE> 1
Exhibit 10.6
SECOND AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
This Second Amended and Restated Registration Rights Agreement (the
"Agreement") amending and restating that certain Registration Rights Agreement,
dated as of September 27, 1996 as amended on February 19, 1997 and restated on
April 28, 1997, by and among Synchronicity, Inc., a Massachusetts corporation
(the "Company"), Wheatley Partners, L.P. and Wheatley Foreign Partners, L.P.
(the "Series B Investors"), Canaan Capital Limited Partnership, Canaan Capital
Offshore Limited Partnership, C.V., Canaan S.B.I.C., L.P., Mark A. Ross, David
Spitzman, Thomas Bouzane, Mark Barlow and Richard Byrd (collectively, with the
Series B Investors, the "Series C Investors") and Pioneer Capital Corporation,
Canaan Equity, L.P., Marek Skoskiewicz, Synopsys, Inc. and Intel Corporation
(collectively, with the Series B Investors and Series C Investors, with the
exception of Thomas Bouzane and Richard Byrd, the "Series D Investors" and the
Series B Investors, Series C Investors and the Series D Investors are sometimes
hereinafter collectively referred to as the "Investors") is entered into as of
September 28, 1998.
RECITALS
WHEREAS, pursuant to the terms of, and in order to induce the Series D
Investors to enter into that certain Series D Convertible Preferred Stock
Purchase Agreement of even date herewith between the Company and the Series D
Investors (the "Stock Purchase Agreement"), the parties hereto have agreed to
provide for the registration rights set forth in this Agreement.
NOW, THEREFORE, the parties to this Agreement hereby agree as follows:
1. Amendment and Restatement of the Registration Rights Agreement. The
Company, the Series B Investors and the Series C Investors, pursuant to Section
13(k) of the Registration Rights Agreement hereby agree that the Registration
Rights Agreement is amended and restated in its entirety as set forth in this
Agreement.
2. Definitions. For all purposes of this Agreement, the following terms
shall have the meanings set forth below (capitalized terms used herein and not
otherwise defined herein shall have the meaning set forth in the Stock Purchase
Agreement for such term):
Commission means the Securities and Exchange Commission, or any
successor agency.
Common Stock means (a) the Common Stock (as defined in the Stock
Purchase Agreement), and (b) any shares of any other class of capital
stock of the Company hereafter issued which is (i) not preferred in the
Company's Amended and Restated Articles of Organization, as amended (the
"Charter"), as to dividends or to assets upon liquidation, dissolution or
winding up of the Company over any other class of stock of the Company,
(ii) not subject to redemption in the
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Charter or (iii) issued to the holders of Common Stock upon any
reclassification thereof.
Demand Registration means any request by the Stockholders to
register the Registrable Securities pursuant to Section 3(a)(i).
indemnified party and indemnifying party. As defined in
Section 9(c).
Instrument of Accession means an Instrument of Accession in the form
of Exhibit A hereto.
Piggyback Registration. As defined in Section 4(a)(i).
Public Sale means any sale of Registrable Securities to the public
pursuant to a public offering registered under the Securities Act or to
the public through a broker or marketmaker pursuant to the provisions of
Rule 144 (or any successor rule) adopted under the Securities Act or any
other public offering not required to be registered under the Securities
Act.
Qualified Public Offering has the meaning assigned to the term
"Qualified Public Offering" in the Charter.
Registration Expenses. As defined in Section 8(a).
registered and registration mean a registration effected by
preparing and filing a registration statement in compliance with the
Securities Act and the declaration or ordering by the Commission of the
effectiveness of such registration statement.
Registrable Securities means at any particular time all shares of
Common Stock (a) into which the Series B Preferred Stock, the Series C
Preferred Stock and the Series D Preferred Stock have been converted and
(b) acquired after the date hereof by any Series B Investor, Series C
Investor or Series D Investor, including shares of Common Stock issuable
on the conversion of other securities or other options, that have not been
sold in a Public Sale, less those shares held by Stockholders whose entire
holdings of such shares are eligible for resale, without registration,
under Rule 144 in any three (3) month period.
Rule 144 means Rule 144 adopted by the Commission under the
Securities Act, as such rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission.
Securities Act means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to
time.
<PAGE> 3
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Series B Preferred Stock means the Series B Convertible Preferred
Stock, $.01 par value per share, of the Company.
Series C Preferred Stock means the Series C Convertible Preferred
Stock, $.01 par value per share, of the Company.
Series D Preferred Stock means the Series D Convertible Preferred
Stock, $.01 par value per share, of the Company.
Stockholders means, initially, the Investors and, thereafter, any
Person who becomes a party to this Agreement by executing an Instrument of
Accession in connection with a transfer to or acquisition by such Person
or Persons who become holders of Registrable Securities pursuant to or in
connection with a transfer permitted under Section 13(e) herein from any
Investor or any subsequent transferee of an Investor; provided, that the
term "Stockholder" shall not include any Person who has sold, transferred
or otherwise disposed of all of such Person's Registrable Securities.
Underwriters' Maximum Number means, for any Piggyback Registration,
Demand Registration or other registration which is an underwritten
registration, that number of securities to which such registration should,
in the opinion of the managing underwriters of such registration in the
light of marketing factors, be limited.
3. Stockholder Demand Registration.
(a) Request for Demand Registration.
(i) Subject to the limitations contained in the following
paragraphs of this Section 3, the holders of thirty-three percent (33%) or
more of the Registrable Securities then outstanding may at any time on or
after 180 days after the effective date of the registration statement of
the Company's Qualified Public Offering, give to the Company, pursuant to
this clause (i), a written request to register the Registrable Securities.
Within ten (10) days after the receipt by the Company of any such written
request, the Company will give written notice of such registration request
to all Stockholders.
(ii) Subject to the limitations contained in the following
paragraphs of this Section 3, after the receipt of such written request
for a Demand Registration, (A) the Company will be obligated and required
to include in such Demand Registration all Registrable Securities with
respect to which the Company shall receive from Stockholders, within
thirty (30) days after the date on which the Company shall have given to
all Stockholders a written notice of registration request pursuant to
Section 3(a)(i) hereof, the written requests of such
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Stockholders for inclusion of their respective shares of Registrable
Securities in such Demand Registration, and (B) the Company will use its
best efforts to prepare and file with the Commission a registration
statement under the Securities Act on any appropriate form promulgated by
the Commission and reasonably acceptable to the Stockholders requesting
such Demand Registration pursuant to clause (i) above covering all such
Registrable Securities and shall use its best efforts to cause such
registration statement to become effective under the Securities Act. All
written requests made by Stockholders pursuant to this clause (ii) will
specify the number of shares of Registrable Securities to be registered
and will also specify the intended method of disposition thereof. Such
method of disposition shall, in any case, be an underwritten offering if
an underwritten offering is requested by the Demanding Stockholders (as
defined in Section 3(c) hereof) holding fifty-one percent (51%) or more of
the Registrable Securities to be included in such Demand Registration by
all of the Demanding Stockholders.
(iii) The Stockholders shall be permitted to withdraw all or
any part of the Registrable Securities of such Stockholders from any
Demand Registration at any time prior to the effective date of such Demand
Registration but, in the case of an underwritten public offering, only if
such Stockholders are permitted to do so by the managing underwriters or
pursuant to any agreement therewith.
(b) Limitations on Demand Registration.
(i) The holders of Series B Preferred Stock, the holders of
Series C Preferred Stock and the holders of Series D Preferred Stock shall
not be entitled to require the Company to effect, pursuant to Section 3(a)
hereof, more than two (2) Demand Registrations but shall be entitled to
unlimited additional Demand Registrations if such additional Demand
Registrations would be eligible for registration on Form S-3 (after the
Company qualifies for Form S-3, provided that in the case of any
individual such Demand Registration the aggregate gross proceeds from such
S-3 Demand Registration would exceed $500,000, if all registered shares
thereunder were sold) provided, however, that there shall be no more than
two (2) such registrations in any twelve (12) month period.
(ii) Any registration initiated pursuant to Section 3(a)
hereof shall not count as a Demand Registration for purposes of Section
3(a) hereof unless and until such registration shall have become effective
and seventy-five percent (75%) of the number of shares initially included
in the first filing by the Company with the Commission, but not withdrawn
under Section 3(a)(iii) above, shall have been actually sold (unless the
requesting Stockholders withdraw all their Registrable Securities and the
Company has performed its obligations hereunder in all material respects,
in which case such demand will count as a Demand Registration unless the
requesting Stockholders pay all Registration Expenses in connection with
the withdrawn registration).
<PAGE> 5
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(iii) The Company shall not be obligated or required to effect
the Demand Registration of any Registrable Securities pursuant to Section
3(a) hereof during (a) the period commencing on the date falling
forty-five (45) days prior to the Company's estimated date of filing (as
notified to the Stockholders in writing) of, and ending on the date 180
days following the effective date of, any registration statement
pertaining to any firm commitment underwritten registration of the
Company's equity securities or such shorter period which in the opinion of
the managing underwriters), if any, of such registration would not affect
the marketability of the shares being offered thereby (x) initiated by the
Company, and solely for the account of the Company (other than any
registration by the Company on Form S-8 or similar form or dividend
reinvestment plan) or (y) initiated pursuant to Section 3(a)(i) hereof or
(b) the ninety (90) day period after the commencement by the Company of
any activity (a "Material Activity") that, in the good faith business
judgment of the Company's Board of Directors, would be materially and
adversely affected to the detriment of the Company by the requested Demand
Registration (provided that (x) the Demand Registration may only be
deferred if the Material Activity was commenced prior to receipt by the
Company of the request for the Demand Registration, and (y) no more than
one (1) deferral may be effected pursuant to clause (a) or (b) during any
360 day period). A deferral of a Demand Registration pursuant to this
Section 3(b)(iii) shall be lifted, and, unless the Demand Registration
request has been withdrawn as contemplated below, the requested
registration statement shall be filed forthwith, if, in the case of a
deferral pursuant to clause (a) of the preceding sentence, the proposed
registration for the Company's account is abandoned or not declared
effective within ninety (90) days from the filing date, or in the case of
a deferral pursuant to clause (b) of the preceding sentence, the Company
ceases to be engaged in a Material Activity (and the Board of Directors
shall immediately notify the Stockholders if, in their good faith
determination, such activity has ceased). In order to defer the filing of
a registration statement pursuant to this Section 3(b)(iii), the Company
shall promptly (but in any event within ten (10) days), upon determining
to effect such deferral, deliver to each Stockholder a certificate signed
by an executive officer of the Company, on behalf of the Board of
Directors, stating that the Company is deferring such filing pursuant to
this Section 3(b)(iii) and setting forth the anticipated deferral period.
Within twenty (20) days after receiving such certificate, the holders of a
majority of the Registrable Securities owned by the Stockholders and for
which registration was previously requested may withdraw such Demand
Registration request by giving notice to the Company; if withdrawn, the
Demand Registration request shall be deemed not to have been made for all
purposes of this Agreement. If any deferral is lifted as provided above,
prompt notice thereof shall be given in writing to the Stockholders
requesting Demand Registration who thereafter shall be entitled to deliver
a new request. This Section 3(b)(iii) shall not prohibit the Stockholders
from exercising any "piggyback" registration rights to which they would
otherwise be entitled pursuant to Section 4. The Company shall not be
required to
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maintain the effectiveness of any Demand Registration beyond the earlier
to occur of (i) the consummation of the distribution by Stockholders of
the Registrable Securities included therein or (ii) 180 days after the
effective date thereof, unless such registration is a "shelf registration"
in which case the Company will be required to maintain such effectiveness
until the earlier to occur of (i) 365 days from the effectiveness thereof
or (ii) the date on which the last security registered thereunder is sold.
(c) Priority on Demand Registrations. If the managing underwriters
in any Demand Registration pursuant to this Section 3 shall give written advice
to the Company and the Stockholders that, in their opinion, there is an
Underwriters' Maximum Number of shares of Registrable Securities that may
successfully be included in such registration, then: (i) if the Underwriters'
Maximum Number is less than the number of shares of Registrable Securities
requested to be included in such registration, the Company will be obligated and
required to include in such registration that number of shares of Registrable
Securities which does not exceed the Underwriters' Maximum Number, and such
number of shares of Registrable Securities shall be allocated (A) first, pro
rata among the Stockholders of the class or classes of securities which
initiated the Demand Registration pursuant to this Section 3 (such Stockholders
being referred to herein as the "Demanding Stockholders") on the basis of the
number of shares of Registrable Securities requested to be included therein by
each such Demanding Stockholder, up to the Underwriters' Maximum Number, before
any other securities are included therein, and (B) next, pro rata among the
Stockholders (other than the Demanding Stockholders) on the basis of the number
of shares of Registrable Securities requested to be included therein by each
such Stockholder, up to the number of securities which they requested to include
in such registration which does not exceed the difference between the
Underwriters' Maximum Number and that number of securities included in such
registration pursuant to clause (A) of this sentence; and (ii) if the
Underwriters' Maximum Number exceeds the number of shares of Registrable
Securities requested to be included in such registration, then the Company will
be entitled to include in such registration that number of securities which
shall have been requested by the Company or by other securityholders of the
Company to be included in such registration for the account of the Company or
such other securityholders and which shall not be greater than such excess.
Neither the Company nor any of its securityholders shall be entitled to include
any securities in any underwritten Demand Registration unless the Company or
such securityholders (as the case may be) shall have agreed to such inclusion
and unless the Company and such other securityholders shall have agreed in
writing to sell such securities on the same terms and conditions as shall apply
to the Registrable Securities to be included in such Demand Registration.
(d) Selection of Underwriters. If any Demand Registration or any
registration effected pursuant to Section 3 hereof is a firm commitment
underwritten offering, or a best efforts underwritten offering, the investment
bankers and managing underwriters in such registration will be selected by the
Company, subject to the approval of the Demanding Stockholders holding fifty-one
percent (51%) or more of the Registrable Securities to be included in such
registration by all of the Demanding Stockholders (which approval shall not be
unreasonably withheld).
<PAGE> 7
-7-
4. Piggyback Registrations.
(a) Rights to Piggyback.
(i) If (and on each occasion that) the Company proposes to
register any of its equity securities or any other securities convertible
into equity securities under the Securities Act for its own account or for
the account of any other Person (other than pursuant to Section 3(a)
hereof) (each such registration not withdrawn or abandoned prior to the
effective date thereof being herein called a "Piggyback Registration"),
the Company will give written notice to all Stockholders of such proposal
not later than twenty (20) days prior to the anticipated filing date of
such Piggyback Registration.
(ii) Subject to the provisions contained in paragraphs (b) and
(c) of this Section 4 and in the last two sentences of this clause (ii),
(A) the Company will be obligated and required to include in each
Piggyback Registration all Registrable Securities with respect to which
the Company shall receive from Stockholders, within thirty (30) days after
the date on which the Company shall have given written notice of such
Piggyback Registration to all Stockholders pursuant to Section 4(a)(i)
hereof, the written requests of such Stockholders for inclusion in such
Piggyback Registration, and (B) the Company will use its best efforts to
promptly file with the Commission a registration statement under the
Securities Act covering all such Registrable Securities and shall use its
best efforts to cause such registration statement to become effective
under the Securities Act. The Stockholders shall be permitted to withdraw
all or any part of the Registrable Securities of such Stockholders from
any Piggyback Registration at any time prior to the effective date of such
Piggyback Registration but only in the case of an underwritten offering if
such Stockholders are permitted to do so by the managing underwriters or
pursuant to any agreement therewith. The Company will not be obligated or
required to give notice of any proposed registration or include any
Registrable Securities in any registration effected solely to implement an
employee benefit plan or a transaction to which Rule 145 of the Commission
is applicable. The Stockholders shall not be entitled to include
Registrable Securities in a Piggyback Registration unless the Stockholders
shall have agreed in writing to sell such securities on the same terms and
conditions as shall apply to the securities (other than Registrable
Securities) being included in such registration. The Company shall not be
required to maintain the effectiveness of any Piggyback Registration
beyond the earlier to occur of (i) the consummation of the distribution by
holders of Registrable Securities included in such Piggyback Registration
or (ii) 120 days after the effective date thereof.
(b) Priority on Piggyback Registrations. If in connection with any
Piggyback Registration, the managing underwriters shall give written advice to
the Company that, in their opinion, there is an Underwriters' Maximum Number of
securities that may successfully be included in such registration, then: (i) the
Company shall be entitled to include in such
<PAGE> 8
-8-
registration that number of securities which the Company proposes to offer and
sell for its own account in such registration and which does not exceed the
Underwriters' Maximum Number; and (ii) the Company will be obligated and
required to include in such registration that number of shares of Registrable
Securities which shall have been requested by the Stockholders to be included in
such registration and which does not exceed the difference between the
Underwriters' Maximum Number and that number of securities which the Company is
entitled to include therein pursuant to clause (i) above and such number of
shares of Registrable Securities shall be allocated pro rata among each such
Stockholder, on the basis of the number of shares of Registrable Securities
requested to be included therein by each such Stockholder and, if the total of
such Registrable Securities and such securities which the Company is entitled to
include pursuant to clause (i) above is less than the Underwriters' Maximum
Number, the Company may include shares requested to be included by other
securityholders of the Company.
(c) Selection of Underwriters. In any Piggyback Registration, the
Company shall (unless the Company shall otherwise agree) have the right to
select the investment bankers and managing underwriters in such registration.
5. Lockup Agreement.
(a) Restrictions on Public Sale by Stockholders.
(i) Each Stockholder, if the Company or the managing
underwriters so request in connection with the initial registration of the
Company's securities, will not, without the prior written consent of the
Company or such underwriters, effect any public sale or other distribution
of any equity securities of the Company, including any sale pursuant to
Rule 144, during the period required by the managing underwriters;
provided, however, that such period of time shall not exceed that
applicable to all the Company's executive officers and directors.
(ii) If the Company or the managing underwriters so request,
each Stockholder who holds 3% or greater of the Company's outstanding
equity securities at the time of any registration, other than the
Company's initial registration, or such lesser percentage if so determined
by the managing underwriters, will not, without the prior written consent
of the Company or such underwriters, effect any public sale or other
distribution of any equity securities of the Company, including any sale
pursuant to Rule 144, during the period required by the managing
underwriters; provided, however, that such period of time shall not exceed
that applicable to all the Company's executive officers and directors.
(b) Restrictions on Public Sale by the Company. The Company agrees,
unless it obtains the consent of the managing underwriter(s) of any underwritten
offering of Registrable Securities pursuant to Sections 3 or 4 hereof, not to
effect any public sale or distribution of its equity securities, or any
securities convertible into or exchangeable or exercisable for such equity
securities, during the period commencing on the seventh day prior to, and ending
on the ninetieth
<PAGE> 9
-9-
day (or such longer period as shall be reasonably required by the managing
underwriters) following, the effective date of any underwritten Demand or
Piggyback Registration, except in connection with any such underwritten
registration, or pursuant to any registration statements on Form S-8 or the then
equivalent form.
6. Registration Procedures. If (and on each occasion that) the Company
shall become obligated to effect any registration of any Registrable Securities
hereunder, the Company will use its best efforts to effect promptly the
registration of such Registrable Securities under the Securities Act and to
permit the public offering and sale of such Registrable Securities in accordance
with the intended method of disposition thereof, and, in connection therewith,
the Company, as expeditiously as shall be reasonably possible, shall:
(a) use its best efforts to prepare and file with the Commission a
registration statement with respect to such Registrable Securities, and use its
best efforts to cause such registration statement to become and remain effective
as provided herein;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus including such
registration statement as may be necessary or advisable to comply in all
material respects with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement or as may
be necessary to keep such registration statement effective and current as
provided herein;
(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement thereto (in
each case including all exhibits thereto), the prospectus included in such
registration statement (including each preliminary prospectus), and such other
documents as any such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities held by such seller;
(d) use its best efforts to register and qualify the Registrable
Securities covered by such registration statement under such securities or blue
sky laws of such jurisdictions as any seller (or the managing underwriter, in
the case of any underwritten offering) shall reasonably request and do any and
all such other acts and things as may be reasonably necessary or advisable to
permit the disposition in such jurisdictions of the Registrable Securities
covered by such registration statement; provided, however, that the Company
shall not be required in connection therewith to qualify to do business or file
a general consent to service of process in any such jurisdiction, unless the
Company is already subject to service in such jurisdiction or subject itself to
taxation in any jurisdiction where the Company is not already subject to
taxation;
(e) furnish to each prospective seller a signed counterpart,
addressed to the prospective sellers, (or to the underwriters, in the case of
any underwritten offering) of (i) an opinion of counsel for the Company, dated
the effective date of the registration statement, and (ii) to the extent not
prohibited by applicable financial accounting statements or standards not
generally delivered by "big six" accounting firms, a "comfort" letter signed by
the independent public accountants who have certified the Company's financial
statements included in the
<PAGE> 10
-10-
registration statement, covering substantially the same matters with respect to
the registration statement (and the prospectus included therein) and (in the
case of the "comfort" letter) with respect to events subsequent to the date of
the financial statements, as are customarily covered (at the time of such
registration) in opinions of issuer's counsel and in "comfort" letters,
respectively, delivered to the underwriters in underwritten public offerings of
securities.
7. Cooperation by Prospective Sellers, etc.
(a) Each prospective seller of Registrable Securities will furnish
to the Company in writing such information as the Company may reasonably require
and which is customary in such transactions from such seller, and otherwise
reasonably cooperate with the Company in connection with any registration
statement with respect to such Registrable Securities.
(b) The failure of any prospective seller of Registrable Securities
to furnish any information or documents in accordance with any provision
contained in this Agreement shall not affect the obligations of the Company
under this Agreement to any remaining sellers who furnish such information and
documents unless in the reasonable opinion of counsel to the Company or the
underwriters, such failure impairs or may impair the viability of the offering
or the legality of the registration statement or the underlying offering.
(c) The Stockholders included in any registration statement will not
(until further notice) affect sales of Registrable Securities included in any
registration statement after receipt of telegraphic or written notice from the
Company to suspend sales to permit the Company to correct or update such
registration statement or prospectus (which obligation to correct or update the
Company will satisfy promptly); but the obligations of the Company with respect
to maintaining any registration statement current and effective shall be
extended by a period of days equal to the period such suspension is in effect.
(d) At the end of any period during which the Company is obligated
to keep any registration statement current and effective as provided herein (and
any extensions thereof required by the preceding paragraph (c) of this Section
7), the Stockholders included in such registration statement shall discontinue
sales of shares pursuant to such registration statement upon receipt of notice
from the Company of its intention to remove from registration the shares covered
by such registration statement which remain unsold, and such Stockholders shall
notify the Company of the number of shares registered which remain unsold
promptly after receipt of such notice from the Company.
8. Registration Expenses.
(a) Except as otherwise provided herein, all fees and expenses
incurred or sustained in connection with or arising out of the Demand
Registrations pursuant to Section 3 hereof and each registration pursuant to
Section 4 hereof, including, without limitation, all registration, filing fees
and qualification fees, fees and expenses of compliance with federal and state
securities or blue sky laws (including reasonable fees and disbursements of
counsel for the
<PAGE> 11
-11-
underwriters in connection with the blue sky qualification of Registrable
Securities), printing expenses, messenger, telephone, facsimile and delivery
expenses, fees and disbursements of counsel for the Company, reasonable fees and
disbursements of one counsel representing any or all of the selling holders of
Registrable Securities, fees and disbursements of all independent certified
public accountants of the Company (including the expenses relating to the
preparation and delivery of any special audit or "cold comfort" letters required
by or incident to such registration), and fees and disbursements of underwriters
(excluding discounts, commissions and expenses representing disguised
commissions), the reasonable fees and expenses of any special experts retained
by the Company of its own initiative or at the request of the managing
underwriters in connection with such registration, and fees and expenses of all
(if any) other persons retained by the Company (all such costs and expenses
being herein called, collectively, the "Registration Expenses"), will be borne
and paid by the Company. The Company will, in any case, pay its internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit, and the fees and expenses incurred in connection with the
listing of the securities to be registered on each securities exchange on which
similar securities of the Company are then listed.
(b) The Company will not bear the cost of nor pay for any stock
transfer taxes imposed in respect of the transfer of any Registrable Securities
to any purchaser thereof by any Stockholder in connection with any registration
of Registrable Securities pursuant to this Agreement.
(c) To the extent the Registration Expenses incident to any
registration are, under the terms of this Agreement, not required to be paid by
the Company, each Stockholder included in such registration will pay all
Registration Expenses which are solely attributable to the registration of such
Stockholder's Registrable Securities so included in such registration, and all
other Registration Expenses not so attributable to one Stockholder will be borne
and paid by all sellers of securities included in such registration in
proportion to the number of securities so included by each such seller.
9. Indemnification.
(a) Indemnification by the Company. To the full extent permitted by
law, the Company will indemnify and hold harmless each Stockholder requesting or
joining in a registration and each underwriter of the securities so registered,
the officers, directors, agents, employees and partners of each such Person and
each Person, if any, who controls, is controlled by or is under common control
any thereof (within the meaning of the Securities Act) against any and all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of any
material fact contained in any registration statement, prospectus or any
amendment or supplement thereto, or any document filed pursuant to state
securities laws (or in any related registration statement, notification or the
like) or any omission (or alleged omission) to state therein any material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation or alleged violation by the Company of the
Securities Act or the Securities Exchange Act of 1934, as amended (the "1934
Act") or any rule or regulation promulgated under the Securities Act or the
<PAGE> 12
-12-
1934 Act or state securities or "blue sky" laws, common law or otherwise
applicable to the Company and relating to any action or inaction required of the
Company in connection with any such registration, qualification or compliance,
and the Company will reimburse each such Stockholder, underwriter, and each
other Person indemnified pursuant to this paragraph (a) for any legal and any
other expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action provided, however, that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission (or alleged untrue statement or omission) made in reliance
upon and in conformity with written information furnished to the Company by such
Stockholder, underwriter, officer, director, partner or controlling person and
stated to be specifically for use therein and provided further, that such
indemnity shall not inure to the benefit of any Stockholder, underwriter,
director, partner or controlling person ("indemnifiable party") from whom the
person asserting any claim, loss, damage or expense purchased securities which
are the subject thereof if such indemnified party failed to send or give a copy
of the prospectus or such other document as amended or supplemented to such
person at or prior to the confirmation of the sale of such securities to such
person in any case where such delivery is required by the Securities Act by such
indemnified party and the untrue statement or omission of a material fact
contained in a preliminary prospectus was corrected in the prospectus as amended
and supplemented. The Company also agrees to indemnify and provide contribution
arrangements to any underwriters of the Registrable Securities, their officers
and directors and each person who controls such underwriters (within the meaning
of Section 15 of the Securities Act or Section 20 of the 1934 Act)
(collectively, "Securities Professionals") on substantially the same basis as
that of the indemnification of the Stockholder provided in this Section 9 and in
Section 10, if requested.
(b) Indemnification by Each Stockholder. Each Stockholder requesting
or joining in a registration will severally, and not jointly, indemnify each
underwriter of the securities so registered, the Company and the officers,
agents, employees and directors of the Company and each Person, if any, who
controls any thereof (within the meaning of the Securities Act) and their
respective successors in title and assigns against any and all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of any material fact
contained in any registration statement, prospectus, or any amendment or
supplement thereto, or any dominant filed pursuant to state securities laws (or
in any related registration statement, notification or the like) or any omission
(or alleged omission) to state therein any material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation or alleged violation by such Stockholder of any rule or regulation
promulgated under the Securities Act or the 1934 Act applicable to such Person
and relating to any action or inaction required of such Person in connection
with any such registration, qualification or compliance, and such Stockholder
will reimburse each underwriter, the Company and each other Person indemnified
pursuant to this paragraph (b) for any legal and any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action; provided, however, that this paragraph (b) shall
apply only if (and only to the extent that) such statement or omission (or
alleged untrue statement or omission) was made in reliance upon and in
conformity with written information furnished to such underwriter or the Company
by any such Stockholder or
<PAGE> 13
-13-
any officer, director, partner or controlling person of such Stockholder and
stated to be specifically for use therein, and provided further that each
Stockholder's liability hereunder (including, without limitation, Section 10)
with respect to any particular registration shall be limited to an amount equal
to the proceeds received by such Stockholder from the Registrable Securities
sold by such Stockholder in such registration. The Company and the Stockholders
shall be entitled to receive indemnities from underwriters participating in any
distribution of Registrable Securities to the same extent as provided above with
respect to information so furnished in writing by such underwriters expressly
for use in any prospectus or registration statement.
(c) Indemnification Proceedings. Each party entitled to
indemnification pursuant to this Section 9 (the "indemnified party") shall give
notice to the party required, to provide indemnification pursuant to this
Section 9 (the "indemnifying party") promptly after such indemnified party
acquires actual knowledge of any claim as to which indemnity may be sought, and
shall permit the indemnifying party (at its expense) to assume the defense of
any claim or any litigation resulting therefrom; provided that counsel for the
indemnifying party, who shall conduct the defense of such claim or litigation,
shall be reasonably acceptable to the indemnified party, and the indemnified
party may participate in such defense at the indemnified party's expense; and
provided, further that the failure by any indemnified party to give notice as
provided in this paragraph (c) shall not relieve the indemnifying party of its
obligations under this Section 9, except to the extent the indemnifying party is
materially prejudiced by such failure. 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 thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
of such claim or litigation. The reimbursement required by this Section 9 shall
be made by periodic payments during the course of the investigation or defense,
as and when bills are received or expenses incurred.
10. Contribution in Lieu of Indemnification. If the indemnification
provided for in Section 9 hereof is unavailable to a party that would have been
an indemnified party under any such section in respect of any losses, claims,
damages, expenses or liabilities (or actions in respect thereof) referred to
therein, then each party that would have been an indemnifying party thereunder
shall, in lieu of indemnifying such indemnified party, contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages, expenses or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and such indemnified party on the other in connection with
the statements or omissions which resulted in such losses, claims, damages,
expenses or liabilities (or actions in respect thereof). The relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the indemnifying
party or such indemnified party and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company and each Stockholder agree that it would not be just and
equitable if contribution pursuant to this Section 10 were determined by pro
rata allocation or by any other method of
<PAGE> 14
-14-
allocation which does not take into account the equitable considerations
referred to above in this Section 10. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, expenses or
liabilities (or actions in respect thereof) referred to above in this Section 10
shall include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to indemnification or
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
11. Rule 144 Requirements; Current Public Information. From time to time
after the earlier to occur of (a) the ninetieth day following the date on which
there shall first become effective a registration statement filed by the Company
under the Securities Act with respect to its equity securities, or (b) the date
on which the Company shall register a class of equity securities under Section
12 of the 1934 Act, the Company will use its best efforts to file all reports
required to be filed by it under the Securities Act or the 1934 Act and the
rules and regulations adopted by the Commission thereunder, and will take such
further action as any holder of Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock or Registrable Securities may reasonably request
all to the extent required to enable each such holder to sell Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock or Registrable
Securities pursuant to Rule 144. The Company will furnish to any Stockholder,
upon request made by such Stockholder at any time after the undertaking of the
Company in the preceding sentence shall have first become effective, a written
statement signed by the Company, addressed to such Stockholder, describing
briefly the action the Company has taken or proposes to take to comply with the
current public information requirements of Rule 144. The Company will, at the
request of any Stockholder, upon receipt from such Stockholder of an unqualified
written opinion of counsel knowledgeable in securities law matters, addressed to
the Company and reasonably acceptable in form and substance to the Company and
its counsel, remove from the stock certificates representing such Registrable
Securities that portion of any restrictive legend which relates to the
registration provisions of the Securities Act, and, thereupon, such Registrable
Securities will cease to be Registrable Securities for purposes of this
Agreement.
12. Participation in Underwritten Registrations. No person may participate
in any underwritten registration pursuant to this Agreement unless such person
(a) agrees to sell such person's securities on the basis provided in any
underwriting arrangements approved by the persons entitled, under the provisions
hereof, to approve such arrangements, and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required by the terms of such underwriting
arrangements. Any Stockholder to be included in any underwritten registration
shall be entitled at any time to withdraw such Registrable Securities from such
registration prior to the execution of the related underwriting agreement in the
event that such Stockholder shall disapprove of any of the terms of such
agreement.
<PAGE> 15
-15-
13. Confidentiality and Non-Disclosure.
(a) Disclosure of Terms. The terms and conditions of this Agreement, the
Stock Purchase Agreement, the Second Amended and Restated Co-Sale Agreement and
the Second Amended and Restated Voting Agreement (collectively, the "Financing
Terms"), including their existence, shall be considered confidential information
and shall not be disclosed by any party hereto to any third party except in
accordance with the provisions set forth below.
(b) Press Releases, Etc. Within sixty (60) days of the Closing, the
Company may issue a press release disclosing that the Purchasers have invested
in the Company; provided that the release does not disclose any of the Financing
Terms and is approved in advance in writing by any Purchaser who is named in
such press release. Intel Corporation ("Intel") and any other Purchaser, at its
sole discretion, may provide an executive quote or other material regarding its
investment in the Company. No other announcement regarding any Purchaser or the
Company in a press release, conference, advertisement, announcement,
professional or trade publication, mass marketing materials or otherwise to the
general public may be made without such named party's prior written consent.
(c) Permitted Disclosures. Notwithstanding the foregoing, (i) any party
may disclose any of the Financing Terms to its current or bona fide prospective
investors, partners of such investors, employees, investment bankers, lenders,
accountants and attorneys, in each case only where such persons or entities are
under appropriate nondisclosure obligations; (ii) any party may disclose (other
than in a press release or other public announcement described in subsection
(b)) solely the fact that the Purchasers are investors in the Company to any
third parties without the requirement for the consent of any other party or
nondisclosure obligations; and (iii) Intel may disclose its investment in the
Company and the Financing Terms to third parties or to the public at its sole
discretion and, if it does so, the other parties hereto shall have the right to
disclose to third parties any such information disclosed in a press release or
other public announcement by Intel.
(d) Legally Compelled Disclosure. In the event that any party is requested
or becomes legally compelled (including without limitation, pursuant to
securities laws and regulations) to disclose the existence of the Financing
Documents or any of the terms hereof in contravention of the provisions of this
Section 13, such party (the "Disclosing Party") shall provide the other parties
(the "Non-Disclosing Parties") with prompt written notice of that fact so that
the appropriate party may seek (with the cooperation and reasonable efforts of
the other parties) a protective order, confidential treatment or other
appropriate remedy. In such event, the Disclosing Party shall furnish only that
portion of the information which is legally required and shall exercise
reasonable efforts to obtain reliable assurance that confidential treatment will
be accorded such information to the extent reasonably requested by any
Non-Disclosing Party.
(e) Other Information. The provisions of this Section 13 shall be in
addition to, and not in substitution for, the provisions of any separate
nondisclosure agreement executed by any of the parties hereto with respect to
the transactions contemplated hereby. Additional disclosures and exchange of
confidential information between the Company and Intel (including without
limitation, any exchanges of information with any Intel Board Observer, as
defined in the Second
<PAGE> 16
-16-
Amended and Restated Voting Agreement) shall be governed by the terms of the
Corporate Non-Disclosure Agreement No. 76093, dated August 13, 1998, executed by
the Company and Intel, and any Confidential Information Transmittal Records
("CITR") provided in connection therewith. The CITR that shall govern the
exchanges of confidential information with any Intel Board Observer shall be the
form attached hereto as Exhibit B.
14. Miscellaneous.
(a) No Inconsistent Agreements. The Company hereby represents and
warrants that it is not a party to or bound in any manner under, and covenants
that it will not enter into at any time after the date hereof, any agreement or
contract (whether written or oral) with respect to any of its securities which
prevents the Company from complying in any respect with the registration rights
granted by the Company to the Stockholders hereunder.
(b) Waivers. No waiver of any breach or default hereunder shall be
considered valid unless in writing and signed by party granting such waiver, and
no waiver shall be deemed a waiver of any subsequent breach or default of the
same or similar nature.
(c) Term. The agreements of the Company contained in this Agreement
shall continue in full force and effect so long as any Stockholder holds any
Registrable Securities.
(d) Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given (i) upon personal delivery to the party to be notified, (ii)
when delivered by overnight courier or (iii) five (5) days after deposit with
the United States Post Office, by registered or certified mail, return receipt
requested, postage prepaid and addressed:
(i) if to a Series B Investor, at such Series B Investor's address on the
signature pages hereto with a copy to:
Joel M. Simon, Esq.
Paul, Hastings, Janofsky & Walker LLP
31st Floor
399 Park Avenue
New York, NY 10022
Fax No.: (212) 3194090
(ii) if to a Series C Investor or a Series D Investor, at such Series C
Investor's or Series D Investor's address on the signature pages hereto
with a copy to:
Edward A. Reilly, Jr., Esq.
LeBoeuf, Lamb, Greene & MacRae LLP
225 Asylum Street, 13th Floor
Hartford, CT 06103
Fax No.: (860) 292-3555
<PAGE> 17
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(iii) if to the Company, at:
Synchronicity, Inc.
201 Forest Street
Marlborough, MA 01752
Attention: Dennis R. Harmon
Fax No.: (508) 485-7514
with a copy to:
Linda DeRenzo, Esq.
Testa, Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, MA 02110
Fax No.: (617) 248-7100
and thereafter at such other address, notice of which has been given in
accordance with the provisions of this Section 14(d).
(e) Assignability; Successors and Assigns. The registration rights
granted to the Investors herein shall be assignable only (i) to an assignee or
transferee who, as a result of such assignment, holds at least ten percent (10%)
of the aggregate of the then outstanding shares of Series B Preferred Stock;
(ii) to an assignee or transferee who, as a result of such assignment, holds at
least ten percent (10%) of the aggregate of the then outstanding shares of
Series C Preferred Stock; (iii) to an assignee or transferee who, as a result of
such assignment, holds at least ten percent (10%) of the aggregate of the then
outstanding shares of Series D Preferred Stock; or (iv) as to assignments by an
Investor to another Investor. Such subsequent holders of Registrable Securities
shall agree to be bound by all of the terms and conditions of this Agreement by
executing an Instrument of Accession in the form set forth in attached Exhibit
A. Otherwise, this agreement shall not confer any rights, remedies, obligations
or liabilities upon any third party, except for an indemnified party under
Section 9 and Section 10.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same instrument.
(g) Headings. The section and subsection headings contained herein
are for convenience only and are not intended to define or limit the contents of
said sections and subsections.
(h) Governing Law. This Agreement and all amendments hereof shall be
governed by and construed in accordance with the laws of the Commonwealth of
Massachusetts, disregarding any Massachusetts principles of choice or conflict
of laws that would otherwise provide for the application of the substantive laws
of another jurisdiction.
<PAGE> 18
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(i) Severability. If any provision of this Agreement shall be held
to be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
(j) Specific Performance. Without limiting the rights of each party
hereto to pursue all other legal and equitable rights and remedies available to
such party to any other party's failure to perform its obligations under this
Agreement, each such party acknowledges and agrees that the remedy at law for
any failure to perform obligations hereunder would be inadequate and all such
parties shall be entitled to specific performance, injunctive relief or other
equitable remedies in the event of any such failure.
(k) Entire Agreement. (i) This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and may not
be modified, amended or terminated (other than in accordance with its terms)
except by a written agreement specifically referring to this Agreement and
signed by the Company and each of the Investors.
(ii) To the extent any term or other provision of any
agreement, instrument or oral understanding by which any party hereto is bound
conflicts with this Agreement, this Agreement shall have precedence over such
conflicting term or provision.
[REST OF PAGE INTENTIONALLY LEFT BLANK.]
<PAGE> 19
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IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
COMPANY:
SYNCHRONICITY, INC.
By: /s/ Dennis R. Harmon
-------------------------------
Name:
Title:
Address:
201 Forest Street
Marlborough, MA 01752
INVESTORS:
CANAAN CAPITAL LIMITED PARTNERSHIP
By: Canaan Capital Management L.P.
By: Canaan Capital Partners L.P.
By: /s/ James Furnivall
-------------------------------
Name:
Title:
Address: 105 Rowayton Ave.
Rowayton, CT 06853
Attn.: James Furnivall
CANAAN CAPITAL OFFSHORE LIMITED
PARTNERSHIP, C.V.
By: Canaan Capital Management L.P.
By: Canaan Capital Partners L.P.
By: /s/ James Furnivall
-------------------------------
Name:
Title:
Address:105 Rowayton Ave.
Rowayton, CT 06853
Attn.: James Furnivall
[Signature Page to Second Amended and Restated Registration Rights Agreement]
<PAGE> 20
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CANAAN S.B.I.C., L.P.
By: Canaan S.B.I.C. Partners L.P.
By: /s/ James Furnivall
___________________________________
Name:
Title:
Address: 105 Rowayton Ave.
Rowayton, CT 06853
Attn.: James Furnivall
CANAAN EQUITY, L.P.
By: Canaan Equity Partners L.L.C.
By: /s/ James Furnivall
___________________________________
Name:
Title:
Address: 105 Rowayton Ave.
Rowayton, CT 06853
Attn.: James Furnivall
WHEATLEY PARTNERS, L.P.
By: Wheatley Partners, LLC
By: /s/ Seth Lieber
___________________________________
Name: Seth Lieber
Title: General Partner
Address: 80 Cuttermill Road,
Suite 311
Great Neck, New York 11021
Attn: Maureen Wilson
[Signature Page to Second Amended and Restated Registration Rights Agreement]
<PAGE> 21
-21-
WHEATLEY FOREIGN PARTNERS, L.P.
By: Wheatley Partners, LLC
By: /s/ Seth Lieber
___________________________________
Name: Seth Lieber
Title: General Partner
Address: 80 Cuttermill Road,
Suite 311
Great Neck, New York 11021
Attn: Maureen Wilson
PIONEER CAPITAL CORPORATION
By: /s/ Leigh Michl
___________________________________
Name: Leigh E. Michl
Title: Vice President
Address: 60 State Street
Boston, MA 02109
PIONEER VENTURES LIMITED PARTNERSHIP II
By: Pioneer Ventures Management LP, its
General Partner
By: Pioneer Management SBIC Corp., its
General Partner
By: /s/ Leigh Michl
___________________________________
Name: Leigh E. Michl
Title: Vice President
Address: 60 State Street
Boston, MA 02109
[Signature Page to Second Amended and Restated Registration Rights Agreement]
<PAGE> 22
-22-
SYNOPSYS, INC.
/s/ Robert Dahlberg
By: __________________________________
Name:
Title:
Address:
INTEL CORPORATION
/s/ Diane Labrador
By: __________________________________
Name:
Title:
Address:
/s/ Mark A. Ross
______________________________________
Mark A. Ross
Address:
Rock Creek Court
Redwood City, CA 94062
/s/ David Spitzman
______________________________________
David Spitzman
Address:
1 Cliff Avenue
Newport, RI 02840
/s/ Mark Barlow
______________________________________
Mark Barlow
Address:
18 Hazard Street
Newport, RI 02840
/s/ Marek Skoskiewicz
______________________________________
Marek Skoskiewicz
Address:
16-376 County Road N
Napoleon, OH 43545
[Signature Page to Second Amended and Restated Registration Rights Agreement]
<PAGE> 23
-23-
/s/ Leigh Michl
______________________________________
Leigh E. Michl
Address:
74 Cherry Brook Road
Weston, MA 02493
[Signature Page to Second Amended and Restated Registration Rights Agreement]
<PAGE> 1
Exhibit 10.7
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT is entered into as of February 20, 1998,
by and between SILICON VALLEY BANK, a California-chartered bank, with its
principal place of business at 3003 Tasman Drive, Santa Clara, California 95054
and with a loan production office located at Wellesley Office Park, 40 William
Street, Suite 350, Wellesley, Massachusetts 02181, doing business under the name
"Silicon Valley East" ("Bank") and SYNCHRONICITY, INC., a Massachusetts
corporation with a chief executive office located at 201 Forest Street,
Marlborough, Massachusetts 01752 ("Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the following terms shall have
the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods (including, without limitation, the
licensing of software and other technology) or the rendering of services by
Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"Advance" or "Advances" means a loan advance under the Committed
Revolving Line.
"Affiliate" means, with respect to any Person, any Person that owns
or controls directly or indirectly such Person, any Person that controls
or is controlled by or is under common control with such Person, and each
of such Person's senior executive officers, directors, partners and, for
any Person that is a limited liability company, such Persons, managers and
members.
"Agreement" means this Loan and Security Agreement.
"Bank Expenses" means all reasonable costs or expenses (including
reasonable attorneys' fees and expenses) incurred in connection with the
preparation, negotiation, administration, and enforcement of the Loan
Documents; and Bank's reasonable attorneys" fees and expenses incurred in
amending, enforcing or defending the Loan
<PAGE> 2
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Documents, (including fees and expenses of appeal or review, or those
incurred in any Insolvency Proceeding) whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and records
including, without limitation: ledgers; records concerning Borrower's
assets or liabilities, the Collateral, business operations or financial
condition; and all computer programs, or tape files, and the equipment,
containing such information.
"Borrowing Base" means an amount equal to eighty percent (80%) of
Eligible Accounts, as determined by Bank with reference to the most recent
Borrowing Base Certificate delivered by Borrower.
"Business Day" means any day that is not a Saturday, Sunday, or
other day on which banks in the State of California are authorized or
required to close.
"Closing Date" means the date of this Agreement.
"Code" means the Massachusetts Uniform Commercial Code.
"Collateral" means the property described on Exhibit A attached
hereto.
"Committed Revolving Line" means a credit extension of up to Nine
Hundred Thousand Dollars ($900,000.00).
"Committed Equipment Line" means a credit extension of up to Three
Hundred Fifty Thousand Dollars ($350,000.00).
"Contingent Obligation" means, as applied to any Person, any direct
or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or
other obligation of another, including, without limitation, any such
obligation directly or indirectly guaranteed, endorsed, co-made or
discounted or sold with recourse by that Person, or in respect of which
that Person is otherwise directly or indirectly liable, (ii) any
obligations with respect to undrawn letters of credit issued for the
account of that Person; and (iii) all obligations arising under any
interest rate, currency or commodity swap agreement, interest rate cap
agreement, interest rate collar agreement, or other agreement or
arrangement designated to protect a Person against fluctuation in interest
rates, currency exchange rates or commodity prices; provided, however,
that the term "Contingent Obligation" shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of
any Contingent Obligation shall be deemed to be an amount equal to the
stated or determined amount of the primary obligation in respect of which
such Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as determined
by such Person in good faith; provided, however, that such amount shall
not in any event exceed the maximum amount of the obligations under the
guarantee or other support arrangement.
<PAGE> 3
-3-
"Credit Extension" means each Advance, Equipment Advance, or any
other extension of credit by Bank for the benefit of Borrower hereunder.
"Current Liabilities" means, as of any applicable date, all amounts
that should, in accordance with GAAP, be included as current liabilities
on the consolidated balance sheet of Borrower, as at such date, plus, to
the extent not already included therein, all outstanding Credit Extensions
made under this Agreement, including all Indebtedness that is payable upon
demand or within one year from the date of determination thereof unless
such Indebtedness is renewable or extendable at the option of Borrower to
a date more dm one year from the date of determination, but excluding
Subordinated Debt.
"Debt Service Coverage Ratio" means the ratio of EBITDA to Total
Liabilities, each as determined in accordance with GAAP.
"EBITDA" means the Borrower's earnings before interest, taxes,
depreciation, and amortization, as determined in accordance with GAAP.
"Eligible Accounts" means those Accounts that arise in the ordinary
course of Borrower's business that comply with all of Borrower's
representations and warranties to Bank set forth in Section 5.4. Unless
otherwise agreed to by Bank in writing, Eligible Accounts shall not
include the following:
(a) Accounts that the account debtor has failed to pay within
ninety (90) days of invoice date;
(b) Accounts with respect to an account debtor, fifty percent
(50%) of whose Accounts the account debtor has failed to pay within ninety
(90) days of invoice date;
(c) Accounts with respect to an account debtor, including
Affiliates, whose total obligations to Borrower exceed twenty-five percent
(25%) of all Accounts to the extent such obligations exceed the
aforementioned percentage, except as approved in writing by Bank;
(d) Accounts with respect to which the account debtor does not
have its principal place of business in the United States;
(e) Accounts with respect to which the account debtor is a
federal, state, or local governmental entity or any department, agency, or
instrumentality thereof, except for those Accounts of the United States or
any department, agency or instrumentality thereof as to which the payee
has assigned its rights to payment thereof to Bank and the assignment has
been acknowledged, pursuant to the Assignment of Claims Act of 1940, as
amended (31 U.S.C. 3727);
(f) Accounts with respect to which Borrower is liable to the
account debtor, but only to the extent of any amounts owing to the account
debtor (sometimes
<PAGE> 4
-4-
referred to as "contra" accounts, e.g. accounts payable, customer
deposits, credit accounts etc.) against amounts owed to Borrower;
(g) Accounts generated by demonstration, or promotional
equipment, or with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval, bill and hold, or other
terms by reason of which the payment by the account debtor may be
conditional;
(h) Accounts with respect to which the account debtor is an
Affiliate, officer, employee, or agent of Borrower;
(i) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank
believes, in its sole discretion, that there may be a basis for dispute
(but only to the extent of the amount subject to such dispute or claim),
or is subject to any Insolvency Proceeding, or becomes insolvent, or goes
out of business; and
(j) Accounts the collection of which Bank reasonably to be
doubtful.
"Equipment" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and
attachments in which Borrower has any interest.
"Equipment Advance" has the meaning set forth in Section 2.1.2.
"Equipment Availability End Date" has the meaning set forth in
Section 2.1.2.
"Equipment Maturity Date" is the date which is four (4) years from
the Closing Date.
"ERISA" means the Employment Retirement Income Security Act of
1974. as amended, and the regulations thereunder.
"GAAP" means generally accepted accounting principles as in effect
in the United States from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money or the
deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety
bonds and letters of credit, (b) all obligations evidenced by notes,
bonds, debentures or similar instruments, (c) all capital lease
obligations and (d) all Contingent Obligations.
"Insolvency Proceeding" means any proceeding commenced by or against
any person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, formal or informal
moratoria, compositions, extension generally with its creditors, or
proceedings seeking reorganization, arrangement, or other relief.
<PAGE> 5
-5-
"Inventory" means all present and future inventory in which Borrower
has any interest, including merchandise, raw materials, parts, supplies,
packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service,
of every kind and description now or at any time hereafter owned by or in
the custody or possession, actual or constructive, of Borrower, including
such inventory as is temporarily out of its custody or possession or in
transit and including any returns upon any accounts or other proceeds,
including insurance proceeds, resulting from the sale or disposition of
any of the foregoing and any documents of title representing any of the
above.
"Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person. or any loan.
advance or capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"Liquidity Ratio" means the ratio of (i) Unrestricted Cash plus (ii)
the Borrower's Reserve Position (as set forth on the Borrowing Base
Certificate) under the Committed Revolving Line, to the aggregate amount
of Equipment Advances outstanding.
"Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any note or
notes executed by Borrower, and any other present or future agreement
entered into between Borrower and/or for the benefit of Bank in connection
with this Agreement, all as amended, extended or restated from time to
time.
"Material Adverse Effect" means a material adverse effect on (i) the
business operations or condition (financial or otherwise) of Borrower
taken as a whole or (ii) the ability of Borrower to repay the Obligations
or otherwise perform its obligations under the Loan Documents.
"Maturity Date" means, as applicable, the Revolving Maturity Date
or Equipment Maturity Date.
"Negotiable Collateral" means all of Borrower's present and future
letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper.
"Obligations" means all debt, principal, interest, Bank Expenses and
other amounts owed to Bank by Borrower pursuant to this Agreement or any
other agreement, whether absolute or contingent, due or to become due, now
existing or hereafter arising, including any interest that accrues after
the commencement of an Insolvency Proceeding and including any debt,
liability, or obligation owing from Borrower to others that Bank may have
obtained by assignment or otherwise.
<PAGE> 6
-6-
"Payment Date" means the fifteenth (15th) calendar day of each month
commencing on the first such date after the Closing Date and ending on the
Maturity Date.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under
this Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in
the Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary
course of business; and
(e) Indebtedness secured by Permitted Liens.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in
the Schedule; and
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency
or any State thereof maturing within one (1) year from the date of
acquisition thereof, (ii) commercial paper maturing no more than one (1)
year from the date of creation thereof and currently having the highest
rating obtainable from either Standard & Poor's Corporation or Moody's
Investors Service, Inc., and (iii) certificates of deposit maturing no
more than one (1) year from the date of investment therein issued by Bank.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed in
the Schedule or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith
by appropriate proceedings and as to which adequate reserves are
maintained on Borrower's Books in accordance with GAAP, provided the same
have no priority over any of Bank's security interests;
(c) Liens (i) upon or in any Equipment acquired or held by
Borrower to secure the purchase price of such Equipment or indebtedness
incurred solely for the purpose of financing the acquisition of such
Equipment, or (ii) existing on such equipment at the time of its
acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such equipment; and
<PAGE> 7
-7-
(d) Liens incurred in connection with the extension, renewal
or refinancing of the indebtedness secured by Liens of the type described
in clauses (a) through (c) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness being extended,
renewed or refinanced does not increase.
"Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit
corporation, firm, joint stock company, estate, entity or governmental
agency.
"Prime Rate" means the variable rate of interest, per annum, most
recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.
"Quick Assets" means, as of any applicable date, the consolidated
cash, cash equivalents, accounts receivable and investments with
maturities of fewer than 90 days of Borrower determined in accordance with
GAAP.
"Responsible Officer" means each of the Chief Executive Officer,
the President, the Chief Financial Officer and the Controller of
Borrower.
"Revolving Maturity Date" means the date which is one (1) year from
the Closing Date.
"Schedule" means the schedule of exceptions attached hereto, if
any.
"Subordinated Debt" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms acceptable to
Bank (and identified as being such by Borrower and Bank).
"Tangible Net Worth" means as of any applicable date, the
consolidated total assets of Borrower without duplication, (i) the sum of
any amounts attributable to (a) goodwill, (b) intangible items such as
unamortized debt discount and expense, patents, trade and service marks
and names, copyrights and research and development expenses except prepaid
expenses, and (c) all reserves not already deducted from assets, and (ii)
Total Liabilities.
"Total Liabilities" means as of any applicable date, any date as of
which the amount thereof shall be determined, all obligations that should,
in accordance with GAAP be classified as liabilities on the consolidated
balance sheet of Borrower, including in any event all Indebtedness, but
specifically excluding Subordinated Debt.
"Unrestricted Cash" means all cash or cash equivalents (determined
in accordance with GAAP) which are not subject to a lien other than to the
Bank, and arise out of the Borrower's Accounts. Unrestricted Cash shall
exclude, without limitation, any amounts due or allocated for taxes.
<PAGE> 8
-8-
1.2 Accounting and Other Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP and all calculations
and determinations made hereunder shall be made in accordance with GAAP. When
used herein, the term "financial statements" shall include the notes and
schedules thereto. The terms "including"/ "includes" shall always be read as
meaning "including (or includes) without limitation", when used herein or in any
other Loan Document.
2. LOAN AND TERMS OF PAYMENT
2.1 Credit Extensions. Borrower promises to pay to the order of Bank, in
lawful money of the United States of America, the aggregate unpaid principal
amount of all Credit Extensions made by Bank to Borrower hereunder in accordance
with the terms hereof. Borrower shall also pay interest on the unpaid principal
amount of such Credit Extensions at rates in accordance with the terms hereof.
2.1.1 (a) Subject to and upon the terms and conditions of this Agreement,
Bank agrees to make Advances to Borrower in an aggregate outstanding amount not
to exceed the Committed Revolving Line or the Borrowing Base, whichever is less.
Subject to the terms and conditions of this Agreement, amounts borrowed pursuant
to this Section 2.1 may be repaid and reborrowed at any time during the term of
this Agreement.
(b) Whenever Borrower desires an Advance, Borrower will notify Bank
by facsimile transmission or telephone no later dm 3:00 p.m. Pacific time, on
the Business Day that the Advance is to be made. Each such notification shall be
promptly confirmed by a Payment/Advance Form in substantially the form of
Exhibit B hereto. Bank is authorized to make Advances under this Agreement,
based upon instructions received from a Responsible Officer or a designee of a
Responsible Officer, or without instructions if in Bank's discretion such
Advances are necessary to meet Obligations which have become due and remain
unpaid. Bank shall be entitled to rely on any telephonic notice given by a
person who Bank reasonably believes to be a Responsible Officer or a designee
thereof, and Borrower shall indemnify and hold Bank harmless for any damages or
loss suffered by Bank as a result of such reliance. Bank will credit the amount
of Advances made under this Section 2.1 to Borrower's deposit account.
(c) The Committed Revolving Line shall terminate on the Revolving
Maturity Date, at which time all Advances under this Section 2.1 and other
amounts due under this Agreement (except as otherwise expressly specified
herein) shall be immediately due and payable.
2.1.2 Equipment Advances.
(a) Subject to and upon the terms and conditions of this Agreement,
at any time from the date hereof through the date which is one (1) year from the
Closing Date (the "Equipment Availability End Date"), Bank agrees to make
advances (each an "Equipment Advance" and collectively, the "Equipment
Advances") to Borrower in an aggregate outstanding amount not to exceed the
Committed Equipment Line. To evidence the Equipment Advance or Equipment
Advances, Borrower shall deliver to Bank, at the time of each Equipment Advance
<PAGE> 9
-9-
request, an invoice for the equipment to be purchased. The Equipment Advances
shall be used only to purchase Equipment purchased on or after September 30,
1997 and shall not exceed one hundred percent (100%) of the invoice amount of
such equipment approved from time to time by Bank, excluding taxes, shipping,
warranty charges, freight discounts and installation expense. Software may,
however, constitute only up to fifty percent (50%) of aggregate Equipment
Advances. Additionally, tenant improvements to the Borrower's chief executive
office may constitute only up to thirty five percent (35%) of aggregate
Equipment Advances.
(b) Interest shall accrue from the date of each Equipment Advance at
the rate specified in Section 2.3(a) and shall be payable monthly for each month
through the month in which the Equipment Availability End Date falls. Any
Equipment Advances that are outstanding on the Equipment Availability End Date
will be payable in thirty six (36) equal monthly installments of principal, plus
all accrued interest, beginning on the Payment Date of the month following the
Equipment Availability End Date and ending on the Equipment Maturity Date.
Equipment Advances, once repaid, may not be reborrowed.
(c) When Borrower desires to obtain an Equipment Advance, Borrower
shall notify Bank (which notice shall be irrevocable) by facsimile transmission
to be received no later than 3:00 p.m. Pacific time one (1) Business Day before
the day on which the Equipment Advance is to be made. Such notice shall be
substantially in the form of Exhibit B. The notice shall be signed by a
Responsible Officer or its designee and include a copy of the invoice for the
Equipment to be financed.
2.2 Overadvances. If, at any time or for any reason, the amount of
Obligations owed by Borrower to Bank pursuant to Section 2.1.1 of this Agreement
is greater than the lesser of (i) the Committed Revolving Line or (ii) the
Borrowing Base, Borrower shall immediately pay to Bank, in cash, the amount of
such excess.
2.3 Interest Rates, Payments, and Calculations.
(a) Interest Rate. Except as set forth in Section 2.3(b), any
Advances and Equipment Advances shall bear interest, on the average daily
balance thereof, at a per annum rate equal to one half of one (0.50%) percentage
point above the Prime Rate.
(b) Default Rate. All Obligations shall bear interest, from and
after the occurrence of an Event of Default, at a rate equal to three (3)
percentage points above the interest rate applicable immediately prior to the
occurrence of the Event of Default.
(c) Payments. Interest hereunder shall be due and payable on each
Payment Date . Borrower hereby authorizes Bank to debit any accounts with Bank,
including, without limitation, Account Number _____________________ for payments
of principal and interest due on the Obligations and any other amounts owing by
Borrower to Bank. Bank will notify Borrower of all debits which Bank has made
against Borrower's accounts. Any such debits against Borrower's accounts in no
way shall be deemed a setoff. Any interest not paid when due shall be compounded
by becoming a part of the Obligations, and such interest shall thereafter accrue
interest at the rate then applicable hereunder.
<PAGE> 10
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(d) Computation. In the event the Prime Rate is changed from time to
time hereafter, the applicable rate of interest hereunder shall be increased or
decreased effective as of 12:01 a.m. on the day the Prime Rate is changed, by an
amount equal to such change in the Prime Rate. All interest chargeable under the
Loan Documents shall be computed on the basis of a three hundred sixty (360) day
year for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence of an Event of Default,
Bank shall credit a wire transfer of funds, check or other item of payment to
such deposit account or Obligation as Borrower specifies. After the occurrence
of an Event of Default, the receipt by Bank of any wire transfer of funds,
check, or other item of payment, whether directed to Borrower's deposit account
with Bank or to the Obligations or otherwise, shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment in
respect of the Obligations unless such payment is of immediately available
federal funds or unless and until such check or other item of payment is honored
when presented for payment. Notwithstanding anything to the contrary contained
herein, any wire transfer or payment received by Bank after 12:00 noon Pacific
time shall be deemed to have been received by Bank as of the opening of business
on the immediately following Business Day. Whenever any payment to Bank under
the Loan Documents would otherwise be due (except by reason of acceleration) on
a date that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.
2.5 Fees. Borrower shall pay to Bank the following:
(a) Facility Fee. A Facility Fee equal to Two Thousand Dollars
($2,000.00), which fee shall be due on the Closing Date and shall be fully
earned and nonrefundable;
(b) Financial Examination and Appraisal Fees. Bank's customary fees
and out-of-pocket expenses for Bank's annual audits of Borrower's Accounts, and
for each annual appraisal of Collateral and annual financial analysis and
examination of Borrower performed by Bank or its agents and all such expenses
for audits, examination, or appraisals from and after the occurrence of an Event
of Default;
(c) Bank Expenses. Upon demand from Bank, including, without
limitation, upon the date hereof, all Bank Expenses incurred through the date
hereof, including reasonable attorneys' fees and expenses, and, after the date
hereof, all Bank Expenses, including reasonable attorneys' fees and expenses, as
and when they become due.
2.6 Additional Costs. In case any law, regulation, treaty or official
directive or the interpretation or application thereof by any court or any
governmental authority charged with the administration thereof or the compliance
with any guideline or request of any central bank or other governmental
authority (whether or not having the force of law):
(a) subjects Bank to any tax with respect to payments of principal
or interest or any other amounts payable hereunder by Borrower or
otherwise with respect to the transactions contemplated hereby (except for
taxes on the overall net income of Bank imposed by the United States of
America or any political subdivision thereof);
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(b) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect to its
performance under this Agreement, and the result of any of the foregoing
is to increase the cost to Bank, reduce the income receivable by Bank or
impose any expense upon Bank with respect to any loans, Bank shall notify
Borrower thereof. Borrower agrees to pay to Bank the amount of such
increase in cost, reduction in income or additional expense as and when
such cost, reduction or expense is incurred or determined, upon
presentation by Bank of a statement of the amount and setting forth Bank's
calculation thereof, all in reasonable detail, which statement shall be
deemed true and correct absent manifest error.
2.7 Except as otherwise set forth herein, this Agreement shall become
effective on the Closing Date and, subject to Section 12.7, shall continue in
full force and effect for a term ending on the Maturity Date. Notwithstanding
the foregoing, Bank shall have the right to terminate its obligation to make
Credit Extensions under this Agreement immediately and without notice upon the
occurrence and during the continuance of an Event of Default. Notwithstanding
termination of this Agreement, Bank's lien on the Collateral shall remain in
effect for so long as any Obligations are outstanding.
3. CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Credit Extension. The obligation of
Bank to make the initial Credit Extension is subject to the condition precedent
that Bank shall have received, in form and substance satisfactory to Bank, the
following:
(a) this Agreement;
(b) a certificate of the Clerk of Borrower with respect to articles,
bylaws, incumbency and resolutions authorizing the execution and delivery
of this Agreement;
(c) a negative pledge agreement covering intellectual property;
(d) an opinion of Borrower's counsel;
(e) financing statements (Forms UCC-1);
(f) insurance certificate;
(g) payment of the fees and Bank Expenses then due specified in
Section 2.5 hereof;
(h) Certificate of Foreign Qualification (if applicable); and
such other documents, and completion of such other matters, as Bank may
reasonably deem necessary or appropriate.
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3.2 Conditions Precedent to all Credit Extensions. The obligation of
Bank to make each Credit Extension, including the initial Credit Extension, is
further subject to the following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1; and
(b) the representations and warranties contained in Section 5 shall
be true and correct in all material respects in light of the circumstances
under which they were made and on and as of the date of such
Payment/Advance Form and on the effective date of each Credit Extension as
though made at and as of each such date, and no Event of Default shall
have occurred and be continuing, or would result from such Credit
Extension. The malting of each Credit Extension shall be deemed to be a
representation and warranty by Borrower on the date of such Credit
Extension as to the accuracy of the facts referred to in this Section
3.2(b).
4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower grants and pledges to Bank a
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure prompt payment of any and all Obligations
and in order to secure prompt performance by Borrower of each of its covenants
and duties under the Loan Documents. Except as set forth in the Schedule, such
security interest constitutes a valid, first priority security interest in the
presently existing Collateral, and will constitute a valid, first priority
security interest in Collateral acquired after the date hereof. Borrower
acknowledges that Bank may place a "hold" on any Deposit Account pledged as
Collateral to secure the Obligations. Notwithstanding termination of this
Agreement, Bank's Lien on the Collateral shall remain in effect for so long as
any Obligations are outstanding.
4.2 Delivery of Additional Documentation Required. Borrower shall from
time to time execute and deliver to Bank, at the request of Bank, all Negotiable
Collateral, all financing statements and other documents that Bank may
reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 Right to Inspect. Bank (through any of its officers, employees, or
agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours, to inspect Borrower's Books and to make
copies thereof and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, condition of, or any other
matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower is a corporation duly
existing and in good standing under the laws of its state of incorporation and
qualified and licensed to do
<PAGE> 13
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business in, and is in good standing in, any state in which the conduct of its
business or its ownership of property requires that it be so qualified.
5.2 Due Authorization: No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor will
they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound. Borrower is not in default
under any agreement to which it is a party or by which it is bound, which
default could have a Material Adverse Effect.
5.3 No Prior Encumbrances. Borrower has good and feasible title to the
Collateral, free and clear of Liens, except for Permitted Liens.
5.4 Bona Fide Eligible Accounts. The Eligible Accounts are bona fide
existing obligations. To the Borrower's knowledge, the service or property
giving rise to such Eligible Accounts has been performed or delivered to the
account debtor or to the account debtor's agent for immediate shipment to and
unconditional acceptance by the account debtor. Borrower has not received notice
of actual or imminent Insolvency Proceeding of any account debtor whose accounts
are included in any Borrowing Base Certificate as an Eligible Account.
5.5 Merchantable Inventory. To the Borrower's knowledge, all Inventory is
in all material respects of good and marketable quality, free from all material
defects.
5.6 Name: Location of Chief Executive Office. Except as disclosed in the
Schedule, Borrower has not done business and will not without at least thirty
(30) days prior written notice to Bank do business under any name other than
that specified on the signature page hereof. The chief executive office of
Borrower is located at the address indicated in Section 10 hereof.
5.7 Litigation. Except as set forth in the Schedule, there are no actions
or proceedings pending, or, to Borrower's knowledge, threatened by or against
Borrower before any court or administrative agency in which an adverse decision
could have a Material Adverse Effect or a material adverse effect on Borrower's
interest or Bank's security interest in the Collateral.
5.8 No Material Adverse Change in Financial Statements. All consolidated
financial statements related to Borrower that have been delivered by Borrower to
Bank fairly present in all material respects Borrower's consolidated financial
condition as of the date thereof and for the periods specified therein and
Borrower's consolidated results of operations for the period then ended. There
has not been a material adverse change in the consolidated financial condition
of Borrower since the date of the most recent of such financial statements
submitted to Bank on or about the Closing Date.
5.9 Solvency. Borrower is able to pay its debts (including trade debts) as
they mature.
5.10 Regulatory Compliance. Borrower has met the minimum funding
requirements of ERISA with respect to any employee benefit plans subject to
ERISA. No event has occurred resulting from Borrower's failure to comply with
ERISA that is reasonably likely to result in
<PAGE> 14
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Borrower's incurring any liability that could have a Material Adverse Effect.
Borrower is not an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940.
Borrower is not engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulations G, T and U of the Board of
Governors of the Federal Reserve System). Borrower has complied with all the
provisions of the Federal Fair Labor Standards Act. Borrower has not violated
any statutes, laws, ordinances or rules applicable to it, violation of which
could have a Material Adverse Effect.
5.11 Environmental Condition. To the Borrower's knowledge, none of
Borrower's properties or assets has ever been used by Borrower or, to the best
of Borrower's knowledge, by previous owners or operators, in the disposal of, or
to produce, store, handle, treat, release, or transport, any hazardous waste or
hazardous substance other than in accordance with applicable law; to the best of
Borrower's knowledge, none of Borrower's properties or assets has ever been
designated or identified in any manner pursuant to any environmental protection
statute as a hazardous waste or hazardous substance disposal site, or a
candidate for closure pursuant to any environmental protection statute; no lien
arising under any environmental protection statute has attached to any revenues
or to any real or personal property owned by Borrower; and Borrower has not
received a summons, citation, notice, or directive from the Environmental
Protection Agency or any other federal, state or other governmental agency
concerning any action or omission by Borrower resulting in the release, or other
disposition of hazardous waste or hazardous substances into the environment.
5.12 Taxes. Borrower has filed or caused to be filed all tax ream required
to be filed on a timely basis, and has paid, or has made adequate provision for
the payment of, all taxes reflected therein, unless contested by the Borrower in
good faith pursuant to appropriate proceedings.
5.13 Subsidiaries. Borrower does not own any stock, partnership interest
or other equity securities of any Person, except for Permitted Investments.
5.14 Government Consents. Borrower has obtained all consents, approvals
and authorizations of, made all declarations or filings with, and given all
notices to, all governmental authorities that are necessary for the continued
operation of Borrower's business as currently conducted, failure of which would
not cause a Material Adverse Effect.
5.15 Full Disclosure. No representation, warranty or other statement made
by Borrower in any certificate or written statement furnished to Bank contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained in such certificates or
statements not misleading in light of the circumstances under which
representation or warranty was made.
<PAGE> 15
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6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
a Credit Extension hereunder, Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain its corporate existence and
good standing in its jurisdiction of incorporation and maintain qualification in
each jurisdiction in which the failure to so qualify could have a Material
Adverse Effect. Borrower shall maintain, to the extent consistent with prudent
management of Borrower's business, in force all licenses, approvals and
agreements, the loss of which could have a Material Adverse Effect.
6.2 Government Compliance. Borrower shall meet the minimum funding
requirements of ERISA with respect to any employee benefit plans subject to
ERISA. Borrower shall comply with all statutes, laws, ordinances and government
rules and regulations to which it is subject, noncompliance with which could
have a Material Adverse Effect or a material adverse effect on the Collateral or
the priority of Bank's Lien on the Collateral.
6.3 Financial Statements, Reports, Certificates. Borrower shall deliver to
Bank: (a) as soon as available, but in any event within twenty five (25) days
after the end of each month, a company prepared consolidated balance sheet and
income statement covering Borrower's consolidated operations during such period,
in a form and certified by an officer of Borrower reasonably acceptable to Bank;
(b) as soon as available, but in any event within ninety (90) days after the end
of Borrower's fiscal year, audited consolidated financial statements of Borrower
prepared in accordance with GAAP, consistently applied, together with an
unqualified opinion on such financial statements of an independent certified
public accounting firm reasonably acceptable to Bank (c) within ten (10) days of
filing, copies of all statements, reports and notices sent or made available
generally by Borrower to its security holders or to any holders of Subordinated
Debt and all reports on Form 10K, 10-Q and 8K filed with the Securities and
Exchange Commission; (d) promptly upon receipt of notice thereof, a report of
any legal actions pending or threatened against Borrower that could result in
damages or costs to Borrower of One Hundred Thousand Dollars ($100,000) or more,
and (e) such budgets, sales projections, operating plans or other financial
information as Bank may reasonably request from time to time.
Within twenty five (25) days after the last day of each month (or
portion thereof) during which there are any Advances outstanding under the
Committed Revolving Line, Borrower shall deliver to Bank a Borrowing Base
Certificate signed by a Responsible Officer in substantially the form of Exhibit
C hereto, together with aged listings of accounts receivable provided however
that the Borrowing Base Certificate shall be delivered only in the event that
the Borrower has requested Advances under the Committed Revolving Line.
Within twenty five (25) days after the last day of each month,
Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the form
of Exhibit D hereto.
<PAGE> 16
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Bank shall have a right from time to time hereafter to audit
Borrower's Accounts at Borrower's expense, provided that such audits will be
conducted no more often than once every twelve (12) months unless an Event of
Default has occurred and is continuing with the first such audit to take place
within one hundred eighty (180) days of the Closing Date.
6.4 Inventory: Returns. Borrower shall keep all Inventory in good and
marketable condition, free from all material defects. Ream and allowances, if
any, as between Borrower and its account debtors shall be on the same basis and
in accordance with the usual customary practices of Borrower, as they exist at
the time of the execution and delivery of this Agreement. Borrower shall
promptly notify Bank of all returns and recoveries and of all disputes and
claims, where the return, recovery, dispute or claim involves more than One
Hundred Thousand Dollars ($100,000).
6.5 Taxes. Borrower shall make due and timely payment or deposit of all
material federal, state, and local taxes, assessments, or contributions required
of it by law, and will execute and deliver to Bank, on demand, appropriate
certificates attesting to the payment or deposit thereof, and Borrower will make
timely payment or deposit of all material tax payments and withholding taxes
required of it by applicable laws, including, but not limited to, those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal
income taxes, and will, upon request, furnish Bank with proof satisfactory to
Bank indicating that Borrower has made such payments or deposits; provided that
Borrower need not make any payment if (i) the amount or validity of such payment
is contested in good faith by appropriate proceedings, (ii) Borrower has
established proper reserves (to the extent required by GAAP) and (iii) no lien
other than a Permitted Lien results.
6.6 Insurance.
(a) Borrower, at its expense, shall keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain insurance
relating to Borrower's ownership and use of the Collateral in amounts and of a
type that are customary to businesses similar to Borrower's.
(b) All such policies of insurance shall be in such form, with such
companies, and in such amounts as are reasonably satisfactory to Bank. All such
policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof and all liability insurance policies shall show the Bank as an
additional insured, and shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any reason. At Bank's
request, Borrower shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. All proceeds
payable under any such policy shall, at the option of Bank, be payable to Bank
to be applied on account of the Obligations.
6.7 Principal Depository. Borrower shall maintain its principal
depository and operating accounts with Bank.
<PAGE> 17
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6.8 Quick Ratio. Borrower shall maintain, as of the last day of each
calendar month, a ratio of Quick Assets to Current Liabilities of at least 1.50
to 1.0.
6.9 Liquidity Ratio/Debt Service Coverage. Borrower shall maintain, as of
the last day of each calendar month either (i) a Liquidity Ratio of at least
1.50 to 1.0 or (ii) a Debt Service Coverage Ratio of 1.25 to 1.0 (measured for
the preceding calendar quarter).
6.10 Tangible Net Worth. Borrower shall maintain, as of the last day of
each calendar month, a Tangible Net Worth of not less than One Million Five
Hundred Thousand Dollars ($1,500,000.00).
6.11 Further Assurances. At any time and from time to time Borrower shall
execute and deliver such further instruments and take such further action as may
reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANT
Borrower covenants and agrees that, so long as any Credit Extension
hereunder shall be available and until payment in full of the outstanding
Obligations or for so long as Bank may have any commitment to make any Advances,
Borrower will not do any of the following:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose of
(collectively, a "Transfer") all or any part of its business or property, other
than Transfers: (i) of inventory in the ordinary course of business, (ii) of
non-exclusive licenses and similar arrangements for the use of the property of
Borrower in the ordinary course of business; (iii) that constitute payment of
normal and usual operating expenses in the ordinary course of business; or (iv)
of worn-out or obsolete Equipment.
7.2 Changes in Business, Ownership, or Management, Business Locations.
Engage in any business, other than the businesses currently engaged in by
Borrower and any business substantially similar or related thereto (or
incidental thereto), or suffer a material adverse change in Borrower's ownership
or management. Borrower will not, without at least thirty (30) days prior
written notification to Bank, relocate its chief executive office or add any new
offices or business locations.
7.3 Mergers or Acquisitions. Merge or consolidate with or into any other
business organization, or acquire all or substantially all of the capital stock
or property of another Person.
7.4 Indebtedness. Create, incur. assume or be or remain liable with
respect to any Indebtedness other than Permitted Indebtedness.
7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien with
respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, except for Permitted Liens.
7.6 Distributions. Pay any dividends or make any other distribution or
payment on account of or in redemption, retirement or purchase of any capital
stock.
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7.7 Investments. Directly or indirectly acquire or own, or make any
Investment in or to any Person, other than Permitted Investments.
7.8 Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower except
for transactions that are in the ordinary course of Borrower's business, upon
fair and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm's length transaction with a nonaffiliated Person.
7.9 Subordinated Debt. Make any payment in respect of any Subordinated
Debt, except in compliance with the terms of such Subordinated Debt, or amend
any provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.10 Inventory. Store the Inventory with a bailee, warehouseman, or
similar party unless Bank has received a pledge of any warehouse receipt
covering such Inventory. Except for Inventory sold in the ordinary course of
business and except for such other locations as Bank may approve in writing,
Borrower shall keep the Inventory only at the location set forth in Section 10
hereof and such other locations of which Borrower gives Bank prior written
notice and as to which Borrower signs and files a financing statement where
needed to perfect Bank's security interest.
7.11 Compliance. Become an "investment company" or a company controlled by
an "investment company," within the meaning of the Investment Company Act of
1940, or become principally engaged in, or under as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose; fail
to meet the minimum funding requirements of ERISA; permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the
Federal Fair Labor Standards Act or violate any other law or regulation, which
violation could have a Material Adverse Effect or a material adverse effect on
the Collateral or the priority of Bank's Lien on the Collateral.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay, when due, any of the
Obligations.
8.2 Covenant Default.
(a) If Borrower fails to perform any obligation under Sections 6.3,
6.5, 6.6, 6.7, 6.8, 6.9, or 6.10 or violates any of the covenants contained in
Article 7 of this Agreement; or
(b) If Borrower fails or neglects to perform, keep, or observe any
other material term, provision, condition, covenant, or agreement contained in
this Agreement, in any of the Loan Documents, or in any other present or future
agreement between Borrower and Bank and as to any default under such other term,
provision, condition, covenant or agreement that can
<PAGE> 19
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be cured, has failed to cure such default within ten (10) days after the
occurrence thereof, provided, however, that if the default cannot by its nature
be cured within the ten (10) day period or cannot after diligent attempts by
Borrower be cured within such ten (10) day period, and such default is likely to
be cured within a reasonable time, then Borrower shall have an additional
reasonable period (which shall not in any case exceed thirty (30) days) to
attempt to cure such default, and within such reasonable time period the failure
to have cured such default shall not be deemed an Event of Default (provided
that no Advances will be required to be made during such cure period);
8.3 Material Adverse Change. If there (i) occurs a material adverse change
in the business, operations, or condition (financial or otherwise) of the
Borrower, or (ii) is a material impairment of the prospect of repayment of any
portion of the Obligations or (iii) is a material impairment of the value or
priority of Bank's security interests in the Collateral:
8.4 Attachment. If any material portion of Borrower's assets is attached,
seized, subjected to a writ or distress warrant, or is levied upon, or comes
into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Credit Extensions will be required to be made during such cure period);
8.5 Insolvency. If Borrower becomes insolvent, or if an Insolvency
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within 45 days (provided that no
Advances will be made prior to the dismissal of such Insolvency Proceeding);
8.6 Other Agreements. If there is a default in any agreement to which
Borrower is a parry with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount in excess of One Hundred "Thousand Dollars
($100,000) or that could have a Material Adverse Effect;
8.7 Subordinated Debt. If Borrower makes any payment on account of
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8 Judgments. If a judgment or judgments for the payment of money in an
amount, individually or in the aggregate, of at least Fifty Thousand Dollars
($50,000) shall be rendered against Borrower and shall remain unsatisfied and
unstayed for a period of ten (10) days
<PAGE> 20
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(provided that no Credit Extensions will be made prior to the satisfaction or
stay of such judgment); or
8.9 Misrepresentations. If any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate or writing delivered to Bank by Borrower or any
Person acting on Borrower's behalf pursuant to this Agreement or to induce Bank
to enter into this Agreement or any other Loan Document.
9. BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. Upon the occurrence and during the continuance of
an Event of Default, Bank may, at its election, without notice of its election
and without demand, do any one or more of the following, all of which are
authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement, by
any of the other Loan Documents, or otherwise, immediately due and payable
(provided that upon the occurrence of an Event of Default described in
Section 8.5 all Obligations shall become immediately due and payable
without any action by Bank);
(b) Cease advancing money or extending credit to or for the benefit
of Borrower under this Agreement or under any other agreement between
Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
(d) Without notice to or demand upon Borrower, make such payments
and do such acts as Bank considers necessary or reasonable to protect its
security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires, and to make the Collateral available to
Bank as Bank may designate. Borrower authorizes Bank to enter the premises
where the Collateral is located, to take and maintain possession of the
Collateral, or any part of it, and to pay, purchase, contest, or
compromise any encumbrance, charge, or lien which in Bank's determination
appears to be prior or superior to its security interest and to pay all
expenses incurred in connection therewith. With respect to any of
Borrower's premises, Borrower hereby grants Bank a license to enter such
premises and to occupy the same, without charge;
(e) Without notice to Borrower set off and apply to the Obligations
any and all (i) balances and deposits of Borrower held by Bank, or (ii)
indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell (in the manner provided for herein)
the Collateral. Bank is hereby granted a nonexclusive, royalty-free
license or other right, solely pursuant to the provisions of this Section
9.1, to use, without charge, Borrower's labels, patents, copyrights, mask
works, rights of use of any name, trade secrets, trade names. trademarks,
service marks, and advertising matter, or any property of a similar
nature, as it pertains to
<PAGE> 21
-21-
the Collateral, in completing production of, advertising for sale, and
selling any Collateral and, in connection with Bank's exercise of its
rights under this Section 9.1, Borrower's rights under all licenses and
all franchise agreements shall inure to Bank's benefit;
(g) Sell the Collateral at either a public or private sale, or both,
by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply the proceeds thereof to
the Obligations in accordance with applicable law, if any;
(h) Bank may credit bid and purchase at any public sale, or at any
private sale as permitted by law; and
(i) Any deficiency that exists after disposition of the Collateral
as provided above will be paid immediately by Borrower.
9.2 Power of Attorney. Effective only upon the occurrence and during the
continuance of an Event of Default, Borrower hereby irrevocably appoints Bank
(and any of Bank's designated officers, or employees) as Borrower's true and
lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or bill of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) make, settle, and adjust all claims under and decisions with
respect to Borrower's policies of insurance; and (e) settle and adjust disputes
and claims respecting the accounts directly with account debtors, for amounts
and upon terms which Bank determines to be reasonable; and (f) to file, in its
sole discretion, one or more financing or continuation statements and amendments
thereto, relative to any of the Collateral without the signature of Borrower
where permitted by law, provided Bank may exercise such power of attorney to
sign the name of Borrower on any of the documents described in Section 4.2
regardless of whether an Event of Default has occurred. The appointment of Bank
as Borrower's attorney in fact, and each and every one of Bank's rights and
powers, being coupled with an interest, is irrevocable until all of the
Obligations have been fully repaid and performed and Bank's obligation to
provide advances hereunder is terminated.
9.3 Accounts Collection. Upon the occurrence and during the continuance of
an Event of Default, Bank may notify any Person owing funds to Borrower of
Bank's security interest in such funds and verify the amount of such Account.
Borrower shall collect all amounts owing to Borrower for Bank, receive in trust
all payments as Bank's trustee, and if requested or required by Bank,
immediately deliver such payments to Bank in their original form as received
from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or cash any
required proof of payment due to third persons or entities, as required under
the terms of this Agreement, then Bank may do any or all of the following: (a)
make payment of the same or any part thereof, (b) set up such reserves under the
Committed Revolving Line as Bank deems necessary to protect Bank from the
exposure created by such failure; or (c) obtain and maintain insurance policies
of
<PAGE> 22
-22-
the type discussed in Section 6.6 of this Agreement, and take any action with
respect to such policies as Bank deems prudent. Any amounts so paid or deposited
by Bank shall constitute Bank Expenses, shall be immediately due and payable,
and shall bear interest at the then applicable rate hereinabove provided, and
shall be secured by the Collateral. Any payments made by Bank shall not
constitute an agreement by Bank to make similar payments in the future or a
waiver by Bank of any Event of Default under this Agreement.
9.5 Bank's Liability for Collateral. So long as Bank complies with
reasonable banking practices, Bank shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof, or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower.
9.6 Remedies Cumulative. Bank's rights and remedies under this Agreement,
the Loan Documents, and all other agreements shall be cumulative. Bank shall
have all other rights and remedies not expressly set forth herein as provided
under the Code, by law, or in equity. No exercise by Bank of one right or remedy
shall be deemed an election, and no waiver by Bank of any Event of Default on
Borrower's part shall be deemed a continuing waiver. No delay by Bank shall
constitute a waiver, election, or acquiescence by it. No waiver by Bank shall be
effective unless made in a written document signed on behalf of Bank and then
shall be effective only in the specific instance and for the specific purpose
for which it was given.
9.7 Demand: Protest. Borrower waives demand, protest, notice of protest,
notice of default or dishonor, notice of payment and nonpayment, notice of any
default, nonpayment at maturity, release, compromise, settlement, extension, or
renewal of accounts, documents, instruments, chattel paper, and guarantees at
any time held by Bank on which Borrower may in any way be liable.
10. NOTICES
Unless otherwise provided m this Agreement, all notices or demands by any
party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by firs-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, by certified mad, postage prepaid, return receipt requested,
or by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:
If to Borrower Synchronicity, Inc.
201 Forest Street
Marlborough, Massachusetts 01752
Attn: Mr. Eugene Connolly
FAX: (508)-485-7514
<PAGE> 23
-23-
with a copy to: Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, Massachusetts 02110
Attn: Jennifer A. Post, Esquire
FAX: (617) 248-7100
If to Bank Silicon Valley Bank
40 William Street
Wellesley, Massachusetts 02181
Attn: James C. Maynard, Vice
President
FAX: (781) 431-9906
with a copy to: Riemer & Braunstein
Three Center Plaza
Boston, Massachusetts 02108
Attn: David A. Ephraim, Esquire
FAX: (617) 723-6831
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE: JURY WAIVER
The laws of the Commonwealth of Massachusetts shall apply to this
Agreement. BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, SUIT,
OR PROCEEDING OF ANY KIND, AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS
AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR ANY REASON BANK CANNOT AVAIL ITSELF OF
THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS, BORROWER ACCEPTS JURISDICTION
OF THE COURTS AND VENUE IN SANTA CLARA COUNTY, CALIFORNIA.
BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE
LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH
PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
<PAGE> 24
-24-
12. GENERAL PROVISIONS
12.1 Successors and Assigns. This Agreement shall bind and inure to the
benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder.
12.2 Indemnification. Borrower shall , indemnify defend, protect and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by the Loan Documents;
and (b) all losses or Bank Expenses in any way suffered, incurred, or paid by
Bank as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under the Loan Documents, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 Time of Essence. Time is of the essence for the performance of all
obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
12.5 Amendments in Writing; Integration. This Agreement cannot be amended
or terminated except by a writing signed by Borrower and Bank. All prior
agreements, understandings, representations, warranties, and negotiations
between the parties hereto with respect to the subject matter of this Agreement,
if any, are merged into this Agreement and the Loan Documents.
12.6 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.7 Survival. All covenants, representations and warranties made in this
Agreement shall continue in full force and effect so long as any Obligations
remain outstanding. The obligations of Borrower to indemnify Bank with respect
to the expenses, damages, losses, costs and liabilities described in Section
12.2 shall survive until all applicable statute of limitations periods with
respect to actions that may be brought against Bank have run.
12.8 Countersignature. This Agreement shall become effective only when it
shall have been executed by Borrower and Bank (provided, however, in no event
shall this Agreement become effective until signed by an officer of Bank in
California).
<PAGE> 25
-25-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
SYNCHRONICITY, INC.
By: Eugene Connolly
____________________________________
Title: Vice President
__________________________________
By: ____________________________________
Title: __________________________________
SILICON VALLEY BANK, d/b/a SILICON VALLEY
EAST
By: Carolyn Macedo
____________________________________
Name: _________________________________
Title: __________________________________
SILICON VALLEY BANK
By: Michelle Giannini
____________________________________
Name: _________________________________
Title: __________________________________
(Signed in Santa Clara County,
California)
<PAGE> 26
EXHIBIT A
The Collateral shall consist of all right, title and interest of Borrower
in and to the following:
(a) All goods and equipment now owned or hereafter acquired,
including, without limitation, all machinery, fixtures, vehicles
(including motor vehicles and trailers), and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing,
wherever located;
(b) All inventory, now owned or hereafter acquired, including,
without limitation, all merchandise, raw materials, parts, supplies,
packing and shipping materials, work in process and finished products
including such inventory as is temporarily out of Borrower's custody or
possession or in transit and including any returns upon any accounts or
other proceeds, including insurance proceeds, resulting from the sale or
disposition of any of the foregoing and any documents of title
representing any of the above, and Borrower's Books relating to any of the
foregoing;
(c) All contract rights and general intangibles now owned or
hereafter acquired, including, without limitation, goodwill, leases,
license agreements, franchise agreements, blueprints, drawings, purchase
orders, customer lists, route lists, claims, literature, reports,
catalogs, income tax refunds, payments of insurance and rights to payment
of any kind,
(d) All now existing and hereafter arising accounts, contract
rights, royalties, license rights and all other forms of obligations owing
to Borrower arising out of the sale or lease of goods, the licensing of
technology or the rendering of services by Borrower, whether or not earned
by performance, and any and all credit insurance, guaranties, and other
security therefor, as well as all merchandise returned to or reclaimed by
Borrower and Borrower's Books relating to any of the foregoing;
(e) All documents, cash, deposit accounts, securities, letters of
credit, certificates of deposit, instruments and chattel paper now owned
or hereafter acquired and Borrower's Books relating to the foregoing; and
(f) Any and all claims, rights and interests in any of the above and
all substitutions for, additions and accessions to and proceeds thereof.
Notwithstanding the foregoing, the Collateral shall not be deemed to
include any copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work thereof,
whether published or unpublished, now owned or hereafter acquired; any patents,
trademarks, servicemarks and applications therefor; any trade secret rights,
including any rights to unpatented inventions, know-how, operating manuals,
license rights and agreements and confidential information, now owned or
hereafter acquired; or
<PAGE> 27
any claims for damages by way of any past, present and future infringement of
any of the foregoing.
<PAGE> 28
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM DEADLINE FOR SAME
DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE: _________________
FAX#: (408) _______________________________________ TIME: _________________
FROM:_________________________________________________________________________
BORROWER'S NAME
FROM: ________________________________________________________________________
AUTHORIZED SIGNER'S NAME
______________________________________________________________________________
AUTHORIZED SIGNATURE
PHONE:
________________________________________
FROM ACCOUNT # _________________________ TO ACCOUNT # _______________
<TABLE>
<CAPTION>
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
-------------------------- ---------------------
<S> <C>
PRINCIPAL INCREASE (ADVANCE) $
PRINCIPAL PAYMENT (ONLY) $
INTEREST PAYMENT (ONLY) $
PRINCIPAL AND INTEREST (PAYMENT) $
</TABLE>
OTHER INSTRUCTIONS:
All representations and warranties of Borrower stated in the Loan and
Security Agreement are true, correct and complete in all material respects as of
the date of the telephone request for and Advance confirmed by this Advance
Request; provided, however, that those representations and warranties expressly
referring to another date shall be true, correct and complete in all material
respects as of such date.
BANK USE ONLY:
TELEPHONE REQUEST:
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
____________________________________
Authorized Requester
_________________________________
Authorized Signature (Bank)
Phone # ________________
<PAGE> 29
EXHIBIT C
BORROWING BASE CERTIFICATE
<TABLE>
<CAPTION>
Borrower: Synchronicity, Inc. Bank: Silicon Valley Bank
<S> <C>
Commitment Amount: $900,000.00
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of $
2. Additions (please explain on reverse) $
3. TOTAL ACCOUNTS RECEIVABLE $
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $
5. Balance of 50% over 90 day accounts $
6. Concentration Limits $
7. Foreign Accounts $
8. Governmental Accounts $
9. Contra Accounts $
10. Promotion or Demo Accounts $
11. Intercompany/Employee Accounts $
12. Other (please explain on reverse) $
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $
14. Eligible Accounts (#3 minus #13) $
15. LOAN VALUE OF ACCOUNTS (___% of #14) $
BALANCES
16. Maximum Loan Amount $
17. Total Funds Available [Lesser of #16 or #15] $
18. Present balance owing on Line of Credit $
19. RESERVE POSITION (#16 minus #17 and #18) $
</TABLE>
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Silicon Valley Bank.
=================================
COMMENTS: BANK USE ONLY
SYNCHRONICITY, INC.
Received By:
-------------------
Date:
---------------------------
By: Reviewed By:
------------------------------------ --------------------
Authorized Signer Compliance Status: Yes / No
=================================
<PAGE> 30
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: SYNCHRONICITY, INC.
The undersigned authorized officer of SYNCHRONICITY, INC hereby certifies that
in accordance with the terms and conditions of the Loan and Security Agreement
between Borrower and Bank (the "Agreement"), (i) Borrower is in complete
compliance for the period ending __________________________________ with all
required covenants except as noted below and (ii) all representations and
warranties of Borrower stated in the Agreement are true and correct in all
material respects as of the date hereof. Attached herewith are the required
documents supporting the above certification. The Officer further certifies that
these are prepared in accordance with Generally Accepted Accounting Principles
(GAAP) and are consistently applied from one period to the next except as
explained in an accompanying letter or footnotes. The Officer expressly
acknowledges that h no borrowings may be requested by the Borrower at any time
or date of determination that Borrower is not in compliance with any of the
terms of the Agreement, and that such compliance is determined not just at the
date this certificate is delivered.
Please indicate compliance status by circling Yes/No under "Complies" column.
<TABLE>
<CAPTION>
Reporting Covenant Required Complies
- ------------------ -------- ---------
<S> <C> <C> <C>
Monthly financial statements Monthly within 25 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
10-Q and 10-K Within 5 days after filing
with the SEC Yes No
A/R Agings Monthly within 25 days Yes No
</TABLE>
<TABLE>
<CAPTION>
Financial Covenant Required Actual Complies
- ------------------ -------- ------ --------
<S> <C> <C> <C> <C>
Maintain on a Monthly Basis:
Minimum Quick Ratio 1.50:1.0 :1.0 Yes No
---
Minimum Liquidity Ratio 1.50:1.0 :1.0 Yes No
---
Minimum Debt Service 1.25:1.0 :1.0 Yes No
-------
Minimum Tangible Net Worth $1,500,000.00 Yes No
-------
</TABLE>
=================================
Comments Regarding Exceptions: BANK USE ONLY
Sincerely,
Received By:
-------------------------
Date:
- --------------------------------------- -------------------------------
Signature Date:-------- Reviewed By:
------------------------
- --------------------------------------- Compliance Status: Yes / No
Title:
=================================
<PAGE> 31
DISBURSEMENT REQUEST AND AUTHORIZATION
Borrower: Synchronicity, Inc Bank: Silicon Valley Bank
LOAN TYPE. This is a Variable Rate, Revolving Line of Credit of a principal
amount up to $900,000.00.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.
SPECIFIC PURPOSE. The specific purpose of this loan is: .
----------------------
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Bank's conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:
Revolving Loan
<TABLE>
<S> <C>
Amount paid to Borrower directly: $ 0.00
Undisbursed Funds: $900,000.00
Principal: $900,000.0l0
</TABLE>
AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct from
Borrower's account numbered __________ the amount of any loan payment. If the
funds in the account are insufficient to cover any payment, Bank shall not be
obligated to advance funds to cover the payment.
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO BANK. THIS
AUTHORIZATION IS DATED AS OF _________________, 1998.
BORROWER: SYNCHRONICITY, INC
- -------------------------------------
Authorized Officer
<PAGE> 32
AGREEMENT TO PROVIDE INSURANCE
Grantor: Synchronicity, Inc Bank: Silicon Valley Bank
INSURANCE REQUIREMENTS. Synchronicity, Inc. ("Grantor") understands
that insurance coverage is required in connection with the extending of a
loan or the providing of other financial accommodations to Grantor by Bank.
These requirements are set forth in the Loan Documents. The following
minimum insurance coverages must be provided on the following described
collateral (the "Collateral"):
<TABLE>
<S> <C>
Collateral: All Inventory, Equipment and Fixtures.
Type: All risks, including fire, theft and liability.
Amount: Full insurable value.
Basis: Replacement value.
Endorsements: Loss payable clause to Bank with stipulation that coverage
will not be cancelled or diminished without a minimum of
twenty (20) days' prior written notice to Bank.
</TABLE>
INSURANCE COMPANY. Grantor may obtain insurance from any insurance company
Grantor may choose that is reasonably acceptable to Bank. Grantor understands
that credit may not be denied solely because insurance was not purchased through
Bank.
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Bank, on or
before closing, evidence of the required insurance as provided above, with an
effective date of ________________________________, or earlier. Grantor
acknowledges and agrees that if Grantor fails to provide any required insurance
or fails to continue such insurance in force, Bank may do so at Grantor's
expense as provided in the Loan and Security Agreement. The cost of such
insurance, at the option of Bank, shall be payable on demand or shall be added
to the indebtedness as provided in the security document. GRANTOR ACKNOWLEDGES
THAT IF BANK SO PURCHASES ANY SUCH INSURANCE, THE INSURANCE WILL PROVIDE LIMITED
PROTECTION AGAINST PHYSICAL DAMAGE TO THE COLLATERAL, UP TO THE BALANCE OF THE
LOAN; HOWEVER, GRANTOR'S EQUITY IN THE COLLATERAL MAY NOT BE INSURED. IN
ADDITION, THE INSURANCE MAY NOT PROVIDE ANY PUBLIC LIABILITY OR PROPERTY DAMAGE
INDEMNIFICATION AND MAY NOT MEET THE REQUIREMENTS OF ANY FINANCIAL
RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral,
Grantor authorizes Bank to provide to any person (including any insurance agent
or company) all information Bank deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.
<PAGE> 33
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF TIE[S AGREEMENT
TO PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED
________________________________, 1998
GRANTOR: SYNCHRONICITY, INC.
By:
-----------------------------------------
Authorized Officer
================================================================================
FOR BANK USE ONLY
INSURANCE VERIFICATION
DATE:
PHONE:
AGENT'S NAME:
INSURANCE COMPANY:
POLICY NUMBER:
EFFECTIVE DATES:
COMMENTS:
================================================================================
<PAGE> 1
Exhbit 10.8
FIRST LOAN MODIFICATION AGREEMENT
This First Loan Modification Agreement is entered into as of April 15,
1999, by and between SYNCHRONICITY, INC., a Massachusetts corporation with its
principal place of business at 201 Forest Street, Marlborough, Massachusetts
01752 (the "Borrower') and SILICON VALLEY BANK, a California chartered bank
("Bank"), with Ks principal place of business at 3003 Tasman Drive, Santa Clara,
CA 95054 and with a loan production office at Wellesley Office Park, 40 William
Street Suits 350, Wellesley, MA 02481, doing business under the name "Silicon
Valley East'.
1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among other indebtedness which may be
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a loan
arrangement dated as of February 20, 1998, evidenced by, among other documents,
a certain Loan and Security Agreement dated as of February 20,1998 Borrower and
Bank (the "Loan Agreement'). The Loan Agreement established in favor of the
Borrower (i) a working capital line of credit in the maximum principal amount of
Nine Hundred Thousand Dollars ($900,000.00) (the "Committed Revolving Line"),
and (ii) an equipment line of credit in the maximum principal amount of Three
Hundred Fifty Thousand Dollars ($350,000.00) (the "I 998 Committed Equipment
Line"). Capitalized terms used but not se defined herein shall have the same
meaning as in the Loan Agreement
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness".
2. DESCRIPTION OF COLLATERAL. Repayment of the Indebtedness is secured by the
Collateral as described in the Loan Agreement (together with any other
collateral security granted to Bank the "Security Documents").
Hereinafter, the Security Documents, together with all other documents
evidencing or securing the Indebtedness shall be referred to as the "Existing
Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. Modification(s) to Loan Agreement.
1. The Loan Agreement shall be amended by deleting the following
definition appearing in Section 1.1 thereof:
"Committed Revolving Line" means a credit extension
of up to Nine Hundred Thousand Dollars ($900,000.00)."
and inserting in lieu thereof the following:
"Committed Revolving Line" means a credit extension of
up to One Million Five Hundred Thousand Dollars
($1,500,000.00). Notwithstanding the foregoing, the
availability of Advances under
<PAGE> 2
-2-
the Committed Revolving Line shall be subject to the
receipt by the Bank of satisfactory results, in the sole
and absolute discretion of the Bank, of the Initial
Audit of Borrowers Accounts pursuant to Section 6.3
hereof. If the results of the Initial Audit are not
satisfactory to the Bank for any reason, the Bank may,
at its discretion, reduce ft amount of the Committed
Revolving Line, or not make any Advances hereunder,
except pursuant to terms satisfactory to the Bank."
2. All references to "Committed Equipment Line" in the Loan
Agreement shall mean and refer to the "1998 Committed
Equipment Line".
3. The Loan Agreement shall be amended by deleting the following
text appearing as paragraph (c) in the definition of "Eligible
Accounts" in Section 1.1 thereof
"(c) Accounts with respect to an account debtor,
including Affiliates, whose total obligations to
Borrower exceed twenty-five percent (25%) of all
Accounts to the extent such obligations exceed the
aforementioned percentage, except as approved in writing
by Bank;"
and inserting in lieu thereof the following:
"(c) Accounts with respect to an account debtor,
including Affiliates, whose total obligations to
Borrower exceed thirty-five percent (35%) of all
Accounts to the extent such obligations exceed the
aforementioned percentage, except as approved in writing
by Bank;"
4. The Loan Agreement shall be amended by deleting the following
definition appearing in Section 1.1 thereof.
"Equipment Advance" has the meaning set forth in
Section 2.1.2."
and inserting in lieu thereof the following:
"Equipment Advance" or "Equipment Advances" shall mean
any advance made hereunder pursuant to Section 2.1.2 or
Section 2.1.3 hereof."
5. The Loan Agreement shall be amended by deleting the following
definition appearing in Section 1.1 thereof
"Maturity Data" means, as applicable, the Revolving
Maturity Date or the Equipment Maturity Date."
<PAGE> 3
-3-
and inserting in lieu thereof the following:
"Maturity Date" means, as applicable, (i) the Revolving
Maturity Date with respect to Advances pursuant to
Section 2.1.1; (ii) the Equipment Maturity Date for
Equipment Advances pursuant to Section 2.1.2; and (iii)
the 1999 Equipment Maturity Date for Equipment Advances
pursuant to Section 2.1.3."
6. The Loan Agreement shall be amended by inserting the following
definitions immediately after the definition of "Negotiable
Collateral" appearing in Section 1.1 thereof:
"1999 Committed Equipment Line" means a credit extension
of up to Five Hundred Thousand Dollars ($500,000.00).
"1999 Equipment Availability End Date" has the
meaning set forth in Section 2.1.3.
"1999 Equipment Maturity Date" means that date which is
thirty-six (36) months from the 1999 Equipment
Availability End Date."
7. The Loan Agreement shall be amended by deleting em following
definition appearing in Section 1.1 thereof:
"Revolving Maturity Date" means the date which is one
(1) year from the Closing Date."
and inserting in lieu thereof the following:
"Revolving Maturity Date' means February 19, 2000."
8. Section 2.1.2 of the Loan Agreement shall be retitled as "1998
Equipment Advances".
9. There are no outstanding Equipment Advances under the 1998
Committed Equipment Line. No additional Equipment Advances
shall be made to Borrower under Section 2.1.2.
10. The Loan Agreement shall be amended by inserting after Section
2.1.2 thereof the Following new section entitled "1999
Equipment Advances":
"2.1.3 1999 Equipment Advances.
(a) Subject to and upon the terms and Conditions of this
Agreement at any time through _____________________,
2000 (the "1999 Equipment Availability End Date"), Bank
agrees to make Equipment Advances (each an "Equipment
Advance" and
<PAGE> 4
-4-
collectively, the "Equipment Advance") to Borrower under
this Section 2.1.3 in an aggregate outstanding amount
not to exceed the 1999 Committed Equipment Line. To
evidence the Equipment Advances, Borrower shall deliver
to Bank, at the time of each Equipment Advance request
an invoice for the equipment purchased. The Equipment
Advances under this Section 2.1.3 shall be used only to
purchase Equipment and shall not exceed One Hundred
Percent (100%) of the invoice amount of such equipment
approved from time to time by Bank, excluding taxes,
shipping, warranty charges, freight discounts and
installation expense. Software may only constitute up to
Two Hundred Fifty Thousand Dollars ($250,000.00) of
aggregate Equipment Advances under this Section 2.1.3.
(b) Interest shall accrue from the date of each
Equipment Advance made pursuant to this Section 2.1.3 at
a per annum rate equal to the aggregate of the Prime
Rate, plus One Half of One percent (0.50%), and shall be
payable monthly on the Payment Date of each month
through the month in which the 1999 Equipment
Availability End Date falls. Any Equipment Advances made
pursuant to this Section 2.1.3 that are outstanding on
the 1999 Equipment Availability End Date will be payable
in thirty-six (36) equal monthly installments of
principal, plus all accrued interest beginning on the
Payment Date of each month following the 1999 Equipment
Availability End Date and ending on the 1999 Equipment
Maturity Date. Equipment Advances, once repaid, may not
be reborrowed.
(c) When Borrower desires to obtain an Equipment
Advance, Borrower shall notify Bank (which notice shall
be irrevocable) by facsimile transmission to be received
no later than 3:00 p.m. Eastern time one (1) Business
Day before the day on which the Equipment Advance is to
be made. Such notice shall be substantially in the form
of Exhibit B. The notice shall be signed by a
Responsible Officer or its designee and include a copy
of the invoice for the Equipment to be financed."
11. The Loan Agreement shall be amended by deleting the following
text appearing in the first paragraph of Section 6.3 thereof
entitled "Financial Statements, Reports, Certificates":
"(b) as soon as available, but in any event within
ninety (90) days after the end of Borrower's fiscal
year, audited consolidated financial statements of
Borrower prepared in accordance with GAAP, consistently
applied, together with an unqualified opinion
<PAGE> 5
-5-
on such financial statements of an independent certified
public accounting firm reasonably acceptable to Bank;"
and inserting in lieu thereof the following:
"(b) as soon as available, but in any event within one
hundred twenty (120) days after the end of Borrower's
fiscal year, audited consolidated financial statements
of Borrower prepared in accordance with GAAP,
consistently applied, together with an unqualified
opinion on such financial statements of an independent
certified public accounting firm reasonably acceptable
to Bank;"
12. The Loan Agreement shall be amended by deleting the following
text appearing as the second paragraph of Section 6.3 thereof:
"Within twenty five (25) days after the last day of each
month (or portion thereof) during which there are any
Advances outstanding under the Committed Revolving Line,
Borrower shall deliver to Bank a Borrowing Base
Certificate signed by a Responsible Officer in
substantially the form of Exhibit C hereto, together
with aged listings of accounts receivable provided
however that the Borrowing Base Certificate shall be
delivered only in the event that the Borrower has
requested Advances under the Committed Revolving Line."
and inserting in lieu thereof the following:
"Within in twenty-five (25) days after the last day of
each month with respect to which either (i) Obligations
under the Committed Revolving Line are outstanding, or
(ii) Advances were made, Borrower shall deliver to Bank
a Borrowing Base Certificate signed by a Responsible
Officer in substantially the form of Exhibit C hereto,
together with aged listings of accounts receivable (by
invoice date)."
13. The Loan Agreement shall be amended by deleting the following
text appearing as the fourth paragraph of Section 6.3 thereof:
"Bank shall have a right from time to time hereafter to
audit Borrowers Accounts at Borrowers expense, provided
that such audits will be conducted no more often than
once every twelve (12) months unless an Event of Default
has occurred and is continuing with the first such audit
to take place within one hundred eighty (1 80) days of
the Closing Date."
and inserting in lieu thereof the following:
<PAGE> 6
-6-
"Bank shall have a right from time to time hereafter to
audit Borrower's Accounts at Borrower's expense,
provided that such audits will be conducted: (a) no more
often than every twelve (12) months, and (b) only when
either (i) Obligations under the Committed Revolving
Line are outstanding or (ii) Advances were made during
the preceding twelve (12) month period. Notwithstanding
the foregoing, the Bank shall have the right to audit
Borrower's Accounts at Borrower's expense at any time
after the occurrence of an Event of Default. The initial
Advance under the Committed Revolving Line shall be
subject to satisfactory results, in the sole discretion
of Bank, of an initial audit (the "Initial Audit") of
Borrower's Accounts."
14. The Loan Agreement shall be amended by deleting the following
text appearing as Sections 6.7, 6.8, 6.9 and 6.10 thereof.
"6.7 Principal Depository. Borrower shall maintain
its principal depository and operating accounts with
Bank.
6.8 Quick Ratio. Borrower shall maintain, as of the last
day of each calendar month, a ratio of Quick Assets to
Current Liabilities of at least 1.50 to 1.0.
6.9 Liquidity Ratio/Debt Service Coverage. Borrower
shall maintain, as of the last day of each calendar
month either (1) a Liquidity Ratio of at least 1.50 to
1.0 or (ii) a Debt Service Coverage Ratio of 1.25 to 1.0
(measured for the preceding calendar quarter).
6.10 Tangible Net Worth. Borrower shall maintain, as of
the last day of each calendar month, a Tangible Net
Worth of not less than One Million Five Hundred Thousand
Dollars ($1,500,000.00)."
and inserting in lieu thereof the following:
"6.7 Principal Depository. Borrower shall maintain its
principal depository and operating accounts with Bank,
which shall include, limitation, a demand deposit
account or money market account with the Bank in the
minimum aggregate amount at all time, of Two Hundred
Fifty Thousand Dollars ($250,000.00).
6.8 Quick Ratio. Borrower shall maintain, as of the last
day of each calendar month, a ratio of Quick Assets to
Current Liabilities of at least 1.50 to 1.0.
6.9 Liquidity Ratio/Debt Service Coverage. Borrower
shall maintain, as of the last day of each calendar
month either (i) a
<PAGE> 7
-7-
Liquidity Ratio of at least 1.50 to 1.0 or (ii) a Debt
Service Coverage Ratio of at least 1.25 to 1.0 (measured
for the preceding calendar quarter).
6.10 Tangible Net Worth. Borrower shall maintain: (i) as
of the last day of each quarter, a Tangible Net Worth of
not less than Three Million Dollars ($3,000,000.00), and
(ii) on a monthly basis, as of the last day of all
months which are not the last month of a quarter, a
Tangible Net Worth of not less than Two Million Five
Hundred Thousand Dollars ($2,500,000.00)."
15. The Borrower hereby ratifies, confirms and reaffirms, all and
singular, the terms and conditions of a certain Negative
Pledge Agreement dated as of February 20, 1998 between
Borrower and Bank, and acknowledges, confirms and agrees that
said Negative Pledge Agreement shall remain in full force and
effect.
16. The Borrowing Base Certificate appearing as Exhibit C to the
Loan Agreement is hereby replaced with the Compliance
Certificate attached as Exhibit A hereto.
17. The Compliance Certificate appearing as Exhibit D to the Loan
Agreement is hereby replaced with the Compliance Certificate
attached as Exhibit B hereto.
4. FEE. Borrower shall pay to Bank a modification fee equal to Two Thousand Five
Hundred Dollars ($2,500.00), which fee shall be due on the date hereof and shall
be deemed fully earned as of the date hereof. The Borrower shall also reimburse
Bank for all legal fees and expenses incurred in connection with this amendment
to the Existing Loan Documents.
5. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and
reaffirms all terms and conditions of all security or other collateral granted
to the Bank, and confirms that the indebtedness secured thereby includes,
limitation, the Indebtedness.
6. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has no
defenses against the obligations to pay any amounts under the Indebtedness.
7. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
existing Indebtedness, Bank is relying upon Borrowers representations,
warranties, and agreements, as set forth in the Documents. Except as expressly
modified pursuant to this Loan Modification Agreement, the terms of the Existing
Loan Documents remain unchanged and in full force and effect. Bank's agreement
to mod s to the existing Indebtedness pursuant to this Loan Mod Agreement in no
way shall obligate Bank to make any future modifications to the Indebtedness.
Nothing in this Loan Modification Agreement shall constitute a satisfaction of
the Indebtedness. It is the intention of Bank and Borrower to retain as liable
parties all makers of
<PAGE> 8
-8-
Existing Loan Documents, unless the party is expressly released by Bank in
writing. No maker will be released by virtue of this Loan Modification
Agreement.
8. JURISDICTION/VENUE. Borrower accepts for itself and in connection with its
properties, unconditionally, the non-exclusive jurisdiction of any state or
federal court of competent jurisdiction in the Commonwealth of Massachusetts in
any action, suit or proceeding of any kind against it which arises out of or by
reason of this Loan Modification Agreement provided, however, that if for any
reason Bank cannot avail itself of the courts of the Commonwealth of
Massachusetts, then venue shall lie in Santa Clara County, California.
9. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
only when it shall have been executed by Borrower and Bank (provided, however,
in no event shall this Loan Modification Agreement become effective until signed
by an officer of Bank in California).
This Loan Modification Agreement is executed as a sealed instrument under
the laws of the Commonwealth of Massachusetts as of the date first written
above.
BORROWER: BANK:
SYNCHRONICITY, INC. SILICON VALLEY BANK doing business
a as SILICON VALLEY EAST
By: /s/ Eugene Connolly By: ________________________________
__________________________________
Name: ________________________________ Name: ______________________________
Title: _______________________________ Title:______________________________
SILICON VALLEY BANK
By: ________________________________
Name: ______________________________
Title:_______________________________
(signed in Santa Clara
County, California)
<PAGE> 9
CORPORATE RESOLUTIONS FOR
AMENDING LOAN ARRANGEMENT
________________________, being the Clerk of SYNCHRONICITY, INC., a corporation
duly organized, validly existing, and in good standing under the laws of the
Commonwealth of Massachusetts, CERTIFIES that the following resolutions were
adopted
CHECK / / at a duly called and conducted meeting of the Directors of said
corporation held on ________________________ at which a quorum was
present and voting throughout.
/ / by the unanimous consent of the Directors of said corporation, the
originals of which consents having been placed with the records of
meetings of Directors of said corporation,
and are in conformity with the Articles of incorporation and By-Laws of said
corporation (each as amended to date) and that each of the following resolutions
presently is in full force and effect without change:
AMENDMENT OF LOAN ARRANGEMENT
RESOLVED, That this corporation amend its loan arrangements) with Silicon
Valley Bank (hereinafter, with any successor, the "Bank") in such
manner as has been or is hereafter discussed and negotiated by and
between the Bank on the one hand and any of the following, acting on
behalf of this corporation, on the other:
Insert title, only, if
Persons to act on behalf of
corporation have titles.
otherwise, insert names.
In connection with the foregoing, each of said officers and/or persons, acting
as described above, is authorized to execute, seal, acknowledge, and deliver in
the name of and on behalf of this corporation such instruments, documents, and
papers which relate thereto as may be appropriate, each in such form and upon
such terms as the officer(s) and/or person(s) so authorized determines, such
execution and delivery to be conclusive of such officer'(s) and/or person' (s)
authority so to act in the name of and on behalf of this corporation.
DELEGATION OF AUTHORITY
RESOLVED, That any one of the officers and/or persons authorized by the
foregoing Resolution, acting singly, may by written instrument
furnished the Bank delegate to any other officer or person the
same authority which is vested singly and individually by said
Resolution in the person(s) or officer(s) so delegating
authority, which written delegation shall be in such form as may
be requested by
<PAGE> 10
the Bank and may be subject to such restrictions and limitations as
may be indicated thereon.
CONTINUATION OF AUTHORITY
RESOLVED, That all resolutions and delegations relative to the authority of
any officer or person to act on behalf of this corporation shall
remain in full force and effect until the Bank's receipt of
written notice of the revocation or modification of such
authority from the person signing below as the Clerk of this
corporation or from that person whom the Bank reasonably believes
to be authorized to act in this regard on behalf of this
corporation.
RATIFICATION OF PRIOR TRANSACTIONS
RESOLVED, That all action heretofore taken on behalf of this corporation
and all instruments, documents, and papers heretofore executed in
the name of and on behalf of this corporation concerning this
corporation's relationship with the Bank be, and they hereby are,
approved, adopted, and ratified. This corporation shall
indemnify, defend, and hold the Bank harmless of and from any
loss, liability, or damage the Bank may suffer or incur on
account of this corporation's relationship with the Bank.
REVOCATION OF INCONSISTENT RESOLUTIONS
RESOLVED, That any and all resolutions of this corporation which may be in
conflict with any of the foregoing resolutions be, and they hereby
are, revoked.
RESOLVED, That the resolutions of this corporation's Directors concerning
this corporation's relationship with and borrowing from Silicon
Valley Bank (the "Bank"), with offices at 40 William Street,
Suite 350, Wellesley, Massachusetts 02481, pursuant to which,
among other things, this corporation may be granting the Bank a
security interest or other collateral in and to, and/or
mortgaging, all or any portion of the assets of this corporation,
be, and said resolutions are hereby approved, adopted, and
incorporated herein by reference.
PERSONS PRESENTLY AUTHORIZED TO ACT
I further certify that the following persons presently are authorized under the
preceding Resolutions to act:
<PAGE> 11
<TABLE>
<CAPTION>
Name Title
<S> <C>
_____________________________ _____________________________
_____________________________ _____________________________
_____________________________ _____________________________
_____________________________ _____________________________
</TABLE>
IN WITNESS WHEREOF, I have set my hand and the seal of this corporation on
this _____ day of __________________, 2000.
(Corporate Seal) _________________________________
Clerk
Print Name: _______________________
If the foregoing Resolutions confer authority upon the Clerk, this
Certificate should be confirmed by another officer of the corporation.
CONFIRMED: ___________________________
Print Name: _____________________________
Title: ___________________________________
<PAGE> 1
Exhibit 10.9
SECOND LOAN MODIFICATION AGREEMENT
This Second Loan Modification Agreement is entered into as of
______________, effective as of __________________, by and between
SYNCHRONICITY, INC., a Massachusetts corporation with its principal place of
business at 201 Forest Street, Marlborough, Massachusetts 01752 (the "Borrower")
and SILICON VALLEY BANK, a California-chartered bank ("Bank"), with its
principal place of business at 3003 Tasman Drive, Santa Clara, CA 95054 and with
a loan production office located at Wellesley Office Park, 40 William Street,
Suite 350, Wellesley, MA 02481, doing business under the name "Silicon Valley
East".
1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among other indebtedness which
may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a
loan arrangement dated as of February 20, 1998, evidenced by, among other
documents, a certain Loan and Security Agreement dated as of February 20, 1998
between Borrower and Bank (the "Loan Agreement"). The Loan Agreement established
in favor of the Borrower: (i) a working capital line of credit in the maximum
principal amount of Nine Hundred Thousand Dollars ($900,000.00) (the "Committed
Revolving Line"), and (ii) an equipment line of credit in the maximum principal
amount of Three Hundred Fifty Thousand Dollars ($350,000.00) (the "1998
Committed Equipment Line"). Capitalized terms used but not otherwise defined
herein shall have the same meaning as in the Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness".
2. DESCRIPTION OF COLLATERAL. Repayment of the Indebtedness is secured by
the Collateral as described in the Loan Agreement (together with any other
collateral security granted to Bank, the "Security Documents").
Hereinafter, the Security Documents, together with all other documents
evidencing or securing the Indebtedness shall be referred to as the "Existing
Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. Modification(s) to Loan Agreement.
1. The Loan Agreement shall be amended by deleting the
following definition appearing in Section 1.1
thereof:
"Committed Revolving Line" means a credit
extension of up to One Million Five Hundred
Thousand Dollars ($1,500,000.00).
Notwithstanding the foregoing, the
availability of Advances under the Committed
Revolving Line shall be subject to the
receipt by the Bank of satisfactory results,
in the sole and absolute discretion of the
Bank, of the Initial Audit of Borrower's
Accounts pursuant to Section 6.3 hereof. If
the results of the Initial Audit are not
satisfactory to the Bank for any reason, the
Bank may, at its discretion, reduce the
amount of the Committed Revolving Line, or
not make any Advances hereunder, except
pursuant to terms satisfactory to the Bank."
and inserting in lieu thereof the following:
"Committed Revolving Line" means a credit
extension of up to Two Million Five Hundred
Thousand Dollars ($2,500,000.00).
Notwithstanding the foregoing, the
availability of Advances under the Committed
Revolving
<PAGE> 2
Line shall be subject to the receipt by the
Bank of satisfactory results, in the sole
and absolute discretion of the Bank, of the
Initial Audit of Borrower's Accounts
pursuant to Section 6.3 hereof. If the
results of the Initial Audit are not
satisfactory to the Bank for any reason, the
Bank may, at its discretion, reduce the
amount of the Committed Revolving Line, or
not make any Advances hereunder, except
pursuant to terms satisfactory to the Bank."
2. The Loan Agreement shall be amended by deleting the
following definition appearing in Section 1.1
thereof:
"Current Liabilities" means, as of any
applicable date, all amounts that should, in
accordance with GAAP, be included as current
liabilities on the consolidated balance
sheet of Borrower, as at such date, plus, to
the extent not already included therein, all
outstanding Credit Extensions made under
this Agreement, including all Indebtedness
that is payable upon demand or within one
year from the date of determination thereof
unless such Indebtedness is renewable or
extendable at the option of Borrower to a
date more than one year from the date of
determination, but excluding Subordinated
Debt.
and inserting in lieu thereof:
"Current Liabilities" means, as of any
applicable date, all amounts that should, in
accordance with GAAP, be included as current
liabilities on the consolidated balance
sheet of Borrower, as at such date, plus, to
the extent not already included therein, all
outstanding Credit Extensions made under
this Agreement, including all Indebtedness
that is payable upon demand or within one
year from the date of determination thereof
unless such Indebtedness is renewable or
extendable at the option of Borrower to a
date more than one year from the date of
determination, but excluding Subordinated
Debt and deferred revenue.
3. The Loan Agreement shall be amended by deleting the
following definition appearing in Section 1.1
thereof:
""Revolving Maturity Date" means February
19, 2000."
and inserting in lieu thereof:
""Revolving Maturity Date" means February
19, 2001."
4. The Loan Agreement shall be amended by deleting the
following text appearing as paragraph (a) of Section
2.1.3. thereof:
"2.1.3 1999 Equipment Advances.
(a) Subject to and upon the terms and conditions of
this Agreement, at any time through January 15, 2000
(the "1999 Equipment Availability End Date"), Bank
agrees to make Equipment Advances (each an "Equipment
Advance" and
2-
<PAGE> 3
collectively, the "Equipment Advances") to Borrower
under this Section 2.1.3 in an aggregate outstanding
amount not to exceed the 1999 Committed Equipment
Line. To evidence the Equipment Advances, Borrower
shall deliver to Bank, at the time of each Equipment
Advance request, an invoice for the equipment
purchased. The Equipment Advances under this Section
2.1.3 shall be used only to purchase Equipment and
shall not exceed One Hundred Percent (100%) of the
invoice amount of such equipment approved from time
to time by Bank, excluding taxes, shipping, warranty
charges, freight discounts and installation expense.
Software may only constitute up to Two Hundred Fifty
Thousand Dollars ($250,000.00) of aggregate Equipment
Advances under this Section 2.1.3.
and inserting in lieu thereof the following:
(a) Subject to and upon the terms and conditions of
this Agreement, at any time through August 16, 2000
(the "1999 Equipment Availability End Date"), Bank
agrees to make Equipment Advances (each an "Equipment
Advance" and collectively, the "Equipment Advances")
to Borrower under this Section 2.1.3 in an aggregate
outstanding amount not to exceed the 1999 Committed
Equipment Line. To evidence the Equipment Advances,
Borrower shall deliver to Bank, at the time of each
Equipment Advance request, an invoice for the
equipment purchased. The Equipment Advances under
this Section 2.1.3 shall be used only to purchase
Equipment and shall not exceed One Hundred Percent
(100%) of the invoice amount of such equipment
approved from time to time by Bank, excluding taxes,
shipping, warranty charges, freight discounts and
installation expense. Software may only constitute up
to Two Hundred Fifty Thousand Dollars ($250,000.00)
of aggregate Equipment Advances under this Section
2.1.3.
5. The Loan Agreement shall be amended by deleting the
following text appearing as the fourth paragraph of
Section 6.3 thereof:
"Bank shall have a right from time to time
hereafter to audit Borrower's Accounts at
Borrower's expense, provided that such
audits will be conducted: (a) no more often
than every twelve (12) months, and (b) only
when either (i) Obligations under the
Committed Revolving Line are outstanding or
(ii) Advances were made during the preceding
twelve (12) month period. Notwithstanding
the foregoing, the Bank shall have the right
to audit Borrower's Accounts at Borrower's
expense at any time after the occurrence of
an Event of Default. The initial Advance
under the Committed Revolving Line shall be
subject to satisfactory results, in the sole
discretion of Bank, of an initial audit (the
"Initial Audit") of Borrower's Accounts."
and inserting in lieu thereof the following:
"Bank shall have a right from time to time
hereafter to audit Borrower's Accounts at
Borrower's expense, provided that such
audits will be conducted: (a) no more often
than every twelve (12) months, and (b) only
when either (i) Obligations under the
Committed Revolving Line are outstanding or
(ii) Advances were made during the preceding
twelve (12) month period. Notwithstanding
the foregoing, the Bank shall have the right
3-
<PAGE> 4
to audit Borrower's Accounts at Borrower's
expense at any time after the occurrence of
an Event of Default. Any Advance under the
Committed Revolving Line which is in excess
of twenty-five percent (25%) of the
available Borrowing Base or when added to
the aggregate outstanding Advances would
result in the aggregate outstanding Advances
being in excess of twenty-five percent (25%)
of the available Borrowing Base, shall be
subject to satisfactory results, in the sole
discretion of Bank, of an initial audit (the
"Initial Audit") of Borrower's Accounts."
6. The Loan Agreement shall be amended by deleting the
following text appearing as Section 6.10 thereof:
"6.10 Tangible Net Worth. Borrower shall
maintain: (i) as of the last day of each
quarter, a Tangible Net Worth of not less
than Three Million Dollars ($3,000,000.00),
and (ii) on a monthly basis, as of the last
day of all months which are not the last
month of a quarter, a Tangible Net Worth of
not less than Two Million Five Hundred
Thousand Dollars ($2,500,000.00)."
and inserting in lieu thereof the following:
"6.10 Tangible Net Worth. Borrower shall
maintain: (i) as of the last day of each
month through May 31, 2000, a Tangible Net
Worth of not less than Two Million Dollars
($2,000,000.00), and (ii) on a monthly
basis, as of the last day of all months
thereafter beginning on June 30, 2000, a
Tangible Net Worth of not less than the
greater of (a) Five Million Dollars
($5,000,000.00) or (b) the amount raised in
any initial public offering or the next
equity round."
7. The Borrower hereby ratifies, confirms and reaffirms,
all and singular, the terms and conditions of a
certain Negative Pledge Agreement dated as of
February 20, 1998 between Borrower and Bank, and
acknowledges, confirms and agrees that said Negative
Pledge Agreement shall remain in full force and
effect.
8. Bank hereby waives Borrower's existing Default under
the Loan Agreement by virtue of Borrower's failure to
comply with the Adjusted Quick Ratio and Tangible Net
Worth covenants at December 31, 1999. Bank's waiver
of Borrower's compliance of said covenants shall
apply only to the foregoing periods.
Bank's agreement to waive the above-described
compliance (i) shall not be deemed an agreement by
Bank to waive Borrower's compliance with either of
the above-described covenants as of any other dates,
(ii) shall not limit or impair Bank's right to demand
strict performance of either covenant as of any other
dates, and (iii) shall not limit or impair Bank's
right to demand strict performance of all other
covenants as of any date.
9. The Compliance Certificate appearing as EXHIBIT D to
the Loan Agreement is hereby replaced with the
Compliance Certificate attached as EXHIBIT A hereto.
4-
<PAGE> 5
4. FEES. Borrower shall pay to Bank a fee equal to Five Thousand Dollars
($5,000.00), in connection with the modification of the Committed
Revolving Line, which fee shall be due on the date hereof and shall be
deemed fully earned as of the date hereof, and a fee equal to Two
Thousand Five Hundred Dollars ($2,500.00), in connection with the
modification of the 1999 Committed Equipment Line (the "Equipment Line
Modification Fee"), which fee shall be due on the 1999 Equipment
Availability End Date and shall be deemed fully earned as of the date
hereof. Notwithstanding the foregoing, the Equipment Line Modification
Fee shall be waived by Bank if on, or any time prior to the Equipment
Availability End Date, the aggregate outstanding Equipment Advances
equal at least Two Hundred Fifty Thousand Dollars ($250,000.00) The
Borrower shall also reimburse Bank for all legal fees and expenses
incurred in connection with this amendment to the Existing Loan
Documents.
5. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and
reaffirms all terms and conditions of all security or other collateral granted
to the Bank, and confirms that the indebtedness secured thereby includes,
without limitation, the Indebtedness.
6. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has
no defenses against the obligations to pay any amounts under the Indebtedness.
7. CONTINUING VALIDITY. Borrower understands and agrees that in modifying
the existing Indebtedness, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents. Except
as expressly modified pursuant to this Loan Modification Agreement, the terms of
the Existing Loan Documents remain unchanged and in full force and effect.
Bank's agreement to modifications to the existing Indebtedness pursuant to this
Loan Modification Agreement in no way shall obligate Bank to make any future
modifications to the Indebtedness. Nothing in this Loan Modification Agreement
shall constitute a satisfaction of the Indebtedness. It is the intention of Bank
and Borrower to retain as liable parties all makers of Existing Loan Documents,
unless the party is expressly released by Bank in writing. No maker will be
released by virtue of this Loan Modification Agreement.
8. JURISDICTION/VENUE. Borrower accepts for itself and in connection with
its properties, unconditionally, the non-exclusive jurisdiction of any state or
federal court of competent jurisdiction in the Commonwealth of Massachusetts in
any action, suit, or proceeding of any kind against it which arises out of or by
reason of this Loan Modification Agreement; provided, however, that if for any
reason Bank cannot avail itself of the courts of the Commonwealth of
Massachusetts, then venue shall lie in Santa Clara County, California.
9. COUNTERSIGNATURE. This Loan Modification Agreement shall become
effective only when it shall have been executed by Borrower and Bank (provided,
however, in no event shall this Loan Modification Agreement become effective
until signed by an officer of Bank in California).
5-
<PAGE> 6
This Second Loan Modification Agreement is executed as a sealed
instrument under the laws of the Commonwealth of Massachusetts as of the date
first written above.
BORROWER: BANK:
SYNCHRONICITY, INC. SILICON VALLEY BANK, doing business as
SILICON VALLEY EAST
By:______________________________ By:___________________________________
Name: Joseph Calo Name: David E. Rodriguez
Title: Chief Financial Officer Title: Vice President
SILICON VALLEY BANK
By:___________________________________
Name:_________________________________
Title:________________________________
(signed in Santa Clara County,
California)
6-
<PAGE> 7
EXHIBIT A
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: SYNCHRONICITY, INC.
The undersigned authorized officer of SYNCHRONICITY, INC. hereby
certifies that in accordance with the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is
in complete compliance for the period ending with all required covenants
except as noted below and (ii) all representations and warranties of Borrower
stated in the Agreement are true and correct in all material respects as of the
date hereof. Attached herewith are the required documents supporting the above
certification. The Officer further certifies that these are prepared in
accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The Officer expressly acknowledges that no
borrowings may be requested by the Borrower at any time or date of determination
that Borrower is not in compliance with any of the terms of the Agreement, and
that such compliance is determined not just at the date this certificate is
delivered.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES"
COLUMN.
<TABLE>
<CAPTION>
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
<S> <C> <C>
Monthly financial statements & CC Monthly within 25 days Yes No
Annual (CPA Audited) FYE within 120 days Yes No
Monthly BBC & A/R Agings Monthly within 25 days Yes No
(when borrowing)
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
<S> <C> <C> <C>
Maintain:
Quick Ratio (monthly) 1.50:1.0 _____:1.0 Yes No
Tangible Net Worth (monthly) $2,000,000 as of 5/31/00 $_________ Yes No
$5,000,000 or 25% of
the IPO/equity round,
whichever is greater
beginning 6/30/00 and
thereafter
Minimum Liquidity (monthly) 1.50:1.0 _____:1.0 Yes No
OR Minimum Debt Service Coverage 1.25:1.0 _____:1.0 Yes No
</TABLE>
COMMENTS REGARDING EXCEPTIONS:
Sincerely,
_______________________ Date:_______________
SIGNATURE
_______________________
BANK USE ONLY
RECEIVED
BY:_________________________
DATE:_______________________
REVIEWED
BY:_________________________
COMPLIANCE STATUS: YES / NO
7-
<PAGE> 1
Exhibit 10.10
NEGATIVE PLEDGE AGREEMENT
This Negative Pledge Agreement is made as of February 20, 1998, by and
between SYNCHRONICITY, INC., a Massachusetts corporation with a chief executive
office located at 201 Forest Street, Marlborough, Massachusetts 01752
("Borrower") and SILICON VALLEY BANK, a California-chartered bank, with its
principal place of business at 3003 Tasman Drive, Santa Clara, California 95054
and with a loan production office located at Wellesley Office Park, 40 William
Street, Suite 350, Wellesley, Massachusetts 02181, doing business under the name
"Silicon Valley East" ("Bank")
In connection with, among other documents, the Loan and Security Agreement (the
"Loan Documents") being concurrently executed herewith between Borrower and
Bank, Borrower agrees as follows:
1. Except for the granting of licenses by borrower in the ordinary course of
business, Borrower shall not sell, transfer, assign, mortgage, pledge,
lease, grant a security interest in, or encumber any of Borrower's
Intellectual Property (as defined below):
2. It shall be an event of default under the Loan Documents between Borrower
and Bank if there is a breach of any term of this Negative Pledge
Agreement.
3. As used herein,
(a) "Intellectual Property" means:
(i) Any and all Copyright rights, Copyright applications,
copyright registrations and like protections in each work or
authorship and derivative work thereof, whether published or
unpublished and whether or not the same also constitutes a
trade secret, now or hereafter existing, created, acquired or
held;
(ii) Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software
products now or hereafter existing, created, acquired or held;
(iii) Any and all design rights which may be available to Borrower
now or hereafter existing, created, acquired or held;
(iv) All Mask Works or similar rights available for the protection
of semiconductor chips;
(v) All Patents, Patent applications and like protections
including, without limitation, improvements, divisions,
continuations, renewals, reissues, extensions and
continuations-in-part of the same, including without
limitation the Patents and Patent applications;
<PAGE> 2
(vi) Any Trademark and servicemark rights, whether registered or
not, applications to register and registrations of the same
and like protections, and the entire goodwill of the business
of Borrower connected with and symbolized by such Trademarks;
(vii) Any and all claims for damages by way of past, present and
future infringements of any of the rights included above, with
the right, but not the obligation, to sue for and collect such
damages for said use or infringement of the intellectual
property rights identified above;
(viii) All licenses or other rights to use any of the Copyrights,
Patents, Trademarks, or Mask Works and all license fees and
royalties arising from such use to the extent permitted by
such license or rights; and
(ix) All amendments, extensions, renewals and extensions of any of
the Copyrights, Trademarks, Patents, or Mask Works; and
(x) All proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or
warranty payable in respect of any of the foregoing.
(b) "Copyrights" means any and all copyright rights, copyright
applications, copyright registrations and like protections in each
work or authorship and derivative work thereof, whether published or
unpublished and whether or not the same also constitutes a trade
secret, now or hereafter existing, created, acquired or held;
(c) "Mask Works" means all mask work or similar rights available for the
protection of semiconductor chips, now owned or hereafter acquired;
(d) "Patents" means all patents, patent applications and like
protections including without limitation improvements, divisions,
continuations, renewals, reissues, extension and
continuations-in-part of the same;
(e) "Trademarks" means any trademark and servicemark rights, whether
registered or not, applications to register and registrations of the
same and like protections, and the entire goodwill of the business
of Borrower connected with and symbolized by such trademarks.
4. Capitalized terms used but not otherwise defined herein shall have the
same meaning as in the Loan Documents.
5. The laws of the Commonwealth of Massachusetts shall apply to this
Agreement. BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS
PROPERTIES, UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF ANY STATE
OR FEDERAL COURT OF COMPETENT
<PAGE> 3
JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, SUIT, OR
PROCEEDING OF ANY KIND, AGAINST IT WHICH ARISES OUT OF OR BY REASON OF
THIS AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR ANY REASON BANK CANNOT
AVAIL ITSELF OF THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS, BORROWER
ACCEPTS JURISDICTION OF THE COURTS AND VENUE IN SANTA CLARA COUNTY,
CALIFORNIA.
6. This Agreement shall become effective only when it shall have been
executed by Borrower and Bank (provided, however, in no event shall this
Agreement become effective until signed by an officer of Bank in
California).
BORROWER:
SYNCHRONICITY, INC.
By: /s/ Eugene Connolly
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
BANK:
SILICON VALLEY BANK d/b/a SILICON VALLEY
EAST
By: /s/ Carolyn Macedo
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
SILICON VALLEY BANK
By: /s/ Michelle Giannini
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
(Signed in Santa Clara, California)
<PAGE> 1
Exhibit 10.11
201 FOREST STREET
MARLBOROUGH, MASSACHUSETTS
OFFICE LEASE
STANDARD FORM
THIS LEASE ("Lease") made at Marlborough, Massachusetts, by and between
201 Forest Street Realty Trust, a Massachusetts partnership ("Landlord") having
a principal place of business at 293 Boston Post Road West, Suite 320,
Marlborough, Massachusetts, 01752 and Syncronicity, Inc. ("Tenant") having a
principal place of business at 47 Old Sudbury Road, Wayland, Massachusetts,
01778.
WITNESSETH:
ARTICLE 1
REFERENCE DATA AND DEFINITIONS
1.01 Reference Data
<TABLE>
<S> <C>
LANDLORD'S REPRESENTATIVE: David Depietri
Rosewood Development Corporation
LANDLORD'S ADDRESS 201 Forest Street Realty Trust
(FOR PAYMENT OF RENT): c/o Rosewood Companies
293 Boston Post Road West
Suite 320
Marlborough, MA 01752
LANDLORD'S ADDRESS
(FOR NOTICE AND BILLING): Same as Above
TENANT: Syncronicity, Inc.
47 Old Sudbury Road
Wayland, MA 01778
TENANT'S REPRESENTATIVE: Eugene Connolly
TENANT'S PHONE NUMBER: (508)358-2856
PREMISES: Suite 320
RENTABLE AREA OF PREMISES: 4,331 Square Feet
</TABLE>
<PAGE> 2
-2-
<TABLE>
<S> <C>
RENTABLE AREA OF THE BUILDING: 40,000 Square Feet
RENT COMMENCEMENT DATE: April 1,1997 or upon substantial
completion of construction and
issuance of Certificate of
Occupancy.
OCCUPANCY DATE: April 1,1997 or upon substantial
completion of construction and
issuance of Certificate of
Occupancy.
LEASE TERMINATION DATE: Five (5) Years from the rent
commencement date.
TERM: Five (5) Years.
BASIC RENT: SEE SCHEDULE BELOW:
</TABLE>
<TABLE>
<CAPTION>
NET, NET, NET NET, NET, NET NET, NET, NET
YEAR RATE PER SO. FT. ANNUAL RENT MONTHLY RENT
---- ---------------- ------------- --------------
<S> <C> <C> <C>
1-5 $13.50 $58,468.50 $4,872.37
</TABLE>
<TABLE>
<S> <C>
ESTIMATED COST OF ELECTRICAL Tenant to be separately metered for
SERVICE: electricity.
INITIAL MONTHLY PAYMENT
(Basic Rent): $4,872.37
TAX BASE: $0.00 Per Square Foot of Rentable
Area per year.
OPERATING EXPENSE BASE: $0.00 Per Square Foot of Rentable
Area per year.
TENANT'S SHARE: 10.8 96
SECURITY DEPOSIT: $4;992.391
GUARANTOR: N/A
PERMITTED USES: General Office uses consistent with
a first class office building.
</TABLE>
<PAGE> 3
-3-
1.02 General Provisions.
For all purposes of the Lease unless otherwise expressed and provided
herein or therein or unless the context otherwise requires:
(a) The words herein, hereof, hereunder and other words of words of
similar import refer to the Lease as a whole and not to any
particular article, section or other subdivision of this Lease.
(b) A pronoun in one gender includes and applies to the other genders as
well.
(c) Each definition stated in Section 1.01 or 1.03 of this Lease applies
equally to the singular and the plural forms of the term or
expression defined.
(d) Any reference to a document defined in Section 1.03 of this Lease is
to such document as originally executed, or, if modified, amended or
supplemented in accordance with the provisions of this Lease, to
such document as so modified, amended or supplemented and in effect
at the relevant time of reference thereto.
(e) All accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting
principles.
(f) All references in Section 1.01 hereof are subject to the specified
definitions thereof (if any) in Section 1.03 hereof.
1.03 Terms Defined.
Each term of expression set forth above in Section hereof or below in this
Section 1.03 has the meaning stated immediately after it.
Additional Services. Services provided to Tenant or in respect of the
Premises which are not described in Exhibit F hereto.
Adjusted Operating Expense Base. The amount determined by multiplying
the Operating Expense Base by the Adjustment Factor.
Adjusted Tax Base. The amount determined by multiplying the Tax Base
by the Adjustment Factor.
Adjustment Factor. With respect to the First Calendar Year and the Last
Calendar Year, the percentage computed by dividing (i) the number of days
of each such period falling within the Lease term by (ii) 365.
Affiliate. With respect to any specified person, any other person directly
or indirectly controlling or controlled by or under direct or indirect
common control with such specified person. For the purposes of this
definition, the term control when used with respect to any specified
person means the power to direct the management and policies of
<PAGE> 4
-4-
such person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise, and the terms controlling and
controlled by have meanings correlative to the foregoing.
Authorizations. All franchises, licenses, permits and other governmental
consents issued by Governmental Authorities pursuant to Legal Requirements
which are or may be required for the use and occupancy of the Premises and
the conduct or continuation of a Permitted use therein.
Basic Services. The services described in Exhibit F hereto.
Building. The building currently under construction on the Land.
Building Standard Tenant Finishes. The standards set bar Landlord for
the quality of work done on the Premises.
Business Day. A day which is not a Saturday, Sunday or other day on
which banks in Boston, Massachusetts, are authorized or required by law
or executive order to remain dosed.
Calendar Year. The First Calendar Year, the Last Calendar Year and full
calendar year (January 1 through December 31) occurring during the Lease
Term.
C.P.I. "Consumer Price Index - All Urban Consumers - (CPI-U) - U.S.
City Average - All Items (1967=100)" as published by the U.S.
Department of Labor.
Common Areas. All areas devoted to the common use of occupants of the
Building or the provision of Services to the Building, including but not
limited to the atrium, all corridors, elevator foyers, air shafts,
elevator shafts, and elevators, stairwells and stairs, rest rooms,
mechanical rooms, janitor closets, vending areas and other similar
facilities for the provision of Services or the use of all occupants of
multi-tenant floors or all occupants of the Building.
Control. As defined in the definition of Affiliate.
Corporation. A corporation, company, association, business trust or
similar organization wherever formed.
Default. Any event or condition specified in Article 20 hereof so long as
any applicable requirement for the giving of notice or lapse of time or
both have not been fulfilled.
Event of Default. Any event or condition specified in (a) Article 20
hereof (if all applicable periods for the giving of notice or lapse of
time or both have been fulfilled) or (b) in Article 21 hereof.
Fair Rental Value. The amount per square foot per annum which a Person not
an Affiliate or either Landlord or Tenant would pay as Basic Rent (using
the Tax Base and
<PAGE> 5
-5-
Operating Expense Base) as of the time of determination for the Premises
for a term of four years. All Additional Rent such as Taxes, Operating
Expenses and Estimated Cost of Electrical Service shall be in addition to
the price per square foot so determined.
First Calendar Year. The partial Calendar Year period commencing on
the Term Commencement Date and ending on the next succeeding December
31.
Force Majeure. Acts of God, strikes, lock outs, labor troubles, inability
to procure materials, failure of power, restrictive Legal Requirements,
riots and insurrection, acts of public enemy, wars, earthquakes,
hurricanes and other natural disasters, fires, explosions, any act,
failure to act or Default of the other party to this Lease; provided,
however, lack of money shall not be deemed such a cause.
General Contractor. Triton Construction Corp.
Governmental Authority. United States of America, the Commonwealth of
Massachusetts, the County of Middlesex, City of Marlborough, and any
political subdivision thereof and any agency, department, commission,
board, bureau or instrumentality of any of them.
Insolvency. The occurrence with respect to any Person of one or more of
the following events: the death, dissolution, termination of existence
(other than by merger or consolidation), insolvency, appointment of a
receiver for all or substantially all of the property of such person, the
making of a fraudulent conveyance or the execution of an assignment or
trust mortgage for the benefit of creditors by such Person, or the filing
of a petition of bankruptcy or the commencement of any proceedings by or
against such Person under a bankruptcy, insolvency or other law relating
to the relief or the adjustment of indebtedness, rehabilitation or
reorganization of debtors; provided that if such petition or commencement
is involuntarily made against such a Person and is dismissed within sixty
(60) days of the date of such filing or commencement, such events shall
not constitute an insolvency hereunder.
Insurance Requirements. All terms of any policy of insurance maintained by
Landlord or Tenant and applicable to (or affecting any condition,
operation, use or occupancy of) the Building or the Premises or any part
or parts of either and all requirements of the issuer of any such policy
and all orders, rules, regulations and other requirements of the National
Board of Fire Underwriters (or any other body exercising similar
functions).
Land. The land on 201 Forest Street, Marlborough, Massachusetts County
of Middlesex, Commonwealth of Massachusetts.
Landlord's Contribution. The amount contributed by Landlord as a
credit toward the cost of finishing the Premises shown in Exhibit B.
Landlord's Work. The work to be done by Landlord with respect to the
Premises described in Exhibit B.
<PAGE> 6
-6-
Last Calendar Year. The partial Calendar Year commencing on January 1 of
the Calendar Year in which the Lease Termination Date occurs and ending on
the Lease Termination Date.
Lease Term. The period commencing on the Term Commencement Date and
ending on the Lease Termination Date.
Lease Termination Date. The earlier to occur of (1) the Stated Expiration
Date, (2) the termination of this Lease by Landlord as the result of an
Event of Default, (3) the termination of this Lease pursuant to Article 17
(Damage or Destruction) or 18 (Eminent Domain) hereof.
Lease Year. A period commencing on the Term Commencement Date (or an
anniversary thereof) and ending on the Day before the next succeeding
anniversary thereof. For example, the first Lease Year is a period
commencing on the Term Commencement Date and ending on the day before the
first anniversary thereof. The last Lease Year shall end on the Lease
Termination Date.
Legal Requirements. All statutes, codes, ordinances (and all rules and
regulations thereunder), all executive orders and other administrative
orders, judgments, decrees, injunctions and other judicial orders of or by
any Governmental Authority which may at any time be applicable to parts or
appurtenances of the Premises or Building or to any condition or use
thereof and the provisions of all Authorizations.
Occupancy Arrangement. With respect to the Premises or any portion thereof
of the Lease, and whether (a) written or unwritten or (b) for all or any
portion of the Lease Term, an assignment, a sublease, any tenancy at will,
a tenancy at sufferance, or any other arrangement (including but not
limited to a license or concession) pursuant to which a Person occupies
the Premises for any purpose.
Operating Expense Base. With respect to each Calendar Year the amount
determined by multiplying the Rentable Area of the Premises by the amount
hereinbefore set forth as the Operating Expense Base per square foot of
Rentable Area per year, but with respect to the First Calendar Year and
the Last Calendar Year, the Adjusted Operating Expense Base.
Operating Expenses. All expenses, costs, and disbursements of every kind
and nature which Landlord shall pay or become obligated to pay in
connection with the ownership, operation and maintenance of the Building
(including all facilities in operation on the Term Commencement Date and
such additional facilities which are necessary or beneficial for the
operation of the Building) and the Land and the provision of Basic
Services, including, but not limited to (a) wages, salaries, fees and
costs to Landlord of all Persons engaged in connection therewith,
including taxes, insurance, and benefits relating thereto; (b) the cost of
(i) all supplies and materials, electricity and lighting, for Common
Areas, (ii) water, heat, air conditioning, and ventilation for the
Building, (iii) all maintenance, janitorial, and service agreements, (iv)
all insurance, including the cost of casualty and liability insurance
applicable to the Building and Landlord's personal
<PAGE> 7
-7-
property used in connection therewith, (v) repairs and general
maintenance, (vi) capital items which are primarily for the purpose of
reducing Operating Expenses or which may be required by a Governmental
Authority, amortized over the reasonable life of the capital items with
the reasonable life and amortization schedule being determined by Landlord
in accordance with generally accepted accounting principles, (vii)
pursuing an application for an abatement of taxes pursuant to Section 6.05
hereof to the extent not deducted from the abatement, if any, received,
(viii) independent auditors, (ix) Landlord's central accounting functions,
and (x) providing office space for the manager of the Building; (c)
management fees; and (d) a share (equal to percentage computed by a
fraction the numerator of which is the Rentable Area of the Building and
the denominator of which is the aggregate Rentable Area of all constructed
buildings (including the Building at 201 Forest Street, Marlborough) of
the cost to Landlord of operating, repairing and maintaining exterior
common areas and facilities of 201 Forest Street, Marlborough (of which
development the Building is a part) which may not be located entirely on
the Land but which are available for landscaping, security and maintenance
for common roadways and open areas. Operating Expenses shall not include
(i) capital items except as provided above or (ii) specific costs billed
to and paid by specific tenants. Operating Expenses shall be determined
using the accrual of accounting. If at any time during the Term, less than
ninety-five percent (95 %) of the Rentable Area of the Project is
occupied, the "operating expenses" component of Operating Expenses shall
be adjusted by Landlord to reasonably approximate the operating expenses
which would have been incurred if the Project had been at least
ninety-five percent (95%) occupied.
Partial Taking. Any Taking which is not a Total Taking.
Permitted Exceptions. Any liens or encumbrances on the Premises in the
nature of (a) liens for taxes assessed but not yet due and payable, (b)
easements, reservations, restrictions and rights of way encumbering or
affecting the Land on the date of this Lease, (c) the rights of Landlord,
Tenant and any other Person to whom Landlord has granted such rights to
exercise in common with respect to the Land and the Common Areas the
rights granted to Tenant hereunder, (d) mortgages of record, and (e) Title
Conditions.
Person. An individual, a Corporation, a company, a voluntary
association, a partnership, a trust, an unincorporated organization or
a government or any agency, instrumentality or political subdivision
thereof.
Premises. The space in the Building shown outlined in red on Exhibit B
hereto.
Proceeds. With respect to any Taking or occurrence described in Article 17
hereof, with respect to which any Person is obligated to pay any amount to
or for the account of Landlord, the aggregate of (i) all sums payable or
receivable under or in respect of any insurance policy, and (ii) all sums
or awards payable in respect to a Taking.
Prohibited Occupancy Arrangement. An Occupancy Arrangement which provides
for any rent or other payment based in whole or in part on the net income
or profits derived by any person from the Premises.
<PAGE> 8
-8-
Rent. Basic Rent and all Additional Rent.
Rentable Area of the Premises. The number of square feet stated in Section
1.01, whether the same should be more or less as a result of minor
variations resulting from actual construction and completion of the
Building or Premises so long as such work is done in accordance with the
terms and provisions hereof. The calculation was made according to the
following formula:
(i) On single tenant floors, the usable area measured from the inside
surfaces of the outer glass of the Building, plus Tenant's Share of
Common Areas.
(ii) On multi-tenant floors, the usable area measured from inside surface
of the outer glass of the Building to the midpoint of all demising
walls of the space being measured plus the area of each corridor
adjacent to and required as the result of the layout of the space
being measured, measured from the midpoint of the adjacent demising
walls, plus Tenant's Share of Common Areas.
Rules and Regulations. Reasonable rules and regulations promulgated by
Landlord and uniformly applicable to persons occupying the Building
regulating the details of the operation and use of the Building. The
initial Rules and Regulations are attached hereto as Exhibit G.
Services. Basic Services and Additional Services.
Special Work. Work done in or with respect to the Premises which is
not part of Landlord's Work or the cost of which exceeds Landlord's
Contribution.
Stated Expiration Date. The last day of the last Lease Year of the
Term stated in Section 1.01.
Substantial Completion Date. The date on which the Premises together with
the appurtenant areas of the Building necessary for access and service
thereto, have been completed in accordance with Article 7 hereof except
for items of work and adjustment of equipment and fixtures which are not
necessary to make the Premises reasonably tenantable for the Permitted
Uses and because of season or weather or nature of the item cannot
practicably be done at the time.
Taking. The taking or condemnation of title to all or any part of the Land
or the possession or use of the Building or the Premises by a person for
any public use or purpose or any proceeding or negotiations which might
result in such a taking or any sale or lease in lieu of or in anticipation
of such a taking.
Tax Base. With respect to each Calendar Year the amount determined by
multiplying the Rentable Area of the Premises by the amount hereinbefore
set forth as the Tax Base per square foot of Rentable Area per year, but
with respect to the First Calendar Year and the Last Calendar Year, the
Adjusted Tax Base.
<PAGE> 9
-9-
Taxes. All taxes, special or general assessments, water rents, rates and
charges, sewer rents and other impositions and charges imposed by
Governmental Authorities of every kind and nature whatsoever,
extraordinary as well as ordinary and each and every installment thereof
which shall or may during the term of this Lease be charged, levied, laid,
assessed, imposed, become due and payable or become liens upon or for or
with respect to the Land or any part thereof or the Building or the
Premises, appurtenances or equipment owned by Landlord thereon or therein
or any part thereof or on this Lease under or by virtue of all present or
future Legal Requirements and are tax based on a percentage, fraction or
capitalized value of the Rent (whether in lieu of or in addition to the
taxes hereinbefore described). Taxes shall not include inheritance,
estate, excise, succession, transfer, gift, franchise, income, gross
receipt, or profit taxes except to the extent such are in lieu of or in
substitution for Taxes as now imposed on the Building, the Land, the
Premises or this Lease.
Tenant. As defined in the preamble hereof.
Tenant's Cost. The cost of work done in connection with the completion
of the Premises in excess of (i) the cost of Landlord's Work and (ii)
Landlord's Contribution.
Tenant's Share. Tenant's share of building is equal to T divided by B x
100%, where "T" is equal to the number of rentable square feet rented by
the Tenant and "B" is equal to 95% of the total rentable square feet of
the building.
Term Commencement Date. The earlier of (a) the later of (x) the date
specified by Landlord in the notice delivered pursuant to Section 7.03 or
(y) the Substantial Completion Date, or (b) any other date for such
commencement determined in accordance with said Article 7, or (c) the date
on which Tenant first occupies the Premises for the Permitted Uses.
Title Conditions. All covenants, agreements, restrictions, easements
and declarations of record on the date hereof so far as the same may be
from time to time in force and applicable.
Total Taking. (i) a Taking of: (a) the fee interest in all or
substantially all of the Building or (b) such title to, easement in, over,
under or such rights to occupy and use any part or parts of the Building
to the exclusion of Landlord as shall have the effect, in the good faith
judgement of the Landlord, of rendering the portion of the Building
remaining after such Taking (even if restoration were made) unsuitable for
the continued use and occupancy of the Building for the Permitted Uses or
(ii) a Taking of all or substantially all of the Premises or such title to
or easement in, on or over the Premises to the exclusion of Tenant which
in the good faith judgement of the Landlord prohibits access to the
Premises or the exercise by Tenant of any rights under this Lease.
Working Drawings. The Working Drawings for the finishing of the Premises
developed by Landlord and Tenant. The Working Drawings shall be prepared
in compliance with all applicable Legal Requirements and stamped by
registered Massachusetts professionals,
<PAGE> 10
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and shall consist of all architectural and engineering plans which are
required to finish the Premises or to obtain any Authorization required
therefor.
<PAGE> 11
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Table of Contents by Articles and Sections
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Reference Data and Definitions.
1.01 Reference Data .............................................
1.02 General Provisions .........................................
1.03 Terms Defined ..............................................
1.04 Table of Contents ..........................................
2. Premises.
2.01 Premises....................................................
2.02 Appurtenances ..............................................
3. Term.
3.01 Term Commencement ..........................................
3.02 Termination ................................................
4. Rent.
4.01 Basic Rent .................................................
4.02 Computation of Basic Rent ..................................
4.03 Intentionally Omitted ......................................
4.04 Resolution of Disputes with Respect to Fair Rental Value,
Arbitration ...........................................................
5. Use of Premises.
5.01 Use Restricted .............................................
6. Taxes; Operating Expenses; Estimated Cost of Electrical Services.
6.01 Expenses and Taxes .........................................
6.02 Annual Statement of Additional Rent Due ....................
6.03 Monthly Payments of Additional Rent ........................
6.04 Accounting Periods .........................................
6.05 Abatement of Taxes .........................................
6.06 Electric Service; Payment of Additional Rent ...............
6.07 Change in Rates or Usage ...................................
6.08 Late Payment of Rent .......................................
7. Improvements, Repairs, Additions, Replacements.
7.01 Preparation of the Premises ................................
</TABLE>
<PAGE> 12
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<TABLE>
<S> <C>
7.02 Time for Completion ........................................
7.03 Notice to Commence .........................................
7.04 Delays......................................................
7.05 Tenant's Access to the Premises ............................
7.06 Alterations and Improvements ...............................
7.07 Maintenance ................................................
7.08 Redelivery .................................................
8. Building Services.
8.01 Building Services ..........................................
8.02 Other Janitors .............................................
8.03 Additional Services ........................................
8.04 Limitation on Landlord's Liability .........................
8.05 Electric Service ...........................................
9. Tenant's Particular Covenants.
9.01 Pay Rent ...................................................
9.02 Occupancy of the Premises ..................................
9.03 Safety .....................................................
9.04 Equipment...................................................
9.05 Electrical Equipment .......................................
9.06 Pay Taxes...................................................
9.07 Tenant's Covenants .........................................
10. Requirements of Public Authority.
10.01 Legal Requirements ........................................
10.02 Contests...................................................
11. Covenant Against Liens.
11.01 Mechanics Liens ...........................................
11.02 Right to Discharge ........................................
12. Access to Premises.
12.01 Access.....................................................
13. Assignment and Subletting; Company Arrangements.
13.01 Subletting and Assignments ................................
</TABLE>
<PAGE> 13
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<TABLE>
<S> <C>
14. Indemnity.
14.01 Tenant's Indemnity ........................................
14.02 Landlord's Liability ......................................
15. Insurance.
15.01 Liability Insurance .......................................
15.02 Casualty Insurance ........................................
16. Waiver of Subrogation.
16.01 Waiver of Subrogation .....................................
16.02 Waiver of Rights ..........................................
17. Damage of Destruction.
17.01 Substantial Damage ........................................
17.02 Restoration ...............................................
18. Eminent Domain.
18.01 Total Taking ..............................................
18.02 Partial Taking ............................................
18.03 Awards and Proceeds .......................................
19. Quiet Enjoyment.
19.01 Landlord's Covenant .......................................
19.02 Subordination .............................................
19.03 Notice to Mortgage ........................................
19.04 Other Provisions Regarding Mortgages ......................
20. Defaults; Events of Default.
20.01 Defaults...................................................
20.02 Tenant's Best Efforts .....................................
20.03 Elimination of Default ....................................
20.04 Tenant's Default - Rent Abatement Cancellation ............
21. Insolvency.
21.01 Insolvency ................................................
</TABLE>
<PAGE> 14
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<TABLE>
<S> <C>
22. Landlord's Remedies; Damages on Default.
22.01 Landlord's Remedies .......................................
22.02 Surrender..................................................
22.03 Right to Relet ............................................
22.04 Survival of Covenants .....................................
22.05 Right to Equitable Relief .................................
22.06 Right to Self Help; Interest on Overdue Rent ..............
22.07 Further Remedies ..........................................
23. Waivers.
23.01 No Waivers.................................................
24. Security Deposit.
24.01 Security Deposit ..........................................
25. General Provisions.
25.01 Force Majeure .............................................
25.02 Notices and Communications ................................
25.03 Certificates, Estoppel Letter .............................
25.04 Renewal....................................................
25.05 Governing Law .............................................
25.06 Partial Invalidity ........................................
25.07 Notice of Lease ...........................................
25.08 Interpretation; Consents ..................................
25.09 Parties....................................................
25.10 Waiver of Trial by Jury ...................................
26. Miscellaneous.
26.01 Expansion Space ...........................................
26.02 Exterior Landscaping ......................................
26.03 Holdover Clause ...........................................
26.04 Exterior Signage ..........................................
27. Entire Agreement.
27.01 Entire Agreement ..........................................
</TABLE>
<PAGE> 15
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ARTICLE 2
PREMISES
2.01 Premises.
Landlord hereby leases and lets to Tenant, and Tenant hereby takes and
hires from Landlord, upon and subject to the terms, conditions, covenants and
provisions hereof, the Premises subject to the Permitted Exceptions. Landlord
reserves the right to relocate within or without the Premises pipes, ducts,
vents, flues, conduits, wires and appurtenant fixtures which service other parts
of the Building; provided that such work is done in such a manner that it does
not unreasonably interfere with Tenant's use of the Premises.
2.02 Appurtenances.
Tenant may use the Common Areas and the Land as appurtenant to the
Premises for the purposes for which they were designed.
ARTICLE 3
TERM
3.01 Term Commencement.
The Lease Term shall commence on the Term Commencement Date.
3.02 Termination.
The Lease Term shall end on the Lease Termination Date.
ARTICLE 4
RENT
4.01 Basic Rent.
Tenant shall pay Landlord for the Premises, without offset or deduction
and without previous demand therefor, the Basic Rent as annual rent for each
Lease Year. Basic Rent shall be paid in equal monthly installments in advance on
the first day of each calendar month during the Lease Term. The first
installment of Basic Rent should be paid on the Rent Commencement Date.
Subsequent installments of Basic Rent shall be paid on the first day of every
calendar month thereafter. Basic Rent for partial months at the beginning or end
of the Lease Term shall be pro-rated and paid on the Term Commencement Date and
the first day of the calendar month in which the Lease Termination Date is to
occur. If an Event of Default occurs at any time during the term of this Lease,
as outlined under Article 20 of this Lease, Landlord shall have the option of
retracting any rent abatement, and Tenant shall pay the full abated amount
immediately to Landlord upon demand.
<PAGE> 16
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4.02 Computation of Basic Rent.
The Basic Rent for each the first five (5) Lease Years shall be stated in
Article 1.01 hereof.
Basic Rent so determined shall be exclusive of (and in addition to)
amounts due hereunder for Taxes, Operating Expenses and Estimated Cost of
Electrical Service.
4.03 Intentionally Omitted.
ARTICLE 5
USE OF PREMISES
5.01 Use Restricted.
The Premises may be used for the Permitted Uses and for no other purpose.
No improvements may be made in or to the Premises except as otherwise provided
in this Lease.
ARTICLE 6
TAXES; OPERATING EXPENSES; ESTIMATED COST OF ELECTRICAL SERVICES
6.01 Expenses and Taxes.
If with respect to any Calendar Year, Tenant's Share of (a) Operating
Expenses exceeds the Operating Expense Base or (b) Taxes exceeds the Tax Base
(whether as the result of an increase in rate or assessment or both), Tenant
shall pay to Landlord the amount of each such excess. Any amount due with
respect to this Section 6.01 shall be due on the date which is five (5) days
after receipt by the Tenant of the statement described in Section 6.02 hereof.
6.02 Annual Statement of Additional Rent Due.
Landlord shall render to Tenant a statement, showing (i) for the Calendar
Year so indicated (a) Taxes and (b) Operating Expenses and (ii) for the then
current Calendar Year, and estimate for (a) Operating Expenses (b) Taxes and (c)
Tenant's obligation under Section 6.01.
6.03 Monthly Payments of Additional Rent.
Tenant shall pay to Landlord in advance for each calendar month as
Additional Rent an amount equal to 1/12th of Tenant's estimated obligation under
Section 6.01 shown thereon. The amount due under this Section 6.03 shall be paid
with Tenant's monthly payments of Basic Rent and shall be credited by Landlord
to Tenant's obligations under Section 6.01. If the total amount paid hereunder
exceeds the amount due under such Section, such excess shall be credited by
Landlord against the monthly installments of Additional Rent next falling due or
shall be refunded to Tenant upon the expiration or termination of this Lease
(unless such expiration or termination is the result of an Event of Default).
<PAGE> 17
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6.04 Accounting Periods.
Landlord shall have the right from time to time to change the periods of
accounting hereunder to any other annual period than a Calendar Year, and upon
any such change, all items referred to in this Article 6 shall be appropriately
apportioned. In all statements rendered under Section 6.02, amounts for periods
partially within and partially without the accounting periods shall be
appropriately apportioned, and any items which are not determinable at the time
of a statement shall be included therein on the basis of Landlord's estimate and
with respect thereof Landlord shall render promptly after determination a
supplemental statement and appropriate adjustment shall be made according
thereto.
6.05 Abatement of Taxes.
Landlord may at any time and from time to time make application to the
appropriate Governmental Authority for an abatement of Taxes. Landlord shall
make such an application at any time Tenant's occupying more than 60% of the
Rentable Area of the Building under written Occupancy Arrangements directly with
the Landlord request that Landlord do so. If (i) such an application is
successful and (ii) Tenant has made any payment in respect of Taxes pursuant to
this Article 6 for the period with respect to which the abatement was granted,
Landlord shall (a) deduct from the amount of the abatement all expenses incurred
by it in connection with the application (b) pay to Tenant Tenant's share
(adjusted for any period for which Tenant has made a partial payment) of
abatement, with interest, if any, paid by the Governmental Authority on such
abatement and (c) retain the balance, if any.
6.06 Electric Service; Payment as Additional Rent.
The Estimated Cost of Electrical Service if applicable, is Landlord's
estimate of the cost (on the date hereof) of lighting the Premises and operating
Tenant's office equipment This estimate is based on information supplied to
Landlord by Tenant and shall be subject to adjustment as hereinafter set forth.
Tenant shall reimburse Landlord for the cost of providing such electrical energy
by paying to Landlord the estimated Cost of Electrical Service. Tenant shall pay
Landlord (without previous demand therefor) such amount in monthly installments
on the same day on which Basic Rent is due. If Tenant (a) connects equipment (i)
other than normal office equipment or (ii) which operates in excess of 120 volts
nominal to the Building Distribution System or (b) operates any such equipment
beyond normal operating hours, the Estimated Cost of Electrical Service shall be
increased by an amount which will reflect the cost to Landlord of the additional
electrical service to be furnished by Landlord. If Landlord and Tenant cannot
agree on the amount of such increase, such amount shall be conclusively
determined by a reputable independent electrical engineer or consulting firm to
be selected by Landlord and paid equally by both parties. All additional risers
or other equipment required for equipment other than normal office equipment or
equipment which operates on 120 volts nominal shall be provided by Landlord, and
the cost thereof shall be paid by Tenant.
<PAGE> 18
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6.07 Change in Rates or Usage.
The Estimated Cost of Electrical Service is based on current rates for
such service and Landlord's good faith estimate of the usage of electricity by
Tenant If at any time after the date of this Lease, (i) the rates at which
Landlord purchases electrical energy from the public utility supplying
electrical service to the Building, or any charges incurred or Taxes payable by
Landlord in connection therewith shall be increased or decreased or (ii) the
usage by Tenant exceeds Landlord's estimate thereof, the Estimated Cost of
Electrical Service shall be increased or decreased, as the case may be, by an
amount equal to the estimated increase or decrease, as the case may be, in
Landlord's cost of furnishing the electricity referred to above as a result of
such increase or decrease in rates, charges, taxes or usage.
6.08 Late Payment of Rent.
If any installment of fixed rent or additional rent is not received in
full within five (5) days of its due date then, in addition to any other rights
or remedies of the Landlord, upon demand of Landlord, Tenant shall pay for each
month that rental payments are not timely made, a sum equal to ten percent (10%)
of each unpaid portion of such monthly installment as a liquidated damages
charge arising out of and occurring as the result of each such late payment.
In the event that Tenant makes three or more late payments of rent during
the Term, Landlord may deem such action to constitute an Event of Default
sufficient to terminate (i) the Lease (ii) any provision for exercise by Tenant
of any option rights under the Lease or (iii) both.
ARTICLE 7
IMPROVEMENTS, REPAIRS, ADDITIONS, REPLACEMENTS
7.01 Preparation of the Premises.
Landlord shall perform Landlord's Work as set forth in Exhibit C. p3862Y
All other work must be of a quality equal to or better than the Building
Standard Tenant Finishes. Landlord shall also do the work described in the
Working Drawings. If (i) the cost of such work exceeds Landlord's Contribution
or (ii) Landlord further agrees to do, at Tenant's request, any Special Work,
Tenant shall pay the amount of Tenant's Cost to Landlord.
7.02 Time for Completion.
Landlord shall use due diligence to have the Premises ready for occupancy
on or before the Estimated Term Commencement Date. Reference is made in Exhibit
"B" for details of the completion process.
7.03 Notice to Commence.
Approximately fifteen (15) days prior to the Substantial Completion Date,
at Tenant's written request, Landlord shall furnish Tenant a notice stating the
Term Commencement Date.
<PAGE> 19
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7.04 Delays.
If Landlord shall be delayed in substantially completing the work in the
Premises as the result of:
(a) delay in delivery to Landlord of any plans, design work and
detailed drawing, or
(b) Tenant's requests for Special Work. (notwithstanding Landlord's
approval of such changes), or
(c) delays in performance by Tenant or any Person employed by Tenant which
shall cause delays in the completion of any work to be done by Landlord or which
shall otherwise delay the substantial completion of the Premises, or
(d) any fault, negligence, omission, or failure to act on the part of
Tenant or its agents, contractors, workmen, mechanics, suppliers or invitees,
the Premises shall be deemed to be substantially completed on (and the Term
Commencement Date shall be) the Estimated Term Commencement Date.
7.05 Tenant's Access to the Premises.
Tenant and Tenant's agents, at Tenant's sole risk, may, with Landlord's
prior consent, enter the Premises prior to the Term Commencement Date in order
to do such work as may be required to make the Premises ready for Tenant's use
and occupancy thereof. If Landlord permits such entry prior to the Term
Commencement Date, such permission shall be conditioned upon Tenant and Tenant's
agents, contractors, workmen, mechanics, suppliers and invitees, working in
harmony with Landlord and the General Contractor and with other Tenant's and
occupants of the Building. If at any time such entry shall cause or threaten to
cause disharmony or otherwise interfere with the orderly completion of operation
of the Building Landlord shall have the right to withdraw such permission upon
twenty-four (24) hours written notice to Tenant. Any such entry into and
occupation of the Premises shall be deemed to be under all of the terms,
covenants, conditions and provisions of this Lease except the covenant to pay
Rent landlord shall not be liable in any way for any injury, loss or damage
which may occur to any of Tenant's work and installations made in the Premises
or to properties placed therein prior to the Term Commencement Date, the same
being at Tenant's sole risk.
7.06 Alterations and Improvements.
Tenant shall not make alterations or additions to the Premises except in
accordance with plans and specifications therefore first approved by Landlord.
Tenant shall not hang shades, curtains, signs, awnings or other materials,
attach any materials to or make any change in the appearance of any glass
visible from outside of the Premises, add any window treatments of any kind or
make improvements or install furniture visible from outside of the Premises,
without Landlord's prior written consent Without limitation, Landlord shall not
be deemed unreasonable for withholding approval of any alterations or additions
which would (a) delay completion of the Premises or the Building or (b) require
unusual expense to readapt the Premises to normal office use upon termination of
this Lease or increase (i) the cost of (a) construction or (b) insurance or
<PAGE> 20
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(ii) Taxes. All alterations and additions shall be part of the Premises unless
and until Landlord shall specify the same for removal in a notice delivered to
Tenant on or before the Lease Termination Date. All of Tenant's alterations and
additions and installation of furnishings shall be coordinated with any work
being performed by Landlord and in such manner as to maintain harmonious labor
relations and not to damage the Building or the Premises or interfere with
Building operation and, except for installation of furnishings, shall be
performed by contractors or workman first approved by Landlord. Except for work
done by or through Landlord, Tenant before its work is started shall: secure all
licenses and permits necessary therefor; deliver to Landlord a statement of the
names of all its contractors and subcontractors and the estimated cost of all
labor and material to be furnished by them; and cause each contractor to carry
workmen's compensation insurance in statutory amounts covering all the
contractor's and subcontractor's employees and comprehensive public liability
insurance with limits as Landlord may reasonably require, but in no event less
than $1,000,000.00 and property damage insurance with limits of not less than
$1,000,000.00 and have deductibles of no more this $5,000.00 (all such insurance
to be written in companies approved by Landlord and insuring Landlord and Tenant
as well as the contractors), and to deliver to Landlord certificates of all such
insurance. Tenant agrees to pay promptly when due the entire cost of any work
done in the Premises by Tenant, its agents, employees or independent
contractors, and not to cause or permit any liens therewith to attach to the
Premises and immediately to discharge any such liens which may so attach. All
construction work done by Tenant, its agents, employees or independent
contractors shall be done in a good and workmanlike manner and in compliance
with all Legal Requirements and Insurance Requirements. Landlord shall promptly
give notice to Tenant of any observed defects.
7.07 Maintenance.
Tenant shall, at all times during the Lease Term, and at its own cost and
expense, (i) keep and maintain (or cause to be kept and maintained) the Premises
in good repair and condition (ordinary wear and tear and damage by fire or
casualty only excepted) and (ii) use all reasonable precaution to prevent waste,
damage or in this thereto.
7.08 Redelivery.
On the Lease Termination Date, Tenant shall quit and surrender the
Premises free and dear of all Tenant's, occupants, liens, and encumbrances
whatsoever except (i) Permitted Exceptions and (ii) encumbrances, restrictions
or reservations caused by or consented to by Landlord. Tenant shall, subject to
the provisions of Articles 17 and 18 hereof, surrender the Premises to Landlord
broom clean and in good condition and repair (ordinary wear and tear, damage by
fire or casualty only excepted) with all damages occasioned by Tenant's removal
of Tenant's fixtures or equipment repaired at Tenant's cost to Landlord's
satisfaction.
<PAGE> 21
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ARTICLE 8
BUILDING SERVICES
8.01 Building Services.
Landlord shall furnish, or cause to be furnished, during the Lease Term
the Basic Services.
8.02 Other Janitors.
No persons shall be employed by Tenant to do janitorial work in the
Premises and no persons other than the janitors of the Building shall clean the
Premises unless Landlord shall give its written consent thereto. Any person
employed by Tenant with Landlord's consent to do janitorial work shall, while in
the Building either inside or outside the Premises, be subject to and under the
control and direction of the superintendent of the Building (but not as agent or
servant of said superintendent or of Landlord).
8.03 Additional Services.
Tenant will pay the Landlord a reasonable charge for any extra cleaning of
the Premises required because of the carelessness or indifference of Tenant and
for any Additional Services rendered at the request of Tenant. If the cost of
cleaning the Premises shall be increased due to the installation in the
Premises, at Tenant's request, of any unique or special materials, finish or
equipment, Tenant shall pay the Landlord an amount equal to such increase in
cost All charges for Additional Services shall be due and payable within ten
(10) days of the date on which they are billed.
8.04 Limitations on Landlord's Liability.
Landlord shall not be liable in damages, not in default hereunder, for any
failure or delay in furnishing any Basic Service or Additional Service when such
failure or delay is occasioned by Force Majeure or by the act or Default of
Tenant No such failure or delay shall be held or pleaded as eviction or
disturbance in any manner whatsoever of Tenant's possession or give Tenant any
right to terminate this Lease or give rise to any claim for set-off of any
abatement of Rent or of any of Tenant's obligations under this Lease.
8.05 Electric Service.
Subject to Section 6.06 Landlord shall furnish electrical energy required
for lighting the Premises and operating Tenant's office equipment used in the
Premises, provided, however, Landlord may, at any time, elect to discontinue the
furnishing of electrical energy. In the event of any such election by Landlord:
(1) Landlord shall give reasonable advance notice of any such discontinuance to
Tenant; (2) Landlord shall permit Tenant to receive electrical service directly
from the public utility supplying service to the Building and to use (in common
with others) the existing feeders, risers, wiring and other electrical
facilities serving the Premises for such purpose to the extent they are suitable
and safely capable; (3) Landlord shall pay such charges and costs, if any, as
such public utility may impose in connection with the installation of Tenant's
<PAGE> 22
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meters and pay for such other installations as such public utility may require,
as a condition to providing comparable electrical service to Tenant, (4)
Tenant's obligations under Section 6.06 shall end; and (5) Tenant shall
thereafter pay, directly to the utility furnishing the same, all charges for
electrical services to the Premises promptly when due.
ARTICLE 9
TENANT'S PARTICULAR COVENANTS
9.01 Pay this Rent.
Tenant shall pay when due all Rent and all charges for utility services
rendered to the Premises not included in Rent and, as further Additional Rent,
all charges of Landlord for Additional Services.
9.02 Occupancy of the Premises.
Tenant shall occupy the Premises continuously from the Term Commencement
Date for the Permitted Uses only. Tenant shall not (i) injure or deface the
Premises or the Building (ii) install any sign in or on any window, demising
wall or Common Area, (iii) permit in the Premises any flammable fluids or
chemicals not reasonably related to the Permitted Uses nor (iv) permit nuisance
or any use thereof which is improper, offensive, contrary to any Legal
Requirement or Insurance Requirement or liable to render any alteration or
addition to the Building.
9.03 Safety.
Tenant shall keep the Premises equipped with all safety appliances
required by Legal Requirements or Insurance Requirements because of any use made
by Tenant. Tenant shall procure all Authorizations so required because of such
use and, if requested by Landlord, this do any work so required because of such
use, it being understood that the foregoing provision shall not be construed to
broaden in any way the Permitted Uses.
9.04 Equipment.
Tenant shall not place a load upon the floor of the Premises exceeding the
live load for which the floor has been designed; and shall not move any safe or
other heavy equipment in, about or out of the Premises except in such a manner
and at such a time as Landlord shall in each instance authorize. Tenant shall
isolate and maintain all of Tenant's business machines and mechanical equipment
which cause or may cause air-borne or structure-born vibration or noise, whether
or not it may be transmitted to my other Premises so as to eliminate such
vibration or noise.
9.05 Electrical Equipment
Tenant shall not, without prior written notice to Landlord in each
instance (i) connect to the Building electric distribution system anything other
this normal office equipment or (ii) operate such equipment on a regular basis
beyond normal Building operating hours. Tenant's
<PAGE> 23
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use of electrical energy in the Premises shall not at any time exceed the
capacity of any of the electrical conductors or equipment in or otherwise
serving the Premises. Tenant shall not, without prior written notice to Landlord
in each instance, connect to the Building electric distribution system any
fixtures, appliances or equipment which operate on a voltage in excess of 120
volts nominal or make any alteration or addition to the electric system of the
Premises.
9.06 Pay Taxes.
Tenant shall pay promptly when due all Taxes upon personal property
(including without limitation, fixtures and equipment) in the Premises to
whomsoever assessed.
9.07 Tenant's Covenants.
Tenant will not vacate, abandon or desert the Premises or cause the
Premises to be empty or unoccupied.
ARTICLE 10
REQUIREMENTS OF PUBLIC AUTHORITY
10.01 Legal Requirements.
Tenant shall, at its own cost and expense, promptly observe and comply
with all Legal Requirements. Tenant shall pay all costs, expenses, liabilities,
losses, damages, fines, penalties, claims and demands, that may in any manner
arise out of or be imposed because of the failure of Tenant to comply with the
covenants of this Article 10.
10.02 Contests.
Tenant shall have the right to contest by appropriate legal proceedings
diligently conducted in good faith, in the name of the Tenant, or Landlord (if
legally required), or both (if legally required), without cost, expense,
liability or damage to Landlord, the validity or application of any Legal
Requirement and, if compliance with any of the terms of any such Legal
Requirement may legally be delayed pending the prosecution of any such
proceeding, Tenant may delay such compliance therewith until the final
determination of such proceedings
ARTICLE 11
COVENANT AGAINST LIENS
11.01 Mechanics Liens.
Landlord's right, title and interest in the Premises or the Land or the
Building shall not be subject to or liable for liens of mechanics or materialmen
for work done on behalf of Tenant in connection with improvements to the
Premises. Notwithstanding such restriction, if because of any act or omission of
Tenant, any mechanic's hen or other lien, charge or order for payment of money
shall be filed against any portion of the Premises or the Land or the Building
Tenant shall, at its own cost and expense, cause the same to be discharged of
record or bonded within thirty (30) days after the filing thereof.
<PAGE> 24
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11.02 Right to Discharge.
Without otherwise limiting any other remedy of Landlord for default
hereunder, if Tenant shall fail to cause such liens to be discharged of record
or bonded within the aforesaid this (30) day period or to satisfy such lien
within (30) days after any judgement in favor of such lien holders from which no
further appeal might be taken then Landlord shall have the right to cause the
same to be discharged. All amounts paid by Landlord to cause such liens to be
discharged shall constitute Additional Rent.
ARTICLE 12
ACCESS TO PREMISES
12.01 Access.
Landlord or Landlord's agents and designers shall have the right, but not
the obligation, to enter upon the Premises at all reasonable times during
ordinary business hours to examine same and to exhibit the Premises to
prospective purchasers and Tenant's, but in the latter case only during the last
six (6) months of the Lease Term.
ARTICLE 13
ASSIGNMENT AND SUBLETTING: OCCUPANCY ARRANGEMENTS
13.01 Subletting and Assignment.
Tenant shall not (either voluntarily or by operation of law) enter into a
Prohibited Occupancy Arrangement, and any Prohibited Occupancy Arrangement shall
be absolutely void and ineffective for any purpose. Tenant shall not enter into
any other Occupancy Arrangement, either voluntarily or by operation of law,
(other than with a Person who is Affiliate of Tenant for a period ending when,
as and If such Person ceases to be Affiliate of Tenant) without the prior
written consent of Landlord.
If Tenant intends to enter into a Occupancy Arrangement which requires
Landlord's consent, Tenant shall so notify Landlord in writing stating the name
of (and a financial statement with respect to) the Person whom Tenant intends to
enter into such Arrangement, the exact terms of the Arrangement and a precise
description of the portion of the Premises intended to be subject thereto.
Within thirty (30) days of receipt of such writing Landlord shall either (i)
consent to such Occupancy Arrangement or (ii) terminate this Lease with respect
to so much of the Premises as is intended to be subject thereto.
If the Landlord consents to such Occupancy Arrangement, Tenant shall (i)
enter into such Arrangement on the exact terms described to Landlord within
fourteen (14) days of Landlord's consent or comply again with their terms of
this Section and (ii) remain liable for the payment and performance of the terms
and covenants of this Lease. If Tenant enters into such an Arrangement, Tenant
shall pay to Landlord when received the excess, if any, of amounts received in
respect of such Occupancy Arrangement over the Rent.
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If Landlord terminates this Lease, all Rent due shall be adjusted as of
the day the Premises (or portion thereof) are redelivered to Landlord. Any
portion of the Premises so redelivered shall be in the condition specified in
Section 7.08 hereof.
ARTICLE 14
INDEMNITY
14.01 Tenant's Indemnity.
To the fullest extent permitted by law, Tenant shall indemnify and save
Landlord harmless from and against any and all liability, damage, penalties or
judgements and from and against any claims, actions, proceedings and expenses
and costs in connection therewith, including reasonable counsel fees arising
from injury to person or property sustained by anyone in and about the leased
premises, by any act or omission of Tenant, or Tenant's officers, agents,
servants, employees, contractors, sublessees or invitees. Tenant shall, at is
own cost and expense, defend any and all suits or actions just or unjust) in
which Landlord may be impleaded with others upon any above mentioned matter,
claim or claims, except as may result from the acts as set forth in Section
14.02. All merchandise, furniture, fixtures and property of every kind, nature
and description of Tenant or Tenant's employees, agents, contractors, invitees,
visitors, or guests which may be in or upon the Premises, the Land or the
Building during the Lease Term shall be at the sole risk and hazard of Tenant,
and that if the whole or any part thereof shall be damage, whatsoever, other
this by the gross negligence or willful default of Landlord, no part of said
damage or loss shall be charged to or borne by Landlord.
14.02 Landlord's Liability.
Except for its intentional acts or gross negligence or the intentional
acts or gross negligence of its officers, agents, servants, employees or
contractors, Landlord shall not be responsible or liable for any damage or
injury to any property, fixtures, buildings or improvements, or to any person or
persons, at any time in the Premises, including any damage or injury to Tenant
or to any of Tenant's officers, agents, servants, employees, Contractors,
invitees, customers or sublessee.
ARTICLE 15
INSURANCE
15.01 Liability Insurance.
Tenant shall provide or cause to be provided at its expense, and keep in
force during the Lease Term, general comprehensive liability insurance in a good
and solvent insurance company or companies licensed to do business in the
Commonwealth of Massachusetts, selected by Tenant, and reasonably satisfactory
to Landlord, and in an amount reasonably required by Landlord but in any event
not less than One Million Dollars ($1,000,000.00) with respect to injury or
death to any one person and One Million Dollars ($1,000,000.) with respect to
injury or death to more than one person in any one accident or other occurrence
and One Million Dollars ($1,000,000.00) with respect to damages to property.
Such policy or policies shall include
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Landlord as an additional insured and have deductibles of no more than
$5,000.00. Tenant agrees to deliver certificates of such insurance to Landlord
as of the date hereof and thereafter not less than ten (10) days prior to the
expiration of any such policy. Such insurance shall not be cancelable without
this (30) days' written notice to Landlord.
15.02 Casualty Insurance.
Tenant shall cause its improvements to the Premises to be insured for the
benefit of Landlord and Tenant as their respective interests may appear, against
loss or damage by fire and customary extended coverage in an amount equal to (i)
the replacement value thereof, if insurance in such amount is available, or (ii)
the amount necessary to avoid the effect of coinsurance provisions of the
applicable policies. Certificates thereof shall be delivered to Landlord,
Landlord shall, at Tenant's cost and expense, cooperate fully with Tenant and
execute any and all consents and other instruments and take all other actions
necessary to obtain the largest possible recovery. Landlord shall not carry any
insurance concurrent in coverage and contributing in the event of loss with any
insurance required to be furnished by Tenant hereunder If the effect of such
separate insurance would be to reduce the protection or the payment to be made
under Tenant's insurance.
ARTICLE 16
WAIVER OF SUBROGATION
16.01 Waiver of Subrogation.
An insurance policies carried by either party covering the Premises,
including but not limited to contents, fire and casualty insurance, shall
expressly waive any right on the part of the insurer to make any claim against
the other party. The parties hereto agree that their policies will include such
waiver clause or endorsement.
16.02 Waiver of Rights.
Landlord and Tenant each hereby waive all claims, causes of action and
rights of recovery against the other and their respective partners, agents,
officers and employees, for any damage to or destruction of persons, property or
business which shall occur on or about the Premises and shall result from any of
the perils insured under any and all policies of insurance maintained by
Landlord and Tenant, regardless of cause, including the negligence and
intentional wrong doing of either party and their respective agents, officers
and employees but only to the extent of recovery, if any under such policy or
policies of insurance; provided however, that this waiver shall be invalidated
by reason of this waiver.
ARTICLE 17
DAMAGE OF DESTRUCTION
17.01 Substantial Damage.
If the Building or any part thereof shall be damaged by fire or other
casualty to the extent that substantial alteration or reconstruction of the
Building shall, in Landlord's reasonable
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opinion, be required (whether or not the Premises shall have been damaged) or if
as payable be used to retire the mortgage debt, Landlord may, at its option,
terminate this Lease by notifying Tenant in writing of such termination within
sixty (60) days after the date of such damage. If this Lease is so terminated,
Rent shall be abated as of the date of such damage.
17.02 Restoration.
If Landlord does not terminate this Lease pursuant to Section 17.01,
Landlord shall, within seventy-five (75) days after receipt by Landlord of the
Proceeds payable in respect of such fire or other casualty, proceed with
reasonable diligence to repair and restore the Building (subject to Force
Majeure) to substantially the same condition in which it was immediately prior
to the occurrence of the casualty to the extent of Landlord's Work and the value
of Landlord's Contribution. Landlord shall not be required to rebuild, repair,
or replace any part of Tenant's furniture, furnishings or fixtures or equipment
Landlord shall not be liable for any inconvenience or annoyance to Tenant or to
the business of Tenant resulting in any way from such damage or the repair
thereof, except that, Landlord shall allow Tenant a fair diminution of Rent
during the time and to the extent the Premises are unfit for occupancy.
ARTICLE 18
EMINENT DOMAIN
18.01 Total Taking.
If the Premises or the Building should be the subject of a Total Taking,
then this Lease shall terminate as of the date when physical possession of the
Building or the Premises is taken by the condemning authority.
18.02 Partial Taking.
If there occurs a Partial Taking Landlord (whether or not the Premises are
affected thereby) may terminate this Lease by giving written notice thereof to
Tenant within sixty (60) days after the right of election accrues, in which
event this Lease shall terminate as of the date the Building or Premises is
taken by the condemning authority. If upon such Partial Taking this Lease is not
terminated, Rent shall be abated by an amount representing that part of the Rent
properly be allocable to the portion of the Premises so taken and Landlord
shall, at Landlord's sole expense, restore and reconstruct the Building and the
Premises to substantially their former condition to the extent that the same, in
Landlord's judgement, may be feasible, but such work shall not exceed the scope
of Landlord's Work and the value of Landlord's Contribution. The Landlord shall
have no liability for interruption of Tenant's business.
18.03. Awards and Proceeds.
All Proceeds payable in respect of Taking shall be the property of
Landlord. Tenant hereby assigns to Landlord all rights of Tenant in or to such
Proceeds, provided that Tenant shall be entitled to separately petition the
condemning authority for a separate award for its moving expenses and trade
fixtures out only if such a separate award will not diminish the amount of
Proceeds payable to Landlord.
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ARTICLE 19
QUIET ENJOYMENT
19.01 Landlord's Covenant.
Provided that an Event of Default has not occurred and is not then
continuing, Tenant shall, subject to the Permitted Exceptions, quietly have and
enjoy the Premises during the Lease Term, without hindrance or molestation from
any Person lawfully claiming by, through or under Landlord.
19.02 Subordination.
This Lease is and shall be subject and subordinate to any mortgage now or
hereafter on the Building and to each advance made or hereafter to be made under
any mortgage, and to all renewals, modifications, consolidations, replacements
and extensions thereof and all substitutions therefore. This Section 19.02 shall
be self-operative and no further instrument of subordination shall be required.
In confirmation of such subordination, Tenant shall execute and deliver promptly
any certificate that Landlord or any mortgagee may request In the event that any
mortgagee shall succeed to the interest of Landlord then this Lease shall
terminate, or, at the option of such mortgagee, this Lease shall nevertheless
continue m full force and effect and Tenant shall and does hereby agree to
attorn to such mortgagee and to recognize such mortgagee as its Landlord.
19.03 Notice to Mortgagee.
No act or failure to act on the part of Landlord which would entitle
Tenant under the terms of this Lease, or by law, to be relieved of Tenant's
obligations hereunder or to terminate this Lease, shall result in a release or
termination or such obligations or a termination of this Lease unless (i) Tenant
shall have first given written notice of Landlord's act or failure to act to
Landlord's mortgagees of record, if any, specifying the act or failure to act on
the part of Landlord which could or would give basis to Tenant's rights; and
(ii) such mortgagees,. after receipt of such notice, have had the opportunity to
cure such default within a reasonable time thereafter; but nothing contained in
this Section 19.03 shall be deemed to impose any obligation on any such
mortgagees to correct or cure any such condition. "Reasonable time" as used
above shall mean a period of not less than thirty (30) Business Days and shall
include (but not be limited to) a reasonable time to obtain possession of the
Building if the mortgagee elects to do so and a reasonable time to correct or
cure the condition if such condition is determined to exist.
19.04 Other Provisions Regarding Mortgagees.
If this Lease or the Rent due hereunder is assigned to a mortgagee as
collateral security for a loan, no such mortgagee shall be deemed to have
assumed any of Landlord's obligations hereunder solely as a result of said
assignment A mortgagee to whom this Lease has been so assigned shall be deemed
to have assumed such obligations only if (i) by the terms of the instrument of
assignment such mortgagee specifically elects to assume such obligations or (ii)
such mortgagee has (a) foreclosed its mortgage, (b) accepted a deed in lieu
thereof, or (c) taken
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possession of the Premises by entry or otherwise. Even if such mortgagee assumes
the obligations of Landlord hereunder, (i) any such obligation under Section
24.01 to return the Security Deposit to the Tenant shall be limited to the
amount actually received by the mortgagee with respect thereto, and (ii) such
mortgagee will be liable for breaches of any Landlord's obligations hereunder
only to the extent such breaches occur during the period of ownership by the
mortgagee after foreclosure (or any conveyance by a deed in lieu thereof, all as
set forth in Section 25.10. hereof. Tenant may from time to time, at mortgagees
request, be required to provide mortgagee with certain financial information
pertaining to the Tenant as mortgagee may reasonably request.
ARTICLE 20
DEFAULTS; EVENTS OF DEFAULT
20.01 Defaults.
The following shall, If any requirement for notice or lapse of time or
both has not been met, constitute Defaults, and, if such requirements for notice
or lapse of time have been met, constitute Events of Default hereunder:
1. Occurrence of any event set forth in Article 21 hereof;
2. The failure of Tenant to pay Rent when the same shall be due and payable
and the continuance of such failure for a period of ten (10) days after
receipt by Tenant of notice in writing from Landlord specifying such
failure;
3. The failure of Tenant to observe any covenant made by it in Sections
13.01, 15.01 and 25.03 hereof and;
4. The failure of Tenant to keep, observe or perform any of the other
covenants, conditions and agreements herein contained on Tenant's part to
be kept, observed or performed and the continuance of such failure without
the curing of same for a period of twenty (20) days after receipt by
Tenant of notice in writing from Landlord specifying in reasonable detail
the nature of such failure.
20.02 Tenant's Best Efforts.
In the event that the Default of which Landlord gives notice is of such a
nature that it cannot be cured within such twenty (20) day period, then such
Default shall not be deemed to be an Event of Default so long as Tenant, after
receiving such notice, proceeds to cure the Default as soon as reasonably
possible and continues to take all steps necessary to complete the same within a
period of time which, under all prevailing circumstances, shall be reasonable.
No Default shall be deemed to be an Event of Default if and so long as Tenant
shall be so proceeding to cure the same in good faith or be delayed in or
prevented from curing the same by reason of Force Majeure.
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20.03 Elimination of Default.
Notwithstanding anything to the contrary contained in this Article 20, in
the event that hereinabove provided, such Default's) shall be deemed never to
have occurred and Tenant's rights hereunder shall continue unaffected by such
Defaults.
20.04 Tenant's Default - Rent Abatement Cancellation.
If an Event of Default occurs at any time during the term of this Lease,
Landlord shall have the option of retracting the full rent abatement and Tenant
shall pay the full abated amount immediately to Landlord upon demand.
ARTICLE 21
INSOLVENCY
21.01 Insolvency.
If (1) there occurs with respect to Tenant an Insolvency or (2) any
execution or attachment is issued against Tenant or any of its property and as a
result thereof the Premises are taken or occupied by some Person other than the
Tenant, except as may herein be permitted, then an Event of Default hereunder
shall be deemed to have occurred so that the provisions of Article 22 hereof
shall become effective and Landlord shall have the rights and remedies provided
for therein.
ARTICLE 22
LANDLORD'S REMEDIES; DAMAGES ON DEFAULT
22.01 Landlord's Remedies.
If an Event of Default shall occur and be continuing, Landlord may, at its
option, give to Tenant a notice terminating this Lease upon a date specified in
such notice, which date shall be not less than three (3) Business Days after the
date of receipt by Tenant of such notice from Landlord, and upon the date
specified in said notice, the term and estate hereby vested in Tenant shall
cease and any and all other right, title and interest of Tenant hereunder shall
likewise cease without further notice or lapse of time, as fully and with like
effect as if the entire Lease Term had elapsed, but Tenant shall continue to be
liable to Landlord as hereinafter provided.
If such Event of Default results from Tenant's failure to pay Tenant's
Cost as required by Section 7.01 hereof and the Work Letter, Landlord may, at
its option, in addition to or in lieu of the other remedies available to
Landlord, refuse Tenant access to the Premises. In such event the Term
Commencement Date shall be the earlier of (i) the date determined in accordance
with Section 7.04 or (ii) the Substantial Completion Date.
If such Event of Default results from Tenant's failure to pay a charge for
an Additional Service pursuant to Section 8.03 hereof, Landlord may, without
further notice to Tenant, discontinue any or all of such Additional Services.
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If an Event of Default shall occur and be continuing Landlord shall be
relieved of its undertakings under Article 13 hereof.
22.02 Surrender.
Upon any termination of this Lease as the result of an Event of Default,
Tenant shall quit and peacefully surrender the Premises to Landlord, upon or at
any time after any such termination, Landlord may without further notice enter
the Premises and possess itself thereof by summary proceedings or otherwise, any
may dispossess Tenant and remove Tenant and all other Persons and property from
the Persons and may have, hold and enjoy the Premises and the right. to receive
all rental income of and from the same.
22.03 Right to Relet.
At any time from time to time after any such termination, Landlord may
relet the Premises or any part thereof, in the name of Landlord or otherwise,
for such terms or terms (which may be greater or less this the period which
would otherwise have constituted the balance of the Lease Term) and on such
conditions (which may include concessions or free rent) as Landlord, in its
reasonable discretion, may determine and may collect and receive the rents
therefor. Landlord shall in no way be responsible or liable for any failure to
relet the Premises or any part thereof, or for any failure to correct any rent
due upon any such reletting.
22.04 Survival of Covenants.
No such termination of this 1XLease shall relieve Tenant of its liability
and obligations under this Lease and such liability and obligations shall
survive any such termination. Tenant shall indemnify and hold Landlord harmless
from all loss, cost, expense, damage or liability arising out or in connection
with such termination.
In the event of any such termination, Tenant shall pay to the Landlord the
Rent up to the date of such termination. Tenant shall also pay to Landlord, on
demand, as and for liquidated and agreed damages for Tenant's Default, the
difference between
(1) the aggregate Rent which would have been payable under this Lease by
Tenant from the date of such termination until the Stated Expiration Date, less
(2) the fair and reasonable rental value of the Premises for the same
period, excluding all of Landlord's reasonable estimate of expenses to be
incurred in connection with reletting the Premises, including, without
limitation all repossess costs, brokerage commission, legal expenses, reasonable
attorney's fees, alteration costs, and expenses of preparation for such
reletting.
If the Premises or any part thereof are relet by the Landlord before
presentation of proof of such liquidated damages to any court, commission or
tribunal, the amount of rent reserved upon such reletting shall be, prima facie,
the fair and reasonable rental value for the part or the whole of the Premises
so relet during the term of the reletting.
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Nothing herein contained shall limit or prejudice the right of the
Landlord to prove and obtain as liquidated damages by reason of such
termination, an amount equal to the maximum allowed by any statute of rule of
law in effect at the time when, and governing the proceedings in which, such
damages are to be proved, whether or not such amount be greater, equal to, or
less than the amount of the difference referred to above.
22.05 Right to Equitable Relief.
If there shall occur a Default or threatened Default, Landlord shall be
entitled to enjoin such Default or threatened Default and shall have the right
to invoke any right and remedy allowed at law or in equity or by statute or
otherwise as though reentry, summary proceedings, and other remedies were not
provided for in this Lease.
22.06 Right to Self Help; Interest on Overdue Rent.
If an Event of Default shall occur and be continuing, Landlord shall have
the right, but shall not be obligated, to enter upon the Premises and to perform
such obligation notwithstanding the fact that no specific provision for such
substituted performance by Landlord is made in this Lease with respect to such
Default In performing such obligation, Landlord may make any payment of money or
perform any other act The aggregate of (i) all sums so paid by Landlord, (ii)
interest (at the rate of 1 1/2% per month or the highest rate permitted by law,
whichever is less) on such sum plus all Rent not paid when due and (iii) all
necessary incidental costs and expenses in connection with the performance of
any such act by Landlord, shall be deemed to be Rent under this Lease and shall
be payable to Landlord immediately upon demand. Landlord may exercise the
foregoing rights without waiving any other of its rights or releasing Tenant
from any of its obligations under this Lease.
22.07 Further Remedies.
Upon any termination of this Lease pursuant to Section 22.01, or at any
time thereafter, Landlord may, in addition to and without prejudice to any other
rights and remedies Landlord shall have at law or in equity, re-enter the
Premises, and recover possession thereof and may dispossess any or all occupants
of the Premises in the manner prescribed by the statute relating to summary
proceedings, or similar statute(s); but Tenant in such case shall remain liable
to Landlord as hereinbefore provided.
ARTICLE 23
WAIVERS
23.01 No Waivers.
Failure of Landlord to complain of any act or omission on the part of
Tenant no matter how long the same may continue, shall not be deemed to be a
waiver by said Landlord of any of its rights hereunder. No waiver by any
provision of Lease shall be deemed a waiver of a breach of the same or any other
provision. No acceptance by Landlord of any partial payment shall constitute an
accord or satisfaction but shall only be deemed A partial payment on account
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ARTICLE 24
SECURITY DEPOSIT
24.01 Security Deposit.
Tenant has deposited the Security Deposit with Landlord. Landlord shall
hold the Security Deposit as security for the full and fair payment or
performance by Tenant of its obligations under this Lease and not as a
prepayment of Rent Landlord may commingle the Security Deposit with other funds
of Landlord but shall not be liable to Tenant for the payment of interest
thereon or profits therefrom. Landlord may expend such amounts from the Security
Deposit, including legal fees, as may be necessary to cure any Default and, in
such case, Tenant shall pay to landlord the amount so expended, on demand.
Landlord may assign the Security Deposit to any subsequent owner of the Building
and thereafter Landlord shall have no further liability to Tenant with respect
thereto. As soon as reasonably practicable after the Lease Termination Date,
Landlord shall (i) inspect the Premises, (ii) make such payments from the
Security Deposit as may be required to cure any outstanding Events of Default
hereunder and (iii) if no Event of Default is then continuing, pay the balance
of the Security Deposit to T
ARTICLE 25
GENERAL PROVISIONS
25.01 Force Majeure.
In the event that Landlord or Tenant shall be delayed, hindered in or
prevented from the performance of any act required hereunder by reason of Force
Majeure, then performance of such act shall be excused for the period of the
delay and the period for the performance of any such act shall be extended for a
period equivalent to the period of such delay.
25.02 Notices and Communications.
All notices, demands, requests and other communications provided for or
permitted under Lease shall be in writing, either delivered by hand or sent by
certified mail, postage prepaid, to the following address:
(a) if to Landlord at the address stated in Section 1.01 hereof, or at
such other address as the Landlord shall have designated in
writing to the Tenant, with a copy to such Persons as Landlord
shall have designated in writing to Tenant, or
(b) if to Tenant at the address stated in Section 1.01 hereof, or at
such other address as the Tenant shall have designated in writing
to the Landlord, with a copy to such Persons as Tenant shall have
designated in writing to Landlord.
Any notice provided for herein shall become effective only upon and at the
time of receipt by the Person to whom it is given, unless such notice is mailed
by first-class registered or
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certified mail, in which case it shall be deemed to be received on (i) the third
Business Day following the mailing thereof or (ii) the day of its receipt, if a
Business Day, or the next succeeding Business Day, whichever of (i) or (ii)
shall be the earlier.
25.03 Certificates, Estoppel Letter.
Either party shall, without charge, at any time and from time to time
hereafter, within ten (10) days after written request of the other, certify by
written instrument duly executed and acknowledged to any mortgagee or purchaser,
or proposed mortgagee or proposed purchaser, or any Person specified in such
request; (a) as to whether this Lease has been supplemented or amended, and if
so, the substance and manner of such supplement or amendment, (b) as to the
validity and force constituted, (c) as to the existence of any Default or Event
of Default, (d) as to the existence of any offsets, counterclaims or defenses
thereto on the part of such other party, (e) as to the Term Commencement Date
and Stated Expiration Date, and (f) as to any other matters as may reasonably be
so requested. Any such certificate may be relied upon by the party requesting it
and any other Person to whom the same may be exhibited or delivered, and the
contents of such certificate shall be binding on the party executing same.
Tenant shall in addition, within 5 Business Days of the Term Commencement
Date, execute and deliver to Landlord a tenant estoppel letter substantially in
the form attached hereto as Exhibit 1.
25.04 Renewal.
If this Lease is renewed or extended the provisions of Sections 7.01,
7.02, 7.03, 7.04, and 7.05 of Article 7 hereof shall not apply.
25.05 Governing Law.
This Lease and the performance thereof shall be governed, interpreted,
construed and regulated by the laws of the Commonwealth of Massachusetts.
25.06 Partial Invalidity.
If any term, covenant, condition or provision of this Lease or the
application thereof to any person or circumstance shall, at any time or to any
extent, be invalid or unenforceable, the remainder of this Lease, or the
application of such term or provision to persons or circumstances other than
those as to which is held invalid or unenforceable, shall not be affected
thereby, and each term, covenant, condition and provision of this Lease shall be
valid and be enforced to the fullest extent permitted by law.
25.07 Notice of Lease.
The parties will at any time, at the request of either one, promptly
execute duplicate originals of an instrument, in recordable form, which will
constitute a Notice of Lease, setting
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forth a description of the Premises, the Lease Term and any other portions
thereof, excepting the rental provisions, as either party may request Cost of
review and recording to be borne by Tenant.
25.08 Interpretation; Consents.
The section headings used herein are for reference and convenience only,
and shall not enter into the interpretation hereof. This Lease may be executed
in several counterparts, each of which shall be an original, but all of which
shall constitute one and the same instrument The term "Landlord" whenever used
herein, shall mean only the owner at the time of Landlord's interest here and
shall upon any sale or assignment (other than as collateral security for a loan)
of the interest of Landlord herein, its respective successors in interest and/or
assigns shall, during the term of ownership of its respective estates herein, be
deemed to be Landlord and the liability of Landlord, if any, hereunder shall in
any event be limited to the Landlord's interest in the Building.
Subjects to the provisions of the third sentence of Section 7.06 and
except for the consents of Landlord required pursuant to the second sentence of
Section 7.06 and Article 13 hereof, consents or approvals required or requested
of either Landlord or Tenant shall not be unreasonably withheld or delayed.
25.09 Parties.
Except as herein otherwise expressly provided, the covenants, conditions
and agreements contained in this Lease shall be binding upon the heirs,
successors and assigns of the parties hereto.
25.10 Waiver of Trial by Jury.
Landlord and Tenant do hereby waive trial by jury in any action,
proceeding or counterclaim brought by either against the other upon any matters
whatsoever arising out of or in any way connected with this Lease, Tenant's use
or occupancy of the Premises and/or claim of injury or damage.
ARTICLE 26
MISCELLANEOUS
26.01 Expansion Space.
Landlord shall use its best efforts to provide Tenant with expansion space
in the facility or one in the local area at the request of Tenant
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26.02 Exterior Landscaping.
Landlord shall use its best efforts to landscape the entrance to suite 150
and parking area prior to Tenant's rent commencement date. Landlord shall
landscape twenty (20) feet from the front of Tenant's main entrance using its
own design criteria.
26.03 Holdover Clause.
In the event Tenant fails to vacate the Premises by the Lease Termination
Date, Tenant hereby agrees to pay Landlord two (2) times the monthly rental
rate. The "Holdover Rental Rate" shall be paid monthly in advance to Landlord.
In determining the "Holdover Rental Rate" Landlord shall charge two (2) the
gross monthly for the last full calendar month under the lease.
26.04 Exterior Signage.
Landlord shall supply and install exterior directories in the parking lot
indicating Tenant entrance locations.
ARTICLE 27
ENTIRE AGREEMENT
27.01 Entire Agreement.
No oral statement or prior written matter shall have any force or effect.
This Agreement shall not be modified or canceled except by written subscribed to
all parties.
No Representations, inducement, promises or agreements, oral or otherwise,
between Landlord and Tenant or any of their respective brokers, employees or
agents, not embodied herein, shall be of any force or effect.
Executed as a sealed instrument as of the _________day of _____________ 1997.
201 Forest Street Realty Trust Synchronicity, Inc.
By:_________________________________ By ________________________________
David P. Depietri Eugene Connolly
Its: Trustee Its: Vice President of Operations
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INDEX
EXHIBITS
Exhibit B: PLAN SHOWING TENANT'S SPACE
Exhibit C: SERVICES BY LANDLORD
Exhibit D: RULES AND REGULATIONS
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EXHIBIT B
(PLAN SHOWING TENANTS SPACE)
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EXHIBIT C
SERVICES TO BE PROVIDED BY LANDLORD
(AS OPERATING EXPENSES)
A. Replacement of fluorescent tubes and starters in overhead parabolic light
fixtures as needed.
B. Hot and cold water for lavatory and drinking purposes.
C. Toilet supplies including soap, paper or cloth towels, and toilet tissue
for lavatories.
D. Janitor services in accordance with the following schedule and to be
accomplished unless otherwise indicated, five nights per week after
Tenants normal working hours:
Entrance Doors: Entrance glass will be cleaned five times per week.
Entrance Floor: Entrance floor will be polished five times per week.
Broadloom: All carpeted areas will be vacuumed three times per week.
Broadloom will be shampooed upon request, at an additional
cost to Tenant.
Wastepaper
Containers: Wastepaper containers will be emptied five times per week;
plastic liner bags will be provided for wastepaper
containers; liners will be changed once a week.
Water Fountains: All water fountains will be sanitized and polished five
times per week.
Washrooms: Washrooms will be cleaned and serviced five times per
week. This will include refilling all paper towel, toilet
tissue, and soap dispensers, cleaning all towel and trash
containers, cleaning and polishing all stainless steel
fixtures, cleaning toilets, washing and sanitizing all wash
basins and shelves, cleaning and polishing all mirrors,
removing all disfigurations such as ink marks, drawings,
etc., from all partitions and walls, damp mopping of floors.
Scuff Marks: All scuff marks will be removed five times per week from
all scuff plates on doors.
Tile Floors: All floors will be swept five times per week. All corridors
and office floors will be polished five times per week.
Floors 14Xwill be stripped whenever necessary.
Cafeteria: Table and counters will be cleaned five times per week.
<PAGE> 40
-40-
E. Proper care of grounds surrounding the Building, including care of lawns
and shrubs and including removal of litter.
F. Maintaining and cleaning the sidewalks and parking areas in front of and
around the Building including snow removal.
G. Provision of adequate lighting for the parking areas servicing the
Building.
H. Exterior windows will be washed annually as a common area expense.
1. Rooftop HVAC (Heating, Ventilation, and Air-Conditioning) will be provided
to Tenant at Landlord's expense during normal business hours. All of
Tenants secondary HVAC systems and any special interior requirements shall
be at Tenant's expense.
<PAGE> 41
-41-
EXHIBIT D
RULES AND REGULATIONS
1. Heating, lighting and plumbing: The Landlord should be notified at once of
any trouble with heating, lighting or plumbing fixtures. Tenants must not
leave the doors of the Premises unlocked at night.
2. The sidewalks, entrances, halls and stairways shall not be obstructed by
any Tenant or used for any purposes other than ingress and egress to and
from their respective Premises, and no articles or rubbish shall be left
herein.
3. No toilet fixture shall be used for any purpose other than that for which
it is intended, and now sweepings, rubbish, rags, ashes or other
substances shall be thrown herein.
4. The weight and position of all safes and heavy equipment or machines shall
be subject to the approval of the Landlord.
5. Lettering on doors, tablets and building directory shall be subject to the
approval of the Landlord; no lettering shall be allowed on outside
windows.
6. No wires for telephone service, electric lights, messenger service or for
any other purpose shall be put in the Premises without the consent of the
Landlord.
7. No glass in doors or elsewhere through which light is admitted in to any
part of the building shall be obstructed.
8. No animals or birds shall be kept in or about the Building.
9. All freight, furniture, etc. must be received and delivered through
entrances to the Building designated for such purpose unless otherwise
authorized by the Landlord.
10. Nothing shall be thrown from or taken in through the windows, nor shall
any be left outside the Building on the window sills of the Premises.
11. No person shall loiter in the halls, corridors, or lavatories.
12. The Landlord, its agents and employees shall have access at reasonable
times to perform their duties in the maintenance and operation of the
Premises.
13. No Tenant shall use any method of heating other that provided for in the
Tenant's Lease without the consent of the Landlord.
<PAGE> 42
-42-
14. Any damage caused to the Building or the Premises or to any person or
property herein as a result of any breach of any of the rules and
regulations by the Tenant shall be borne by the Tenant.
15. The Landlord reserves the right to make any such other and further rules
and regulations as, in its judgement, may from time to time be necessary
for maintaining the safety and cleanliness of the Premises and Building
for the preservation of good order therein.
16. All office areas shall require floor mats under any chairs that have
casters, so that the carpet shall remain in good order and repair.
SECOND LEASE AMENDMENT
This Second Lease Amendment ("Second Amendment") is made this___________
day of _______________,1999 by and between 201 Forest Street Realty Trust, with
a mailing address c/o Rosewood Development Corporation, 293 Boston Post Road
West, Suite 320, Marlborough, Massachusetts, 01752 (hereafter referred to as
"Landlord") and Synchronicity, Inc., a Massachusetts Corporation, with a
principal place of business at 201 Forest Street, Marlborough, Massachusetts
01752 (hereinafter referred to as "Tenant").
WITNESSETH
WHEREAS, Landlord and Tenant have entered into a certain lease dated April 1,
1997 which was amended pursuant to a First Lease Amendment dated June 30, 1997,
(hereinafter collectively referred to as the "Lease") wherein Landlord leased to
Tenant and Tenant leased from Landlord certain premises consisting of 4,331
rentable square feet (the "original Premises") located on the third floor of the
building located at 201 Forest Street, Marlborough, Massachusetts (the
"Building").
WHEREAS, Tenant wishes to lease from Landlord and Landlord wishes to lease to
Tenant additional space located on the third floor of the Building upon the
terms and conditions hereinafter set forth.
NOW THEREFORE, for good and valuable consideration the receipt and sufficiency
of which is hereby acknowledged, Landlord and Tenant hereby agree as follows:
1. Landlord and Tenant hereby incorporate all tenants and provisions of the
Lease herein as is specifically set forth, except as said terms are modified
herein. Capitalized terms not specifically defined in this Second Amendment
shall have the same meaning ascribed to them in the Lease.
2. Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord
approximately 4,928 square feet of rentable floor area (hereinafter referred to
as the "Expansion Space located on the third floor of the Building for a term
commencing November 1, 1999 and continuing
<PAGE> 43
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through (and including) October 31, 2004. Expansion Space is hereby agreed to be
that certain space which is shown cross-hatched on Exhibit A attached hereto and
Landlord's Work is hereby agreed to be set forth on Exhibit B attached hereto
and made a part hereof.
3. Effective as of the Expansion Space Commencement Date, the Rentable Area
of Premises shall be increased by 4,928 rentable square feet (RSF) (the
"Expansion Space") to a total of 9,259 RSF of office space.
4. Effective as of the Expansion Space Commencement Date, Section 1.01 OF
LEASE AGREEMENT.
a. Delete:
"RENTABLE AREA OF PREMISES: 4,331."
b. Insert:
"RENTABLE AREA OF PREMISES: 9,259."
5. Section 1.01 OF LEASE AGREEMENT
a. Delete:
"TERM: Five (5) years."
b. Insert:
"TERM: Seven (7) years four (4) months.
July 1, 1997 to October 31, 2004"
6. Section 1.01 OF LEASE AGREEMENT
a. Delete:
"BASIC RENT: Delete section and all amendments
thereto in their entirety."
b. Insert:
"BASIC RENT: See schedule below:
<TABLE>
<CAPTION>
SQUARE NET, NET, NET NET, NET, NET NET, NET, NET
PERIOD FEET RATE/RSF ANNUAL RENT MONTHLY RENT
------ ------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
7/l/97 10/31/99 4,331 $13.50 $58,468.50 $4,872.37
II/l/99 10/31/04 9,259 $13.50 $124,996.50 $10,416.38"
</TABLE>
7. Effective as of the Expansion Lease Commencement Date, Section 1.01 OF LEASE
AGREEMENT
<PAGE> 44
-44-
a. Delete:
"TENANT'S SHARE: 10.8%"
b. Insert:
"TENANT'S SHARE: 24.37%"
In all other respects the Lease is hereby ratified, confirmed, and approved.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed the Second Lease
Amendment under seal as of the ___________day of September, 1999.
LANDLORD: 201 FOREST STREET REALTY TRUST
__________________________________________
By: David P. Depietri
Its: Trustee
TENANT: Synchronicity, Inc.
__________________________________________
By: Eugene Connolly
Its: Vice President of Operations
<PAGE> 1
Exhibit 10.12
[OFFICE FORM CALIFORNIA]
LEASE AGREEMENT
BETWEEN
W9/PHC REAL ESTATE LIMITED PARTNERSHIP,
A DELAWARE LIMITED PARTNERSHIP
AS LANDLORD
AND
SYNCHRONICITY, INC.,
A MASSACHUSETTS CORPORATION
AS TENANT
DATED NOVEMBER 18, 1998
PROPERTY:
160 WEST SANTA CLARA STREET
SAN JOSE, CALIFORNIA 95113
DECEMBER 14, 1998
<PAGE> 2
BASIC LEASE INFORMATION
LEASE DATE: November 18, 1998
TENANT: SYNCHRONICITY, INC., a Massachusetts
corporation
LANDLORD: W9/PHC REAL ESTATE LIMITED PARTNERSHIP,
a Delaware limited partnership
PREMISES: Suite No. 1300 in the office building
commonly known as 160 West Santa Clara
Street (the "BUILDING"), and whose
street address is 160 West Santa Clara
Street, San Jose, California, 95113. The
Premises are outlined on the plan
attached to the Lease as Exhibit A. The
land on which the Building is located
(the "LAND") is described on Exhibit B.
The term "Building" includes the related
land, driveways, parking - facilities,
and similar improvements.
TERM: Approximately sixty (60) months,
commencing on January 1, 1999 (the
"COMMENCEMENT DATE") and ending at 5:00
p.m. on the last day of the sixtieth
full calendar month following the
Commencement Date (the "TERM" which
definition shall include all renewals of
the initial term), subject to adjustment
and earlier termination as provided in
the Lease.
OPTION: One (1) option for forty-eight (48)
months
BASIC RENT: Basic Rent shall be the following
amounts for the following periods of
time:
LEASE MONTH MONTHLY BASIC RENT
Months 1-12 $20,138.10
Months 13-24 $20,915.36
Months 25-36 $21,763.28
Months 37-48 $22,681.86
Months 49-60 $23,529.78
As used herein, the term "LEASE MONTH"
shall mean each calendar month during
the Term (and if the Commencement Date
does not occur on the first day of a
calendar month, the period from the
Commencement Date to the first day of
the next calendar month shall be
included in the first Lease Month for
purposes of determining the
-i-
<PAGE> 3
duration of the Term and the monthly
Basic Rent rate applicable for such
partial month).
SECURITY DEPOSIT: $23,529.78, plus a letter of credit in
the amount of $70,590.00.
RENT: Basic Rent, Tenant's Proportionate Share
of Taxes, Tenant's share of Additional
Rent, and all other sums that Tenant may
owe to Landlord or otherwise be required
to pay under the Lease.
PERMITTED USE: Sales, marketing, and general office
use.
TENANT'S PROPORTIONATE SHARE: 3.34%, which is the percentage obtained
by dividing the 7,066 rentable square
feet in the Premises by the 211,757
rentable square feet in the Building.
Landlord and Tenant stipulate that the
number of rentable square feet in the
Premises and in the Building set forth
above shall be binding upon them.
EXPENSE STOP: Actual Operating Costs for calendar year
1999
BASE YEAR: 1999
INITIAL LIABILITY INSURANCE AMOUNT: $3,000,000.00
MAXIMUM CONSTRUCTION ALLOWANCE: $5.00 per rentable square foot.
GUARANTOR: None
TENANT'S ADDRESS:
Following Commencement Date:
Synchronicity, Inc.
160 West Santa Clara Street, Suite 1300
San Jose, California 95113
Attn: ________________________
Facsimile: ____________________
-ii-
<PAGE> 4
Landlord's Address:
For All Notices:
W9/PHC Real Estate Limited Partnership
c/o Archon Group
Two California Plaza
350 South Grand Avenue, 46th Floor
Los Angeles, California 90071
Attn: Nancy M. Haag
Facsimile: (213) 633-5870
For Rent Payments:
Insignia/ESG
160 West Santa Clara Street, Suite 550
San Jose, California 95113
Attn: Vicki Herl
With A Copy To:
Insignia/ESG
160 West Santa Clara Street, Suite 550
San Jose, California 95113
Attn: Vicki Herl
Facsimile: (408) 971-9880
-iii-
<PAGE> 5
THE FOREGOING BASIC LEASE INFORMATION IS INCORPORATED INTO AND MADE A PART OF
THE LEASE IDENTIFIED ABOVE. IF ANY CONFLICT EXISTS BETWEEN ANY BASIC LEASE
INFORMATION AND THE LEASE, THEN THE LEASE SHALL CONTROL.
LANDLORD: W9/PHC REAL ESTATE LIMITED PARTNERSHIP,
a Delaware limited partnership
By: W9/PHC GENPAR, INC., a Delaware
corporation, its general partner
By: _______________________________
Name: Howard Stern
Title: Assistant Vice President
TENANT: SYNCHRONICITY, INC., a
Massachusetts corporation
By: _______________________________
Name: ____________________________
Title: _____________________________
By: _______________________________
Name: ____________________________
Title: _____________________________
-iv-
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
BASIC LEASE INFORMATION ............................................... i
1. Definitions And Basic Provisions ................................. 1
2. Lease Grant ...................................................... 1
3. Term ............................................................. 1
4. Rent ............................................................. 1
4.1 Payment ................................................. 1
4.2 Operating Costs; Taxes .................................. 2
5. Delinquent Payment,Handling Charges .............................. 3
6. Security Deposit ................................................. 4
6.1 Security Deposit ........................................ 4
6.2 Letter Of Credit ........................................ 4
7. Landlord's Obligations ........................................... 5
7.1 Services ................................................ 5
7.2 Excess Utilities ........................................ 5
7.3 Restoration of Services; Abatement ...................... 6
8. Improvements; Alterations; Repairs; Maintenance .................. 6
8.1 Improvements,Alterations ................................ 6
8.2 Repairs; Maintenance .................................... 6
8.3 Performance of Work ..................................... 7
8.4 Mechanic's Liens ........................................ 7
9. Use .......................................................... 7
10. Assignment and Subletting .................................... 7
10.1 Transfers ............................................... 7
10.2 Consent Standards ....................................... 8
10.3 Request For Consent ..................................... 8
10.4 Conditions To Consent ................................... 8
10.5 Cancellation ............................................ 8
10.6 Additional Compensation ................................. 9
10.7 Permitted Transfers ..................................... 9
11. Insurance, Waivers; Subrogation; Indemnity ....................... 10
11.1 Insurance ............................................... 10
11.2 Waiver of Negligence; No Subrogation .................... 10
11.3 Indemnity ............................................... 10
12. Subordination; Attornment; Notice to Landlord's Mortgagee......... 11
12.1 Subordination ........................................... 11
12.2 Attornment .............................................. 11
12.3 Notice to Landlord's Mortgagee .......................... 11
12.4 Landlord's Mortgagee's Protection Provisions ............ 11
13. Rules and Regulations ............................................ 12
14. Condemnation ............................................ 12
14.1 Total Taking ............................................ 12
</TABLE>
-v-
<PAGE> 7
<TABLE>
<CAPTION>
<S> <C>
14.2 Partial Taking-Tenant's Rights .......................... 12
14.3 Partial Taking-Landlord's Rights ................... 12
14.4 Award .............................................. 12
15. Fire or Other Casualty ............................. 12
15.1 Repair Estimate .................................... 13
15.2 Landlord's and Tenant's Rights ..................... 13
15.3 Landlord's Rights .................................. 13
15.4 Repair Obligation .................................. 13
15.5 Waiver of Statutory Provisions ..................... 13
16. Personal Property Taxes ............................ 14
17. Events of Default .................................. 14
18. Remedies ........................................... 15
18.1 Termination ........................................ 15
18.2 Enforcement of Lease ............................... 15
18.3 Sublessees of Tenant ............................... 16
18.4 Efforts to Relet ................................... 16
19. Payment by Tenant; Non-Waiver ...................... 16
19.1 Payment by Tenant .................................. 16
19.2 No Waiver .......................................... 16
20. Landlord's Lien .................................... 16
21. Surrender of Premises .............................. 17
22. Holding Over ....................................... 17
23. Certain Rights Reserved by Landlord ................ 18
24. Substitution Space ................................. 18
25. Miscellaneous ...................................... 18
25.1 Landlord Transfer .................................. 18
25.2 Landlord's Liability ............................... 19
25.3 Force Majeure ...................................... 19
25.4 Brokerage .......................................... 19
25.5 Estoppel Certificates .............................. 19
25.6 Notices ............................................ 19
25.7 Separability ....................................... 19
25.8 Amendments, and Binding Effect ..................... 20
25.9 Quiet Enjoyment .................................... 20
25.10 No Merger .......................................... 20
25.11 No Offer ........................................... 20
25.12 Entire Agreement ................................... 20
25.13 Waiver of Jury Trial ............................... 20
25.14 Governing Law ...................................... 20
25.15 Joint and Several Liability ........................ 20
25.16 Financial Reports .................................. 20
25.17 Landlord's Fees .................................... 21
25.18 Attorney Fees ...................................... 21
25.19 Telecommunications ................................. 21
25.20 Confidentiality .................................... 21
</TABLE>
-vi-
<PAGE> 8
<TABLE>
<CAPTION>
<S> <C>
25.21 Hazardous Materials ................................ 22
25.22 Signage ............................................ 22
25.23 Parking ............................................ 22
25.24 List Of Exhibits ................................... 22
26. Renewal Option ..................................... 23
26.1 Grant of Options ................................... 23
26.2 Basic Rent ......................................... 23
26.3 Termination of Option .............................. 23
27. Right of First Offer ............................... 24
27.1 Definitions ........................................ 24
27.2 First Right Space .................................. 24
27.3 Miscellaneous ...................................... 24
27.4 No Extension ....................................... 24
27.5 Termination ........................................ 25
</TABLE>
-vii-
<PAGE> 9
TABLE OF EXHIBITS:
Exhibit A Outline of Premises
Exhibit B Description of Building
Exhibit C Building Rules and Regulations
Exhibit D Tenant Finish-Work
Exhibit E Amendment No. I
Exhibit F Form of Tenant Estoppel Certificate
Exhibit G Depiction of Offer Space
-viii-
<PAGE> 10
LIST OF DEFINED TERMS
Additional Rent.................................................................
Affiliate.......................................................................
Basic Lease Information.........................................................
Building........................................................................
Casualty........................................................................
Collateral......................................................................
Commencement Date...............................................................
Damage Notice...................................................................
Event of Default................................................................
GAAP............................................................................
Hazardous Materials.............................................................
HVAC............................................................................
Including.......................................................................
Interest Rate...................................................................
Land............................................................................
Landlord........................................................................
Landlord's Mortgagee............................................................
Law.............................................................................
Laws............................................................................
Lease...........................................................................
Lease Month.....................................................................
Loss............................................................................
Maximum Letter of Credit Amount.................................................
Operating Costs.................................................................
Operating Costs and Tax Statement...............................................
Parking Area....................................................................
Rent............................................................................
Taking..........................................................................
Tangible Net Worth..............................................................
Taxes...........................................................................
Tenant..........................................................................
Tenant Party....................................................................
Term............................................................................
Transfer........................................................................
UCC.............................................................................
-ix-
<PAGE> 11
LEASE
THIS LEASE AGREEMENT (this "LEASE") is entered into as of November 18,
1998, between W9/PHC REAL ESTATE LIMITED PARTNERSHIP, a Delaware limited
partnership ("LANDLORD"), and SYNCHRONICITY, INC., a Massachusetts corporation
("TENANT").
1. DEFINITIONS AND BASIC PROVISIONS. The definitions and basic
provisions set forth in the Basic Lease Information (the "BASIC LEASE
INFORMATION") executed by Landlord and Tenant contemporaneously herewith are
incorporated herein by reference for all purposes. Additionally, the following
terms shall have the following meanings when used in this Lease: "LAWS" means
all federal, state, and local laws, rules and regulations, all court orders,
governmental directives, and governmental orders, and all restrictive covenants
affecting the Property, and "LAW" shall mean any of the foregoing; "AFFILIATE"
means any person or entity which, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with the
party in question; "TENANT PARTY" means any of the following persons: Tenant;
any assignees claiming by, through, or under Tenant; any subtenants claiming by,
through, or under Tenant; and any of their respective agents, contractors,
employees, and invitees; and "INCLUDING" means including, without limitation.
2. LEASE GRANT. Subject to the terms of this Lease, Landlord leases to
Tenant, and Tenant leases from Landlord, the Premises.
3. TERM. If the Premises are not ready for occupancy by Tenant on the
Commencement Date, then (a) Tenant's obligation to pay Basic Rent and Additional
Rent (as defined in Section 4) shall be waived until Landlord tenders possession
of the Premises to Tenant, (b) Landlord shall not be in default hereunder or be
liable for damages therefor, and (c) Tenant shall accept possession of the
Premises when Landlord tenders possession thereof to Tenant. By occupying the
Premises, Tenant shall be deemed to have accepted the Premises in their
condition as of the date of such occupancy, subject to the performance of
punch-list items that remain to be performed by Landlord, if any. Tenant shall
execute and deliver to Landlord, within ten days after Landlord has requested
the same, an amendment substantially in the form of Exhibit E hereto confirming
the Commencement Date and the expiration date of the initial Term, that Tenant
has accepted the Premises, and that Landlord has performed all of its
obligations with respect to the Premises (except for punch-list items specified
in such letter).
4. RENT.
4.1 PAYMENT. Tenant shall timely pay to Landlord Basic Rent and
all additional sums to be paid by Tenant to Landlord under this Lease
(collectively, the "RENT"), without deduction or set off, at Landlord's address
provided for in this Lease or as otherwise specified by Landlord, and shall be
accompanied by all applicable state and local sales or use taxes. Basic Rent,
adjusted as herein provided, shall be payable monthly in advance. The first
monthly installment of Basic Rent shall be payable contemporaneously with the
execution of this Lease; thereafter, Basic Rent shall be payable on the first
day of each month beginning on the first day of the second full calendar month
of the Term. The monthly Basic Rent for any partial
<PAGE> 12
month at the beginning of the Term shall equal the product of 1/365 of the
annual Basic Rent in effect during the partial month and the number of days in
the partial month from and after the Commencement Date, and shall be due on the
Commencement Date.
4.2 OPERATING COSTS; TAXES.
4.2.1 Tenant shall pay an amount (per each rentable square foot
in the Premises) ("ADDITIONAL RENT") equal to the difference between the
Operating Costs (defined below) per rentable square foot in the Building, and
the Expense Stop (calculated on a per rentable square foot basis). Landlord may
make a good faith estimate of the Additional Rent to be due by Tenant for any
calendar year or part thereof during the Term, and Tenant shall pay to Landlord,
on the Commencement Date and on the first day of each calendar month thereafter,
an amount equal to the estimated Additional Rent for such calendar year or part
thereof divided by the number of months therein. From time to time, Landlord may
estimate and re-estimate the Additional Rent to be due by Tenant and deliver a
copy of the estimate or re-estimate to Tenant. Thereafter, the monthly
installments of Additional Rent payable by Tenant shall be appropriately
adjusted in accordance with the estimations so that, by the end of the calendar
year in question, Tenant shall have paid all of the Additional Rent as estimated
by Landlord. Any amounts paid based on such an estimate shall be subject to
adjustment as herein provided when actual Operating Costs are available for each
calendar year.
4.2.2 The term "OPERATING COSTS" shall mean all expenses and
disbursements (subject to the limitations set forth below) that Landlord incurs
in connection with the ownership, operation, and maintenance of the Building,
determined in accordance with sound accounting principles consistently applied,
including, but not limited to, the following costs: (A) wages and salaries
(including management fees) of all employees engaged in the operation,
maintenance, and security of the Building, including taxes, insurance and
benefits relating thereto; (B) all supplies and materials used in the operation,
maintenance, repair, replacement, and security of the Building; (C) costs for
improvements made to the Building which, although capital in nature, are
expected to reduce the normal operating costs of the Building (including all
utility costs), as well as capital improvements made in order to comply with any
law hereafter promulgated by any governmental authority, as amortized over the
useful economic life of such improvements as determinedly Landlord in its
reasonable discretion; (D) cost of all utilities, except the cost of other
utilities reimbursable to Landlord by the Building's tenants other than pursuant
to a provision similar to this Section 4.2; (E) insurance expenses; (F) repairs,
replacements, and general maintenance of the Building; and (G) service or
maintenance contracts with independent contractors for the operation,
maintenance, repair, replacement, or security of the Building (including,
without limitation, alarm service, window cleaning, and elevator maintenance).
Operating Costs shall not include costs for (i) capital
improvements made to the Building, other than capital improvements described in
Section 4.2.2(C) and except for items which are generally considered maintenance
and repair items, such as painting of common areas, replacement of carpet in
elevator lobbies, and the like; (ii) repair, replacements and general
maintenance paid by proceeds of insurance or by Tenant or other third parties;
(iii) interest, amortization or other payments on loans to Landlord; (iv)
depreciation; (v) leasing commissions;
-2-
<PAGE> 13
(vi) legal expenses for services, other than those that benefit the Building
tenants generally (e.g., tax disputes); (vii) renovating or otherwise improving
space for occupants of the Building or vacant space in the Building; (viii)
Taxes (defined below); and (ix) federal income taxes imposed on or measured by
the income of Landlord from the operation of the Building.
4.2.3 Tenant shall also pay its Proportionate Share of any
increase in Taxes for each year and partial year falling within the Term over
the Taxes for the Base Year. Tenant shall pay its Proportionate Share of Taxes
in the same manner as provided above for Additional Rent with regard to
Operating Costs. "TAXES" shall mean taxes, assessments, and governmental charges
whether federal, state, county or municipal, and whether they be by taxing
districts or authorities presently taxing or by others, subsequently created or
otherwise, and any other taxes and assessments attributable to the Building (or
its operation), excluding, however, penalties and interest thereon and federal
and state taxes on income (if the present method of taxation changes so that in
lieu of the whole or any part of any Taxes, there is levied on Landlord a
capital tax directly on the rents received therefrom or a franchise tax,
assessment, or charge based, in whole or in part, upon such rents for the
Building, then all such taxes, assessments, or charges, or the part thereof so
based, shall be deemed to be included within the term "TAXES" for purposes
hereof). Taxes shall include the costs of consultants retained in an effort to
lower taxes and all costs incurred in disputing any taxes or in seeking to lower
the tax valuation of the Building. For property tax purposes, Tenant waives all
rights to protest or appeal the appraised value of the Premises, as well as the
Building, and all rights to receive notices of reappraisement.
4.2.4 [INTENTIONALLY DELETED]
4.2.5 By April 1 of each calendar year, or as soon thereafter as
practicable, Landlord shall furnish to Tenant a statement of Operating Costs for
the previous year, in each case adjusted as provided in Section 4.2.6, and of
the Taxes for the previous year (the "OPERATING COSTS AND TAX STATEMENT"). If
the Operating Costs and Tax Statement reveals that Tenant paid more for
Operating Costs than the actual amount for the year for which such statement was
prepared, or more than its actual share of Taxes for such year, then Landlord
shall promptly credit or reimburse Tenant for such excess; likewise, if Tenant
paid less than Tenant's actual Proportionate Share of Additional Rent or share
of Taxes due, then Tenant shall promptly pay Landlord such deficiency.
4.2.6 With respect to any calendar year or partial calendar year
(including calendar year 1999) in which the Building is not occupied to the
extent of ninety-five percent (95%) of the rentable area thereof, the Operating
Costs for such period shall, for the purposes hereof, be increased to the amount
which would have been incurred had the Building been occupied to the extent of
ninety-five percent (95%) of the rentable area thereof.
5. DELINQUENT PAYMENT, HANDLING CHARGES. All past due payments required of
Tenant hereunder shall bear interest from the date due until paid at the lesser
of ten percent (10%) per annum (the "INTEREST RATE") or the maximum lawful rate
of interest; additionally, Landlord may charge Tenant a fee equal to five
percent (5%) of the delinquent payment to reimburse Landlord for its cost and
inconvenience incurred as a consequence of Tenant's delinquency. In no event,
however, shall the charges permitted under this Section 5 or elsewhere
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in this Lease, to the extent they are considered to be interest under applicable
Law, exceed the maximum lawful rate of interest.
6. SECURITY DEPOSIT.
6.1 SECURITY DEPOSIT. Contemporaneously with the execution of this
Lease, Tenant shall pay to Landlord the Security Deposit, which shall be held by
Landlord to secure Tenant's performance of its obligations under this Lease. The
Security Deposit is not an advance payment of Rent or a measure or limit of
Landlord's damages upon an Event of Default (defined in Section 17). Landlord
may, from time to time following an Event of Default and without prejudice to
any other remedy, use all or a part of the Security Deposit to perform any
obligation Tenant fails to perform hereunder. Following any such application of
the Security Deposit, Tenant shall pay to Landlord on demand the amount so
applied in order to restore the Security Deposit to its original amount.
Provided that Tenant has performed all of its obligations hereunder, Landlord
shall, within thirty (30) days after the Term ends, return to Tenant the portion
of the Security Deposit which was not applied to satisfy Tenant's obligations.
The Security Deposit may be commingled with other funds, and no interest shall
be paid thereon. If Landlord transfers its interest in the Premises and the
transferee assumes Landlord's obligations under this Lease, then Landlord may
assign the Security Deposit to the transferee and Landlord thereafter shall have
no transfer liability for the return of the Security Deposit.
6.2 LETTER OF CREDIT. As additional security for Tenant's obligations
hereunder, concurrently with the execution of this Lease, Tenant shall deliver
to Landlord an irrevocable letter of credit as hereinafter described (the
"LETTER OF CREDIT"). The Letter of Credit shall (i) be an irrevocable standby
letter of credit, (ii) be issued by a reputable bank reasonably approved by
Landlord, (iii) name Landlord as beneficiary, (iv) be payable on sight draft
accompanied only by Landlord's statement that it is entitled to payment thereon
because an Event of Default under the Lease has occurred, (v) be for an initial
term of at least twelve (12) months and, subject to the terms set forth below,
shall be renewed each year thereafter to remain in effect during the entire
initial term of this Lease, and (vi) assure payment in the total amount of
$70,590.00. The following provisions shall govern the parties' rights and
obligations with respect to the Letter of Credit:
6.2.1 Landlord shall be entitled to recourse against the Letter
of Credit to recover any loss or damage it may suffer as a result of any breach
or default by Tenant under this Lease. Partial draws shall be permitted under
the Letter of Credit.
6.2.2 On each anniversary of the Commencement Date during the
initial term, provided an Event of Default has not occurred during the preceding
twelve (12) month period and Tenant's financial condition as of such anniversary
date is a net worth of at least three million dollars ($3,000,000.00) (defined
as Total Assets less Total Liabilities) and a current ratio of 2.0 (defined as
Total Current Assets divided by Total Current Liabilities, Landlord shall reduce
the required amount of the Letter of Credit by the sum of $23,530.00 each year
until the required amount of the Letter of Credit is reduced to $0.00. Subject
to the above, Tenant's failure to keep the Letter of Credit in effect during the
entire initial term of the Lease, or Tenant's failure
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to furnish written evidence to Landlord of the yearly renewal of the Letter of
Credit, shall be an Event of Default hereunder.
7. LANDLORD'S OBLIGATIONS.
7.1 SERVICES. Landlord shall use all reasonable efforts to furnish to
Tenant (1) water at those points of supply provided for general use of tenants
of the Building; (2) heated and refrigerated air conditioning ("HVAC") as
appropriate, at such temperatures and in such amounts as are standard for
comparable buildings in the vicinity of the Building; (3) janitorial service to
the Premises on weekdays, other than holidays, for Building standard
installations and such window washing as may from time to time be reasonably
required; (4) elevators for ingress and egress to the floor on which the
Premises are located, in common with other tenants, provided that Landlord may
reasonably limit the number of operating elevators during non-business hours and
holidays; and (5) electrical current during normal business hours for equipment
that does not require more than 110 volts and whose electrical energy
consumption does not exceed normal office usage. Landlord shall maintain the
common areas of the Building in reasonably good order and condition, except for
damage caused by a Tenant Party. If Tenant desires any of the services specified
in Section 7.1(2): (A) at any time other than between 7:30 a.m. and 6:00 p.m. on
weekdays, or (B) on Saturdays, Sundays or holidays observed by Landlord, then
such services shall be supplied to Tenant upon the written request of Tenant
delivered to Landlord before 3:00 p.m. on the business day preceding such extra
usage, and Tenant shall pay to Landlord the cost of such services within ten
(10) days after Landlord has delivered to Tenant an invoice therefor. The costs
incurred by Landlord in providing after-hour HVAC service to Tenant shall
include costs for electricity, water, sewage, water treatment, labor, metering,
filtering, and maintenance reasonably allocated by Landlord to providing such
service.
7.2 EXCESS UTILITIES. Landlord shall not be required to furnish
electrical current for equipment that requires more than 110 volts or other
equipment whose electrical energy consumption exceeds normal office usage. If
Tenant's requirements for or consumption of electricity exceed the electricity
to be provided by Landlord as described in Section 7.1, Landlord shall, at
Tenant's expense, make reasonable efforts to supply such service through the
then-existing feeders and risers serving the Building and the Premises, and
Tenant shall pay to Landlord the cost of such service within ten (10) days after
Landlord has delivered to Tenant an invoice therefor. Landlord may determine the
amount of such additional consumption and potential consumption by any
verifiable method, including installation of a separate meter in the Premises
installed, maintained, and read by Landlord, at Tenant's expense. Tenant shall
not install any electrical equipment requiring special wiring or requiring
voltage in excess of 110 volts or otherwise exceeding Building capacity unless
approved in advance by Landlord. The use of electricity in the Premises shall
not exceed the capacity of existing feeders and risers to or wiring in the
Premises. Any risers or wiring required to meet Tenant's excess electrical
requirements shall, upon Tenant's written request, be installed by Landlord, at
Tenant's cost, if, in Landlord's judgment, the same are necessary and shall not
cause permanent damage to the Building or the Premises, cause or create a
dangerous or hazardous condition, entail excessive or unreasonable alterations,
repairs, or expenses, or interfere with or disturb other tenants of the
Building. If Tenant uses machines or equipment in the Premises which affect the
temperature otherwise maintained by the air conditioning system or otherwise
overload any utility, Landlord
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may install supplemental air conditioning units or other supplemental equipment
in the Premises, and the cost thereof, including the cost of installation,
operation, use, and maintenance, shall be paid by Tenant to Landlord within ten
(10) days after Landlord has delivered to Tenant an invoice therefor.
7.3 RESTORATION OF SERVICES; ABATEMENT. Landlord shall use reasonable
efforts to restore any service required of it that becomes unavailable; however,
such unavailability shall not render Landlord liable for any damages caused
thereby, be a constructive eviction of Tenant, constitute a breach of any
implied warranty, or, except as provided in the next sentence, entitle Tenant to
my abatement of Tenant's obligations hereunder. If, however, Tenant is prevented
from using the Premises for more than twenty-five (25) consecutive business days
because of the unavailability of any such service and such unavailability was
not caused by a Tenant Party, then Tenant shall, as its exclusive remedy be
entitled to a reasonable abatement of Rent for each consecutive day (after such
twenty-five (25) day period) that Tenant is so prevented from using the
Premises.
8. IMPROVEMENTS; ALTERATIONS; REPAIRS; MAINTENANCE.
8.1 IMPROVEMENTS, ALTERATIONS. Improvements to the Premises shall be
installed at Tenant's expense only in accordance with plans and specifications
which have been previously submitted to and approved in writing by Landlord. No
alterations or physical additions in or to the Premises may be made without
Landlord's prior written consent, which shall not be unreasonably withheld or
delayed; however, Landlord may withhold its consent to any alteration or
addition that would affect the Building's structure or its HVAC, plumbing,
electrical, or mechanical systems. Tenant shall not paint or install lighting or
decorations, signs, window or door lettering, or advertising media of any type
on or about the Premises without the prior written consent of Landlord, which
shall not be unreasonably withheld or delayed; however, Landlord may withhold
its consent to any such painting or installation which would affect the
appearance of the exterior of the Build or of my common areas of the Building.
All alterations, additions, and improvements shall be constructed, maintained,
and used by Tenant, at its risk and expense, in accordance with all Laws;
Landlord's approval of the plans and specifications therefor shall not be a
representation by Landlord that such alterations, additions, or improvements
comply with my Law.
8.2 REPAIRS; MAINTENANCE. Tenant shall maintain the Premises in a
clean, safe, and operable condition, and shall not permit or allow to remain any
waste or damage to any portion of the Premises. Tenant shall repair or replace,
subject to Landlord's direction and supervision, any damage to the Building
caused by a Tenant Party. If Tenant fails to make such repairs or replacements
within fifteen (15) days after the occurrence of such damage, then Landlord may
make the same at Tenant's cost. If any such damage occurs outside of the
Premises, then Landlord may elect to repair such damage at Tenant's expense,
rather than having Tenant repair such damage. The cost of all repair or
replacement work performed by Landlord under this Section 8 shall be paid by
Tenant to Landlord within ten (10) days after Landlord has invoiced Tenant
therefor. Tenant hereby waives and releases its right to make repairs at
Landlord's expense under Sections 1941 and 1942 of the California Civil Code or
under any similar law, statute, or ordinance now or hereafter in effect.
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8.3 PERFORMANCE OF WORK. All work described in this Section 8 shall be
performed only by Landlord or by contractors and subcontractors approved in
writing by Landlord. Tenant shall cause all contractors and subcontractors to
procure and maintain insurance coverage naming Landlord as an additional insured
against such risks, in such amounts, and with such companies as Landlord may
reasonably require. All such work shall be performed in accordance with all Laws
and in a good and workmanlike manner so as not to damage the Building (including
the Premises, the structural elements, and the plumbing, electrical lines, or
other utility transmission facility). All such work which may affect the
Building's HVAC, electrical, plumbing, other mechanical systems, or structural
elements must be approved by the Building's engineer of record, at Tenant's
expense and, at Landlord's election, must be performed by Landlord's usual
contractor for such work.
8.4 MECHANIC'S LIENS. Tenant shall not permit any mechanic's liens to
be filed against the Premises or the Building for any work performed, materials
furnished, or obligation incurred by or at the request of Tenant. If such a lien
is filed, then Tenant shall, within ten (10) days after Landlord has delivered
notice of the filing thereof to Tenant, either pay the amount of the lien or
diligently contest such lien and deliver to Landlord a bond or other security
reasonably satisfactory to Landlord. If Tenant fails to timely take either such
action, then Landlord may pay the lien claim, and any amounts so paid, including
expenses and interest, shall be paid by Tenant to Landlord within ten (10) days
after Landlord has invoiced Tenant therefor.
9. USE. Tenant shall continuously occupy and use the Premises only for
the Permitted Use, and shall comply with all Laws relating to the use,
condition, access to, and occupancy of the Premises. The population density
within the Premises as a whole shall at no time exceed one person for each 300
rentable square feet in the Premises. Tenant shall not conduct second or third
shift operations within the Premises; however, Tenant may use the Premises after
normal business hours, so long as Tenant is not generally conducting business
from the Premises after normal business hours. The Premises shall not be used
for any use which is disreputable, creates extraordinary fire hazards, or
results in an increased rate of insurance on the Building or its contents, or
for the storage of any Hazardous Materials. If, because of a Tenant Party's
acts, the rate of insurance on the Building or its contents increases, then such
acts shall be an Event of Default, Tenant shall pay to Landlord the amount of
such increase on demand, and acceptance of such payment shall not waive any of
Landlord's other rights. Tenant shall conduct its business and control each
other Tenant Party so as not to create any nuisance or unreasonably interfere
with other tenants or Landlord in its management of the Building.
10. ASSIGNMENT AND SUBLETTING.
10.1 TRANSFERS. Except as provided in Section 10.7, Tenant shall
not, without the prior written consent of Landlord, (1) assign, transfer, or
encumber this Lease or any estate or interest herein, whether directly or by
operation of law, (2) permit any other entity to become Tenant hereunder by
merger, consolidation, or other reorganization, (3) if Tenant is an entity other
than a corporation whose stock is publicly traded, permit the transfer of an
ownership interest in Tenant so as to result in a change in the current control
of Tenant, (4) sublet any portion of the Premises, (5) grant any license,
concession, or other right of occupancy of any
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portion of the Premises, or (6) permit the use of the Premises by any parties
other than Tenant (any of the events listed in Sections 10.1(1) through 10.1(6)
being a "TRANSFER").
10.2 CONSENT STANDARDS. Landlord shall not unreasonably withhold
its consent to any assignment or subletting of the Premises, provided that the
proposed transferee is creditworthy, has a good reputation in the business
community, will use the Premises for the Permitted Use (thus, excluding, without
limitation uses for credit processing and telemarketing) and will not use the
Premises in any manner that would conflict with any exclusive use agreement or
other similar agreement entered into by Landlord with any other tenant of the
Building, is not a governmental entity, or subdivision or agency thereof, and is
not another occupant of the Building or person or entity with whom Landlord is
negotiating to lease space in the Building; otherwise, Landlord may withhold its
consent in its sole discretion.
10.3 REQUEST FOR CONSENT. If Tenant requests Landlord's consent
to a transfer, then Tenant shall provide Landlord with a written description of
all terms and conditions of the proposed Transfer, copies of the proposed
documentation, and the following information about the proposed transferee: name
and address; reasonably satisfactory information about its business and business
history; its proposed use of the Premises; banking, financial, and other credit
information; and general references sufficient to enable Landlord to determine
the proposed transferee's creditworthiness and character. Concurrently with
Tenant's notice of any request for consent to a Transfer, Tenant shall pay to
Landlord a fee of $750.00 to defray Landlord's expenses in reviewing such
request, and Tenant shall also reimburse Landlord immediately upon request for
its reasonable attorney's fees incurred in connection with considering any
request for consent to a Transfer.
10.4 CONDITIONS TO CONSENT. If Landlord consents to a proposed
Transfer, then the proposed transferee shall deliver to Landlord a written
agreement whereby it expressly assumes Tenant's obligations hereunder; however,
any transferee of less than all of the space in the Premises shall be liable
only for obligations under this Lease that are properly allocable to the space
subject to the Transfer for the period of the Transfer. No Transfer shall
release Tenant from its obligations under this Lease, but rather Tenant and its
transferee shall be jointly and severally liable therefore Landlord's consent to
any Transfer shall not waive Landlord's rights as to any subsequent Transfers.
If an Event of Default occurs while the Premises or any part thereof are subject
to a Transfer, then Landlord, in addition to its other remedies, may collect
directly from such transferee all rents becoming due to Tenant and apply such
rents against Rent. Tenant authorizes its transferees to make payments of rent
directly to Landlord upon receipt of notice from Landlord to do so. Tenant shall
pay for the cost of any demising walls or other improvements necessitated by a
proposed subletting or assignment.
10.5 CANCELLATION. Landlord may, within thirty (30) days after
submission of Tenant's written request for Landlord's consent to an assignment
or subletting, cancel this Lease as to the portion of the Premises proposed to
be sublet or assigned as of the date the proposed Transfer is to be effective.
If Landlord cancels this Lease as to any portion of the Premises, then this
Lease shall cease for such portion of the Premises and Tenant shall pay to
Landlord all Rent accrued through the cancellation date relating to the portion
of the Premises covered by the
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proposed Transfer. Thereafter, Landlord may lease such portion of the Premises
to the prospective transferee (or to any other person) without liability to
Tenant.
10.6 ADDITIONAL COMPENSATION. Tenant shall pay to Landlord,
immediately upon receipt thereof, one-half of the excess of (1) all compensation
received by Tenant for a Transfer less the costs reasonably incurred by Tenant
with unaffiliated third parties in connection with such Transfer (i.e.,
brokerage commissions, tenant finish work, and the like) over (2) the Rent
allocable to the portion of the Premises covered thereby.
10.7 PERMITTED TRANSFERS. Notwithstanding Section 10.1, Tenant
may Transfer all or part of its interest in this Lease or all or part of the
Premises (a "PERMITTED TRANSFERS") to the following types of entities (a
"PERMITTED TRANSFEREE") without the written consent of Landlord:
10.7.1 An Affiliate of Tenant;
10.7.2 Any corporation, limited partnership, limited liability
partnership, limited liability company or other business entity in which or with
which Tenant, or its corporate successors or assigns, is merged or consolidated,
in accordance with applicable statutory provisions governing merger and
consolidation of business entities, so long as (A) Tenant's obligations
hereunder are assumed by the entity surviving such merger or created by such
consolidation; and (B) the Tangible Net Worth of the surviving or created entity
is not less than the Tangible Net Worth of Tenant as of the date hereof; or
10.7.3 Any corporation, limited partnership, limited liability
partnership, limited liability company or other business entity acquiring all or
substantially all of Tenant's assets if such entity's Tangible Net Worth after
such acquisition is not less than the Tangible Net Worth of Tenant as of the
date hereof.
Tenant shall promptly notify Landlord of any such Permitted Transfer. Tenant
shall remain liable for the performance of all of the obligations of Tenant
hereunder, or if Tenant no longer exists because of a merger, consolidation, or
acquisition, the surviving or acquiring entity shall expressly assume in writing
the obligations of Tenant hereunder. Additionally, the Permitted Transferee
shall comply with all of the terms and conditions of this Lease, including the
Permitted Use, and the use of the Premises by the Permitted Transferee may not
violate any other agreements affecting the Premises, the Building, Landlord or
other tenants of the Building. At least thirty (30) days after the effective
date of any Permitted Transfer, Tenant agrees to furnish Landlord with copies of
the instrument effecting any of the foregoing Transfers and documentation
establishing Tenant's satisfaction of the requirements set forth above
applicable to any such Transfer. The occurrence of a Permitted Transfer shall
not waive Landlord's rights as to any subsequent Transfers. "TANGIBLE NET WORTH"
means the excess of total assets over total liabilities, in each case as
determined in accordance with generally accepted accounting principles
consistently applied ("GAAP"), excluding, however, from the determination of
total assets all assets which would be classified as intangible assets under
GAAP including, without limitation, goodwill, licenses, patents, trademarks,
trade names, copyrights, and franchises. Any
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subsequent Transfer by a Permitted Transferee shall be subject to Landlord's
prior written consent (which Landlord may grant or deny in its sole discretion).
11. INSURANCE, WAIVERS; SUBROGATION; INDEMNITY.
11.1 INSURANCE. Tenant shall maintain throughout the Term the
following insurance policies: (1) commercial general liability insurance in
amounts of $3,000,000.00 per occurrence, or such other amounts as Landlord may
from time to time reasonably require, insuring Tenant, Landlord, Landlord's
agents and their respective Affiliates against all liability for injury to or
death of a person or persons or damage to property arising from the use and
occupancy of the Premises; (2) insurance covering the full value of Tenant's
property and improvements, and other property (including property of others) in
the Premises; (3) contractual liability insurance sufficient to cover Tenant's
indemnity obligations hereunder (but only if such contractual liability
insurance is not already included in Tenant's commercial general liability
insurance policy); (4) worker's compensation insurance, containing a waiver of
subrogation endorsement acceptable to Landlord; and (5) business interruption
insurance. Tenant's insurance shall provide primary coverage to Landlord when
any policy issued to Landlord provides duplicate or similar coverage, and in
such circumstance Landlord's policy will be excess over Tenant's policy. Tenant
shall furnish to Landlord certificates of such insurance and such other evidence
satisfactory to Landlord of the maintenance of all insurance coverages required
hereunder, and Tenant shall obtain a written obligation on the part of each
insurance company to notify Landlord at least thirty (30) days before
cancellation or a material change of any such insurance policies. All such
insurance policies shall be in form, and issued by companies, reasonably
satisfactory to Landlord.
11.2 WAIVER OF NEGLIGENCE; NO SUBROGATION. Landlord and Tenant each
waives any claim it might have against the other for any injury to or death of
any person or persons or damage to or theft, destruction, loss, or loss of use
of any property (a "LOSS"), to the extent the same is insured against under any
insurance policy that covers the Building, the Premises, Landlord's or Tenant's
fixtures, personal property, leasehold improvements, or business, or, in the
case of Tenant's waiver, is required to be insured against under the terms
hereof, regardless of whether the negligence of the other party caused such
Loss; however, Landlord's waiver shall not include any deductible amounts on
insurance policies carried by Landlord. Each party shall cause its insurance
carrier to endorse all applicable policies waiving the carrier's rights of
recovery under subrogation or otherwise against the other party.
11.3 INDEMNITY. Subject to Section 11.2, Tenant shall defend,
protect, indemnify, and hold harmless Landlord and its representatives and
agents from and against all claims, demands, liabilities, causes of action,
suits, judgments, damages, and expenses (including attorney fees) arising from
(1) any Loss arising from any occurrence on the Premises (other than any Loss
arising out of a breach of Tenant's obligations under Section 25.21, which shall
be subject to the indemnity in such section), or (2) Tenant's failure to perform
its obligations under this Lease, even though caused or alleged to be caused by
the negligence or fault of Landlord or its agents (other than a Loss arising
from the sole or gross negligence of Landlord or its agents), and even though
any such claim, cause of action, or suit is based upon or alleged to be based
upon the strict liability of Landlord or its agents. This indemnity is intended
to indemnify
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Landlord and its agents against the consequences of their own negligence when
Landlord or its agents are jointly, comparatively, contributively, or
concurrently negligent with Tenant. This indemnity provision shall survive
termination or expiration of this Lease. If any proceeding is filed for which
indemnity is required hereunder, Tenant agrees, upon request therefor, to defend
the indemnified party in such proceeding at its sole cost utilizing counsel
satisfactory to the indemnified party.
12. SUBORDINATION; ATTORNMENT; NOTICE TO LANDLORD'S MORTGAGEE.
12.1 SUBORDINATION. This Lease shall be subordinate to any deed of
trust, mortgage, or other security instrument, or any ground lease, master
lease, or primary lease, that now or hereafter covers all or any part of the
Premises (the mortgagee under any such mortgage or the lessor under any such
lease is referred to herein as a "LANDLORD'S MORTGAGEE"). Any Landlord's
Mortgagee may elect, at any time, unilaterally, to make this Lease superior to
its mortgage, ground lease, or other interest in the Premises by so notifying
Tenant in writing.
12.2 ATTORNMENT. Tenant shall attorn to any party succeeding to
Landlord's interest in the Premises, whether by purchase, foreclosure, deed in
lieu of foreclosure, power of sale, termination of lease, or otherwise, upon
such party's request, and shall execute such agreements confirming such
attornment as such party may reasonably request.
12.3 NOTICE TO LANDLORD'S MORTGAGEE. Tenant shall not seek to
enforce any remedy it may have for any default on the part of Landlord without
first giving written notice by certified mail, return receipt requested,
specifying the default in reasonable detail, to any Landlord's Mortgagee whose
address has been given to Tenant, and affording such Landlord's Mortgagee a
reasonable opportunity to perform Landlord's obligations hereunder.
12.4 LANDLORD'S MORTGAGEE'S PROTECTION PROVISIONS. If Landlord's
Mortgagee shall succeed to the interest of Landlord under this Lease, Landlord's
Mortgagee shall not be: (1) liable for any act or omission of any prior lessor
(including Landlord); (2) bound by any rent or additional rent or advance rent
which Tenant might have paid for more than the current month to any prior lessor
(including Landlord), and all such rent shall remain due and owing,
notwithstanding such advance payment; (3) bound by any security or advance
rental deposit made by Tenant which is not delivered or paid over to Landlord's
Mortgagee and with respect to which Tenant shall look solely to Landlord for
refund or reimbursement; (4) bound by any termination, amendment or modification
of this Lease made without Landlord's Mortgagee's consent and written approval,
except for those terminations, amendments and modifications permitted to be made
by Landlord without Landlord's Mortgagee's consent pursuant to the terms of the
loan documents between Landlord and Landlord's Mortgagee; (5) subject to the
defenses which Tenant might have against any prior lessor (including Landlord);
and (6) subject to the offsets which Tenant might have against any prior lessor
(including Landlord) except for those offset rights which (A) are expressly
provided in this Lease, (B) relate to periods of time following the acquisition
of the Building by Landlord's Mortgagee, and (C) Tenant has provided written
notice to Landlord's Mortgagee and provided Landlord's Mortgagee a reasonable
opportunity to cure the event giving rise to such offset event. Landlord's
Mortgagee shall have no liability or responsibility under or pursuant to the
terms of this Lease or otherwise after it
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ceases to own an interest in the Building. Nothing in this Lease shall be
construed to require Landlord's Mortgagee to see to the application of the
proceeds of any loan, and Tenant's agreements set forth herein shall not be
impaired on account of any modification of the documents evidencing and securing
any loan.
13. RULES AND REGULATIONS. Tenant shall comply with the rules and
regulations of the Building which are attached hereto as Exhibit C. Landlord
may, from time to time, change such rules and regulations for the safety, care,
or cleanliness of the Building and related Facilities, provided that such
changes are applicable to all tenants of the Building and will not unreasonably
interfere with Tenant's use of the Premises. Tenant shall be responsible for the
compliance with such rules and regulations by each Tenant Party.
14. CONDEMNATION.
14.1 TOTAL TAKING. If the entire Building or Premises are taken by
right of eminent domain or conveyed in lieu thereof (a "TAKING"), this Lease
shall terminate as of the date of the Taking.
14.2 PARTIAL TAKING-TENANT'S RIGHTS. If any part of the Building
becomes subject to a Taking and such Tenant will prevent Tenant from conducting
its business in the Premises in a manner reasonably comparable to that conducted
immediately before such Taking for a period of more than one hundred eighty
(180) days, then Tenant may terminate this Lease as of the date of such Taking
by giving written notice to Landlord within thirty (30) days after the Taking,
and Rent shall be apportioned as of the date of such Taking. If Tenant does not
terminate this Lease, then Rent shall be abated on a reasonable basis as to that
portion of the Premises rendered untenantable by the Taking.
14.3 PARTIAL TAKING-LANDLORD'S RIGHTS. If any material portion, but
less than all, of the Building becomes subject to a Taking, or if Landlord is
required to pay any of the proceeds received for a Taking to a Landlord's
Mortgagee, then Landlord may terminate this Lease by delivering written notice
thereof to Tenant within thirty (30) days after such Taking, and Rent shall be
apportioned as of the date of such Taking. If Landlord does not so terminate
this Lease, then this Lease will continue, but if any portion of the Premises
has been taken, Rent shall abate as provided in the last sentence of Section
14.2. Tenant hereby waives any and all rights it might otherwise have pursuant
to Section 1265.130 of The California Code of Civil Procedure.
14.4 AWARD. If any Taking occurs, then Landlord shall receive the
entire award or other compensation for the land on which the Building is
situated, the Building, and other improvements taken, and Tenant may separately
pursue a claim (to the extent it will not reduce Landlord's award) against the
condemnor for the value of Tenant's personal property which Tenant is entitled
to remove under this Lease, moving costs and loss of business.
15. FIRE OR OTHER CASUALTY.
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15.1 REPAIR ESTIMATE. If the Premises or the Building are damaged
by fire or other casualty (a "CASUALTY"), Landlord shall, within ninety (90)
days after such Casualty, deliver to Tenant a good faith estimate (the "DAMAGE
NOTICE") of the time needed to repair the damage caused by such Casualty.
15.2 LANDLORD'S AND TENANT'S RIGHTS. If a material portion of the
Premises or the Building is damaged by Casualty such that Tenant is prevented
from conducting its business in the Premises in a manner reasonably comparable
to that conducted immediately before such Casualty and Landlord estimates that
the damage caused thereby cannot be repaired within two hundred seventy (270)
days after the Casualty, then Tenant may terminate this Lease by delivering
written notice to Landlord of its election to terminate within thirty (30) days
after the Damage Notice has been delivered to Tenant. If Tenant does not so
timely terminate this Lease, then (subject to Section 15.3) Landlord shall
repair the Building or the Premises, as the case may be, as provided below, and
Rent for the portion of the Premises rendered untenantable by the damage shall
be abated on a reasonable basis from the date of damage until the completion of
the repair, unless a Tenant Party caused such damage, in which case, Tenant
shall continue to pay Rent without abatement.
15.3 LANDLORD'S RIGHTS. If a Casualty damages a material portion of
the Building, and Landlord makes a good faith determination that restoring the
Premises would be uneconomical, or if Landlord is required to pay any insurance
proceeds arising out of the Casualty to a Landlord's Mortgagee, then Landlord
may terminate this Lease by giving written notice of its election to terminate
within thirty (30) days after the Damage Notice has been delivered to Tenant,
and Basic Rent and Additional Rent shall be abated as of the date of the
Casualty.
15.4 REPAIR OBLIGATION. If neither party elects to terminate this
Lease following a Casualty, then Landlord shall, within a reasonable time after
such Casualty, begin to repair the Building and the Premises and shall proceed
with reasonable diligence to restore the Building and Premises to substantially
the same condition as they existed immediately before such Casualty; however,
Landlord shall not be required to repair or replace any of the furniture,
equipment, fixtures, and other improvements which may have been placed by, or at
the request of, Tenant or other occupants in the Building or the Premises, and
Landlord's obligation to repair or restore the Building or Premises shall be
limited to the extent of the insurance proceeds actually received by Landlord
for the Casualty in question.
15.5 WAIVER OF STATUTORY PROVISIONS. The provisions of this Lease,
including this Article 15, constitute an express agreement between Landlord and
Tenant with respect to any and all damage to, or destruction of, all or any part
of the Premises or the Building and any statute or regulation of the State of
California, including, without limitation, Sections 1932(2) and 1933(4) of the
California Civil Code, with respect to any rights or obligations concerning
damage or destruction in the absence of an express agreement between the
parties, and any other statute or regulation, now or hereafter in effect, shall
have no application to this Lease or any damage or destruction to all or any
part of the Premises or the Building.
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16. PERSONAL PROPERTY TAXES. Tenant shall be liable for all taxes
levied or assessed against personal property, furniture, or fixtures placed by
Tenant in the Premises. If any taxes for which Tenant is liable are levied or
assessed against Landlord or Landlord's property and Landlord elects to pay the
same, or if the assessed value of Landlord's property is increased by inclusion
of such personal property, furniture or fixtures and Landlord elects to pay the
taxes based on such increase, then Tenant shall pay to Landlord, upon demand,
the part of such taxes for which Tenant is primarily liable hereunder; however,
Landlord shall not pay such amount if Tenant notifies Landlord that it will
contest the validity or amount of such taxes before Landlord makes such payment,
and thereafter diligently proceeds with such contest in accordance with law and
if the nonpayment thereof does not pose a threat of loss or seizure of the
Building or interest of Landlord therein or impose any fee or penalty against
Landlord.
17. EVENTS OF DEFAULT. Each of the following occurrences shall be an
"EVENT OF DEFAULT":
17.1 Tenant fails to pay Rent within five (5) days after Landlord
has delivered notice to Tenant that the same is due (any such notice shall be in
lieu of, and not in addition to, any notice required under California Code of
Civil Procedure Section 1161 or any similar or successor law); however, an Event
of Default shall occur hereunder without any obligation of Landlord to give any
notice if Landlord has given Tenant written notice under this Section 17.1 on
more than one occasion during the twelve (12) month interval preceding such
failure by Tenant;
17.2 Tenant (1) abandons or vacates the Premises or any substantial
portion thereof, or (2) fails to continuously operate its business in the
Premises;
17.3 Tenant fails to comply with the Permitted Use set forth herein
and such failure continues for a period of five (5) days after Landlord has
delivered to Tenant written notice thereof,
17.4 Tenant fails to provide any estoppel certificate within the
time period required under Section 25.5 and such failure continues for five (5)
days after written notice thereof from Landlord to Tenant;
17.5 Tenant fails to perform, comply with, or observe any other
agreement or obligation of Tenant under this Lease and such failure continues
for a period of more than thirty (30) days after Landlord has delivered to
Tenant written notice thereof (any such notice shall be in lieu of, and not in
addition to, any notice required under California Code of Civil Procedure
Section 1161 or any similar or successor law); and
17.6 The filing of a petition by or against Tenant (the term
"TENANT" shall include, for the purpose of this Section 17.6, any guarantor of
Tenant's obligations hereunder) (1) in any bankruptcy or other insolvency
proceeding; (2) seeking any relief under any state or federal debtor relief law;
(3) for the appointment of a liquidator or receiver for all or substantially all
of Tenant's property or for Tenant's interest in this Lease; or (4) for the
reorganization or modification of Tenant's capital structure; however, if such a
petition is filed against Tenant,
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then such filing shall not be an Event of Default unless Tenant fails to have
the proceedings initiated by such petition dismissed within ninety (90) days
after the filing thereof.
18. REMEDIES. Upon any Event of Default Landlord may, in addition to
all other rights and remedies afforded Landlord hereunder or by law or equity,
take any of the following actions, each and all of which shall be cumulative and
nonexclusive, without notice or demand whatsoever:
18.1 TERMINATION. Terminate this Lease, in which event Tenant shall
immediately surrender the Premises to Landlord, and if Tenant fails to do so,
Landlord may, without prejudice to any other remedy which it may have for
possession or arrearages in rent, enter upon and take possession of the Premises
and expel or remove Tenant and any other person who may be occupying the
Premises or any part thereof, without being liable for prosecution or any claim
or damages therefor; and Landlord may recover from Tenant the following:
18.1.1 The worth at the time of award of any unpaid rent which
has been earned at the time of such termination; plus
18.1.2 The worth at the time of award of the amount by which
the unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided; plus
18.1.3 The worth at the time of award of the amount by which
the unpaid rent for the balance of the Lease Term after the time of award
exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided; plus
18.1.4 Any other amount necessary to compensate Landlord for
all the detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, specifically including, but not limited to,
brokerage commissions and advertising expenses incurred, expenses of remodeling
the Premises or any portion thereof for a new tenant, whether for the same or a
different use, and any special concessions made to obtain a new tenant; and
18.1.5 At Landlord's election, such other amounts in addition
to or in lieu of the foregoing as may be permitted from time to time by
applicable law.
The Term "rent" as used in this Section 18.1 shall be deemed to be
and to mean all sums of every nature required to be paid by Tenant, pursuant to
the terms of this Lease, whether to Landlord or to others. As used in Sections
18.1.1 and 18.1.2 above, the "worth at the time of award" shall be computed by
allowing interest at the Interest Rate set forth in Section 5 of this Lease, but
in no case greater than the maximum amount of such interest permitted by law. As
used in Section 18.1.3 above, the "worth at the time of award" shall be computed
by discounting such amount at the discount rate of the Federal Reserve Bank of
San Francisco at the time of award plus one percent (1%).
18.2 ENFORCEMENT OF LEASE. Landlord shall have the remedy described
in California Civil Code Section 1951.4 (lessor may continue lease in effect
after lessee's breach
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and abandonment and recover rent as it becomes due, if lessee has the right to
sublet or assign, subject only to reasonable limitations). Accordingly, Landlord
may, from time to time, without terminating this Lease, enforce all of its
rights and remedies under this Lease, including the right to recover all rent as
it becomes due.
18.3 SUBLESSEES OF TENANT. Whether or not Landlord elects to
terminate this Lease on account of any default by Tenant, as set forth in this
Section 18, Landlord shall have the right to terminate any and all subleases,
licenses, concessions or other consensual arrangements for possession entered
into by Tenant and affecting the Premises or may, in Landlord's sole discretion,
succeed to Tenant's interest in such subleases, licenses, concessions or
arrangements. In the event of Landlord's election to succeed to Tenant's
interest in any such subleases, licenses, concessions or arrangements, Tenant
shall, as of the date of notice by Landlord of such election, have no further
right to or interest in the rent or other consideration receivable thereunder.
18.4 EFFORTS TO RELET. For the purposes of this Section 18,
Tenant's right to possession shall not be deemed to have been terminated by
efforts of Landlord to relet the Premises, by its acts of maintenance or
preservation with respect to the Premises, or by appointment of a receiver to
protect Landlord's interests hereunder. The foregoing enumeration is not
exhaustive, but merely illustrative of acts which may be performed by Landlord
without terminating Tenant's right to possession.
19. PAYMENT BY TENANT; NON-WAIVER.
19.1 PAYMENT BY TENANT. Upon any Event of Default, Tenant shall pay
to Landlord all costs incurred by Landlord (including court costs and reasonable
attorney fees and expenses) in (1) obtaining possession of the Premises, (2)
removing and storing Tenant's or any other occupant's property, (3) repairing,
restoring, altering, remodeling, or otherwise putting the Premises into
condition acceptable to a new tenant, (4) performing Tenant's obligations which
Tenant failed to perform, and (5) enforcing, or advising Landlord of, its
rights, remedies, and recourses arising out of the Event of Default. To the full
extent permitted by law, Landlord and Tenant agree the federal and state courts
of the state in which the Premises are located shall have exclusive jurisdiction
over any matter relating to or arising from this Lease and the parties' rights
and obligations under this Lease.
19.2 NO WAIVER. Landlord's acceptance of Rent following an Event of
Default shall not waive Landlord's rights regarding such Event of Default. No
waiver by Landlord of any violation or breach of any of the terms contained
herein shall waive Landlord's rights regarding any future violation of such
term. Landlord's acceptance of any partial payment of Rent shall not waive
Landlord's rights with regard to the remaining portion of the Rent that is due,
regardless of any endorsement or other statement on any instrument delivered in
payment of Rent or any writing delivered in connection therewith; accordingly,
Landlord's acceptance of a partial payment of Rent shall not constitute an
accord and satisfaction of the full amount of the Rent that is due.
20. LANDLORD'S LIEN. In addition to the statutory landlord's lien,
Tenant grants to Landlord, to secure performance of Tenant's obligations
hereunder, a security interest in all
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goods (including equipment and inventory), fixtures, and other personal property
of Tenant situated on the Premises, and all proceeds thereof (the "COLLATERAL"),
and the Collateral shall not be removed from the Premises without the prior
written consent of Landlord (other than in Tenant's ordinary course of business)
until all obligations of Tenant have been fully performed. Upon the occurrence
of an Event of Default, Landlord may, in addition to all other remedies, without
notice or demand except as provided below, exercise the rights afforded to a
secured party under the Uniform Commercial Code of the state in which the
Premises are located (the "UCC"). To the extent the UCC requires Landlord to
give to Tenant notice of any act or event and such notice cannot be validly
waived before a default occurs, then five (5) days' prior written notice thereof
shall be reasonable notice of the act or event. Tenant grants to Landlord a
power of attorney to execute and file any financing statement or other
instrument necessary to perfect Landlord's security interest under this Section
20, which power is coupled with an interest and is irrevocable during the Term.
Landlord may also file a copy of this Lease as a financing statement to perfect
its security interest in the Collateral.
21. SURRENDER OF PREMISES. No act by Landlord shall be deemed an
acceptance of a surrender of the Premises, and no agreement to accept a
surrender of the Premises shall be valid unless it is in writing and signed by
Landlord. At the expiration or termination of this Lease, Tenant shall deliver
to Landlord the Premises with all improvements located therein in good repair
and condition, free of Hazardous Materials placed on the Premises during the
Term, broom-clean, reasonable wear and tear (and condemnation and Casualty
damage not caused by Tenant, as to which Sections 14 and 15 shall control)
excepted, and shall deliver to Landlord all keys to the Premises. Provided that
Tenant has performed all of its obligations hereunder, Tenant may remove all
unattached trade fixtures, furniture, and personal property placed in the
Premises or elsewhere in the Building by Tenant (but Tenant may not remove any
such item which was paid for, in whole or in part, by Landlord or any wiring or
cabling unless Landlord requires such removal). Additionally, at Landlord's
option, Tenant shall remove such alterations, additions, improvements, trade
fixtures, personal property, equipment, wiring, cabling, and furniture as
Landlord may request; however, Tenant shall not be required to remove any
addition or improvement to the Premises if Landlord has specifically agreed in
writing that the improvement or addition in question need not be removed. Tenant
shall repair all damage caused by such removal. All items not so removed shall,
at Landlord's option, be deemed to have been abandoned by Tenant and may be
appropriated, sold, stored, destroyed, or otherwise disposed of by Landlord
without notice to Tenant and without any obligation to account for such items;
any such disposition shall not be considered a strict foreclosure or other
exercise of Landlord's rights in respect of the security interest granted under
Section 20. The provisions of this Section 21 shall survive the end of the Term.
22. HOLDING OVER. If Tenant fails to vacate the Premises at the end of
the Term, then Tenant shall be a tenant at will and, in addition to all other
damages and remedies to which Landlord may be entitled for such holding over,
Tenant shall pay, in addition to the other Rent, a daily Basic Rent equal to the
greater of (a) one hundred fifty percent (150%) of the daily Basic Rent payable
during the last month of the Term, or (b) one hundred twenty-five percent (125%)
of the prevailing rental rate in the Building for similar space. The provisions
of this Section 22 shall not be deemed to limit or constitute a waiver of any
other rights or remedies of Landlord provided herein or at law. If Tenant fails
to surrender the Premises upon the termination or
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expiration of this Lease, in addition to any other liabilities to Landlord
accruing therefrom, Tenant shall protect, defend, indemnify and hold Landlord
harmless from all loss, costs (including reasonable attorney fees) and liability
resulting from such failure, including, without limiting the generality of the
foregoing, any claims made by any succeeding tenant founded upon such failure to
surrender, and any lost profits to Landlord resulting therefrom.
23. CERTAIN RIGHTS RESERVED BY LANDLORD. Provided that the exercise of
such rights does not unreasonably interfere with Tenant's occupancy of the
Premises, Landlord shall have the following rights:
23.1 To decorate and to make inspections, repairs, alterations,
additions, changes, or improvements, whether structural or otherwise, in and
about the Building, or any part thereof, to enter upon the Premises (after
giving Tenant reasonable notice thereof, which may be oral notice, except in
cases of real or apparent emergency, in which case no notice shall be required)
and, during the continuance of any such work, to temporarily close doors,
entryways, public space, and corridors in the Building; to interrupt or
temporarily suspend Building services and facilities; to change the name of the
Building; and to change the arrangement and location of entrances or
passageways, doors, and doorways, corridors, elevators, stairs, restrooms, or
other public parts of the Building;
23.2 To take such reasonable measures as Landlord deems advisable
for the security of the Building and its occupants; evacuating the Building for
cause, suspected cause, or for drill purposes; temporarily denying access to the
Building; and closing the Building after normal business hours and on Sundays
and holidays, subject, however, to Tenant's right to enter when the Building is
closed after normal business hours under such reasonable regulations as Landlord
may prescribe from time to time; and
23.3 To enter the Premises at reasonable hours to show the Premises
to prospective purchasers, lenders, or, during the last twelve (12) months of
the Term, tenants.
24. SUBSTITUTION SPACE. Landlord may, at Landlord's expense, relocate
Tenant within the Building to space which is comparable in size, utility and
condition to the Premises. If Landlord relocates Tenant, Landlord shall
reimburse Tenant for Tenant's reasonable out-of-pocket expenses for moving
Tenant's furniture, equipment, and supplies from the Premises to the relocation
space and for reprinting Tenant's stationery of the same quality and quantity as
Tenant's stationery supply on hand immediately before Landlord's notice to
Tenant of the exercise of this relocation right. Upon such relocation, the
relocation space shall be deemed to be the Premises and the terms of the Lease
shall remain in full force and shall apply to the relocation space.
25. MISCELLANEOUS.
25.1 LANDLORD TRANSFER. Landlord may transfer any portion of the
Building and any of its rights under this Lease. If Landlord assigns its rights
under this Lease, then Landlord shall thereby be released from any further
obligations hereunder arising after the date of transfer, provided that the
assignee assumes Landlord's obligations hereunder in writing.
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25.2 LANDLORD'S LIABILITY. The liability of Landlord to Tenant for
any default by Landlord under the terms of this Lease shall be limited to
Tenant's actual direct, but not consequential, damages therefor and shall be
recoverable only from the interest of Landlord in the Building, and neither
Landlord nor its partners shall be personally liable for any deficiency. This
Section shall not limit any remedies which Tenant may have for Landlord's
defaults which do not involve the personal liability of Landlord.
25.3 FORCE MAJEURE. Other than for Tenant's obligations under this
Lease that can be performed by the payment of money (e.g., payment of Rent and
maintenance of insurance), whenever a period of time is herein prescribed for
action to be taken by either party hereto, such party shall not be liable or
responsible for, and there shall be excluded from the computation of any such
period of time, any delays due to strikes, riots, acts of God, shortages of
labor or materials, war, governmental laws, regulations, or restrictions, or any
other causes of any kind whatsoever which are beyond the control of such party.
25.4 BROKERAGE. Neither Landlord nor Tenant has dealt with any
broker or agent in connection with the negotiation or execution of this Lease,
other than Landlord's Broker (CPS, The Commercial Property Services Company-M.
McSwain/M. White), and Tenant's Broker (Cornish & Carey-C. Sahadi/D. Hunter/J.
Rodgers), whose commission shall be paid by Landlord pursuant to a separate
agreement. Tenant and Landlord shall each indemnify the other against all costs,
expenses, attorney fees, and other liability for commissions or other
compensation claimed by any broker or agent claiming the same by, through, or
under the indemnifying party.
25.5 ESTOPPEL CERTIFICATES. From time to time, Tenant shall furnish
to any party designated by Landlord, within ten (10) days after Landlord has
made a request therefor, a certificate signed by Tenant confirming and
containing such factual certifications and representations as to this Lease as
Landlord may reasonably request. Unless otherwise required by Landlord's
Mortgagee or a prospective purchaser or mortgagee of the Building, the initial
form of estoppel certificate to be signed by tenant is attached hereto as
Exhibit F.
25.6 NOTICES. All notices and other communications given pursuant
to this Lease shall be in writing and shall be (1) mailed by first class, United
States Mail, postage prepaid, certified, with return receipt requested, and
addressed to the parties hereto at the address specified in the Basic Lease
Information, (2) hand delivered to the intended address, (3) sent by a
nationally recognized overnight courier service, or (4) sent by facsimile
transmission during normal business hours followed by a confirmatory letter sent
in another manner permitted hereunder. All notices shall be effective upon
delivery to the address of the addressee. The parties hereto may change their
addresses by giving notice thereof to the other in conformity with this
provision.
25.7 SEPARABILITY. If any clause or provision of this Lease is
illegal, invalid, or unenforceable under present or future laws, then the
remainder of this Lease shall not be affected thereby and in lieu of such clause
or provision, there shall be added as a part of this Lease a clause or provision
as similar in terms to such illegal, invalid, or unenforceable clause or
provision as may be possible and be legal, valid, and enforceable.
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25.8 AMENDMENTS, AND BINDING EFFECT. This Lease may not be amended
except by instrument in writing signed by Landlord and Tenant. No provision of
this Lease shall be deemed to have been waived by Landlord unless such waiver is
in writing signed by Landlord, and no custom or practice which may evolve
between the parties in the administration of the terms hereof shall waive or
diminish the right of Landlord to insist upon the performance by Tenant in
strict accordance with the terms hereof. The terms and conditions contained in
this Lease shall inure to the benefit of and be binding upon the parties hereto,
and upon their respective successors in interest and legal representatives,
except as otherwise herein expressly provided. This Lease is for the sole
benefit of Landlord and Tenant, and, other than Landlord's Mortgagee, no third
party shall be deemed a third party beneficiary hereof
25.9 QUIET ENJOYMENT. Provided Tenant has performed all of its
obligations hereunder, Tenant shall peaceably and quietly hold and enjoy the
Premises for the Term, without hindrance from Landlord or any party claiming by,
through, or under Landlord, but not otherwise, subject to the terms and
conditions of this Lease.
25.10 NO MERGER. There shall be no merger of the leasehold estate
hereby created with the fee estate in the Premises or any part thereof if the
same person acquires or holds, directly or indirectly, this Lease or any
interest in this Lease and the fee estate in the leasehold Premises or any
interest in such fee estate.
25.11 NO OFFER. The submission of this Lease to Tenant shall not be
construed as an offer, and Tenant shall not have any rights under this Lease
unless Landlord executes a copy of this Lease and delivers it to Tenant.
25.12 ENTIRE AGREEMENT. This Lease constitutes the entire agreement
between Landlord and Tenant regarding the subject matter hereof and supersedes
all oral statements and prior writings relating thereto. Except for those set
forth in this Lease, no representations, warranties, or agreements have been
made by Landlord or Tenant to the other with respect to this Lease or the
obligations of Landlord or Tenant in connection therewith. The normal rule of
construction that any ambiguities be resolved against the drafting party shall
not apply to the interpretation of this Lease or any exhibits or amendments
hereto.
25.13 WAIVER OF JURY TRIAL. To the maximum extent permitted by law,
Landlord and Tenant each waive right to trial by jury in any litigation arising
out of or with respect to this Lease.
25.14 GOVERNING LAW. This Lease shall be governed by and construed
in accordance with the laws of the State in which the Premises are located.
25.15 JOINT AND SEVERAL LIABILITY. If Tenant is comprised of more
than one party, each such party shall be jointly and severally liable for
Tenant's obligations under this Lease.
25.16 FINANCIAL REPORTS. Within fifteen (15) days after Landlord's
request, Tenant will furnish Tenant's most recent audited financial statements
(including any notes to
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them) to Landlord, or, if no such audited statements have been prepared, such
other financial statements (and notes to them) as may have been prepared by an
independent certified public accountant or, failing those, Tenant's internally
prepared financial statements. If Tenant is a publicly traded corporation,
Tenant may satisfy its obligations hereunder by providing to Landlord Tenant's
most recent annual and quarterly reports. Tenant will discuss its financial
statements with Landlord and will give Landlord access to Tenant's books and
records in order to enable Landlord to verify the financial statements. Landlord
will not disclose any aspect of Tenant's financial statements that Tenant
designates to Landlord as confidential except (1) to Landlord's Mortgagee or
prospective purchasers of the Building, (2) in litigation between Landlord and
Tenant, or (3) if required by court order. Tenant shall not be required to
deliver the financial statements required under this Section 25.16 more than
once in any twelve (12) month period unless requested by Landlord's Mortgagee or
a prospective buyer or lender of the Building or an Event of Default occurs.
25.17 LANDLORD'S FEES. Whenever Tenant requests Landlord to take
any action not required of it hereunder or give any consent required or
permitted under this Lease, Tenant will reimburse Landlord for Landlord's
reasonable, out-of-pocket costs payable to third parties and incurred by
Landlord in reviewing the proposed action or consent, including without
limitation reasonable attorney, engineers' or architects' fees, within ten (10)
days after Landlord's delivery to Tenant of a statement of such costs. Tenant
will be obligated to make such reimbursement without regard to whether Landlord
consents to any such proposed action.
25.18 ATTORNEY FEES. In the event that either Landlord or Tenant
should bring suit for the possession of the Premises, for the recovery of any
sum due under this Lease, or because of the breach of any provision of this
Lease or for any other relief against the other, then all costs and expenses,
including reasonable attorney fees, incurred by the prevailing party therein
shall be paid by the other party, which obligation on the part of the other
party shall be deemed to have accrued on the date of the commencement of such
action and shall be enforceable whether or not the action is prosecuted to
judgment.
25.19 TELECOMMUNICATIONS. Tenant and its telecommunications
companies, including but not limited to local exchange telecommunications
companies and alternative access vendor services companies shall have no right
of access to and within the Building, for the installation and operation of
telecommunications systems including but not limited to voice, video, data, and
any other telecommunications services provided over wire, fiber optic,
microwave, wireless, and any other transmission systems, for part or all of
Tenant's telecommunications within the Building and from the Building to any
other location without Landlord's prior written consent.
25.20 CONFIDENTIALITY. Tenant acknowledges that the terms and
conditions of this Lease are to remain confidential for Landlord's benefit, and
may not be disclosed by Tenant to anyone, by any manner or means, directly or
indirectly, without Landlord's prior written consent. The consent by Landlord to
any disclosures shall not be deemed to be a waiver on the part of Landlord of
any prohibition against any future disclosure.
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25.21 HAZARDOUS MATERIALS. The term "HAZARDOUS MATERIALS" means any
substance, material, or waste which is now or hereafter classified or considered
to be hazardous, toxic, or dangerous under any Law relating to pollution or the
protection or regulation of human health, natural resources or the environment,
or poses or threatens to pose a hazard to the health or safety of persons on the
Premises or in the Building. Tenant shall not use, generate, store, or dispose
of, or permit the use, generation, storage or disposal of Hazardous Materials on
or about the Premises or the Building except in a manner and quantity necessary
for the ordinary performance of Tenant's business, and then in compliance with
all Laws. If Tenant breaches its obligations under this Section 25.21, Landlord
may immediately take any and all action reasonably appropriate to remedy the
same, including taking all appropriate action to clean up or remediate any
contamination resulting from Tenant's use, generation, storage or disposal of
Hazardous Materials. Tenant shall protect, defend, indemnify and hold harmless
Landlord and its representatives and agents from and against any and all claims,
demands, liabilities, causes of action, suits, judgments, damages and expenses
(including reasonable attorney fees and cost of clean up and remediation)
arising from Tenant's failure to comply with the provisions of this Section
25.21. This indemnity provision shall survive termination or expiration of the
Lease.
25.22 SIGNAGE. Tenant shall not erect or maintain any temporary or
permanent sign on or about the Premises or the Building or visible from the
exterior without obtaining prior written approval from Landlord, which may be
granted or withheld in Landlord's sole and absolute discretion. Any request for
approval of a sign shall be made in such detail as Landlord shall request. All
signs, whether erected by Landlord or Tenant, shall conform to Landlord's
building standard signage and to all laws, ordinances, rules, regulations,
permits, covenants, conditions, restrictions, and easements pertaining to signs.
In the event of a violation of the foregoing by Tenant, Landlord may remove same
without any liability, and may charge the expense incurred in such removal to
Tenant. Tenant shall remove all approved signs which it has erected upon the
termination of the Lease and repair all damage caused by such removal.
25.23 PARKING. Tenant shall have the right to rent eighteen (18)
undesignated parking spaces in the parking garage/area associated with the
Building (the "PARKING AREA") during the initial term at such rates and subject
to such terms, conditions and regulations as are from time to time charged or
applicable to patrons of the Parking Area. If, for any reason, Tenant is unable
to use all or any portion of the parking spaces to which it is entitled
hereunder, then Tenant's obligation to pay for such spaces shall be abated for
so long as Tenant does not have the use thereof; this abatement shall be in full
settlement of all claims that Tenant might otherwise have against Landlord
because of Landlord's failure or inability to provide Tenant with such parking
spares.
25.24 LIST OF EXHIBITS. All exhibits and attachments attached
hereto are incorporated herein by this reference.
Exhibit A Outline of Premises
Exhibit B Legal Description of Building
Exhibit C Building Rules and Regulations
Exhibit D Tenant Finish-Work
Exhibit E Amendment No. 1
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<PAGE> 33
Exhibit F Form of Tenant Estoppel Certificate
Exhibit G Depiction of Offer Space
26. RENEWAL OPTION.
26.1 GRANT OF OPTIONS. Provided no Event of Default exists and
Tenant is occupying the entire Premises at the time of such election, Tenant may
renew this Lease for one (1) additional period of forty-eight (48) months, by
delivering written notice of the exercise thereof to Landlord not earlier than
nine (9) months nor later than six (6) months before the expiration of the
initial term.
26.2 BASIC RENT. The Basic Rent payable for each month during such
extended Term shall be the prevailing rental rate (the "PREVAILING RENTAL
RATE"), at the commencement of such extended Term, for renewals of space of
equivalent quality, size, utility and location, with the length of the extended
Term and the credit standing of Tenant to be taken into account. Within thirty
(30) days after receipt of Tenant's notice to renew, Landlord shall deliver to
Tenant written notice of the Prevailing Rental Rate and shall advise Tenant of
the required adjustment to Basic Rent, if any, and the other terms and
conditions offered. Tenant shall, within ten (10) days after receipt of
Landlord's notice, notify Landlord in writing whether Tenant accepts or rejects
Landlord's determination of the Prevailing Rental Rate. If Tenant timely
notifies Landlord that Tenant accepts Landlord's determination of the Prevailing
Rental Rate, then, on or before the commencement date of the extended Term,
Landlord and Tenant shall execute an amendment to this Lease extending the Term
on the same terms provided in this Lease, except as follows:
(a) Basic Rent shall be adjusted to the Prevailing Rental
Rate;
(b) Tenant shall have no further renewal option unless
expressly granted by Landlord in writing; and
(c) Landlord shall lease to Tenant the Premises in their
then-current condition, and Landlord shall not provide to Tenant any
allowances (e.g., moving allowance, construction allowance, and the
like) or other tenant inducements.
If Tenant rejects Landlord's determination of the Prevailing Rental
Rate, or fails to timely notify Landlord in writing that Tenant accepts or
rejects Landlord's determination of the Prevailing Rental Rate, time being of
the essence with respect thereto, Tenant's rights under this Section 26 shall
terminate and Tenant shall have no right to renew this Lease.
26.3 TERMINATION OF OPTION. Tenant's rights under this Section 26
shall terminate if (1) this Lease or Tenant's night to possession of the
Premises is terminated, (2) Tenant assigns any of its interest in this Lease or
sublets any portion of the Premises, (3) Tenant fails to timely exercise its
option under this Section 26, time being of the essence with respect to Tenant's
exercise thereof, or (4) Landlord determines, in its sole but reasonable
discretion, that Tenant's financial condition or creditworthiness has materially
deteriorated since the date of this Lease.
-23-
<PAGE> 34
27. RIGHT OF FIRST OFFER.
27.1 DEFINITIONS. As used herein:
27.1.1 "AVAILABLE FOR LEASE" means, with respect to any First
Right Space, that Landlord is prepared to offer such First Right Space for lease
in the general leasing market, regardless of the proposed commencement date of
such lease.
27.1.2 "FIRST RIGHT SPACE" means the space located on that
portion of the thirteenth (13th) floor of the Building shown cross hatched on
Exhibit G.
27.2 FIRST RIGHT SPACE. Provided that this Lease is in full force
and Tenant is not in default hereunder, and subject to any options, rights of
first refusal or rights of first offer already in existence as of the date of
full execution of this Lease and to Section 27.3, if, during the Term, any First
Right Space shall become Available for Lease, Landlord shall, prior to offering
such First Right Space to any other person, deliver to Tenant a notice (a "FIRST
RIGHT AVAILABILITY NOTICE") (a) stating that Landlord intends to offer such
First Right Space for lease and (b) describing such First Right Space and the
material business terms at which Landlord intends to market such space. If
Tenant shall deliver to Landlord a notice (a "TENANT'S INTEREST NOTICE") that it
desires to engage in negotiations with Landlord regarding the leasing of such
First Right Space within four (4) business days after receipt of the First Right
Availability Notice, then for fifteen (15) days (the "NEGOTIATION PERIOD") after
Tenant so notifies Landlord, Landlord shall negotiate exclusively with Tenant to
enter into a lease or a lease amendment under which Landlord would lease such
First Right Space to Tenant; provided, however, that neither Tenant nor Landlord
shall have any obligation to agree to any provision or term with respect to such
lease or lease amendment. If Tenant does not timely deliver to Landlord a
Tenant's Interest Notice in response to a First Right Availability Notice in
accordance with this Section 27.2, or if an agreement for the leasing of such
First Right Space is not executed and delivered by Landlord and Tenant within
the Negotiation Period, time being of the essence, then (i) Tenant shall have
waived and relinquished its rights under this Section 27.2 with respect to the
First Right Space described in such First Right Availability Notice, and (ii)
Landlord shall at any time thereafter be entitled to offer, show, market and
lease such First Right Space to all others selected by Landlord at such rental
rates and upon such terms as Landlord in its sole discretion may desire.
27.3 MISCELLANEOUS. Notwithstanding any provision of this Section
27 to the contrary, Tenant shall have no right to give a Tenant's Interest
Notice on any date on which Tenant (a) is in default under this Lease beyond any
applicable grace, notice and cure period, or (b) has assigned any of its
interest in this Lease or sublet any portion of the Premises. At any time when
Tenant (1) is so in default under this Lease, or (ii) has assigned or sublet any
portion of the Premises, Landlord may cancel a Tenant's Interest Notice by
notice to Tenant, and on and after the date of such notice to Tenant, Tenant
shall have no rights, and Landlord shall have no obligations, under this Section
27 with respect to the First Right Space.
27.4 NO EXTENSION. The period of time within which Tenant may
exercise the Right of First Offer granted in this Section 27 shall not be
extended or enlarged by reason of
-24-
<PAGE> 35
Tenant's inability to exercise such Right of First Offer because of the
provisions of Section 27.3 above.
27.5 TERMINATION. The expiration or termination of this Lease shall
automatically terminate Tenant's Right of First Offer with respect to the First
Right Space.
LANDLORD AND TENANT EXPRESSLY DISCLAIM ANY IMPLIED WARRANTY THAT THE PREMISES
ARE SUITABLE FOR TENANT'S INTENDED COMMERCIAL PURPOSE, AND TENANT'S OBLIGATION
TO PAY RENT HEREUNDER IS NOT DEPENDENT UPON THE CONDITION OF THE PREMISES OR THE
PERFORMANCE BY LANDLORD OF ITS OBLIGATIONS HEREUNDER, AND, EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED HEREIN, TENANT SHALL CONTINUE TO PAY THE RENT, WITHOUT
ABATEMENT, SETOFF OR DEDUCTION, NOTWITHSTANDING ANY BREACH BY LANDLORD OF ITS
DUTIES OR OBLIGATIONS HEREUNDER, WHETHER EXPRESS OR IMPLIED.
Dated as of the date first above written.
TENANT: SYNCHRONICITY, INC., a Massachusetts
corporation
By: _________________________________
Name: _______________________________
Title: ______________________________
By: _________________________________
Name: _______________________________
Title: ______________________________
LANDLORD: W9/PHC REAL ESTATE LIMITED
PARTNERSHIP, a Delaware limited
partnership
By: W9/PHC GEN PAR, INC., a Delaware
corporation, General Partner
By: _________________________________
Name: Howard Stern
Title: Assistant Vice President
-25-
<PAGE> 36
EXHIBIT A
OUTLINE OF PREMISES
<PAGE> 37
EXHIBIT B
LEGAL DESCRIPTION OF BUILDING
PARCEL ONE:
PARCEL A, AS SHOWN ON THAT CERTAIN PARCEL MAP FILED IN THE OFFICE OF THE
RECORDER OF THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA ON MAY 7, 1985 IN
BOOK 542 OF MAPS, AT PAGES 46 AND 47.
PARCEL TWO:
A NON-EXCLUSIVE EASEMENT FOR INGRESS AND EGRESS OVER PARCEL C, AS SHOWN ON THAT
CERTAIN PARCEL MAP FILED IN THE OFFICE OF THE RECORDER OF THE COUNTY OF SANTA
CLARA, STATE OF CALIFORNIA ON MAY 7, 1985 IN BOOK 542 OF MAPS, AT PAGE 46
AND 47.
<PAGE> 38
EXHIBIT C
BUILDING RULES AND REGULATIONS
The following rules and regulations shall apply to the Premises, the
Building, the parking garage associated therewith, and the appurtenances
thereto:
1. Sidewalks, doorways, vestibules, halls, stairways, and other similar
areas shall not be obstructed by tenants or used by any tenant for purposes
other than ingress and egress to and from their respective leased premises and
for going from one to another part of the Building.
2. Plumbing, fixtures and appliances shall be used only for the
purposes for which designed, and no sweepings, rubbish, rags or other unsuitable
material shall be thrown or deposited therein. Damage resulting to any such
fixtures or appliances from misuse by a tenant or its agents, employees or
invitees, shall be paid by such tenant.
3. No signs, advertisements or notices shall be painted or affixed on
or to any windows or doors or other part of the Building without the prior
written consent of Landlord. No nails, hooks or screws shall be driven or
inserted in any part of the Building except by Building maintenance personnel.
No curtains or other window treatments shall be placed between the glass and the
Building standard window treatments.
4. Landlord shall provide and maintain an alphabetical directory for
all tenants in the main lobby of the Building.
5. Landlord shall provide all door locks in each tenant's leased
premises, at the cost of such tenant, and no tenant shall place any additional
door locks in its leased premises without Landlord's prior written consent.
Landlord shall furnish to each tenant a reasonable number of keys to such
tenant's leased premises, at such tenant's cost, and no tenant shall make a
duplicate thereof.
6. Movement in or out of the Building of furniture or office equipment,
or dispatch or receipt by tenants of any bulky material, merchandise or
materials which require use of elevators or stairways, or movement through the
Building entrances or lobby shall be conducted under Landlord's supervision at
such times and in such a manner as Landlord may reasonably require. Each tenant
assumes all risks of and shall be liable for all damage to articles moved and
injury to persons or public engaged or not engaged in such movement, including
equipment, property and personnel of Landlord if damaged or injured as a result
of acts in connection with carrying out this service for such tenant.
7. Landlord may prescribe weight limitations and determine the
locations for safes and other heavy equipment or items, which shall in all cases
be placed in the Building so as to distribute weight in a manner acceptable to
Landlord which may include the use of such supporting devices as Landlord may
require. All damages to the Building caused by the installation or removal of
any property of a tenant, or done by a tenant's property while in the Building,
shall be repaired at the expense of such tenant.
<PAGE> 39
8. Corridor doors, when not in use, shall be kept closed. Nothing shall
be swept or thrown into the corridors, halls, elevator shafts or stairways. No
birds or animals shall be brought into or kept in, on or about any tenant's
leased premises. No portion of any tenant's leased premises shall at any time be
used or occupied as sleeping or lodging quarters.
9. Tenant shall cooperate with Landlord's employees in keeping its
leased premises neat and clean. Tenants shall not employ any person for the
purpose of such cleaning other than the Building's cleaning and maintenance
personnel.
10. To ensure orderly operation of the Building, no ice, mineral or
other water, towels, newspapers, etc. shall be delivered to any leased area
except by persons approved by Landlord.
11. Tenant shall not make or permit any vibration or improper,
objectionable or unpleasant noises or odors in the Building or otherwise
interfere in any way with other tenants or persons having business with them.
12. No machinery of any kind (other than normal office equipment) shall
be operated by any tenant on its leased area without Landlord's prior written
consent, nor shall any tenant use or keep in the Building any flammable or
explosive fluid or substance.
13. Landlord will not be responsible for lost or stolen personal
property, money or jewelry from tenant's leased premises or public or common
areas regardless of whether such loss occurs when the area is locked against
entry or not.
14. No vending or dispensing machines of any kind may be maintained in
any leased premises without the prior written permission of Landlord.
15. Tenant shall not conduct any activity on or about the Premises or
Building which will draw pickets, demonstrators, or the like.
16. All vehicles are to be currently licensed, in good operating
condition, parked for business purposes having to do with Tenant's business
operated in the Premises, parked within designated parking spaces, one vehicle
to each space. No vehicle shall be parked as a "billboard" vehicle in the
parking lot. Any vehicle parked improperly may be towed away. Tenant, Tenant's
agents, employees, vendors and customers who do not operate or park their
vehicles as required shall subject the vehicle to being towed at the expense of
the owner or driver. Landlord may place a "boot" on the vehicle to immobilize it
and may levy a charge of $50.00 to remove the "boot." Tenant shall indemnify,
hold and save harmless Landlord of any liability arising from the towing or
booting of any vehicles belonging to a Tenant Party.
17. No tenant may enter into phone rooms, electrical rooms, mechanical
rooms, or other service areas of the Building unless accompanied by Landlord or
the Building manager.
<PAGE> 40
EXHIBIT D
TENANT FINISH-WORK; ALLOWANCE
[LANDLORD PERFORMS THE WORK]
1. Except as set forth in this Exhibit, Tenant accepts the Premises in
their "AS-IS" condition on the date that this Lease is entered into.
2. On or before the date which is fifteen (15) days following the date
on which this Lease is fully executed by both Landlord and Tenant, Landlord
shall engage a design consultant (whose fee shall be included in the Total
Construction Cost [defined below]) to prepare final working drawings of all
improvements to be installed in the Premises and deliver the same to Tenant for
its review and approval (which approval shall not be unreasonably withheld,
delayed or conditioned). Tenant shall notify Landlord whether it approves of the
submitted working drawings within three (3) business days after Landlord's
submission thereof. If Tenant disapproves of such working drawings, then Tenant
shall notify Landlord thereof specifying in reasonable detail the reasons for
such disapproval, in which case Landlord shall, within three (3) business days
after such notice, revise such working drawings in accordance with Tenant's
objections and submit to Tenant for its review and approval. Tenant shall notify
Landlord in writing whether it approves of the resubmitted working drawings
within one business day after its receipt thereof. This process shall be
repeated until the working drawings have been finally approved by Landlord and
Tenant. If Tenant fails to notify Landlord that it disapproves of the initial
working drawings within three (3) business days (or, in the case of resubmitted
working drawings, within one business day) after the submission thereof, then
Tenant shall be deemed to have approved the working drawings in question. Any
delay caused by Tenant's unreasonable withholding of its consent or delay in
giving its written approval as to such working drawings shall constitute Tenant
Delay Day (defined below). To the extent that such working drawings also require
Landlord's approval, Landlord shall also approve such working drawings within
three (3) business days after the architect's submission of such working
drawings to Landlord. Further, if any of Tenant's proposed construction work
will affect the Building's HVAC, electrical, mechanical, or plumbing systems,
then the working drawings pertaining thereto must be approved by the Building's
engineer of record. Landlord's approval of such working drawings shall not be
unreasonably withheld, provided that (a) they comply with all Laws, (b) such
working drawings are sufficiently detailed to allow construction of the
improvements in a good and workmanlike manner, and (e) the improvements depicted
thereon conform to the rules and regulations promulgated from time to time by
Landlord for the construction of tenant improvements (a copy of which has been
delivered to Tenant). As used herein, "WORKING DRAWINGS" shall mean the final
working drawings approved by Landlord, as amended from time to time by any
approved changes thereto, and "WORK" shall mean all improvements to be
constructed in accordance with and as indicated on the Working Drawings,
together with any work required by governmental authorities to be made to other
areas of the Building as a result of the improvements indicated by the Working
Drawings. Landlord's approval of the Working Drawings shall not be a
representation or warranty of Landlord that such drawings are adequate for any
use or comply with any Law, but shall merely be the consent of Landlord thereto.
Tenant shall, at Landlord's request, sign the Working Drawings to evidence its
review and approval
<PAGE> 41
thereof. All changes in the Work must receive the prior written approval of
Landlord, and in the event of any such approved change Tenant shall, upon
completion of the Work, furnish Landlord with an accurate, reproducible
"as-built" plan of the improvements as constructed. After the Working Drawings
have been approved, Landlord shall cause the Work to be performed in accordance
with the Working Drawings.
3. The Work shall be performed only by contractors and subcontractors
approved in writing by Landlord, which approval shall not be unreasonably
withheld. All contractors and subcontractors shall be required to procure and
maintain insurance against such risks, in such amounts, and with such companies
as Landlord may reasonably require. Certificates of such insurance, with paid
receipts therefor, must be received by Landlord before the Work is commenced.
The Work shall be performed in a good and workmanlike manner free of defects,
shall conform strictly with the Working Drawings, and shall be performed in such
a manner and at such times as and not to interfere with or delay Landlord's
other contractors, the operation of the Building, and the occupancy thereof by
other tenants. All contractors and subcontractors shall contact Landlord and
schedule time periods during which they may use Building facilities in
connection with the Work (e.g., elevators, excess electricity, etc.).
4. If a delay in the performance of the Work occurs (a) because of any
change by Tenant to the space plans or Working Drawings, (b) because of any
specification by Tenant of materials or installations in addition to or other
than Landlord's standard finish-out materials, or (c) if Tenant or Tenant's
agents otherwise delays completion of the Work, then, notwithstanding any
provision to the contrary in this Lease, Tenant's obligation to pay Rent
hereunder shall commence on the scheduled Commencement Date (each day of delay
caused by any such event shall be a "TENANT DELAY DAY"). If the Premises are not
ready for occupancy and the Work is not substantially completed (as reasonably
determined by Landlord) on the scheduled Commencement Date for any reason other
than the reasons specified in the immediately preceding sentence, then the
obligations of Landlord and Tenant shall continue in full force and Rent shall
be abated until the date the Work is substantially completed less the number of
Tenant Delay Days, which date shall be the Commencement Date.
5. The entire cost of performing the Work (including, without
limitation, design of the Work and preparation of the Working Drawings, costs of
construction labor and materials, electrical usage during construction,
additional janitorial services, general tenant signage, related taxes and
insurance costs, and the construction supervision fee referenced in Section 7 of
this Exhibit, all of which costs are herein collectively called the "TOTAL
CONSTRUCTION COSTS") in excess of the Construction Allowance (hereinafter
defined) shall be paid by Tenant. Upon approval of the Working Drawings and
selection of a contractor, Tenant shall promptly (a) execute a work order
agreement prepared by Landlord which identifies such drawings and itemizes the
Total Construction Costs and sets forth the Construction Allowance, and (b) pay
to Landlord fifty percent (50%) of the amount by which Total Construction Costs
exceed the Construction Allowance; upon substantial completion of the Work,
Tenant shall pay to Landlord an amount equal to the Total Construction Costs (as
adjusted for any approved changes to the Work), less (1) the amount of the
advance payment already made by Tenant, and (2) the amount of the Construction
Allowance.
<PAGE> 42
6. For Work completed in the first six (6) months following the
Commencement Date only, Landlord shall provide to Tenant a construction
allowance (the "CONSTRUCTION ALLOWANCE") equal to the lesser of (a) $5.00 per
rentable square foot in the Premises (not to exceed $35,330.00), or (b) the
Total Construction Costs, as adjusted for any approved changes to the Work;
however, if Tenant or its agent is managing the performance of the Work, then
Tenant shall not become entitled to full credit for the Construction Allowance
until the Work has been substantially completed and Tenant has caused to be
delivered to Landlord (1) all invoices from contractors, subcontractors, and
suppliers evidencing the cost of performing the Work, together with lien waivers
from such parties, and a consent of the surety to the finished Work (if
applicable) and (2) a certificate of occupancy from the appropriate governmental
authority, if applicable to the Work, or evidence of governmental inspection and
approval of the Work. Landlord shall have no obligation to pay the Construction
Allowance to Tenant for any portion of the Work completed after the date which
is six (6) months after the Commencement Date, and Tenant shall present all such
invoices, lien waivers and a certificate of occupancy, if applicable, before
such six (6) month date in order for same to be eligible for payment from the
Construction Allowance.
7. Landlord or its affiliate or agent shall supervise the Work, make
disbursements required to be made to the contractor, and act as a liaison
between the contractor and Tenant and coordinate the relationship between the
Work, the Building, and the Building's systems. In consideration for Landlord's
construction supervision services, Tenant shall pay to Landlord a construction
supervision fee equal to five percent (5%) of the Total Construction Costs.
8. To the extent not inconsistent with this Exhibit, Section 8.1 of
this Lease shall govern the performance of the Work and Landlord's and Tenant's
respective rights and obligations regarding the improvements installed pursuant
thereto.
<PAGE> 43
EXHIBIT E
AMENDMENT NO. 1
This Amendment No. 1 (this "AMENDMENT") is executed as of
_______________, 200_ between W9/PHC REAL ESTATE LIMITED PARTNERSHIP, a Delaware
limited partnership ("LANDLORD"), and SYNCHRONICITY, INC., a Massachusetts
corporation ("TENANT"), for the purpose of amending the Lease Agreement between
Landlord and Tenant dated November 18, 1998 (the "LEASE"). Capitalized terms
used herein but not defined shall be given the meanings assigned to them in the
Lease.
AGREEMENTS
For valuable consideration, whose receipt and sufficiency are
acknowledged, Landlord and Tenant agree as follows:
1. CONDITION OF PREMISES. Tenant has accepted possession of the
Premises pursuant to the Lease. Any improvements required by the terms of the
Lease to be made by Landlord have been completed to the full and complete
satisfaction of Tenant in all respects except for the punch list items described
on EXHIBIT A hereto (the "PUNCH LIST ITEMS"), and except for such Punch List
Items, Landlord has fulfilled all of its duties under the Lease with respect to
such initial tenant improvements. Furthermore, Tenant acknowledges that the
Premises are suitable for the Permitted Use.
2. COMMENCEMENT DATE. The Commencement Date of the Lease is
________________, 200_. If the Commencement Date set forth in the Lease is
different than the date set forth in the preceding sentence, then the
Commencement Date as contained in the Lease is amended to be the Commencement
Date set forth in the preceding sentence.
3. EXPIRATION DATE. The Term is scheduled to expire on
________________, 200_. If the scheduled expiration date of the initial Term as
set forth in the Lease is different than the date set forth in the preceding
sentence, then the scheduled expiration date as set forth in the Lease is hereby
amended to the expiration date set forth in the preceding sentence.
4. CONTACT NUMBERS. Tenant's telephone number in the Premises is
__________. Tenant's telecopy number in the Premises is ___________.
5. RATIFICATION. Tenant hereby ratifies and confirms its obligations
under the Lease, and represents and warrants to Landlord that it has no defenses
thereto. Additionally, Tenant further confirms and ratifies that, as of the date
hereof, the Lease is and remains in good standing and in full force and effect,
and Tenant has no claims, counterclaims, setoffs or defenses against Landlord
arising out of the Lease or in any way relating thereto or arising out of any
other transaction between Landlord and Tenant.
6. BINDING EFFECT; GOVERNING LAW. Except as modified hereby, the Lease
shall remain in full effect and this Amendment shall be binding upon Landlord
and Tenant and their
<PAGE> 44
respective successors and assigns. If any inconsistency exists or arises between
the terms of this Amendment and the terms of the Lease, the terms of this
Amendment shall prevail. This Amendment shall be governed by the laws of the
State in which the Premises is located.
7. COUNTERPARTS. This Amendment may be executed in multiple
counterparts, each of which shall constitute an original, but all of which shall
constitute one document.
Executed as of the date first written above.
TENANT: SYNCHRONICITY, INC., a Massachusetts
corporation
By: ___________________________________
Name: _________________________________
Title: ________________________________
By: ___________________________________
Name: _________________________________
Title: ________________________________
LANDLORD: W9/PHC REAL ESTATE LIMITED PARTNERSHIP,
a Delaware limited partnership
By: W9/PHC GEN-PAR, INC., a Delaware
corporation, General Partner
By: ___________________________________
Name: Nancy M. Haag
Title: Assistant Vice President
<PAGE> 45
EXHIBIT A TO AMENDMENT NO. 1
PUNCH LIST ITEMS
<PAGE> 46
EXHIBIT F
FORM OF TENANT ESTOPPEL CERTIFICATE
The undersigned is the Tenant under the Lease (Defined below) between
W9/PHC REAL ESTATE LIMITED PARTNERSHIP, a Delaware limited partnership, as
Landlord, and the undersigned as Tenant, for the Premises on the thirteenth
floor of the office building located at 160 West Santa Clara Street, San Jose,
California, 95113, and commonly known as 160 West Santa Clara Street, and hereby
certifies as follows:
1. The Lease consists of the original Lease Agreement dates as of
November 18, 1998 between Tenant and Landlord and the following amendments or
modifications thereto (if none, please state "none"):__________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
The documents listed above are herein collectively referred to as the "LEASE"
and represent the entire agreement between the parties with respect to the
Premises. All capitalized terms used herein but not defined shall be given the
meaning assigned to them in the Lease.
2. The Lease is in full force and effect and has not been modified,
supplemented or amended in any way except as provided in Section 1 above.
3. The Term commenced on __________________, 199_ and the Term expires,
excluding any renewal options, on _____________, 200_, and Tenant has no option
to purchase all or any part of the Premises or the Building or, except as
expressly set forth in the Lease, any option to terminate or cancel the Lease.
4. Tenant currently occupies the Premises described in the Lease and
Tenant has not transferred, assigned, or sublet any portion of the Premises nor
entered into any license or concession agreements with respect thereto except as
follows (if none, please state "none"): _______________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
5. All monthly installments of Basic Rent and Additional Rent has been
paid with due through ______________. The current monthly installment of Basic
Rent is $________.
6. All conditions of the Lease to be performed by Landlord necessary to
the enforceability of the Lease have been satisfied and Landlord is not in
default thereunder. In addition, Tenant has not delivered any notice to Landlord
regarding a default by Landlord thereunder.
7. As of the date hereof, there are no existing defenses or offsets,
or, to the undersigned's knowledge, claims or any basis for a claim, that the
undersigned has against
<PAGE> 47
Landlord and no event has occurred and no condition exists, which, with the
giving of notice or the passage of time, or both, will constitute a default
under the Lease.
8. No rental has been paid more than thirty (30) days in advance and no
security deposit has been delivered to Landlord except as provided in the Lease.
9. If Tenant is a corporation, partnership or other business entity,
each individual executing this Estoppel Certificate on behalf of Tenant hereby
represents and warrants that Tenant is a duly formed and existing entity
qualified to do business in the state in which the Premises is located and that
Tenant has full right and authority to execute and deliver this Estoppel
Certificate and that each person signing on behalf of Tenant is authorized to do
so.
<PAGE> 48
EXHIBIT G
DEPICTION OF OFFER SPACE
<PAGE> 1
Exhibit 10.13
LEASE
THIS LEASE AGREEMENT, dated 03 November 98 by and between Koger Equity, Inc., a
Florida Corporation ("Landlord") with its principal office at 8880 Freedom
Crossing Trail, Jacksonville, FL 32256, and Synchronicity, Inc., a Corporation
organized and existing under the laws of the State of Ma. ("Tenant") with its
principal office at 201 Forest St., Marlborough, MA 01752.
1. BASIC LEASE PROVISIONS
A. DESCRIPTION OF PREMISES
Suite Number 185
Building Name Laurel
Address: 3504 Lake Lynda Drive
County: Orange
City Orlando
State/Zip: Florida 32803
Center: Koger Ctr. University
B. PRINCIPAL LEASE TERMS
Lease Term (Months) 36
Commencement Date: 01 January 99
Expiration Date: 31 December 01
Monthly Base Rent: $2326.57
Sales or Use Taxes: $139.59
Total: $2466.16
Security Deposit: $2466.16
C. LEASED AREA
Approximately 1534 rentable square feet.
(Includes Tenant's share of common area.)
D. ADDRESS FOR PAYMENT OF RENT AND SECURITY DEPOSITS:
Payee: Koger Equity, Inc.
Address: Post Office Box 860502
City/State/Zip: Orlando, FL 32886-0502
Tenant Account # 0139 (note on remittance)
E. ADDRESSES FOR NOTICES
Tenant: Synchronicity, Inc.
201 Forest St.
Marlborough, MA 01752
Tenant Fed. I.D./SSN: 04-329-4799
Landlord: Koger Equity, Inc.
930 Woodcock Road
Suite 127
Orlando, FL 32802
Landlord Fed. I.D.: 59-289805-45
With a copy to: Koger Equity, Inc.
Attn: President
8880 Freedom Crossing Tr.
Jacksonville, FL 32256
The provisions contained in Sections 2 through 36, inclusive, which
appear after the signature lines below, are a part of this Lease and are
incorporated in this Lease by reference. The Tenant and the Landlord have
executed or caused to be executed this Lease on the dates shown below their
signatures, to be effective as of the date set forth above.
Tenant: Synchronicity, Inc.
By: (SEAL)
-----------------------------------------------------------
Print Name
----------------------------------------------------
Title:
--------------------------------------------------------
Attest:
Print Name
Landlord: Koger Equity, Inc.
By: (SEAL)
-----------------------------------------------------------
Print Name Thomas C. McGeachy
Title: Divisional Vice President
Attest:
Print Name Thomas C. McGeachy
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Title:
(Corporate Seal)
Date:
Signed and sealed in the presence of:
(1)
Print Name:
(2)
Print Name:
As to Tenant
Title: Divisional Vice President
(Corporate Seal)
Date:
Signed and sealed in the presence of:
(1)
Print Name:
(2)
Print Name:
As to Landlord
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<PAGE> 3
LEASE PROVISIONS INCORPORATED BY REFERENCE
2. LEASE OF PREMISES: The Landlord hereby leases to the Tenant and the
Tenant hereby takes from the Landlord the premises (the "Premises") which
include the Suite(s) shown and described on Exhibit "A", together with any other
parts of the Building used exclusively by Tenant, which Premises are or will be
contained in the office building (the "Building") located at the address stated
in Section 1A, under the terms and conditions contained in this Lease. For the
purposes of this lease, "Property" shall mean the property referred to at the
street address in Section 1A which is more specifically described in the legal
description maintained in the Landlord's records. For this purposes of this
lease, "Center" shall mean the Koger Center referred to in Section 1A.
3. TERM: The term of this Lease (the "Term") shall commence on the date
(the "Commencement Date") which is the earlier to occur of the date stated in
Section 1B, or the date the Tenant first occupies all or part of the Premises.
The Term shall expire on the date (the "Expiration Date") stated in Section 1B
unless sooner terminated as otherwise provided in this Lease or unless extended
pursuant to Section 27 or other extension provisions contained herein.
4. USE AND POSSESSION: The Tenant covenants and agrees that the
Premises are to be used by the Tenant for general office purposes and for no
other purposes without the prior written consent of the Landlord. The Tenant
shall not occupy or use the Premises or permit the use or occupancy of the
Premises for any purpose or in any manner which: (a) is unlawful or is in
violation of any applicable legal, government or quasi-governmental requirement,
ordinance, rule or code; (b) may be dangerous to persons or property; (c) may
invalidate any insurance policy held by the Landlord or increase the amount of
premiums for any insurance policy affecting the Building or the Property (if any
additional amounts of insurance premiums are so incurred, the Tenant shall pay
the Landlord the additional amounts on demand as Additional Rent, provided that
such payment shall not authorize such use); (d) may create a nuisance or disturb
any other tenant of the Building or the occupants of neighboring Property or
injure the reputation of the Building or the Center; and (e) violates the "Rules
and Regulations" of the Building as may from time to time be adopted by
Landlord, or any restriction of record. The Tenant agrees that Tenant shall be
responsible for any costs incurred by Landlord by reason of Tenant's misuse of
the Premises or the Building and common areas, including without limitation any
damages incurred by Tenant in moving into or out of the Premises. If any costs
are so incurred by Landlord, the Tenant shall pay the Landlord such costs on
demand as Additional Rent.
The Landlord agrees to have the Premises substantially completed and
ready for possession on or before the Commencement Date, subject to delays
caused or occasioned by strikes, insurrections, Acts of God, labor unrest,
shortage of materials, civil disturbances and other casualties or unforeseen
causes or events beyond the control of the Landlord ("Unforeseen Causes"). The
Tenant agrees to accept possession of the Premises within ten (10) days after
the receipt of notice from the Landlord of substantial completion (if after the
date specified in Section 1B).
5. RENT: Tenant agrees to pay to Landlord at the address specified in
Section 1E, or at such other place designated in writing by Landlord, the
Monthly Rent, and any Additional Rent, plus any sales or use taxes (collectively
called "Rent"). "Monthly Rent" shall mean the initial monthly base rent stated
in Section 1B for the first twelve months following the Commencement Date of the
Term of this Lease ("First Lease Year"), and the Adjusted Monthly Rent, as
adjusted under Section 7. Rent shall be paid without any prior notice or demand
and without any deduction whatsoever. Monthly Rent shall be due in advance on
the first day of each month of
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the Term. The first installment of Monthly Rent shall be paid by Tenant to
Landlord upon execution of this Lease. Rent for any partial lease month shall be
prorated. Monthly Rent will be adjusted in the manner set forth in Section 7.
Tenant's obligation to pay Rent to Landlord shall be independent of every other
covenant or obligation of Landlord under this Lease. All delinquent Rent shall
bear interest at the maximum rate permitted by applicable law or 18% per annum,
whichever is less, from the date due until paid. Rent shall be considered
delinquent after the 10th day following the date it is due. If Tenant fails to
pay Rent or any other charge when due under this Lease, then Tenant shall pay
and Landlord shall be entitled to receive a late payment service charge, in
addition to any interest charge due hereunder, covering administrative and
overhead expenses incurred by Landlord caused by such late payment, which the
parties stipulate and agree are hereby liquidated and shall be equal to five
percent of the overdue amount. Tenant shall pay a charge equal to $25.00 per
returned check or the amount to which landlord is entitled under State law,
whichever is greater, for any checks written to Landlord which are returned for
insufficient funds.
6. REAL ESTATE TAX INCREASES: See Attached Rider
7. RENT ADJUSTMENT: See Attached Rider
8. SALES AND USE TAX: In addition to the Rent and other amounts due to
the Landlord under this Lease, the Tenant shall pay to the Landlord and the
Landlord shall remit to the appropriate governmental authorities any sales, use,
or other tax, excluding Federal or State income taxes, now or hereafter imposed
upon rents and other amounts due to the Landlord under this Lease,
notwithstanding the fact that any statute, ordinance, enactment, or regulation
may impose any of those types of taxes on the Landlord.
9. NOTICES: For the purpose of any notice or demand under this Lease,
the respective parties shall be served by overnight delivery, personal delivery
or certified or registered mail, return receipt requested, addressed to the
Tenant at the address as set forth in Section 1E and to the Landlord at the
addresses set forth in Section 1E or other such addresses designated in writing
by Landlord. Any notice shall be effective when delivered.
10. ORDINANCES AND REGULATIONS: The Tenant shall comply promptly, at
the Tenant's sole cost and expense, with all present and future laws, codes,
ordinances, rules and regulations or any municipal, county, state, federal or
other governmental authority, including environmental laws, and any bureau or
department thereof, and of the Board of Fire Underwriters or any other body
exercising similar functions, which may be applicable to the Premises and
Tenant's use or occupancy of the Premises, and shall comply with the
requirements of all of Landlord's policies of insurance at any time in force
with respect to the Building in which the Premises are located. The Tenant
agrees for itself and for its subtenants, employees, agents, and invitees to
comply with the Rules and Regulations, promulgated from time to time with
respect to the Premises, Building, Property and Center, a copy of which is
available in the management office in the Center.
Notwithstanding any other provision of this lease to the contrary,
Tenant shall comply with the Americans with Disabilities Act ("ADA"), as it now
exists and as it may hereafter be amended, with regard to the Premises and the
Tenant's use of the Premises, including, without limitation, the obligation to
make the Premises accessible and shall hold Landlord harmless with respect
thereto. Landlord shall not be responsible for compliance with the ADA with
respect to the Premises, including the design or construction thereof. Tenant
waives any right, claim, defense or set off which Tenant may have, now or
hereafter, based upon any responsibility Landlord may have under the ADA with
respect to the Premises, the Building, the Property or
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otherwise. Tenant agrees that any and all steps taken or to be taken by
Landlord, in Landlord's judgment, now or hereafter, to comply with the ADA
concerning the Building or the Property are authorized and permitted under the
Lease and shall not constitute an interruption, disturbance or other breach of
Tenant's rights under this Lease. Nothing herein shall constitute an admission
by Landlord that the ADA governs any part of the Premises, Building or Property
or any activities of Landlord with respect thereto.
Tenant covenants and agrees that Tenant shall not at any time maintain
on, or dispose or discharge from, the Property or the Premises any "Hazardous
Materials", as defined below, except Tenant may use and store minor quantities
of Hazardous Materials for cleaning purposes only or in connection with the use
of office equipment so long as the quantities and use are exempt from applicable
governmental regulation and such Hazardous Materials are disposed of in
accordance with all applicable laws. The failure to comply with al applicable
laws regarding Hazardous Materials and this covenant shall constitute an Event
of Default by the Tenant under this Lease and shall entitle the Landlord to all
rights and remedies provided in this Lease, at law or in equity. The term
"Hazardous Materials" as used herein shall mean collectively, any hazardous
waste, any hazardous substances, any pollutant or contaminant, all as defined by
42 USC Section 9601, and any toxic substances, petroleum products, other
hazardous materials, or other chemicals or substances regulated by any
environmental laws of any county, state or federal government or any other
governmental entity. Tenant's obligations as set forth in this paragraph shall
survive the termination of this Lease.
11. SIGNS: The Tenant shall not place any signs or other advertising
matter or materials on the exterior or on the interior of the Building or at any
other location on the Property or Center, without the prior written consent from
the Landlord. Any lettering or signs placed on the interior of the Building
shall be for directional purposes only, and such signs and lettering shall be of
a type, kind, character, location and description which have been approved by
the Landlord in writing. Directional and identification signage provided by the
Landlord shall be limited to the tenant directory of the Building.
12. SERVICES: The Landlord shall provide the following: heating and
cooling of the Premises, during normal business hours defined as Monday through
Friday, 8:00 a.m. to 5:00 p.m., excluding national holidays, to the extent
necessary for the comfortable occupancy of the Premises, according to Landlord's
standard, under normal business operations and in the absence of the use of
machines, equipment, or devices which affect the temperature otherwise
maintained in the Premises: water from the regular Building fixtures for
drinking, lavatory, and toilet purposes: customary cleaning and janitorial
services in the Premises five times per week, excluding national holidays:
customary cleaning, mowing, grounds keeping, and trash removal in the Common
Areas; Landlord's customary security services for the Property; and electricity
for normal business usage according to Landlord's standard. Additional capacity
or usage shall be provided at the option of the Landlord (reasonable exercised)
and at the sole cost and expense of the Tenant as Additional Rent. The Landlord
shall provide Landlord's standard amount of free non-exclusive parking for the
employees and visitors of the Tenant on the parking areas adjacent to the
Building.
The services to be provided by Landlord at its cost under the terms of
this Lease shall not include any maintenance or replacement of non-standard
building items such as kitchen or breakroom fixtures and appliances including
but not limited to sinks, disposals, dishwashers, water heaters, refrigerators,
icemakers, special air conditioning or heating units, and card access systems or
special facilities such as showers. All cost for the maintenance or replacement
of such items shall be the obligation of the Tenant.
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The Tenant agrees that the Landlord shall not be liable for damages for
failure to furnish or delay in furnishing any service if attributable to any of
the causes described in Sections 16 and 17 or as a result of unforeseen causes.
No failure or delay resulting from the foregoing reasons shall be considered to
be an eviction or disturbance of the Tenant's quiet enjoyment, use, or
possession of the Premises. If the Tenant shall require electrical current to
operate equipment or machines, including heating, refrigeration, computer(s),
data processing, or other machines or equipment using electrical current or
maintain office hours that will increase the amount of the electricity usually
furnished by the Landlord for use in general office space, the Tenant will
obtain the prior written approval of the Landlord and pay to the Landlord the
additional direct expense incurred, including any installation or maintenance
cost, as Additional Rent. Landlord reserves the right to install a submeter for
such service.
13. ALTERATIONS: The Tenant, by occupancy hereunder, accepts the
Premises as being in good repair and condition and suitable for Tenant's
intended use of the Premises. The Tenant shall maintain the Premises and every
part thereof in good repair and condition, reasonable use, wear and tear
excepted. The Tenant shall not make or suffer to be made any alterations,
additions or improvements to or of the Premises or any part thereof without
Landlord's prior written consent. The Tenant shall not permit any lien or claim
for lien of a mechanic, laborer, or supplier or any other lien to be filed
against the Center, the Property containing the Building, the Premises, or any
part of such property, arising out of work performed, or alleged to have been
performed by, or at the direction of, or on behalf of the Tenant.
The interest of Landlord in the Property or any part thereof shall not
be subject to liens for improvements made by Tenant or by persons claiming by,
through or under Tenant, and Tenant agrees that Tenant shall notify any person
making any improvements on behalf of Tenant of this provision. Upon request of
Landlord, Tenant will execute a short form of this Lease which states that the
terms of this Lease expressly prohibits any liability to Landlord or the
Landlord's property for any improvements made by, through or under Tenant which
may be recorded by Landlord.
14. QUIET ENJOYMENT: Subject to the provisions of this Lease, the
Tenant shall be entitled to peaceful and quiet enjoyment of the Premises, so
long as the Tenant is not in default under this Lease.
15. LANDLORD'S RIGHTS: The Landlord and its agents shall have the
right, at all reasonable times during the Term of this Lease, to enter the
Premises for the purpose of inspecting the Premises and of making any repairs
and alterations as the Landlord shall deem necessary. The Landlord and its
agents shall also have the right to enter the Premises at all reasonable hours
for the purpose of displaying the Premises to prospective tenants during the
ninety (90) day period prior to the Expiration Date of this Lease. Landlord and
its agents shall have the right at all times to alter, renovate, and repair
portions of the Building which do not include the Premises, notwithstanding any
temporary inconvenience or disturbance to Tenant caused by such repairs,
renovations, or alterations.
16. DESTRUCTION OF PREMISES: If the Premises, the Building, or the
Property is rendered substantially untenantable by fire or other casualty, the
Landlord may elect, by giving the Tenant written notice within ninety (90) days
after the date of the fire or casualty, either to: (a) terminate this Lease as
of the date of the fire or other casualty; or (b) proceed to repair or restore
the Premises, the Building, or the Property (other than the leasehold
improvements and personal property installed by the Tenant), to substantially
the same condition as existed immediately prior to fire or other casualty.
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If the Landlord elects to proceed pursuant to 16(b) above, the
Landlord's notice shall contain the Landlord's reasonable estimate of the time
required to substantially complete the repair or restoration. If the estimate
indicates that the time so required will exceed one hundred eighty (180) days
from the date of the casualty and the Landlord does not make available to the
Tenant for its use and occupancy other office space, substantially similar to
the Premises and located in the Property or in the Center, if any, pursuant to
Section 23, then the Tenant shall have the right to terminate this Lease of the
date of such casualty by giving written notice to the Landlord not later than
twenty (20) days after the date of the Landlord's notice. If the Landlord's
estimate indicates that the repair or restoration can be substantially completed
within one hundred eighty (180) days, or if the Tenant fails to exercise its
right to terminate this Lease, this Lease shall remain in force and effect.
If the Premises are damaged by fire or other casualty but the Premises
are not rendered substantially untenantable, then the Landlord shall diligently
proceed to repair and restore the damaged portions thereof (other than the
leasehold improvements and personal property installed by the Tenant), to
substantially the same condition as existed immediately prior to such fire or
other casualty, unless such damage occurs during the last twelve (12) months of
the Term, in which event the Landlord shall have the right to terminate this
Lease as of the date of such fire or other casualty by giving written notice to
the Tenant within thirty (30) days after the date of such fire or other
casualty.
If all or any part of the Premises are damaged by fire or other
casualty and this Lease is not terminated, the Rent shall abate for that part of
the Premises which are untenantable on a per diem and proportionate area basis
from three (3) days after the date of the fire or other casualty until the
Landlord has substantially completed the repair and restoration work in the
Premises which it is required to perform, provided, that as a result of such
fire or other casualty, the Tenant does not occupy the portion of the Premises
which are untenantable during such period.
17. CONDEMNATION: If all or part of the Premises, Building or Property
is taken or condemned by an authority for any public use or purpose (including a
deed given in lieu of condemnation), which renders the Premises substantially
untenantable, this Lease shall terminate as of the date title vests in such
authority, and the Rent shall be apportioned as of such date.
If any part of the Premises, Building, or Property is taken or
condemned but the Premises are not rendered substantially untenantable
(including a deed given in lieu of condemnation), this Lease shall not
terminate. If the taking reduces the rentable square feet in the Premises, Rent
shall be equitably reduced for the period of such taking by an amount which
bears the same ratio to the Rent then in effect as the number of square feet so
taken or condemned bears to the Leased Area set forth in Section 1C. The
Landlord, upon receipt and to the extent of the award in condemnation or
proceeds of sale, shall make necessary repairs and restorations (exclusive of
leasehold improvements and personal property installed by the Tenant) to restore
the Premises remaining to as near its former condition as circumstances will
permit, and to the Building and the Property to the extent necessary to
constitute the portion of same not so taken or condemned as complete.
The Landlord shall be entitled to receive the entire price or award
from any sale, taking or condemnation without any payment to the Tenant and the
Tenant hereby assigns to the Landlord the Tenant's interest, if any, in such
award. However, the Tenant shall have the right separately to pursue against the
condemning authority an award with respect to the loss, if any, to leasehold
improvements paid by the Tenant's business resulting from such taking. Under no
circumstances shall the Tenant seek or be entitled to any compensation for the
value of its leasehold estate which Tenant hereby assigns to Landlord.
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18. ASSIGNMENT AND SUBLEASE: Without the prior written consent of the
Landlord which will not be unreasonably withheld, the Tenant shall not sublease
the Premises, or assign, mortgage, pledge, hypothecate or otherwise transfer or
permit the transfer of this Lease or the interest of the Tenant in this Lease,
in whole or in part, by operation of law, court decree or otherwise. Landlord
may grant, deny or withhold consent or impose conditions on the granting of
consent, in landlord's sole discretion. If the Tenant desires to assign this
Lease or to enter into any sublease of the Premises, the Tenant shall deliver
written notice of such intent to the Landlord, together with a copy of the
proposed assignment or sublease at least thirty (30) days prior to the effective
date of the proposed assignment or commencement date of the term of the proposed
sublease. Any approved sublease shall be expressly subject to the terms and
conditions of this Lease. In the event of any approved sublease or assignment,
the Tenant shall not be released or discharged from any liability, whether past,
present or future, under this Lease, including any renewal term of this Lease,
and if the sublease or assignment provides for rent in excess of the Rent
payable to Landlord under the terms of this Lease, one-half (1/2) of the
difference between the rent payable by the assignee or subtenant and the Rent
payable to Landlord under the terms of this Lease shall be paid to Landlord in
consideration of its consent to the assignment or sublease. For purposes of this
Section 18, an assignment shall be considered to include a change in the
majority ownership or control of Tenant if Tenant is a corporation whose shares
of stock are not traded publicly, or, if the tenant is a partnership, a change
in the general partner of the partnership or a change in the persons holding
more than 50% interest in the partnership, or change in majority ownership or
control of any general partner of the partnership.
19. HOLDING OVER: If the Tenant, or any assignee or sublessee of the
Tenant, shall continue to occupy the Premises after the termination or
expiration of this Lease (including a termination by notice under Section 24 or
a termination or expiration under Section 27), without the prior written consent
of the Landlord, such tenancy shall be a Tenancy at Sufferance. During the
period of any hold over tenancy by the Tenant, or any assignee or sublessee, the
Landlord, by notice to the Tenant, may adjust the Rent to an amount equal to one
hundred and fifty percent of the Rent of the last month of the Term in which
Rent was payable. Acceptance by the Landlord of any Rent after termination shall
not constitute a renewal of this Lease or consent to such hold over occupancy
nor shall it waive the Landlord's right of re-entry or any other right contained
in this Lease or provided by law.
20. SUBORDINATION AND ATTORNMENT: This Lease and the right of the
Tenant hereunder are expressly subject and subordinate to the lien and
provisions of any mortgage, deed of trust, deed to secure debt, ground lease,
assignment of leases, or other security instrument or operating agreement
(collectively a "Security Instrument") now or hereafter encumbering the
Premises, the Building, the Property, or any part thereof, and all amendments,
renewals, modifications and extensions of and to any such Security Instrument
and to all advances made or hereafter to be made upon such Security Instrument.
The Tenant agrees to execute and deliver such further instruments, in such form
as may be required by Landlord or any holder of a proposed or existing Security
Instrument, subordinating this Lease to the lien of any such Security Instrument
as may be requested in writing by the Landlord or holder from time to time.
In the event of the foreclosure of any such Security Instrument by
voluntary agreement or otherwise, or the commencement of any judicial action
seeking such foreclosure, the Tenant, at the request of the then Landlord, shall
attorn to and recognize such mortgagee or purchaser in foreclosure as the
Tenant's landlord under this Lease. The Tenant agrees to execute and deliver at
any time upon request of such mortgagee, purchaser, or their successors, any
instrument to further evidence such attornment.
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The Tenant shall from time to time, upon not less than seven (7) days'
prior written request by the Landlord, deliver to the Landlord a statement in
writing certifying that this Lease is unmodified and in full force and effect,
or, if there have been modifications, that this Lease, as modified, is in full
force and effect; providing a true, correct and complete copy of the Lease and
any and all modifications of the Lease; the amount of each item of the Rent then
payable under this Lease and the date to which the Rent has been paid; that the
Landlord is not in default under this Lease or, if in default, a detailed
description of such default; that the Tenant is or is not in possession of the
Premises, as the case may be; and containing such other information and
agreements as may reasonably requested.
21. WAIVER AND INDEMNIFICATION: To the full extent permitted by law,
the Tenant hereby releases and waives all claims against the Landlord and its
agents, employees, officers, directors, and independent contractors, for injury
or damage to person, property or business sustained in or about the Property,
the Building, or the Premises by the Tenant, its agents or employees other than
damage proximately and solely caused by the gross negligence of the Landlord or
its agents or employees.
The Tenant agrees to indemnify and hold harmless the Landlord and its
agents and employees, from and against any and all liabilities, claims, demands,
costs, and expenses of every kind and nature, including those arising from any
injury or damage to any person (including death) or property sustained in the
Premises, or resulting from the failure of the Tenant to perform its obligations
under this Lease; provided, however, the Tenant's obligations under this section
shall not apply to injury or damage resulting from the negligence or willful act
of the Landlord or its agents or employees.
The Landlord agrees to indemnify and hold harmless the Tenant, and its
respective agents and employees, from and against any and all liabilities,
claims, demands, costs and expenses of every kind and nature, arising from any
injury or damage to any person (including death) or property sustained in or
about the Building proximately caused by the gross negligence or willful act or
omission of the Landlord; provided, however, the Landlord's obligations under
this section shall not apply to injury or damage resulting from the negligence
or willful act or omission of the Tenant, or its agents or employees.
The Landlord shall not be responsible or liable to the Tenant for any
event, act or omission to the extent covered by insurance and maintained or
required to be maintained by the Tenant with respect to the Premises and its use
and occupancy thereof (whether or not such insurance is actually obtained or
maintained). At the request of the Landlord, the Tenant shall from time to time
cause its insurers to provide effective waivers of subrogation for the benefit
of the Landlord, and its agents or employees and insurers, in a form
satisfactory to the Landlord.
22. SURRENDER OF PREMISES: Upon the expiration or termination of this
Lease or the termination of the Tenant's right of possession of the Premises,
the Tenant shall surrender and vacate the Premises immediately and deliver
possession thereof to the Landlord in a clean, good, and tenantable condition,
except for a) damages beyond the control of the Tenant; b) reasonable use; c)
ordinary wear and tear. Any movable trade fixtures and personal property that
may be removed from the Premises by the Tenant at the end of the Lease term, but
which are not so removed, shall be conclusively presumed to have been abandoned
by the Tenant and title to such property shall pass to the Landlord without any
payment or credit; or, the Landlord may, at is option, either store or dispose
of such trade fixtures and personal property at the Tenant's expense.
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Tenant agrees that it shall not remove any of the personal property from the
Premises without Landlord's consent so long as any Rent or Additional Rent, or
other sums owed to Landlord, remain unpaid.
23. RELOCATION OF TENANT: At any time after the date of this Lease, the
Landlord may substitute for the Premises, other premises in the Center, in which
even the New Premises shall be deemed to be the Premises for all purposes under
this Lease, provide: (1) the New Premises shall be similar to the Premises in
area and configuration; (2) if the Tenant is then occupying the Premises, the
Landlord shall give the Tenant not less than sixty (60) days prior written
notice of such substitution; (3) if the Tenant is then occupying the Premises,
the Landlord shall pay the actual and reasonable expenses of physically moving
the Tenant, its then existing property and its then existing equipment to the
New Premises and the Landlord shall pay the actual and reasonable expenses of
replacing the then unusable printed materials of the Tenant; and (4) the
Landlord, at is expense, shall improve the New Premises in a manner
substantially similar to that of the Premises at the time of such substitution
or as otherwise mutually agreed between the Tenant and the Landlord in writing.
24. EVENTS OF DEFAULT: Each of the following shall constitute an event
of default by the Tenant under this Lease: (1) the Tenant fails to pay any
installment of Rent or Additional Rent within ten (10) days after the date on
which the installment of Rent or Additional Rent first becomes due; (2) the
Tenant fails to observe or perform its obligations under sub-section (d) of
Section 4 above and such violation continues for more than 24 hours after such
notice or Tenant fails to observe or perform any of the other covenants,
conditions or provisions of this Lease other than the payment of any installment
of Rent or Additional Rent, and fails to cure such default within fifteen (15)
days after written notice from the Landlord to the Tenant; (3) the Tenant fails
a second time to observe or perform any of the other covenants, conditions or
provisions of this Lease other than the payment of any installment of Rent or
Additional Rent after prior written notice of the failure; (4) a petition is
filed by or against the Tenant or any Guarantor to declare the Tenant or the
Guarantor, as the case may be, bankrupt or to seek relief for such tenant or
Guarantor under any chapter of the bankruptcy Doe, as amended, or under any
other law imposing a moratorium on, or granting debtor's relief with respect to,
the rights of creditors; (5) the Tenant or any Guarantor becomes or is declared
insolvent by law or Tenant or any Guarantor makes an assignment for the benefit
of creditors; (6) a receiver is appointed for the Tenant or the Tenant's
property or for any Guarantor or any of the Guarantor's property; (7) the Tenant
abandons or vacates the Premises; or, (8) the interest of the Tenant in this
Lease is levied upon under execution or other legal process.
Upon the occurrence of an event of default by the Tenant under this
Lease, the Landlord at its option, without further notice or demand to the
Tenant, may in addition to all other rights and remedies provided in this Lease,
at law or in equity:
A. Terminate this Lease and the Tenant's right of possession of the
Premises, and recover all damages to which the Landlord is entitled under this
Lease, at law and in equity, specifically including, without limitation, all the
Landlord's expenses of reletting (including repairs, alterations, improvements,
additions, decorations, legal fees and brokerage commissions).
B. Terminate the Tenant's right of possession of the Premises without
terminating this Lease, in which event the Landlord may, but shall not be
obligated to, relet the Premises, or any part thereof for the account of the
Tenant, for such rent and such term and upon such terms and conditions as are
acceptable to the Landlord. For purposes of any reletting of the Premises, the
Landlord is authorized to redecorate, repair, alter and improve the Premises to
the extent necessary or desirable in the Landlord's judgement. For any period
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during which the Premises have not been relet, Tenant shall pay Landlord monthly
on the first day of each month during the period that Tenant's right of
possession is terminated, a sum equal to the amount of rent due under this Lease
for such month. If and when the Premises are relet and a sufficient sum is not
realized from such reletting after payment of all the Landlords' expenses of
reletting (including repairs, alterations, improvements, additions, decorations,
legal fees and brokerage commissions) to satisfy the payment of Rent due under
this lease for any month, the Tenant shall pay to the Landlord any such
deficiency monthly upon demand. The Tenant agrees that the Landlord may file
suit to recover any sums due to the Landlord under this section and that such
suit or recovery of any amount due the Landlord shall not be any defense to any
subsequent action brought for any amount not previously reduced by judgement in
favor of the Landlord. If the Landlord elects to terminate the Tenant's right to
possession only without terminating this Lease, the Landlord may, at is option,
enter into the Premises, removing the Tenant's signs and other evidences of
tenancy, and take and hold possession thereof; provided, however, that such
entry and possession shall not terminate this Lease or release the Tenant, in
whole or in part, from the Tenant's obligation to pay the Rent reserved
hereunder for the full Term or from any other obligation of the Tenant under
this Lease.
Tenant shall pay on demand or reimburse Landlord for payment of
Landlord's reasonable attorney's fees, expenses and court costs in negotiation,
at trial, and on appeal incurred by Landlord to enforce any obligation of Tenant
under this Lease or to defend any claim brought by Tenant against Landlord or by
any person claiming by, through or under Tenant, or in curing any default by
Tenant, or in connection with any action or proceeding arising out of or
occasioned by any lien or claim of lien on the Premises, the Building, or the
center, or in defending or otherwise participating in any legal proceeding
initiated by Tenant or against Tenant, or in connection with the investigation
of a response to any request for consent or other amendments to the Lease by
Tenant.
25. SUCCESSOR AND ASSIGNS: This Lease shall bind and inure to the
benefit of the successors, assigns, heirs, executors, administrators, and legal
representatives of the parties hereto. In the event of the sale, assignment, or
transfer by the Landlord of its interest in the Building or in this Lease (other
than a collateral assignment to secure a debt of the Landlord prior to
enforcement) to a successor in interest who expressly assumes the obligations
of the Landlord hereunder, the Landlord shall thereupon be released or
discharged from all of its covenants and obligations hereunder, except such
obligations as the Landlord shall have accrued prior to any such sale,
assignment or transfer; and the Tenant agrees to look solely to such successor
of the Landlord for performance of such obligations. Any securities or funds
given by the Tenant to the Landlord to secure performance by the Tenant of its
obligations hereunder may be assigned by the Landlord to such successor of the
Landlord and, upon acknowledgement by such successor or receipt of such security
and its assumption of the obligation to account for such security in accordance
with the terms of the lease, the Landlord shall be discharged of any further
obligation relating thereto. The Landlord's assignment of the Lease or of any or
all of its rights herein shall in no manner affect the Tenant's obligations
hereunder. The Landlord shall have the right to freely sell, assign or otherwise
transfer its interest in the Building and/or this Lease.
26. NON-WAIVER: No waiver of any covenant or condition of this Lease by
either party shall be deemed to imply or constitute a further waiver of any
other covenant or condition of this Lease.
27. See attached rider.
28. SECURITY DEPOSIT: As security for the performance of its
obligations under this Lease, the Tenant upon its execution of this Lease has
paid to the Landlord a security deposit (the "Security Deposit") in the
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amount stated in Section 1B. The Security Deposit may be applied by the Landlord
to cure or partially cure any default of the Tenant under this Lease, and upon
notice by the Landlord of such application, the Tenant shall replenish the
Security Deposit in full by promptly paying to the Landlord the amount so
applied. The Landlord shall not pay any interest on the Security Deposit. The
Security Deposit shall not be deemed an advance payment of rent or a measure of
damages for any default by the Tenant under this Lease, nor shall it be a bar or
defense to any action which the Landlord may at any time commence against the
Tenant.
29. LIMITATION OF THE LANDLORD'S LIABILITY: As used in this Lease, the
term "Landlord" shall mean the entity herein named as such, and its successors
and assigns. No person holding the Landlord's interest under the Lease (whether
or not such person is named as the "Landlord") shall have any liability
hereunder after such person ceases to hold such interest, except for any
liability accruing hereunder while such person held such interest. No principal,
officer, employee, or partner (general or limited) of the Landlord shall have
any personal liability under any provision of this Lease. If the Landlord
defaults in the performance of any of its obligations under this Lease or
otherwise, the Tenant shall look solely to the Landlord's interest in the
Building and not to the other assets of Landlord or the assets, interest, or
rights of any principal, officer, employee, or partner (general or limited) for
satisfaction of the Tenant's remedies on account thereof.
30. COMMON AREAS: For purposes of this Lease "Common Areas" shall mean
all areas, improvements, space, and equipment (owned or controlled by the
Landlord) in or at the Property, provided by the Landlord for the common or
joint use and benefit of tenants, customers and other invitees.
31. MISCELLANEOUS: This Lease, the Exhibits, the Riders and Addendums
contained herein or attached hereto contain the entire agreement between the
Landlord and the Tenant and there are no other agreements, either oral or
written. This Lease shall not be modified or amended except by a written
document signed by the Landlord and the Tenant which specifically refers to this
Lease. The captions in this Lease are for convenience only and in no way define,
limit, construe or describe the scope or intent of the provisions of this Lease.
This Lease shall be construed in accordance with the laws of the state in which
the Building is located. If any provision of this Lease or any amendment hereof
is invalid or unenforceable in any instance, such invalidity or unenforceability
shall not affect the validity or enforceability of any other provision, or such
provision in any circumstance not controlled by such determination.
32. TENANT'S INSURANCE: Tenant shall obtain and keep in force during
the Term of this Lease, including any extension and renewal, comprehensive
general liability insurance, including contractual liability coverage, insuring
Landlord (as an additional insured) and tenant against any liability arising out
of the ownership, use, occupancy or maintenance of the Premises, and all areas
appurtenant thereto. Such policy shall provide minimum limits of $1,000,000 for
damage to property or for death or injury to any one person in any one accident.
Tenant shall deliver to Landlord, prior to occupancy of the Premises, a
certificate of insurance and evidence of payment of one year's premium, and
shall deliver a new certificate as and when the policy is renewed or replaced.
Said policy shall contain a waiver of subrogation clause in form and content
satisfactory to Landlord and provide that it will not be subject to
cancellation, non-renewal, reduction or other change except after at least
thirty (30) days prior written notice to Landlord. If Tenant fails to comply
with such requirements, Landlord may obtain such insurance and keep the same in
effect and Tenant shall pay Landlord, as Additional Rent due hereunder, the
premium cost thereof upon demand.
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33. NO RECORDING: NEITHER THIS LEASE NOR ANY MEMORANDUM OF THIS LEASE
MAY BE RECORDED OR FILED FOR RECORD IN ANY PUBLIC RECORDS WITHOUT THE SEPARATE
EXPRESS WRITTEN CONSENT, IN RECORDABLE FORM OF THE LANDLORD.
34. ENCUMBRANCES ON LANDLORD'S TITLE: Upon request of Landlord, Tenant
will promptly release or modify, or cause to be released or modified, any
financing statement given by Tenant to a third party, any notice of commencement
filed by Tenant with respect to work on the Premises, or any other recorded
document filed by or on account of Tenant ("Document"), which adversely affects,
clouds, or otherwise encumbers Landlord's title to the Center or any part
thereof, so that the Document shall not encumber any portion of the Center,
Building, or Property other than the Tenant's leasehold interest in the
Premises. Tenant's obligations as set forth in this Section 34 shall survive
termination of this Lease.
35. RADON DISCLOSURE FOR FLORIDA LEASES: Radon is a naturally occurring
radioactive gas which, when it has accumulated in a building in sufficient
quantities, may present health risks to persons who are exposed to it over time.
Levels of radon that exceed federal and state guidelines have been found in
buildings in Florida. Additional information regarding radon and radon testing
may be obtained from your county public health unit. Tenant acknowledges this
disclosure by signing this Lease.
36. RIDERS & ADDENDA: All riders and addenda contained herein or
attached hereto shall be deemed to be a part hereof and hereby incorporated in
this Lease by reference.
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THIS PAGE CONTAINS FLOOR PLAN
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THIS PAGE CONTAINS BUILDING LAYOUT PLAN
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LEASE RIDER
This Rider is attached to and made a part of the Lease dated October 30, 1998 by
and between KOGER EQUITY, INC., a Florida Corporation ("Landlord") with its
principal office at 8880 Freedom Crossing Trail, Jacksonville, Florida, 32256,
and SYNCHRONICITY, INC., a corporation organized and existing under the laws of
the State of Massachusetts ("Tenant") with its principal office at 201 Forest
Street, Marlborough, MA 01752.
36A: RENT ADJUSTMENT: The monthly rental as stated in Paragraph 1B, Monthly
Base Rent, will be adjusted on the respective anniversary dates by a
fixed increase of five percent (5%) per year.
36B: TENANT IMPROVEMENTS: Landlord to construct ceiling height wall in
conference room and add new door and replace carpet in Conference Room.
Landlord to install a 6' base/cabinet and counter with cold water sink
(see floor plan attached). Tenant to be responsible for phone and
computer wiring and to coordinate installation with Koger's Operations
Supervisor.
36C: OPTION TO CANCEL: Tenant may have the option to cancel this Lease
Agreement on second anniversary dates of this lease dated October 30,
1998 by providing the Landlord with 120 days prior written notice of
such intent to cancel accompanied by a two months cancellation fee. This
120 day notice period shall pertain to full calendar months and shall
commence the first day of the month. It is further acknowledged and
understood that Tenant remains obligated to pay any and all scheduled
rental payments through the effective date of the termination. Upon
receipt of all monies due and payable, Tenant shall be released from any
future liability under the terms of the Lease Agreement.
36D: EARLY OCCUPANCY: If the Lessee takes occupancy prior to the commencement
date of this Lease Agreement, all terms and conditions will be in effect
as of the date of occupancy except the monthly rent which will prorated
as of the date of occupancy.
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Exhibit 10.14
INTERNATIONAL SOFTWARE DISTRIBUTION AGREEMENT
SYNCHRONICITY, INC.
201 FOREST STREET
MARLBORO, MA 01752
USA
Telephone: +1- 508-485-4122
Fax: +1- 508-485-7514
This International Software Distribution Agreement (the "Agreement") is made and
entered into effective as of the 28th day of December, 1999 (the "Effective
Date"), by and between Synchronicity, Inc., a Massachusetts corporation having
its principal place of business as shown above ("Synchronicity"), on the one
part, and Itochu Corporation, a Japanese corporation with its Tokyo office at
5-1 Kita-Aoyama 2-chome, Minato-ku, Tokyo, Japan ("ITC"), and Itochu Techno
Science Corporation, a Japanese corporation with its principal place of business
at 11-5 Fujimi 1-chome, Chiyoda-ku, Tokyo 102, Japan ("Distributor"; together
with ITC collectively, "Distributor"), on the other part.
SECTION 1: DEFINITIONS
1.1. "Authorized Hardware/Software Configurations" are set forth
in Exhibit B.
1.2. "Authorized Reseller" is a subdistributor of Distributor's
right to market and distribute Products in the Territory who
has signed an agreement with Distributor sufficient to fulfill
Distributor's obligations to Synchronicity hereunder (except
any payment obligations of Distributor to Synchronicity which
shall be always honored and discharged by Distributor).
1.3. "End User" is any customer acquiring one or more copies of a
Product for the customer's own internal use.
1.4. "Evaluation Copies" are copies of the Products which will
automatically cease to function upon the expiration of a
stated period, i.e. which include a "Time Bomb," and which are
subject to the license granted in Section 3.1 of this
Agreement.
1.5. "First Line Support" is the activity of communicating with End
Users by telephone on the use, operation, installation,
configuration and implementation of the Products, assisting
End Users in the use and interpretation of Product
documentation, and passing on reports of errors and suspected
errors in the Products for Second Line Support.
1.6. "License Agreement" is an End User license agreement written
by Distributor in Japanese language with terms at least as
protective of Synchronicity's interests as the terms in
Synchronicity's end user license agreement as shown in Exhibit
A.
1.7. "Products" are those software products shown in Exhibit C, in
their most current versions, and the Japanese localized
version of the Products as developed by the parties in
accordance with Section 2 of this Agreement, including (i) its
modifications, enhancements, corrections or upgrades to the
Products to be furnished by Synchronicity to Distributor
hereunder; and (ii) documentation and any other related
materials described in Exhibit C attached hereto.
Synchronicity may amend Exhibit C of this Agreement from
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time to time upon ninety (90) days' prior written notice to
Distributor as updates or new releases of the Products are
provided.
1.8. "Second Line Support" is the maintenance activity to be
provided by Synchronicity to Distributors in connection with
the Products (i) bug fixing, modifying and correcting errors
in the Products and (ii) hot line support that will include,
without limitation in support of Distributor efforts to
support their End Users and, (iii) the release of updates and
upgrades of the Products for Distributor's provision of the
First Line Support to the End User.
1.9. "Support Agreement" is an annual support agreement to be
entered into by and between Distributor and the End User
written by Distributor in Japanese language with terms at
least as protective of Synchronicity's interest as
Synchronicity's Domestic support agreement shown in Exhibit I.
It also provides Product support of the Products through First
Line Support by Distributor.
1.10. "U.S. Version" is any Product based on English Language and
intended for distribution by Synchronicity in the United
States.
1.11 "Territory" is the country of Japan.
SECTION 2: DEVELOPMENT OF JAPANESE VERSION
2.1. When and if so agreed upon in writing by the parties to this
Agreement, Distributor, with the cooperation of Synchronicity,
will undertake efforts to localize the Products for the
Japanese market, in accordance with a separate Localization
Development, Marketing and Distribution Agreement.
SECTION 3: GRANT OF RIGHT TO MARKET
3.1. Synchronicity hereby grants, and Distributor hereby accepts,
an exclusive, non-transferable right and license to use for
the purposes specified hereunder, sublicense, market,
distribute and support the Products to Authorized Resellers
and End Users located in the Territory for the End User's
internal use only and only pursuant to an effective written
License Agreement, that is signed or otherwise accepted by End
User in a manner chosen by Distributor. Synchronicity also
grants to Distributor an exclusive, non-transferable license
to use (and to sublicense its Authorized Resellers to use) of
up to ten (10) copies of the Products necessary for
evaluation, demonstration and training purposes in accordance
with the License Agreement (the "Not-for-Resale Copies"). The
Not-for-Resale Copies shall not count towards any sales
benchmarks or royalty payments due Synchronicity.
Synchronicity shall not appoint any other entity as a
distributor in Japan and shall not distribute the products in
Japan directly or indirectly during the term of this
agreement.
3.1.1 Synchronicity and Distributor have established target
revenue plan for the Products during the period
commencing from the Effective Date and ending on
December 31, 2001 as set forth in Exhibit E attached
hereto and incorporated herein by reference (the
"Revenue Plan"), and Distributor shall use
commercially reasonable efforts to meet the Revenue
Plan. Notwithstanding anything contained herein to
the contrary and for avoidance of doubts,
Synchronicity and Distributor acknowledge and agree
that the Revenue Plan shall not be construed
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as creating any legally binding obligation of
Distributor to purchase those amount of the Products.
3.2. In order to be eligible for the Product Support set forth in
Section 4 or the Product warranty set forth in Section 8, the
Products must be run on Authorized Hardware/Software
Configurations.
3.3. The Products are supplied to Distributor solely for the
purposes set forth in this Agreement. Distributor is
authorized to use and distribute the Products to Authorized
Resellers and End Users solely for such purposes, and may not
reproduce or modify the Products except as otherwise
specifically provided herein. Distributor shall have no right
to market or service products developed by Synchronicity other
than the Products in Exhibit C.
3.3.1. During the term of this agreement Synchronicity shall
notify Distributor of the release of any new
Synchronicity product. Distributor shall have thirty
(30) days from the date of such notice to enter into
an amendment to this Agreement which adds the new
product to Exhibit C.
3.3.2. If the parties do not enter into a mutually agreed
upon amendment to this Agreement, as provided in
Section 3.3.1 above, within the thirty (30) day
period, Synchronicity shall have no further
obligation to Distributor with respect to such
product and shall have no restriction on its
development or distribution for or within Japan or
otherwise.
3.4. Distributor acknowledges that its rights under this Agreement
are exclusive only within the geographic borders of Japan.
Synchronicity reserves the right to license Products to other
agents, distributors, value added resellers, original
equipment manufacturers, end users and other parties, located
outside Japan, provided, however, that Synchronicity shall not
appoint any other distributors, value added resellers, system
integrators or original equipment manufactures for
distribution of the Products in the Territory and shall not
distribute, market or license the Products to the End User,
directly or indirectly, in the Territory during the term of
this Agreement.
3.5 Distributor may engage any Authorized Reseller in the
Territory to market and resell the Products to the End User
located within the Territory; provided, however, that
Distributor shall (i) cause Authorized Reseller to abide by
all the terms, conditions and provisions of this Agreement to
be performed on the part of Distributor (except any payment
obligations of Distributor to Synchronicity which shall be
always honored and discharged by Distributor) and (ii) be
responsible to Synchronicity for any act or omission of its
Authorized Reseller in violation of any such terms,
conditions, or provisions of this Agreement.
SECTION 4: PRODUCT SUPPORT AND TECHNICAL TRAINING
4.1. Distributor agrees to provide First Line Support to End-Users
of the Products. The Support Agreement must, among other
things, clearly state that the agreement is assignable to
Synchronicity (or Synchronicity's designee) upon termination
of Distributor's right to provide First Line Support to End
User.
4.2. Distributor agrees to provide the marketing, sales, technical
support and staffing for the Products as set forth on Exhibit
D
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* Confidential Information has been omitted pursuant to Rule
406 under the Securities Act of 1933 and has been filed
separately with the Securities and Exchange Commission. The
locations of the omitted materials have been indicated with
asterisks.
4.3. Synchronicity will provide support to Distributor by
telephone, fax, the Internet or electronic mail during
Synchronicity's normal business hours for the purposes of
supporting End Users and Authorized Resellers. Distributor
will designate two (2) primary contacts to handle all contact
with Synchronicity.
4.4. Synchronicity shall make available all upgrades, updates and
enhancements specified in the end user licensing agreement for
US version Products.
4.5. Synchronicity shall provide Second Line Support to
Distributor.
SECTION 5: PRICE, PAYMENT TERMS, AND RECORDS
5.1. In consideration of the exclusive license granted to
Distributor described in Section 3 above, Distributor shall
pay to Synchronicity a pre-payment license fee (the
"Pre-Payment License Fee") for the Products in the amount of *
Dollars (USD *) with a payment structure as follows:
(i) *Dollars (USD *) payable within 45 days of completion
of this agreement, receipt of which is hereby
acknowledged by Synchronicity.
(ii) * Dollars (USD *) payable by March 31, 2000.
(iii) * Dollars (USD *) payable by June 30, 2000.
(iv) * Dollars (USD *) payable by September 29, 2000.
(v) * Dollars (USD *) payable by December 29, 2000.
(vi) * Dollars (USD *) payable by March 30, 2001.
(vii) * Dollars (USD *) payable by June 29, 2001.
(viii) * Dollars (USD *) payable by September 28, 2001.
(ix) * Dollars (USD *) payable by December 29, 2001
The Pre-Payment License Fee shall be applied as a credit
against all future license fees for the Products payable by Distributor
to Synchronicity pursuant to Section 5.2 of this Agreement.
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* Confidential Information has been omitted pursuant to Rule
406 under the Securities Act of 1933 and has been filed
separately with the Securities and Exchange Commission. The
locations of the omitted materials have been indicated with
asterisks.
5.2. The license fees to be paid by Distributor for Products shall
be determined by reference to Synchronicity's US Domestic
Pricing and Configuration Schedule, set forth in Exhibit B
hereto, less a * discount. The prices set forth in Exhibit B
may be amended from time to time by Synchronicity upon ninety
(90) days' prior written notice. All Not-for-Resale Copies of
Products used by Distributor or its Authorized Resellers for
evaluation, demonstration, support and training shall not be
subject to a fee. The license fee for other internal use of
the Products (other than evaluation, demonstration, support
and training) shall be in accordance with Exhibit B. In
addition, distributor will be granted the right to convert
remaining inventory of DesignSync and ProjectSync licenses
held on December 31, 1999 to other product license types of
equal cost as specified in Exhibit C.
5.3. If there is an increase in prices set forth in Exhibit B
attached hereto, then all End User orders for Products
received by Distributor and not yet shipped prior to the
effective date of the price increase are not subject to such
price increase. And, if Distributor shall deliver to
Synchronicity a copy of the quotation furnished to its
potential End Users no later than five (5) business days after
the receipt of notice for the price increase and Distributor
has received firm order from such End Users within ninety (90)
days after the effective date of such price increase, ex-price
shall apply to such orders. If there is a price decrease then
all End User orders for a Products received by Distributor and
not yet shipped prior to the effective date of the price
decrease will be subject to such price decrease.
5.4. All payments to Synchronicity shall be in U. S. dollars, and
are due within thirty (30) days after receipt of an invoice
issued by Synchronicity for the full amount owed for the
delivered Products. Except for the withholding income tax
assessed by the Japanese tax officer on the payments by
Distributor to Synchronicity hereunder, payments will be
conducted via cable transfer of funds to the bank account
specified by Synchronicity. Prices listed are exclusive of any
shipping costs, import duties, sales, use, value-added,
privilege, excise, or similar taxes or duties levied upon
Synchronicity, or any other charges or assessments established
by any government agency in Japan, that are based upon
licensing of the Products pursuant to this Agreement, all of
which shall be paid by Distributor. Synchronicity acknowledges
and agrees that the payment pursuant to this Agreement shall
be subject to the withholding income tax based on (i) Sections
161-7-2, 178, 179-1, and 212 of the Income Tax Laws of Japan,
and (ii) Article 14 of the Tax Convention between U.S.A. and
Japan (the "USA/Japan Tax Convention"). Distributor shall (i)
withhold such tax from the payment to Synchronicity, (ii) pay
such tax to the Japanese tax authority on behalf of
Synchronicity, and (iii) transmit to Synchronicity an official
tax receipt issued by the Japanese tax authority after such
tax payment. Synchronicity shall execute and deliver to
Distributor an appropriate application form and Distributor
shall execute such application form and file it with a
competent tax office in Japan in order to reduce an applicable
tax rate of withholding income tax in accordance with the
USA/Japan Tax Convention.
5.5. Distributor shall prepare and maintain complete and accurate
books and records documenting the licensing and servicing of
Products and any compensation received therefrom.
5.6. During the term of this Agreement and for a period of one year
thereafter, Synchronicity shall have the right, at its expense
and upon reasonable notice, to examine or have examined by an
accountant Distributor's books and records in connection with
the distribution of the Products under this Agreement during
the Distributor's normal business hours and without
interrupting Distributor's business no more than once
annually, in order to determine and verify performance under
this Agreement.
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5.7. In the event that Distributor at any time during the term of
this Agreement has outstanding payables to Synchronicity more
than one hundred twenty (120) days past due aggregating to 10%
of the total account balance, Synchronicity may elect, at its
discretion, to send notice of default of this contract to
Distributor and it shall be considered a material breach of
this Agreement. Additionally, any funds due Synchronicity from
Distributor over ninety (90) days past due will be subject to
an annual interest rate of 18%.
SECTION 6: SALES COLLATERAL AND TRADEMARKS
6.1. Synchronicity will provide Distributor with up-to-date
electronic copies of all sales collateral, documentation, or
other promotional materials for Distributor's use in marketing
the Products. Distributor may purchase printed versions of
these materials as required at Synchronicity's reproduction
costs plus reasonable mark-up for administrative overhead.
Synchronicity may prohibit the use of any materials, which
include trademarks, which Synchronicity has not successfully
registered in Japan. Such materials may not be changed or
modified without the prior consent of Synchronicity.
6.2. All packaging, documentation and promotional materials
prepared by Distributor shall be subject to Synchronicity's
prior written approval, which approval shall be given within
five (5) business days after receipt of a sample and shall not
be unreasonably withheld. Synchronicity will provide
Distributor with copies of appropriate trademarks, trade
names, logos and identifying slogans (hereafter the "Marks"),
as described in Exhibit H attached hereto, in a format
suitable for incorporation into Distributor's packaging,
documentation and promotional materials so approved. Such
Marks may vary from the Marks utilized by Synchronicity in
jurisdictions other than the Territory.
6.3. Distributor will not remove, alter, cover, or obfuscate any
copyright notice, Mark or other proprietary rights, notice
placed by Synchronicity on the Products or any copy or portion
thereof. Distributor acknowledges that the Marks used by
Synchronicity or by Distributor in relation to the Products,
whether registered or not registered, belong exclusively to
Synchronicity. Distributor will, during the term of this
Agreement, use the Marks solely in connection with the
promotion and marketing of the Products and Synchronicity
hereby grants to Distributor, during the term of this
Agreement, a non-exclusive, nontransferable right to use and
reproduce the Marks solely for the purposes of promoting and
marketing the Products as authorized herein. Distributor will
accompany each use of the Marks with a conspicuous notation
that the Marks are owned by Synchronicity and any other
proprietary legend that Synchronicity determines reasonably
necessary to protect its rights herein. Distributor shall not
use the Marks in conjunction with the promotion or marketing
of services to be performed by Distributor except to the
extent necessary to indicate Synchronicity as the source of
training materials and only with Synchronicity's prior written
approval of such use. Distributor will not register any of the
Marks or any other mark, sign, symbol, design, device or
trademark used in relation to the Products. All rights which
may accrue to Distributor in relation to the Marks or any
other mark, sign, symbol, design, device or trademark used in
relation to the Products are understood to be the property of
Synchronicity, and Distributor agrees that, at Synchronicity's
request, Distributor will, at Synchronicity's expense, take
reasonable steps as are necessary to perfect such rights.
6.4. Distributor hereby acknowledges that Synchronicity has the
exclusive rights to license the use of the Marks and that by
reason of Distributor's use of the Marks under this Agreement,
it shall not acquire ownership of the Marks or any part
thereof. All use of the marks by Distributor shall inure to
Synchronicity's benefit.
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6.5. Upon termination of this Agreement, Distributor shall cease
all use of the Marks, except as necessary under Section 11.3.3
SECTION 7: OTHER DISTRIBUTOR OBLIGATIONS
7.1. In addition to other terms and conditions set forth in this
Agreement, Distributor agrees as follows:
7.1.1. By the fifteenth working day following the close of
each quarter, Distributor shall supply to
Synchronicity the following reports for the previous
calendar month: all shipments of Products to
Authorized Resellers and End Users; all orders
received for Products; all Authorized Resellers and
End User training conducted using Synchronicity
training materials; and consulting engagements
conducted using Synchronicity Process methodology.
7.1.2. By the fifteenth working day following the close of
each quarter, Distributor shall promptly supply to
Synchronicity all new End User, for the purposes of
the calendar quarter, identifying information,
including name, location, division or group, name of
primary technical contact, all Passport
identification information as specified in the
License Agreement and a copy of the executed License
Agreement.
7.1.3. Distributor shall promptly inform Synchronicity in
writing of all inquiries for the Products outside the
Territory.
7.1.4. Distributor shall not export the Products in
violation of the export control laws of the United
States or of any other country, and agrees to
indemnify Synchronicity for any breach of this
warranty.
SECTION 8: SYNCHRONICITY WARRANTY AND INDEMNITY
8.1. Synchronicity hereby warrants that it has the right to enter
into this Agreement and to grant the licenses and distribution
rights hereunder. Synchronicity agrees, at its expense, to
defend or, at its option, to settle any and all claim, action,
suit or proceeding brought against Distributor or ITI USA (as
defined in Section 13 below) Authorized Reseller and/or End
User (collectively, "Indemnitee") alleging that the
Distributor's use of the Products pursuant to this Agreement
infringes any United States or Japanese patents, copyrights,
trade marks, trade names or any other proprietary rights of
any third party, and to indemnify Indemnitee against any and
all claims, actions, suits, proceedings, losses, damages,
liabilities and expenses (including attorneys' fees) assessed
against Indemnitee or incurred by Indemnitee arising out of
such infringement, provided: (a) Distributor notifies
Synchronicity promptly and in writing that any such claim,
action or suit is threatened or has been brought; (b)
Synchronicity has the right to assume the defense of such
claim, action or suit with counsel selected by Synchronicity;
and (c) Synchronicity receives Distributor's full and complete
cooperation in the defense of such claim, action or suit.
Synchronicity shall have no liability for costs incurred or
settlements made without its consent.
8.2. In the event of any such claim, action or suit, Synchronicity
shall have the right, at its option, to either:
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8.2.1. procure for Distributor and its End Users the right
to continue using and selling the Products,
8.2.2. modify the Products so that they are non-infringing
to the extent that such functions of the Products are
maintained, or
8.2.3. withdraw the Products.
8.3. In the event any Product is withdrawn, Distributor agrees to
cooperate with Synchronicity in the retrieval of such Product.
Synchronicity's sole liability to Distributor in such event
shall be to refund all amounts paid by Distributor to
Synchronicity for such Product.
8.4. Synchronicity does not warrant that the functions contained in
a Licensed Program will meet an End User's requirements or
that the operation of a Product will be error free. For ninety
(90) days from the date of delivery of the Products to End
Users by Distributor and provided that Products are run
exclusively on Authorized Hardware/Software Configurations,
Synchronicity warrants that the Products will perform as
described in the License Agreement in Exhibit A. If the
Product fails to perform as warranted, Distributor shall
notify Synchronicity of the problem with specificity, and
Synchronicity shall make reasonable efforts to remedy the
problem. If Synchronicity's efforts to remedy a problem are
unsuccessful, Distributor acknowledges and agrees that
Synchronicity's sole and exclusive obligations hereunder to
Distributor and its Authorized Resellers and End Users will be
limited to the replacements of defective media of the Product,
or to a refund to Distributor of the license fee paid by
Distributor pursuant to Section 5.2 above. Before returning
the Product to Synchronicity for replacement, Distributor must
first obtain a return merchandise authorization (RMA) from
Synchronicity's technical support function. Furthermore,
Synchronicity does not warrant any part of any Product that is
derived or licensed from a third party licensor if such third
party has not warranted, assumed liability of or provided
support to Synchronicity for such third party product.
8.5. THE FOREGOING LIMITED WARRANTY OF SYNCHRONICITY IS IN LIEU OF
ALL OTHER WARRANTIES OF SYNCHRONICITY, EXPRESS OR IMPLIED,
WITH RESPECT TO THE PRODUCTS, INCLUDING WITHOUT LIMITATION,
WARRANTIES OF TITLE, NONINFRINGEMENT, MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
8.6. Notwithstanding anything in this Section 8, Synchronicity
shall not be liable for any damages caused by:
8.6.1. any claim of infringement resulting in any way from
operating Products on other than Authorized Hardware/
Software Configurations;
8.6.2. the use of the Products with infringing software or
data, or from modifications made to the software by
Distributor pursuant to the development effort set
forth in Section 2 of this Agreement.
8.6.3. any modification of the Products provided by
Synchronicity by any person other than Synchronicity
without Synchronicity's approval.
8.7. THIS SECTION 8 STATES THE ENTIRE LIABILITY OF SYNCHRONICITY
FOR PATENT, COPYRIGHT, TRADEMARK OR OTHER INTELLECTUAL
PROPERTY RIGHT INFRINGEMENT OR FOR ANY BREACH OF WARRANTY,
EXPRESS OR IMPLIED.
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8.8. EXCEPT FOR AMOUNTS PAYABLE PURSUANT TO SECTION 8.1 OF THIS
AGREEMENT, SYNCHRONICITY AGREES TO INDEMNIFY DISTRIBUTOR
AGAINST CLAIMS RESULTING FROM SYNCHRONICITY'S BREACH OF THE
WARRANTIES SET FORTH IN THIS SECTION 8, BUT IN NO EVENT SHALL
SYNCHRONICITY BE LIABLE TO DISTRIBUTOR OR TO ANY END USER FOR
ANY LOSS OF PROFITS, LOSS OF DATA, OR LOSS OF USE OF HARDWARE,
OR FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL
DAMAGES OF DISTRIBUTOR, ANY END USER OR ANY OTHER THIRD PARTY.
No action may be brought by Distributor against Synchronicity
beyond two (2) years after the cause of action has arisen or
should have arisen.
SECTION 9: DISTRIBUTOR WARRANTY AND INDEMNITY
9.1. Distributor hereby warrants that it has the right to enter
into this Agreement. Distributor agrees to indemnify
Synchronicity against any and all losses, damage or liability
assessed against Synchronicity or incurred by Synchronicity
arising out of or in connection with any claim that any
portion of the Products developed by Distributor pursuant to
Section 2 hereunder (but not the portions of the Products that
remain unmodified from the Products delivered by Synchronicity
hereunder) infringe a patent, trademark, copyright or other
intellectual property right, provided: (a) Synchronicity
notifies Distributor promptly and in writing that any such
claim, action or suit is threatened or has been brought; (b)
Distributor has the right to assume the defense of such claim,
action or suit with counsel selected by Distributor; and (c)
Distributor receives Synchronicity's full and complete
cooperation in the defense of such claim, action or suit.
Distributor shall have no liability for costs incurred or
settlements made without its consent.
9.2. Distributor agrees to indemnify Synchronicity against any and
all losses, damage or liability assessed against Synchronicity
or incurred by Synchronicity arising out of or in connection
with any claim asserted against Synchronicity with respect to
Distributor's sales, marketing, support, distribution or
services of the Products hereunder, provided: (a)
Synchronicity notifies Distributor promptly and in writing
that any such claim, action or suit is threatened or has been
brought; (b) Distributor has the right to assume the defense
of such claim, action or suit with counsel selected by
Distributor; and (c) Distributor receives Synchronicity's full
and complete cooperation in the defense of such claim, action
or suit. Distributor shall have no liability for costs
incurred or settlements made without its consent. Nothing in
this Section shall effect Synchronicity's liability to
Distributor pursuant to Section 8 of this Agreement.
9.3. THIS SECTION 9 STATES THE ENTIRE LIABILITY OF DISTRIBUTOR FOR
PATENT, COPYRIGHT, TRADEMARK OR OTHER INTELLECTUAL PROPERTY
RIGHT INFRINGEMENT OR FOR ANY BREACH OF WARRANTY, EXPRESS OR
IMPLIED.
9.4. DISTRIBUTOR AGREES TO INDEMNIFY SYNCHRONICITY AGAINST CLAIMS
RESULTING FROM DISTRIBUTOR'S BREACH OF THE WARRANTIES SET
FORTH IN THIS SECTION 9, BUT IN NO EVENT SHALL DISTRIBUTOR BE
LIABLE TO SYNCHRONICITY FOR ANY LOSS OF PROFITS, REVENUE OR
BUSINESS OR ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL
DAMAGES OF SYNCHRONICITY. No action may be brought by
Synchronicity against Distributor beyond two (2) years after
the cause of action has arisen or should have arisen.
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SECTION 10: PROPRIETARY & CONFIDENTIAL INFORMATION
10.1. Distributor recognizes that Synchronicity is the owner of the
Products licensed under this Agreement, the results of the
development performed hereunder by or on behalf of either
party, and all copies thereof, and of all copyright, trade
secret, patent and other intellectual or industrial property
rights therein, all of which are valuable property of
Synchronicity. To the extent necessary for Synchronicity to
own the entire right, title and interest in and to the results
of any development performed by Distributor under Section 2
hereof, in relation to the Products, Distributor does hereby
assign and agree to assign to Synchronicity, all that right,
title and interest in and to any such development, such
assignment occurring as soon as capable of taking place in law
or equity. Distributor shall obligate all persons employed or
engaged by Distributor to perform any such development under
Section 2 hereof to provide to Distributor, which shall supply
to Synchronicity at no additional charge, all such
assignments, rights and covenants as are deemed appropriate by
Synchronicity to assure and perfect such assignment.
10.2. Distributor shall take all reasonable measures to assist
Synchronicity in maintaining its proprietary rights. Such
measures shall include using diligent efforts to prevent End
Users from copying or using the Products outside the scope of
this Agreement or the License Agreement. In the event of any
violations or suspected violations of such provisions,
Distributor shall immediately notify Synchronicity and
Distributor will, at Synchronicity's expense, assist
Synchronicity in enforcing Synchronicity's proprietary
interest in the Products.
10.3. Distributor hereby acknowledges and agrees that Synchronicity
in any case has the right to enforce and protect its own
rights in the Products directly against any and all parties,
including, without limitation, End Users.
10.4. Except as specifically provided in this Agreement, neither
Distributor nor any End User is authorized to modify, enhance
or otherwise change the Products, including documentation and
any other related materials described in Exhibit C, without
the prior written consent of Synchronicity.
10.5. Distributor shall not cause or permit disclosure, copying,
display, loan, publication, transfer of possession (whether by
sale, exchange, gift, operation of law or otherwise) or other
dissemination of the Products, in whole or in part, to any
third party, except as permitted in this Agreement.
10.6. In any distribution of the Products, Distributor will preserve
and respect Synchronicity's copyright, trade secret, patent,
proprietary and/or other legal notices contained on or in
copies of the Products.
10.7. Distributor will maintain appropriate records relating to the
disposition and use of all copies of Products.
10.8. Distributor shall not disassemble or reverse compile any
Product or portion thereof, nor create any derivative works
thereof other than those specifically provided for hereunder,
except as permitted by applicable law, and to the extent that
Synchronicity is not permitted by such law to exclude or limit
such rights. Neither shall Distributor bypass any security
device provided with the Products.
10.9. Each party shall keep confidential any confidential or
proprietary information of the other party received from the
other party in writing and appropriately marked to indicate
its confidential or proprietary nature. If the disclosure is
oral, the information disclosed shall
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be identified as confidential and/or proprietary at or prior
to such oral disclosure, and the information disclosed is
reduced to writing and transmitted to the other party within
thirty (30) days of such oral disclosure. Neither party shall
have the obligation of confidentiality set forth in this
Section 10.9 if the confidential or proprietary information is
or becomes:
(i) already known to receiving party; or
(ii) publicly available through no fault of receiving
party; or
(iii) independently developed by receiving party without
access to such information; or
(iv) required to be disclosed pursuant to any statutory or
regulatory provision or court order.
(v) received by receiving party without confidential
obligations or restrictions on use.
SECTION 11: TERM AND TERMINATION OF AGREEMENT
11.1. The term of this Agreement shall enter into full force and
effect on the Effective Date and shall remain in force through
the Satisfactory Delivery Date and ends on December 31, 2001.
This Agreement shall automatically extend on a year to year
basis unless either party shall give written notice of
non-renewal to the other party, for cause or without cause,
not less than ninety (90) days prior to the expiration of the
then current term.
11.2. This Agreement may be terminated as follows:
11.2.1. Except as otherwise herein provided, either party may
terminate this Agreement upon the other party's
failure to cure a default (including the failure to
make any of the prepayments or payments provided for
in Section 5) under this Agreement within thirty (30)
days of receipt of notice of default. Notwithstanding
the foregoing, Synchronicity may terminate this
Agreement immediately, upon written notice to
Distributor, if Distributor violates any terms and
conditions of or relating to Synchronicity's
proprietary rights or to United States export control
laws.
11.2.2. If either party shall have ceased business, been
adjudged bankrupt or insolvent under the laws of any
relevant jurisdiction, made an assignment for the
benefit of creditors, or filed, or had filed against
it, a petition of bankruptcy, reorganization or other
insolvency proceeding, the other party may terminate
the Agreement upon written notice.
11.2.3. If there should be any transfer of a controlling
interest in Distributor, Synchronicity may terminate
this Agreement upon thirty (30) days' written notice,
where such change, in the judgment of Synchronicity,
substantially impairs Distributor's ability to
perform its obligations pursuant to this Agreement.
11.2.4. If either party chooses to terminate this Agreement
as set forth in Section 11.1 above.
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11.3. Upon termination or expiration of this Agreement, the duties
and rights of the parties shall be as follows:
11.3.1. Distributor's right and license to market the
Products shall terminate and, except as provided
herein, Distributor shall immediately stop marketing
and using the Products, and shall cease to provide
Authorized Resellers and End Users with First Line
Support. Distributor shall immediately return to
Synchronicity all Products as well as all technical
and marketing materials relating to the Products and
all copies thereof. Distributor shall promptly return
to Synchronicity any confidential information
belonging to Synchronicity.
11.3.2. Within ninety (90) days of termination or expiration
of this Agreement, a duly authorized officer of
Distributor shall certify in writing that all
Products and all technical and marketing materials
relating to the Products have been returned to
Synchronicity.
11.3.3. Distributor shall have ninety (90) days to complete
sales to potential Authorized Resellers and End Users
contacted by Distributor prior to the date of
termination or expiration of this Agreement. During
this time, Synchronicity shall continue to provide
Distributor with Second Line Support in accordance
with Section 4 in order to assist Distributor in
completing sales to potential Authorized Resellers
and End Users contacted by Distributor prior to the
termination or expiration date.
11.3.4. Within ninety (90) days of termination or expiration
of this Agreement, Distributor shall pay
Synchronicity all sums due and owing under this
Agreement on or prior to the effective date of such
termination. IN NO EVENT SHALL EITHER PARTY BE
REQUIRED TO PAY THE OTHER PARTY ANY DAMAGES OR
SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING
OUT OF THE TERMINATION OR EXPIRATION OF THIS
AGREEMENT.
11.3.5. All Product Support Agreements relating to the
Products between Distributor and End Users in effect
at the time of termination or expiration of this
Agreement shall at Synchronicity's request be
assigned by Distributor to Synchronicity (or its
designee), which shall thereupon assume the
performance of Distributor's First Line Support
obligations to each End User that has paid all fees
and charges due pursuant to such Product Support
Agreement (but not to any End User that has not paid
all such fees and charges).
11.3.6. Termination or expiration of this Agreement shall not
terminate or cancel any sublicense to the Products
granted by Distributor or Authorized Resellers to End
User hereunder prior to the termination or expiration
of this Agreement.
SECTION 12: GENERAL PROVISIONS
12.1. The parties agree to cooperate fully in exchanging all
consents, information and documents which may be reasonably
necessary in fulfilling the terms of this Agreement, including
such information and documents required under Japanese laws
and regulations.
12.2. This Agreement shall not create and shall not be construed as
creating any relationship of agency, partnership, joint
venture, or employment between the parties. Synchronicity and
Distributor enter this Agreement as and shall remain
independent parties.
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12.3. Neither party shall have the right or authority to assume,
create or enlarge any obligation or commitment on behalf of
the other party and shall not represent itself as having the
authority to obligate or bind the other party in any manner
except as provided for in this Agreement.
12.4. All notices or other communications given by either party to
the other under this Agreement shall be in writing and shall
be personally delivered or sent by registered or certified
mail, return receipt requested, to the other party at this
address set forth above or such other address as a party may
subsequently designate in writing. Notices shall be effective
upon receipt.
12.5. Neither party may assign, delegate or otherwise transfer any
of its rights or obligations under this Agreement without the
prior written consent of the other party. No assignment,
delegation, transfer or any attempt thereof in violation of
the foregoing shall be effective without such prior written
consent of the other party. This Agreement shall be binding
upon and inure to the benefit of the parties and their
respective successors, administrators, heirs, and assigns.
12.6. This Agreement, including all referenced and attached
Exhibits, supersedes all prior and contemporaneous agreements,
representations, negotiations, and understandings, including
oral representations, between the parties relating to this
Agreement, and is intended by the parties as a complete and
exclusive statement with respect to the subject matter hereof.
This Agreement may be modified only in a written instrument
executed by the authorized representatives of the parties. In
case of any discrepancy between this Agreement and any other
documents, the terms of this Agreement shall prevail.
12.7. No waiver of any provision of this Agreement shall be
effective unless in writing and signed by the authorized
representative of a party against whom the waiver is sought to
be enforced. Waiver of breach of any provision of this
Agreement on any occasion shall not be deemed a waiver of that
provision or of any other provision on any other occasion, nor
shall such waiver affect the right of either party to
terminate this Agreement. The remedies herein reserved shall
be cumulative and additional to any other remedies in law or
equity.
12.8. Because unauthorized use or transfer of the Products, or any
information contained therein, may diminish substantially the
value of such materials and irrevocably harm Synchronicity, if
Distributor breaches any of its obligations under this
Agreement, Synchronicity (without limiting its other rights or
remedies) shall be entitled to injunctive and/or equitable
relief, in addition to other remedies afforded by law, to
protect its interests.
12.9. In case of a dispute arising from the interpretation or
enforcement of patents, trademarks or copyrights, the parties
agree to submit to the exclusive jurisdiction of the United
States District Court for the District of Massachusetts,
located in Boston, Massachusetts, USA. All other disputes
shall be submitted exclusively to the rules then in effect of
Conciliation and Arbitration of the International Chamber of
Commerce. Such arbitration shall be held in the city and
country where the respondent resides. The arbitrator(s) shall
decide the matters submitted to them based upon the evidences
presented and the terms of this Agreement and arbitrator(s)
shall issue a written award which shall state the basis of the
award and include findings of fact and conclusions of law. The
award of the arbitration shall be final, non-appealable and
binding upon the parties and their respective successors and
permitted assigns. Judgment upon the award may be entered in
any court having the jurisdiction thereof. This Agreement will
not be governed by the United Nations Convention of Contracts
for the International Sale of Goods, the application of which
is hereby expressly excluded.
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12.10. The provisions of Sections 1, 6.3, 6.4, 6.5, 7, 8,9, 10, 11.3
and 12 shall survive the termination of this Agreement;
provided, however, that, Section 10.9 shall survive for three
(3) years thereafter.
12.11 Neither party shall be liable hereunder by reason of any
failure or delay in the performance of its obligations
hereunder on accounts of strikes, riots, fires, flood, storm,
explosions, acts of God, war, governmental action, labor
conditions, earthquakes, or any other cause which is beyond
the reasonable control of such party.
12.12 This Agreement shall be governed by and construed in
accordance with laws of Commonwealth of Massachusetts, without
regard to conflicts of law provisions.
12.13 If any provision of this Agreement shall be held invalid or
unenforceable by a court of competent jurisdiction, the
remainder of this Agreement shall nevertheless continue in
full force and effect. All Section headings are provided for
the convenience or references only and shall not be construed
otherwise.
SECTION 13: PURCHASE ORDER AND DELIVERY
13.1. All orders for the Products issued by Distributor are subject
to acceptance by Synchronicity and shall not be binding until
the written acceptance of Synchronicity is delivered to
Distributor, which acceptance shall not be unreasonably
withheld or delayed.
13.2 Synchronicity must accept an order of Distributor within five
(5) business days after its receipt as long as the order is
consistent with the terms of this Agreement. Unless otherwise
expressly agreed to by Synchronicity and Distributor in
advance, all printed and other terms contained in purchase
orders, order acknowledgments, price list for the Products and
invoices contrary to this Agreement are hereby excluded and
shall be of no force and effect.
13.3 Delivery of the Products ordered by Distributor hereunder
shall be F.O.B. Marlboro, Massachusetts, USA and all risk of
loss of and damages to the Products shall pass to Distributor
upon delivery by Synchronicity to a carrier designated by
Distributor. The term "F.O.B." shall be construed in
accordance with Massachusetts Uniform Commercial Code Chapter
106 Section 2-319.
SECTION 14: ITOCHU TECHNOLOGY INC.
14. Synchronicity acknowledges and agrees that Distributor may
engage ITOCHU TECHNOLOGY INC. ("ITI"), a Delaware corporation
with its office currently located at 3100 Patrick Henry Drive,
Santa Clara, CA 95054 or any successor entity to act as an
order processing agent acting for and on behalf of Distributor
with its authority including, without limitation, to receive
shipment, place orders and effect payments from, with and to
Synchronicity, respectively, on behalf of Distributor.
Distributor shall be responsible to Synchronicity for any act
or omission of ITI regarding its activities contemplated
herein.
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SECTION 15: SYNCHRONICITY'S OBLIGATION
15.1 Synchronicity shall make the reasonable commercial efforts to
keep Distributor informed of United States' market trends, and
competitive products with respect to the Products and other
pertinent information which may aid Distributor in promoting
the Products.
15.2 Synchronicity shall keep Distributor informed of
Synchronicity's technical developments and new products and
shall make the reasonable commercial efforts to provide such
information in advance of the initial introduction of such
products.
15.3 Synchronicity shall be solely responsible for the design,
development, production and performance of the Products and
for the legal protection of its trademarks, tradenames,
copyrights and patents.
15.4 Synchronicity shall provide to Distributor the names and the
addresses of end user prospects within the assigned Territory,
which Synchronicity had received as a result of advertising,
trade shows, and referrals by present end users or cooperative
marketing partners.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under seal
as of the day and year indicated above in Marlboro, Massachusetts, USA
AGREED AND ACCEPTED AGREED AND ACCEPTED
SYNCHRONICITY, INC. ITOCHU TECHNO SCIENCE CORP.
By: /s/ Eugene Connolly By: /s/ Hito Satake
-------------------------------- ----------------------------------
Title: Title:
----------------------------- -------------------------------
Date: Date:
------------------------------ --------------------------------
AGREED AND ACCEPTED
ITOCHU CORPORATION
By: /s/ Eizo Koyayashi
--------------------------------
Title:
-----------------------------
Date:
------------------------------
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<PAGE> 1
Exhibit 10.15
Intel Confidential
Agreement # 1308984
Effective Date December 31, 1999
Expiration Date December 31, 2002
LICENSE AGREEMENT
LICENSE AGREEMENT (this "License Agreement"), is made and entered into effective
December 31, 1999 (the "Effective Date") by and between INTEL CORPORATION, a
Delaware corporation with a place of business at 2200 Mission College Boulevard,
Santa Clara, CA 95052 (together with all divisions and subsidiaries, hereinafter
"Intel") and Synchronicity, Inc., a Delaware corporation with a place of
business at 201 Forest Street, Marlboro, MA 01778 ("Synchronicity"). Intel and
Synchronicity may be singularly or collectively referred to in this License
Agreement as the "Party" or the "Parties", respectively.
RECITALS
WHEREAS, Intel (through its DT group) and Synchronicity have entered into a
"COLLABORATION AND EVALUATION AGREEMENT" dated September 28, 1998 (the
"Collaboration Agreement") pursuant to which the Parties outlined some general
terms and conditions for collaboration in certain technical activities;
WHEREAS, Intel (through its Microprocessor Products Group's Design Technology
unit, hereafter "DT") and Synchronicity have entered into an "EVALUATION LICENSE
AGREEMENT FOR THIRD-PARTY TECHNOLOGY" dated August 9, 1999 (the "Evaluation
Agreement") pursuant to which Intel evaluated the DesignSync DFII tool to
determine whether Intel would like to engage in a collaborative project with
Synchronicity; and
WHEREAS, Intel and Synchronicity now desire to engage in a collaborative project
and to license the DesignSync DFII software tool, as enhanced by the work
performed by Synchronicity under the SOW, to Intel.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Parties to this License Agreement hereby
agree as follows:
1. DEFINITIONS
1.01 "Collaborative Developments" means any and all work product and results
arising from the collaborative development activities under this License
Agreement pursuant to one or more SOWs, including any Source Code and
Object Code.
1.02 "Date Data" means any data or input, whether generated within a
Deliverable or communicated to it, which includes an indication of or
reference to date.
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<PAGE> 2
Intel Confidential
1.03 "Deliverables" means the Collaborative Developments, Documentation,
Products, Services, and Software provided by Synchronicity to Intel.
1.04 "Documentation" means documentation, including without limitation, data
sheets, specifications, installation guides, and manuals.
1.05 "Effective Date" means the date first set forth above.
1.06 "Expiration Date" means the date first set forth above, whereby this
License Agreement shall expire unless renewed by the Parties according to
the terms and conditions herein.
1.07 "Intellectual Property" means all intellectual property rights worldwide
arising under statutory or common law, including without limitation that
which is acquired or obtained under a contract with a third party, and
whether or not perfected, comprising any of the following: (i) copyrights,
copyright applications, copyright registrations, mask works and mask work
registrations; (ii) rights relating to the protection of trade secrets and
confidential information; (iii) patents, patent applications, reissue
patents, reissue applications, invention registrations, petty patents;
(iv) any right analogous to those set forth in this Section in foreign
jurisdictions; and (v) any renewals or extensions of the foregoing (as and
to the extent applicable) now existing hereafter filed, issued or
acquired.
1.08 "Initial Allocation Fee" means the fee set forth on Addendum C attached
hereto.
1.09 "Object Code" means the object code version of a software product,
including all computer programming code, entirely in binary form, which is
directly executable by a computer and includes those help, message,
overlay, and other files necessary for supporting the intended use of the
executable code.
1.10 "Products" means any software products that Synchronicity makes generally
commercially available for purchase or license to third parties in Object
Code format.
1.11 "Release" means a substantial improvement in user functionality of an
existing Product that is marketed as a new Product, or a version of a
Product that replaces previous Releases. Substantial improvement must
include more than just new hardware support (i.e., devices, drivers,
ports) and fixes to program errors in a previous Release. Such Releases
are typically identified by a new product name or a new release number.
1.12 "Services" means the Software related work provided by Synchronicity,
which may include development, training, consulting, support, and
maintenance.
1.13 "Software" means the Product known as DesignSync DFII Version 2.1.1 as
modified for Intel's needs, in Object Code form, including but not limited
to (i) the current Release, (ii) all new Releases, Updates and Upgrades,
(iii) all developments
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performed on such Product for Intel pursuant to this License Agreement,
and (iv) all Documentation customarily provided with the Product or
developed for Intel pursuant to this License Agreement.
1.14 "Source Code" means the source code version of a software product, along
with all available information, documentation, specifications, and
schematics which would enable one to develop, maintain, support, and/or
enhance the software product without assistance of any other third person
or reference to any other materials.
1.15 "SOW" means the Statement of Work to be performed under this License
Agreement attached hereto as Addendum A.
1.16 "Update" with respect to any Product means a version of the Product that
has a different version number than the prior version of the Product that
includes bug fixes or other limited improvements. Such Updates are
typically identified by a change in the tenths digit [x.x(x)] (i.e.-1.11,
1.12, 1.13).
1.17 "Upgrade" means the unique functional and/or feature improvements made to
any Product to keep the current version of the Release competitive in
terms of new capabilities, features or pricing in the Product's respective
market. Such Upgrades are typically identified by a change in the tenths
digit [x.(X)x] (i.e.-1.10, 1.20, 1.30).
2. COLLABORATIVE ACTIVITIES
2.1 Collaborative Development. Intel and Synchronicity hereby agree to engage
in the collaborative development described in the SOW. If Synchronicity
fails to perform its obligations under this License Agreement,
Synchronicity shall appoint as many Synchronicity application engineers as
necessary to resolve Synchronicity's performance deficiencies. The
application engineer(s) must be approved by Intel prior to entering Intel
facilities and shall be subject to Intel's standard security procedures.
If Intel is unable to obtain Synchronicity's commitment to the performance
of the SOW to Intel's satisfaction after having worked with a
Synchronicity application engineer in an effort to fulfill Synchronicity's
performance obligations under this License Agreement, Intel may terminate
this License Agreement and all of its obligations under this License
Agreement.
2.2 Services provided by Synchronicity. Synchronicity shall promptly perform
Services as scheduled or shall promptly notify Intel if unable to perform
any scheduled Services and shall state the reasons.
2.3 Best efforts. Synchronicity will use its best efforts to perform and
timely complete the work specified by the project in accordance with the
SOW, specifications, schedules and milestones and other requirements
associated therewith.
2.4 Primary Contact. Synchronicity will appoint a program manager who will
serves as a primary contact for issues related to the project, and will
hold program reviews with Intel on any of the work ("Primary Contact").
Synchronicity shall make the contact
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information for the Primary Contact available to Intel prior to starting
the project contemplated in the SOW.
3. OWNERSHIP
3.1 Ownership by Intel. Intel shall own all right, title and interest, in and
to the Intellectual Property rights embodied in the following work product
used or developed under this License Agreement, even if such work product
or improvements to such work product are developed solely by Synchronicity
employees:
(a) Intel proprietary file formats used in connection with design tools
and communicating between and among such tools.
(b) Source Code and Object Code whose primary function is to integrate
the Collaborative Developments into Intel's design environment.
(c) Intel circuit designs and manufacturing processes used as alpha and
beta projects for testing the Collaborative Developments, Products
and Software, including any intermediate data and final reports
generated in connection with such designs.
3.2 Ownership by Synchronicity. Subject to Intel's ownership under Section
3.1, Synchronicity shall own all right, title and interest in and to any
remaining Intellectual Property embodied in the Collaborative
Developments, Products and Software used or developed under this License
Agreement, whether developed solely by Synchronicity employees, or jointly
by Synchronicity employees in conjunction with Intel employees.
Synchronicity shall have no ownership interest in any Intellectual
Property developed solely by Intel employees, which shall be exclusively
owned by Intel.
3.3 Cooperation. The Parties agree to assist each other, at the other's
expense, in every proper way, to secure the other party's Intellectual
Property rights as provided in this Section 3. At no expense to Intel,
Intel may request that Synchronicity promptly provide Intel with a
completed and executed copy of the Certificate of Originality set forth on
Addendum G in connection with any Collaborative Developments, Products and
Software provided to Intel under this License Agreement. At no expense to
Intel, Intel may request that Synchronicity promptly provide Intel with a
completed and executed copy of the Assignment of Intellectual Property set
forth on Addendum H in connection with any Intellectual Property owned by
Intel under this License Agreement.
4 LICENSES TO INTEL
4.1 General License. Synchronicity hereby grants to Intel a royalty-free,
paid-up, non-exclusive, irrevocable, perpetual, worldwide license, with
the right to sublicense, under all Intellectual Property owned or licensed
by Synchronicity, to make, have made, use, sell, offer to sell, reproduce,
have reproduced, prepare derivatives, publicly display or perform, by any
means and on any tangible or intangible medium now known or
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developed in the future, any integrated circuits and related electronic
devices, but only to the extent that Intel's use of the Deliverables
necessarily introduces Synchronicity's Intellectual Property into such
integrated circuits and related electronic devices.
4.2 Software License. Promptly after the acceptance criteria of the SOW have
been met for the full standard release package to be provided under the
final phase of the SOW, Synchronicity shall deliver and install on Intel's
computer systems, as reasonably directed by Intel, the full standard
release of the Software. Intel shall have the type of license set forth on
Addendum B for the number of copies of the Software set forth on Addendum
B. Included in this software license grant shall be the maintenance and
support of the Software as set forth on Addendum B. Fees for this software
license grant and maintenance and support are specified on Addendum C. In
the event that Intel exercises it option to license Synchronicity's
ProjectSync Product pursuant to Addendum C, the Parties agree that
ProjectSync shall be considered Software for purposes of this License
Agreement and all applicable terms and conditions of this License
Agreement shall apply.
4.3 Additional Software Licenses and Maintenance. Additional software licenses
and maintenance may be purchased for the fees shown on Addendum C.
4.4 Source Code Escrow. Concurrent with the execution of this License
Agreement, the Parties shall enter into a multi-party source code escrow
agreement of the form set forth in Addendum D and Exhibits A and B
thereto, which shall be triggered pursuant to the terms and conditions
provided thereunder and Addendum B hereto.
4.5 Residuals. Notwithstanding anything herein to the contrary, either party
may use Residuals for any purpose, including without limitation use in
development, manufacture, promotion, sale and maintenance of its products
and services; provided that this right to Residuals does not represent a
license under any valid patents, copyrights or other intellectual property
rights of the disclosing party. The term "Residuals" means any information
that are retained in the unaided memories of the receiving party's
employees who have had access to the disclosing party's information
pursuant to the terms of this License Agreement. An employee's memory is
unaided if the employee has not intentionally memorized the Information
for the purpose of retaining and subsequently using or disclosing it.
4.6 Other Limitations. Intel may not rent, lease, modify, translate, reverse
engineer, decompile, disassemble, or create derivative works of the
Software, or the Collaborative Developments owned by Synchronicity under
Section 3.2 of this License Agreement.
5. FEES AND PAYMENT
5.1 Fees. Intel shall pay to Synchronicity the fees shown on Addendum C in
consideration of the development obligations and licenses granted to Intel
hereunder. These prices remain fixed for the duration of this License
Agreement except as provided herein.
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5.2 Most Favored Customer. Synchronicity agrees to negotiate with Intel in
good faith with regard to any and all licenses, fees, charges, purchases,
or services required by Intel in connection with the Products not
otherwise provided for in this License Agreement, and Synchronicity agrees
that the license fees for Synchronicity's standard commercially available
Products, and charges for standard maintenance and support shall be no
less favorable than those offered or granted by Synchronicity to any third
party licensing or purchasing such Product on substantially similar terms
and condition. Synchronicity agrees that if Synchronicity provides the
Software or maintenance on substantially similar terms and conditions to
any customer at a price less than that set forth in this License
Agreement, Synchronicity shall adjust its price to Intel to the lower
price. After expiration of this License Agreement, Synchronicity shall
continue to offer to Intel a maintenance package for the Software and the
opportunity to obtain additional licenses of the Software on terms and
conditions and at a price no less favorable than those offered or granted
by Synchronicity to any third party.
5.3 Taxes and Other Costs. All applicable taxes and other charges such as
duties, customs, tariffs, imposts, and government imposed surcharges shall
be stated separately on Synchronicity's invoice and borne by
Synchronicity. In the event that Intel is prohibited by law from remitting
payments to Synchronicity, unless Intel deducts or withholds taxes
therefrom on behalf of the local taxing jurisdiction, then Intel shall
duly withhold such taxes and shall remit the remaining net invoice amount
to the Synchronicity. Intel shall not reimburse Synchronicity for the
amount of such taxes withheld. Additional costs, except those described on
Addendum C, will not be reimbursed without Intel's prior written approval.
5.4 Inspection and Audit. Intel reserves the right to have Synchronicity's
records inspected and audited to ensure compliance with this License
Agreement. At Intel's option or upon Synchronicity's written demand, such
audit will be performed by an independent third party at Intel's expense.
However, if Synchronicity is found to not be complying with this License
Agreement in any way, Synchronicity shall reimburse Intel for all costs
associated with the audit, along with any discrepancies discovered, within
thirty (30) days after completion of the audit. The results of such audit
shall be kept confidential by the auditor and, if conducted by a third
party, only Synchronicity's failures to abide by the obligations of this
License Agreement shall be reported to Intel.
5.5 Invoicing. Synchronicity agrees to invoice Intel no later than one hundred
eighty (180) days after completion of particular Services or delivery of
particular items. Intel will not be obligated to make payment against any
invoices submitted after such period.
6 TERM AND TERMINATION
6.1 Term. Unless earlier terminated, the term of this License Agreement shall
begin on the Effective Date and continue through the Expiration Date. Upon
expiration,
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Intel shall have the right to renew this License Agreement for an
additional three (3) years for the renewal fee(s) set forth in Addendum C.
Upon the termination or expiration of this License Agreement, Intel shall
return to Synchronicity or destroy all Software covered by this License
Agreement, including any copies thereof. The termination or expiration
shall not effect any irrevocable licenses already granted to Intel, which
shall continue in full force.
6.2 Termination. Either party may terminate this License Agreement if the
other party breaches any material provision of this License Agreement and,
if such breach is curable, fails to cure the same within thirty (30) days
after receipt of written notice from the other party.
6.3 Termination for Convenience. In addition to the above termination rights,
Intel may terminate this License Agreement and all further obligations to
Synchronicity at any time and without cause by giving Synchronicity thirty
(30) days written notice. Upon Synchronicity's receipt of such notice,
Synchronicity shall, unless otherwise specified in such notice,
immediately stop all work previously authorized and give prompt written
notice to, and cause all of, its Synchronicity employees or subcontractors
to cease all related work. If this License Agreement is terminated by
Intel without cause, Intel will pay Synchronicity for all completed work
and on a prorated basis for partially completed work. Except as provided
in this Section 6.3, Intel will have no liability or obligation to
Synchronicity for terminating this License Agreement without cause. Intel
will not be responsible for any anticipated profits or for any equipment
purchased or other expenses incurred by Synchronicity in reliance on this
License Agreement.
6.4 Termination for Failure to Perform. If Synchronicity does not fulfill its
development obligations within the time periods provided on Addendum A and
Synchronicity fails to cure such failure within thirty (30) days, in
addition to Intel's other rights and remedies, Intel may elect to require
Synchronicity to assign and convey to Intel all right, title and interest
in and to Collaborative Developments already developed, without obligation
to make any further payment.
7 REPRESENTATION AND WARRANTIES
7.1 Representations and Warranties of Synchronicity. Synchronicity makes the
following representations and warranties to Intel regarding Deliverables
furnished hereunder, which survive any delivery, inspection, acceptance,
or payment for the Deliverables.
(a) Deliverables will not infringe any third party Intellectual
Property;
(b) Deliverables will not incorporate any third party Intellectual
Property without notifying and obtaining the prior written approval
of Intel, which consent shall not be unreasonably withheld;
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(c) Deliverables will conform in all materials respects with the
Documentation and specifications set forth in the SOW;
(d) Deliverables will not contain any computer viruses, worms, trojan
horses, disabling mechanisms, or other harmful code that is intended
to or has the effect of damaging, disabling, corrupting or deleting
any other product, software, hardware, data, or information;
(e) Synchronicity has the necessary right, title, and interest to
provide the Deliverables to Intel, which will be free of liens and
encumbrances;
(f) Synchronicity has no outstanding agreement or obligation that is in
conflict with any of the provisions of this License Agreement, nor
shall Synchronicity enter into any such conflicting agreement or
obligation during the term of this License Agreement;
(g) Deliverables will function without error or interruption related to
Date Data from more than one century;
(h) Services provided shall be performed in accordance with good
workmanlike standards and shall meet the descriptions and
specifications set forth in the SOW;
(i) Synchronicity hereby waives any and all moral rights, including the
right to identification of authorship or limitation on subsequent
modification, that Synchronicity (or its employees) has or may have
in any Deliverables provided to Intel hereunder; and
(j) Synchronicity's employees or contractors who perform work under this
License Agreement have been advised of the terms and conditions of
this License Agreement, agree to be bound by them, and have been
instructed that the work they do for or on behalf of Intel is
governed by this License Agreement.
7.2 WARRANTY DISCLAIMER. TECHNICAL INFORMATION PROVIDED AT NO CHARGE BY ONE
PARTY TO ANOTHER PURSUANT TO THIS LICENSE AGREEMENT WILL BE PROVIDED "AS
IS" WITHOUT WARRANTY OF ANY KIND. EXCEPT AS OTHERWISE PROVIDED IN SECTION
7.1, THE PARTIES SPECIFICALLY DISCLAIM THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND ANY WARRANTY
AGAINST INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHT OF ANY THIRD
PARTY.
7.3 CERTAIN CONSEQUENTIAL DAMAGE. If Synchronicity breaches any of the
warranties of Section 7.1, or Deliverables are otherwise defective or
non-conforming, Synchronicity shall promptly correct any non-conforming
Deliverables and shall pay to Intel all incidental and consequential
damages (as those terms are
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defined in the Uniform Commercial Code, Article 1, 1995 Official Text)
arising from the breach of the foregoing warranties. Synchronicity shall
pay the cost of shipping and risk of loss for all non-conforming
Deliverables.
7.4 OTHER CONSEQUENTIAL DAMAGES. EXCEPT AS PROVIDED IN 7.3, IN NO EVENT SHALL
EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT OR
CONSEQUENTIAL DAMAGES UNDER OR CONCERNING THIS LICENSE AGREEMENT,
IRRESPECTIVE OF WHETHER THE OTHER PARTY HAS ADVANCE NOTICE OF THE
POSSIBILITY OF SUCH DAMAGES.
8 CONFIDENTIALITY AND PUBLICITY
8.1 Existing Confidentiality Obligations Continue. During the course of this
License Agreement, either party may have or may be provided access to the
other's confidential information and materials. Additionally,
Synchronicity may be engaged to develop new information for Intel, or may
develop such information during the performance of Services, which
information will become, upon creation, Intel's confidential information.
Synchronicity shall not use any of the confidential information created
for Intel other than for Intel. Each party agrees to maintain confidential
information and materials in accordance with the terms of any other
applicable separate non-disclosure agreement between Intel and
Synchronicity, including but not limited to:
(a) CBD Non-Disclosure Agreement between the Parties, dated May 19,
1998.
8.2 Other Confidential Information. For confidential information not covered
by one of the non-disclosure agreements of Section 8.1, each party agrees,
at a minimum, to maintain such information in confidence and limit
disclosure on a need to know basis, to take all reasonable precautions to
prevent unauthorized disclosure, and to treat such information as it
treats its own information of a similar nature, until the information
becomes rightfully available to the public through no fault of the
non-disclosing party.
8.3 Publicity. The Parties agree that neither will disclose the existence of
this License Agreement, nor any of its details or the existence of the
relationship created by this License Agreement, to any third party without
the specific, written consent of the other. If disclosure of this License
Agreement or any of the terms hereof is required by applicable law, rule,
or regulation, or is compelled by a court or governmental agency,
authority, or body: (i) the Parties shall use all legitimate and legal
means available to minimize the disclosure to third Parties of the content
of the License Agreement, including without limitation seeking a
confidential treatment request or protective order; (ii) the disclosing
party shall inform the other party at least ten (10) business days in
advance of the disclosure; and (iii) the disclosing party shall give the
other party a reasonable opportunity to review and comment upon the
disclosure, and any request for confidential treatment or a protective
order pertaining thereto, prior to making such disclosure. The Parties may
disclose
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this License Agreement in confidence to their respective legal counsel,
accountants, bankers, and financing sources as necessary in connection
with obtaining services from such third parties. The obligations stated in
this section shall survive the expiration or termination of this License
Agreement. Neither party may use the other party's name or trademarks in
advertisements, brochures, banners, letter-head, business cards, reference
lists, or similar advertisements without the other's express written
consent.
9. INTELLECTUAL PROPERTY INDEMNIFICATION
9.1 Synchronicity shall indemnify and hold Intel and its customers harmless
from any costs, expenses (including reasonable attorneys' fees), losses,
damages, or liabilities incurred because of actual or alleged infringement
of any patent, copyright, trade secret, trademark, maskwork, or other
Intellectual Property right arising out of the use or sale by Intel or
Intel's customers of Intel's products manufactured using the Deliverables
or containing the Deliverables, irrespective of whether Intel furnishes
any specifications to Synchronicity; provided, however, the foregoing
sentence shall only apply to the extent that Intel provides Synchronicity
with specifications that do not infringe the Intellectual Property giving
rise to the claim for indemnification. Intel shall notify Synchronicity of
such claim or demand and shall permit Synchronicity to participate in the
defense or settlement thereof. If an injunction issues as a result of any
claim or action, Synchronicity agrees at its expense and Intel's option to
either: (i) procure for Intel and Intel's customers the right to continue
using affected products; (ii) replace them with non-infringing Items;
(iii) modify them so they become non-infringing; or (iv) refund to Intel
the amount paid for any Deliverables returned to Synchronicity or
destroyed.
9.2 The foregoing provides the entire set of obligations and remedies flowing
between Intel and Synchronicity arising from any intellectual property
claim by a third party.
10 COMPLIANCE WITH LAWS AND RULES
10.1 Synchronicity shall comply with all national, state, and local laws and
regulations governing the manufacture, transportation, and/or sale of
Deliverables and/or the performance of Services in the course of this
License Agreement. In the United States, these may include, but are not
limited to, Department of Commerce, Environmental Protection Agency, and
Department of Transportation regulations applicable to hazardous
materials. Upon Intel's request, Synchronicity will promptly provide Intel
with a statement of origin for all Deliverables and with applicable
customs documentation for Deliverables wholly or partially manufactured
outside of the country of import.
10.2 Synchronicity agrees to abide by all Intel's rules and regulations while
on Intel's premises or performing Services including, but not limited to,
safety, health and hazardous material management rules, and rules
prohibiting misconduct on Intel's premises including, but not limited to,
use of physical aggression against persons or property, harassment, and
theft. Synchronicity will perform only those services
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identified on any SOWs and will work only in areas designated for such
services. Synchronicity shall take all reasonable precautions to ensure
safe working procedures and conditions for performance on Intel's premises
and shall keep Intel's site neat and free from debris.
10.3 Synchronicity's employees who access Intel's facilities may be required to
sign a separate access agreement prior to admittance to Intel's
facilities. Synchronicity will furnish a copy of Addendum E to each of its
employees and contractors assigned to or contracted for Intel work and
will take reasonable steps to assure Intel that all such employees and
contractors have read and understood Addendum E.
10.4 In addition to the security measures set forth in Addendum E,
Synchronicity warrants that it shall not assign to work at Intel's
facilities any employee of Synchronicity that has a record of criminal
convictions involving drugs, assaultive or combative behavior, or theft
within the last five (5) years that Synchronicity is aware of or should be
aware of. Synchronicity understands that employees assigned to work at
Intel's facilities may be subject to criminal history investigations by
Intel at Intel's expense and may be denied access to Intel's facilities if
any such criminal convictions are discovered. Synchronicity also agrees to
comply with Intel's Alcohol and Drug-free Workplace Directive set forth in
Addendum F.
10.5 Synchronicity represents and agrees that it is in compliance with
Executive Order 11246 and implementing Equal Employment Opportunity
regulations and the Immigration Act of 1987, unless exempted or
inapplicable.
11 INSURANCE
11.1 Without limiting or qualifying Synchronicity's liabilities, obligations,
or indemnities otherwise assumed by Synchronicity pursuant to this License
Agreement, Synchronicity shall maintain, at its sole cost and expense,
with companies acceptable to Intel, Commercial General Liability and
Automobile Liability Insurance with limits of liability not less than
$1,000,000.00 per occurrence and including liability coverage for bodily
injury or property damage (1) assumed in a contract or agreement
pertaining to Synchronicity's business and (2) arising out of
Synchronicity's product, services, or work. Synchronicity's insurance
shall be primary, and any applicable insurance maintained by Intel shall
be excess and non-contributing.
11.2 Synchronicity shall also maintain statutory Workers' Compensation
coverage, including a Broad Form All States Endorsement in the amount
required by law, and Employers' Liability Insurance in the amount of
$1,000,000.00 per occurrence. Such insurance shall include an insurer's
waiver of subrogation in favor of Intel.
11.3 If Synchronicity is providing any professional service to Intel,
Synchronicity shall maintain Professional Liability Insurance (including
errors and omissions coverage) with liability limits not
less than $1,000,000.
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11.4 At the request of Intel, Synchronicity shall provide Intel with properly
executed Certificates of Insurance prior to commencement of any operation
hereunder and shall notify Intel, no less than 30 days in advance, of any
reduction or cancellation of the above coverages.
12 GENERAL INDEMNIFICATION
12.1 Synchronicity shall, to the fullest extent permitted by law, protect,
defend, indemnify, and hold Intel harmless from and against any and all
claims, liabilities, demands, penalties, forfeitures, suits, judgments,
and the associated costs and expenses (including attorney's fees), which
Intel may hereafter incur, become responsible for, or pay out as a result
of: death or personal injury (including bodily injury) to any person,
destruction or damage to any property, contamination of or adverse effects
on the environment, and any clean up costs in connection therewith, or any
violation of law, governmental regulation or orders, to the extent caused
by (i) Synchronicity's breach of any term or provision of this License
Agreement; (ii) any negligent or willful acts, errors, or omissions by
Synchronicity, its employees, officers, agents, representatives, or
subcontractors in the performance of this License Agreement; or (iii)
dangerous defects in Deliverables or Services provided by Synchronicity
under this License Agreement.
12.2 Notwithstanding Synchronicity's immunities under applicable state worker's
compensation and industrial insurance acts, and as mutually negotiated
between the Parties, Synchronicity specifically undertakes to defend,
indemnify, and hold Intel harmless from claims or liabilities asserted
against Intel by Synchronicity's employees.
13 MISCELLANEOUS
13.1 Retention and Audits. Synchronicity will maintain complete and accurate
records of the services performed under this License Agreement for a
period of five (5) years after the completion of these services. Records
relating to the performance of this License Agreement shall be made
available to Intel upon reasonable notice.
13.2 Independent Contractor. In performing services under this License
Agreement, Synchronicity is an independent contractor and its personnel
and other representatives shall not act as nor be agents or employees of
Intel. As an independent contractor, Synchronicity will be solely
responsible for determining the means and methods for performing the
required services. Synchronicity shall have complete charge and
responsibility for personnel employed by Synchronicity; however, Intel
reserves the right to instruct Synchronicity to remove from Intel's
premises immediately any of Synchronicity's personnel who are in breach of
Section 10 of this License Agreement. Such removal shall not affect
Synchronicity's obligation to provide services under this License
Agreement.
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13.3 Merger and Modification. This License Agreement together with the
following Addenda and any Exhibits thereto:
Addendum A Statement of Work
Addendum B Worldwide Enterprise License & Support
Addendum C Pricing and Payment Schedule
Addendum D Source Code Escrow
Addendum E Protection of Intel's Assets
Addendum F Alcohol and Drug Free Workplace Directive
Addendum G Certificate of Origin
Addendum H Assignment of Intellectual Property
contains the entire understanding between Intel and Synchronicity with
respect to the subject matter hereof and merges and supersedes all prior
and contemporaneous agreements, dealings and negotiations. No
modification, alteration, or amendment shall be effective unless made in
writing, dated and signed by duly authorized representatives of both
Parties.
13.4 Waiver. No waiver of any breach hereof shall be held to be a waiver of any
other or subsequent breach.
13.5 Severability. If any provision of this License Agreement is determined by
a court of competent jurisdiction to be invalid, illegal, or
unenforceable, such determination shall not affect the validity of the
remaining provisions unless Intel determines in its discretion that the
court's determination causes this License Agreement to fail in any of its
essential purposes.
13.6 Assignment. Synchronicity may not assign, factor any rights in, delegate,
or otherwise transfer any rights or obligations under this License
Agreement, or any portion thereof, without the prior written consent of
Intel, which consent shall not be unreasonably withheld. Intel may
terminate this License Agreement for cause in conjunction with the sale or
transfer of all or substantially all of Synchronicity's business or
assets, or a change or transfer of ownership in a majority of
Synchronicity's voting stock, whether voluntarily, by operation of law or
otherwise, unless Intel has provided its prior written consent thereto,
which consent shall not be unreasonably withheld.
13.7 Headings. The headings provided in this License Agreement are for
convenience only and shall not be used in interpreting or construing this
License Agreement.
13.8 Specific Performance. Notwithstanding anything else contained in this
License Agreement, the Parties hereto agree that failure to perform
certain obligations undertaken in connection with this License Agreement
would cause irreparable damage, and that monetary damages would not
provide an adequate remedy in such event. The Parties further agree that
failure to complete performance of the services called for in this License
Agreement, or on any project released under this License Agreement, or
failure to deliver or effect delivery of services and/or
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materials as contracted, or failure to deliver against accepted projects,
or to deliver confirmed supply or pricing, are such obligations.
Accordingly, it is agreed that, in addition to any other remedy to which
the non breaching party may be entitled, at law or in equity, the non
breaching party shall be entitled to injunctive relief to prevent breaches
of the provisions of this License Agreement, and an order of specific
performance to compel performance of such obligations in any action
instituted in any court of the United States or any state thereof having
subject matter jurisdiction.
13.9 Force Majeure. Neither party shall be responsible for its failure to
perform due to causes beyond its reasonable control, such as acts of God,
fire, theft, war, riot, embargoes, or acts of civil or military
authorities. If delivery or performance of services are to be delayed by
such contingencies, Synchronicity shall immediately notify Intel in
writing and Intel may either: (i) extend time of performance; or (ii)
terminate all or part of the uncompleted portion of the project at no cost
to Intel.
13.10 Right to Develop and Compete Independently. It is understood that as a
result of the relationship contemplated under this License Agreement,
Intel and its personnel may become familiar with the subject matter
licensed to Intel under this License Agreement and the general concepts
employed therein. However, nothing contained in this License Agreement
shall prevent either party from developing either through third parties or
through the use of its own personnel, or from developing or acquiring from
third parties, products similar to and competitive with the subject matter
licensed from Synchronicity under this License Agreement except as
provided for in Section 2 and Section 8 of this License Agreement; and
nothing herein shall be construed to grant either party any rights in any
such products so developed or acquired, or any rights to the revenues or
any portion thereof derived by either party from the use, sale, lease,
license or other disposal of any such products. Synchronicity understands
that Intel evaluates, designs, develops, and acquires products similar to
the subject matter licensed from Synchronicity under this License
Agreement, and that existing or planned products independently developed,
evaluated or acquired by Intel may contain ideas and concepts similar to
those contained in the subject matter licensed from Synchronicity under
this License Agreement.
13.11 Export Controls. Both Parties understand and acknowledge that they are
subject to regulation by agencies of the U.S. government, including the
U.S. Department of Commerce, which prohibit export or diversion of certain
products and technology to certain countries. Any and all obligations of
either Party to provide technical information, technical assistance, any
media in which any of the foregoing is contained, training and related
technical data (collectively, "Data") shall be subject in all respects to
such United States laws and regulations as shall from time to time govern
the license and delivery of technology and products abroad by persons
subject to the jurisdiction of the United States, including the Export
Administration Act of 1979, as amended, any successor legislation, and the
Export Administration Regulations issued by the Department of Commerce, or
the Bureau of Export Administration. Both Parties warrant that they will
comply in all respects with the
Page 14 of 51
<PAGE> 15
Intel Confidential
export and re-export restrictions including those set forth in any export
license (if necessary) for Data disclosed to the other Party hereunder.
13.12 Notice. All notices required or permitted to be given hereunder shall be
notified in writing and shall be delivered by hand, or if dispatched by
prepaid air courier or by registered or certified airmail, postage
prepaid, addressed as follows:
<TABLE>
<CAPTION>
If to Synchronicity: If to Intel:
------------------- -----------
<S> <C>
Synchronicity, Inc. General Counsel
Attn: President Intel Corporation
201 Forest Street 2200 Mission College Blvd.
Marlboro, MA 01778 Santa Clara, CA 95052
</TABLE>
Such notices shall be deemed to have been served when received by
addressee or, if delivery is not accomplished by reason of some avoidance
of the addressee, when tendered for delivery. Either Party may give
written notice of a change of address and, after notice of such change has
been received, any notice or request shall thereafter be given to such
Party as above provided at such changed address.
13.13 Governing Law. This License Agreement and matters connected with the
performance thereof shall be construed, interpreted, applied and governed
in all respects in accordance with the laws of the United States of
America and the State of Delaware, without reference to conflict of laws
principles.
13.14 Jurisdiction. Intel and Synchronicity agree that all disputes and
litigation regarding this License Agreement and matters connected with its
performance shall be subject to the exclusive jurisdiction of the state
and federal courts in Delaware.
13.15 Survival. The provisions of Sections: 1, 3, 4, 7, 8, 9, 13, the provisions
of Addendum A, Addendum B, and Addendum C (to the extent Addenda amend the
surviving clauses), and the provisions of any and all Certificates of
Originality and Assignments of Intellectual Property which are executed by
Synchronicity, will survive any termination or expiration of this License
Agreement. Additionally, Section 12 of this License Agreement shall also
survive any termination or expiration of this License Agreement, but only
for three (3) years.
13.16 Counterparts. This License Agreement shall be executed in two (2) or more
counterparts, all of which, taken together, shall be regarded as one and
the same instrument and shall constitute the Parties entire understanding
with respect to the subject matter hereof.
IN WITNESS THEREOF, the duly authorized representatives have entered into this
License Agreement as of the Effective Date first set forth above.
Page 15 of 51
<PAGE> 16
INTEL CORPORATION SYNCHRONICITY, INC.
Intel Confidential
/s/ Robert Basso /s/ Eric Thune
- ------------------------------ -----------------------------------
Signature Signature
Robert Basso Eric Thune
- ------------------------------ -----------------------------------
Name Name
Supplier Manager Western Area Sales Manager
- ------------------------------ -----------------------------------
Title Title
12/27/99 12/22/99
- ------------------------------ -----------------------------------
Date Date
Page 16 of 51
<PAGE> 17
* Confidential Information has been omitted pursuant to Rule 406 under the
Securities Act of 1933 and has been filed separately with the Securities
and Exchange Commission. The locations of the omitted materials have
been indicated with asterisks.
Intel Confidential
ADDENDUM B
WORLDWIDE ENTERPRISE LICENSE & SUPPORT
1. Software: The software defined in this License Agreement.
2. Number of Copies: *
3. Type of License Grant: A non-exclusive, irrevocable, non-terminable,
worldwide, paid-up license (with the right to sublicense to
wholly-owned subsidiaries of Intel and to any entity with whom Intel is
engaging in joint design work), for the term of this License Agreement,
to use and maintain up to the number of concurrently active copies of
the Software provided above, without restriction on the number of
design projects supported, and with the right to move licenses between
design projects from time-to-time at Intel's sole discretion. Except
for allowing Intel's employees and authorized contractors access to the
Software, Intel may not rent or lease the Software. In addition, and
except as provided in this License Agreement or permitted by applicable
law, Intel may not modify, translate, reverse engineer, decompile,
disassemble, grant any rights in the Software or accompanying
documentation, or create derivative works based on the Software.
Information relating to the Software which is necessary to enable the
production of software which is interoperable with the Software (or
other software) is available from Synchronicity upon request.
4. Distribution Mechanism: Pursuant to Section 2.4 of this License Agreement,
Intel shall order Software by sending an email to the Primary Contact
specifying how many copies of the Software Intel requires. Upon receipt of
such an email, Synchronicity shall send the requested number of copies,
and/or the keys thereto, to Intel electronically within two (2) business
days.
5. Term of Maintenance & Support: Except as provided in the License
Agreement, the term of technical support provided under this Worldwide
Enterprise License shall be from December 31, 1999 through December 31,
2002. Intel shall have the right to renew the terms of this License
Agreement for an additional three (3) years for the applicable fee(s)
set forth in Addendum C; provided, however, if the number of Intel
licensed users exceeds * at the time of renewal, Intel shall pay the
additional fee(s) set forth in Addendum C.
6. Nature of Maintenance & Support: Synchronicity shall provide support
to Intel for the Software for the term of this License Agreement. If
the Software fails to conform to the specifications set forth in the
Documentation and any SOWs ("Specifications"), Synchronicity agrees to
use best efforts to modify the Software to conform to the
Specifications, and to respond to general questions from Intel
regarding the use and functionality of the Software, according to the
procedure and priority levels set forth below. Such support shall be
available to Intel at no charge during business hours of Monday through
Friday of *
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<PAGE> 18
* Confidential Information has been omitted pursuant to Rule 406 under the
Securities Act of 1933 and has been filed separately with the Securities
and Exchange Commission. The locations of the omitted materials have
been indicated with asterisks.
Intel Confidential
Time, excluding holidays. The level of support provided by Synchronicity
to Intel shall depend on the urgency of the situation, as determined by
the criteria set forth below in the following chart:
<TABLE>
<CAPTION>
DEFINITION RESPONSE
---------- --------
<S> <C> <C>
CRITICAL A problem preventing Synchronicity shall
the operation of a respond within *
major function of the and provide a
Software. correction to the
error within *
from notice.
URGENT A problem impairing the Synchronicity shall
operation of a major respond within
function of the * and provide a
Software. correction to the
error within *
from notice.
ROUTINE A problem impacting a Synchronicity shall
minor, yet desired, respond within *
specified function or and provide a
feature of the Software. correction to the
error within *
from notice.
</TABLE>
If Synchronicity defaults on the support obligations set forth in this
Section 4, this may trigger a source code escrow release pursuant to the
terms and conditions of Addendum D and the Exhibits thereto. Upon release
of the source code to Intel, and pursuant to the terms and conditions of
Addendum D, Intel shall be entitled to use the source code in any manner
necessary to resolve Synchronicity's support deficiencies.
7. Renewal: Intel may, but is not obligated to, renew this License Agreement for
an additional three (3) years for the renewal fee(s) set forth in Addendum C.
If Intel elects to exercise its right to renew this License Agreement,
Synchronicity shall continue providing support to the Software in accordance
with this License Agreement; provided, however, that Synchronicity shall not
be obligated to provide Routine support for Releases greater than one (1)
year old.
8. Payment Schedule and Pricing: Intel shall pay Synchronicity the Initial
Allocation Fee set forth in Addendum C within net thirty (30) days from
receipt of a purchase order for the first distribution of the Software. For
all other Services, Intel shall pay Synchronicity the applicable fee(s) set
forth in Addendum C; payment due net thirty (30) days from receipt of
purchase order. In the event of a conflict between the terms and conditions
of this License Agreement and a purchase order, the terms and conditions of
this License Agreement shall control.
9. Training and Consulting: Training and consulting are not included in the
Initial Allocation Fee and may result in additional fees as set forth in
Addendum C. As part of the training classes offered to Intel by
Synchronicity, further specified in Addendum C ("Training Classes"),
Synchronicity shall offer to Intel a course titled "Train-the-Trainer" which
shall include an extra day of training to describe class setup, training
techniques, and additional technical information. The Train-the-Trainer class
includes PDF files for training manuals and Updates thereof at no additional
cost to Intel. Training Classes may also be
Page 28 of 51
<PAGE> 19
* Confidential Information has been omitted pursuant to Rule 406 under the
Securities Act of 1933 and has been filed separately with the Securities
and Exchange Commission. The locations of the omitted materials have
been indicated with asterisks.
Intel Confidential
customized by Intel for an additional cost.
10.ProjectSync Options: ProjectSync, a web-based team collaboration software
tool, may be purchased at an additional cost. Synchronicity shall make
bundles of * licenses available for the three (3) year term.
The total amount will be due net thirty (30) days from placement of the
Purchase Order. This amount will be prorated for the remainder of the
contract and will also terminate with the DesignSync DFII contract. If Intel
exercises its option to license ProjectSync from Synchronicity, Intel pay
Synchronicity the fees set forth in Addendum C.
Page 29 of 51
<PAGE> 20
* Confidential Information has been omitted pursuant to Rule 406 under the
Securities Act of 1933 and has been filed separately with the Securities and
Exchange Commission. The locations of the omitted materials have been
indicated with asterisks.
Intel Confidential
ADDENDUM C
PRICING
The prices for the Deliverables are as follows:
Initial Allocation Fee
<TABLE>
<CAPTION>
Item Cost Quantity Total
<S> <C> <C> <C>
DesignSync DFII, V 2.1.1 * Unlimited *
Maintenance & Support (included) N/A *
----------
Total *
</TABLE>
Maintenance & Support
Fee(s) included in the Initial Allocation Fee above.
Additional Fee(s)
In the event that Intel acquires a company during the term of this License
Agreement with an aggregate number of engineers in excess of *, and all the
foregoing engineers will use the Software, Intel shall pay a prorated fee of
* dollars * per newly acquired engineer in excess of * (E.g., If Intel
acquires a company with * engineers, and all * engineers will use the
Software, Intel shall pay * at the start of the first year of this License
Agreement - or a prorated portion thereof if such acquisition takes place
later in the term of this License Agreement); provided, however, no
additional fees shall be assessed if the acquired company was already a
Synchronicity licensee.
Renewal Fee(s)
Upon Expiration, Intel may pay a flat * for up to * licenses (including
maintenance and support) and * per license in excess of * (E.g., *
licenses shall cost *)
Training and Consulting
Consulting shall be available to Intel at a rate of * dollars * per week.
Training shall also be available to Intel as set forth in the chart below and
at the corresponding fees:
<TABLE>
<CAPTION>
ITEM # COURSE NAME DESCRIPTION AMOUNT NOTES
- ------ ----------- ----------- ------ -----
<S> <C> <C> <C> <C>
TRN-1000 DesignSync Fundamentals Customer-site 1-day * plus T&E* and 1/2 day
training setup cost
TRN-1001 DesignSync Fundamentals Regional 1-day training * per student
TRN-1002 DesignSync Fundamentals Training Manual *
</TABLE>
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<PAGE> 21
* Confidential Information has been omitted pursuant to Rule 406 under the
Securities Act of 1933 and has been filed separately with the Securities and
Exchange Commission. The locations of the omitted materials have been indicated
with asterisks.
Intel Confidential
<TABLE>
<S> <C> <C> <C> <C>
TRN-1100 DesignSync/DFII Fundamentals Customer-site 1-day training $ * plus T&E* and 1/2 day setup cost
TRN-1101 DesignSync/DFII Fundamentals Regional 1-day training $ * per student
TRN-1102 DesignSync/DFII Fundamentals Training Manual $ *
TRN-1200 ProjectSync Fundamentals Customer-site 1/2-day training $ * plus T&E* and 1/2 day setup cost
TRN-1201 ProjectSync Fundamentals Regional 1/2-day training $ * per student
TRN-1202 ProjectSync Fundamentals Training Manual $ *
TRN-2000 DesignSync Administration Customer-site 2-day training $ * plus T&E* and 1/2 day setup cost
TRN-2001 DesignSync Administration Regional 2-day training $ * per student
TRN-2002 DesignSync Administration Training Manual $ *
TRN-2100 ProjectSync Administration Customer-site 1-day training $ * plus T&E* and 1/2 day setup cost
TRN-2101 ProjectSync Administration Regional 1-day training $ * per student
TRN-2102 ProjectSync Administration Training Manual $ *
TRN-9001 Customer-site 1-day training $ * plus T&E* and 1/2 day setup cost
TRN-9002 Customer-site 2-day training $ * plus T&E* and 1/2 day setup cost
TRN-9003 Customer-site 3-day training $ * plus T&E* and 1/2 day setup cost
TRN-9004 Customer-site 4-day training $ * plus T&E* and 1/2 day setup cost
TRN-9005 Customer-site 5-day training $ * plus T&E* and 1/2 day setup cost
TRN-9999 Train-the-Trainer One extra day to each course $ * see Addendum B
</TABLE>
* T&E shall only be reimbursed according to Intel's then current
travel guidelines.
ProjectSync Options
- Intel may license ProjectSync during the first year of this License
Agreement (from December 31, 1999 through December, 2000) for *
dollars (*) per each bundle of * licenses.
- Intel may license ProjectSync during the second year of this License
Agreement (from December 31, 2000 through December, 2001) for *
dollars (*) per each bundle of * licenses.
Page 31 of 51
<PAGE> 22
* Confidential Information has been omitted pursuant to Rule 406 under the
Securities Act of 1933 and has been filed separately with the Securities and
Exchange Commission. The locations of the omitted materials have been indicated
with asterisks.
Intel Confidential
- Intel may license ProjectSync during the third year of this License
Agreement (from December 31, 2001 through December 31, 2002) for *
dollars (*) per each bundle of * licenses.
- If Intel exercises its option to license ProjectSync, it shall be
granted the type of license in Addendum B for the term of this
License Agreement.
Page 32 of 51
<PAGE> 23
Intel Confidential
ADDENDUM D
SOURCE CODE ESCROW
Account Number _________
This Preferred Registration Technology Escrow Agreement including any
Exhibits ("Agreement") is effective this day of , 199_, by and
among Data Securities International, Inc. ("DSI"), a Delaware corporation,
Synchronicity, Inc.("Depositor"), and Intel Corporation ("Preferred
Registrant").
WHEREAS, Depositor has entered into that certain ("License Agreement")
with the Preferred Registrant regarding certain proprietary technology and other
materials of Depositor;
WHEREAS, Depositor and Preferred Registrant desire the Agreement to be
supplementary to said License Agreement pursuant to 11 United States Code
Section 365(n);
WHEREAS, availability of or access to certain proprietary data related to
certain proprietary technology and other material is critical to Preferred
Registrant in the conduct of its business;
WHEREAS, Depositor has deposited or will deposit with DSI proprietary data
to provide for retention, administration and controlled access for Preferred
Registrant under the conditions specified herein;
NOW THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged, and in consideration of the promises, mutual covenants
and conditions contained herein, the Parties hereto agree as follows:
1. Deposit Account. Following the delivery of the executed Agreement, DSI
shall open a deposit account ("Deposit Account") for Depositor and
Preferred Registrant. The opening of the Deposit Account means that
DSI shall establish an account ledger in the name of Depositor, assign
a deposit account number ("Deposit Account Number"), calendar renewal
notices to be sent to Depositor as provided in Section 29, and request
the initial deposit ("Initial Deposit") from Depositor. Depositor has
an obligation to make the Initial Deposit. Unless and until Depositor
makes the Initial Deposit with DSI, DSI shall continue to request the
Initial Deposit from Depositor and copy Preferred Registrant.
2. Preferred Registration Account. Following the execution and delivery
of the Agreement, DSI shall open a registration account ("Registration
Account") for Preferred Registrant. The opening of the Registration
Account means that DSI shall establish under the Deposit Account an
account ledger with a unique registration number ("Registration
Number") in the name of Preferred Registrant, calendar renewal notices
to be sent to Preferred Registrant as provided in Section 29, and
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<PAGE> 24
Intel Confidential
request the Initial Deposit from Depositor. DSI shall notify Preferred
Registrant upon receipt of Initial Deposit.
3. Term of Agreement. The Agreement will have an initial term of five (5)
years, commencing on the effective date, and shall continue in full force
unless terminated earlier as provided in the Agreement. The Agreement may
be extended for additional five (5) year terms by either the Depositor or
the Preferred Registrant.
4. Exhibit A, Notices and Communications. Notices and invoices to Depositor,
Preferred Registrant or DSI should be sent to the Parties at the addresses
identified in the Exhibit A.
4.1 Documents, payment of fees, deposits of material, and any written
communication should be sent to the DSI offices as identified in the
Exhibit A.
4.2 Depositor and Preferred Registrant agree to each name their respective
designated contact ("Designated Contact") to receive notices from DSI and
to act on their behalf in the performance of their obligations as set
forth in the Agreement. Depositor and Preferred Registrant agree to notify
DSI immediately in the event of a change of their Designated Contact in
the manner stipulated in Exhibit A.
5. Exhibit B and Deposit Material. Depositor shall submit proprietary data
and related material ("Deposit Material") to DSI for retention and
administration in the Deposit Account.
5.1 The Deposit Material shall be submitted together with a completed document
called a "Description of Deposit Material," hereinafter referred to as
Exhibit B. Each Exhibit B should be signed by Depositor prior to
submission to DSI and shall be signed by DSI upon completion of the
Deposit Material inspection.
5.2 Depositor represents and warrants that it lawfully possesses all Deposit
Material, can transfer Deposit Material to DSI and has the authority to
store Deposit Material in accordance with the terms of the Agreement.
6. Deposit Material Inspection. Upon receipt of an Exhibit B and Deposit
Material, DSI shall be responsible only for reasonably matching the
labeling of the materials to the item descriptions listed on the
Exhibit B and validating the count of the materials to the quantity
listed on the Exhibit B. DSI shall not be responsible for any other
claims made by the Depositor on the Exhibit B. Acceptance shall occur
when DSI concludes that the Deposit Material Inspection is complete.
Upon acceptance DSI will sign the Exhibit B and assign the next Exhibit
B number. DSI shall issue a copy of the Exhibit B to Depositor and
Preferred Registrant within ten (10) days of acceptance.
7. Initial Deposit. The Initial Deposit shall consist of all material
initially supplied by Depositor to DSI.
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<PAGE> 25
Intel Confidential
8. Deposit Changes. Depositor may desire or may be obligated to update the
Deposit Account with supplemental or replacement Deposit Material.
8.1 Supplemental Deposit ("Supplemental") is Deposit Material which is to be
added to the Deposit Account. Depositor shall make Supplemental Deposits
no less than every three (3) months to ensure that the Deposit is an
accurate and complete manifestation and recording of Depositor's
technology, work product and intellectual property as described in the
License Agreement.
8.2 Replacement Deposit ("Replacement") is Deposit Material which will replace
existing Deposit Material as identified by any one or more Exhibit B(s) in
the Deposit Account. Replaced Deposit Material shall be destroyed or
returned to Depositor.
9. Deposit. The existing deposit ("Deposit") means all Exhibit B(s) and their
associated Deposit Material currently in DSI's possession. Destroyed or
returned Deposit Material is not part of the Deposit; however, DSI shall
keep records of the destruction or return of Deposit Material.
10. Replacement Option. Within ten (10) days of receipt of Replacement from
Depositor, DSI shall send a letter to Preferred Registrant stating that
Depositor requests to replace existing Deposit Material, and DSI will
include a copy of the new Exhibit B(s) listing the new Deposit Material.
10.1 Preferred Registrant has twenty (20) days from the mailing of such letter
by DSI to instruct DSI to retain the existing Deposit Material held by
DSI, and if so instructed, DSI will change the Replacement to a
Supplemental. Conversion to Supplemental may cause an additional storage
unit fee as specified by DSI's Fee and Services Schedule.
10.2 If Preferred Registrant does not instruct DSI to retain the existing
Deposit Material, DSI shall permit such Deposit Material to be replaced
with the Replacement. Within ten (10) days of acceptance of the
Replacement by DSI, DSI shall issue a copy of the executed Exhibit B(s) to
Depositor and Preferred Registrant. DSI will either destroy or return to
Depositor all Deposit Material replaced by the Replacement.
11. Storage Unit. DSI will store the Deposit in defined units of space, called
storage units. The cost of the first storage unit will be included in the
annual Deposit Account fee.
12. Deposit Obligations of Confidentiality. DSI agrees to establish a locked
receptacle in which it shall place the Deposit and shall put the
receptacle under the administration of one or more of its officers,
selected by DSI, whose identify shall be available to Depositor at all
times. DSI shall exercise a professional level of care in carrying out the
terms of the Agreement.
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Intel Confidential
12.1 DSI acknowledges Depositor's assertion that the Deposit shall contain
proprietary data and that DSI has an obligation to preserve and protect
the confidentiality of the Deposit.
12.2 Except as provided for in the Agreement, DSI agrees that it shall not
divulge, disclose, make available to third parties, or make any use
whatsoever of the Deposit.
13. Audit Rights. DSI agrees to keep records of the activities undertaken and
materials prepared pursuant to the Agreement. DSI may issue to Depositor
and Preferred Registrant an annual report profiling the Deposit Account.
Such annual report will identify the Depositor, Preferred Registrant, the
current Designated Contacts, selected special services, and the Exhibit B
history, which includes Deposit Material acceptance and destruction or
return dates.
13.1 Upon reasonable notice, during normal business hours and during the term
of the Agreement, Depositor and Preferred Registrant will be entitled to
inspect the records of DSI pertaining to the Agreement, and accompanied by
an employee of DSI, inspect the physical status and condition of the
Deposit. The Deposit may not be changed during the audit.
14. Renewal Period of Agreement. Upon payment of the initial fee or
renewal fee, the Agreement shall be in full force and will have an
initial period of at least one (1) year unless otherwise specified.
This Agreement may be renewed for additional periods upon receipt by
DSI of the specified renewal fees prior to the last day of the period
("Expiration Date"). DSI may extend the period of the Agreement to
cover the processing of any outstanding instruction made during any
period of the Agreement.
14.1 Preferred Registrant has the right to pay renewal fees and other related
fees. In the event Preferred Registrant pays the renewal fees and
Depositor is of the opinion that any necessary condition for renewal is
not met, Depositor may so notify DSI and Preferred Registrant in writing.
The Agreement shall remain in full force and effect until such dispute is
resolved between Preferred Registrant and Depositor.
15. Expiration. If the Agreement is not renewed or is otherwise
terminated, all duties and obligations of DSI to Depositor and
Preferred Registrant will terminate. If Depositor requests the return
of the Deposit, DSI shall return the Deposit to Depositor only after
any outstanding invoices and the Deposit return fee are paid and
Preferred Registrant consents in writing. If the fees are not received
by the Expiration Date of the Agreement, DSI, at its option, may
destroy the Deposit thirty (30) days after written notice of such
intent is given Preferred Registrant.
16. Certification by Depositor. Depositor represents to Preferred Registrant
that:
a. The Deposit delivered to DSI consists of the following: source
code deposited on computer magnetic media, all necessary and
available information, proprietary information, and technical
documentation which
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<PAGE> 27
Intel Confidential
will enable a reasonably skilled programmer of Preferred Registrant
to create, maintain and/or enhance the proprietary technology
without the aid of Depositor or any other person or reference to any
other materials; maintenance tools (test programs and program
specifications); proprietary or third party system utilities
(compiler and assembler descriptions); description of the
system/program generation; descriptions and locations of programs
not owned by Depositor but required for use and/or support; and
names of key developers for the technology on Depositor's staff.
b. The Depositor will be defined in the Exhibit B(s).
These representations shall be deemed to be made continuously throughout
the term of the Agreement.
17. Indemnification. Depositor and Preferred Registrant agree to defend
and indemnify DSI and hold DSI harmless from and against any and all
claims, actions and suits, whether in contract or in tort, and from
and against any and all liabilities, losses, damages, costs, charges,
penalties, counsel fees, and other expenses of any nature (including,
without limitation, settlement costs) incurred by DSI as a result of
performance of the Agreement except in the event of a judgment which
specifies that DSI acted with gross negligence or willful misconduct.
18. Filing For Release of Deposit by Preferred Registrant. Upon notice to DSI
by Preferred Registrant of the occurrence of a release condition as
defined in Section 21 and payment of the release request fee, DSI shall
notify Depositor by certified mail or commercial express mail service
with a copy of the notice from Preferred Registrant.
19. Contrary Instruction. "Contrary Instruction" is the filing of an
objection with DSI by Depositor stating that a Contrary Instruction is
in effect. Such Contrary Instruction means an officer of Depositor
warrants that a release condition has not occurred or has been cured.
DSI shall send a copy of the objection by certified mail or commercial
express mail service to Preferred Registrant. DSI shall notify both
Depositor and Preferred Registrant that there is a dispute to be
resolved. Receipt of Contrary Instruction by DSI shall not alter
DSI's performance of its obligations pursuant to Section 20.
20. Release of Deposit to Preferred Registrant. Pursuant to Section 18,
whether or not DSI receives Contrary Instruction from Depositor and
unless ordered by a court of competent jurisdiction not to release the
Deposit, DSI is authorized to and shall release the Deposit, or if
more than one Preferred Registrant is registered to the Deposit, a
copy of the Deposit to the Preferred Registrant filing for release,
ten (10) days after the notice was given Depositor pursuant to Section
18, and following receipt of any fees due to DSI including Deposit
copying and delivery fees.
21. Release Conditions of Deposit to Preferred Registrant. Release conditions
are:
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Intel Confidential
a. Depositor's failure to carry out obligations imposed on it pursuant
to a license agreement or other agreement(s) between Depositor and
Preferred Registrant; or
b. Depositor's failure to continue to do business in the ordinary
course; or
c. any bankruptcy, reorganization, debt arrangement, or other case
proceeding under any bankruptcy or insolvency law, or any
dissolution or liquidation proceedings commenced by or against
Depositor and if such case or proceeding is not commenced by
Depositor, it is not dismissed within sixty (60) days from the
filing thereof; or
d. Depositor becomes insolvent or generally fails to pay, or admits its
inability to pay, its debts as they become due; or
e. Depositor applies for or consents to the appointment of or has
appointed a trustee, receiver or other custodian for any of its
assets, or makes a general assignment for the benefit of its
creditors.
22. Grant of Use License. Notwithstanding any other rights Preferred
Registrant may have in or to the Deposit, subject to the terms and
conditions of the Agreement, Depositor hereby transfers and upon execution
by DSI, DSI hereby accepts a non-exclusive, irrevocable, perpetual, and
royalty-free use license which DSI will transfer to Preferred Registrant
upon controlled release of the Deposit as described in the Agreement.
23. Use License Representation. Depositor represents and warrants to
Preferred Registrant and DSI that it has no knowledge of nor will it
permit to be created any encumbrance or infringement of the Deposit, or
that any claim has been made that the Deposit infringes any patent,
trade secret, copyright or other proprietary right of any third party.
Depositor warrants that it has the full right, power, and ability to
enter into and perform the Agreement, to grant the foregoing use
license, and to permit the Deposit to be placed with DSI.
24. Conditions Following Release. Following a release and subject to payment
to DSI of all outstanding fees, DSI shall transfer the Use License to
Preferred Registrant. Additionally, Preferred Registrant shall be required
to maintain the confidentiality of the released Deposit.
25. Verification Rights. Depositor grants to Preferred Registrant the
option to verify the Deposit for accuracy, completeness and
sufficiency. Depositor agrees to permit DSI and at least one employee
of Preferred Registrant to be present at Depositor's facility to
verify, audit and inspect the Deposit held by DSI to confirm the
quality and/or content of the Deposit for the benefit of Preferred
Registrant. If DSI is present or is selected to perform the
verification, DSI will be paid according to DSI's then current
verification service hourly rates and any out of pocket expenses.
Page 38 of 51
<PAGE> 29
Intel Confidential
26. General. DSI may act in reliance upon any instruction, instrument, or
signature believed to be genuine and may assume that any employee
giving any written notice, request, advice or instruction in connection
with or relating to the Agreement has apparent authority and has been
duly authorized to do so. DSI may provide copies of the Agreement or
account history information to any employee of Depositor or Preferred
Registrant upon their request. For purposes of termination or
replacement, Deposit Material shall be returned only to Depositor's
Designated Contact, unless otherwise instructed by Depositor's
Designated Contact.
26.1 DSI is not responsible for failure to fulfill its obligations under the
Agreement due to causes beyond DSI's control.
26.2 The Agreement is to be governed by and construed in accordance with the
laws of the State of California.
26.3 The Agreement constitutes the entire agreement between the Parties
concerning the subject matter hereof, and supersedes all previous
contemporaneous, representations, understandings, and agreements, either
oral or written, between the Parties. The Agreement may be amended only in
writing signed by the Parties.
26.4 If any provision of the Agreement is held by any court to be invalid or
unenforceable, that provision will be severed from the Agreement and any
remaining provisions will continue in full force.
27. Title to Media. Subject to the terms of the Agreement or License
Agreement, title to the media, upon which the proprietary data is written
or stored, is and shall be irrevocably vested in DSI.
28. Termination of Rights. The Use License as described above will terminate
in the event that the Agreement is terminated without the Use License
transferring to Preferred Registrant.
29. Fees. Fees are due upon receipt of signed contract, receipt of Deposit
Material, or when service is requested, whichever is earliest. If invoiced
fees are not paid within sixty (60) days of the date of the invoice, DSI
may terminate the Agreement. If the payment is not timely received by DSI,
DSI shall have the right to accrue and collect interest at the rate of one
and one-half percent per month (18% per annum) from the date of the
invoice for all late payments.
29.1 Renewal fees will be due in full upon the receipt of invoice unless
otherwise specified by the invoice. In the event that renewal fees are not
received thirty (30) days prior to the Expiration Date, DSI shall so
notify Depositor and Preferred Registrant. If the renewal fees are not
received by the Expiration Date, DSI may terminate the Agreement without
further notice and without liability of DSI to Depositor or Preferred
Registrant.
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<PAGE> 30
Intel Confidential
29.2 DSI shall not be required to process any request for service unless the
payment for such request shall be made or provided for in a manner
satisfactory to DSI.
29.3 All service fees will be those specified in DSI's Fee and Services
Schedule in effect at the time of renewal or request for service, except
as otherwise agreed. For any increase in DSI's standard fees, DSI shall
notify Depositor and Preferred Registrant at least ninety (90) days prior
to the renewal of the Agreement. For any service not listed on the Fee and
Services Schedule, DSI shall provide a quote prior to rendering such
service.
<TABLE>
<CAPTION>
SYNCHRONICITY, INC. INTEL CORPORATION ESCROW AGENT
Depositor Preferred Registrant
<S> <C> <C>
________________ ___________________ ________________________
Signature Signature Signature
________________ ___________________ ________________________
Printed Name Printed Name Printed Name
________________ ___________________ ________________________
Title Title Title
________________ ___________________ ________________________
Date Date Date
</TABLE>
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<PAGE> 31
Intel Confidential
EXHIBIT A TO ADDENDUM D ("EXHIBIT A")
SOURCE CODE ESCROW
Account Number __________
Designated Contact
Notices, Deposit Material returns
and communication, including
delinquencies to Depositor should Invoices to Depositor
be addressed to: should be addressed to:
DSI Name: _________________ _________________________
Address: _________________ _________________________
Designated Invoice Contact:_________
Contact: _________________ _________________________
Phone Number: _________________ _________________________
Facsimile: _________________ _________________________
State of Incorporation: _______________________________________
Notices and communication,
including delinquencies to Invoices to Preferred
Preferred Registrant should Registrant
be addressed to: should be addressed to:
DSI Name: _________________ _________________________
Address: _________________ _________________________
Designated Invoice Contact:_________
Contact: _________________ _________________________
Phone Number: _________________ _________________________
Facsimile: _________________ _________________________
Requests from Depositor or Preferred Registrant to change the Designated Contact
should be given in writing by the Designated Contact or an authorized employee
of Depositor or Preferred Registrant.
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<PAGE> 32
Intel Confidential
Contracts, Deposit Material Invoice inquiries and
and notices to DSI fee remittances to SYNCHRONICITY
should be addressed to: should be addressed to:
DSI SYNCHRONICITY
Attn: ________________________ Attn: _____________________________
______________________________ ___________________________________
______________________________ ___________________________________
Telephone:____________________ Telephone: ________________________
Facsimile:____________________ Facsimile: ________________________
Date: _______________________ Date: ____________________________
Page 42 of 51
<PAGE> 33
Intel Confidential
EXHIBIT B TO ADDENDUM D ("EXHIBIT B")
DESCRIPTION OF DEPOSIT MATERIALS
Deposit Account Number ____________________________________
Depositor DSI Name ____________________________________
DEPOSIT TYPE:_______Initial_______Supplemental_______Replacement
If Replacement:________Destroy Deposit_______Return Deposit
ENVIRONMENT:
Host System CPU/OS______________Version________________Backup_______________
Source System CPU/OS____________Version________________Compiler______________
Special
Instructions:___________________________________________________________________
________________________________________________________________________________
DEPOSIT MATERIAL:
Exhibit B Name_________________________________________Version_______________
<TABLE>
<CAPTION>
Item label description Media Quantity
- ---------------------- ----- --------
<S> <C> <C>
</TABLE>
<TABLE>
<S> <C>
For Depositor, I certify that the For DSI, I received the above
above described Deposit described Deposit Material subject
Material was sent to DSI: to the terms on the reverse side of this Exhibit:
By ____________________________ By _______________________________
Print Name ____________________ Print Name _______________________
Date____________________________ Date of Acceptance________________
ISE____________EX. B#___________
</TABLE>
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<PAGE> 34
Intel Confidential
OBLIGATIONS
Depositor, pursuant to a Technology Deposit Agreement ("Agreement"), hereby
deposits the Deposit Material into the Deposit Account by transferring it to
Data Securities International, Inc. ("DSI"). DSI is obligated to hold the
Deposit Material as called for in the Agreement between the Parties, and among
other things, not to disclose, divulge or otherwise make the Deposit Material
available, except pursuant to the Agreement.
DEFINITIONS
The initial Deposit will consist of all material initially supplied by Depositor
to DSI.
The Supplemental Deposit is Deposit Material which is to be added to the Deposit
Account.
The Replacement Deposit is Deposit Material, which is to replace existing
Deposit Materials as identified by any one or more Exhibit B(s) in the Deposit
Account.
DEPOSIT INSPECTION
Upon receipt of an Exhibit B and Deposit Material, DSI will be responsible only
for reasonably matching the labeling of the materials to the item descriptions
listed on the Exhibit B and validating the count of the materials to the
quantity listed on the Exhibit B. DSI will not be responsible for any other
claims made by the Depositor on the Exhibit B.
DEPOSIT ACCEPTANCE
Deposit Acceptance will occur when DSI concludes that the Deposit Material
Inspection is complete. Upon acceptance DSI will sign the Exhibit B and assign
it the next Exhibit B number and issue a copy of the Exhibit B to Depositor
within (10) days. If no Deposit Type is checked on the reverse by Depositor, the
Deposit Material will be deemed to be an Initial or Supplemental Deposit.
WARRANTY BY DEPOSITOR
Deposit Material will be proprietary data, typically deposited on computer
magnetic media, and other related materials of Depositor.
Depositor represents and warrants that it lawfully possesses all Deposit
Material, can transfer Deposit Material to DSI and has the authority to store
Deposit Material in accordance with the terms of the Agreement.
AMENDMENT
This document acts as an Amendment, if one is called for.
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<PAGE> 35
Intel Confidential
ADDENDUM E
PROTECTION OF INTEL'S ASSETS
Synchronicity agrees to safeguard Intel's classified (i.e., Intel Confidential,
Intel Secret, Intel Restricted Secret and Intel Top Secret) and proprietary
information set out in the body of the Parties' Agreement and relevant
Unescorted Access Application forms for badges. Synchronicity also agrees to use
and apply Intel's information protection methods stated below in this Addendum
in the performance of Synchronicity's work. Synchronicity agrees that this
performance standard applies to all Intel classified and proprietary
information, regardless of the medium (Intel's or Synchronicity's) in or on
which it is retained or communicated and to software that is licensed by Intel
for its internal use.
Synchronicity is not automatically granted access to Intel classified and
proprietary information, networks or software. However, authorization to use or
access Intel information, software, or telecommunications may be granted by the
Intel information owner if access is necessary and directly related to
Synchronicity's scope of work or duties. Unless specifically authorized,
Synchronicity may not use or access Intel classified or proprietary information
that may be happened upon or inadvertently discovered while performing work
under this Agreement. Neither may a Synchronicity or Synchronicity's employee
control an Intranet web site at Intel.
Synchronicity shall not modify Intel classified or proprietary information,
software, hardware, or telecommunications without the explicit permission of the
Intel employee responsible for the resource, with the exception of
contract-related requirements or resources that allow for individual
customization (e.g., Microsoft Windows user features). The Synchronicity's
employees, agents, or subcontractors may not disclose Intel classified or
proprietary information to their co-workers, except for disclosure to those
similarly bound to protect Intel's intellectual property with a need to know to
fulfill this Agreement.
INTEL INFORMATION PROTECTION METHODS
This section outlines Intel's minimum requirements for protection methods for
all Intel classified or proprietary information and software that the
Synchronicity's personnel may come in contact with. Intel recognizes that the
correct and proper protection of its information rests with its employees and
Synchronicitys who have been authorized access. FAILURE TO COMPLY WITH THESE
REQUIREMENTS WILL PROVIDE GROUNDS FOR IMMEDIATE TERMINATION OF THIS AGREEMENT BY
INTEL. Periodic updates to these protection methods can be found on Intel's
internal web at:
HTTP://WWW-INFOSEC.FM.INTEL.COM/POLICIES/
Upon reaching the above web site, refer to Policies for Employees and Procedures
for Employees. These protection methods may also be obtained through your
purchasing representative. For further information or questions, contact your
Intel management sponsor.
Page 45 of 51
<PAGE> 36
Intel Confidential
ADDENDUM F
ALCOHOL AND DRUG-FREE WORKPLACE DIRECTIVE
Intel is committed to fulfilling its legal and ethical responsibility to
maintain a safe and efficient working environment on Intel premises.
Synchronicity agrees that Intel may administer drug and alcohol tests at
Synchronicity's expense, in accordance with Intel's procedures, to all
Synchronicity employees or subcontractors (each a "Contractor") assigned to
Intel's facility and may bar access to all Intel facilities to any Contractor
who refuses to take such a test or fails to pass any test so administered per
the schedule outlined below.
When Intel or Synchronicity has a reasonable suspicion that a Contractor is
under the influence of alcohol or drugs while on Intel premises, Intel may
require Synchronicity to perform drug and/or alcohol testing of the Contractor
or remove the Contractor from Intel premises. "Reasonable suspicion" is present
when an observation of a change in a Contractor's behavior or such conduct
indicates a noticeable performance impairment to the observer.
If an Intel requested testing shows that the tested Contractor is under the
influence of alcohol or drugs in excess of the standard set forth below, that
Contractor shall be denied access to Intel premises and Synchronicity shall
return that Contractor's security badge (including duplicate picture badges,
Fab, AT, or other specialty access or permit badges and other property movement
badges) and other Intel property immediately to the nearest Intel security post.
Synchronicity shall also be responsible for prompt notification and removal of
any Contractor it may find to be in violation of Intel's Alcohol and Drug Free
Workplace Directive. Additionally, a corporate wide "no access" notation will be
placed in the Intel corporate security database and no Application for Waiver
will be considered by Intel.
<TABLE>
<CAPTION>
DRUGS SCREENING METHOD CONFIRMATION METHOD
CUTOFF (IMMUNOASSAY) CUTOFF (GC/MS)
<S> <C> <C>
Amphetemines 1000 ng/ml 500ng/ml
Cannabinoids 50 ng/ml 15 ng/ml
Cocaine 300 ng/ml 150 ng/ml
Opiates 300 ng/ml 300 ng/ml
Phencyclidine 25 ng/ml 25 ng/ml
</TABLE>
Page 46 of 51
<PAGE> 37
Intel Confidential
ADDENDUM G
CERTIFICATE OF ORIGINALITY
This Addendum "G" must be completed by You when furnishing software material
(program product or offering and related documentation, or other software
material) for Intel.
One Addendum "G" can cover one complete product, even if that product
includes multiple modules. However, a separate Addendum "G" must be completed
for the code and another for its related documentation (if any.)
Please leave no questions blank. Write "not applicable" or "N/A" if a
question is not relevant to the furnished software material.
**************************************************
1. Name of the software material (provide complete identification, including
version, release and modification numbers for programs and documentation):
2. Was the software material or any portion thereof written by any party other
than you, or your employees working within their job assignment?
Yes ______ No ______
If Yes, provide the following information:
(a) Indicate if the whole software material or only a portion thereof was
written by such party, and identify such portion:
_______________________________________________________________________________
_______________________________________________________________________________
(b) Specify for each involved party:
(i) Name:
___________________________________________________________________
(ii) Company:
___________________________________________________________________
(iii) Address:
___________________________________________________________________
___________________________________________________________________
(iv) If the party is a company, how did it acquire title to the software
material (e.g., software material was written by company's employees
as part of their job assignment)?
Page 47 of 51
<PAGE> 38
Intel Confidential
___________________________________________________________________
___________________________________________________________________
(v) If the party is an individual, did s/he create the software material
while employed by or under contractual relationship with another
party?
Yes ______ No ______
If Yes, provide name and address of the other party and explain the
nature of the obligations:
___________________________________________________________________
___________________________________________________________________
(c) How did you acquire tittle to the software material written by the other
party?
___________________________________________________________________
___________________________________________________________________
3. Was the software material or any portion thereof derived from any third
party's pre-existing material(s)?
Yes ______ No ______
If Yes, provide the following information for each of the pre-existing
materials:
(a) Name of the materials:
___________________________________________________________________
(b) Owner:
___________________________________________________________________
(c) How did you get the right to use the pre-existing material (s) ?
___________________________________________________________________
4. Identify below, or in an attachment, any other circumstances which might
affect Intel's ability to reproduce and market this software product,
including:
(a) Confidentiality or trade secrecy of pre-existing materials:
___________________________________________________________________
___________________________________________________________________
Page 48 of 51
<PAGE> 39
Intel Confidential
(b) Known or possible royalty obligations to others:
____________________________________________________________________________
____________________________________________________________________________
(c) Pre-existing material developed for another party or customer (including
government) where you may not have retained full rights to the material:
_____________________________________________________________________________
_____________________________________________________________________________
(d) Materials acquired from a person or company possibly not having title to
them:
_____________________________________________________________________________
_____________________________________________________________________________
(e) Other circumstances:
_____________________________________________________________________________
_____________________________________________________________________________
SYNCHRONICITY, INC.,
_________________________________
Signature
_________________________________
Name
_________________________________
Title
_________________________________
Date
Page 49 of 51
<PAGE> 40
Intel Confidential
ADDENDUM H
ASSIGNMENT OF INTELLECTUAL PROPERTY
In consideration of the disclosure of Intellectual Property and Confidential
Information of Intel and the compensation paid by Intel to Synchronicity, Inc.
with a place of business at 111 N. Market Street, Suite 440, San Jose, CA 95113
("Assignor") under the Intel Co-Development and License Agreement, Intel
Agreement No., with an Effective Date of September ___, 1999 (the "Agreement")
the receipt and sufficiency of which is hereby acknowledged, the Parties agree
as follows:
Assignor has created or obtained exclusive title to the following work(s)
(hereinafter "Work") entitled:
1.
2.
In this Agreement, "Work" means all works, including literary works, pictorial,
graphic and sculptural works, architectural works, works of visual art, mask
works, and any other work that may be the subject matter of copyright
protection; advertising and marketing concepts; information; data; formulas;
designs; models; drawings; computer programs; including all documentation,
related listings, design specifications, and flowcharts, trade secrets, and any
inventions including all processes, machines, manufactures and compositions of
matter, and any other invention that may be the subject OF patent protection;
and all statutory protection obtained or obtainable thereon including those in
foreign countries.
The undersigned hereby assigns to Intel all right, title, and interest to all
Work created by Assignor arising out of or utilized by the Assignor in the
performance of the Agreement, and the ownership of the same shall be vested
solely in Intel. In respect to copyrights, this assignment shall be effective
for the entire duration of the copyrights and shall include, but not be limited
to all rights to derivative works. Assignor waives all rights of attribution,
and integrity for specific works created by Assignor under the Agreement in
respect of all marketing, advertising, and commercial uses thereof.
Assignor represents and warrants that the Work is original; that neither the
Assignor's interest in the Work nor the copyright therein is encumbered or
subject to any undisclosed lien or charge; and that Assignor is free to make the
present assignment and has no legal obligation or prior commitment which is
inconsistent with this Agreement.
SYNCHRONICITY, INC.
_________________________________
Signature
_________________________________
Name
_________________________________
Title
_________________________________
Date
Page 50 of 51
<PAGE> 1
Exhibit 10.16
[CADENCE LOGO]
SOFTWARE OEM LICENSE AGREEMENT
BETWEEN
SYNCHRONICITY, INC.
AND
CADENCE DESIGN SYSTEMS, INC.
EFFECTIVE DATE: May 7, 1999
AGREEMENT NO. SOLA-99 SYNC 0507
CADENCE CONFIDENTIAL
SOFTWARE OEM LICENSE AGREEMENT
1
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
Section Description Page
- ------- ----------- ----
<S> <C>
RECITAL ............................................................. 3
1.0 DEFINITIONS ......................................................... 3
2.0 APPOINTMENT ......................................................... 5
3.0 DELIVERY AND ACCEPTANCE ............................................. 5
4.0 LICENSE GRANT ....................................................... 5
5.0 MAINTENANCE, TRAINING AND ENHANCEMENTS .............................. 6
6.0 MARKETING AND PROMOTION ............................................. 7
7.0 FEES ................................................................ 8
8.0 SOURCE CODE ESCROW .................................................. 8
9.0 PROTECTION OF CONFIDENTIAL INFORMATION .............................. 9
10.0 WARRANTY AND INDEMNIFICATION ....................................... 10
11.0 TERM AND TERMINATION ............................................... 11
12.0 GENERAL ............................................................ 12
</TABLE>
EXHIBITS:
Exhibit A - Products and Designated Equipment
Exhibit B - Maintenance and Support Services
Exhibit C - Fees and Payment
Exhibit D - Software Deposit Agreement
Exhibit E - Licenses for Use in Professional Services
Exhibit F - Trademark Specifications
CADENCE CONFIDENTIAL
SOFTWARE OEM LICENSE AGREEMENT
2
<PAGE> 3
[CADENCE LOGO]
SOFTWARE OEM LICENSE AGREEMENT
Effective Date: May 7, 1999
Agreement No: _______
This Software OEM License Agreement ("Agreement") is entered into effective as
of the date set forth above by and among, on the one hand, CADENCE DESIGN
SYSTEMS, INC., a Delaware corporation having a principal place of business at
555 River Oaks Parkway, San Jose, California 95134, and CADENCE DESIGN SYSTEMS
(IRELAND) LIMITED, a corporation organized and existing under the laws of
Ireland having a place of business at Block U, East Point Business Park, Dublin
3, Ireland (collectively with its Subsidiaries, as defined below, "Cadence"),
and, on the other hand, Synchronicity, Inc., a Massachusetts corporation, having
a principal place of business at 201 Forest Street, Marlboro, MA 01752
("VENDOR").
WHEREAS Cadence develops and markets software application programs used in the
electronic design automation industry for the computer-aided engineering,
design, co-verification, simulation, and layout of advanced electronic circuits,
printed circuit boards and electronic systems and subsystems; and
WHEREAS Vendor has developed certain computer programs and desires to grant
Cadence rights to commercially exploit such programs on a world-wide basis; and
WHEREAS Cadence is willing, subject to the terms of this Agreement, to market,
distribute and sublicense Vendor's programs a bundled component, or in
combination or for use with the software and systems which Cadence develops or
distributes;
NOW THEREFORE in consideration of the mutual promises herein contained the
parties hereby agree as follows:
1.0 DEFINITIONS.
In addition to the terms defined elsewhere in this Agreement, the
following terms have the following meanings:
1.1 "Ancillary Work" means any software code written by or for Cadence
(and not by Vendor) for the purpose of tightly integrating the Licensed Work as
an integral and functioning part of Cadence's product framework environment
and/or to meet unique requirements of an End User.
1.2 "Cadence" means Cadence and its world-wide Subsidiaries and the
successors and assigns of any of them.
1.3 "Designated Equipment" means computer hardware contained in one of
the equipment product families listed on Exhibit A, and also including the
operating system environment with which
CADENCE CONFIDENTIAL
SOFTWARE OEM LICENSE AGREEMENT
3
<PAGE> 4
Cadence's products operate as listed in Exhibit A. At the request of either
party from time to time, and upon mutual agreement, the parties shall amend
Exhibit A to reflect expansions and extensions of the product families there
represented and will in good faith negotiate the inclusion of additional product
lines.
1.4 "Documentation" means all data sheets, user manuals and/or
education and training materials in human or machine readable form, and all
Maintenance Modifications and Enhancements thereto which are generally provided
to Vendor customers and which: (i) document the design or details of the
Product(s); and/or (ii) explain the capabilities of the Product(s); and/or (iii)
provide operating instructions for using the Product(s).
1.5 "End User" means an entity that acquires the Licensed Work for its
internal production use and not for redistribution.
1.6 "Enhancement" means any modification(s), revision(s), upgrade(s) or
addition(s) to a Product made by or on behalf of Vendor (other than a
Maintenance Modification) that improves its function, substantially enhances its
performance, including, without limitation, new versions of the Products.
Enhancements shall include updates to the Documentation.
1.7 "Error(s)" means any malfunction or defect in the Products and/or a
mistake in the Documentation that prevents the Product from correctly operating
in full conformance with its functional specifications as set forth in the
Documentation.
1.8 "Fees" means the fees that Cadence shall pay to Vendor for the
rights granted hereunder, as more specifically described in Section 7 below.
1.9 "Licensed Work(s)" means the Products and Documentation
collectively.
1.10 "Maintenance Modification" means any modification(s), revision(s)
or addition(s) to the Products that: (i) correct Errors; or (ii) support new
releases of the Designated Equipment or subsequent revisions of its operating
system; or (iii) update a Product to ensure its continuing compatibility with
versions of Cadence's product(s) it is intended to be used with, if any; or (iv)
other modification(s) or addition(s) which are not Enhancements. Maintenance
Modifications shall include correction to Documentation.
1.11 "Marketing Agent(s)" means those distributors, dealers, resellers,
representatives, affiliates or Subsidiaries with whom Cadence enters into a
contractual relationship for the express purpose of engaging such entity to
market to End-Users the Licensed Work or other Cadence products which include
the Licensed Works.
1.12 "Net Maintenance Revenues" means the portion of gross revenues
recognized by Cadence that is directly attributable to the sale of maintenance
services directly related and apportioned to the Licensed Works, net of
Marketing Agent commissions, refunds, commodity taxes, value added taxes, sales
taxes, and provision for bad debt. Net Maintenance Revenues specifically
excludes revenues recognized by Cadence from the sale or provision of
maintenance services related to or in connection with Licensed Works that are
provided to persons for evaluation or demonstration purposes only. In connection
with the license and distribution of the Licensed Work known as Cadence library
CADENCE CONFIDENTIAL
SOFTWARE OEM LICENSE AGREEMENT
4
<PAGE> 5
structure based applications, this Section is not applicable since no per item
payments are due.
1.13 "Net Product Revenues" means the portion of gross revenues
recognized by Cadence that is directly attributable to the sale or license of
the Licensed Works, net of Marketing Agent commissions, returns, commodity
taxes, value added taxes, sales taxes, and provision for bad debt. Net Product
Revenues specifically excludes revenues recognized by Cadence from any Licensed
Works that are provided to persons for evaluation or demonstration purposes
only. In connection with the license and distribution of the Licensed Work known
as Cadence library structure based applications, this Section is not applicable
since no per item payments are due.
1.14 "Product(s)" means the Vendor software product(s), in object code
form, as specified in Exhibit A, including any Maintenance Modifications and/or
Enhancements thereto.
1.15 "Subsidiary" means a corporation, limited liability company,
partnership, joint venture, company, unincorporated association or other entity
in which more than fifty percent (50%) of the outstanding shares, securities or
other ownership interest (representing the right to vote for the election of
directors or other managing authority or the right to make the decisions for
such entity, as applicable) is, now or hereafter, owned or controlled, directly
or indirectly, by a party hereto. Such corporation, company or other entity
shall be deemed to be a Subsidiary only so long as such ownership or control
exists.
1.16 "Term" means the initial term and any renewal term of this
Agreement as specified in Section 11.1 below.
2.0 APPOINTMENT.
2.1 Vendor hereby appoints Cadence as its non-exclusive OEM for the
delivery of Licensed Works to End Users world-wide, and Cadence hereby accepts
such appointment, subject to the terms and conditions hereof. "OEM" as used
herein shall be a party which acquires a product for redistribution in
combination with other products and/or services.
2.2 Cadence shall arrange for delivery of Licensed Works to the End
Users and providing End Users maintenance support of Licensed Works, through
Cadence's usual channels for distribution and maintenance, subject to the terms
and conditions hereof. Cadence will pay Vendor the license and maintenance fees
as more fully described in Section 7.
3.0 DELIVERY AND ACCEPTANCE.
3.1 Initial Delivery, Acceptance Tests and Corrections. For the initial
Licensed Work, each additional Licensed Work and each major revision thereof,
Vendor shall deliver to Cadence a copy of the Licensed Work in accordance with
the delivery schedule mutually agreed upon by the parties. Cadence shall have
thirty (30) days after the initial delivery of the Product to perform such tests
developed by the parties pursuant to Section 3.3 herein, to determine whether
such version meets the specifications and performance standards represented by
Vendor and is capable of performing repetitively in a variety of situations
without failure (the "Acceptance Standards"). Cadence shall
CADENCE CONFIDENTIAL
SOFTWARE OEM LICENSE AGREEMENT
5
<PAGE> 6
promptly notify Vendor if Cadence determines that the Product does not meet the
Acceptance Standards. Vendor shall then have sixty (60) days to modify or
improve such Product version, at Vendor's expense, so that it performs in
accordance with the Acceptance Standards and to redeliver it to Cadence. Cadence
shall have a second thirty (30) day test period to reconduct the acceptance
tests. Cadence shall have the option to terminate this agreement pursuant to
Section 11.2.2 in the event of the failure of the Product to meet the Acceptance
Standards.
3.2 Acceptance Date. If and when the acceptance tests establish that
the Product is performing in accordance with the Acceptance Standards, Cadence
shall promptly notify Vendor in writing that it accepts that Product version
(the "Acceptance Date"). Within ten (10) days of the Acceptance Date Vendor
shall deliver to Cadence: (i) one (1) reproducible master copy of the Product,
and (ii) a camera ready hard copy of the Documentation, with a collation guide
for printing and reproduction together with an electronic soft copy of the
Documentation in Word, PostScript format or as otherwise agreed to by the
parties. Vendor shall deliver the Licensed Works to Cadence on such media and
format as Cadence specifies. It is the intent of the parties that Vendor shall
provide Cadence a "golden master" copy of the Licensed Work from which Cadence
can thenceforth replicate, without intervention or assistance from Vendor,
additional copies of the Products and Documentation as necessary to exercise the
grants of Section 4.
3.3 Test Plan. Vendor shall work diligently with Cadence to develop as
soon as practicably possible following the execution of this Agreement a
mutually acceptable test plan and quality assurance plan necessary for the
development of the acceptance tests to verify a Product's conformance to the
Acceptance Standards.
4.0 LICENSE GRANT.
4.1 Distribution License. Vendor hereby grants Cadence a non-exclusive,
non-transferable, worldwide, right and license (sublicenseable through Cadence's
standard distribution channels), for the Term of this Agreement, to use, copy,
reproduce, market, display, perform and distribute externally and to prepare
Ancillary Works of the Licensed Work. Such right and license includes the right
and license of Cadence to sublicense and distribute copies of Licensed Work and
Ancillary Work to End Users world-wide and under the same forms of license and
maintenance agreements Cadence uses with respect to the licensing of, and
providing maintenance for, its own proprietary software products, and to permit
End Users to copy the Products or Documentation as is necessary in connection
with their internal use of the Products on the Designated Equipment.
With respect to the source code of the Licensed Work, effective
currently but exercisable only if and when the source code is released from
escrow in accordance with Section 8 hereof, Vendor hereby grants to Cadence the
non-exclusive, non-transferable, worldwide, royalty free, fully-paid right and
license to modify and prepare Ancillary Works of the source code, to replicate
the source code, and to use the source code, including such modifications
internally, in each case solely for maintenance and support purposes (including
enhancements). The object code version of such revisions, enhancements and
Ancillary Works may be distributed to End Users under maintenance, as included
in "Products". The parties expressly agree that an Ancillary Work shall not
include a new software product that would not constitute a Product hereunder.
Cadence shall license to Vendor those enhancements or modifications Cadence
makes to the source code of the Licensed Work during the time Vendor so
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performs maintenance obligations hereunder, following source code release from
escrow, on a non-exclusive, irrevocable, perpetual, worldwide, royalty free,
fully paid basis.
4.2 Internal Use License. Vendor hereby grants Cadence and its
Marketing Agents a non-exclusive, non-sublicenseable, fully paid, royalty free,
worldwide right and license to internally use the Licensed Works for the
purposes of technical support, quality assurance, manufacturing, testing,
demonstration, training, marketing and other tasks incidental to: (a) carrying
out the distribution activities of Section 4.1; and (b) supporting End Users in
their use of the Products sublicensed to them by Cadence and/or its Marketing
Agent(s). The internal use described in the preceding sentence shall be at no
charge or Fee to Cadence.
4.3 Ownership. Title to and ownership of the Licensed Works shall not
be modified by this Agreement and shall at all times remain with Vendor or
Vendor's suppliers. Title to and ownership of all Ancillary Works, or
Maintenance Modifications made by Cadence, and modifications thereof, shall be
held exclusively by Cadence. Vendor and its suppliers, shall have no rights in,
or license to use any Ancillary Works in any manner without the express prior
written permission of Cadence. Cadence shall not, and shall not permit any third
party to, reverse engineer, or decompile, the Licensed Work, except as
specifically permitted by this Agreement or by applicable law and except to the
extent that Vendor is not permitted by such applicable law to exclude or limit
such rights.
4.4 - Left intentionally blank.
4.5 Use in Professional Services. In addition to the licenses granted
above in Section 4, Vendor grants to Cadence the licenses set forth in Exhibit E
in connection with Cadence's provision of electronic design and consulting
services to customers, which Exhibit E is hereby incorporated herein by this
reference. The parties intend that customers of such Cadence professional
services involving a Licensed Work will separately purchase a license to the
Licensed Work from Cadence.
5.0 MAINTENANCE, TRAINING AND ENHANCEMENTS.
5.1 Maintenance and Training Services. Vendor will provide Cadence with
the maintenance and training services described on Exhibit B hereto. All
references to Exhibit B include Exhibit B-1 if applicable. Vendor's maintenance
and support obligations hereunder and under Exhibit B shall survive termination
of this Agreement for whatever reason and shall continue until the earlier of
(i) three years from the date of termination or expiration of this Agreement,
(ii) for so long as Cadence has maintenance obligations for Licensed Works to
End Users, or (iii) such time as mutually agreed upon between the parties in
connection with the "end-of-life"of a specified Licensed Work.
5.2 Maintenance Modifications, Enhancements. Within thirty (30) days
after the execution of this Agreement, each party shall designate, and notify
the other party in writing of, a company representative; both persons together
shall comprise a steering committee ("Steering Committee") whose function shall
be to evaluate the functionality and overall performance of the Licensed Works
and Products and determine the need for additional functionality, features,
Maintenance Modifications and Enhancements with respect thereto in a mutually
agreed upon schedule. The Steering Committee shall meet at least once each
calendar quarter during the Term of this Agreement in the performance of its
functions and mutually agree upon any Enhancements and/or Maintenance
Modifications to be made
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to the Products. Vendor shall use reasonable commercial efforts to develop all
Maintenance Modifications and Enhancements so agreed upon by the Steering
Committee. Vendor shall use reasonable commercial efforts to provide Cadence, at
no charge, all Maintenance Modifications and Enhancements of the Licensed Works
and related Documentation created by or for Vendor during the term of this
Agreement on or before the date Vendor's first release of such Maintenance
Modifications and/or Enhancements to any of its other distributors, OEM's,
marketing partners or end customers. Such Maintenance Modifications and
Enhancements shall, upon their availability, automatically become part of the
Licensed Work(s) for the purpose of this Agreement.
5.3 Product Utilization. At least biannually, Vendor shall provide a
qualified specialist without additional charge to review Cadence's system
performance and utilization for each Product. A written report will be furnished
to Cadence delineating ways Cadence might improve the utilization of the
Products in Cadence's product environment.
6.0 MARKETING AND PROMOTION.
6.1 Control of Marketing. Except as set forth in Section 6.5 hereof,
and subject to the terms and conditions hereof, the means by which Cadence
markets and distributes the Licensed Work shall be in Cadence's sole discretion
and control, including without limitation the methods of pricing, marketing,
naming, packaging, labeling, advertising, and collection of fees. Cadence may
distribute the Licensed Work world-wide through any combination of direct
marketing, Marketing Agents, original equipment manufacturers, and other means,
and either alone or in combination with other products. The parties agree that
the Licensed Work know as Cadence library structure based applications shall
only be distributed as a bundled component with other Cadence products except in
instances of Enhancements or Maintenance Modifications to such Licensed Work.
6.2 Referral of Inquiries. Vendor shall refer any inquiries received by
it regarding the use of the Licensed Work for use with Cadence's products to
Cadence and shall notify Cadence of each such referral.
6.3 Sales Support. Vendor agrees to provide Cadence sufficient sales
and technical support, including but not limited to Vendor personnel proficient
in the performance, use, implementation and modification of the Licensed Works
and Products (collectively, "Sales Support"), as Cadence may reasonably require
with respect to the sales attempts and other sales efforts by Cadence and/or its
Marketing Agent(s) to sell and market sublicenses to the Licensed Works and/or
Products to customers and/or potential End Users hereunder. Such Sales Support
shall be at no charge to Cadence.
6.4 Marketing Support. Vendor agrees to provide Cadence sufficient
marketing support ("Marketing Support") at such events as Cadence may reasonably
specify (e.g., industry conferences, business/trade shows, marketing seminars,
presentations and/or demonstration for key customers or strategic accounts).
Such Marketing Support shall be at no charge to Cadence.
6.5 Trademarks and Copyrights. Vendor hereby grants to Cadence (and its
applicable subcontractors) a non-exclusive license to use the trademarks and
logos set forth on Exhibit F (the "Trademarks") in connection with the
manufacture, distribution, license and promotion of the Licensed Works. Vendor
and Cadence shall agree upon the use of Vendor's Trademarks within the Products.
If
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Cadence uses the Trademarks, then the use of such Trademarks shall conform
with all trademark specifications of Vendor for such Trademarks, which
specifications are attached hereto as Exhibit F and which may be amended from
time to time by Vendor. If Cadence manufactures the Products, then Cadence shall
cause the manufacture of the Products to conform to the reasonable quality
standards of Vendor for the manufacture of the Products and Vendor may review
the Products manufactured by Cadence, upon reasonable notice to Cadence, to make
sure that such quality standards are met. Except for the use of the Trademarks
however, the packaging design, and advertising for the Licensed Products shall
be within the discretion and control of Cadence. Vendor represents and warrants
to Cadence that it is not aware and has not received notice of any infringement
or claim of infringement of any Trademark upon any rights of any third party
anywhere in the world. Cadence shall replicate Vendor's copyright notices (as
they appear or as designated by Vendor) in any Product and Documentation
reproduced under this Agreement. Use of Vendor's Trademarks shall inure to the
benefit of Vendor.
6.6 Drop Shipment. If Cadence does not manufacture the Products and
Vendor drop ships the Products, then the drop shipment box on Exhibit A shall be
checked.
6.7 Promotional Activities. On a quarterly basis Cadence will send
targeted promotional materials provided by Vendor to Cadence End-Users who could
be potential users of Vendor's products. Potential modes of communication may
include email or direct mail. Cadence will have final approval of the content
and form. Costs to be shared by both companies.
7.0 FEES.
7.1 Amount. Cadence shall pay to Vendor Fees from the Licensed Work
distributed by Cadence to End Users or Marketing Agents, as applicable, under
the terms of Exhibit C hereto.
7.2 Preferred Customer. If, during the Term of this Agreement, Vendor
makes available the Licensed Work or any material part thereof for distribution
to any third party under substantially similar terms and conditions which are
more advantageous to such third party than those specified in this Agreement,
Vendor agrees it shall give Cadence prompt written notice thereof. Cadence shall
have the right within ninety (90) days after such notification to substitute
such different terms for those specified herein, effective as of the date of
availability of such terms to the third party, and Vendor will return to Cadence
any payments made by Cadence which are in excess of the payments required under
the elected terms.
7.3 Payments, Quarterly Reports. Unless otherwise specified in Exhibit
C attached hereto, Fees shall be remitted on a quarterly basis within forty-five
(45) days following the end of Cadence's fiscal quarter during which Cadence
recognized revenues for the Licensed Work to which the Fee payment applies.
Cadence will deliver written reports to Vendor within forty-five (45) days after
the last day of each fiscal quarter stating: (i) the amount of Net Product
Revenues recognized during the quarter; and (ii) the amount of Net Maintenance
Revenues recognized during that same quarter, and (iii) the resulting Fees due.
Cadence will enclose with the report the Fee payment so calculated.
7.4 Records and Audit. Cadence agrees that it shall maintain records
sufficient to establish the Fees payable pursuant to this Section 7. Vendor may,
with prior written notice and during normal business hours, have independent
certified public accountants acceptable to Cadence examine, at Vendor's expense,
Cadence's records relating to the Fees payable pursuant to this Agreement. Such
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accountants must agree in advance in writing to maintain in confidence and not
to disclose to any party any information obtained during the course of such
examination, other than a disclosure to Vendor of the amounts of Fees that
should have been paid for the period covered by the examination. Any errors
discovered during such examination shall be corrected by the appropriate party.
In no event shall any such adjustment be made more than two (2) years after the
end of the period in error. The audit right contained in this Section may not be
exercised more than once during any 12 month period.
8.0 SOURCE CODE ESCROW.
8.1 Deposit. Within ten (10) days of the Acceptance Date, Vendor shall,
at Cadence's expense, place the complete Licensed Work source code ("Source Code
Materials") into escrow with an independent third party escrow holder. The form
of escrow deposit agreement to be used is attached hereto as Exhibit D.
Throughout the Term of this Agreement, Vendor shall update the Source Code
Materials as is necessary to include Maintenance Modifications and Enhancements,
so that the deposit at all times reflects the most current version of the
Licensed Work distributed by Cadence hereunder.
8.2 Release Event. If Vendor fails to meet its obligations under
Exhibit B (all as more fully set forth in the escrow deposit agreement), or an
Event of Default occurs under Exhibit D, and such failure or Event of Default
remains uncured for a period of at least forty-five days following written
notice from Cadence, Cadence may retrieve the Source Code Materials and use same
to fulfill its maintenance obligations to End Users respecting the Licensed Work
and otherwise continue to exercise the license grants of Section 4, provided
however that the release of Source Code Materials shall occur without such cure
period, and in accordance with Exhibit D, upon the fourth failure of Vendor to
meet its support obligations or Event of Default. If the source code is released
from escrow Cadence may (i) fully exercise its source code license rights
granted in Sections 4.1 and 4.2 hereof, solely for purposes of support and
maintenance (including enhancements) of the Licensed Work, and (ii) if the
release event occurred during the Term, continue to exercise the license grants
of Section 4 as if this Agreement continued in full force and effect for the
full Term (initial or then applicable renewal). Upon release of the source code
from escrow all other terms and conditions of this Agreement shall continue to
apply, including Cadence's obligation to pay product and maintenance fees. The
license to the source code granted herein shall be irrevocable (except in the
instance of a breach by Cadence of Sections 4.3 or 9 hereof) but shall expire at
the later of: (i) ten (10) years after the occurrence of a release event, (ii)
five (5) years following the end of the then applicable Term, or (iii) when
Cadence no longer has any maintenance obligations to End Users with respect to
the Licensed Work.
8.3 Escrow Termination. The escrow shall continue and survive on its
own terms independent of the existence of this Agreement and shall terminate on
the fifth (5th) anniversary of the termination of this Agreement, if no release
event has occurred prior thereto, or such other date as mutually agreed upon by
the parties in writing.
9.0 PROTECTION OF CONFIDENTIAL INFORMATION.
9.1 The parties acknowledge that: (i) Licensed Work in the case of
Vendor; and (ii) Ancillary Works in the case of Cadence; and/or (iii) any other
information which the parties desire to exchange to conduct the activities
contemplated by this Agreement, which the revealing party ("Discloser") holds in
confidence or received from a third party under confidentiality obligations
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("Proprietary Materials"), are confidential information of the Discloser. Except
as permitted under this Agreement, the receiving party ("Recipient") shall treat
Discloser's Proprietary Materials that are prominently marked with a notice in
human readable form noting their confidential nature, or, if delivered orally,
designated as confidential at the time of disclosure, with the same standard of
care that Recipient uses to safeguard its own proprietary materials from
unauthorized access, use, disclosure or dissemination. Proprietary Materials
disclosed orally or visually shall be identified as confidential prior to the
discussion or presentation, then furnished to Recipient in tangible form within
thirty (30) days thereof and marked as confidential. Notwithstanding the
foregoing marking requirement, source code of either party shall be treated as
Proprietary Materials hereunder and shall only be used in accordance with the
terms of Section 8.2 hereof.
9.2 Recipient's obligations respecting Discloser's Proprietary
Materials shall terminate with respect to any part thereof which Recipient can
establish by documentary evidence: (i) was not labeled as proprietary at the
time of its receipt by Recipient or in the case of orally disclosed information,
identified as confidential prior to the discussion or presentation, then
furnished to Recipient in tangible form within thirty (30) days thereof and
marked as confidential; (ii) now or hereafter may be in the public domain by
acts not attributable to Recipient; (iii) was rightfully in the possession of or
known to Recipient prior to its receipt from Discloser under this Agreement;
(iv) is or becomes available without restriction to Recipient from a source
independent of Discloser who was in lawful possession of same and authorized to
disclose it to Recipient; or (v) is agreed to be unrestricted by Discloser in
writing.
9.3 Nothing herein shall restrict Recipient's right to disclose the
Proprietary Materials where such disclosure is required by written order of a
judicial, legislative, or administrative authority of competent jurisdiction, or
is necessary to establish its rights under this Agreement, provided, however
that, in each case, Recipient will first notify Discloser of such need or
requirement and cooperate with Discloser in limiting the scope of the proposed
disclosure. Recipient will assist Discloser in taking all reasonable steps for
obtaining further appropriate means of limiting the scope of the required
disclosure of Discloser's Proprietary Materials.
9.4 Within ten (10) days of the earlier of (i) receipt of Discloser's
written request for return of same (other than the Licensed Work), or (ii) the
termination or expiration of this Agreement (except as and to the extent
otherwise provided herein); Recipient shall return all Discloser's Proprietary
Materials along with Recipient's certification that through its best efforts and
to the best of its knowledge all Discloser's Proprietary Materials have either
been returned or destroyed and no Discloser Proprietary Materials, or copies
thereof, remain in the possession of Recipient, its employees or agents;
provided, however, that Cadence as Recipient may retain such of Vendor's
Proprietary Materials as Cadence may reasonably require to provide support and
maintenance for the Licensed Works to its customers, but only for the lesser of
(i) so long as such support and maintenance obligations are in effect or (ii)
three years after the termination of this Agreement. Recipient's obligations set
forth in this Section 9 shall terminate on the fifth (5th) anniversary of the
termination or expiration of this Agreement, excluding those obligations with
respect to the source code placed in escrow pursuant to Section 8 above which
shall terminate on the tenth anniversary of the termination or expiration of
this Agreement.
9.5 Equitable Relief. Each party acknowledges that unauthorized
disclosure or use of the Proprietary Materials may cause irreparable harm to the
other party for which recovery of money damages would be inadequate, and the
other party shall therefore be entitled to obtain timely injunctive
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relief to protect the other party rights under this Agreement in addition to any
and all remedies available at law.
10.0 WARRANTY AND INDEMNIFICATION.
10.1 Vendor warrants and represents that: it has the corporate right
and power to enter into this Agreement, and that doing so does not violate or
conflict with any other Vendor obligations.
10.2 Vendor warrants and represents that the Licensed Works, and all
Maintenance Modifications and Enhancements thereto shall conform to and perform
in accordance with Vendor's published Documentation.
10.3 Vendor warrants and represents that the Licensed Work is designed
to be used prior to, during and after the calendar year 2000 A.D., and that the
Licensed Work will operate during each such time period without error relating
to date data, specifically including any error relating to, or the product of,
date data which represents or references different centuries or more than one
century. Without limiting the forgoing, Vendor represents and warrants that (i)
the Licensed Work will properly manage and manipulate data involving dates,
including single-century and multi-century formulas, and will not abnormally
end, or cause an abnormally ending scenario, within the application or generate
incorrect values or invalid results involving such dates; and (ii) the Licensed
Work has been designed to ensure year 2000 compatibility, including, without
limitation, date data century recognition, calculations which accommodate same
century and multiple century formulas and date values, and date data interface
values that reflect the century, and (iii) the Licensed Work provides that all
date-related user interface functionalities and data fields include the
indication of the century, and that all date-related data interface
functionalities include the indication of the century, and (iv) handle all leap
years, including, without limitation, the year 2000 leap year, correctly. Vendor
shall promptly advise Cadence of any breach of the above warranty. Vendor makes
no warranty as to the year 2000 compatibility of the Products when used in
conjunction with third party application software products and no warranty as to
the year 2000 capability of any third party products.
10.4 EXCEPT AS OTHERWISE PROVIDED HEREIN, THE LICENSED WORK IS PROVIDED
"AS IS," AND VENDOR AND ITS SUPPLIERS MAKE NO WARRANTIES WHATSOEVER, AND TO THE
EXTENT PERMITTED BY APPLICABLE LAW, SPECIFICALLY DISCLAIM ALL OTHER WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF
TITLE, NON-INFRINGEMENT, MERCHANTABILITY, AND FITNESS FOR A PARTICULAR PURPOSE.
NO EMPLOYEE, AGENT, DEALER, OR RESELLER IS AUTHORIZED TO MAKE ANY ADDITIONAL
WARRANTIES OR MODIFY THE FOREGOING LIMITED WARRANTY. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, VENDOR DOES NOT WARRANT THAT THE LICENSED WORK WILL
MEET ALL OF CADENCE'S OR ITS MARKETING AGENT'S OR END-USERS' REQUIREMENTS; WILL
OPERATE IN ALL OF THE COMBINATIONS WHICH MAY BE SELECTED FOR USE BY CADENCE OR
ITS MARKETING AGENTS OR END-USERS; THAT THE OPERATION OF THE LICENSED WORK WILL
BE ERROR FREE OR UNINTERRUPTED; OR THAT ALL ERRORS OR DEFECTS IN LICENSED WORK
WILL BE CORRECTED. CADENCE ACKNOWLEDGES THAT THE LICENSED WORK MAY HAVE
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DEFECTS OR ERRORS WHICH WILL NOT BE CORRECTED BY VENDOR, AND HEREBY EXPRESSLY
WAIVES ALL WARRANTIES OR CONDITIONS NOT SPECIFICALLY SET FORTH HEREIN. EXCEPT AS
SET FORTH IN SECTION 10.5 HEREIN, TO THE EXTENT PERMITTED BY APPLICABLE LAW, IT
IS EXPRESSLY AGREED THAT VENDOR'S MAXIMUM LIABILITY FOR DAMAGES HEREUNDER,
REGARDLESS OF THE FORM OF LEGAL ACTION, WHETHER IN CONTRACT OR IN TORT,
INCLUDING NEGLIGENCE, SHALL IN NO EVENT EXCEED THE ACTUAL PAYMENTS RECEIVED BY
VENDOR FOR THE LICENSED WORK AND ANY SERVICES PROVIDED BY VENDOR TO CADENCE
HEREUNDER. IN ADDITION, TO THE EXTENT PERMITTED BY APPLICABLE LAW, IN NO EVENT
SHALL VENDOR BE LIABLE FOR (I) ANY SPECIAL, INDIRECT, CONSEQUENTIAL, INCIDENTAL,
PUNITIVE, OR MULTIPLE DAMAGES, INCLUDING, WITHOUT LIMITATION, LOSS OF PROFITS,
LOSS OF REVENUE, OR LOSS OF DATA, EVEN IF ADVISED OF THE POSSIBILITY THEREOF,
(II) ANY CLAIM AGAINST CADENCE BY ANY THIRD PARTY, EXCEPT AS PROVIDED IN SECTION
10.5 BELOW, OR (III) ANY DAMAGES WHATSOEVER RESULTING FROM A FORCE MAJEURE, AN
ACT OF A THIRD PARTY, OR CIRCUMSTANCES INVOLVING NO FAULT ON VENDOR'S BEHALF.
10.5 Vendor shall defend, at its expense, Cadence, Marketing Agents and
End-Users from and against any third party claims alleging that the Licensed
Work infringes any; (i) North American, European Union or Japanese patent or
trademark, (ii) copyright, or (iii) trade secret, and shall indemnify Cadence
against all damages payable as part of a final judgment or settlement thereof.
Such indemnification obligation shall not apply to any claim to the extent such
claim is based on (A) software not claimed to be owned or developed by or on
behalf of Vendor, (B) the combination of the Licensed Work with other products
not claimed to be owned or developed by or on behalf of Vendor, (C) the
modification of the Licensed Work by anyone other than Vendor, to the extent
that the alleged infringement would have been avoided absent such modification
or combination, or (D) arising from the failure of Cadence to use updated
Licensed Work provided by Vendor for avoiding alleged infringement. In seeking
indemnification pursuant to this Section 10 Cadence shall give prompt notice to
Vendor, provided, however, that failure to give prompt notice will not relieve
the Vendor of any liability hereunder (except to the extent that Vendor has
suffered actual material prejudice by such failure). Within ten (10) business
days of receipt of such notice from Cadence, Vendor shall assume the defense of
a claim. Vendor may select counsel, which shall be reasonably acceptable to
Cadence. If Vendor fails to defend against such claim then, upon ten (10) days'
written notice to Vendor, Cadence may assume the defense of such claim. In such
event, Cadence shall be entitled under this Section as part of its damages to
indemnification for the costs of such defense. Vendor will have the right to
consent to the entry of judgment with respect to, or otherwise settle, such
claim with the prior written consent of Cadence, which consent shall not be
unreasonably withheld. The parties shall cooperate in the defense or prosecution
of any claim. Cadence shall have the right to participate, at its own expense,
in the defense or settlement of any claim. THE FOREGOING STATES THE ENTIRE
LIABILITY OF VENDOR TO CADENCE AND ANY AND ALL THIRD PARTIES, WHETHER FOR
DAMAGES OR OTHERWISE, FOR CLAIMS OF INFRINGEMENT OF ANY COPYRIGHT, PATENT,
TRADEMARK, TRADE SECRET, OR OTHER INTELLECTUAL PROPERTY RIGHT.
10.6 TO THE EXTENT PERMITTED BY APPLICABLE LAW, IT IS EXPRESSLY AGREED
THAT CADENCE'S MAXIMUM LIABILITY FOR DAMAGES HEREUNDER, REGARDLESS OF THE FORM
OF LEGAL ACTION, WHETHER IN CONTRACT OR IN TORT, INCLUDING NEGLIGENCE, SHALL IN
NO EVENT EXCEED $1,175,000. IN ADDITION, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, IN NO EVENT SHALL CADENCE BE LIABLE FOR ANY SPECIAL, INDIRECT,
CONSEQUENTIAL, INCIDENTAL, PUNITIVE, OR MULTIPLE DAMAGES, INCLUDING, WITHOUT
LIMITATION, LOSS OF PROFITS, LOSS OF REVENUE, OR
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LOSS OF DATA, OR ANY DAMAGES WHATSOEVER RESULTING FROM A FORCE MAJEURE, AN ACT
OF A THIRD PARTY, OR CIRCUMSTANCES INVOLVING NO FAULT ON VENDOR'S BEHALF, EVEN
IF CADENCE ADVISED OF THE POSSIBILITY THEREOF. IN NO EVENT SHALL THIS SECTION
10.6 APPLY IN THE INSTANCE OF A WILLFUL AND INTENTIONAL BREACH BY CADENCE OF
SECTION 4.3.
11.0 TERM AND TERMINATION.
11.1 Term. The initial term of this Agreement shall be for a period
commencing upon the effective date first set forth above and ending three (3)
years thereafter. This Agreement shall subsequently automatically renew, and
thereafter re-renew for additional terms of one (1) year each unless terminated
by either party, providing the other ninety (90) days written notice prior to
the end of the then current term.
11.2 Termination. This Agreement may be terminated at any time:
11.2.1 Non-Marketability. By Cadence upon thirty (30) days
written notice to Vendor, after the first twelve months of the Term of this
Agreement if Cadence determines that due to changes in market conditions Cadence
will not, or will not continue to, market or distribute the Licensed Works; or
11.2.2 For Cause. By either party at any time immediately upon
written notice to the other party in the event the other party fails to observe
or perform a material obligation of this Agreement (a "Default"), which Default
is not cured within thirty (30) days after the non-defaulting party has given
written notice of the Default and demanded its cure.
11.3 Effect of Termination. Upon non-renewal or termination of this
Agreement for any reason, all financial obligations of Cadence shall cease,
(except as set forth herein) all rights and licenses previously granted to End
Users shall continue in full force and effect and Vendor shall either: (i)
continue to provide Cadence all Licensed Work and support services necessary to
enable Cadence and Marketing Agents to fulfill its continuing obligations to End
User's respecting the Licensed Work during the period set forth in Section 5.1;
or alternatively, (ii) assume, as licensor directly with End Users, Cadence's
obligations respecting the Licensed Work under any of Cadence's or its Marketing
Agent(s)' then current quotations, license and maintenance and support
agreements which Cadence or its Marketing Agents entered into prior to the
termination date. In the event of termination of this Agreement pursuant to
Section 11.2.1, (except if Cadence terminates this Agreement as a result of an
EDA competitor of Cadence acquiring at least 50% of the outstanding shares of
Vendor), Cadence shall pay to Vendor 50% of the remaining payments due for the
Cadence library structure based application, set forth in Exhibit C.
11.4 Survival. The provisions of Sections 4.2 (during the period
specified in Section 8.2), 4.3, 4.5 (and Exhibit E), 5.1 (and Exhibit B), 6.3,
7.4, 8 (and other provisions of this Agreement (including Exhibits) as
contemplated therein), 9, 10.4, 10.5 (for 4 years) 10.6, 11.3 (and the
provisions of Section 7 to the extent applicable), 11.4 and 12, along with any
other provision which by its terms continues after termination, shall survive
the termination of this Agreement.
12.0 GENERAL.
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12.1 Relationship. The relationship between the parties under this
Agreement is that of independent contractors, and nothing contained in this
Agreement shall be construed to constitute either party as an agent, partner, or
joint venturer of the other.
12.2 Rights. Nothing in this Agreement shall be construed as
prohibiting or restricting: (i) Cadence from independently developing or
acquiring products which are competitive, irrespective of the similarity to or
substitutability for the Licensed Works; or (ii) the rights which the parties
have outside the scope of this Agreement; or (iii) the rights of either party to
make, have made, use, lease, license, sell or otherwise dispose of any
particular product(s) not herein described.
12.3 Notices. All notices, demands or consents required or permitted
hereunder shall be delivered in writing to the respective parties at the
addresses set forth above, and, in the case of Cadence, to the attention of the
General Counsel, or at such other address as shall have been given to the other
party in writing for the purposes of this clause. Such notices shall be deemed
effective upon the earliest to occur of: (i) actual delivery; or (ii) five (5)
calendar days after mailing (airmail for international mailings), addressed and
postage prepaid, return receipt requested (except for international mailings);
or (iii) one (1) day after transmission by fax, if to Cadence to (408) 944-0215,
and if to Vendor, to (508) 485-7514.
12.4 Assignment. Neither this Agreement nor any rights hereunder, in
whole or in part, shall be assignable or otherwise transferable by either party
without the express written consent of the other party which consent shall not
unreasonably be withheld. However, the foregoing notwithstanding, an assignment
by either party in connection with the transfer of all, or a substantial portion
of its assets, product lines or business, or by reason of acquisition, merger,
consolidation or operation of laws shall not require the other party's consent.
Subject to the above, this Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the parties hereto. In the event Vendor
executes a definitive agreement with a third party to acquire at least 50% of
Vendor's outstanding shares, Vendor shall provide Cadence prompt written notice
of such agreement. In the event such agreement is with a company with stock
traded on a national exchange or Nasdaq, such notification shall be promptly
following any public disclosure of such agreement. In addition, at Cadence's
option, the Term of this Agreement shall be extended for an additional two
years.
12.5 Severability, Waiver or Amendment. If any Agreement provision is
determined by a court of competent jurisdiction to be contrary to law, the
remaining provisions of this Agreement will continue in effect. No waiver,
amendment or modification of any provision hereof shall be effective unless in
writing and signed by the party against whom such waiver, amendment or
modification is sought to be enforced. No failure or delay by either party in
exercising any right, power or remedy hereunder shall operate as a waiver of any
such right, power or remedy.
12.6 Rights and Remedies Cumulative. Except as expressly provided
herein, the rights and remedies provided in this Agreement shall be cumulative
and not exclusive of any other rights or remedies provided at law, in equity or
otherwise.
12.7 Government Provisions. When the Licensed Works are to be furnished
to the United States Government, or, to an End User for use on a subcontract
under a United States Government prime contract (collectively a "Government
Contract"), Vendor agrees to comply with provisions that
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are contained in the Government Contract, insofar as Cadence is required by law,
regulation or the terms of the Government Contract to flow down or otherwise
make such provisions applicable to Vendor as a supplier/subcontractor of
Cadence.
12.8 Excusable Delays; Force Majeure. Neither party shall be
responsible for any delay in or failure to deliver or perform any obligations
which is due to circumstances beyond that party's reasonable control. In the
event of any such failure or delay, the time of performance shall be extended
for a period equal to the time lost by reason of the delay.
12.9 Governing Law. This Agreement is made under, governed by, and
shall be construed in accordance with the laws of the state of California,
excluding its choice of laws rule, as applied to contracts between California
corporations entered into and to be performed entirely in California. The
prevailing party in any judicial action brought to enforce or interpret this
Agreement or for relief for its breach shall be entitled to recover its costs
and its reasonable attorneys' fees incurred to prosecute or defend such action.
12.10 Entire Agreement. The provisions of this Agreement and the
Exhibits hereto, which are incorporated herein by this reference, except for
Exhibit D which is a separate agreement, constitute the entire agreement between
the parties in connection with the subject matter hereof and supersede all prior
and contemporaneous agreements, understanding, negotiations and discussions,
whether oral or written, between the parties hereto with respect to the subject
matter hereof.
12.11 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which will be considered an original, but all
of which together will constitute one and the same instrument.
12.12 Export. Vendor will notify Cadence from time to time of all
export classifications for the Licensed Works (including ECCNs) and all unusual
export requirements of which they are aware.
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IN WITNESS WHEREOF the parties have entered into this Agreement
effective as of the year and date first set forth above.
CADENCE DESIGN SYSTEMS, INC. VENDOR:
/s/ R.L. Smith McKeithen /s/ Mark A. Miller
By: ___________________________________ By: _______________________________
Name: _________________________________ Name: _____________________________
Title: ________________________________ Title: ____________________________
Date: _________________________________ Date: _____________________________
CADENCE DESIGN SYSTEMS (IRELAND) LIMITED
/s/ R.L. Smith McKeithen
By: ___________________________________
Name: __________________________________
Title: _________________________________
Date: __________________________________
CADENCE CONFIDENTIAL
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<PAGE> 18
EXHIBIT A
PRODUCTS AND DESIGNATED EQUIPMENT
REF: Software OEM Agreement
Dated:
================================================================================
1. DESCRIPTION OF PRODUCTS AND DOCUMENTATION.
Product Name Description
Embedded DesignSync(R) Limited Special limited functionality version of
Synchronicity's Design Management technology to be Function Data Manager
embedded in Cadence tools and corresponding documentation.
2. DESIGNATED EQUIPMENT.
The Products shall operate on the following equipment product families
and operating system version level on which the programs that Cadence offers on
such equipment operate: Sun Solaris 2.5 and above, HPUX 10.2 and above, and
Windows NT 4.0 and above. IBM AIX 4.3 and above will be supported within 120
days of a customer request if required due to Cadence customer requirements, but
in no event earlier than 120 days following the availability of the Licensed
Work. Additional equipment product families may be added in the future upon
mutual agreement.
3. DROP SHIPMENT.
[ ] If the box is checked the parties agree that Vendor will drop ship the
Products to End Users (or Marketing Agents, as applicable) worldwide, as
designated by Cadence from time to time, and at no charge to Cadence.
4. CADENCE IS AUTHORIZED TO MARKET AND DISTRIBUTE THE FOLLOWING VENDOR SOFTWARE:
A limited functionality data management client capable of check-in,
check-out, and versioning of Cadence library structure data. Said data
management software shall be embedded with and interfaced to Cadence
library structure based applications such that data management
functions may be performed from menus appearing within the Cadence
library structure applications.
A well defined upgrade path to the rest of Synchronicity's data
management products will be defined and offered to Cadence library
structure users commensurate with release of the availability of the
limited functionality embedded data management client for Cadence
library structure users for a fee to be paid to Synchronicity directly
upon exercise of the upgrade.
CADENCE CONFIDENTIAL
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* Confidential Information has been omitted pursuant to Rule 406 under the
Securities Act of 1933 and has been filed separately with the Securities and
Exchange Commission. The locations of the omitted materials have been
indicated with asterisks.
5. THE DISTRIBUTOR PACKAGE SHALL INCLUDE THE FOLLOWING SOFTWARE:
5.1. CONSTRAINTS:
- Must have a solution for a limited number of customers right
now (Q1 99). Must support 4.3=>4.4 migration imperative. Must
have a solution now to move existing customers who have DM
objections to 4.4.
- Feature set must be very limited (super simple setup, ci/co
only, no server, no multisite, no security, no....)
- Software must offer acceptable performance from the view of an
experienced 4.3 user
- Synchronicity to control distribution (See below).
5.2. TIMING:
- Phase 0: Now until DAC 99/Q3 99
- Phase 1: DAC 99 until availability of second generation
solution based on GDM++ (Q3 99)
- Phase 2: Beginning with introduction of GDM ++
6. DELIVERY:
6.1. PHASE 0:
Following execution of this agreement, Cadence delivers the * software
to Synchronicity. Synchronicity takes over development responsibility.
Notwithstanding the development of the Licensed Work, Cadence shall
retain all right, title and interest in and to the * software (along
with any other software, data, materials or other information) provided
to Synchroncity.
Support, documentation, QA, Test, and release management assumed in
staged manner culminating with "release" of low-end * client announced
at DAC 99 and shipped in Q3. Between now and Q3, Cadence brings all
customers needing * to Synchronicity for qualification. Synchronicity
assesses their needs and propose * as solution highlighting the
limitations and missing functionality in *, while offering aggressive
pricing.
If they pass this * qualification and Synchronicity is * using this
limited solution, then we give them * in its current form with
disclaimers that there will be no support (other than P0 or Stopper),
documentation, training, QA, etc. until it is released later in the
year (Q3). Most importantly, there will be no guaranteed migration path
to multi-site, configuration management, bug tracking, security, access
rights, or any other high end features until Synchronicity releases the
product.
6.2. PHASE 1:
Low End Client (whether based upon * or Synchronicity technology) is
announced at DAC and released in Q399. Migration path is defined and
tested to *. Support via Cadence for Level 1 and Synchronicity for
Level 2. We work through a single point of contact at Cadence for
customer issues unless absolutely necessary. Documentation to Cadence
for formatting and reproduction. Distribution through Cadence CD-ROM or
our FTP site.
Synchronicity will need to maintain two FISERV engines, one for *,
one for *. Existing GDM interface is used by both.
6.3. PHASE 2:
Same external strategy. Internally, we collapse the two FISERV engines
into one with the reengineered GDM++ interface reliant upon .dll
approach advocated by Steve Banks and Mitch. Everything runs better,
faster, and is easier to support.
CADENCE CONFIDENTIAL
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Cadence agrees to allow direct communications to be sent to the Cadence
library structure application installed base on an ongoing basis
describing the features and limitations of embedded low end dm solution
as well as upgrade and new product notification. Ongoing promotional
campaign to maintain visibility and entice users to CM, multisite,
security, access rights, integrated bug tracking, signoff, and
distribution via the web.
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* Confidential Information has been omitted pursuant to Rule 406 under the
Securities Act of 1933 and has been filed separately with the Securities and
Exchange Commission. The locations of the omitted materials have been
indicated with asterisks.
EXHIBIT B
MAINTENANCE AND SUPPORT SERVICES
REF: Software OEM Agreement
Dated:
================================================================================
1.0 MAINTENANCE.
1.1 FOR CADENCE.
1.1.1 Error Correction. Vendor will use reasonable commercial
efforts to provide a Maintenance Modification to correct any Errors in the
Licensed Works reported by Cadence. Such response shall include as appropriate:
(i) reviewing the Error with Cadence; and (ii) gathering additional information
about the Error; and (iii) analyzing the Error to determine its cause; and (iv)
providing an Error solution if already known; and (v) where required providing a
Maintenance Modification. Maintenance Modifications will be delivered promptly
to Cadence at no additional cost. Vendor shall provide Cadence with an estimate
of how long it will take to correct the Error(s) reported by Cadence and shall
keep Cadence informed of the progress of the problem resolution.
1.1.2 Error Classification & Response: Cadence will notify
Vendor, as set forth in Section 1.1.3 hereof, when Errors are discovered.
Cadence and Vendor will classify Errors by severity as: "Fatal ", preventing a
Product from performing any useful work; or "Severe Impact ", disables major
function(s); or "Degraded Operations ", Errors disabling non-essential
functions; or "Minor ", all other Errors. Vendor's shall use reasonable
commercial efforts to respond to Error's in the three levels defined as follows:
(i) Level 1, Cadence's receipt of Vendor's written, electronic (email) or oral
confirmation acknowledging Vendor's receipt of the Error report; and (ii) Level
2, Cadence's receipt of Vendor's patch, workaround or temporary fix including
Documentation changes; and (iii) Level 3, Cadence's receipt of Vendor's official
fix or update, including applicable Documentation changes. The
response/correction timetable shall be as follows, wherein a day shall be
considered to be a workday:
Response/Correction Timetable
<TABLE>
<CAPTION>
Severity Level 1 Level 2 Level 3
- -------- ------- ------- -------
<S> <C> <C> <C>
Fatal * Continued effort until *
corrected
Severe Impact * * 20 business days
Degraded Operations * 15 business days 60 business days
Minor 5 business days To be determined on To be determined on a case-
a case-by basis by-case basis
</TABLE>
1.1.3 Customer Support: To initiate support and error
correction for the Licensed Work, Cadence must first notify Vendor via Vendor's
internet support site (www.syncinc.com/support, the Internet Support Site).
Cadence may access Internet Support Site 7 days a week, 24 hours a day, with the
exception of scheduled maintenance periods and service disruptions outside of
Vendor's
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control. The Internet Support Site, utilizing Vendor's Online Support (SOS)
system, will allow Cadence to submit problem reports for staff review and/or
search for problem solutions in Vendor's on-line support data base. Vendor's
customer support staff will be available to address problem reports submitted
via the Internet Support Site, Monday through Friday, 10am to 6pm Eastern
Standard Time, excluding vendor holidays.
1.1.4 Vendor shall provide to Cadence sufficient advance
notice of any planned Maintenance Modification or Enhancements to the
Products(s) as soon as such plans are made by Vendor so as to enable Cadence to
timely adapt its interface programs to the revised Product(s).
1.2 FOR END USERS:
1.2.1 From the Effective Date until Synchronicity delivers and
Cadence accepts the Licensed Work, or such other date as mutually agreed upon by
the parties in writing, Vendor shall be responsible for providing P0 bug fixes
directly to End Users of the End User Software Maintenance Agreement attached
hereto as Exhibit B-1 (Cadence's standard end user software maintenance
agreement). During such time period referenced in the preceding sentence, Vendor
shall fulfill and satisfy all of the maintenance and support obligations of
Cadence as described in the Software Maintenance Agreement attached hereto as
Exhibit B-1.
1.2.2 Upon the delivery and acceptance of the Licensed Work,
or such other date as mutually agreed upon by the parties in writing, Cadence
shall be responsible for providing "first line" maintenance and support services
directly to End Users in accordance with the terms and conditions of the End
User Software Maintenance Agreement attached hereto as Exhibit B1. During this
time, Vendor shall continue to provide "second line" maintenance and support
services to Cadence, consistent with the terms and conditions of Section 1.1 of
this Exhibit B, and such other maintenance and support services as Cadence may
reasonably require in order to fulfill and satisfy its maintenance and support
obligations to End Users.
2.0 TRAINING.
2.1 Cadence Internal. During the Term of this Agreement, Vendor shall
provide training to Cadence and its Marketing Agents' engineering, operations,
customer service and application engineering personnel. Such training shall
cover, without limitation, the following topics in detail: (i) installation and
configuration procedures, (ii) operating, usage and performance characteristics
of the Product, (iii) Error diagnosis and isolation. Such training shall be
without charge to Cadence, shall consist of at least one eight (8) hour courses
per month, and shall be conducted at Cadence's facilities with such schedule as
is mutually agreeable, except however Cadence shall reimburse Vendor for its out
of pocket costs for the instructor's travel, lodging and meal expenses for
training held at Cadence's facilities. Additionally, if any of the foregoing
topics are covered in regularly scheduled classes held at Vendor's facilities,
then Cadence or its Marketing Agents' personnel who are engaged in the
marketing, sales, integration or support of the Products may attend any such
course(s) at no charge, provided however Cadence shall be responsible for the
travel and living expenses of its course attendees.
2.2 End User training. Vendor shall make available training to End
Users in the Licensed Work. Such training shall be available by the End User(s)'
attendance at standard classes which Vendor offers. All training to End Users
shall be at Vendors established, published and advertised
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prices.
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* Confidential Information has been omitted pursuant to Rule 406 under the
Securities Act of 1933 and has been filed separately with the Securities and
Exchange Commission. The locations of the omitted materials have been
indicated with asterisks.
EXHIBIT C
FEES AND PAYMENT
REF: Software OEM Agreement
Dated:
===============================================================================
LICENSED WORK - ___________________
1. FEES.
For each year during the Term of this Agreement (and thereafter as
applicable), Cadence shall pay Vendor the following amounts in Fees:
<TABLE>
<CAPTION>
PAYMENTS COMMITMENT
<S> <C>
Year 1 *; * to be invoiced on Effective Date,
* to be invoiced following the Acceptance
Date of the Licensed Work on the Designated
Equipment which is specified on Exhibit A
(excepting IBM AIX) and availability of
support as described in Exhibit A, Phase 1.
Year 2 * (to be invoiced *)
Year 3 * (to be invoiced *)
</TABLE>
Fees shall be due immediately upon receipt of invoice.
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EXHIBIT D
SOFTWARE DEPOSIT AGREEMENT
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EXHIBIT E
LICENSES FOR USE IN PROFESSIONAL SERVICES
REF: Software OEM Agreement
Dated:
================================================================================
1. DEFINITIONS: Unless defined in this Exhibit, capitalized terms shall have the
meanings provided therefor in the Software OEM License Agreement to which this
Exhibit is attached (the "OEM Agreement").
(a) "IP RIGHTS" means semiconductor topography rights, rights in maskworks
conferred by the U.S. Semiconductor Chip Protection Act of 1994 or any
modification or re-enactment thereof, patents, copyrights, trademarks (including
service marks), trade secrets, and design rights whether registered or
unregistered and including any application for registration of any of the
foregoing, and all rights or forms of protection of a similar nature or having
equivalent or similar effect to any of these, which may subsist anywhere in the
world.
(b) "WORLD WIDE SERVICES" means the World Wide Services groups within
Cadence and its Subsidiaries worldwide, which are engaged in the performance of
electronic design and consulting services for customers.
2. INTERNAL EVALUATION LICENSE: Vendor hereby grants to World Wide Services a
non-exclusive, non-transferable, royalty free, right and license to use copies
of the Licensed Works internally worldwide, and only to the limited extent
necessary for World Wide Services' internal review, evaluation, testing,
verification, and training.
3. LICENSE TO CUSTOMERS: The parties intend that in connection with World Wide
Services providing electronic design and/or consulting services to a customer
involving the Licensed Work, Cadence is not required to license the Licensed
Work directly to the End User customer pursuant to the distribution rights
granted to Cadence in the OEM Agreement before World Wide Services may use the
license rights reflected below in its professional services for such customer
involving the Licensed Work. The licenses below apply if Cadence's professional
services customer has purchased a license to the Licensed Work or in connection
with Cadence's right to use the Licensed Work pursuant to the license grants
under this Agreement.
4. ACCESS LICENSE: If an End User licensee of the Licensed Work is also a World
Wide Services professional services customer, Vendor hereby grants to World Wide
Services a non-exclusive, non-transferable, worldwide, royalty-free, limited
license to use and practice the Licensed Work licensed to such customer
licensee, and all IP Rights therein, in the performance by World Wide Services
of professional services for such licensee at such customer's facilities and as
a permitted user under such customer's software license agreement for the
Licensed Work. Vendor agrees that such customer licensee may make the Licensed
Work licensed to customer available to World Wide Services for use in connection
with World Wide Services' performing professional services for such customer
licensee involving the Licensed Work.
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5. TEMPORARY LICENSES FOR SPECIFIC SERVICES ENGAGEMENTS: If a customer of World
Wide Services is also a End User licensee of a Licensed Work, then World Wide
Services may use copies of the same Licensed Work licensed to such customer
licensee in Cadence's or its Subsidiary's own facilities in the performance of a
specific professional services engagement for such customer involving such
Licensed Work. With respect to such Licensed Work licensed to such customer,
Vendor hereby grants to the World Wide Services a non-transferable,
non-exclusive, royalty free, limited license, for the time period set forth
below, to use and practice the Licensed Work licensed to such customer and all
IP Rights therein, in the same form licensed to such customer, at the Cadence or
its Subsidiary's site(s), solely for the purpose of performing the specific
professional services engagement for such customer. Such license shall be
granted for a time period equal to the duration of the specific professional
services engagement for such customer.
6. QUALITY: With respect to the licenses granted to World Wide Services under
Section 2, 4 and 5 of this Exhibit, in the event the Licensed Work does not work
or does not perform in accordance with its specifications, regardless of whether
such non-performance or defective performance occurs when customer or World Wide
Services use the Licensed Work, Vendor shall promptly perform its obligations
under Section 5 of the OEM Agreement (and Exhibit B) to make the Licensed Work
perform and conform to specifications.
7 OTHER LICENSE TERMS:
The following additional license terms shall apply to the licenses granted in
Sections 2, 4 and 5 of this Exhibit:
(a) Vendor agrees that World Wide Services may use contractors to
perform the evaluation and/or the professional services involving a Licensed
Work for a licensee customer. Cadence agrees that the World Wide Services will
not use any Licensed Work in its professional services for a customer except as
expressly authorized in this Exhibit, and that World Wide Services will only
grant access to the Licensed Works licensed under this Exhibit to those of its
employees and/or contractors (1) performing the permitted evaluation (Section 2)
or (2) performing the specific professional services engagement for such
licensee customer (Sections 4 and 5). Cadence and its Subsidiaries shall impose
confidentiality obligations and use restrictions on their contractors so using
the Licensed Work as permitted hereunder.
(b) With respect to a Licensed Work licensed to World Wide Services
under Section 2 hereof, World Wide Services shall be entitled to receive, at no
charge, all Maintenance Modifications and Enhancements to such Licensed Work
that are released by Vendor during the applicable evaluation period(s). With
respect to a Licensed Work licensed to World Wide Services under Section 5,
World Wide Services shall be entitled to receive from Vendor, at no charge, all
Maintenance Modifications and Enhancements to such Licensed Work that are
released by Vendor during the period World Wide Services performs the specific
professional services engagement for such licensee customer, but only to the
same extent such licensee customer would be entitled to receive such Maintenance
Modifications or Enhancements.
(c) The provisions of this Exhibit E shall survive termination of the
OEM Agreement for whatever reason, until completion of all relevant professional
services engagements.
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EXHIBIT F
TRADEMARK SPECIFICATIONS
REF: Software OEM Agreement
Dated:
================================================================================
1. TRADEMARK SPECIFICATIONS.
The following are the trademark specifications for the Trademarks:
______________________ of Vendor.
DesignSync(R)
ProjectSync(R)
[SYNCHRONICITY LOGO]
IP Gear(TM)
DesignSync(R) DFII
[CONTENT TO BE PROVIDED BY VENDOR IN DIFFERENT SIZES AND SCALED]
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575VDG7769/9.944486
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<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors and Stockholders of Synchronicity, Inc. of
Massachusetts:
We consent to the use in this Registration Statement of Synchronicity, Inc. of
Massachusetts on Form S-1 of our report dated February 17, 2000 (which report
expresses an unqualified opinion and includes an explanatory paragraph relating
to a change in accounting for revenue in 1998) appearing in the Prospectus,
which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 18, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S AUDITED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1999 AND
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 3,652,124
<SECURITIES> 0
<RECEIVABLES> 3,144,139
<ALLOWANCES> 44,000
<INVENTORY> 0
<CURRENT-ASSETS> 7,842,779
<PP&E> 1,303,108
<DEPRECIATION> 723,735
<TOTAL-ASSETS> 8,758,000
<CURRENT-LIABILITIES> 5,906,197
<BONDS> 0
12,482,668
2,000
<COMMON> 37,860
<OTHER-SE> (9,670,725)
<TOTAL-LIABILITY-AND-EQUITY> 8,758,000
<SALES> 7,447,205
<TOTAL-REVENUES> 7,447,205
<CGS> 1,042,478
<TOTAL-COSTS> 12,221,021
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,601,895)
<INCOME-TAX> 37,425
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,639,320)
<EPS-BASIC> (1.39)
<EPS-DILUTED> (1.39)
</TABLE>
