<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 14, 1996
REGISTRATION NO. 333-05241
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
OBJECT DESIGN, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 7372 02-0424252
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
25 MALL ROAD
BURLINGTON, MASSACHUSETTS 01803
(617) 674-5000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
ROBERT N. GOLDMAN
PRESIDENT
OBJECT DESIGN, INC.
25 MALL ROAD
BURLINGTON, MASSACHUSETTS 01803
(617) 674-5000
(Name, address, including zip code and telephone number, including area code, of
agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
JOHN D. PATTERSON, JR., ESQ. MARK J. MACENKA, ESQ.
ROBERT W. SWEET, JR., ESQ. TESTA, HURWITZ & THIBEAULT, LLP
FOLEY, HOAG & ELIOT LLP HIGH STREET TOWER
ONE POST OFFICE SQUARE 125 HIGH STREET
BOSTON, MASSACHUSETTS 02109 BOSTON, MASSACHUSETTS 02110
(617) 832-1000 (617) 248-7000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / __________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ____________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
OBJECT DESIGN, INC.
------------------------
<TABLE>
CROSS-REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS IN PART I OF FORM S-1
<CAPTION>
FORM S-1 ITEM NUMBER AND HEADING LOCATION IN PROSPECTUS
-------------------------------- ----------------------
<S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus..... Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus.............................. Inside Front and Outside Back Cover Pages
of Prospectus
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges............... Prospectus Summary; Risk Factors
4. Use of Proceeds............................ Prospectus Summary; Use of Proceeds;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations
5. Determination of Offering Price............ Outside Front Cover Page of Prospectus;
Underwriting
6. Dilution................................... Dilution
7. Selling Security Holders................... Principal Stockholders
8. Plan of Distribution....................... Outside Front Cover Page of Prospectus;
Underwriting
9. Description of Securities to be Description of Capital Stock
Registered.................................
10. Interests of Named Experts and Counsel..... Legal Matters; Experts
11. Information with Respect to the Registrant:
(a) Description of Business.............. Summary; Risk Factors; Business
(b) Description of Property.............. Business -- Facilities
(c) Legal Proceedings.................... Business -- Legal Proceedings
(d) Market Price of and Dividends on the
Registrant's Common Equity and
Related Stockholders Matters......... Outside Front Cover Page of Prospectus;
Dividend Policy; Management -- Executive
Compensation; Description of Capital
Stock; Shares Eligible for Future Sale
(e) Financial Statements................. Summary; Capitalization; Consolidated
Financial Statements
(f) Selected Financial Data.............. Selected Financial Data
(g) Supplementary Financial
Information.......................... Not Applicable
(h) Management's Discussion and Analysis
of Financial Condition and Results of
Operations........................... Management's Discussion and Analysis of
Financial Condition and Results of
Operations
(i) Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure................. Not Applicable
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
FORM S-1 ITEM NUMBER AND HEADING LOCATION IN PROSPECTUS
-------------------------------- ----------------------
<S> <C>
(j) Directors, Executive Officers,
Promoters and Control Persons........ Management -- Directors and Executive
Officers; Certain Transactions
(k) Executive Compensation............... Management -- Executive Compensation
(l) Security Ownership of Certain
Beneficial Owners and Management..... Principal Stockholders
(m) Certain Relationships and Related
Transactions......................... Certain Transactions
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ Not Applicable
</TABLE>
<PAGE> 4
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, JUNE 14, 1996
PROSPECTUS
3,000,000 SHARES
LOGO
COMMON STOCK
All of the 3,000,000 shares of Common Stock offered hereby are being sold
by Object Design, Inc. ("Object Design" or the "Company"). Prior to this
offering, there has been no public market for the Common Stock of the Company.
It is currently estimated that the initial public offering price of the Common
Stock will be between $9.00 and $11.00 per share. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price. Application has been made for the inclusion of the Common Stock
in the Nasdaq National Market under the symbol "ODIS."
------------------
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGE 6.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C>
============================================================================================
</TABLE>
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
Per Share....................................... $ $ $
- ------------------------------------------------------------------------------------------------
Total(3)........................................ $ $ $
============================================================================================
</TABLE>
(1) See "Underwriting" for indemnification arrangements with the several
Underwriters.
(2) Before deducting expenses payable by the Company estimated at $1,000,000.
(3) Certain stockholders of the Company (the "Selling Stockholders") have
granted to the Underwriters a 30-day option to purchase up to 450,000
additional shares of Common Stock solely to cover over-allotments, if any.
If all such shares are purchased, the total Price to Public and Underwriting
Discount will be $ and $ , respectively, and the Selling
Stockholders will receive proceeds of $ . See "Underwriting."
------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be available
for delivery on or about , 1996 at the office of the agent of
Hambrecht & Quist LLC in New York, New York.
HAMBRECHT & QUIST
ALEX. BROWN & SONS
INCORPORATED
WESSELS, ARNOLD & HENDERSON
, 1996
<PAGE> 5
DESCRIPTION OF GRAPHICS
1) Company logo in upper left corner, accompanied by text:
"The Database for the Web."
2) Color art: four screen shots of World Wide Web home pages of several
customers of the Company, who are using the Company's products to build
Web applications.
Text accompanying screen shots:
"The World Wide Web is changing the way leading corporations do
business. . .
. . . "Object Design is changing the way Web Developers build business
applications."
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. SUCH TRANSACTIONS
MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE OVER-THE-COUNTER MARKET,
OR OTHERWISE.
2
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the consolidated financial statements and notes thereto
appearing elsewhere in this Prospectus.
THE COMPANY
Object Design develops, markets and supports the ObjectStore database
management system and related tools, used to build and deploy Internet, Intranet
and other applications. The Company's database products are designed to handle
the data types and data relationships found on the rapidly expanding World Wide
Web. ObjectStore provides support for extended data types such as image, free
text, video, audio, HTML, and Java software objects, as well as for the extended
relationships among data exemplified by the non-tabular unstructured data found
on the Internet.
Over time, new types of database management systems have been adopted as
new computing platforms have emerged. The Company believes that the computer
industry is presently undergoing such a fundamental platform shift with the
rapid adoption of the Internet and the World Wide Web. This latest platform
shift is creating a new set of requirements for database management systems. As
the World Wide Web expands, developers are increasingly building applications
that include multimedia content, require the ability to rapidly search and
browse diverse types of data and provide greater interactivity and more dynamic
context-sensitive and user-sensitive behavior.
The Company's ObjectStore database, Internet Solution Suite, and related
tools provide a powerful data management solution for building Internet
applications. ObjectStore, in conjunction with the Internet Solution Suite,
provides native support for extended data types and is readily extensible to
accommodate new data types. Unlike relational and extended-relational database
management systems, ObjectStore provides the ability both to store these new
data types and to encapsulate the functions that define their behavior. In
addition, ObjectStore allows customers to directly model the complex and
extended data relationships common to emerging Internet applications, which
provides a performance advantage over relational and object-relational systems.
ObjectStore natively supports object oriented programming languages, allowing
JAVA, C++, and other programming language objects to be stored in the database
exactly as they are represented in programs, eliminating the time and effort
needed to convert the objects to relational tables for storage.
Customers that have recently built Internet applications using the
Company's products include Southwest Airlines and GTE Directories Corporation.
Southwest Airlines recently introduced a Web-based electronic ticketing system
using ObjectStore. GTE used ObjectStore and the Internet Solution Suite to
deploy its Superpages(SM) application, a listing of over ten million businesses
nationwide that can be rapidly searched over the Web.
The Company has yet to recognize material revenues from its new Internet
products, which were introduced in March 1996. However, since the introduction
of ObjectStore in 1990, the Company has licensed over 20,000 copies of its
software to an installed base of more than 700 customers. The Company's
customers have used ObjectStore to build high-performance applications in a
variety of challenging computing environments where relational databases were
unable to provide adequate functionality.
The open architecture of the Company's products provides compatibility with
a wide range of third party applications, tools and programming languages. The
Company's products operate on standard industry hardware platforms and operating
systems such as Windows 95, Windows NT and UNIX.
The Company employs a multi-channel sales and marketing strategy, using
direct sales, systems integrators, independent software vendors, distributors
and other channel partners to address its global market.
3
<PAGE> 7
<TABLE>
THE OFFERING
<S> <C>
Common Stock offered by the Company........................ 3,000,000 shares
Common Stock to be outstanding after the offering.......... 26,267,685 shares(1)
Use of proceeds............................................ Working capital and other general
corporate purposes, including
repayment of debt
Proposed Nasdaq National Market Symbol..................... ODIS
</TABLE>
<TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------- ----------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- -------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Software................ $ 3,322 $ 8,607 $ 8,688 $ 15,706 $ 18,700 $ 4,972 $5,612
Services................ 706 1,989 4,155 6,731 10,928 2,647 2,369
Related party software
and services.......... -- -- 11,807 3,052 3,078 402 1,015
------- ------- ------- -------- --------- ------- ------
Total revenues........ 4,028 10,596 24,650 25,489 32,706 8,021 8,996
Gross profit............... 2,815 8,511 19,333 18,513 23,786 5,857 6,589
Operating income
(loss)(2)............... (3,856) (2,262) 565 (12,387) (10,406) (2,116) 191
Net income (loss)(2)....... (3,868) (2,342) 627 (12,021) (10,282) (1,996) 145
Pro forma net income (loss)
per common and common
equivalent share(3)..... $ (0.40) $ 0.01
Pro forma weighted average
common and common
equivalent shares
outstanding(3).......... 25,837 26,427
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
------------------------------------------
PRO FORMA
AS
ACTUAL PRO FORMA(3) ADJUSTED(3)(4)
-------- ------------ --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents....................... $ 3,382 $ 3,382 $29,414
Marketable securities, current.................. 4,949 4,949 4,949
Working capital................................. 4,274 4,274 30,830
Total assets.................................... 21,805 21,805 47,837
Long-term obligations........................... 344 344 --
Redeemable convertible preferred stock.......... 41,232 -- --
Total stockholders' equity (deficit)............ (32,835) 8,397 35,297
</TABLE>
4
<PAGE> 8
- -------------------------------------------------------------------------------
- ---------------
(1) Based on shares outstanding at May 31, 1996. Includes 2,883,714 shares of
Common Stock issued upon the exercise of stock options between March 31,
1996 and May 31, 1996. Assumes the issuance of 49,758 shares of Common Stock
upon the cashless exercise of an outstanding warrant to purchase 57,858
shares of Common Stock at an exercise price of $1.40 per share (the
"Warrant"). The holder of the Warrant has notified the Company of its
intention to exercise the Warrant at the closing of this offering. Excludes
(i) 3,485,896 shares of Common Stock issuable upon exercise of outstanding
options outstanding at May 31, 1996, at a weighted average exercise price of
$0.96 per share, (ii) 2,700,000 shares of Common Stock reserved for issuance
upon exercise of stock options that may be granted after May 31, 1996 under
the Company's 1996 Incentive and Nonqualified Stock Option Plan (the "1996
Stock Option Plan") and 300,000 shares reserved for issuance under the
Company's 1996 Employee Stock Purchase Plan (the "Stock Purchase Plan"). See
"Management -- Stock Option Plans" and "-- Employee Stock Purchase Plan" and
"Description of Capital Stock -- Warrant."
(2) The Company's results of operations for 1995 include restructuring charges
of approximately $2.7 million, consisting principally of severance costs and
expenses related to consolidation of the Company's facilities in connection
with a strategic realignment of the Company's business undertaken during the
second half of 1995.
(3) Pro forma information reflects the conversion to Common Stock at the closing
of this offering of all outstanding preferred stock of the Company. See Note
B of Notes to Consolidated Financial Statements.
(4) As adjusted, reflects the sale of the 3,000,000 shares offered hereby at an
assumed public offering price of $10.00 per share and the application of the
estimated net proceeds therefrom. See "Use of Proceeds."
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors." Except as otherwise specified, all information in this Prospectus
assumes no exercise of the Underwriters' over-allotment option and has been
adjusted to give effect to (i) the conversion upon the closing of this offering
of all outstanding shares of the preferred stock, $0.01 par value, of the
Company ("Preferred Stock") into an aggregate of 17,891,654 shares of Common
Stock and (ii) the amendment of the Company's Certificate of Incorporation on or
before the closing of this offering to, among other things, increase the number
of authorized shares of Common Stock to 200,000,000 and create a class of
5,000,000 shares of undesignated preferred stock. See "Description of Capital
Stock" and "Underwriting."
- -------------------------------------------------------------------------------
5
<PAGE> 9
THE COMPANY
The Company was incorporated under the laws of Delaware in 1988. The
Company's principal executive offices are located at 25 Mall Road, Burlington,
Massachusetts 01803 and its telephone number is (617) 674-5000. As used in this
Prospectus, "Object Design" or the "Company" refer to Object Design, Inc. and
its wholly-owned subsidiaries, unless the context otherwise requires.
Object Design and ObjectStore are registered trademarks of the Company.
Internet Solution Suite, Object Forms, Webconnect, ObjectForms Engine, Image
Object Manager, Text Object Manager, Video Object Manager, Audio Object Manager,
HTML Object Manager, Java Object Manager, ObjectStore Inspector, ObjectStore
Performance Expert, ObjectStore OpenAccess and DBconnect are trademarks of the
Company. This Prospectus also includes trademarks of companies other than the
Company.
RISK FACTORS
The following factors should be considered carefully before purchasing the
Common Stock offered hereby:
History of Losses; Strategic Realignment. Despite increasing revenues in
every year since its inception, the Company has incurred substantial losses and
negative cash flow, and at March 31, 1996 had an accumulated deficit of $33.9
million. The Company had net income of $627,000 in 1993. However, it incurred
losses of $12.0 million and $10.3 million in 1994 and 1995, respectively.
In late 1995, the Company appointed a new Chief Executive Officer and Chief
Operating Officer and replaced several other members of its senior management
team, and in April 1996 appointed a new Chief Financial Officer. In the second
half of 1995, the Company also embarked upon a Company-wide program of expense
reduction, including layoffs, and commenced a fundamental realignment of the
Company's business strategy. Historically, the Company had marketed its
ObjectStore database management system primarily to customers in certain
industries, such as telecommunications, finance and engineering design and
analysis, that required specialized database management capabilities unavailable
from relational database management systems. In early 1996, the Company shifted
its strategy to focus on providing database management solutions for the
emerging Internet and Intranet computing market.
In March 1996 the Company released the Internet Solution Suite, its first
group of products designed specifically to address the Internet and Intranet
computing market. Although the Company had net income of $145,000 in the three
months ended March 31, 1996, the Company has yet to recognize material revenues
from its new Internet and Intranet products. There can be no assurance that the
Company's strategic realignment to focus on the Internet and Intranet computing
market will be successful or result in sustained profitability.
As a result of the Company's strategic realignment and reallocation of its
research and development, sales and marketing and technical support resources,
it is likely that the Company's revenues from its historical business base will
experience a lower rate of growth, or will decline. Also, the Company in the
past has derived a substantial portion of its revenue from fee-based consulting
services. Recently the Company has reduced its emphasis on consulting services
as a source of revenue in favor of concentrating its technical support staff on
its recently implemented key account management program and other non-billable
activities designed to ensure customer satisfaction and success in deployment of
applications based on ObjectStore. A reduction in the rate of growth of, or
decline in, the Company's revenues from its historical business base, if not
offset by revenue from sales of the Company's products for Internet and Intranet
applications, would have a material adverse effect on the business, results of
operations and financial condition of the Company. There can be no assurance
that the Company's revenues will not decline in the short or long term, or that
the Company will be able to achieve or sustain profitability or positive cash
flow at any time in the future. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
6
<PAGE> 10
Fluctuations in Operating Results. The Company's quarterly operating
results have varied significantly and are expected to vary significantly in the
future. These fluctuations may be caused by many factors, including, among
others, the size and timing of individual orders; customer order deferrals in
anticipation of new products; timing of introduction or enhancement of products
by the Company or its competitors; market acceptance of new products;
technological changes in database management, networking or communications
technology; competitive pricing pressures; changes in the Company's operating
expenses; personnel changes; foreign currency exchange rates; mix of products
sold; quality control of products sold; and general economic conditions.
Sales cycles for the Company's customers have historically been up to six
months or longer. Although the Company believes that its sales cycles will grow
shorter as a result of its strategic realignment, there can be no assurance that
this will be the case. In addition, like many software companies, the Company
has generally recognized a substantial portion of its revenues in the last month
of each quarter, with these revenues concentrated in the last weeks of the
quarter. To the extent this trend continues, the failure to achieve such
revenues in the last weeks of a given quarter may have a material adverse effect
on the Company's financial results for that quarter. Accordingly, the
cancellation or deferral of even a small number of purchases of the Company's
products could have a material adverse effect on the Company's business, results
of operations and financial condition in any particular quarter. To the extent
that significant sales occur earlier than expected, operating results for
subsequent quarters may fail to keep pace or even decline.
Because the Company generally ships software products within a short period
after receipt of an order, the Company has not typically had a material backlog
of unfilled orders, and revenues in any quarter have been substantially
dependent on orders booked in that quarter. Product revenues are also difficult
to forecast because the market for database management solutions for the
Internet is uncertain and evolving. The Company's expense levels are based, in
part, on its expectations as to future revenues and to a large extent are fixed.
Therefore, the Company may be unable to adjust spending in a timely manner to
compensate for any unexpected revenue shortfall. Any significant shortfall of
demand in relation to the Company's expectations or any material delay of
customer orders would have an almost immediate adverse affect on the Company's
results of operations and on the Company's ability to achieve or sustain
profitability.
As a result of the foregoing and other factors, the Company believes that
period-to-period comparisons of its results of operations are not necessarily
meaningful and should not be relied upon as indications of future performance.
Fluctuations in operating results may also result in volatility in the price of
the shares of the Company's Common Stock. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Quarterly Results
of Operations."
Dependence on the Internet. The Company's future success will depend to a
substantial degree on continued expansion of use of the Internet and the World
Wide Web, and on increased adoption by businesses and organizations of
Intranets. Although currently new users and Web sites are proliferating rapidly
on the Internet, there can be no assurance that the Internet will develop as a
viable medium for business communications and activity in the long term. Failure
of the Internet to develop as such a medium could result from, among other
things, inadequate development of the infrastructure, such as the reliable
network backbone necessary to support increased volumes of traffic, delayed
development of complementary products and technologies such as high speed modems
and security procedures for financial transactions, delays in the development or
adoption of new standards and protocols or other factors that could inhibit the
Internet's ability to handle increased levels of activity. There can be no
assurance that the infrastructure, complementary products or protocols necessary
to make the Internet a viable medium for business communications and activity
will develop, and, if they do not, demand for the Company's products could be
materially adversely affected. Moreover, critical issues concerning the
commercial use of, distribution of information on, and government regulation of
the Internet (including security, cost, ease of use and access, property
ownership and other legal liability issues) remain unresolved and may affect
both the growth of the Internet and the Company's business, results of
operations and financial condition.
7
<PAGE> 11
Developing Market; Unproven Acceptance of the Company's Products. The
Company has recently changed its strategic focus to concentrate on the Internet
and Intranet market. In March 1996, the Company introduced the Internet Solution
Suite, its first group of products developed specifically for use in developing
and deploying Internet and Intranet applications. The market for database
management systems and tools designed specifically for the Internet has only
recently begun to develop, is rapidly evolving, and is characterized by an
increasing number of market entrants offering solutions based on a variety of
technologies. Database management systems in general, including object oriented
database management systems such as ObjectStore, have not commonly been used as
the basis for developing and deploying Web applications, and only a limited
number of the Company's customers have used ObjectStore to build and deploy such
applications. As is typical in the case of a new and evolving industry, demand
for and market acceptance of newly introduced products are subject to a high
degree of uncertainty. There can be no assurance that the Company's Internet-
related products and services will achieve market acceptance.
Management of Transition and Growth. The Company is experiencing a period
of transition. The Company's Chief Executive Officer, Robert N. Goldman, its
Executive Vice President and Chief Operating Officer, Justin J. Perreault, its
Chief Financial Officer, Lacey P. Brandt, and other members of the Company's
senior management team have been employed by the Company for less than one year.
The Company's recent strategic realignment and new product introductions have
placed, and will continue to place, a significant strain on its resources and
personnel. In order for the Company's new strategy to succeed, the Company must
continue to extend its core database management technology to develop new
product offerings for the Internet and Intranet market, and must redirect its
research and development, sales and marketing and technical support staffs to
focus on this market. Between the commencement of the Company's expense
reduction program in August 1995, and May 31, 1996, the Company's workforce was
reduced by layoffs and attrition by approximately 23%. Continuity of personnel
is an important factor in the success of the Company's product development and
sales and marketing activities. The Company believes that its ability to attract
and retain qualified individuals at all levels in the Company will be essential
to its success, and there can be no assurance that the Company will be
successful in attracting and retaining the necessary personnel. If Company
management is unable to effectively manage its planned transition or any
subsequent growth, identify opportunities in a timely fashion, and evaluate and
manage the Company's business, the Company's business, results of operations and
financial condition will be materially and adversely affected.
To manage any future growth, the Company must continue to implement and
improve its operational and financial systems and to expand, train and manage
its employee base. Although the Company believes that it has made adequate
allowances for the costs and risks associated with this expansion, there can be
no assurance that the Company's systems, procedures or controls will be adequate
to support the Company's operations or that Company management will be able to
carry out the rapid execution necessary to fully exploit the market for the
Company's products and services. The Company's future operating results will
also depend on its ability to expand its sales and marketing organizations,
establish distribution channels to address the Internet and Intranet computing
market and expand its support organization commensurately with the increasing
base of its installed products. If the Company is unable to manage its growth
effectively, the Company's business, results of operations and financial
condition will be materially adversely affected. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and
"Business -- Products," "-- Services" and "-- Employees".
Recent Change in Relationship with IBM. In April 1993, International
Business Machines Corporation ("IBM") purchased shares of the Company's
Preferred Stock convertible into an aggregate of 3,750,695 shares of Common
Stock, which will represent approximately 14.3% of the Company's issued and
outstanding Common Stock immediately following this offering. (If the
Underwriters' over-allotment option is exercised in full, IBM will sell an
aggregate of 426,949 shares of Common Stock, reducing its holdings to 12.7% of
the Company's issued and outstanding Common Stock.) In 1993, the Company and IBM
entered into certain business agreements (the "IBM Agreements") under which
8
<PAGE> 12
IBM is entitled to develop and market products in which the Company's
ObjectStore database management system is embedded, and the parties undertook
certain joint product development and marketing activities. During 1993, 1994,
1995 and the three months ended March 31, 1996, revenues attributable to IBM
were $9.9 million, $1.7 million, $3.1 million and $980,000, and constituted
40.2%, 6.9%, 9.4% and 10.9% of the Company's total revenues for such periods,
respectively. Under the IBM Agreements, either party has the option (the
"Break-Up Option") of terminating certain of the IBM Agreements and modifying
the terms of certain others, upon nine months' advance notice. In March 1996,
the Company exercised the Break-Up Option by giving written notice to IBM, to
become effective in January 1997. As a result of its exercise of the Break-Up
Option, the Company's revenues from IBM are likely to decline, and the Company's
joint product development and marketing efforts with IBM may be curtailed or
eliminated. There can be no assurance that the change in the Company's
relationship with IBM, and any related loss of revenue, will not have a material
adverse effect on the business, results of operations and financial condition of
the Company. See "Certain Transactions -- Relationship with International
Business Machines Corporation."
International Operations. A significant portion of the Company's revenues
are derived from sales by its international subsidiaries and to distributors
outside the United States. Revenues from foreign sales accounted for 9.3%,
28.8%, 36.9% and 44.5% of total revenues in 1993, 1994 and 1995 and in the three
months ended March 31, 1996, respectively. The Company anticipates that
international revenues will continue to account for a significant portion of
total revenues in the foreseeable future. International operations are subject
to various risks, including fluctuations in currency exchange rates, political
and economic instability, unexpected changes in regulatory requirements,
including export regulations, import and export duties and restrictions, tariffs
and other trade barriers, difficulties in managing distributors or
representatives, difficulties in staffing and managing foreign subsidiary
operations, potentially adverse tax consequences, long payment cycles,
uncertainties in connection with collecting accounts receivable, and logistical
difficulties in managing multinational operations. There can be no assurance
that any of these factors will not have a material adverse effect on the
Company's business, results of operations and financial condition. The Company
does not hedge any of its transactions denominated in foreign currencies. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Sales and Marketing."
Competition. The market in which the Company competes is intensely
competitive, highly fragmented, and characterized by rapidly changing technology
and standards. The Company's current and prospective competitors offer a variety
of database solutions, including: object databases available from Computer
Associates, GemStone, Objectivity, Poet, O2 and Versant; relational databases
available from Computer Associates, IBM, Informix, Microsoft, Oracle and Sybase;
extended-relational and object-relational databases available from IBM,
Informix, Oracle and UniSQL; and other specialized databases such as on-line
analytical processing databases. The Company has experienced and expects to
continue to experience increased competition from current and potential
competitors, many of which have significantly greater financial, technical,
marketing, and other resources than the Company, and many of which have well
established relationships with current and potential customers of the Company.
In the future, the Company expects to experience increased competition from
established vendors of relational database systems that may seek to offer
extended-relational, object-relational or object oriented database solutions. It
is also possible that alliances among competitors may emerge and rapidly acquire
significant market share. The Company also believes that competition will
increase as a result of software industry consolidation. Increased competition
may result in price reductions, reduced gross margins, and loss of market share,
any of which would materially adversely affect the Company's business, results
of operations and financial condition. There can be no assurance the Company
will be able to compete effectively against current and future competitors. See
"Business -- Competition."
Risks Associated with Product Development and Introduction. The computer
software industry is subject to rapid technological change, changing customer
requirements, frequent new product introductions and evolving industry standards
that may render existing products and services obsolete.
9
<PAGE> 13
As a result, the Company's position in its existing markets or other markets
that it may enter could be eroded rapidly by product advancements by
competitors. The life cycles of the Company's products are difficult to
estimate. The Company's future success will depend, in part, upon its ability to
enhance existing products and to develop new products on a timely basis. In
addition, its products must keep pace with technological developments and
conform to evolving industry standards, including new extended data types, new
electronic publishing formats and new client/server and Internet communication
protocols. There can be no assurance that the Company will not experience
difficulties that could delay or prevent the successful development,
introduction and marketing of new products, or that new products and product
enhancements will meet the requirements of the marketplace or achieve market
acceptance. If the Company is unable to develop and introduce products in a
timely manner in response to changing market conditions or customer
requirements, the Company's business, results of operations and financial
condition would be materially and adversely affected. In addition, the Company
or its competitors may announce enhancements to existing products or services,
or new products or services embodying new technologies, industry standards or
customer requirements that have the potential to supplant or provide lower cost
alternatives to the Company's existing products and services. The introduction
of such enhancements or new products and services could render the Company's
existing products and services obsolete and unmarketable. There can be no
assurance that the announcement or introduction of new products or services by
the Company or its competitors or any change in industry standards will not
cause customers to defer or cancel purchases of existing products or services,
which could have a material adverse effect on the Company's business, results of
operations and financial condition.
The Company has from time to time experienced delays in introducing new
products and product enhancements and there can be no assurance that the Company
will not experience difficulties that could delay or prevent the successful
development, introduction and marketing of new products or product enhancements.
In addition, there can be no assurance that such new products or product
enhancements will meet the requirements of the marketplace and achieve market
acceptance. Any such failure could have a material adverse effect on the
Company's business, results of operations and financial condition. Furthermore,
software products as complex as those offered by the Company may contain errors
or bugs that may be detected at any point in the products' life cycles. The
Company has in the past discovered software errors in certain of its products
and has experienced delays in shipment of products during the period required to
correct these errors. There can be no assurance that, despite testing and
quality assurance efforts by the Company and by current and potential customers,
errors will not be found, or product shipment delays will not occur, resulting
in loss of or delay in market acceptance and sales, diversion of development
resources, injury to the Company's reputation or increased service and warranty
costs, any of which could have a material adverse effect on the Company's
business, results of operations and financial condition. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Overview" and "Business -- Research, Development and Quality
Assurance."
Reliance on Proprietary Technology. The Company relies on a combination of
trademark, copyright, trade secret laws, employee and third-party non-disclosure
agreements, confidentiality procedures and contractual provisions to protect its
proprietary technology. The Company seeks to protect its software,
documentation, and other written materials under trade secret and copyright
laws, which offer limited protection. The Company currently has one United
States patent. There can be no assurance that the Company's patent will not be
invalidated, circumvented, or challenged, that the rights granted thereunder
will provide competitive advantage to the Company or that any future patent
applications will be issued with the scope of the claims sought by the Company.
There can be no assurance that the Company's competitors will not independently
develop technologies that are substantially equivalent or superior to the
Company's technologies. There can also be no assurance that the measures taken
by the Company to protect its proprietary rights will be adequate to prevent
misappropriation of the technology or independent development of similar
technology by others. Certain of the Company's software products are licensed to
customers under "shrink wrap" licenses included as part of the product
packaging. Although in larger sales the Company's shrink wrap licenses
10
<PAGE> 14
are generally accompanied by specifically negotiated agreements signed by the
licensee, in many cases its shrink wrap licenses are not negotiated with or
signed by individual licensees. Certain provisions of the Company's shrink wrap
licenses, including provisions protecting against unauthorized use, copying,
transfer and disclosure of the licensed program, may be unenforceable under the
laws of certain jurisdictions. In addition, the laws of various countries in
which the Company's products may be sold may not protect the Company's products
and intellectual property rights to the same degree as the laws of the United
States. There can be no assurance that third parties will not assert
intellectual property infringement claims against the Company or that any such
claims will not require the Company to enter into royalty arrangements or result
in costly litigation. The Company is not aware of any patent infringement charge
or any violation of other proprietary rights claimed by any third party relating
to the Company or to the Company's products. However, the computer software
industry is characterized by frequent and substantial intellectual property
litigation. Intellectual property litigation is complex and expensive, and the
outcome of such litigation is difficult to predict. The Company believes that,
due to the rapid pace of technological innovation for database software
products, the Company's ability to establish and maintain a position of
technology leadership in the industry is dependent more upon the skills of its
development personnel than upon the legal protections afforded its existing
technology. See "Business -- Proprietary Technology."
Reliance on Third-Party Software. The Company relies upon certain software
that it licenses from third parties, including software that is integrated with
the Company's internally developed software and used to perform key functions
such as the relational database engine licensed from Dharma Systems and
incorporated in the Company's DBconnect and OpenAccess products. Certain of
these licenses are for limited terms, can be renewed only by mutual consent and
may be terminated if the Company breaches the terms of the license and fails to
cure the breach within a specified period of time. There can be no assurance
that such licenses will continue to be available to the Company on commercially
reasonable terms, if at all. The loss of or inability to maintain any of these
licenses could result in the discontinuation of, or delays or reductions in,
product shipments unless and until equivalent technology is identified, licensed
and integrated with the Company's software. Any such discontinuation, delay or
reduction would have a material adverse effect on the Company's business,
results of operations and financial condition. Most of the Company's third-party
licenses are non-exclusive, and there can be no assurance that the Company's
competitors will not obtain licenses to and utilize such technology in
competition with the Company. There can be no assurance that the vendors of
technology utilized in the Company's products will continue to support such
technology in its current form, nor can there be any assurance that the Company
will be able to modify its own products to adapt to changes in such technology.
In addition, there can be no assurance that financial or other difficulties that
may be experienced by such third-party vendors will not have a material adverse
effect upon the technologies incorporated in the Company's products, or that, if
such technologies become unavailable, the Company will be able to find suitable
alternatives. The loss of, or inability to maintain, any such software licenses
could result in shipment delays or reductions until equivalent software could be
developed, identified, licensed and integrated, and could materially adversely
affect the Company's business, results of operations and financial condition.
See "Business -- Proprietary Technology."
Dependence on Key Personnel. The Company's future success depends to a
significant extent on its executive officers and certain technical, managerial
and marketing personnel. The loss of the services of any of these individuals or
groups of individuals could have a material adverse effect on the Company's
business, results of operations and financial condition. None of the Company's
current executive officers, other than Robert N. Goldman and Justin J.
Perreault, the Company's Chief Executive Officer and Executive Vice President
and Chief Operating Officer, respectively, has entered into an employment
agreement with the Company. The Company believes that its future success also
will depend significantly upon its ability to attract, motivate and retain
additional highly skilled technical, managerial and marketing personnel.
Competition for such personnel is intense, and there can be no assurance that
the Company will be successful in attracting, assimilating and retaining the
11
<PAGE> 15
personnel it requires. See "Management -- Executive Officers and Directors" and
"Business -- Employees."
Concentration of Stock Ownership. Upon completion of this offering, the
Company's officers and directors and entities with which they are affiliated and
six other entities which hold 5% or more of the Company's outstanding securities
will beneficially own 72.6% of the Company's outstanding Common Stock. These
stockholders, if acting together, will be in a position to elect the Company's
directors and control other corporate actions requiring stockholder approval.
See "Management" and "Principal Stockholders."
Antitakeover Considerations; Effect of Charter Provisions, By-Laws and
Delaware Law. The Company's Amended and Restated By-laws (the "Restated
By-laws") will require that any action required or permitted to be taken by
stockholders of the Company must be effected at a duly called annual or special
meeting of stockholders and may not be effected by consent in writing, and will
require specified advance notice by a stockholder of a proposal or director
nomination which such stockholder desires to present at any annual or special
meeting of stockholders. Special meetings of stockholders may be called only by
the Chairman of the Board, the Chief Executive Officer or, if none, the
President of the Company or by the Board of Directors. The Restated By-laws will
provide for a classified Board of Directors, and members of the Board of
Directors may be removed by the stockholders only upon the affirmative vote of
holders of a least two-thirds of the shares of capital stock of the Company
entitled to vote. The affirmative vote of the holders of 75% of the shares of
capital stock of the Company issued and outstanding and entitled to vote is
required to amend or repeal these provisions. In addition, under the Company's
Amended and Restated Certificate of Incorporation (the "Restated Certificate of
Incorporation") the Board of Directors will have the authority, without further
action by the stockholders, to fix the rights and preferences of, and issue
shares of, preferred stock. In addition, following this offering the Company
will become subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law, which will prohibit the Company 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. The application of Section 203 also could have the effect of
delaying or preventing a change of control of the Company and may limit the
ability of stockholders to approve a transaction that they may deem to be in
their best interests. The foregoing and other provisions of the Restated
Certificate of Incorporation and the Restated By-laws and the application of
Section 203 of the Delaware General Corporation Law could have the effect of
deterring certain takeovers or delaying or preventing certain changes in control
or management of the Company, including transactions in which stockholders might
otherwise receive a premium for their shares over then current market prices.
See "Management," "Description of Capital Stock -- Preferred Stock" and "--
Delaware Law and Certain Provisions of the Company's Certificate of
Incorporation and By-Laws."
No Prior Public Market; Possible Volatility of Stock Price. Prior to this
offering there has been no public market for the Company's Common Stock, and
there can be no assurance that an active public market for the Common Stock will
develop or be sustained after the offering. The initial public offering price
will be determined by negotiation between the Company and the representatives of
the Underwriters based upon several factors and may not be indicative of future
market prices. The market price of the Company's Common Stock could be subject
to wide fluctuations in response to quarterly variations in operating results,
announcements of technological innovations or new products by the Company or its
competitors, trends in, usage of and regulatory actions affecting the Internet,
and other events or factors. In addition, the stock market has experienced
extreme price and volume fluctuations that have particularly affected the market
prices for many high technology companies. These broad market fluctuations may
adversely affect the market price of the Company's Common Stock. See
"Underwriting."
Shares Eligible for Future Sale. Sales of substantial amounts of shares in
the public market or the prospect of such sales could adversely affect the
market price of the Company's Common Stock. Upon
12
<PAGE> 16
completion of this offering, the Company will have outstanding 26,267,685 shares
of Common Stock, of which the 3,000,000 shares offered hereby will be freely
tradeable. A total of 22,936,192 other outstanding shares are subject to lock-up
agreements under which the holders of such shares have agreed not to sell or
otherwise dispose of any of their shares for a period of 180 days after the date
of this Prospectus without the prior written consent of Hambrecht & Quist LLC.
In its sole discretion and at any time without notice, Hambrecht & Quist LLC may
release all or any portion of the shares subject to lock-up agreements.
Immediately following the close of this offering, 40,800 shares of Common Stock
will become eligible for sale without restriction under Rule 144(k), and an
additional 268,193 shares of Common Stock will become eligible for sale subject
to the restrictions of Rule 144 or, in some cases, Rule 701 under the Securities
Act. In addition, following this offering, the holders of 18,294,432 shares of
Common Stock have certain rights with respect to the registration of such shares
of Common Stock for sale to the public. If such holders, by exercising their
registration rights, cause a large number of shares to be sold in the public
market, such sales could have an adverse effect on the market price for the
Company's Common Stock. In addition, if the Company is required to include such
shares in Company-initiated registration statements, this could have an adverse
effect on the Company's ability to raise needed capital. Further, the Company
may use stock for acquisitions, which may have a dilutive effect. See "Shares
Eligible for Future Sale" and "Underwriting." At May 31, 1996 there were
outstanding options and the Warrant to purchase a total of 3,485,896 and 57,858
shares of Common Stock, respectively. Approximately 90 days following this
offering, the Company intends to file a registration statement on Form S-8 under
the Securities Act of 1933, as amended (the "Securities Act"), covering the sale
of an aggregate of 6,485,896 shares reserved for issuance pursuant to options
that are outstanding or may hereafter be granted under the Company's stock
option plans and its employee stock purchase plan. See "Management -- Stock
Option Plans" and " -- Employee Stock Purchase Plan."
Dilution. Investors purchasing shares of Common Stock in this offering
will incur immediate and substantial dilution in the net tangible book value of
the Common Stock from the initial public offering price and will incur
additional dilution upon the exercise of outstanding stock options. See
"Dilution."
13
<PAGE> 17
USE OF PROCEEDS
The net proceeds to the Company from the sale of 3,000,000 shares of Common
Stock offered hereby, after deducting estimated underwriting discounts and
estimated offering expenses payable by the Company, are estimated to be
approximately $26.9 million, assuming an initial public offering price of $10.00
per share. The Company will not receive any proceeds from the exercise, if any,
of the Underwriters' over-allotment option.
The primary purposes of this offering are to increase the Company's equity
capital and to create a public market for the Common Stock. The Company intends
to use the net proceeds of this offering for working capital and other general
corporate purposes, including repayment of debt. The debt to be repaid out of
the proceeds of the offering consists of installment notes payable to a bank in
the aggregate principal amount of $868,000 at March 31, 1996. The installment
notes are due on various dates through May 1, 1998 and bear interest at floating
rates of interest equal to the bank's prime rate per annum plus 0.75% to 1.0%
(9.0% to 9.25% at March 31, 1996). The installment notes are collateralized by
substantially all the assets of the Company. See "Management's Discussion and
Analysis of Results of Operation and Financial Condition -- Liquidity and
Capital Resources" and Note E of Notes to Consolidated Financial Statements.
The Company may also use a portion of the net proceeds of this offering to
acquire businesses, products or technologies complementary to the Company's
business. Although the Company has from time to time engaged in discussions with
respect to possible acquisitions, it has no present understandings, commitments
or agreements, nor is it currently engaged in any negotiations, with respect to
any such transaction. Pending such uses, the Company intends to invest the net
proceeds from this offering in short-term, investment-grade, interest-bearing
securities. The Company has no other specific uses for the proceeds of this
offering, and the exact use of such proceeds will be subject to the discretion
of management.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its Common Stock.
The Company currently intends to retain its earnings to fund its business and
therefore does not anticipate paying cash dividends in the foreseeable future.
In addition, the terms of the Company's existing borrowing arrangements with its
bank prohibit the payment of cash dividends on the Common Stock before the
payment in full of all outstanding indebtedness to the bank. In the future, the
terms of the Company's line of credit are likely to prohibit the payment of cash
dividends on the Common Stock. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
14
<PAGE> 18
CAPITALIZATION
<TABLE>
The following table sets forth the capitalization of the Company as of March 31, 1996, on a
pro forma basis giving effect to the conversion to Common Stock of all outstanding Preferred Stock,
and pro forma as adjusted to reflect the receipt of net proceeds from the sale by the Company of
3,000,000 shares of Common Stock pursuant to this offering at an assumed price of $10.00 per share,
after deducting estimated underwriting discounts and offering expenses payable by the Company, and
the application of the estimated net proceeds therefrom:
<CAPTION>
MARCH 31, 1996
----------------------------------
PRO FORMA
PRO FORMA(1) AS ADJUSTED(1)(2)
------------ -----------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C>
Current portion of long-term obligations...................... $ 645 121
Long-term obligations......................................... 344 --
-------- --------
Stockholders' equity:
Preferred stock, par value $0.01 per share, 5,000,000 shares
authorized; no shares issued and outstanding............. -- --
Common stock, par value $0.001 per share, 200,000,000 shares
authorized; 20,353,113 shares issued, pro forma and
23,353,113 shares issued, pro forma as adjusted(1)(3).... 20 23
Additional paid-in capital.................................. 42,592 69,489
Accumulated deficit......................................... (33,908) (33,908)
Net unrealized holding loss on marketable securities........ (29) (29)
Cumulative translation adjustment........................... 36 36
Treasury stock of 18,900 shares, at cost.................... 0 0
Advances to shareholders.................................... (200) (200)
Unearned compensation....................................... (114) (114)
-------- --------
Total stockholders' equity.................................... 8,397 35,297
-------- --------
Total capitalization..................................... $ 9,386 $ 35,418
======== ========
<FN>
- ---------------
(1) Assumes (i) the conversion to Common Stock of all outstanding shares of Preferred Stock at
the closing of this offering and (ii) the amendment of the Restated Certificate of
Incorporation of the Company to authorize the issuance of up to 200,000,000 shares of Common
Stock and up to 5,000,000 shares of undesignated preferred stock.
(2) As adjusted to give effect to the receipt of net proceeds from the sale by the Company of
3,000,000 shares of Common Stock pursuant to this offering, after deducting estimated
underwriting discounts and offering expenses payable by the Company, and the application
of the estimated net proceeds therefrom. See "Use of Proceeds."
(3) Excludes (i) 2,883,714 shares of Common Stock issued upon the exercise of stock options
between March 31, 1996 and May 31, 1996, (ii) 49,758 shares of Common Stock issuable upon the
cashless exercise of the Warrant, (iii) 3,485,896 shares of Common Stock issuable upon exercise
of options outstanding at May 31, 1996 at a weighted average exercise price of $0.96 per share
and (iv) 2,700,000 and 300,000 shares of Common Stock reserved for issuance upon exercise of
stock options that may be granted after May 31, 1996 under the 1996 Stock Option Plan and the
Stock Purchase Plan, respectively. See "Management -- Stock Option Plans" and "-- Employee
Stock Purchase Plan" and "Description of Capital Stock -- Warrant."
</TABLE>
15
<PAGE> 19
DILUTION
The pro forma net tangible book value of the Common Stock as of March 31,
1996, was $8.2 million or approximately $0.40 per share. Pro forma net tangible
book value per share represents the amount of the Company's pro forma
stockholders' equity, less intangible assets, divided by 20,353,113 shares of
Common Stock outstanding at March 31, 1996 after giving effect to the conversion
to Common Stock of all then outstanding shares of Preferred Stock.
<TABLE>
Net tangible book value dilution per share represents the difference between the amount
per share paid by purchasers of shares of Common Stock in the offering made hereby and the pro
forma as adjusted net tangible book value per share of Common Stock immediately after
completion of this offering. After giving effect to the sale of 3,000,000 shares of Common
Stock in this offering at an assumed offering price of $10.00 per share and the application of
the estimated net proceeds therefrom, the pro forma as adjusted net tangible book value of the
Company as of March 31, 1996 would have been $35.1 million or $1.50 per share. This represents
an immediate increase in net tangible book value of $1.10 per share to existing stockholders
and an immediate dilution in net tangible book value of $8.50 per share to purchasers of Common
Stock in this offering, as illustrated in the following table:
<CAPTION>
<S> <C> <C>
Assumed public offering price per share..................................... $10.00
Pro forma net tangible book value per share at March 31, 1996............. $0.40
Increase per share attributable to new investors.......................... 1.10
-----
Pro forma as adjusted net tangible book value per share after the
offering.................................................................. 1.50
------
Net tangible book value dilution per share to new investors................. $ 8.50
======
</TABLE>
<TABLE>
The following table sets forth on a pro forma basis as of March 31, 1996 the difference between
the existing stockholders and the purchasers of shares in this offering (at an assumed offering price of
$10.00 per share) with respect to the number of shares purchased from the Company, the total
consideration paid and the average price per share paid:
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
---------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............ 20,353,113 87.2% $41,137,386 57.8% $ 2.02
New investors.................... 3,000,000 12.8 30,000,000 42.2 $10.00
---------- ----- ----------- -----
Total.......................... 23,353,113 100.0% $71,137,386 100.0%
========== ===== =========== =====
</TABLE>
The foregoing computations assume no exercise of the Warrant and do not
give effect to the issuance of an aggregate of 2,883,714 shares of Common Stock
issued upon exercise of options between March 31, 1996 and May 31, 1996
resulting in aggregate proceeds to the Company of $735,000 (of which $687,000
was received in the form of promissory notes and has been excluded from the
computations below). The pro forma net tangible book value per share as of March
31, 1996 giving effect to the exercise of these options and the issuance of
49,758 shares of Common Stock upon the cashless exercise of the Warrant would
have been $0.35 per share, and the pro forma as adjusted net tangible book value
after the offering would have been $1.34, resulting in an immediate increase per
share attributable to new investors of $0.99 and net tangible book value
dilution per share to new investors of $8.66. Giving effect to such exercises,
the average price per share paid by existing stockholders for the shares
purchased by them from the Company on a pro forma basis as of March 31, 1996
would have been $1.77.
The foregoing computations also assume no exercise of (i) the Underwriters'
over-allotment option, or (ii) options to purchase an aggregate of 3,485,896
shares of Common Stock at a weighted average exercise price of $0.96 per share
outstanding at May 31, 1996. To the extent that any of these options or warrants
are exercised, new investors will experience further dilution. See
"Capitalization," "Management -- Stock Option Plans" and "Description of Capital
Stock -- Warrant."
16
<PAGE> 20
<TABLE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated balance sheet data as of December 31, 1994 and
1995 and the selected consolidated statement of operations data for the years
ended December 31, 1993, 1994 and 1995 have been derived from the Company's
consolidated financial statements, which have been audited by Coopers & Lybrand
L.L.P., independent accountants, and which are included elsewhere in this
Prospectus. The selected consolidated balance sheet data as of December 31,
1991, 1992 and 1993 and the selected consolidated statement of operations data
for the years ended December 31, 1991 and 1992 have been derived from the
Company's consolidated financial statements, which have been audited by Coopers
& Lybrand L.L.P., independent accountants, and which are not included in this
Prospectus. The selected consolidated balance sheet data as of March 31, 1996
and the selected consolidated statement of operations data for the three months
ended March 31, 1995 and 1996 have been derived from the Company's unaudited
consolidated financial statements, which have been prepared on a basis
substantially consistent with the audited consolidated financial statements and
which, in the opinion of management, include all adjustments, consisting only of
normal recurring adjustments and accruals, necessary for a fair presentation of
the financial position and results of operations for these periods. The results
of operations for the three months ended March 31, 1996 are not necessarily
indicative of future results. The following selected consolidated financial data
are qualified in their entirety by the more detailed information in the
Company's consolidated financial statements, including the notes thereto,
included elsewhere in this Prospectus, and should be read in conjunction with
such financial statements and notes and the discussion under "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------- -----------------
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Software....................................... $ 3,322 $ 8,607 $ 8,688 $ 15,706 $ 18,700 $ 4,972 $ 5,612
Services....................................... 706 1,989 4,155 6,731 10,928 2,647 2,369
Related party software and services............ -- -- 11,807 3,052 3,078 402 1,015
------- ------- ------- -------- -------- ------- -------
Total revenues............................ 4,028 10,596 24,650 25,489 32,706 8,021 8,996
Cost of revenues:
Cost of software............................... 166 243 430 1,533 1,088 343 499
Cost of services............................... 1,047 1,842 4,297 4,267 6,928 1,657 1,698
Cost of related party software and services.... -- -- 590 1,176 904 164 210
------- ------- ------- -------- -------- ------- -------
Total cost of revenues.................... 1,213 2,085 5,317 6,976 8,920 2,164 2,407
Gross profit..................................... 2,815 8,511 19,333 18,513 23,786 5,857 6,589
Operating expenses:
Selling and marketing.......................... 3,801 6,214 11,632 18,245 19,596 4,831 3,683
Research and development....................... 1,957 2,966 4,727 9,514 8,298 2,223 1,804
General and administrative..................... 913 1,593 2,409 3,141 3,589 919 911
Restructuring charges(1)....................... -- -- -- -- 2,709 -- --
------- ------- ------- -------- -------- ------- -------
Total operating expenses.................. 6,671 10,773 18,768 30,900 34,192 7,973 6,398
Operating income (loss).......................... (3,856) (2,262) 565 (12,387) (10,406) (2,116) 191
Other income (expense):
Interest income................................ -- 86 263 516 278 126 57
Interest expense............................... (12) (90) (99) (121) (136) (39) (36)
Other expense, net............................. -- (76) (72) (11) (20) 33 (43)
------- ------- ------- -------- -------- ------- -------
Total other income (expense).............. (12) (80) 92 384 122 120 22
------- ------- ------- -------- -------- ------- -------
Income (loss) before provision for income
taxes.......................................... (3,868) (2,342) 657 (12,003) (10,284) (1,996) 169
Provision (benefit) for income taxes............. -- -- 30 18 (2) -- 24
------- ------- ------- -------- -------- ------- -------
Net income (loss)................................ $(3,868) $(2,342) $ 627 $(12,021) $(10,282) $(1,996) $ 145
======= ======= ======= ======== ======== ======= =======
Pro forma net income (loss) per common and common
equivalent share(2)............................ $ (0.40) $ 0.01
Pro forma weighted average number of common and
common equivalent shares outstanding(2)........ 25,837 26,427
</TABLE>
17
<PAGE> 21
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
-------------------------------------------------- MARCH 31, MARCH 31,
1991 1992 1993 1994 1995 1996 1996(2)
---- ---- ---- ---- ---- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................... $ 930 $ 3,422 $ 2,643 $ 3,225 $ 2,465 $ 3,382 $ 3,382
Marketable securities, current.............. -- -- 3,617 1,924 1,488 4,949 4,949
Working capital (deficit)................... 1,361 2,868 8,503 790 (991) 4,274 4,274
Total assets................................ 4,253 8,248 25,484 25,429 17,154 21,805 21,805
Long-term obligations....................... 508 549 708 858 476 344 344
Redeemable convertible preferred stock...... 11,912 16,377 29,041 35,982 35,982 41,232 --
Total stockholders' equity (deficit)........ (10,033) (12,371) (11,698) (24,314) (32,756) (32,835 ) 8,397
<FN>
- ---------------
(1) Restructuring charges consist principally of severance costs and expenses
related to consolidation of the Company's facilities in connection with a
strategic realignment of the Company's business undertaken in 1995.
(2) Pro forma data assume the conversion to Common Stock of all outstanding
Preferred Stock. See Note B of Notes to Consolidated Financial Statements.
</TABLE>
18
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company was founded in 1988, and first shipped its ObjectStore database
management system in 1990. Initially, the Company concentrated on marketing its
products for use in computer assisted design and other engineering design and
analysis applications. The Company subsequently expanded its customer base to
include customers in telecommunications, finance and other industries that
required specialized database management capabilities not readily available from
conventional relational database management systems. Despite increasing revenues
in every year since its inception, the Company incurred substantial losses and
negative cash flow, and at March 31, 1996 had an accumulated deficit of $33.9
million. The Company had net income of $627,000 in 1993. However, it incurred
losses of $12.0 million and $10.3 million in 1994 and 1995, respectively.
In late 1995, the Company elected Robert N. Goldman as its new Chief
Executive Officer and Justin J. Perreault as its Chief Operating Officer and
replaced several other members of its senior management team. In April 1996,
Lacey P. Brandt joined the Company as its Chief Financial Officer.
In late 1995, the Company also commenced a fundamental reappraisal of its
business strategy of concentrating on a limited number of vertical industry
markets, and in early 1996 shifted its strategy to focus on providing database
management solutions for the emerging Internet and Intranet computing market. In
March 1996, the Company released the Internet Solution Suite, its first group of
products designed specifically to address the Internet and Intranet computing
market.
In connection with its strategic realignment, the Company also embarked
upon a Company-wide restructuring program, which included layoffs and other
expense reduction measures. Restructuring charges in the aggregate amount of
approximately $2.7 million, consisting principally of severance costs and
expenses related to consolidation of the Company's facilities, were recorded in
the second and third quarters of 1995.
As a result of the Company's strategic realignment and reallocation of its
research and development, sales and marketing and technical support resources to
focus on the Internet market, it is likely that the Company's revenues from its
historical business base will experience a lower rate of growth, or will
decline. Also, the Company historically derived a substantial portion of its
revenue from fee-based consulting services. In connection with its strategic
realignment, the Company has reduced its emphasis on consulting services as a
source of revenue in favor of concentrating the efforts of its technical support
staff on a key account management program and other non-billable activities
designed to ensure customer satisfaction and success in deployment of Internet
and Intranet applications based on ObjectStore.
In April 1993, the Company entered into a relationship with IBM. At that
time IBM purchased shares of the Company's Preferred Stock convertible into an
aggregate of 3,750,695 shares of Common Stock, which will represent 14.3% of the
Company's outstanding Common Stock immediately following this offering. (If the
Underwriters' over-allotment option is exercised in full, IBM will sell 426,949
shares of Common Stock in the offering, reducing its holdings to 12.7% of the
Company's issued and outstanding Common Stock.) The Company and IBM also signed
certain business agreements (the "IBM Agreements") under which IBM would be
entitled to develop and market products in which the Company's ObjectStore
database management system would be embedded, and the parties would undertake
certain joint product development and marketing activities. Under the IBM
Agreements, either party has the option (the "Break-Up Option") of terminating
certain of the IBM Agreements and modifying the terms of certain others, upon
nine months' advance notice. In March 1996, the Company exercised the Break-Up
Option by giving written notice to IBM, effective in January 1997. As a result
of its exercise of the Break-Up Option, the Company's revenues from IBM are
likely to decline. See "Certain Transactions -- Relationship with International
Business Machines Corporation," "Principal Stockholders" and Note K of Notes to
Consolidated Financial Statements. During 1993, 1994, 1995 and the three months
ended March 31, 1996 revenues attributable to IBM were $9.9 million,
19
<PAGE> 23
$1.7 million, $3.1 million and $980,000, and constituted 40.2%, 6.9%, 9.4% and
10.9% of the Company's total revenues for such periods, respectively.
Revenues and accounts receivable from IBM are included in related party
software and services, accounts receivable -- related party in the Company's
consolidated financial statements for such periods. Related party revenues and
accounts receivable also include amounts attributable to AT&T, Intel, Kodak,
Olivetti and Zuken, each of which is also a stockholder of the Company. However,
no customer other than IBM has accounted for more than 10% of the Company's
revenues in any of the foregoing periods.
The Company's revenues are derived from two sources, software license fees
and fees for services complementary to its software products, including software
maintenance, consulting and training. The Company recognizes revenue in
accordance with American Institute of Certified Public Accountants Statement of
Position No. 91-1, "Software Revenue Recognition." Software license revenue is
recognized upon execution of a contract or purchase order and shipment of the
software, provided that no significant obligations on the part of the Company
remain outstanding and collection of the related receivable is deemed probable
by management. Revenues from development contracts are recorded using the
percentage of completion method based on contract milestones. Maintenance fees,
which are generally payable in advance and non-refundable, are recognized
ratably over the period of the maintenance contract, typically twelve months.
Revenues from training and consulting services are recognized as the services
are provided. Software license fees, consulting fees and training fees that have
been prepaid or invoiced but that do not yet qualify for recognition as revenue
under the Company's policy, and prepaid maintenance fees not yet recognized as
revenue, are reflected as deferred revenue in the Company's Consolidated
Financial Statements. See Note B of Notes to Consolidated Financial Statements.
Research and development expenditures are charged to operations as
incurred. In accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed," the Company considers that technological feasibility has been
established once a working model of a product has been produced and tested. To
date, the Company has not capitalized software development costs after
technological feasibility has been established since costs incurred subsequent
to the establishment of technological feasibility have not been material. See
Note B of Notes to Consolidated Financial Statements.
At December 31, 1995, the Company had federal net operating loss
carryforwards ("NOLs") and research and experimentation credit carryforwards
("R&E credits") of approximately $28.5 million and $1.4 million and foreign NOLs
of approximately $1.9 million, respectively, available to offset future federal
income tax liabilities, expiring at various dates through 2010. The utilization
of federal NOLs and R&E credits is subject to limitation under Section 382 in
the event of a "change in ownership" of the Company as defined in Section 382.
The 1993 purchases of Preferred Stock by IBM, in combination with certain other
transactions, constituted a change in ownership of the Company. As a result, the
Company's utilization of NOLs and R&E credits in the aggregate amount of
approximately $10.0 million that were available at the time of such change will
be limited to a maximum of $2.3 million per year through 2008. No change of
ownership within the meaning of Section 382 has occurred since 1993, and the
Company does not expect the offering made hereby to result in such a change of
ownership. Accordingly, federal NOLs and R&E credits in the aggregate amount of
approximately $18.5 million at December 31, 1995 that have arisen since the 1993
change in ownership may be utilized by the Company through 2010 without
limitation under Section 382. See Note I of Notes to Consolidated Financial
Statements. As a result of these carryforwards, the Company's tax provision for
the quarter ended March 31, 1996 as well as during 1993, 1994 and 1995, consists
solely of state and foreign income taxes, and federal alternative minimum taxes.
The Company has established a valuation allowance against its deferred tax
assets due to the uncertainty surrounding the realization of such assets.
Management evaluates on a quarterly basis the recoverability of the deferred tax
assets and the level of the valuation allowance. At such time as it is
determined that it is more likely than not that deferred tax assets are
realizable, the valuation allowance will be appropriately reduced. See Note I of
Notes to Consolidated Financial Statements.
20
<PAGE> 24
This Prospectus, including Management's Discussion and Analysis of
Financial Condition and Results of Operations, contains forward-looking
statements which involve risks and uncertainties. The Company's actual results
may differ significantly from the results discussed in the forward-looking
statements. Factors that might cause such a difference include, but are not
limited to, those discussed in "Risk Factors" above.
<TABLE>
RESULTS OF OPERATIONS
The following table sets forth certain revenue and cost data as a
percentage of the Company's total revenues for each period presented:
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------- ---------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues:
Software......................................... 35.2% 61.6% 57.2% 62.0% 62.4%
Services......................................... 16.9 26.4 33.4 33.0 26.3
Related party software and services.............. 47.9 12.0 9.4 5.0 11.3
---- ---- ---- ---- ----
Total revenues................................ 100.0 100.0 100.0 100.0 100.0
---- ---- ---- ---- ----
Cost of revenues:
Cost of software................................. 1.7 6.0 3.3 4.3 5.5
Cost of services................................. 17.4 16.8 21.2 20.7 18.9
Cost of related party software and services...... 2.4 4.6 2.8 2.0 2.4
---- ---- ---- ---- ----
Total cost of revenues........................ 21.5 27.4 27.3 27.0 26.8
---- ---- ---- ---- ----
Gross profit....................................... 78.5 72.6 72.7 73.0 73.2
Operating expenses:
Selling and marketing............................ 47.2 71.6 59.9 60.2 40.9
Research and development......................... 19.2 37.3 25.4 27.7 20.1
General and administrative....................... 9.8 12.3 10.9 11.5 10.1
Restructuring charges............................ -- -- 8.3 -- --
---- ---- ---- ---- ----
Total operating expenses...................... 76.2 121.2 104.5 99.4 71.1
---- ---- ---- ---- ----
Operating income (loss)............................ 2.3 (48.6) (31.8) (26.4) 2.1
---- ---- ---- ---- ----
Other income (expense):
Interest income.................................. 1.0 2.0 0.9 1.6 0.6
Interest expense................................. (0.4) (0.5) (0.4) (0.5) (0.4)
Other expense, net............................... (0.3) (0.0) (0.1) 0.4 (0.4)
---- ---- ---- ---- ----
Total other income (expense).................. 0.3 1.5 0.4 1.5 (0.2)
---- ---- ---- ---- ----
Income (loss) before provision for income taxes.... 2.6 (47.1) (31.4) (24.9) 1.9
Provision (benefit) for income taxes............... 0.1 0.1 (0.0) (0.0) 0.3
---- ---- ---- ---- ----
Net income (loss).................................. 2.5% (47.2)% (31.4)% (24.9)% 1.6%
==== ==== ==== ==== ====
</TABLE>
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Software Revenue. Software revenue increased 12.9%, to $5.6 million for
the three months ended March 31, 1996 compared with $5.0 million for the
corresponding period in 1995. The increase resulted primarily from growth in
volume of licenses of ObjectStore sold to customers in the Company's historical
markets. Software revenue for the first quarter of 1995 included a single large
order for $1.1 million for use in an engineering design application, while no
order of that magnitude was received in the corresponding period of 1996. During
the first quarter of 1996, the Company recognized no revenue from licenses of
its Internet Solution Suite, which was released in March 1996.
21
<PAGE> 25
The Company expects that as a result of its strategic realignment, revenues from
its historical business base will experience a lower rate of growth, or will
decline.
Services Revenue. Services revenue decreased 10.5%, to $2.4 million for
the three months ended March 31, 1996 compared with $2.6 million for the
corresponding period in 1995. The decrease was due to a reduction in billable
consulting activity as a result of the Company's realignment of the focus of its
technical support staff.
Related Party Software and Services Revenue. Related party software and
services revenue increased 152.6%, to $1.0 million for the three months ended
March 31, 1996 compared with $402,000 for the corresponding period in 1995. The
increase was due primarily to recognition in the first quarter of 1996 of
$650,000 in revenue from IBM attributable to the discontinuation of a
significant joint product development project with IBM, which was being
accounted for by the percentage of completion method. The Company anticipates
that a final $750,000 of revenue related to this discontinued project will be
recognized by the Company in the second quarter of 1996. These amounts, which
were prepaid by IBM, had been recorded as deferred revenue-related party. As a
result of the Company's exercise of the Break-Up Option, the Company expects
revenues from IBM to decline both in dollar amount and as a percentage of its
total revenues in future periods.
Revenues from International Operations. Revenues from international
operations, including export sales, increased as a percentage of the Company's
total revenues to 44.5% for the three months ended March 31, 1996 compared with
36.2% in the corresponding period of 1995. The increases resulted primarily from
a more established direct sales presence in certain markets in Europe and Asia.
The Company expects that revenues from foreign operations and export sales will
continue to be significant in future periods.
Cost of Software. Cost of software consists primarily of costs of product
media, manuals, packaging materials, duplication and shipping, as well as
royalties relating to third-party software included in the Company's products.
Cost of software increased 45.3%, to $499,000 for the three months ended March
31, 1996 compared with $343,000 for the corresponding period in 1995, and
represented 8.9% and 6.9% of software revenue for such periods, respectively.
The increase in dollar amount was attributable primarily to increases in direct
costs related to increased sales volume, as well as to an increase in royalties
related to third-party software acquired in the first quarter of 1996. The
increase as a percentage of software revenue was attributable primarily to
increased sales of products containing royalty-bearing third-party software. The
Company intends to continue its strategy of enhancing its product line through
the incorporation of third-party software and, as a result, the cost of software
as a percentage of software revenue may continue to fluctuate.
Cost of Services. Cost of services consists primarily of personnel-related
costs incurred in providing software maintenance and technical support,
consulting, and training services, as well as maintenance fees payable by the
Company associated with third-party software included in the Company's products.
Cost of services was $1.7 million in each of the three month periods ended March
31, 1995 and 1996. Cost of services as a percentage of services revenue
increased to 71.7% for the three month period ended March 31, 1996 compared with
62.6% for the corresponding period in 1995. The increase as a percentage of
services revenue is primarily due to the Company's reduced emphasis on fee-based
consulting and the increased focus of the Company's technical support staff on
the Company's key account management program and other non-billable activities
designed to ensure customer satisfaction and successful deployment of Internet
and Intranet applications based on ObjectStore.
Cost of Related Party Software and Services. Cost of related party
software and services consists of the cost of software and the cost of services
licensed or provided to related parties. Cost of related party software and
services increased 27.8% to $210,000 in the three months ended March 31, 1996
compared with $164,000 in the corresponding period of 1995, and represented
20.7% and 40.9% of related party software and services revenue for such periods,
respectively. The decrease as a percentage of related party software and
services revenue is attributable to the recognition in the first quarter of 1996
of $650,000 in deferred software revenue from IBM for which there was little
22
<PAGE> 26
corresponding expense, and to a shift in the mix of related party revenues from
lower-margin consulting services revenue to higher-margin software revenue.
Selling and Marketing Expense. Selling and marketing expense, consisting
primarily of costs associated with personnel involved in the sales and marketing
process, sales commissions, seminars, sales facilities expense, trade shows,
advertising and promotional materials, decreased 23.8% to $3.7 million for the
three months ended March 31, 1996 compared with $4.8 million for the
corresponding period in 1995, and decreased as a percentage of total revenues to
40.9% from 60.2% for such periods, respectively. The decrease in dollar amount
and as a percentage of revenues reflects the effects of the Company's
restructuring in the second half of 1995 and related headcount reductions in
marketing, telesales and IBM sales, as well as the sale of the Company's
Australian subsidiary to its employees. The Company intends to expand its direct
sales force and significantly increase its expenditures on marketing focused
specifically on the Internet opportunity throughout 1996.
Research and Development Expense. Research and development expense,
consisting primarily of costs of personnel, equipment and facilities, decreased
18.8%, to $1.8 million for the three months ended March 31, 1996 compared with
$2.2 million for the corresponding period in 1995, and decreased as a percentage
of total revenues to 20.1% from 27.7% in the corresponding periods of 1996 and
1995, respectively. The decreases reflect the effects of the Company's
restructuring and headcount reductions, which included the disbanding of a
separate product development group based in California. The Company expects that
research and development expenses will increase in dollar amount in future
periods as the Company continues to enhance its existing products and introduce
new products.
General and Administrative Expense. General and administrative expense
consisting of expenses of the Company's administrative, finance and general
management activities, including legal, accounting and other professional fees,
decreased 0.9%, to $911,000 for the three months ended March 31, 1996 compared
with $919,000 for the corresponding period in 1995, and decreased as a
percentage of the Company's total revenues to 10.1% from 11.5% for such periods,
respectively. The decrease as a percentage of total revenues is attributable to
effects of the Company's expense reduction program in the second half of 1995,
which were offset in part by increased consulting fees and some temporary
duplication in personnel costs associated with the Company's strategic
realignment and transition in senior management in late 1995 and early 1996.
Total Other Income (Expense). Total other income (expense) consists
primarily of interest income related to the Company's invested cash and interest
expense related to bank term loans. The Company invests cash not required for
operations in short-term investment grade interest-bearing securities. Interest
income fluctuates based on the amount of funds available for investment and
prevailing interest rates. Total other income (expense) changed to a net expense
of $22,000 for the three months ended March 31, 1996 compared with net income of
$120,000 for the corresponding period of 1995. This decrease was primarily a
result of lower interest income related to the decline in invested cash balances
in the March 31, 1996 quarter.
Provision (Benefit) for Income Taxes. The Company's effective tax rate of
14.0% in the three months ended March 31, 1996 primarily reflected foreign taxes
for which no NOLs were available.
The Company believes that its operating expenses for the three months ended
March 31, 1996, which generally reflect the effects of its strategic realignment
and its restructuring efforts during 1995, are likely to be more indicative of
future levels of such expenses, as a percentage of total revenues, than are its
operating expenses in 1995 and prior periods.
1995 COMPARED TO 1994
Software Revenue. Software revenue increased 19.1% to $18.7 million in
1995 compared with $15.7 million in 1994. The increase was due to growth in
volume of sales of ObjectStore as the Company continued to expand its customer
base from the engineering industry to customers in the telecommunications, data
communications, finance and other industries.
23
<PAGE> 27
Services Revenue. Services revenue increased 62.4% to $10.9 million in
1995 compared with $6.7 million in 1994. The increase was due primarily to an
increase in consulting revenues and to an increase in maintenance revenues
attributable to growth of the Company's installed base.
Related Party Software and Services Revenue. Related party software and
services revenue, primarily consisting of revenue from IBM, was $3.1 million in
each of 1995 and 1994.
Revenues from International Operations. Revenues from international
operations, including export sales, increased as a percentage of the Company's
total revenues to 36.9% in 1995 compared with 28.8% in 1994. The increases
resulted primarily from a more established direct sales presence in certain
markets in Europe and Asia.
Cost of Software. Cost of software decreased 29.0%, to $1.1 million for
1995 compared with $1.5 million for 1994, and decreased as a percentage of
software revenue to 5.8% from 9.8% for such periods, respectively. The decrease
in dollar amount and as a percentage of total revenues was primarily
attributable to successful efforts by management to reduce the costs of media,
manuals, packaging materials and duplication.
Cost of Services. Cost of services increased 62.4%, to $6.9 million in
1995 compared with $4.3 million in 1994, and represented 63.4% of services
revenue in each period. The increase in dollar amount was attributable to growth
in the size of the Company's consulting staff in the first half of 1995.
Cost of Related Party Software and Services. Cost of related party
software and services decreased 23.1%, to $904,000 for 1995 compared with $1.2
million for 1994, and represented 29.4% and 38.5% of related party software and
services revenue for such periods, respectively. The reduction as a percentage
of revenue was attributable to a shift in the mix of revenues toward higher
margin software revenue in 1995 from lower margin consulting revenue in 1994.
Selling and Marketing Expense. Selling and marketing expense increased
7.4%, to $19.6 million in 1995 compared with $18.2 million in 1994, but
decreased as a percentage of the Company's total revenues to 59.9% from 71.6%
for such periods, respectively. The increase in dollar amount reflected
expansion of the Company's direct sales force during the first half of 1995 and
higher commission expense associated with increased software license revenues,
which were partially offset by the effects of the Company's restructuring and
related reductions in headcount and marketing expense in late 1995. The decrease
as a percentage of revenue was attributable to higher productivity of the
Company's sales force in 1995.
Research and Development Expense. Research and development expense
decreased 12.8%, to $8.3 million in 1995 compared with $9.5 million in 1994, and
represented 25.4% and 37.3% of total revenues for such periods respectively. The
decrease in dollar amount and as a percentage of total revenues was due
primarily to the Company's restructuring in late 1995 and the related reduction
in research and development headcount, as well as to the Company's suspension of
certain non-strategic product development efforts.
General and Administrative Expense. General and administrative expense
increased 14.2%, to $3.6 million in 1995 compared with $3.1 million in 1994, but
decreased as a percentage of the Company's total revenues to 10.9% from 12.3%
for such periods, respectively. The increase in dollar amount was attributable
primarily to increased headcount to support the Company's expanding domestic and
international operations.
Restructuring Charges. Restructuring charges in 1995 consist primarily of
severance payments and costs related to consolidation of the Company's
facilities in connection with its restructuring and strategic realignment in the
second and third quarters of 1995. See Note M of Notes to Consolidated Financial
Statements.
Total Other Income (Expense). Total other income (expense) decreased by
68.2% to net income of $122,000 in 1995 compared with net income of $384,000 in
1994. This decrease was largely the result of decreased interest income related
to lower cash balances during 1995 as compared to 1994.
Provision (Benefit) for Income Taxes. Differences between the Company's
effective tax rates in 1995 and 1994 are attributable to the effect of foreign
taxes.
24
<PAGE> 28
1994 COMPARED TO 1993
Software Revenue. Software revenue increased 80.8%, to $15.7 million in
1994 compared with $8.7 million in 1993. The increase was due to growth in
volume of sales of ObjectStore as the Company expanded its customer base from
the engineering industry to customers in the telecommunications, data
communications, finance and other industries.
Services Revenue. Services revenue increased 62.0%, to $6.7 million in
1994 compared with $4.2 million in 1993. The increase was due primarily to an
increase in consulting revenues and to an increase in maintenance revenues
attributable to growth of the Company's installed base.
Related Party Software and Services Revenue. Related party software and
services revenue, primarily consisting of revenue from IBM, decreased 74.2%, to
$3.1 million in 1994 compared with $11.8 million in 1993. In 1993, the Company
and IBM entered into the business relationship which was reflected in the IBM
Agreements entered into in April 1993, which resulted in the recognition by the
Company of substantial revenue from IBM during 1993.
Revenues from International Operations. Revenues from international
operations, including export sales, increased as a percentage of the Company's
total revenues to 28.8% in 1994 compared with 9.3% in 1993 as a result of the
expansion of the Company's international sales and marketing presence.
Cost of Software. Cost of software increased 256.4%, to $1.5 million for
1994 compared with $430,000 for 1993, and increased as a percentage of software
revenue to 9.8% from 4.9% for such periods, respectively. The dollar increase
and increase as a percentage of software revenue in 1994 was attributable to
increases in software license sales and increases in production and inventory
management costs for the Company's expanding product line.
Cost of Services. Cost of services was $4.3 million in each of 1994 and
1993, but represented 63.4% and 103.4% of services revenue in such periods,
respectively. The decrease as a percentage of services revenue was attributable
to the growth in the Company's consulting and maintenance revenues in 1994,
resulting in higher utilization and productivity of personnel.
Cost of Related Party Software and Services. Cost of related party
software and services increased 99.3%, to $1.2 million for 1994 compared with
$590,000 for 1993, and represented 38.5% and 5.0% of related party software and
services revenue for such periods, respectively. The increase in dollar amount
and as a percentage of related party software and services revenue was
attributable to an increased percentage of lower margin consulting revenues in
1994, as well as to the Company's recognition in 1993 of approximately $9.9
million of fully paid software license fees from IBM, with which relatively
little incremental cost was associated.
Selling and Marketing Expense. Selling and marketing expense increased
56.9%, to $18.2 million in 1994 compared with $11.6 million in 1993, and
increased as a percentage of the Company's total revenues to 71.6% from 47.2%
for such periods, respectively. The increase in dollar amount reflected
expansion of the Company's direct sales force and substantially increased
marketing expense in anticipation of future growth, as well as higher commission
expense associated with increased software license revenues.
Research and Development Expense. Research and development expense
increased 101.3%, to $9.5 million in 1994 compared with $4.7 million in 1993,
and represented 37.3% and 19.2% of total revenues for such periods,
respectively. The increase in dollar amount and as a percentage of total
revenues was attributable to growth of the Company's research and development
staff to support the continued development and enhancement of ObjectStore and
related tools.
General and Administrative Expense. General and administrative expense
increased 30.4%, to $3.1 million in 1994 compared with $2.4 million in 1993, and
increased as a percentage of the Company's total revenues to 12.3% from 9.8% for
such periods, respectively. The increase in dollar amount and as a percentage of
total revenues was attributable primarily to increased headcount to support the
expected growth of Company's domestic and international operations and its
business relationship with IBM.
25
<PAGE> 29
Total Other Income (Expense). Total other income (expense) increased by
318.7% to net income of $384,000 in 1994 compared with net income of $92,000 in
1993. This increase was the result of higher invested cash balances during 1994
compared with 1993.
Provision (Benefit) for Income Taxes. The difference between the Company's
effective tax rates in 1994 and 1993 is attributable to the effects of foreign
taxes as well as of federal alternative minimum taxes in 1993.
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain unaudited quarterly financial data
for the five quarters ended March 31, 1996 in dollar amounts and as a percentage
of total revenues. In the opinion of management, this information has been
presented on the same basis as the audited Consolidated Financial Statements
appearing elsewhere in this Prospectus, and includes all adjustments, consisting
only of normal recurring adjustments and accruals, that the Company considers
necessary for a fair presentation. Such quarterly results are not necessarily
indicative of future results of operations and should be read in conjunction
with the audited Consolidated Financial Statements and Notes thereto.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------
MARCH 31, JUNE 30, SEP. 30, DEC. 31, MARCH 31,
1995 1995 1995 1995 1996
--------- -------- -------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues:
Software.............................. $ 4,972 $ 4,198 $ 4,421 $5,109 $ 5,612
Services.............................. 2,647 2,571 2,745 2,965 2,369
Related party software and services... 402 317 1,190 1,169 1,015
------ ------ ------ ----- -----
Total revenues..................... 8,021 7,086 8,356 9,243 8,996
Cost of revenues:
Cost of software...................... 343 263 127 355 499
Cost of services...................... 1,657 1,747 1,970 1,554 1,698
Cost of related party software and
services........................... 164 182 274 284 210
------ ------ ------ ----- -----
Total cost of revenues............. 2,164 2,192 2,371 2,193 2,407
Gross profit............................ 5,857 4,894 5,985 7,050 6,589
Operating expenses:
Selling and marketing................. 4,831 4,998 5,475 4,292 3,683
Research and development.............. 2,223 2,218 1,971 1,886 1,804
General and administrative............ 919 1,077 785 808 911
Restructuring charges................. -- 1,239 1,470 -- --
------ ------ ------ ----- -----
Total operating expenses........... 7,973 9,532 9,701 6,986 6,398
Operating income (loss)................. (2,116) (4,638) (3,716) 64 191
Other income (expense):
Interest income....................... 126 81 42 29 57
Interest expense...................... (39) (38) (30) (29) (36)
Other expense, net.................... 33 (25) (4) (24) (43)
------ ------ ------ ----- -----
Total other income (expense)....... 120 18 8 (24) (22)
Income (loss) before provision for
income taxes.......................... (1,996) (4,620) (3,708) 40 169
Provision (benefit) for income taxes.... -- -- -- (2) 24
------ ------ ------ ----- -----
Net income (loss)....................... $(1,996) $ (4,620) $ (3,708) $ 42 $ 145
====== ====== ====== ===== =====
</TABLE>
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<PAGE> 30
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------
MARCH 31, JUNE 30, SEP. 30, DEC. 31, MARCH 31,
1995 1995 1995 1995 1996
--------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Revenues:
Software............................... 62.0% 59.3% 52.9% 55.3% 62.4%
Services............................... 33.0 36.3 32.9 32.1 26.3
Related party software and services.... 5.0 4.4 14.2 12.6 11.3
----- ----- ----- ----- -----
Total revenues...................... 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Cost of software....................... 4.3 3.7 1.5 3.8 5.5
Cost of services....................... 20.7 24.7 23.6 16.8 18.9
Cost of related party software and
services............................ 2.0 2.6 3.3 3.1 2.4
----- ----- ----- ----- -----
Total cost of revenues.............. 27.0 31.0 28.4 23.7 26.8
Gross profit............................. 73.0 69.0 71.6 76.3 73.2
Operating expenses:
Selling and marketing.................. 60.2 70.5 65.5 46.5 40.9
Research and development............... 27.7 31.2 23.6 20.4 20.1
General and administrative............. 11.5 15.2 9.4 8.7 10.1
Restructuring charges.................. -- 17.5 17.6 -- --
----- ----- ----- ----- -----
Total operating expenses............ 99.4 134.4 116.1 75.6 71.1
Operating income (loss).................. (26.4) (65.4) (44.5) 0.7 2.1
Other income (expense):
Interest income........................ 1.6 1.1 0.5 0.3 0.6
Interest expense....................... (0.5) (0.5) (0.4) (0.3) (0.4)
Other expense, net..................... 0.4 (0.4) 0.0 (0.2) (0.4)
----- ----- ----- ----- -----
Total other income (expense)........... 1.5 0.2 0.1 (0.2) (0.2)
Income (loss) before provision for income
taxes.................................. (24.9) (65.2) (44.4) 0.5 1.9
Provision (benefit) for income taxes... -- -- -- (0.0) 0.3
----- ----- ----- ----- -----
Net income (loss)........................ (24.9)% (65.2)% (44.4)% 0.5% 1.6%
===== ===== ===== ===== =====
</TABLE>
The Company's quarterly operating results have varied significantly and are
expected to vary significantly in the future. These fluctuations may be caused
by many factors, including, among others, the size and timing of individual
orders; customer order deferrals in anticipation of new products; timing of
introduction or enhancement of products by the Company or its competitors;
market acceptance of new products; technological changes in database management,
networking, or communications technology; competitive pricing pressures; changes
in the Company's operating expenses; personnel changes; foreign currency
exchange rates; mix of products sold; quality control of products sold; and
general economic conditions.
For example, software revenue in the three months ended March 31, 1995 was
high in comparison to the two succeeding quarters, as a result of a $1.1 million
order from a single customer received in the first quarter. Related party
software and service revenues in the third and fourth quarter of 1995 include an
aggregate of $1.6 million in revenue attributable to a single license agreement
with IBM, and in the first quarter of 1996 include $650,000 attributable to the
recognition of deferred revenue related to a joint development project with IBM,
being accounted for by the percentage of completion method, which was
discontinued in the first quarter of 1996. Cost of software as a percentage of
software revenues fluctuated during 1995 and the first quarter of 1996 as a
result of costs associated with introduction of new versions of ObjectStore
during 1995 and of several new products, including the Internet Solution Suite,
in the last quarter of 1995 and the first quarter of 1996. Operating expenses
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<PAGE> 31
also fluctuated as a result of the Company's restructuring and related
reductions in personnel and facilities expenses in the second and third quarters
of 1995.
Sales cycles for the Company's customers have historically been up to six
months or longer. In addition, like many software companies, the Company has
generally recognized a substantial portion of its revenues in the last month of
each quarter, with these revenues concentrated in the last weeks of the quarter.
Although the Company believes that its sales cycles will grow shorter as a
result of its strategic realignment, there can be no assurance that this will be
the case. Accordingly, the cancellation or deferral of even a small number of
purchases of the Company's products could have a material adverse effect on the
Company's business, results of operations and financial condition in any
particular quarter. To the extent that significant sales occur earlier than
expected, results of operations for subsequent quarters may fail to keep pace or
even decline.
Because the Company generally ships software products within a short period
after receipt of an order, the Company has not typically had a material backlog
of unfilled orders, and revenues in any quarter have been substantially
dependent on orders booked in that quarter. Product revenues are also difficult
to forecast because the market for database management solutions for the
Internet is uncertain and evolving. The Company's expense levels are based, in
part, on its expectations as to future revenues and to a large extent are fixed.
Therefore, the Company may be unable to adjust spending in a timely manner to
compensate for any unexpected revenue shortfall. Any significant shortfall of
demand in relation to the Company's expectations or any material delay of
customer orders would have an almost immediate adverse affect on the Company's
results of operations and on the Company's ability to achieve profitability.
As a result of the foregoing and other factors, the Company believes that
period-to-period comparisons of its results of operations are not necessarily
meaningful and should not be relied upon as indications of future performance.
Fluctuations in operating results may also result in volatility in the price of
the shares of the Company's Common Stock.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations through a
combination of sales of Preferred Stock, bank lines of credit and capital and
operating leases. At March 31, 1996, the Company had cash, cash equivalents and
marketable securities of $9.1 million and working capital of $4.3 million.
The Company's operating activities used cash of $2.0 million, $4.3 million,
$6.2 million, and $205,000 in 1993, 1994, 1995, and the quarter ending March 31,
1996, respectively. Cash used in operations during 1993 was primarily due to an
increase in accounts receivable as a result of increased sales. Cash used in
operations in 1994 and 1995 was primarily the result of the Company's net
losses. Cash used in operations during the quarter ending March 31, 1996 was
primarily the result of increases in accounts receivable and decreases in
accrued expenses.
Cash used in investing activities was $11.8 million and $2.4 million in
1993 and 1994, respectively, and due primarily to purchases of marketable
securities and capital expenditures, offset in part in 1994 by sales of
marketable securities. Cash provided by investing activities was $5.9 million in
1995, primarily from sales of marketable securities, offset in part by capital
expenditures. Cash used by investing activities was $3.7 million in the quarter
ending March 31, 1996 and was attributable to purchases of marketable
securities.
Cash provided by financing activities was $13.0 million and $7.3 million in
1993 and 1994, respectively, due primarily to proceeds from issuance of
Preferred Stock and long-term borrowings, offset in part by principal payments
on long-term borrowings and capital leases. Cash used by financing activities
was $486,000 in 1995, primarily due to principal payments on long-term
borrowings and capital leases. Cash provided by financing activities was $4.7
million in the quarter ending March 31, 1996, primarily due to proceeds from
issuance of Preferred Stock.
Capital expenditures, including capital leases, were approximately $2.0
million, $2.7 million, $1.2 million, and $175,000 in 1993, 1994, 1995, and the
quarter ending March 31, 1996, respectively.
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These expenditures consisted principally of purchases of property and equipment,
primarily computer hardware and software.
The Company's revolving credit agreement with Fleet Bank expired in April
1995. At March 31, 1996, the Company had no outstanding borrowings under the
revolving credit line. However, letters of credit in the aggregate amount of
$800,000 issued for the account of the Company under the revolving credit line
were outstanding at that date. Additionally, installment notes in the aggregate
principal amount of $868,000, payable to Fleet Bank at various dates through May
1998 and bearing interest at the Bank's prime rate of interest plus 0.75% to
1.0%, were outstanding at March 31, 1996. The Company intends to repay these
installment notes in full out of the net proceeds of this offering. The letters
of credit and installment notes are collateralized by substantially all the
assets of the Company. The Company's agreements with the Bank contain various
covenants, including financial covenants tested on a quarterly basis, that
require maintenance of a specified quick ratio, leverage ratio and minimum
capital base and prohibit losses in excess of a specified maximum. Upon the
occurrence of an event of default under the Bank agreements that is not waived
by the Bank or cured, the Bank is entitled to, among other things, demand
payment of all outstanding amounts and terminate the letters of credit. The
Company's noncompliance with certain of these covenants during 1995 was waived
by the Bank. At March 31, 1996, the Company was in compliance with the Bank's
covenants.
The Company is in discussions with The First National Bank of Boston with
respect to a new $2.0 million revolving credit facility. There can be no
assurance, however, that the Company will enter into such a new credit facility.
As of March 31, 1996, the Company's primary source of liquidity was its
cash, cash equivalents and marketable securities of $9.1 million. The Company
believes that the net proceeds from this offering, together with current cash,
cash equivalents and marketable securities, its capital leases and funds
generated from operations, if any, will provide adequate liquidity to meet the
Company's capital and operating requirements through at least 1997. Thereafter,
or if the Company's spending plans change, the Company may find it necessary to
seek additional sources of financing to support its capital needs. There can be
no assurance that such financing will be available on commercially reasonable
terms, or at all. See "Risk Factors -- Fluctuations in Operating Results."
ACCOUNTING FOR STOCK OPTIONS
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation," encourages, but does not require, companies to
recognize compensation expense for grants of stock, stock options and other
equity instruments to employees. Although expense recognition for employee
stock-based compensation is not mandatory, SFAS No. 123 requires companies that
choose not to adopt fair value accounting to disclose pro forma net income and
earnings per share under that method. This accounting principle will be
effective for the Company's financial statements for the full year ending
December 31, 1996. The Company believes that adoption of SFAS No. 123 will not
have a material impact on its financial condition or results of operations, as
the Company will not use the fair value method of accounting for stock options,
but will instead comply with the pro forma disclosure requirements.
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<PAGE> 33
BUSINESS
OVERVIEW
Object Design develops, markets, and supports the ObjectStore database
management system and related tools, used to build and deploy Internet, Intranet
and other applications. The Company's database products are designed to handle
the data types and data relationships found on the rapidly expanding World Wide
Web. ObjectStore supports extended data types such as image, free text, video,
audio, HTML and Java software objects, as well as the extended relationships
among data exemplified by the non-tabular, unstructured data found on the
Internet.
The Company's products include the ObjectStore database management system,
Internet Solution Suite, DBconnect and related development and administration
tools. ObjectStore has been designed to provide native support for extended data
types and extended data relationships. As a result, the Company's products
enable its customers to build applications that would be difficult or impossible
to implement with conventional relational, extended-relational or
object-relational database management systems, as well as to reduce development
costs and shorten the time required to develop and deploy applications. The
Company believes that the object oriented architecture, performance, reliability
and extensibility of ObjectStore provide a powerful solution for the rapidly
evolving data management needs of developers of emerging World Wide Web
applications. Among the Company's customers for its new Internet products are
Southwest Airlines and GTE Directories Corporation, each of which has recently
deployed a World Wide Web application based on ObjectStore.
Since its introduction in 1990, ObjectStore has become the market leader in
object databases. ObjectStore has been widely deployed in telecommunications,
finance and engineering design and analysis applications, where rigorous
requirements for high performance, reliability, concurrency and scalability must
be met and where conventional relational databases, due to their limited ability
to accommodate complex, non-tabular data and multi-dimensional data
relationships, have been unable to meet user requirements.
INDUSTRY BACKGROUND
Businesses are continually expanding their use of information technology to
manage their operations and deliver new goods and services to customers. This
expansion has been driven by the need to increase efficiency and responsiveness
in order to compete more effectively and by the rapid pace of innovation and
reduction in cost of computer hardware and software. As a result, information
systems are being used to manage more complex types of data and more varied
types of interrelationships among data. Over time, these trends have resulted in
a need for increasingly powerful and flexible database management systems.
New types of database management systems have emerged as customer needs
have evolved and new computing platforms have been adopted. In the 1970s,
terminal-based on-line processing replaced batch-processing as the dominant mode
of computing. As advances in technology made it feasible for multiple users to
have concurrent access to the same data, database management systems such as
Cullinet's IDMS, which provided data integrity and transaction management
capabilities not available from the simple flat file systems used in
batch-processing applications, achieved widespread acceptance. The minicomputer
revolution in the early 1980s, which made departmental-level computing possible,
created demand for easier access to data, and relational database systems
providing ad hoc query and reporting capabilities proliferated. The shift to the
client/server model of computing created the need for new relational database
management systems optimized for access by desktop clients over heterogeneous
networks. Each of these major shifts in computing platform has driven the
adoption of new database technology which better matches the requirements of new
applications or computing platforms. The Company believes that the computer
industry is undergoing another fundamental platform shift, as the emergence of
the Internet and World Wide Web has once again created the need for a new
generation of database management systems.
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The Internet and the World Wide Web
The Internet is a global collection of thousands of computer networks
interconnected to enable organizations and individuals to communicate, share
information and conduct business electronically. Much of the recent growth of
the Internet has been driven by the development of the World Wide Web. The Web
is a subset of the Internet that takes advantage of graphical user interfaces
and is rich in multimedia content and interactivity.
As the World Wide Web expands, developers are building increasingly
sophisticated and complex applications for Web sites. Early Web sites consisted
of static pages of text and graphics whose main function was to convey the same
information to all users. Now, however, Web site developers are rapidly
enhancing their sites to provide more varied and dynamic experiences to users
visiting the site. In order to attract users to their sites and encourage them
to explore their content, as well as to more effectively convey information, Web
site developers are adding multimedia content in the form of extended data types
such as video and audio. These applications also require the rapid assembly of
data of diverse types from a variety of sources in order to tailor the content
"on the fly." Applications are now being deployed on the Web to enable
electronic commerce, sophisticated data search and retrieval, on-line banking,
electronic publishing and information delivery and other innovative services.
Businesses and organizations are also taking advantage of the capabilities
of the Web to create private networks or "Intranets" that connect employees and
business partners through one or more internal Web sites. Intranet applications
can be deployed rapidly and inexpensively using industry standard Web browsers
and Internet communications protocols. Also, Intranets can link geographically
diverse personnel at communication costs that are largely independent of time
and distance. As a result, Intranet applications are proliferating rapidly
within businesses and organizations.
As a result of these and other trends, the Internet, Intranets and the
World Wide Web are rapidly emerging as a new and fundamentally different type of
computing platform. As access to the Internet becomes easier and less expensive
and as powerful Web browsers that can act as a "universal client" have become
available, applications can be rapidly and cost-effectively built and deployed
over the Web to end users anywhere in the world. The Company believes that the
rapid adoption of the Internet and the Web as a new computing platform is
defining a new set of requirements for database management systems.
Implications of the Internet for Database Management Systems
The key requirements of a database management system to be used in creating
and deploying Internet and Intranet applications include the ability to support
extended data types, the ability to manage extended data relationships, and
support for object oriented programming methodologies.
- SUPPORT FOR EXTENDED DATA TYPES. Internet databases must support
extended data types that go beyond the simple character, numeric, and
date information typically used in traditional business applications and
databases. Extended data types include multimedia data such as audio,
video and image data as well as data types such as spatial data
(geographic or mapping data) and time series data that are not easily
handled by conventional database systems. Each extended data type has
behavior that is particular to its content. For example, image data
stored in various file formats is compressed, converted, rendered and
processed in different ways. For more effective use of multimedia and
other extended data types on the Internet, a database should permit the
functions that define the behavior of the data to be stored and
maintained together with the data. Also, the Web is evolving rapidly and
unpredictably, and new extended data types, such as Java applets and
three-dimensional "virtual reality" data types, continue to emerge.
Consequently, the ability to quickly add support for new data types is a
key requirement for database management systems used with Internet
applications. Relational databases developed to store and manipulate
numerical and text data arranged in tabular form were not designed to
efficiently manage extended data. Also, due to their architectural
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<PAGE> 35
limitations, relational, extended-relational and object-relational
database management systems typically cannot provide support for new data
types without a substantial, time-consuming development effort.
- SUPPORT FOR EXTENDED DATA RELATIONSHIPS. Internet applications often
require support for modeling extended data relationships. These
applications are characterized by complex, dynamic and multi-dimensional
relationships among sets of data that cannot be easily represented, if at
all, in relational tables. To interact with a Web page containing diverse
multimedia content typically requires rapid navigation, search and
retrieval of numerous hierarchically structured collections of data, in
which data elements are linked by multi-dimensional networks of logical
relationships. Relational databases are optimized to perform ad hoc
queries, not browsing and searching, which are the typical modes of
interaction with the Internet. Relational databases are not optimized to
manage the extended relationships of Internet applications, and as a
result may deliver unsatisfactory performance and limited scalability.
- SUPPORT FOR OBJECT ORIENTED PROGRAMMING METHODOLOGIES. Internet
applications increasingly are being built using object oriented languages
such as C++ and Java, which utilize nested, hierarchically organized
structures of reusable software "objects" as basic building blocks. With
these languages, the fundamental unit of data representation is the
software object. When using object oriented programming languages with a
relational database, a tedious translation step is generally required to
map software objects into a two-dimensional tabular relational model. In
using object oriented languages to develop an application for use with a
relational database, much of the application code and development time
must be devoted to solving the mapping problem. In contrast, a database
that natively stores the software objects in the database without
requiring translation results in faster development cycles, fewer lines
of application code and better application performance.
THE OBJECT DESIGN SOLUTION
The Company's ObjectStore database, Internet Solution Suite, DBconnect and
related development and database administration tools provide a powerful data
management solution for building Internet and Intranet applications. ObjectStore
provides native support for extended data types and extended data relationships,
is extensible to accommodate new data types, and enables customers to take full
advantage of object oriented programming languages and methodologies. Since its
introduction in 1990, the Company's customers have used ObjectStore to build
high-performance applications in a variety of challenging production
environments where relational databases were unable to provide adequate
functionality.
Object Design's ObjectStore database was designed to provide native support
for extended data types such as image, audio, video, software objects (e.g.,
Java applets), unstructured text, HTML and others now being used for the
development of Internet and Intranet applications. The Company's Internet
Solution Suite provides advanced capabilities for the storage and manipulation
of extended data types and for the encapsulation of their related behavior
logic, relieving the developer of the need to separately provide for these
routines in the application and improving the performance of the application.
ObjectStore has also been designed to be quickly and easily extensible by the
Company or its customers to add support for new data types. Consequently,
customers can build applications that are adaptable to the rapidly changing
Internet environment. ObjectStore also provides customers with the capability to
model the more complex and extended relationships common to emerging Internet
applications, and to manage such relationships without the performance penalties
often experienced with relational databases.
Because data is represented in the ObjectStore database exactly as it is
used by the object oriented programming languages increasingly being used to
build Internet applications, no data translation is necessary. As a result, the
Company believes that Internet applications can be developed more rapidly and
perform better than if they were developed to run on a relational database. The
open
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<PAGE> 36
architecture of the Company's products provides compatibility with a wide range
of third party applications, tools and programming languages. The Company's
products operate on standard industry hardware platforms and operating systems,
such as Windows 95, Windows NT and UNIX.
STRATEGY
The Company's objective is to be the premier supplier of data management
solutions for Internet applications and other applications that require the
management of extended data types and extended data relationships. Key elements
of the Company's strategy include the following:
- TARGET THE INTERNET COMPUTING MARKET. The Company's primary focus is on
providing data management solutions for the emerging category of
Internet/Intranet computing applications. The Company believes that
growing demand for content-rich Web applications is creating
opportunities for the Company in a broad range of industries, and is
concentrating its product development and sales and marketing resources
on promoting the Company's Internet solutions.
- MAINTAIN AND EXTEND TECHNOLOGY LEADERSHIP. The Company intends to
maintain its technology leadership by focusing its development efforts on
enhancing the performance and scalability of its ObjectStore database and
on providing support for additional extended data types and programming
languages. In addition, the Company intends to continue to enhance its
developer and end-user tools and data access products, to make it easier
to build, deploy and use applications based on ObjectStore.
- FOSTER STRATEGIC RELATIONSHIPS. To accelerate the development and
acceptance of its products, the Company has entered into a variety of
strategic relationships with developers of third-party software, original
equipment manufacturers ("OEMs") and marketing partners. The Company
intends to continue its strategy of incorporating "best of breed"
functionality in its products through relationships such as those under
which it has licensed visual search engine technology from Virage, text
search engine technology from Verity and HTML development tools from
net.Genesis. Additionally, the Company intends to enter joint marketing
partnerships with vendors of complementary products, such as its existing
relationships with Iona Technologies, the developer of the Orbix object
request broker, and Rogue Wave, a provider of third-party class
libraries.
- PROVIDE SUPPORT FOR INDUSTRY STANDARD PLATFORMS AND ENVIRONMENTS. The
Company's products are designed to work with a variety of standard
programming environments and third-party tools and to permit applications
built with ObjectStore to be interfaced, where appropriate, with existing
information systems. The Company intends to continue to pursue this open
systems approach, which allows customers to rapidly deploy applications
using the Company's database products and take advantage of their
existing investments in hardware, software, and network infrastructures.
- EXPAND GLOBAL SALES AND DISTRIBUTION. The Company intends to expand its
global sales capabilities by increasing the size of its direct sales
force and by expanding the number of its systems integrators, independent
software vendors and distributors. In addition, the Company intends to
expand its indirect sales channel by recruiting additional reseller
organizations that specifically target Internet/Intranet application
market opportunities.
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PRODUCTS
The Company's ObjectStore database management system, Internet Solution
Suite, DBconnect and related development and database administration tools
provide a powerful data management solution for customers building Internet and
Intranet applications and other high-performance applications requiring the
management of extended data types and extended data relationships. The following
comprise the Company's product family:
OBJECTSTORE. ObjectStore is an object oriented database management system
that provides native support for both extended data types and extended data
relationships. Since its introduction in 1990, ObjectStore has been successfully
deployed in telecommunications, finance and engineering design and analysis
applications where high performance, reliability, concurrency, and scalability
are core requirements. The ObjectStore database delivers the following key
benefits:
- Provides native storage and management of extended data types such as
multimedia data and software objects without requiring the programmer to
write application code to map extended data types into relational tables.
Storage and handling of extended data types with the related behavior
logic as a single object permits rapid access and processing and
eliminates the requirement to separately provide that behavior logic in
the application. Native storage of extended data types and encapsulation
of behavior logic make possible functions such as content searching on
image data -- for example, to locate an image by shape, color or
texture -- that would be difficult or impossible to implement with a
relational database.
- Is easily extensible to permit the Company or customers to add support
for new data types or add more powerful functions to manipulate existing
data types. Through creation or modification of the class libraries that
describe the data structure and behavior of extended data types,
ObjectStore enables the rapid incorporation of new data types and
additional functions.
- Provides for direct modeling of extended relationships among sets of
data, allowing customers to create applications optimized to navigate and
manipulate complex data structures. Because extended relationships are
stored as direct links in the database, ObjectStore enables an Internet
application to dynamically construct a Web page on demand in response to
user input by rapidly locating and assembling content from a variety of
disparate data sources.
- Provides full support for object oriented programming methodologies.
Because data is stored in the same object oriented format in which it
will be used by the application code, ObjectStore accelerates the
development process and improves application performance by eliminating
the need to map to relational tables. ObjectStore offers customers
several programming language interfaces to the database, including C++,
HTML, SmallTalk, and SQL, with support for OLE/Visual Basic, currently in
beta testing, and a Java programming language interface expected to be
introduced during the second half of 1996.
Prices for all the Company's products vary, based on hardware platform,
configuration, machine class, quantity ordered and other factors. Run-time
licenses for the Company's products are generally priced separately.
The list price of a single-user development license for ObjectStore starts
at approximately $5,000. The list price of a single-user run-time license for
ObjectStore starts at approximately $375.
INTERNET SOLUTION SUITE. This group of products was introduced in March
1996 to enhance the functionality and ease of use of ObjectStore for customers
building Internet and Intranet applications. The Internet Solution Suite
consists of the following components:
ObjectForms. ObjectForms provides connectivity between the
ObjectStore database and standard Web server software through its
Webconnect module. Webconnect allows customers to connect directly through
higher-speed proprietary vendor interfaces such as Netscape's NSAPI or
Microsoft's ISAPI, as well as through the standard Common Gateway Interface
("CGI"). Webconnect also provides automated dispatching capabilities that
permit customers to build and deploy
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high-volume Web sites using the ObjectStore database. ObjectForms includes
the ObjectForms Engine, an HTML development tool designed to automate
database access through HTML extensions and to allow customers to interface
their HTML applications to the ObjectStore database. The ObjectForms
Engine, which is compatible with major HTML authoring tools, increases
developer productivity by automatically formatting information extracted
from the ObjectStore database for presentation within an HTML application.
Extended Object Management Suite. The Extended Object Management
Suite is a set of modules that enables extended data types to be stored and
manipulated as objects by the ObjectStore database. Used individually or in
combination with each other, Extended Object Managers provide storage
management and built-in functions to operate on extended data types. The
Company intends to continue to introduce new Extended Object Managers and
increase the capabilities of existing Extended Object Managers. The
Extended Object Managers currently available are:
Image Object Manager. The Image Object Manager is designed to help
customers build image-rich Internet and multimedia applications. The
Image Object Manager stores, retrieves, indexes and catalogs images, and
also provides functions to translate between common image formats (such
as .GIF, .JPG and .BMP formats). It also provides a powerful
query-by-content capability that permits users to search and retrieve
images from a database based on characteristics of a sample image such
as color or composition. The Company's Image Object Manager includes
visual search engine technology licensed from Virage.
Text Object Manager. The Text Object Manager allows users to store
and retrieve unstructured text in native text formats such as word
processor formats and also includes a built-in capability to perform
free text indexing, search and retrieval. The Text Object Manager
includes text search engine technology licensed from Verity.
Video Object Manager. The Video Object Manager allows users to
manage video clips in common file formats such as MPEG or QuickTime
directly in the database. The Video Object Manager can be used to back
up, archive and index video clips, and to search clips by author, date,
copyright and other identifying information.
Audio Object Manager. The Audio Object Manager allows users to
manage audio clips in common file formats such as MIDI or .AU format
directly in the database. Like the Video Object Manager, the Audio
Object Manager facilitates the back-up, archiving, indexing and
searching of audio clips.
HTML Object Manager. The HTML Object Manager allows users to store
and retrieve HTML text, including words, phrases, paragraphs or entire
HTML pages, as HTML objects. The HTML Object Manager provides users with
the ability to track, manage, globally update and reuse HTML text in Web
applications, and eliminates the cumbersome task of managing HTML data
through file directory structures and complex naming conventions.
Java Object Manager. The Java Object Manager allows users to store
Java applets directly as objects in the ObjectStore database. The Java
Object Manager permits users to index, store, retrieve, back up, and
archive Java software objects natively. The Java Object Manager can
deliver Java applets dynamically to a Web application without the
performance degradation that results from the need to access a file
system or assemble the Java applet into its native object form from a
tabular relational storage format.
The single-quantity list prices of the individual components of the Internet
Solution Suite range from approximately $395 to $19,500.
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DBCONNECT. DBconnect, introduced in December 1995, is a powerful
connectivity tool that allows applications built with the ObjectStore database
to access data stored in existing relational databases. DBconnect provides the
following key benefits:
- Provides automatic conversion capabilities that reduce the need for
developers to write mapping code to translate between object oriented
data types and tabular relational data. For example, in Internet
applications, data from relational databases inside the corporate
security firewall can be accessed via DBconnect and combined with
extended data types stored in an ObjectStore database on a Web server
that hosts a customer's external Web site.
- Provides heterogeneous database access by allowing customers to access
multiple relational databases (such as Oracle, Sybase, and DB2)
simultaneously from within the same application.
- Provides automatic synchronization of data between ObjectStore and
relational databases, allowing application programmers to provide for the
updating of relational databases without having to write complex SQL
commands.
The single-quantity list price for the minimum configuration of DBconnect,
including a development license and ten single-user run-time licenses, is
approximately $30,000.
DEVELOPMENT AND END-USER TOOLS. Object Design provides customers with
tools designed to enhance the ability of developers and end users to build and
deploy applications with the Company's products and to easily access information
stored within the ObjectStore database. The tools currently offered by Company
are:
ObjectStore Inspector. ObjectStore Inspector, introduced in January
1996, is a graphical browser, editor and query tool for the ObjectStore
database. The Inspector product allows developers, database administrators,
and end users to access the ObjectStore database to test and verify
databases, edit data, and perform ad hoc data mining and analysis, using an
intuitive "point-and-click" query tool.
ObjectStore Performance Expert. ObjectStore Performance Expert,
introduced in January 1996, is a graphical, interactive analysis and
monitoring tool designed to provide developers and database administrators
with information necessary to optimize the scalability and concurrency and
tune the performance of ObjectStore-based applications. ObjectStore
Performance Expert organizes and presents large quantities of complex
information to the user through a graphical user interface, enabling rapid
optimization of application performance and increased productivity.
ObjectStore OpenAccess. ObjectStore Open Access, introduced in
February 1996, is a query and reporting interface tool for the ObjectStore
database, implemented through the Microsoft Open Database Connectivity
("ODBC") protocol, that allows customers to use any ANSI or ODBC-compliant
query tool or report generator to extract information from the ObjectStore
database. Customers using OpenAccess can leverage their investment in
third-party tools such as Microsoft Access, Powersoft's PowerBuilder or
Borland's ReportSmith, to perform querying and reporting tasks using
ObjectStore data.
The single-quantity list price of the Company's developer and end user tools
ranges from $995 to $10,000.
SERVICES
The Company believes that providing high-quality services is critical to
ensure customer success and satisfaction, and, accordingly, supplements all of
its product offerings with training, consulting, and technical support services.
The Company has implemented a key account management program in which technical
support personnel are assigned to provide customers with assistance in project
and deployment planning with the objective of more successful implementation of
applications and greater customer satisfaction. The Company also offers
fee-based training, consulting and maintenance and support services.
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<PAGE> 40
Training and Consulting. Training courses are held at various Company
locations around the world or at customers' sites, at fees ranging from $400 to
$2,000 per day. The Company currently offers a schedule of eleven different
training courses covering subjects ranging from introductory object oriented
programming techniques to advanced topics such as database performance tuning
and Internet application design concepts incorporating the Company's Internet
Solution Suite. The Company also provides fee-based consulting services to its
customers in the form of on-site services designed to provide high-leverage
assistance at key points in the customers' product development cycle.
Maintenance and Support Services. Maintenance and support contracts are
offered with the initial software license and typically are renewable annually.
Maintenance and support fees are set at a fixed percentage, generally 15%, of
the current list price of the product. Support services include the maintenance
of the Company's software products in accordance with specifications contained
in the user's guide for such products and access to technical support personnel.
Customers who are under an active software support contract are entitled to
product upgrades and enhancements when released by the Company. Certain of the
Company's distributors and channel partners also provide telephone and initial
support to end users.
CUSTOMERS
The Company has recently changed its product development and marketing
strategy to focus on the Internet and Intranet computing markets. In March 1996,
the Company introduced its Internet Solution Suite of products, specifically
designed to address this market.
The following examples illustrate the ways in which organizations have used
the Company's products to build leading-edge Internet applications for their
businesses:
Southwest Airlines. Southwest Airlines, one of the most innovative and
successful companies in the highly competitive airline industry, has recently
deployed an on-line electronic ticketing application (http://www.iflyswa.com)
using ObjectStore. With Southwest's Internet ticketing system, fare and flight
information is continually updated and is available on the Web at the same time
as through the airline's toll-free number. Customers can use a Web browser to
review flight information, purchase tickets, and print an itinerary and
confirmation number. Because airline reservation information is a
multi-dimensional matrix of cities, departure and arrival times, fares and seat
availabilities, the data model for the application consists of complex, extended
relationships. Southwest Airlines chose ObjectStore because of its support for
extended relationships and resulting superior performance in navigating and
retrieving flight information. By using extended relationships instead of
relational joins to traverse the web of reservation information, ObjectStore is
able to execute complex searches and quickly return flight schedules and fares
to customers, making the reservation system faster and more convenient for
Southwest Airline's Internet commerce customers.
GTE Directories Corporation. GTE Directories, a unit of GTE Corporation
and one of the world's largest telephone directory companies, selected
ObjectStore and components of the Company's Internet Solution Suite to build and
deploy an innovative on-line Internet business directory called GTE
SuperPages(SM) (http://superpages.gte.net). With over ten million listings,
GTE's SuperPages(SM) enables users to search for business information based on
category, name, location, telephone number, and other parameters. The
SuperPages(SM) application also allows businesses to include advertisements and
links to other Web sites with their listings. GTE's SuperPages(SM) Web site
earned a "Top Five Percent of the Web" ranking from Point Communications, which
provides independent evaluations of Web sites. GTE selected ObjectStore because
of its ability to support extended data types which will enable GTE to rapidly
add new features and capabilities and its support for extended relationships,
which is necessary to meet the SuperPages(SM) Web site's high-volume traffic
requirements. ObjectStore's native support for the object oriented programming
language which was being used to develop the SuperPages(SM) Web application was
another important factor in GTE's choice.
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Although the Company's revenues from licensing of its new Internet products
have not been material to date, as of March 31, 1996, the Company had licensed
over 20,000 copies of its software to an installed base of more than 700
customers. Although the Company's installed base includes customers in a wide
variety of industries, the Company's historical market penetration has
predominantly been in the telecommunications and network management, finance and
engineering design and analysis industries, where rigorous requirements for high
performance, reliability, concurrency and scalability must be met and where
conventional relational database systems have been unable to meet the challenge
of managing extended data types and extended data relationships while providing
acceptable performance. The following is a representative list of the Company's
customers that have licensed ObjectStore, each of which has accounted for at
least $100,000 of revenue since January 1, 1994.
<TABLE>
<S> <C>
AT&T Lehman Brothers
Abbott Laboratories Long-Term Credit Bank of Japan
Apertus Loral
Bankers Trust Manugistics
BayNetworks MCI
Bell Northern Research Mead Data Central
BellSouth NASA
British Telecom New York Stock Exchange (SIAC)
Cabletron Nomura
Cellnet Data Systems Northern Telecom
Credit Suisse Pitney Bowes
Fidelity Management and Research Platinum Technology
Ford Motor Company Sandia National Laboratory
GPT Schlumberger
Hewlett-Packard Sterling Software
Hughes Information Systems Sun Microsystems
IDD Information Services Telecom Australia
Intergraph Universal Oil Products
</TABLE>
Other than IBM, a principal stockholder of the Company, which accounted for
40.2% and 10.9% of the Company's total revenue in 1993 and in the three months
ended March 31, 1996, respectively, no customer accounted for more than 10% of
the Company's total revenue in 1993, 1994, 1995 or the three months ended March
31, 1996.
SALES AND MARKETING
The Company employs a multi-channel sales and marketing strategy, using
direct sales, systems integrators, independent software vendors, distributors
and other channel partners to address its global market.
DIRECT SALES. The Company has historically relied principally on direct
sales of its products. The Company has structured its direct sales force in
teams consisting of a field sales representative and a technical sales support
representative. As of May 31, 1996, the Company's direct sales force consisted
of 60 employees. In addition to its Burlington, Massachusetts headquarters, the
Company has domestic sales locations in Atlanta, Chicago, Cincinnati, Dallas,
Los Angeles, Melbourne, FL, New York, San Mateo, CA and Washington, DC, and
international direct sales locations in Brussels, London, Paris, Tokyo and
Weisbaden. The Company intends to hire additional sales and support personnel to
broaden its direct selling effort and distribution capabilities.
CHANNEL PARTNER PROGRAMS. The Company conducts programs aimed at
attracting systems integrators, independent software vendors and resellers to
complement its direct sales force and broaden the worldwide penetration of the
Company's products. The Company's systems integration partners include Alta
Software, Andersen Consulting, GlobalWeb, Indus, SAIC and TASC. The
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Company intends to continue to expand its channel partner programs to attract
additional channel partners that have specifically targeted Internet and
Intranet applications.
INTERNATIONAL DISTRIBUTORS. In certain international markets, the Company
uses third party distributors and resellers that are supported by the Company's
sales organization. Approximately 2.6%, 8.5%, 12.9% and 11.6% of the Company's
total revenues were derived from sales to international distributors in 1993,
1994, 1995 and the three months ended March 31, 1996, respectively. The Company
intends to increase the number of its international distributors.
In support of its sales efforts, the Company conducts sales training
courses, targeted marketing programs including direct mail, trade shows, public
relations, advertising, seminars, and ongoing customer and third party
communications programs. The Company also seeks to stimulate interest in its
products and services through speaking engagements, white papers, technical
notes and other publications. The Company has also established a home page on
the World Wide Web where potential customers can obtain information about the
Company's products.
RESEARCH, DEVELOPMENT, AND QUALITY ASSURANCE
The Company believes that its future success will depend in large part on
its ability to maintain and enhance its leadership in object oriented database
technology and develop new products that meet an expanding range of customer
requirements, particularly those customer requirements associated with the
Company's focus on Internet and Intranet applications. The Company's research
and development organization is divided into teams consisting of development
engineers, quality assurance, testing, and porting engineers, and technical
writers. Product definition is based on a consolidation of requirements from
existing and prospective customers and from the Company's technical support,
product management, and engineering groups.
The Company's research and development is focused on development of new
products and enhancement of the functionality of the Company's existing
products. The Company currently plans to release enhancements of its existing
products and several new products, including a programming language interface
for OLE/Visual Basic, currently in beta testing, and a Java programming language
interface expected to be introduced during the second half of 1996. The
Company's scheduled release dates for products and product enhancements are
forward-looking statements, and the actual release dates for such products and
enhancements could differ materially from those stated as a result of a variety
of factors, including the ability of the Company's engineers to solve technical
problems and test products as well as other factors, including factors outside
the Company's control. As of May 31, 1996, there were 51 employees on the
Company's research and development staff. The Company's research and development
expenditures during 1993, 1994, 1995, and the three months ending March 31,
1996, were $4.7 million, $9.5 million, $8.3 and $1.8 million, respectively, and
represented 19.2%, 37.3%, 25.4%, and 20.1% of total revenues, respectively. The
Company expects it will continue to commit substantial resources to product
development in the future.
The computer software industry is subject to rapid technological change,
changing customer requirements, frequent new product introductions, and evolving
industry standards that may render existing products and services obsolete. As a
result, the Company's position in its existing markets or other markets that it
may enter could be eroded rapidly by product advancements by its competitors.
The life cycles of the Company's products are difficult to estimate. The
Company's future successes will depend, in part, on its ability to enhance
existing products and develop new products on a timely basis. In addition, its
products must keep pace with technological developments and conform to evolving
industry standards including new extended data types, new electronic publishing
formats and new client/server and Internet communication and security protocols.
There can be no assurance that the Company will not experience difficulties that
could delay or prevent the successful development, introduction, and marketing
of new products, or that new products and product enhancements will meet the
requirements of the marketplace or achieve market acceptance. If the Company is
unable to develop and introduce products in a timely manner in response to
changing market conditions or
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customer requirements, the Company's business, results of operations and
financial condition would be materially and adversely affected.
Software products as complex as those offered by the Company may contain
errors that may be detected at any point in the products' life cycles. The
Company has in the past discovered software errors in certain of its products
and has experienced delays in shipments of products during the period required
to correct these errors. There can be no assurance that, despite testing and
quality assurance efforts by the Company and by current and potential customers,
errors will not be found, or product shipment delays will not occur, resulting
in loss of or delay in market acceptance and sales, diversion of development
resources, injury to the Company's reputation or increased service and warranty
costs, any of which could have a material adverse effect on the Company's
business, results of operations and financial condition. See "Risk
Factors -- Risks Associated with Product Development and Introduction."
COMPETITION
The market in which the Company competes is intensely competitive, highly
fragmented, and characterized by rapidly changing technology and standards. The
Company's current and prospective competitors offer a variety of database
solutions, including: object databases available from Computer Associates,
GemStone, Objectivity, O2, Poet and Versant; relational databases available from
Computer Associates, IBM, Informix, Microsoft, Oracle and Sybase;
extended-relational and object-relational databases available from IBM,
Informix, Oracle and UniSQL; and other specialized databases such as on-line
analytical processing databases. The Company has experienced and expects to
continue to experience increased competition from current and potential
competitors, many of which have significantly greater financial, technical,
marketing, and other resources than the Company, and many of which have well
established relationships with current and potential customers of the Company.
In the future, the Company expects to experience increased competition from
established vendors of relational database systems that may seek to offer
extended-relational, object-relational or object oriented database management
systems. It is also possible that alliances among competitors may emerge and
rapidly acquire significant market share. The Company also believes that
competition will increase as a result of software industry consolidation.
Increased competition may result in price reductions, reduced gross margins, and
loss of market share, any of which would materially adversely affect the
Company's business, results of operations and financial condition. The can be no
assurance the Company will be able to compete effectively against current and
future competitors. See "Risk Factors -- Competition."
The Company believes that the principal competitive factors affecting its
market include product features and functionality, ease of use, quality,
performance, price, customer service and support, effectiveness of sales and
marketing efforts and company reputation and financial viability. Although the
Company believes that it currently competes effectively with respect to such
factors, there can be no assurance that the Company will be able to maintain its
competitive position with respect to these and other important competitive
factors.
PROPRIETARY TECHNOLOGY
The Company relies on a combination of trademark, copyright, trade secret
laws, employee and third-party non-disclosure agreements, confidentiality
procedures and contractual provisions to protect its proprietary technology. The
Company seeks to protect its software, documentation, and other written
materials under trade secret and copyright laws, which offer limited protection.
The Company currently has one United States patent, covering certain virtual
memory mapping architecture used in its ObjectStore database management system.
There can be no assurance that the Company's patent will not be invalidated,
circumvented, or challenged, that the rights granted thereunder will provide
competitive advantage to the Company or that any future patent applications will
be issued with the scope of the claims sought by the Company. There can be no
assurance that the Company's competitors will not independently develop
technologies that are substantially equivalent or superior
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<PAGE> 44
to the Company's technologies. There can also be no assurance that the measures
taken by the Company to protect its proprietary rights will be adequate to
prevent misappropriation of the technology or independent development of similar
technology by others. Certain of the Company's software products are licensed to
customers under "shrink wrap" licenses included as part of the product
packaging. Although in larger sales the Company's shrink wrap licenses are
generally accompanied by specifically negotiated agreements signed by the
licensee, in many cases its shrink wrap licenses are not negotiated with or
signed by individual licensees. Certain provisions of the Company's shrink wrap
licenses, including provisions protecting against unauthorized use, copying,
transfer and disclosure of the licensed program, may be unenforceable under the
laws of certain jurisdictions. In addition, the laws of various countries in
which the Company's products may be sold may not protect the Company's products
and intellectual property rights to the same degree as the laws of the United
States. There can be no assurance that third parties will not assert
intellectual property infringement claims against the Company or that any such
claims will not require the Company to enter into royalty arrangements or result
in costly litigation. If infringement is alleged, the Company could be required
to discontinue the use of certain software or to cease the use and sale of
infringing products, to incur significant litigation costs and expenses and to
develop non-infringing technology or to obtain licenses to the alleged
infringing technology. There can be no assurance that the Company would be able
to develop alternative technologies or to obtain such licenses or, if a license
were obtainable, that the terms would be commercially acceptable to the Company.
The Company is not aware of any patent infringement charge or any violation of
other proprietary rights claimed by any third party relating to the Company or
to the Company's products. However, the computer software market is
characterized by frequent and substantial intellectual property litigation.
Intellectual property litigation is complex and expensive, and the outcome of
such litigation is difficult to predict. The Company believes that, due to the
rapid pace of technological innovation for database software products, the
Company's ability to establish and maintain a position of technology leadership
in the industry is dependent more upon the skills of its development personnel
than upon the legal protections afforded its existing technology. See "Risk
Factors -- Reliance on Proprietary Technology."
The Company relies upon certain software that it licenses from third
parties, including software that is integrated with the Company's internally
developed software and used to perform key functions such as the relational
database engine licensed from Dharma Systems and incorporated in the Company's
DBconnect and OpenAccess products, visual and text search engine technology
licensed from Virage and Verity and HTML development tools licensed from
net.Genesis. In addition, the Company has licensed technology from IBM for use
in its ObjectStore Performance Expert product and technology from ViVi Software,
for use in its ObjectStore Inspector product. The agreement with net.Genesis
conveys a fully paid license to use the net.Genesis technology in the Company's
products. The other licensing agreements require the Company to pay royalties to
the licensors upon sale of the Company's products containing the licensed
technology. The Company believes these licensing agreements contain commercially
reasonable terms for such agreements. As of the date of this Prospectus, all
minimum royalties due to the licensing parties have been paid by the Company.
However, there can be no assurance that these third-party software licenses will
continue to be available to the Company on commercially reasonable terms, if at
all. The loss of, or inability to maintain, any such software licenses could
result in shipment delays or reductions until equivalent software could be
developed, identified, licensed and integrated, and could materially adversely
affect the Company's business, operating results, and financial condition. See
"Risk Factors -- Reliance on Third-Party Software."
EMPLOYEES
As of May 31, 1996 the Company employed 204 persons, including 51 in
research and development, 69 in sales and marketing, 55 in customer support, and
29 in finance and administration. None of the Company's employees is represented
by a labor union and the Company considers its employee relations to be good.
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FACILITIES
The Company's corporate headquarters are located in Burlington,
Massachusetts, in a leased facility consisting of approximately 34,000 square
feet of office space occupied under a lease expiring in November 2001. The
Company also leases space for sales offices in fourteen additional locations
worldwide. The Company believes that its existing facilities and offices and
additional space available to it are adequate to meet its requirements over the
next twelve months.
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
The following table sets forth certain information with respect to the
executive officers and directors of the Company:
<CAPTION>
NAME AGE POSITION
------------------------------- --- --------------------------------------------------
<S> <C> <C>
Robert N. Goldman.............. 47 President, Chief Executive Officer and Director
Justin J. Perreault............ 33 Executive Vice President and Chief Operating
Officer
Robert J. Potter............... 42 Senior Vice President, Sales
Brian W. Otis.................. 37 Vice President, Professional Services
Melissa Webster................ 45 Vice President, Marketing
Gregory A. Baryza.............. 49 Vice President, Product Development
Lacey P. Brandt................ 38 Chief Financial Officer
Gerald B. Bay(1)............... 56 Director
Arthur J. Marks(2)............. 51 Director
Tim R. Palmer(1)............... 38 Director
Scott Sperling(2).............. 38 Director
Steven C. Walske............... 44 Director
<FN>
- ---------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
</TABLE>
Mr. Goldman was elected President and Chief Executive Officer of the
Company in November 1995. He has been a director of Object Design since August
1995. Prior to joining the Company, Mr. Goldman was Chairman of Trinzic
Corporation, a supplier of client/server development software, from 1992 to
1995. Trinzic was formed by the merger of AICorp and AION Corporation in 1992.
From 1986 to 1992, Mr. Goldman served as President and Chief Executive Officer
of AICorp, a supplier of artificial intelligence software. From 1983 to 1986,
Mr. Goldman served as President and Chief Operating Officer of Cullinet
Software, a supplier of database management software. Mr. Goldman is a member of
the board of directors of Citrix Systems, Inc., Intersolv Inc., Parametric
Technology Corporation and Systemsoft Corporation.
Mr. Perreault joined the Company as Executive Vice President and Chief
Operating Officer in November 1995. From 1992 to 1995, Mr. Perreault was a Vice
President with the Harvard Private Capital Group, Inc., which manages the direct
investment portfolio of the Harvard University endowment fund and is a
wholly-owned subsidiary of the President and Fellows of Harvard College. From
May 1995 to December 1995 he served on the Board of Directors of the Company as
the representative of the Harvard Private Capital Group, Inc. From 1990 to 1992,
Mr. Perreault was a management consultant with McKinsey & Co., Inc. Mr.
Perreault is a member of the board of directors of Kentek Information Systems,
Inc.
Mr. Potter joined the Company as Vice President of Sales in 1990, and was
appointed Senior Vice President of Sales in 1994. From 1988 to 1989, Mr. Potter
was Vice President of Marketing of Concentra, Inc., a mechanical engineering
design software company.
Mr. Otis joined Object Design as Consulting Manager, Eastern Region in 1993
and was promoted to Vice President, Professional Services in June 1995. From
1987 to 1993, Mr. Otis was a management consultant with Coopers & Lybrand L.L.P.
Ms. Webster joined Object Design as Vice President, Marketing in April
1996. From 1993 to December 1995, Ms. Webster was employed by UniSQL, a
developer of database management software, most recently as Vice President of
Marketing. From 1978 to 1993, Ms. Webster held a variety
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of positions at Information Builders, Inc., a developer of software languages
and tools, including Vice President and General Manager, Digital Division.
Mr. Baryza joined Object Design as Director of Engineering Operations in
1993 and was promoted to Vice President, Product Development in August 1995.
From 1988 to 1993, Mr. Baryza was employed in various management and technical
positions at Stratus Computer, Inc., a computer manufacturer.
Ms. Brandt joined Object Design as Chief Financial Officer in April 1996.
From September 1995 to April 1996, Ms. Brandt served as Director of Finance,
Controller and Treasurer of International Integration Inc., a systems
integration company. From 1993 to September 1995, Ms. Brandt was Director of
Investor Relations at Proteon, Inc., a data networking company. From 1991 to
1992, Ms. Brandt was Finance Manager at AICorp.
Mr. Bay has been a director of the Company since 1988. Since 1980, Mr. Bay
has been a Managing Partner of The Vista Group, a venture capital firm. Mr. Bay
served as interim President of the Company from August to November 1995.
Mr. Marks has been a director of the Company since 1990. Since 1984, Mr.
Marks has been a General Partner of New Enterprise Associates, a venture capital
firm. Mr. Marks is a director of AMISYS Managed Care Systems, Inc., Platinum
Software, Inc., NETRIX Corporation, and Progress Software Corporation.
Mr. Palmer has been a director of the Company since February 1996. Since
1990, Mr. Palmer has held several positions at the Harvard Private Capital
Group, Inc., most recently as Managing Director. Mr. Palmer is a director of
PriCellular Corporation and NHP Inc.
Mr. Sperling has been a director of the Company since 1988. Since 1994, Mr.
Sperling has been a Managing Director of the Thomas H. Lee Company, a private
equity investment firm, and a General Partner of its affiliated equity funds.
From 1984 to 1994, he was a Managing Partner of Harvard Private Capital Group,
Inc. Mr. Sperling is a director of Beacon Properties Corp., Softkey
International and Livent, Inc.
Mr. Walske has been a director of the Company since 1994. Since 1994, Mr.
Walske has been Chairman of the Board and Chief Executive Officer of Parametric
Technology Corporation, a mechanical design automation software firm. From 1986
to 1994 Mr. Walske was President and Chief Executive Officer of Parametric
Technology Corporation. Mr. Walske is a director of Synopsys, Inc., VideoServer,
Inc. and Cascade Communications, Inc.
Upon the closing of this offering, the Board of Directors will be divided
into three classes. One class of directors will be elected each year at the
annual meeting of stockholders for a term of office expiring after three years.
Messrs. Bay and Palmer will serve in the class whose term expires in 1997;
Messrs. Marks and Walske will serve in the class whose term expires in 1998; and
Messrs. Goldman and Sperling will serve in the class whose term expires in 1999.
Each director serves until the expiration of his or her term and thereafter
until his or her successor is duly elected and qualified. Executive officers of
the Company are elected annually by the Board of Directors and serve at its
discretion or until their successors are duly elected and qualified.
BOARD COMMITTEES
The Board of Directors has a Compensation Committee, which makes
recommendations concerning salaries and incentive compensation for employees of
and consultants to the Company and administers the Company's stock option plans,
its Stock Purchase Plan and the 401(k) Plan. The members of the Compensation
Committee currently are Messrs. Marks and Sperling. The Board of Directors also
has an Audit Committee, which reviews the results and scope of the audit and
other services provided by the Company's independent accountants. The members of
the Audit Committee currently are Messrs. Bay and Palmer.
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BOARD COMPENSATION
Each non-employee director of the Company serves without compensation but
is reimbursed, upon request, for expenses incurred in attending meetings of the
Board of Directors. Directors who are employees of the Company are not paid any
separate fees for serving as directors. In March 1994, Mr. Walske was granted a
nonqualified stock option to purchase 12,000 shares of Common Stock at an
exercise price of $3.50 per share. In November 1995, Messrs. Bay, Sperling and
Walske were granted nonqualified stock options to purchase 100,000 shares,
50,000 shares and 50,000 shares of Common Stock, respectively, in each case at
an exercise price of $0.50 per share. In November 1995, Mr. Bay, who had been
serving without compensation as interim President of the Company since August
1995, was also granted a nonqualified option to purchase an additional 75,000
shares of Common Stock, at an exercise price of $0.01 per share. The Company
recognized non-cash compensation expense in the amount of $36,750 in the fourth
quarter of 1995 in connection with the grant of this option to Mr. Bay.
Under the Company's 1996 Incentive and Nonqualified Stock Option Plan
adopted by the Board of Directors in May 1996, non-employee directors of the
Company are eligible to receive automatic formula grants of nonqualified
options. See "-- Stock Option Plans."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1995, the entire Board of Directors performed the functions of the
Compensation Committee. Of the members of the Board of Directors who served
during 1995, Robert N. Goldman, Gerald B. Bay, Justin J. Perreault, Thomas
Atwood and Kenneth Marshall also were executive officers or employees of the
Company during 1995. Except as set forth below, no executive officer of the
Company served during 1995 on the Board of Directors or compensation committee
of any entity, one of whose executive officers also served on the Board of
Directors or Compensation Committee of the Company. During 1995, Robert N.
Goldman, the Company's Chairman of the Board, President and Chief Executive
Officer, served as a director of Parametric Technology Corporation, of which
Steven C. Walske, a director of the Company, is Chairman of the Board and Chief
Executive Officer. Mr. Goldman also served as a member of the compensation
committee of Parametric Technology Corporation during 1995.
45
<PAGE> 49
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND OTHER COMPENSATION
<TABLE>
The following table provides certain summary information concerning compensation earned in the
year ended December 31, 1995 by the Company's President and Chief Executive Officer, by each other person
who served in the capacity of Chief Executive Officer at any time during the year, by the Company's other
executive officers in office at December 31, 1995 who earned in excess of $100,000 during 1995, by the
Company's two most highly compensated executive officers not in office on December 31, 1995 who earned in
excess of $100,000 during 1995, and by the Company's Executive Vice President and Chief Operating Officer
(collectively, the "Named Executive Officers").
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
----------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) COMPENSATION($)(1) OPTIONS (#) COMPENSATION($)(2)
- --------------------------- --------- -------- ------------------ ------------ ------------------
<S> <C> <C> <C> <C> <C>
Robert N. Goldman.......... $ 47,726 -- -- 2,300,000 $ 484
President and Chief
Executive Officer(3)
Justin J. Perreault........ 22,759 -- -- 460,000 421
Executive Vice President
and Chief
Operating Officer(4)
Robert J. Potter........... 95,475 $173,617 -- 80,000 583
Senior Vice President,
Sales(5)
Gregory A. Baryza.......... 114,885 -- -- 65,000 284
Vice President, Product
Development
Brian W. Otis.............. 90,852 73,656 -- 54,000 228
Vice President,
Services(6)
David Stryker.............. 137,500 -- -- 56,000 27,752
Former Vice President,
Technology(7)
Kenneth E. Marshall........ 183,333 -- -- 389,625 1,335
Former President,
Chairman, Chief
Executive Officer
and Treasurer(8)
Gerald B. Bay.............. -- -- -- 175,000 --
Former President(9)
Thomas Atwood.............. 147,500 -- -- 35,000 390
Former Chairman(10)
<FN>
- ---------------
(1) Other annual compensation in the form of perquisites and other personal benefits has been omitted
because the aggregate amount of such perquisites and other personal benefits constituted less than
$50,000 or 10% of each executive's total annual salary.
(2) Except in the case of Mr. Stryker, consists solely of premiums paid on behalf of named executives
for excess life insurance coverage.
(3) Mr. Goldman's annual compensation includes $20,700 paid to him for his services as a consultant to
the Company prior to his becoming an employee of the Company in November 1995. Mr. Goldman's 1995
salary was $176,700 on an annualized basis.
</TABLE>
46
<PAGE> 50
(4) Mr. Perreault joined the Company as an employee in November 1995. Mr.
Perreault's 1995 salary was $148,800 on an annualized basis.
(5) Mr. Potter's annual compensation in 1995 included a $6,000 automobile
allowance. The amount shown as bonus represents sales-based commissions.
(6) Mr. Otis's annual compensation in 1995 included a $6,000 automobile
allowance. The amount shown as bonus represents sales-based commissions.
(7) Mr. Stryker left the Company in November 1995. "All Other Compensation" to
Mr. Stryker includes a $390 life insurance premium payment, a $12,500
severance payment and a $14,862 payment in lieu of accrued vacation.
(8) Mr. Marshall resigned as President, Chief Executive Officer and Treasurer
of the Company in May 1995 and as Chairman of the Board of the Company in
August 1995. Mr. Marshall's annual compensation includes $83,333 paid to
him for his services as a consultant to the Company during 1995.
(9) Mr. Bay, a long-serving Director, served as interim President of the
Company without cash compensation while leading the Company's efforts to
recruit a new President and Chief Executive Officer.
(10) Mr. Atwood resigned as Chairman of the Board in June 1995. He remains an
employee of the Company through September 1996 pursuant to a severance
arrangement. See "--Severance Agreements."
STOCK OPTION PLANS
The Board of Directors adopted on May 23, 1996, and the stockholders of the
Company are expected to approve by written consent in June 1996, the Company's
1996 Incentive and Nonqualified Stock Option Plan of the Company (the "1996
Stock Option Plan").
The 1996 Stock Option Plan authorizes (i) the grant of options to purchase
Common Stock intended to qualify as incentive stock options ("Incentive
Options"), as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") and (ii) the grant of options that do not so qualify
("Nonqualified Options"). Options to purchase up to 2,700,000 shares of Common
Stock may be granted under the 1996 Stock Option Plan, provided that prior to
May 23, 1997, options to purchase no more than 1,200,000 shares of Common Stock
may be issued under the Plan, with such number increasing by 300,000 on each of
the first five anniversaries of the adoption of the Plan by the Board of
Directors, up to a maximum of 2,700,000 shares.
The Company's 1989 Incentive and Nonqualified Stock Option Plan (the "1989
Plan") was adopted by the Board of Directors and approved by the stockholders of
the Company in June 1989. The Company's 1995 Nonqualified Stock Option Plan (the
"1995 Plan") was adopted by the Board of Directors in June 1995 and approved by
the stockholders of the Company in August 1995. The 1989 Plan and the 1995 Plan
are hereinafter sometimes referred to collectively as the "Original Stock Option
Plans," and the Original Stock Option Plans and the 1996 Stock Option Plan are
hereinafter sometimes referred to as the "Stock Option Plans." As of May 31,
1996, options to purchase an aggregate of 3,485,896 shares having a weighted
average exercise price of $0.96 per share were outstanding under the Original
Stock Option Plans and options for 3,561,173 shares had been exercised. No
further options may be granted under either of the Original Stock Option Plans.
The Stock Option Plans are administered by a committee of the Board of
Directors (the "Committee") consisting of the non-employee directors of the
Company, currently Messrs. Marks and Sperling. All members of the Committee are
intended to be "disinterested persons" as that term is defined under rules
promulgated by the Securities and Exchange Commission. The Committee selects the
individuals to whom options will be granted and determines the option exercise
price and other terms of each option, subject to the provisions of the Stock
Option Plans.
47
<PAGE> 51
Incentive Options may be granted under the 1996 Stock Option Plan to
employees and officers of the Company or a subsidiary, including members of the
Board of Directors who are also employees of the Company or a subsidiary.
Nonqualified Options may be granted under the Stock Option Plans to officers or
other employees of the Company or a subsidiary, to members of the Board of
Directors or the board of directors of a subsidiary, whether or not employees of
the Company or a subsidiary, and to consultants and other individuals providing
services to the Company or a subsidiary.
The 1996 Stock Option Plan also provides for automatic formula grants of
Nonqualified Options to non-employee directors of the Company ("Outside
Directors"). Each Outside Director (i) who is in office immediately after the
closing of this offering who holds no outstanding stock option granted to him in
his capacity as a director (a "Prior Option") or (ii) who is elected to the
Board after the closing of this offering will automatically be granted,
immediately after the closing of this offering or upon his or her initial
election, as the case may be, a Nonqualified Option (an "Initial Option") to
purchase 25,000 shares of Common Stock of the Company, vesting in equal
installments on the first three anniversaries of the date of grant (provided
that the optionee then remains a director of the Company). In addition,
immediately following each annual meeting of stockholders of the Company or
special meeting in lieu thereof, there will automatically be granted to each
Outside Director reelected at or remaining in office after such meeting a
fully-vested Nonqualified Option to purchase 3,500 shares of Common Stock (an
"Additional Option"), provided that no such Additional Option will be granted to
any Outside Director who at the time of the meeting holds any outstanding
Initial Option or Prior Option that is not fully vested, unless at least two
annual meetings of stockholders of the Company or special meetings in lieu
thereof have intervened between the closing of the Company's initial public
offering (or, if later, the date of the initial election of such Outside
Director) and the meeting following which such automatic grant would occur. Each
Nonqualified Option granted to an Outside Director pursuant to this provision of
the 1996 Stock Option Plan will expire on the tenth anniversary of the date of
grant. The exercise price of each such Nonqualified Option will be equal to the
fair market value of the Common Stock on the date the Nonqualified Option is
granted.
No options may extend for more than ten years from the date of grant (five
years in the case of employees or officers holding ten percent or more of the
total combined voting power of all classes of stock of the Company or any
subsidiary or parent ("greater-than-ten-percent-stockholders")). The exercise
price for all options may not be less than the fair market value of the Common
Stock on the date of grant (110% of fair market value in the case of an
Incentive Option granted to a greater-than-ten-percent-stockholder). The
aggregate fair market value (determined at the time of grant) of shares issuable
pursuant to Incentive Options which first become exercisable by an employee or
officer in any calendar year may not exceed $100,000. Any option granted in
excess of the foregoing limitation shall be specifically designated as a
Nonqualified Option.
Options are non-transferable except by will or by the laws of descent or
distribution. Generally, options granted under the Stock Option Plans terminate
upon the earliest of (i) the expiration date of the option, (ii) the date of
termination of the optionee's employment with or performance of services for the
Company by the Company for cause or by the optionee for any reason other than
death or permanent and total disability, (iii) thirty days after the termination
of the optionee's employment with or performance of services for the Company by
the Company without cause other than for death or permanent and total disability
and (iv) one year after the date of termination of the optionee's employment
with or performance of services for the Company as a result of the permanent and
total disability of the optionee. If an option may be exercised during any
period after the termination of the optionee's employment with or performance of
services for the Company, such option may be exercised only to the extent that
the optionee was entitled to exercise such option at the time of such
termination of employment or performance of services.
Payment of the exercise price for shares subject to options may be made (i)
in cash or by check, bank draft or money order payable to the order of the
Company, (ii) through the delivery of shares of Common Stock (which, in the case
of shares acquired from the Company upon exercise of an option, have been
outstanding for at least six months) having a fair market value equal to the
purchase price,
48
<PAGE> 52
(iii) by delivery of an unconditional and irrevocable undertaking by a broker to
deliver promptly to the Company sufficient funds to pay the exercise price, (iv)
by delivery of a promissory note, or (v) by any combination of these permissible
forms of payment. In the event that payment of the exercise price is made under
(ii) above, the 1996 Stock Option Plan permits the grant of an automatic reload
option covering the number of shares surrendered at an exercise price equal to
the fair market value of the Common Stock on the date of such surrender.
OPTION GRANTS DURING 1995
<TABLE>
During 1995, the Company granted options under the Original Stock Option
Plans to purchase an aggregate of 5,615,400 shares of Common Stock at a weighted
average exercise price of $0.57 per share. The following table sets forth for
each of the Named Executive Officers information concerning stock options
granted under the Original Stock Option Plans during the year ended December 31,
1995:
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE AT
------------------------------------------------------- ASSUMED ANNUAL RATE OF
% OF TOTAL STOCK PRICE APPRECIATION FOR
OPTIONS OPTIONS GRANTED EXERCISE OR OPTION TERM(1)
GRANTED TO EMPLOYEES IN BASE PRICE EXPIRATION ----------------------------------
NAME (#)(2) FISCAL YEAR ($/SHARE)(3) DATE 0% 5% 10%
---- --------- --------------- ------------ ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert N. Goldman(4)........... 2,300,000 41.0% $ 0.25 12/20/05 -- $ 361,614 $ 916,402
Justin J. Perreault(4)......... 460,000 8.19 0.25 12/20/05 -- 72,323 183,280
Robert J. Potter............... 15,000 0.27 0.50 8/31/05 -- 4,716 11,953
15,000 0.27 0.50 8/31/05 -- 4,716 11,953
50,000 0.89 0.01 11/30/05 -- 19,861 31,922
Gregory A. Baryza.............. 10,000 0.18 3.50 12/31/04 -- 22,011 55,781
5,000 0.09 0.50 8/20/05 -- 1,572 3,984
25,000 0.45 0.50 8/31/05 -- 7,861 19,922
10,000 0.18 0.50 12/31/04 -- 3,144 7,969
25,000 0.45 0.01 11/30/05 $ 6,000 9,931 15,961
Brian W. Otis.................. 25,000 0.45 3.50 7/17/05 -- 55,028 139,452
4,000 0.07 0.50 8/31/05 -- 1,258 3,187
3,500 0.06 0.50 8/31/05 -- 1,101 2,789
1,500 0.03 0.50 8/31/05 -- 472 1,195
25,000 0.45 0.50 7/17/05 -- 7,861 19,922
David Stryker.................. 56,000 1.00 0.50 8/31/05 -- 17,609 44,625
Kenneth E. Marshall(5)......... 290,250 5.17 0.10 6/30/00 986,850 1,267,518 1,607,052
15,000 0.27 0.20 6/30/00 49,500 64,005 81,522
23,375 0.42 0.25 6/30/00 75,969 98,572 125,916
21,000 0.37 0.75 6/30/00 57,750 78,057 102,622
25,000 0.45 3.00 6/30/00 12,500 36,675 65,920
15,000 0.27 6.00 6/30/00 -- -- --
Gerald B. Bay.................. 75,000 1.34 0.01 9/20/05 36,750 60,334 96,515
100,000 1.78 0.50 9/20/05 -- 31,445 79,687
Thomas Atwood.................. 35,000 0.62 0.50 8/31/05 -- 11,006 27,890
<FN>
- ---------------
(1) Amounts reported in this column represent hypothetical values that may be
realized upon exercise of the options immediately prior to the expiration of
their term, assuming the specified compounded rates of appreciation of the
Company's Common Stock, based on the original exercise price of each option,
over the term of the options. These numbers are calculated based on rules
promulgated by the Securities and Exchange Commission and do not represent
the Company's estimate of future stock price growth. Actual gains, if any,
on stock option exercises and Common Stock holdings are dependent on the
timing of such exercise and the future performance of the Company's 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. This table does not take into account any appreciation in
the price of the Common Stock from the date of grant to the current date.
The values shown are net of the option exercise price, but do not include
deductions for taxes or other expenses associated with the exercise.
</TABLE>
49
<PAGE> 53
(2) Except as specified below, all options granted to Named Executive Officers
provide for vesting of 20% of the total number of shares after their date of
grant, with an additional 5% of the total number of shares vesting at the
end of each three-month period thereafter until the options are fully
vested. The option granted to Mr. Atwood, the option for 10,000 shares at an
exercise price of $0.50 granted to Mr. Baryza and the option for 25,000
shares at an exercise price of $0.50 granted to Mr. Otis vest for 15% of the
total number of shares six months after their date of grant, 15% nine months
after their date of grant, 20% one year after their date of grant and an
additional 4.16% at the end of each three-month period thereafter until the
options are fully vested. The options granted to Mr. Marshall were fully
vested as of December 31, 1995. The options granted to Mr. Bay vest in full
upon the earlier of (i) December 1, 1997 and (ii) a qualified change of
control (as defined therein) of the Company.
(3) Except for those options with an exercise price of $0.01, all options were
granted at fair market value as determined by the Board of Directors of the
Company on the date of grant. The Board of Directors determined the market
value of the Common Stock based on various factors, including the illiquid
nature of an investment in the Company's Common Stock, the preference given
to preferred stock upon the liquidation or sale of the Company, other recent
transactions involving the Company's capital stock, the Company's historical
financial performance and the Company's future prospects. The Company
recorded non-cash compensation expense in the aggregate amount of $122,000
in connection with the grant of options to Mr. Marshall and the grant of
options at an exercise price of $0.01.
(4) The vesting of the options granted to Mr. Perreault and Mr. Goldman was
accelerated so that these options were fully exercisable as of April 1,
1996, and the options were exercised in full by Messrs. Goldman and
Perreault on that date. The shares received upon the exercise of these
options are subject to Stock Restriction and Repurchase Agreements which
permit the Company to repurchase, at their original purchase price, the
unvested shares upon termination of the executive's employment (for any
reason) with the Company. The shares vest at a quarterly rate of 6.25% from
November 1995 through November 1997, with the remaining 50.0% of the shares
vesting on December 21, 2000. Upon a qualified change of control of the
Company or the initial public offering of Common Stock, all of the shares
will become fully vested.
(5) In connection with the termination of his employment with the Company, Mr.
Marshall was granted these nonqualified options in exchange for
previously-granted vested incentive stock options in the same amounts and
with the same exercise prices. Those incentive stock options would have been
forfeited by their terms if not exercised upon Mr. Marshall's termination of
employment and had been granted at fair market value as determined by the
Board of Directors of the Company on the date of grant. See
"Management -- Severance Agreements."
50
<PAGE> 54
<TABLE>
The following table sets forth information with respect to (i) options exercised during 1995 by the
Named Executive Officers (ii) the number of unexercised options held by the Named Executive Officers as of
December 31, 1995 and (iii) the value of unexercised in-the-money options (options for which the fair market
value of the Common Stock exceeds the exercise price) as of December 31, 1995.
<CAPTION>
OPTION EXERCISES IN 1995 AND YEAR END OPTION VALUES
VALUE OF
NUMBER OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT
SHARES DECEMBER 31, 1995(#) DECEMBER 31, 1995($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED($)(1) UNEXERCISABLE UNEXERCISABLE(1)
- ---- ----------- -------------- ---------------------- --------------------
<S> <C> <C> <C> <C>
Robert N. Goldman(2)........... -- -- 0/2,300,000 $0/$22,425,000
Justin J. Perreault(2)......... -- -- 0/460,000 0/4,485,000
Robert J. Potter............... -- -- 74,250/90,750 728,688/887,063
Gregory A. Baryza.............. -- -- 0/65,000 0/629,750
Brian W. Otis.................. -- -- 0/54,000 0/522,800
Kenneth E. Marshall............ 5,000 $49,500 389,625/0 3,677,631/0
David Stryker.................. -- -- 0/0 0/0
Gerald B. Bay.................. -- -- 0/175,000 0/1,699,250
Thomas Atwood.................. -- -- 0/35,000 0/332,500
<FN>
- ---------------
(1) There was no public trading market for the Common Stock at any time during 1995. Solely for purposes of
this table, the values have been calculated on the basis of the assumed initial public offering price
of $10.00, less the aggregate exercise price of the options.
(2) The options held by Messrs. Goldman and Perreault at December 31, 1995 were exercised in full in April
1996.
</TABLE>
EMPLOYEE STOCK PURCHASE PLAN
On May 23, 1996, the Board of Directors adopted, and the stockholders of
the Company are expected to approve by written consent in June 1996, an Employee
Stock Purchase Plan (the "Stock Purchase Plan"), under which options to purchase
up to 300,000 shares of Common Stock may be granted to employees of the Company.
Under the Stock Purchase Plan, participating employees will be entitled to
purchase shares through payroll deductions.
During each six month offering period under the Stock Purchase Plan, all
employees of the Company, including directors of the Company who are employees,
and all employees of any participating subsidiaries, (i) whose customary
employment is more than 20 hours per week and for more than five months in any
calendar year, (ii) who have been employed by the Company or a subsidiary for at
least six months prior to enrolling in the Stock Purchase Plan, and (iii) who
are employees on the first day of the designated payroll deduction period (the
"Offering Period"), are eligible to participate in the Stock Purchase Plan.
Employees who would immediately after the grant own 5% or more of the total
combined voting power or value of the stock of the Company or any subsidiary are
not eligible to participate.
The maximum number of shares which may be purchased by an employee under
the Stock Purchase Plan will be determined on the first day of the offering
period pursuant to a formula under which the employee's projected payroll
deductions over the Offering Period are divided by 85% of the market value of
one share of Common Stock on the first day of the Offering Period, and the
quotient is multiplied by two. During each Offering Period, the price at which
the employee will be able to purchase the Common Stock will be 85% of the last
reported sale price of the Common Stock on the Nasdaq National Market on the
first or last day of the Offering Period, whichever is lower.
51
<PAGE> 55
If an employee is not a participant on the last day of the Offering Period,
the employee is not entitled to exercise any option, and the amount of such
employee's accumulated payroll deductions will be refunded. An employee's rights
under the Stock Purchase Plan terminate upon voluntary withdrawal from the Stock
Purchase Plan at any time, or when the employment of such participant ceases for
any reason, excluding death. Upon the death of a participant, the participant's
beneficiary will have the right to elect either (i) to withdraw all of the
payroll deductions credited to the participant's account under the Stock
Purchase Plan or (ii) to exercise the participant's option for the purchase of
stock on the last day of the Offering Period next following the date of the
participant's death for the purchase of the number of full shares which the
accumulated payroll deductions in the participant's account at the date of the
participant's death will purchase at the applicable option price, and any excess
in such account will be returned to the beneficiary.
The Stock Purchase Plan will be administered by the Compensation Committee.
The Compensation Committee has not determined when the first Offering Period
under the Stock Purchase Plan will commence.
EMPLOYMENT AGREEMENTS
In November 1995, the Company executed employment agreements with Messrs.
Goldman and Perreault. The Company agreed to employ Messrs. Goldman and
Perreault as President and Chief Executive Officer of the Company and Executive
Vice President and Chief Operating Officer of the Company, respectively, at
annual salaries of $190,000 and $160,000, respectively. In connection with the
Company's expense reduction program in late 1995, the salaries of its executive
officers, including Messrs. Goldman and Perreault, were voluntarily reduced.
Messrs. Goldman and Perreault are currently receiving salaries at the rate of
$176,700 and $148,800 per year, respectively. Each of the employment agreements
is terminable at will by either party to them. If the employment of the officer
is terminated by the Company for any reason other than just cause, death or
permanent disability, the agreements require the Company to continue to pay the
officer's salary for a period of twelve months, in the case of Mr. Goldman, or
six months, in the case of Mr. Perreault, after such termination, offset by any
amounts received by the officer from subsequent employment during such period.
In connection with their employment, these officers and all other executive
officers of the Company have also executed the Company's standard
Non-Competition, Non-Disclosure and Developments Agreement (the "Non-Competition
Agreement"). This agreement contains covenants prohibiting the improper
disclosure of confidential information at any time, as well as provisions
assigning to the Company all inventions made or conceived by the officer during
his employment with the Company. Each officer agreed with the Company that, with
certain exceptions, until one year after the termination of his employment with
the Company, he would not participate in any capacity in any business activities
competitive with those of the Company. Each officer further agreed not to
participate in any capacity in soliciting the business of any customers or the
services of any employees of the Company during such one-year period.
SEVERANCE AGREEMENTS
In connection with the resignation of Thomas M. Atwood as a director of the
Company effective April 1, 1996 and as an employee of the Company effective
September 30, 1996, the Company and Mr. Atwood entered into an agreement dated
March 1, 1996 (the "Atwood Agreement"). Pursuant to the Atwood Agreement, Mr.
Atwood was relieved of day-to-day operating responsibilities effective March 31,
1996 but agreed to provide such services as might be required through September
30, 1996 to assist in the transition of his responsibilities to other employees.
Mr. Atwood will continue to receive amounts in lieu of his present salary at the
rate in effect on March 1, 1996 through September 30, 1996 and will be paid for
any vacation he had accrued as of March 1, 1996. Mr. Atwood was also permitted
to participate in the health and dental plans of the Company through September
30, 1996, with certain restrictions. In connection with the Atwood Agreement,
Mr. Atwood executed a general release of the
52
<PAGE> 56
Company. The Atwood Agreement also confirmed Mr. Atwood's obligations under his
Non-Competition Agreement.
In connection with the resignation of Kenneth E. Marshall as President and
Chief Executive Officer of the Company, effective May 24, 1995, the Company and
Mr. Marshall entered into an agreement dated May 24, 1995 (the "Marshall
Agreement"). Pursuant to the Marshall Agreement, Mr. Marshall ceased day-to-day
operating responsibilities but agreed to provide such services as might be
required through June 30, 1995 to help the Company complete pending transactions
with customers and prospects and otherwise assist in the transition period. From
July 1995 through June 1996 (the "Consulting Period"), Mr. Marshall agreed to
act as a consultant for the Company. During the Consulting Period, the Company
agreed to pay Mr. Marshall amounts in lieu of salary at the rate of $200,000 per
year; provided, however, that such amounts would be reduced by any amounts he
received with respect to employment elsewhere (except that director fees would
not reduce such fees and only 50% of any consulting fees earned by Mr. Marshall
during the Consulting Period would be deducted from his payments from the
Company). The Company also agreed to provide Mr. Marshall and his family with
health and dental benefits during such period, to provide Mr. Marshall with life
insurance during such period and to pay Mr. Marshall up to a maximum of $5,000
for outplacement services. The Marshall Agreement also confirmed Mr. Marshall's
obligations under his Non-Competition Agreement. The Company may elect to extend
these non-competition obligations until June 30, 1997 in exchange for a
fully-vested five-year nonqualified stock option to purchase an aggregate of up
to 30,125 shares at prices ranging from $0.25 to $6.00 per share. Pursuant to
the terms of the Marshall Agreement, Mr. Marshall's incentive stock options
ceased to vest on June 30, 1995, though the vesting of such options was
accelerated by one year. In exchange for his unexercised vested incentive stock
options, on June 30, 1995 the Company also issued to Mr. Marshall nonqualified
options to purchase an aggregate of up to 389,625 shares of common stock at
prices ranging from $0.10 per share to $6.00 per share. In connection with the
Marshall Agreement, Mr. Marshall executed a general release of the Company and
the Company executed a release regarding claims arising out of Mr. Marshall's
employment.
In connection with the resignation of David Stryker as an employee and
Chief Technical Officer of the Company effective November 30, 1995, the Company
and Mr. Stryker entered into an agreement dated November 28, 1995 (the "Stryker
Agreement"). Pursuant to the Stryker Agreement, from December 1, 1995 through
April 30, 1996, the Company was obligated to pay Mr. Stryker amounts in lieu of
salary at the rate in effect on November 1, 1995, provided that such amounts
would be reduced by any amounts he received with respect to employment
elsewhere. The Company also agreed to pay the premiums of Mr. Stryker's group
health insurance coverage during the period from December 1, 1995 through April
30, 1996, if Mr. Stryker elected to continue such coverage pursuant to COBRA
law. The Stryker Agreement also confirmed Mr. Stryker's obligations under his
Non-Competition Agreement. In connection with the Stryker Agreement, Mr. Stryker
executed a general release of the Company.
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<PAGE> 57
CERTAIN TRANSACTIONS
RELATIONSHIP WITH INTERNATIONAL BUSINESS MACHINES CORPORATION
In April 1993, IBM purchased 2,601,877 shares of Series E Convertible
Preferred Stock and 1,148,818 shares of Series F Convertible Preferred Stock of
the Company. Under agreements entered into in connection with this purchase of
Preferred Stock, IBM is entitled to appoint an observer to attend meetings of
the Company's Board of Directors so long as IBM continues to hold shares
representing at least 10% of the voting power of the stockholders of the
Company, and is entitled to certain registration rights with respect to
securities of the Company held by it. Under these agreements, IBM was also
entitled to certain rights of first refusal with respect to future issuances of
the Company's securities and a limited right to require repurchase by the
Company of the Preferred Stock held by IBM. The Company also has a limited right
to require IBM to sell the Preferred Stock held by IBM to the Company at a
formula price. These rights of first refusal and rights and obligations with
respect to repurchase of the Preferred Stock held by IBM will terminate upon the
closing of this Offering. Immediately following the closing of this Offering,
(after giving effect to the conversion to Common Stock of all outstanding
Preferred Stock), IBM will beneficially own 3,750,695 shares of Common Stock,
representing 14.3% of the Common Stock then issued and outstanding. (If the
Underwriters' over-allotment option is exercised in full, IBM will sell 426,949
shares of Common Stock in this offering, reducing its holdings to 12.7% of the
Company's issued and outstanding Common Stock.)
In April 1993, the Company also entered into certain business agreements
with IBM (the "IBM Agreements"). The IBM Agreements permit IBM to develop and
market products in which the Company's ObjectStore database is embedded in
return for the payment by IBM of royalties at a rate lower than that customarily
imposed by the Company. The IBM Agreements also impose mutual obligations of
confidentiality on the Company and IBM, and include a source code escrow
agreement under which IBM, in certain circumstances, may receive a copy of the
source code for certain of the Company's products. The IBM Agreements also
provide a framework for the parties to perform joint development projects from
time to time through individually-negotiated agreements regarding the
development of new or derivative products, specifying the work to be performed
by each party, payments to be made in connection with such work and the
ownership of the completed product. During 1993, 1994, 1995 and during the three
months ended March 31, 1996, the Company's revenues attributable to IBM were
$9.9 million, $1.7 million, $3.1 million and $980,000 and constituted 40.2%,
6.9%, 9.4% and 10.9% of the Company's total revenues, respectively. Revenues and
related accounts receivable from IBM are included in related party software and
service revenue, accounts receivable-related party and deferred revenue-related
party in the Consolidated Financial Statements included in this Prospectus.
Under the terms of the IBM Agreements, either party has the option (the
"Break-Up Option") of terminating certain of the IBM Agreements and modifying
the terms of certain others upon nine months' advance notice. On March 5, 1996,
the Company exercised the Break-Up Option by giving written notice to IBM. Upon
the effectiveness of the Break-Up Option, the rate of royalties paid to the
Company by IBM for ObjectStore-based products will be substantially increased,
IBM will no longer be entitled to a discount on training and consulting services
provided by the Company and the Company's joint development and joint marketing
efforts with IBM may be curtailed or eliminated.
At any time up to one month prior to the effective date of the Break-Up
Option, IBM may elect to obtain a copy of the source code for the Company's
ObjectStore product and a limited license to use such source code (the "Source
Code Option"). In exchange for delivery of this source code, IBM must, without
receiving any further consideration, surrender to the Company all of the shares
of capital stock of the Company held by IBM. The license that would be granted
to IBM in the event that it exercises the Source Code Option would permit IBM to
use the ObjectStore source code solely in the development, marketing and support
of existing applications in which ObjectStore is embedded and would not permit
it to market ObjectStore as a stand-alone product.
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<PAGE> 58
LOANS TO EXECUTIVE OFFICERS
In 1994, the Company loaned to Robert J. Potter, the Senior Vice President,
Sales, of the Company, an aggregate of $200,000 pursuant to two $100,000 full
recourse promissory notes dated April and November 1994 and bearing interest at
rates of 5.88% and 7.45% per annum. The notes are due in April and November
1998, respectively, and will bear interest at 18.0% per annum or, if lower, the
highest legal rate of interest, if not paid when due. The notes are
collateralized by the pledge to the Company of an aggregate of 50,000 shares of
Common Stock owned by Mr. Potter. Upon any sale of all or part of these shares,
any amount realized by Mr. Potter in excess of his selling and tax expenses in
connection with the sale must be paid to the Company and applied to this
indebtedness.
In April 1996, in connection with the exercise by Robert N. Goldman, the
President and Chief Executive Officer of the Company and by Justin Perreault,
the Executive Vice President and Chief Operating Officer of the Company, of
stock options granted to them under the Company's 1995 Nonqualified Stock Option
Plan, to purchase 2,300,000 and 460,000 shares of Common Stock, respectively,
the Company loaned to Mr. Goldman and to Mr. Perreault $572,700 and $114,540,
respectively. The loan to each executive was at an interest rate of 7.0% per
annum and was pursuant to a promissory note with full recourse due upon the
earlier of (i) April 1, 2001 and (ii) the date the executive's employment with
the Company terminates for any reason. Each loan is secured by a pledge to the
Company of the shares of Common Stock acquired upon exercise of the option.
These shares are also subject to Stock Restriction and Repurchase Agreements
which permit the Company to repurchase, at their original purchase price, the
unvested shares of an executive upon termination of that executive's employment
(for any reason) with the Company. The shares vest at a quarterly rate of 6.25%
from November 1995 through November 1997, with the remaining 50.0% of the shares
vesting on December 21, 2000. Upon a qualified change of control of the Company
or the initial public offering of Common Stock, all of the executives' shares
will become fully vested.
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<PAGE> 59
PRINCIPAL STOCKHOLDERS
<TABLE>
The following table sets forth certain information regarding beneficial ownership of the
Company's Common Stock as of May 31, 1996, and as adjusted to reflect the sale of shares offered
hereby, by (i) each person or entity known to the Company to own beneficially five percent or more
of the Company's Common Stock, (ii) each of the Company's directors, (iii) the Named Executive
Officers and (iv) all directors and executive officers of the Company as a group. The information
as to each person has been furnished by such person, and each person has sole voting power and sole
investment power with respect to all shares beneficially owned by such person except as otherwise
indicated.
<CAPTION>
PERCENTAGE OF
OUTSTANDING SHARES
BENEFICIALLY OWNED
------------------------------
NUMBER OF SHARES BEFORE AFTER
NAME BENEFICIALLY OWNED(1) OFFERING(2) OFFERING(3)
- ---- --------------------- ----------- -----------
<S> <C> <C> <C>
DIRECTORS, OFFICERS AND 5%
STOCKHOLDERS:
Aeneas Venture Corporation(4)......... 4,873,303 20.9% 18.6%
c/o Harvard Management Company
600 Atlantic Avenue, 2nd Floor
Boston, Massachusetts 02110
International Business Machines
Corporation......................... 3,750,695 16.1 14.3
Old Orchard Road
Armonk, New York 10504
Vista III, L.P........................ 2,442,184 10.5 9.3
c/o Palmeri Fund Administrators
16-00 Route 208 South
Fairlawn, New Jersey 07410
Robert N. Goldman..................... 2,300,000 9.9 8.8
New Enterprise Associates V, Limited
Partnership......................... 1,806,356 7.8 6.9
1119 St. Paul Street
Baltimore, MD 21202
Orien I, L.P.......................... 1,420,492 6.1 5.4
315 Post Road West
Westport, CT 06880
Olivetti Holding N.V.................. 1,241,261 5.3 4.7
c/o Caribbean Management Company
14 John B. Gorsiraweg
Curacao, Netherlands Antilles
Thomas Atwood(5)...................... 510,500 2.2 1.9
Justin J. Perreault................... 460,000 2.0 1.8
Kenneth Marshall(6)................... 440,625 1.9 1.7
David Stryker......................... 250,000 1.1 1.0
Robert J. Potter(7)................... 87,350 * *
Gregory A. Baryza(8).................. 10,500 * *
Brian W. Otis(9)...................... 10,200 * *
Gerald B. Bay(10)..................... 5,018,721 21.6 19.1
Steven C. Walske(11).................. 19,000 * *
Arthur J. Marks(12)................... 1,861,970 8.0 7.1
Tim R. Palmer......................... -- -- --
Scott Sperling........................ -- -- --
All directors and executive officers
as a group (12 persons)............. 9,767,741 41.8 37.1
<FN>
- ---------------
* Less than 1%.
(1) The persons named in this table have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them, subject to community property
laws where applicable and subject to the information contained in the footnotes to this
table.
</TABLE>
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<PAGE> 60
Amounts shown for each stockholder include all shares obtainable upon
conversion of Preferred Stock, and all shares subject to stock options
exercisable within 60 days of May 31, 1996.
(2) The number of shares of Common Stock deemed outstanding prior to this
offering includes (i) 5,376,031 shares of Common Stock, including 2,883,714
shares of Common Stock issued upon exercise of options between March 31,
1996 and May 31, 1996 and 49,758 shares of Common Stock issuable upon the
cashless exercise of the Warrant, and (ii) 17,891,654 shares of Common
Stock issuable upon the conversion of all outstanding shares of Preferred
Stock.
<TABLE>
(3) Gives effect to the issuance by the Company of 3,000,000 shares of Common
Stock in this offering. Assumes no exercise of the Underwriters'
over-allotment option. Certain Selling Stockholders have agreed to sell to
the several Underwriters an aggregate of 450,000 shares of Common Stock
owned by them in the event that the Underwriters exercise their
over-allotment option. If the over-allotment option is exercised in full,
the number of shares to be sold by such Selling Stockholders and their
respective beneficial ownership of Common Stock before and after the
offering will be as follows.
<CAPTION>
BENEFICIAL
OWNERSHIP BENEFICIAL OWNERSHIP
BEFORE OFFERING AFTER OFFERING
------------------- SHARES TO ---------------------
SELLING STOCKHOLDERS SHARES PERCENT BE SOLD SHARES PERCENT
-------------------- --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
International Business Machines
Corporation............................... 3,750,695 16.1% 426,949 3,323,746 12.7%
Zuken Incorporated.......................... 160,457 * 11,383 149,074 *
Thomas Atwood............................... 510,500 2.2% 11,383 499,117 1.9%
David Maier................................. 12,500 * 285 12,215 *
</TABLE>
(4) Includes 500,000 shares held by Cooper, Raburn & Kniffin Limited
Partnership, of which Aeneas Venture Corporation is a limited partner.
Aeneas Venture Corporation disclaims beneficial ownership of the shares
held by Cooper, Raburn & Kniffin Limited Partnership, except to the extent
of its pecuniary interest therein.
(5) Includes 10,500 shares subject to stock options exercisable within 60 days
of May 31, 1996. Does not include 24,500 shares subject to stock options
not exercisable within 60 days of May 31, 1996.
(6) Includes 30,000 shares held in trust for members of Mr. Marshall's family.
(7) Includes 37,350 shares subject to stock options exercisable within 60 days
of May 31, 1996. Does not include 207,750 shares subject to stock options
not exercisable within 60 days of May 31, 1996.
(8) Includes 10,500 shares subject to stock options exercisable within 60 days
of May 31, 1996. Does not include 119,500 shares subject to stock options
not exercisable within 60 days of May 31, 1996.
(9) Includes 10,200 shares subject to stock options exercisable within 60 days
of May 31, 1996. Does not include 143,800 shares subject to stock options
not exercisable within 60 days of May 31, 1996.
(10) Represents shares held by Orien I, L.P., Philips Venture Fund I, L.P.,
Vista III, L.P. and Cooper, Raburn & Kniffin Limited Partnership. Mr. Bay
is a limited partner in Orien Partners, L.P., the general partner of Orien
I, L.P.; a general partner of Vista Ventures Partners II, the general
partner of Philips Venture Fund I, L.P.; and a general partner of Vista III
Partners, L.P., the general partner of Vista III, L.P. Vista III, L.P. is a
limited partner in Cooper, Raburn & Kniffin Limited Partnership. Mr. Bay
disclaims beneficial ownership of the shares held by these entities, except
to the extent of his pecuniary interest therein.
(11) Includes 19,000 shares subject to stock options exercisable within 60 days
of May 31, 1996. Does not include 53,000 shares subject to stock options
not exercisable within 60 days of May 31, 1996.
(12) Represents shares held by New Enterprise Associates V, Limited Partnership
and The Silverado Fund I, Limited Partnership. Mr. Marks is a general
partner of NEA Partners V, Limited Partnership, the general partner of New
Enterprise Associates V, Limited Partnership and a general partner of NEA
Silverado Partners I, Limited Partnership, the general partner of The
Silverado Fund I, Limited Partnership. Mr. Marks disclaims beneficial
ownership of the shares held by these entities, except to the extent of his
pecuniary interest therein.
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<PAGE> 61
DESCRIPTION OF CAPITAL STOCK
Effective upon the closing of this offering and after giving effect to the
amendment and restatement of the Certificate of Incorporation of the Company,
the authorized capital stock of the Company will consist of 200,000,000 shares
of Common Stock, par value $0.001 per share and 5,000,000 shares of undesignated
preferred stock, par value $0.01 per share.
COMMON STOCK
As of May 31, 1996, there were outstanding 5,326,273 shares of Common Stock
held of record by 140 persons. Upon the closing of this offering, there will be
outstanding 26,267,685 shares of Common Stock, after giving effect to the
conversion into shares of Common Stock of all outstanding shares of Preferred
Stock and assuming the issuance of 49,758 shares of Common Stock upon the
cashless exercise of the Warrant, but assuming no exercise of outstanding
options to purchase an aggregate of 3,485,896 shares of Common Stock outstanding
at May 31, 1996.
Holders of Common Stock are entitled to one vote per share held of record
on all matters submitted to a vote by the stockholders of the Company. Subject
to preferences that may be applicable to the holders of outstanding shares of
preferred stock, if any, the holders of Common Stock are entitled to receive
such dividends when and as declared by the Board of Directors out of funds
legally available therefor. In the event of any liquidation, dissolution or
winding up of the affairs of the Company, and subject to the rights of the
holders of outstanding shares of preferred stock, if any, the remaining assets
of the Company available to stockholders shall be distributed equally per share
to the holders of shares of Common Stock. Holders of shares of Common Stock have
no cumulative voting rights nor any preemptive, subscription, redemption or
conversion rights. There are no redemption or sinking fund provisions applicable
to the Common Stock. All outstanding shares of Common Stock are validly issued,
fully paid and nonassessable, and the shares of Common Stock offered hereby will
be, when issued and paid for, validly issued, fully paid and nonassessable. The
rights, preferences and privileges of holders of Common Stock are subject to,
and may be adversely affected by, the rights of holders of shares of preferred
stock which the Company may designate and issue in the future.
PREFERRED STOCK
As of May 31, 1996, there were outstanding 2,750,000 shares of Series A
Convertible Preferred Stock held of record by three holders, 4,517,857 shares of
Series B Convertible Preferred Stock held of record by eight holders, 2,857,143
shares of Series C Convertible Preferred Stock held of record by seven holders,
1,111,111 shares of Series D Convertible Preferred Stock held of record by eight
holders, 2,601,877 shares of Series E Convertible Preferred Stock held of record
by one holder, 1,148,818 shares of Series F Convertible Preferred Stock held of
record by one holder, 250,000 shares of Series G Convertible Preferred Stock
held of record by one holder, no shares of Series H Convertible Preferred Stock,
999,848 shares of Series I Convertible Preferred Stock held of record by eleven
holders and 1,655,000 shares of Series J Convertible Preferred Stock held of
record by eleven holders.
The terms of the Preferred Stock provide that, upon the closing of this
offering, the outstanding shares of the Series A through Series J Convertible
Preferred Stock will automatically convert into 17,891,654 shares of Common
Stock. Upon the closing of this offering and the conversion of the Series A
through Series J Preferred Stock, the Company intends to amend and restate its
Certificate of Incorporation to eliminate all references to the Series A through
Series J Preferred Stock.
On or before the closing of this offering, the Company's Certificate of
Incorporation will be amended to create a class of 5,000,000 shares of
undesignated preferred stock, par value $0.01 per share. The Board of Directors
will be authorized, subject to any limitations prescribed by Delaware law, to
issue shares of preferred stock in one or more series, to establish from time to
time the number of shares to be included in each such series, to establish or
alter the voting powers, designations, preferences and relative, participating,
optional or other rights, or the qualifications, limitations or restrictions
thereof, and to increase (but not above the total number of authorized shares of
the class)
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<PAGE> 62
or decrease (but not below the number of shares of such series then outstanding)
the number of shares of any such series without any further vote or action by
the stockholders. The Board of Directors will be authorized to issue preferred
stock with voting, conversion and other rights and preferences that could
adversely affect the voting power or other rights of the holders of Common
Stock. Although the Company has no current plans to issue any such shares, the
issuance of preferred stock or of rights to purchase preferred stock could have
the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, a majority of the
outstanding voting stock of the Company. See "Risk Factors -- Antitakeover
Considerations; Effect of Charter Provisions, By-laws and Delaware Law."
WARRANT
In connection with a Master Lease and Warrant Agreement dated October 1,
1990 between the Company and PacifiCorp Credit, Inc. ("PacifiCorp"), the Company
issued to PacifiCorp a ten-year warrant (the "Warrant") to purchase 57,858
shares of Series B Convertible Preferred Stock at an exercise price of $1.40 per
share. Upon the automatic conversion of outstanding Preferred Stock in
connection with the closing of this offering, the Warrant will be exercisable
for the purchase of 57,858 shares of Common Stock at an exercise price of $1.40
per share. The Warrant will expire upon the closing of this offering if not
exercised prior to that date. PacifiCorp has notified the Company that it
intends to effect a cashless exercise of the Warrant at the closing of the
offering. PacifiCorp also has certain registration rights with respect to the
shares of Common Stock issuable upon exercise of the Warrant. See
"-- Registration Rights."
REGISTRATION RIGHTS
In connection with prior issuances of Preferred Stock, the Company has
granted certain rights with respect to the registration under the Securities Act
of an aggregate of 18,294,432 shares of Common Stock, consisting of (i) 353,020
shares of Common Stock, (ii) 17,891,654 shares of Common Stock issuable upon
conversion of outstanding Preferred Stock and (iii) 57,858 shares of Common
Stock issuable upon conversion of 57,858 shares of Series B Convertible
Preferred Stock issuable upon exercise of the Warrant (collectively, the
"Registrable Securities"). The holders of at least 40% of the Registrable
Securities then outstanding are entitled, at any time after the earlier of June
29, 1998 or six months after the closing of an initial public offering, to
request that the Company file a registration statement under the Securities Act
covering the sale of some or all of the Registrable Securities owned by such
holders, subject to certain conditions. The Company is required to effect no
more than two such registrations and generally not more than one during any
180-day period. The Company may defer any requests for registration for up to 90
days in any 24-month period, if there exists at the time material non-public
information of the Company which, in the reasonable opinion of the Company,
should not be disclosed. The Company is not required to effect any such
registration unless shares of Common Stock representing at least 20% of the
Registrable Securities originally issued are proposed to be offered or unless
the anticipated aggregate public offering price of the shares of Common Stock
proposed to be registered is more than $2,000,000. In addition, in the event
that the Company proposes to register any of its securities under the Securities
Act (other than registrations relating solely to employee benefit plans or
pursuant to Rule 145 or on a form which does not permit secondary sales), either
for its own account or for the account of other security holders, holders of
Registrable Securities may require the Company to use its best efforts to
include all or a portion of their Registrable Securities in the registration and
in any underwriting involved therein, provided, among other conditions, that the
managing underwriter (if any) of any such offering has the right, subject to
certain conditions, to limit the number of Registrable Securities included in
the registration. Further, once the Company is qualified to use Form S-3 to
register securities under the Securities Act, the holders of Registrable
Securities shall have the right to request up to two registrations on Form S-3
during any twelve-month period to register all or a portion of such shares under
the Securities Act, provided that the anticipated aggregate public offering
price of such shares is more than $500,000 and subject to certain conditions. In
general, all fees, costs and expenses of such registrations (other than
underwrit-
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<PAGE> 63
ing discounts and selling commissions applicable to sales of the Registrable
Securities) will be borne by the Company. The holders of Registrable Securities
have waived the foregoing registration rights with respect to this offering.
The Company and the holders of Registrable Securities have agreed to
indemnify each other from certain liabilities relating to any registration in
which any Registrable Securities are included, including liabilities arising
under the Securities Act.
DELAWARE LAW AND CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE OF
INCORPORATION AND BY-LAWS
The Company is subject to the provisions of Section 203 of the General
Corporation Law of Delaware. Section 203 prohibits a publicly-held Delaware
corporation 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 mergers, asset sales and other transactions resulting in a financial
benefit to the interested stockholder. Subject to certain exceptions, an
"interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years did own, 15% or more of the
corporation's voting stock.
The Board of Directors of the Company adopted in May 1996 and the
stockholders of the Company are expected to approve by written consent in June
1996 an Amended and Restated Certificate of Incorporation (the "Restated
Certificate of Incorporation") and Amended and Restated By-laws ("Restated
By-laws"), each of which will become effective immediately following the closing
of this offering. The following description assumes the effectiveness of the
Restated Certificate of Incorporation and Restated By-laws. The Restated By-laws
provide for the division of the Board of Directors into three classes as nearly
equal in size as possible with staggered three-year terms. See "Management." The
classification of the Board of Directors could have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
acquiring, control of the Company.
The Company's Restated By-laws provide that any action required or
permitted to be taken by the stockholders of the Company at an annual meeting or
special meeting of stockholders may only be taken if it is properly brought
before such meeting and may not be taken by written action in lieu of a meeting.
The Restated By-laws further provide that a special meeting of the stockholders
may only be called by the Chairman of the Board of Directors, the Chief
Executive Officer, or if none, the President of the Company or by the Board of
Directors. Under the Company's Restated By-laws, in order for any matter to be
considered "properly brought" before a meeting, a stockholder must comply with
certain requirements regarding advance notice to the Company. The foregoing
provisions could have the effect of delaying until the next stockholders meeting
stockholder actions which are favored by the holders of a majority of the
outstanding voting securities of the Company. These provisions may also
discourage another person or entity from making a tender offer for the Company's
Common Stock, because such person or entity, even if it acquired a majority of
the outstanding voting securities of the Company, would be able to take action
as a stockholder (such as electing new directors or approving a merger) only 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. The Restated By-laws require the affirmative
vote of the holders of at least 75% of the shares of capital stock of the
Company issued and outstanding and entitled to vote to amend or repeal the
provisions described in the prior paragraph.
The Restated Certificate of Incorporation contains certain provisions
permitted under the General Corporation Law of Delaware relating to the
liability of directors. The provisions eliminate a director's liability for
monetary damages for a breach of fiduciary duty, except in certain circumstances
involving wrongful acts, such as the breach of a director's duty of loyalty or
acts or omissions which involve
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<PAGE> 64
intentional misconduct or a knowing violation of law. Further, the Restated
Certificate of Incorporation and the Restated By-laws contain provisions to
indemnify the Company's directors and officers to the fullest extent permitted
by the General Corporation Law of Delaware. The Company believes that these
provisions will assist the Company in attracting and retaining qualified
individuals to serve as directors.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Common Stock is Boston
Equiserve Limited Partnership.
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<PAGE> 65
SHARES ELIGIBLE FOR FUTURE SALE
Upon the closing of this offering, there will be 26,267,685 shares of
Common Stock outstanding, after giving effect to the conversion of all
outstanding shares of Preferred Stock into shares of Common Stock and assuming
the exercise of the Warrant, but assuming no exercise of options to purchase
3,485,896 shares of Common Stock outstanding as of May 31, 1996. Of the
outstanding shares of Common Stock, the 3,000,000 shares registered in this
offering (3,450,000 shares if the over-allotment option is exercised in full)
will be freely tradeable without restriction under the Securities Act, unless
they are purchased by "affiliates" of the Company as that term is used under the
Securities Act. The remaining 23,267,685 shares will be "restricted securities"
as defined in Rule 144 under the Securities Act (the "Restricted Shares").
The directors, officers and certain stockholders of the Company including
the Selling Stockholders, holding an aggregate of 22,936,192 Restricted Shares,
have agreed that they will not, without the prior written consent of Hambrecht &
Quist LLC, sell, offer, contract to sell or grant any option to sell or
otherwise dispose of any shares of Common Stock, or securities exchangeable or
exercisable for or convertible into shares of Common Stock owned by them during
the 180-day period following the date of this Prospectus. Immediately following
the closing of this offering, 40,800 Restricted Shares will become eligible for
sale without restriction under Rule 144(k), and an additional 268,193 Restricted
Shares will become eligible for sale subject to the restrictions of Rule 144 or,
in some cases, Rule 701 under the Securities Act. Upon the expiration of the
foregoing 180-day lock-up period (or earlier with the consent of Hambrecht &
Quist LLC), an additional 4,142,781 Restricted Shares will become eligible for
sale without restriction under Rule 144(k) and an additional 17,160,911
Restricted Shares will become eligible for sale subject to the restrictions of
Rule 144 or in some cases Rule 701.
In general, under Rule 144, as currently in effect, any person (or persons
whose shares are aggregated) who has beneficially owned any Restricted Shares
for at least two years is entitled to sell, within any three-month period, a
number of such securities that does not exceed the greater of 1% of the then
outstanding shares of Common Stock (approximately 262,677 shares immediately
after this offering) or the average weekly trading volume during the four
calendar weeks preceding the date on which notice of such sale was filed under
Rule 144, provided certain requirements concerning the availability of public
information, manner of sale and notice of sale are satisfied. A person who is
not an affiliate, has not been an affiliate within three months prior to the
sale and has beneficially owned Restricted Shares for at least three years is
entitled to sell such shares under Rule 144(k) without regard to any of the
limitations described above. In satisfying the two-year and three-year holding
periods described above, a holder of Restricted Shares may, in certain
circumstances, include the holding period of a prior owner.
The Securities and Exchange Commission has proposed certain amendments to
Rule 144 that would reduce by one year the holding periods required for shares
subject to Rule 144 to become eligible for resale in the public market. This
proposal, if adopted, would increase the number of shares of Common Stock
eligible for immediate resale following expiration of the lock-up agreements
described above. No assurance can be given concerning whether or when the
proposal will be adopted by the Securities and Exchange Commission.
Any director, officer or employee of or consultant to the Company who has
been granted options to purchase shares or who has purchased shares pursuant to
a written compensatory benefit plan or written contract relating to the
compensation of such person prior to the effective date of this offering
pursuant to Rule 701 will be entitled to rely on the resale provisions of Rule
701, which permits non-affiliates to sell their Rule 701 shares under Rule 144
without having to comply with the public information, holding-period,
volume-limitation or notice provisions of Rule 144 and permits affiliates to
sell their Rule 701 shares under Rule 144 without having to comply with the Rule
144 holding period restrictions, in each case commencing 90 days after the date
of this Prospectus.
The Company intends to file, approximately 90 days after the date of this
Prospectus, a registration statement on Form S-8 under the Securities Act to
register approximately 6,185,896 shares of Common
62
<PAGE> 66
Stock reserved for issuance upon exercise of options that are now outstanding
under the Original Stock Option Plans or that may be granted hereafter under the
1996 Stock Option Plan and 300,000 shares of Common Stock reserved for issuance
under the Stock Purchase Plan (including, in some cases, shares for which an
exemption under Rule 144 or Rule 701 would also be available), thus permitting
the resale of shares issued under the Stock Option Plans and the Stock Purchase
Plan by non-affiliates in the public market without restriction under the
Securities Act, subject to vesting and, in certain cases, subject to the lock-up
agreements described above. Such registration statement is expected to become
effective immediately upon filing. At the date of this Prospectus, options to
purchase an aggregate of 3,485,896 shares of Common Stock are outstanding under
the Original Stock Option Plans and no shares are outstanding under the 1996
Stock Option Plan or the Stock Purchase Plan. An additional 2,700,000 shares of
Common Stock are available for future grants under the 1996 Stock Option Plan.
See "Management -- Stock Option Plans" and "-- Employee Stock Purchase Plan."
Following this offering, the holders of 18,294,432 Restricted Shares will
have the right to cause the Company to register the sale of their shares under
the Securities Act. If such holders exercise their registration rights, they
will be able to sell their shares in the public market upon the effectiveness of
the registration statement covering such shares without any holding period or
sales volume limitation. See "Description of Capital Stock -- Registration
Rights."
Prior to this offering, there has been no public market for the Common
Stock of the Company. Future sales of substantial amounts of Common Stock in the
public market could adversely affect the market price of the Common Stock. See
"Risk Factors -- Shares Eligible for Future Sale" and "-- No Prior Public
Market; Possible Volatility of Stock Price."
63
<PAGE> 67
UNDERWRITING
<TABLE>
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representatives,
Hambrecht & Quist LLC, Alex. Brown & Sons Incorporated and Wessels, Arnold &
Henderson, L.L.C., have severally agreed to purchase from the Company and the
Selling Stockholders the following respective numbers of shares of Common Stock:
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Hambrecht & Quist LLC.....................................................
Alex. Brown & Sons Incorporated...........................................
Wessels, Arnold & Henderson, L.L.C........................................
---------
Total...........................................................
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in the Company's business and the receipt of
certain certificates, opinions and letters from the Company and the Selling
Stockholders, their counsel and the Company's independent auditors. The nature
of the Underwriters' obligation is such that they are committed to purchase all
shares of Common Stock offered hereby if any of such shares are purchased.
The Underwriters propose to offer the shares of Common Stock to the public
at the initial public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $ per share. The Underwriters may allow and such dealers may reallow a
concession not in excess of $ per share to certain other dealers. After the
initial public offering of the shares, the offering price and other selling
terms may be changed by the Representatives of the Underwriters. The
Representatives of the Underwriters have informed the Company that the
Underwriters do not intend to confirm sales to accounts over which they exercise
discretionary authority.
The Selling Stockholders have granted to the Underwriters an option,
exercisable not later than 30 days after the date of this Prospectus, to
purchase up to 450,000 additional shares of Common Stock at the initial public
offering price, less the underwriting discount, set forth on the cover page of
this Prospectus. To the extent that the Underwriters exercise this option, each
of the Underwriters will have a firm commitment to purchase approximately the
same percentage thereof which the number of shares of Common Stock to be
purchased by it shown in the above table bears to the total number of shares of
Common Stock offered hereby. The Selling Stockholders will be obligated,
pursuant to the option, to sell shares to the Underwriters to the extent the
option is exercised. The Underwriters may exercise such option only to cover
over-allotments made in connection with the sale of the shares of Common Stock
offered hereby.
The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.
64
<PAGE> 68
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters and certain controlling persons against certain liabilities,
including liabilities under the Securities Act, and to contribute to payments
the Underwriters may be required to make in respect thereof.
The directors, officers, and certain stockholders of the Company, including
the Selling Stockholders, holding an aggregate of 22,933,592 shares of Common
Stock upon the closing of the offering, have agreed that they will not, without
the prior written consent of Hambrecht & Quist LLC, sell, offer, contract to
sell or grant any option to sell or otherwise dispose of any shares of Common
Stock, or any securities exchangeable or exercisable for or convertible into
shares of Common Stock owned by them during the 180-day period following the
date of this Prospectus. Such agreements provide that Hambrecht & Quist LLC may,
in its sole discretion and at any time without notice, release all or a portion
of the shares subject to lock-up agreements. The Company has agreed that it will
not, without the prior written consent of Hambrecht & Quist LLC, sell, offer,
contract to sell or grant any option to purchase or otherwise dispose of any
shares of Common Stock or any securities exchangeable or exercisable for or
convertible into shares of Common Stock during the 180-day period following the
date of this Prospectus, except that the Company may issue securities under its
stock option plans and upon exercise of outstanding options. Sales of such
shares in the future could adversely affect the market price of the Common
Stock. See "Shares Eligible for Future Sale."
Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock will be determined
by negotiation between the Company and the Representatives. Among the factors to
be considered in determining the initial public offering price are prevailing
market and economic conditions, revenues and earnings of the Company, market
valuations of other companies engaged in activities similar to those of the
Company, estimates of the business potential and prospects of the Company, the
present state of the Company's business operations, the management and other
factors deemed relevant.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Foley, Hoag & Eliot LLP Boston, Massachusetts. John D. Patterson,
Jr., Secretary of the Company, is a partner at Foley, Hoag & Eliot LLP. Certain
legal matters in connection with this offering will be passed upon for the
Underwriters by Testa, Hurwitz and Thibeault, LLP.
EXPERTS
The consolidated balance sheets as of December 31, 1994 and December 31,
1995 and the consolidated statements of operations, stockholders' deficit and
cash flows for each of the three years in the period ended December 31, 1995,
included in this Prospectus, have been included herein in reliance on the report
of Coopers & Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing.
65
<PAGE> 69
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement on Form S-1 under the
Securities Act with respect to the Common Stock offered hereby. This Prospectus
does not contain all of the information set forth in the Registration Statement
and the exhibits and schedules to the Registration Statement. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to the Registration Statement and the exhibits and schedules
filed as a part of the Registration Statement. Statements contained in this
Prospectus concerning the contents of any contract or any other document
referred to are not necessarily complete; reference is made in each instance to
the copy of such contract or document filed as an exhibit to the Registration
Statement. Each such statement is qualified in all respects by such reference to
such exhibit. The Registration Statement, including exhibits and schedules
thereto, may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the Regional Offices of the Commission at
Suite 1400, 500 West Madison Street, Chicago, Illinois 60661 and 7 World Trade
Center, Thirteenth Floor, New York, New York 10048. Copies also may be obtained
from the Public Reference Section of the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington D.C. 20549, at prescribed rates. As a
result of this offering, the Company will become subject to the information and
reporting requirements of the Securities Exchange Act of 1934, as amended, and
in accordance therewith will file periodic reports, proxy statements and other
information with the Commission.
------------------------
The Company intends to furnish to its stockholders annual reports
containing consolidated financial statements audited by an independent public
accounting firm and quarterly reports containing unaudited consolidated
financial information for the first three quarters of each fiscal year.
66
<PAGE> 70
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Object Design, Inc.:
We have audited the accompanying consolidated balance sheets of Object
Design, Inc. as of December 31, 1994 and 1995, and the related consolidated
statements of operations, stockholders' deficit and cash flows for each of the
three years in the period ended December 31, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Object Design, Inc. as of December 31, 1994 and 1995, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
May 23, 1996
F-1
<PAGE> 71
OBJECT DESIGN, INC.
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
DECEMBER 31, MARCH 31, 1996
-------------------------- MARCH 31, PRO FORMA
1994 1995 1996 STOCKHOLDERS'
---- ---- ------------ EQUITY (NOTE 2)
(UNAUDITED) ---------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $ 3,224,507 $ 2,465,432 $ 3,381,956
Marketable securities.......................... 1,923,823 1,488,299 4,949,199
Accounts receivable, less allowances of
$399,842, $591,812 and $636,580 at December
31, 1994 and 1995 and March 31, 1996,
respectively................................. 7,329,442 7,631,045 8,401,041
Accounts receivable -- related parties......... 852,000 432,590 174,466
Prepaid expenses and other current assets...... 362,882 444,387 430,208
----------- ------------ ------------
Total current assets.................... 13,692,654 12,461,753 17,336,870
Marketable securities............................ 7,091,112 748,350 737,325
Property and equipment, net...................... 4,221,446 3,569,335 3,317,018
Other assets..................................... 423,728 375,048 413,415
----------- ------------ ------------
Total assets........................ $25,428,940 $ 17,154,486 $ 21,804,628
=========== ============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current portion of long-term obligations......... $ 878,722 $ 733,241 $ 645,076
Accounts payable................................. 1,731,515 1,622,490 1,354,137
Accrued expenses................................. 3,014,098 2,251,142 2,604,373
Accrued compensation............................. 1,903,601 1,805,693 1,610,531
Deferred revenue................................. 4,957,254 5,639,844 5,945,580
Deferred revenue -- related parties.............. 417,012 1,400,000 903,520
----------- ------------ ------------
Total current liabilities............... 12,902,202 13,452,410 13,063,217
Long-term obligations............................ 858,252 476,447 344,008
Redeemable convertible preferred stock, $0.01 par
value; 16,837,521 shares authorized at December
31, 1994 and 1995 and 19,004,188 shares
authorized at March 31, 1996; 16,236,654 shares
issued and outstanding at December 31, 1994 and
1995, and 17,891,654 shares issued and
outstanding at March 31, 1996 and no shares on
a pro forma basis (liquidation preference
$36,400,430, $36,400,430 and $51,295,430 at
December 31, 1994 and 1995 and March 31, 1996,
respectively).................................. 35,982,012 35,982,012 41,232,010 $ --
Commitments and contingencies
Stockholders' deficit:
Common stock, $0.001 par value; 22,500,000
shares authorized at December 31, 1994 and
1995 and 30,166,667 shares authorized at
March 31, 1996; 2,097,724 and 2,373,786
shares issued at December 31, 1994 and 1995,
respectively and 2,461,459 shares issued at
March 31, 1996 (historical) and 20,353,113 at
March 31, 1996 (pro forma)................... 2,098 2,374 2,461 20,353
Additional paid-in capital..................... 55,615 1,672,647 1,378,550 42,592,668
Accumulated deficit............................ (23,770,943) (34,053,312) (33,908,456) (33,908,456)
Net unrealized holding loss on marketable
securities................................... (403,951) (12,882) (29,160) (29,160)
Cumulative translation adjustment.............. 3,674 (43,325) 36,266 36,266
Treasury stock of 18,900 shares, at cost....... (19) (19) (19) (19)
Advances to stockholders....................... (200,000) (200,000) (200,000) (200,000)
Unearned compensation.......................... -- (121,866) (114,249) (114,249)
----------- ------------ ------------ ------------
Total stockholders' equity (deficit).... (24,313,526) (32,756,383) (32,834,607) $ 8,397,403
============
----------- ------------ ------------
Total liabilities and stockholders'
deficit........................... $25,428,940 $ 17,154,486 $ 21,804,628
=========== ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-2
<PAGE> 72
OBJECT DESIGN, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------- -------------------------
1993 1994 1995 1995 1996
----------- ------------ ------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Software.................... $ 8,687,889 $ 15,705,980 $ 18,699,616 $ 4,971,899 $ 5,612,199
Services.................... 4,155,167 6,730,743 10,928,027 2,647,603 2,369,083
Related party software and
services................. 11,807,000 3,052,000 3,078,000 401,846 1,014,892
----------- ------------ ------------ ----------- -----------
Total revenues...... 24,650,056 25,488,723 32,705,643 8,021,348 8,996,174
Cost of revenues:
Cost of software............ 430,000 1,532,392 1,087,631 343,099 498,580
Cost of services............ 4,297,034 4,267,253 6,928,172 1,656,889 1,697,982
Cost of related party
software and services.... 590,000 1,175,934 903,793 164,370 210,000
----------- ------------ ------------ ----------- -----------
Total cost of
revenues.......... 5,317,034 6,975,579 8,919,596 2,164,358 2,406,562
Gross profit.................. 19,333,022 18,513,144 23,786,047 5,856,990 6,589,612
Operating expenses:
Selling and marketing....... 11,632,069 18,245,484 19,596,551 4,830,920 3,683,406
Research and development.... 4,727,080 9,513,518 8,298,146 2,222,895 1,804,361
General and
administrative........... 2,408,667 3,141,452 3,589,076 919,283 911,178
Restructuring charges....... -- -- 2,708,893 -- --
----------- ------------ ------------ ----------- -----------
Total operating
expenses.......... 18,767,816 30,900,454 34,192,666 7,973,098 6,398,945
Operating income (loss)....... 565,206 (12,387,310) (10,406,619) (2,116,108) 190,667
Other income (expense):
Interest income............. 262,579 516,434 278,382 126,618 57,469
Interest expense............ (98,711) (121,070) (136,174) (39,245) (36,128)
Other expense, net.......... (72,102) (11,180) (19,940) 33,035 (43,194)
----------- ------------ ------------ ----------- -----------
Total other income
(expense)......... 91,766 384,184 122,268 120,408 (21,853)
----------- ------------ ------------ ----------- -----------
Income (loss) before provision
for income taxes............ 656,972 (12,003,126) (10,284,351) (1,995,700) 168,814
Provision (benefit) for income
taxes....................... 30,000 18,000 (1,982) -- 23,958
----------- ------------ ------------ ----------- -----------
Net income (loss)............. $ 626,972 $(12,021,126) $(10,282,369) $(1,995,700) $ 144,856
=========== ============ ============ =========== ===========
Net income (loss) available to
common shareholders --
historical basis (Note B)...
Pro forma net income (loss)
per common and common
equivalent share............ $ (0.40) $ 0.01
============ ===========
Pro forma weighted average
number of common and common
equivalent shares
outstanding................. 25,837,307 26,427,258
============ ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE> 73
OBJECT DESIGN, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
for the years ended December 31, 1993, 1994, and 1995 and the three months ended
March 31, 1996
<TABLE>
<CAPTION>
NET
UNREALIZED
HOLDING
ADDITIONAL LOSS ON CUMULATIVE
COMMON PAID-IN ACCUMULATED MARKETABLE TRANSLATION
STOCK CAPITAL DEFICIT SECURITIES ADJUSTMENT
------ ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992................................ $1,803 $ 2,856 $(12,376,789) $ 1,235
------ ----------- ------------ ---------
Exercise of stock options................................. 227 30,738
Foreign currency translation adjustment................... 15,296
Net income................................................ 626,972
------ ---------- ------------ ---------
Balance at December 31, 1993................................ 2,030 33,594 (11,749,817) 16,531
------ ---------- ------------ ---------
Exercise of stock options................................. 68 22,021
Issuance of note to officer...............................
Net unrealized holding loss on securities available for
sale.................................................... $(403,951)
Foreign currency translation adjustment................... (12,857)
Net loss.................................................. (12,021,126)
----- ---------- ------------ --------- ---------
Balance at December 31, 1994................................ 2,098 55,615 (23,770,943) (403,951) 3,674
----- ---------- ------------ --------- ---------
Exercise of stock options................................. 276 141,397
Compensation on stock options for employees............... 1,353,769
Stock options granted to employees below fair value....... 121,866
Net unrealized holding gain on securities available for
sale.................................................... 391,069
Foreign currency translation adjustment................... (46,999)
Net loss.................................................. (10,282,369)
------ ---------- ------------ --------- ---------
Balance at December 31, 1995................................ 2,374 1,672,647 (34,053,312) (12,882) (43,325)
------ ---------- ------------ --------- ---------
Exercise of stock options................................. 87 38,903
Amortization of unearned compensation.....................
Net unrealized holding loss on securities available for
sale.................................................... (16,278)
Foreign currency translation adjustment................... 79,591
Accretion of preferred stock to redemption value.......... (333,000)
Net income................................................ 144,856
------- ---------- ------------ --------- ---------
Balance at March 31, 1996 (unaudited)....................... $ 2,461 $1,378,550 $(33,908,456) $(29,160) $ 6,266
======= ========== ============ ========= =========
<CAPTION>
TREASURY ADVANCES TO UNEARNED STOCKHOLDERS'
STOCK STOCKHOLDERS COMPENSATION DEFICIT
-------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance at December 31, 1992................................ $(19) $(12,370,914)
------ ------------
Exercise of stock options................................. 30,965
Foreign currency translation adjustment................... 15,296
Net income................................................ 626,972
------ -----------
Balance at December 31, 1993................................ (19) (11,697,681)
------ -----------
Exercise of stock options................................. 22,089
Issuance of note to officer............................... $(200,000) (200,000)
Net unrealized holding loss on securities available for
sale.................................................... (403,951)
Foreign currency translation adjustment................... (12,857)
Net loss.................................................. (12,021,126)
------ -----------
Balance at December 31, 1994................................ (19) (200,000) (24,313,526)
------ --------- -----------
Exercise of stock options................................. 141,673
Compensation on stock options for employees............... 1,353,769
Stock options granted to employees below fair value....... $ (121,866)
Net unrealized holding gain on securities available for
sale.................................................... 391,069
Foreign currency translation adjustment................... (46,999)
Net loss.................................................. (10,282,369)
------ --------- ---------- -----------
Balance at December 31, 1995................................ (19) (200,000) (121,866) (32,756,383)
------ --------- ---------- -----------
Exercise of stock options................................. 38,990
Amortization of unearned compensation..................... 7,617 7,617
Net unrealized holding loss on securities available for
sale.................................................... (16,278)
Foreign currency translation adjustment................... 79,591
Accretion of preferred stock to redemption value.......... (333,000)
Net income................................................ 144,856
-------- ---------- ---------- ------------
Balance at March 31, 1996 (unaudited)....................... $(19) $(200,000) $ (114,249) $(32,834,607)
======== ========== ========== ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 74
OBJECT DESIGN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEAR ENDED DECEMBER 31, 31,
------------------------------------------ -------------------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................... $ 626,972 $(12,021,126) $(10,282,369) $(1,995,700) $ 144,856
Adjustments to reconcile net income
(loss) to net cash used for
operating activities:
Depreciation and amortization...... 861,683 1,493,102 1,818,045 433,094 426,863
Bad debt expense................... 449,256 433,957 571,644 117,339 95,678
Restructuring charges.............. -- -- 2,708,893 -- --
Non-cash compensation for stock
options to employee.............. -- -- 36,750 --
Other.............................. (14,903) (19,725) (938) -- 7,617
Net realized loss on sale of
marketable securities............ -- 725 30,499 -- --
Net changes in operating assets and
liabilities:
Accounts receivable.............. (6,817,465) 785,488 (453,837) (259,331) (607,550)
Prepaids and other current
assets........................ (169,475) (87,984) (81,505) (150,388) 14,179
Other assets..................... (203,688) (241,645) (6,244) (51,021) 14,633
Accounts payable................. 183,937 586,064 (109,025) 785,660 (268,353)
Accrued expenses................. 945,074 2,515,063 (2,068,467) (1,532,211) 158,069
Deferred revenue................. 2,136,799 2,289,842 1,665,578 1,304,361 (190,744)
------------ ------------ ------------ ----------- -----------
Net cash used for operating
activities.................. (2,001,810) (4,266,239) (6,170,976) (1,348,197) (204,752)
------------ ------------ ------------ ----------- -----------
Investing activities:
Capital expenditures................. (1,996,687) (2,712,389) (1,194,962) (471,174) (174,546)
Purchases of marketable securities... (9,837,803) (11,412,750) (509,269) (509,269) (3,466,153)
Proceeds from sale/maturity of
marketable securities.............. -- 11,835,762 7,649,063 902,510 --
Purchase of minority interest........ -- (112,526) -- -- (53,000)
------------ ------------ ------------ ----------- -----------
Net cash provided (used) for
investing activities........ (11,834,490) (2,401,903) 5,944,832 (77,933) (3,693,699)
------------ ------------ ------------ ----------- -----------
Financing activities:
Proceeds from issuance of redeemable
convertible preferred stock........ 12,663,871 6,941,207 -- -- 4,916,998
Proceeds from exercise of stock
options.. 30,965...... 22,089 141,673 48,351 38,990
Proceeds from long-term borrowings... 800,000 1,143,000 321,687 -- --
Principal payments on long-term
borrowings......................... (211,947) (633,621) (863,476) (195,819) (207,762)
Principal payments on capital lease
obligations........................ (241,622) (209,679) (85,816) (12,245) (12,842)
------------ ------------ ------------ ----------- -----------
Net cash provided (used) for
financing activities........ 13,041,267 7,262,996 (485,932) (159,713) 4,735,384
Effect of exchange rate changes on
cash................................. 15,296 (12,857) (46,999) 189,869 79,591
------------ ------------ ------------ ----------- -----------
Net change in cash and cash
equivalents.......................... (779,737) 581,997 (759,075) (1,395,974) 916,524
Cash and cash equivalents, beginning of
year................................. 3,422,247 2,642,510 3,224,507 3,224,507 2,465,432
------------ ------------ ------------ ----------- -----------
Cash and cash equivalents, end of
year................................. $ 2,642,510 $ 3,224,507 $ 2,465,432 $ 1,828,533 $ 3,381,956
============ ============ ============ =========== ===========
Supplemental disclosure of cash flow
information:
Interest paid........................ $ 98,711 $ 121,070 $ 136,164 $ 39,245 $ 36,128
Supplemental disclosure of noncash
transactions:
Equipment purchased under capital
leases............................. $ 101,582 $ -- $ 100,319 -- --
Equipment purchases accrued.......... $ 199,960 $ 143,952 -- -- --
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE> 75
OBJECT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information for the three months ended March 31, 1996 and 1995 is unaudited)
A. NATURE OF BUSINESS:
Object Design, Inc. (the "Company") develops, produces, markets and
provides customer support services for an object-oriented database management
system and related development tools.
Historically, the Company had marketed its ObjectStore database management
system primarily to customers in certain industries, such as telecommunications,
finance and engineering design and analysis, that required specialized database
management capabilities unavailable from conventional relational database
management systems. In early 1996, the Company shifted its strategy to focus on
providing database management solutions for the emerging Internet and Intranet
computing market.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
USE OF ESTIMATES
The preparation of the 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 and 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.
INTERIM FINANCIAL INFORMATION (UNAUDITED)
The consolidated financial statements of the Company as of March 31, 1996
and for the three months ended March 31, 1995 and 1996 and related footnote
information are unaudited. All adjustments, consisting only of normal recurring
adjustments, have been made which, in the opinion of management, are necessary
for a fair presentation of the interim financial information. Results of
operations for the three months ended March 31, 1996 are not necessarily
indicative of the results that may be expected for any future period.
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, Object Design Japan Co. Ltd., Object Design
Software GmbH, Object Design (UK) Ltd., Object Design Pty. Ltd., Object Design
S.A.R.L., and Object Design Securities Corp. In September 1995, the shares of
Object Design Pty. Ltd. were sold as part of the Company's restructuring (See
Note M). All intercompany accounts and transactions are eliminated in
consolidation.
CASH EQUIVALENTS AND MARKETABLE SECURITIES
The marketable securities of the Company have been classified as available
for sale. They are carried at their fair value, based on quoted market prices
with the unrealized gains and losses, net of tax, reported in a separate
component of stockholders' deficit. Realized gains and losses on disposition of
securities are determined on the specific identification method and are
reflected in the consolidated statements of operations. The Company considers
all highly liquid investments having a maturity, at date of acquisition, of
three months or less to be cash equivalents. Those instruments with original
maturities greater than three months and less than twelve months from the
balance sheet date are considered to be short-term marketable securities.
Instruments with scheduled maturities greater than one year from the balance
sheet date are considered to be long-term marketable securities.
The amortized cost of debt securities is adjusted for amortization of
premiums and accretion of discounts to maturity. Such amortization and interest
are included in interest income.
F-6
<PAGE> 76
OBJECT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the three months ended March 31, 1996 and 1995 is unaudited)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. The Company provides for
depreciation and amortization using the straight-line method over the shorter of
the estimated useful lives of the assets, or remaining terms of leases, which
range from three to five years.
Repairs and maintenance are charged to expense as incurred. Significant
improvements are capitalized and depreciated. Upon retirement or sale, the cost
of the assets disposed of and the related accumulated depreciation are removed
from the accounts and any resulting gain or loss is included in the results of
operations.
REVENUE RECOGNITION
Revenue from software license agreements is recognized upon execution of a
contract and shipment of the software, provided that no significant obligations
remain outstanding and collection of the related receivable is deemed probable
by management. Revenue from maintenance contracts is recognized ratably over the
life of the contract, generally one year. Revenue from training and consulting
is recognized as the services are provided. Revenues from contracts involving
nonrecurring engineering services are recorded using the
percentage-of-completion method of accounting based on contract milestones.
Estimates of costs to complete are reviewed periodically, and provisions for
anticipated losses are made in the period in which they first become
determinable. Amounts that have been billed before these criteria are met are
reflected as deferred revenues until such criteria are met.
FOREIGN CURRENCY
The financial statements of the Company's foreign subsidiaries, all of
whose functional currency is the local currency, are translated using exchange
rates in effect at the end of the year for assets and liabilities and average
exchange rates during the year for results of operations. Foreign currency
translation adjustments are recorded as a separate component of stockholders'
deficit. The Company also engages in transactions denominated in a foreign
currency, and gains and losses from these transactions, which have been
immaterial, are included in results of operations.
CONCENTRATIONS OF CREDIT RISK
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash equivalents, marketable securities and
trade receivables.
The Company invests its excess cash primarily in deposits with commercial
banks, U.S. Government or agency issues and municipal obligations and any losses
recognized to date have been insignificant.
The Company has no significant concentrations of credit risk with respect
to trade receivables due to the broad base of customers representing various
geographic locations and industries. The Company performs ongoing credit
evaluations of its customers but does not require collateral or other security
to support customer receivables and maintains reserves for potential credit
losses. Such losses have been within management's expectations.
RESEARCH AND DEVELOPMENT AND SOFTWARE DEVELOPMENT COSTS
Research and development expenditures are charged to operations as
incurred. The Company considers that technological feasibility has been
established once a working model of a product has been produced and tested. To
date, the Company has not capitalized software development costs after
F-7
<PAGE> 77
OBJECT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the three months ended March 31, 1996 and 1995 is unaudited)
technological feasibility has been established since costs incurred subsequent
to the establishment of technological feasibility have not been material.
INCOME TAXES
The Company provides for income taxes under the liability method, which
requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Deferred tax liabilities and assets are determined
based on the difference between the financial statement basis of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. Under this method a valuation allowance is
required against net deferred tax assets, if based upon the available evidence,
it is more likely than not that some or all of the deferred tax assets will not
be realized.
Management evaluates on a quarterly basis the recoverability of the
deferred tax assets and the level of the valuation allowance. At such time as it
is determined that it is more likely than not that deferred tax assets are
realizable, the valuation allowance will be appropriately reduced.
INTANGIBLES
The Company has classified as goodwill, and included in other assets, the
cost in excess of fair value of the net assets related to the 1994 purchase of
the remaining minority interest in Object Design Software GmbH as well as the
contingent payments made as defined in the purchase agreement (see Note F). The
Company provides for amortization of goodwill using the straight-line method
over a period of five years.
The Company has included in other assets the cost of licensing third party
software and is amortizing the cost over the terms of the agreements, generally
four years.
NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
The unaudited pro forma net income (loss) per common share is computed
based upon the weighted average number of common shares and common equivalent
shares outstanding after certain adjustments described below. Common equivalent
shares comprise stock options and warrants using the treasury stock method.
Common equivalent shares from stock options and warrants are excluded from the
computation if their effect is antidilutive. Pursuant to the Securities and
Exchange Commission Staff Accounting Bulletin No. 83, common, common equivalent
shares, and other potentially dilutive securities issued at prices below the
estimated initial public offering price of $10.00 per share during the 12 months
immediately preceding the initial filing date of the registration statement have
been included in the calculation as if they were outstanding for all periods
presented (using the treasury stock method and the anticipated initial public
offering price for stock options). In addition, all outstanding shares of
preferred stock to be converted into common stock upon the closing of the
initial public offering are treated as having been converted into common stock
at the date of original issuance.
Net income (loss) per common share on a historical basis is computed in the
same manner as pro forma net income (loss) per common share except that all
preferred stock is not considered to be a common stock equivalent based on its
terms and conditions.
F-8
<PAGE> 78
OBJECT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the three months ended March 31, 1996 and 1995 is unaudited)
<TABLE>
Net income (loss) per common share on a historical basis is as follows:
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------------------- -----------------------
1993 1994 1995 1995 1996
----------- ------------ ------------ ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net income (loss)...... $ 626,972 $(12,021,126) $(10,282,369) $(1,995,700) $ 144,856
============ ============ ============ =========== =========
Accretion of preferred
stock to redemption
value................ -- -- -- -- (333,000)
------------ ------------ ------------ ----------- ---------
Net income (loss)
available to common
shareholders......... $ 626,972 $(12,021,126) $(10,282,369) $(1,995,700) $(188,144)
============ ============ ============ =========== =========
Net income (loss) per
common share......... $ 0.06 $ (1.28) $ (1.07) $ (0.21) $ (0.02)
============ ============ ============ =========== =========
Weighted average number
of common and common
equivalent shares
outstanding.......... 10,689,064 9,417,873 9,600,653 9,531,638 9,751,447
============ ============ ============ =========== =========
</TABLE>
Fully diluted net income (loss) per share is not presented as it is the
same as the amounts disclosed in historical net income (loss) per share for the
years ended December 31, 1993, 1994 and 1995, and for the three-month periods
ended March 31, 1995 and 1996.
PRO FORMA PRESENTATION (UNAUDITED)
Upon the closing of a public offering, such as the one contemplated in the
registration statement in which the accompanying financial statements have been
included, all of the outstanding series of redeemable convertible preferred
stock will automatically convert into an aggregate of 17,891,654 shares of
common stock, and the Company's existing series of redeemable convertible
preferred stock will be removed and a class of authorized but undesignated
preferred stock will be created. The unaudited pro forma presentation of the
March 31, 1996 stockholders' equity has been prepared assuming such conversion.
ACCOUNTING STANDARDS
SFAS No. 123, "Accounting for Stock-Based Compensation," must be adopted in
1996. This standard encourages, but does not require, recognition of
compensation expense based on the fair value of equity instruments granted to
employees. The Company does not plan to record compensation for equity
instruments granted to employees and, therefore, the adoption of this standard
will have no impact on its financial position or results of operations. The
Company will adopt the disclosure provision of SFAS No. 123 in 1996.
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," must be adopted in 1996. The standard
requires that impairment losses be recognized when the carrying value of an
asset exceeds its fair value. The Company regularly assesses all of its
long-lived assets for impairment and, therefore, does not believe the adoption
of the standard will have a material effect on its financial position or results
of operations.
F-9
<PAGE> 79
OBJECT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the three months ended March 31, 1996 and 1995 is unaudited)
C. PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------- MARCH 31,
1994 1995 1996
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
Computer and computer-related equipment..... $ 4,774,408 $ 5,502,002 $ 5,648,200
Office equipment, furniture and purchased
computer software......................... 1,814,656 2,095,932 2,086,261
Leasehold improvements...................... 218,018 120,348 142,637
Automobiles................................. 107,454 226,012 220,220
------------ ----------- -----------
6,914,536 7,944,294 8,097,318
Less accumulated depreciation and
amortization.............................. (2,693,090 ) (4,374,959) (4,780,300)
------------ ----------- -----------
$ 4,221,446 $ 3,569,335 $ 3,317,018
========== ========== ==========
</TABLE>
The equipment under capital leases consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
--------------------- 1996
1994 1995 (UNAUDITED)
----- ---- -----------
<S> <C> <C> <C>
Computer and computer-related equipment......... $368,919
Automobiles..................................... 107,454 $226,012 $ 220,220
--------- -------- -----------
476,373 226,012 220,220
Less accumulated depreciation................... (359,088) (95,580) (110,891)
--------- -------- -----------
$117,285 $130,432 $ 109,329
======== ======== =========
</TABLE>
Depreciation expense was $808,650, $1,444,711 and $1,763,121 for the years
ended December 31, 1993, 1994 and 1995, respectively and $419,363 and $426,863
for the three months ended March 31, 1995 and 1996, respectively.
D. MARKETABLE SECURITIES:
At December 31, 1994, marketable securities can be summarized as follows:
<TABLE>
<CAPTION>
UNREALIZED UNREALIZED
AMORTIZED HOLDING HOLDING
COST FAIR VALUE GAINS LOSSES
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Marketable securities, current:
U.S. Government and its
agencies.................... $1,472,740 $1,440,698 $1,250 $ (33,292)
Municipal issues................. 499,752 483,125 -- (16,627)
---------- ---------- ---------- ----------
1,972,492 1,923,823 1,250 (49,919)
---------- ---------- ---------- ----------
Marketable securities,
noncurrent:
U.S. Government and its
agencies.................... 6,447,292 6,139,462 -- (307,830)
Municipal issues................. 999,102 951,650 -- (47,452)
---------- ---------- ---------- ----------
7,446,394 7,091,112 -- (355,282)
---------- ---------- ---------- ----------
$9,418,886 $9,014,935 $ 1,250 $ (405,201)
========= ========== ========== ==========
</TABLE>
F-10
<PAGE> 80
OBJECT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the three months ended March 31, 1996 and 1995 is unaudited)
<TABLE>
At December 31, 1995, marketable securities can be summarized as follows:
<CAPTION>
UNREALIZED UNREALIZED
AMORTIZED HOLDING HOLDING
COST FAIR VALUE GAINS LOSSES
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Marketable securities, current:
U.S. Government and its agencies........ $1,499,531 $1,488,299 $(11,232)
Marketable securities, noncurrent:
U.S. Government and its agencies........ 750,000 748,350 -- (1,650)
---------- ---------- ---------- --------
$2,249,531 $2,236,649 -- $(12,882)
========= ========= ======== ========
</TABLE>
<TABLE>
At March 31, 1996, marketable securities can be summarized as follows:
<CAPTION>
UNREALIZED UNREALIZED
AMORTIZED HOLDING HOLDING
COST FAIR VALUE GAINS LOSSES
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Marketable securities, current:
U.S. Government and its agencies........ $4,965,684 $4,949,199 $(16,485)
Marketable securities, noncurrent:
U.S. Government and its agencies........ 750,000 737,325 -- (12,675)
---------- ---------- ---------- --------
$5,715,684 $5,686,524 -- $(29,160)
========= ========= ======== ========
</TABLE>
At December 31, 1995, the contractual maturities of the current marketable
securities available for sale range from 9 to 12 months and up to 24 months for
the noncurrent portfolios, respectively.
E. REVOLVING CREDIT AGREEMENT AND LONG-TERM OBLIGATIONS:
REVOLVING CREDIT AGREEMENT
The Company's previous revolving credit agreement with a bank expired in
1995. At December 31, 1994, 1995 and March 31, 1996, the Company had no
outstanding borrowings under the revolving credit line. At December 31, 1995 and
March 31, 1996, letters of credit in the aggregate amount of $812,948 issued for
the account of the Company under the revolving credit agreement in connection
with certain lease transactions were outstanding.
F-11
<PAGE> 81
OBJECT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the three months ended March 31, 1996 and 1995 is unaudited)
LONG-TERM OBLIGATIONS
<TABLE>
The Company's long-term obligations consist of the following:
<CAPTION>
DECEMBER 31,
------------------------- MARCH 31,
1994 1995 1996
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Installment notes payable, due in monthly principal
payments plus interest with the unpaid principal
balance payable on various dates through May 1, 1998,
bearing interest at prime plus 0.75% to 1.0% (9.25%
to 9.5% and 9.0% to 9.25% at December 31, 1995 and
March 31, 1996, respectively) per annum.............. $1,617,676 $1,075,887 $ 867,867
Capital lease obligations (Note F)..................... 119,298 133,801 121,217
---------- ---------- ---------
1,736,974 1,209,688 989,084
Amounts due within one year............................ 878,722 733,241 645,076
---------- ---------- ---------
Long-term portion...................................... $ 858,252 $ 476,447 $ 344,008
========== ========== =========
</TABLE>
Each installment note is collateralized by all assets of the Company and
contains certain covenants, including but not limited to the maintenance of a
quick ratio, leverage ratio, minimal capital base and minimal quarterly loss.
The Company did not meet the requirements of the quick ratio, leverage ratio,
minimal capital base and certain other covenants during the year ended December
31, 1995, for which the bank has waived noncompliance. The Company was in
compliance with these covenants as of March 31, 1996. Upon the occurrence of any
event of default as defined in the agreement with the bank, unless waived or
cured, the bank has the right to demand payment on all unpaid amounts, terminate
the financing arrangement, liquidate the collateral or use any deposit amounts
to offset the debt.
Based on borrowing rates currently available to the Company for installment
notes with similar terms and maturities, the fair value of long-term obligations
approximates their carrying values.
F. COMMITMENTS:
CAPITAL AND OPERATING LEASES
The Company leases certain equipment and automobiles under noncancelable
capital leases that mature at various dates through 1998.
In addition, the Company leases its primary office facility and several
sales offices under various noncancelable leases with terms that expire through
2004, with certain renewal terms. Total rent expense under operating leases was
approximately $960,000, $1,797,000 and $2,063,000 for the years ended December
31, 1993, 1994 and 1995, respectively, and $442,000 and $331,000 for the three
months ended March 31, 1995 and 1996, respectively.
F-12
<PAGE> 82
OBJECT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the three months ended March 31, 1996 and 1995 is unaudited)
Future minimum lease payments under capital and operating leases are as
follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
-------- ----------
<S> <C> <C>
1996........................................................... $ 86,653 $1,366,000
1997........................................................... 31,604 1,157,000
1998........................................................... 33,164 1,214,000
1999........................................................... 1,010,000
2000........................................................... 674,000
2001 to 2004................................................... -- 1,760,000
-------- ----------
Total future minimum lease payments............................ 151,421 $7,181,000
=========
Less amount representing interest.............................. 17,620
--------
Present value of net future minimum lease payments............. 133,801
Less current portion of capital lease obligations.............. 73,585
--------
Long-term portion of capital lease obligation.................. $ 60,216
========
</TABLE>
PURCHASE OF MINORITY INTEREST
In 1994, the Company purchased the remaining 24,000 shares in Object Design
Software GmbH from the minority shareholder. The purchase price, as defined by
the purchase agreement, is subject to adjustment based upon the financial
results of the subsidiary through December 31, 1997. The excess of the adjusted
purchase price over the fair value of the shares through December 31, 1994, 1995
and March 31, 1996 totaling $112,526, $112,526 and $165,526, respectively, has
been recorded as goodwill. Accumulated amortization totaled $9,376, $31,876 and
$37,501 at December 31, 1994 and 1995 and March 31, 1996, respectively. All
future contingent payments, to a maximum additional purchase price of DM 139,058
(approximately $97,000), will be recorded as an increase to goodwill.
G. REDEEMABLE CONVERTIBLE PREFERRED STOCK:
The authorized preferred stock of the Company at December 31, 1995 and
March 31, 1996 consists of Redeemable Convertible Preferred Stock (Series A
through J) (collectively the "Preferred Stock"). The following table presents
Preferred Stock activity for the three years ended December 31, 1995 and the
three months ended March 31, 1996:
<TABLE>
<CAPTION>
SHARES AMOUNT
------ ------
<S> <C> <C>
Balance at December 31, 1992 (Series A through D)................ 11,236,111 $16,376,934
Issuance of 2,601,877 and 1,148,818 shares of Series E and F,
respectively, on April 12, 1993 and 250,000 shares of Series
G Preferred Stock on May 14, 1993, net of issuance costs of
$162,623.................................................... 4,000,695 12,663,871
---------- -----------
Balance at December 31, 1993..................................... 15,236,806 29,040,805
Issuance of Series I Preferred Stock on March 31, 1994 net of
issuance costs of $57,729................................... 999,848 6,941,207
---------- -----------
Balance at December 31, 1994..................................... 16,236,654 35,982,012
---------- -----------
Balance at December 31, 1995..................................... 16,236,654 35,982,012
Issuance of Series J Preferred Stock on February 15, 1996 net
of issuance of costs of $48,002............................. 1,655,000 4,916,998
Accretion of Series J Preferred Stock to redemption value...... 333,000
---------- -----------
Balance at March 31, 1996........................................ 17,891,654 $41,232,010
========= ==========
</TABLE>
F-13
<PAGE> 83
OBJECT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the three months ended March 31, 1996 and 1995 is unaudited)
No shares of Series H Preferred Stock have been issued.
The Preferred Stock is convertible, at the holder's option, into common
stock on a one-for-one basis subject to adjustment upon the occurrence of
certain events. The Preferred Stock is subject to mandatory conversion upon the
earlier to occur of: the issuance of two-thirds of the common stock issuable
upon conversion of the Preferred Stock or the closing of an underwritten public
offering in which the gross proceeds to the Company are at least $10,000,000 and
the net price per share is at least $3.50.
Each share of Preferred Stock has the same voting rights as a share of
common stock; however, certain corporate actions require the consent of the
holders of two-thirds of the outstanding Preferred Stock.
Shares of Series A, B, C, D, G, I and J Preferred Stock are redeemable at
the option of the holder if notification is made at least 180 days prior to
January 1, 2000. Shares of Series E and F Preferred Stock are redeemable at the
option of the holder if notification is made at least 90 days prior to January
1, 2003. Redemptions for each Series are made over three-year periods, and range
from January 1, 2000 through January 7, 2007.
The price per share to be paid by the Company will be the greater of the
respective redemption prices (as shown below) plus, if the Company has had any
year at the end of which it has had positive retained earnings, all accrued and
unpaid dividends (see schedule below of mandatory redemption) or the fair value,
as determined in accordance with the redemption agreement.
REDEMPTION PRICES
<TABLE>
<S> <C>
Series A: $1.00 Series F: $3.50
Series B: $1.40 Series G: $4.00
Series C: $1.75 Series I: $7.00
Series D: $2.25 Series J: $9.00
Series E: $3.00
</TABLE>
If the funds of the Company legally available for redemption are
insufficient to redeem all the Preferred Stock on any date for which payment
should be made: (a) the unpaid balance will bear interest at 12.0% per annum
compounded quarterly until sufficient funds are available, and (b) the holders
of the Series J Preferred Stock shall receive the applicable redemption amounts
prior to any other payments to other holders of Preferred Stock.
If all holders of Preferred Stock elected to require the redemption of all
shares of Preferred Stock held by them, the minimum redemption requirements for
the Preferred Stock, excluding any dividends, for the first five years and
thereafter would be as follows:
<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, 1995 MARCH 31, 1996
----------------- --------------
<S> <C> <C>
2000................................................... $ 3,025,000 $ 7,990,000
2001................................................... 4,691,667 9,656,667
2002................................................... 5,525,000 10,490,000
2003................................................... 6,442,164 6,442,164
2004................................................... 1,673,620 1,673,620
Thereafter............................................. 15,042,979 15,042,979
----------- -----------
Total........................................ $36,400,430 $51,295,430
=========== ===========
</TABLE>
F-14
<PAGE> 84
OBJECT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the three months ended March 31, 1996 and 1995 is unaudited)
Each share of Preferred Stock has a liquidation preference over the
Company's common stock equal to the respective redemption price for each series,
plus all accrued and unpaid dividends including any noncompliance dividends.
Alternatively, in the event that there is a surplus over the liquidation
preference, the preferred stockholder will receive such amount as would have
been payable had each such share been converted to common stock.
Each share of Preferred Stock is to accrue on a daily basis, cumulative
dividends at an annual rate of 10% of the redemption price (as specified above),
compounded at the rate of 10.0% per share per annum beginning on the date of
original issuance.
The Company is under no obligation to pay such dividends until declared by
the Board of Directors, and the Company's obligation to pay such dividends upon
redemption per the Redemption Agreement or upon liquidation accrues from the end
of the first year in which the Company has positive retained earnings.
Accordingly, no provision has been made for such dividends at December 31, 1994
and 1995 and March 31, 1996. If the Company is in noncompliance (as defined)
with the terms of the Certificate of Incorporation, the Preferred Stock will
accrue an additional noncompliance cumulative dividend, on a daily basis, for
the first 30 days that the Company is in noncompliance. The dividend rate will
increase by $0.01 per share for each successive 30-day period the Company
remains in noncompliance, up to a maximum annual rate. The annual rate of
noncompliance dividends range from $0.10 to $0.70 per share and the maximum
noncompliance dividends range from $0.16 to $1.12 per share.
PREFERRED STOCK WARRANT
In 1990, the Company issued a warrant to purchase 57,858 shares of Series B
Preferred Stock at an exercise price of $1.40 per share to a leasing company.
The warrant expires upon the earlier of October 1, 2000 or the closing of an
initial public offering. Upon the automatic conversion of the Preferred Stock in
connection with an initial public offering, the warrant will be exercisable for
the purchase of 57,858 shares of common stock at an exercise price of $1.40 per
share.
H. STOCKHOLDERS' DEFICIT:
COMMON STOCK
Each share of common stock has full voting rights.
The terms of the Company's existing borrowing arrangements with its bank
prohibit the payment of cash dividends on the common stock before the payment in
full of all outstanding indebtedness to the bank. The terms of the Company's
proposed 1996 line of credit prohibit the payment of cash dividends on the
common stock.
At December 31, 1995 and March 31, 1996, 24,283,726 and 25,853,428 shares,
respectively, of common stock were reserved for the potential conversion of
Preferred Stock, Preferred Stock warrants and stock options.
STOCK OPTION PLANS
The Company has two stock option plans, a 1989 Incentive and Nonqualified
Stock Option Plan and a 1995 Nonqualified Stock Option Plans (the "Plans"),
whereby options to purchase up to 8,582,000 shares of the Company's common stock
at a price not less than fair value (as determined by the Board of Directors)
may be granted to key employees and consultants. The options are exercisable at
various dates and expire ten years from the date of grant. Under the terms of
the Plans, the Company
F-15
<PAGE> 85
OBJECT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the three months ended March 31, 1996 and 1995 is unaudited)
maintains the right of first refusal if any of the employees wish to sell the
shares received from exercise of such options, and the employees' rights to
exercise vest over a five or ten-year period.
<TABLE>
Information related to activity under the Plans for the three years ended
December 31, 1995 and for the three months ended March 31, 1996 is as follows:
<CAPTION>
SHARES OPTION PRICE
------ ------------
<S> <C> <C> <C> <C>
Outstanding at December 31, 1992.......................... 1,377,464 $0.10 -- $0.75
Granted................................................... 1,029,200 0.75 -- 6.00
Exercised................................................. (227,186) 0.10 -- 0.75
Canceled.................................................. (78,650) 0.10 -- 1.75
----------
Outstanding at December 31, 1993.......................... 2,100,828 0.10 -- 6.00
Granted................................................... 526,475 3.00 -- 3.50
Exercised................................................. (67,788) 0.10 -- 2.00
Canceled.................................................. (113,425) 0.10 -- 3.50
----------
Outstanding at December 31, 1994.......................... 2,446,090 0.10 -- 6.00
Granted................................................... 5,615,400 0.01 -- 3.50
Exercised................................................. (276,062) 0.10 -- 3.50
Canceled.................................................. (2,187,350) 0.10 -- 6.00
----------
Outstanding at December 31, 1995.......................... 5,598,078 0.01 -- 6.00
Granted................................................... 868,550 0.25 -- 2.00
Exercised................................................. (87,673) 0.20 -- 3.50
Canceled.................................................. (175,910) 0.01 -- 6.00
----------
Outstanding at March 31, 1996............................. 6,203,045 0.01 -- 6.00
==========
</TABLE>
At December 31, 1995 and March 31, 1996, 881,226 and 937,849 options,
respectively, had vested under the Plans and 2,400,136 and 1,707,496,
respectively, were available for grant.
On April 1, 1996, options to purchase 2,760,000 shares of common stock
issued to two officers of the Company during December 1995 were accelerated, and
the officers exercised these options in exchange for cash of $2,760 and full
recourse promissory notes in the amount of $687,240. The promissory notes bear
interest at 7.0% and are due on the earlier of April 1, 2001 or upon termination
of employment. Pursuant to these agreements, the shares may be repurchased by
the Company at the amounts paid by the officers for the shares under certain
conditions such that, economically, the original vesting schedule for these
options remains in effect.
Except as set forth below, the exercise price for each of the above grants
was determined by the Board of Directors of the Company to be equal to the fair
value of the common stock on the date of grant. In reaching this determination
at the time of each such grant, the Board considered a broad range of factors
including the illiquid nature of an investment in the Company's common stock,
the Company's historical financial performance, the preferences (including
liquidation) of the Company's outstanding convertible preferred stock, and the
Company's future prospects.
In connection with the severance of certain key employees pursuant to the
Company's restructuring plan (see Note M), during 1995 the Company converted
465,311 incentive stock options to nonqualified stock options. Simultaneously,
the exercise period for these options was extended and consequently,
approximately $1,317,000 was charged to operations and included in restructuring
charges. This charge represented the differences between the aggregate fair
value of those options and the aggregate exercise amounts on the remeasurement
date.
In December 1995 and pursuant to the 1995 Nonqualified Stock Option Plan,
the Company, as authorized by the Board of the Directors, granted certain
employees non-qualified stock options to purchase 507,775 shares at an exercise
price of $0.01 per share, which was less than fair value at the
F-16
<PAGE> 86
OBJECT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the three months ended March 31, 1996 and 1995 is unaudited)
date of grant. Unearned compensation related to these options amounting to
approximately $122,000 has been recorded in the Company's stockholders' deficit
and will be recognized as expense ratably over the vesting period of five years.
The Board of Directors adopted on May 23, 1996, and the stockholders of the
Company are expected to approve by written consent in June 1996, the 1996
Incentive and Nonqualified Stock Option Plan of the Company (the "1996 Stock
Option Plan").
The 1996 Stock Option Plan authorizes (i) the grant of options to purchase
Common Stock intended to qualify as incentive stock options ("Incentive
Options"), as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") and (ii) the grant of options that do not so qualify
("Nonqualified Options"). Options to purchase up to 2,700,000 shares of Common
Stock may be granted under the 1996 Stock Option Plan, provided that prior to
May 23, 1997, options to purchase no more than 1,200,000 shares of Common Stock
may be issued under the Plan, with such number increasing by 300,000 on each of
the first five anniversaries of the adoption of the Plan by the Board of
Directors, up to a maximum of 2,700,000 shares.
The terms of the options to be issued under the 1996 Stock Option Plan,
including exercise price, vesting and term, will be similar to the terms of the
1989 and 1995 Plans; however, the 1996 Stock Option Plan also provides for
certain automatic grants of nonqualified options to non-employee directors of
the Company.
EMPLOYEE STOCK PURCHASE PLAN
On May 23, 1996, the Board of Directors adopted, and the stockholders of
the Company are expected to approve by written consent in June 1996, an Employee
Stock Purchase Plan (the "Stock Purchase Plan"), under which options to purchase
up to 300,000 shares of Common Stock may be granted to employees of the Company.
The maximum number of shares which may be purchased by an employee under
the Stock Purchase Plan will be determined on the first day of the offering
period pursuant to a formula under which the employee's projected payroll
deductions over the Offering Period are divided by 85% of the market value of
one share of Common Stock on the first day of the Offering Period, and the
quotient is multiplied by two. During each Offering Period, the price at which
the employee will be able to purchase the Common Stock will be 85% of the last
reported sale price of the Common Stock on the Nasdaq National Market on the
first or last day of the Offering Period, whichever is lower.
The Stock Purchase Plan will be administered by the Compensation Committee
of the Board of Directors. All employees who meet certain minimum criteria based
on hours worked per week and length of tenure with the Company will be eligible
to participate in the Stock Purchase Plan and no employee will be able to
purchase shares pursuant to the Stock Purchase Plan if after such purchase such
employee would own more than a specific percentage of the total combined voting
power or value of the stock of the Company.
In addition, effective upon the closing of such offering and after giving
effect to the amendment and restatement of the Certificate of Incorporation of
the Company, the authorized capital stock of the Company will consist of
200,000,000 shares of Common Stock, par value $0.001 per share and 5,000,000
shares of undesignated preferred stock, par value $0.01 per share. The Board of
Directors will be authorized, subject to any limitations prescribed by Delaware
law, to issue shares of preferred stock in one or more series, to establish from
time to time the number of shares to be included in each such series, to
establish or alter the voting powers, designations, preferences and relative,
participating, optional or other rights, or the qualifications, limitations or
restrictions thereof, and to increase (but
F-17
<PAGE> 87
OBJECT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the three months ended March 31, 1996 and 1995 is unaudited)
not above the total number of authorized shares of the class) or decrease (but
not below the number of shares of such series then outstanding) the number of
shares of any such series without any further vote or action by the
stockholders. The Board of Directors will be authorized to issue preferred stock
with voting, conversion and other rights and preferences that could adversely
affect the voting power or other rights of the holders of Common Stock.
On May 23, 1996 the Board of Directors voted to retire the 18,900 treasury
shares.
I. INCOME TAXES:
<TABLE>
Income (loss) before income taxes for domestic and foreign operations is as
follows:
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------- ------------------------
1993 1994 1995 1995 1996
--------- ------------ ------------ ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Domestic.......... $ 796,968 $(11,182,270) $ (8,716,140) $(1,451,337) $(10,464)
Foreign........... (139,996) (820,856) (1,568,211) (544,363) 179,278
--------- ------------ ------------ ----------- --------
$ 656,972 $(12,003,126) $(10,284,351) $(1,995,700) $168,814
========= ============ ============ =========== ========
</TABLE>
<TABLE>
The provision (benefit) for income taxes consists of the following:
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- -------------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Currently payable (refundable):
Foreign........................ -- $18,000 $(1,982) -- $23,958
Federal........................ $26,000 -- -- -- --
State.......................... 4,000 -- -- -- --
------- ------- ------- ------- -------
$30,000 $18,000 $(1,982) -- $23,958
======= ======= ======= ======= =======
</TABLE>
<TABLE>
The following is a reconciliation between the U.S. federal statutory rate
and the effective tax rate:
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------- -------------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
U.S. federal statutory rate......... 34.0% (34.0)% (34.0)% (34.0)% 34.0%
State taxes, net of applicable
federal tax benefit............... 0.5 -- -- -- --
Foreign income and withholding
taxes............................. -- 0.2 -- -- 12.2
Losses not benefited................ -- 34.0 34.0 34.0 --
Net operating loss benefit.......... (34.0) -- -- -- (34.0)
Alternative minimum tax............. 4.0 -- -- -- 2.0
----- ----- ----- ----- -----
4.5% 0.2% -- -- 14.2%
===== ===== ===== ===== =====
</TABLE>
F-18
<PAGE> 88
OBJECT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the three months ended March 31, 1996 and 1995 is unaudited)
The approximate tax effect of each type of temporary difference and
carryforward before allocation of the valuation allowance is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- MARCH 31,
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards
(domestic)............................. $ 8,543,000 $11,211,000 $11,152,000
Net operating loss carryforward
(foreign).............................. 440,000 848,000 838,000
Tax credit carryforwards.................. 1,783,000 1,819,000 1,819,000
Accounts receivable reserves.............. 160,000 173,000 173,000
Vacation and benefits reserves............ 231,000 241,000 241,000
Restructuring reserves.................... -- 132,000 46,000
Stock option compensation................. -- 530,000 530,000
Other..................................... 35,000 -- --
Deferred tax liabilities:
Depreciation and amortization............. (72,000) (123,000) (123,000)
----------- ----------- ----------
Net deferred tax assets..................... $11,120,000 $14,831,000 $14,676,000
=========== =========== ==========
</TABLE>
Due to the uncertainty surrounding the realization of these favorable tax
attributes in future tax returns, the net deferred tax assets have been fully
offset by a valuation allowance.
As of December 31, 1995, the Company had federal net operating loss ("NOL")
and research and experimentation credit carryforwards of approximately
$28,500,000 and $1,375,000, respectively, available to offset future federal
income tax liabilities, which expire at various dates through 2010. The
utilization of NOL and research and experimentation credit carryforwards is
subject to Section 382 of the Internal Revenue Code. This section established an
annual limitation, based on changes in the Company's ownership, on the amount of
income which may be offset by these tax attributes. The 1993 purchases of
Preferred Stock by IBM, in combination with certain other transactions,
constituted such a change in ownership of the Company. As a result, the
Company's utilization of NOLs and R&E credits in the aggregate amount of
approximately $10,000,000, that were available at the time of such change, will
be limited to a maximum of $2,300,000 per year through 2010. No change of
ownership has occurred since 1993, and the Company does not expect that the
offering contemplated by the registration statement is which these financial
statements are included will result in such a change of ownership. Accordingly,
NOLs and R&E credits in the aggregate amount of approximately $18,500,000 at
December 31, 1995 that have arisen since the 1993 change in ownership may be
utilized by the Company without limitation under Section 382.
As of December 31, 1995, the Company's foreign subsidiaries had NOL
carryforwards of approximately $1,900,000.
J. 401(K) PLAN:
The Company sponsors a defined contribution employees' investment and
savings plan under Section 401(k) of the Internal Revenue Code. This plan covers
all eligible (as defined) employees of the Company. The Company made no matching
contributions to the plan during 1993, 1994 and 1995 or during the three months
ended March 31, 1996.
F-19
<PAGE> 89
OBJECT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the three months ended March 31, 1996 and 1995 is unaudited)
K. AGREEMENTS WITH RELATED PARTIES:
During 1993, 1994 and 1995 and the three months ended March 31, 1995 and
1996, the Company sold a total of $11,807,000, $3,052,000, $3,078,000 and
$402,000 and $1,015,000, respectively, in software and services, respectively,
to preferred stockholders of the Company.
During 1993, the Company entered into a series of agreements with IBM (a
related party) encompassing product licenses, customized development, consulting
and maintenance. The agreements cover a three-year period. During 1993, 1994,
1995 and the three months ended March 31, 1995 and 1996, the Company recognized
approximately $9,900,000, $1,745,000, $3,078,000, $402,000 and $980,000,
respectively, of revenue under the terms of these agreements comprising 40.2%,
6.9%, 9.4% , 5.0% and 10.9%, respectively, of the total revenues of the Company
for the respective periods. At December 31, 1994 and 1995, the Company had
approximately $742,000 and $359,000, respectively, in accounts receivable due
from IBM. During 1993 and concurrent with the aforementioned agreements, IBM
purchased 3,750,695 shares of the Company's Series E and F Preferred Stock for
approximately $11,800,000. IBM did not participate in the purchase and sale of
preferred shares of the Series J offering on February 15, 1996.
Deferred revenue at December 31, 1995 and March 31, 1996 includes
$1,400,000 and $750,000, respectively, collected from IBM pursuant to a
$1,800,000 development contract. IBM directed the Company to suspend development
efforts on this contract during the quarter ended March 31, 1996 and,
accordingly, the Company recognized $650,000 in revenues related to certain
contract milestones. On April 2, 1996, this contract was terminated and, in
accordance with the terms of the contract, the Company recognized the remaining
$750,000 of revenues. The Company has no further obligations under this
contract.
Under the terms of the IBM agreements, either party has the option (the
"Break-Up Option") of terminating certain of the IBM agreements and modifying
the terms of certain others upon nine months' advance notice. On March 5, 1996,
the Company exercised the Break-Up Option by giving written notice to IBM. Upon
the effectiveness of the Break-Up Option, the rate of royalties paid to the
Company by IBM for ObjectStore-based products will be substantially increased,
IBM will no longer be entitled to a discount on training and consulting services
provided by the Company and the Company's joint development and marketing
efforts with IBM may be curtailed or eliminated.
During 1993, the Company entered into a cooperative marketing agreement
with IBM pursuant to which the Company pays fees to IBM for marketing the
Company's products and services. In addition IBM charges the Company for certain
equipment rentals, maintenance and other expenses. Total charges from IBM during
the years ended December 31, 1993, 1994 and 1995 and three months ended March
31, 1995 and 1996 amounted to approximately $19,000, $166,000, $1,289,000,
$14,000 and $74,000, respectively.
F-20
<PAGE> 90
OBJECT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the three months ended March 31, 1996 and 1995 is unaudited)
L. GEOGRAPHIC DATA:
The Company's operations consist of a single line of business comprised of
developing and marketing computer software and providing related maintenance and
consulting services.
<TABLE>
The Company has sales and marketing operations located outside the United
States, in the United Kingdom, France, Germany, Japan, and, until September
1995, in Australia. Revenues are reflected in the geographic areas from which
the sales are made. Financial information, summarized by geographic area, is as
follows:
<CAPTION>
NORTH ASIA
AMERICA EUROPE PACIFIC ELIMINATIONS CONSOLIDATED
------------ ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993
Revenues:
From unaffiliated
customers................ $ 22,998,000 $1,212,000 $ 440,000 $ -- $ 24,650,000
Intercompany transfers..... 687,000 -- -- (687,000) --
------------ ----------- ----------- ------------ ------------
Total revenues........ $ 23,685,000 $1,212,000 $ 440,000 $ (687,000) $ 24,650,000
============ =========== =========== ============ ============
Income (loss) from operations... $ 926,000 $ 150,000 $ (511,000) $ -- 565,000
============ =========== =========== ============ ============
Identifiable assets............. $ 35,571,000 $1,185,000 $ 528,000 $(11,655,000) $ 25,629,000
============ =========== =========== ============ ============
Year ended December 31, 1994
Revenues:
From unaffiliated
customers................ $ 20,319,000 $4,332,000 $ 838,000 -- $ 25,489,000
Intercompany transfers..... 1,738,000 -- -- $ (1,738,000) --
------------ ----------- ----------- ------------ ------------
Total revenues........ $ 22,057,000 $4,332,000 $ 838,000 $ (1,738,000) $ 25,489,000
============ =========== =========== ============ ============
Loss from operations.......... $(10,312,000) $ (734,000) $(1,341,000) $ -- $(12,387,000)
============ =========== =========== ============ ============
Identifiable assets........... $ 39,563,000 $3,010,000 $ 2,263,000 $(19,407,000) $ 25,429,000
============ =========== =========== ============ ============
Year ended December 31, 1995
Revenues:
From unaffiliated
customers................ $ 24,867,000 $5,859,000 $ 1,980,000 -- $ 32,706,000
Intercompany transfers..... 2,644,000 -- -- $ (2,644,000) --
------------ ----------- ----------- ------------ ------------
Total revenues........ $ 27,511,000 $5,859,000 $ 1,980,000 $ (2,644,000) $ 32,706,000
============ =========== =========== ============ ============
Loss from operations.......... $ (8,876,000) $ (870,000) $ (661,000) $ -- $(10,407,000)
============ =========== =========== ============ ============
Identifiable assets........... $ 18,666,000 $4,290,000 $ 1,049,000 $ (6,851,000) $ 17,154,000
============ =========== =========== ============ ============
For the three months ended March
31, 1996:
Revenues:
From unaffiliated
customers................ $ 6,032,000 $1,583,000 $ 1,381,000 -- 8,996,000
Intercompany transfers..... 1,047,000 -- -- $ (1,047,000) --
------------ ----------- ----------- ------------ ------------
Total................. $ 7,079,000 $1,583,000 $ 1,381,000 $ (1,047,000) $ 8,996,000
============ =========== =========== ============ ============
Income (loss) from operations... $ 39,000 $ (297,000) $ 449,000 -- $ 191,000
============ =========== =========== ============ ============
Identifiable assets............. $ 22,667,000 $4,605,000 $ 2,031,000 $ (7,498,000) $ 21,805,000
============ =========== =========== ============ ============
</TABLE>
Intercompany transfers primarily represent shipments of software to foreign
subsidiaries and are eliminated from consolidated revenues.
F-21
<PAGE> 91
OBJECT DESIGN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(Information for the three months ended March 31, 1996 and 1995 is unaudited)
Export sales to unaffiliated customers were approximately $638,000,
$2,177,000, and $4,217,000, for the years ended December 31, 1993, 1994, and
1995, respectively, and approximately $1,256,000, and $1,041,000 for the three
months ended March 31, 1995 and 1996, respectively.
M. RESTRUCTURING CHARGES:
During fiscal 1995, the Company recorded restructuring charges aggregating
approximately $2,709,000. The restructuring plan was developed to re-focus the
Company's product strategies and reduce the Company's cost structure and
included severance payments to 36 terminated employees (including the Company's
President and four Vice Presidents, all telesales personnel and certain
marketing personnel) totaling approximately $2,100,000 (including the extension
of exercise periods of certain stock options totaling approximately $1,317,000),
loss on the sale of the Company's Australian subsidiary amounting to
approximately $76,000 and losses on vacated office leases approximately
$533,000. The revenues and net operating losses of the Company's Australian
operation were not material. As of March 31, 1996, the restructuring plan was
substantially complete.
<TABLE>
Activity related to the restructuring change and the related accrued
restructuring reserve (included in accrued expenses) is summarized as follows:
<CAPTION>
RESERVE AT RESERVE AT
PROVISION DECEMBER 31, MARCH 31,
DURING 1995 PAYMENTS 1995 PAYMENTS 1996
----------- --------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C>
Employee severance.................... $ 783,000 $(691,000) $ 92,000 $ (92,000) --
Vacated office leases and related
costs............................... 408,000 (173,000) 235,000 (120,000) $ 115,000
----------- --------- ------------ --------- -----------
Total restructuring
reserve................... 1,191,000 $(864,000) $327,000 $(212,000) $ 115,000
========= ======== ========= ========
Stock option remeasurement............ 1,317,000
Abandoned leaseholds.................. 125,000
Loss on sale of subsidiary............ 76,000
-----------
Total restructuring
charges................... $ 2,709,000
=========
</TABLE>
F-22
<PAGE> 92
DESCRIPTION OF GRAPHICS
1) Text on top of page:
"OBJECT DESIGN offers a complete data management solution for Internet
and Intranet applications."
2) Graphic in middle of page:
A diagram of the Company's product line containing graphics. A
one-sentence description of each product is included as follows:
-- ObjectStore is a high-performance database that incorporates
support for extended data types and extended data
relationships.
-- Extended Object Managers offer built-in support for Text,
Audio, Image, Video, HTML, Java objects and other extended
data types.
-- ObjectForms dynamically generates HTML pages from ObjectStore
databases.
-- ObjectStore supports widely used development languages and
standards.
-- DBconnect provides access to relational data.
-- ObjectStore Performance Expert and ObjectStore Inspector
simplify performance tuning and database design.
3) Company logo in bottom right hand corner, accompanied by text:
"The Database for the Web"
<PAGE> 93
- ------------------------------------------------------------
- ------------------------------------------------------------
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, ANY SELLING STOCKHOLDER OR THE UNDERWRITERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION TO BUY, ANY SECURITIES
OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES OR AN OFFER TO,
OR SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................ 3
The Company....................... 6
Risk Factors...................... 6
Use of Proceeds................... 14
Dividend Policy................... 14
Capitalization.................... 15
Dilution.......................... 16
Selected Consolidated Financial
Data............................ 17
Management's Discussion and
Analysis of Financial Condition
and Results of Operations....... 19
Business.......................... 30
Management........................ 43
Certain Transactions.............. 54
Principal Stockholders............ 56
Description of Capital Stock...... 58
Shares Eligible for Future Sale... 62
Underwriting...................... 64
Legal Matters..................... 65
Experts........................... 65
Additional Information............ 66
Consolidated Financial
Statements...................... F-1
</TABLE>
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
3,000,000 SHARES
LOGO
COMMON STOCK
-----------------------
PROSPECTUS
-----------------------
HAMBRECHT & QUIST
ALEX. BROWN & SONS
INCORPORATED
WESSELS, ARNOLD & HENDERSON
, 1996
- ------------------------------------------------------------
- ------------------------------------------------------------
<PAGE> 94
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
The following table sets forth the various expenses in connection with the
issuance and distribution of the securities being registered, other than
underwriting discounts and commissions. All amounts shown are estimates except
the Securities and Exchange Commission registration fee and the National
Association of Securities Dealers, Inc. filing fee.
<S> <C>
Registration fee (Securities and Exchange Commission).................. $ 13,087
Nasdaq listing fee..................................................... 50,000
NASD filing fee........................................................ 4,495
Printing and engraving expenses........................................ 125,000
Transfer agent fees.................................................... 5,000
Accounting fees and expenses........................................... 300,000
Legal fees and expenses................................................ 300,000
Blue Sky fees and expenses (including related legal fees).............. 20,000
D&O insurance premium.................................................. 150,000
Miscellaneous.......................................................... 32,418
----------
Total........................................................ $1,000,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article SEVENTH of the Company's Amended and Restated Certificate of
Incorporation, as amended to date (the "Certificate of Incorporation") provides
that the Company shall indemnify each of its directors and officers (and any
former director or officer) to the maximum extent permitted by the General
Corporation Law of the State of Delaware against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement incurred by him or her in
connection with any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, to which he or she is
threatened to be or is made a party, by reason of his or her being or having
been such a director or officer, or having served at the request of the Company
as a director, officer, employee, trustee or agent of another corporation,
partnership, trust or other enterprise.
Article NINTH of the Certificate of Incorporation provides that, to the
maximum extent permitted by the General Corporation Law of the State of
Delaware, no director of the Company shall be personally liable to the Company
or to any of its stockholders for monetary damages arising out of such
director's breach of fiduciary duty.
Article SEVENTH of the Certificate of Incorporation further provides that
the right of indemnification provided thereby shall not be exclusive of or
affect any other rights to which any director or officer may be entitled.
Articles SEVENTH and NINTH of the Certificate of Incorporation each provide that
no amendment or repeal of such Article shall deprive any person of the benefits
thereof with respect to any act or failure to act occurring prior to such
amendment or repeal.
Section 10 of the By-laws of the Company, as amended to date, provides that
the Company shall indemnify its officers and directors to the full extent the
Company is permitted or required to do so by the General Corporation Law of the
State of Delaware.
Section 145 of the General Corporation Law of the State of Delaware
("Section 145") permits a corporation to indemnify its directors and officers in
the manner described by Article SEVENTH of the Certificate of Incorporation,
except with respect to any matter as to which a director or officer shall have
been adjudicated in any proceeding not to have acted in good faith in the
reasonable belief that his or her action was in the best interests of the
corporation. Such indemnification may include
II-1
<PAGE> 95
payment by the corporation of expenses incurred in defending or disposing of any
such action, suit or other proceeding, whether civil or criminal, in advance of
the final disposition or compromise of such action, suit or proceeding, upon
receipt of an undertaking by the person indemnified to repay such payment if he
or she shall be adjudicated to be not entitled to indemnification by the
corporation. No indemnification shall be provided in any particular matter
unless such indemnification shall be determined to be proper under Section 145
(a) by a majority of the disinterested then in office, even though less than a
quorum; (b) if there are no such directors, or if such directors so direct, then
by independent legal counsel in a written opinion; or (c) by the stockholders.
Section 145 also authorizes corporations 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 and
incurred by him or her in any such capacity, or arising out of his or her status
as such, whether or not the corporation would have the power to indemnify him or
her against such liability. The Company maintains a general liability insurance
policy which covers certain liabilities of directors and officers of the Company
arising out of claims based on acts or omissions in their capacities as
directors or officers.
Section 7 of the Underwriting Agreement provides that, under certain
circumstances, the Underwriters are obligated to indemnify the directors and
officers of the Company 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 effect of these provisions would be to permit indemnification by the
Company for, among other liabilities, liabilities arising out of the Securities
Act of 1933 (the "Securities Act").
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following information is furnished with regard to all securities sold
by the Company within the past three years which were not registered under the
Securities Act.
(a) From January 1, 1993 through May 31, 1996, the Company issued an
aggregate of 3,414,823 shares of Common Stock to 117 directors, officers,
employees and consultants of the Company upon the exercise of options
granted pursuant to the Company's Stock Option Plans at prices ranging from
$.01 to $3.50 per share for an aggregate consideration of $953,317.
(b) On April 12, 1993, the Company issued 2,601,877 shares of Series E
Convertible Preferred Stock for an aggregate consideration of $7,805,631
and 1,148,818 shares of Series F Convertible Preferred Stock for an
aggregate consideration of $4,020,863 to one investor.
(c) On May 14, 1993, the Company issued 250,000 shares of Series G
Convertible Preferred Stock for an aggregate consideration of $1,000,000 to
one investor.
(d) On March 31, 1994, the Company issued 999,848 shares of Series I
Convertible Preferred Stock for an aggregate consideration of $6,998,936 to
eleven investors.
(e) On February 15, 1996, the Company issued 1,655,000 shares of
Series J Convertible Preferred Stock for an aggregate consideration of
$4,965,000 to eleven investors.
The issuances described in this Item 15 were made in reliance upon the
exemption from registration set forth in Section 4(2) of the Securities Act
relating to sales by an issuer not involving any public offering, and, in the
case of shares of Common Stock issued pursuant to the exercise of options
granted under the Stock Option Plans, in further reliance upon the exemption
from registration set forth in Rule 701 under the Securities Act. The foregoing
transactions did not involve a distribution or public offering. No underwriters
were engaged in connection with the foregoing issuances of securities, and no
commissions or discounts were paid.
II-2
<PAGE> 96
ITEM 16. EXHIBITS AND FINANCIAL SCHEDULES.
<TABLE>
(A) EXHIBITS
<CAPTION>
<S> <C>
*1.1 Form of Underwriting Agreement
3.1 Restated Certificate of Incorporation, as amended
3.2 Form of Certificate of Amendment of Restated Certificate of Incorporation (to be
effective upon adoption by the stockholders of the Company)
3.3 Form of Amended and Restated Certificate of Incorporation of the Company (to be
effective upon closing of the offering)
3.4 By-Laws of the Company, as amended
3.5 Form of Amended and Restated By-Laws of the Company (to be effective upon closing
of the offering)
*4.1 Specimen certificate for Common Stock of the Company
*5.1 Opinion of Foley, Hoag & Eliot LLP
10.1 1989 Incentive and Nonqualified Stock Option Plan
10.2 1995 Nonqualified Stock Option Plan
*10.3 1996 Incentive and Nonqualified Stock Option Plan
*10.4 1996 Employee Stock Purchase Plan
10.5 Letter Agreement dated April 18, 1995 between the Company and Fleet Bank of
Massachusetts, N.A. ("Fleet")
10.6 $1,500,000 Term Note I dated November 19, 1993 by the Company and payable to Fleet,
with Allonge to Note dated April 18, 1995
10.7 $1,500,000 Term Note II dated June 24, 1994 by the Company and payable to Fleet,
with Allonge to Note dated April 18, 1995
10.8 $5,000,000 Revolving Note dated April 18, 1995 by the Company payable to Fleet
10.9 Security Agreement dated June 23, 1993 between the Company and Fleet
10.10 Pledge Agreement dated August 20, 1993 between the Company and Fleet
10.11 Loan Modification Agreement and Waiver dated January 17, 1996 between the Company
and Fleet
10.12 Lease dated September 15, 1993 between the Company and 25 Mall Road Trust.
*10.13 First Amendment to Lease dated June 28, 1994 between the Company and 25 Mall Road
Trust
*10.14 Second Amendment to Lease dated March 1, 1996 between the Company and 25 Mall Road
Trust
10.15 Employment Agreement dated December 21, 1995 between the Company and Robert N.
Goldman, as amended by Amendment to Employment Agreement dated May , 1996
10.16 Employment Agreement dated December 21, 1995 between the Company and Justin J.
Perreault, as amended by Employment Agreement Amendment dated May , 1996
10.17 Severance Agreement dated March 1, 1996 between the Company and Thomas M. Atwood
10.18 Severance Agreement dated May 24, 1995 between the Company and Kenneth E. Marshall
10.19 Severance Agreement dated November 28, 1995 between the Company and David Stryker
10.20 Sixth Amended and Restated Stockholders' Agreement dated February 13, 1996 among
the Company and certain of its stockholders
10.21 Amended and Restated IBM Stockholders' Agreement dated May 14, 1993 among the
Company, International Business Machines Corporation ("IBM") and certain other
stockholders of the Company, as amended by a Second Amendment dated March 31, 1994,
as further amended by a Third Amendment dated June 10, 1994 and as further amended
by a Fourth Amendment dated February 14, 1996
10.22 Amended and Restated Registration Rights Agreement dated June 29, 1990 between the
Company and certain of its stockholders, as amended by Amendment No. 1 dated
October 1, 1990, as further amended by Amendment No. 2 dated July 29, 1991, as
further amended by Amendment No. 3 dated March 12, 1992, as further amended by
Amendment No. 4 dated April 12, 1993, as further amended by Amendment No. 5 dated
May 14, 1993, as further amended by Amendment No. 6 dated March 31, 1994 and as
further amended by Amendment No. 7 dated February 13, 1996
</TABLE>
II-3
<PAGE> 97
<TABLE>
<S> <C>
*10.23 Master Lease and Warrant Agreement dated October 1, 1990 between the Company and
PacifiCorp Credit, Inc. d/b/a Pacific Venture Finance, Inc. ("PacifiCorp")
10.24 Preferred Stock Purchase Warrant dated October 1, 1990 between the Company and
PacifiCorp.
10.25 Internal Use and Substrate Agreement dated April 10, 1993 between the Company and
IBM
10.26 Break-Up Agreement dated April 10, 1993 between the Company and IBM
10.27 Escrow Agreement dated April 10, 1993 between the Company and IBM
*10.28 Master Agreement dated April 10, 1993 between the Company and IBM
10.29 First Amended and Restated Agreement Regarding Confidential Information dated
February 11, 1993 between the Company and IBM
10.30 Master OEM Agreement dated between the Company and Verity, Inc.
*10.31 Limited Source Code License Agreement dated December 1, 1994 between the Company
and Dharma Systems, Inc., as amended March 21, 1995
10.32 Software License and Distribution Agreement dated December 1, 1995 between the
Company and ViVi Software, S.r.1
10.33 License Agreement dated February 23, 1996 between the Company and net.Genesis Corp.
*10.34 Object Design Licensing Agreement dated March 19, 1996 between the Company and
Virage, Inc.
**11.1 Computation of Earnings per Share
**21.1 List of Subsidiaries of the Company
23.1 Consent of Coopers & Lybrand L.L.P.
*23.2 Consent of Foley, Hoag & Eliot LLP (included in Exhibit 5.1)
**24.1 Power of Attorney (included on the signature page of the registration statement)
<FN>
- ---------------
* To be filed by amendment.
** Previously filed.
</TABLE>
(B) FINANCIAL STATEMENT SCHEDULES
All financial statement schedules are omitted because they are not
applicable or the required information is shown in the Consolidated Financial
Statements or Notes thereto.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act") may be permitted to directors,
officers and controlling persons of the registrant pursuant to the provisions
contained in the Certificate of Incorporation and By-Laws of the registrant and
the laws of the Commonwealth of Massachusetts, 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
II-4
<PAGE> 98
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; and
(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> 99
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE COMPANY HAS
DULY CAUSED THIS AMENDMENT TO REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE TOWN OF BURLINGTON,
MASSACHUSETTS ON JUNE 14, 1996.
OBJECT DESIGN, INC.
By: /s/ ROBERT N. GOLDMAN
------------------------------------------
Robert N. Goldman
President and Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, 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>
* President and Chief Executive June 14, 1996
- --------------------------------------------- Officer (Principal Executive
Robert N. Goldman Officer and Director)
* Chief Financial Officer June 14, 1996
- --------------------------------------------- (Principal Financial and
Lacey P. Brandt Accounting Officer)
* Director June 14, 1996
- ---------------------------------------------
Gerald B. Bay
* Director June 14, 1996
- ---------------------------------------------
Arthur J. Marks
* Director June 14, 1996
- ---------------------------------------------
Tim R. Palmer
* Director June 14, 1996
- ---------------------------------------------
Scott Sperling
* Director June 14, 1996
- ---------------------------------------------
Steven C. Walske
</TABLE>
*By:
- ---------------------------------------------
Robert N. Goldman
Attorney-in-Fact
II-6
<PAGE> 1
EXHIBIT 3.1
BOOK 808 PAGE 493 FILED
DEC 22 1988
[signature]
SECRETARY OF STATE
RESTATED
CERTIFICATE OF INCORPORATION
OF
OBJECT DESIGN, INC.
This restated Certificate of Incorporation is being filed pursuant to Sections
242 & 245 and restates integrates and further amends.
FIRST: The name of the corporation (the "Corporation") is Object
Design, 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, and
the name of its registered agent at such address is The Corporation Trust
Company.
THIRD: The nature of the business or purpose to be conducted or
promoted is as follows:
To develop, license, purchase, sell, lease and market object oriented
data base management systems and associated programming environmental tools for
the creation and maintenance of object oriented applications, to engage in the
development, licensing and marketing of, and to otherwise deal with, computer
software products and applications generally, and to conduct or engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH: The total number of shares of capital stock which the
Corporation shall have the authority to issue shall be 5,250,000 common shares,
having a par value of $.001 per share, amounting to an aggregate par value of
$5,250, and 2,750,000 shares of Series A Convertible Preferred Stock having a
par value of $.01 per share (the "Preferred Stock") amounting to an aggregate
par value of $27,500.
The voting power, preferences and relative participating, optional or
other special rights and the qualifications, limitations or restrictions or the
Preferred Stock are set forth as follows:
1. Number of Shares. The series of Preferred Stock designated and known
as "Series A Convertible Preferred Stock" shall consist of 2,750,000 shares.
2. Voting.
2A. General. Except as may be otherwise provided in these
terms of the Series A Convertible Preferred Stock or by law, the Series A
Convertible Preferred Stock shall vote together with the Common Stock as a
single class on all actions to be taken by the stockholders of the Corporation.
Each share of Series A Convertible Preferred Stock shall entitle the holder
<PAGE> 2
-2-
thereof to such number of votes per share on each such action as shall
equal the number of shares of Common Stock (including fractions of a share)
into which each share of Series A Convertible Preferred Stock is then
convertible.
2B. Board Size. The Corporation shall not, without the written
consent or affirmative vote of the holders of at least two-thirds of the then
outstanding shares of Series A Convertible Preferred Stock, given in writing or
by vote at a meeting, consenting or voting (as the case may be) separately as a
class, increase the maximum number of directors constituting the Board of
Directors to a number in excess of seven (7).
2C. Board Seats. The holders of the Series A Convertible
Preferred Stock shall be entitled to vote together with the Common Stock as a
single class for the election of each of the directors of the Corporation.
Notwithstanding the foregoing or anything else to the contrary provided in the
Certificate of Incorporation, upon the occurrence of any Noncompliance Event (as
such term is defined in subparagraph 7B) and continuing for so long as the
Corporation remains in noncompliance (as defined in subparagraph (7B), the
holders of the Series A Convertible Preferred Stock, voting as a separate class,
shall be entitled to elect a majority of the directors of the Corporation, with
the remaining directors of the Corporation to be elected as set forth in the
first sentence of this subparagraph 2C. A vacancy in any directorship elected by
the holders of the Series A Convertible Preferred Stock, voting as a separate
class, shall be filled only by vote or written consent of the holders of the
Series A Convertible Preferred Stock, and a vacancy in any directorship elected
jointly by the holders of the Series A Convertible Preferred Stock and all other
classes and series of stock of the Corporation, voting together as a single
class, shall be filled only by vote or written consent of the Series A
Convertible Preferred Stock and all other classes and series of stock of the
Corporation, as provided above. At any meeting (or in a written consent in lieu
thereof) held for the purpose of electing directors, the presence in person or
by proxy (or the written consent) of the holders of a majority of the shares of
Series A Convertible Preferred Stock then outstanding shall constitute a quorum
of the Series A Convertible Preferred Stock for the election of directors to be
elected solely by the holders of the Series A Convertible Preferred Stock.
3. Dividends. The holders of the Series A Convertible Preferred Stock
shall be entitled to receive, as and when declared by the Board of Directors out
of funds legally available therefor, dividends at the same rate as dividends
(other than dividends paid in additional shares of Common Stock) are paid with
respect to the Common Stock (treating each share of Series A Convertible
Preferred Stock as being equal to the number of shares of Common Stock
(including fractions of a share) into which each share of Series A Convertible
Preferred Stock is then
<PAGE> 3
-3-
convertible). In addition, the holders of the Series A Convertible Preferred
Stock may from time to time be entitled, pursuant to the terms of paragraph 7
below, to certain "Noncompliance Dividends", as that term is defined in
subparagraph 7A, as well as to any other dividends declared by the Board of
Directors on the outstanding shares of Series A Convertible Preferred Stock out
of funds legally available therefor.
4. Liquidation. Upon any liquidation, dissolution of winding up of the
Corporation, whether voluntary or involuntary, the holders of the shares of
Series A Convertible Preferred Stock shall first be entitled, before any
distribution or payment is made upon any stock ranking on liquidation,
dissolution or winding up, junior to the Series A Convertible Preferred Stock,
to be paid, out of assets legally available therefor, an amount equal to $1.00
per share plus, in the case of each share, an amount equal to all accrued and
unpaid dividends (including all accrued and unpaid Noncompliance Dividends, if
any) thereon, computed to the date payment thereof is made available, such
amount payable with respect to one share of Series A Convertible Preferred
Stock being sometimes referred to as the "Liquidation Preference Payment" and
with respect to all shares of Series A Convertible Preferred Stock being
sometimes referred to as the "Liquidation Preference Payments". If upon such
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the assets to be distributed among the holders of Series A
Convertible Preferred Stock shall be insufficient to permit payment in full to
the holders to Series A Convertible Preferred Stock of the Liquidation
Preference Payments, then the entire assets of the Corporation to be so
distributed shall be distributed ratably among the holders of Series A
Convertible Preferred Stock. Upon any such liquidation, dissolution or
winding-up of the Corporation, immediately after the holders of Series A
Convertible Preferred Stock shall have been paid in full the Liquidation
Preference Payments, the remaining assets of the Corporation available for
distribution shall be distributed ratably among the holders of Series A
Convertible Preferred Stock and Common Stock (with each share of Series A
Convertible Preferred Stock being deemed, for such purpose, to be equal to the
number of shares of Common Stock (including fractions of a share) into which
such share of Series A Convertible Preferred Stock is convertible immediately
prior to the close of business on the business day fixed for such distribution);
provided, however, that if the aggregate amount of assets which would be
distributed to the holders of shares of Series A Convertible Preferred Stock
pursuant to the provisions set forth above exceeds an amount equal to the sum of
the original aggregate purchase price of such shares plus a cumulative annual
rate of return of 12% on such purchase price, then the aggregate amount of
assets which shall be distributable to such holders upon such liquidation,
dissolution or winding up of the Corporation shall instead be limited to the
amount of the Liquidation Preference
<PAGE> 4
-4-
Payments. Written notice of such liquidation, dissolution or winding up, stating
a payment date, the place where said payments shall be made, the aggregate
amount to be paid to each holder of Series A Convertible Preferred Stock, and
the alternate amount which would be paid to each such holder if all outstanding
shares of Series A Convertible Preferred Stock were to be converted into shares
of Common Stock prior to the payment date, shall be given by mail, postage
prepaid, or by telex to non-U.S. residents, not less than 20 days prior to the
payment date stated therein, to the holders of record of Series A Convertible
Preferred Stock, such notice to be addressed to each such holder at its address
as shown by the records of the Corporation. The consolidation or merger of the
Corporation into or with any other entity or entities which results in the
exchange of outstanding securities of the Corporation for securities or other
consideration issued or paid or caused to be issued or paid by any such entity
or entities or affiliate thereof, and the sale or transfer by the Corporation of
all or substantially all its assets, shall be deemed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of the
provisions of this paragraph 4, unless the holders of all outstanding shares of
the Corporation's voting stock immediately prior to such transaction hold,
immediately following the consummation of such transaction, more than fifty (50)
percent of the voting stock of such entity of entities or affiliate thereof, or
of the transferee of the assets of the Corporation, as the case may be. For
purposes hereof, the Common Stock shall rank on liquidation, dissolution or
winding up of the Corporation, junior to the Series A Convertible Preferred
Stock.
5. Restrictions. At any time when shares of Series A Convertible
Preferred Stock are outstanding, except where the vote or written consent of the
holders of a greater number of shares of stock of the Corporation is required by
law or by the Certificate of Incorporation, and in addition to any other vote
required by law or the Certificate of Incorporation, without the written consent
or affirmative vote of the holders of at least two-thirds of the
then-outstanding shares of Series A Convertible Preferred Stock, consenting
separately as a class, the Corporation will not:
5A. Create or authorize the creation of any additional class
or series of shares of stock, or reclassify the shares of any existing class or
series of stock, unless the same ranks junior to the Series A Convertible
Preferred Stock as to the distribution of assets on the liquidation, dissolution
or winding up of the Corporation, or increase the authorized amount of the
Series A Convertible Preferred Stock or increase the authorized amount of any
additional class or series of shares of stock unless the same ranks junior to
the Series A Convertible Preferred Stock as to the distribution of assets on the
liquidation, dissolution or winding up of the Corporation, or create or
authorize any obligation or security convertible into shares of
<PAGE> 5
-5-
Series A Convertible Preferred Stock or into shares of any other class or series
of stock unless the same ranks junior to the Series A Convertible Preferred
Stock as to the distribution of assets on the liquidation, dissolution or
winding up of the Corporation, whether any such creation, authorization or
increase shall be by means of amendment to the Certificate of Incorporation or
by merger, consolidation or otherwise;
5B. Consent to any liquidation, dissolution or winding up of
the Corporation or consolidate or merge into or with any other entity or
entities or sell or transfer all or substantially all its assets;
5C. Sell or transfer more than ten percent (10%) of the assets
of the Corporation within any 12-month period, other than in the ordinary course
of business;
5D. Amend, alter or repeal its Certificate of Incorporation or
By-laws;
5E. Purchase or set aside any sums for the purchase of, or pay
any dividend or make any distribution on, any shares of stock other than the
Series A Convertible Preferred Stock, except for dividends or other
distributions payable on the Common Stock solely in the form of additional
shares of Common Stock and except for the purchase of shares of Common Stock
from former employees of the Corporation who acquire such shares directly from
the Corporation, if each such purchase is made pursuant to contractual rights
held by the Corporation relating to the termination of employment of such former
employee and the purchase price does not exceed the original issue price paid by
such former employee to the Corporation for such shares; or
5F. Redeem or otherwise acquire any shares of Series A
Convertible Preferred Stock except pursuant to a written agreement to which the
Corporation and all of the holders of Series A Preferred Stock may be parties,
or pursuant to a purchase offer made pro rata to all holders of the shares of
Series A Convertible Preferred Stock on the basis of the aggregate number of
outstanding shares of Series A Convertible Preferred Stock then held by each
such holder.
6. Conversions. The holders of shares of Series A Convertible Preferred
Stock shall have the following conversion rights:
6A. Conversion Events.
6A(1) Optional Conversion. Subject to the terms and conditions
of this paragraph 6, the holder of any share or shares of Series A Convertible
Preferred Stock shall have the right, at its option at any time, to convert any
such shares of Series A Convertible Preferred Stock (except that upon any
liquidation, voluntary or involuntary dissolution, or winding-up of the
<PAGE> 6
-6-
Corporation the right of conversion shall terminate at the close of business on
the business day fixed for payment of the amount distributable on the Series A
Convertible Preferred Stock) into such number of fully paid and nonassessable
shares of Common Stock as is obtained by (i) multiplying the number of shares of
Series A Convertible Preferred Stock so to be converted by $1.00 and (ii)
dividing the result by the conversion price of $1.00 per share or, in case an
adjustment of such price has taken place pursuant to the further provisions of
this paragraph 6, then by the conversion price as last adjusted and in effect at
the date any share or shares of Series A Convertible Preferred Stock are
surrendered for conversion (such price, or such price as last adjusted, being
referred to as the "Conversion Price"). Such rights of conversion shall be
exercised by the holder thereof by giving written notice to the Corporation that
the holder elects to convert a stated number of shares of Series A Convertible
Preferred Stock into Common Stock and by surrender of a certificate or
certificates for the shares so to be converted to the Corporation at its
principal office (or such other office or agency of the Corporation as the
Corporation may designate by notice in writing to the holders of the Series A
Convertible Preferred Stock) at any time during its usual business hours on the
date set forth in such notice, together with a statement of the name or names
(with address) in which the certificate or certificates for shares of Common
Stock shall be issued.
6A(2) Mandatory Conversion. All outstanding shares of Series A
Convertible Preferred Stock shall automatically and without any further action
on the part of the Corporation convert into shares of Common Stock effective
upon the earlier to occur of (i) such time as the Corporation shall have issued
an aggregate of at least two-thirds of the total number of shares of Common
Stock which were issued, or are then issuable, upon conversion of shares of
Series A Convertible Preferred Stock; or (ii) the closing of a sale of shares of
Common Stock by the Corporation pursuant to an underwritten public offering in
which (a) the aggregate gross proceeds to the Corporation shall be at least
$12,500,000 and (b) the price per share paid by the public, net of underwriting
discounts and commissions, shall be at least five times the lowest Conversion
Price in effect on the date of such closing for any shares of Series A
Convertible Preferred Stock then outstanding.
6B. Issuance of Certificates; Time Conversion Effected.
Promptly upon (1) the happening of either event described in subparagraph 6A(2)
or the receipt by the Corporation of the written notice referred to in
subparagraph 6A(1), and (2) the surrender of the certificate or certificates for
the share or shares of Series A Convertible Preferred Stock to be converted, the
Corporation shall issue and deliver, or cause to be issued and delivered, to the
holder, registered in such name or names as such holder may direct, a
certificate or certificates for the number of whole shares of Common Stock
issuable upon the
<PAGE> 7
-7-
conversion of such share or shares of Series A Convertible Preferred Stock. To
the extent permitted by law, such conversion shall be deemed to have been
effected and the Conversion Price shall be determined as of the close of
business on the date on which such written notice shall have been received by
the Corporation, or, in the case of a mandatory conversion under subparagraph
6A(2), on the date of occurrence of either event specified in such subparagraph,
and at such time the rights of the holder of such share or shares of Series A
Convertible Preferred Stock shall cease, and the person or persons in whose name
or names any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares of Common Stock represented thereby.
6C. Partial Conversion; Dividends; Fractional Shares. In case
the number of shares of Series A Convertible Preferred Stock represented by the
certificate or certificates surrendered pursuant to subparagraph 6A(1) exceeds
the number of shares to be converted, the Corporation shall, upon such
conversion, execute and deliver to the holder, at the expense of the
Corporation, a new certificate or certificates for the number of shares of
Series A Convertible Preferred Stock represented by the certificate or
certificates surrendered which are not to be converted. At the time of each
conversion of shares of Series A Convertible Preferred Stock, the Corporation
shall pay in cash an amount equal to all dividends declared, accrued and unpaid
on the shares of Series A Convertible Preferred Stock surrendered for conversion
to the date upon which such conversion is deemed to take place as provided in
subparagraph 6B; provided that any holder of shares of Series A Convertible
Preferred Stock may elect, at the time such shares are surrendered for
conversion or at any other time prior to conversion, to take payment for all
Noncompliance Dividends accrued and unpaid on such shares, if any, in shares of
Common Stock rather than in cash, with the number of shares of Common Stock
issuable in lieu of such case payment to be determined by dividing the aggregate
amount of such accrued and unpaid Noncompliance Dividends by the Conversion
Price then in effect for the shares of Series A Convertible Preferred Stock held
by such holder. No fractional shares shall be issued upon conversion of Series A
Convertible Preferred Stock into Common Stock or upon election to take shares of
Common Stock in lieu of cash for accrued and unpaid Noncompliance Dividends, and
no payment or adjustment at the time of such conversion or election shall be
made by the Company on account of any previously-declared cash dividends on the
Common Stock. In lieu of delivering any such fractional share of Common Stock,
the Corporation shall pay an amount in cash equal to the current market price of
such fractional share as determined in good faith by the Board of Directors of
the Corporation.
<PAGE> 8
-8-
6D. Adjustment of Price Upon Issuance of Common Stock. Except
as provided in subparagraph 6E, if and whenever the Corporation shall issue or
sell, or is, in accordance with subparagraph 6D(1) through 6D(8), deemed to have
issued or sold, any shares of Common Stock for a consideration per share less
than the Conversion Price in effect immediately prior to the time of such issue
or sale (a "Dilutive Offering"), then, forthwith upon such issue or sale, the
Conversion Price shall be reduced to the price determined by dividing (i) an
amount equal to the sum of (a) the number of shares of Common Stock outstanding
immediately prior to such issue or sale multiplied by the then existing
Conversion Price and (b) the consideration, if any, received by the Corporation
upon such issue of sale, by (ii) the total number of shares of Common Stock
outstanding immediately after such issue or sale.
For purposes of this subparagraph 6D, the following subparagraphs 6D(1)
to 6D(8) shall also be applicable:
6D(1) Issuance of Rights or Options. In case at any
time the Corporation shall in any manner grant (whether directly or by
assumption in a merger or otherwise) any warrants or other rights to
subscribe for or to purchase, or any options for the purchase of,
Common Stock or any stock or security convertible into or exchangeable
for Common Stock (such warrants, rights or options being called
"Options" and such convertible or exchangeable stock or securities
being called "Convertible Securities") whether or not such Options or
the right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock
is issuable upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities (determined by dividing (i) 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 the 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 upon the issue or
sale of such Convertible Securities and upon the conversion or exchange
thereof, by (ii) 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) shall be less than the Conversion Price 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 issuable upon the
exercise of such Options shall be deemed to have been issued for such
price per share as of the date of granting of such Options or the
issuance of such Convertible Securities
<PAGE> 9
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and thereafter shall be deemed to be outstanding. Except as otherwise
provided in subparagraph 6D(3), no adjustment of the Conversion Price
shall be made upon the actual issue of such Common Stock or of such
Convertible Securities upon exercise of such Options or upon the actual
issue of such Common Stock upon conversion or exchange of such
Convertible Securities.
6D(2) Issuance of Convertible Securities. In case the
Corporation shall in any manner issue (whether directly or by
assumption in a merger or otherwise) or sell any Convertible
Securities, whether or not the rights to exchange or convert any such
Convertible Securities are immediately exercisable, and the price per
share for which Common Stock is issuable upon such conversion or
exchange (determined by dividing (i) 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, by (ii) the total maximum number of
shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities) shall be less than the Conversion Price in
effect immediately prior to the time of such issue or sale, then the
total maximum number of shares of Common Stock issuable upon conversion
or exchange of all such Convertible Securities shall be deemed to have
been issued for such price per share as of the date of the issue or
sale of such Convertible Securities and thereafter shall be deemed to
be outstanding as of such date, provided that (a) except as otherwise
provided in subparagraph 6D(3), no adjustment of the Conversion Price
shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities and (b) if any
such issue or sale of such Convertible Securities is made upon exercise
of any Options to purchase any such Convertible Securities for which
adjustments of the Conversion Price have been or are to be made
pursuant to other provisions of this subparagraph 6D, no further
adjustment of the Conversion Price shall be made by reason of such
issue or sale.
6D(3) Change in Option Price or Conversion Rate. Upon
the happening of any of the following events, namely, if the purchase
price provided for in any Option referred to in subparagraph 6D(1); the
additional consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in subparagraph
6D(1) or 6D(2); or the rate at which Convertible Securities referred to
in subparagraph 6D(1) or 6D(2) are convertible into or exchangeable for
Common Stock shall change at any time (including, but not limited to,
changes under or by reason of provisions designed to protect against
dilution), the Conversion Price in effect at the time of such event
shall forthwith be readjusted to
<PAGE> 10
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the 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 conversion
rate, as the case may be, at the time initially granted, issued or
sold, but only if as a result of such adjustment the Conversion Price
then in effect hereunder is thereby reduced; and on the expiration of
any such Option or the termination of any such right to convert or
exchange such Convertible Securities, the Conversion Price then in
effect hereunder shall forthwith be increased to the Conversion Price
which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent
outstanding immediately prior to such expiration or termination, never
been issued.
6D(4) Stock Dividends. In case the Corporation shall
declare a dividend or make any other distribution upon any stock of the
Corporation payable in Common Stock (except for dividends or
distributions upon the Common Stock), Options or Convertible
Securities, any Common Stock, Options or Convertible Securities, as the
case may be, issuable in payment of such dividend or distribution shall
be deemed to have been issued or sold without consideration.
6D(5) Consideration for Stock. In case any shares of
Common Stock, Options or Convertible Securities shall be issued or sold
for cash, the consideration received therefor shall be deemed to be the
amount received by the Corporation therefor, without deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith.
In case any shares of Common Stock, Options or Convertible Securities
shall be issued or sold for a consideration other than cash, the amount
of the consideration other than cash received by the Corporation shall
be deemed to be the fair value of such consideration as determined in
good faith by the Board of Directors of the Corporation, without
deduction of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith.
In case any Options shall be issued in connection with the issue and
sale of other securities of the Corporation, together comprising one
integral transaction in which no specific consideration is allocated to
such Options by the parties thereto, such Options shall be deemed to
have been issued for such consideration as determined in good faith by
the Board of Directors of the Corporation.
6D(6) Record Date. In case the Corporation shall take
a record of the holders of its Common Stock for the purpose of
entitling them (i) to receive a dividend or other distribution payable
in Common Stock, Options or Convertible Securities or (ii) to subscribe
for or purchase Common Stock, Options or Convertible Securities, then
such record date
<PAGE> 11
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shall be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration of
such dividend or the making of such other distribution or the date of
the granting of such right of subscription or purchase, as the case may
be.
6D(7) Treasury Shares. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or
held by or for the account of the Corporation, and the disposition of
any such shares hall be considered an issue or sale of Common Stock for
the purpose of this subparagraph 6D.
6D(8) Adjustments for Failure of Participation.
Notwithstanding anything contained in this subparagraph 6D to the
contrary, the holder of any shares of Series A Convertible Preferred
Stock shall not be entitled to the benefits of this subparagraph 6D if
such holder has failed to participate in any particular Dilutive
Offering by acquiring in such Dilutive Offering such number of shares
as shall equal the product of the number of shares actually offered in
the Dilutive Offering to all holders of Series A Convertible Preferred
Stock, as determined by the Board of Directors, multiplied by a
fraction: (a) the numerator of which is the number of shares of Series
A Convertible Preferred Stock held by such holder (by itself or
together with any affiliated persons or entities) at the time of such
Dilutive offering, and (b) the denominator of which is the total number
of shares of the Series A Convertible Preferred Stock then outstanding
(the "Pro Rata Share"). If any holder of Series A Convertible Preferred
Stock shall fail to purchase its Pro Rata Share (by itself or together
with any affiliated persons or entities) of any such Dilutive Offering,
then such holder's rights under this subparagraph 6D shall terminate
and shall no longer be of any force and effect; provided, however, that
no holder of shares of Series A Convertible Preferred Stock shall be
required to participate to the extent of all or any part of his Pro
Rata Share of a Dilutive Offering if and to the extent such
participation would violate any statute, rule or regulation, or order
of any court or governmental agency applicable to such holder, and such
holder furnishes to the Corporation a certificate, signed by an
executive officer or general partner of such holder, as the case may
be, and an opinion of counsel, each to such effect. The Corporation,
the Board of Directors and the holders of the Series A Convertible
Preferred Stock shall take all necessary actions to designate a new
series of Preferred Stock on any occasion that any holder of Series A
Convertible Preferred Stock shall fail to purchase its Pro Rata Share
of any Dilutive Offering. Each share of such holder's Series A
Convertible Preferred Stock shall be immediately converted into one
share of such newly-created series of Preferred Stock; provided that
any such new series
<PAGE> 12
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of Preferred Stock shall be identical in all respects to the Series A
Convertible Preferred Stock, except that (i) the Conversion Price of
the new series of Preferred Stock shall be the Conversion Price in
effect for the Series A Convertible Preferred Stock immediately prior
to such Dilutive Offering, and (ii) any holder of shares of the new
series of Preferred Stock shall not be entitled to receive the benefits
of any adjustments to the Conversion Price pursuant to this
subparagraph 6D with respect to any future Dilutive Offering by the
Corporation. Except as otherwise required by law, any newly-created
series of Preferred Stock shall vote together as a single series with
the Series A Convertible Preferred Stock on all matters submitted to
the stockholders for a vote or a written consent, including but not
limited to the election of a majority of directors of the Corporation
by the Series A Convertible Preferred Stock pursuant to subparagraph
2C. For the purposes of paragraphs 3, 4, 5, 6A, 6C, 6G, 6I, 6J, 6K, 6L,
6M, 6N, 6O, 6P, 7 and 8, the terms "Series A Convertible Preferred
Stock" shall include any series of Preferred Stock issued by the
Corporation pursuant to this subparagraph 6D(8).
6E. Certain Issues of Common Stock Excepted. Anything herein
to the contrary notwithstanding, the Corporation shall not be required to make
any adjustment of the Conversion Price in the case of the issuance of up to an
aggregate of 2,500,000 shares (appropriately adjusted to reflect the occurrence
of any event described in subparagraph 6F) of (1) Common Stock, (2) securities
convertible or exchangeable into Common Stock, or (3) options or warrants to
purchase Common Stock or securities convertible or exchangeable into Common
Stock, to directors, officers, employees or consultants of the Corporation in
connection with their service as directors or consultants of the Corporation or
their employment by the Corporation, which number of shares shall include any
shares issued prior to the issuance of any shares of Series A Convertible
Preferred Stock.
6F. Subdivision or Combination of Common Stock. In case the
Corporation shall at any time subdivide (by any stock split, stock dividend or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price in effect immediately prior to such subdivision
shall be proportionately reduced, and, conversely, in case the outstanding
shares of Common Stock shall be combined into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall be
proportionately increased.
6G. Reorganization or Reclassification. If any capital
reorganization or reclassification of the capital stock of the Corporation shall
be effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Common
Stock, then, as a condition of such reorganization or reclassification, lawful
<PAGE> 13
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and adequate provisions shall be made whereby each holder of a share or shares
of Series A Convertible Preferred Stock shall thereupon have the right to
receive, upon the basis and upon the terms and conditions specified herein and
in lieu of the shares of Common Stock immediately theretofore receivable upon
the conversion of such share or shares of Series A Convertible Preferred Stock,
such shares of stock, securities or assets as may be issued or payable with
respect to or in exchange for a number of outstanding shares of such Common
Stock equal to the number of shares of such Common Stock immediately theretofore
receivable upon such conversion had such reorganization or reclassification not
taken place, and in any such case appropriate provisions shall be made with
respect to the rights and interests of such holder to the end that the
provisions hereof (including without limitation provisions for adjustments of
the Conversion Price) shall thereafter be applicable, as nearly as may be, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise of such conversion rights.
6H. Adjustment of Provisions. If the Corporation grants to the
holders of any class or series of stock of the Corporation any rights relating
to the adjustment of the Conversion Price of such class or series of stock upon
a Dilutive Offering or otherwise, which rights shall be more favorable to the
holders of such class or series of stock than the comparable rights in this
paragraph 6 are to the holders of the Series A Convertible Preferred Stock, or
which rights shall grant to the holders of such class or series of stock rights
not granted to the holders of Series A Convertible Preferred Stock pursuant to
the Certificate of Incorporation of the Corporation, then such more favorable
rights shall be deemed also apply to all holders of Series A Convertible
Preferred Stock.
6I. Notice of Adjustment. Upon any adjustment of the
Conversion Price, then and in each such case the Corporation shall give written
notice thereof, by first class mail, postage prepaid, or by telex to non-U.S.
residents, addressed to each holder of shares of Series A Convertible Preferred
Stock at the address of such holder as shown on the books of the Corporation,
which notice shall state the Conversion Price resulting from such adjustment,
setting forth in reasonable detail the method upon which such calculation is
based.
6J. Other Notices. In case at any time:
(1) the Corporation shall declare any dividend upon
its Common Stock payable in cash or stock or make any other
distribution to the holders of its Common Stock;
(2) the Corporation shall offer for subscription pro
rata to the holders of its Common Stock any additional shares of stock
of any class or other rights;
<PAGE> 14
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(3) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or a
consolidation or merger of the Corporation with or into, or a sale of
all or substantially all its assets to, another entity or entities; or
(4) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by first
class mail, postage prepaid, or by telex to non-U.S. residents, addressed to
each holder of any shares of Series A Convertible Preferred Stock at the address
of such holder as shown on the books of the Corporation, (a) at least 20 days'
prior written notice of the date on which the books of the Corporation shall
close or a record shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale dissolution, liquidation or
winding up, and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at least 20
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause (a) shall also specify, in the
case of any such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto any such notice in
accordance with the foregoing clause (b) shall also specify the date on which
the holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be.
6K. Stock to be Reserved. The Corporation will at all times
reserve and keep available out of its authorized Common Stock, solely for the
purpose of issuance upon the conversion of Series A Convertible Preferred Stock
as herein provided, such number of shares of Common Stock as shall then be
issuable upon the conversion of all outstanding shares of Series A Convertible
Preferred Stock. The Corporation covenants that all shares of Common Stock which
shall be so issued shall be duly and validly issued and fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, and, without limiting the generality of the foregoing, the
Corporation covenants that it will from time to time take all such action as may
be requisite to ensure that the par value per share of the Common Stock is at
all times equal to or less than the Conversion Price in effect at the time. The
Corporation will take all such action as may be necessary to ensure that all
such shares of Common Stock may be so issued without violation of any applicable
law or regulation, or of any requirement of any national securities exchange
upon which the Common Stock may be listed. The Corporation will not take any
action which results in an adjustment of
<PAGE> 15
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the Conversion Price if the total number of shares of Common Stock issued and
issuable after such action upon conversion of the Series A Convertible Preferred
Stock would exceed the total number of shares of Common Stock then authorized by
the Certificate of Incorporation.
6L. No Reissuance of Series A Convertible Preferred Stock.
Shares of Series A Convertible Preferred Stock which are converted into shares
of Common Stock as provided herein shall be cancelled and shall not be reissued.
6M. Issue Tax. The issuance of certificates for shares of
Common Stock upon conversion of Series A Convertible Preferred Stock shall be
made without charge to the holders thereof for any issuance tax in respect
thereof, provided that the Corporation shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the holder of the
Series A Convertible Preferred Stock which is being converted.
6N. Closing of Books. The Corporation will at no time close
its transfer books against the transfer of any Series A Convertible Preferred
Stock or of any shares of Common Stock issued or issuable upon the conversion of
any shares of Series A Convertible Preferred Stock in any manner which
interferes with the timely conversion of such Series A Convertible Preferred
Stock, except as may otherwise be required to comply with applicable securities
laws.
6O. Definition of Common Stock. As used in this paragraph 6,
the term "Common Stock" shall mean and include the Corporation's authorized
Common Stock, par value $.001 per share, as constituted on the date of filing of
these terms of the Series A Convertible Preferred Stock, and shall also include
any capital stock of any class of the Corporation thereafter authorized which
shall neither be limited to a fixed sum or percentage of par value in respect of
the rights of the holders thereof to participate in dividends nor entitled to a
preference in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation; provided that the
shares of Common Stock receivable upon conversion of shares of Series A
Convertible Preferred Stock shall include only shares designated as Common Stock
of the Corporation on the date of filing of this instrument, or in case of any
reorganization or reclassification of the outstanding shares thereof, the stock,
securities or assets provided for in subparagraph 6G.
7. Noncompliance.
7A. Remedies. Immediately upon the occurrence of any
Noncompliance Event, as defined below, the holders of the Series A Convertible
Preferred Stock will have all of the following rights, in addition to all other
rights set forth in
<PAGE> 16
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the Certificate of Incorporation, in any agreement between such holders and the
Corporation, or as otherwise provided by law:
(1) A cumulative dividend (the "Noncompliance Dividend") shall
accrue on a daily basis on all outstanding shares of Series A
Convertible Preferred Stock so long as the Corporation is in
noncompliance (as defined below). Such dividend shall accrue at the
annual rate of $.10 per share of Series A Convertible Preferred Stock
for the first 30 days that the Corporation is in noncompliance, which
rate shall increase by $.01 for each successive 30-day period that the
Corporation remains in noncompliance, up to a maximum annual rate of
$.16 per share. Each holder of Series A Convertible Preferred Stock to
whom any such dividend is payable may elect to have such dividend paid
by the Corporation in cash or in shares of Common Stock of the
Corporation, as provided in subparagraph 6C.
(2) As provided in subparagraph 2C, the holders of Series A
Convertible Preferred Stock, voting as a single class, shall have the
right to elect a majority of the directors of the Corporation.
7B. Noncompliance Event. For the purposes of this Certificate
of Incorporation, a "Noncompliance Event" shall be defined as any one or more of
the following events:
(1) The Corporation has materially breached any one
or more of the covenants or other provisions of the Series A
Convertible Preferred Stock Purchase Agreement dated on or about
December 22, 1988 between the Corporation and the Purchasers named
therein (the "Purchase Agreement"), or of any of the other agreements
contemplated by the Purchase Agreement and executed in connection
therewith (the "Ancillary Agreements"), in each case as the same shall
have been amended, and such breach has continued for 30 days following
receipt by the Corporation of written notice of said breach given by
the holders of at least two-thirds of the outstanding shares of Series
A Convertible Preferred Stock;
(2) Any of the Corporation's representations and/or
warranties set forth in the Purchase Agreement or in any one or more of
the Ancillary Agreements was not substantially true as of the date of
closing for such Purchase Agreement and the Corporation has received
written notice of such fact from the holders of at least two-thirds of
the outstanding shares of Series A Convertible Preferred Stock;
(3) The Corporation has failed to make payment(s)
when due for any dividends, interest and/or mandatory redemption of any
securities, where such payment(s) aggregate
<PAGE> 17
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over $50,000 and such failure to pay has continued for 30 days
following receipt by the Corporation of written notice of said failure
to pay from the holders of at least two-thirds of the outstanding
shares of Series A Convertible Preferred Stock;
(4) The Corporation has been in material default of
payment on any debt agreement under which the Corporation is obligated
to pay at least $50,000 in principal (including any acceleration
thereof) and accrued interest at the time of such default, and such
default has continued for 30 days following receipt by the Corporation
of written notice of said default given by the holders of at least
two-thirds of the outstanding shares of Series A Convertible Preferred
Stock; or
(5) The Corporation has filed for bankruptcy, made an
assignment for the benefit of creditors, materially compromised its
debt with a material creditor of the Corporation, or suffered
acceleration of a material debt instrument, and the Corporation has
received written notice of same from the holders of at least two-thirds
of the outstanding shares of Series A Convertible Preferred Stock.
Once a Noncompliance Event has occurred, the Corporation shall give prompt
notice thereof to each holder of Series A Convertible Preferred Stock, and shall
be deemed "in noncompliance" until such time as the President or the Chief
Financial Officer of the Corporation shall have certified and delivered by hand
or by first class mail, postage prepaid, or by telex to non-U.S. residents,
addressed to each holder of Series A Convertible Preferred Stock at the address
of such holder as shown on the books of the Corporation, notice that the
condition underlying such Noncompliance Event is cured.
8. Amendments. No provision of these terms of the Series A Convertible
Preferred Stock may be amended, modified or waived without the written consent
or affirmative vote of the holders of at least two-thirds of the
then-outstanding shares of Series A Convertible Preferred Stock.
FIFTH. In furtherance of and not in limitation of powers conferred by
statute, it is further provided that:
(a) Subject to the limitations and exceptions, if any,
contained in the by-laws of the Corporation, the by-laws may be adopted, amended
or repealed by the Board of Directors of the Corporation.
(b) Elections of directors need not be by written ballot.
<PAGE> 18
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(c) Subject to any applicable requirements of law, the books
of the Corporation may be kept outside the State of Delaware at such location as
may be designated by the Board of Directors or in the by-laws of the
Corporation.
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: The Corporation shall indemnify each person who at any time
is, or shall have been a director or officer of the Corporation, and is
threatened to be or is made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is, or was, a director or officer
of the Corporation, or served at the request of the Corporation as a director,
officer, employee, trustee, or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement incurred in connection
with any such action, suit or proceeding to the maximum extent permitted by the
General Corporation Law of the State of Delaware. The foregoing right of
indemnification shall in no way be exclusive of any other rights of
indemnification to which any such director or officer may be entitled, under any
by-law, agreement, vote of directors or stockholders or otherwise. No amendment
to or repeal of the provisions of this paragraph shall deprive a person of the
benefit of this paragraph with respect to any act or failure to act of such
director occurring prior to such amendment or repeal.
EIGHTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders of this Corporation, as the case may be,
and also on this Corporation.
<PAGE> 19
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NINTH: To the maximum extent permitted by the General Corporation Law
of the State of Delaware as the same exists or may hereafter be amended, no
director of the Corporation shall be personally liable to the Corporation or to
any of its stockholders for monetary damages arising out of such director's
breach of fiduciary duty as a director of the Corporation. No amendment to or
repeal of the provisions of this paragraph shall apply to or have any effect on
the liability or the alleged liability of any director of the Corporation with
respect to any act or failure to act of such director occurring prior to such
amendment or repeal.
TENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Restated Certificate or Incorporation, in
the manner now or hereafter prescribed by statute and this Restated Certificate
of Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.
IN WITNESS WHEREOF, said Object Design, Inc. has caused this
certificate to be signed by Eugene Bonte, its Vice President and attested by
John D. Patterson, Jr., its Secretary, this 21st day of December, 1988.
OBJECT DESIGN, INC.
By: /s/ Eugene Bonte
-------------------------------
Vice President
ATTEST:
By: /s/ John D. Patterson
-------------------------------
Secretary
<PAGE> 20
EXHIBIT 3.1
FILED
JUN 29, 1990
/s/ MICHAEL HARKINS
SECRETARY OF STATE
12 NOON
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
OBJECT DESIGN, INC.
Object Design, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That the following amendment to the Restated Certificate of
Incorporation of Object Design, Inc. (the "Corporation") has been duly adopted
in accordance with the provisions of Section 242 and Section 228 of the Delaware
General Corporation Law:
That the Certificate of Incorporation of the Corporation be amended by
deleting the old Article Fourth and inserting a new Article Fourth in its stead
which shall be and read as follows in its entirety:
"FOURTH: The total number of shares of capital stock which the
Corporation shall have the authority to issue shall be 10,300,000 common shares,
having a par value of $.001 per share, amounting to an aggregate par value of
$10,300 and 7,267,857 shares of Preferred Stock having a par value of $.01 per
share amounting to an aggregate par value of $72,678.57.
The voting power, preferences and relative participating, optional or
other special rights and the qualifications, limitations or restrictions of the
Preferred Stock are set forth as follows:
1. Number of Shares. 2,750,000 shares of the Preferred Stock shall be
designated and known as "Series A Convertible Preferred Stock" and 4,517,857
shares of the Preferred Stock shall be designated and known as "Series B
Convertible Preferred Stock". Unless otherwise specifically designated, the term
<PAGE> 21
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"Preferred Stock" refers collectively to Series A Convertible Preferred Stock
and Series B Convertible Preferred Stock.
2. Voting
2A. General. Except as may be otherwise provided in these terms of the
Preferred Stock or by law, the Preferred Stock shall vote together with the
Common Stock as a single class on all actions to be taken by the stockholders of
the Corporation. Each share of Preferred Stock shall entitle the holder thereof
to such number of votes per share on each such action as shall equal the number
of shares of Common Stock (including fractions of a share) into which each share
of Preferred Stock is then convertible.
2B. Board Size. The Corporation shall not, without the written consent
or affirmative vote of the holders of at least two-thirds of the then
outstanding shares of Preferred Stock, given in writing or by vote at a meeting,
consenting or voting (as the case may be) separately as a class, change the
number of directors constituting the Board of Directors to a number other than
seven (7).
2C. Board Seats. The holders of the Preferred Stock shall be entitled
to vote together with the Common Stock as a single class for the election of
each of the directors of the Corporation. Notwithstanding the foregoing or
anything else to the contrary provided in the Certificate of Incorporation, upon
the occurrence of any Noncompliance Event (as such term is defined in
subparagraph 7B) and continuing for so long as the Corporation remains in
noncompliance (as defined in subparagraph 7B), the holders of the Preferred
Stock, voting as a separate class, shall be entitled to elect a majority of the
directors of the Corporation, with the remaining directors of the Corporation to
be elected as set forth in the first sentence of this subparagraph 2C. A vacancy
in any directorship elected by the holders of the Preferred Stock, voting as a
separate class, shall be filled only by vote or written consent of the holders
of the Preferred Stock, and a vacancy in any directorship elected jointly by the
holders of the Preferred Stock and all other classes and series of stock of the
Corporation, voting together as a single class, shall be filled only by vote or
written consent of the Preferred Stock and all other classes and series of stock
of the Corporation, as provided above. At any meeting (or in a written consent
in lieu thereof) held for the purpose of electing directors, the presence in
person or by proxy (or the written consent) of the holders of a majority of the
shares of Preferred Stock then outstanding shall constitute a quorum of the
Preferred Stock for the election of directors to be elected solely by the
holders of the Preferred Stock.
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3. Dividends.
3A. General. The holders of the Preferred Stock shall be entitled to
receive, as and when declared by the Board of Directors out of funds legally
available therefor, dividends at the same rate as dividends (other than
dividends paid in additional shares of Common Stock) are paid with respect to
the Common Stock (treating each share of Preferred Stock as being equal to the
number of shares of Common Stock (including fractions of a share) into which
each share of Preferred Stock is then convertible). In addition, the holders of
the Preferred Stock may from time to time be entitled, pursuant to the terms of
subparagraph 3B below, to certain cumulative dividends, and pursuant to the
terms of paragraph 7 below, to certain "Noncompliance Dividends," as that term
is defined in subparagraph 7A, as well as to any other dividends declared by the
Board of Directors on the outstanding shares of Preferred Stock out of funds
legally available therefor. All dividends on Preferred Stock shall be paid on a
pro-rata basis (except such Noncompliance Dividends as are payable solely on
Series A Convertible Preferred Stock or Series B Convertible Preferred Stock, as
the case may be, pursuant to subparagraph 7A).
3B. Accruing Dividends. In each year commencing on June 29, 1990, the
holders of Preferred Stock shall be entitled to receive out of funds legally
available therefor, as and when declared by the Board of Directors, dividends at
the rate of $.10 per share in the case of Series A Convertible Preferred Stock
and $.14 per share in the case of Series B Convertible Preferred Stock (such
price subject to equitable adjustment in the event of any stock dividend, stock
split, combination, reclassification or other similar event), compounded at the
rate of 10% per share per annum. Such dividends shall accrue from day to day,
whether or not earned or declared, and shall be cumulative; provided, however,
that except as provided in paragraph 4 hereto and under the terms of an Amended
and Restated Preferred Stock Redemption Agreement dated June 1990, the
Corporation shall be under no obligation to pay such accruing dividends unless
so declared by the Board of Directors.
3C. Restrictions. Unless all accrued but unpaid dividends on each
series of Preferred Stock shall have been paid or shall have been declared and a
sum sufficient for the payment thereof set apart, (i) no dividend shall be paid
or declared, and no distribution shall be made, on any Common Stock, other than
a dividend or other distribution payable solely in the form of additional shares
of Common Stock, and (ii) no shares of Common Stock shall be purchased, redeemed
or acquired by the Company and no amounts shall be paid for the purchase,
redemption or acquisition thereof. Anything herein to the contrary
notwithstanding, the restrictions set forth in this Paragraph 3C shall not apply
to (i) the repurchase of shares of Common Stock from former employees, officers,
directors or other providers of
<PAGE> 23
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services to the Corporation who acquired such shares directly from the
Corporation, if each such purchase is made pursuant to contractual rights held
by the Corporation relating to the termination of employment or services of such
former employees, officers, directors or other providers of services to the
Corporation and the purchase price does not exceed the original issue price
paid by such person to the Corporation for such shares; and (ii) repurchase of
shares of Common Stock pursuant to a certain Stockholders' Agreement dated June
1990 by and among the Company and the parties thereto (the "Stockholders'
Agreement").
4. Liquidation. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the Preferred
Stock shall first be entitled, before any distribution or payment is made upon
any stock ranking on liquidation, dissolution or winding up, junior to the
Preferred Stock, including the Common Stock, to be paid, out of assets legally
available therefor, an amount equal to the greater of:
(i) $1.00 per share in the case of the Series A Convertible
Preferred Stock and $1.40 per share in the case of the Series B
Convertible Preferred Stock, plus, in each case, all accrued and unpaid
dividends thereon, whether or not earned or declared (including all
accrued and unpaid Noncompliance Dividends, if any) computed to the
date payment thereof is made available; or
(ii) such amount per share of Preferred Stock as would have been
payable had each such share been converted to Common Stock immediately
prior to such event of liquidation, dissolution or winding up pursuant
to the provisions of Section 6 hereof.
Such amount payable with respect to one share of Preferred Stock under
this Paragraph 4 shall sometimes be referred to as the "Liquidation Preference
Payment" and with respect to all shares of Preferred Stock shall sometimes be
referred to as the "Liquidation Preference Payments." If upon such liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the assets to be distributed among the holders of Preferred Stock shall be
insufficient to permit payment in full to the holders of Preferred Stock of the
Liquidation Preference Payments, then the entire assets of the Corporation to be
so distributed shall be distributed ratably among the holders of Preferred Stock
according to the respective amounts which would be payable on or with respect to
the shares of Preferred Stock held by them upon such distribution if all amounts
payable on or with respect to said shares were paid in full. Written notice of
such liquidation, dissolution or winding up, stating a payment date, the place
where said payments shall be made, the aggregate amount to be paid to each
holder of Preferred Stock, and the alternate amount which would be paid to each
such holder if all
<PAGE> 24
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outstanding shares of Preferred Stock were to be converted into shares of Common
Stock prior to the payment date, shall be given by mail, postage prepaid, or by
telex to non-U.S. residents, not less than 20 days prior to the payment date
stated therein, to the holders of record of Preferred Stock, such notice to be
addressed to each such holder at its address as shown by the records of the
Corporation. The consolidation or merger of the Corporation into or with any
other entity or entities which results in the exchange of outstanding securities
of the Corporation for securities or other consideration issued or paid or
caused to be issued or paid by any such entity or entities or affiliate thereof,
and the sale or transfer by the Corporation of all or substantially all its
assets, shall be deemed to be a liquidation, dissolution or winding up of the
Corporation within the meaning of the provisions of this paragraph 4, unless the
holders of all outstanding shares of the Corporation's voting stock immediately
prior to such transaction or series of transactions hold, immediately following
the consummation of such transaction or series of transactions, more than
two-thirds of the voting stock of such entity or entities or affiliate thereof,
or of the transferee of the assets of the Corporation, as the case may be,
provided, however, that each holder of Preferred Stock shall have the right to
elect to receive the benefits of the provisions of subparagraph 6G hereof in
lieu of receiving payment in liquidation, dissolution or winding up of the
Corporation pursuant to this Paragraph 4. For purposes hereof, the Common Stock
shall rank on liquidation, dissolution or winding up of the Corporation, junior
to the Preferred Stock.
5. Restrictions. At any time when shares of Preferred Stock are
outstanding, except where the vote or written consent of the holders of a
greater number of shares of stock of the Corporation is required by law or by
the Certificate of Incorporation and in addition to any other vote required by
law or the Certificate of Incorporation, without the written consent or
affirmative vote of the holders of at least two-thirds of the then-outstanding
shares of each series of Preferred Stock, consenting separately, the Corporation
will not:
5A. Create or authorize the creation of any additional class or series
of shares of stock, or reclassify the shares of any existing class or series of
stock, unless the same ranks junior to the Preferred Stock as to the
distribution of assets on the liquidation, dissolution or winding up of the
Corporation, or increase the authorized amount of the Preferred Stock or
increase the authorized amount of any additional class or series of shares of
stock unless the same ranks junior to the Preferred Stock as to the
distribution of assets on the liquidation, dissolution or winding up of the
Corporation and as to the payment of dividends, or create or authorize any
obligation or security convertible into shares of Preferred Stock or into
shares of any other class or series of stock unless the same ranks junior to
the Preferred Stock as to the distribution of assets on the liquidation,
<PAGE> 25
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dissolution or winding up of the Corporation and as to the payment of dividends,
whether any such creation, authorization or increase shall be by means of
amendment to the Certificate of Incorporation or by merger, consolidation or
otherwise;
5B. Consent to any liquidation, dissolution or winding up of the
Corporation or consolidate or merge into or with any other entity or entities,
or sell or transfer all or substantially all its assets, unless the holders of
the outstanding shares of the Corporation's voting stock immediately prior to
such transaction hold, immediately following the consummation of such
transaction, two-thirds or more of the voting stock of the surviving entity or
entities or affiliates thereof, or of the transferee of the assets of the
Corporation, as the case may be;
5C. Sell or transfer more than ten percent (10%) of the assets of the
Corporation within any 12-month period, other than in the ordinary course of
business;
5D. Amend, alter or repeal its Certificate of Incorporation or
By-laws;
5E. Purchase or set aside any sums for the purchase of, or pay any
dividend or make any distribution on, any shares of stock other than the
Preferred Stock, except for (i) dividends or other distributions payable on the
Common Stock solely in the form of additional shares of Common Stock; (ii) the
purchase of shares of Common Stock from former employees, officers, directors or
other providers of services to the Corporation who acquired such shares directly
from the Corporation, if each such purchase is made pursuant to contractual
rights held by the Corporation relating to the termination of employment or
services of such former employees, officers, directors or other providers of
services to the Corporation and the purchase price does not exceed the original
issue price paid by such person to the Corporation for such shares; and (iii)
repurchase of shares of Common Stock pursuant to the Stockholders' Agreement.
5F. Redeem or otherwise acquire any shares of Preferred Stock except
pursuant to one or more written agreements to which the Corporation and all of
the holders of Preferred Stock, are parties, or pursuant to a purchase offer
made pro rata to all holders of the shares of Preferred Stock on the basis of
the aggregate number of outstanding shares of Preferred Stock then held by each
such holder.
6. Conversions. The holders of shares of Preferred Stock shall have the
following conversion rights:
6A. Conversion Events.
<PAGE> 26
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6A(1) Optional Conversion. Subject to the terms and conditions of this
paragraph 6, the holder of any share or shares of Preferred Stock shall have the
right, at its option at any time, to convert any such shares of Preferred Stock
(except that upon any liquidation, voluntary or involuntary dissolution, or
winding-up of the Corporation the right of conversion shall terminate at the
close of business on the business day fixed for payment of the amount
distributable on the Preferred Stock) into such number of fully paid and
nonassessable shares of Common Stock as is obtained by (i) multiplying the
number of shares of Preferred Stock so to be converted by $1.00 in the case of
Series A Convertible Preferred Stock and $1.40 in the case of Series B
Convertible Preferred Stock and (ii) dividing the result by the conversion price
of $1.00 in the case of Series A Convertible Preferred Stock and $1.40 in the
case of Series B Convertible Preferred Stock or, in case an adjustment of
such price has taken place pursuant to the further provisions of this paragraph
6, then by the conversion price as last adjusted and in effect at the date any
share or shares of Preferred Stock are surrendered for conversion (such price,
or such price as last adjusted, being referred to as the "Conversion Price").
Such rights of conversion shall be exercised by the holder thereof by giving
written notice to the Corporation that the holder elects to convert a stated
number of shares of Preferred Stock into Common Stock and by surrender of a
certificate or certificates for the shares so to be converted to the Corporation
at its principal office (or such other office or agency of the Corporation as
the Corporation may designate by notice in writing to the holders of the
Preferred Stock) at any time during its usual business hours on the date set
forth in such notice, together with a statement of the name or names (with
address) in which the certificate or certificates for shares of Common Stock
shall be issued.
6A(2) Mandatory Conversion. The outstanding shares of the Series A
Convertible Preferred Stock and the Series B Convertible Preferred Stock, as the
case may be, shall automatically and without any further action on the part of
the Corporation convert into shares of Common Stock effective upon the earlier
to occur of (i) such time as the Corporation shall have issued an aggregate of
at least two-thirds of the total number of shares of Common Stock which were
issued or issuable, upon conversion of the shares of Series A Convertible
Preferred Stock and Series B Convertible Preferred Stock, as the case may be, as
of the date of a certain Series B Convertible Preferred Stock Purchase Agreement
by and among the Company and the parties thereto (the "Series B Purchase
Agreement"), as such number shall have been adjusted from time to time in the
event of any stock dividend, stock split, combination, reclassification or other
similar event; or (ii) the closing of a sale of shares of Common Stock by the
Corporation pursuant to an underwritten public offering in which (a) the
aggregate gross proceeds to the Corporation shall be at least $10,000,000, and
(b) the price per
<PAGE> 27
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share paid by the public, net of underwriting discounts and commissions, shall
be at least $2.50 (subject to adjustment in the event of any stock dividend,
stock split, combination, reclassification or other similar event).
6B. Issuance of Certificates; Time Conversion Effected. Promptly upon
(1) the happening of either event described in subparagraph 6A(2) or the receipt
by the Corporation of the written notice referred to in subparagraph 6A(1), and
(2) the surrender of the certificate or certificates for the share or shares of
Preferred Stock to be converted, the Corporation shall issue and deliver, or
cause to be issued and delivered, to the holder, registered in such name or
names as such holder may direct, a certificate or certificates for the number of
whole shares of Common Stock issuable upon the conversion of such share or
shares of Preferred Stock. To the extent permitted by law, such conversion shall
be deemed to have been effected and the Conversion Price shall be determined as
of the close of business on the date on which such written notice shall have
been received by the Corporation, or, in the case of a mandatory conversion
under subparagraph 6A(2), on the date of occurrence of either event specified in
such subparagraph, and at such time the rights of the holder of such share or
shares of Preferred Stock shall cease, and the person or persons in whose name
or names any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares of Common Stock represented thereby.
6C. Partial Conversion; Dividends; Fractional Shares. In case the
number of shares of Preferred Stock represented by the certificate or
certificates surrendered pursuant to subparagraph 6A(1) exceeds the number of
shares to be converted, the Corporation shall, upon such conversion, execute and
deliver to the holder, at the expense of the Corporation, a new certificate or
certificates for the number of shares of Preferred Stock represented by the
certificate or certificates surrendered which are not to be converted. At the
time of each conversion of shares of Preferred Stock pursuant to this Paragraph
6, the Corporation shall pay, out of funds legally available therefor, in cash
an amount equal to all dividends, declared but unpaid, and any Noncompliance
Dividends, on the shares of Preferred Stock surrendered for conversion to the
date upon which such conversion is deemed to take place as provided in
subparagraph 6B; provided, that, any holder of shares of Preferred Stock may
elect, at the time such shares are surrendered for conversion or at any other
time prior to conversion, to take payment for all declared but unpaid dividends
and any Noncompliance Dividends on such shares, if any, in shares of Common
Stock rather than in cash, with the number of shares of Common Stock issuable in
lieu of such cash payment to be determined by dividing the aggregate amount of
such declared but unpaid dividends and Noncompliance Dividends by the Conversion
Price then in effect for the shares of Preferred Stock
<PAGE> 28
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held by such holder with respect to which such declared but unpaid dividends and
Noncompliance Dividends shall be payable. No fractional shares shall be issued
upon conversion of Preferred Stock into Common Stock or upon election to take
shares of Common Stock in lieu of cash for declared but unpaid dividends and
Noncompliance Dividends, and no payment or adjustment at the time of such
conversion or election shall be made by the Company on account of any
previously-declared cash dividends on the Common Stock. In lieu of delivering
any such fractional share of Common Stock, the Corporation shall pay an amount
in cash equal to the current market price of such fractional share as determined
in good faith by the Board of Directors of the Corporation.
6D. Adjustment of Price Upon Issuance of Common Stock. Except as
provided in subparagraph 6E, if and whenever the Corporation shall issue or
sell, or is, in accordance with subparagraphs 6D(1) through 6D(8), deemed to
have issued or sold, any shares of Common Stock for a consideration per share
less than the Conversion Price in effect for either or both of the Series A
Convertible Preferred Stock and the Series B Convertible Preferred Stock
immediately prior to the time of such issue or sale (a "Dilutive Offering"),
then in each such case, forthwith upon such issue or sale, such Conversion Price
for the Series A Convertible Preferred Stock or Series B Convertible Preferred
Stock or both, as the case may be, shall be reduced to the price determined by
dividing (i) an amount equal to the sum of (a) the number of shares of Common
Stock outstanding immediately prior to such issue or sale multiplied by the then
existing Conversion Price for the Series A Convertible Preferred Stock or Series
B Convertible Preferred Stock, as the case may be, and (b) the consideration, if
any, received by the Corporation upon such issue or sale, by (ii) the total
number of shares of Common Stock outstanding immediately after such issue or
sale. Notwithstanding the foregoing, if the Company shall issue or sell or is,
in accordance with subparagraphs 6D(1) through 6D(8), deemed to have issued or
sold, any shares of Common Stock for a consideration per share less than the
Conversion Price for the Series B Convertible Preferred Stock in effect
immediately prior to such sale, the Conversion Price in effect for the Series B
Convertible Preferred Stock shall be reduced to equal the greater of $1.00 or
such consideration per share, provided, that if such consideration per share is
less than $1.00, the Conversion Price shall first be reduced to $1.00 in
accordance with this sentence and shall thereafter be reduced as otherwise
provided in this Section 6.
Notwithstanding anything to the contrary set forth in Section 6 hereof, no
adjustment shall be made to the Conversion Price of the Series A Convertible
Preferred Stock in the event that the Corporation shall issue or sell, or is, in
accordance with subparagraphs 6D(1) through 6D(8), deemed to have issued or
sold any shares of Common Stock solely at a price per share equal to or greater
than the Conversion Price for the Series A
<PAGE> 29
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Convertible Preferred Stock but less than the Conversion Price for the Series B
Convertible Preferred Stock.
For purposes of this subparagraph 6D, the following subparagraphs 6D(1)
to 6D(8) shall also be applicable:
6D(1) Issuance of Rights or Options. In case at any time the
Corporation shall in any manner grant (whether directly or by
assumption in a merger or otherwise) any warrants or other rights to
subscribe for or to purchase, or any options for the purchase of,
Common Stock or any stock or security convertible into or exchangeable
for Common Stock (such warrants, rights or options being called
"Options" and such convertible or exchangeable stock or securities
being called "Convertible Securities") whether or not such Options or
the right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock
is issuable upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities (determined by dividing (i) 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 the 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 upon the issue or
sale of such Convertible Securities and upon the conversion or exchange
thereof, by (ii) 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) shall be less than the Conversion Price of the Series
A Convertible Preferred Stock or Series B Convertible Preferred Stock,
as the case may be, or both, 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 issuable upon the exercise of such Options shall be deemed
to have been issued for such price per share as of the date of granting
of such Options or the issuance of such Convertible Securities and
thereafter shall be deemed to be outstanding. Except as otherwise
provided in subparagraph 6D(3), no adjustment of the Conversion Price
shall be made upon the actual issue of such Common Stock or of such
Convertible Securities upon exercise of such Options or upon the actual
issue of such Common Stock upon conversion or exchange of such
Convertible Securities.
6D(2) Issuance of Convertible Securities. In case the
Corporation shall in any manner issue (whether directly or by
assumption in a merger or otherwise) or sell any Convertible
Securities, whether or not the rights to exchange or
<PAGE> 30
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convert any such Convertible Securities are immediately exercisable,
and the price per share for which Common Stock is issuable upon such
conversion or exchange (determined by dividing (i) 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, by (ii) the total
maximum number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities) shall be less than the
Conversion Price of the Series A Convertible Preferred Stock or Series
B Convertible Preferred Stock or both, as the case may be, in effect
immediately prior to the time of such issue or sale, then the total
maximum number of shares of Common Stock issuable upon conversion or
exchange of all such Convertible Securities shall be deemed to have
been issued for such price per share as of the date of the issue or
sale of such Convertible Securities and thereafter shall be deemed to
be outstanding as of such date, provided that (a) except as otherwise
provided in subparagraph 6D(3), no adjustment of the Conversion Price
of the Series A Convertible Preferred Stock or Series B Convertible
Preferred Stock or both, as the case may be, shall be made upon the
actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities and (b) if any such issue or sale of such
Convertible Securities is made upon exercise of any Options to purchase
any such Convertible Securities for which adjustments of the Conversion
Price of the Series A Convertible Preferred Stock or Series B
Convertible Preferred Stock or both, as the case may be, have been or
are to be made pursuant to other provisions of this subparagraph 6D, no
further adjustment of the Conversion Price of the Series A Convertible
Preferred Stock or Series B Convertible Preferred Stock or both, as the
case may be, shall be made by reason of such issue or sale.
6D(3) Change in Option Price or Conversion Rate. Upon the
happening of any of the following events, namely, if the purchase price
provided for in any Option referred to in subparagraph 6D(1); the
additional consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in subparagraph
6D(1) or 6D(2); or the rate at which Convertible Securities referred to
in subparagraph 6D(1) or 6D(2) are convertible into or exchangeable for
Common Stock shall change at any time (including, but not limited to,
changes under or by reason of provisions designed to protect against
dilution), the Conversion Price of the Series A Convertible Preferred
Stock or Series B Convertible Preferred Stock or both, as the case may
be, in effect at the time of such event shall forthwith be readjusted
to the Conversion Price which would have been in effect at such
time had such Options or Convertible Securities still outstanding
<PAGE> 31
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provided for such changed purchase price, additional consideration or
conversion rate, as the case may be, at the time initially granted,
issued or sold, but only if as a result of such adjustment the
Conversion Price then in effect hereunder is thereby reduced; and on
the expiration of any such Option or the termination of any such right
to convert or exchange such Convertible Securities, the Conversion
Price then in effect hereunder shall forthwith be increased to the
Conversion Price which would have been in effect at the time of such
expiration or termination had such Option or Convertible Securities, to
the extent outstanding immediately prior to such expiration or
termination, never been issued.
6D(4) Stock Dividends. In case the Corporation shall declare a
dividend or make any other distribution upon any stock of the
Corporation payable in Common Stock (except for dividends or
distributions upon the Common Stock), Options or Convertible
Securities, any Common Stock, Options or Convertible Securities, as the
case may be, issuable in payment of such dividend or distribution shall
be deemed to have been issued or sold without consideration.
6D(5) Consideration for Stock. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to be the
amount received by the Corporation therefor, without deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith.
In case any shares of Common Stock, Options or Convertible Securities
shall be issued or sold for a consideration other than cash, the amount
of the consideration other than cash received by the Corporation shall
be deemed to be the fair value of such consideration as determined in
good faith by the Board of Directors of the Corporation, without
deduction of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith.
In case any Options shall be issued in connection with the issue and
sale of other securities of the Corporation, together comprising one
integral transaction in which no specific consideration is allocated to
such Options by the parties thereto, such Options shall be deemed to
have been issued for such consideration as determined in good faith by
the Board of Directors of the Corporation.
6D(6) Record Date. In case the Corporation shall set a record
date for the determination of the holders of its Common Stock for the
purpose of entitling them (i) to receive a dividend or other
distribution payable in Common Stock, Options or Convertible Securities
or (ii) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have
<PAGE> 32
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been issued or sold upon the declaration of such dividend or the making
of such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
6D(7) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by
or for the account of the Corporation, and the disposition of any such
shares shall be considered an issue or sale of Common Stock for the
purpose of this subparagraph 6D.
6D(8) Adjustments for Failure of Participation.
Notwithstanding anything contained in this subparagraph 6D to the
contrary, the rights of any holder of Preferred Stock to the benefits
of this paragraph 6D shall be subject to the limitations contained in
this subparagraph 6D(8) if such holder has failed to participate in any
offering which is a Dilutive Offering with respect to such holder's
shares by acquiring in such Dilutive Offering such number of shares as
shall equal the product of the number of shares actually offered in the
Dilutive Offering to all holders of Preferred Stock, as determined by
the Board of Directors, multiplied by a fraction: (a) the numerator of
which is the number of shares of Preferred Stock with respect to which
the offering is a Dilutive Offering as is held by such holder at the
time of such Dilutive Offering, and (b) the denominator of which is the
total number of shares of the Preferred Stock then outstanding with
respect to which the offering is a Dilutive Offering (the "Pro Rata
Share"). If any holder of Preferred Stock shall fail to purchase its
Pro Rata Share of any such Dilutive Offering, then such holder's rights
under this subparagraph 6D shall terminate and shall no longer be of
any force and effect as to the shares of Preferred Stock with respect
to which the offering was a Dilutive Offering; provided, however, that
no holder of shares of Preferred Stock shall be required to participate
to the extent of all or any part of such holder's Pro Rata Share of a
Dilutive Offering if and to the extent such participation would violate
any statute, rule or regulation, or order of any court or governmental
agency applicable to such holder, and such holder furnishes to the
Corporation a certificate, signed by an executive officer or general
partner of such holder, as the case may be, and an opinion of counsel,
each to such effect. The Corporation, the Board of Directors and the
holders of the Preferred Stock shall take all necessary actions to
designate a new series of Preferred Stock on any occasion that any
holder of Preferred Stock shall fail to purchase its Pro Rata Share of
any Dilutive Offering. Shares of such holder's Preferred Stock with
respect to which the offering is a Dilutive Offering shall be
immediately and automatically converted into shares of a newly-created
series of Preferred Stock (the "New Preferred Stock"); provided that
<PAGE> 33
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the terms of any series of New Preferred Stock shall be identical in
all respects to the terms of the Series A Convertible Preferred Stock
or Series B Convertible Preferred Stock, as the case may be,
except that (i) the Conversion Price of the New Preferred Stock shall
be the Conversion Price in effect for the Series A Convertible
Preferred Stock or Series B Convertible Preferred Stock, as the case
may be, immediately prior to such Dilutive Offering, and (ii) any
holder of shares of such New Preferred Stock shall not be entitled
to receive the benefits of any adjustments to the Conversion Price
pursuant to this subparagraph 6D with respect to any future Dilutive
Offering by the Corporation. Except as otherwise required by law, all
series of New Preferred Stock shall vote together as a single series
with the Series A Convertible Preferred Stock and Series B Convertible
Preferred Stock, as the case may be, relating thereto, on all matters
submitted to the stockholders for a vote or a written consent,
including but not limited to the election of a majority of directors
of the Corporation by the Preferred Stock pursuant to subparagraph 2C.
For the purposes of paragraphs 3, 4, 5, 6A, 6B, 6C, 6E, 6F, 6G, 6I, 6J,
6K, 6L, 6M, 6N, 6O, 6P, 7 and 8, the terms "Preferred Stock," "Series A
Convertible Preferred Stock," and "Series B Convertible Preferred
Stock" shall include any series of New Preferred Stock relating
thereto issued by the Corporation pursuant to this subparagraph 6D(8).
6E. Certain Issues of Common Stock Excepted. Anything herein
to the contrary notwithstanding, the Corporation shall not be required to make
any adjustment of the Conversion Price in the case of the issuance of (i) up to
an aggregate of 3,000,000 shares (appropriately adjusted to reflect the
occurrence of any event described in subparagraph 6F) of Common Stock or options
or warrants to purchase Common Stock to directors, officers or employees of, or
other providers of service to, the Corporation in connection with their service
as directors, officers or employees of, or providers of services to the
Corporation, which number of shares shall include any shares issued prior to the
issuance of any shares of Preferred Stock, (ii) any shares of Common Stock or
other securities upon conversion of the Series A Convertible Preferred Stock or
Series B Convertible Preferred Stock, or (iii) any shares of New Preferred Stock
in accordance with subparagraph 6D(8).
6F. Subdivision or Combination of Common Stock. In case the
Corporation shall at any time subdivide (by any stock split, stock dividend or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price of the Preferred Stock in effect immediately prior
to such subdivision shall be proportionately reduced, and, conversely, in case
the outstanding shares of Common Stock shall be combined into a smaller number
of shares, the Conversion Price of the Preferred Stock in effect immediately
prior to such combination shall be proportionately increased.
<PAGE> 34
- 15 -
6G. Reorganization or Reclassification. If any capital
reorganization or reclassification of the capital stock of the Corporation shall
be effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Common
Stock, then, as a condition of such reorganization or reclassification, lawful
and adequate provisions shall be made whereby each holder of a share or shares
of Preferred Stock shall thereupon have the right to receive, upon the basis and
upon the terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore receivable upon the conversion of such
share or shares of Preferred Stock, such shares of stock, securities or assets
as may be issued or payable with respect to or in exchange for a number of
outstanding shares of such Common Stock equal to the number of shares of such
Common Stock immediately theretofore receivable upon such conversion had such
reorganization or reclassification not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
such holder to the end that the provisions hereof (including without limitation
provisions for adjustments of the Conversion Price) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise of such conversion rights.
6H. Adjustment of Provisions. If the Corporation grants to the
holders of any class or series of stock of the Corporation any rights relating
to the adjustment of the Conversion Price of such class or series of stock upon
a Dilutive Offering or otherwise, which rights shall be more favorable to the
holders of such class or series of stock than the comparable rights in this
paragraph 6 are to the holders of the Preferred Stock, or which rights shall
grant to the holders of such class or series of stock rights not granted to the
holders of Preferred Stock pursuant to the Certificate of Incorporation of the
Corporation, then such more favorable rights shall be deemed to also apply to
all holders of Preferred Stock.
6I. Notice of Adjustment. Upon any adjustment of the
Conversion Price, then and in each such case the Corporation shall give written
notice thereof, by first class mail, postage prepaid, or by telex to non-U.S.
residents, addressed to each holder of shares of Preferred Stock at the address
of such holder as shown on the books of the Corporation, which notice shall
state the Conversion Price resulting from such adjustment, setting forth in
reasonable detail the method upon which such calculation is based.
6J. Other Notices. In case at any time:
(1) the Corporation shall declare any dividend upon its
Common Stock payable in cash or stock or make any other distribution to
the holders of its Common Stock;
<PAGE> 35
- 16 -
(2) the Corporation shall offer for subscription pro rata
to the holders of its Common Stock any additional shares of stock of
any class or other rights;
(3) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or a
consolidation or merger of the Corporation with or into, or a sale of
all or substantially all its assets to, another entity or entities; or
(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by first
class mail, postage prepaid, or by telex to non-U.S. residents, addressed to
each holder of any shares of Preferred Stock at the address of such holder as
shown on the books of the Corporation, (a) at least 20 days' prior written
notice of the date on which the books of the Corporation shall close or a record
shall be taken for such dividend, distribution or subscription rights or for
determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at least 20
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause (a) shall also specify, in the
case of any such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto and such notice in
accordance with the foregoing clause (b) shall also specify the date on which
the holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be.
6K. Stock to be Reserved. The Corporation will at all times
reserve and keep available out of its authorized Common Stock, solely for the
purpose of issuance upon the conversion of Preferred Stock as herein provided,
such number of shares of Common Stock as shall then be issuable upon the
conversion of all outstanding shares of Preferred Stock. The Corporation
covenants that all shares of Common Stock which shall be so issued shall be duly
and validly issued and fully paid and nonassessable and free from all taxes,
liens and charges with respect to the issue thereof, and, without limiting the
generality of the foregoing, the Corporation covenants that it will from time to
time take all such action as may be requisite to ensure that the par value per
share of the Common Stock is at all times equal to or less than the Conversion
Price in effect at the time. The Corporation will take all such action as may be
necessary to ensure that all such shares of Common Stock may be so issued
without violation of any
<PAGE> 36
- 17 -
applicable law or regulation, or of any requirement of any national securities
exchange or quotation system upon which the Common Stock may be listed. The
Corporation will not take any action which results in any adjustment of the
Conversion Price if the total number of shares of Common Stock issued and
issuable after such action upon conversion of the Preferred Stock would exceed
the total number of shares of Common Stock then authorized by the Certificate of
Incorporation.
6L. No Reissuance of Preferred Stock. Shares of Preferred
Stock which are converted into shares of Common Stock as provided herein shall
be cancelled and shall not be reissued.
6M. Issue Tax. The issuance of certificates for shares of
Common Stock upon conversion of Preferred Stock shall be made without charge to
the holders thereof for any issuance tax in respect thereof, provided that the
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than that of the holder of the Preferred Stock which is being
converted.
6N. Closing of Books. The Corporation will at no time close
its transfer books against the transfer of any Preferred Stock or of any shares
of Common Stock issued or issuable upon the conversion of any shares of
Preferred Stock in any manner which interferes with the timely conversion of
such Preferred Stock, except as may otherwise be required to comply with
applicable securities laws.
6O. Definition of Common Stock. As used in this paragraph 6,
the term "Common Stock" shall mean and include the Corporation's authorized
Common Stock, par value $.001 per share, as constituted on the date of filing of
these terms of the Preferred Stock, and shall also include any capital stock of
any class of the Corporation thereafter authorized which shall neither be
limited to a fixed sum or percentage of par value in respect of the rights of
the holders thereof to participate in dividends nor entitled to a preference in
the distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation; provided that the shares of Common
Stock receivable upon conversion of shares of Preferred Stock shall include only
shares designated as Common Stock of the Corporation on the date of filing of
this instrument, or in case of any reorganization or reclassification of the
outstanding shares thereof, the stock, securities or assets provided for in
subparagraph 6G.
7. Noncompliance.
7A. Remedies. Immediately upon the occurrence of any
Noncompliance Event, as defined below, the holders of the Preferred Stock will
have the following rights, in addition to
<PAGE> 37
- 18 -
all other rights set forth in the Certificate of Incorporation, in any agreement
between such holders and the Corporation, or as otherwise provided by law:
(1) A cumulative dividend (the "Noncompliance Dividend") shall accrue
on a daily basis on all outstanding shares of Preferred Stock to which the
Noncompliance Event applies as set forth in subparagraph 7B, so long as the
Corporation is in noncompliance (as defined below), which such dividend
shall be in addition to the accruing dividends described in subparagraph 3B.
Such dividend shall accrue at the annual rate of $.10 per share in the case
of Series A Convertible Preferred Stock and $.14 per share in the case of
Series B Convertible Preferred Stock for the first 30 days that the
Corporation is in noncompliance, which rate shall increase by $.01 for each
successive 30-day period that the Corporation remains in noncompliance, up
to a maximum annual rate of $.16 per share in the case of Series A
Convertible Preferred Stock and $.22 per share in the case of Series B
Convertible Preferred Stock. Each holder of Preferred Stock to whom any such
dividend is payable may elect to have such dividend paid by the Corporation
in cash or in shares of Common Stock of the Corporation, as provided in
subparagraph 6C.
(2). As provided in subparagraph 2C, the holders of Preferred Stock,
voting as a single class, shall have the right to elect a majority of the
directors of the Corporation.
7B. Noncompliance Event. For the purposes of this Certificate of
Incorporation, a "Noncompliance Event" shall be defined as any one or more of
the following events:
(1) The Corporation has materially breached any one or more of the
provisions of the Series A Convertible Preferred Stock Purchase Agreement
dated December 22, 1988 (the "Series A Purchase Agreement") then in effect
or Article V of the Series B Purchase Agreement with respect to the Series A
Convertible Preferred Stock, or the Series B Purchase Agreement with respect
to the Series B Convertible Preferred Stock the Series B Purchase Agreement
to be referred to collectively herein as the "Purchase Agreements"), or of
any of the other agreements contemplated by the Purchase Agreements and
executed in connection therewith (collectively, the "Ancillary Agreements")
with respect to the shares of Preferred Stock to which such Ancillary
Agreements may apply, in each case as such Ancillary Agreements shall have
been amended, and such breach has continued for 30 days following receipt by
the Corporation of written notice of said breach given by the holders of at
least two-thirds of the outstanding shares of Preferred Stock with respect
to which such covenant or provisions applies;
<PAGE> 38
- 19 -
(2) Any of the Corporation's representations and/or warranties set
forth in the Series A Purchase Agreement with respect to the Series A
Convertible Preferred Stock or the Series B Purchase Agreement with respect
to the Series B Convertible Preferred Stock, or in any one or more of the
Ancillary Agreements with respect to the shares of Preferred Stock to which
such Ancillary Agreement may apply, was not substantially true as of the date
of closing for such Purchase Agreement or Ancillary Agreement and the
Corporation has received written notice of such fact from the holders of at
least two-thirds of the outstanding shares of Preferred Stock with respect to
which such representation and/or warranty applies;
(3) The Corporation has failed to make payment(s) when due for any
dividends, interest and/or mandatory redemption of any securities, where
such payment(s) aggregate over $100,000 and such failure to pay has
continued for thirty (30) days following receipt by the Corporation of
written notice of said failure to pay from the holders of at least
two-thirds of the outstanding shares of Preferred Stock;
(4) The Corporation has been in material default of payment on any
debt agreement under which the Corporation is obligated to pay at least
$100,000 in principal (including any acceleration thereof) and accrued
interest at the time of such default, and such default has continued for
thirty (30) days following receipt by the Corporation of written notice of
said default given by the holders of at least two-thirds of the outstanding
shares of Preferred Stock; or
(5) The Corporation has filed for bankruptcy, made an assignment
for the benefit of creditors, materially compromised its debt with a
material creditor of the Corporation, or suffered acceleration of a material
debt instrument, and the Corporation has received written notice of same
from the holders of at least two-thirds of the outstanding shares of
Preferred Stock.
Once a Noncompliance Event has occurred, the Corporation shall give prompt
notice thereof to each holder of Preferred Stock, and shall be deemed "in
noncompliance" until such time as the President or Chief Financial Officer of
the Corporation shall have certified and delivered by hand or by first class
mail, postage prepaid, or by telex to non-U.S. residents, addressed to each
holder of Preferred Stock at the address of such holder as shown on the books of
the Corporation, notice that the condition underlying such Noncompliance Event
is cured.
8. Amendments. No provisions of these terms of the Preferred Stock may be
amended, modified or waived without the written consent or affirmative note of
the holders of at least two-thirds of the then-outstanding shares of Preferred
Stock, voting separately.
<PAGE> 39
- 20 -
SECOND: Written consent to the adoption of the foregoing amendment of
the Restated Certificate of Incorporation of the Corporation has been given in
accordance with the provisions of Section 228 of the Delaware General
Corporation Law, and written notice of the adoption of said amendment without a
meeting by less than unanimous written consent has been given to those
stockholders who have not consented in writing as provided in said Section 228.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
<PAGE> 40
IN WITNESS WHEREOF, Object Design, Inc. has caused this certificate to
be signed by its President and attested by its Secretary this 29th day of June,
1990.
Object Design, Inc.
By: /s/ Kenneth E. Haskell
-----------------------------
Its President
ATTEST
By: /s/ John D. Patterson
------------------------------
Its Secretary
<PAGE> 41
EXHIBIT 3.1
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 10/09/1990
902825153 - 2164410
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
OBJECT DESIGN, INC.
Object Design, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That the following amendments to the Restated Certificate of
Incorporation of Object Design, Inc. (the "Corporation") have been duly adopted
in accordance with the provisions of Section 242 and Section 228 of the Delaware
General Corporation Law:
That the Restated Certificate of Incorporation of the Corporation be
amended by deleting the first paragraph to Article Fourth and inserting a new
first paragraph to Article Fourth in its stead which shall be and read as
follows in its entirety:
"FOURTH: The total number of shares of capital stock which the
Corporation shall have the authority to issue shall be 10,400,000 common shares,
having a par value of $.001 per share, amounting to an aggregate par value of
$10,400 and 7,325,715 shares of Preferred Stock having a par value of $.01 per
share amounting to an aggregate par value of $73,257.15."
That the Restated Certificate of Incorporation of the Corporation be
further amended by deleting the third paragraph to Article Fourth and inserting
a new third paragraph to Article Fourth in its stead which shall be and read as
follows in its entirety:
<PAGE> 42
"1. Number of Shares. 2,750,000 shares of the Preferred Stock shall be
designated and known as "Series A Convertible Preferred Stock" and 4,575,715
shares of the Preferred Stock shall be designated and known as "Series B
Convertible Preferred Stock." Unless otherwise specifically designated, the term
"Preferred Stock" refers collectively to Series A Convertible Preferred Stock
and Series B Convertible Preferred Stock."
SECOND: Written consent to the adoption of the foregoing amendments of
the Restated Certificate of Incorporation of the Corporation has been given in
accordance with the provisions of Section 228 of the Delaware General
Corporation Law, and written notice of the adoption of said amendments without a
meeting by less than unanimous written consent has been given to those
stockholders who have not consented in writing as provided in said Section 228.
IN WITNESS WHEREOF, Object Design, Inc. has caused this certificate to
be signed by its President and attested by its Secretary this 3rd day of
October, 1990.
Object Design, Inc.
By: /s/ Kenneth E. Marshall
----------------------------
Its President and CEO
ATTEST
By: /s/ John D. Patterson
------------------------
Its Secretary
<PAGE> 43
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
OBJECT DESIGN, INC.
Object Design, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That the following amendment to the Restated Certificate of
Incorporation of Object Design, Inc. (the "Corporation") has been duly
adopted in accordance with the provisions of Section 242 and Section 228
of the Delaware General Corporation Law:
That the Certificate of Incorporation of the Corporation be amended by
deleting the old Article Fourth and inserting a new Article Fourth in its stead
which shall be and read as follows in its entirety:
FOURTH: The total number of shares of capital stock which the
Corporation shall have the authority to issue shall be 13,600,000 common shares,
having a par value of $.001 per share, amounting to an aggregate par value of
$13,600.00 and 10,182,858 shares of Preferred Stock having a par value of $.01
per share amounting to an aggregate par value of $101,828.58.
The voting power, preferences and relative participating, optional or
other special rights and the qualifications, limitations or restrictions of the
Preferred Stock are set forth as follows:
1. Number of Shares. 2,750,000 shares of the Preferred Stock shall be
designated and known as "Series A Convertible Preferred Stock", 4,575,715 shares
of the Preferred Stock shall be designated and known as "Series B Convertible
Preferred Stock" and 2,857,143 shares of the Preferred Stock shall be designated
<PAGE> 44
- 2 -
and known as "Series C Convertible Preferred Stock." Unless otherwise
specifically designated, the term "Preferred Stock" refers collectively to
Series A Convertible Preferred Stock, Series B Convertible Preferred Stock and
Series C Convertible Stock.
2. Voting.
2A. General. Except as may be otherwise provided in these
terms of the Preferred Stock or by law, the Preferred Stock shall vote together
with the Common Stock as a single class on all actions to be taken by the
stockholders of the Corporation. Each share of Preferred Stock shall entitle the
holder thereof to such number of votes per share on each such action as shall
equal the number of shares of Common Stock (including fractions of a share) into
which each share of Preferred Stock is then convertible.
2B. Board Size. The Corporation shall not, without the written
consent or affirmative vote of the holders of at least two-thirds of the then
outstanding shares of Preferred Stock, given in writing or by vote at a meeting,
consenting or voting (as the case may be) separately as a class, change the
number of directors constituting the Board of Directors to a number other than
seven (7), except that the Corporation may increase or decrease the number of
directors constituting the Board of Directors with the consent of a majority of
the members of the Board of Directors designated by the holders of Preferred
Stock pursuant to the Amended and Restated Stockholders' Agreement dated July
1991 by and among the Company and the parties thereto (the "Stockholders'
Agreement").
2C. Board Seats. The holders of the Preferred Stock shall be
entitled to vote together with the Common Stock as a single class for the
election of each of the directors of the Corporation. Notwithstanding the
foregoing or anything else to the contrary provided in the Certificate of
Incorporation, upon the occurrence of any Noncompliance Event (as such term is
defined in subparagraph 7B) and continuing for so long as the Corporation
remains in noncompliance (as defined in subparagraph 7B), the holders of the
Preferred Stock, voting as a separate class, shall be entitled to elect a
majority for the directors of the Corporation, with the remaining directors of
the Corporation to be elected as set forth in the first sentence of this
subparagraph 2C. A vacancy in any directorship elected by the holders of the
Preferred Stock, voting as a separate class, shall be filled only by vote or
written consent of the holders of the Preferred Stock, and a vacancy in any
directorship elected jointly by the holders of the Preferred Stock and all other
classes and series of stock of the Corporation, voting together as a single
class, shall be filled only by vote or written consent of the Preferred Stock
and all other classes and series of stock of the Corporation, as provided above.
At any meeting
<PAGE> 45
- 3 -
(or in a written consent in lieu thereof) held for the purpose of electing
directors, the presence in person or by proxy (or the written consent) of the
holders of a majority of the shares of Preferred Stock then outstanding shall
constitute a quorum of the Preferred Stock for the election of directors to be
elected solely by the holders of the Preferred Stock.
3. Dividends.
3A. General. The holders of the Preferred Stock shall be
entitled to receive, as and when declared by the Board of Directors out of funds
legally available therefor, dividends at the same rate as dividends (other than
dividends paid in additional shares of Common Stock) are paid with respect to
the Common Stock (treating each share for Preferred Stock as being equal to the
number of shares of Common Stock (including fractions of a share) into which
each share of Preferred Stock is then convertible). In addition, the holders of
the Preferred Stock may from time to time be entitled, pursuant to the terms of
subparagraph 3B below, to certain cumulative dividends, and pursuant to the
terms of paragraph 7 below, to certain "Noncompliance Dividend", as that term
is defined in subparagraph 7A, as well as to any other dividends declared by the
Board of Directors on the outstanding shares of Preferred Stock out of funds
legally available therefor. All dividends on Preferred Stock shall be paid on a
pro-rata basis (except such Noncompliance Dividends as are payable solely on
Series A Convertible Preferred Stock or Series B Convertible Preferred Stock or
Series C Convertible Series Stock, as the case may be, pursuant to subparagraph
7A).
3B. Accruing Dividends. In each year commencing on July 25,
1991, the holders of Preferred Stock shall be entitled to receive out of funds
legally available therefor, as and when declared by the Board of Directors,
dividends at the rate of $.10 per share in the case of Series A Convertible
Preferred Stock, $.14 per share in the case of Series B Convertible Preferred
Stock and $.175 per share in the case of Series C Convertible Preferred Stock
(such price subject to equitable adjustment in the event of any stock dividend,
stock split, combination, reclassification or other similar event), compounded
at the rate of 10% per share per annum. Such dividends shall accrue from day to
day, whether or not earned or declared, and shall be cumulative; provided,
however, that except as provided in paragraph 4 hereto and under the terms of an
Amended and Restated Preferred Stock Redemption Agreement dated July 1991 (the
"Redemption Agreement"), the Corporation shall be under an obligation to pay
such accruing dividends unless so declared by the Board of Directors; and
provided, further that the Corporation's obligation to pay such accruing
dividends upon liquidation, pursuant to the terms of the Redemption Agreement or
otherwise shall commence at the end of the first year in which the Corporation
has positive retained earnings.
<PAGE> 46
- 4 -
3C. Restrictions. Unless all accrued but unpaid dividends on
each series of Preferred Stock shall have been paid or shall have been declared
and a sum sufficient for the payment thereof set apart, (i) no dividend shall be
paid or declared, and no distribution shall be made, on any Common Stock, other
than a dividend or other distribution payable solely in the form of additional
shares of Common Stock, and (ii) no shares of Common Stock shall be purchased,
redeemed or acquired by the Company and no amounts shall be paid for the
purchase, redemption or acquisition thereof. Anything herein to the contrary
notwithstanding, the restrictions set forth in this Paragraph 3C shall not apply
to (i) the repurchase of shares of Common Stock from former employees, officers,
directors or other providers of services to the Corporation who acquired such
shares directly from the Corporation, if each such purchase is made pursuant to
contractual rights held by the Corporation relating to the termination of
employment or services of such former employees, officers, directors or other
providers of services to the Corporation and the purchase price does not exceed
the original issue price by such person to the Corporation for such shares; (ii)
repurchase of shares of Common Stock pursuant to the Stockholders' Agreement and
(iii) repurchase of shares of Common Stock pursuant to right of first refusal
agreements executed in connection with options granted under the Corporation's
1989 Incentive and Non-Qualified Stock Option Plan (the "Plan").
4. Liquidation. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the Preferred
Stock shall first by entitled, before any distribution or payment is made upon
any stock ranking on liquidation, dissolution or winding up, junior to the
Preferred Stock, including the Common Stock, to be paid, out of assets legally
available therefor, an amount equal to the greater of:
(i) $1.00 per share in the case of the Series A Convertible
Preferred Stock, $1.40 per share in the case of the Series B
Convertible Preferred Stock and $1.75 per share in the case of the
Series C Convertible Preferred Stock, plus, in each case, all
accrued and unpaid dividends thereon, whether or not earned or declared
(including all accrued and unpaid Noncompliance Dividends, if any,)
computed to the date payment thereof is made available; or
(ii) such amount per share of Preferred Stock as would have
been payable had each such share been converted to Common Stock
immediately prior to such event of liquidation, dissolution or winding
up pursuant to the provisions of Section 6 hereof.
Such amount payable with respect to one share of Preferred Stock under
this Paragraph 4 shall sometimes referred to as the "Liquidation Preference
Payment" and with respect to all shares
<PAGE> 47
- 5 -
of Preferred Stock shall sometimes be referred to as the "Liquidation Preference
Payments". If upon such liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the assets to be distributed
among the holders of Preferred Stock shall be insufficient to permit payment in
full to the holders of Preferred Stock of the Liquidation Preference Payments,
then the entire assets of the Corporation to be so distributed shall be
distributed ratably among the holders of Preferred Stock according to the
respective amounts which would be payable on or with respect to the shares of
Preferred Stock held by them upon such distribution if all amounts payable on or
with respect to said shares were paid in full. Written notice of such
liquidation, dissolution or winding up, stating a payment date, the place where
said payments shall be made, the aggregate amount to be paid to each holder of
Preferred Stock, and the alternate amount which would be paid to each such
holder if all outstanding shares of Preferred Stock were to be converted into
shares of Common Stock prior to the payment date, shall be given by mail,
postage prepaid, by recorded delivery service or by telex to non-U.S. residents,
not less than 20 days prior to the payment date stated therein, to the holders
of record of Preferred Stock, such notice to be addressed to each such holder at
its address as shown by the records of the Corporation. The consolidation or
merger of the Corporation into or with any other entity or entities which
results in the exchange of outstanding securities of the Corporation for
securities or other consideration issued or paid or caused to be issued or paid
by any such entity or entities or affiliate thereof, and the sale or transfer by
the Corporation of all or substantially all its assets, shall be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of
the provisions of this paragraph 4, unless the holders of all outstanding shares
of the Corporation's voting stock immediately prior to such transaction or
series of transactions hold, immediately following the consummation of such
transaction or series of transactions, more than two-thirds of the voting stock
of such entity or entities or affiliate thereof, or of the transferee of the
assets of the Corporation, as the case may be, provided, however, that each
holder of Preferred Stock shall have the right to elect to receive the benefits
of the provisions of subparagraph 6G hereof in lieu of receiving payment in
liquidation, dissolution or winding up of the Corporation pursuant to this
Paragraph 4. For purposes hereof, the Common Stock shall rank on liquidation,
dissolution or winding up of the Corporation, junior to the Preferred Stock.
5. Restrictions. At any time when shares of Preferred Stock are
outstanding, except where the vote or written consent of the holders of a
greater number of shares of stock of the Corporation is required by law or by
the Certificate of Incorporation and in addition to any other vote required by
law or the Certificate of Incorporation, without the written consent or
affirmative vote of the holders of at least two-thirds of the
<PAGE> 48
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then-outstanding shares of each series of Preferred Stock, consenting
separately, the Corporation will not:
5A. Create or authorize the creation of any additional class
or series of shares of stock, or reclassify the shares of any existing class or
series of stock, unless the same ranks junior to the Preferred Stock as to the
distribution of assets on the liquidation, dissolution or winding up of the
Corporation, or increase the authorized amount of the Preferred Stock or
increase the authorized amount of any additional class or series of shares of
stock unless the same ranks junior to the Preferred Stock as to the distribution
of assets on the liquidation, dissolution or winding up of the Corporation and
as to the payment of dividends, or create or authorize any obligation or
security convertible into shares of Preferred Stock or into shares of any other
class or series of stock unless the same ranks junior to the Preferred Stock as
to the distribution of assets on the liquidation, dissolution or winding up of
the Corporation and as to the payment of dividends, whether any such creation,
authorization or increase shall be by means of amendment to the Certificate of
Incorporation or by merger, consolidation or otherwise;
5B. Consent to any liquidation, dissolution or winding up of
the Corporation or consolidate or merge into or with any other entity or
entities, or sell or transfer all or substantially all its assets, unless the
holders of the outstanding shares of the Corporation's voting stock immediately
prior to such transaction hold, immediately following the consummation of such
transaction, two-thirds or more of the voting stock of the surviving entity or
entities or affiliates thereof, or of the transferee of the assets of the
Corporation, as the case may be;
5C. Sell or transfer more than ten percent (10%) of the
assets of the Corporation within any 12-month period, other than in the
ordinary course of business;
5D. Amend, alter or repeal its Certificate of Incorporation,
or amend, alter or repeal its By-laws so as to adversely affect a holder
of Preferred Stock;
5E. Purchase or set aside any sums for the purchase of, or pay
any dividend or make any distribution on, any shares of stock other than the
Preferred Stock, except for (i) dividends or other distributions payable on the
Common Stock solely in the form of additional shares of Common Stock; (ii) the
purchase of shares of Common Stock from former employees, officers, directors or
other providers of services to the Corporation who acquired such shares directly
from the Corporation, if each such purchase is made pursuant to contractual
rights held by the Corporation relating to the termination of employment or
services of such former employees, officers, directors or other providers of
services to the Corporation and the purchase price does not
<PAGE> 49
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exceed the original issue price paid by such person to the Corporation for such
shares; (iii) repurchase of shares of Common Stock pursuant to the Stockholders'
Agreement and (iv) repurchase of shares of Common Stock pursuant to right of
first refusal agreements executed in connection with options granted under the
Plan.
5F. Redeem or otherwise acquire any shares of Preferred Stock
except pursuant to one or more written agreements to which the Corporation and
all of the holders of Preferred Stock, are parties, or pursuant to a purchase
offer made pro rata to all holders of the shares of Preferred Stock on the basis
of the aggregate number of outstanding shares of Preferred Stock then held by
each such holder.
6. Conversions. The holders of shares of Preferred Stock shall
have the following conversion rights:
6A. Conversion Events.
6A(1) Optional Conversion. Subject to the terms and conditions
of this Paragraph 6, the holder of any share or shares of Preferred Stock shall
have the right, at its option at any time, to convert any such shares of
Preferred Stock (except that upon any liquidation, voluntary or involuntary
dissolution, or winding-up of the Corporation the right of conversion shall
terminate at the close of business on the business day fixed for payment of the
amount distributable on the Preferred Stock) into such number of fully paid and
nonassessable shares of Common Stock as is obtained by (i) multiplying the
number of shares of Preferred Stock so to be converted by $1.00 in the case of
Series A Convertible Preferred Stock, $1.40 in the case of Series B Convertible
Preferred Stock and $1.75 in the case of Series C Convertible Preferred Stock
and (ii) dividing the result by the conversion price of $1.00 in the case of
Series A Convertible Preferred Stock, $1.40 in the case of Series B Convertible
Preferred Stock and $1.75 in the case of the Series C Convertible Preferred
Stock or, in case an adjustment of such price has taken place pursuant to the
further provisions of this Paragraph 6, then by the conversion price as last
adjusted and in effect at the date any share or shares of Preferred
Stock are surrendered for conversion (such price, or such price as last
adjusted, being referred to as the "Conversion Price"). Such rights of
conversion shall be exercised by the holder thereof by giving written notice to
the Corporation that the holder elects to convert a stated number of shares of
Preferred Stock into Common Stock and by surrender of a certificate or
certificates for the shares so to be converted to the Corporation at its
principal office (or such other office or agency of the Corporation as the
Corporation may designate by notice in writing to the holders of the Preferred
Stock) at any time during its usual business hours on the date set forth in such
notice, together with a statement of the name or names (with address) in
<PAGE> 50
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which the certificate or certificates for shares of Common Stock shall be
issued.
6A(2) Mandatory Conversion. The outstanding shares of the
Series A Convertible Preferred Stock, the Series B Convertible Preferred Stock
and the Series C Convertible Preferred Stock, as the case may be, shall
automatically and without any further action on the part of the Corporation
convert into shares of Common Stock effective upon the earlier to occur of (i)
such time as the Corporation shall have issued an aggregate of at least
two-thirds of the total number of shares of Common Stock which were issued or
issuable, upon conversion of the shares of Series A Convertible Preferred Stock,
Series B Convertible Preferred Stock and Series C Convertible Preferred Stock,
as the case may be, as of the date of a certain Series C Convertible Preferred
Stock Purchase Agreement by and among the Company and the parties thereto (the
"Series C Purchase Agreement") assuming, for such purposes, that all shares of
Series C Convertible Preferred Stock issuable thereunder were issuable as of the
date of such agreement, as such number shall have been adjusted from time to
time in the event of any stock dividend, stock split, combination,
reclassification or other similar event; or (ii) the closing of a sale of shares
of Common Stock by the Corporation pursuant to an underwritten public offering
in which (a) the aggregate gross proceeds to the Corporation shall be at least
$10,000,000, and (b) the price per share paid by the public, net of underwriting
discounts and commissions, shall be at least $2.50 (subject to adjustment in the
event of any stock dividend, stock split, combination, reclassification or other
similar event).
6B. Issuance of Certificates; Time Conversion Effected.
Promptly upon (1) the happening of either event described in subparagraph 6A(2)
or the receipt by the Corporation of the written notice referred to in
subparagraph 6A(1), and (2) the surrender of the certificate or certificates for
the share or shares of Preferred Stock to be converted, the Corporation shall
issue and deliver, or cause to be issued and delivered, to the holder,
registered in such name or names as such holder may direct, a certificate or
certificates for the number of whole shares of Common Stock issuable upon the
conversion of such share or shares of Preferred Stock. To the extent permitted
by law, such conversion shall be deemed to have been effected and the Conversion
Price shall be determined as of the close of business on the date on which such
written notice shall have been received by the Corporation, or, in the case of a
mandatory conversion under subparagraph 6A(2), on the date of occurrence of
either event specified in such subparagraph, and at such time the rights of the
holder of such share or shares of Preferred Stock shall cease, and the person or
persons in whose name or names any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become the
<PAGE> 51
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holder or holders of record of the shares of Common Stock represented
thereby.
6C. Partial Conversion; Dividends; Fractional Shares. In case
the number of shares of Preferred Stock represented by the certificate or
certificates surrendered pursuant to subparagraph 6A(1) exceeds the number of
shares to be converted, the Corporation shall, upon such conversion, execute and
deliver to the holder, at the expense of the Corporation, a new certificate or
certificates for the number of shares of Preferred Stock represented by the
certificate or certificates surrendered which are not to be converted. At the
time of each conversion of shares of Preferred Stock pursuant to this Paragraph
6, the Corporation shall pay, out of funds legally available therefor, in cash
an amount equal to all dividends, declared but unpaid, and any Noncompliance
Dividends, on the shares of Preferred Stock surrendered for conversion to the
date upon which such conversion is deemed to take place as provided in
subparagraph 6B; provided, that, any holder of shares of Preferred Stock may
elect, at the time such shares are surrendered for conversion or at any other
time prior to conversion, to take payment for all declared but unpaid dividends
and any Noncompliance Dividends on such shares, if any, in shares of Common
Stock rather than in cash, with the number of shares of Common Stock issuable in
lieu of such cash payment to be determined by dividing the aggregate amount of
such declared but unpaid dividends and Noncompliance Dividends by the Conversion
Price then in effect for the shares of Preferred Stock held by such holder with
respect to which such declared but unpaid dividends and Noncompliance Dividends
shall be payable. No fractional shares shall be issued upon conversion of
Preferred Stock into Common Stock or upon election to take shares of Common
Stock in lieu of cash for declared but unpaid dividends and Noncompliance
Dividends, and no payment or adjustment at the time of such conversion or
election shall be made by the Company on account of any previously-declared cash
dividends on the Common Stock. In lieu of delivering any such fractional share
of Common Stock, the Corporation shall pay an amount in cash equal to the
current market price of such fractional share as determined in good faith by the
Board of Directors of the Corporation.
6D. Adjustment of Price Upon Issuance of Common Stock. Except
as provided in subparagraph 6B, if and whenever the Corporation shall issue or
sell, or is, in accordance with subparagraphs 6D(1) through 6D(8), deemed to
have issued or sold, any shares of Common Stock for a consideration per share
less than the Conversion Price in effect for each or all three of the Series A
Convertible Preferred Stock, the Series B Convertible Preferred Stock or the
Series C Convertible Preferred Stock immediately prior to the time of such issue
or sale (a "Dilutive Offering"), then in each such case, forthwith upon such
issue or sale, such Conversion Price for the Series A Convertible Preferred
Stock, Series B Convertible Preferred Stock or Series C Convertible Preferred
Stock or all three, as the case may be,
<PAGE> 52
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shall be reduced to the price determined by dividing (i) an amount equal to the
sum of (a) the number of shares of Common Stock outstanding immediately prior to
such issue or sale (including the number of shares of Common Stock issued or
issuable upon conversion of the Preferred Stock) multiplied by the then existing
Conversion Price for the Series A Convertible Preferred Stock, Series B
Convertible Preferred Stock or Series C Convertible Preferred Stock, as the case
may be, and (b) the consideration, if any, received by the Corporation upon such
issue or sale, by (ii) the total number of shares of Common Stock outstanding
immediately after such issue or sale (including the number of shares of Common
Stock issued or issuable upon conversion of the Preferred Stock).
Notwithstanding the foregoing, if the Company shall issue or sell or
is, in accordance with subparagraphs 6D(1) through 6D(8), deemed to have issued
or sold, any shares of Common Stock for a consideration per share less than the
Conversion Price for the Series C Convertible Preferred Stock in effect
immediately prior to such sale, the Conversion Price in effect for the Series C
Convertible Preferred Stock shall be reduced to equal the greater of $1.40 or
such consideration per share, provided, that if such consideration per share is
less than $1.40, the Conversion Price shall as a result of such issue or sale
(i) first be reduced to $1.40 in accordance with this sentence and (ii)
thereafter be reduced as otherwise provided in this Section 6. For any later
issues or sales of Common Stock below the applicable Conversion Price in effect
for the Series C Convertible Preferred Stock, adjustments shall be made as
otherwise provided in this Section 6.
In addition, notwithstanding the foregoing, if the Company shall issue
or sell or is, in accordance with subparagraphs 6D(1) through 6D(8), deemed to
have issued or sold, any shares of Common Stock for a consideration per share
less than the Conversion Price for the Series B Convertible Preferred Stock in
effect immediately prior to such sale, the Conversion Price in effect for the
Series B Convertible Preferred Stock shall be reduced to equal the greater of
$1.00 or such consideration per share, provided, that if such consideration per
share is less than $1.00, the Conversion Price shall as a result of such issue
or sale (i) first be reduced to $1.00 in accordance with this sentence and (ii)
thereafter be reduced as otherwise provided in this Section 6. For any later
issues or sales of Common Stock below the applicable Conversion Price in effect
for the Series B Convertible Preferred Stock, adjustments shall be made as
otherwise provided in this Section 6.
Notwithstanding anything to the contrary set forth in Section 6 hereof,
no adjustment shall be made to (i) the Conversion Price of the Series A
Convertible Preferred Stock in the event that the Corporation shall issue or
sell, or is, in accordance with subparagraphs 6D(1) through 6D(8), deemed to
have
<PAGE> 53
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issued or sold any shares of Common Stock solely at a price per share equal to
or greater than the Conversion Price for the Series A Convertible Preferred
Stock but less than the Conversion Price for the Series B or Series C
Convertible Preferred Stock; or (ii) the Conversion Price of the Series B
Convertible Preferred Stock in the event that the Corporation shall issue or
sell, or is, in accordance with subparagraphs 6D(1) through 6D(8), deemed to
have issued or sold any shares of Common Stock solely at a price per share equal
to or greater than the Conversion Price for the Series B Convertible Preferred
Stock, but less than the Conversion Price for the Series C Convertible Preferred
Stock.
For purposes of this subparagraph 6D, the following subparagraphs 6D(1)
to 6D(8) shall also be applicable:
6D(1) Issuance of Rights or Options. In case at any time the
Corporation shall in any manner grant (whether directly or by
assumption in a merger or otherwise) any warrants or other rights to
subscribe for or to purchase, or any options for the purchase of,
Common Stock or any stock or security convertible into or exchangeable
for Common Stock (such warrants, rights or options being called
"Options" and such convertible or exchangeable stock or securities
being called "Convertible Securities") whether or not such Options or
the right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock
is issuable upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities (determined by dividing (i) 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 the 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 upon the issue or
sale of such Convertible Securities and upon the conversion or exchange
thereof, by (ii) 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) shall be less than the Conversion Price of the Series
A Convertible Preferred Stock, Series B Convertible Preferred Stock or
Series C Convertible Preferred Stock, as the case may be, or all three,
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
issuable upon the exercise of such Options shall be deemed to have been
issued for such price per share as of the date of granting of such
Options or the issuance of such Convertible Securities and
<PAGE> 54
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thereafter shall be deemed to be outstanding. Except as otherwise
provided in subparagraph 6D(3), no adjustment of the Conversion Price
shall be made upon the actual issue of such Common Stock or of such
Convertible Securities upon exercise of such Options or upon the actual
issue of such Common Stock upon conversion or exchange of such
Convertible Securities.
6D(2) Issuance of Convertible Securities. In case the
Corporation shall in any manner issue (whether directly or by
assumption in a merger or otherwise) or sell any Convertible
Securities, whether or not the rights to exchange or convert any such
Convertible Securities are immediately exercisable, and the price per
share for which Common Stock is issuable upon such conversion or
exchange (determined by dividing (i) 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, by (ii) the total maximum number of
shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities) shall be less than the Conversion Price of
the Series A Convertible Preferred Stock, Series B Convertible
Preferred Stock or Series C Convertible Preferred Stock or all three,
as the case may be, in effect immediately prior to the time of such
issue or sale, then the total maximum number of shares of Common Stock
issuable upon conversion or exchange of all such Convertible Securities
shall be deemed to have been issued for such price per share as of the
date of the issue or sale of such Convertible Securities and thereafter
shall be deemed to be outstanding as of such date, provided that (a)
except as otherwise provided in subparagraph 6D(3), no adjustment of
the Conversion Price of the Series A Convertible Preferred Stock,
Series B Convertible Preferred Stock or Series C Convertible Preferred
Stock or all three, as the case may be, shall be made upon the actual
issue of such Common Stock upon conversion or exchange of such
Convertible Securities and (b) if any such issue or sale of such
Convertible Securities is made upon exercise of any Options to purchase
any such Convertible Securities for which adjustments of the Conversion
Price of the Series A Convertible Preferred Stock, Series B Convertible
Preferred Stock or Series C Convertible Preferred Stock or all three,
as the case may be, have been or are to be made pursuant to other
provisions of this subparagraph 6D, no further adjustment of the
Conversion Price of the Series A Convertible Preferred Stock, Series B
Convertible Preferred Stock or the Series C Convertible Preferred Stock
or all three, as the case may be, shall be made by reason of such issue
or sale.
<PAGE> 55
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6D(3) Change in Option Price or Conversion Rate. Upon the
happening of any of the following events, namely, if the purchase price
provided for in any Option referred to in subparagraph 6D(1); the
additional consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in subparagraph
6D(1) or 6D(2); or the rate at which Convertible Securities referred to
in subparagraph 6D(1) or 6D(2) are convertible into or exchangeable for
Common Stock shall change at any time (including, but not limited to,
changes under or by reason of provisions designed to protect against
dilution), the Conversion Price of the Series A Convertible Preferred
Stock, Series B Convertible Preferred Stock or Series C Convertible
Preferred Stock or all three, as the case may be, in effect at the time
of such event shall forthwith be readjusted to the 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 conversion rate, as the
case may be, at the time initially granted, issued or sold, but only if
as a result of such adjustment the Conversion Price then in effect
hereunder is thereby reduced; and on the expiration of any such Option
or the termination of any such right to convert or exchange such
Convertible Securities, the Conversion Price then in effect hereunder
shall forthwith be increased to the Conversion Price which would have
been in effect at the time of such expiration or termination had such
Option or Convertible Securities, to the extent outstanding immediately
prior to such expiration or termination, never been issued.
6D(4) Stock Dividends. In case the Corporation shall declare a
dividend or make any other distribution upon any stock of the
Corporation payable in Common Stock (except for dividends or
distributions upon the Common Stock), Options or Convertible
Securities, any Common Stock, Options or Convertible Securities, as the
case may be, issuable in payment of such dividend or distribution shall
be deemed to have been issued or sold without consideration.
6D(5) Consideration for Stock. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to be the
amount received by the Corporation therefor, without deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith.
In case any shares of Common Stock, Options or Convertible Securities
shall be issued or sold for a consideration other than cash, the amount
of the consideration other than cash received by the Corporation shall
be deemed to be the fair value of such consideration as determined in
good faith by the Board of Directors of the Corporation, without
deduction of any expenses incurred or any underwriting commissions or
<PAGE> 56
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concessions paid or allowed by the Corporation in connection therewith.
In case any Options shall be issued in connection with the issue and
sale of other securities of the Corporation, together comprising one
integral transaction in which no specific consideration is allocated to
such Options by the parties thereto, such Options shall be deemed to
have been issued for such consideration as determined in good faith by
the Board of Directors of the Corporation.
6D(6) Record Date. In case the Corporation shall set a record
date for the determination of the holders of its Common Stock for the
purpose of entitling them (i) to receive a dividend or other
distribution payable in Common Stock, Options or Convertible Securities
or (ii) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have
been issued or sold upon the declaration of such dividend or the making
of such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
6D(7) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by
or for the account of the Corporation, and the disposition of any such
shares shall be considered an issue or sale of Common Stock for the
purpose of this subparagraph 6D.
6D(8) Adjustments for Failure of Participation.
Notwithstanding anything contained in this subparagraph 6D to the
contrary, the rights of any holder of Preferred Stock to the benefits
of this paragraph 6D shall be subject to the limitations contained in
this subparagraph 6D(8) if such holder has failed to participate in any
offering which is a Dilutive Offering with respect to such holder's
shares by acquiring in such Dilutive Offering such number of shares as
shall equal the product of the number of shares actually offered in the
Dilutive Offering to all holders of Preferred Stock, as determined by
the Board of Directors, multiplied by a fraction: (a) the numerator of
which is the number of shares of Preferred Stock with respect to which
the offering is a Dilutive Offering as is held by such holder at the
time of such Dilutive Offering, and (b) the denominator of which is the
total number of shares of the Preferred Stock then outstanding with
respect to which the offering is a Dilutive Offering (the "Pro Rata
Share"). Solely for purposes of this subparagraph 6D(8), shares
purchased by an affiliate or affiliates of a holder of Preferred Stock
in a Dilutive Offering (other than an affiliate who held Preferred
Stock prior to such Dilutive Offering except to the extent that such
affiliate has exceeded its Pro Rata Share and has not otherwise
directed that such excess be counted towards the
<PAGE> 57
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Pro Rata Share of another affiliate) shall be deemed to have been
purchased by such holder. As used in this subparagraph, the term
affiliate of a holder shall mean a person who directly or indirectly
through one or more intermediaries controls, is controlled by, or is
under common control with, such holder. If any holder of Preferred
Stock shall fail to purchase its Pro Rata Share of any such Dilutive
Offering, then such holder's rights under this subparagraph 6D shall
terminate and shall no longer be of any force and effect as to the
shares of Preferred Stock with respect to which the offering was a
Dilutive Offering; provided, however, that no holder of shares of
Preferred Stock shall be required to participate to the extent of all
or any part of such holder's Pro Rata Share of a Dilutive Offering if
and to the extent such participation would violate any statute, rule or
regulation, or order any court or governmental agency applicable to
such holder, and such holder furnishes to the Corporation a
certificate, signed by an executive officer or general partner of such
holder, as the case may be, and an opinion of counsel, each to such
effect. The Corporation, the Board of Directors and the holders of the
Preferred Stock shall take all necessary actions to designate a new
series of Preferred Stock on any occasion that any holder of Preferred
Stock shall fail to purchase its Pro Rata Share of any Dilutive
Offering. Shares of such holder's Preferred Stock with respect to which
the offering is a Dilutive Offering shall be immediately and
automatically converted into shares of newly-created series of
Preferred Stock (the "New Preferred Stock"); provided that the terms of
any series of New Preferred Stock shall be identical in all respects to
the terms of the Series A Convertible Preferred Stock, Series B
Convertible Preferred Stock or Series C Convertible Preferred Stock, as
the case may be, except that (i) the Conversion Price of the New
Preferred Stock shall be the Conversion Price in effect for the Series
A Convertible Preferred Stock, Series B Convertible Preferred Stock or
Series C Convertible Preferred Stock, as the case may be, immediately
prior to such Dilutive Offering, and (ii) any holder of shares of the
such New Preferred Stock shall not be entitled to receive the benefits
of any adjustments to the Conversion Price pursuant to this
subparagraph 6D with respect to any future Dilutive Offering by the
Corporation. Except as otherwise required by law, all series of New
Preferred Stock shall vote together as a single series with the Series
A Convertible Preferred Stock, Series B Convertible Preferred Stock and
Series C Convertible Preferred Stock, as the case may be, relating
thereto, on all matters submitted to the stockholders for a vote or a
written consent, including but not limited to the election of a
majority of directors of the Corporation by the Preferred Stock
pursuant to subparagraph 2C. For the purposes of paragraphs 3, 4, 5,
6A, 6B, 6C, 6E, 6F, 6G, 6I, 6J, 6K, 6L, 6M, 6N, 6O, 6P, 7 and 8, the
terms "Preferred Stock," "Series A Convertible Preferred Stock,"
"Series B
<PAGE> 58
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Convertible Preferred Stock," and "Series C Convertible Preferred
Stock" shall include any series of New Preferred Stock relating
thereto issued by the Corporation pursuant to this subparagraph 6D(8).
6E. Certain Issues of Common Stock Excepted. Anything herein
to the contrary notwithstanding, the Corporation shall not be required to make
any adjustment of the Conversion Price in the case of the issuance of (i) up to
an aggregate of 3,250,000 shares (appropriately adjusted to reflect the
occurrence of any event described in subparagraph 6F) of Common Stock or options
or warrants to purchase Common Stock to directors, officers or employees of, or
other providers of service to, the Corporation in connection with their service
as directors, officers or employees of, or providers of services to the
Corporation, which number of shares shall include any shares issued prior to the
issuance of any shares of Preferred Stock (the "Reserved Employee Shares"), (ii)
any shares of Common Stock or other securities upon conversion of the Series A
Convertible Preferred Stock, the Series B Convertible Preferred Stock or the
Series C Convertible Preferred Stock, (iii) any shares of New Preferred Stock in
accordance with subparagraph 6D(8); (iv) any shares of Preferred Stock issuable
upon exercise of warrants to purchase Preferred Stock; or (v) any securities
issued in connection with equipment lease transactions undertaken in the
ordinary course of the Corporation's business and approved by a majority of the
members of the Board of Directors designated by the holders of Preferred Stock
under the Stockholders' Agreement.
6F. Subdivision or Combination of Common Stock. In case the
Corporation shall at any time subdivide (by any stock split, stock dividend or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price of the Preferred Stock in effect immediately prior
to such subdivision shall be proportionately reduced, and, conversely, in case
the outstanding shares of Common Stock shall be combined into a smaller number
of shares, the Conversion Price of the Preferred Stock in effect immediately
prior to such combination shall be proportionately increased.
6G. Reorganization or Reclassification. If any capital
reorganization or reclassification of the capital stock of the Corporation shall
be effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Common
Stock, then, as a condition of such reorganization or reclassification, lawful
and adequate provisions shall be made whereby each holder of a share or shares
of Preferred Stock shall thereupon have the right to receive, upon the basis and
upon the terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore receivable upon the conversion of such
share or shares of Preferred Stock, such shares of stock, securities or assets
as may be issued or payable with respect to
<PAGE> 59
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or in exchange for a number of outstanding shares of such Common Stock equal to
the number of shares of such Common Stock immediately theretofore receivable
upon such conversion had such reorganization or reclassification not taken
place, and in any such case appropriate provisions shall be made with respect to
the rights and interests of such holder to the end that the provisions hereof
(including without limitation provisions for adjustments of the Conversion
Price) shall thereafter be applicable, as nearly as may be, in relation to any
shares of stock, securities or assets thereafter deliverable upon the exercise
of such conversion rights.
6H. Adjustment of Provisions. If the Corporation grants to the
holders of any class or series of stock of the Corporation any rights relating
to the adjustment of the Conversion Price of such class or series of stock upon
a Dilutive Offering or otherwise, which rights shall be more favorable to the
holders of such class or series of stock than the comparable rights in this
paragraph 6 are to the holders of the Preferred Stock, or which rights shall
grant to the holders of such class or series of stock rights not granted to the
holders of Preferred Stock pursuant to the Certificate of Incorporation of the
Corporation, then such more favorable rights shall be deemed to also apply to
all holders of Preferred Stock.
6I. Notice of Adjustment. Upon any adjustment of the
Conversion Price, then and in each such case the Corporation shall give written
notice thereof, by first class mail, postage prepaid, by recorded delivery
service or by telex to non-U.S. residents, addressed to each holder of shares of
Preferred Stock at the address of such holder as shown on the books of the
Corporation, which notice shall state the Conversion Price resulting from such
adjustment, setting forth in reasonable detail the method upon which such
calculation is based.
6J. Other Notices. In case at any time:
(1) the Corporation shall declare any dividend upon its
Common Stock payable in cash or stock or make any other distribution to
the holders of its Common Stock;
(2) the Corporation shall offer for subscription pro rata
to the holders of its Common Stock any additional shares of stock of
any class or other rights;
(3) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or a
consolidation or merger of the Corporation with or into, or a sale of
all or substantially all its assets to, another entity or entities; or
(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
<PAGE> 60
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then, in any one or more of said cases, the Corporation shall give, by first
class mail, postage prepaid, by recorded delivery service or by telex to
non-U.S. residents, addressed to each holder of any shares of Preferred Stock at
the address of such holder as shown on the books of the Corporation, (a) at
least 20 days' prior written notice of the date on which the books of the
Corporation shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in respect
of any such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, and (b) in the case of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, at least 20 days' prior written notice of the date
when the same shall take place. Such notice in accordance with the foregoing
clause (a) shall also specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Common Stock shall be
entitled thereto and such notice in accordance with the foregoing clause (b)
shall also specify the date on which the holders of Common Stock shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up, as the case may be.
6K. Stock to be Reserved. The Corporation will at all times
reserve and keep available out of its authorized Common Stock, solely for the
purpose of issuance upon the conversion of Preferred Stock as herein provided,
such number of shares of Common Stock as shall then be issuable upon the
conversion of all outstanding shares of Preferred Stock. The Corporation
covenants that all shares of Common Stock which shall be so issued shall be duly
and validly issued and fully paid and nonassessable and free from all taxes,
liens, and charges with respect to the issue thereof, and, without limiting the
generality of the foregoing, the Corporation covenants that it will from time to
time take all such action as may be requisite to ensure that the par value per
share of the Common Stock is at all times equal to or less than the Conversion
Price in effect at the time. The Corporation will take all such action as may be
necessary to ensure that all such shares of Common Stock may be so issued
without violation of any applicable law or regulation, or of any requirement of
any national securities exchange or quotation system upon which the Common Stock
may be listed. The Corporation will not take any action which results in any
adjustment of the Conversion Price if the total number of shares of Common Stock
issued and issuable after such action upon conversion of the Preferred Stock
would exceed the total number of shares of Common Stock then authorized by the
Certificate of Incorporation.
<PAGE> 61
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6L. No Reissuance of Preferred Stock. Shares of Preferred
Stock which are converted into shares of Common Stock as provided herein shall
be cancelled and shall not be reissued.
6M. Issue Tax. The issuance of certificates for shares of
Common Stock upon conversion of Preferred Stock shall be made without charge to
the holders thereof for any issuance tax in respect thereof, provided that the
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than that of the holder of the Preferred Stock which is being
converted.
6N. Closing of Books. The Corporation will at no time close
its transfer books against the transfer of any Preferred Stock or of any shares
of Common Stock issued or issuable upon the conversion of any shares of
Preferred Stock in any manner which interferes with the timely conversion of
such Preferred Stock, except as may otherwise be required to comply with
applicable securities laws.
6O. Definition of Common Stock. As used in this Paragraph 6,
the term "Common Stock" shall mean and include the Corporation's authorized
Common Stock, par value $.001 per share, as constituted on the date of filing of
these terms of the Preferred Stock, and shall also include any capital stock of
any class of the Corporation thereafter authorized which shall neither be
limited to a fixed sum or percentage of par value in respect of the rights of
the holders thereof to participate in dividends nor entitled to a preference in
the distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation; provided that the shares of Common
Stock receivable upon conversion of shares of Preferred Stock shall include only
shares designated as Common Stock of the Corporation on the date of filing of
this instrument, or in case of any reorganization or reclassification of the
outstanding shares thereof, the stock, securities or assets provided for in
subparagraph 6G.
7. Noncompliance.
7A. Remedies. Immediately upon the occurrence of any
Noncompliance Event, as defined below, the holders of the Preferred Stock will
have the following rights, in addition to all other rights set forth in the
Certificate of Incorporation, in any agreement between such holders and the
Corporation, or as otherwise provided by law:
(1) A cumulative dividend (the "Noncompliance Dividend") shall
accrue on a daily basis on all outstanding shares of Preferred Stock to
which the Noncompliance Event applies as set forth in subparagraph 7B,
so long as the Corporation is in noncompliance (as defined below),
which
<PAGE> 62
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such dividend shall be in addition to the accruing dividends described
in subparagraph 3B. Such dividend shall accrue at the annual rate of
$.10 per share in the case of Series A Convertible Preferred Stock,
$.14 per share in the case of Series B Convertible Preferred Stock and
$.175 per share in the case of Series C Convertible Preferred Stock for
the first 30 days that the Corporation is in noncompliance, which rate
shall increase by $.01 for each successive 30-day period that the
Corporation remains in noncompliance, up to a maximum annual rate of
$.16 per share in the case of Series A Convertible Preferred Stock,
$.22 per share in the case of Series B Convertible Preferred Stock and
$.28 per share in the case of Series C Convertible Preferred Stock.
Each holder of Preferred Stock to whom any such dividend is payable may
elect to have such dividend paid by the Corporation in cash or in
shares of Common Stock of the Corporation, as provided in subparagraph
6C.
(2) As provided in subparagraph 2C, the holders of Preferred
Stock, voting as a single class, shall have the right to elect a
majority of the directors of the Corporation.
7B. Noncompliance Event. For the purposes of this Certificate
of Incorporation, a "Noncompliance Event" shall be defined as any one or more
of the following events:
(1) The Corporation has materially breached any one or more of
the provisions of (i) the Series A Convertible Preferred Stock
Purchase Agreement dated December 22, 1988 (the "Series A Purchase
Agreement") then in effect or Article V of the Series C Purchase
Agreement with respect to the Series A Convertible Preferred Stock,
(ii) the Series B Purchase Agreement dated June 29, 1990 (the "Series B
Purchase Agreement") then in effect or Article V of the Series C
Purchase Agreement with respect to the Series B Convertible Preferred
Stock or (iii) the Series C Purchase Agreement (the Series A Purchase
Agreement, the Series B Purchase Agreement and the Series C Purchase
Agreement to be referred to collectively herein as the "Purchase
Agreements"), or of any of the other agreements contemplated by the
Purchase Agreements and executed in connection therewith (collectively,
the "Ancillary Agreements") with respect to the shares of Preferred
Stock to which such Ancillary Agreements may apply, in each case as
such Ancillary Agreements shall have been amended, and such breach has
continued for 30 days following receipt by the Corporation of written
notice of said breach given by the holders of at least two-thirds of
the outstanding shares of Preferred Stock with respect to which such
covenant or provision applies;
<PAGE> 63
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(2) Any of the Corporation's representations and/or warranties
set forth in the Series A Purchase Agreement with respect to the Series
A Convertible Preferred Stock, or the Series B Purchase Agreement with
respect to the Series B Convertible Preferred Stock, or the Series C
Purchase Agreement with respect to the Series C Convertible Preferred
Stock or in any one or more of the Ancillary Agreements with respect to
the shares of Preferred Stock to which such Ancillary Agreement may
apply, was not substantially true as of the date of closing for such
Purchase Agreement or Ancillary Agreement and the Corporation has
received written notice of such fact from the holders of at least
two-thirds of the outstanding shares of Preferred Stock with respect to
which such representation and/or warranty applies;
(3) The Corporation has failed to make payments(s) when due
for any dividends, interest and/or mandatory redemption of any
securities, where such payment(s) aggregate over $200,000 and such
failure to pay has continued for 30 days following receipt by the
Corporation of written notice of said failure to pay from the holders
of at least two-thirds of the outstanding shares of Preferred Stock;
(4) The Corporation has been in material default of payment on
any debt agreement under which the Corporation is obligated to pay at
least $200,000 in principal (including any acceleration thereof) and
accrued interest at the time of such default, and such default has
continued for 30 days following receipt by the Corporation of written
notice of said default given by the holders of at least two-thirds of
the outstanding shares of Preferred Stock; or
(5) The Corporation has filed for bankruptcy, made an
assignment for the benefit of creditors, materially compromised its
debt with a material creditor of the Corporation, or suffered
acceleration of a material debt instrument, and the Corporation has
received written notice of same from the holders of at least two-thirds
of the outstanding shares of Preferred Stock.
Once a Noncompliance Event has occurred, the Corporation shall give prompt
notice thereof to each holder of Preferred Stock, and shall be deemed "in
noncompliance" until such time as the President or the Chief Financial Officer
of the Corporation shall have certified and delivered by hand or by first class
mail, postage prepaid, by recorded delivery service or by telex to non-U.S.
residents, addressed to each holder of Preferred Stock at the address of such
holder as shown on the books of the Corporation, notice that the condition
underlying such Noncompliance Event is cured.
<PAGE> 64
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8. Amendments. No provision of these terms of the Preferred Stock
may be amended, modified or waived without the written consent or affirmative
vote of the holders of at least two-thirds of the then-outstanding shares of
each series of Preferred Stock, voting separately.
SECOND: Written consent to the adoption of the foregoing amendment of
the Restated Certificate of Incorporation of the Corporation has been given in
accordance with the provisions of Section 228 of the Delaware General
Corporation Law, and written notice of the adoption of said amendment without a
meeting by less than unanimous written consent has been given to those
stockholders who have not consented in writing as provided in said Section 228.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
<PAGE> 65
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IN WITNESS WHEREOF, Object Design, Inc. has caused this certificate to
be signed by its President and attested by its Secretary this 29 day of July,
1991.
Object Design, Inc.
By: /s/ Kenneth E. Marshall
----------------------------
Its President & CEO
ATTEST
By: /s/ John Patterson
----------------------------
Its Secretary
<PAGE> 66
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
OBJECT DESIGN, INC.
Object Design, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That the following amendment to the Restated Certificate of
Incorporation of Object Design, Inc. (the "Corporation") has been duly adopted
in accordance with the provisions of Section 242 and Section 228 of the Delaware
General Corporation Law:
That the Restated Certificate of Incorporation of the Corporation be
amended by deleting the old Article Fourth and inserting a new Article Fourth in
its stead which shall be and read as follows in its entirety:
"Fourth: The total number of shares of capital stock which the
Corporation shall have the authority to issue shall be 15,000,000 common shares,
having a par value of $.001 per share, amounting to an aggregate par value of
$15,000.00 and 11,293,969 shares of Preferred Stock having a par value of $.01
per share amounting to an aggregate par value of $112,939.69."
The voting power, preferences and relative participating, optional or
other special rights and the qualifications, limitations or restrictions of the
Preferred Stock are set forth as follows:
1. Number of Shares. 2,750,000 shares of the Preferred Stock shall be
designated and known as "Series A Convertible Preferred Stock," 4,575,715
shares of the Preferred Stock shall be designated and known as "Series B
Convertible Preferred Stock," 2,857,143 shares of the Preferred Stock shall be
designated and known as "Series C Convertible Preferred Stock"
<PAGE> 67
and 1,111,111 shares of Preferred Stock shall be designated and known as
"Series D Convertible Preferred Stock." Unless otherwise specifically
designated, the term "Preferred Stock" refers collectively to Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C
Convertible Preferred Stock and Series D Convertible Preferred Stock.
2. Voting.
2A. General. Except as may be otherwise provided in these
terms of the Preferred Stock or by law, the Preferred Stock shall vote together
with the Common Stock as a single class on all actions to be taken by the
stockholders of the Corporation. Each share of Preferred Stock shall entitle the
holder thereof to such number of votes per share on each such action as shall
equal the number of shares of Common Stock (including fractions of a share) into
which each share of Preferred Stock is then convertible.
With respect to all questions as to which, under law, stockholders are
entitled to vote by classes, the holders of Preferred Stock shall vote together
as a single class separately from the holders of Common stock. With respect to
all questions as to which, under law, stockholders are required to vote by
series, the holders of Series A Convertible Preferred Stock shall vote
separately as a single series, the holders of Series B Convertible Preferred
Stock shall vote separately as a single series, the holders of Series C
Convertible Preferred Stock shall vote separately as a single series and the
holders of Series D Convertible Preferred Stock shall vote separately as a
single series.
2B. Board Size. The Corporation shall not, without the written
consent or affirmative vote of the holders of at least two-thirds of the then
outstanding shares of Preferred Stock, given in writing or by vote at a meeting,
consenting or voting (as the case may be) separately as a class, change the
number of directors constituting the Board of Directors to a number other than
seven (7), except that the Corporation may increase or decrease the number of
directors constituting the Board of Directors with the consent of a majority of
the members of the Board of Directors designated by the holders of Preferred
Stock pursuant to the Second Amended and Restated Stockholders' Agreement dated
March 1992, by and among the Company and the parties thereto (the "Stockholders'
Agreement").
2C. Board Seats. The holders of the Preferred Stock shall be
entitled to vote together with the Common Stock as a single class for the
election of each of the directors of the Corporation. Notwithstanding the
foregoing or anything else to the contrary provided in the Certificate of
Incorporation, upon the occurrence of any Noncompliance Event (as such term is
defined in subparagraph 7B) and continuing for so long as the Corporation
remains in noncompliance (as defined in subparagraph
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<PAGE> 68
7B), the holders of the Preferred Stock, voting as a separate class, shall be
entitled to elect a majority of the directors of the Corporation, with the
remaining directors of the Corporation to be elected as set forth in the first
sentence of this subparagraph 2C. A vacancy in any directorship elected by the
holders of the Preferred Stock, voting as a separate class, shall be filled only
by vote or written consent of the holders of the Preferred Stock, and a vacancy
in any directorship elected jointly by the holders of the Preferred Stock and
all other classes and series of stock of the Corporation, voting together as a
single class, shall be filled only by vote or written consent of the Preferred
Stock and all other classes and series of stock of the Corporation, as provided
above. At any meeting (or in a written consent in lieu thereof) held for the
purpose of electing directors, the presence in person or by proxy (or the
written consent) of the holders of a majority of the shares of Preferred Stock
then outstanding shall constitute a quorum of the Preferred Stock for the
election of directors to be elected solely by the holders of the Preferred
Stock.
3. Dividends.
3A. General. The holders of the Preferred Stock shall be
entitled to receive, as and when declared by the Board of Directors out of funds
legally available therefor, dividends at the same rate as dividends (other than
dividends paid in additional shares of Common Stock) are paid with respect to
the Common Stock (treating each share of Preferred Stock as being equal to the
number of shares of Common Stock (including fractions of a share) into which
each share of Preferred Stock is then convertible). In addition, the holders of
the Preferred Stock may from time to time be entitled, pursuant to the terms of
subparagraph 3B below, to certain cumulative dividends, and pursuant to the
terms of paragraph 7 below, to certain "Noncompliance Dividends," as that term
is defined in subparagraph 7A, as well as to any other dividends declared by the
Board of Directors on the outstanding shares of Preferred Stock out of funds
legally available therefor. All dividends on Preferred Stock shall be paid on a
pro-rata basis (except such Noncompliance Dividends as are payable solely on
Series A Convertible Preferred Stock or Series B Convertible Preferred Stock or
Series C Convertible Preferred Stock or Series D Convertible Preferred Stock, as
the case may be, pursuant to subparagraph 7A).
3B. Accruing Dividends. In each year commencing on (1) July
25, 1991, the holders of Preferred Stock other than Series D Convertible
Preferred Stock shall be entitled to receive out of funds legally available
therefor, as and when declared by the Board of Directors, dividends at the rate
of $.10 per share in the case of Series A Convertible Preferred Stock, $.14 per
share in the case of Series B Convertible Preferred Stock and $.175 per share in
the case of Series C Convertible Preferred Stock, and (2) March 11, 1992, the
holders of Series D
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<PAGE> 69
Convertible Preferred Stock shall be entitled to receive out of funds legally
available therefor, as and when declared by the Board of Directors, dividends at
the rate of $.225 per share (each such price subject to equitable adjustment in
the event of any stock dividend, stock split, combination, reclassification or
other similar event), compounded at the rate of 10% per share per annum. Such
dividends shall accrue from day to day, whether or not earned or declared, and
shall be cumulative; provided, however, that except as provided in paragraph 4
hereto and under the terms of a Third Amended and Restated Preferred Stock
Redemption Agreement dated March 1992 (the "Redemption Agreement"), the
Corporation shall be under no obligation to pay such accruing dividends unless
so declared by the Board of Directors; and provided, further that the
Corporation's obligation to pay such accruing dividends upon liquidation,
pursuant to the terms of the Redemption Agreement or otherwise shall commence at
the end of the first year in which the Corporation has positive retained
earnings.
3C. Restrictions. Unless all accrued but unpaid dividends on
each series of Preferred Stock shall have been paid or shall have been declared
and a sum sufficient for the payment thereof set apart, (i) no dividend shall be
paid or declared, and no distribution shall be made, on any Common Stock, other
than a dividend or other distribution payable solely in the form of additional
shares of Common Stock, and (ii) no shares of Common Stock shall be purchased,
redeemed or acquired by the Company and no amounts shall be paid for the
purchase, redemption or acquisition thereof. Anything herein to the contrary
notwithstanding, the restrictions set forth in this Paragraph 3C shall not apply
to (i) the repurchase of shares of Common Stock from former employees, officers,
directors or other providers of services to the Corporation who acquired such
shares directly from the Corporation, if each such purchase is made pursuant to
contractual rights held by the Corporation relating to the termination of
employment or services of such former employees, officers, directors or other
providers of services to the Corporation and the purchase price does not exceed
the original purchase price paid by such person to the Corporation for such
shares; (ii) repurchase of shares of Common Stock pursuant to the Stockholders'
Agreement and (iii) repurchase of shares of Common Stock pursuant to right of
first refusal agreements executed in connection with options granted under the
Corporation's 1989 Incentive and Non-Qualified Stock Option Plan (the "Plan").
4. Liquidation. Upon any liquidation, dissolution or winding
up of the Corporation, whether voluntary or involuntary, the holders of the
Preferred Stock shall first be entitled, before any distribution or payment is
made upon any stock ranking on liquidation, dissolution or winding up, junior
to the Preferred Stock, including the Common Stock, to be paid, out of assets
legally available therefor, an amount equal to the greater of:
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<PAGE> 70
(i) $1.00 per share in the case of the Series A Convertible
Preferred Stock, $1.40 per share in the case of the Series B
Convertible Preferred Stock, $1.75 per share in the case of the Series
C Convertible Preferred Stock and $2.25 per share in the case of Series
D Convertible Preferred Stock, plus, in each case, all accrued and
unpaid dividends thereon, whether or not earned or declared (including
all accrued and unpaid Noncompliance Dividends, if any,) computed to
the date payment thereof is made available; or
(ii) such amount per share of Preferred Stock as would have
been payable had each such share been converted to Common Stock
immediately prior to such event of liquidation, dissolution or winding
up pursuant to the provisions of Section 6 hereof.
Such amount payable with respect to one share of Preferred Stock under
this Paragraph 4 shall sometimes be referred to as the "Liquidation Preference
Payment" and with respect to all shares of Preferred Stock shall sometimes be
referred to as the "Liquidation Preference Payments." If upon such liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the assets to be distributed among the holders of Preferred Stock shall be
insufficient to permit payment in full to the holders of Preferred Stock of the
Liquidation Preference Payments, then the entire assets of the Corporation to be
so distributed shall be distributed ratably among the holders of Preferred Stock
according to the respective amounts which would be payable on or with respect to
the shares of Preferred Stock held by them upon such distribution if all amounts
payable on or with respect to said shares were paid in full. Written notice of
such liquidation, dissolution or winding up, stating a payment date, the place
where said payments shall be made, the aggregate amount to be paid to each
holder of Preferred Stock, and the alternate amount which would be paid to each
such holder if all outstanding shares of Preferred Stock were to be converted
into shares of Common Stock prior to the payment date, shall be given by mail,
postage prepaid, by recorded delivery service or by telex to non-U.S. residents,
not less than 20 days prior to the payment date stated therein, to the holders
of the record of Preferred Stock, such notice to be addressed to each such
holder at its address as shown by the records of the Corporation. The
consolidation or merger of the Corporation into or with any other entity or
entities which results in the exchange of outstanding securities of the
Corporation for securities or other consideration issued or paid or caused to be
issued or paid by any such entity or entities or affiliate thereof, and the sale
or transfer by the Corporation of all or substantially all its assets, shall be
deemed to be a liquidation, dissolution or winding up of the Corporation within
the meaning of the provisions of this paragraph 4, unless the holders of all
outstanding shares of the Corporation's voting stock immediately prior to such
transaction or series of transactions hold,
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<PAGE> 71
immediately following the consummation of such transaction or series of
transactions, more than two-thirds of the voting stock of such entity or
entities or affiliate thereof, or of the transferee of the assets of the
Corporation, as the case may be, provided, however, that each holder of
Preferred Stock shall have the right to elect to receive the benefits of the
provisions of subparagraph 6G hereof in lieu of receiving payment in
liquidation, dissolution or winding up of the Corporation pursuant to this
Paragraph 4. For purposes hereof, the Common Stock shall rank on liquidation,
dissolution or winding up of the Corporation, junior to the Preferred Stock.
5. Restrictions. At any time when shares of Preferred Stock are
outstanding, except as otherwise required by law or by the Certificate of
Incorporation, without the written consent or affirmative vote of the holders of
at least two-thirds of the then outstanding shares of Preferred Stock,
consenting or voting (as the case may be) separately as a class, the Corporation
will not:
5A. Create or authorize the creation of any additional class
or series of shares of stock, or reclassify the shares of any existing class or
series of stock, unless the same ranks junior to the Preferred Stock as to the
distribution of assets on the liquidation, dissolution or winding up of the
Corporation, or increase the authorized amount of the Preferred Stock or
increase the authorized amount of any additional class or series of shares of
stock unless the same ranks junior to the Preferred Stock as to the
distribution of assets on the liquidation, dissolution or winding up of the
Corporation and as to the payment of dividends, or create or authorize any
obligation or security convertible into shares of Preferred Stock or into
shares of any other class or series of stock unless the same ranks junior to
the Preferred Stock as to the distribution of assets on the liquidation,
dissolution or winding up of the Corporation and as to the payment of
dividends, whether any such creation, authorization or increase shall be by
means of amendment to the Certificate of Incorporation or by merger,
consolidation or otherwise;
5B. Consent to any liquidation, dissolution or winding up of
the Corporation or consolidate or merger into or with any other entity or
entities, or sell or transfer all or substantially all its assets, unless the
holders of the outstanding shares of the Corporation's voting stock immediately
prior to such transaction hold, immediately following the consummation of such
transaction, two-thirds or more of the voting stock of the surviving entity or
entities or affiliates thereof, or of the transferee of the assets of the
Corporation, as the case may be;
5C. Sell or transfer more than ten percent (10%) of the
assets of the Corporation within any 12-month period, other than in the
ordinary course of business;
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<PAGE> 72
5D. Amend, alter or repeal its Certificate of Incorporation,
or amend, alter or repeal its By-laws so as to adversely affect a holder of
Preferred Stock;
5E. Purchase or set aside any sums for the purchase of, or pay
any dividend or make any distribution on, any shares of stock other than the
Preferred Stock, except for (i) dividends or other distributions payable on the
Common Stock solely in the form of additional shares of Common Stock; (ii) the
purchase of shares of Common Stock from former employees, officers, directors or
other providers of services to the Corporation who acquired such shares directly
from the Corporation, if each such purchase is made pursuant to contractual
rights held by the Corporation relating to the termination of employment or
services of such former employees, officers, directors or other providers of
services to the Corporation and the purchase price does not exceed the original
issue price paid by such person to the Corporation for such shares; (iii)
repurchase of shares of Common Stock pursuant to the Stockholders' Agreement and
(iv) repurchase of shares of Common Stock pursuant to right of first refusal
agreements executed in connection with options granted under the Plan.
5F. Redeem or otherwise acquire any shares of Preferred Stock
except pursuant to one or more written agreements to which the Corporation and
all of the holders of Preferred Stock, are parties, or pursuant to a purchase
offer made pro rata to all holders of the shares of Preferred Stock on the basis
of the aggregate number of outstanding shares of Preferred Stock then held by
each such holder.
6. Conversions. The holders of shares of Preferred Stock shall
have the following conversion rights:
6A. Conversion Events.
6A1. Optional Conversion. Subject to the terms and conditions
of this Paragraph 6, the holder of any share or shares of Preferred Stock shall
have the right, at its option at any time, to convert any such shares of
Preferred Stock (except that upon any liquidation, voluntary or involuntary
dissolution, or winding-up of the Corporation the right of conversion shall
terminate at the close of business on the business day fixed for payment of the
amount distributable on the Preferred Stock) into such number of fully paid and
nonassessable shares of Common Stock as is obtained by (i) multiplying the
number of shares of Preferred Stock so to be converted by $1.00 in the case of
Series A Convertible Preferred Stock, $1.40 in the case of Series B Convertible
Preferred Stock, $1.75 in the case of Series C Convertible Preferred Stock and
$2.25 in the case of Series D Convertible Preferred Stock and (ii) dividing the
result by the conversion price of $1.00 in the case of Series A Convertible
Preferred Stock, $1.40 in the case of the Series B Convertible Preferred Stock,
$1.75 in the case of the Series C Convertible
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<PAGE> 73
Preferred Stock and $2.25 in the case of Series D Convertible Preferred Stock,
or, in case an adjustment of such price has taken place pursuant to the further
provisions of this Paragraph 6, then by the conversion price as last adjusted
and in effect at the date any share or shares of Preferred Stock are surrendered
for conversion (such price, or such price as last adjusted, being referred to as
the "Conversion Price"). Such rights of conversion shall be exercised by the
holder thereof by giving written notice to the Corporation that the holder
elects to convert a stated number of shares of Preferred Stock into Common Stock
and by surrender of a certificate or certificates for the shares so to be
converted to the Corporation at its principal office (or such other office or
agency of the Corporation as the Corporation may designate by notice in writing
to the holders of the Preferred Stock) at any time during its usual business
hours on the date set forth in such notice, together with a statement of the
name or names (with address) in which the certificate or certificates for shares
of Common Stock shall be issued.
6A(2). Mandatory Conversion. The outstanding shares of the Series A
Convertible Preferred Stock, the Series B Convertible Preferred Stock, the
Series C Convertible Preferred Stock and the Series D Convertible Preferred
Stock, as the case may be, shall automatically and without any further action on
the part of the Corporation convert into shares of Common Stock effective upon
the earlier to occur of (i) such time as the Corporation shall have issued an
aggregate of at least two-thirds of the total number of shares of Common Stock
which were issued or issuable, upon conversion of the shares of Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C
Convertible Preferred Stock and the Series D Convertible Preferred Stock, as the
case may be, as of the date of a certain Series D Convertible Preferred Stock
Purchase Agreement by and among the Company and the parties thereto (the "Series
D Purchase Agreement"), as such number shall have been adjusted from time to
time in the event of any stock dividend, stock split, combination,
reclassification or other similar event; or (ii) the closing of a sale of shares
of Common Stock by the Corporation pursuant to an underwritten public offering
in which (a) the aggregate gross proceeds to the Corporation shall be at least
$10,000,000 and (b) the price per share paid by the public, net of underwriting
discounts and commissions, shall be at least $3.25 (subject to adjustment in the
event of any stock dividend, stock split, combination, reclassification or other
similar event.)
6B. Issuance of Certificates; Time Conversion Effected. Promptly upon
(1) the happening of either event described in subparagraph 6A(2) or the receipt
by the Corporation of the written notice referred to in subparagraph 6A(1), and
(2) the surrender of the certificate or certificates for the share or shares of
Preferred Stock to be converted, the Corporation shall issue and deliver, or
cause to be issued and delivered, to the holder, registered in such name or
names as such holder may
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direct, a certificate or certificates for the number of whole shares of Common
Stock issuable upon the conversion of such shares or shares of Preferred Stock.
To the extent permitted by law, such conversion shall be deemed to have been
effected and the Conversion Price shall be determined as of the close of
business on the date on which such written notice shall have been received by
the Corporation, or, in the case of a mandatory conversion under subparagraph
6A(2), on the date of occurrence of either event specified in such subparagraph,
and at such time the rights of the holder of such share or shares of Preferred
Stock shall cease, and the person or persons in whose name or names any
certificate or certificates for shares of Common Stock shall be issuable upon
such conversion shall be deemed to have become the holder or holders of record
of the shares of Common Stock represented thereby.
6C. Partial Conversion; Dividends; Fractional Shares. In case the
number of shares of Preferred Stock represented by the certificate or
certificates surrendered pursuant to subparagraph 6A(1) exceeds the number of
shares to be converted, the Corporation shall, upon such conversion, execute and
deliver to the holder, at the expense of the Corporation, a new certificate or
certificates for the number of shares of Preferred Stock represented by the
certificate or certificates surrendered which are not to be converted. At the
time of each conversion of shares of Preferred Stock pursuant to this Paragraph
6, the Corporation shall pay, out of funds legally available therefor, in cash
an amount equal to all dividends, declared but unpaid, and any Noncompliance
Dividends, on the shares of Preferred Stock surrendered for conversion to the
date upon which such conversion is deemed to take place as provided in
subparagraph 6B; provided that, any holder of shares of Preferred Stock may
elect, at the time such shares are surrendered for conversion or at any other
time prior to conversion, to take payment for all declared but unpaid dividends
and any Noncompliance Dividends on such shares, if any, in shares of Common
Stock rather than in cash, with the number of shares of Common Stock issuable in
lieu of such cash payment to be determined by dividing the aggregate amount of
such declared but unpaid dividends and Noncompliance Dividends by the Conversion
Price then in effect for the shares of Preferred Stock held by such holder with
respect to which such declared but unpaid dividends and Noncompliance Dividends
shall be payable. No fractional shares shall be issued upon conversion of
Preferred Stock into Common Stock or upon election to take shares of Common
Stock in lieu of cash for declared but unpaid dividends and Noncompliance
Dividends, and no payment or adjustment at the time of such conversion or
election shall be made by the Company on account of any previously-declared cash
dividends on the Common Stock. In lieu of delivering any such fractional share
of Common Stock, the Corporation shall pay an amount in cash equal to the
current market price of such fractional share as determined in good faith by the
Board of Directors of the Corporation.
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6D. Adjustment of Price Upon Issuance of Common Stock. Except as
provided in subparagraph 6E, if and whenever the Corporation shall issue or
sell, or is, in accordance with subparagraphs 6D(1) through 6D(8), deemed to
have issued or sold, any shares of Common Stock for a consideration per share
less than the Conversion Price in effect for each or all four of the Series A
Convertible Preferred Stock, the Series B Convertible Preferred Stock, the
Series C Convertible Preferred Stock or the Series D Convertible Preferred Stock
immediately prior to the time of such issue or sale (a "Dilutive Offering"),
then in each such case, forthwith upon such issue or sale, such Conversion Price
for the Series A Convertible Preferred Stock, Series B Convertible Preferred
Stock, Series C Convertible Preferred Stock or the Series D Convertible
Preferred Stock or all four, as the case may be, shall be reduced to the price
determined by dividing (i) an amount equal to the sum of (a) the number of
shares of Common Stock outstanding immediately prior to such issue or sale
(including the number of shares of Common Stock issued or issuable upon
conversion of the Preferred Stock) multiplied by the then existing Conversion
Price for the Series A Convertible Preferred Stock, Series B Convertible
Preferred Stock, Series C Convertible Preferred Stock or Series D Convertible
Preferred Stock, as the case may be, and (b) the consideration, if any, received
by the Corporation upon such issue or sale, by (ii) the total number of shares
of Common Stock outstanding immediately after such issue or sale (including the
number of shares of Common Stock issued or issuable upon conversion of the
Preferred Stock).
Notwithstanding the foregoing, if the Company shall issue or sell or
is, in accordance with subparagraphs 6D(1) through 6D(8), deemed to have issued
or sold, any shares of Common Stock for a consideration per share less than the
Conversion Price for the Series C Convertible Preferred Stock in effect
immediately prior to such sale, the Conversion Price in effect for the Series C
Convertible Preferred Stock shall be reduced to equal the greater of $1.40 or
such consideration per share, provided, that if such consideration per share is
less than $1.40, the Conversion Price shall as a result of such issue or sale
(i) first be reduced to $1.40 in accordance with this sentence and (ii)
thereafter be reduced as otherwise provided in this Section 6. For any later
issues or sales of Common Stock below the applicable Conversion Price in effect
for the Series C Convertible Preferred Stock, adjustments shall be made as
otherwise provided in this Section 6.
In addition, notwithstanding the foregoing, if the Company shall issue
or sell or is, in accordance with subparagraphs 6D(1) through 6D(8), deemed to
have issued or sold, any shares of Common Stock for a consideration per share
less than the Conversion Price for the Series B Convertible Preferred Stock in
effect immediately prior to such sale, the Conversion Price in effect for the
Series B Convertible Preferred Stock shall be reduced to equal the greater of
$1.00 or such consideration per
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share, provided, that if such consideration per share is less than $1.00, the
Conversion Price shall as a result of such issue or sale (i) first be reduced to
$1.00 in accordance with this sentence and (ii) thereafter be reduced as
otherwise provided in this Section 6. For any later issues of sales of Common
Stock below the applicable Conversion Price in effect for the Series B
Convertible Preferred Stock, adjustments shall be made as otherwise provided in
this Section 6.
Notwithstanding anything to the contrary set forth in Section 6 hereof,
no adjustment shall be made to (i) the Conversion Price of the Series A
Convertible Preferred Stock in the event that the Corporation shall issue or
sell or is, in accordance with subparagraphs 6D(1) through 6D(8), deemed to have
issued or sold any shares of Common Stock solely at a price per share equal to
or greater than the Conversion Price for the Series A Convertible Preferred
Stock, but less than the Conversion Price for the Series B, Series C or Series D
Convertible Preferred Stock; or (ii) the Conversion Price of the Series B
Convertible Preferred Stock in the event that the Corporation shall issue or
sell or is, in accordance with subparagraph 6D(1) through 6D(8), deemed to have
issued or sold any shares of Common Stock solely at a price per share equal to
or greater than the Conversion Price for the Series B Convertible Preferred
Stock, but less than the Conversion Price for the Series C or Series D
Convertible Preferred Stock; or (iii) the Conversion Price of the Series C
Convertible Preferred Stock in the event that the Corporation shall issue or
sell or is, in accordance with subparagraph 6D(1) through 6D(8), deemed to have
issued or sold any shares of Common Stock solely at a price per share equal to
or greater than the Conversion Price for the Series C Convertible Preferred
Stock, but less than the Conversion Price for the Series D Convertible Preferred
Stock.
For purposes of this subparagraph 6D, the following subparagraphs 6D(1)
to 6D(8) shall also be applicable:
6D(1) Issuance of Rights or Options. In case at any time the
Corporation shall in any manner grant (whether directly or by
assumption in a merger or otherwise) any warrants or other rights to
subscribe for or to purchase, or any options for the purchase of,
Common Stock or any stock or security convertible into or exchangeable
for Common Stock (such warrants, rights or options being called
"Options" and such convertible or exchangeable stock or securities
being called "Convertible Securities") whether or not such Options or
the right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock
is issuable upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities (determined by dividing (i) the
total amount, if any, received or receivable by the Corporation as
consideration for the granting of such Options, plus the minimum
aggregate amount
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of additional consideration payable to the Corporation upon the
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 upon the issue or sale of
such Convertible Securities and upon the conversion or exchange
thereof, by (ii) 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) shall be less than the Conversion Price of the Series
A Convertible Preferred Stock, Series B Convertible Preferred Stock,
Series C Convertible Preferred Stock or Series D Convertible Preferred
Stock, as the case may be, or all four, 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 issuable upon the exercise of such Options shall
be deemed to have been issued for such price per share as of the date
of granting of such Options or the issuance of such Convertible
Securities and thereafter shall be deemed to be outstanding. Except as
otherwise provided in subparagraph 6D(3), no adjustment of the
Conversion Price shall be made upon the actual issue of such Common
Stock or of such Convertible Securities upon exercise of such Options
or upon the actual issue of such Common Stock upon conversion or
exchange of such Convertible Securities.
6D(2) Issuance of Convertible Securities. In case the
Corporation shall in any manner issue (whether directly or by
assumption in a merger or otherwise) or sell any Convertible
Securities, whether or not the rights to exchange or convert any such
Convertible Securities are immediately exercisable, and the price per
share for which Common Stock is issuable upon such conversion or
exchange (determined by dividing (i) 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, by (ii) the total maximum number of
shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities) shall be less than the Conversion Price of
the Series A Convertible Preferred Stock, Series B Convertible
Preferred Stock, Series C Convertible Preferred Stock or Series D
Convertible Preferred Stock, or all four, as the case may be, in effect
immediately prior to the time of such issue or sale, then the total
maximum number of shares of Common Stock issuable upon conversion or
exchange of all such Convertible Securities shall be deemed to have
been issued for such price per share as of the date of the issue or
sale of such Convertible Securities and thereafter shall be deemed
to be
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<PAGE> 78
outstanding as of such date, provided that (a) except as otherwise
provided in subparagraph 6D(3), no adjustment of the Conversion Price
of the Series A Convertible Preferred Stock, Series B Convertible
Preferred Stock, Series C Convertible Preferred Stock or Series D
Convertible Preferred Stock, or all four, as the case may be, shall be
made upon the actual issue of such Common Stock upon conversion or
exchange of such Convertible Securities and (b) if any such issue or
sale of such Convertible Securities is made upon exercise of any
Options to purchase any such Convertible Securities for which
adjustments of the Conversion Price of the Series A Convertible
Preferred Stock, Series B Convertible Preferred Stock, Series C
Convertible Preferred Stock or Series D Convertible Preferred Stock, or
all four, as the case may be, have been or are to be made pursuant to
other provisions of this subparagraph 6D, no further adjustment of the
Conversion Price of the Series A Convertible Preferred Stock, Series B
Convertible Preferred Stock, Series C Convertible Preferred Stock or
Series D Convertible Preferred Stock, or all four, as the case may be,
shall be made by reason of such issue or sale.
6D(3) Change in Option Price or Conversion Rate. Upon the
happening of any of the following events, namely, if the purchase price
provided for in any Option referred to in subparagraph 6D(1); the
additional consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in subparagraph
6D(1) or 6D(2); or the rate at which Convertible Securities referred to
in subparagraph 6D(1) or 6D(2) are convertible into or exchangeable for
Common Stock shall change at any time (including, but not limited to,
changes under or by reason of provisions designed to protect against
dilution), the Conversion Price of the Series A Convertible Preferred
Stock, Series B Convertible Preferred Stock, Series C Convertible
Preferred Stock or Series D Convertible Preferred Stock, or all four,
as the case may be, in effect at the time of such event shall forthwith
be readjusted to the 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 conversion rate, as the case may be, at the time
initially granted, issued or sold, but only if as a result of such
adjustment the Conversion Price then in effect hereunder is thereby
reduced; and on the expiration of any such Option or the termination of
any such right to convert or exchange such Convertible Securities, the
Conversion Price then in effect hereunder shall forthwith be increased
to the Conversion Price which would have been in effect at the time of
such expiration or termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such
expiration or termination, never been issued.
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<PAGE> 79
6D(4) Stock Dividends. In case the Corporation shall declare a
dividend or make any other distribution upon any stock of the
Corporation payable in Common Stock (except for dividends or
distributions upon the Common Stock), Options or Convertible
Securities, any Common Stock, Options or Convertible Securities, as the
case may be, issuable in payment of such dividend or distribution
shall be deemed to have been issued or sold without consideration.
6D(5) Consideration for Stock. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to be the
amount received by the Corporation therefore, without deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith.
In case any shares of Common Stock, Options or Convertible Securities
shall be issued or sold for a consideration other than cash, the amount
of the consideration other than cash received by the Corporation shall
be deemed to be the fair value of such consideration as determined in
good faith by the Board of Directors of the Corporation, without
deduction of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection
therewith. In case any Options shall be issued in connection with the
issue and sale of other securities of the Corporation, together
comprising one integral transaction in which no specific consideration
is allocated to such Options by the parties thereto, such Options shall
be deemed to have been issued for such consideration as determined in
good faith by the Board of Directors of the Corporation.
6D(6) Record Date. In case the Corporation shall set a record
date for the determination of the holders of its Common Stock for the
purpose of entitling them (i) to receive a dividend or other
distribution payable in Common Stock, Options or Convertible Securities
or (ii) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have
been issued or sold upon the declaration of such dividend or the making
of such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
6D(7) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by
or for the account of the Corporation, and the disposition of any such
shares shall be considered an issue or sale of Common Stock for the
purpose of this subparagraph 6D.
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<PAGE> 80
6D(8) Adjustments for Failure of Participation.
Notwithstanding anything contained in this subparagraph 6D to the
contrary, the rights of any holder of Preferred Stock to the benefits
of this Paragraph 6D shall be subject to the limitations contained in
this subparagraph 6D(8) if such holder has failed to participate in any
offering which is a Dilutive Offering with respect to such holder's
shares by acquiring in such Dilutive Offering such number of shares as
shall equal the product of the number of shares actually offered in the
Dilutive Offering to all holders of Preferred Stock, as determined by
the Board of Directors, multiplied by a fraction: (a) the numerator of
which is the number of shares of Preferred Stock with respect to which
the offering is a Dilutive Offering as is held by such holder at the
time of such Dilutive Offering, and (b) the denominator of which is the
total number of shares of the Preferred Stock then outstanding with
respect to which the offering is a Dilutive Offering (the "Pro Rata
Share"). Solely for purposes of this subparagraph 6D(8), shares
purchased by an affiliate or affiliates of a holder of Preferred Stock
in a Dilutive Offering (other than an affiliate who held Preferred
Stock prior to such Dilutive Offering except to the extent that such
affiliate has exceeded its Pro Rata Share and has not otherwise
directed that such excess be counted towards the Pro Rata Share of
another affiliate) shall be deemed to have been purchased by such
holder. As used in this subparagraph, the term affiliate of a holder
shall mean a person who directly or indirectly through one or more
intermediaries controls, is controlled by, or is under common control
with, such holder. If any holder of Preferred Stock shall fail to
purchase its Pro Rata Share of any such Dilutive Offering in accordance
with this subsection 6D(8), then such holders rights under this
subparagraph 6D shall terminate and shall no longer be of any force and
effect as to the shares of Preferred Stock with respect to which the
offering was a Dilutive Offering; provided, however, that no holder of
shares of Preferred Stock shall be required to participate to the
extent of all or any part of such holder's Pro Rata Share of a Dilutive
Offering if and to the extent such participation would violate any
statute, rule or regulation, or order of any court or governmental
agency applicable to such holder, and such holder furnishes to the
Corporation a certificate, signed by an executive officer or general
partner of such holder, as the case may be, and an opinion of counsel,
each to such effect. The Corporation, the Board of Directors and the
holders of the Preferred Stock shall take all necessary actions to
designate a new series of Preferred Stock on any occasion that any
holder of Preferred Stock shall fail to purchase its Pro Rata Share of
any Dilutive Offering. The Corporation shall, thirty (30) days prior to
any issuance of its securities pursuant to a Dilutive Offering, give
each holder of Preferred Stock written notice of the holder's right
to participate in such Dilutive Offering. If, after
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the Corporation has given such notice, a Dilutive Offering occurs and a
holder of Preferred Stock fails to purchase its Pro Rata Share of the
Dilutive Offering, shares of such holder's Preferred Stock with respect
to which the offering is a Dilutive Offering shall be immediately and
automatically converted into shares of a newly-created series of
Preferred Stock (the "New Preferred Stock"); provided that the terms of
any series of New Preferred Stock shall be identical in all respects to
the terms of the Series A Convertible Preferred Stock, Series B
Convertible Preferred Stock, Series C Convertible Preferred Stock or
Series D Convertible Preferred Stock, as the case may be, except that
(i) the Conversion Price of the New Preferred Stock shall be the
Conversion Price in effect for the Series A Convertible Preferred
Stock, Series B Convertible Preferred Stock, Series C Convertible
Preferred Stock or Series D Convertible Preferred Stock, as the case
may be, immediately prior to such Dilutive Offering, and (ii) any
holder of shares of the such New Preferred Stock shall not be entitled
to receive the benefits of any adjustments to the Conversion Price
pursuant to this subparagraph 6D with respect to any future Dilutive
Offering by the Corporation. Except as otherwise required by law, all
series of New Preferred Stock shall vote together as a single series
with the Series A Convertible Preferred Stock, Series B Convertible
Preferred Stock, Series C Convertible Preferred Stock and Series D
Convertible Preferred Stock, as the case may be, relating thereto, on
all matters submitted to the stockholders for a vote or a written
consent, including but not limited to the election for a majority of
directors of the Corporation by the Preferred Stock pursuant to
subparagraph 2C. For the purposes of paragraphs 3, 4, 5, 6A, 6B, 6C,
6E, 6F, 6G, 6I, 6J, 6K, 6L, 6M, 6N, 6O, 6P, 7 and 8, the terms
"Preferred Stock," "Series A Convertible Preferred Stock," "Series B
Convertible Preferred Stock," "Series C Convertible Preferred Stock"
and "Series D Convertible Preferred Stock" shall include any series of
New Preferred Stock relating thereto issued by the Corporation pursuant
to this subparagraph 6D(8).
6E. Certain Issues of Common Stock Excepted. Anything herein
to the contrary notwithstanding, the Corporation shall not be required to make
any adjustment of the Conversion Prices in the case of the issuance of (i) up to
an aggregate of 3,450,000 shares (appropriately adjusted to reflect the
occurrence of any event described in subparagraph 6F) of Common Stock or options
or warrants to purchase Common Stock to directors, officers or employees of, or
other providers of service to, the Corporation in connection with their service
as directors, officers or employees of, or providers of services to the
Corporation, which number of shares shall include any shares issued prior to the
issuance of any shares of Preferred Stock (the "Reserved Employee Shares"); (ii)
any shares of Common Stock or other securities upon conversion of the Series A
Convertible Preferred Stock, the
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<PAGE> 82
Series B Convertible Preferred Stock, the Series C Convertible Preferred Stock
or the Series D Convertible Preferred Stock; (iii) any shares of New Preferred
Stock in accordance with subparagraph 6D(8); (iv) any shares of Preferred Stock
issuable upon exercise of outstanding warrants to purchase Preferred Stock; or
(v) any securities issued in connection with equipment lease transactions
undertaken in the ordinary course of the Corporation's business and approved by
a majority of the members of the Board of Directors designated by the holders of
Preferred Stock under the Stockholders' Agreement.
6F. Subdivision or Combination of Common Stock. In case the
Corporation shall at any time subdivide (by any stock split, stock dividend or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price of the Preferred Stock in effect immediately prior
to such subdivision shall be proportionately reduced, and, conversely, in case
the outstanding shares of Common Stock shall be combined into a smaller number
of shares, the Conversion Price of the Preferred Stock in effect immediately
prior to such combination shall be proportionately increased.
6G. Reorganization or Reclassification. If any capital
reorganization or reclassification of the capital stock of the Corporation shall
be effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Common
Stock, then, as a condition of such reorganization or reclassification, lawful
and adequate provisions shall be made whereby each holder of a share or shares
of Preferred Stock shall thereupon have the right to receive, upon the basis and
upon the terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore receivable upon the conversion of such
share or shares of Preferred Stock, such shares of stock, securities or assets
as may be issued or payable with respect to or in exchange for a number of
outstanding shares of such Common Stock equal to the number of shares of such
Common Stock immediately theretofore receivable upon such conversion had such
reorganization or reclassification not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
such holder to the end that the provisions hereof (including without limitation
provisions for adjustments of the Conversion Price) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise of such conversion rights.
6H. Adjustment of Provisions. If the Corporation grants to the
holders of any class or series of stock of the Corporation any rights relating
to the adjustment of the Conversion Price of such class or series of stock upon
a Dilutive Offering or otherwise, which rights shall be more favorable to the
holders of such class or series of stock than the comparable rights in this
paragraph 6 are to the holders of the Preferred
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Stock, or which rights shall grant to the holders of such class or series of
stock rights not granted to the holders of Preferred Stock pursuant to the
Certificate of Incorporation of the Corporation, then such more favorable rights
shall be deemed to also apply to all holders of Preferred Stock.
6I. Notice of Adjustment. Upon any adjustment of the
Conversion Price, then and in each such case the Corporation shall give written
notice thereof, by first class mail, postage prepaid, by recorded delivery
service or by telex to non-U.S. residents, addressed to each holder of shares of
Preferred Stock at the address of such holder as shown on the books of the
Corporation, which notice shall state the Conversion Price resulting from such
adjustment, setting forth in reasonable detail the method upon which such
calculation is based.
6J. Other Notices. In case at any time:
(1) the Corporation shall declare any dividend upon
its Common Stock payable in cash or stock or make any other
distribution to the holders of its Common Stock;
(2) the Corporation shall offer for subscription pro
rata to the holders of its Common Stock any additional shares
of stock of any class or other rights;
(3) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or a
consolidation or merger of the Corporation with or into, or a
sale of all or substantially all its assets to, another entity
or entities; or
(4) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by first
class mail, postage prepaid, by recorded delivery service or by telex to
non-U.S. residents, addressed to each holder of any shares of Preferred Stock at
the address of such holder as shown on the books of the Corporation, (a) at
least 20 days' prior written notice of the date on which the books of the
Corporation shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in respect
of any such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, and (b) in the case of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, at least 20 days' prior written notice of the date
when the same shall take place. Such notice in accordance with the foregoing
clause (a) shall also
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specify, in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled thereto and such
notice in accordance with the foregoing clause (b) shall also specify the date
on which the holders of Common Stock shall be entitled to exchange their Common
Stock for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be.
6K. Stock to be Reserved. The Corporation will at all times
reserve and keep available out of its authorized Common Stock, solely for the
purposes of issuance upon the conversion of Preferred Stock as herein provided,
such number of shares of Common Stock as shall then be issuable upon the
conversion of all outstanding shares of Preferred Stock. The Corporation
covenants that all shares of Common Stock which shall be so issued shall be duly
and validly issued and fully paid and nonassessable and free from all taxes,
liens and charges with respect to the issue thereof, and, without limiting the
generality of the foregoing, the Corporation covenants that it will from time to
time take all such action as may be requisite to ensure that the par value per
share of the Common Stock is at all times equal to or less than the Conversion
Price in effect at the time. The Corporation will take all such action as may be
necessary to ensure that all such shares of Common Stock may be so issued
without violation of any applicable law or regulation, or of any requirement of
any national securities exchange or quotation system upon which the Common Stock
may be listed. The Corporation will not take any action which results in any
adjustment of the Conversion Price it the total number of shares of Common Stock
issued and issuable after such action upon conversion of the Preferred Stock
would exceed the total number of shares of Common Stock then authorized by the
Certificate of Incorporation.
6L. No Reissuance of Preferred Stock. Shares of Preferred
Stock which are converted into shares of Common Stock as provided herein
shall be cancelled and shall not be reissued.
6M. Issue Tax. The issuance of certificates for shares of
Common Stock upon conversion of Preferred Stock shall be made without charge to
the holders thereof for any issuance tax in respect thereof, provided that the
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than that of the holder of the Preferred Stock which is being
converted.
6N. Closing of Books. The Corporation will at no time close
its transfer books against the transfer of any Preferred Stock or of any shares
of Common Stock issued or issuable upon the conversion of any shares of
Preferred Stock in any manner
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which interferes with the timely conversion of such Preferred Stock, except as
may otherwise be required to comply with applicable securities laws.
6O. Definition of Common Stock. As used in this Paragraph 6,
the term "Common Stock" shall mean and include the Corporation's authorized
Common Stock, par value $.001 per share, as constituted on the date of filing of
these terms of the Preferred Stock, and shall also include any capital stock of
any class of the Corporation thereafter authorized which shall neither be
limited to a fixed sum or percentage of par value in respect of the rights of
the holders thereof to participate in dividends nor entitled to a preference in
the distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation; provided that the shares of Common
Stock receivable upon conversion of shares of Preferred Stock shall include only
shares designated as Common Stock of the Corporation on the date of filing of
this instrument, or in case of any reorganization or reclassification of the
outstanding shares thereof, the stock, securities or assets provided for in
subparagraph 6G.
7. Noncompliance.
7A. Remedies. Immediately upon the occurrence of any
Noncompliance Event, as defined below, the holders of the Preferred Stock will
have the following rights, in addition to all other rights set forth in the
Certificate of Incorporation, in any agreement between such holders and the
Corporation, or as otherwise provided by law:
(1) A cumulative dividend (the "Noncompliance Dividend") shall
accrue on a daily basis on all outstanding shares of Preferred Stock to
which the Noncompliance Event applies as set forth in subparagraph 7B,
so long as the Corporation is a noncompliance (as defined below), which
such dividend shall be in addition to the accruing dividends described
in subparagraph 3B. Such dividend shall accrue at the annual rate of
$.10 per share in the case of Series A Convertible Preferred Stock,
$.14 per share in the case of Series B Convertible Preferred Stock,
$.175 per share in the case of Series C Convertible Preferred Stock and
$.225 per share in the case of Series D Convertible Preferred Stock for
the first 30 days that the Corporation is in noncompliance, which rate
shall increase by $.01 for each successive 30-day period that the
Corporation remains in noncompliance, up to a maximum annual rate of
$.16 per share in the case of Series A Convertible Preferred Stock,
$.22 per share in the case of Series B Convertible Preferred Stock,
$.28 per share in the case of Series C Convertible Preferred Stock and
$.36 per share in the case of Series D Convertible Preferred Stock.
Each holder of Preferred Stock to whom any such dividend is payable may
elect to have such
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dividend paid by the Corporation in cash or in shares of Common Stock
of the Corporation, as provided in subparagraph 6C.
(2) As provided in subparagraph 2C, the holders of Preferred
Stock, voting as a single class, shall have the right to elect a
majority of the directors of the Corporation.
7B. Noncompliance Event. For the purposes of this Certificate of
Incorporation, a "Noncompliance Event" shall be defined as any one or more of
the following events:
(1) The Corporation has materially breached any one or more of
the provisions of (i) the Series A Convertible Preferred Stock Purchase
Agreement dated December 22, 1988 (the "Series A Purchase Agreement")
then in effect or Article V of the Series D Purchase Agreement with
respect to the Series A Convertible Preferred Stock, (ii) the Series B
Purchase Agreement dated June 29, 1990 (the "Series B Purchase
Agreement") then in effect or Article V of the Series D Purchase
Agreement with respect to the Series B Convertible Preferred Stock,
(iii) the Series C Purchase Agreement dated as of July 29, 1991 (the
"Series C Purchase Agreement") then in effect or Article V of the
Series D Purchase Agreement with respect to Series C Convertible
Preferred Stock, or (iv) the Series D Purchase Agreement (the Series A
Purchase Agreement, the Series B Purchase Agreement, the Series C
Purchase Agreement and the Series D Purchase Agreement to be referred
to collectively herein as the "Purchase Agreements"), or of any of the
other agreements contemplated by the Purchase Agreements and executed
in connection therewith (collectively, the "Ancillary Agreements") with
respect to the shares of Preferred Stock to which such Ancillary
Agreements may apply, in each case as such Ancillary Agreements shall
have been amended, and such breach has continued for 30 days following
receipt by the Corporation of written notice of said breach given by
the holders of at least two-thirds of the outstanding shares of
Preferred Stock with respect to which such covenant or provisions
applies;
(2) Any of the Corporation's representations and/or warranties
set forth in the Series A Purchase Agreement with respect to the Series
A Convertible Preferred Stock, the Series B Purchase Agreement with
respect to the Series B Convertible Preferred Stock, the Series C
Purchase Agreement with respect to the Series C Convertible Preferred
Stock, the Series D Purchase Agreement with respect to the Series D
Convertible Preferred Stock, or in any one or more of the Ancillary
Agreements with respect to the shares of Preferred Stock to which such
Ancillary Agreement may apply, was not substantially true as of the
date of closing for such Purchase Agreement or Ancillary Agreement and
the
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<PAGE> 87
Corporation has received written notice of such fact from the holders
of at least two-thirds of the outstanding shares of Preferred Stock
with respect to which such representation and/or warranty applies;
(3) The Corporation has failed to make payment(s) when due for
any dividends, interest and/or mandatory redemption of any securities,
where such payment(s) aggregate over $200,000 and such failure to pay
has continued for thirty (30) days following receipt by the Corporation
of written notice of said failure to pay from the holders of at least
two-thirds of the outstanding shares of Preferred Stock;
(4) The Corporation has been in material default of payment on
any debt agreement under which the Corporation is obligated to pay at
least $200,000 in principal (including any acceleration thereof) and
accrued interest at the time of such default, and such default has
continued for thirty (30) days following receipt by the Corporation of
written notice of said default given by the holders of at least
two-thirds of the outstanding shares of Preferred Stock; or
(5) The Corporation has filed for bankruptcy, made an
assignment for the benefit of creditors, materially compromised its
debt with a material creditor of the Corporation, or suffered
acceleration of a material debt instrument, and the Corporation has
received written notice of same from the holders of at least two-thirds
of the outstanding shares of Preferred Stock.
Once a Noncompliance Event has occurred, the Corporation shall give prompt
notice thereof to each holder of Preferred Stock, and shall be deemed "in
noncompliance" until such time as the President or Chief Financial Officer of
the Corporation shall have certified and delivered by hand or by first class
mail, postage prepaid, by the recorded delivery service or by telex to non-U.S.
residents, addressed to each holder of Preferred Stock at the address of such
holder as shown on the books of the Corporation, notice that the condition
underlying such Noncompliance Event is cured.
8. Amendments. No provision of these terms of the Preferred Stock
may be amended, modified or waived without the written consent or
affirmative vote of the holders of at least two-thirds of the then-
outstanding shares of Preferred Stock voting as a single class.
SECOND: Written consent to the adoption of the foregoing amendment of
the Restated Certificate of Incorporation of the Corporation has been given in
accordance with the provisions of Section 228 of the Delaware General
Corporation Law, and written notice of the adoption of said amendment without a
meeting by
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IN WITNESS WHEREOF, Object Design, Inc. has caused this certificate to
be signed by its President and attested by its Secretary this 10th day of March,
1992.
Object Design, Inc.
By: /s/ Kenneth E. Marshall
--------------------------------
Its President
ATTEST
By: /s/ John Patterson
----------------------
Its Secretary
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EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
OBJECT DESIGN, INC.
Object Design, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That the following amendment to the Restated Certificate of
Incorporation of Object Design, Inc. (the "Corporation") has been duly adopted
in accordance with the provisions of Section 242 and Section 228 of the Delaware
General Corporation Law:
That the Restated Certificate of Incorporation of the Corporation be
further amended by deleting the old Article Fourth and inserting a new Article
Fourth in its stead which shall be and read as follows in its entirety:
"Fourth: The total number of shares of capital stock which the Corporation
shall have the authority to issue shall be 19,000,000 common shares, having a
par value of $.001 per share, amounting to an aggregate par value of $19,000.00
and 15,044,664 shares of Preferred Stock having a par value of $.01 per share
amounting to an aggregate par value of $150,446.64.
The voting power, preferences and relative participating, optional or other
special rights and the qualifications, limitations or restrictions of the
Preferred Stock are set forth as follows:
1. Number of Shares. 2,750,000 shares of the Preferred Stock shall be
designated and known as "Series A Convertible Preferred Stock," 4,575,715 shares
of the Preferred Stock shall be designated and known as "Series B Convertible
Preferred
<PAGE> 90
Stock," 2,857,143 shares of the Preferred Stock shall be designated and known as
"Series C Convertible Preferred Stock," 1,111,111 shares of Preferred Stock
shall be designated and known as "Series D Convertible Stock," 2,601,877 shares
of Preferred Stock shall be designated and known as "Series E Convertible
Preferred Stock" and 1,148,818 shares of Preferred Stock shall be designated and
known as "Series F Convertible Preferred Stock." Unless otherwise specifically
designated, the term "Preferred Stock" refers collectively to Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C
Convertible Preferred Stock, Series D Convertible Preferred Stock, Series E
Convertible Preferred Stock and Series F Convertible Preferred Stock.
2. Voting.
2A. General. Except as may be otherwise provided in these terms of the
Preferred Stock or by law, the Preferred Stock shall vote together with the
Common Stock as a single class on all actions to be taken by the stockholders of
the Corporation. Each share of Preferred Stock shall entitle the holder thereof
to such number of votes per share on each such action as shall equal the number
of shares of Common Stock (including fractions of a share) into which each share
of Preferred Stock is then convertible.
With respect to all questions as to which, under law, stockholders are
entitled to vote by classes, the holders of Preferred Stock shall vote together
as a single class separately from the holders of Common Stock. With respect to
all questions as to which, under law, stockholders are required to vote by
series, the holders of Series A Convertible Preferred Stock shall vote
separately as a single series, the holders of Series B Convertible Preferred
Stock shall vote separately as a single series, the holders of Series C
Convertible Preferred Stock shall vote separately as a single series, the
holders of Series D Convertible Preferred Stock shall vote separately as a
single series, the holders of Series E Convertible Preferred Stock shall vote
separately as a single series and the holders of Series F Convertible Preferred
Stock shall vote separately as a single series.
2B. Board Size. The Corporation shall not, without the written consent
or affirmative vote of the holders of at least two-thirds of the then
outstanding shares of Preferred Stock, given in writing or by vote at a meeting,
consenting or voting (as the case may be) separately as a class, change the
number of directors constituting the Board of Directors to a number other than
eight (8) except that the Corporation may increase or decrease the number of
directors constituting the Board of Directors with the vote of a majority of the
members of the Board of Directors designated by the holders of Preferred
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Stock pursuant to the Second Amended and Restated Stockholders' Agreement dated
March 12, 1992 by and among the Corporation and the parties thereto, as amended
as of April 12, 1993 (the "Stockholders' Agreement").
2C. Board Seats. The holders of the Preferred Stock shall be entitled to
vote together with the Common Stock as a single class for the election of each
of the directors of the Corporation. Notwithstanding the foregoing or anything
else to the contrary provided in the Certificate of Incorporation, upon the
occurrence of any Noncompliance Event (as such term is defined in subparagraph
7B) and continuing for so long as the Corporation remains in noncompliance (as
defined in subparagraph 7B), the holders of the Preferred Stock, voting as a
separate class, shall be entitled to elect a majority of the directors of the
Corporation, with the remaining directors of the Corporation to be elected as
set forth in the first sentence of this subparagraph 2C. A vacancy in any
directorship elected by the holders of the Preferred Stock, voting as a separate
class, shall be filled only by vote or written consent of the holders of the
Preferred Stock, and a vacancy in any directorship elected jointly by the
holders of the Preferred Stock and all other classes and series of stock of the
Corporation, voting together as a single class, shall be filled only by vote or
written consent of the Preferred Stock and all other classes and series of stock
of the Corporation, as provided above. At any meeting (or in a written consent
in lieu thereof) held for the purpose of electing directors, the presence in
person or by proxy (or the written consent) of the holders of a majority of the
shares of Preferred Stock then outstanding shall constitute a quorum of the
Preferred Stock for the election of directors to be elected solely by the
holders of the Preferred Stock.
3. Dividends
3A. General. The holders of the Preferred Stock shall be entitled to
receive, as and when declared by the Board of Directors out of funds legally
available therefor, dividends at the same rate as dividends (other than
dividends paid in additional shares of Common Stock) are paid with respect to
the Common Stock (treating each share of Preferred Stock as being equal to the
number of shares of Common Stock (including fractions of a share) into which
each share of Preferred Stock is then convertible). In addition, the holders of
the Preferred Stock may from time to time be entitled, pursuant to the terms of
subparagraph 3B below, to certain cumulative dividends, and pursuant to the
terms of paragraph 7 below, to certain "Noncompliance Dividends," as that term
is defined in subparagraph 7A, as well as to any other dividends declared by the
Board of Directors on the outstanding shares of Preferred Stock out of funds
legally available therefor. All dividends on Preferred Stock shall be paid on a
pro-rata basis (except such
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Noncompliance Dividends as are payable solely on Series A Convertible Preferred
Stock, Series B Convertible Preferred Stock, Series C Convertible Preferred
Stock, Series D Convertible Preferred Stock, Series E Preferred Stock or Series
F Preferred Stock, as the case may be, pursuant to subparagraph 7A).
3B. Accruing Dividends. In each year commencing on (1) July 25, 1991,
the holders of Series A Convertible Preferred Stock, Series B Convertible
Preferred Stock and Series C Convertible Preferred Stock shall be entitled to
receive out of funds legally available therefor, as and when declared by the
Board of Directors, dividends at the rate of $.10 per share in the case of
Series A Convertible Preferred Stock, $.14 per share in the case of Series B
Convertible Preferred Stock and $.175 per share in the case of Series C
Convertible Preferred Stock, (2) March 11, 1992, the holders of Series D
Convertible Preferred Stock shall be entitled to receive out of funds legally
available therefor, as and when declared by the Board of Directors, dividends at
the rate of $.225 per share and (3) April 12, 1993, the holders of Series E
Convertible Preferred Stock and the holders of Series F Convertible Preferred
Stock shall be entitled to receive out of funds legally available therefor, as
and when declared by the Board of Directors, dividends at the rate of $.30 per
share in the case of Series E Convertible Preferred Stock and $.35 per share in
the case of Series F Convertible Preferred Stock (each such price subject to
equitable adjustment in the event of any stock dividend, stock split,
combination, reclassification or other similar event), compounded at the rate of
10% per share per annum. Such dividends shall accrue from day to day, whether or
not earned or declared, and shall be cumulative; provided, however, that except
as provided in paragraph 4 hereto and under the terms of a Fourth Amended and
Restated Preferred Stock Redemption Agreement dated April 12, 1993 (the
"Redemption Agreement"), the Corporation shall be under no obligation to pay
such accruing dividends unless so declared by the Board of Directors; and
provided, further that the Corporation's obligation to pay such accruing
dividends upon liquidation, pursuant to the terms of the Redemption Agreement or
otherwise shall commence at the end of the first year in which the Corporation
has positive retained earnings.
3C. Restrictions. Unless all accrued but unpaid dividends on each series
of Preferred Stock shall have been paid or shall have been declared and a sum
sufficient for the payment thereof set apart, (i) no dividend shall be paid or
declared, and no distribution shall be made, on any Common Stock, other than a
dividend or other distribution payable solely in the form of additional shares
of Common Stock, and (ii) no shares of Common Stock shall be purchased, redeemed
or acquired by the Corporation and no amounts shall be paid for the purchase,
redemption or acquisition thereof. Anything herein to the contrary
notwithstanding, the restrictions set forth in this Paragraph 3C
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<PAGE> 93
shall not apply to (i) the repurchase or shares of Common Stock from former
employees, officers, directors or other providers of services to the Corporation
who acquired such shares directly from the Corporation, if each such purchase is
made pursuant to contractual rights held by the Corporation relating to the
termination of employment or services of such former employees, officers,
directors or other providers of services to the Corporation and the purchase
price does not exceed the original purchase price paid by such person to the
Corporation for such shares; (ii) repurchase of shares of Common Stock pursuant
to the Stockholders' Agreement, the Series E and Series F Stock Purchase
Agreement (as hereinafter defined) and the IBM Stockholders' Agreement (as
hereinafter defined); and (iii) repurchase of shares of Common Stock pursuant to
right of first refusal agreements executed in connection with options granted
under the Corporation's 1989 Incentive and Non-Qualified Stock Option Plan, as
amended (the "Plan").
4. Liquidation. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the Preferred
Stock shall first be entitled, before any distribution or payment is made upon
any stock ranking on liquidation, dissolution or winding up, junior to the
Preferred Stock, including the Common Stock, to be paid, out of assets legally
available therefor, an amount equal to the greater of:
(i) $1.00 per share in the case of the Series A Convertible Preferred
Stock, $1.40 per share in the case of the Series B Convertible Preferred
Stock, $1.75 per share in the case of the Series C Convertible Preferred
Stock, $2.25 per share in the case of Series D Convertible Preferred Stock,
$3.00 per share in the case of Series E Convertible Preferred Stock and
$3.50 per share in the case of Series F Convertible Preferred Stock plus,
in each case, all accrued and unpaid dividends thereon, whether or not
earned or declared (including all accrued and unpaid Noncompliance
Dividends, if any,) computed to the date payment thereof is made available;
or
(ii) such amount per share of Preferred Stock as would have been payable
had each such share been converted to Common Stock immediately prior to
such event of liquidation, dissolution or winding up pursuant to the
provisions of paragraph 6 hereof.
Such amount payable with respect to one share of Preferred Stock under this
paragraph 4 shall sometimes be referred to as the "Liquidation of Preference
Payment" and with respect to all shares of Preferred Stock shall sometimes be
referred to as the "Liquidation Preference Payments." If upon such liquidation,
dissolution or winding up of the Corporation, whether voluntary
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or involuntary, the assets to be distributed among the holders of Preferred
Stock shall be insufficient to permit payment in full to the holders of
Preferred Stock of the Liquidation Preference Payments, then the entire assets
of the Corporation to be so distributed shall be distributed ratably among the
holders of Preferred Stock according to the respective amounts which would be
payable on or with respect to the shares of Preferred Stock held by them upon
such distribution if all amounts payable on or with respect to said shares were
paid in full. Written notice of such liquidation, dissolution or winding up,
stating a payment date, the place where said payments shall be made, the
aggregate amount to be paid to each holder of Preferred Stock, and the alternate
amount which would be paid to each such holder if all outstanding shares of
Preferred Stock were to be converted into shares of Common Stock prior to the
payment date, shall be given by mail, postage prepaid, by recorded delivery
service or by telex to non-U.S. residents, not less than twenty (20) days prior
to the payment date stated therein, to the holders of the record of Preferred
Stock, such notice to be addressed to each such holder at its address as shown
by the records of the Corporation. The consolidation or merger of the
Corporation into or with any other entity or entities which results in the
exchange of outstanding securities of the Corporation for securities or other
consideration issued or paid or caused to be issued or paid by any such entity
or entities or affiliate thereof, and the sale or transfer by the Corporation of
all or substantially all its assets, shall be deemed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of the
provisions of this paragraph 4, unless the holders of all outstanding shares of
the Corporation's voting stock immediately prior to such transaction or series
of transactions hold, immediately following the consummation of such transaction
or series of transactions, more than two-thirds of the voting stock of such
entity or entities or affiliate thereof, or of the transferee of the assets of
the Corporation, as the case may be, provided, however, that each holder of
Preferred Stock shall have the right to elect to receive the benefits of the
provisions of subparagraph 6G hereof in lieu of receiving payment in
liquidation, dissolution or winding up of the Corporation pursuant to this
paragraph 4. For purposes hereof, the Common Stock shall rank on liquidation,
dissolution or winding up of the Corporation, junior to the Preferred Stock.
5. Restrictions. At any time when shares of Preferred Stock are
outstanding, except as otherwise required by law or by the Certificate of
Incorporation, without the written consent or affirmative vote of the holders of
at least two-thirds of the then outstanding shares of Preferred Stock,
consenting or voting (as the case may be) separately as a class, the Corporation
will not:
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<PAGE> 95
5A. Create or authorize the creation of any additional class or series
of shares or stock, or reclassify the shares of any existing class or series of
stock, unless the same ranks junior to the Preferred Stock as to the
distribution of assets on the liquidation, dissolution or winding up of the
Corporation, or increase the authorized amount of the Preferred Stock or
increase the authorized amount of any additional class or series of shares of
stock unless the same ranks junior to the Preferred Stock as to the distribution
of assets on the liquidation, dissolution or winding up of the Corporation and
as to the payment of dividends, or create or authorize any obligation or
security convertible into shares of Preferred Stock or into shares of any other
class or series of stock unless the same ranks junior to the Preferred Stock as
to the distribution of assets on the liquidation, dissolution or winding up of
the Corporation and as to the payment of dividends, whether any such creation,
authorization or increase shall be by means of amendment to the Certificate of
Incorporation or by merger, consolidation or otherwise;
5B. Consent to any liquidation, dissolution or winding up of the
Corporation or consolidate or merger into or with any other entity or entities,
or sell or transfer all or substantially all its assets, unless the holders of
the outstanding shares of the Corporation's voting stock immediately prior to
such transaction hold, immediately following the consummation of such
transaction, two-thirds or more of the voting stock of the surviving entity or
entities or affiliates thereof, or of the transferee of the assets of the
Corporation, as the case may be;
5C. Sell or transfer more than ten percent (10%) of the assets of the
Corporation within any 12-month period, other than in the ordinary course of
business;
5D. Amend, alter or repeal its Certificate of Incorporation, or amend,
alter or repeal its By-laws so as to adversely affect a holder of Preferred
Stock;
5E. Purchase or set aside any sums for the purchase of, or pay any
dividend or make any distribution on, any shares of stock other than the
Preferred Stock, except for (i) dividends or other distributions payable on the
Common Stock solely in the form of additional shares of Common Stock; (ii) the
purchase of shares of Common Stock from former employees, officers, directors or
other providers of services to the Corporation who acquired such shares directly
from the Corporation, if each such purchase is made pursuant to contractual
rights held by the Corporation relating to the termination of employment or
services of such former employees, officers, directors or other providers of
services to the Corporation and the purchase price does not exceed the original
issue price paid by such person to the Corporation for such shares; (iii)
repurchase of shares of Common
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Stock pursuant to the Stockholders' Agreement; (iv) repurchase of shares of
Common Stock pursuant to right of first refusal agreements executed in
connection with options granted under the Plan; and (v) the repurchase of shares
of Series E Convertible Preferred Stock and Series F Convertible Preferred Stock
pursuant to a certain Stock Purchase Agreement by and among the Corporation and
the holders of Series E Convertible Preferred Stock and Series F Convertible
Preferred Stock (the "Series E and Series F Stock Purchase Agreement") and
pursuant to a certain Stockholders' Agreement by and among the Corporation,
International Business Machines Corporation and certain of its stockholders
dated as of April 12, 1993 (the "IBM Stockholders' Agreement").
5F. Redeem or otherwise acquire any shares of Preferred Stock except
pursuant to one or more written agreements to which the Corporation and all of
the holders of Preferred Stock, are parties, pursuant to a purchase offer made
pro rata to all holders of the shares of Preferred Stock on the basis of the
aggregate number of outstanding shares of Preferred Stock then held by each such
holder or pursuant to the Series E and Series F Stock Purchase Agreement and the
IBM Stockholders' Agreement.
6. Conversions. The holders of shares of Preferred Stock shall have the
following conversion rights:
6A. Conversion Events.
6A(1) Optional Conversion. Subject to the terms and conditions of
this Paragraph 6, the holder of any share or shares of Preferred Stock shall
have the right, at its option at any time, to convert any such shares of
Preferred Stock (except that upon any liquidation, voluntary or involuntary
dissolution, or winding-up of the Corporation the right of conversion shall
terminate at the close of business on the business day fixed for payment of the
amount distributable on the Preferred Stock) into such number of fully paid and
nonassessable shares of Common Stock as is obtained by (i) multiplying the
number of shares of Preferred Stock so to be converted by $1.00 in the case of
Series A Convertible Preferred Stock, $1.40 in the case of Series B Convertible
Preferred Stock, $1.75 in the case of Series C Convertible Preferred Stock,
$2.25 in the case of Series D Convertible Preferred Stock, $3.00 in the case of
Series E Convertible Preferred Stock and $3.50 in the case of Series F
Convertible Preferred Stock and (ii) dividing the result by the conversion price
of $1.00 in the case of Series A Convertible Preferred Stock, $1.40 in the case
of Series B Convertible Preferred Stock, $1.75 in the case of Series C
Convertible Preferred Stock, $2.25 in the case of Series D Convertible Preferred
Stock, $3.00 in the case of Series E Convertible Preferred Stock and $3.50 in
the case of Series F Convertible Preferred Stock or, in case an adjustment of
such price has taken
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place pursuant to the further provisions of this Paragraph 6, then by the
conversion price as last adjusted and in effect at the date any share or shares
of Preferred Stock are surrendered for conversion (such price, or such price as
last adjusted, being referred to as the "Conversion Price"). Such rights of
conversion shall be exercised by the holder thereof by giving written notice to
the Corporation that the holder elects to convert a stated number of shares of
Preferred Stock into Common Stock and by surrender of a certificate or
certificates for the shares so to be converted to the Corporation at its
principal office (or such other office or agency of the Corporation as the
Corporation may designate by notice in writing to the holders of the Preferred
Stock) at any time during its usual business hours on the date set forth in such
notice, together with a statement of the name or names (with address) in which
the certificate or certificates for shares of Common Stock shall be issued.
6A.(2) Mandatory Conversion. The outstanding shares of Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C
Convertible Preferred Stock, Series D Convertible Preferred Stock, Series E
Convertible Preferred Stock and Series F Convertible Preferred Stock, as the
case may be, shall automatically and without any further action on the part of
the Corporation convert into shares of Common Stock effective upon the earlier
to occur of (i) such time as the Corporation shall have issued an aggregate of
at least two-thirds of the total number of shares of Common Stock which were
issued or issuable upon conversion of the shares of Series A Convertible
Preferred Stock, Series B Convertible Preferred Stock, Series C Convertible
Preferred Stock, Series D Convertible Preferred Stock, Series E Convertible
Preferred Stock and Series F Convertible Preferred Stock, as the case may be, as
of the date of the Series E and Series F Stock Purchase Agreement, as such
number shall have been adjusted from time to time in the event of any stock
dividend, stock split, combination, reclassification or other similar event; or
(ii) the closing of a sale of shares of Common Stock by the Corporation pursuant
to an underwritten public offering in which (a) the aggregate gross proceeds to
the Corporation shall be at least $10,000,000 and (b) the price per share paid
by the public, net of underwriting discounts and commissions, shall be at least
$3.50 (subject to adjustment in the event of any stock dividend, stock split,
combination, reclassification or other similar event.)
6B. Issuance of Certificates; Time Conversion Effected. Promptly upon
(1) the happening of either event described in subparagraph 6A(2) or the receipt
by the Corporation of the written notice referred to in subparagraph 6A(1), and
(2) the surrender of the certificate or certificates for the share or shares of
Preferred Stock to be converted, the Corporation shall issue and deliver, or
cause to be issued and delivered, to the holder, registered in such name or
names as such holder may
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direct, a certificate or certificates for the number of whole shares of Common
Stock issuable upon the conversion of such shares or shares of Preferred Stock.
To the extent permitted by law, such conversion shall be deemed to have been
effected and the Conversion Price shall be determined as of the close of
business on the date on which such written notice shall have been received by
the Corporation, or, in the case of a mandatary conversion under subparagraph
6A(2), on the date of occurrence of either event specified in such subparagraph,
and at such time the rights of the holder of such share or shares of Preferred
Stock shall cease, and the person or persons in whose name or names any
certificate or certificates for shares of Common Stock shall be issuable upon
such conversion shall be deemed to have become the holder or holders of record
of the shares of Common Stock represented thereby.
6C. Partial Conversion; Dividends; Fractional Shares. In case the number
of shares of Preferred Stock represented by the certificate or certificates
surrendered pursuant to subparagraph 6A(1) exceeds the number of shares to be
converted, the Corporation shall, upon such conversion, execute and deliver to
the holder, at the expense of the Corporation, a new certificate or certificates
for the number of shares of Preferred Stock represented by the certificate or
certificates surrendered which are not being converted. At the time of each
conversion of shares of Preferred Stock pursuant to this paragraph 6, the
Corporation shall pay, out of funds legally available therefor, in cash an
amount equal to all dividends declared but unpaid and any Noncompliance
Dividends on the shares of Preferred Stock surrendered for conversion to the
date upon which such conversion is deemed to take place as provided in
subparagraph 6B; provided that, any holder of shares of Preferred Stock may
elect, at the time such shares are surrendered for conversion or at any other
time prior to conversion, to take payment for all declared but unpaid dividends
and any Noncompliance Dividends on such shares, if any, in shares of Common
Stock rather than in cash, with the number of shares of Common Stock issuable in
lieu of such cash payment to be determined by dividing the aggregate amount of
such declared but unpaid dividends and Noncompliance Dividends by the Conversion
Price then in effect for the shares of Preferred Stock held by such holder with
respect to which such declared but unpaid dividends and Noncompliance Dividends
shall be payable. No fractional shares shall be issued upon conversion of
Preferred Stock into Common Stock or upon election to take shares of Common
Stock in lieu of cash for declared but unpaid dividends and Noncompliance
Dividends and no payment or adjustment at the time of such conversion or
election shall be made by the Corporation on account of any previously-declared
cash dividends on the Common Stock. In lieu of delivering any such fractional
share of Common Stock, the Corporation shall pay an amount in cash equal to the
current market price of such fractional share as
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determined in good faith by the Board of Directors of the Corporation.
6D. Adjustment of Price Upon Issuance of Common Stock. Except as
provided in subparagraph 6E, if and whenever the Corporation shall issue or sell
or is, in accordance with subparagraphs 6D(1) through 6D(8), deemed to have
issued or sold any shares of Common Stock for a consideration per share less
than the Conversion Price in effect for each or all six of the Series A
Convertible Preferred Stock, the Series B Convertible Preferred Stock, the
Series C Convertible Preferred Stock, the Series D Convertible Preferred Stock,
the Series E Convertible Preferred Stock or the Series F Convertible Preferred
Stock immediately prior to the time of such issue or sale (a "Dilutive
Offering"), then in each such case, forthwith upon such issue or sale, such
Conversion Price for the Series A Convertible Preferred Stock, the Series B
Convertible Preferred Stock, the Series C Convertible Preferred Stock, the
Series D Convertible Preferred Stock, the Series E Convertible Preferred Stock
or the Series F Convertible Preferred Stock, or all six, as the case may be,
shall be reduced to the price determined by dividing (i) an amount equal to the
sum of (a) the number of shares of Common Stock outstanding immediately prior to
such issue or sale (including the number of shares of Common Stock issued or
issuable upon conversion of the Preferred Stock) multiplied by the then existing
Conversion Price for the Series A Convertible Preferred Stock, the Series B
Convertible Preferred Stock, the Series C Convertible Preferred Stock, the
Series D Convertible Preferred Stock, the Series E Convertible Preferred Stock
or the Series F Convertible Preferred Stock, as the case may be, and (b) the
consideration, if any, received by the Corporation upon such issue or sale, by
(ii) the total number of shares of Common Stock outstanding immediately after
such issue or sale (including the number of shares of Common Stock issued or
issuable upon conversion of the Preferred Stock).
Notwithstanding the foregoing, if the Corporation shall issue or sell or
is, in accordance with subparagraphs 6D(1) through 6D(8), deemed to have issued
or sold, any shares of Common Stock for a consideration per share less than the
Conversion Price for the Series C Convertible Preferred Stock in effect
immediately prior to such sale, the Conversion Price in effect for the Series C
Convertible Preferred Stock shall be reduced to equal the greater of $1.40 or
such consideration per share, provided that if such consideration per share is
less than $1.40, the Conversion Price shall as a result of such issue or sale
(i) first be reduced to $1.40 in accordance with this sentence and (ii)
thereafter be reduced as otherwise provided in this paragraph 6. For any later
issues or sales of Common Stock below the applicable Conversion Price in effect
for the Series C Convertible Preferred Stock, adjustments shall be made as
otherwise provided in this paragraph 6.
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In addition, notwithstanding the foregoing, if the Corporation shall issue
or sell or is, in accordance with subparagraphs 6D(1) through 6D(8), deemed to
have issued or sold, any shares of Common Stock for a consideration per share
less than the Conversion Price for the Series B Convertible Preferred Stock in
effect immediately prior to such sale, the Conversion Price in effect for the
Series B Convertible Preferred Stock shall be reduced to equal the greater of
$1.00 or such consideration per share, provided, that if such consideration per
share is less than $1.00, the Conversion Price shall as a result of such issue
or sale (i) first be reduced to $1.00 in accordance with this sentence and (ii)
thereafter be reduced as otherwise provided in this paragraph 6. For any later
issues of sales of Common Stock below the applicable Conversion Price in effect
for the Series B Convertible Preferred Stock, adjustments shall be made as
otherwise provided in this paragraph 6.
Notwithstanding anything to the contrary set forth in paragraph 6 hereof,
no adjustment shall be made to (i) the Conversion Price of the Series A
Convertible Preferred Stock in the event that the Corporation shall issue or
sell or is, in accordance with subparagraphs 6D(1) through 6D(8), deemed to have
issued or sold any shares of Common Stock solely at a price per share equal to
or greater than the Conversion Price for the Series A Convertible Preferred
Stock, but less than the Conversion Price for the Series B Convertible Preferred
Stock, the Series C Convertible Preferred Stock, the Series D Convertible
Preferred Stock, the Series E Convertible Preferred Stock or the Series F
Convertible Preferred Stock; (ii) the Conversion Price of the Series B
Convertible Preferred Stock in the event that the Corporation shall issue or
sell or is, in accordance with subparagraphs 6D(1) through 6D(8), deemed to have
issued or sold any shares of Common Stock solely at a price per share equal to
or greater than the Conversion Price for the Series B Convertible Preferred
Stock, but less than the Conversion Price for the Series C Convertible Preferred
Stock, the Series D Convertible Preferred Stock, the Series E Convertible
Preferred Stock or the Series F Convertible Preferred Stock; (iii) the
Conversion Price of the Series C Convertible Preferred Stock in the event that
the Corporation shall issue or sell or is, in accordance with subparagraphs
6D(1) through 6D(8), deemed to have issued or sold any shares of Common Stock
solely at a price per share equal to or greater than the Conversion Price for
the Series C Convertible Preferred Stock, but less than the Conversion Price for
the Series D Convertible Preferred Stock, the Series E Convertible Preferred
Stock or the Series F Convertible Preferred Stock; (iv) the Conversion Price of
the Series D Convertible Preferred Stock in the event that the Corporation shall
issue or sell or is, in accordance with subparagraphs 6D(1) through 6D(8),
deemed to have issued or sold any shares of Common Stock solely at a price per
share equal to or greater than the Conversion Price for the Series D
Convertible
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Preferred Stock, but less than the Conversion Price for the Series E Convertible
Preferred Stock or the Series F Convertible Preferred Stock; or (v) the
Conversion Price of the Series E Convertible Preferred Stock in the event that
the Corporation shall issue or sell or is, in accordance with subparagraphs
6D(1) through 6D(8), deemed to have issued or sold any shares of Common Stock
solely at a price per share equal to or greater than the conversion Price of the
Series E Convertible Preferred Stock, but less than the Conversion Price for the
Series F Convertible Preferred Stock.
For purposes of this subparagraph 6D, the following subparagraphs 6D(1) to
6D(8) shall also be applicable:
6D(1) Issuance of Rights or Options. In case at any time the
Corporation shall in any manner grant (whether directly or by assumption in a
merger or otherwise) any warrants or other rights to subscribe for or to
purchase, or any options for the purchase of, Common Stock or any stock or
security convertible into or exchangeable for Common Stock (such warrants,
rights or options being called "Options" and such convertible or exchangeable
stock or securities being called "Convertible Securities"), whether or not such
Options or the right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock is
issuable upon the exercise of such Options or upon the conversion or exchange of
such Convertible Securities (determined by dividing (i) 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 the 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 upon the issue or
sale of such Convertible Securities and upon the conversion or exchange thereof,
by (ii) 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) shall be less
than the Conversion Price of the Series A Convertible Preferred Stock, the
Series B Convertible Preferred Stock, the Series C Convertible Preferred Stock,
the Series D Convertible Preferred Stock, the Series E Convertible Preferred
Stock or the Series F Convertible Preferred Stock, or all six, 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 issuable upon the exercise of such Options
shall be deemed to have been issued for such price per share as of the date of
granting of such Options or the issuance of such Convertible Securities and
thereafter shall be deemed to be
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outstanding. Except as otherwise provided in subparagraph 6D(3), no adjustment
of the Conversion Price shall be made upon the actual issue of such Common Stock
or of such Convertible Securities upon exercise of such Options or upon the
actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities.
6D(2) Issuance of Convertible Securities. In case the Corporation
shall in any manner issue (whether directly or by assumption in a merger or
otherwise) or sell any Convertible Securities, whether or not the rights to
exchange or convert any such Convertible Securities are immediately exercisable,
and the price per share for which Common Stock is issuable upon such conversion
or exchange (determined by dividing (i) 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, by (ii)
the total maximum number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities) shall be less than the
Conversion Price of the Series A Convertible Preferred Stock, the Series B
Convertible Preferred Stock, the Series C Convertible Preferred Stock, the
Series D Convertible Preferred Stock, the Series E Convertible Preferred Stock
or the Series F Convertible Preferred Stock, or all six, as the case may be, in
effect immediately prior to the time of such issue or sale, then the total
maximum number of shares of Common Stock issuable upon conversion or exchange of
all such Convertible Securities shall be deemed to have been issued for such
price per share as of the date of the issue or sale of such Convertible
Securities and thereafter shall be deemed to be outstanding as of such date,
provided that (a) except as otherwise provided in subparagraph 6D(3), no
adjustment of the Conversion Price of the Series A Convertible Preferred Stock,
the Series B Convertible Preferred Stock, the Series C Convertible Preferred
Stock, the Series D Convertible Preferred Stock, the Series E Convertible
Preferred Stock or the Series F Convertible Preferred Stock, or all six, as the
case may be, shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities and (b) if any such issue
or sale of such Convertible Securities is made upon exercise of any Options to
purchase any such Convertible Securities for which adjustments of the Conversion
Price of the Series A Convertible Preferred Stock, the Series B Convertible
Preferred Stock, the Series C Convertible Preferred Stock, the Series D
Convertible Preferred Stock, the Series E Convertible Preferred Stock or the
Series F Convertible Preferred Stock, or all six, as the case may be, have been
or are to be made pursuant to other provisions of this subparagraph 6D, no
further adjustment of the Conversion Price of the Series A Convertible Preferred
Stock, the Series B Convertible Preferred Stock, the Series C Convertible
Preferred Stock, the Series D Convertible
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Preferred Stock, the Series E Convertible Preferred Stock or the Series F
Convertible Preferred Stock, or all six, as the case may be, shall be made by
reason of such issue or sale.
6D(3) Change in Option Price or Conversion Rate. Upon the happening
of any of the following events, namely, if the purchase price provided for in
any Option referred to in subparagraph 6D(1), the additional consideration, if
any, payable upon the conversion or exchange of any Convertible Securities
referred to in subparagraph 6D(1) or 6D(2), or the rate at which Convertible
Securities referred to in subparagraph 6D(1) or 6D(2) are convertible into or
exchangeable for Common Stock shall change at any time (including, but not
limited to, changes under or by reason of provisions designed to protect against
dilution), the Conversion Price of the Series A Convertible Preferred Stock, the
Series B Convertible Preferred Stock, the Series C Convertible Preferred Stock,
the Series D Convertible Preferred Stock, the Series E Convertible Preferred
Stock or the Series F Convertible Preferred Stock, or all six, as the case may
be, in effect at the time of such event shall forthwith be readjusted to the
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 conversion rate, as the case may be, at the
time initially granted, issued or sold, but only if as a result of such
adjustment the Conversion Price then in effect hereunder is thereby reduced; and
on the expiration of any such Option or the termination of any such right to
convert or exchange such Convertible Securities, the Conversion Price then in
effect hereunder shall forthwith be increased to the Conversion Price which
would have been in effect at the time of such expiration or termination had such
Option or Convertible Securities, to the extent outstanding immediately prior to
such expiration or termination, never been issued.
6D(4) Stock Dividends. In case the Corporation shall declare a
dividend or make any other distribution upon any stock of the Corporation
payable in Common Stock (except for dividends or distributions upon the Common
Stock), Options or Convertible Securities, any Common Stock, Options or
Convertible Securities, as the case may be, issuable in payment of such dividend
or distribution shall be deemed to have been issued or sold without
consideration.
6D(5) Consideration for Stock. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount received by the
Corporation therefor, without deduction therefrom of any expenses incurred or
any underwriting commissions or concessions paid or allowed by the Corporation
in connection therewith. In case any shares of Common Stock, Options or
Convertible Securities shall be issued
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or sold for a consideration other than cash, the amount of the consideration
other than cash received by the Corporation shall be deemed to be the fair value
of such consideration as determined in good faith by the Board of Directors of
the Corporation, without deduction of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Corporation in connection
therewith. In case any Options shall be issued in connection with the issue and
sale of other securities of the Corporation, together comprising one integral
transaction in which no specific consideration is allocated to such Options by
the parties thereto, such Options shall be deemed to have been issued for such
consideration as determined in good faith by the Board of Directors of the
Corporation.
6D(6) Record Date. In case the Corporation shall set a record date
for the determination of the holders of its Common Stock for the purpose of
entitling them (i) to receive a dividend or other distribution payable in Common
Stock, Options or Convertible Securities or (ii) to subscribe for or purchase
Common Stock, Options or Convertible Securities, then such record date shall be
deemed to be the date of the issue or sale of the shares of Common Stock deemed
to have been issued or sold upon the declaration of such dividend or the making
of such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
6D(7) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Corporation, and the disposition of any such shares shall be
considered an issue or sale of Common Stock for the purpose of this
subparagraph 6D.
6D(8) Adjustments for Failure of Participation. Notwithstanding
anything contained in this subparagraph 6D to the contrary, the rights of any
holder of Preferred Stock to the benefits of this subparagraph 6D shall be
subject to the limitations contained in this subparagraph 6D(8) if such holder
has failed to participate in any offering which is a Dilutive Offering with
respect to such holder's shares by acquiring in such Dilutive Offering such
number of shares as shall equal the product of the number of shares actually
offered in the Dilutive Offering to all holders of Preferred Stock, as
determined by the Board of Directors, multiplied by a fraction: (a) the
numerator of which is the number of shares of Preferred Stock with respect to
which the offering is a Dilutive Offering as is held by such holder at the time
of such Dilutive Offering and (b) the denominator of which is the total number
of shares of the Preferred Stock then outstanding with respect to which the
offering is a Dilutive Offering (the "Pro Rata Share"). Solely for purposes of
this subparagraph 6D(8), shares purchased by an affiliate or affiliates of a
holder of Preferred Stock in a Dilutive Offering (other than an affiliate who
held Preferred
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Stock prior to such Dilutive Offering, except to the extent that such affiliate
has exceeded its Pro Rata Share and has not otherwise directed that such excess
be counted towards the Pro Rata Share of another affiliate) shall be deemed to
have been purchased by such holder. As used in this subparagraph, the term
affiliate of a holder shall mean a person who directly or indirectly through one
or more intermediaries controls, is controlled by, or is under common control
with, such holder. If any holder of Preferred Stock shall fail to purchase its
Pro Rata Share of any such Dilutive Offering in accordance with this
subparagraph 6D(8), then such holders rights under this subparagraph 6D shall
terminate and shall no longer be of any force and effect as to the shares of
Preferred Stock with respect to which the offering was a Dilutive Offering;
provided, however, that no holder of shares of Preferred Stock shall be required
to participate to the extent of all or any part of such holder's Pro Rata Share
of a Dilutive Offering if and to the extent such participation would violate any
statute, rule or regulation, or order of any court or governmental agency
applicable to such holder and such holder furnishes to the Corporation a
certificate, signed by an executive officer or general partner of such holder,
as the case may be, and an opinion of counsel, each to such effect. The
Corporation, the Board of Directors and the holders of the Preferred Stock shall
take all necessary actions to designate a new series of Preferred Stock on any
occasion that any holder of Preferred Stock shall fail to purchase its Pro Rata
Share of any Dilutive Offering. The Corporation shall, thirty (30) days prior to
any issuance of its securities pursuant to a Dilutive Offering, give each holder
of Preferred Stock written notice of the holder's right to participate in such
Dilutive Offering. If, after the Corporation has given such notice, a Dilutive
Offering occurs and a holder of Preferred Stock fails to purchase its Pro Rata
Share of the Dilutive Offering, shares of such holder's Preferred Stock with
respect to which the offering is a Dilutive Offering shall be immediately and
automatically converted into shares of a newly-created series of Preferred Stock
(the "New Preferred Stock"); provided that the terms of any series of New
Preferred Stock shall be identical in all respects to the terms of the Series A
Convertible Preferred Stock, the Series B Convertible Preferred Stock, the
Series C Convertible Preferred Stock, the Series D Convertible Preferred Stock,
the Series E Convertible Preferred Stock or the Series F Convertible Preferred
Stock, as the case may be, except that (i) the Conversion Price of the New
Preferred Stock shall be the Conversion Price in effect for the Series A
Convertible Preferred Stock, the Series B Convertible Preferred Stock, the
Series C Convertible Stock, the Series D Convertible Preferred Stock, the Series
E Convertible Preferred Stock or the Series F Convertible Preferred Stock, as
the case may be, immediately prior to such Dilutive Offering and (ii) any holder
of shares of the such New Preferred Stock shall not be entitled to receive the
benefits of any adjustments to the Conversion Price pursuant to
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this subparagraph 6D with respect to any future Dilutive Offering by the
Corporation. Except as otherwise required by law, all series of New Preferred
Stock shall vote together as a single series with the Series A Convertible
Preferred Stock, the Series B Convertible Preferred Stock, the Series C
Convertible Preferred Stock, the Series D Convertible Preferred Stock, the
Series E Convertible Preferred Stock or the Series F Convertible Preferred
Stock, as the case may be, relating thereto, on all matters submitted to the
stockholders for a vote or a written consent, including but not limited to the
election for a majority of directors of the Corporation by the Preferred Stock
pursuant to subparagraph 2C. For the purposes of paragraphs 3, 4, 5, 6A, 6B, 6C,
6E, 6F, 6G, 6I, 6J, 6K, 6L, 6M, 6N, 6O, 6P, 7 and 8, the terms "Preferred
Stock," "Series A Convertible Preferred Stock," "Series B Convertible Preferred
Stock," "Series C Convertible Preferred Stock," "Series D Convertible Preferred
Stock," "Series E Convertible Preferred Stock," and "Series F Convertible
Preferred Stock" shall include any series of New Preferred Stock relating
thereto issued by the Corporation pursuant to this subparagraph 6D(8).
6E. Certain Issues of Common Stock Excepted. Anything herein to the
contrary notwithstanding, the Corporation shall not be required to make any
adjustment of the Conversion Prices in the case of the issuance of (i) up to an
aggregate of 3,450,000 shares (appropriately adjusted to reflect the occurrence
of any event described in subparagraph 6F) of Common Stock or options or
warrants to purchase Common Stock to directors, officers or employees of, or
other providers of service to, the Corporation in connection with their service
as directors, officers or employees of, or providers of services to the
Corporation, which number of shares shall include any shares issued prior to the
issuance of any shares of Preferred Stock (the "Reserved Employee Shares"); (ii)
any shares of Common Stock or other securities upon conversion of the Series A
Convertible Preferred Stock, the Series B Convertible Preferred Stock, the
Series C Convertible Preferred Stock, the Series D Convertible Preferred Stock,
the Series E Convertible Preferred Stock or the Series F Convertible Preferred
Stock; (iii) any shares of New Preferred Stock in accordance with subparagraph
6D(8); (iv) any shares of Preferred Stock issuable upon exercise of outstanding
warrants to purchase Preferred Stock; of (v) any securities issued in connection
with equipment lease transactions undertaken in the ordinary course of the
Corporation's business and approved by a majority of the members of the Board of
Directors designated by the holders of Preferred Stock under the Stockholders'
Agreement.
6F. Subdivision or Combination of Common Stock. In case the Corporation
shall at any time subdivide (by any stock split, stock dividend or otherwise)
its outstanding shares of Common Stock into a greater number of shares, the
Conversion Price of the Preferred Stock in effect immediately prior to such
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subdivision shall be proportionately reduced and, conversely, in case the
outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Conversion Price of the Preferred Stock in effect immediately prior
to such combination shall be proportionately increased.
6G. Reorganization or Reclassification. If any capital reorganization or
reclassification of the capital stock of the Corporation shall be effected in
such a way that holders of Common Stock shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common Stock, then, as a
condition of such reorganization or reclassification, lawful and adequate
provisions shall be made whereby each holder of a share or shares of Preferred
Stock shall thereupon have the right to receive, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore receivable upon the conversion of such share or shares
of Preferred Stock, such shares of stock, securities or assets as may be issued
or payable with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of shares of such Common Stock immediately
theretofore receivable upon such conversion had such reorganization or
reclassification not taken place and, in any such case, appropriate provisions
shall be made with respect to the rights and interests of such holder to the end
that the provisions hereof (including without limitation provisions for
adjustments of the Conversion Price) shall thereafter be applicable, as nearly
as may be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of such conversion rights.
6H. Adjustment of Provisions. If the Corporation grants to the holders
of any class or series of stock of the Corporation any rights relating to the
adjustment of the Conversion Price of such class or series of stock upon a
Dilutive Offering or otherwise, which rights shall be more favorable to the
holders of such class or series of stock than the comparable rights in this
paragraph 6 are to the holders of the Preferred Stock, or which rights shall
grant to the holders of such class or series of stock rights not granted to the
holders of Preferred Stock pursuant to the Certificate of Incorporation of the
Corporation, then such more favorable rights shall be deemed to also apply to
all holders of Preferred Stock.
6I. Notice of Adjustment. Upon any adjustment of the Conversion Price,
then and in each such case the Corporation shall give written notice thereof, by
first class mail, postage prepaid, by recorded delivery service of by telex to
non-U.S. residents, addressed to each holder of shares of Preferred Stock at the
address of such holder as shown on the books of the Corporation, which notice
shall state the Conversion Price
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resulting from such adjustment, setting forth in reasonable detail the method
upon which such calculation is based.
6J. Other Notices. In case at any time:
(1) the Corporation shall declare any dividend upon its Common Stock
payable in cash or stock or make any other distribution to the holders of its
Common Stock;
(2) the Corporation shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class or other
rights);
(3) there shall be any capital reorganization or reclassification of
the capital stock of the Corporation, or a consolidation or merger of the
Corporation with or into, or a sale of all or substantially all its assets to,
another entity or entities; or
(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by first
class mail, postage prepaid, by recorded delivery service or by telex to
non-U.S. residents, addressed to each holder of any shares of Preferred Stock at
the address of such holder as shown on the books of the Corporation (a) at least
twenty (20) days prior written notice of the date on which the books of the
Corporation shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in respect
of any such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up and (b) in the case of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, at least twenty (20) days prior written notice of the
date when same shall take place. Such notice in accordance with the foregoing
clause (a) shall also specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Common Stock shall be
entitled thereto and such notice in accordance with the foregoing clause and (b)
shall also specify the date on which the holders of Common Stock shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up, as the case may be.
6K. Stock to be Reserved. The Corporation will at all times reserve and
keep available out of its authorized Common Stock, solely for the purposes of
issuance upon the conversion of Preferred Stock as herein provided, such number
of shares of Common Stock as shall then be issuable upon the conversion of all
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outstanding shares of Preferred Stock. The Corporation covenants that all shares
of Common Stock which shall be so issued shall be duly and validly issued and
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof and, without limiting the generality of the
foregoing, the Corporation covenants that it will from time to time take all
such action as may be requisite to ensure that the par value per share of the
Common Stock is at all times equal to or less than the Conversion Price in
effect at the time. The Corporation will take all such action as may be
necessary to ensure that all such shares of Common Stock may be so issued
without violation of any applicable law or regulation or of any requirement of
any national securities exchange or quotation system upon which the Common Stock
may be listed. The Corporation will not take any action which results in any
adjustment of the Conversion Price if the total number of shares of Common Stock
issued and issuable after such action upon conversion of the Preferred Stock
would exceed the total number of shares of Common Stock then authorized by the
Certificate of Incorporation.
6L. No Reissuance of Preferred Stock. Shares of Preferred Stock which
are converted into shares of Common Stock as provided herein shall be cancelled
and shall not be reissued.
6M. Issue Tax. The issuance of certificates for shares of Common Stock
upon conversion of Preferred Stock shall be made without charge to the holders
thereof for any issuance tax in respect thereof, provided that the Corporation
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any certificate in a name
other than that of the holder of the Preferred Stock which is being converted.
6N. Closing of Books. The Corporation will at not time close its
transfer books against the transfer of any Preferred Stock or of any shares of
Common Stock issued or issuable upon the conversion of any shares of Preferred
Stock in any manner which interferes with the timely conversion of such
Preferred Stock, except as may otherwise be required to comply with applicable
securities laws.
6O. Definition of Common Stock. As used in this paragraph 6, the term
"Common Stock" shall mean and include the Corporation's authorized Common Stock,
par value $.001 per share, as constituted on the date of filing of these terms
of the Preferred Stock and also shall include any capital stock of any class of
the Corporation thereafter authorized which shall neither be limited to a fixed
sum or percentage of par value in respect of the rights of the holders thereof
to participate in dividends nor entitled to a preference in the distribution of
assets upon the voluntary or involuntary liquidation, dissolution or winding up
of the Corporation; provided that the shares of
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Common Stock receivable upon conversion of shares of Preferred Stock shall
include only shares designated as Common Stock of the Corporation on the date of
filing of this instrument or, in case of any reorganization or reclassification
of the outstanding shares thereof, the stock, securities or assets provided for
in subparagraph 6G.
7. Noncompliance.
7A. Remedies. Immediately upon the occurrence of any Noncompliance
Event, as defined below, the holders of the Preferred Stock will have the
following rights, in addition to all other rights set forth in the Certificate
of Incorporation, in any agreement between such holders and the Corporation, or
as otherwise provided by law:
(1) A cumulative dividend (the "Noncompliance Dividend") shall accrue on
a daily basis on all outstanding shares of Preferred Stock to which the
Noncompliance Event applies as set forth in subparagraph 7B, so long as the
Corporation is a noncompliance (as defined below), which such dividend shall be
in addition to the accruing dividends described in subparagraph 3B. Such
dividend shall accrue at the annual rate of $.10 per share in the case of Series
A Convertible Preferred Stock, $.14 per share in the case of Series B
Convertible Preferred Stock, $.175 per share in the case of Series C Convertible
Preferred Stock, $.225 per share in the case of Series D Convertible Preferred
Stock, $.30 per share in the case of Series E Convertible Preferred Stock and
$.35 per share in the case of Series F Convertible Preferred Stock for the first
thirty (30) days that the Corporation is in noncompliance, which rate shall
increase by $.01 for each successive thirty-day period that the Corporation
remains in noncompliance, up to a maximum annual rate of $.16 per share in the
case of Series A Convertible Preferred Stock, $.22 per share in the case of
Series B Convertible Preferred Stock, $.28 per share in the case of Series C
Convertible Preferred Stock, $.36 per share in the case of Series D Convertible
Preferred Stock, $.48 per share in the case of Series E Convertible Preferred
Stock and $.56 per share in the case of Series F Convertible Preferred Stock.
Each holder of Preferred Stock to whom any such dividend is payable may elect to
have such dividend paid by the Corporation in cash or in shares of Common Stock
of the Corporation, as provided in subparagraph 6C.
(2) As provided in subparagraph 2C, the holders of Preferred Stock,
voting as a single class, shall have the right to elect a majority of the
directors of the Corporation.
7B. Noncompliance Event. For the purposes of this Certificate of
Incorporation, a "Noncompliance Event" shall be defined as any one or more of
the following events:
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(1) The Corporation has materially breached any one or more of the
provisions of (i) the Series A Convertible Preferred Stock Purchase Agreement
dated December 22, 1988 as then in effect (the "Series A Stock Purchase
Agreement") or Article V of the Series D Convertible Preferred Stock Purchase
Agreement dated March 12, 1992 as then in effect (the "Series D Stock Purchase
Agreement") with respect to the Series A Convertible Preferred Stock, (ii) the
Series B Purchase Agreement dated June 29, 1990 as then in effect (the "Series
B Stock Purchase Agreement") or Article V of the Series D Stock Purchase
Agreement with respect to the Series B Convertible Preferred Stock, (iii) the
Series C Convertible Preferred Stock Purchase Agreement dated July 29, 1991 as
then in effect (the "Series C Stock Purchase Agreement") or Article V of the
Series D Stock Purchase Agreement with respect to the Series C Convertible
Preferred Stock, (iv) the Series D Stock Purchase Agreement, (v) the Series E
and Series F Stock Purchase Agreement (the Series A Stock Purchase Agreement,
the Series B Stock Purchase Agreement, the Series C Stock Purchase Agreement,
the Series D Stock Purchase Agreement and the Series E and Series F Stock
Purchase Agreement to be referred to collectively herein as the "Stock Purchase
Agreements") or (vi) the Amended and Restated Registration Rights Agreement, as
amended, the Redemption Agreement, the Stockholders' Agreement and the IBM
Stockholders' Agreement executed in connection with the Stock Purchase
Agreements (collectively, the "Ancillary Agreements") with respect to the
shares of Preferred Stock to which such Ancillary Agreements may apply, in each
case as such Ancillary Agreements shall have been amended, and such breach has
continued for thirty (30) days following receipt by the Corporation of written
notice of said breach given by the holders of at least two-thirds of the
outstanding shares of Preferred Stock with respect to which such covenant or
provisions applies;
(2) Any of the Corporation's representations and/or warranties set forth
in the Series A Stock Purchase Agreement with respect to the Series A
Convertible Preferred Stock, the Series B Stock Purchase Agreement with respect
to the Series B Convertible Preferred Stock, the Series C Stock Purchase
Agreement with respect to the Series C Convertible Preferred Stock, the Series D
Stock Purchase Agreement with respect to the Series D Convertible Preferred
Stock or the Series E and Series F Stock Purchase Agreement with respect to the
Series E Convertible Preferred Stock and the Series F Convertible Preferred
Stock, or in any one or more of the Ancillary Agreements with respect to the
shares of Preferred Stock to which such Ancillary Agreement may apply, was not
substantially true as of the date of closing for such Stock Purchase Agreement
or Ancillary Agreement and the Corporation has received written notice of such
fact from the holders of at least two-thirds of the outstanding shares of
Preferred Stock with respect to which such representation and/or warranty
applies;
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(3) The Corporation has failed to make payment(s) when due for any
dividends, interest and/or mandatory redemption of any securities, where such
payment(s) aggregate over $200,000 and such failure to pay has continued for
thirty (30) days following receipt by the Corporation of written notice of said
failure to pay from the holders of at least two-thirds of the outstanding shares
of Preferred Stock;
(4) The Corporation has been in material default of payment on any debt
agreement under which the Corporation is obligated to pay at least $200,000 in
principal (including any acceleration thereof) and accrued interest at the time
of such default, and such default has continued for thirty (30) days following
receipt by the Corporation of written notice of said default given by the
holders of at least two-thirds of the outstanding shares of Preferred Stock; or
(5) The Corporation has filed for bankruptcy, made an assignment for the
benefit of creditors, materially compromised its debt with a material creditor
of the Corporation or suffered acceleration of a material debt instrument and
the Corporation has received written notice of same from the holders of at least
two-thirds of the outstanding shares of Preferred Stock.
Once a Noncompliance Event has occurred, the Corporation shall give prompt
notice thereof to each holder of Preferred Stock, and shall be deemed "in
noncompliance" until such time as the President or Chief Financial Officer of
the Corporation shall have certified and delivered by hand or by first class
mail, postage prepaid, by the recorded delivery service or by telex to non-U.S.
residents, addressed to each holder of Preferred Stock at the address of such
holder as shown on the books of the Corporation, notice that the condition
underlying such Noncompliance Event is cured.
8. Amendments. No provision of theses terms of the Preferred Stock may be
amended, modified or waived without the written consent or affirmative vote of
the holders of at least two-thirds of the then-outstanding shares of Preferred
Stock voting as a single class.
SECOND: Written consent to the adoption of the foregoing amendment of the
Restated Certificate of Incorporation of the Corporation has been given in
accordance with the provisions of Section 228 of the Delaware General
Corporation Law and written notice of the adoption of said amendment without a
meeting by less than unanimous written consent has been given to those
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stockholders who have not consented in writing as provided in said Section 228.
IN WITNESS WHEREOF, Object Design, Inc. has caused this certificate to be
signed by its President and attested by its Secretary this 12th day of April,
1993.
Object Design, Inc.
By: /s/ Kenneth E. Marshall
-----------------------------
Its President
ATTEST
By: /s/ John Patterson
-----------------------------
Its Secretary
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EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
OBJECT DESIGN, INC.
Object Design, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That the following amendment to the Restated Certificate of
Incorporation of Object Design, Inc. (the "Corporation") has been duly adopted
in accordance with the provisions of Section 242 and Section 228 of the Delaware
General Corporation Law:
That the Restated Certificate of Incorporation of the Corporation be
amended by deleting the old Article Fourth and inserting a new Article Fourth in
its stead which shall be and read as follows in its entirety:
"FOURTH: The total number of shares of capital stock which the Corporation
shall have the authority to issue shall be 20,250,000 common shares, having a
par value of $.001 per share, amounting to an aggregate par value of $20,250.00
and 15,694,664 shares of Preferred Stock having a par value of $.01 per share
amounting to an aggregate par value of $156,946.64.
The voting power, preferences and relative participating, optional or
other special rights and the qualifications, limitations or restrictions of the
Preferred Stock are set forth as follows:
1. Number of Shares. 2,750,000 shares of the Preferred Stock shall be
designated and known as "Series A Convertible Preferred Stock" and 4,575,715
shares of the Preferred Stock shall be designated and known as "Series B
Convertible Preferred
<PAGE> 115
Stock," 2,857,143 shares of the Preferred Stock shall be designated and known
as "Series C Convertible Preferred Stock," 1,111,111 shares of Preferred
Stock shall be designated and known as "Series D Convertible Preferred Stock,"
2,601,877 shares of Preferred Stock shall be designated and known as "Series E
Convertible Preferred Stock," 1,148,818 shares of Preferred Stock shall be
designated and known as "Series F Convertible Preferred Stock," 250,000 shares
of Preferred Stock shall be designated and known as "Series G Convertible
Preferred Stock" and 400,000 shares of Preferred Stock shall be designated and
known as "Series H Convertible Preferred Stock." Unless otherwise specifically
designated, the term "Preferred Stock" refers collectively to Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C
Convertible Preferred Stock, Series D Convertible Preferred Stock, Series E
Convertible Preferred Stock, Series F Convertible Preferred Stock, Series G
Convertible Preferred Stock and Series H Convertible Preferred Stock.
2. Voting
2A. General. Except as may be otherwise provided in these terms of the
Preferred Stock or by law, the Preferred Stock shall vote together with the
Common Stock as a single class on all actions to be taken by the stockholders of
the Corporation. Each share of Preferred Stock shall entitle the holder thereof
to such number of votes per share on each such action as shall equal the number
of shares of Common Stock (including fractions of a share) into which each share
of Preferred Stock is then convertible.
With respect to all questions as to which, under law, stockholders are
entitled to vote by classes, the holders of Preferred Stock shall vote together
as a single class separately from the holders of Common Stock. With respect to
all questions as to which, under law, stockholders are required to vote by
series, the holders of Series A Convertible Preferred Stock shall vote
separately as a single series, the holders of Series B Convertible Preferred
Stock shall vote separately as a single series, the holders of Series C
Convertible Preferred Stock shall vote separately as a single series, the
holders of Series D Convertible Preferred Stock shall vote separately as a
single series, the holders of Series E Convertible Preferred Stock shall vote
separately as a single series, the holders of Series F Convertible Preferred
Stock shall vote separately as a single series, the holders of Series G
Convertible Preferred Stock shall vote separately as a single series and the
holders of Series H Convertible Preferred Stock shall vote separately as a
single series.
2B. Board Size. The Corporation shall not, without the written
consent or affirmative vote of the holders of at
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least two-thirds of the then outstanding shares of Preferred Stock, given in
writing or by vote at a meeting, consenting or voting (as the case may be)
separately as a class, change the number of directors constituting the Board of
Directors to a number other than eight (8), except that the Corporation may
increase or decrease the number of directors constituting the Board of Directors
with the vote of a majority of the members of the Board of Directors designated
by the holders of Preferred Stock pursuant to the Third Amended and Restated
Stockholders' Agreement dated May 14, 1993, by and among the Company and the
parties thereto, as may be amended or restated from time to time (the
"Stockholders' Agreement").
2C. Board Seats. The holders of the Preferred Stock shall be entitled
to vote together with the Common Stock as a single class for the election of
each of the directors of the Corporation. Notwithstanding the foregoing or
anything else to the contrary provided in the Certificate of Incorporation, upon
the occurrence of any Noncompliance Event (as such term is defined in
subparagraph 7B) and continuing for so long as the Corporation remains in
noncompliance (as defined in subparagraph 7B), the holders of the Preferred
Stock, voting as a separate class, shall be entitled to elect a majority of the
directors of the Corporation, with the remaining directors of the Corporation to
be elected as set forth in the first sentence of this subparagraph 2C. A vacancy
in any directorship elected by the holders of the Preferred Stock, voting as a
separate class, shall be filled only by vote or written consent of the holders
of the Preferred Stock, and a vacancy in any directorship elected jointly by the
holders of the Preferred Stock and all other classes and series of stock of the
Corporation, voting together as a single class, shall be filled only by vote or
written consent of the Preferred Stock and all other classes and series of stock
of the Corporation, as provided above. At any meeting (or in a written consent
in lieu thereof) held for the purpose of electing directors, the presence in
person or by proxy (or the written consent) of the holders of a majority of the
shares of Preferred Stock then outstanding shall constitute a quorum of the
Preferred Stock for the election of directors to be elected solely by the
holders of the Preferred Stock.
3. Dividends.
3A. General. The holders of the Preferred Stock shall be entitled to
receive, as and when declared by the Board of Directors out of funds legally
available therefor, dividends at the same rate as dividends (other than
dividends paid in additional shares of Common Stock) are paid with respect to
the Common Stock (treating each share of Preferred Stock as being equal to the
number of shares of Common Stock (including fractions of a share) into which
each share of Preferred Stock is then convertible). In addition, the holders of
the Preferred
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Stock may from time to time be entitled, pursuant to the terms of subparagraph
3B below, to certain cumulative dividends, and pursuant to the terms of
paragraph 7 below, to certain "Noncompliance Dividends," as that term is defined
in subparagraph 7A, as well as to any other dividends declared by the Board of
Directors on the outstanding shares of Preferred Stock out of funds legally
available therefor. All dividends on Preferred Stock shall be paid on a pro-rata
basis (except such Noncompliance Dividends as are payable solely on Series A
Convertible Preferred Stock or Series B Convertible Preferred Stock or Series C
Convertible Preferred Stock or Series D Convertible Preferred Stock, Series E
Convertible Preferred Stock, Series F Convertible Preferred Stock, Series G
Convertible Preferred Stock or Series H Convertible Preferred Stock, as the case
may be, pursuant to subparagraph 7A).
3B. Accruing Dividends. In each year commencing on (1) July 25, 1991,
the holders of Series A Convertible Preferred Stock, Series B Convertible
Preferred Stock and Series C Convertible Preferred Stock shall be entitled to
receive out of funds legally available therefor, as and when declared by the
Board of Directors, dividends at the rate of $.10 per share in the case of
Series A convertible Preferred Stock, $.14 per share in the case of Series B
Convertible Preferred Stock and $.175 per share in the case of Series C
Convertible Preferred Stock; (2) March 11, 1992, the holders of Series D
Convertible Preferred Stock shall be entitled to receive out of funds legally
available therefor, as and when declared by the Board of Directors, dividends at
the rate of $.225 per share; (3) April 12, 1993, the holders of Series E
Convertible Preferred Stock and the holders of Series F Convertible Preferred
Stock shall be entitled to receive out of funds legally available therefor, as
and when declared by the Board of Directors, dividends at the rate of $.30 per
share in the case of Series E Convertible Preferred Stock and $.35 per share in
the case of Series F Convertible Preferred Stock; and (4) May 14, 1993, the
holders of Series G Convertible Preferred Stock and the holders of Series H
Convertible Preferred Stock shall be entitled to receive out of funds legally
available therefore, as and when declared by the Board of Directors, dividends
at the rate of $.40 per share in the case of Series G Convertible Preferred
Stock and $.50 per share in the case of Series H Convertible Preferred Stock
(each such price subject to equitable adjustment in the event of any stock
dividend, stock split, combination, reclassification or other similar event),
compounded at the rate of 10% per share per annum. Such dividends shall accrue
from day to day, whether or not earned or declared, and shall be cumulative;
provided, however, that except as provided in paragraph 4 hereto and under the
terms of a Fifth Amended and Restated Preferred Stock Redemption Agreement dated
May 14, 1993 (the "Redemption Agreement"), the Corporation shall be under no
obligation to pay such accruing dividends unless so declared by the Board of
Directors; and provided, further that
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the Corporation's obligation to pay such accruing dividends upon liquidation,
pursuant to the terms of the Redemption Agreement or otherwise shall commence at
the end of the first year in which the Corporation has positive retained
earnings.
3C. Restrictions. Unless all accrued but unpaid dividends on each
series of Preferred Stock shall have been paid or shall have been declared and a
sum sufficient for the payment thereof set apart, (i) no dividend shall be paid
or declared, and no distribution shall be made, on any Common Stock, other than
a dividend or other distribution payable solely in the form of additional shares
of Common Stock, and (ii) no shares of Common Stock shall be purchased, redeemed
or acquired by the Corporation and no amounts shall be paid for the purchase,
redemption or acquisition thereof. Anything herein to the contrary
notwithstanding, the restrictions set forth in this Paragraph 3C shall not apply
to (i) the repurchase of shares of Common Stock from former employees, officers,
directors or other providers of services to the Corporation who acquired such
shares directly from the Corporation, if each such purchase is made pursuant to
contractual rights held by the Corporation relating to the termination of
employment or services of such former employees, officers, directors or other
providers of services to the Corporation and the purchase price does not exceed
the original purchase price paid by such person to the Corporation for such
shares; (ii) repurchase of shares of Common Stock pursuant to the Stockholders'
Agreement, the Series E and Series F Stock Purchase Agreement (as hereafter
defined) and the IBM Stockholders' Agreement (as hereafter defined); and (iii)
repurchase of shares of Common Stock pursuant to right of first refusal
agreements executed in connection with options granted under the Corporation's
1989 Incentive and Non-Qualified Stock Option Plan, (the "Plan").
4. Liquidation. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the Preferred
Stock shall first be entitled, on liquidation, dissolution or winding up, junior
to the Preferred Stock, including the Common Stock, to be paid, out of assets
legally available therefor, an amount equal to the greater of:
(i) $1.00 per share in the case of the Series A Convertible Preferred
Stock, $1.40 per share in the case of the Series B convertible Preferred
Stock, $1.75 per share in the case of the Series C Convertible Preferred
Stock, $2.25 per share in the case of Series D Convertible Preferred
Stock, $3.00 per share in the case of Series E Convertible Preferred
Stock, $3.50 per share in the case of Series F Convertible Preferred
Stock, $4.00 per share in the case of Series G Convertible Preferred
Stock and $5.00 per share in
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the case of Series H Convertible Preferred Stock plus, in each case, all
accrued and unpaid dividends thereon, whether or not earned or declared
(including all accrued and unpaid Noncompliance Dividends, if any,)
computed to the date payment thereof is made available; or
(ii) such amount per share of Preferred Stock as would have been
payable had each such share been converted to Common Stock immediately
prior to such event of liquidation, dissolution or winding up pursuant to
the provisions of paragraph 6 hereof.
Such amount payable with respect to one share of Preferred Stock under
this paragraph 4 shall sometimes be referred to as the "Liquidation Preference
Payment" and with respect to all shares of Preferred Stock shall sometimes be
referred to as the "Liquidation Preference Payments." If upon such liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the assets to be distributed among the holders of Preferred Stock shall be
insufficient to permit payment in full to the holders of Preferred Stock of the
Liquidation Preference Payments, then the entire assets of the Corporation to be
so distributed shall be distributed ratably among the holders of Preferred Stock
according to the respective amounts which would be payable on or with respect to
the shares of Preferred Stock held by them upon such distribution if all amounts
payable on or with respect to said shares were paid in full. Written notice of
such liquidation, dissolution or winding up, stating a payment date, the place
where said payments shall be made, the aggregate amount to be paid to each
holder of Preferred Stock, and the alternate amount which would be paid to each
such holder if all outstanding shares of Preferred Stock were to be converted
into shares of Common Stock prior to the payment date, shall be given by mail,
postage prepaid, by recorded delivery service or by telex to non-U.S. residents,
not less than twenty (20) days prior to the payment date stated therein, to the
holders of the record of Preferred Stock, such notice to be addressed to each
such holder at its address as shown by the records of the Corporation. The
consolidation or merger of the Corporation into or with any other entity or
entities which results in the exchange of outstanding securities of the
Corporation for securities or other consideration issued or paid or caused to be
issued or paid by any such entity or entities or affiliate thereof, and the sale
or transfer by the Corporation of all or substantially all its assets, shall be
deemed to be a liquidation, dissolution or winding up of the Corporation within
the meaning of the provisions of this paragraph 4, unless the holders of all
outstanding shares of the Corporation's voting stock immediately prior to such
transaction or series of transactions hold, immediately following the
consummation of such transaction or series of transactions, more than two-thirds
of the voting stock of such entity or entities or affiliate thereof, or of the
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transferee of the assets of the Corporation, as the case may be, provided,
however, that each holder of Preferred Stock shall have the right to elect to
receive the benefits of the provisions of subparagraph 6G hereof in lieu of
receiving payment in liquidation, dissolution or winding up of the Corporation
pursuant to this paragraph 4. For purposes hereof, the Common Stock shall rank
on liquidation, dissolution or winding up of the Corporation, junior to the
Preferred Stock.
5. Restrictions. At any time when shares of Preferred Stock are
outstanding, except as otherwise required by law or by the Certificate of
Incorporation, without the written consent or affirmative vote of the holders of
at least two-thirds of the then outstanding shares of Preferred Stock,
consenting or voting (as the case may be) separately as one class, the
Corporation will not:
5A. Create or authorize the creation of any additional class or
series of shares of stock, or reclassify the shares of any existing class or
series of stock, unless the same ranks junior to the Preferred Stock as to the
distribution of assets on the liquidation, dissolution or winding up of the
Corporation, or increase the authorized amount of the Preferred Stock or
increase the authorized amount of any additional class or series of shares of
stock unless the same ranks junior to the Preferred Stock as to the distribution
of assets on the liquidation, dissolution or winding up of the Corporation and
as to the payment of dividends, or create or authorize any obligation or
security convertible into shares of Preferred Stock or into shares of any other
class or series of stock unless the same ranks junior to the Preferred Stock as
to the distribution of assets on the liquidation, dissolution or winding up of
the Corporation and as to the payment of dividends, whether any such creation,
authorization or increase shall be by means of amendment to the Certificate of
Incorporation or by merger, consolidation or otherwise;
5B. Consent to any liquidation, dissolution or winding up of the
Corporation or consolidate or merger into or with any other entity or entities,
or sell or transfer all or substantially all its assets, unless the holders of
the outstanding shares of the Corporation's voting stock immediately prior to
such transaction hold, immediately following the consummation of such
transaction, two-thirds or more of the voting stock of the surviving entity or
entities or affiliates thereof, or of the transferee of the assets of the
Corporation, as the case may be;
5C. Sell or transfer more than ten percent (10%) of the assets of the
Corporation within any 12-month period, other than in the ordinary course of
business;
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5D. Amend, alter or repeal its Certificate of Incorporation, or
amend, alter or repeal its By-laws so as to adversely affect a holder of
Preferred Stock;
5E. Purchase or set aside any sums for the purchase of, or pay any
dividend or make any distribution on, any shares of stock other than the
Preferred Stock, except for (i) dividends or other distributions payable on the
Common Stock solely in the form of additional shares of Common Stock; (ii) the
purchase of shares of Common Stock from former employees, officers, directors or
other providers of services to the Corporation who acquired such shares directly
from the Corporation, if each such purchase is made pursuant to contractual
rights held by the Corporation relating to the termination of employment or
services of such former employees, officers, directors or other providers of
services to the Corporation and the purchase price does not exceed the original
issue price paid by such person to the Corporation for such shares; (iii)
repurchase of shares of Common Stock pursuant to the Stockholders' Agreement;
(iv) repurchase of shares of Common Stock pursuant to right of first refusal
agreements executed in connection with options granted under the Plan; and (v)
the repurchase of shares of Series E Convertible Preferred Stock and Series F
Convertible Preferred Stock pursuant to a certain Stock Purchase Agreement by
and among the Corporation and the holders of Series E Convertible Preferred
Stock and Series F Convertible Preferred Stock (the "Series E and Series F Stock
Purchase Agreement") and pursuant to a certain Amended and Restated
Stockholders' Agreement by and among the Corporation, International Business
Machines Corporation and certain of its stockholders dated as of May 14, 1993
(the "IBM Stockholders' Agreement").
5F. Redeem or otherwise acquire any shares of Preferred Stock except
pursuant to one or more written agreements to which the Corporation and all of
the holders of Preferred Stock, are parties, pursuant to a purchase offer
made pro rata to all holders of the shares of Preferred Stock on the basis of
the aggregate number of outstanding shares of Preferred Stock then held by each
such holder or pursuant to the Series E and Series F Stock Purchase Agreement
and the IBM Stockholders' Agreement.
6. Conversions. The holders of shares of Preferred Stock shall have the
following conversion rights:
6A. Conversion Events.
6A(1) Optional Conversion. Subject to the terms and conditions
of this Paragraph 6, the holder of any share or shares of Preferred Stock shall
have the right, at its option at any time, to convert any such shares of
Preferred Stock (except that upon any liquidation, voluntary or involuntary
dissolution, or winding-up of the Corporation the right of conversion shall
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terminate at the close of business on the business day fixed for payment of
the amount distributable on the Preferred Stock) into such number of fully paid
and nonassessable shares of Common Stock as is obtained by (i) multiplying the
number of shares of Preferred Stock so to be converted by $1.00 in the case of
Series A Convertible Preferred Stock, $1.40 in the case of Series B Convertible
Preferred Stock, $1.75 in the case of Series C Convertible Preferred Stock,
$2.25 in the case of Series D Convertible Preferred Stock, $3.00 in the case of
Series E Convertible Preferred Stock, $3.50 in the case of Series F Convertible
Preferred Stock, $4.00 in the case of Series G Convertible Preferred Stock and
$5.00 in the case of Series H Convertible Preferred Stock and (ii) dividing the
result by the conversion price of $1.00 in the case of Series A Convertible
Preferred Stock, $1.40 in the case of Series B Convertible Preferred Stock,
$1.75 in the case of Series C Convertible Preferred Stock, $2.25 in the case of
Series D Convertible Preferred Stock, $3.00 in the case of Series E Convertible
Preferred Stock, $3.50 in the case of Series F Convertible Preferred Stock,
$4.00 in the case of Series G Convertible Preferred Stock and $5.00 in the case
of Series H Convertible Preferred Stock or, in case an adjustment of such price
has taken place pursuant to the further provisions of this Paragraph 6, then by
the conversion price as last adjusted and in effect at the date any share or
shares of Preferred Stock are surrendered for conversion (such price, or such
price as last adjusted, being referred to as the "Conversion Price"). Such
rights of conversion shall be exercised by the holder thereof by giving written
notice to the Corporation that the holder elects to convert a stated number of
shares of Preferred Stock into Common Stock and by surrender of a certificate or
certificates for the shares so to be converted to the Corporation at its
principal office (or such other office or agency of the Corporation as the
Corporation may designate by notice in writing to the holders of the Preferred
Stock) at any time during its usual business hours on the date set forth in such
notice, together with a statement of the name or names (with address) in which
the certificate or certificates for shares of Common Stock shall be issued.
6A(2). Mandatory Conversion. The outstanding shares of Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C
Convertible Preferred Stock, Series D Convertible Preferred Stock, Series E
Convertible Preferred Stock, Series F Convertible Preferred Stock, Series G
Convertible Preferred Stock and Series H Convertible Preferred Stock, as the
case may be, shall automatically and without any further action on the part of
the Corporation convert into shares of Common Stock effective upon the earlier
to occur of (i) such time as the Corporation shall have issued an aggregate of
at least two-thirds of the total number of shares of Common Stock which were
issued or issuable, upon conversion of the shares of Series A Convertible
Preferred Stock, Series B Convertible
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Preferred Stock, Series C Convertible Preferred Stock, Series D Convertible
Preferred Stock, Series E Convertible Preferred Stock, Series F
Convertible Preferred Stock, Series G Convertible Preferred Stock and, if
and when issued, Series H Convertible Preferred Stock, as the case may be, as of
the date of a certain Series G and Series H Convertible Preferred Stock Purchase
Agreement by and between the Corporation and AT&T Ventures, L.P. (the "Series G
and Series H Stock Purchase Agreement"), as such number shall have been adjusted
from time to time in the event of any stock dividend, stock split, combination,
reclassification or other similar event; or (ii) the closing of a sale of shares
of Common Stock by the Corporation pursuant to an underwritten public offering
in which (a) the aggregate gross proceeds to the Corporation shall be at least
$10,000,000, and (b) the price per share paid by the public, net of underwriting
discounts and commissions, shall be at least $3.50 (subject to adjustment in the
event of any stock dividend, stock split, combination, reclassification or other
similar event.)
6B. Issuance of Certificates; Time Conversion Effected. Promptly upon
(1) the happening of either event described in subparagraph 6A(2) or the receipt
by the Corporation of the written notice referred to in subparagraph 6A(1), and
(2) the surrender of the certificate or certificates for the share or shares of
Preferred Stock to be converted, the Corporation shall issue and deliver, or
cause to be issued and delivered, to the holder, registered in such name or
names as such holder may direct, a certificate or certificates for the number of
whole shares of Common Stock issuable upon the conversion of such shares or
shares of Preferred Stock. To the extent permitted by law, such conversion shall
be deemed to have been effected and the Conversion Price shall be determined as
of the close of business on the date on which such written notice shall have
been received by the Corporation, or, in the case of a mandatory conversion
under subparagraph 6A(2), on the date of occurrence of either event specified in
such subparagraph, and at such time the rights of the holder of such share or
shares of Preferred Stock shall cease, and the person or persons in whose name
or names any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares of Common Stock represented thereby.
6C. Partial Conversion; Dividends; Fractional Shares. In case the
number of shares of Preferred Stock represented by the certificate or
certificates surrendered pursuant to subparagraph 6A(1) exceeds the number of
shares to be converted, the Corporation shall, upon such conversion, execute and
deliver to the holder, at the expense of the Corporation, a new certificate or
certificates for the number of shares of Preferred Stock represented by the
certificate or certificates surrendered which are not being converted. At the
time of each conversion of
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shares of Preferred Stock pursuant to this Paragraph 6, the Corporation shall
pay, out of funds legally available therefor, in cash an amount equal to all
dividends declared but unpaid and any Noncompliance Dividends on the shares
of Preferred Stock surrendered for conversion to the date upon which such
conversion is deemed to take place as provided in subparagraph 6B; provided
that, any holder of shares of Preferred Stock may elect, at the time such shares
are surrendered for conversion or at any other time prior to conversion, to take
payment for all declared but unpaid dividends and any Noncompliance Dividends on
such shares, if any, in shares of Common Stock rather than in cash, with the
number of shares of Common Stock issuable in lieu of such cash payment to be
determined by dividing the aggregate amount of such declared but unpaid
dividends and Noncompliance Dividends by the Conversion Price then in effect for
the shares of Preferred Stock held by such holder with respect to which such
declared but unpaid dividends and Noncompliance Dividends shall be payable. No
fractional shares shall be issued upon conversion of Preferred Stock into Common
Stock or upon election to take shares of Common Stock in lieu of cash for
declared but unpaid dividends and Noncompliance Dividends and no payment or
adjustment at the time of such conversion or election shall be made by the
Corporation on account of any previously-declared cash dividends on the Common
Stock. In lieu of delivering any such fractional share of Common Stock, the
Corporation shall pay an amount in cash equal to the current market price of
such fractional share as determined in good faith by the Board of Directors of
the Corporation.
6D. Adjustment of Price Upon Issuance of Common Stock. Except as
provided in subparagraph 6E, if and whenever the Corporation shall issue or sell
or is, in accordance with subparagraphs 6D(1) through 6D(8), deemed to have
issued or sold, any shares of Common Stock for a consideration per share less
than the Conversion Price in effect for each or all eight of the Series A
Convertible Preferred Stock, the Series B Convertible Preferred Stock, the
Series C Convertible Preferred Stock, the Series D Convertible Preferred Stock,
the Series E Convertible Preferred Stock, the Series F Convertible Preferred
Stock, the Series G Convertible Preferred Stock or the Series H Convertible
Preferred Stock immediately prior to the time of such issue or sale (a "Dilutive
Offering"), then in each such case, forthwith upon such issue or sale, such
Conversion Price for the Series A Convertible Preferred Stock, the Series B
Convertible Preferred Stock, the Series C Convertible Preferred Stock, the
Series D Convertible Preferred Stock, the Series E Convertible Preferred Stock,
the Series F Convertible Preferred Stock, the Series G Convertible Preferred
Stock or the Series H Convertible Preferred Stock, or all eight, as the case may
be, shall be reduced to the price determined by dividing (i) an amount equal to
the sum of (a) the number of shares of Common Stock outstanding immediately
prior to such issue or sale (including the number of shares of
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Common Stock issued or issuable upon conversion of the Preferred Stock)
multiplied by the then existing Conversion Price for the Series A Convertible
Preferred Stock, the Series B Convertible Preferred Stock, the Series C
Convertible Preferred Stock, the Series D Convertible Preferred Stock, the
Series E Convertible Preferred Stock, the Series F Convertible Preferred Stock,
the Series G Convertible Preferred Stock or the Series H Convertible Preferred
Stock, as the case may be, and (b) the consideration, if any, received by the
Corporation upon such issue or sale, by (ii) the total number of shares of
Common Stock outstanding immediately after such issue or sale (including the
number of shares of Common Stock issued or issuable upon conversion of the
Preferred Stock).
Notwithstanding the foregoing, if the Company shall issue or sell or is,
in accordance with subparagraphs 6D(1) through 6D(8), deemed to have issued or
sold, any shares of Common Stock for a consideration per share less than the
Conversion Price for the Series C Convertible Preferred Stock in effect
immediately prior to such sale, the Conversion Price in effect for the Series C
Convertible Preferred Stock shall be reduced to equal the greater of $1.40 or
such consideration per share, provided, that if such consideration per share is
less than $1.40, the Conversion Price shall as a result of such issue or sale
(i) first be reduced to $1.40 in accordance with this sentence and (ii)
thereafter be reduced as otherwise provided in this paragraph 6. For any later
issues or sales of Common Stock below the applicable Conversion Price in effect
for the Series C Convertible Preferred Stock, adjustments shall be made as
otherwise provided in this paragraph 6.
In addition, notwithstanding the foregoing, if the Corporation shall
issue or sell or is, in accordance with subparagraphs 6D(1) through 6D(8),
deemed to have issued or sold, any shares of Common Stock for a consideration
per share less than the Conversion Price for the Series B Convertible Preferred
Stock in effect immediately prior to such sale, the Conversion Price in effect
for the Series B Convertible Preferred Stock shall be reduced to equal the
greater of $1.00 or such consideration per share, provided, that if such
consideration per share is less than $1.00, the Conversion Price shall as a
result of such issue or sale (i) first be reduced to $1.00 in accordance with
this sentence and (ii) thereafter be reduced as otherwise provided in this
paragraph 6. For any later issues of sales of Common Stock below the applicable
Conversion Price in effect for the Series B Convertible Preferred Stock,
adjustments shall be made as otherwise provided in this paragraph 6.
Notwithstanding anything to the contrary set forth in paragraph 6 hereof,
no adjustment shall be made to (i) the Conversion Price of the Series A
Convertible Preferred Stock in the event that the Corporation shall issue or
sell or is, in
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accordance with subparagraphs 6D(1) through 6D(8), deemed to have issued or sold
any shares of Common Stock solely at a price per share equal to or greater than
the Conversion Price for the Series A Convertible Preferred Stock, but less than
the Conversion Price for the Series B Convertible Preferred Stock, the Series C
Convertible Preferred Stock, the Series D Convertible Preferred Stock, the
Series E Convertible Preferred Stock, the Series F Convertible Preferred Stock,
the Series G Convertible Preferred Stock or the Series H Convertible Preferred
Stock; (ii) the Conversion Price of the Series B Convertible Preferred Stock in
the event that the Corporation shall issue or sell or is, in accordance with
subparagraphs 6D(1) through 6D(8), deemed to have issued or sold any shares of
Common Stock solely at a price per share equal to or greater than the Conversion
Price for the Series B Convertible Preferred Stock, but less than the Conversion
Price for the Series C Convertible Preferred Stock, the Series D Convertible
Preferred Stock, the Series E Convertible Preferred Stock, the Series F
Convertible Preferred Stock, the Series G Convertible Preferred Stock or the
Series H Convertible Preferred Stock; (iii) the Conversion Price of the Series C
Convertible Preferred Stock in the event that the Corporation shall issue or
sell or is, in accordance with subparagraphs 6D(1) through 6D(8), deemed to have
issued or sold any shares of Common Stock solely at a price per share equal to
or greater than the Conversion Price for the Series C Convertible Preferred
Stock, but less than the Conversion Price for the Series D Convertible Preferred
Stock, the Series E Convertible Preferred Stock, the Series F Convertible
Preferred Stock, the Series G Convertible Preferred Stock or the Series H
Convertible Preferred Stock; (iv) the Conversion Price of the Series D
Convertible Preferred Stock in the event that the Corporation shall issue or
sell or is, in accordance with subparagraphs 6D(1) through 6D(8), deemed to have
issued or sold any shares of Common Stock solely at a price per share equal to
or greater than the Conversion Price for the Series D Convertible Preferred
Stock, but less than the Conversion Price for the Series E Convertible Preferred
Stock, the Series F Convertible Preferred Stock, the Series G Convertible
Preferred Stock or the Series H Convertible Preferred Stock; (v) the Conversion
Price of the Series E Convertible Preferred Stock in the event that the
Corporation shall issue or sell or is, in accordance with subparagraphs 6D(1)
through 6D(8), deemed to have issued or sold any shares of Common Stock solely
at a price per share equal to or greater than the Conversion Price for the
Series E Convertible Preferred Stock, but less than the Conversion Price for the
Series F Convertible Preferred Stock, the Series G Convertible Preferred Stock
or the Series H Convertible Preferred Stock; (vi) the Conversion Price of the
Series F Convertible Preferred Stock in the event that the Corporation shall
issue or sell or is, in accordance with subparagraphs 6D(1) through 6D(8),
deemed to have issued or sold any shares of Common Stock solely at a price per
share equal to or greater than the Conversion Price for the Series F Convertible
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Preferred Stock, but less than the Conversion Price for the Series G or the
Series H Convertible Preferred Stock; (vii) the Conversion Price of the Series G
Convertible Preferred Stock in the event that the Corporation shall issue or
sell or is, in accordance with subparagraphs 6D(1) through 6D(8), deemed to have
issued or sold any shares of Common Stock solely at a price per share equal to
or greater than the Conversion Price for the Series G Convertible Preferred
Stock, but less than the Conversion Price for the Series H Convertible Preferred
Stock; or (viii) the Conversion Price of the Series H Convertible Preferred
Stock in the event that the Corporation shall issue or sell or is, in accordance
with subparagraphs 6D(1) through 6D(8), deemed to have issued or sold any shares
of Common Stock solely at a price per share equal to or greater than the
Conversion Price for the Series H Convertible Preferred Stock.
For purposes of this subparagraph 6D, the following subparagraphs 6D(1)
to 6D(8) shall also be applicable:
6D(1) Issuance of Rights or Options. In case at any time the
Corporation shall in any manner grant (whether directly or by assumption in a
merger or otherwise) any warrants or other rights to subscribe for or to
purchase, or any options for the purchase of, Common Stock or any stock or
security convertible into or exchangeable for Common Stock (such warrants,
rights or options being called "Options" and such convertible or exchangeable
stock or securities being called "Convertible Securities"), whether or not such
Options or the right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock is
issuable upon the exercise of such Options or upon the conversion or exchange of
such Convertible Securities (determined by dividing (i) 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 the 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 upon the issue or
sale of such Convertible Securities and upon the conversion or exchange thereof,
by (ii) 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) shall be less
than the Conversion Price of the Series A Convertible Preferred Stock, the
Series B Convertible Preferred Stock, the Series C Convertible Preferred Stock,
the Series D Convertible Preferred Stock, the Series E Convertible Preferred
Stock, the Series F Convertible Preferred Stock, the Series G Convertible
Preferred Stock or the Series H Convertible Preferred Stock, or all eight, as
the case may be, in effect immediately prior to the time of the granting of such
Options, then the total maximum number of
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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 issuable upon the exercise of such Options shall be deemed to have
been issued for such price per share as of the date of granting of such Options
or the issuance of such Convertible Securities and thereafter shall be deemed to
be outstanding. Except as otherwise provided in subparagraph 6D(3), no
adjustment of the Conversion Price shall be made upon the actual issue of such
Common Stock or of such Convertible Securities upon exercise of such Options or
upon the actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities.
6D(2) Issuance of Convertible Securities. In case the Corporation
shall in any manner issue (whether directly or by assumption in a merger or
otherwise) or sell any Convertible Securities, whether or not the rights to
exchange or convert any such Convertible Securities are immediately exercisable,
and the price per share for which Common Stock is issuable upon such conversion
or exchange (determined by dividing (i) 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, by (ii)
the total maximum number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities) shall be less than the
Conversion Price of the Series A Convertible Preferred Stock, the Series B
Convertible Preferred Stock, the Series C Convertible Preferred Stock, the
Series D Convertible Preferred Stock, the Series E Convertible Preferred Stock,
the Series F Convertible Preferred Stock, the Series G Convertible Preferred
Stock or the Series H Convertible Preferred Stock, or all eight, as the case may
be, in effect immediately prior to the time of such issue or sale, then the
total maximum number of shares of Common Stock issuable upon conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
for such price per share as of the date of the issue or sale of such Convertible
Securities and thereafter shall be deemed to be outstanding as of such date,
provided that (a) except as otherwise provided in subparagraph 6D(3), no
adjustment of the conversion Price of the Series A Convertible Preferred Stock,
the Series B Convertible Preferred Stock, the Series C Convertible Preferred
Stock, the Series D Convertible Preferred Stock, the Series E Convertible
Preferred Stock, the Series F Convertible Preferred Stock, the Series G
Convertible Preferred Stock or the Series H Convertible Preferred Stock, or all
eight, as the case may be, shall be made upon the actual issue of such Common
Stock upon conversion or exchange of such Convertible Securities and (b) if any
such issue or sale of such Convertible Securities is made upon exercise of any
Options to purchase any such Convertible Securities for which adjustments of the
Conversion Price of the Series A Convertible Preferred
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Stock, the Series B Convertible Preferred Stock, the Series C Convertible
Preferred Stock, the Series D Convertible Preferred Stock, the Series E
Convertible Preferred Stock, the Series F Convertible Preferred Stock, the
Series G Convertible Preferred Stock or the Series H Convertible Preferred
Stock, or all eight, as the case may be, have been or are to be made pursuant to
other provisions of this subparagraph 6D, no further adjustment of the
Conversion Price of the Series A Convertible Preferred Stock, the Series B
Convertible Preferred Stock, the Series C Convertible Preferred Stock, the
Series D Convertible Preferred Stock, the Series E Convertible Preferred Stock,
the Series F Convertible Preferred Stock, the Series G Convertible Preferred
Stock or the Series H Convertible Preferred Stock, or all eight, as the case may
be, shall be made by reason of such issue or sale.
6D(3) Change in Option Price or Conversion Rate. Upon the
happening of any of the following events, namely, if the purchase price provided
for in any Option referred to in subparagraph 6D(1), the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subparagraph 6D(1) or 6D(2), or the rate
at which Convertible Securities referred to in subparagraph 6D(1) or 6D(2) are
convertible into or exchangeable for Common Stock shall change at any time
(including, but not limited to, changes under or by reason of provisions
designed to protect against dilution), the Conversion Price of the Series A
Convertible Preferred Stock, the Series B Convertible Preferred Stock, the
Series C Convertible Preferred Stock, the Series D Convertible Preferred Stock,
the Series E Convertible Preferred Stock, the Series F Convertible Preferred
Stock, the Series G Convertible Preferred Stock or the Series H Convertible
Preferred Stock, or all eight, as the case may be, in effect at the time of such
event shall forthwith be readjusted to the 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 conversion rate, as the case may be, at the time initially granted, issued or
sold, but only if as a result of such adjustment the Conversion Price then in
effect hereunder is thereby reduced; and on the expiration of any such Option or
the termination of any such right to convert or exchange such Convertible
Securities, the Conversion Price then in effect hereunder shall forthwith be
increased to the Conversion Price which would have been in effect at the time of
such expiration or termination had such Option or Convertible Securities, to the
extent outstanding immediately prior to such expiration or termination, never
been issued.
6D(4) Stock Dividends. In case the Corporation shall declare a
dividend or make any other distribution upon any stock of the Corporation
payable in Common Stock (except for dividends or distributions upon the Common
Stock), Options or Convertible Securities, any Common Stock, Options or
Convertible Securities,
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as the case may be, issuable in payment of such dividend or distribution shall
be deemed to have been issued or sold without consideration.
6D(5) Consideration for Stock. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount received by the
Corporation therefor, without deduction therefrom of any expenses incurred or
any underwriting commissions or concessions paid or allowed by the Corporation
in connection therewith. In case any shares of Common Stock, Options or
Convertible Securities shall be issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the
Corporation shall be deemed to be the fair value of such consideration as
determined in good faith by the Board of Directors of the Corporation, without
deduction of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith. In case
any Options shall be issued in connection with the issue and sale of other
securities of the Corporation, together comprising one integral transaction in
which no specific consideration is allocated to such Options by the parties
thereto, such Options shall be deemed to have been issued for such consideration
as determined in good faith by the Board of Directors of the Corporation.
6D(6) Record Date. In case the Corporation shall set a record
date for the determination of the holders of its Common Stock for the purpose of
entitling them (i) to receive a dividend or other distribution payable in Common
Stock, Options or Convertible Securities or (ii) to subscribe for or purchase
Common Stock, Options or Convertible Securities, then such record date shall be
deemed to be the date of the issue or sale of the shares of Common Stock deemed
to have been issued or sold upon the declaration of such dividend or the making
of such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
6D(7) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Corporation, and the disposition of any such shares shall be
considered an issue or sale of Common Stock for the purpose of this subparagraph
6D.
6D(8) Adjustments for Failure of Participation. Notwithstanding
anything contained in this subparagraph 6D to the contrary, the rights of any
holder of Preferred Stock to the benefits of this subparagraph 6D shall be
subject to the limitations contained in this subparagraph 6D(8) if such holder
has failed to participate in any offering which is a Dilutive Offering with
respect to such holder's shares by acquiring in such Dilutive Offering such
number of shares as shall equal the
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product of the number of shares actually offered in the Dilutive Offering
to all holders of Preferred Stock, as determined by the Board of Directors,
multiplied by a fraction: (a) the numerator of which is the number of shares of
Preferred Stock with respect to which the offering is a Dilutive Offering as is
held by such holder at the time of such Dilutive Offering and (b) the
denominator of which is the total number of shares of the Preferred Stock then
outstanding with respect to which the offering is a Dilutive Offering (the "Pro
Rata Share"). Solely for purposes of this subparagraph 6D(8), shares purchased
by an affiliate or affiliates of a holder of Preferred Stock in a Dilutive
Offering (other than an affiliate who held Preferred Stock prior to such
Dilutive Offering, except to the extent that such affiliate has exceeded its Pro
Rata Share and has not otherwise directed that such excess be counted towards
the Pro Rata Share of another affiliate) shall be deemed to have been purchased
by such holder. As used in this subparagraph, the term affiliate of a holder
shall mean a person who directly or indirectly through one or more
intermediaries controls, is controlled by, or is under common control with, such
holder. If any holder of Preferred Stock shall fail to purchase its Pro Rata
Share of any such Dilutive Offering in accordance with this subparagraph 6D(8),
then such holders rights under this subparagraph 6D shall terminate and shall no
longer be of any force and effect as to the shares of Preferred Stock with
respect to which the offering was a Dilutive Offering; provided, however, that
no holder of shares of Preferred Stock shall be required to participate to the
extent of all or any part of such holder's Pro Rata Share of a Dilutive Offering
if and to the extent such participation would violate any statute, rule or
regulation, or order of any court or governmental agency applicable to such
holder and such holder furnishes to the Corporation a certificate, signed by an
executive officer or general partner of such holder, as the case may be, and an
opinion of counsel, each to such effect. The Corporation, the Board of Directors
and the holders of the Preferred Stock shall take all necessary actions to
designate a new series of Preferred Stock on any occasion that any holder of
Preferred Stock shall fail to purchase its Pro Rata Share of any Dilutive
Offering. The Corporation shall, thirty (30) days prior to any issuance of its
securities pursuant to a Dilutive Offering, give each holder of Preferred Stock
written notice of the holder's right to participate in such Dilutive Offering.
If, after the Corporation has given such notice, a Dilutive Offering occurs and
a holder of Preferred Stock fails to purchase its Pro Rata Share of the Dilutive
Offering, shares of such holder's Preferred Stock with respect to which the
offering is a Dilutive Offering shall be immediately and automatically converted
into shares of a newly-created series of Preferred Stock (the "New Preferred
Stock"); provided that the terms of any series of New Preferred Stock shall be
identical in all respects to the terms of the Series A Convertible Preferred
Stock, the Series B Convertible Preferred Stock, the Series C Convertible
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Preferred Stock, the Series D Convertible Preferred Stock, the Series E
Convertible Preferred Stock, the Series F Convertible Preferred Stock, the
Series G Convertible Preferred Stock or the Series H Convertible Preferred
Stock, as the case may be, except that (i) the Conversion Price of the New
Preferred Stock shall be the Conversion Price in effect for the Series A
Convertible Preferred Stock, the Series B Convertible Preferred Stock, the
Series C Convertible Preferred Stock, the Series D Convertible Preferred Stock,
the Series E Convertible Preferred Stock, the Series F Convertible Preferred
Stock, the Series G Convertible Preferred Stock or the Series H Convertible
Preferred Stock, as the case may be, immediately prior to such Dilutive
offering, and (ii) any holder of shares of the such New Preferred Stock shall
not be entitled to receive the benefits of any adjustments to the Conversion
Price pursuant to this subparagraph 6D with respect to any future Dilutive
Offering by the Corporation. Except as otherwise required by law, all series of
New Preferred Stock shall vote together as a single series with the Series A
Convertible Preferred Stock, the Series B Convertible Preferred Stock, the
Series C Convertible Preferred Stock, the Series D Convertible Preferred Stock,
the Series E Convertible Preferred Stock, the Series F Convertible Preferred
Stock, the Series G Convertible Preferred Stock or the Series H Convertible
Preferred Stock, as the case may be, relating thereto, on all matters submitted
to the stockholders for a note or a written consent, including but not limited
to the election for a majority of directors of the Corporation by the Preferred
Stock pursuant to subparagraph 2C. For the purposes of paragraphs 3, 4, 5, 6A,
6B, 6C, 6E, 6F, 6G, 6I, 6J, 6K, 6L, 6M, 6N, 6O, 6P, 7 and 8, the terms
"Preferred Stock," "Series A Convertible Preferred Stock," "Series B Convertible
Preferred Stock," "Series C Convertible Preferred Stock," "Series D Convertible
Preferred Stock," "Series E Convertible Preferred Stock," "Series F Convertible
Preferred Stock," "Series G Convertible Preferred Stock" and "Series H
Convertible Preferred Stock" shall include any series of New Preferred Stock
relating thereto issued by the Corporation pursuant to this subparagraph 6D(8).
6E. Certain Issues of Common Stock Excepted. Anything herein to the
contrary notwithstanding, the Corporation shall not be required to make any
adjustment of the Conversion Prices in the case of the issuance of (i) up to an
aggregate of 4,050,000 shares (appropriately adjusted to reflect the occurrence
of any event described in subparagraph 6F) of Common Stock or options or
warrants to purchase Common Stock to directors, officers or employees of, or
other providers of service to, the Corporation in connection with their service
as directors, officers or employees of, or providers of services to the
Corporation, which number of shares shall include any shares issued prior to the
issuance of any shares of Preferred Stock (the "Reserved Employee Shares"); (ii)
any shares of Common Stock or other securities upon conversion of the Series A
Convertible Preferred Stock, the
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Series B Convertible Preferred Stock, the Series C Convertible Preferred Stock,
the Series D Convertible Preferred Stock, the Series E Convertible Preferred
Stock, the Series F Convertible Preferred Stock, the Series G Convertible
Preferred Stock or the Series H Convertible Preferred Stock; (iii) any shares
of New Preferred Stock in accordance with subparagraph 6D(8); (iv) any shares of
Preferred Stock issuable upon exercise of outstanding warrants to purchase
Preferred Stock; or (v) any securities issued in connection with equipment lease
transactions undertaken in the ordinary course of the Corporation's business and
approved by a majority of the members of the Board of Directors designated by
the holders of Preferred Stock under the Stockholders' Agreement.
6F. Subdivision or Combination of Common Stock. In case the
Corporation shall at any time subdivide (by any stock split, stock dividend or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price of the Preferred Stock in effect immediately prior
to such subdivision shall be proportionately reduced and, conversely, in case
the outstanding shares of Common Stock shall be combined into a smaller number
of shares, the Conversion Price of the Preferred Stock in effect immediately
prior to such combination shall be proportionately increased.
6G. Reorganization or Reclassification. If any capital reorganization
or reclassification of the capital stock of the Corporation shall be effected in
such a way that holders of Common Stock shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common Stock, then, as a
condition of such reorganization or reclassification, lawful and adequate
provisions shall be made whereby each holder of a share or shares of Preferred
Stock shall thereupon have the right to receive, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore receivable upon the conversion of such share or shares
of Preferred Stock, such shares of stock, securities or assets as may be issued
or payable with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of shares of such Common Stock immediately
theretofore receivable upon such conversion had such reorganization or
reclassification not taken place and, in any such case appropriate provisions
shall be made with respect to the rights and interests of such holder to the end
that the provisions hereof (including without limitation provisions for
adjustments of the Conversion Price) shall thereafter be applicable, as nearly
as may be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of such conversion rights.
6H. Adjustment of Provisions. If the Corporation grants to the
holders of any class or series of stock of the
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Corporation any rights relating to the adjustment of the Conversion Price of
such class or series of stock upon a Dilutive Offering or otherwise, which
rights shall be more favorable to the holders of such class or series of stock
than the comparable rights in this paragraph 6 are to the holders of the
Preferred Stock, or which rights shall grant to the holders of such class or
series of stock rights not granted to the holders of Preferred Stock pursuant to
the Certificate of Incorporation of the Corporation, then such more favorable
rights shall be deemed to also apply to all holders of Preferred Stock.
6I. Notice of Adjustment. Upon any adjustment of the Conversion
Price, then and in each such case the Corporation shall give written notice
thereof, by first class mail, postage prepaid, by recorded delivery service or
by telex to non-U.S. residents, addressed to each holder of shares of Preferred
Stock at the address of such holder as shown on the books of the Corporation,
which notice shall state the Conversion Price resulting from such adjustment,
setting forth in reasonable detail the method upon which such calculation is
based.
6J. Other Notices. In case at any time:
(1) the Corporation shall declare any dividend upon its Common Stock
payable in cash or stock or make any other distribution to the holders of its
Common Stock;
(2) the Corporation shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class or other
rights);
(3) there shall be any capital reorganization or reclassification of
the capital stock of the Corporation, or a consolidation or merger of the
Corporation with, or into, or a sale of all or substantially all its assets to,
another entity or entities; or
(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by first
class mail, postage prepaid, by recorded delivery service or by telex to
non-U.S. residents, addressed to each holder of any shares of Preferred Stock at
the address of such holder as shown on the books of the Corporation (a) at least
twenty (20) days prior written notice of the date on which the books of the
Corporation shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in respect
of any such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up, and (b) in the case of any such
reorganization, reclassification, consolidation, merger, sale,
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dissolution, liquidation or winding up, at least twenty (20) days prior written
notice of the date when the same shall take place. Such notice in accordance
with the foregoing clause (a) shall also specify, in the case of any such
dividend, distribution or subscription rights, the date on which the holders of
Common Stock shall be entitled thereto and such notice in accordance with the
foregoing clause and (b) shall also specify the date on which the holders of
Common Stock shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, as the case
may be.
6K. Stock to be Reserved. The Corporation will at all times reserve
and keep available out of its authorized Common Stock, solely for the purposes
of issuance upon the conversion of Preferred Stock as herein provided, such
number of shares of Common Stock as shall then be issuable upon the conversion
of all outstanding shares of Preferred Stock. The Corporation covenants that all
shares of Common Stock which shall be so issued shall be duly and validly issued
and fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issue thereof and, without limiting the generality of the
foregoing, the Corporation covenants that it will from time to time take all
such action as may be requisite to ensure that the par value per share of the
Common Stock is at all times equal to or less than the Conversion Price in
effect at the time. The Corporation will take all such action as may be
necessary to ensure that all such shares of Common Stock may be so issued
without violation of any applicable law or regulation or of any requirement of
any national securities exchange or quotation system upon which the Common Stock
may be listed. The Corporation will not take any action which results in any
adjustment of the Conversion Price it the total number of shares of Common Stock
issued and issuable after such action upon conversion of the Preferred Stock
would exceed the total number of shares of Common Stock then authorized by the
Certificate of Incorporation.
6L. No Reissuance of Preferred Stock. Shares of Preferred Stock which
are converted into shares of Common Stock as provided herein shall be cancelled
and shall not be reissued.
6M. Issue Tax. The issuance of certificates for shares of Common
Stock upon conversion of Preferred Stock shall be made without charge to the
holders thereof for any issuance tax in respect thereof, provided that the
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than that of the holder of the Preferred Stock which is being
converted.
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6N. Closing of Books. The Corporation will at no time close its
transfer books against the transfer of any Preferred Stock or of any shares of
Common Stock issued or issuable upon the conversion of any shares of Preferred
Stock in any manner which interferes with the timely conversion of such
Preferred Stock, except as may otherwise be required to comply with applicable
securities laws.
6O. Definition of Common Stock. As used in this paragraph 6, the term
"Common Stock" shall mean and include the Corporation's authorized Common Stock,
par value $.001 per share, as constituted on the date of filing of these terms
of the Preferred Stock and shall also include any capital stock of any class of
the Corporation thereafter authorized which shall neither be limited to a fixed
sum or percentage of par value in respect of the rights of the holders thereof
to participate in dividends nor entitled to a preference in the distribution of
assets upon the voluntary or involuntary liquidation, dissolution or winding up
of the Corporation; provided that the shares of Common Stock receivable upon
conversion of shares of Preferred Stock shall include only shares designated as
Common Stock of the Corporation on the date of filing of this instrument or, in
case of any reorganization or reclassification of the outstanding shares
thereof, the stock, securities or assets provided for in subparagraph 6G.
7. Noncompliance.
7A. Remedies. Immediately upon the occurrence of any Noncompliance
Event, as defined below, the holders of the Preferred Stock will have the
following rights, in addition to all other rights set forth in the Certificate
of Incorporation, in any agreement between such holders and the Corporation, or
as otherwise provided by law:
(1) A cumulative dividend (the "Noncompliance Dividend") shall accrue
on a daily basis on all outstanding shares of Preferred Stock to which the
Noncompliance Event applies as set forth in subparagraph 7B, so long as the
Corporation is a noncompliance (as defined below), which such dividend shall be
in addition to the accruing dividends described in subparagraph 3B. Such
dividend shall accrue at the annual rate of $.10 per share in the case of Series
A Convertible Preferred Stock, $.14 per share in the case of Series B
Convertible Preferred Stock, $.175 per share in the case of Series C Convertible
Preferred Stock, $.225 per share in the case of Series D Convertible Preferred
Stock, $.30 per share in the case of Series E Convertible Preferred Stock, $.35
per share in the case of Series F Convertible Preferred Stock, $.40 per share in
the case of Series G Convertible Preferred Stock and $.50 per share in the case
of Series H Convertible Preferred Stock for the first thirty (30) days that the
Corporation is in noncompliance,
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which rate shall increase by $.01 for each successive thirty-day period that the
Corporation remains in noncompliance, up to a maximum annual rate of $.16 per
share in the case of Series A Convertible Preferred Stock, $.22 per share in the
case of Series B Convertible Preferred Stock, $.28 per share in the case of
Series C Convertible Preferred Stock, $.36 per share in the case of Series D
Convertible Preferred Stock, $.48 per share in the case of Series E Convertible
Preferred Stock, $.56 per share in the case of Series F Convertible Preferred
Stock, $.64 per share in the case of Series G Convertible Preferred Stock and
$.80 per share in the case of Series H Convertible Preferred Stock. Each holder
of Preferred Stock to whom any such dividend is payable may elect to have such
dividend paid by the Corporation in cash or in shares of Common Stock of the
Corporation, as provided in subparagraph 6C.
(2) As provided in subparagraph 2C, the holders of Preferred Stock,
voting as a single class, shall have the right to elect a majority of the
directors of the Corporation.
7B. Noncompliance Event. For the purposes of this Certificate of
Incorporation, a "Noncompliance Event" shall be defined as any one or more of
the following events:
(1) The Corporation has materially breached any one or more of the
provisions of (i) the Series A Convertible Preferred Stock Purchase Agreement
dated December 22, 1988 as then in effect (the "Series A Purchase Agreement") or
Article V of the Series D Purchase Agreement dated March 12, 1992 as then in
effect (the "Series D Stock Purchase Agreement") with respect to the Series A
Convertible Preferred Stock, (ii) the Series B Convertible Preferred Purchase
Agreement dated June 29, 1990 as then in effect (the "Series B Stock Purchase
Agreement") or Article V of the Series D Purchase Agreement with respect to the
Series B Convertible Preferred Stock, (iii) the Series C Convertible Preferred
Stock Purchase Agreement dated as of July 29, 1991 as then in effect (the
"Series C Stock Purchase Agreement") or Article V of the Series D Stock Purchase
Agreement as then in effect with respect to Series C Convertible Preferred
Stock, (iv) the Series D Stock Purchase Agreement, (v) the Series E and Series F
Stock Purchase Agreement, (vi) the Series G and Series H Stock Purchase
Agreement (the Series A Stock Purchase Agreement, the Series B Stock Purchase
Agreement, the Series C Stock Purchase Agreement, the Series D Stock Purchase
Agreement, the Series E and Series F Stock Purchase Agreement and the Series G
and Series H Stock Purchase Agreement to be referred to collectively herein as
the "Stock Purchase Agreements") or (vii) the Amended and Restated Registration
Rights Agreement, as amended, the Redemption Agreement, the Stockholders'
Agreement and the IBM Stockholders' Agreement executed in connection with the
Stcok Purchase Agreements (collectively, the "Ancillary Agreements")
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with respect to the shares of Preferred Stock to which such Ancillary Agreements
may apply, in each case as such Ancillary Agreements shall have been amended,
and such breach has continued for thirty (30) days following receipt by the
Corporation of written notice of said breach given by the holders of at least
two-thirds of the outstanding shares of Preferred Stock with respect to which
such covenant or provisions applies;
(2) Any of the Corporation's representations and/or warranties set
forth in the Series A Stock Purchase Agreement with respect to the Series A
Convertible Preferred Stock, the Series B Stock Purchase Agreement with respect
to the Series B Convertible Preferred Stock, the Series C Stock Purchase
Agreement with respect to the Series C Convertible Preferred Stock, the Series D
Stock Purchase Agreement with respect to the Series D Convertible Preferred
Stock, the Series E and Series F Stock Purchase Agreement with respect to the
Series E Convertible Preferred Stock and Series F Convertible Preferred Stock,
the Series G and Series H Stock Purchase Agreement with respect to the Series G
Convertible Preferred Stock and the Series H Convertible Preferred Stock or in
any one or more of the Ancillary Agreements with respect to the shares of
Preferred Stock to which such Ancillary Agreement may apply, was not
substantially true as of the date of closing for such Stock Purchase Agreement
or Ancillary Agreement and the Corporation has received written notice of such
fact from the holders of at least two-thirds of the outstanding shares of
Preferred Stock with respect to which such representation and/or warranty
applies;
(3) The Corporation has failed to make payment(s) when due for any
dividends, interest and/or mandatory redemption of any securities, where such
payment(s) aggregate over $200,000 and such failure to pay has continued for
thirty (30) days following receipt by the Corporation of written notice of said
failure to pay from the holders of at least two-thirds of the outstanding shares
of Preferred Stock;
(4) The Corporation has been in material default of payment on any
debt agreement under which the Corporation is obligated to pay at least $200,000
in principal (including any acceleration thereof) and accrued interest at the
time of such default, and such default has continued for thirty (30) days
following receipt by the Corporation of written notice of said default given by
the holders of at least two-thirds of the outstanding shares of Preferred Stock;
or
(5) The Corporation has filed for bankruptcy, made an assignment for
the benefit of creditors, materially compromised its debt with a material
creditor of the Corporation or suffered acceleration of a material debt
instrument, and the Corporation
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has received written notice of same from the holders of at least two-thirds of
the outstanding shares of Preferred Stock.
Once a Noncompliance Event has occurred, the Corporation shall give prompt
notice thereof to each holder of Preferred Stock, and shall be deemed "in
noncompliance" until such time as the President or Chief Financial Officer of
the Corporation shall have certified and delivered by hand or by first class
mail, postage prepaid, by the recorded delivery service or by telex to non-U.S.
residents, addressed to each holder of Preferred Stock at the address of such
holder as shown on the books of the Corporation, notice that the condition
underlying such Noncompliance Event is cured.
8. Amendments. No provision of these terms of the Preferred Stock
may be amended, modified or waived without the written consent or affirmative
vote of the holders of at least two-thirds of the then-outstanding shares of
Preferred Stock voting as a single class.
SECOND: Written consent to the adoption of the foregoing amendment of
the Restated Certificate of Incorporation of the Corporation has been given in
accordance with the provisions of Section 228 of the Delaware General
Corporation Law and written notice of the adoption of said amendment without a
meeting by less than unanimous written consent has been given to those
stockholders who have not consented in writing as provided in said Section 228.
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IN WITNESS WHEREOF, Object Design, Inc. has caused this certificate
to be signed by its President and attested by its Secretary this 14 day of May,
1993.
Object Design, Inc.
By: /s/ Kenneth E. Marshall
--------------------------
Its President
ATTEST
By: /s/ John Patterson
------------------------------
Its Secretary
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EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
OBJECT DESIGN, INC.
Object Design, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That the following amendment to the Restated Certificate of
Incorporation of Object Design, Inc. (the "Corporation") has been duly adopted
in accordance with the provisions of Section 242 and Section 228 of the Delaware
General Corporation Law:
That the Restated Certificate of Incorporation of the Corporation be
further amended by deleting the old Article Fourth and inserting a new Article
Fourth in its stead which shall be and read as follows in its entirety:
"Fourth: The total number of shares of capital stock which the
Corporation shall have the authority to issue shall be 22,500,000 common shares,
having a par value of $.001 per share, amounting to an aggregate par value of
$22,500.00 and 16,837,521 shares of Preferred Stock having a par value of $.01
per share amounting to an aggregate par value of $168,375.21.
The voting power, preferences and relative participating, optional or
other special rights and the qualifications, limitations or restrictions of the
Preferred Stock are set forth as follows:
1. Number of Shares. 2,750,000 shares of the Preferred Stock shall be
designated and known as "Series A Convertible Preferred Stock," 4,575,715 shares
of the Preferred Stock shall be designated and known as "Series B Convertible
Preferred
<PAGE> 142
Stock," 2,857,143 shares of the Preferred Stock shall be designated and known as
"Series C Convertible Preferred Stock," 1,111,111 shares of Preferred Stock
shall be designated and known as "Series D Convertible Preferred Stock,"
2,601,877 shares of Preferred Stock shall be designated and known as "Series E
Convertible Preferred Stock," 1,148,818 shares of Preferred Stock shall be
designated and known as "Series F Convertible Preferred Stock," 250,000 shares
of Preferred Stock shall be designated and known as "Series G Convertible
Preferred Stock," 400,000 shares of Preferred Stock shall be designated and
known as "Series H Convertible Preferred Stock" and 1,142,857 shares of
Preferred Stock shall be designated and know as "Series I Convertible Preferred
Stock." Unless otherwise specifically designated, the term "Preferred Stock"
refers collectively to Series A Convertible Preferred Stock, Series B
Convertible Preferred Stock, Series C Convertible Preferred Stock, Series D
Convertible Preferred Stock, Series E Convertible Preferred Stock, Series F
Convertible Preferred Stock, Series G Convertible Preferred Stock, Series H
Convertible Preferred Stock and Series I Convertible Preferred Stock.
2. Voting.
2A. General. Except as may be otherwise provided in these
terms of the Preferred Stock or by law, the Preferred Stock shall vote together
with the Common Stock as a single class on all actions to be taken by the
stockholders of the Corporation. Each share of Preferred Stock shall entitle the
holder thereof to such number of votes per share on each such action as shall
equal the number of shares of Common Stock (including fractions of a share) into
which each share of Preferred Stock is then convertible.
With respect to all questions as to which, under law, stockholders are
entitled to vote by classes, the holders of Preferred Stock shall vote together
as a single class separately from the holders of Common Stock. With respect to
all questions as to which, under law, stockholders are required to vote by
series, the holders of Series A Convertible Preferred Stock shall vote
separately as a single series, the holders of Series B Convertible Preferred
Stock shall vote separately as a single series, the holders of Series C
Convertible Preferred Stock shall vote separately as a single series, the
holders of Series D Convertible Preferred Stock shall vote separately as a
single series, the holders of Series E Convertible Preferred Stock shall vote
separately as a single series, the holders of Series F Convertible Preferred
Stock shall vote separately as a single series, the holders of Series G
Convertible Preferred Stock shall vote separately as a single series, the
holders of Series H Convertible Preferred Stock shall vote separately as a
single series, and the holders of Series I Convertible Preferred Stock shall
vote separately as a single series.
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2B. Board Size. The Corporation shall not, without the written
consent or affirmative vote of the holders of at least two-thirds of the then
outstanding shares of Preferred Stock, given in writing or by vote at a meeting,
consenting or voting (as the case may be) separately as a class, change the
number of directors constituting the Board of Directors to a number other than
nine, except that the Corporation may increase or decrease the number of
directors constituting the Board of Directors with the vote of a majority of the
members of the Board of Directors designated by the holders of Preferred Stock
pursuant to the Fourth Amended and Restated Stockholders' Agreement dated March
31, 1994 by and among the Corporation and the parties thereto, as may be amended
or restated from time to time (the "Stockholders' Agreement").
2C. Board Seats. The holders of the Preferred Stock shall be
entitled to vote together with the Common Stock as a single class for the
election of each of the directors of the Corporation. Notwithstanding the
foregoing or anything else to the contrary provided in the Certificate of
Incorporation, upon the occurrence of any Noncompliance Event (as such term is
defined in subparagraph 7B) and continuing for so long as the Corporation
remains in noncompliance (as defined in subparagraph 7B), the holders of the
Preferred Stock, voting as a separate class, shall be entitled to elect a
majority of the directors of the Corporation, with the remaining directors of
the Corporation to be elected as set forth in the first sentence of this
subparagraph 2C. A vacancy in any directorship elected by the holders of the
Preferred Stock, voting as a separate class, shall be filled only by vote or
written consent of the holders of the Preferred Stock, and a vacancy in any
directorship elected jointly by the holders of the Preferred Stock and all other
classes and series of stock of the Corporation, voting together as a single
class, shall be filled only by vote or written consent of the Preferred Stock
and all other classes and series of stock of the Corporation, as provided above.
At any meeting (or in a written consent in lieu thereof) held for the purpose of
electing directors, the presence in person or by proxy (or the written consent)
of the holders of a majority of the shares of Preferred Stock then outstanding
shall constitute a quorum of the Preferred Stock for the election of directors
to be elected solely by the holders of the Preferred Stock.
3. Dividends.
3A. General. The holders of the Preferred Stock shall be
entitled to receive, as and when declared by the Board of Directors out of funds
legally available therefor, dividends at the same rate as dividends (other than
dividends paid in additional shares of Common Stock) are paid with respect to
the Common Stock (treating each share of Preferred Stock as being equal to the
number of shares of Common Stock (including
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fractions of a share) into which each share of Preferred Stock is then
convertible). In addition, the holders of the Preferred Stock may from time to
time be entitled, pursuant to the terms of subparagraph 3B below, to certain
cumulative dividends, and pursuant to the terms of paragraph 7 below, to certain
"Noncompliance Dividends," as that term is defined in subparagraph 7A, as well
as to any other dividends declared by the Board of Directors on the outstanding
shares of Preferred Stock out of funds legally available therefor. All dividends
on Preferred Stock shall be paid on a pro-rata basis (except such Noncompliance
Dividends as are payable solely on Series A Convertible Preferred Stock, Series
B Convertible Preferred Stock, Series C Convertible Preferred Stock, Series D
Convertible Preferred Stock, Series E Convertible Preferred Stock, Series F
Convertible Preferred Stock, Series G Convertible Preferred Stock, Series H
Convertible Preferred Stock or Series I Convertible Preferred Stock, as the case
may be, pursuant to subparagraph 7A).
3B. Accruing Dividends. In each year commencing on: (1) July
25, 1991, the holders of Series A Convertible Preferred Stock, Series B
Convertible Preferred Stock and Series C Convertible Preferred Stock shall be
entitled to receive out of funds legally available therefor, as and when
declared by the Board of Directors, dividends at the rate of $.10 per share in
the case of Series A Convertible Preferred Stock, $.14 per share in the case of
Series B Convertible Preferred Stock and $.175 per share in the case of Series C
Convertible Preferred Stock; (2) March 11, 1992, the holders of Series D
Convertible Preferred Stock shall be entitled to receive out of funds legally
available therefor, as and when declared by the Board of Directors, dividends at
the rate of $.225 per share; (3) April 12, 1993, the holders of Series E
Convertible Preferred Stock and the holders of Series F Convertible Preferred
Stock shall be entitled to receive out of funds legally available therefor, as
and when declared by the Board of Directors, dividends at the rate of $.30 per
share in the case of Series E Convertible Preferred Stock and $.35 per share in
the case of Series F Convertible Preferred Stock; (4) May 14, 1993, the holders
of Series G Convertible Preferred Stock and the holders of Series H Convertible
Preferred Stock shall be entitled to receive out of funds legally available
therefor, as and when declared by the Board of Directors, dividends at the rate
of $.40 per share in the case of Series G Convertible Preferred Stock and $.50
per share in the case of Series H Convertible Preferred Stock; and (5) March 31,
1994, the holders of Series I Convertible Preferred Stock shall be entitled to
receive out of funds legally available therefor, as and when declared by the
Board of Directors, dividends at the rate of $.70 per share (each such price
subject to equitable adjustment in the event of any stock dividend, stock split,
combination, reclassification or other similar event), compounded at the rate of
10% per share per annum. Such dividends shall accrue from day
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to day, whether or not earned or declared, and shall be cumulative; provided,
however, that except as provided in paragraph 4 hereto and under the terms of a
Sixth Amended and Restated Preferred Stock Redemption Agreement dated March 31,
1994 (the "Redemption Agreement"), the Corporation shall be under no obligation
to pay such accruing dividends unless so declared by the Board of Directors; and
provided, further that the Corporation's obligation to pay such accruing
dividends upon liquidation, pursuant to the terms of the Redemption Agreement or
otherwise shall commence at the end of the first year in which the Corporation
has positive retained earnings.
3C. Restrictions. Unless all accrued but unpaid dividends on
each series of Preferred Stock shall have been paid or shall have been declared
and a sum sufficient for the payment thereof set apart, (i) no dividend shall be
paid or declared, and no distribution shall be made, on any Common Stock, other
than a dividend or other distribution payable solely in the form of additional
shares of Common Stock, and (ii) no shares of Common Stock shall be purchased,
redeemed or acquired by the Corporation and no amounts shall be paid for the
purchase, redemption or acquisition thereof. Anything herein to the contrary
notwithstanding, the restrictions set forth in this Paragraph 3C shall not apply
to (i) the repurchase of shares of Common Stock from former employees, officers,
directors or other providers of services to the Corporation who acquired such
shares directly from the Corporation, if each such purchase is made pursuant to
contractual rights held by the Corporation relating to the termination of
employment or services of such former employees, officers, directors or other
providers of services to the Corporation and the purchase price does not exceed
the original purchase price paid by such person to the Corporation for such
shares; (ii) repurchase of shares of Common Stock pursuant to the Stockholders'
Agreement, the Series E and Series F Stock Purchase Agreement (as hereafter
defined) and the IBM Stockholders' Agreement (as hereafter defined); and (iii)
repurchase of shares of Common Stock pursuant to right of first refusal
agreements executed in connection with options granted under the Corporation's
1989 Incentive and Non-Qualified Stock Option Plan, as amended (the "Plan").
4. Liquidation. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the Preferred
Stock shall first be entitled, before any distribution or payment is made upon
any stock ranking on liquidation, dissolution or winding up, junior to the
Preferred Stock, including the Common Stock, to be paid, out of assets legally
available therefor, an amount equal to the greater of:
(i) $1.00 per share in the case of the Series A Convertible
Preferred Stock, $1.40 per share in the case of
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the Series B Convertible Preferred Stock, $1.75 per share in the case
of the Series C Convertible Preferred Stock, $2.25 per share in the
case of Series D Convertible Preferred Stock, $3.00 per share in the
case of Series E Convertible Preferred Stock, $3.50 per share in the
case of Series F Convertible Preferred Stock, $4.00 per share in the
case of Series G Convertible Preferred Stock, $5.00 per share in the
case of Series H Convertible Preferred Stock and $7.00 per share in the
case of Series I Convertible Preferred Stock plus, in each case, all
accrued and unpaid dividends thereon, whether or not earned or declared
(including all accrued and unpaid Noncompliance Dividends, if any,)
computed to the date payment thereof is made available; or
(ii) such amount per share of Preferred Stock as would have
been payable had each such share been converted to Common Stock
immediately prior to such event of liquidation, dissolution or winding
up pursuant to the provisions of paragraph 6 hereof.
Such amount payable with respect to one share of Preferred Stock under
this paragraph 4 shall sometimes be referred to as the "Liquidation Preference
Payment" and with respect to all shares of Preferred Stock shall sometimes be
referred to as the "Liquidation Preference Payments." If upon such liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the assets to be distributed among the holders of Preferred Stock shall be
insufficient to permit payment in full to the holders of Preferred Stock of the
Liquidation Preference Payments, then the entire assets of the Corporation to be
so distributed shall be distributed ratably among the holders of Preferred Stock
according to the respective amounts which would be payable on or with respect to
the shares of Preferred Stock held by them upon such distribution if all amounts
payable on or with respect to said shares were paid in full. Written notice of
such liquidation, dissolution or winding up, stating a payment date, the place
where said payments shall be made, the aggregate amount to be paid to each
holder of Preferred Stock, and the alternate amount which would be paid to each
such holder if all outstanding shares of Preferred Stock were to be converted
into shares of Common Stock prior to the payment date, shall be given by mail,
postage prepaid, by recorded delivery service or by telex to non-U.S. residents,
not less than 20 days prior to the payment date stated therein, to the holders
of the record of Preferred Stock, such notice to be addressed to each such
holder at its address as shown by the records of the Corporation. The
consolidation or merger of the Corporation into or with any other entity or
entities which results in the exchange of outstanding securities of the
Corporation for securities or other consideration issued or paid or caused to be
issued or paid by any such entity or entities or affiliate thereof, and the sale
or transfer by the Corporation of all or substantially all its
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assets, shall be deemed to be a liquidation, dissolution or winding up of the
Corporation within the meaning of the provisions of this paragraph 4, unless the
holders of all outstanding shares of the Corporation's voting stock immediately
prior to such transaction or series of transactions hold, immediately following
the consummation of such transaction or series of transactions, more than
two-thirds of the voting stock of such entity or entities or affiliate thereof,
or of the transferee of the assets of the Corporation, as the case may be,
provided, however, that each holder of Preferred Stock shall have the right to
elect to receive the benefits of the provisions of subparagraph 6G hereof in
lieu of receiving payment in liquidation, dissolution or winding up of the
Corporation pursuant to this paragraph 4. For purposes hereof, the Common Stock
shall rank on liquidation, dissolution or winding up of the Corporation, junior
to the Preferred Stock.
5. Restrictions. At any time when shares of Preferred Stock are
outstanding, except as otherwise required by law or by the Certificate of
Incorporation, without the written consent or affirmative vote of the holders of
at least two-thirds of the then outstanding shares of Preferred Stock,
consenting or voting (as the case may be) separately as one class, the
Corporation will not:
5A. Create or authorize the creation of any additional class
or series of shares of stock, or reclassify the shares of any existing class or
series of stock, unless the same ranks junior to the Preferred Stock as to the
distribution of assets on the liquidation, dissolution or winding up of the
Corporation, or increase the authorized amount of the Preferred Stock or
increase the authorized amount of any additional class or series of shares of
stock unless the same ranks junior to the Preferred Stock as to the distribution
of assets on the liquidation, dissolution or winding up of the Corporation and
as to the payment of dividends, or create or authorize any obligation or
security convertible into shares of Preferred Stock or into shares of any other
class or series of stock unless the same ranks junior to the Preferred Stock as
to the distribution of assets on the liquidation, dissolution or winding up of
the Corporation and as to the payment of dividends, whether any such creation,
authorization or increase shall be by means of amendment to the Certificate of
Incorporation or by merger, consolidation or otherwise;
5B. Consent to any liquidation, dissolution or winding up of
the Corporation or consolidate or merger into or with any other entity or
entities, or sell or transfer all or substantially all its assets, unless the
holders of the outstanding shares of the Corporation's voting stock immediately
prior to such transaction hold, immediately following the consummation of such
transaction, two-thirds or more of the voting stock of the surviving entity or
entities or affiliates
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thereof, or of the transferee of the assets of the Corporation, as the case may
be;
5C. Sell or transfer more than 10% of the assets of the
Corporation within any 12 month period, other than in the ordinary course of
business;
5D. Amend, alter or repeal its Certificate of Incorporation,
or amend, alter or repeal its By-laws so as to adversely affect a holder of
Preferred Stock;
5E. Purchase or set aside any sums for the purchase of, or pay
any dividend or make any distribution on, any shares of stock other than the
Preferred Stock, except for (i) dividends or other distributions payable on the
Common Stock solely in the form of additional shares of Common Stock; (ii) the
purchase of shares of Common Stock from former employees, officers, directors or
other providers of services to the Corporation who acquired such shares directly
from the Corporation, if each such purchase is made pursuant to contractual
rights held by the Corporation relating to the termination of employment or
services of such former employees, officers, directors or other providers of
services to the Corporation and the purchase price does not exceed the original
issue price paid by such person to the Corporation for such shares; (iii)
repurchase of shares of Common Stock pursuant to the Stockholders' Agreement;
(iv) repurchase of shares of Common Stock pursuant to right of first refusal
agreements executed in connection with options granted under the Plan; (v) the
repurchase of shares of Series E Convertible Preferred Stock and Series F
Convertible Preferred Stock pursuant to a certain Stock Purchase Agreement by
and among the Corporation and the holders of Series E Convertible Preferred
Stock and Series F Convertible Preferred Stock dated as of April 12, 1993 (the
"Series E and Series F Stock Purchase Agreement") and pursuant to a certain
Amended and Restated Stockholders' Agreement by and among the Corporation,
International Business Machines Corporation and certain of the Corporation's
stockholders dated as of May 14, 1993, as amended (the "IBM Stockholders'
Agreement"); and (vi) the repurchase of shares of Series I Convertible Preferred
Stock pursuant to a certain Supplement to Stock Purchase Agreement by and
between the Corporation and Intel Corporation dated as of March 31, 1994 (the
"Intel Agreement").
5F. Redeem or otherwise acquire any shares of Preferred Stock
except pursuant to one or more written agreements to which the Corporation and
all of the holders of Preferred Stock are parties, pursuant to a purchase offer
made pro rata to all holders of the shares of Preferred Stock on the basis of
the aggregate number of outstanding shares of Preferred Stock then held by each
such holder, pursuant to the Series E and Series F
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Stock Purchase Agreement and the IBM Stockholders' Agreement, or pursuant to the
Intel Agreement.
6. Conversions. The holders of shares of Preferred Stock shall have the
following conversion rights:
6A. Conversion Events.
6A(1) Optional Conversion. Subject to the terms
and conditions of this Paragraph 6, the holder of any share or shares of
Preferred Stock shall have the right, at its option at any time, to convert any
such shares of Preferred Stock (except that upon any liquidation, voluntary or
involuntary dissolution, or winding-up of the Corporation the right of
conversion shall terminate at the close of business on the business day fixed
for payment of the amount distributable on the Preferred Stock) into such number
of fully paid and nonassessable shares of Common Stock as is obtained by (i)
multiplying the number of shares of Preferred Stock so to be converted by $1.00
in the case of Series A Convertible Preferred Stock, $1.40 in the case of Series
B Convertible Preferred Stock, $1.75 in the case of Series C Convertible
Preferred Stock, $2.25 in the case of Series D Convertible Preferred Stock,
$3.00 in the case of Series E Convertible Preferred Stock, $3.50 in the case of
Series F Convertible Preferred Stock, $4.00 in the case of Series G Convertible
Preferred Stock, $5.00 in the case of Series H Convertible Preferred Stock and
$7.00 in the case of Series I Convertible Preferred Stock and (ii) dividing the
result by the conversion price of $1.00 in the case of Series A Convertible
Preferred Stock, $1.40 in the case of Series B Convertible Preferred Stock,
$1.75 in the case of Series C Convertible Preferred Stock, $2.25 in the case of
Series D Convertible Preferred Stock, $3.00 in the case of Series E Convertible
Preferred Stock, $3.50 in the case of Series F Convertible Preferred Stock,
$4.00 in the case of Series G Convertible Preferred Stock, $5.00 in the case of
Series H Convertible Preferred Stock and $7.00 in the case of Series I
Convertible Preferred Stock or, in case an adjustment of such price has taken
place pursuant to the further provisions of this Paragraph 6, then by the
conversion price as last adjusted and in effect at the date any share or shares
of Preferred Stock are surrendered for conversion (such price, or such price as
last adjusted, being referred to as the "Conversion Price"). Such rights of
conversion shall be exercised by the holder thereof by giving written notice to
the Corporation that the holder elects to convert a stated number of shares of
Preferred Stock into Common Stock and by surrender of a certificate or
certificates for the shares so to be converted to the Corporation at its
principal office (or such other office or agency of the Corporation as the
Corporation may designate by notice in writing to the holders of the Preferred
Stock) at any time during its usual business hours on the date set forth in such
notice, together with a statement
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of the name or names (with address) in which the certificate or certificates for
shares of Common Stock shall be issued.
6A(2) Mandatory Conversion. The outstanding
shares of Series A Convertible Preferred Stock, Series B Convertible Preferred
Stock, Series C Convertible Preferred Stock, Series D Convertible Preferred
Stock, Series E Convertible Preferred Stock, Series F Convertible Preferred
Stock, Series G Convertible Preferred Stock, Series H Convertible Preferred
Stock and Series I Convertible Preferred Stock, as the case may be, shall
automatically and without any further action on the part of the Corporation
convert into shares of Common Stock effective upon the earlier to occur of (i)
such time as the Corporation shall have issued an aggregate of at least
two-thirds of the total number of shares of Common Stock which were issued or
issuable upon conversion of the shares of Series A Convertible Preferred Stock,
Series B Convertible Preferred Stock, Series C Convertible Preferred Stock,
Series D Convertible Preferred Stock, Series E Convertible Preferred Stock,
Series F Convertible Preferred Stock, Series G Convertible Preferred Stock,
Series I Convertible Preferred Stock and, if and when issued, Series H
Convertible Preferred Stock, as the case may be, as of the date of a certain
Series I Convertible Preferred Stock Purchase Agreement by and among the
Corporation and the parties thereto (the "Series I Stock Purchase Agreement"),
as such number shall have been adjusted from time to time in the event of any
stock dividend, stock split, combination, reclassification or other similar
event; or (ii) the closing of a sale of shares of Common Stock by the
Corporation pursuant to an underwritten public offering in which (a) the
aggregate gross proceeds to the Corporation shall be at least $10,000,000, and
(b) the price per share paid by the public, net of underwriting discounts and
commissions, shall be at least $3.50 (subject to adjustment in the event of any
stock dividend, stock split, combination, reclassification or other similar
event.)
6B. Issuance of Certificates; Time Conversion Effected.
Promptly upon (1) the happening of either event described in subparagraph 6A(2)
or the receipt by the Corporation of the written notice referred to in
subparagraph 6A(1), and (2) the surrender of the certificate or certificates for
the share or shares of Preferred Stock to be converted, the Corporation shall
issue and deliver, or cause to be issued and delivered, to the holder,
registered in such name or names as such holder may direct, a certificate or
certificates for the number of whole shares of Common Stock issuable upon the
conversion of such shares or shares of Preferred Stock. To the extent permitted
by law, such conversion shall be deemed to have been effected and the Conversion
Price shall be determined as of the close of business on the date on which such
written notice shall have been received by the Corporation, or, in the case of a
mandatory conversion under subparagraph 6A(2), on the date of occurrence of
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either event specified in such subparagraph, and at such time the rights of the
holder of such share or shares of Preferred Stock shall cease, and the person or
persons in whose name or names any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become the holder or holders of record of the shares of Common Stock represented
thereby.
6C. Partial Conversion; Dividends; Fractional Shares. In case
the number of shares of Preferred Stock represented by the certificate or
certificates surrendered pursuant to subparagraph 6A(1) exceeds the number of
shares to be converted, the Corporation shall, upon such conversion, execute and
deliver to the holder, at the expense of the Corporation, a new certificate or
certificates for the number of shares of Preferred Stock represented by the
certificate or certificates surrendered which are not being converted. At the
time of each conversion of shares of Preferred Stock pursuant to this paragraph
6, the Corporation shall pay, out of funds legally available therefor, in cash
an amount equal to all dividends declared but unpaid and any Noncompliance
Dividends on the shares of Preferred Stock surrendered for conversion to the
date upon which such conversion is deemed to take place as provided in
subparagraph 6B; provided that, any holder of shares of Preferred Stock may
elect, at the time such shares are surrendered for conversion or at any other
time prior to conversion, to take payment for all declared but unpaid dividends
and any Noncompliance Dividends on such shares, if any, in shares of Common
Stock rather than in cash, with the number of shares of Common Stock issuable in
lieu of such cash payment to be determined by dividing the aggregate amount of
such declared but unpaid dividends and Noncompliance Dividends by the Conversion
Price then in effect for the shares of Preferred Stock held by such holder with
respect to which such declared but unpaid dividends and Noncompliance Dividends
shall be payable. No fractional shares shall be issued upon conversion of
Preferred Stock into Common Stock or upon election to take shares of Common
Stock in lieu of cash for declared but unpaid dividends and Noncompliance
Dividends and no payment or adjustment at the time of such conversion or
election shall be made by the Corporation on account of any previously-declared
cash dividends on the Common Stock. In lieu of delivering any such fractional
share of Common Stock, the Corporation shall pay an amount in cash equal to the
current market price of such fractional share as determined in good faith by the
Board of Directors of the Corporation.
6D. Adjustment of Price Upon Issuance of Common Stock. Except
as provided in subparagraph 6E, if and whenever the Corporation shall issue or
sell or is, in accordance with subparagraphs 6D(1) through 6D(8), deemed to have
issued or sold any shares of Common Stock for a consideration per share less
than the Conversion Price in effect for any of the Series A
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Convertible Preferred Stock, the Series B Convertible Preferred Stock, the
Series C Convertible Preferred Stock, the Series D Convertible Preferred Stock,
the Series E Convertible Preferred Stock, the Series F Convertible Preferred
Stock, the Series G Convertible Preferred Stock, the Series H Convertible
Preferred Stock or the Series I Convertible Preferred Stock immediately prior to
the time of such issue or sale (a "Dilutive Offering"), then in each such case,
forthwith upon such issue or sale, such Conversion Price for the Series A
Convertible Preferred Stock, the Series B Convertible Preferred Stock, the
Series C Convertible Preferred Stock, the Series D Convertible Preferred Stock,
the Series E Convertible Preferred Stock, the Series F Convertible Preferred
Stock, the Series G Convertible Preferred Stock, the Series H Convertible
Preferred Stock or the Series I Convertible Preferred Stock, as the case may be,
shall be reduced to the price determined by dividing (i) an amount equal to the
sum of (a) the number of shares of Common Stock outstanding immediately prior to
such issue or sale (including the number of shares of Common Stock issued or
issuable upon conversion of the Preferred Stock) multiplied by the then existing
Conversion Price for the Series A Convertible Preferred Stock, the Series B
Convertible Preferred Stock, the Series C Convertible Preferred Stock, the
Series D Convertible Preferred Stock, the Series E Convertible Preferred Stock,
the Series F Convertible Preferred Stock, the Series G Convertible Preferred
Stock, the Series H Convertible Preferred Stock or the Series I Convertible
Preferred Stock, as the case may be, and (b) the consideration, if any, received
by the Corporation upon such issue or sale, by (ii) the total number of shares
of Common Stock outstanding immediately after such issue or sale (including the
number of shares of Common Stock issued or issuable upon conversion of the
Preferred Stock).
Notwithstanding the foregoing, if the Corporation shall issue or sell
or is, in accordance with subparagraphs 6D(1) through 6D(8), deemed to have
issued or sold, any shares of Common Stock for a consideration per share less
than the Conversion Price for the Series C Convertible Preferred Stock in effect
immediately prior to such sale, the Conversion Price in effect for the Series C
Convertible Preferred Stock shall be reduced to equal the greater of $1.40 or
such consideration per share, provided, that if such consideration per share is
less than $1.40, the Conversion Price shall as a result of such issue or sale
(i) first be reduced to $1.40 in accordance with this sentence and (ii)
thereafter be reduced as otherwise provided in this paragraph 6. For any later
issues or sales of Common Stock below the applicable Conversion Price in effect
for the Series C Convertible Preferred Stock, adjustments shall be made as
otherwise provided in this paragraph 6.
In addition, notwithstanding the foregoing, if the Corporation shall
issue or sell or is, in accordance with
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subparagraphs 6D(1) through 6D(8), deemed to have issued or sold, any shares of
Common Stock for a consideration per share less than the Conversion Price for
the Series B Convertible Preferred Stock in effect immediately prior to such
sale, the Conversion Price in effect for the Series B Convertible Preferred
Stock shall be reduced to equal the greater of $1.00 or such consideration per
share, provided, that if such consideration per share is less than $1.00, the
Conversion Price shall as a result of such issue or sale (i) first be reduced to
$1.00 in accordance with this sentence and (ii) thereafter be reduced as
otherwise provided in this paragraph 6. For any later issues of sales of Common
Stock below the applicable Conversion Price in effect for the Series B
Convertible Preferred stock, adjustments shall be made as otherwise provided in
this paragraph 6.
Notwithstanding anything to the contrary set forth in paragraph 6
hereof, no adjustment shall be made to (i) the Conversion Price of the Series A
Convertible Preferred Stock in the event that the Corporation shall issue or
sell or is, in accordance with subparagraphs 6D(1) through 6D(8), deemed to have
issued or sold any shares of Common Stock solely at a price per share equal to
or greater than the Conversion Price for the Series A Convertible Preferred
Stock, but less than the Conversion Price for the Series B Convertible Preferred
Stock, the Series C Convertible Preferred Stock, the Series D Convertible
Preferred Stock, the Series E Convertible Preferred Stock, the Series F
Convertible Preferred Stock, the Series G Convertible Preferred Stock, the
Series H Convertible Preferred Stock or the Series I Convertible Preferred
Stock; (ii) the Conversion Price of the Series B Convertible Preferred Stock in
the event that the Corporation shall issue or sell or is, in accordance with
subparagraphs 6D(1) through 6D(8), deemed to have issued or sold any shares of
Common Stock solely at a price per share equal to or greater than the Conversion
Price for the Series B Convertible Preferred Stock, but less than the Conversion
Price for the Series C Convertible Preferred Stock, the Series D Convertible
Preferred Stock, the Series E Convertible Preferred Stock, the Series F
Convertible Preferred Stock, the Series G Convertible Preferred Stock, the
Series H Convertible Preferred Stock or the Series I Convertible Preferred
Stock; (iii) the Conversion Price of the Series C Convertible Preferred Stock in
the event that the Corporation shall issue or sell or is, in accordance with
subparagraphs 6D(1) through 6D(8), deemed to have issued or sold any shares of
Common Stock solely at a price per share equal to or greater than the Conversion
Price for the Series C Convertible Preferred Stock, but less than the Conversion
Price for the Series D Convertible Preferred Stock, the Series E Convertible
Preferred Stock, the Series F Convertible Preferred Stock, the Series G
Convertible Preferred Stock, the Series H Convertible Preferred Stock or the
Series I Convertible Preferred Stock; (iv) the Conversion Price of the Series D
Convertible Preferred Stock in the event that the
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Corporation shall issue or sell or is, in accordance with subparagraphs 6D(1)
through 6D(8), deemed to have issued or sold any shares of Common Stock solely
at a price per share equal to or greater than the Conversion Price for the
Series D Convertible Preferred Stock, but less than the Conversion Price for the
Series E Convertible Preferred Stock, the Series F Convertible Preferred Stock,
the Series G Convertible Preferred Stock, the Series H Convertible Preferred
Stock or the Series I Convertible Preferred Stock; (v) the Conversion Price of
the Series E Convertible Preferred Stock in the event that the Corporation shall
issue or sell or is, in accordance with subparagraphs 6D(1) through 6D(8),
deemed to have issued or sold any shares of Common Stock solely at a price per
share equal to or greater than the Conversion Price of the Series E Convertible
Preferred Stock, but less than the Conversion Price for the Series F Convertible
Preferred Stock, the Series G Convertible Preferred Stock, the Series H
Convertible Preferred Stock or the Series I Convertible Preferred Stock; (vi)
the Conversion Price of the Series F Convertible Preferred Stock in the event
that the Corporation shall issue or sell or is, in accordance with subparagraphs
6D(1) through 6D(8), deemed to have issued or sold any shares of Common Stock
solely at a price per share equal to or greater than the Conversion Price of the
Series F Convertible Preferred Stock, but less than the Conversion Price for the
Series G Convertible Preferred Stock, the Series H Convertible Preferred Stock
or the Series I Convertible Preferred Stock; (vii) the Conversion Price of the
Series G Convertible Preferred Stock in the event that the Corporation shall
issue or sell or is, in accordance with subparagraphs 6D(1) through 6D(8),
deemed to have issued or sold any shares of Common Stock solely at a price per
share equal to or greater than the Conversion Price of the Series G Convertible
Preferred Stock, but less than the Conversion Price for the Series H Convertible
Preferred Stock or the Series I Convertible Preferred Stock; (viii) the
Conversion Price of the Series H Convertible Preferred Stock in the event that
the Corporation shall issue or sell or is, in accordance with subparagraphs
6D(1) through 6D(8), deemed to have issued or sold any shares of Common Stock
solely at a price per share equal to or greater than the Conversion Price of the
Series H Convertible Preferred Stock, but less than the Conversion Price for the
Series I Convertible Preferred Stock; or (ix) the Conversion Price of the Series
I Convertible Preferred Stock in the event that the Corporation shall issue or
sell or is, in accordance with subparagraphs 6D(1) through 6D(8), deemed to have
issued or sold any shares of Common Stock solely at a price per share equal to
or greater than the Conversion Price of the Series I Convertible Preferred
Stock.
For purposes of this subparagraph 6D, the following subparagraphs 6D(1)
to 6D(8) shall also be applicable:
6D(1) Issuance of Rights or Options. In case at any time the
Corporation shall in any manner grant (whether directly
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or by assumption in a merger or otherwise) any warrants or other rights to
subscribe for or to purchase, or any options for the purchase of, Common Stock
or any stock or security convertible into or exchangeable for Common Stock (such
warrants, rights or options being called "Options" and such convertible or
exchangeable stock or securities being called "Convertible Securities"), whether
or not such Options or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such Options or upon the conversion or
exchange of such Convertible Securities (determined by dividing (i) 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 the 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 upon the
issue or sale of such Convertible Securities and upon the conversion or exchange
thereof, by (ii) 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) shall be less
than the Conversion Price of the Series A Convertible Preferred Stock, the
Series B Convertible Preferred Stock, the Series C Convertible Preferred Stock,
the Series D Convertible Preferred Stock, the Series E Convertible Preferred
Stock, the Series F Convertible Preferred Stock, the Series G Convertible
Preferred Stock, the Series H Convertible Preferred Stock or the Series I
Convertible Preferred Stock, or all nine, 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 issuable upon the exercise of such Options shall be
deemed to have been issued for such price per share as of the date of granting
of such Options or the issuance of such Convertible Securities and thereafter
shall be deemed to be outstanding. Except as otherwise provided in subparagraph
6D(3), no adjustment of the Conversion Price shall be made upon the actual issue
of such Common Stock or of such Convertible Securities upon exercise of such
Options or upon the actual issue of such Common Stock upon conversion or
exchange of such Convertible Securities.
6D(2) Issuance of Convertible Securities. In case the
Corporation shall in any manner issue (whether directly or by assumption in a
merger or otherwise) or sell any Convertible Securities, whether or not the
rights to exchange or convert any such Convertible Securities are immediately
exercisable, and the price per share for which Common Stock is issuable upon
such conversion or exchange (determined by dividing (i) the total
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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, by (ii) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities)
shall be less than the Conversion Price of the Series A Convertible Preferred
Stock, the Series B Convertible Preferred Stock, the Series C Convertible
Preferred Stock, the Series D Convertible Preferred Stock, the Series E
Convertible Preferred Stock, the Series F Convertible Preferred Stock, the
Series G Convertible Preferred Stock, the Series H Convertible Preferred Stock
or the Series I Convertible Preferred Stock, or all nine, as the case may be, in
effect immediately prior to the time of such issue or sale, then the total
maximum number of shares of Common Stock issuable upon conversion or exchange of
all such Convertible Securities shall be deemed to have been issued for such
price per share as of the date of the issue or sale of such Convertible
Securities and thereafter shall be deemed to be outstanding as of such date,
provided that (a) except as otherwise provided in subparagraph 6D(3), no
adjustment of the Conversion Price of the Series A Convertible Preferred Stock,
the Series B Convertible Preferred Stock, the Series C Convertible Preferred
Stock, the Series D Convertible Preferred Stock, the Series E Convertible
Preferred Stock, the Series F Convertible Preferred Stock, the Series G
Convertible Preferred Stock, the Series H Convertible Preferred Stock or the
Series I Convertible Preferred Stock, or all nine, as the case may be, shall be
made upon the actual issue of such Common Stock upon conversion or exchange of
such Convertible Securities and (b) if any such issue or sale of such
Convertible Securities is made upon exercise of any Options to purchase any such
Convertible Securities for which adjustments of the Conversion Price of the
Series A Convertible Preferred Stock, the Series B Convertible Preferred Stock,
the Series C Convertible Preferred Stock, the Series D Convertible Preferred
Stock, the Series E Convertible Preferred Stock, the Series F Convertible
Preferred Stock, the Series G Convertible Preferred Stock, the Series H
Convertible Preferred Stock or the Series I Convertible Preferred Stock, or all
nine, as the case may be, have been or are to be made pursuant to other
provisions of this subparagraph 6D, no further adjustment of the Conversion
Price of the Series A Convertible Preferred Stock, the Series B Convertible
Preferred Stock, the Series C Convertible Preferred Stock, the Series D
Convertible Preferred Stock, the Series E Convertible Preferred Stock, the
Series F Convertible Preferred Stock, the Series G Convertible Preferred Stock,
the Series H Convertible Preferred Stock or the Series I Convertible Preferred
Stock, or all nine, as the case may be, shall be made by reason of such issue or
sale.
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6D(3) Change in Option Price or Conversion Rate. Upon the
happening of any of the following events, namely, if the purchase price provided
for in any Option referred to in subparagraph 6D(1), the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subparagraph 6D(1) or 6D(2), or the rate
at which Convertible Securities referred to in subparagraph 6D(1) or 6D(2) are
convertible into or exchangeable for Common Stock shall change at any time
(including, but not limited to, changes under or by reason of provisions
designed to protect against dilution), the Conversion Price of the Series A
Convertible Preferred Stock, the Series B Convertible Preferred Stock, the
Series C Convertible Preferred Stock, the Series D Convertible Preferred Stock,
the Series E Convertible Preferred Stock, the Series F Convertible Preferred
Stock, the Series G Convertible Preferred Stock, the Series H Convertible
Preferred Stock or the Series I Convertible Preferred Stock, or all nine, as the
case may be, in effect at the time of such event shall forthwith be readjusted
to the 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 conversion rate, as the case may be,
at the time initially granted, issued or sold, but only if as a result of such
adjustment the Conversion Price then in effect hereunder is thereby reduced; and
on the expiration of any such Option or the termination of any such right to
convert or exchange such Convertible Securities, the Conversion Price then in
effect hereunder shall forthwith be increased to the Conversion Price which
would have been in effect at the time of such expiration or termination had such
Option or Convertible Securities, to the extent outstanding immediately prior to
such expiration or termination, never been issued.
6D(4) Stock Dividends. In case the Corporation shall declare a
dividend or make any other distribution upon any stock of the Corporation
payable in Common Stock (except for dividends or distributions upon the Common
Stock), Options or Convertible Securities, any Common Stock, Options or
Convertible Securities, as the case may be, issuable in payment of such dividend
or distribution shall be deemed to have been issued or sold without
consideration.
6D(5) Consideration for Stock. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount received by the
Corporation therefor, without deduction therefrom of any expenses incurred or
any underwriting commissions or concessions paid or allowed by the Corporation
in connection therewith. In case any shares of Common Stock, Options or
Convertible Securities shall be issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the
Corporation shall
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be deemed to be the fair value of such consideration as determined in good faith
by the Board of Directors of the Corporation, without deduction of any expenses
incurred or any underwriting commissions or concessions paid or allowed by the
Corporation in connection therewith. In case any Options shall be issued in
connection with the issue and sale of other securities of the Corporation,
together comprising one integral transaction in which no specific consideration
is allocated to such Options by the parties thereto, such Options shall be
deemed to have been issued for such consideration as determined in good faith by
the Board of Directors of the Corporation.
6D(6) Record Date. In case the Corporation shall set a record
date for the determination of the holders of its Common Stock for the purpose of
entitling them (i) to receive a dividend or other distribution payable in Common
Stock, Options or Convertible Securities or (ii) to subscribe for or purchase
Common Stock, Options or Convertible Securities, then such record date shall be
deemed to be the date of the issue or sale of the shares of Common Stock deemed
to have been issued or sold upon the declaration of such dividend or the making
of such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
6D(7) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Corporation, and the disposition of any such shares shall be
considered an issue or sale of Common Stock for the purpose of this subparagraph
6D.
6D(8) Adjustments for Failure of Participation.
Notwithstanding anything contained in this subparagraph 6D to the contrary, the
rights of any holder of Preferred Stock to the benefits of this subparagraph 6D
shall be subject to the limitations contained in this subparagraph 6D(8) if such
holder has failed to participate in any offering which is a Dilutive Offering
with respect to such holder's shares by acquiring in such Dilutive Offering such
number of shares as shall equal the product of the number of shares actually
offered in the Dilutive Offering to all holders of Preferred Stock, as
determined by the Board of Directors, multiplied by a fraction: (a) the
numerator of which is the number of shares of Preferred Stock with respect to
which the offering is a Dilutive Offering as is held by such holder at the time
of such Dilutive Offering and (b) the denominator of which is the total number
of shares of the Preferred Stock then outstanding with respect to which the
offering is a Dilutive Offering (the "Pro Rata Share"). Solely for purposes of
this subparagraph 6D(8), shares purchased by an affiliate or affiliates of a
holder of Preferred Stock in a Dilutive Offering (other than an affiliate who
held Preferred Stock prior to such Dilutive Offering, except to the extent that
such affiliate has exceeded its Pro Rata Share and has not
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otherwise directed that such excess be counted towards the Pro Rata Share of
another affiliate) shall be deemed to have been purchased by such holder. As
used in this subparagraph, the term affiliate of a holder shall mean a person
who directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with, such holder. If any holder of
Preferred Stock shall fail to purchase its Pro Rata Share of any such Dilutive
Offering in accordance with this subparagraph 6D(8), then such holders rights
under this subparagraph 6D shall terminate and shall no longer be of any force
and effect as to the shares of Preferred Stock with respect to which the
offering was a Dilutive Offering; provided, however, that no holder of shares of
Preferred Stock shall be required to participate to the extent of all or any
part of such holder's Pro Rata Share of a Dilutive Offering if and to the extent
such participation would violate any statute, rule or regulation, or order of
any court or governmental agency applicable to such holder and such holder
furnishes to the Corporation a certificate, signed by an executive officer or
general partner of such holder, as the case may be, and an opinion of counsel,
each to such effect. The Corporation, the Board of Directors and the holders of
the Preferred Stock shall take all necessary actions to designate a new series
of Preferred Stock on any occasion that any holder of Preferred Stock shall fail
to purchase its Pro Rata Share of any Dilutive Offering. The Corporation shall,
30 days prior to any issuance of its securities pursuant to a Dilutive Offering,
give each holder of Preferred Stock written notice of the holder's right to
participate in such Dilutive Offering. If, after the Corporation has given such
notice, a Dilutive Offering occurs and a holder of Preferred Stock fails to
purchase its Pro Rata Share of the Dilutive Offering, shares of such holder's
Preferred Stock with respect to which the offering is a Dilutive Offering shall
be immediately and automatically converted into shares of a newly-created series
of Preferred Stock (the "New Preferred Stock"); provided that the terms of any
series of New Preferred Stock shall be identical in all respects to the terms of
the Series A Convertible Preferred Stock, the Series B Convertible Preferred
Stock, the Series C Convertible Preferred Stock, the Series D Convertible
Preferred Stock, the Series E Convertible Preferred Stock, the Series F
Convertible Preferred Stock, the Series G Convertible Preferred Stock, the
Series H Convertible Preferred Stock or the Series I Convertible Preferred
Stock, as the case may be, except that (i) the Conversion Price of the New
Preferred Stock shall be the Conversion Price in effect for the Series A
Convertible Preferred Stock, the Series B Convertible Preferred Stock, the
Series C Convertible Preferred Stock, the Series D Convertible Preferred Stock,
the Series E Convertible Preferred Stock, the Series F Convertible Preferred
Stock, the Series G Convertible Preferred Stock, the Series H Convertible
Preferred Stock or the Series I Convertible Preferred Stock, as the case may be,
immediately prior to such Dilutive offering and (ii) any holder of shares of the
such New Preferred
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Stock shall not be entitled to receive the benefits of any adjustments to the
Conversion Price pursuant to this subparagraph 6D with respect to any future
Dilutive Offering by the Corporation. Except as otherwise required by law, all
series of New Preferred Stock shall vote together as a single series with the
Series A Convertible Preferred Stock, the Series B Convertible Preferred Stock,
the Series C Convertible Preferred Stock, the Series D Convertible Preferred
Stock, the Series E Convertible Preferred Stock, the Series F Convertible
Preferred Stock, the Series G Convertible Preferred Stock, the Series H
Convertible Preferred Stock or the Series I Convertible Preferred Stock, as the
case may be, relating thereto, on all matters submitted to the stockholders for
a vote or a written consent, including, but not limited to, the election for a
majority of directors of the Corporation by the Preferred Stock pursuant to
subparagraph 2C. For the purposes of paragraphs 3, 4, 5, 6A, 6B, 6C, 6E, 6F, 6G,
6I, 6J, 6K, 6L, 6M, 6N, 6O, 6P, 7 and 8, the terms "Preferred Stock," "Series A
Convertible Preferred Stock," "Series B Convertible Preferred Stock," "Series C
Convertible Preferred Stock," "Series D Convertible Preferred Stock," "Series E
Convertible Preferred Stock," "Series F Convertible Preferred Stock," "Series G
Convertible Preferred Stock," "Series H Convertible Preferred Stock" and "Series
I Convertible Preferred Stock" shall include any series of New Preferred Stock
relating thereto issued by the Corporation pursuant to this subparagraph 6D(8).
6E. Certain Issues of Common Stock Excepted. Anything herein
to the contrary notwithstanding, the Corporation shall not be required to make
any adjustment of the Conversion Prices in the case of the issuance of (i) up to
an aggregate of 4,866,000 shares (appropriately adjusted to reflect the
occurrence of any event described in subparagraph 6F) of Common Stock or options
or warrants to purchase Common Stock to directors, officers or employees of, or
other providers of service to, the Corporation in connection with their service
as directors, officers or employees of, or providers of services to the
Corporation, which number of shares shall include any shares issued prior to the
issuance of any shares of Preferred Stock (the "Reserved Employee Shares"); (ii)
any shares of Common Stock or other securities upon conversion of the Series A
Convertible Preferred Stock, the Series B Convertible Preferred Stock, the
Series C Convertible Preferred Stock, the Series D Convertible Preferred Stock,
the Series E Convertible Preferred Stock, the Series F Convertible Preferred
Stock, the Series G Convertible Preferred Stock, the Series H Convertible
Preferred Stock or the Series I Convertible Preferred Stock; (iii) any shares of
New Preferred Stock in accordance with subparagraph 6D(8); (iv) any shares of
Preferred Stock issuable upon exercise of outstanding warrants to purchase
Preferred Stock; or (v) any securities issued in connection with equipment lease
transactions undertaken in the ordinary course of the Corporation's business and
approved by a majority of the
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members of the Board of Directors designated by the holders of Preferred Stock
under the Stockholders' Agreement.
6F. Subdivision or Combination of Common Stock. In case the
Corporation shall at any time subdivide (by any stock split, stock dividend or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price of the Preferred Stock in effect immediately prior
to such subdivision shall be proportionately reduced and, conversely, in case
the outstanding shares of Common Stock shall be combined into a smaller number
of shares, the Conversion Price of the Preferred Stock in effect immediately
prior to such combination shall be proportionately increased.
6G. Reorganization or Reclassification. If any capital
reorganization or reclassification of the capital stock of the Corporation shall
be effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Common
Stock, then, as a condition of such reorganization or reclassification, lawful
and adequate provisions shall be made whereby each holder of a share or shares
of Preferred Stock shall thereupon have the right to receive, upon the basis and
upon the terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore receivable upon the conversion of such
share or shares of Preferred Stock, such shares of stock, securities or assets
as may be issued or payable with respect to or in exchange for a number of
outstanding shares of such Common Stock equal to the number of shares of such
Common Stock immediately theretofore receivable upon such conversion had such
reorganization or reclassification not taken place and, in any such case,
appropriate provisions shall be made with respect to the rights and interests of
such holder to the end that the provisions hereof (including without limitation
provisions for adjustments of the Conversion Price) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise of such conversion rights.
6H. Adjustment of Provisions. If the Corporation grants to the
holders of any class or series of stock of the Corporation any rights relating
to the adjustment of the Conversion Price of such class or series of stock upon
a Dilutive Offering or otherwise, which rights shall be more favorable to the
holders of such class or series of stock than the comparable rights in this
paragraph 6 are to the holders of the Preferred Stock, or which rights shall
grant to the holders of such class or series of stock rights not granted to the
holders of Preferred Stock pursuant to the Certificate of Incorporation of the
Corporation, then such more favorable rights shall be deemed to also apply to
all holders of Preferred Stock.
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<PAGE> 162
6I. Notice of Adjustment. Upon any adjustment of the
Conversion Price, then and in each such case the Corporation shall give written
notice thereof, by first class mail, postage prepaid, by recorded delivery
service or by telex to non-U.S. residents, addressed to each holder of shares of
Preferred Stock at the address of such holder as shown on the books of the
Corporation, which notice shall state the Conversion Price resulting from such
adjustment, setting forth in reasonable detail the method upon which such
calculation is based.
6J. Other Notices. In case at any time:
(1) the Corporation shall declare any dividend upon its Common
Stock payable in cash or stock or make any other distribution to the holders of
its Common Stock;
(2) the Corporation shall offer for subscription pro rata to
the holders of its Common Stock any additional shares of stock of any class or
other rights);
(3) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or a consolidation or
merger of the Corporation with or into, or a sale of all or substantially all
its assets to, another entity or entities; or
(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by first
class mail, postage prepaid, by recorded delivery service or by telex to
non-U.S. residents, addressed to each holder of any shares of Preferred Stock at
the address of such holder as shown on the books of the Corporation (a) at least
20 days prior written notice of the date on which the books of the Corporation
shall close or a record shall be taken for such dividend, distribution or
subscription rights or for determining rights to vote in respect of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up and (b) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, at least 20 days prior written notice of the date when the same
shall take place. Such notice in accordance with the foregoing clause (a) shall
also specify, in the case of any such dividend, distribution or subscription
rights, the date on which the holders of Common Stock shall be entitled thereto
and such notice in accordance with the foregoing clause and (b) shall also
specify the date on which the holders of Common Stock shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation,
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merger, sale, dissolution, liquidation or winding up, as the case may be.
6K. Stock to be Reserved. The Corporation will at all times
reserve and keep available out of its authorized Common Stock, solely for the
purposes of issuance upon the conversion of Preferred Stock as herein provided,
such number of shares of Common Stock as shall then be issuable upon the
conversion of all outstanding shares of Preferred Stock. The Corporation
covenants that all shares of Common Stock which shall be so issued shall be duly
and validly issued and fully paid and nonassessable and free from all taxes,
liens and charges with respect to the issue thereof and, without limiting the
generality of the foregoing, the Corporation covenants that it will from time to
time take all such action as may be requisite to ensure that the par value per
share of the Common Stock is at all times equal to or less than the Conversion
Price in effect at the time. The Corporation will take all such action as may be
necessary to ensure that all such shares of Common Stock may be so issued
without violation of any applicable law or regulation or of any requirement of
any national securities exchange or quotation system upon which the Common Stock
may be listed. The Corporation will not take any action which results in any
adjustment of the Conversion Price if the total number of shares of Common Stock
issued and issuable after such action upon conversion of the Preferred Stock
would exceed the total number of shares of Common Stock then authorized by the
Certificate of Incorporation.
6L. No Reissuance of Preferred Stock. Shares of Preferred
Stock which are converted into shares of Common Stock as provided herein shall
be cancelled and shall not be reissued.
6M. Issue Tax. The issuance of certificates for shares of
Common Stock upon conversion of Preferred Stock shall be made without charge to
the holders thereof for any issuance tax in respect thereof, provided that the
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than that of the holder of the Preferred Stock which is being
converted.
6N. Closing of Books. The Corporation will at no time close
its transfer books against the transfer of any Preferred Stock or of any shares
of Common Stock issued or issuable upon the conversion of any shares of
Preferred Stock in any manner which interferes with the timely conversion of
such Preferred Stock, except as may otherwise be required to comply with
applicable securities laws.
6O. Definition of Common Stock. As used in this paragraph 6,
the term "Common Stock" shall mean and include the Corporation's authorized
Common Stock, par value $.001 per share,
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as constituted on the date of filing of these terms of the Preferred Stock and
also shall include any capital stock of any class of the Corporation thereafter
authorized which shall neither be limited to a fixed sum or percentage of par
value in respect of the rights of the holders thereof to participate in
dividends nor entitled to a preference in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation; provided that the shares of Common Stock receivable upon conversion
of shares of Preferred Stock shall include only shares designated as Common
Stock of the Corporation on the date of filing of this instrument or, in case of
any reorganization or reclassification of the outstanding shares thereof, the
stock, securities or assets provided for in subparagraph 6G.
7. Noncompliance.
7A. Remedies. Immediately upon the occurrence of any
Noncompliance Event, as defined below, the holders of the Preferred Stock will
have the following rights, in addition to all other rights set forth in the
Certificate of Incorporation, in any agreement between such holders and the
Corporation, or as otherwise provided by law:
(1) A cumulative dividend (the "Noncompliance Dividend") shall
accrue on a daily basis on all outstanding shares of Preferred Stock to which
the Noncompliance Event applies as set forth in subparagraph 7B, so long as the
Corporation is a noncompliance (as defined below), which such dividend shall be
in addition to the accruing dividends described in subparagraph 3B. Such
dividend shall accrue at the annual rate of $.10 per share in the case of Series
A Convertible Preferred Stock, $.14 per share in the case of Series B
Convertible Preferred Stock, $.175 per share in the case of Series C Convertible
Preferred Stock, $.225 per share in the case of Series D Convertible Preferred
Stock, $.30 per share in the case of Series E Convertible Referred Stock, $.35
per share in the case of Series F Convertible Preferred Stock, $.40 per share in
the case of Series G Convertible Preferred Stock, $.50 per share in the case of
Series H Convertible Preferred Stock and $.70 per share in the case of Series I
Convertible Preferred Stock for the first 30 days that the Corporation is in
noncompliance, which rate shall increase by $.01 for each successive 30-day
period that the Corporation remains in noncompliance, up to a maximum annual
rate of $.16 per share in the case of Series A Convertible Preferred Stock, $.22
per share in the case of Series B Convertible Preferred Stock, $.28 per share in
the case of Series C Convertible Preferred Stock, $.36 per share in the case of
Series D Convertible Preferred Stock, $.48 per share in the case of Series E
Convertible Preferred Stock, $.56 per share in the case of Series F Convertible
Preferred Stock, $.64 per share in the case of Series G
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Convertible Preferred Stock, $.80 per share in the case of Series H Convertible
Preferred Stock and $1.12 per share in the case of Series I Convertible
Preferred Stock. Each holder of Preferred Stock to whom any such dividend is
payable may elect to have such dividend paid by the Corporation in cash or in
shares of Common Stock of the Corporation, as provided in subparagraph 6C.
(2) As provided in subparagraph 2C, the holders of Preferred
Stock, voting as a single class, shall have the right to elect a majority of the
directors of the Corporation.
7B. Noncompliance Event. For the purposes of this Certificate
of Incorporation, a "Noncompliance Event" shall be defined as any one or more of
the following events:
(1) The Corporation has materially breached any one or more of
the provisions of (i) the Series A Convertible Preferred Stock Purchase
Agreement dated December 22, 1988 as then in effect (the "Series A Stock
Purchase Agreement") or Article V of the Series D Convertible Preferred Stock
Purchase Agreement dated March 12, 1992 (the "Series D Stock Purchase
Agreement") as then in effect with respect to the Series A Convertible Preferred
Stock, (ii) the Series B Convertible Preferred Stock Purchase Agreement dated
June 29, 1990 as then in effect (the "Series B Stock Purchase Agreement") or
Article V of the Series D Stock Purchase Agreement as then in effect with
respect to the Series B Convertible Preferred Stock, (iii) the Series C
Convertible Preferred Stock Purchase Agreement dated July 29, 1991 as then in
effect (the "Series C Stock Purchase Agreement") or Article V of the Series D
Stock Purchase Agreement as then in effect with respect to the Series C
Convertible Preferred Stock, (iv) the Series D Stock Purchase Agreement as then
in effect, (v) the Series E and Series F Stock Purchase Agreement, (vi) the
Series G and Series H Convertible Preferred Stock Purchase Agreement dated May
14, 1993 as then in effect (the "Series G and Series H Stock Purchase
Agreement") or Article V of the Series I Stock Purchase Agreement as then in
effect with respect to the Series G Convertible Preferred Stock and the Series H
Convertible Preferred Stock, (vii) the Series I Stock Purchase Agreement (the
Series A Stock Purchase Agreement, the Series B Stock Purchase Agreement, the
Series C Stock Purchase Agreement, the Series D Stock Purchase Agreement, the
Series E and Series F Stock Purchase Agreement, the Series G and Series H Stock
Purchase Agreement and the Series I Stock Purchase Agreement to be referred to
collectively herein as the "Stock Purchase Agreements") or (viii) the Amended
and Restated Registration Rights Agreement, as amended, the Redemption
Agreement, the Stockholders' Agreement and the IBM Stockholders' Agreement
executed in connection with the Stock Purchase Agreements (collectively, the
"Ancillary Agreements") with respect to the shares of Preferred Stock to which
such Ancillary Agreements may apply, in each case as such Ancillary Agreements
shall have been
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amended, and such breach has continued for 30 days following receipt by the
Corporation of written notice of said breach given by the holders of at least
two-thirds of the outstanding shares of Preferred Stock with respect to which
such covenant or provisions applies;
(2) Any of the Corporation's representations and/or warranties
set forth in the Series A Stock Purchase Agreement with respect to the Series A
Convertible Preferred Stock, the Series B Stock Purchase Agreement with respect
to the Series B Convertible Preferred Stock, the Series C Stock Purchase
Agreement with respect to the Series C Convertible Preferred Stock, the Series D
Stock Purchase Agreement with respect to the Series D Convertible Preferred
Stock, the Series E and Series F Stock Purchase Agreement with respect to the
Series E Convertible Preferred Stock and the Series F Convertible Preferred
Stock, the Series G and Series H Stock Purchase Agreement with respect to the
Series G Convertible Preferred Stock and the Series H Convertible Preferred
Stock, the Series I Convertible Preferred Stock Purchase Agreement with respect
to the Series I Convertible Preferred Stock or in any one or more of the
Ancillary Agreements with respect to the shares of Preferred Stock to which such
Ancillary Agreement may apply, was not substantially true as of the date of
closing for such Stock Purchase Agreement or Ancillary Agreement and the
Corporation has received written notice of such fact from the holders of at
least two-thirds of the outstanding shares of Preferred Stock with respect to
which such representation and/or warranty applies;
(3) The Corporation has failed to make payment(s) when due for
any dividends, interest and/or mandatory redemption of any securities, where
such payment(s) aggregate over $200,000 and such failure to pay has continued
for 30 days following receipt by the Corporation of written notice of said
failure to pay from the holders of at least two-thirds of the outstanding shares
of Preferred Stock;
(4) The Corporation has been in material default of payment on
any debt agreement under which the Corporation is obligated to pay at least
$200,000 in principal (including any acceleration thereof) and accrued interest
at the time of such default, and such default has continued for 30 days
following receipt by the Corporation of written notice of said default given by
the holders of at least two-thirds of the outstanding shares of Preferred Stock;
or
(5) The Corporation has filed for bankruptcy, made an
assignment for the benefit of creditors, materially compromised its debt with a
material creditor of the Corporation or suffered acceleration of a material debt
instrument and the Corporation has received written notice of same from the
holders of at least two-thirds of the outstanding shares of Preferred Stock.
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<PAGE> 167
Once a Noncompliance Event has occurred, the Corporation shall give prompt
notice thereof to each holder of Preferred Stock, and shall be deemed "in
noncompliance" until such time as the President or Chief Financial Officer of
the Corporation shall have certified and delivered by hand or by first class
mail, postage prepaid, by the recorded delivery service or by telex to non-U.S.
residents, addressed to each holder of Preferred Stock at the address of such
holder as shown on the books of the Corporation, notice that the condition
underlying such Noncompliance Event is cured.
8. Amendments. No provision of these terms of the Preferred Stock may
be amended, modified or waived without the written consent or affirmative vote
of the holders of at least two-thirds of the then-outstanding shares of
Preferred Stock voting as a single class.
SECOND: Written consent to the adoption of the foregoing amendment of
the Restated Certificate of Incorporation of the Corporation has been given in
accordance with the provisions of Section 228 of the Delaware General
Corporation Law and written notice of the adoption of said amendment without a
meeting by less than unanimous written consent has been given to those
stockholders who have not consented in writing as provided in said Section 228.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Object Design, Inc. has caused this certificate to
be signed by its President and attested by its Secretary this 17th day of March,
1994.
Object Design, Inc.
By:___________________________
Its President
ATTEST
By:________________________________
Its Secretary
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<PAGE> 169
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
OBJECT DESIGN, INC.
Object Design, Inc. (the "Corporation"), a corporation
organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation at a meeting of
the Directors duly adopted resolutions proposing and declaring
it advisable that the Restated Certificate of Incorporation be
amended, and that such amendment be submitted to the
stockholders of the Corporation for their consideration, as
follows:
RESOLVED: That the Board of Directors deems it
advisable and in the best interests of the
Corporation that the Restated Certificate of
Incorporation of the Corporation, as amended
, be, and it hereby is, further amended to
delete the number 4,866,000 in the fourth
line of Paragraph 6E of Article Fourth and
to insert the number 6,916,000 in its place
and stead.
RESOLVED: That a Certificate of Amendment of Restated
Certificate of Incorporation (the "Amended
Certificate of Incorporation") to effectuate
the foregoing resolution be submitted to the
stockholders for their consideration.
RESOLVED: That, following the stockholders' approval
of the Amended Certificate of Incorporation
as required by law, the officers of this
Corporation be, and they hereby are, and
each of them acting singly hereby is,
authorized (a) to execute and file with the
Secretary of State of Delaware the Amended
Certificate of Incorporation setting forth
said amendment in the form approved by the
stockholders and (b) to take any and all
other actions necessary,
<PAGE> 170
desirable or convenient to give effect to
said amendment or otherwise to carry out the
purposes of the foregoing Resolutions.
SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders have given written consent to said amendment in
accordance with the provisions of Section 228 of the General
Corporation Law of the State of Delaware, and written notice
has been given as provided in Section 228 of the General
Corporation Law of the State of Delaware to every stockholder
entitled to such notice.
THIRD: That the aforesaid amendment was duly adopted in accordance
with the applicable provisions of Sections 228 and 242 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Object Design, Inc., a Delaware corporation, has
caused this Certificate to be signed by its President and attested by its
Secretary this day of August, 1995.
OBJECT DESIGN, INC.
By:____________________________
President
ATTEST:
By:___________________________
John D. Patterson, Jr.
Secretary
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<PAGE> 171
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
OBJECT DESIGN, INC.
Object Design, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That the following amendment to the Restated Certificate of
Incorporation of Object Design, Inc. (the "Corporation") has been duly adopted
in accordance with the provisions of Section 242 and Section 228 of the Delaware
General Corporation Law:
That the Restated Certificate of Incorporation of the Corporation be
further amended by deleting the old Article Fourth and inserting a new Article
Fourth in its stead which shall be and read as follows in its entirety:
"Fourth: The total number of shares of capital stock which the
Corporation shall have the authority to issue shall be 30,166,667 common shares,
having a par value of $.001 per share, amounting to an aggregate par value of
$30,166.67 and 19,004,188 shares of Preferred Stock having a par value of $.01
per share amounting to an aggregate par value of $190,041.88.
The voting power, preferences and relative participating, optional or
other special rights and the qualifications, limitations or restrictions of the
Preferred Stock are set forth as follows:
1. Number of Shares. 2,750,000 shares of the Preferred Stock shall be
designated and known as "Series A Convertible Preferred Stock," 4,575,715 shares
of the Preferred Stock shall be designated and known as "Series B Convertible
Preferred
<PAGE> 172
Stock," 2,857,143 shares of the Preferred Stock shall be designated and known as
"Series C Convertible Preferred Stock," 1,111,111 shares of Preferred Stock
shall be designated and known as "Series D Convertible Preferred Stock,"
2,601,877 shares of Preferred Stock shall be designated and known as "Series E
Convertible Preferred Stock," 1,148,818 shares of Preferred Stock shall be
designated and known as "Series F Convertible Preferred Stock," 250,000 shares
of Preferred Stock shall be designated and known as "Series G Convertible
Preferred Stock," 400,000 shares of Preferred Stock shall be designated and
known as "Series H Convertible Preferred Stock," 1,142,857 shares of Preferred
Stock shall be designated and know as "Series I Convertible Preferred Stock" and
2,166,667 shares of Preferred Stock shall be designated and know as "Series J
Convertible Preferred Stock." Unless otherwise specifically designated, the term
"Junior Preferred Stock" refers collectively to Series A Convertible Preferred
Stock, Series B Convertible Preferred Stock, Series C Convertible Preferred
Stock, Series D Convertible Preferred Stock, Series E Convertible Preferred
Stock, Series F Convertible Preferred Stock, Series G Convertible Preferred
Stock, Series H Convertible Preferred Stock and Series I Convertible Preferred
Stock. Unless otherwise specifically designated, the term "Preferred Stock"
refers collectively to Junior Preferred Stock and Series J Convertible Preferred
Stock.
2. Voting.
2A. General. Except as may be otherwise provided in these
terms of the Preferred Stock or by law, the Preferred Stock shall vote together
with the Common Stock as a single class on all actions to be taken by the
stockholders of the Corporation. Each share of Preferred Stock shall entitle the
holder thereof to such number of votes per share on each such action as shall
equal the number of shares of Common Stock (including fractions of a share) into
which each share of Preferred Stock is then convertible.
With respect to all questions as to which, under law, stockholders are
entitled to vote by classes, the holders of Preferred Stock shall vote together
as a single class separately from the holders of Common Stock. With respect to
all questions as to which, under law, stockholders are required to vote by
series, the holders of Series A Convertible Preferred Stock shall vote
separately as a single series, the holders of Series B Convertible Preferred
Stock shall vote separately as a single series, the holders of Series C
Convertible Preferred Stock shall vote separately as a single series, the
holders of Series D Convertible Preferred Stock shall vote separately as a
single series, the holders of Series E Convertible Preferred Stock shall vote
separately as a single series, the holders of Series F Convertible Preferred
Stock shall vote separately as a single series, the holders of Series G
Convertible Preferred Stock shall
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vote separately as a single series, the holders of Series H Convertible
Preferred Stock shall vote separately as a single series, the holders of Series
I Convertible Preferred Stock shall vote separately as a single series and the
holders of Series J Convertible Preferred Stock shall vote separately as a
single series.
2B. Board Size. The Corporation shall not, without the written
consent or affirmative vote of the holders of at least two-thirds of the then
outstanding shares of Preferred Stock, given in writing or by vote at a meeting,
consenting or voting (as the case may be) separately as a class, change the
number of directors constituting the Board of Directors to a number other than
nine, except that the Corporation may increase or decrease the number of
directors constituting the Board of Directors with the vote of a majority of the
members of the Board of Directors designated by the holders of Preferred Stock
pursuant to the Sixth Amended and Restated Stockholders' Agreement dated
February 13, 1996 by and among the Corporation and the parties thereto, as may
be amended or restated from time to time (the "Stockholders' Agreement").
2C. Board Seats. The holders of the Preferred Stock shall be
entitled to vote together with the Common Stock as a single class for the
election of each of the directors of the Corporation. Notwithstanding the
foregoing or anything else to the contrary provided in the Certificate of
Incorporation, upon the occurrence of any Noncompliance Event (as such term is
defined in subparagraph 7B) and continuing for so long as the Corporation
remains in noncompliance (as defined in subparagraph 7B), the holders of the
Preferred Stock, voting as a separate class, shall be entitled to elect a
majority of the directors of the Corporation, with the remaining directors of
the Corporation to be elected as set forth in the first sentence of this
subparagraph 2C. A vacancy in any directorship elected by the holders of the
Preferred Stock, voting as a separate class, shall be filled only by vote or
written consent of the holders of the Preferred Stock, and a vacancy in any
directorship elected jointly by the holders of the Preferred Stock and all other
classes and series of stock of the Corporation, voting together as a single
class, shall be filled only by vote or written consent of the Preferred Stock
and all other classes and series of stock of the Corporation, as provided above.
At any meeting (or in a written consent in lieu thereof) held for the purpose of
electing directors, the presence in person or by proxy (or the written consent)
of the holders of a majority of the shares of Preferred Stock then outstanding
shall constitute a quorum of the Preferred Stock for the election of directors
to be elected solely by the holders of the Preferred Stock.
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3. Dividends.
3A. General. The holders of the Preferred Stock shall be
entitled to receive, as and when declared by the Board of Directors out of funds
legally available therefor, dividends at the same rate as dividends (other than
dividends paid in additional shares of Common Stock) are paid with respect to
the Common Stock (treating each share of Preferred Stock as being equal to the
number of shares of Common Stock (including fractions of a share) into which
each share of Preferred Stock is then convertible). In addition, the holders of
the Preferred Stock may from time to time be entitled, pursuant to the terms of
subparagraph 3B below, to certain cumulative dividends, and pursuant to the
terms of paragraph 7 below, to certain "Noncompliance Dividends," as that term
is defined in subparagraph 7A, as well as to any other dividends declared by the
Board of Directors on the outstanding shares of Preferred Stock out of funds
legally available therefor. All dividends on Preferred Stock shall be paid on a
pro-rata basis (except such Noncompliance Dividends as are payable solely on
Series A Convertible Preferred Stock, Series B Convertible Preferred Stock,
Series C Convertible Preferred Stock, Series D Convertible Preferred Stock,
Series E Convertible Preferred Stock, Series F Convertible Preferred Stock,
Series G Convertible Preferred Stock, Series H Convertible Preferred Stock,
Series I Convertible Preferred Stock or Series J Convertible Preferred Stock, as
the case may be, pursuant to subparagraph 7A).
3B. Accruing Dividends. In each year commencing on: (1) July
25, 1991, the holders of Series A Convertible Preferred Stock, Series B
Convertible Preferred Stock and Series C Convertible Preferred Stock shall be
entitled to receive out of funds legally available therefor, as and when
declared by the Board of Directors, dividends at the rate of $.10 per share in
the case of Series A Convertible Preferred Stock, $.14 per share in the case of
Series B Convertible Preferred Stock and $.175 per share in the case of Series C
Convertible Preferred Stock; (2) March 11, 1992, the holders of Series D
Convertible Preferred Stock shall be entitled to receive out of funds legally
available therefor, as and when declared by the Board of Directors, dividends at
the rate of $.225 per share; (3) April 12, 1993, the holders of Series E
Convertible Preferred Stock and the holders of Series F Convertible Preferred
Stock shall be entitled to receive out of funds legally available therefor, as
and when declared by the Board of Directors, dividends at the rate of $.30 per
share in the case of Series E Convertible Preferred Stock and $.35 per share in
the case of Series F Convertible Preferred Stock; (4) May 14, 1993, the holders
of Series G Convertible Preferred Stock and the holders of Series H Convertible
Preferred Stock shall be entitled to receive out of funds legally available
therefor, as and when declared by the Board of Directors, dividends at the rate
of $.40 per share in the case of Series G
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Convertible Preferred Stock and $.50 per share in the case of Series H
Convertible Preferred Stock; (5) March 31, 1994, the holders of Series I
Convertible Preferred Stock shall be entitled to receive out of funds legally
available therefor, as and when declared by the Board of Directors, dividends at
the rate of $.70 per share; and (6) February 13, 1996, the holders of Series J
Convertible Preferred Stock shall be entitled to receive out of funds legally
available therefor, as and when declared by the Board of Directors, dividends at
the rate of $.30 per share (each such price subject to equitable adjustment in
the event of any stock dividend, stock split, combination, reclassification or
other similar event), compounded at the rate of 10% per share per annum. Such
dividends shall accrue from day to day, whether or not earned or declared, and
shall be cumulative; provided, however, that except as provided in paragraph 4
hereto and under the terms of a Eighth Amended and Restated Preferred Stock
Redemption Agreement dated February 13, 1996 (the "Redemption Agreement"), the
Corporation shall be under no obligation to pay such accruing dividends unless
so declared by the Board of Directors; and provided, further that the
Corporation's obligation to pay such accruing dividends upon liquidation,
pursuant to the terms of the Redemption Agreement or otherwise shall commence at
the end of the first year in which the Corporation has positive retained
earnings.
3C. Restrictions. Unless all accrued but unpaid dividends on
each series of Preferred Stock shall have been paid or shall have been declared
and a sum sufficient for the payment thereof set apart, (i) no dividend shall be
paid or declared, and no distribution shall be made, on any Common Stock, other
than a dividend or other distribution payable solely in the form of additional
shares of Common Stock, and (ii) no shares of Common Stock shall be purchased,
redeemed or acquired by the Corporation and no amounts shall be paid for the
purchase, redemption or acquisition thereof. Anything herein to the contrary
notwithstanding, the restrictions set forth in this Paragraph 3C shall not apply
to (i) the repurchase of shares of Common Stock from former employees, officers,
directors or other providers of services to the Corporation who acquired such
shares directly from the Corporation, if each such purchase is made pursuant to
contractual rights held by the Corporation relating to the termination of
employment or services of such former employees, officers, directors or other
providers of services to the Corporation and the purchase price does not exceed
the original purchase price paid by such person to the Corporation for such
shares; (ii) repurchase of shares of Common Stock pursuant to the Stockholders'
Agreement, the Series E and Series F Stock Purchase Agreement (as hereafter
defined) and the IBM Stockholders' Agreement (as hereafter defined); and (iii)
repurchase of shares of Common Stock pursuant to right of first refusal
agreements executed in connection with options granted under the Corporation's
1989 Incentive and Non-Qualified Stock Option Plan,
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as amended (the "1989 Plan") or the Corporation's 1995 Non-Qualified Stock
Option Plan, as amended (the "1995 Plan").
4. Liquidation. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary:
4A. The holders of the Series J Convertible Preferred Stock
shall first be entitled, before any distribution or payment is made upon any
stock ranking on liquidation, dissolution or winding up, junior to the Series J
Convertible Preferred Stock, including the Junior Preferred Stock and the Common
Stock, to be paid, out of assets legally available therefor, an amount equal to
the greater of:
(i) $9.00 per share plus all accrued and unpaid dividends
thereon, whether or not earned or declared (including all accrued and
unpaid Noncompliance Dividends, if any,) computed to the date payment
thereof is made available; or
(ii) such amount per share of Series J Convertible Preferred
Stock as would have been payable had each such share been converted to
Common Stock immediately prior to such event of liquidation,
dissolution or winding up pursuant to the provisions of paragraph 6
hereof.
4B. The holders of the Junior Preferred Stock shall next be
entitled, before any distribution or payment is made upon any stock ranking on
liquidation, dissolution or winding up, junior to the Junior Preferred Stock,
including the Common Stock, to be paid, out of assets legally available
therefor, an amount equal to the greater of:
(i) $1.00 per share in the case of the Series A Convertible
Preferred Stock, $1.40 per share in the case of the Series B
Convertible Preferred Stock, $1.75 per share in the case of the Series
C Convertible Preferred Stock, $2.25 per share in the case of Series D
Convertible Preferred Stock, $3.00 per share in the case of Series E
Convertible Preferred Stock, $3.50 per share in the case of Series F
Convertible Preferred Stock, $4.00 per share in the case of Series G
Convertible Preferred Stock, $5.00 per share in the case of Series H
Convertible Preferred Stock and $7.00 per share in the case of Series I
Convertible Preferred Stock plus, in each case, all accrued and unpaid
dividends thereon, whether or not earned or declared (including all
accrued and unpaid Noncompliance Dividends, if any,) computed to the
date payment thereof is made available; or
(ii) such amount per share of Preferred Stock as would have
been payable had each such share been converted to Common Stock
immediately prior to such event of liquidation,
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dissolution or winding up pursuant to the provisions of
paragraph 6 hereof.
4C. The amount payable with respect to one share of Preferred
Stock under paragraph 4A or 4B, as the case may be, shall sometimes be referred
to as the "Liquidation Preference Payment" and with respect to all shares of
Preferred Stock shall sometimes be referred to as the "Liquidation Preference
Payments." Upon payment in full of the Liquidation Preference Payments, the
remainder of assets legally available for distribution upon the liquidation,
dissolution or winding up of the Corporation shall be distributed ratably among
the holders of Common Stock according to the number of shares of Common Stock
held by them. If upon such liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the assets to be distributed
among the holders of Preferred Stock shall be insufficient to permit payment in
full to the holders of Preferred Stock of the Liquidation Preference Payments,
then the entire assets of the Corporation to be so distributed shall be
distributed first to the holders of Series J Convertible Preferred Stock until
payment in full to the holders of Series J Convertible Preferred Stock of the
Liquidation Preference Payments is made, with the remainder of such assets to be
distributed ratably among the holders of Junior Preferred Stock according to the
respective amounts which would be payable on or with respect to the shares of
Junior Preferred Stock held by them upon such distribution if all amounts
payable on or with respect to said shares were paid in full. If upon such
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the assets to be distributed among the holders of Preferred Stock
shall be insufficient to permit payment in full to the holders of Series J
Convertible Preferred Stock of the Liquidation Preference Payments, then the
entire assets of the Corporation to be so distributed shall be distributed
ratably among the holders of Series J Convertible Preferred Stock according to
the respective amounts which would be payable on or with respect to the shares
of Series J Convertible Preferred Stock held by them upon such distribution if
all amounts payable on or with respect to said shares were paid in full. Written
notice of such liquidation, dissolution or winding up, stating a payment date,
the place where said payments shall be made, the aggregate amount to be paid to
each holder of Preferred Stock, and the alternate amount which would be paid to
each such holder if all outstanding shares of Preferred Stock were to be
converted into shares of Common Stock prior to the payment date, shall be given
by mail, postage prepaid, by recorded delivery service or by telex to non-U.S.
residents, not less than 20 days prior to the payment date stated therein, to
the holders of the record of Preferred Stock, such notice to be addressed to
each such holder at its address as shown by the records of the Corporation. The
consolidation or merger of the Corporation into or with any other entity or
entities which results in the exchange of outstanding
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securities of the Corporation for securities or other consideration issued or
paid or caused to be issued or paid by any such entity or entities or affiliate
thereof, and the sale or transfer by the Corporation of all or substantially all
its assets, shall be deemed to be a liquidation, dissolution or winding up of
the Corporation within the meaning of the provisions of this paragraph 4, unless
the holders of all outstanding shares of the Corporation's voting stock
immediately prior to such transaction or series of transactions hold,
immediately following the consummation of such transaction or series of
transactions, more than two-thirds of the voting stock of such entity or
entities or affiliate thereof, or of the transferee of the assets of the
Corporation, as the case may be, provided, however, that each holder of
Preferred Stock shall have the right to elect to receive the benefits of the
provisions of subparagraph 6G hereof in lieu of receiving payment in
liquidation, dissolution or winding up of the Corporation pursuant to this
paragraph 4. For purposes hereof, the Common Stock shall rank on liquidation,
dissolution or winding up of the Corporation, junior to the Junior Preferred
Stock, and the Common Stock and the Junior Preferred Stock shall rank on
liquidation, dissolution or winding up of the Corporation, junior to the Series
J Convertible Preferred Stock.
5. Restrictions. At any time when shares of Preferred Stock are
outstanding, except as otherwise required by law or by the Certificate of
Incorporation, without the written consent or affirmative vote of the holders of
at least two-thirds of the then outstanding shares of Preferred Stock,
consenting or voting (as the case may be) separately as one class, the
Corporation will not:
5A. Create or authorize the creation of any additional class
or series of shares of stock, or reclassify the shares of any existing class or
series of stock, unless the same ranks junior to the Preferred Stock as to the
distribution of assets on the liquidation, dissolution or winding up of the
Corporation, or increase the authorized amount of the Preferred Stock or
increase the authorized amount of any additional class or series of shares of
stock unless the same ranks junior to the Preferred Stock as to the distribution
of assets on the liquidation, dissolution or winding up of the Corporation and
as to the payment of dividends, or create or authorize any obligation or
security convertible into shares of Preferred Stock or into shares of any other
class or series of stock unless the same ranks junior to the Preferred Stock as
to the distribution of assets on the liquidation, dissolution or winding up of
the Corporation and as to the payment of dividends, whether any such creation,
authorization or increase shall be by means of amendment to the Certificate of
Incorporation or by merger, consolidation or otherwise;
5B. Consent to any liquidation, dissolution or winding
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up of the Corporation or consolidate or merger into or with any other entity or
entities, or sell or transfer all or substantially all its assets, unless the
holders of the outstanding shares of the Corporation's voting stock immediately
prior to such transaction hold, immediately following the consummation of such
transaction, two-thirds or more of the voting stock of the surviving entity or
entities or affiliates thereof, or of the transferee of the assets of the
Corporation, as the case may be;
5C. Sell or transfer more than 10% of the assets of the
Corporation within any 12 month period, other than in the ordinary course of
business;
5D. Amend, alter or repeal its Certificate of Incorporation,
or amend, alter or repeal its By-laws so as to adversely affect a holder of
Preferred Stock;
5E. Purchase or set aside any sums for the purchase of, or pay
any dividend or make any distribution on, any shares of stock other than the
Preferred Stock, except for (i) dividends or other distributions payable on the
Common Stock solely in the form of additional shares of Common Stock; (ii) the
purchase of shares of Common Stock from former employees, officers, directors or
other providers of services to the Corporation who acquired such shares directly
from the Corporation, if each such purchase is made pursuant to contractual
rights held by the Corporation relating to the termination of employment or
services of such former employees, officers, directors or other providers of
services to the Corporation and the purchase price does not exceed the original
issue price paid by such person to the Corporation for such shares; (iii)
repurchase of shares of Common Stock pursuant to the Stockholders' Agreement;
(iv) repurchase of shares of Common Stock pursuant to right of first refusal
agreements executed in connection with options granted under the Plan; (v) the
repurchase of shares of Series E Convertible Preferred Stock and Series F
Convertible Preferred Stock pursuant to a certain Stock Purchase Agreement by
and among the Corporation and the holders of Series E Convertible Preferred
Stock and Series F Convertible Preferred Stock dated as of April 12, 1993 (the
"Series E and Series F Stock Purchase Agreement") and pursuant to a certain
Amended and Restated Stockholders' Agreement by and among the Corporation,
International Business Machines Corporation and certain of the Corporation's
stockholders dated as of May 14, 1993, as amended (the "IBM Stockholders'
Agreement"); and (vi) the repurchase of shares of Series I Convertible Preferred
Stock pursuant to a certain Supplement to Stock Purchase Agreement by and
between the Corporation and Intel Corporation dated as of March 31, 1994 (the
"Intel Agreement").
5F. Redeem or otherwise acquire any shares of
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Preferred Stock except pursuant to one or more written agreements to which the
Corporation and all of the holders of Preferred Stock are parties, pursuant to a
purchase offer made pro rata to all holders of the shares of Preferred Stock on
the basis of the aggregate number of outstanding shares of Preferred Stock then
held by each such holder, pursuant to the Series E and Series F Stock Purchase
Agreement and the IBM Stockholders' Agreement, or pursuant to the Intel
Agreement.
6. Conversions. The holders of shares of Preferred Stock shall have the
following conversion rights:
6A. Conversion Events.
6A(1) Optional Conversion. Subject to the terms
and conditions of this Paragraph 6, the holder of any share or shares of
Preferred Stock shall have the right, at its option at any time, to convert any
such shares of Preferred Stock (except that upon any liquidation, voluntary or
involuntary dissolution, or winding-up of the Corporation the right of
conversion shall terminate at the close of business on the business day fixed
for payment of the amount distributable on the Preferred Stock) into such number
of fully paid and nonassessable shares of Common Stock as is obtained by (i)
multiplying the number of shares of Preferred Stock so to be converted by $1.00
in the case of Series A Convertible Preferred Stock, $1.40 in the case of Series
B Convertible Preferred Stock, $1.75 in the case of Series C Convertible
Preferred Stock, $2.25 in the case of Series D Convertible Preferred Stock,
$3.00 in the case of Series E Convertible Preferred Stock, $3.50 in the case of
Series F Convertible Preferred Stock, $4.00 in the case of Series G Convertible
Preferred Stock, $5.00 in the case of Series H Convertible Preferred Stock,
$7.00 in the case of Series I Convertible Preferred Stock and $3.00 in the case
of Series J Convertible Preferred Stock and (ii) dividing the result by the
conversion price of $1.00 in the case of Series A Convertible Preferred Stock,
$1.40 in the case of Series B Convertible Preferred Stock, $1.75 in the case of
Series C Convertible Preferred Stock, $2.25 in the case of Series D Convertible
Preferred Stock, $3.00 in the case of Series E Convertible Preferred Stock,
$3.50 in the case of Series F Convertible Preferred Stock, $4.00 in the case of
Series G Convertible Preferred Stock, $5.00 in the case of Series H Convertible
Preferred Stock, $7.00 in the case of Series I Convertible Preferred Stock and
$3.00 in the case of Series J Convertible Preferred Stock or, in case an
adjustment of such price has taken place pursuant to the further provisions of
this Paragraph 6, then by the conversion price as last adjusted and in effect at
the date any share or shares of Preferred Stock are surrendered for conversion
(such price, or such price as last adjusted, being referred to as the
"Conversion Price"). Such rights of conversion shall be exercised by the holder
thereof by giving
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written notice to the Corporation that the holder elects to convert a stated
number of shares of Preferred Stock into Common Stock and by surrender of a
certificate or certificates for the shares so to be converted to the Corporation
at its principal office (or such other office or agency of the Corporation as
the Corporation may designate by notice in writing to the holders of the
Preferred Stock) at any time during its usual business hours on the date set
forth in such notice, together with a statement of the name or names (with
address) in which the certificate or certificates for shares of Common Stock
shall be issued.
6A(2) Mandatory Conversion. The outstanding
shares of Series A Convertible Preferred Stock, Series B Convertible Preferred
Stock, Series C Convertible Preferred Stock, Series D Convertible Preferred
Stock, Series E Convertible Preferred Stock, Series F Convertible Preferred
Stock, Series G Convertible Preferred Stock, Series H Convertible Preferred
Stock, Series I Convertible Preferred Stock and Series J Convertible Preferred
Stock, as the case may be, shall automatically and without any further action on
the part of the Corporation convert into shares of Common Stock effective upon
the earlier to occur of (i) such time as the Corporation shall have issued an
aggregate of at least two-thirds of the total number of shares of Common Stock
which were issued or issuable upon conversion of the shares of Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C
Convertible Preferred Stock, Series D Convertible Preferred Stock, Series E
Convertible Preferred Stock, Series F Convertible Preferred Stock, Series G
Convertible Preferred Stock, Series I Convertible Preferred Stock, Series J
Convertible Preferred Stock and, if and when issued, Series H Convertible
Preferred Stock, as the case may be, as of the date of a certain Series J
Convertible Preferred Stock Purchase Agreement by and among the Corporation and
the parties thereto (the "Series J Stock Purchase Agreement"), as such number
shall have been adjusted from time to time in the event of any stock dividend,
stock split, combination, reclassification or other similar event; or (ii) the
closing of a sale of shares of Common Stock by the Corporation pursuant to an
underwritten public offering in which (a) the aggregate gross proceeds to the
Corporation shall be at least $10,000,000, and (b) the price per share paid by
the public, net of underwriting discounts and commissions, shall be at least
$3.50 (subject to adjustment in the event of any stock dividend, stock split,
combination, reclassification or other similar event.)
6B. Issuance of Certificates; Time Conversion Effected.
Promptly upon (1) the happening of either event described in subparagraph 6A(2)
or the receipt by the Corporation of the written notice referred to in
subparagraph 6A(1), and (2) the surrender of the certificate or certificates for
the share or shares of Preferred Stock to be converted, the Corporation shall
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issue and deliver, or cause to be issued and delivered, to the holder,
registered in such name or names as such holder may direct, a certificate or
certificates for the number of whole shares of Common Stock issuable upon the
conversion of such shares or shares of Preferred Stock. To the extent permitted
by law, such conversion shall be deemed to have been effected and the Conversion
Price shall be determined as of the close of business on the date on which such
written notice shall have been received by the Corporation, or, in the case of a
mandatory conversion under subparagraph 6A(2), on the date of occurrence of
either event specified in such subparagraph, and at such time the rights of the
holder of such share or shares of Preferred Stock shall cease, and the person or
persons in whose name or names any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become the holder or holders of record of the shares of Common Stock represented
thereby.
6C. Partial Conversion; Dividends; Fractional Shares. In case
the number of shares of Preferred Stock represented by the certificate or
certificates surrendered pursuant to subparagraph 6A(1) exceeds the number of
shares to be converted, the Corporation shall, upon such conversion, execute and
deliver to the holder, at the expense of the Corporation, a new certificate or
certificates for the number of shares of Preferred Stock represented by the
certificate or certificates surrendered which are not being converted. At the
time of each conversion of shares of Preferred Stock pursuant to this paragraph
6, the Corporation shall pay, out of funds legally available therefor, in cash
an amount equal to all dividends declared but unpaid and any Noncompliance
Dividends on the shares of Preferred Stock surrendered for conversion to the
date upon which such conversion is deemed to take place as provided in
subparagraph 6B; provided that, any holder of shares of Preferred Stock may
elect, at the time such shares are surrendered for conversion or at any other
time prior to conversion, to take payment for all declared but unpaid dividends
and any Noncompliance Dividends on such shares, if any, in shares of Common
Stock rather than in cash, with the number of shares of Common Stock issuable in
lieu of such cash payment to be determined by dividing the aggregate amount of
such declared but unpaid dividends and Noncompliance Dividends by the Conversion
Price then in effect for the shares of Preferred Stock held by such holder with
respect to which such declared but unpaid dividends and Noncompliance Dividends
shall be payable. No fractional shares shall be issued upon conversion of
Preferred Stock into Common Stock or upon election to take shares of Common
Stock in lieu of cash for declared but unpaid dividends and Noncompliance
Dividends and no payment or adjustment at the time of such conversion or
election shall be made by the Corporation on account of any previously-declared
cash dividends on the Common Stock. In lieu of delivering any such fractional
share of Common Stock, the Corporation shall pay an amount in cash equal
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to the current market price of such fractional share as determined in good faith
by the Board of Directors of the Corporation.
6D. Adjustment of Price Upon Issuance of Common Stock. Except
as provided in subparagraph 6E, if and whenever the Corporation shall issue or
sell or is, in accordance with subparagraphs 6D(1) through 6D(8), deemed to have
issued or sold any shares of Common Stock for a consideration per share less
than the Conversion Price in effect for any of the Series A Convertible
Preferred Stock, the Series B Convertible Preferred Stock, the Series C
Convertible Preferred Stock, the Series D Convertible Preferred Stock, the
Series E Convertible Preferred Stock, the Series F Convertible Preferred Stock,
the Series G Convertible Preferred Stock, the Series H Convertible Preferred
Stock, the Series I Convertible Preferred Stock or the Series J Convertible
Preferred Stock immediately prior to the time of such issue or sale (a "Dilutive
Offering"), then in each such case, forthwith upon such issue or sale, such
Conversion Price for the Series A Convertible Preferred Stock, the Series B
Convertible Preferred Stock, the Series C Convertible Preferred Stock, the
Series D Convertible Preferred Stock, the Series E Convertible Preferred Stock,
the Series F Convertible Preferred Stock, the Series G Convertible Preferred
Stock, the Series H Convertible Preferred Stock, the Series I Convertible
Preferred Stock or the Series J Convertible Preferred Stock, as the case may be,
shall be reduced to the price determined by dividing (i) an amount equal to the
sum of (a) the number of shares of Common Stock outstanding immediately prior to
such issue or sale (including the number of shares of Common Stock issued or
issuable upon conversion of the Preferred Stock) multiplied by the then existing
Conversion Price for the Series A Convertible Preferred Stock, the Series B
Convertible Preferred Stock, the Series C Convertible Preferred Stock, the
Series D Convertible Preferred Stock, the Series E Convertible Preferred Stock,
the Series F Convertible Preferred Stock, the Series G Convertible Preferred
Stock, the Series H Convertible Preferred Stock, the Series I Convertible
Preferred Stock or the Series J Convertible Preferred Stock, as the case may be,
and (b) the consideration, if any, received by the Corporation upon such issue
or sale, by (ii) the total number of shares of Common Stock outstanding
immediately after such issue or sale (including the number of shares of Common
Stock issued or issuable upon conversion of the Preferred Stock).
Notwithstanding the foregoing, if the Corporation shall issue or sell
or is, in accordance with subparagraphs 6D(1) through 6D(8), deemed to have
issued or sold, any shares of Common Stock for a consideration per share less
than the Conversion Price for the Series C Convertible Preferred Stock in effect
immediately prior to such sale, the Conversion Price in effect for the Series C
Convertible Preferred Stock shall be
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reduced to equal the greater of $1.40 or such consideration per share, provided,
that if such consideration per share is less than $1.40, the Conversion Price
shall as a result of such issue or sale (i) first be reduced to $1.40 in
accordance with this sentence and (ii) thereafter be reduced as otherwise
provided in this paragraph 6. For any later issues or sales of Common Stock
below the applicable Conversion Price in effect for the Series C Convertible
Preferred Stock, adjustments shall be made as otherwise provided in this
paragraph 6.
In addition, notwithstanding the foregoing, if the Corporation shall
issue or sell or is, in accordance with subparagraphs 6D(1) through 6D(8),
deemed to have issued or sold, any shares of Common Stock for a consideration
per share less than the Conversion Price for the Series B Convertible Preferred
Stock in effect immediately prior to such sale, the Conversion Price in effect
for the Series B Convertible Preferred Stock shall be reduced to equal the
greater of $1.00 or such consideration per share, provided, that if such
consideration per share is less than $1.00, the Conversion Price shall as a
result of such issue or sale (i) first be reduced to $1.00 in accordance with
this sentence and (ii) thereafter be reduced as otherwise provided in this
paragraph 6. For any later issues of sales of Common Stock below the applicable
Conversion Price in effect for the Series B Convertible Preferred stock,
adjustments shall be made as otherwise provided in this paragraph 6.
Notwithstanding anything to the contrary set forth in paragraph 6
hereof, no adjustment shall be made to (i) the Conversion Price of the Series A
Convertible Preferred Stock in the event that the Corporation shall issue or
sell or is, in accordance with subparagraphs 6D(1) through 6D(8), deemed to have
issued or sold any shares of Common Stock solely at a price per share equal to
or greater than the Conversion Price for the Series A Convertible Preferred
Stock, but less than the Conversion Price for the Series B Convertible Preferred
Stock, the Series C Convertible Preferred Stock, the Series D Convertible
Preferred Stock, the Series E Convertible Preferred Stock, the Series F
Convertible Preferred Stock, the Series G Convertible Preferred Stock, the
Series H Convertible Preferred Stock or the Series I Convertible Preferred
Stock; (ii) the Conversion Price of the Series B Convertible Preferred Stock in
the event that the Corporation shall issue or sell or is, in accordance with
subparagraphs 6D(1) through 6D(8), deemed to have issued or sold any shares of
Common Stock solely at a price per share equal to or greater than the Conversion
Price for the Series B Convertible Preferred Stock, but less than the Conversion
Price for the Series C Convertible Preferred Stock, the Series D Convertible
Preferred Stock, the Series E Convertible Preferred Stock, the Series F
Convertible Preferred Stock, the Series G Convertible Preferred Stock, the
Series H Convertible Preferred Stock or the Series I Convertible Preferred
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Stock; (iii) the Conversion Price of the Series C Convertible Preferred Stock in
the event that the Corporation shall issue or sell or is, in accordance with
subparagraphs 6D(1) through 6D(8), deemed to have issued or sold any shares of
Common Stock solely at a price per share equal to or greater than the Conversion
Price for the Series C Convertible Preferred Stock, but less than the Conversion
Price for the Series D Convertible Preferred Stock, the Series E Convertible
Preferred Stock, the Series F Convertible Preferred Stock, the Series G
Convertible Preferred Stock, the Series H Convertible Preferred Stock or the
Series I Convertible Preferred Stock; (iv) the Conversion Price of the Series D
Convertible Preferred Stock in the event that the Corporation shall issue or
sell or is, in accordance with subparagraphs 6D(1) through 6D(8), deemed to have
issued or sold any shares of Common Stock solely at a price per share equal to
or greater than the Conversion Price for the Series D Convertible Preferred
Stock, but less than the Conversion Price for the Series E Convertible Preferred
Stock, the Series F Convertible Preferred Stock, the Series G Convertible
Preferred Stock, the Series H Convertible Preferred Stock or the Series I
Convertible Preferred Stock; (v) the Conversion Price of the Series E
Convertible Preferred Stock in the event that the Corporation shall issue or
sell or is, in accordance with subparagraphs 6D(1) through 6D(8), deemed to have
issued or sold any shares of Common Stock solely at a price per share equal to
or greater than the Conversion Price of the Series E Convertible Preferred
Stock, but less than the Conversion Price for the Series F Convertible Preferred
Stock, the Series G Convertible Preferred Stock, the Series H Convertible
Preferred Stock or the Series I Convertible Preferred Stock; (vi) the Conversion
Price of the Series F Convertible Preferred Stock in the event that the
Corporation shall issue or sell or is, in accordance with subparagraphs 6D(1)
through 6D(8), deemed to have issued or sold any shares of Common Stock solely
at a price per share equal to or greater than the Conversion Price of the Series
F Convertible Preferred Stock, but less than the Conversion Price for the Series
G Convertible Preferred Stock, the Series H Convertible Preferred Stock or the
Series I Convertible Preferred Stock; (vii) the Conversion Price of the Series G
Convertible Preferred Stock in the event that the Corporation shall issue or
sell or is, in accordance with subparagraphs 6D(1) through 6D(8), deemed to have
issued or sold any shares of Common Stock solely at a price per share equal to
or greater than the Conversion Price of the Series G Convertible Preferred
Stock, but less than the Conversion Price for the Series H Convertible Preferred
Stock or the Series I Convertible Preferred Stock; (viii) the Conversion Price
of the Series H Convertible Preferred Stock in the event that the Corporation
shall issue or sell or is, in accordance with subparagraphs 6D(1) through 6D(8),
deemed to have issued or sold any shares of Common Stock solely at a price per
share equal to or greater than the Conversion Price of the Series H Convertible
Preferred Stock, but less than the Conversion Price for the Series I Convertible
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Preferred Stock; (ix) the Conversion Price of the Series I Convertible Preferred
Stock in the event that the Corporation shall issue or sell or is, in accordance
with subparagraphs 6D(1) through 6D(8), deemed to have issued or sold any shares
of Common Stock solely at a price per share equal to or greater than the
Conversion Price of the Series I Convertible Preferred Stock; or (x) the
Conversion Price of the Series J Convertible Preferred Stock in the event that
the Corporation shall issue or sell or is, in accordance with subparagraphs
6D(1) through 6D(8), deemed to have issued or sold any shares of Common Stock
solely at a price per share equal to or greater than the Conversion Price of the
Series J Convertible Preferred Stock, but less than the Conversion Price for the
Series F Convertible Preferred Stock, the Series G Convertible Preferred Stock,
the Series H Convertible Preferred Stock or the Series I Convertible Preferred
Stock.
For purposes of this subparagraph 6D, the following subparagraphs 6D(1)
to 6D(8) shall also be applicable:
6D(1) Issuance of Rights or Options. In case at any time the
Corporation shall in any manner grant (whether directly or by assumption in a
merger or otherwise) any warrants or other rights to subscribe for or to
purchase, or any options for the purchase of, Common Stock or any stock or
security convertible into or exchangeable for Common Stock (such warrants,
rights or options being called "Options" and such convertible or exchangeable
stock or securities being called "Convertible Securities"), whether or not such
Options or the right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock is
issuable upon the exercise of such Options or upon the conversion or exchange of
such Convertible Securities (determined by dividing (i) 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 the 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 upon the issue or
sale of such Convertible Securities and upon the conversion or exchange thereof,
by (ii) 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) shall be less
than the Conversion Price of the Series A Convertible Preferred Stock, the
Series B Convertible Preferred Stock, the Series C Convertible Preferred Stock,
the Series D Convertible Preferred Stock, the Series E Convertible Preferred
Stock, the Series F Convertible Preferred Stock, the Series G Convertible
Preferred Stock, the Series H Convertible Preferred Stock, the Series I
Convertible Preferred Stock or the Series J Convertible Preferred
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Stock, or all ten, 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 issuable
upon the exercise of such Options shall be deemed to have been issued for such
price per share as of the date of granting of such Options or the issuance of
such Convertible Securities and thereafter shall be deemed to be outstanding.
Except as otherwise provided in subparagraph 6D(3), no adjustment of the
Conversion Price shall be made upon the actual issue of such Common Stock or of
such Convertible Securities upon exercise of such Options or upon the actual
issue of such Common Stock upon conversion or exchange of such Convertible
Securities.
6D(2) Issuance of Convertible Securities. In case the
Corporation shall in any manner issue (whether directly or by assumption in a
merger or otherwise) or sell any Convertible Securities, whether or not the
rights to exchange or convert any such Convertible Securities are immediately
exercisable, and the price per share for which Common Stock is issuable upon
such conversion or exchange (determined by dividing (i) 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, by (ii) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities)
shall be less than the Conversion Price of the Series A Convertible Preferred
Stock, the Series B Convertible Preferred Stock, the Series C Convertible
Preferred Stock, the Series D Convertible Preferred Stock, the Series E
Convertible Preferred Stock, the Series F Convertible Preferred Stock, the
Series G Convertible Preferred Stock, the Series H Convertible Preferred Stock,
the Series I Convertible Preferred Stock or the Series J Convertible Preferred
Stock, or all ten, as the case may be, in effect immediately prior to the time
of such issue or sale, then the total maximum number of shares of Common Stock
issuable upon conversion or exchange of all such Convertible Securities shall be
deemed to have been issued for such price per share as of the date of the issue
or sale of such Convertible Securities and thereafter shall be deemed to be
outstanding as of such date, provided that (a) except as otherwise provided in
subparagraph 6D(3), no adjustment of the Conversion Price of the Series A
Convertible Preferred Stock, the Series B Convertible Preferred Stock, the
Series C Convertible Preferred Stock, the Series D Convertible Preferred Stock,
the Series E Convertible Preferred Stock, the Series F Convertible Preferred
Stock, the Series G Convertible Preferred Stock, the Series H Convertible
Preferred Stock, the Series I Convertible Preferred Stock or the Series J
Convertible Preferred Stock, or all ten, as the case may be, shall be made upon
the actual issue
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of such Common Stock upon conversion or exchange of such Convertible Securities
and (b) if any such issue or sale of such Convertible Securities is made upon
exercise of any Options to purchase any such Convertible Securities for which
adjustments of the Conversion Price of the Series A Convertible Preferred Stock,
the Series B Convertible Preferred Stock, the Series C Convertible Preferred
Stock, the Series D Convertible Preferred Stock, the Series E Convertible
Preferred Stock, the Series F Convertible Preferred Stock, the Series G
Convertible Preferred Stock, the Series H Convertible Preferred Stock, the
Series I Convertible Preferred Stock or the Series J Convertible Preferred
Stock, or all ten, as the case may be, have been or are to be made pursuant to
other provisions of this subparagraph 6D, no further adjustment of the
Conversion Price of the Series A Convertible Preferred Stock, the Series B
Convertible Preferred Stock, the Series C Convertible Preferred Stock, the
Series D Convertible Preferred Stock, the Series E Convertible Preferred Stock,
the Series F Convertible Preferred Stock, the Series G Convertible Preferred
Stock, the Series H Convertible Preferred Stock, the Series I Convertible
Preferred Stock or the Series J Convertible Preferred Stock, or all ten, as the
case may be, shall be made by reason of such issue or sale.
6D(3) Change in Option Price or Conversion Rate. Upon the
happening of any of the following events, namely, if the purchase price provided
for in any Option referred to in subparagraph 6D(1), the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subparagraph 6D(1) or 6D(2), or the rate
at which Convertible Securities referred to in subparagraph 6D(1) or 6D(2) are
convertible into or exchangeable for Common Stock shall change at any time
(including, but not limited to, changes under or by reason of provisions
designed to protect against dilution), the Conversion Price of the Series A
Convertible Preferred Stock, the Series B Convertible Preferred Stock, the
Series C Convertible Preferred Stock, the Series D Convertible Preferred Stock,
the Series E Convertible Preferred Stock, the Series F Convertible Preferred
Stock, the Series G Convertible Preferred Stock, the Series H Convertible
Preferred Stock, the Series I Convertible Preferred Stock or the Series J
Convertible Preferred Stock, or all ten, as the case may be, in effect at the
time of such event shall forthwith be readjusted to the 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 conversion rate, as the case may be, at the time
initially granted, issued or sold, but only if as a result of such adjustment
the Conversion Price then in effect hereunder is thereby reduced; and on the
expiration of any such Option or the termination of any such right to convert or
exchange such Convertible Securities, the Conversion Price then in effect
hereunder shall forthwith be increased to the Conversion Price which would have
been in effect
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at the time of such expiration or termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such expiration or
termination, never been issued.
6D(4) Stock Dividends. In case the Corporation shall declare a
dividend or make any other distribution upon any stock of the Corporation
payable in Common Stock (except for dividends or distributions upon the Common
Stock), Options or Convertible Securities, any Common Stock, Options or
Convertible Securities, as the case may be, issuable in payment of such dividend
or distribution shall be deemed to have been issued or sold without
consideration.
6D(5) Consideration for Stock. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount received by the
Corporation therefor, without deduction therefrom of any expenses incurred or
any underwriting commissions or concessions paid or allowed by the Corporation
in connection therewith. In case any shares of Common Stock, Options or
Convertible Securities shall be issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the
Corporation shall be deemed to be the fair value of such consideration as
determined in good faith by the Board of Directors of the Corporation, without
deduction of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith. In case
any Options shall be issued in connection with the issue and sale of other
securities of the Corporation, together comprising one integral transaction in
which no specific consideration is allocated to such Options by the parties
thereto, such Options shall be deemed to have been issued for such consideration
as determined in good faith by the Board of Directors of the Corporation.
6D(6) Record Date. In case the Corporation shall set a record
date for the determination of the holders of its Common Stock for the purpose of
entitling them (i) to receive a dividend or other distribution payable in Common
Stock, Options or Convertible Securities or (ii) to subscribe for or purchase
Common Stock, Options or Convertible Securities, then such record date shall be
deemed to be the date of the issue or sale of the shares of Common Stock deemed
to have been issued or sold upon the declaration of such dividend or the making
of such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
6D(7) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Corporation, and the disposition of any such shares shall be
considered an issue or sale of Common Stock for the purpose of this subparagraph
6D.
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6D(8) Adjustments for Failure of Participation.
Notwithstanding anything contained in this subparagraph 6D to the contrary, the
rights of any holder of Preferred Stock to the benefits of this subparagraph 6D
shall be subject to the limitations contained in this subparagraph 6D(8) if such
holder has failed to participate in any offering which is a Dilutive Offering
with respect to such holder's shares by acquiring in such Dilutive Offering such
number of shares as shall equal the product of the number of shares actually
offered in the Dilutive Offering to all holders of Preferred Stock, as
determined by the Board of Directors, multiplied by a fraction: (a) the
numerator of which is the number of shares of Preferred Stock with respect to
which the offering is a Dilutive Offering as is held by such holder at the time
of such Dilutive Offering and (b) the denominator of which is the total number
of shares of the Preferred Stock then outstanding with respect to which the
offering is a Dilutive Offering (the "Pro Rata Share"). Solely for purposes of
this subparagraph 6D(8), shares purchased by an affiliate or affiliates of a
holder of Preferred Stock in a Dilutive Offering (other than an affiliate who
held Preferred Stock prior to such Dilutive Offering, except to the extent that
such affiliate has exceeded its Pro Rata Share and has not otherwise directed
that such excess be counted towards the Pro Rata Share of another affiliate)
shall be deemed to have been purchased by such holder. As used in this
subparagraph, the term affiliate of a holder shall mean a person who directly or
indirectly through one or more intermediaries controls, is controlled by, or is
under common control with, such holder. If any holder of Preferred Stock shall
fail to purchase its Pro Rata Share of any such Dilutive Offering in accordance
with this subparagraph 6D(8), then such holders rights under this subparagraph
6D shall terminate and shall no longer be of any force and effect as to the
shares of Preferred Stock with respect to which the offering was a Dilutive
Offering; provided, however, that no holder of shares of Preferred Stock shall
be required to participate to the extent of all or any part of such holder's Pro
Rata Share of a Dilutive Offering if and to the extent such participation would
violate any statute, rule or regulation, or order of any court or governmental
agency applicable to such holder and such holder furnishes to the Corporation a
certificate, signed by an executive officer or general partner of such holder,
as the case may be, and an opinion of counsel, each to such effect. The
Corporation, the Board of Directors and the holders of the Preferred Stock shall
take all necessary actions to designate a new series of Preferred Stock on any
occasion that any holder of Preferred Stock shall fail to purchase its Pro Rata
Share of any Dilutive Offering. The Corporation shall, 30 days prior to any
issuance of its securities pursuant to a Dilutive Offering, give each holder of
Preferred Stock written notice of the holder's right to participate in such
Dilutive Offering. If, after the Corporation has given such notice, a Dilutive
Offering occurs and a holder of Preferred Stock fails to purchase its Pro
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Rata Share of the Dilutive Offering, shares of such holder's Preferred Stock
with respect to which the offering is a Dilutive Offering shall be immediately
and automatically converted into shares of a newly-created series of Preferred
Stock (the "New Preferred Stock"); provided that the terms of any series of New
Preferred Stock shall be identical in all respects to the terms of the Series A
Convertible Preferred Stock, the Series B Convertible Preferred Stock, the
Series C Convertible Preferred Stock, the Series D Convertible Preferred Stock,
the Series E Convertible Preferred Stock, the Series F Convertible Preferred
Stock, the Series G Convertible Preferred Stock, the Series H Convertible
Preferred Stock, the Series I Convertible Preferred Stock or the Series J
Convertible Preferred Stock, as the case may be, except that (i) the Conversion
Price of the New Preferred Stock shall be the Conversion Price in effect for the
Series A Convertible Preferred Stock, the Series B Convertible Preferred Stock,
the Series C Convertible Preferred Stock, the Series D Convertible Preferred
Stock, the Series E Convertible Preferred Stock, the Series F Convertible
Preferred Stock, the Series G Convertible Preferred Stock, the Series H
Convertible Preferred Stock, the Series I Convertible Preferred Stock or the
Series J Convertible Preferred Stock, as the case may be, immediately prior to
such Dilutive Offering and (ii) any holder of shares of the such New Preferred
Stock shall not be entitled to receive the benefits of any adjustments to the
Conversion Price pursuant to this subparagraph 6D with respect to any future
Dilutive Offering by the Corporation. Except as otherwise required by law, all
series of New Preferred Stock shall vote together as a single series with the
Series A Convertible Preferred Stock, the Series B Convertible Preferred Stock,
the Series C Convertible Preferred Stock, the Series D Convertible Preferred
Stock, the Series E Convertible Preferred Stock, the Series F Convertible
Preferred Stock, the Series G Convertible Preferred Stock, the Series H
Convertible Preferred Stock, the Series I Convertible Preferred Stock or the
Series J Convertible Preferred Stock, as the case may be, relating thereto, on
all matters submitted to the stockholders for a vote or a written consent,
including, but not limited to, the election for a majority of directors of the
Corporation by the Preferred Stock pursuant to subparagraph 2C. For the purposes
of paragraphs 3, 4, 5, 6A, 6B, 6C, 6E, 6F, 6G, 6I, 6J, 6K, 6L, 6M, 6N, 6O, 6P, 7
and 8, the terms "Preferred Stock," "Junior Preferred Stock," "Series A
Convertible Preferred Stock," "Series B Convertible Preferred Stock," "Series C
Convertible Preferred Stock," "Series D Convertible Preferred Stock," "Series E
Convertible Preferred Stock," "Series F Convertible Preferred Stock," "Series G
Convertible Preferred Stock," "Series H Convertible Preferred Stock," "Series I
Convertible Preferred Stock" and "Series J Convertible Preferred Stock" shall
include any series of New Preferred Stock relating thereto issued by the
Corporation pursuant to this subparagraph 6D(8).
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6E. Certain Issues of Common Stock Excepted. Anything herein
to the contrary notwithstanding, the Corporation shall not be required to make
any adjustment of the Conversion Prices in the case of the issuance of (i) up to
an aggregate of 10,366,000 shares (appropriately adjusted to reflect the
occurrence of any event described in subparagraph 6F) of Common Stock or options
or warrants to purchase Common Stock to directors, officers or employees of, or
other providers of service to, the Corporation in connection with their service
as directors, officers or employees of, or providers of services to the
Corporation, which number of shares shall include any shares issued prior to the
issuance of any shares of Preferred Stock (the "Reserved Employee Shares"); (ii)
any shares of Common Stock or other securities upon conversion of the Series A
Convertible Preferred Stock, the Series B Convertible Preferred Stock, the
Series C Convertible Preferred Stock, the Series D Convertible Preferred Stock,
the Series E Convertible Preferred Stock, the Series F Convertible Preferred
Stock, the Series G Convertible Preferred Stock, the Series H Convertible
Preferred Stock, the Series I Convertible Preferred Stock or the Series J
Convertible Preferred Stock; (iii) any shares of New Preferred Stock in
accordance with subparagraph 6D(8); (iv) any shares of Preferred Stock issuable
upon exercise of outstanding warrants to purchase Preferred Stock; or (v) any
securities issued in connection with equipment lease transactions undertaken in
the ordinary course of the Corporation's business and approved by a majority of
the members of the Board of Directors designated by the holders of Preferred
Stock under the Stockholders' Agreement.
6F. Subdivision or Combination of Common Stock. In case the
Corporation shall at any time subdivide (by any stock split, stock dividend or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price of the Preferred Stock in effect immediately prior
to such subdivision shall be proportionately reduced and, conversely, in case
the outstanding shares of Common Stock shall be combined into a smaller number
of shares, the Conversion Price of the Preferred Stock in effect immediately
prior to such combination shall be proportionately increased.
6G. Reorganization or Reclassification. If any capital
reorganization or reclassification of the capital stock of the Corporation shall
be effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Common
Stock, then, as a condition of such reorganization or reclassification, lawful
and adequate provisions shall be made whereby each holder of a share or shares
of Preferred Stock shall thereupon have the right to receive, upon the basis and
upon the terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore receivable upon the conversion of such
share or shares of Preferred Stock, such shares of stock,
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securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding shares of such Common Stock equal to the number of
shares of such Common Stock immediately theretofore receivable upon such
conversion had such reorganization or reclassification not taken place and, in
any such case, appropriate provisions shall be made with respect to the rights
and interests of such holder to the end that the provisions hereof (including
without limitation provisions for adjustments of the Conversion Price) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise of such
conversion rights.
6H. Adjustment of Provisions. If the Corporation grants to the
holders of any class or series of stock of the Corporation any rights relating
to the adjustment of the Conversion Price of such class or series of stock upon
a Dilutive Offering or otherwise, which rights shall be more favorable to the
holders of such class or series of stock than the comparable rights in this
paragraph 6 are to the holders of the Preferred Stock, or which rights shall
grant to the holders of such class or series of stock rights not granted to the
holders of Preferred Stock pursuant to the Certificate of Incorporation of the
Corporation, then such more favorable rights shall be deemed to also apply to
all holders of Preferred Stock.
6I. Notice of Adjustment. Upon any adjustment of the
Conversion Price, then and in each such case the Corporation shall give written
notice thereof, by first class mail, postage prepaid, by recorded delivery
service or by telex to non-U.S. residents, addressed to each holder of shares of
Preferred Stock at the address of such holder as shown on the books of the
Corporation, which notice shall state the Conversion Price resulting from such
adjustment, setting forth in reasonable detail the method upon which such
calculation is based.
6J. Other Notices. In case at any time:
(1) the Corporation shall declare any dividend upon its Common
Stock payable in cash or stock or make any other distribution to the holders of
its Common Stock;
(2) the Corporation shall offer for subscription pro rata to
the holders of its Common Stock any additional shares of stock of any class or
other rights);
(3) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or a consolidation or
merger of the Corporation with or into, or a sale of all or substantially all
its assets to, another entity or entities; or
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(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by first
class mail, postage prepaid, by recorded delivery service or by telex to
non-U.S. residents, addressed to each holder of any shares of Preferred Stock at
the address of such holder as shown on the books of the Corporation (a) at least
20 days prior written notice of the date on which the books of the Corporation
shall close or a record shall be taken for such dividend, distribution or
subscription rights or for determining rights to vote in respect of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up and (b) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, at least 20 days prior written notice of the date when the same
shall take place. Such notice in accordance with the foregoing clause (a) shall
also specify, in the case of any such dividend, distribution or subscription
rights, the date on which the holders of Common Stock shall be entitled thereto
and such notice in accordance with the foregoing clause and (b) shall also
specify the date on which the holders of Common Stock shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be.
6K. Stock to be Reserved. The Corporation will at all times
reserve and keep available out of its authorized Common Stock, solely for the
purposes of issuance upon the conversion of Preferred Stock as herein provided,
such number of shares of Common Stock as shall then be issuable upon the
conversion of all outstanding shares of Preferred Stock. The Corporation
covenants that all shares of Common Stock which shall be so issued shall be duly
and validly issued and fully paid and nonassessable and free from all taxes,
liens and charges with respect to the issue thereof and, without limiting the
generality of the foregoing, the Corporation covenants that it will from time to
time take all such action as may be requisite to ensure that the par value per
share of the Common Stock is at all times equal to or less than the Conversion
Price in effect at the time. The Corporation will take all such action as may be
necessary to ensure that all such shares of Common Stock may be so issued
without violation of any applicable law or regulation or of any requirement of
any national securities exchange or quotation system upon which the Common Stock
may be listed. The Corporation will not take any action which results in any
adjustment of the Conversion Price if the total number of shares of Common Stock
issued and issuable after such action upon conversion of the Preferred Stock
would exceed the total number of shares of Common Stock then authorized by the
Certificate of Incorporation.
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6L. No Reissuance of Preferred Stock. Shares of Preferred
Stock which are converted into shares of Common Stock as provided herein shall
be cancelled and shall not be reissued.
6M. Issue Tax. The issuance of certificates for shares of
Common Stock upon conversion of Preferred Stock shall be made without charge to
the holders thereof for any issuance tax in respect thereof, provided that the
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than that of the holder of the Preferred Stock which is being
converted.
6N. Closing of Books. The Corporation will at no time close
its transfer books against the transfer of any Preferred Stock or of any shares
of Common Stock issued or issuable upon the conversion of any shares of
Preferred Stock in any manner which interferes with the timely conversion of
such Preferred Stock, except as may otherwise be required to comply with
applicable securities laws.
6O. Definition of Common Stock. As used in this paragraph 6,
the term "Common Stock" shall mean and include the Corporation's authorized
Common Stock, par value $.001 per share, as constituted on the date of filing of
these terms of the Preferred Stock and also shall include any capital stock of
any class of the Corporation thereafter authorized which shall neither be
limited to a fixed sum or percentage of par value in respect of the rights of
the holders thereof to participate in dividends nor entitled to a preference in
the distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation; provided that the shares of Common
Stock receivable upon conversion of shares of Preferred Stock shall include only
shares designated as Common Stock of the Corporation on the date of filing of
this instrument or, in case of any reorganization or reclassification of the
outstanding shares thereof, the stock, securities or assets provided for in
subparagraph 6G.
7. Noncompliance.
7A. Remedies. Immediately upon the occurrence of any
Noncompliance Event, as defined below, the holders of the Preferred Stock will
have the following rights, in addition to all other rights set forth in the
Certificate of Incorporation, in any agreement between such holders and the
Corporation, or as otherwise provided by law:
(1) A cumulative dividend (the "Noncompliance Dividend") shall
accrue on a daily basis on all outstanding shares of Preferred Stock to which
the Noncompliance Event applies as set forth in subparagraph 7B, so long as the
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Corporation is a noncompliance (as defined below), which such dividend shall be
in addition to the accruing dividends described in subparagraph 3B. Such
dividend shall accrue at the annual rate of $.10 per share in the case of Series
A Convertible Preferred Stock, $.14 per share in the case of Series B
Convertible Preferred Stock, $.175 per share in the case of Series C Convertible
Preferred Stock, $.225 per share in the case of Series D Convertible Preferred
Stock, $.30 per share in the case of Series E Convertible Referred Stock, $.35
per share in the case of Series F Convertible Preferred Stock, $.40 per share in
the case of Series G Convertible Preferred Stock, $.50 per share in the case of
Series H Convertible Preferred Stock, $.70 per share in the case of Series I
Convertible Preferred Stock and $.30 per share in the case of Series J
Convertible Referred Stock for the first 30 days that the Corporation is in
noncompliance, which rate shall increase by $.01 for each successive 30-day
period that the Corporation remains in noncompliance, up to a maximum annual
rate of $.16 per share in the case of Series A Convertible Preferred Stock, $.22
per share in the case of Series B Convertible Preferred Stock, $.28 per share in
the case of Series C Convertible Preferred Stock, $.36 per share in the case of
Series D Convertible Preferred Stock, $.48 per share in the case of Series E
Convertible Preferred Stock, $.56 per share in the case of Series F Convertible
Preferred Stock, $.64 per share in the case of Series G Convertible Preferred
Stock, $.80 per share in the case of Series H Convertible Preferred Stock, $1.12
per share in the case of Series I Convertible Preferred Stock and $.48 per share
in the case of Series J Convertible Preferred Stock. Each holder of Preferred
Stock to whom any such dividend is payable may elect to have such dividend paid
by the Corporation in cash or in shares of Common Stock of the Corporation, as
provided in subparagraph 6C.
(2) As provided in subparagraph 2C, the holders of Preferred
Stock, voting as a single class, shall have the right to elect a majority of the
directors of the Corporation.
7B. Noncompliance Event. For the purposes of this Certificate
of Incorporation, a "Noncompliance Event" shall be defined as any one or more of
the following events:
(1) The Corporation has materially breached any one or more of
the provisions of (i) the Series A Convertible Preferred Stock Purchase
Agreement dated December 22, 1988 as then in effect (the "Series A Stock
Purchase Agreement") or Article V of the Series D Convertible Preferred Stock
Purchase Agreement dated March 12, 1992 (the "Series D Stock Purchase
Agreement") as then in effect with respect to the Series A Convertible Preferred
Stock, (ii) the Series B Convertible Preferred Stock Purchase Agreement dated
June 29, 1990 as then in effect (the "Series B Stock Purchase Agreement") or
Article V of the Series D Stock Purchase Agreement as then in effect with
respect to the Series B
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Convertible Preferred Stock, (iii) the Series C Convertible Preferred Stock
Purchase Agreement dated July 29, 1991 as then in effect (the "Series C Stock
Purchase Agreement") or Article V of the Series D Stock Purchase Agreement as
then in effect with respect to the Series C Convertible Preferred Stock, (iv)
the Series D Stock Purchase Agreement as then in effect, (v) the Series E and
Series F Stock Purchase Agreement, (vi) the Series G and Series H Convertible
Preferred Stock Purchase Agreement dated May 14, 1993 as then in effect (the
"Series G and Series H Stock Purchase Agreement") or Article V of the Series J
Stock Purchase Agreement as then in effect with respect to the Series G
Convertible Preferred Stock and the Series H Convertible Preferred Stock, (vii)
the Series I Stock Purchase Agreement dated March 31, 1994 as then in effect
(the "Series I Stock Purchase Agreement"), (viii) the Series J Stock Purchase
Agreement (the Series A Stock Purchase Agreement, the Series B Stock Purchase
Agreement, the Series C Stock Purchase Agreement, the Series D Stock Purchase
Agreement, the Series E and Series F Stock Purchase Agreement, the Series G and
Series H Stock Purchase Agreement, the Series I Stock Purchase Agreement and the
Series J Stock Purchase Agreement to be referred to collectively herein as the
"Stock Purchase Agreements") or (ix) the Amended and Restated Registration
Rights Agreement, as amended, the Redemption Agreement, the Stockholders'
Agreement and the IBM Stockholders' Agreement executed in connection with the
Stock Purchase Agreements (collectively, the "Ancillary Agreements") with
respect to the shares of Preferred Stock to which such Ancillary Agreements may
apply, in each case as such Ancillary Agreements shall have been amended, and
such breach has continued for 30 days following receipt by the Corporation of
written notice of said breach given by the holders of at least two-thirds of the
outstanding shares of Preferred Stock with respect to which such covenant or
provisions applies;
(2) Any of the Corporation's representations and/or warranties
set forth in the Series A Stock Purchase Agreement with respect to the Series A
Convertible Preferred Stock, the Series B Stock Purchase Agreement with respect
to the Series B Convertible Preferred Stock, the Series C Stock Purchase
Agreement with respect to the Series C Convertible Preferred Stock, the Series D
Stock Purchase Agreement with respect to the Series D Convertible Preferred
Stock, the Series E and Series F Stock Purchase Agreement with respect to the
Series E Convertible Preferred Stock and the Series F Convertible Preferred
Stock, the Series G and Series H Stock Purchase Agreement with respect to the
Series G Convertible Preferred Stock and the Series H Convertible Preferred
Stock, the Series I Convertible Preferred Stock Purchase Agreement with respect
to the Series I Convertible Preferred Stock, the Series J Convertible Preferred
Stock Purchase Agreement with respect to the Series J Convertible Preferred
Stock or in any one or more of the Ancillary Agreements with respect to the
shares of Preferred Stock to which such
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<PAGE> 198
Ancillary Agreement may apply, was not substantially true as of the date of
closing for such Stock Purchase Agreement or Ancillary Agreement and the
Corporation has received written notice of such fact from the holders of at
least two-thirds of the outstanding shares of Preferred Stock with respect to
which such representation and/or warranty applies;
(3) The Corporation has failed to make payment(s) when due for
any dividends, interest and/or mandatory redemption of any securities, where
such payment(s) aggregate over $200,000 and such failure to pay has continued
for 30 days following receipt by the Corporation of written notice of said
failure to pay from the holders of at least two-thirds of the outstanding shares
of Preferred Stock;
(4) The Corporation has been in material default of payment on
any debt agreement under which the Corporation is obligated to pay at least
$200,000 in principal (including any acceleration thereof) and accrued interest
at the time of such default, and such default has continued for 30 days
following receipt by the Corporation of written notice of said default given by
the holders of at least two-thirds of the outstanding shares of Preferred Stock;
or
(5) The Corporation has filed for bankruptcy, made an
assignment for the benefit of creditors, materially compromised its debt with a
material creditor of the Corporation or suffered acceleration of a material debt
instrument and the Corporation has received written notice of same from the
holders of at least two-thirds of the outstanding shares of Preferred Stock.
Once a Noncompliance Event has occurred, the Corporation shall give prompt
notice thereof to each holder of Preferred Stock, and shall be deemed "in
noncompliance" until such time as the President or Chief Financial Officer of
the Corporation shall have certified and delivered by hand or by first class
mail, postage prepaid, by the recorded delivery service or by telex to non-U.S.
residents, addressed to each holder of Preferred Stock at the address of such
holder as shown on the books of the Corporation, notice that the condition
underlying such Noncompliance Event is cured.
8. Amendments. No provision of these terms of the Preferred Stock may
be amended, modified or waived without the written consent or affirmative vote
of the holders of at least two-thirds of the then-outstanding shares of
Preferred Stock voting as a single class.
SECOND: Written consent to the adoption of the foregoing amendment of
the Restated Certificate of Incorporation of the
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Corporation has been given in accordance with the provisions of Section 228 of
the Delaware General Corporation Law and written notice of the adoption of said
amendment without a meeting by less than unanimous written consent has been
given to those stockholders who have not consented in writing as provided in
said Section 228.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Object Design, Inc. has caused this certificate to
be signed by its President and attested by its Secretary this 15th day of
February, 1996.
Object Design, Inc.
By:___________________________
Its President
ATTEST
By:________________________________
Its Secretary
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<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
OBJECT DESIGN, INC.
OBJECT DESIGN, INC., A CORPORATION ORGANIZED AND EXISTING UNDER AND BY
VIRTUE OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE, DOES HEREBY
CERTIFY:
FIRST: THAT THE FOLLOWING AMENDMENT TO THE RESTATED CERTIFICATE OF
INCORPORATION OF OBJECT DESIGN, INC. (THE "CORPORATION") HAS BEEN DULY PROPOSED
BY THE BOARD OF DIRECTORS OF THE CORPORATION AND DULY ADOPTED BY THE
STOCKHOLDERS OF THE CORPORATION IN ACCORDANCE WITH THE PROVISIONS OF SECTIONS
228 AND 242 OF THE DELAWARE GENERAL CORPORATION LAW:
THAT THE RESTATED CERTIFICATE OF INCORPORATION OF THE CORPORATION BE
FURTHER AMENDED BY DELETING THE FIRST PARAGRAPH TO ARTICLE FOURTH AND INSERTING
A NEW FIRST PARAGRAPH TO ARTICLE FOURTH IN ITS STEAD WHICH SHALL BE AND READ AS
FOLLOWS IN ITS ENTIRETY:
"FOURTH: THE TOTAL NUMBER OF SHARES OF CAPITAL STOCK WHICH THE
CORPORATION SHALL HAVE THE AUTHORITY TO ISSUE SHALL BE 35,000,000 COMMON SHARES,
HAVING A PAR VALUE OF $.001 PER SHARE, AMOUNTING TO AN AGGREGATE PAR VALUE OF
$35,000.00 AND 19,004,188 SHARES OF PREFERRED STOCK HAVING A PAR VALUE OF $.01
PER SHARE AMOUNTING TO AN AGGREGATE PAR VALUE OF $190,041.88."
<PAGE> 2
SECOND: WRITTEN CONSENT TO THE ADOPTION OF THE FOREGOING AMENDMENT OF
THE RESTATED CERTIFICATE OF INCORPORATION OF THE CORPORATION HAS BEEN GIVEN IN
ACCORDANCE WITH THE PROVISIONS OF SECTION 228 OF THE DELAWARE GENERAL
CORPORATION LAW AND WRITTEN NOTICE OF THE ADOPTION OF SAID AMENDMENT WITHOUT A
MEETING BY LESS THAN UNANIMOUS WRITTEN CONSENT HAS BEEN GIVEN TO THOSE
STOCKHOLDERS WHO HAVE NOT CONSENTED IN WRITING AS PROVIDED IN SAID SECTION 228.
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<PAGE> 3
IN WITNESS WHEREOF, OBJECT DESIGN, INC. HAS CAUSED THIS CERTIFICATE
TO BE SIGNED BY ITS PRESIDENT THIS DAY OF , 1996.
OBJECT DESIGN, INC.
BY:
---------------
ITS PRESIDENT
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<PAGE> 1
EXHIBIT 3.3
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
OBJECT DESIGN, INC.
The following Amended and Restated Certificate of Incorporation (i)
amends and restates the provisions of the Certificate of Incorporation of Object
Design, Inc. (the "Corporation") originally filed with the Secretary of State of
the State of Delaware on June 21, 1988, as amended and restated to date; (ii)
supersedes the Certificate of Incorporation and all amendments thereto and
restatements thereof; and (iii) has been duly proposed by the Board of Directors
of the Corporation and duly adopted by the stockholders of the Corporation in
accordance with the provisions of Sections 228, 242 and 245 of the Delaware
General Corporation Law.
FIRST: The name of the corporation (the "Corporation") is Object
Design, 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, and
the name of its registered agent at such address is The Corporation Trust
Company.
THIRD: The nature of the business or purpose to be conducted or
promoted is as follows:
To develop, license, purchase, sell, lease and market object oriented
data base management systems and associated programming environmental tools for
the creation and maintenance of object oriented applications, to engage in the
development, licensing and marketing of, and to otherwise deal with, computer
software products and applications generally, and to conduct or engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH: The total number of shares of all classes of capital stock
which the Corporation shall have authority to issue is 205,000,000, consisting
of (i) 200,000,000 shares of Common Stock, $.001 par value per share ("Common
Stock"), and (ii) 5,000,000 shares of Preferred Stock, $.01 par value per share
("Preferred Stock").
The following is a statement of the designations and the powers,
privileges and rights, and the qualifications, limitations or restrictions
thereof in respect of each class of capital stock of the Corporation:
<PAGE> 2
A. COMMON STOCK.
1. General. The voting, dividend and liquidation rights of the holders
of the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.
2. Voting. The holders of Common Stock will be entitled to one vote per
share on all matters to be voted on by the stockholders of the Corporation.
There shall be no cumulative voting.
3. 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.
4. Liquidation. Upon the dissolution or liquidation of the Corporation,
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential liquidation rights of any then
outstanding Preferred Stock.
B. PREFERRED STOCK.
Preferred Stock may be issued from time to time in one or more series,
each of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. No share of
Preferred Stock that is redeemed, purchased or acquired by the Corporation may
be reissued except as otherwise provided herein or by law. Different series of
Preferred Stock shall not be construed to constitute different classes of shares
for the purposes of voting by classes unless expressly provided herein, in any
such resolution or resolutions, or by law.
Authority is hereby expressly granted to the Board of Directors from
time to time to issue the Preferred Stock in one or more series, and in
connection with the creation of any such series, by resolution or resolutions
providing for the issue of the shares thereof, to determine and fix such voting
powers, full or limited, or no voting powers, and such designations, preferences
and relative participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, including without
limitation thereof, dividend rights, conversion rights, redemption privileges
and liquidation preferences, as shall be stated and expressed in such
resolutions, all to the full extent now or hereafter permitted by the General
Corporation Law of Delaware. Without limiting the generality of the foregoing,
the resolutions providing for issuance of any series of Preferred Stock may
provide that such series shall be superior or rank equally or be junior to the
Preferred Stock of any other series to the extent permitted by law. Except as
otherwise provided by law or by this Amended and Restated Certificate of
Incorporation, no vote of the holders of the Preferred Stock or Common Stock
shall be a prerequisite to the issuance of any shares of any series of the
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<PAGE> 3
Preferred Stock authorized by and complying with the conditions of the Amended
and Restated Certificate of Incorporation, the right to have such vote being
expressly waived by all present and future holders of the capital stock of the
Corporation.
FIFTH: In furtherance of and not in limitation of powers conferred by
statute, it is further provided that:
(a) Subject to the limitations and exceptions, if any, contained in
the by-laws of the Corporation, the by-laws may be adopted, amended or repealed
by the Board of Directors of the Corporation.
(b) Elections of directors need not be by written ballot.
(c) Subject to any applicable requirements of law, the books of the
Corporation may be kept outside the State of Delaware at such location as may be
designated by the Board of Directors or in the by-laws of the Corporation.
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: The Corporation shall indemnify each person who at any time
is, or shall have been a director or officer of the Corporation, and is
threatened to be or is made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is, or was, a director or officer
of the Corporation, or served at the request of the Corporation as a director,
officer, employee, trustee, or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement incurred in connection
with any such action, suit or proceeding to the maximum extent permitted by the
General Corporation Law of the State of Delaware. The foregoing right of
indemnification shall in no way be exclusive of any other rights of
indemnification to which any such director or officer may be entitled, under any
by-law, agreement, vote of directors or stockholders or otherwise. No amendment
to or repeal of the provisions of this paragraph shall deprive a person of the
benefit of this paragraph with respect to any act or failure to act of such
director occurring prior to such amendment or repeal.
EIGHTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors
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<PAGE> 4
or class of creditors, and/or of the stockholders or class of stockholders of
this Corporation, as the case may be, agree to any compromise or arrangement and
to any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders of this Corporation, as the case may be,
and also on this Corporation.
NINTH: To the maximum extent permitted by the General Corporation Law
of the State of Delaware as the same exists or may hereafter be amended, no
director of the Corporation shall be personally liable to the Corporation or to
any of its stockholders for monetary damages arising out of such director's
breach of fiduciary duty as a director of the Corporation. No amendment to or
repeal of the provisions of this paragraph shall apply to or have any effect on
the liability or the alleged liability of any director of the Corporation with
respect to any act or failure to act of such director occurring prior to such
amendment or repeal.
TENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute and this
Amended and Restated Certificate of Incorporation, and all rights conferred upon
stockholders herein are granted subject to this reservation.
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<PAGE> 5
IN WITNESS WHEREOF, the undersigned, being the duly elected and acting
President of Object Design, Inc., does hereby declare that this Amended and
Restated Certificate of Incorporation has been duly adopted by the Board of
Directors and the stockholders of this Corporation in accordance with the
provisions of Sections 228, 242 and 245 of the General Corporation Law of the
State of Delaware. The undersigned does hereby affirm, under the penalties of
perjury, that this instrument is the act and deed of the Corporation and the
facts herein set forth are true and correct. I have accordingly hereunto set my
hand this day of , 1996.
OBJECT DESIGN, INC.
By:_________________________
Its President
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<PAGE> 1
EXHIBIT 3.4
BY-LAWS
OF
OBJECT DESIGN, INC.
Section 1. CERTIFICATE OF INCORPORATION AND BY-LAWS
1.1 These by-laws are subject to the certificate of incorporation of
the corporation. In these by-laws, references to the certificate of
incorporation and by-laws mean the provisions of the certificate of
incorporation and the by-laws as are from time to time in effect.
Section 2. OFFICES
2.1 Registered Office. The registered office shall be in the City of
Wilmington, County of New Castle, State of Delaware.
2.2 Other Offices. The corporation may also have offices at such other
places both within and without the State of Delaware as the board of directors
may from time to time determine or the business of the corporation may require.
Section 3. STOCKHOLDERS
3.1 Location of Meetings. All meetings of the stockholders shall be
held at such place either within or without the State of Delaware as shall be
designated from time to time by the board of directors. Any adjourned session of
any meeting shall be held at the place designated in the vote of adjournment.
3.2 Annual Meeting. The annual meeting of stockholders shall be held at
10:00 a.m. on the fourth Wednesday in April in each year, unless that day be a
legal holiday at the place where the meeting is to be held, in which case the
meeting shall be held at the same hour on the next succeeding day not a legal
holiday, or at such other date and time as shall be designated from time to time
by the board of directors,, at which they shall elect a board of directors and
transact such other business as may be required by law or these by-laws or as
may properly come before the meeting.
3.3 Special Meeting in Place of Annual Meeting. If the election for
directors shall not be held on the day designated by these by-laws, the
directors shall cause the election to be held as soon thereafter as convenient,
and to that end, if the annual meeting is omitted on the day herein provided
therefor or if the election of directors shall not be held thereat, a special
meeting of the stockholders may be held in place of such omitted meeting or
election, and any business transacted or election held at such special meeting
shall have the same effect as if transacted or held at the annual meeting, and
in such case all
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references in these by-laws to the annual meeting of the stockholders, or to the
annual election of directors, shall be deemed to refer to or include such
special meeting. Any such special meeting shall be called and the purposes
thereof shall be specified in the call, as provided in Section 3.4.
3.4 Notice of Annual Meeting. Written notice of the annual meeting
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting. Such notice may specify the business
to be transacted and actions to be taken at such meeting. No action shall be
taken at such meeting unless such notice is given, or unless waiver of such
notice is given by the holders of outstanding stock having not less than the
minimum number of votes necessary to take such action at a meeting at which all
shares entitled to vote thereon were voted. Prompt notice of all action taken in
connection with such waiver of notice shall be given to all stockholders not
present or represented at such meeting.
3.5 Other Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by law or by the
certificate of incorporation, may be called by the president and shall be called
by the president or secretary at the request in writing of a majority of the
board of directors, or at the request in writing of the holders of at least
twenty percent of all capital stock of the corporation issued and outstanding
and entitled to vote at such meeting. Such request shall state the purpose or
purposes of the proposed meeting and business to be transacted at any special
meeting of the stockholders.
3.6 Notice of Special Meeting. Written notice of a special meeting
stating the place, date and hour of the meeting and the purpose or purposes for
which the meeting is called, shall be given not less than ten nor more than
sixty days before the date of the meeting, to each stockholder entitled to vote
at such meeting, No action shall be taken at such meeting unless such notice is
given, or unless waiver of such notice is given by the holders of outstanding
stock having not less than the minimum number of votes necessary to take such
action at a meeting at which all shares entitled to vote thereon were voted.
Prompt notice of all action taken in connection with such waiver of notice shall
be given to all stockholders not present or represented at such meeting.
3.7 Stockholder List. The officer who has charge of the stock ledger of
the corporation shall prepare and make, at least ten 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 stock-
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<PAGE> 3
holder, for any purpose germane to the meeting, during ordinary business hours,
for a period of at least ten days prior to the meeting, either at a place within
the city 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.
3.8 Quorum of Stockholders. 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 required by
law, or by the certificate of incorporation or by these by-laws. Except as
otherwise provided by law, no stockholder present at a meeting may withhold his
shares from the quorum count by declaring his shares absent from the meeting.
3.9 Adjournment. 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 votes cast upon the question, whether
or not a quorum is present. At such adjourned meeting at which a quorum shall be
present or represented any business may be transacted which might have been
transacted at the original 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.
3.10 Proxy Representation. Every stockholder may authorize another
person or persons to act for him by proxy in all matters in which a stockholder
is entitled to participate, whether by waiving notice of any meeting, objecting
to or voting or participating at a meeting, or expressing consent or dissent
without a meeting. Every proxy must be signed by the stockholder or by his
attorney-in-fact. No proxy shall be voted or acted upon after three years from
its date unless such proxy provides for a longer period. Except as provided by
law, a revokable proxy shall be deemed revoked if the stockholder is present at
the meeting for which the proxy was given. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and, if, and only as long as, it
is coupled with an interest sufficient in law to support an irrevocable power. A
proxy may be made irrevocable regardless of whether the interest with which it
is coupled is an interest in the stock itself or an interest in the corporation
generally. The authorization of a proxy may but need not be limited to specified
action, provided, however, that if a proxy limits its authorization to a meeting
or meetings of stockholders, unless otherwise specifically provided such proxy
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shall entitle the holder thereof to vote at any adjourned session but shall not
be valid after the final adjournment thereof.
3.11 Inspectors. The directors or the person presiding at the meeting
may, but need not, appoint one or more inspectors of election and any substitute
inspectors to act at the meeting or any adjournment thereof. Each inspector,
before entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. The inspectors, if any,
shall determine the number of shares of stock outstanding and the voting power
of each, the shares of stock represented at the meeting the existence of a
quorum and the validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all stockholders. On request of the person
presiding at the meeting, the inspectors shall make a report in writing of any
challenge, question or matter determined by them and execute a certificate of
any fact found by them.
3.12 Action by Vote. When a quorum is present at any meeting, whether
the same be an original or an adjourned session, a plurality of the votes
properly cast for election to any office shall elect to such office and a
majority of the votes properly cast upon any question other than an election to
an office shall decide the question, except when a larger vote is required by
law, by the certificate of incorporation or by these by-laws. No ballot shall be
required for any election unless requested by a stockholder present or
represented at the meeting and entitled to vote in the election.
3.13 Action Without Meetings. Unless otherwise provided in the
certificate of incorporation, any action required to be taken at any annual or
special meeting of stockholders of the corporation, 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 in
writing, setting forth the action so taken shall be signed 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. 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.
Section 4. DIRECTORS
4.1 Number. The number of directors which shall constitute the whole
board shall not be less than two nor more than seven,
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except that whenever there shall be only one stockholder or prior to issuance of
any stock of not less than one. The first board shall consist of one director.
Thereafter, within the foregoing limits, the stockholders at the annual meeting
shall determine the number of directors, and within such limits, the number of
directors may be increased or decreased at any time or from time to time by the
stockholders or by the directors by vote of a majority of directors then in
office, except that any such decrease by vote of the directors shall only be
made to eliminate vacancies existing by reason of the death, resignation or
removal of one or more directors. The directors shall be elected at the annual
meeting of the stockholders, except as provided in Section 4.4 of these by-laws.
Directors need not be stockholders.
4.2 Tenure. Except as otherwise provided by law, by the certificate of
incorporation or by these by-laws, each director shall hold office until the
next annual meeting and until his successor is elected and qualified, or until
he sooner dies, resigns, is removed or becomes disqualified.
4.3 Powers. The business of the corporation shall be managed by or
under the direction of the board of directors which shall have and may exercise
all the powers of the corporation and do all such lawful acts and things as are
not by law, the certificate of incorporation or these by-laws directed or
required to be exercised or done by the stockholders.
4.4 Vacancies. Vacancies and any newly created directorships resulting
from any increase in the number of directors may be filled by vote of the
stockholders at a meeting called for the purpose, or by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. When one or more directors shall resign from the board, effective at a
future date, a majority of the directors then in office, including those who
have resigned, shall have power to fill such vacancy or vacancies, the vote or
action by writing thereon to take effect when such resignation or resignations
shall become effective. The directors shall have and may exercise all their
powers notwithstanding the existence of one or more vacancies in their number,
subject to any requirements of law or of the certificate of incorporation or of
these by-laws as to the number of directors required for a quorum or for any
vote or other actions.
4.5 Committees. The board of directors may, by vote of a majority of
the whole board, (a) designate, change the membership of or terminate the
existence of any committee or committees, each committee to consist of one or
more of the directors; (b) designate one or more directors as alternate members
of any such committee who may replace any absent or disqualified member at any
meeting of the committee; and (c) determine the extent to which each such
committee shall have and may exercise the powers and authority of the board of
directors in the management of the
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business and affairs of the corporation, including the power to authorize the
seal of the corporation to be affixed to all papers which require it and the
power and authority to declare dividends or to authorize the issuance of stock;
excepting, however, such powers which by law, by the certificate of
incorporation or by these by-laws they are prohibited from so delegating. In the
absence or disqualification of any member of such committee and his alternate,
if any, the member or members thereof present at any meeting and not
disqualified from voting, whether or not constituting a quorum, may unanimously
appoint another member of the board of directors to act at the meeting in the
place of any such absent or disqualified member. 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 board or such rules, its
business shall be conducted as nearly as may be in the same manner as is
provided by these by-laws for the conduct of business by the board of directors.
Each committee shall keep regular minutes of its meetings and report the same to
the board of directors upon request.
4.6 Regular Meeting. Regular meetings of the board of directors may be
held without call or notice at such place within or without the State of
Delaware and at such times as the board may from time to time determine,
provided that notice of the first regular meeting following any such
determination shall be given to absent directors. A regular meeting of the
directors may be held without call or notice immediately after and at the same
place as the annual meeting of the stockholders.
4.7 Special Meetings. Special meetings of the board of directors may be
held at any time and at any place within or without the State of Delaware
designated in the notice of the meeting, when called by the president, or by
one-third or more in number of the directors, reasonable notice thereof being
given to each director by the secretary or by the president or by any one of the
directors calling the meeting.
4.8 Notice. It shall be reasonable and sufficient notice to a director
to send notice by mail at least forty-eight hours or by telegram at least
twenty-four hours before the meeting, addressed to him at his usual or last
known business or residence address or to give notice to him in person or by
telephone at least twenty-four hours before the meeting. Notice of a meeting
need not be given to any director if a written waiver of notice, executed by him
before or after the meeting, is filed with the records of the meeting, or to any
director who attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him. Neither notice of a meeting nor a waiver
of a notice need specify the purposes of the meeting.
4.9 Quorum. Except as may be otherwise provided by law, by the
certificate of incorporation or by these by-laws, at any meeting of the
directors a majority of the directors then in
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office shall constitute a quorum; a quorum shall not in any case be less than
one-third of the total number of directors constituting the whole board. Any
meeting may be adjourned from time to time by a majority of the votes cast upon
the question, whether or not a quorum is present, and the meeting may be held as
adjourned without further notice.
4.10 Action by Vote. Except as may be otherwise provided by law, by the
certificate of incorporation or by these by-laws, when a quorum is present at
any meeting the vote of a majority of the directors present shall be the act of
the board of directors.
4.11 Action Without a Meeting. 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 the members of the board or of such
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the records of the meetings of the board or of such
committee. Such consent shall be treated for all purposes as the act of the
board or of such committee, as the case may be.
4.12 Participation in Meetings by Conference Telephone. 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 such board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Such participation shall constitute presence in
person at such meeting.
4.13 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.
4.14 Interested Directors and Officers.
(a) 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 the corporation's
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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:
(1) 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
(2) 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
(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 thereof, or the stockholders.
(b) 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.
4.15 Resignation or Removal of Directors. Unless otherwise restricted
by the certificate of incorporation or by law, any director or the entire board
of directors may be removed, with or without cause, by the holders of a majority
of the stock issued and outstanding and entitled to vote at an election of
directors. Any director may resign at any time by delivering his resignation in
writing to the president or the secretary or to a meeting of the board of
directors. Such resignation shall be effective upon receipt unless specified to
be effective at some other time; and without in either case the necessity of its
being accepted unless the resignation shall so state. No director resigning and
(except where a right to receive compensation shall be expressly provided in a
duly authorized written agreement with the corporation) no director removed
shall have any right to receive compensation as such director for any period
following his resignation or removal, or any right to damages on account of such
removal, whether his compensation be by the month or by the year or otherwise;
unless in the case of a resignation, the directors, or in the case of removal,
the body acting on the removal, shall in their or its discretion provide for
compensation.
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Section 5. NOTICES
5.1 Form of Notice. Whenever, under the provisions of law, or of the
certificate of incorporation or of these by-laws, 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 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.
5.2 Waiver of Notice. Whenever notice is required to be given under the
provisions of law, the certificate of incorporation or these by-laws, a written
waiver thereof, signed by the person entitled to notice, whether before or after
the time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any meeting of the stockholders, directors or members of a
committee of the directors need be specified in any written waiver of notice.
Section 6. OFFICERS AND AGENTS
6.1 Enumeration; Qualification. The officers of the corporation shall
be a president, a treasurer, a secretary and such other officers, if any, as the
board of directors from time to time may in its discretion elect or appoint
including without limitation one or more vice presidents. Any officer may be,
but none need be, a director or stockholder. Any two or more offices may be held
by the same person. Any officer may be required by the board of directors to
secure the faithful performance of his duties to the corporation by giving bond
in such amount and with sureties or otherwise as the board of directors may
determine.
6.2 Powers. Subject to law, to the certificate of incorporation and to
the other provisions of these by-laws, each officer shall have, in addition to
the duties and powers herein set forth, such duties and powers as are commonly
incident to his
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office and such additional duties and powers as the board of directors may from
time to time designate.
6.3 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. At any time or from time
to time, the directors may delegate to any officer their power to elect or
appoint any other officer or any agents.
6.4 Tenure. Each officer shall hold office until the first meeting of
the board of directors following the next annual meeting of the stockholders and
until his successor is elected and qualified unless a shorter period shall have
been specified in terms of his election or appointment, or in each case until he
sooner dies, resigns, is removed or becomes disqualified. Each agent of the
corporation shall retain his authority at the pleasure of the directors, or the
officer by whom he was appointed or by the officer who then holds agent
appointive power.
6.5 President and Vice Presidents. The president shall be the chief
executive officer and shall have direct and active charge of all business
operations of the corporation and shall have general supervision of the entire
business of the corporation, subject to the control of the board of directors.
He shall preside at all meetings of the stockholders and of the board of
directors at which he is present, except as otherwise voted by the board of
directors.
The president or treasurer 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.
Any vice presidents shall have such duties and powers as shall be
designated from time to time by the board of directors or by the president.
6.6 Treasurer and Assistant Treasurers. The treasurer shall be the
chief financial officer of the corporation and shall be in charge of its funds
and valuable papers, and shall have such other duties and powers as may be
assigned to him from time to time by the board of directors or by the president.
Any assistant treasurers shall have such duties and powers as shall be
designated from time to time by the board of directors, the president or the
treasurer.
6.7 Secretary and Assistant Secretaries. The secretary shall record all
proceedings of the stockholders, of the board of
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directors and of committees of the board of directors in a book or series of
books to be kept therefor and shall file therein all writings of, or related to,
action by stockholder or director consent. In the absence of the secretary from
any meeting, an assistant secretary, or if there is none or he is absent, a
temporary secretary chosen at the meeting, shall record the proceedings thereof.
Unless a transfer agent has been appointed, the secretary shall keep or cause to
be kept the stock and transfer records of the corporation, which shall contain
the names and record addresses of all stockholders and the number of shares
registered in the name of each stockholder. The secretary shall have such other
duties and powers as may from time to time be designated by the board of
directors or the president.
Any assistant secretaries shall have such duties and powers as shall be
designated from time to time by the board of directors, the president or the
secretary.
6.8 Resignation and Removal. Any officer may resign at any time by
delivering his resignation in writing to the president or the secretary or to a
meeting of the board of directors. Such resignation shall be effective upon
receipt unless specified to be effective at some other time, and without in any
case the necessity of its being accepted unless the resignation shall so state.
The board of directors may at any time remove any officer either with or without
cause. The board of directors may at any time terminate or modify the authority
of any agent. No officer resigning and (except where a right to receive
compensation shall be expressly provided in a duly authorized written agreement
with the corporation) no officer removed shall have any right to any
compensation as such officer for any period following his resignation or
removal, or any right to damages on account of such removal, whether his
compensation be by the month or by the year or otherwise; unless in the case of
a resignation, the directors, or in the case of removal, the body acting on the
removal, shall in their or its discretion provide for compensation.
6.9 Vacancies. If the office of the president or the treasurer or the
secretary becomes vacant, the directors may elect a successor by vote of a
majority of the directors then in office. If the office of any other officer
becomes vacant, any person or body empowered to elect or appoint that office may
choose a successor. Each such successor shall hold office for the unexpired term
of his predecessor, and in the case of the president, the treasurer and the
secretary until his successor is chosen and qualified, or in each case until he
sooner dies, resigns, is removed or becomes disqualified.
Section 7. CAPITAL STOCK
7.1 Stock Certificates. Each stockholder shall be entitled to a
certificate stating the number and the class and the
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designation of the series, if any, of the shares held by him, in such form as
shall, in conformity to law, the certificate of incorporation and the by-laws,
be prescribed from time to time by the board of directors. Such certificate
shall be signed by the president or a vice-president and (i) the treasurer or an
assistant treasurer or (ii) the secretary or an assistant secretary. Any of or
all the signatures on the certificate may be a facsimile. In case an officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed on such 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 time of its issue.
7.2 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, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be 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 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.
Section 8. TRANSFER OF SHARES OF STOCK
8.1 Transfer on Books. Subject to any restrictions with respect to the
transfer of shares of stock, 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 therefor properly endorsed or accompanied by a written assignment
and power of attorney properly executed, with necessary transfer stamps affixed,
and with such proof of the authenticity of signature as the board of directors
or the transfer agent of the corporation may reasonably require. Except as may
be otherwise required by law, by the certificate of incorporation or by these
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 receive notice and to vote or to give any
consent with respect thereto and to be held liable for such calls and
assessments, if any, as may lawfully be made thereon, regardless of any
transfer, pledge or other disposition of such stock until the shares have been
properly transferred on the books of the corporation.
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It shall be the duty of each stockholder to notify the corporation of
his post office address.
Section 9. GENERAL PROVISIONS
9.1 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, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or 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, in advance, a record date,
which shall not be more than sixty days nor less than ten days before the date
of such meeting, nor more than sixty days prior to any other action to which
such record date relates. 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,
(a) 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 next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held;
(b) The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the board of directors is necessary, shall be the day on which the
first written consent is expressed; and
(c) 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.
9.2 Dividends. Dividends upon the capital stock of the corporation 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.
9.3 Payment of Dividends. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such sum
or sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or
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for repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
9.4 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.
9.5 Fiscal Year. The fiscal year of the corporation shall end on the
date determined from time to time by the board of directors.
9.6 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.
Section 10. INDEMNIFICATION
10.1 It being the intent of the corporation to provide maximum
protection available under the law to its officers and directors, the
corporation shall indemnify its officers and directors to the full extent the
corporation is permitted or required to do so by the General Corporation Law of
Delaware.
Section 11. AMENDMENTS
11.1 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. If the power
to adopt, amend or repeal by-laws is conferred upon the board of directors by
the certificate of incorporation, it shall not divest or limit the power of the
stockholders to adopt, amend or repeal by-laws.
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EXHIBIT 3.5
AMENDED AND RESTATED
BY-LAWS OF
OBJECT DESIGN, INC.
Section 1. CERTIFICATE OF INCORPORATION AND BY-LAWS
1.1 These by-laws are subject to the certificate of incorporation of
the corporation. In these by-laws, references to the certificate of
incorporation and by-laws mean the provisions of the certificate of
incorporation and the by-laws as are from time to time in effect.
Section 2. OFFICES
2.1 Registered Office. The registered office shall be in the City of
Wilmington, County of New Castle, State of Delaware.
2.2 Other Offices. The corporation may also have offices at such other
places both within and without the State of Delaware as the board of directors
may from time to time determine or the business of the corporation may require.
Section 3. STOCKHOLDERS
3.1 Location of Meetings. All meetings of the stockholders
shall be held at such place either within or without the State of Delaware as
shall be designated from time to time by the board of directors. Any adjourned
session of any meeting shall be held at the place designated in the vote of
adjournment.
3.2 Annual Meeting. The annual meeting of stockholders shall be
held at 10:00 a.m. on the fourth Wednesday in May in each year (unless that day
be a legal holiday at the place where the meeting is to be held, in which case
the meeting shall be held at the same hour on the next succeeding day not a
legal holiday) (the "Specified Date"), or at such other date and time as shall
be designated from time to time by the board of directors, at which the
stockholders shall elect a board of directors and transact such other business
as may be required by law or these by-laws or as may properly come before the
meeting.
3.3 Special Meeting in Place of Annual Meeting. If the election
for directors shall not be held on the day designated by these by-laws, the
directors shall cause the election to be held as soon thereafter as convenient,
and to that end, if the annual meeting is omitted on the day herein provided
therefor or if the election of directors shall not be held thereat, a special
meeting of the stockholders may be held in place of such omitted meeting or
election, and any business transacted or election held at such special meeting
shall have the same effect as if transacted or held at the annual meeting, and
in such case all references in these by-laws to the annual meeting of the
stockholders, or to the annual election of directors, shall be deemed to refer
to or include such special meeting. Any such special meeting shall be called and
the purposes thereof shall be specified in the call, as provided in Section 3.4.
<PAGE> 2
3.4 Notice of Annual Meeting. Written notice of the annual meeting
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting. Such notice may specify the business
to be transacted and actions to be taken at such meeting. No action shall be
taken at such meeting unless such notice is given, or unless waiver of such
notice is given by the holders of outstanding stock having not less than the
minimum number of votes necessary to take such action at a meeting at which all
shares entitled to vote thereon were voted. Prompt notice of all action taken in
connection with such waiver of notice shall be given to all stockholders not
present or represented at such meeting.
3.5 Other Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by law or by the
certificate of incorporation, may be called by the president and shall be called
by the president or secretary at the request in writing of a majority of the
board of directors. Such request shall state the purpose or purposes of the
proposed meeting and business to be transacted at any special meeting of the
stockholders. 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.
3.6 Notice of Special Meeting. Written notice of a special meeting
stating the place, date and hour of the meeting and the purpose or purposes for
which the meeting is called, shall be given not less than ten nor more than
sixty days before the date of the meeting, to each stockholder entitled to vote
at such meeting. No action shall be taken at such meeting unless such notice is
given, or unless waiver of such notice is given by the holders of outstanding
stock having not less than the minimum number of votes necessary to take such
action at a meeting at which all shares entitled to vote thereon were voted.
Prompt notice of all action taken in connection with such waiver of notice shall
be given to all stockholders not present or represented at such meeting.
3.7 Notice of Stockholder Business at Annual Meeting. The following
provisions of this Section 3.7 shall apply to the conduct of business at any
annual meeting of the stockholders. (As used in this Section 3.7, the term
annual meeting shall include a special meeting in lieu of an annual meeting.)
(a) At any annual meeting of the stockholders, only such
business shall be conducted as shall have been brought before the meeting (i)
pursuant to the corporation's notice of meeting, (ii) by or at the direction of
the board of directors or (iii) by any stockholder of the corporation who is a
stockholder of record at the time of giving of the notice provided for in
Section 3.7(b), who is entitled to vote at such meeting and who has complied
with the notice procedures set forth in Section 3.7(b).
(b) For business to be properly brought before any annual
meeting of the stockholders by a stockholder pursuant to clause (iii) of 3.7(a),
the stockholder must have given timely notice thereof in writing to the
Secretary of the corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
corporation not less than sixty (60) days prior to the date for such annual
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meeting, regardless of any postponements, deferrals or adjournments of that
meeting to a later date; provided, however, that if the annual meeting of
stockholders is to be held on a date prior to the Specified Date, and if less
than seventy (70) days' notice or prior public disclosure of the date of such
annual or special meeting is given or made, notice by the stockholder to be
timely must be so delivered or received not later than the close of business on
the tenth (10th) day following the earlier of the date on which notice of the
date of such meeting was mailed or the day on which public disclosure was made
of the date of such meeting. A stockholder's notice to the Secretary shall set
forth as to each matter the stockholder proposes to bring before the annual
meeting (i) a brief description of the business desired to be brought before the
meeting and the reasons for conducting such business at the meeting, (ii) the
name and address, as they appear on the corporation's books, of the stockholder
proposing such business, the name and address of the beneficial owner, if any,
on whose behalf the proposal is made, and the name and address of any other
stockholders or beneficial owners known by such stockholder to be supporting
such proposal, (iii) the class and number of shares of the corporation which are
owned beneficially and of record by such stockholder of record, by the
beneficial owner, if any, on whose behalf the proposal is made and by any other
stockholders or beneficial owners known by such stockholder to be supporting
such proposal, and (iv) any material interest of such stockholder of record
and/or of the beneficial owner, if any, on whose behalf the proposal is made, in
such proposed business and any material interest of any other stockholders or
beneficial owners known by such stockholder to be supporting such proposal in
such proposed business, to the extent known by such stockholder.
(c) Notwithstanding anything in these by-laws to the contrary,
no business shall be conducted at an annual meeting except in accordance with
the procedures set forth in this Section 3.7. The person presiding at the annual
meeting shall, if the facts warrant, determine that business was not properly
brought before the meeting and in accordance with the procedures prescribed by
these by-laws, and if he should so determine, he shall so declare at the meeting
and any such business not properly brought before the meeting shall not be
transacted. Notwithstanding the foregoing provisions of this Section 3.7, a
stockholder shall also comply with all applicable requirements of the Securities
Exchange Act of 1934, as amended (or any successor provision), and the rules and
regulations thereunder with respect to the matters set forth in this Section
3.7.
(d) This provision shall not prevent the consideration and
approval or disapproval at an annual meeting of reports of officers, directors
and committees of the board of directors, but, in connection with such reports,
no new business shall be acted upon at such meeting unless properly brought
before the meeting as herein provided.
3.8 Stockholder List. The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten 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
ten days prior to the meeting, either at a place within the city where the
meeting is to be held,
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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.
3.9 Quorum of Stockholders. 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 required by
law, or by the certificate of incorporation or by these by-laws. Except as
otherwise provided by law, no stockholder present at a meeting may withhold his
shares from the quorum count by declaring his shares absent from the meeting.
3.10 Adjournment. 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 votes cast upon the question, whether
or not a quorum is present. At such adjourned meeting at which a quorum shall be
present or represented any business may be transacted which might have been
transacted at the original 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.
3.11 Proxy Representation. Every stockholder may authorize
another person or persons to act for him by proxy in all matters in which a
stockholder is entitled to participate, whether by waiving notice of any
meeting, objecting to or voting or participating at a meeting, or expressing
consent or dissent without a meeting. Every proxy must be signed by the
stockholder or by his attorney-in-fact. No proxy shall be voted or acted upon
after three years from its date unless such proxy provides for a longer period.
Except as provided by law, a revocable proxy shall be deemed revoked if the
stockholder is present at the meeting for which the proxy was given. A duly
executed proxy shall be irrevocable if it states that it is irrevocable and, if,
and only as long as, it is coupled with an interest sufficient in law to support
an irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally. The authorization of a proxy may but need
not be limited to specified action, provided, however, that if a proxy limits
its authorization to a meeting or meetings of stockholders, unless otherwise
specifically provided such proxy shall entitle the holder thereof to vote at any
adjourned session but shall not be valid after the final adjournment thereof.
3.12 Inspectors. The directors or the person presiding at the
meeting may, but need not, appoint one or more inspectors of election and any
substitute inspectors to act at the meeting or any adjournment thereof. Each
inspector, before entering upon the discharge of his duties, shall take and sign
an oath faithfully to execute the duties of inspector at such meeting with
strict impartiality and according to the best of his ability. The inspectors, if
any, shall determine the number of shares of stock outstanding and the voting
power of each, the shares of stock represented at the meeting, the existence of
a quorum and the validity and effect of
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proxies, and shall receive votes, ballots or consents, hear and determine all
challenges and questions arising in connection with the right to vote, count and
tabulate all votes, ballots or consents, determine the result, and do such acts
as are proper to conduct the election or vote with fairness to all stockholders.
On request of the person presiding at the meeting, the inspectors shall make a
report in writing of any challenge, question or matter determined by them and
execute a certificate of any fact found by them.
3.13 Action by Vote. When a quorum is present at any meeting,
whether the same be an original or an adjourned session, a plurality of the
votes properly cast for election to any office shall elect to such office and a
majority of the votes properly cast upon any question other than an election to
an office shall decide the question, except when a larger vote is required by
law, by the certificate of incorporation or by these by-laws. No ballot shall be
required for any election unless requested by a stockholder present or
represented at the meeting and entitled to vote in the election.
3.14 No Action by Consent. Any action required or permitted to
be taken by the stockholders of the corporation must be effected at a duly
constituted annual or special meeting of such stockholders and may not be
effected by any consent in writing by such stockholders.
Section 4. DIRECTORS
4.1 Number. The number of directors which shall constitute the
whole board shall not be less than two nor more than nine, except that whenever
there shall be only one stockholder, such number shall be not less than one.
Within the foregoing limits, the number of directors shall be determined by
resolution of the board of directors and may be increased or decreased at any
time or from time to time by the directors by vote of a majority of directors
then in office, except that any such decrease by vote of the directors shall
only be made to eliminate vacancies existing by reason of the death, resignation
or removal of one or more directors. The directors shall be elected at the
annual meeting of the stockholders, except as provided in Section 4.7 of these
by-laws. Directors need not be stockholders.
4.2 Tenure. Except as otherwise provided by law, by the
certificate of incorporation or by these by-laws, each director shall hold
office until the next annual meeting and until his successor is elected and
qualified, or until he sooner dies, resigns, is removed or becomes disqualified.
4.3 Classes of Directors. The board of directors shall be and
is divided into three classes: Class I, Class II and Class III, each having as
nearly as possible the same number of directors. If a fraction is contained in
the quotient arrived at by dividing the designated number of directors by three,
then, if such fraction is one-third, the extra director shall be a member of
Class III, and if such fraction is two-thirds, one of the extra directors shall
be a member of Class II and the other shall be a member of Class III, unless
otherwise provided from time to time by resolution adopted by the board of
directors.
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4.4 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, that each initial director in Class I shall
serve for a term ending on the date of the annual meeting in 1997; each initial
director in Class II shall serve for a term ending on the date of the annual
meeting in 1998; and each initial director in Class III shall serve for a term
ending on the date of the annual meeting in 1999; and provided further, that the
term of each director shall be subject to the election and qualification of his
successor and to his earlier death, resignation or removal.
4.5 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, (a) each director then serving as such
shall nevertheless continue as a director of the class of which he is a member
and (b) 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 the classes have as nearly as
possible the same number of directors. 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 latest dates following such
allocation, and any newly eliminated directorships shall be subtracted from
those classes whose terms of offices are to expire at the earliest dates
following such allocation, unless otherwise provided from time to time by
resolution adopted by the board of directors.
4.6 Powers. The business of the corporation shall be managed by or
under the direction of the board of directors which shall have and may exercise
all the powers of the corporation and do all such lawful acts and things as are
not by law, the certificate of incorporation or these by-laws directed or
required to be exercised or done by the stockholders.
4.7 Vacancies. Any vacancy in the board of directors, however
occurring, including a vacancy resulting from an enlargement of the board, shall
be filled by the vote of a majority of the directors then in office, although
less than a quorum, or by the sole remaining director. When one or more
directors shall resign from the board, effective at a future date, a majority of
the directors then in office, including those who have resigned, shall have
power to fill such vacancy or vacancies, the vote or action by writing thereon
to take effect when such resignation or resignations shall become effective. A
director elected to fill a vacancy shall hold office until the next election of
the class for which such director has been chosen, subject to the election and
qualification of his successor and to his earlier death, resignation or removal.
The directors shall have and may exercise all their powers notwithstanding the
existence of one or more vacancies in their number, subject to any requirements
of law or of the certificate of incorporation or of these by-laws as to the
number of directors required for a quorum or for any vote or other actions.
4.8 Nomination of Directors. The following provisions of this Section
4.8 shall apply to the nomination of persons for election to the board of
directors at any annual meeting or special meeting of stockholders.
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(a) Nominations of persons for election to the board of
directors of the corporation at any annual meeting or special meeting of
stockholders may be made (i) by or at the direction of the board of directors or
(ii) by any stockholder of the corporation who is a stockholder of record at the
time of giving of notice provided for in Section 4.8(b), who is entitled to vote
for the election of directors at the meeting and who has complied with the
notice procedures set forth in Section 4.8(b).
(b) Nominations by stockholders shall be made pursuant to
timely notice in writing to the Secretary of the corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of the corporation, not less than sixty (60) days
prior to the date for the annual meeting, regardless of any postponements,
deferrals or adjournments of that meeting to a later date; provided, however,
that if the annual meeting of stockholders or a special meeting in lieu thereof
is to be held on a date prior to the Specified Date, and if less than seventy
(70) days' notice or prior public disclosure of the date of such annual or
special meeting is given or made, notice by the stockholder to be timely must be
so delivered or received not later than the close of business on the tenth
(10th) day following the earlier of the day on which notice of the date of such
annual or special meeting was mailed or the day on which public disclosure was
made of the date of such annual or special meeting. Such stockholder's notice
shall set forth (i) 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, pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended, or pursuant to any other then
existing statute, rule or regulation applicable thereto (including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a director if elected); (ii) as to the stockholder giving the notice
(A) the name and address, as they appear on the corporation's books, of such
stockholder and (B) the class and number of shares of the corporation which are
beneficially owned by such stockholder and also which are owned of record by
such stockholder; and (iii) as to the beneficial owner, if any, on whose behalf
the nomination is made, (A) the name and address of such person and (B) the
class and number of shares of the corporation which are beneficially owned by
such person. The corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the corporation to determine
the eligibility of such proposed nominee as a director. At the request of the
board of directors, any person nominated by the board of directors for election
as a director shall furnish to the Secretary of the corporation that information
required to be set forth in a stockholder's notice of nomination which pertains
to the nominee.
(c) No person shall be eligible for election as a director of
the corporation at any annual meeting or special meeting of stockholders unless
nominated in accordance with the procedures set forth in this Section 4.8. The
person presiding at the meeting shall, if the facts warrant, determine that a
nomination was not made in accordance with the procedures prescribed by these
by-laws, and if he should so determine, he shall so declare to the meeting and
the defective nomination shall be disregarded. Notwithstanding the foregoing
provisions of this Section 4.8, a stockholder shall also comply with all
applicable requirements of the
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Securities Exchange Act of 1934, as amended (or any successor provision), and
the rules and regulations thereunder with respect to the matters set forth in
this by-law.
4.9 Committees. The board of directors may, by vote of a
majority of the whole board, (a) designate, change the membership of or
terminate the existence of any committee or committees, each committee to
consist of one or more of the directors; (b) designate one or more directors as
alternate members of any such committee who may replace any absent or
disqualified member at any meeting of the committee; and (c) determine the
extent to which each such committee shall have and may exercise the powers and
authority of the board of directors in the management of the business and
affairs of the corporation, including the power to authorize the seal of the
corporation to be affixed to all papers which require it and the power and
authority to declare dividends or to authorize the issuance of stock; excepting,
however, such powers which by law, by the certificate of incorporation or by
these by-laws they are prohibited from so delegating. In the absence or
disqualification of any member of such committee and his alternate, if any, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not constituting a quorum, may unanimously appoint another
member of the board of directors to act at the meeting in the place of any such
absent or disqualified member. 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 board or such rules, its business shall be
conducted as nearly as may be in the same manner as is provided by these by-laws
for the conduct of business by the board of directors. Each committee shall keep
regular minutes of its meetings and report the same to the board of directors
upon request.
4.10 Regular Meeting. Regular meetings of the board of directors may be
held without call or notice at such place within or without the State of
Delaware and at such times as the board may from time to time determine,
provided that notice of the first regular meeting following any such
determination shall be given to absent directors. A regular meeting of the
directors may be held without call or notice immediately after and at the same
place as the annual meeting of the stockholders.
4.11 Special Meetings. Special meetings of the board of directors may
be held at any time and at any place within or without the State of Delaware
designated in the notice of the meeting, when called by the president, or by
one-third or more in number of the directors, reasonable notice thereof being
given to each director by the secretary or by the president or by any one of the
directors calling the meeting.
4.12 Notice. It shall be reasonable and sufficient notice to a director
to send notice by mail at least forty-eight hours or by telegram at least
twenty-four hours before the meeting, addressed to him at his usual or last
known business or residence address or to give notice to him in person or by
telephone at least twenty-four hours before the meeting. Notice of a meeting
need not be given to any director if a written waiver of notice, executed by him
before or after the meeting, is filed with the records of the meeting, or to any
director who attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him. Neither notice of a meeting nor a waiver
of a notice need specify the purposes of the meeting.
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4.13 Quorum. Except as may be otherwise provided by law, by the
certificate of incorporation or by these by-laws, at any meeting of the
directors a majority of the directors then in office shall constitute a quorum.
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 director so
disqualified, provided that a quorum shall not in any case be less than
one-third of the total number of directors constituting the whole board. Any
meeting may be adjourned from time to time by a majority of the votes cast upon
the question, whether or not a quorum is present, and the meeting may be held as
adjourned without further notice.
4.14 Action by Vote. Except as may be otherwise provided by law, by the
certificate of incorporation or by these by-laws, when a quorum is present at
any meeting the vote of a majority of the directors present shall be the act of
the board of directors.
4.15 Action Without a Meeting. 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 the members of the board or of such
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the records of the meetings of the board or of such
committee. Such consent shall be treated for all purposes as the act of the
board or of such committee, as the case may be.
4.16 Participation in Meetings by Conference Telephone. 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 such board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Such participation shall constitute presence in
person at such meeting.
4.17 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.
4.18 Interested Directors and Officers.
(a) 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 the corporation's 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
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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:
(1) 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
(2) 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
(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 thereof, or the stockholders.
(b) 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.
4.19 Resignation or Removal of Directors. Directors of the
corporation may be removed only for cause by the affirmative vote of the holders
of at least two-thirds of the shares of the capital stock of the corporation
issued and outstanding and entitled to vote at an election of directors. Any
director may resign at any time by delivering his resignation in writing to the
president or the secretary or to a meeting of the board of directors. Such
resignation shall be effective upon receipt unless specified to be effective at
some other time; and without in either case the necessity of its being accepted
unless the resignation shall so state. No director resigning and (except where a
right to receive compensation shall be expressly provided in a duly authorized
written agreement with the corporation) no director removed shall have any right
to receive compensation as such director for any period following his
resignation or removal, or any right to damages on account of such removal,
whether his compensation be by the month or by the year or otherwise; unless in
the case of a resignation, the directors, or in the case of removal, the body
acting on the removal, shall in their or its discretion provide for
compensation.
Section 5. NOTICES
5.1 Form of Notice. Whenever, under the provisions of law, or
of the certificate of incorporation or of these by-laws, 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
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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 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.
5.2 Waiver of Notice. Whenever notice is required to be given under the
provisions of law, the certificate of incorporation or these by-laws, a written
waiver thereof, signed by the person entitled to notice, whether before or after
the time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any meeting of the stockholders, directors or members of a
committee of the directors need be specified in any written waiver of notice.
Section 6. OFFICERS AND AGENTS
6.1 Enumeration; Qualification. The officers of the corporation shall
be a president, a treasurer, a secretary and such other officers, if any, as the
board of directors from time to time may in its discretion elect or appoint
including without limitation one or more vice presidents. Any officer may be,
but none need be, a director or stockholder. Any two or more offices may be held
by the same person. Any officer may be required by the board of directors to
secure the faithful performance of his duties to the corporation by giving bond
in such amount and with sureties or otherwise as the board of directors may
determine.
6.2 Powers. Subject to law, to the certificate of incorporation and to
the other provisions of these by-laws, each officer shall have, in addition to
the duties and powers herein set forth, such duties and powers as are commonly
incident to his office and such additional duties and powers as the board of
directors may from time to time designate.
6.3 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. At any time or from time to
time, the directors may delegate to any officer their power to elect or appoint
any other officer or any agents.
6.4 Tenure. Each officer shall hold office until the first
meeting of the board of directors following the next annual meeting of the
stockholders and until his successor is elected and qualified unless a shorter
period shall have been specified in terms of his election or appointment, or in
each case until he sooner dies, resigns, is removed or becomes disqualified.
Each agent of the corporation shall retain his authority at the pleasure of the
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directors, or the officer by whom he was appointed or by the officer who then
holds agent appointive power.
6.5 President and Vice Presidents. The president shall be the
chief executive officer and shall have direct and active charge of all business
operations of the corporation and shall have general supervision of the entire
business of the corporation, subject to the control of the board of directors.
He shall preside at all meetings of the stockholders and of the board of
directors at which he is present, except as otherwise voted by the board of
directors.
The president or treasurer 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.
Any vice presidents shall have such duties and powers as shall be
designated from time to time by the board of directors or by the president.
6.6 Treasurer and Assistant Treasurers. The treasurer shall be
the chief financial officer of the corporation and shall be in charge of its
funds and valuable papers, and shall have such other duties and powers as may be
assigned to him from time to time by the board of directors or by the president.
Any assistant treasurers shall have such duties and powers as shall be
designated from time to time by the board of directors, the president or the
treasurer.
6.7 Secretary and Assistant Secretaries. The secretary shall record all
proceedings of the stockholders, of the board of directors and of committees of
the board of directors in a book or series of books to be kept therefor and
shall file therein all writings of, or related to, action by stockholder or
director consent. In the absence of the secretary from any meeting, an assistant
secretary, or if there is none or he is absent, a temporary secretary chosen at
the meeting, shall record the proceedings thereof. Unless a transfer agent has
been appointed, the secretary shall keep or cause to be kept the stock and
transfer records of the corporation, which shall contain the names and record
addresses of all stockholders and the number of shares registered in the name of
each stockholder. The secretary shall have such other duties and powers as may
from time to time be designated by the board of directors or the president.
Any assistant secretaries shall have such duties and powers as shall be
designated from time to time by the board of directors, the president or the
secretary.
6.8 Resignation and Removal. Any officer may resign at any time
by delivering his resignation in writing to the president or the secretary or to
a meeting of the board of directors. Such resignation shall be effective upon
receipt unless specified to be effective at some other time, and without in any
case the necessity of its being accepted unless the resignation shall so state.
The board of directors may at any time remove any officer either with or without
cause. The board of directors may at any time terminate or modify the
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authority of any agent. No officer resigning and (except where a right to
receive compensation shall be expressly provided in a duly authorized written
agreement with the corporation) no officer removed shall have any right to any
compensation as such officer for any period following his resignation or
removal, or any right to damages on account of such removal, whether his
compensation be by the month or by the year or otherwise; unless in the case of
a resignation, the directors, or in the case of removal, the body acting on the
removal, shall in their or its discretion provide for compensation.
6.9 Vacancies. If the office of the president or the treasurer
or the secretary becomes vacant, the directors may elect a successor by vote of
a majority of the directors then in office. If the office of any other officer
becomes vacant, any person or body empowered to elect or appoint that office may
choose a successor. Each such successor shall hold office for the unexpired term
of his predecessor, and in the case of the president, the treasurer and the
secretary until his successor is chosen and qualified, or in each case until he
sooner dies, resigns, is removed or becomes disqualified.
Section 7. CAPITAL STOCK
7.1 Stock Certificates. Each stockholder shall be entitled to a
certificate stating the number and the class and the designation of the series,
if any, of the shares held by him, in such form as shall, in conformity to law,
the certificate of incorporation and the by-laws, be prescribed from time to
time by the board of directors. Such certificate shall be signed by the
president or a vice-president and (i) the treasurer or an assistant treasurer or
(ii) the secretary or an assistant secretary. Any of or all the signatures on
the certificate may be a facsimile. In case an officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed on such
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 time
of its issue.
7.2 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, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be 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 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.
Section 8. TRANSFER OF SHARES OF STOCK
8.1 Transfer on Books. Subject to any restrictions with respect to the
transfer of shares of stock, 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 therefor properly endorsed or
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<PAGE> 14
accompanied by a written assignment and power of attorney properly executed,
with necessary transfer stamps affixed, and with such proof of the authenticity
of signature as the board of directors or the transfer agent of the corporation
may reasonably require. Except as may be otherwise required by law, by the
certificate of incorporation or by these 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 receive notice and to vote or to give any consent with respect thereto and to
be held liable for such calls and assessments, if any, as may lawfully be made
thereon, regardless of any transfer, pledge or other disposition of such stock
until the shares have been properly transferred on the books of the corporation.
It shall be the duty of each stockholder to notify the corporation of
his post office address.
Section 9. GENERAL PROVISIONS
9.1 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, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or 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, in advance, a record date,
which shall not be more than sixty days nor less than ten days before the date
of such meeting, nor more than sixty days prior to any other action to which
such record date relates. 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,
(a) 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 next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held;
(b) The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the board of directors is necessary, shall be the day on which the
first written consent is expressed; and
(c) 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.
9.2 Dividends. Dividends upon the capital stock of the
corporation 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.
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<PAGE> 15
9.3 Payment of Dividends. Before payment of any dividend, there
may be set aside out of any funds of the corporation available for dividends
such sum or sums as the directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the directors shall think conducive to
the interest of the corporation, and the directors may modify or abolish any
such reserve in the manner in which it was created.
9.4 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.
9.5 Fiscal Year. The fiscal year of the corporation shall begin on the
first day of January in each year and shall end on the last day of December next
following, unless otherwise determined by the board of directors.
9.6 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.
Section 10. INDEMNIFICATION
10.1 It being the intent of the corporation to provide maximum
protection available under the law to its officers and directors, the
corporation shall indemnify its officers and directors to the full extent the
corporation is permitted or required to do so by the General Corporation Law of
Delaware.
Section 11. AMENDMENTS
11.1 By the Board of Directors. These 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.
11.2 By the Stockholders. Notwithstanding any other provision
of these by-laws, and notwithstanding the fact that a lesser percentage may be
specified by law, these by-laws may be altered, amended or repealed or new
by-laws may be adopted by the affirmative vote of the holders of at least
seventy-five percent (75%) of the shares of the capital stock of the corporation
issued and outstanding and entitled to vote at any regular or 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 regular or special
meeting.
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<PAGE> 1
EXHIBIT 10.1
OBJECT DESIGN, INC.
1989 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN
<PAGE> 2
OBJECT DESIGN, INC.
1989 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN
TABLE OF CONTENTS
1. Purpose of the Plan ........................................... 1
2. Administration ................................................ 1
3. Option Shares ................................................. 2
4. Authority to Grant Options .................................... 2
5. Limitation on Amount of Options which may be Granted .......... 3
6. Eligibility ................................................... 3
7. Option Price .................................................. 4
8. Duration of Options ........................................... 4
9. Amount Exercisable; Right of First Refusal .................... 5
10. Exercise of Options ........................................... 5
11. Transferability of Options .................................... 6
12. Termination of Employment or Services or Death of
Optionee ...................................................... 6
(a) Temporary Leave ........................................... 7
(b) Death or Disability ....................................... 7
(c) Retirement ................................................ 8
13. Employment Relationship; Consultant Relationship .............. 8
14. Requirements of Law ........................................... 8
15. No Rights as Stockholder ......................................10
16. Employment Obligation .........................................10
17. Changes in the Company's Capital Structure ....................10
(a) Rights of the Company .....................................10
(b) Recapitalization, Stock Splits, and Dividends .............11
(c) Merger of Company With No Change of Control ...............11
(d) Sale or Merger of Company Where Company Does Not
Survive ...................................................12
(e) Changes to Common Stock Subject to Options ................13
18. Amendment or Termination of Plan ..............................14
19. Written Agreement .............................................14
20. Effective Date and Duration of Plan ...........................15
21. "Lockup" Agreement ............................................15
<PAGE> 3
OBJECT DESIGN, INC.
1989 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN
1. Purpose of the Plan.
This 1989 Incentive and Nonqualified Stock Option Plan (the "Plan") of
Object Design, Inc., a Delaware corporation (the "company"), is designed to
provide additional incentive to present and future executives, key employees
and consultants of the Company (which shall include its subsidiaries as defined
in Section 425 of the Internal Revenue Code of 1986, (the "Code"). The Company
intends that this purpose will be effected by the granting of incentive stock
options ("Incentive Stock Options") as defined in Section 422(b) of the Code
and nonqualified stock options ("Nonqualified Options") under the Plan which
afford such executives, key employees and consultants an opportunity to acquire
or increase their proprietary interest in the Company through the acquisition
of shares of its Common Stock. By encouraging stock ownership by such
executives, salaried employees and consultants, the Company seeks to attract
and retain on a continuing basis the services of persons of exceptional
competence and seeks to furnish an added incentive for them to increase their
efforts on behalf of the Company.
2. Administration.
<PAGE> 4
The Plan shall be administered by the Board of Directors. All questions
of interpretation and application of the Plan, of Incentive Stock Options and
Nonqualified Options granted hereunder (collectively, the "Options", and
individually, an "Option"), and of the value of shares of Common Stock
subject to an Option, shall be subject to the determination of the Board of
Directors, which determination shall be final and binding; provided, however,
that the Board of Directors shall not modify, extend or renew any Incentive
Stock Option.
3. Option Shares.
The stock subject to the Options and other provisions of the Plan shall
be shares of the Company's Common Stock, $.001 par value (the "Common Stock").
The total amount of the Common Stock with respect to which Options may be
granted shall not exceed in the aggregate 4,582,000 shares; provided, however,
that the class and aggregate number of shares which may be subject to Options
granted hereunder shall be subject to adjustment in accordance with the
provisions of Paragraph 16 hereof. Such shares may be treasury shares or
authorized but unissued shares.
In the event that any outstanding Option for any reason shall expire or
terminate prior to exercise, the shares of Common
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Stock allocable to the unexercised portion of such Option may again be subject
to an Option under the Plan.
4. Authority to Grant Options.
The Board of Directors may grant Options from time to time to such
eligible employees and consultants of the Company as it shall determine.
Subject to any applicable limitations set forth in the Plan or established from
time to time by the Board of Directors, the number of shares of Common Stock to
be covered by any Option shall be as determined by the Board of Directors.
5. Limitation on Amount of Options which may be Granted.
The aggregate fair market value (determined as of the date of grant of
the Option) of the shares of common Stock as to which any Incentive Stock
Option granted under the Plan shall first become exercisable (i.e., shall
"vest") in any calendar year shall not exceed $100,000. To the extent that the
shares of Common Stock as to which any Option granted under the Plan shall vest
in any calendar year shall have a fair market value (determined as of the date
of grant of the Option) in excess of $100,000, such Option shall be deemed to
be a Nonqualified Option with respect to such excess.
6. Eligibility.
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<PAGE> 6
Incentive Options may be granted only to officers and other employees of
the company or its Subsidiaries, including members of the board who are also
employees of the Company or a Subsidiary. Non-Statutory Options may be granted
to officers or other employees of the Company or its Subsidiaries, to members
of the Board or the board of directors of any Subsidiary whether or not
employees of the Company or such Subsidiary, and to certain other individuals
providing services to the Company or its Subsidiaries.
No Incentive Stock Option shall be granted to an individual who, at the
time said Option is granted, owns (including ownership attributed pursuant to
Section 425 of the Code) more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any subsidiary or parent
(a "greater-than-ten-percent-stockholder"); notwithstanding the above, a
greater-than-ten-percent-stockholder may be granted an Incentive Stock Option
provided that the purchase price per share shall not be less than one hundred
and ten percent (110%) of the fair market value of the stock at the time such
Option is granted, and further provided that no such Option shall be
exercisable to any extent after the expiration of five (5) years from the date
it is granted.
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<PAGE> 7
Except as otherwise provided, for all purposes of the Plan the term
"subsidiary corporation" shall mean any corporation of which 50% or more of its
outstanding voting stock is at the time owned by the Company or by one or more
subsidiaries or by the Company and one or more subsidiaries.
7. Option Price.
The price at which shares may be purchased pursuant to Options shall be
specified by the Board of Directors at the time the Option is granted;
provided, however, that the option price of any Incentive Stock Option shall
not be less than one hundred percent (100%) (one hundred and ten percent (110%)
in the case of a greater-than-ten percent-stockholder) of the fair market value
of the shares of Common Stock on the date such Option is granted, such fair
market value to be determined in accordance with procedures to be established
by the Board of Directors.
8. Duration of Options.
The Board of Directors in its discretion may provide that an Option
shall be exercisable during any specified period of time from the date such
Option is granted; provided, however, that no Incentive Stock Option shall be
exercisable after the expiration of ten (10) years (five years in the case of a
greater-than ten percent stockholder) from the date such Option is granted.
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<PAGE> 8
9. Amount Exercisable; Right of First Refusal.
Each Option may be exercised, so long as it is valid and outstanding,
from time to time in part or as a whole, subject to any limitations with
respect to the number of shares for which the Option may be exercised at a
particular time and to such other conditions as the Board of Directors in its
discretion may specify upon granting the Option.
The Board of Directors may also, or alternatively, specify upon
granting an Option that prior to the effective date of a registration statement
under the Securities Act of 1933 covering any shares of Common Stock, all or a
portion of the shares purchasable upon exercise of such Option shall be subject
to a right of first refusal in favor of the Company in the event that the
optionee wishes to sell, assign, transfer, exchange, encumber or otherwise
dispose of any of such shares issued pursuant to exercise of such Option or any
interest in such shares. If such restriction is imposed, the Option shall
contain appropriate provisions, and the shares issued upon exercise shall bear
an appropriate legend, disclosing the Company's right of first refusal.
10. Exercise of Options.
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<PAGE> 9
Subject to the provisions of Paragraph 14 hereof, Options shall be
exercised by the delivery of written notice to the Company setting forth the
number of shares with respect to which the Option is to be exercised, together
with (a) cash, certified check, bank draft or postal or express money order
payable to the order of the Company for an amount equal to the option price of
such shares, or (b) with the consent of the Company, shares of Common Stock of
the Company having a fair market value equal to the option price of such
shares, or (c) with the consent of the Company, a combination of (a) and (b),
and specifying the address to which the certificates for such shares are to be
mailed. For the purpose of the preceding sentence, the fair market value of the
shares of Common Stock so delivered to the Company shall be determined in
accordance with procedures adopted by the Board of Directors. As promptly as
practicable after receipt of such written notification and payment, the Company
shall deliver to the optionee certificates for the number of shares with
respect to which such Option has been so exercised, issued in the optionee's
name; provided, however, that such delivery shall be deemed effected for all
purposes when a stock transfer agent of the Company shall have deposited such
certificates in the United
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<PAGE> 10
States mail, addressed to the optionee, at the address specified pursuant to
this Paragraph 10.
11. Transferability of Options.
Options shall not be transferable by the optionee otherwise than by
will or under the laws of descent and distribution, and shall be exercisable,
during his lifetime, only by him.
12. Termination of Employment or Services or Death of Optionee.
Except as may be otherwise expressly provided herein or, as may be
otherwise expressly provided in the terms and conditions of the option granted
to an Optionee, Options may not be exercised after the earlier of:
(i) the date of expiration thereof; or
(ii) the date of termination of the optionee's employment with or
services to the Company if the termination is by the Company for cause (as
determined by the Company), or if voluntarily by the optionee; or
(iii) Thirty (30) days after termination of the optionee's employment
with or services to the Company by it without cause.
(a) Temporary Leave. Whether authorized temporary leave of absence,
or absence on military or government service, shall constitute termination of
the employment or consultant
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<PAGE> 11
relationship between the Company and the optionee shall be determined by the
Board of Directors at the time thereof.
(b) Death or Disability. In the event the optionee's employment
with or service to the Company is terminated while the optionee is an employee
or consultant in good standing for reasons of permanent disability under the
then established rules of the Company or in the event of the death and before
the date of expiration of such Option, such Option may be exercised until the
earlier of such date of expiration or one (1) year following the date of such
termination for reason of permanent disability or death. Should such
termination for reason of permanent disability or death occur after the first
anniversary of the date at which the optionee was first employed or otherwise
began to serve the Company, the Option may be exercised for up to the
greater of (i) 50% of all Option shares (and such shares shall be deemed
vested) or (ii) the number of shares that had vested as of the date of such
death or such retirement. After the death of the optionee, his executors,
administrators or any person or persons to whom his Option may be transferred
by will or by laws of descent and distribution, shall have the right to
exercise the Option.
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<PAGE> 12
(c) Retirement. If, before the date of expiration of the Option,
the optionee as an employee shall be retired in good standing from the employ
of the Company for reasons of age under the then established rules of the
Company, the Option may be exercised until the earlier of such date of
expiration or thirty (30) days after the date of such retirement, to the extent
to which the optionee was entitled to exercise such Option immediately prior to
such retirement.
13. Employment Relationship; Consultant Relationship. An employment
relationship between the Company and the optionee shall be deemed to exist
during any period in which the optionee is employed by the Company. A
consultant relationship between the Company and the optionee shall be deemed to
exist during any period in which the optionee renders services as a consultant
or otherwise on an independent contractor basis to the Company.
14. Requirements of Law.
The Company shall not be required to sell or issue any shares under any
Option if the issuance of such shares shall constitute a violation by the
optionee or by the Company of any provision of any law, regulation or order of
any governmental authority. Without limiting the generality of the foregoing,
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<PAGE> 13
upon exercise of any Option, the Company shall not be required to issue such
shares unless the Board of Directors has received evidence satisfactory to it
to the effect that the holder of such Option will not transfer such shares
except pursuant to a registration statement in effect under the Securities Act
of 1933, as now in effect or hereafter amended (the "Act"), and under the
applicable securities laws of any State, unless the Company has received an
opinion of counsel satisfactory to the Company, in form and substance
satisfactory to the Company, to the effect that such registration is not
required. Any determination in this connection by the Board of Directors shall
be final, binding and conclusive. In the event the shares issuable on exercise
of an Option are not registered under the Act, the Company may imprint the
following legend or any other legend which counsel for the Company considers
necessary or advisable to comply with the Act or other applicable laws:
"The shares of stock represented by this certificate have not
been registered under the Securities Act of 1933 or under the securities
laws of any State and may not be sold or transferred except upon such
registration or upon receipt by the Corporation of an opinion of counsel
satisfactory to the Corporation, in form and substance satisfactory
to the Corporation, that registration is not required for such sale
or transfer."
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<PAGE> 14
The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Act; and in the event any shares are
so registered the Company may remove any legend on certificates representing
such shares. The Company shall not be obligated to take any other affirmative
action in order to cause the exercise of an Option or the issuance of shares
pursuant thereto to comply with any other law, regulation or order of any
governmental authority.
15. No Rights as Stockholder.
No optionee shall have rights as a stockholder with respect to shares
covered by his Option until the date of issuance of a stock certificate for
such shares; and, except as otherwise provided in Paragraph 16 hereof, no
adjustment for dividends, or otherwise, shall be made if the record date
therefor is prior to the date of issuance of such certificate.
16. Employment Obligation.
The granting of any Option shall not impose upon the Company any
obligation to employ or continue to employ, or to retain or to continue to
retain the services of, any optionee; and the right of the Company to terminate
the employment or services of any officer or other employee or consultant shall
not be
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<PAGE> 15
diminished or affected by reason of the fact that an Option has been granted
to him.
17. Changes in the Company's Capital Structure.
(a) Rights of the Company
The existence of outstanding Options shall not affect in any way the
right or power of the Company or its stockholders to make or authorize any or
all adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Common Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all or
any part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
(b) Recapitalization, Stock Splits, and Dividends
If the Company shall effect a subdivision or consolidation of shares or
other capital readjustment, the payment of a stock dividend, or other increase
or reduction of the number of shares of the Common Stock outstanding, without
receiving compensation therefor in money, services or property, then (i) the
number, class, and per share price of shares of stock subject to
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<PAGE> 16
outstanding Options hereunder shall be appropriately adjusted in such a manner
as to entitle an optionee to receive upon exercise of an Option, for the same
aggregate cash consideration, the same total number and class of shares as he
would have received as a result of the event requiring the adjustment had he
exercised his Option in full immediately prior to such event; and (ii) the
number and class of shares with respect to which Options may be granted under
the Plan shall be adjusted by substituting for the total number of shares of
Common Stock then reserved that number and class of shares of stock that would
have been received by the owner of an equal number of outstanding shares of
Common Stock as the result of the event requiring the adjustment.
(c) Merger of Company With No Change of Control.
After a merger of one or more corporations into the Company, or after a
consolidation of the Company with one or more corporations in which (i) the
Company shall be the surviving corporation and (ii) the stockholders of the
Company prior to such merger or consolidation hold at least fifty percent (50%)
of the voting shares of the Company after such merger or consolidation, each
holder of an outstanding Option shall, at no additional cost, be entitled upon
exercise of such Option to receive (subject to any required action by
stockholders) in lieu
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<PAGE> 17
of the number of shares as to which such Option shall then be so exercisable,
the number and class of shares of stock or other securities to which such
holder would have been entitled pursuant to the terms of the agreement of
merger or consolidation if, immediately prior to such merger or consolidation,
such holder had been the holder of record of a number of shares of Common Stock
equal to the number of shares as to which such Option shall be so exercised.
(d) Sale or Merger of Company Where Company Does Not Survive.
If the Company is merged into or consolidated with another corporation
under circumstances where the Company is not the surviving corporation, or if
there is a merger or consolidation where the Company is the surviving
corporation and the Stockholders of the Company prior to such merger or
consolidation do not hold at least fifty percent (50%) of the voting shares of
the Company after such merger or consolidation occurs, or if the Company is
liquidated, or sells or otherwise disposes of substantially all its assets to
another corporation while unexercised Options remain outstanding under the
Plan, (i) subject to the provisions of clause (iii) below, after the effective
date of such merger, consolidation or sale, as the case may be, each holder of
an outstanding Option shall be entitled,
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<PAGE> 18
upon exercise of such Option, to receive, in lieu of shares of Common Stock,
shares of such stock or other securities, cash or property as the holders of
shares of Common Stock received pursuant to the terms of the merger,
consolidation or sale; (ii) the Board of Directors may accelerate the time for
exercise of all unexercised and unexpired Options to and after a date prior to
the effective date of such merger, consolidation, liquidation or sale, as the
case may be specified by the Board; or (iii) all outstanding Options may be
cancelled by the Board of Directors as of the effective date of any such
merger, consolidation, liquidation or sale provided that (x) notice of such
cancellation shall be given to each holder of an Option and (y) each holder of
an Option shall have the right to exercise such Option to the extent that the
same is then exercisable or, if the Directors shall have accelerated the time
for exercise of all unexercised and unexpired Options, in full during the
30-day period preceding the effective date of such merger, consolidation,
liquidation, sale or acquisition.
(e) Changes to Common Stock Subject to Options
Except as hereinbefore expressly provided, the issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash or
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<PAGE> 19
property, or for labor or services either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, or upon conversion of shares or
obligations of the Company convertible into such shares or other securities,
shall not affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock then subject to
outstanding Options.
18. Amendment or Termination of The Plan.
The Board of Directors may terminate the Plan at any time, and may
amend the Plan at any time and from time to time, subject to the limitation
that, except as provided in Paragraph 17 hereof, no amendment shall be
effective unless approved by the stockholders of the Company in accordance with
applicable law and regulations, at an annual or special meeting held within
twelve months before or after the date of adoption of such amendment, in any
instance in which such amendment would: (i) increase the number of shares of
Common Stock as to which options may be granted under the Plan; or (ii) change
in substance the provisions of Paragraph 6 hereof relating to eligibility to
participate in the Plan.
Except as provided in Paragraph 17 hereof, rights and obligations under
any option granted before termination or
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<PAGE> 20
amendment of the Plan shall not be altered or impaired by such termination or
amendment except with the consent of the optionee.
19. Written Agreement.
Each Option granted hereunder shall be embodied in a written option
agreement which shall be subject to the terms and conditions prescribed above
and shall be signed by the President, any Vice president or the Treasurer of
the Company for and in the name and on behalf of the Company. Such an option
agreement shall contain such other provisions as the Board of Directors in its
discretion shall deem advisable.
20. Effective Date and Duration of Plan.
The Plan shall become effective upon its adoption by the Board of
Directors, provided that the stockholders of the Company shall have approved
the Plan within twelve (12) months prior to or following the adoption of the
Plan by the Board of Directors. Options may not be granted under the Plan more
than ten (10) years after said effective date. The Plan shall terminate (i)
when the total amount of the Common Stock with respect to which Options may be
granted shall have been issued upon the exercise of Options or (ii) by action
of the Board of Directors pursuant to Paragraph 17 hereof, whichever shall
first occur.
21. "Lockup" Agreement.
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<PAGE> 21
The Board of Directors may in its discretion specify upon granting an
Option that the Optionee shall agree for a period of time (not to exceed 180
days) from the effective date of any registration of securities of the Company
(upon request of the Company or the underwriters managing any underwritten
offering of the Company's securities), not to sell, make any short sale of,
loan, grant any option for the purchase of, or otherwise dispose of any shares
issued pursuant to the exercise of such Option, without the prior written
consent of the Company or such underwriters, as the case may be.
***
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<PAGE> 1
EXHIBIT 10.2
OBJECT DESIGN, INC.
1995 NONQUALIFIED STOCK OPTION PLAN
<PAGE> 2
OBJECT DESIGN, INC.
1995 NONQUALIFIED STOCK OPTION PLAN
TABLE OF CONTENTS
1. Purpose of the Plan ........................................... 1
2. Administration ................................................ 1
3. Option Shares ................................................. 2
4. Authority to Grant Options .................................... 2
5. Eligibility ................................................... 2
6. Option Price .................................................. 3
7. Duration of Options ........................................... 3
8. Amount Exercisable; Right of First Refusal .................... 3
9. Exercise of Options ........................................... 4
10. Transferability of Options .................................... 5
11. Termination of Employment or Services or Death of
Optionee ...................................................... 5
(a) Temporary Leave ........................................... 5
(b) Death or Disability ....................................... 5
(c) Retirement ................................................ 6
12. Employment Relationship; Consultant Relationship .............. 6
13. Requirements of Law ........................................... 7
14. No Rights as Stockholder ...................................... 8
15. Employment Obligation ......................................... 8
16. Changes in the Company's Capital Structure .................... 9
(a) Rights of the Company ..................................... 9
(b) Recapitalization, Stock Splits, and Dividends ............. 9
(c) Merger of Company With No Change of Control ...............10
(d) Sale or Merger of Company Where Company Does Not
Survive ...................................................10
(e) Changes to Common Stock Subject to Options ................12
17. Amendment or Termination of The Plan ..........................12
18. Written Agreement .............................................13
19. Effective Date and Duration of Plan ...........................13
20. "Lockup" Agreement ............................................13
<PAGE> 3
OBJECT DESIGN, INC.
1995 NONQUALIFIED STOCK OPTION PLAN
1. Purpose of the Plan.
This 1995 Nonqualified Stock Option Plan (the "Plan") of Object Design,
Inc., a Delaware corporation (the "company"), is designed to provide additional
incentive to present and future executives, key employees and consultants of the
Company (which shall include its subsidiaries as defined in Section 425 of the
Internal Revenue Code of 1986, (the "Code"). The Company intends that this
purpose will be effected by the granting of nonqualified stock options
(collectively, the "Options", and individually, an "Option") under the Plan
which afford such executives, key employees and consultants an opportunity to
acquire or increase their proprietary interest in the Company through the
acquisition of shares of its Common Stock. By encouraging stock ownership by
such executives, salaried employees and consultants, the Company seeks to
attract and retain on a continuing basis the services of persons of exceptional
competence and seeks to furnish an added incentive for them to increase their
efforts on behalf of the Company.
2. Administration.
<PAGE> 4
The Plan shall be administered by the Board of Directors. All questions
of interpretation and application of the Plan, of Options granted hereunder and
of the value of shares of Common Stock subject to an Option, shall be subject to
the determination of the Board of Directors, which determination shall be final
and binding.
3. Option Shares.
The stock subject to the Options and other provisions of the Plan shall
be shares of the Company's Common Stock, $.001 par value (the "Common Stock").
The total amount of the Common Stock with respect to which Options may be
granted shall not exceed in the aggregate 4,000,000 shares; provided, however,
that the class and aggregate number of shares which may be subject to Options
granted hereunder shall be subject to adjustment in accordance with the
provisions of Paragraph 16 hereof. Such shares may be treasury shares or
authorized but unissued shares.
In the event that any outstanding Option for any reason shall expire or
terminate prior to exercise, the shares of Common Stock allocable to the
unexercised portion of such Option may again be subject to an Option under
the Plan.
4. Authority to Grant Options.
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<PAGE> 5
The Board of Directors may grant Options from time to time to such
eligible employees and consultants of the Company as it shall determine.
Subject to any applicable limitations set forth in the Plan or established from
time to time by the Board of Directors, the number of shares of Common Stock to
be covered by any Option shall be as determined by the Board of Directors.
5. Eligibility.
Options may be granted to officers or other employees of the Company or
its Subsidiaries, to members of the Board or the board of directors of any
Subsidiary whether or not employees of the Company or such Subsidiary, and to
certain other individuals providing services to the Company or its Subsidiaries.
Except as otherwise provided, for all purposes of the Plan the term
"subsidiary corporation" shall mean any corporation of which 50% or more of its
outstanding voting stock is at the time owned by the Company or by one or more
subsidiaries or by the Company and one or more subsidiaries.
6. Option Price.
The price at which shares may be purchased pursuant to Options shall be
specified by the Board of Directors at the time the Option is granted.
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<PAGE> 6
7. Duration of Options.
The Board of Directors in its discretion may provide that an Option
shall be exercisable during any specified period of time from the date such
Option is granted.
8. Amount Exercisable; Right of First Refusal.
Each Option may be exercised, so long as it is valid and outstanding,
from time to time in part or as a whole, subject to any limitations with
respect to the number of shares for which the Option may be exercised at a
particular time and to such other conditions as the Board of Directors in its
discretion may specify upon granting the Option.
The Board of Directors may also, or alternatively, specify upon
granting an Option that prior to the effective date of a registration statement
under the Securities Act of 1933 covering any shares of Common Stock, all or a
portion of the shares purchasable upon exercise of such Option shall be subject
to a right of first refusal in favor of the Company in the event that the
optionee wishes to sell, assign, transfer, exchange, encumber or otherwise
dispose of any of such shares issued pursuant to exercise of such Option or any
interest in such shares. If such restriction is imposed, the Option shall
contain appropriate provisions, and the shares issued upon exercise shall
bear an
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<PAGE> 7
appropriate legend, disclosing the Company's right of first refusal.
9. Exercise of Options.
Subject to the provisions of Paragraph 13 hereof, Options shall be
exercised by the delivery of written notice to the Company setting forth the
number of shares with respect to which the Option is to be exercised, together
with (a) cash, certified check, bank draft or postal or express money order
payable to the order of the Company for an amount equal to the option price of
such shares, or (b) with the consent of the Company, shares of Common Stock of
the Company having a fair market value equal to the option price of such
shares, or (c) with the consent of the Company, a combination of (a) and (b),
and specifying the address to which the certificates for such shares are to be
mailed. For the purpose of the preceding sentence, the fair market value of the
shares of Common Stock so delivered to the Company shall be determined in
accordance with procedures adopted by the Board of Directors. As promptly as
practicable after receipt of such written notification and payment, the Company
shall deliver to the optionee certificates for the number of shares with
respect to which such Option has been so exercised, issued in the optionee's
name; provided, however, that such delivery shall be
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<PAGE> 8
deemed effected for all purposes when a stock transfer agent of the Company
shall have deposited such certificates in the United States mail, addressed to
the optionee, at the address specified pursuant to this Paragraph 9.
10. Transferability of Options.
Options shall not be transferable by the optionee otherwise than by
will or under the laws of descent and distribution, and shall be exercisable,
during his lifetime, only by him.
11. Termination of Employment or Services or Death of Optionee.
Except as may be otherwise expressly provided herein or as may be
otherwise expressly provided in the terms and conditions of the option granted
to an Optionee, Options may not be exercised after the earlier of:
(i) the date of expiration thereof; or
(ii) the date of termination of the optionee's employment with or
services to the Company if the termination is by the Company for cause (as
determined by the Company), or if voluntarily by the optionee; or
(iii) Thirty (30) days after termination of the optionee's employment
with or services to the Company by it without cause.
(a) Temporary Leave. Whether authorized temporary leave of absence,
or absence on military or government service, shall
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<PAGE> 9
constitute termination of the employment or consultant relationship between the
Company and the optionee shall be determined by the Board of Directors at the
time thereof.
(b) Death or Disability. In the event the optionee's employment with
or service to the Company is terminated while the optionee is an employee or
consultant in good standing for reasons of permanent disability under the then
established rules of the Company or in the event of the death and before the
date of expiration of such Option, such Option may be exercised until the
earlier of such date of expiration or one (1) year following the date of such
termination for reason of permanent disability or death. Should such termination
for reason of permanent disability or death occur after the first anniversary
of the date at which the optionee was first employed or otherwise began to
serve the Company, the Option may be exercised for up to the greater of (i) 50%
of all Option shares (and such shares shall be deemed vested) or (ii) the
number of shares that had vested as of the date of such death or such
retirement. After the death of the optionee, his executors, administrators or
any person or persons to whom his Option may be transferred by will or by
laws of descent and distribution, shall have the right to exercise the
Option.
-7-
<PAGE> 10
(c) Retirement. If, before the date of expiration of the Option, the
optionee as an employee shall be retired in good standing from the employ of
the Company for reasons of age under the then established rules of the Company,
the Option may be exercised until the earlier of such date of expiration or
thirty (30) days after the date of such retirement, to the extent to which the
optionee was entitled to exercise such Option immediately prior to such
retirement.
12. Employment Relationship; Consultant Relationship. An employment
relationship between the Company and the optionee shall be deemed to exist
during any period in which the optionee is employed by the Company. A
consultant relationship between the Company and the optionee shall be deemed to
exist during any period in which the optionee renders services as a consultant
or otherwise on an independent contractor basis to the Company.
13. Requirements of Law.
The Company shall not be required to sell or issue any shares under any
Option if the issuance of such shares shall constitute a violation by the
optionee or by the Company of any provision of any law, regulation or order of
any governmental authority. Without limiting the generality of the foregoing,
-8-
<PAGE> 11
upon exercise of any Option, the Company shall not be required to issue such
shares unless the Board of Directors has received evidence satisfactory to it
to the effect that the holder of such Option will not transfer such shares
except pursuant to a registration statement in effect under the Securities Act
of 1933, as now in effect or hereafter amended (the "Act"), and under the
applicable securities laws of any State, unless the Company has received an
opinion of counsel satisfactory to the Company, in form and substance
satisfactory to the Company, to the effect that such registration is not
required. Any determination in this connection by the Board of Directors shall
be final, binding and conclusive. In the event the shares issuable on exercise
of an Option are not registered under the Act, the Company may imprint the
following legend or any other legend which counsel for the Company considers
necessary or advisable to comply with the Act or other applicable laws:
"The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933 or under the securities laws
of any State and may not be sold or transferred except upon such
registration or upon receipt by the Corporation of an opinion of counsel
satisfactory to the Corporation, in form and substance satisfactory to
the Corporation, that registration is not required for such sale or
transfer."
-9-
<PAGE> 12
The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Act; and in the event any shares are
so registered the Company may remove any legend on certificates representing
such shares. The Company shall not be obligated to take any other affirmative
action in order to cause the exercise of an Option or the issuance of shares
pursuant thereto to comply with any other law, regulation or order of any
governmental authority.
14. No Rights as Stockholder.
No optionee shall have rights as a stockholder with respect to shares
covered by his Option until the date of issuance of a stock certificate for
such shares; and, except as otherwise provided in Paragraph 16 hereof, no
adjustment for dividends, or otherwise, shall be made if the record date
therefor is prior to the date of issuance of such certificate.
15. Employment Obligation.
The granting of any Option shall not impose upon the Company any
obligation to employ or continue to employ, or to retain or to continue to
retain the services of, any optionee; and the right of the Company to terminate
the employment or services of any officer or other employee or consultant shall
not be
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<PAGE> 13
diminished or affected by reason of the fact that an Option has been granted
to him.
16. Changes in the Company's Capital Structure.
(a) Rights of the Company
The existence of outstanding Options shall not affect in any way the
right or power of the Company or its stockholders to make or authorize any or
all adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Common Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all or
any part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
(b) Recapitalization, Stock Splits, and Dividends
If the Company shall effect a subdivision or consolidation of shares or
other capital readjustment, the payment of a stock dividend, or other increase
or reduction of the number of shares of the Common Stock outstanding, without
receiving compensation therefor in money, services or property, then (i) the
number, class, and per share price of shares of stock subject to
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<PAGE> 14
outstanding Options hereunder shall be appropriately adjusted in such a manner
as to entitle an optionee to receive upon exercise of an Option, for the same
aggregate cash consideration, the same total number and class of shares as he
would have received as a result of the event requiring the adjustment had he
exercised his Option in full immediately prior to such event; and (ii) the
number and class of shares with respect to which Options may be granted under
the Plan shall be adjusted by substituting for the total number of shares of
Common Stock then reserved that number and class of shares of stock that would
have been received by the owner of an equal number of outstanding shares of
Common Stock as the result of the event requiring the adjustment.
(c) Merger of Company With No Change of Control.
After a merger of one or more corporations into the Company, or after
a consolidation of the Company with one or more corporations in which (i) the
Company shall be the surviving corporation and (ii) the stockholders of the
Company prior to such merger or consolidation hold at least fifty percent
(50%) of the voting shares of the Company after such merger or consolidation,
each holder of an outstanding Option shall, at no additional cost, be
entitled upon exercise of such Option to receive (subject to any required
action by stockholders) in lieu
-12-
<PAGE> 15
of the number of shares as to which such Option shall then be so exercisable,
the number and class of shares of stock or other securities to which such
holder would have been entitled pursuant to the terms of the agreement of
merger or consolidation if, immediately prior to such merger or consolidation,
such holder had been the holder of record of a number of shares of Common Stock
equal to the number of shares as to which such Option shall be so exercised.
(d) Sale or Merger of Company Where Company Does Not Survive.
If the Company is merged into or consolidated with another corporation
under circumstances where the Company is not the surviving corporation, or if
there is a merger or consolidation where the Company is the surviving
corporation and the Stockholders of the Company prior to such merger or
consolidation do not hold at least fifty percent (50%) of the voting shares of
the Company after such merger or consolidation occurs, or if the Company is
liquidated, or sells or otherwise disposes of substantially all its assets to
another corporation while unexercised Options remain outstanding under the
Plan, (i) subject to the provisions of clause (iii) below, after the effective
date of such merger, consolidation or sale, as the case may be, each holder of
an outstanding Option shall be entitled,
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<PAGE> 16
upon exercise of such Option, to receive, in lieu of shares of Common Stock,
shares of such stock or other securities, cash or property as the holders of
shares of Common Stock received pursuant to the terms of the merger,
consolidation or sale; (ii) the Board of Directors may accelerate the time for
exercise of all unexercised and unexpired Options to and after a date prior to
the effective date of such merger, consolidation, liquidation or sale, as the
case may be specified by the Board; or (iii) all outstanding Options may be
cancelled by the Board of Directors as of the effective date of any such
merger, consolidation, liquidation or sale provided that (x) notice of such
cancellation shall be given to each holder of an Option and (y) each holder of
an Option shall have the right to exercise such Option to the extent that the
same is then exercisable or, if the Directors shall have accelerated the time
for exercise of all unexercised and unexpired Options, in full during the
30-day period preceding the effective date of such merger, consolidation,
liquidation, sale or acquisition.
(e) Changes to Common Stock Subject to Options
Except as hereinbefore expressly provided, the issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash or
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<PAGE> 17
property, or for labor or services either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, or upon conversion of shares or
obligations of the Company convertible into such shares or other securities,
shall not affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock then subject to
outstanding Options.
17. Amendment or Termination of The Plan.
The Board of Directors may terminate the Plan at any time, and may
amend the Plan at any time and from time to time, subject to the limitation
that, except as provided in Paragraph 17 hereof, no amendment shall be
effective unless approved by the stockholders of the Company in accordance with
applicable law and regulations, at an annual or special meeting held within
twelve months before or after the date of adoption of such amendment, in any
instance in which such amendment would: (i) increase the number of shares of
Common Stock as to which options may be granted under the Plan, or (ii) change
in substance the provisions of Paragraph 5 hereof relating to eligibility to
participate in the Plan.
Except as provided in Paragraph 16 hereof, rights and obligations under
any option granted before termination or
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<PAGE> 18
amendment of the Plan shall not be altered or impaired by such termination
or amendment except with the consent of the optionee.
18. Written Agreement.
Each Option granted hereunder shall be embodied in a written option
agreement which shall be subject to the terms and conditions prescribed above
and shall be signed by the President, any Vice President or the Treasurer
of the Company for and in the name and on behalf of the Company. Such an option
agreement shall contain such other provisions as the Board of Directors in its
discretion shall deem advisable.
19. Effective Date and Duration of Plan.
The Plan shall become effective upon its adoption by the Board of
Directors, provided that the stockholders of the Company shall have approved
the Plan within twelve (12) months prior to or following the adoption of the
Plan by the Board of Directors. Options may not be granted under the Plan
more than ten (10) years after said effective date. The Plan shall terminate
(i) when the total amount of the Common Stock with respect to which Options
may be granted shall have been issued upon the exercise of Options or (ii) by
action of the Board of Directors pursuant to Paragraph 17 hereof, whichever
shall first occur.
20. "Lockup" Agreement.
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<PAGE> 19
The Board of Directors may in its discretion specify upon granting
an Option that the Optionee shall agree for a period of time (not to exceed
180 days) from the effective date of any registration of securities of the
Company (upon request of the Company or the underwriters managing any
underwritten offering of the Company's securities), not to sell, make any
short sale of, loan, grant any option for the purchase of, or otherwise dispose
of any shares issued pursuant to the exercise of such Option, without the
prior written consent of the Company of such underwriters, as the case may be.
***
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<PAGE> 1
EXHIBIT 10.5
OBJECT DESIGN, INC.
25 Burlington Mall Road
Burlington, MA 01803
April 18, 1995
Fleet Bank of Massachusetts, N.A.
75 State Street
Boston, MA 02109
Gentlemen:
This letter agreement will set forth certain understandings between
Object Design, Inc., a Delaware corporation (the "Borrower") and Fleet Bank of
Massachusetts, N.A. (the "Bank") with respect to Revolving Loans and Term Loans
(each as hereinafter defined) which may have been or may hereafter be made by
the Bank to the Borrower and with respect to letters of credit which may have
been or may hereafter be issued by the Bank for the account of the Borrower. In
consideration of the mutual promises contained herein and in the other documents
referred to below, and for other good and valuable consideration, receipt and
sufficiency of which are hereby acknowledged, the Borrower and the Bank agree as
follows:
I. AMOUNTS AND TERMS
1.1. Reference to Documents. Reference is made to (i) that certain
$5,000,000 principal amount promissory note (the "Revolving Note") of even date
herewith made by the Borrower and payable to the order of the Bank, (ii) that
certain $1,500,000 original principal amount promissory note dated November 19,
1993, as modified by Allonge of even date herewith (as so modified, "Term Note
I") made by the Borrower and payable to the order of the Bank, (iii) that
certain $1,500,000 original principal amount promissory note dated June 24,
1994, as modified by Allonge of even date herewith (as so modified, "Term Note
II") made by the Borrower and payable to the order of the Bank, (iv) that
certain security Agreement from the Borrower to the Bank dated June 23, 1993, as
heretofore amended (as so amended, the "Security Agreement") and (v) that
certain Pledge Agreement dated as of August 20, 1993, as heretofore amended (as
so amended, the "Pledge") from the Borrower to the Bank relating to the capital
stock of Object Design Security Corporation, a Massachusetts
<PAGE> 2
corporation ("ODSC"). This letter agreement supersedes and replaces in its
entirety that certain letter agreement between the Bank and the Borrower dated
June 23, 1993, as heretofore amended (as so amended, the "1993 Letter
Agreement"). The Bank has no further commitment or obligation of any sort under
the 1993 Letter Agreement (including, without limitation, any commitment on the
part of the Bank to make any loan or other extension of credit thereunder);
provided that (i) Term Note I (as amended by Allonge as described above) and
Term Note II (as amended by Allonge as described above) remain outstanding and
are entitled to the benefits of this letter agreement and the Security
Agreement, (ii) effective as of the date hereof and without any further request
from the Borrower, the principal of and any interest accrued on any revolving
loans made under the 1993 Letter Agreement and outstanding at the date hereof
will be deemed repaid in full and replaced by Revolving Loans made under this
letter agreement, (iii) that portion of the "Term Loan III" facility provided
for by the Fourth Loan Modification Agreement dated as of June 24, 1994 between
the Borrower and the Bank which has not been advanced prior to the date hereof
may be advanced under the conditions set forth in Section 1.5 below, and (iv)
any letters of credit heretofore issued under the 1993 Letter Agreement and
outstanding at the date hereof will be deemed to be letters of credit issued and
outstanding under this letter agreement.
1.2. Revolving Loans; Revolving Note. Subject to the terms and
conditions hereinafter set forth, the Bank will make loans ("Revolving Loans")
to the Borrower, in such amounts as the Borrower may request, at the Principal
Office of the Bank on any Business Day prior to the first to occur of (i) the
Expiration Date or (ii) the earlier termination of the within-described
revolving financing arrangements pursuant to Section 5.2 or Section 6.7;
provided, however, that (1) the aggregate principal amount of Revolving Loans
outstanding shall at no time exceed the Maximum Revolving Amount (hereinafter
defined) and (2) the Aggregate Revolving Bank Liabilities (hereinafter defined)
shall at no time exceed the Borrowing Base (hereinafter defined). Within such
limits, and subject to the terms and conditions hereof, the Borrower may obtain
Revolving Loans, repay Revolving Loans and obtain Revolving Loans again on one
or more occasions. The Revolving Loans shall be evidenced by the Revolving Note
and interest thereon shall be payable at the times and at the rate provided for
in the Revolving Note. Overdue principal of the
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<PAGE> 3
Revolving Loans and, to the extent permitted by law, overdue interest shall bear
interest at a fluctuating rate per annum which at all times shall be equal to
the sum of (i) two (2%) percent per annum plus (ii) the per annum rate otherwise
payable under the Revolving Note (but in no event in excess of the maximum rate
from time to time permitted by then applicable law), compounded monthly and
payable on demand. The Borrower hereby irrevocably authorizes the Bank to make
or cause to be made, on a schedule attached to the Revolving Note or on the
books of the Bank, at or following the time of making each Revolving Loan and of
receiving any payment of principal, an appropriate notation reflecting such
transaction and the then aggregate unpaid principal balance of the Revolving
Loans. The amount so noted shall constitute presumptive evidence as to the
amount owed by the Borrower with respect to principal of the Revolving Loans.
Failure of the Bank to make any such notation shall not, however, affect any
obligation of the Borrower or any right of the Bank hereunder or under the
Revolving Note.
1.3. Repayment; Renewal of Revolving Loan Facility. The Borrower shall
repay in full all Revolving Loans and all interest thereon upon the first to
occur of: (i) the Expiration Date or (ii) an acceleration under Section 5.2(a)
following an Event of Default. The Borrower may repay at any time, without
penalty or premium, the whole or any portion of any Revolving Loan. In addition,
if at any time the Borrowing Base is in an amount which is less than the then
outstanding Aggregate Revolving Bank Liabilities, the Borrower will forthwith
prepay so much of the Revolving Loans as may be required (or arrange for
termination of such letters of credit as may be required) so that the Aggregate
Revolving Bank Liabilities will not exceed the Borrowing Base. The Bank may, at
its sole discretion, renew the revolving financing arrangements described in
this letter agreement by extending the Expiration Date in a writing signed by
the Bank and accepted by the Borrower. Neither the inclusion in this letter
agreement or elsewhere of covenants relating to periods of time after the
Expiration Date, nor any other provision hereof, nor any action (except a
written extension pursuant to the immediately preceding sentence), non-action or
course of dealing on the part of the Bank will be deemed an extension of, or
agreement on the part of the Bank to extend, the Expiration Date.
1.4. Term Loan I; Term Note I. At various times during 1993 and 1994
the Bank made a series of advances of a term loan
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<PAGE> 4
("Term Loan I") to the Borrower in the aggregate original principal amount of
$1,500,000. Term Loan I is evidenced by Term Note I. The principal amount of
Term Loan I will be paid in the installments and at the times set forth in Term
Note I. Interest on Term Loan I shall be payable at the times and at the rate
provided for in Term Note I. Overdue principal of Term Loan I and, to the extent
permitted by law, overdue interest on Term Loan I shall bear interest at a
fluctuating rate per annum which at all times shall be equal to the sum of (i)
two (2%) percent per annum plus (ii) the per annum rate otherwise payable under
Term Note I (but in no event in excess of the maximum rate from time to time
permitted by then applicable law), compounded monthly and payable on demand. The
Borrower hereby irrevocably authorizes the Bank to make or cause to be made, on
a schedule attached to Term Note I or on the books of the Bank, at or following
the time of receiving any payment of principal of Term Loan I, an appropriate
notation reflecting such transaction and the then aggregate unpaid principal
balance of Term Loan I. The amount so noted with respect to Term Note I shall
constitute presumptive evidence as to the amount owed by the Borrower with
respect to principal of Term Loan I. Failure of the Bank to make any such
notation shall not, however, affect any obligation of the Borrower or any right
of the Bank hereunder or under Term Note I.
The Borrower may prepay, at any time or from time to time, without
premium or penalty, the whole or any portion of Term Loan I; provided that each
such principal prepayment shall be accompanied by payment of all interest under
Term Note I accrued but unpaid to the date of payment. Any partial prepayment of
principal of Term Loan I will be applied to installments of principal of Term
Loan I thereafter coming due, in inverse order of normal maturity. Amounts paid
or prepaid with respect to principal of Term Loan I will not be available for
reborrowing.
1.5. Term Loan II; Term Note II. In addition to the foregoing, the Bank
has established a facility for an additional term loan to the Borrower ("Term
Loan II") in an aggregate principal amount of up to $1,500,000. Term Loan II
shall be made in several advances (an aggregate of $1,142,971 having been
advanced prior to the date hereof) as requested by the Borrower; provided that
(i) no advance of Term Loan II will be made after May 31, 1995; (ii) the
aggregate original principal amounts of all such advances will not exceed
$1,500,000; (iii) no such
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<PAGE> 5
advance will be made for less than $250,000; (iv) no such advance will be in an
amount more than 80% of the invoiced purchase price of the property constituting
the items of Qualifying Equipment with respect to which such advance is made
(excluding taxes, shipping, software, installation charges and other "soft
costs"); and (v) the Qualifying Equipment with respect to which each such
advance is made shall have been acquired by the Borrower no more than 90 days
prior to the relevant advance. Prior to the making of each advance of Term Loan
II, and as.a precondition thereto, the Borrower will provide the Bank with: (i)
invoices supporting the costs of the relevant Qualifying Equipment; (ii) such
evidence as the Bank may require showing that the Qualifying Equipment has been
installed at the Borrower's Burlington, MA premises, has become fully
operational, has been paid for by the Borrower and is owned by the Borrower free
of all liens and interests of any other Person (other than the security interest
of the Bank pursuant to the Security Agreement); (iii) evidence satisfactory to
the Bank that the Qualifying Equipment is fully insured against casualty loss,
with insurance naming the Bank as secured party and first loss payee; and (iv)
all such Uniform Commercial Code financing statements and other documentation as
may be necessary or desirable in order to perfect and/or confirm the Bank's
security interest in the Qualifying Equipment. Term Loan II is evidenced by Term
Note II, and interest on Term Loan II shall be payable at the times and at the
rate provided for in Term Note II. Overdue principal of Term Loan II and, to the
extent permitted by law, overdue interest on Term Loan II shall bear interest at
a fluctuating rate per annum which at all times shall be equal to the sum of (i)
two (2%) percent per annum plus (ii) the per annum rate otherwise payable under
Term Note II (but in no event in excess of the maximum rate from time to time
permitted by then applicable law), compounded monthly and payable on demand. The
Borrower hereby irrevocably authorizes the Bank to make or cause to be made, on
a schedule attached to Term Note II or on the books of the Bank, at or following
the time of making each advance of Term Loan II and of receiving any payment of
principal, an appropriate notation reflecting such transaction and the then
aggregate unpaid principal balance of Term Loan II. The amount so noted shall
constitute presumptive evidence as to the amount owed by the Borrower with
respect to principal of Term Loan II. Failure of the Bank to make any such
notation shall not, however, affect any obligation of the Borrower or any right
of the Bank hereunder or under Term Note II.
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<PAGE> 6
1.6. Principal Repayment of Term Loan II. All advances of Term Loan II
which were made on or prior to June 30, 1994 are hereinafter referred to as
"Tranche 1 Advances". Principal of all Tranche 1 Advances are repayable by the
Borrower to the Bank in 36 equal consecutive monthly installments. Such
installments commenced on July 1, 1994 and will continue on the first day of
each month thereafter through and including June 1, 1997. Each such monthly
installment of principal shall be in an amount equal to 1/36th of the aggregate
outstanding principal balance of the Tranche 1 Advances as at the close of
business on June 30, 1994. Advances of Term Loan II which were made at any time
during the period beginning on July 1, 1994 and continuing through and including
December 31, 1994 are hereinafter referred to as "Tranche 2 Advances". Principal
of all Tranche 2 Advances shall be repaid by the Borrower to the Bank in 36
equal consecutive monthly installments (each in an amount equal to 1/36th of the
aggregate principal amount of Tranche 2 Advances outstanding at the close of
business on December 31, 1994). Such installments commenced on January 1, 1995
and will continue on the first day of each month thereafter through and
including December 1, 1997. Advances of Term Loan II which may be made at any
time during the period beginning on January 1, 1995 and continuing through and
including May 31, 1995 are hereinafter referred to as "Tranche 3 Advances".
Principal of all Tranche 3 Advances shall be repaid by the Borrower to the Bank
in 36 equal consecutive monthly installments (each in an amount equal to 1/36th
of the aggregate principal amount of Tranche 3 Advances outstanding at the close
of business on May 31, 1995). Such installments will commence on June 1, 1995
and will continue on the first day of each month thereafter through and
including May 1, 1998. The Borrower may prepay, at any time or from time to
time, without premium or penalty, the whole or any portion of Term Loan II;
provided that each such principal prepayment shall be accompanied by payment of
all interest under Term Note II accrued but unpaid to the date of payment. Any
partial prepayment of principal of Term Loan II will be applied to installments
of principal of Term Note II thereafter coming due in inverse order of normal
maturity. Amounts paid or prepaid with respect to principal of Term Loan II will
not be available for reborrowing.
1.7. Advances and Payments. The proceeds of all Loans shall be credited
by the Bank to a general deposit account maintained by the Borrower with the
Bank. The proceeds of each Revolving Loan will be used by the Borrower solely
for working capital
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<PAGE> 7
purposes. The proceeds of each Term Loan will be used by the Borrower solely to
pay or reimburse acquisition costs of Qualifying Equipment.
The Bank may charge any general deposit account of the Borrower at the
Bank with the amount of all payments of interest, principal and other sums when
same are due, from time to time, under this letter agreement and/or any Note
and/or with respect to any letter of credit; and will thereafter notify the
Borrower of the amount so charged. The failure of the Bank so to charge any
account or to give any such notice shall not affect the obligation of the
Borrower to pay interest, principal or other sums as provided herein or in any
Note or with respect to any letter of credit.
Whenever any payment to be made to the Bank hereunder or under any Note
or with respect to any letter of credit shall be stated to be due on a day which
is not a Business Day, such payment may be made on the next succeeding Business
Day, and interest payable on each such date shall include the amount thereof
which shall accrue during the period of such extension of time. All payments by
the Borrower hereunder and/or in respect of any Note and/or with respect to any
letter of credit shall be made net of any impositions or taxes and without
deduction, set-off or counterclaim, notwithstanding any claim which the Borrower
may now or at any time hereafter have against the Bank. All payments of
interest, principal and any other sum payable hereunder and/or under any Note
and/or with respect to any letter of credit shall be made to the Bank at its
Principal Office, in immediately available funds. All payments received by the
Bank after 2:00 p.m. on any day shall be deemed received as of the next
succeeding Business Day. All monies received by the Bank shall be applied first
to fees, charges, costs and expenses payable to the Bank under this letter
agreement, any Note and/or any of the other Loan Documents and/or with respect
to any letter of credit, next to interest then accrued on account of any Loans
or letter of credit reimbursement obligations and only thereafter to principal
of the Loans and letter of credit reimbursement obligations, being applied
against the Loans and/or such obligations in such order as the Borrower may
designate (and, failing such designation, being applied first against the letter
of credit reimbursement obligations, next against the Revolving Loans and
thereafter against installments of the Term Loans in inverse order of normal
maturity). All interest and fees payable
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<PAGE> 8
hereunder and/or under any Note shall be calculated on the basis of a 360-day
year for the actual number of days elapsed.
1.8. Letters of Credit. At the Borrower's request, the Bank may, from
time to time, in its sole discretion issue one or more letters of credit for the
account of the Borrower; provided that at the time of such issuance and after
giving effect thereto the Aggregate Revolving Bank Liabilities will in no event
exceed the lesser of (i) $5,000,000 or (ii) the then effective Borrowing Base.
Any such letter of credit will be issued for such fee and upon such terms and
conditions as may be agreed to by the Bank and the Borrower at the time of
issuance. The Borrower hereby authorizes the Bank, without further request from
the Borrower, to cause the Borrower's liability to the Bank for reimbursement of
funds drawn under any such letter of credit to be repaid from the proceeds of a
Revolving Loan to be made hereunder. The Borrower hereby irrevocably requests
that such Revolving Loans be made.
1.9. Conditions to Advance. Prior to the making of the initial Loan or
advance hereunder or the issuance of any letter of credit hereunder, the
Borrower shall deliver to the Bank duly executed copies of this letter
agreement, the Revolving Note, the Allonges to the Term Notes and the documents
and other items listed on the Closing Agenda delivered herewith by the Bank to
the Borrower, all of which, as well as all legal matters incident to the
transactions contemplated hereby, shall be satisfactory in form and substance to
the Bank and its counsel.
Without limiting the foregoing, any Loan or advance or letter of credit
issuance (including the initial Loan or advance or letter of credit issuance) is
subject to the further conditions precedent that on the date on which such Loan
or advance is made or such letter of credit is issued (and after giving effect
thereto):
(a) All statements, representations and warranties of the Borrower made
in this letter agreement and/or the Security Agreement shall continue to be
correct in all material respects as of the date of such Loan or advance or
issuance of such letter of credit, as the case may be.
(b) All covenants and agreements of the Borrower contained herein
and/or in any of the other Loan Documents shall have been
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<PAGE> 9
complied with in all material respects on and as of the date of such Loan or
advance or issuance of such letter of credit, as the case may be.
(c) No event which constitutes, or which with notice or lapse of time
or both could constitute, an Event of Default shall have occurred and be
continuing.
(d) No material adverse change shall have occurred in the financial
condition of the Borrower from that disclosed in the financial statements then
most recently furnished to the Bank.
Each request by the Borrower for any Revolving Loan or for any advance
of Term Loan II or for the issuance of a letter of credit, and each acceptance
by the Borrower of the proceeds of any Revolving Loan or advance of Term Loan II
or delivery of a letter of credit, will be deemed a representation and warranty
by the Borrower that at the date of such Revolving Loan or advance of Term Loan
II or letter of credit issuance, as the case may be, and after giving effect
thereto all of the conditions set forth in the foregoing clauses (a)-(d) of this
Section 1.9 will be satisfied. Each request for a Revolving Loan or any letter
of credit issuance will be accompanied by a borrowing base certificate on a form
satisfactory to the Bank, executed by the chief financial officer of the
Borrower, unless such a certificate shall have been previously furnished setting
forth the Borrowing Base as at a date not more than 15 days prior to the date of
the requested borrowing.
II. REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties. In order to induce the Bank to
enter into this letter agreement and to make Loans hereunder and/or issue
letters of credit hereunder, the Borrower warrants and represents to the Bank as
follows:
(a) The Borrower is a corporation duly organized, validly existing and
in good standing under the laws of Delaware. The Borrower has full corporate
power to own its property and conduct its business as now conducted and as
contemplated to be conducted, to grant the security interests contemplated by
the Security Agreement and to enter into and perform this letter agreement and
the other Loan Documents. The Borrower is duly qualified to do business and in
good standing in Massachusetts
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<PAGE> 10
and in each other jurisdiction in which the Borrower maintains any facility,
sales office or warehouse and in each other jurisdiction where the failure so to
qualify could (singly or in the aggregate with all other such failures) have a
material adverse effect on the financial condition, business or prospects of the
Borrower, all such jurisdictions, as at the date of this letter agreement, being
listed on item 2.1(a) of the attached Disclosure Schedule. At the date hereof,
the Borrower has no subsidiaries except as shown on said item 2.1(a). The
Borrower is not a member of any partnership or joint venture.
(b) At the date of this letter agreement, all of the outstanding
capital stock of the Borrower is owned, of record and beneficially, as set forth
on item 2.1(b) of the attached Disclosure Schedule. The Borrower owns 100% of
the outstanding capital stock of each Subsidiary.
(c) The execution, delivery and performance by the Borrower of this
letter agreement and each of the other Loan Documents have been duly authorized
by all necessary corporate and other action and do not and will not:
(i) violate any provision of, or require any filings (other
than filings under the Uniform Commercial Code), registration, consent
or approval under, any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to the Borrower;
(ii) violate any provision of the charter or by-laws of the
Borrower, or result in a breach of or constitute a default or require
any waiver or consent under any indenture or loan or credit agreement
or any other material agreement, lease or instrument to which the
Borrower is a party or by which the Borrower or any of its properties
may be bound or affected or require any other consent of any Person; or
(iii) result in, or require, the creation or imposition of any
lien, security interest or other encumbrance (other than in favor of
the Bank), upon or with respect to any of the properties now owned or
hereafter acquired by the Borrower.
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<PAGE> 11
(d) This letter agreement and each of the other Loan Documents has been
duly executed and delivered by the Borrower and each is a legal, valid and
binding obligation of the Borrower, enforceable against the Borrower in
accordance with its respective terms.
(e) Except as described on item 2.1(e) of the attached Disclosure
Schedule, there are no actions, suits, proceedings or investigations pending or,
to the knowledge of the Borrower, threatened by or against the Borrower or any
subsidiary of the Borrower before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, which
could hinder or prevent the consummation of the transactions contemplated hereby
or call into question the validity of this letter agreement or any of the other
Loan Documents or any other instrument provided for or contemplated by this
letter agreement or any of the other Loan Documents or any action taken or to be
taken in connection with the transactions contemplated hereby or thereby or
which in any single case or in the aggregate might result in any material
adverse change in the business, prospects, condition, affairs or operations of
the Borrower or any such Subsidiary.
(f) The Borrower is not in violation of any term of its charter or
by-laws as now in effect. Neither the Borrower nor any Subsidiary of the
Borrower is in material violation of any term of any mortgage, indenture or
judgment, decree or order, or any other instrument, contract or agreement to
which it is a party or by which any of its property is bound.
(g) Subject to the matters described in the last sentence of this
Subsection 2.1(g), the Borrower has filed (and has caused each Subsidiary of the
Borrower to file) all federal, foreign, state and local tax returns, reports and
estimates required to be filed by the Borrower or any such Subsidiary. Except as
otherwise described in the last sentence of this Subsection, all such filed
returns, reports and estimates are proper and accurate and the Borrower (or the
Subsidiary concerned, as the case may be) has paid all taxes, assessments,
impositions, fees and other governmental charges required to be paid in respect
of the periods covered by such returns, reports or estimates. To the best of the
Borrower's knowledge (and except as otherwise described in the last sentence of
this Subsection), no deficiencies for any tax, assessment or governmental charge
have
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<PAGE> 12
been asserted or assessed, and the Borrower knows of no material tax liability
or basis therefor. The Borrower believes that it may owe certain sales and use
taxes in California, Massachusetts, Illinois and Texas in amounts which have
heretofore been disclosed to the Bank,, the Borrower hereby representing that it
has established on its financial statements reserves against all of its
liabilities for such taxes.
(h) To the best knowledge of the Borrower, the Borrower is in
compliance (and each Subsidiary of the Borrower is in compliance) with all
requirements of law, federal, state and local, and all requirements of all
governmental bodies or agencies having jurisdiction over it, the conduct of its
business, the use of its properties and assets, and all premises occupied by it,
failure to comply with which could (singly or in the aggregate with all other
such failures) have a material adverse effect upon the assets, business,
financial condition or prospects of the Borrower or any such Subsidiary. Without
limiting the foregoing, the Borrower has all the franchises, licenses (subject
to the qualifications set forth in Subsection 2.1(k) below), leases, permits,
certificates and authorizations needed for the conduct of its business and the
use of its properties and all premises occupied by it,.as now conducted, owned
and used and as proposed to be conducted, owned and used.
(i) The audited financial statements of the Borrower as at December 31,
1994, heretofore delivered to the Bank, fairly present the financial condition
of the Borrower as at the date thereof and for the period covered thereby. The
Borrower has no liability, contingent or otherwise, not disclosed in the
aforesaid December 31, 1994 financial statements that could materially affect
the financial condition of the Borrower. Since December 31, 1994, there has been
no material adverse development in the business or condition of the Borrower and
the Borrower has not entered into any transaction other than in the ordinary
course.
(j) The principal place of business and chief executive offices of the
Borrower are located at 25 Burlington Mall Road, Burlington, MA 01803. All of
the books and records of the Borrower are located at the address set forth in
the immediately preceding sentence. Except as described on item 2.1(j) of the
attached Disclosure Schedule, no assets of the Borrower are located at any other
address. Said item 2.1(j) of the attached
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<PAGE> 13
Disclosure Schedule sets forth the names and addresses of all record owners of
each location where any of the Borrower's assets are located. For the purposes
of this letter agreement, "Premises" shall mean all premises owned, leased or
operated by the Borrower and/or any subsidiaries of the Borrower, all of which
are set forth on item 2.1(j) of the attached Disclosure Schedule.
(k) The Borrower owns or possesses (or will be able to acquire, on
reasonable terms, adequate licenses or other rights to use) all of the patents,
licenses, copyrights, trademarks, trade names and franchises ("Intellectual
Property") now being used or necessary to conduct its business, all of which are
described on Item 2.1(k) of the attached Disclosure Schedule. Except as
described in item 2.1(k) of the attached Disclosure Schedule, to the best of the
Borrower's knowledge, the conduct of the Borrower's business as now operated
does not conflict with valid patents, licenses, copyrights, trademarks, trade
name rights or franchises of others in any manner that could materially
adversely affect the business or assets or condition, financial or otherwise, of
the Borrower.
(l) To the best of the Borrower's knowledge, none of the executive
officers or key employees of the Borrower is subject to any confidentiality,
noncompetition or similar agreement in favor of anyone other than the Borrower
which could reasonably be expected to have a material adverse effect on the
business, prospects or financial condition of the Borrower.
(m) The Borrower is not a party to any contract or agreement which now
has or, as far as can be foreseen by the Borrower at the date hereof, may have a
material adverse effect on the financial condition, business, prospects or
properties of the Borrower.
III. AFFIRMATIVE COVENANTS AND REPORTING REQUIREMENTS
Without limitation of any covenants and agreements contained in the
Security Agreement or elsewhere, the Borrower agrees that so long as the
financing arrangements contemplated hereby are in effect or any Revolving Loan
or all or any portion of any Term Loan or any of the other obligations shall be
outstanding or any letter of credit issued hereunder shall be outstanding:
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<PAGE> 14
3.1. Legal Existence; Qualification; Compliance. The Borrower will
maintain (and will cause each Subsidiary of the Borrower to maintain) its
corporate existence and good standing in the jurisdiction of its incorporation.
The Borrower will remain qualified to do business and in good standing in
Massachusetts and the Borrower will qualify to do business and remain qualified
and in good standing (and will cause each Subsidiary of the Borrower to qualify
and remain qualified and in good standing) in each other jurisdiction where it
maintains any facility, sales office, warehouse or other location and in each
other jurisdiction in which the failure so to qualify could (singly or in the
aggregate with all other such failures) have a material adverse effect on the
financial condition, business or prospects of the Borrower or any such
Subsidiary. The Borrower will comply (and will use its best efforts to cause
each Subsidiary of the Borrower to comply) with its charter documents and
by-laws and, in all material respects, with all contractual requirements by
which it or any of its properties may be bound. The Borrower will comply with
(and will cause each Subsidiary of the Borrower to comply with) all applicable
laws, rules and regulations (including, without limitation, ERISA and those
relating to environmental protection) other than (i) laws, rules or regulations
the validity or applicability of which the Borrower or such Subsidiary shall be
contesting in good faith by proceedings which serve as a matter of law to stay
the enforcement thereof and (ii) those laws, rules and regulations the failure
to comply with any of which could not (singly or in the aggregate) reasonably be
expected to have a material adverse effect on the financial condition, business
or prospects of the Borrower or any such Subsidiary.
3.2. Maintenance of Property; Insurance. The Borrower will maintain and
preserve (and will use its best efforts to cause each Subsidiary of the Borrower
to maintain and preserve) all of its properties in good working order and
condition, ordinary wear and tear excepted, making all necessary repairs thereto
and replacements thereof. The Borrower will maintain all such insurance as may
be required under the Security Agreement and will also maintain, with
financially sound and reputable insurers, insurance with respect to its property
and business against such liabilities, casualties and contingencies and of such
types and in such amounts as shall be reasonably satisfactory to the Bank from
time to time and in any event all such insurance as may from time to time be
customary for
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<PAGE> 15
companies conducting a business similar to that of the Borrower in similar
locales.
3.3. Payment of Taxes. The Borrower will pay and discharge (and will
use its best efforts to cause each Subsidiary of the Borrower to pay and
discharge) all taxes, assessments and governmental charges or levies imposed
upon it or upon its income or property, including, without limitation, taxes,
assessments, charges or levies relating to real and personal property,
franchises, income, unemployment, old age benefits, withholding, or sales or
use, prior to the date on which penalties would attach thereto, and all lawful
claims (whether for any of the foregoing or otherwise) which, if unpaid, might
give rise to a lien upon any property of the Borrower or any such Subsidiary,
except any of the foregoing which is being contested in good faith and by
appropriate proceedings which serve as a matter of law to stay the enforcement
thereof and for which the Borrower has established and is maintaining adequate
reserves. Notwithstanding the foregoing, this Section 3.3 will not be deemed to
require the Borrower to pay prior to June 30, 1995 the state sales and use taxes
described in the last sentence of Subsection 2.1(g) above, provided that the
Borrower maintains at all times reserves for the full amount of its liability
for such taxes. The Borrower will pay, and will cause each of its Subsidiaries
to pay, in a timely manner, all lease obligations, all trade debt, purchase
money obligations, equipment lease obligations and all of its other
Indebtedness. The Borrower will perform and fulfill all material covenants and
agreements under any leases of real estate, agreements relating to purchase
money debt, equipment leases and other material contracts. The Borrower will
maintain in full force and effect, and comply with the terms and conditions of,
all permits, permissions and licenses necessary for its business.
3.4. Accounts. The Borrower will maintain its principal depositing and
operating accounts with the Bank.
3.5. Conduct of Business. The Borrower will conduct, in the ordinary
course, the business in which it is presently engaged. The Borrower will not,
without the prior written consent of the Bank, directly or indirectly (itself or
through any Subsidiary), enter into any other lines of business, businesses or
ventures outside the area of software design and licensing and related
industries.
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<PAGE> 16
3.6. Reporting Requirements. The Borrower will furnish to the Bank:
(i) Within 90 days after the end of each fiscal year of the
Borrower, a copy of the annual audit report for such fiscal year for
the Borrower, including therein consolidated and consolidating balance
sheets of the Borrower and Subsidiaries as at the end of such fiscal
year and related consolidated and consolidating statements of income,
stockholders' equity and cash flow for the fiscal year then ended. The
annual consolidated financial statements shall be certified by
independent public accountants selected by the Borrower and reasonably
acceptable to the Bank, such certification to be in such form as is
generally recognized as "unqualified".
(ii) Within 30 days after the end of each month, consolidated
and consolidating balance sheets of the Borrower and its Subsidiaries
and related consolidated and consolidating statements of income and
cash flow, unaudited but prepared in accordance with generally accepted
accounting principles fairly presenting the financial condition of the
Borrower as at the dates thereof and for the periods covered thereby
(except that such monthly statements need not contain footnotes) and
certified as fairly presenting the Borrower's financial condition
(subject to normal year-end audit adjustments, which shall not be
material) by the chief financial officer of the Borrower (such
certification being deemed given on behalf of the Borrower), such
balance sheets to be as at the end of each such month and such
statements of income and cash flow to be for such month and for the
year to date, in each case together with a comparison to budget.
(iii) At the time of delivery of each annual financial
statement of the Borrower and of delivery of each monthly statement
given as at the end of a fiscal quarter, a certificate executed by the
chief financial officer of the Borrower (such certificate being deemed
given on behalf of the Borrower) stating that he or she has reviewed
this letter agreement and the other Loan Documents and has no knowledge
of any default by the Borrower in the performance or observance of any
of the provisions of this letter agreement or of any of the other Loan
Documents or, if he or
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<PAGE> 17
she has such knowledge, specifying each such default and the nature
thereof. Each such certificate given as at the end of any fiscal
quarter shall also set forth the calculations necessary to evidence
compliance with Sections 3.7-3.11.
(iv) Monthly, within 15 days after the end of each month (if
at such month-end any Revolving Loan is outstanding or any letter of
credit issued by the Bank for the account of the Borrower is
outstanding), (A) an aging report in form satisfactory to the Bank
covering all Receivables of the Borrower outstanding as at the end of
such month and (B) a certificate of the chief financial officer of the
Borrower (such certificate being deemed given on behalf of the
Borrower) setting forth the Borrowing Base as at the end of such month,
all in form reasonably satisfactory to the Bank.
(v) Promptly after receipt, a copy of all audits or reports
submitted to the Borrower by independent public accountants in
connection with any annual, special or interim audits of the books of
the Borrower and any letter of comments directed by such accountants to
the management of the Borrower.
(vi) Should any securities of the Borrower be publicly traded
or if registration of such securities is being sought, the Borrower
will furnish to the Bank, promptly upon same becoming available, one
copy of each financial statement, report, notice or proxy statement
sent by the Borrower to stockholders or the holders of debt securities
generally, and of each regular or periodic report and any registration
statement, prospectus or listing application filed by the Borrower with
the National Association of securities Dealers, any securities exchange
or the securities and Exchange commission or any successor agency.
(vii) As soon as possible and in any event within five days of
the occurrence of any Event of Default or any event which, with the
giving of notice or passage of time or both, would constitute an Event
of Default, the statement of the Borrower setting forth details of such
Event of Default or event and the action which the Borrower proposes to
take with respect thereto.
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<PAGE> 18
(viii) Promptly after the commencement thereof, notice of all
actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality,
domestic or foreign, to which the Borrower or any Subsidiary of the
Borrower is a party.
(ix) Promptly after the Borrower has knowledge thereof,
written notice of any development or circumstance which is likely to
have a material adverse effect on the Borrower or its business,
properties, assets, Subsidiaries or condition, financial or otherwise.
(x) Promptly upon request, such other information respecting
the financial condition, operations, Receivables, inventory, machinery
or equipment of the Borrower or any Subsidiary as the Bank may from
time to time reasonably request.
3.7. Debt to Worth. The Borrower will maintain as at the end of each
fiscal quarter of the Borrower (commencing with its results as at March 31,
1995) on a consolidated basis a Leverage Ratio of not more than 1.0 to 1. As
used herein, "Leverage Ratio" means the ratio of (x) Senior Debt of the Borrower
and Subsidiaries to (y) Capital Base of the Borrower.
3.8. Capital Base. The Borrower will maintain as at the end of each
fiscal quarter of the Borrower (commencing with its results as at March 31,
1995) a consolidated Capital Base which shall not be less than the
then-effective Capital Base Requirement. As used herein, the "Capital Base
Requirement" in effect at any quarter-end will be deemed to be the sum of (i)
the then-applicable Minimum TCB plus (ii) 50% of the net proceeds of any equity
securities sold by the Borrower after December 31, 1994 through the end of the
relevant fiscal quarter and 50% of the proceeds of any Subordinated Debt issued
by the Borrower and/or its Subsidiaries after December 31, 1994 through the end
of the relevant fiscal quarter (nothing contained herein being deemed to approve
the issuance of any such additional Subordinated Debt). As used herein, the
"Minimum TCB" is $9,000,000 as at March 31, 1995; $7,000,000 as at June 30,
1995; $6,000,000 as at September 30, 1995; and $5,000,000 as at December 31,
1995 and as at each fiscal quarter-end thereafter.
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3.9. Quick Ratio. The Borrower will maintain as at the end of each
fiscal quarter of the Borrower (commencing with its results as at March 31,
1995) a ratio of Net Quick Assets to Current Liabilities, which ratio shall be
not less than 2.0 to 1.
3.10. Profitability. The Borrower will not incur a quarterly
consolidated Net Loss in excess of $3,000,000 for its fiscal quarter ending
March 31, 1995. The Borrower will not incur a quarterly consolidated Net Loss in
excess of $2,000,000 for its fiscal quarter ending June 30, 1995. The Borrower
will not incur a quarterly consolidated Net Loss in excess of $1,500,000 for its
fiscal quarter ending September 30, 1995. The Borrower will achieve quarterly
consolidated Net Income of not less than $1.00 for its fiscal quarter ending
December 31, 1995 and for each fiscal quarter thereafter. The Borrower will not
incur an annual consolidated Net Loss in excess of $7,000,000 for its fiscal
year ending December 31, 1995. The Borrower will achieve Net Income of at least
$1,000,000 for its fiscal year ending December 31, 1996 and for each fiscal year
thereafter.
3.11. Capital Expenditures. The Borrower and its Subsidiaries will not
incur, on a consolidated basis, Capital Expenditures in excess of $500,000 in
any one fiscal quarter (commencing with its fiscal quarter ending March 31,
1995), nor will the Borrower and its Subsidiaries incur, on a consolidated
basis, Capital Expenditures in excess of $2,000,000 in any fiscal year.
3.12. Books and Records. The Borrower will maintain (and cause each of
its Subsidiaries to maintain) books, records and accounts which will at all
times accurately and fairly reflect all of its transactions in accordance with
generally accepted accounting principles consistently applied. The Borrower
will, at any reasonable time and from time to time upon reasonable notice and
during normal business hours (and at any time and without any necessity for
notice following the occurrence of an Event of Default), permit the Bank, and
any agents or representatives thereof, to examine and make copies of and take
abstracts from the records and books of account of, and visit the properties of
the Borrower and any of its Subsidiaries, and to discuss its affairs, finances
and accounts with its managers., officers or directors and independent
accountants, all of whom are hereby authorized and directed to cooperate with
the Bank in carrying out the intent of this Section 3.12. Each financial
statement
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of the Borrower hereafter delivered pursuant to this letter agreement will
fairly present the financial condition of the Borrower as at the date thereof
and for the periods covered thereby. Except as otherwise permitted in this
letter agreement and/or the Security Agreement, the Bank will not at any time
use (for any purpose other than in connection with monitoring the
within-described loan facilities and/or enforcing its rights hereunder and/or
under the Security Agreement) any information of any kind to which the Bank is
given access or which is provided to the Bank by the Borrower pursuant to this
Section 3.12 (such information being hereinafter referred to, subject to the
last sentence of this Section 3.12, as the "Confidential Information"). The Bank
agrees that it will use reasonable efforts to ensure that Confidential
Information will not be disclosed to any other Person without the Borrower's
consent; provided, however, that nothing contained herein will be deemed to
preclude any such disclosure: (1) to employees, officers, directors and/or
agents of the Bank in connection with the approval of Loans, letters of credit
or other credit facilities or in connection with the administration of this
letter agreement, any Loans, letters of credit and/or other credit facilities;
(2) to internal or independent auditors; (3) to any examiners or other
officials, employees or agents of any federal or state governmental regulatory
agency, board, commission, public corporation or similar entity; (4) if ordered
by any court or governmental agency having or claiming jurisdiction; (5) to any
actual or proposed assignee of or participant in any Loan; and/or (6) in
connection with any suit, action or other proceeding to collect any Loans or
enforce any other right under this letter agreement, the Security Agreement
and/or any of the Notes. Notwithstanding the foregoing, it is agreed that
"Confidential Information" expressly excludes: (1) any information filed with a
public agency or otherwise within the public domain, (2) any information
supplied to the Bank by a third party under circumstances in which the recipient
of such information does not know of (and should not reasonably have known of)
any confidential relationship between such third party and the Borrower which
would restrict dissemination of such information, and (3) any information
supplied by or on behalf of the Borrower which is not labelled "confidential" or
as to which the Borrower has not otherwise indicated that disclosure is
prohibited.
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<PAGE> 21
3.13. Landlord's Waiver. Prior to the making of the first Loan the
Borrower will use its best efforts to obtain, and will thereafter use its best
efforts to maintain in effect at all times, waivers from the owners of all
premises in which any material amount of Collateral is located, such waivers to
be in form and substance satisfactory to the Bank.
IV. NEGATIVE COVENANTS.
Without limitation of any covenants and agreements contained in the
Security Agreement or elsewhere, the Borrower agrees that so long as the
financing arrangements contemplated hereby are in effect or any Revolving Loan
or all or any portion of any Term Loan or any of the other Obligations shall be
outstanding or any letter of credit issued hereunder shall be outstanding:
4.1. Indebtedness. The Borrower will not create, incur, assume or
suffer to exist any Indebtedness (nor allow any of its Subsidiaries to create,
incur, assume or suffer to exist any Indebtedness), except for:
(i) Indebtedness owed to the Bank, including, without
limitation, the Indebtedness represented by the Notes and any
Indebtedness in respect of letters of credit issued by the Bank;
(ii) Indebtedness of the Borrower or any Subsidiary for taxes,
assessments and governmental charges or levies not yet due and payable;
(iii) unsecured current liabilities of the Borrower or any
Subsidiary (other than for money borrowed or for purchase money
Indebtedness with respect to fixed assets) incurred upon customary
terms in the ordinary course of business;
(iv) purchase money Indebtedness (including, without
limitation, Indebtedness in respect of capitalized equipment leases)
owed to equipment vendors and/or lessors for equipment purchased or
leased by the Borrower for use in the Borrower's business, provided
that the total of Indebtedness permitted under this clause (iv)
(exclusive of presently-existing equipment financing permitted under
clause (v) of
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this Section 4.1) will not exceed $1,500,000 in the aggregate
outstanding at any one time;
(v) other Indebtedness existing at the date hereof, but only
to the extent set forth on item 4.1 of the attached Disclosure Schedule
and not including any refinancing or replacement of any of same; and
(vi) any guaranties or other contingent liabilities expressly
permitted pursuant to Section 4.3.
4.2. Liens. The Borrower will not create, incur, assume or suffer to
exist (nor allow any of its Subsidiaries to create, incur, assume or suffer to
exist) any mortgage, deed of trust, pledge, lien, security interest, or other
charge or encumbrance (including the lien or retained security title of a
conditional vendor) of any nature (collectively, "Liens") upon or with respect
to any of its property or assets, now owned or hereafter acquired, except:
(i) Liens for taxes, assessments or governmental charges or
levies on property of the Borrower or any of its Subsidiaries if the
same shall not at the time be delinquent or thereafter can be paid
without interest or penalty or if the same are being contested in good
faith and by appropriate proceedings which serve as a matter of law to
stay the enforcement thereof and as to which adequate reserves are
maintained on the Borrower's books in accordance with generally
accepted accounting principles;
(ii) Liens imposed by law, such as carriers', warehousemen's
and mechanics' liens and other similar Liens arising in the ordinary
course of business, which Liens either (x) do not in the aggregate
materially detract from the value of the property or assets subject
thereto and do not materially impair the use of such property and
assets in the operation of the Borrower's business or (y) are being
contested in good faith and by appropriate proceedings which serve as a
matter of law to stay the enforcement thereof and as to which adequate
reserves have been made;
(iii) Liens (other than any Liens imposed by ERISA), pledges
or deposits under workmen's compensation laws,
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<PAGE> 23
unemployment insurance, social security, retirement benefits or similar
legislation;
(iv) pledges or deposits securing the performance of bids,
tenders, leases, contracts (other than for the repayment of borrowed
money or the deferred purchase price of property), statutory
obligations, progress payments, surety and appeal bonds and other
obligations of like nature, in each case incurred in the ordinary
course of business and provided that same do not in the aggregate
materially detract from the value of the Collateral or materially
impair the use of any Collateral in the operation of the Borrower's
business;
(v) rights in favor of other Persons arising under Section
2-502 of the Uniform Commercial Code that are special property
interests in goods identified as goods to which a contract refers;
(vi) Liens in favor of the Bank;
(vii) Liens in favor of equipment vendors and/or lessors
securing purchase money Indebtedness to the extent permitted by clause
(iv) of Section 4.1; provided that no such Lien will extend to any
property of the Borrower or any Subsidiary other than the specific
items of equipment financed; or
(viii) other Liens existing at the date hereof, but only to
the extent and with the relative priorities set forth on item 4.2 of
the attached Disclosure Schedule.
4.3. Guaranties. The Borrower will not, without the prior written
consent of the Bank, assume, guarantee, endorse or otherwise become directly or
contingently liable (including, without limitation, liable by way of agreement,
contingent or otherwise, to purchase, to provide funds for payment, to supply
funds to or otherwise invest in any debtor or otherwise to assure any creditor
against loss) in connection with any indebtedness of any other Person (nor will
the Borrower permit any Subsidiary to do so), except (i) guaranties by
endorsement for deposit or collection in the ordinary course of business and
(ii) currently existing guaranties described on item 4.3 of the attached
Disclosure Schedule.
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<PAGE> 24
4.4. Dividends. The Borrower will not, without the prior written
consent of the Bank, make any distributions to its shareholders, pay any
dividends (other than dividends payable solely in capital stock of the Borrower)
or redeem, purchase or otherwise acquire, directly or indirectly any of its
capital stock; provided, however, that the Borrower may make Qualified Payments
(hereinafter defined) so long as at the time of making each such Qualified
Payment and after giving effect thereto the Borrower is not in default under any
of Sections 3.7, 3.8, 3.9 or 5.1(a) and prior to such payment the Borrower
submits to the Bank calculations certified by the Borrower's chief financial
officer and reasonably satisfactory to the Bank demonstrating on a pro forma
basis that no default wi.11 occur under any of Sections 3.7, 3.8 or 3.9 as
at the next fiscal quarter end. As used herein, "Qualified Payment" means any
payment made by the Borrower to repurchase or redeem capital stock to the extent
required by the terms of the Series E and Series F Convertible Preferred Stock
Purchase Agreement by and between the Borrower and International Business
Machines corporation dated as of April 12, 1993, the Fifth Amended and Restated
Preferred Stock Redemption Agreement by and among the Borrower and certain
stockholders of the Borrower dated as of May 14, 1993 (as same may be from time
to time further amended and/or restated) and certain Stock Restriction and
Repurchase Agreements by and between the Borrower and certain employees of the
Borrower.
4.5. Loans and Advances. The Borrower will not make any loans or
advances (nor permit any subsidiary to make any loans or advances) to any
Person, including, without limitation, the Borrower's directors, officers and
employees, except (i) loans and advances existing at the date of this letter
agreement and set forth on item 4.5 of the attached Disclosure Schedule, and
(ii) future loans and advances to directors, officers or employees with respect
to expenses incurred by them in the ordinary course of their duties and advances
against salary, all of which future loans and advances will not exceed, in the
aggregate, $100,000 outstanding at any one time.
4.6. Investments. The Borrower will not, without the Bank's prior
written consent, invest in, hold or purchase any stock or securities of any
Person (nor will the Borrower permit any of its Subsidiaries to invest in,
purchase or hold any such stock or securities) except (i) readily marketable
direct obligations of, or obligations guarantied by, the United States
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<PAGE> 25
of America or any agency thereof, (ii) other investment grade debt securities,
(iii) mutual funds, the assets of which are primarily invested in items of the
kind described in the foregoing clauses (i) and (ii) of this Section 4.6, (iv)
deposits with or certificates of deposit issued by the Bank and any other
obligations of the Bank or the Bank's parent, (v) deposits with or certificates
of deposit issued by any United States commercial bank having more than
$100,000,000 in capital, and (vi) investments in any Subsidiaries now existing
or hereafter created by the Borrower pursuant to Section 4.7 below; provided
that in any event the Tangible Net Worth of the Borrower alone (exclusive of
its investment in Subsidiaries, except as provided in the next following
sentence, and exclusive of any debt owed by any Subsidiary to the Borrower)
will not be less than 85% of the consolidated Tangible Net Worth of the
Borrower and Subsidiaries. Notwithstanding the foregoing provisions of this
Section 4.6, ODSC may hold cash and investments of the types described in
clauses (i)- (iv) of the first sentence of this Section 4.6 in an aggregate
amount not to exceed $20,000,000 and, as long as the Pledge is in effect and no
default exists thereunder the Tangible Net Worth of ODSC (not in excess of
$20,000,000) will be deemed combined with that of the Borrower for the purpose
of determining compliance with the 85% test set forth in the immediately
preceding sentence. The Borrower now owns and at all times will own 100% of the
capital stock of ODSC. The Borrower will cause ODSC at all times:
(i) not to have or incur any Indebtedness to any Person, other than
taxes not yet due and payable; not to incur, assume or suffer to exist
any Lien on any of its assets; and not to make or assume or be liable
for any guaranty of Indebtedness of others;
(ii) to have no employees;
(iii) to conduct no business other than buying, selling,
dealing in or holding securities in its own behalf and not
as a broker; and
(iv) to maintain books and records separate from the Borrower and
conduct its corporate affairs in all respects as a separate corporation
and not as the agent or alter ego of the Borrower.
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<PAGE> 26
4.7. Subsidiaries; Acquisitions. The Borrower will not form (except as
provided below in this Section 4.7) or acquire any new subsidiary or make any
other acquisition of the stock of any Person or of all or substantially all of
the assets of any other Person without the Bank's prior written consent. The
Borrower will not become a partner in any partnership if the effect of such
arrangement is to permit any Person other than the Borrower to bind any assets
of the Borrower or incur any Indebtedness on behalf of the Borrower.
Notwithstanding the foregoing provisions of this Section 4.7, the Borrower may
create one or more new Subsidiaries for the purposes of marketing and
distribution; provided that (i) that the Bank is given at least 10 days' prior
written notice of the creation of any such Subsidiary, and (ii) giving effect to
the creation of any such Subsidiaries and the investments from time to time made
by the Borrower therein, the Borrower will always be in compliance with the
proviso appearing at the end of the first sentence of Section 4.6.
4.8. Merger. The Borrower will not, without the prior written consent
of the Bank, merge or consolidate with any Person or sell, lease, transfer or
otherwise dispose of any material portion of its assets (whether in one or more
transactions), other than sale of inventory in the ordinary course.
4.9. Affiliate Transactions. The Borrower will not, without the prior
written consent of the Bank, enter into any transaction, including, without
limitation, the purchase, sale or exchange of any property or the rendering of
any service, with any affiliate of the Borrower, except in the ordinary course
of and pursuant to the reasonable requirements of the Borrower's business and
upon fair and reasonable terms no less favorable to the Borrower than would be
obtained in a comparable arms'-length transaction with any Person not an
affiliate; provided that nothing in this Section 4.9 shall be deemed to prohibit
the payment of
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<PAGE> 27
salary or other similar payments to any officer or director of the Borrower at a
level consistent with the salary and other payments being paid at the date of
this letter agreement and heretofore disclosed in writing to the Bank, nor to
prevent the hiring of additional officers at a salary level consistent with
industry practice, nor to prevent reasonable periodic increases in salary. For
the purposes of this letter agreement, "affiliate" means any Person which,
directly or indirectly, controls or is controlled by or is under common control
with the Borrower; any officer or director or former officer or director
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<PAGE> 28
of the Borrower; any Person owning of record or beneficially, directly or
indirectly, 5% or more of any class of capital stock of the Borrower or 5% or
more of any class of capital stock or other equity interest having voting power
(under ordinary circumstances) of any of the other Persons described above; and
any member of the immediate family of any of the foregoing. "Control" means
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of any Person, whether through ownership
of voting equity, by contract or otherwise.
4.10. Change of Address, etc. The Borrower will not change its name or
legal structure, nor will the Borrower move its chief executive office or
principal place of business from the address described in the first sentence of
Section 2.1(j) above, nor will the Borrower remove any books or records from
such address, nor will Borrower keep any Collateral at any location other than
the Premises without, in each instance, giving the Bank at least 30 days' prior
written notice and providing all such financing statements, certificates and
other documentation as the Bank may request in order to maintain the perfection
and priority of the security interests granted or intended to be granted
pursuant to the Security Agreement. The Borrower will not change its fiscal year
or methods of financial reporting unless, in each instance, prior written notice
of such change is given to the Bank and prior to such change the Borrower enters
into amendments to this letter agreement in form and substance satisfactory to
the Bank in order to preserve unimpaired the rights of the Bank and the
obligations of the Borrower hereunder.
4.11. Hazardous Waste. Except as provided below, the Borrower will not
dispose of or suffer or permit to exist any hazardous material or oil on any of
the Premises, nor shall the Borrower store (or permit any Subsidiary to store)
on any of the Premises, or transport or arrange the transport of, any hazardous
material or oil (the terms "hazardous material", "oil", "site" and "vessel",
respectively, being used herein with the meanings given those terms in Mass.
Gen. Laws, Ch. 21E or any comparable terms in any comparable statute in effect
in any other relevant jurisdiction). To the extent it has knowledge thereof, the
Borrower shall provide the Bank with written notice of (i) the intended storage
or transport of any hazardous material or oil by the Borrower or any Subsidiary
of the Borrower, (ii) any potential or known release or threat of release of any
hazardous
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<PAGE> 29
material or oil at or from any of the Premises, and (iii) any incurrence of any
expense or loss by any government or governmental authority in connection with
the assessment, containment or removal of any hazardous material or oil for
which expense or loss the Borrower or any Subsidiary of the Borrower may be
liable. Notwithstanding the foregoing, the Borrower and its Subsidiaries may
use, store and transport, and need not notify the Bank of the use, storage or
transportation of, (x) oil in reasonable quantities, as fuel for heating of
their respective facilities or for vehicles or machinery used in the ordinary
course of their respective businesses and (y) hazardous materials that are
solvents, cleaning agents or other materials used in the ordinary course of the
respective business operations of the Borrower and its Subsidiaries, in
reasonable quantities, as long as in any case the Borrower or the Subsidiary
concerned (as the case may be) has obtained and maintains in effect any
necessary governmental permits, licenses and approvals, complies with all
requirements of applicable federal, state and local law relating to such use,
storage or transportation, follows the protective and safety procedures that a
prudent businessperson conducting a business the same as or similar to that of
the Borrower or such Subsidiary (as the case may be) would follow, and disposes
of such materials (not consumed in the ordinary course) only through licensed
providers of hazardous waste removal services.
4.12. No Margin Stock. No proceeds of any Loan shall be used directly
or indirectly to purchase or carry any margin security.
4.13. Subordinated Debt. The Borrower will not directly or indirectly
make any optional or voluntary prepayment or purchase of Subordinated Debt or
modify, alter or add any provisions with respect to payment or terms of
Subordinated Debt. The Borrower will not make any payment of any principal of or
interest on any Subordinated Debt at any time when there exists, or if there
would result therefrom, any Event of Default hereunder.
V. DEFAULT AND REMEDIES
5.1. Events of Default. The occurrence of any one of the following
events shall constitute an Event of Default hereunder:
(a) The Borrower shall fail to make any payment of principal of or
interest on the Revolving Note or any Term Note
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<PAGE> 30
on or before the date when due; or the Borrower shall fail to pay when due any
amount owed to the Bank with respect to any letter of credit now or hereafter
issued by the Bank; or
(b) Any representation or warranty of the Borrower contained herein
shall at any time prove to have been incorrect in any material respect when made
or any representation or warranty made by the Borrower in connection with any
Loan or letter of credit shall at any time prove to have been incorrect in any
material respect when made; or
(c) The Borrower shall default in the performance or observance of any
agreement or obligation under any of Sections 3.1, 3.3, 3.6, 3.7, 3.8, 3.9,
3.10 or 3.11 or Article IV; or
(d) The Borrower shall default in the performance of any other term,
covenant or agreement contained in this letter agreement and such default shall
continue unremedied for 30 days after notice thereof shall have been given to
the Borrower; or
(e) Any default on the part of the Borrower or any Subsidiary of the
Borrower shall exist, and shall remain unwaived or uncured beyond the expiration
of any applicable notice and/or grace period, under any other contract,
agreement or undertaking now existing or hereafter entered into with or for the
benefit of the Bank (or any affiliate of the Bank); or
(f) Any default shall exist and remain unwaived or uncured with respect
to any Subordinated Debt of the Borrower or with respect to any instrument
evidencing, guaranteeing, securing or otherwise relating to any such
Subordinated Debt, or any such Subordinated Debt shall not have been paid when
due, whether by acceleration or otherwise, or shall have been declared to be due
and payable prior to its stated maturity, or any event or circumstance shall
occur which permits, or with the lapse of time or giving of notice or both would
permit, the acceleration of the maturity of any Subordinated Debt by the holder
or holders thereof; or
(g) Any default shall exist and remain unwaived or uncured with respect
to any Indebtedness of the Borrower or any Subsidiary of the Borrower in excess
of $100,000 in aggregate principal amount or with respect to any instrument
evidencing, guaranteeing, securing or otherwise relating to any such
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<PAGE> 31
Indebtedness, or any such Indebtedness in excess of $100,000 in aggregate
principal amount shall not have been paid when due, whether by acceleration or
otherwise, or shall have been declared to be due and payable prior to its stated
maturity, or any event or circumstance shall occur which permits, or with the
lapse of time or giving of notice or both would permit, the acceleration of the
maturity of any such Indebtedness by the holder or holders thereof; or
(h) The Borrower shall be dissolved, or the Borrower or any Subsidiary
of the Borrower shall become insolvent or bankrupt or shall cease paying its
debts as they mature or shall make an assignment for the benefit of creditors,
or a trustee, receiver or liquidator shall be appointed for the Borrower or any
Subsidiary of the Borrower or for a substantial part of the property of the
Borrower or any such Subsidiary, or bankruptcy, reorganization, arrangement,
insolvency or similar proceedings shall be instituted by or against the Borrower
or any such Subsidiary under the laws of any jurisdiction (except for an
involuntary proceeding filed against the Borrower or any Subsidiary of the
Borrower which is dismissed within 60 days following the institution thereof);
or
(i) Any attachment, execution or similar process shall be issued or
levied against any of the property of the Borrower or any Subsidiary and such
attachment, execution or similar process shall not be paid, stayed, released,
vacated or fully bonded within 10 days after its issue or levy; or
(j) Any final uninsured judgment in excess of $100,000 shall be entered
against the Borrower or any Subsidiary of the Borrower by any court of competent
jurisdiction; or
(k) The Borrower or any Subsidiary of the Borrower shall fail to meet
its minimum funding requirements under ERISA with respect to any employee
benefit plan (or other class of benefit which the PBGC has elected to insure) or
any such plan shall be the subject of termination proceedings (whether voluntary
or involuntary) and there shall result from such termination proceedings a
liability of the Borrower or any subsidiary of the Borrower to the PBGC which in
the reasonable opinion of the Bank may have a material adverse effect upon the
financial condition of the Borrower or any such Subsidiary; or
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<PAGE> 32
(l) The Security Agreement, the Pledge and/or any of the other Loan
Documents shall for any reason (other than due to payment in full of all amounts
secured or evidenced thereby or due to discharge in writing by the Bank) not
remain in full force and effect; or
(m) The security interests and liens of the Bank in and on any of the
Collateral covered or intended to be covered by the Security Agreement or the
Pledge shall for any reason (other than written release by the Bank) not be
fully perfected liens and security interests, subject in priority only to
matters set forth in Section 4.2 above; or
(n) If, at any time, more than 50% of any class of voting stock of the
Borrower shall be held, of record and/or beneficially, by any Person or by any
two or more Persons acting as a "group" (as defined in the Securities Exchange
Act of 1934, as amended, and the regulations thereunder); or
(o) There shall occur any other material adverse change in the
condition (financial or otherwise), operations, properties, assets, liabilities
or earnings of the Borrower.
5.2. Rights and Remedies on Default. Upon the occurrence of any Event
of Default, in addition to any other rights and remedies available to the Bank
hereunder or otherwise, the Bank may exercise any one or more of the following
rights and remedies (all of which shall be cumulative):
(a) Declare the entire unpaid principal amounts of the Revolving Note
and each Term Note then outstanding, all interest accrued and unpaid thereon and
all other amounts payable under this letter agreement and all other Indebtedness
of the Borrower to the Bank to be forthwith due and payable, whereupon the same
shall become forthwith due and payable, without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived by the Borrower.
(b) Terminate the revolving financing arrangements and the facility for
advances of Term Loan II provided for in this letter agreement.
(c) Exercise all rights and remedies hereunder, under the Revolving
Note, under each Term Note, under the Security
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<PAGE> 33
Agreement and under each and any other agreement with the Bank; and exercise all
other rights and remedies which the Bank may have under applicable law.
5.3. Set-off. In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, upon the
occurrence of any Event of Default, the Bank is hereby authorized at any time or
from time to time, without presentment, demand, protest or other notice of any
kind to the Borrower or to any other Person, all of which are hereby expressly
waived, to set off and to appropriate and apply any and all deposits and any
other Indebtedness at any time held or owing by the Bank or any affiliate
thereof to or for the credit or the account of the Borrower against and on
account of the obligations and liabilities of the Borrower to the Bank under
this letter agreement or otherwise, irrespective of whether or not the Bank
shall have made any demand hereunder and although said obligations, liabilities
or claims, or any of them, may then be contingent or unmatured and without
regard for the availability or adequacy of other collateral. As further security
for the Obligations, the Borrower also grants to the Bank a security interest
with respect to all its deposits and all securities or other property in the
possession of the Bank or any affiliate of the Bank from time to time, and, upon
the occurrence of any Event of Default, the Bank may exercise all rights and
remedies of a secured party under the Uniform Commercial Code.
5.4. Letters of Credit. Without limitation of any other right or remedy
of the Bank, (i) if an Event of Default shall have occurred and the Bank shall
have accelerated the Revolving Loans or (ii) if this letter agreement and/or the
revolving financing arrangements described herein shall have expired or shall
have been earlier terminated by either the Bank or the Borrower for any reason,
the Borrower will forthwith deposit with the Bank in cash a sum equal to the
total of all then undrawn amounts of all outstanding letters of credit issued by
the Bank for the account of the Borrower.
VI. MISCELLANEOUS
6.1. Costs and Expenses. The Borrower agrees to pay on demand all costs
and expenses (including, without limitation, reasonable legal fees) of the Bank
in connection with the preparation, execution and delivery of this letter
agreement, the
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Security Agreement, the Revolving Note, any Term Note and all other instruments
and documents to be delivered in connection with any Loan or letter of credit
issued hereunder and any amendments or modifications of any of the foregoing, as
well as the costs and expenses (including, without limitation, the reasonable
fees and expenses of legal counsel) incurred by the Bank in connection with
preserving, enforcing or exercising, upon default, any rights or remedies under
this letter agreement, the Security Agreement, the Revolving Note, any Term Note
and all other instruments and documents delivered or to be delivered hereunder
or in connection herewith, all whether or not legal action is instituted. In
addition, the Borrower shall be obligated to pay any and all stamp and other
taxes payable or determined to be payable in connection with the execution and
delivery of this letter agreement, the Security Agreement, the Revolving Note,
any Term Note and all other instruments and documents to be delivered in
connection with any Obligation. Any fees, expenses or other charges which the
Bank is entitled to receive from the Borrower under this Section shall bear
interest from the date of any demand therefor until the date when paid at a rate
per annum equal to the sum of (i) two (2%) percent plus (ii) the per annum rate
otherwise payable under the Revolving Note (but in no event in excess of the
maximum rate permitted by then applicable law).
6.2. Capital Adequacy. If the Bank shall have determined that the
adoption or phase-in after the date hereof of any applicable law, rule or
regulation regarding capital requirements for banks or bank holding companies,
or any change therein after the date hereof, or any change in the interpretation
or administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by the Bank with any request or directive of such entity regarding
capital adequacy (whether or not having the force of law) has or would have the
effect of reducing the return on the Bank's capital with respect to the
Revolving Loans, any Term Loan and/or the within-described revolving and term
loan facilities and/or letters of credit issued for the account of the Borrower
to a level below that which the Bank could have achieved (taking into
consideration the Bank's policies with respect to capital adequacy immediately
before such adoption, phase-in, change or compliance and assuming that the
Bank's capital was then fully utilized) but for such adoption, phase-in, change
or compliance by any amount deemed by
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<PAGE> 35
the Bank to be material: (i) the Bank shall promptly after its determination of
such occurrence give notice thereof to the Borrower; and (ii) the Borrower shall
pay forthwith to the Bank as an additional fee such amount as the Bank certifies
to be the amount that will compensate it for such reduction with respect to the
Revolving Loans, any Term Loan, within-described revolving and term loan
facilities and/or such letters of credit.
A certificate of the Bank claiming compensation under this Section
shall be conclusive in the absence of manifest error. Such certificate shall set
forth the nature of the occurrence giving rise to such compensation, the
additional amount or amounts to be paid to it hereunder and the method by which
such amounts were determined. In determining such amounts, the Bank may use any
reasonable averaging and attribution methods. No failure on the part of the Bank
to demand compensation on any one occasion shall constitute a waiver of its
right to demand such compensation on any other occasion and no failure on the
part of the Bank to deliver any certificate in a timely manner shall reduce any
obligation of the Borrower to the Bank under this Section.
6.3. Facility Fees. In addition to all other fees heretofore paid by
the Borrower to the Bank, the Borrower will pay to the Bank with respect to the
within-described arrangements for Revolving Loans, on the first day of each
calendar quarter (commencing July 1, 1995) as long as the within-described
revolving loan arrangements are in effect and on the Expiration Date, a
non-refundable quarterly facility fee, payable in arrears in the amount of
$12,500 per quarter (appropriately pro-rated for any partial calendar quarter).
In addition, if the revolving loan financing arrangements established by this
letter agreement are terminated prior to October 2, 1995 for any reason (whether
a termination by the Bank under Section 5.2 due to the Borrower's default or a
voluntary termination by the Borrower under Section 6.7), the Borrower shall
forthwith upon such termination pay to the Bank a sum equal to all of the fees
which would have become due pursuant to the immediately preceding sentence from
the date of such termination through and including October 2, 1995 had no such
termination occurred. Fees described in this Section are in addition to any
balances and fees required by the Bank or any of its affiliates in connection
with any other services made available to the Borrower.
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<PAGE> 36
6.4. Other Agreements. The provisions of this letter agreement are not
in derogation or limitation of any obligations, liabilities or duties of the
Borrower under any of the other Loan Documents or any other agreement with or
for the benefit of the Bank. No inconsistency in default provisions between this
letter agreement and any of the other Loan Documents or any such other agreement
will be deemed to create any additional grace period or otherwise derogate from
the express terms of each such default provision. No covenant, agreement or
obligation of the Borrower contained herein, nor any right or remedy of the Bank
contained herein, shall in any respect be limited by or be deemed in limitation
of any inconsistent or additional provisions contained in any of the other Loan
Documents or any such other agreement.
6.5. Governing Law. This letter agreement and the Notes shall be
governed by, and construed and enforced in accordance with, the laws of The
Commonwealth of Massachusetts.
6.6. Addresses for Notices, etc. All notices, requests, demands and
other communications provided for hereunder shall be in writing and shall be
mailed or delivered to the applicable party at the address indicated below:
If to the Borrower:
Object Design, Inc.
25 Burlington Mall Road
Burlington, MA 01803
Attention: Michael B. Byers, Controller
If to the Bank:
Fleet Bank of Massachusetts, N.A.
High Technology Group
75 State Street
Boston, MA 02109
Attention: Catherine M. Bruton, Vice President
or, as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to the other party complying as to delivery with
the terms of this Section. All such notices, requests, demands and other
communications shall be effective two (2) days after deposit in the United
States mails, if sent postage prepaid, certified or registered
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<PAGE> 37
mail, return receipt requested, addressed as aforesaid. If any such notice,
request, demand or other communication is hand delivered, same shall be
effective upon receipted delivery.
6.7. Binding Effect; Assignment; Termination. This letter agreement
shall be binding upon the Borrower, its successors and assigns and shall inure
to the benefit of the Borrower and the Bank and their respective permitted
successors and assigns. The Borrower may not assign this letter agreement or
any rights hereunder without the express written consent of the Bank. The Bank
may, in accordance with applicable law, from time to time assign or grant
participations in this letter agreement, the Loans, the Notes and/or any
letters of credit issued hereunder. The Borrower may terminate this letter
agreement and the financing arrangements made herein by giving written notice
of such termination to the Bank, together with payment of that amount (if any)
provided for by the second sentence of Section 6.3; provided that no such
termination will release or waive any of the Bank's rights or remedies or any
of the Borrower's obligations under this letter agreement or any of the other
Loan Documents unless and until the Borrower has paid in full all Loans and all
interest thereon and all fees and charges payable in connection therewith and
all letters of credit issued hereunder have been terminated.
6.8. Consent to Jurisdiction. The Borrower irrevocably submits to the
non-exclusive jurisdiction of any Massachusetts court or any federal court
sitting within The Commonwealth of Massachusetts over any suit, action or
proceeding arising out of or relating to this letter agreement and/or any Note.
The Borrower irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of venue of any such
suit, action or proceeding brought in such a court and any claim that any such
suit, action or proceeding has been brought in an inconvenient forum. The
Borrower agrees that final judgment in any such suit, action or proceeding
brought in such a court shall be enforced in any court of proper jurisdiction by
a suit upon such judgment, provided that service of process in such action, suit
or proceeding shall have been effected upon the Borrower in one of the manners
specified in the following paragraph of this Section 6.8 or as otherwise
permitted by law.
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<PAGE> 38
The Borrower hereby consents to process being served in any suit,
action or proceeding of the nature referred to in the preceding paragraph of
this Section 6.8 either (i) by mailing a copy thereof by registered or
certified mail, postage prepaid, return receipt requested, to it at its address
set forth in Section 6.6 or (ii) by serving a copy thereof upon it at its
address set forth in Section 6.6.
6.9. Severability. In the event that any provision of this letter
agreement or the application thereof to any Person, property or circumstances
shall be held to any extent to be invalid or unenforceable, the remainder of
this letter agreement, and the application of such provision to Persons,
properties or circumstances other than those as to which it has been held
invalid and unenforceable, shall not be affected thereby, and each provision of
this letter agreement shall be valid and enforced to the fullest extent
permitted by law.
VII. DEFINED TERMS
7.1. Definitions. In addition to terms defined elsewhere in this letter
agreement, as used in this letter agreement, the following terms have the
following respective meanings:
"Aggregate Revolving Bank Liabilities" - At any time, the sum of (i)
the principal amount of all Revolving Loans then outstanding, plus (ii) all then
undrawn amounts of letters of credit issued by the Bank for the account of the
Borrower, plus (iii) all amounts then drawn on any such letter of credit which
at said date shall not have been reimbursed to the Bank by the Borrower.
"Borrowing Base" - At any time, 75% of the aggregate principal amount
of the Qualified Receivables of the Borrower then outstanding.
"Business Day" - Any day which is not a Saturday, nor a Sunday nor a
public holiday under the laws of the United States of America or The
Commonwealth of Massachusetts applicable to a national bank.
"Capital Base" - At any time, the sum of (i) the consolidated Tangible
Net Worth of the Borrower and Subsidiaries then existing plus (ii) the principal
amount of Subordinated Debt
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<PAGE> 39
of the Borrower then outstanding (nothing contained herein being deemed to
authorize the incurrence of any additional Subordinated Debt).
"Capital Expenditures" - All acquisitions of machinery, equipment,
land, leaseholds, buildings, leasehold improvements and all other expenditures
for purposes which are considered to be fixed assets under generally accepted
accounting principles consistently applied. When a fixed asset is acquired by a
lease which is required to be capitalized pursuant to generally accepted
accounting principles, the amount required to be capitalized pursuant thereto
shall be considered to be an expenditure in the year such asset is first leased.
"Collateral" - All property now or hereafter owned by the Borrower or
in which the Borrower now or hereafter has any interest which is described as
"Collateral" in the Security Agreement and/or in the Pledge.
"Current Liabilities" - All liabilities of the Borrower which are
properly shown as current liabilities on a balance sheet of the Borrower
prepared in accordance with generally accepted accounting principles, including,
without limitation, all capitalized lease payments and other payments under
capitalized leases and fixed prepayments of, and sinking fund payments with
respect to, Indebtedness required to be made within one year from the date of
determination. "Current Liabilities" shall also and in any event be deemed to
include the Revolving Loans. In no event will "Current Liabilities" be deemed to
include any Subordinated Debt nor any liabilities which constitute Deferred
Revenue.
"Deferred Revenue" - At any time, such amount as is then properly shown
as "deferred revenue" on a balance sheet of the Borrower prepared consistently
with the December 31, 1994 financial statements heretofore submitted to the
Bank.
"ERISA" - The Employee Retirement Income Security Act of 1974, as
amended.
"Expiration Date" - May 1, 1996, unless extended by the Bank, which
extension may be given or withheld by the Bank in its sole discretion.
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<PAGE> 40
"Indebtedness" - The total of all obligations of a Person, whether
current or long-term, senior or subordinated, which in accordance with generally
accepted accounting principles would be included as liabilities upon such
Person's balance sheet at the date as of which Indebtedness is to be determined,
and shall also include guaranties, endorsements (other than for collection in
the ordinary course of business) or other arrangements whereby responsibility is
assumed for the obligations of others, whether by agreement to purchase or
otherwise acquire the obligations of others, including any agreement, contingent
or otherwise, to furnish funds through the purchase of goods, supplies or
services for the purpose of payment of the obligations of others.
"Loan" - Any Revolving Loan or any Term Loan.
"Loan Documents" - Each of this letter agreement, the Revolving Note,
the Term Notes, the Security Agreement, the Pledge and each other instrument,
document or agreement evidencing, securing, guaranteeing or relating in any way
to any of the Loans or to any of the letters of credit issued hereunder, all
whether now existing or hereafter arising or entered into.
"Maximum Revolving Amount" - At any date as of which same is to be
determined, the amount by which (x) $5,000,000 exceeds (y) the sum of (i) all
then undrawn amounts of letters of credit issued by the Bank for the account of
the Borrower plus (ii) all amounts then drawn on any such letter of credit which
at said date shall not have been reimbursed to the Bank by the Borrower.
"Net Income" (or "Net Loss") - The book net income (or net loss, as the
case may be) of a Person for any period, after all taxes actually paid or
accrued and all expenses and other charges determined in accordance with
generally accepted accounting principles consistently applied.
"Net Quick Assets" - Such current assets of the Borrower as consist of
cash, cash-equivalents and Receivables other than those due from any affiliate
(less an allowance for bad debt consistent with the Borrower's prior
experience).
"Notes" - Collectively, the Revolving Note and each of the
Term Notes.
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<PAGE> 41
"Obligations" - All Indebtedness, covenants, agreements, liabilities
and obligations, now existing or hereafter arising, made by the Borrower with or
for the benefit of the Bank or owed by the Borrower to the Bank in any capacity.
"PBGC" - The Pension Benefit Guaranty Corporation or any successor
thereto.
"Person" - An individual, corporation, partnership, joint venture,
trust, or unincorporated organization, or a government or any agency or
political subdivision thereof.
"Premises" - As defined in Subsection 2.1(j) above.
"Principal Office" - The principal place of business of the Bank, now
located at 75 State Street, Boston, MA 02109.
"Qualified Receivables" - Only those Receivables of the Borrower which
arise out of bona fide sales made to customers of the Borrower (which customers
are located in the United States and are unrelated to the Borrower) in the
ordinary course of the Borrower's business and which remain unpaid no more than
90 days past the invoice date of such Receivable, the payment of which is not in
dispute. Unless the Bank in its sole discretion otherwise determines with
respect to any Receivable, a Receivable which would otherwise be a Qualified
Receivable shall be deemed not to be a Qualified Receivable (i) if the Bank does
not have a fully perfected first security interest in such Receivable; (ii) if
such Receivable is not free and clear of all adverse interests in favor of any
other Person; (iii) if such Receivable is subject to any deduction, off-set,
contra account, counterclaim or condition; (iv) if a field examination made by
the Bank fails to confirm that such Receivable exists and satisfies all of the
criteria set forth herein to be a Qualified Receivable; (v) if such Receivable
is not properly invoiced at the date of sale; (vi) if the customer or account
debtor has disputed liability or made any claim with respect to the Receivable
or the merchandise covered thereby or with respect to any other Receivable due
from said customer to the Borrower; (vii) if the customer or account debtor has
filed a petition for bankruptcy or any other application for relief under the
Bankruptcy Code or effected an assignment for the benefit of creditors, or if
any petition or any other application for relief under the Bankruptcy Code has
been filed against said customer or account debtor, or if the
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<PAGE> 42
customer or account debtor has suspended business, become insolvent, ceased to
pay its debts as they become due, or had or suffered a receiver or trustee to be
appointed for any of its assets or affairs; (viii) if the customer or account
debtor has failed to pay other Receivables so that an aggregate of 25% of the
total Receivables owing to the Borrower by such customer or account debtor has
been outstanding for more than 90 days; (ix) if such Receivable is owed by the
United States government or any agency or department thereof (unless assigned to
the Bank under the Federal Assignment of Claims Act); or (x) if the Bank
reasonably believes that collection of such Receivable is insecure or that it
may not be paid by reason of financial inability to pay or otherwise, or that
such Receivable is not for any reason suitable for use as a basis for borrowing
hereunder. Notwithstanding the foregoing, any Receivable owed to the Borrower by
a customer located outside the United States may be included in Qualified
Receivables if (i) such Receivable otherwise satisfies all of the requirements
set forth in this definition and (ii) the customer has been approved in writing
by the Bank for this purpose.
"Qualifying Equipment" - Equipment (not including software) purchased
by the Borrower for use in the Borrower's business which meets all of the
following criteria: (i) such equipment consists of one of the items shown on the
Equipment List heretofore delivered by the Borrower to the Bank or has otherwise
been approved by the Bank for use in supporting an advance of Term Loan II, (ii)
each item of such equipment has been delivered to and installed at the Premises
and has become fully operational, and (iii) the Borrower has paid in full for
each item of such equipment and holds title to same, free of all interests and
claims of any other Person (other than the security interest of the Bank).
"Receivables" - All of the Borrower's present and future accounts,
accounts receivable and notes, drafts, acceptances and other instruments
representing or evidencing a right to payment for goods sold or for services
rendered.
"Senior Debt" - The principal amount of all Indebtedness of the
Borrower less the total of (i) the then outstanding principal amount of
Subordinated Debt, and (ii) any Indebtedness shown on the Borrower's balance
sheet which constitutes Deferred Revenue.
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<PAGE> 43
"Subordinated Debt" - Any Indebtedness of the Borrower which is
expressly subordinated, pursuant to a subordination agreement in form and
substance satisfactory to the Bank, to all Indebtedness now or hereafter owed by
the Borrower to the Bank.
"Subsidiary" - Any corporation or other entity of which the Borrower
and/or any of its Subsidiaries, directly or indirectly, owns, or has the right
to control or direct the voting of, fifty (50%) percent or more of the
outstanding capital stock or other ownership interest having general voting
power (under ordinary circumstances).
"Tangible Net Worth" - An amount equal to the total assets of any
Person (excluding (i) the total intangible assets of such Person and (ii) any
assets representing amounts due from any officer, employee or other affiliate of
such Person) minus the total liabilities of such Person. Total intangible assets
shall be deemed to include, but shall not be limited to, the excess of cost over
book value of acquired businesses accounted for by the purchase method,
formulae, trademarks, trade names, patents, patent rights and deferred expenses
(including, but not limited to,, unamortized debt discount and expense,
organizational expense, capitalized software costs and experimental and
development expenses).
"Term Loans" - Each of Term Loan I and Term Loan II.
"Term Notes" - Each of Term Note I and Term Note II.
Any defined term used in the plural preceded by the definite article
shall be taken to encompass all members of the relevant class. Any defined term
used in the singular preceded by "any" shall be taken to indicate any number of
the members of the relevant class.
VIII. AMENDMENTS TO PRIOR DOCUMENTS
8.1. Amendments to Security Agreement. The Security Agreement is hereby
further amended:
(a) By providing that all references therein to a "Letter Agreement"
will be deemed to refer to this letter agreement, as same may be from time to
time amended.
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<PAGE> 44
(b) By providing that all references therein to a "Revolving Note" will
be deemed to refer to the above-referenced $5,000,000 Revolving Note of even
date herewith.
(c) By providing that all references therein to a "Term Note" will be
deemed to refer to each of Term Note I and Term Note II.
(e) By providing that all references therein to a "Term Loan" will be
deemed to refer, collectively, to Term Loan I and Term Loan II.
(f) By providing that the term "Obligations", as used in the Security
Agreement, includes each of the Term Loans and each of the Revolving Loans now
or hereafter outstanding and all liabilities of the Borrower in respect of any
letter of credit now or hereafter issued by the Bank for the account of the
Borrower.
Except as expressly amended hereby, the Security Agreement remains in
full force and effect as heretofore. Whenever in this letter agreement or in any
other Loan Document reference is made to a "Security Agreement", from and after
the date hereof same will be deemed to refer to the Security Agreement as
amended hereby.
8.2. Amendment to Pledge. The Pledge is hereby further amended:
(a) By providing that all references therein to a "Letter Agreement"
will be deemed to refer to this letter agreement, as same may be from time to
time amended.
(b) By providing that all references therein to a "Revolving Note" will
be deemed to refer to the above-referenced $5,000,000 Revolving Note of even
date herewith.
(c) By providing that all references therein to a "Term Note" will be
deemed to refer to each of Term Note I and Term Note II.
(d) By providing that the term "Obligations" as used in the Pledge,
includes each of the Term Loans and each of the Revolving Loans now or hereafter
outstanding and all liabilities of the
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<PAGE> 45
Borrower in respect of any letter of credit now or hereafter issued by the Bank
for the account of the Borrower.
Except as expressly amended hereby, the Pledge remains in full force
and effect heretofore. Whenever in this letter agreement or in any other Loan
Document reference is made to a "Pledge" or "Pledge Agreement", from and after
the date hereof same will be deemed to refer to the Pledge as amended hereby.
This letter agreement is executed, as an instrument under seal, as of
the day and year first above written.
Very truly yours,
OBJECT DESIGN, INC.
By______________________________________
Its
Accepted and agreed:
FLEET BANK OF MASSACHUSETTS, N.A.
By_______________________________
Its
By_______________________________
Its
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<PAGE> 1
EXHIBIT 10.6
This note is subject to the Allonge attached hereto and incorporated herein.
PROMISSORY NOTE
$1,500,000.00 Boston, Massachusetts
November 19, 1993
FOR VALUE RECEIVED, the undersigned Object Design, Inc., a Delaware
corporation (the "Borrower") hereby promises to pay to the order of FLEET BANK
OF MASSACHUSETTS, N.A. (the "Bank") the principal amount of One Million Five
Hundred Thousand and 00/100 ($1,500,000.00) Dollars or such portion thereof as
may have heretofore been advanced or may hereafter be advanced by the Bank
pursuant to Section 1.4 of the below-defined Letter Agreement ("Principal"),
with interest, at the rate hereinafter set forth, on the daily balance of all
unpaid Principal, from the date hereof until payment in full of all Principal
and interest hereunder. As used herein, "Letter Agreement" means that certain
letter agreement dated June 23, 1993 between the Borrower and the Bank, as
amended.
Interest on all unpaid Principal shall be due and payable monthly in
arrears, on the first day of each month commencing on the first such date after
the advance of any Principal and continuing on the first day of each month
thereafter and on the date of payment of this note in full, at a fluctuating
rate per annum (computed on the basis of a year of three hundred sixty (360]
days for the actual number of days elapsed) which shall at all times be equal to
the sum of (i) one (1%) percent per annum plus (ii) the Prime Rate, as in effect
from time to time (but in no event in excess of the maximum rate permitted by
then applicable law). A change in the aforesaid rate of interest will become
effective on the same day on which any change in the Prime Rate is effective.
Overdue Principal and, to the extent permitted by law, overdue interest shall
bear interest at a fluctuating rate per annum which at all times shall be equal
to the sum of (i) two (2%) percent plus (ii) the per annum rate otherwise
payable under this note (but in no event in excess of the maximum rate permitted
by then applicable law), compounded monthly and payable on demand. As used
herein, "Prime Rate" means that rate of interest per annum announced by the Bank
from time to time as its prime rate, it being understood that such
<PAGE> 2
rate is merely a reference rate, not necessarily the lowest, which serves as the
basis upon which effective rates of interest are calculated for obligations
making reference thereto.
Principal shall be repaid in twenty-seven (27) equal consecutive
monthly installments (each in an amount equal to one twenty-eighth (1/28th) of
the outstanding Principal hereof as at the close of business on February 28,
1994), commencing on March 1, 1994 and continuing on the first day of each month
thereafter through and including May 1, 1996, plus a twenty-eighth (28th) and
final payment due on June 1, 1996 in an amount equal to all then remaining
Principal and all interest accrued but unpaid thereon. The Borrower may at any
time and from time to time, without premium or penalty, prepay all or any
portion of said Principal, each such prepayment to be applied against Principal
installments in inverse order of normal maturity.
Payments of both Principal and interest shall be made, in immediately
available funds, at the principal office of the Bank (now located at 75 State
Street, Boston, Massachusetts 02109), or at such other address as the Bank may
from time to time designate.
The undersigned Borrower irrevocably authorizes the Bank to make or
cause to be made, on a schedule attached to this note or on the books of the
Bank, at or following the time of making any advance of the Term Loan (as
defined in the Letter Agreement) and of receiving any payment of Principal, an
appropriate notation reflecting such transaction and the then aggregate unpaid
balance of Principal. Failure of the Bank to make any such notation shall not,
however, affect any obligation of the Borrower hereunder or under the Letter
Agreement. The aggregate unpaid principal amount of the Term Loan, as recorded
by the Bank from time to time on such schedule or on such books, shall
constitute presumptive evidence of such amount.
The Borrower hereby (a) waives notice of and consents to any and all
advances, settlements, compromises, favors and indulgences (including, without
limitation, any extension or postponement of the time for payment), any and all
receipts, substitutions, additions, exchanges and releases of collateral, and
any and all additions, substitutions and releases of any person primarily or
secondarily liable, (b) waives presentment, demand, notice, protest and all
other demands and notices generally in connection with the delivery, acceptance,
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<PAGE> 3
performance, default or enforcement of or under this note, and (c) agrees to
pay, to the extent permitted by law, all reasonable costs and expenses,
including, without limitation, reasonable attorneys' fees, incurred or paid by
the Bank in enforcing this note and any collateral or security therefor, all
whether or not litigation is commenced.
This note is the Term Note referred to in, and is secured by and
entitled to the benefits of, the Letter Agreement and the Security Agreement (as
defined in the Letter Agreement). This note is subject to prepayment as set
forth in the Letter Agreement. The maturity of this note may be accelerated upon
the occurrence of an Event of Default, as provided in the Letter Agreement.
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<PAGE> 4
Executed, as an instrument under seal, as of the day and year first
above written.
CORPORATE
SEAL
ATTEST: OBJECT DESIGN, INC.
___________________________________ By:________________________________
Secretary Its
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<PAGE> 5
ALLONGE TO NOTE
This Allonge to Note is made as of April 18, 1995 between Object
Design, Inc., a Delaware corporation (the "Borrower") and Fleet Bank of
Massachusetts, N.A. (the "Bank"). This Allonge to Note is attached to and amends
that certain promissory note in the original face principal amount of $1,500,000
dated November 19, 1993 ("Term Note I") made by the Borrower and payable to the
order of the Bank. Term Note I is hereby amended, effective as of the date
hereof:
a. By deleting from the first grammatical paragraph of Term
Note I the words "or such portion thereof as may have
heretofore been advanced or may hereafter be advanced by the
Bank pursuant to Section 1.4" and by substituting in their
stead the following:
"heretofore advanced by the Bank to
the Borrower as described in Section 1.4"
b. By providing that all references in Term Note I to a
"Letter Agreement" will be deemed to refer to that certain
letter agreement of even date with this Allonge between the
Borrower and the Bank, as such letter agreement may be from
time to time amended.
c. By deleting from the fifth grammatical paragraph of Term
Note I the words "the Term Loan" in both places where same
appear and by substituting in their stead the following:
"Term Loan I"
d. By deleting from the seventh grammatical paragraph of Term
Note I the words "the Term Note" and by substituting in their
stead the following:
"Term Note I"
Except as expressly amended hereby, Term Note I remains in full force
and effect as heretofore.
<PAGE> 6
WITNESS the execution of this Allonge to Note, as an instrument under
seal, as of the day and year first above written.
OBJECT DESIGN, INC.
By_________________________________
Name:
Title:
FLEET BANK OF MASSACHUSETTS, N.A.
By_________________________________
Name:
Title:
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<PAGE> 1
EXHIBIT 10.7
This note is subject to the Allonge attached hereto and incorporated
herein.
PROMISSORY NOTE
$1,500,000.00 Boston, Massachusetts
June 24, 1994
FOR VALUE RECEIVED, the undersigned Object Design, Inc., a Delaware
corporation (the "Borrower") hereby promises to pay to the order of FLEET BANK
OF MASSACHUSETTS, N.A. (the "Bank") the principal amount of one Million Five
Hundred Thousand and 00/100 ($1,5OO,000.00) Dollars or such portion thereof as
may be advanced by the Bank pursuant to Section 1.6 of the below-defined Letter
Agreement and remains outstanding from time to time thereunder ("Principal"),
with interest, at the rate hereinafter set forth, on the daily balance of all
unpaid Principal, from the date hereof until payment in full of all Principal
and interest hereunder. As used herein, "Letter Agreement" means that certain
letter agreement dated June 23, 1993, as amended, between the Bank and the
Borrower.
Interest on all unpaid Principal shall be due and payable monthly in
arrears, on the first day of each month commencing on the first such date after
the advance of any Principal and continuing on the first day of each month
thereafter and on the date of payment of this note in full, at a fluctuating
rate per annum (computed on the basis of a year of three hundred sixty [360]
days for the actual number of days elapsed) which shall at all times be equal to
the sum of (i) three-quarters of one percent (0.75%) per annum plus (ii) the
Prime Rate, as in effect from time to time (but in no event in excess of the
maximum rate permitted by then applicable law). A change in the aforesaid rate
of interest will become effective on the same day on which any change in the
Prime Rate is effective. Overdue Principal and, to the extent permitted by law,
overdue interest shall bear interest at a fluctuating rate per annum which at
all times shall be equal to the sum of (i) two (2%) percent per annum plus (ii)
the per annum rate otherwise payable under this note (but in no event in excess
of the maximum rate permitted by then applicable law), compounded monthly and
payable on demand. As used herein, "Prime Rate" means that rate of interest per
annum announced by the Bank from time to time as its prime rate, it being
understood that such rate is merely a reference rate, not necessarily the
<PAGE> 2
lowest, which serves as the basis upon which effective rates of interest are
calculated for obligations making reference thereto.
All advances of Principal made at any time on or prior to June 30, 1994
are hereinafter referred to as the "Tranche 1 Advances". Principal of the
Tranche 1 Advances shall be repaid by the Borrower to the Bank in 36 equal
consecutive monthly installments (each in an amount equal to 1/36th of the
aggregate principal amount of Tranche 1 Advances outstanding at the close of
business on June 30, 1994), such installments to commence July 1, 1994 and to
continue thereafter on the first day of each month through and including June 1,
1997, on which date all then remaining Principal of the Tranche 1 Advances and
all interest accrued but unpaid thereon will be due and payable in full. All
advances of Principal made at any time on or after July 1, 1994 and not later
than December 31, 1994 are hereinafter referred to as the "Tranche 2 Advances".
Principal of the Tranche 2 Advances shall be repaid by the Borrower to the Bank
in 36 equal consecutive monthly installments (each in an amount equal to 1/36th
of the aggregate principal amount of Tranche 2 Advances outstanding at the close
of business on December 31, 1994), such installments to commence January 1, 1995
and to continue thereafter on the first day of each month through and including
December 1, 1997, on which date all then remaining Principal of the Tranche 2
Advances and all interest accrued but unpaid thereon will be due and payable in
full. All advances of Principal made at any time on or after January 1, 1995 are
hereinafter referred to as the "Tranche 3 Advances". Principal of the Tranche 3
Advances shall be repaid by the Borrower to the Bank in 36 equal consecutive
monthly installments (each in an amount equal to 1/36th of the aggregate amount
of Tranche 3 Advances outstanding at the close of business on May 31, 1995),
such installments to commence June 1, 1995 and to continue thereafter on the
first day of each month through and including May 1, 1998, on which date all
then remaining Principal of the Tranche 3 Advances and all interest accrued but
unpaid thereon will be due and payable in full. The Borrower may at any time and
from time to time, without premium or penalty, prepay all or any portion of the
Principal; provided that each such Principal prepayment shall be accompanied by
payment of all interest on this note accrued but unpaid to the date of payment.
Any partial prepayment of Principal will be applied against Principal
installments in inverse order of normal maturity.
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<PAGE> 3
Payments of both Principal and interest shall be made, in immediately
available funds, at the principal office of the Bank (now located at 75 State
Street, Boston, Massachusetts 02109), or at such other address as the Bank may
from time to time designate.
The undersigned Borrower irrevocably authorizes the Bank to make or
cause to be made, on a schedule attached to this note or on the books of the
Bank, at or following the time of making any advance of Term Loan II (as defined
in the Letter Agreement) and of receiving any payment of Principal, an
appropriate notation reflecting such transaction and the then aggregate unpaid
balance of Principal. Failure of the Bank to make any such notation shall not,
however, affect any obligation of the Borrower hereunder or under the Letter
Agreement. The aggregate unpaid principal amount of Term Loan II, as recorded by
the Bank from time to time on such schedule or on such books, shall constitute
presumptive evidence of such amount.
The Borrower hereby (a) waives notice of and consents to any and all
advances, settlements, compromises, favors and indulgences (including, without
limitation, any extension or postponement of the time for payment), any and all
receipts, substitutions, additions, exchanges and releases of collateral, and
any and all additions, substitutions and releases of any person primarily or
secondarily liable, (b) waives presentment, demand, notice, protest and all
other demands and notices generally in connection with the delivery, acceptance,
performance, default or enforcement of or under this note, and (c) agrees to
pay, to the extent permitted by law, all reasonable costs and expenses,
including, without limitation, reasonable attorneys' fees, incurred or paid by
the Bank in enforcing this note and any collateral or security therefor, all
whether or not litigation is commenced.
This note is Term Note II referred to in, and is secured by and
entitled to the benefits of, the Letter Agreement and the Security Agreement (as
defined in the Letter Agreement). This note is subject to prepayment as set
forth in the Letter Agreement. The maturity of this note may be accelerated upon
the occurrence of an Event of Default, as provided in the Letter Agreement.
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<PAGE> 4
Executed, as an instrument under seal, as of the day and year first
above written.
CORPORATE SEAL
ATTEST: OBJECT DESIGN, INC.
By:________________________________ By:________________________________
Its Secretary Its President and CEO
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<PAGE> 5
ALLONGE TO NOTE
This Allonge to Note is made as of April 18, 1995 between Object
Design, Inc., a Delaware corporation (the "Borrower") and Fleet Bank of
Massachusetts, N.A. (the "Bank"). This Allonge to Note is attached to and amends
that certain promissory note in the original face principal amount of $1,500,000
dated June 24, 1994 ("Term Note II") made by the Borrower and payable to the
order of the Bank. Term Note II is hereby amended, effective as of the date
hereof:
a. By deleting from the first grammatical paragraph of Term
Note II the words "or such portion thereof as may be advanced
by the Bank pursuant to Section 1.6" and by substituting in
their stead the following:
"or such portion thereof as may have heretofore been
advanced or may hereafter be advanced by the Bank to
the Borrower as described in Section 1.5"
b. By providing that all references in Term Note II to a
"Letter Agreement" will be deemed to refer to that certain
letter agreement of even date with this Allonge between the
Borrower and the Bank, as such letter agreement may be from
time to time amended.
Except as expressly amended hereby, Term Note II remains in full force
and effect as heretofore.
WITNESS the execution of this Allonge to Note, as an instrument under
seal, as of the day and year first above written.
OBJECT DESIGN, INC
By_________________________________
Name:
Title:
FLEET BANK OF MASSACHUSETTS, N.A.
<PAGE> 6
By_________________________________
Name:
Title:
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<PAGE> 1
EXHIBIT 10.8
PROMISSORY NOTE
$5,000,000.00 Boston, Massachusetts
April 18, 1995
FOR VALUE RECEIVED, the undersigned Object Design, Inc., a Delaware
corporation (the "Borrower") hereby promises to pay to the order of FLEET BANK
OF MASSACHUSETTS, N.A. (the "Bank") the principal amount of Five Million and
00/100 ($5,000,000.00) Dollars or such portion thereof as may be advanced by the
Bank pursuant to Section 1.2 of that certain letter agreement of even date
herewith between the Bank and the Borrower (the "Letter Agreement") and remains
outstanding from time to time thereunder ("Principal"), with interest, at the
rate hereinafter set forth, on the daily balance of all unpaid Principal, from
the date hereof until payment in full of all Principal and interest hereunder.
Interest on all unpaid Principal shall be due and payable monthly in
arrears, on the first day of each month commencing on the first such date after
the advance of any Principal and continuing on the first day of each month
thereafter and on the date of payment of this note in full, at a fluctuating
rate per annum (computed on the basis of a year of three hundred sixty (360)
days for the actual number of days elapsed) which shall at all times be equal to
the sum of (i) one-half of one percent (0.5%) per annum plus (ii) the Prime Rate
as in effect from time to time (but in no event in excess of the maximum rate
permitted by then applicable law). A change in the aforesaid rate of interest
will become effective on the same day on which any change in the Prime Rate is
effective. Overdue Principal and, to the extent permitted by law, overdue
interest shall bear interest at a fluctuating rate per annum which at all times
shall be equal to the sum of (i) two (2%) percent per annum plus (ii) the per
annum rate otherwise payable under this note (but in no event in excess of the
maximum rate permitted by then applicable law), compounded monthly and payable
on demand. As used herein, "Prime Rate" means that rate of interest per annum
announced by the Bank from time to time as its prime rate, it being understood
that such rate is merely a reference rate, not necessarily the lowest, which
serves as the basis upon which effective rates of interest are calculated for
obligations making reference thereto. If the entire amount of any required
Principal and/or interest is
<PAGE> 2
not paid within ten (10) days after the same is due, the Borrower shall pay to
the Bank a late fee equal to five percent (5%) of the required payment, provided
that such late fee shall be reduced to three percent (3%) of any required
principal and interest that is not paid within fifteen (15) days of the date it
is due if this note is secured by a mortgage on an owner-occupied residence of
1-4 units.
All outstanding Principal and all interest accrued thereon shall be due
and payable in full on the first to occur of: (i) an acceleration under
Section 5.2 of the Letter Agreement or (ii) May 1, 1996. The Borrower may at any
time and from time to time prepay all or any portion of said Principal, without
premium or penalty. Under certain circumstances set forth in the Letter
Agreement, prepayments of Principal may be required.
Payments of both Principal and interest shall be made, in immediately
available funds, at the principal office of the Bank (now located at 75 State
Street, Boston, Massachusetts 02109), or at such other address as the Bank may
from time to time designate.
The undersigned Borrower irrevocably authorizes the Bank to make or
cause to be made, on a schedule attached to this note or on the books of the
Bank, at or following the time of making any Revolving Loan (as defined in the
Letter Agreement) and of receiving any payment of Principal, an appropriate
notation reflecting such transaction and the then aggregate unpaid balance of
Principal. Failure of the Bank to make any such notation shall not, however,
affect any obligation of the Borrower hereunder or under the Letter Agreement.
The aggregate unpaid principal amount of the Revolving Loans, as recorded by the
Bank from time to time on such schedule or on such books, shall constitute
presumptive evidence of such amount.
The Borrower hereby (a) waives notice of and consents to any and all
advances, settlements, compromises, favors and indulgences (including, without
limitation, any extension or postponement of the time for payment), any and all
receipts, substitutions, additions, exchanges and releases of collateral, and
any and all additions, substitutions and releases of any person primarily or
secondarily liable, (b) waives presentment, demand, notice, protest and all
other demands and notices generally in connection with the delivery, acceptance,
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<PAGE> 3
performance, default or enforcement of or under this note, and (c) agrees to pay
all reasonable costs and expenses, including, without limitation, reasonable
attorneys' fees, incurred or paid by the Bank in enforcing this note and any
collateral or security therefor, all whether or not litigation is commenced.
This note is the Revolving Note referred to in the Letter Agreement.
This note is secured by, and is entitled to the benefits of, the Security
Agreement (as defined in the Letter Agreement). This note is subject to
prepayment as set forth in the Letter Agreement. The maturity of this note may
be accelerated upon the occurrence of an Event of Default, as provided in the
Letter Agreement.
Executed, as an instrument under seal, as of the day and year first
above written.
CORPORATE SEAL OBJECT DESIGN, INC.
ATTEST:
__________________________________ By:________________________________
Secretary Its Corporate Controller
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<PAGE> 1
EXHIBIT 10.9
SECURITY AGREEMENT
SECURITY AGREEMENT dated as of June 23, 1993 by and between Object
Design, Inc., a Delaware corporation (the "Debtor") and Fleet Bank of
Massachusetts, N.A. (the "Secured Party").
WHEREAS, the Debtor has today executed and delivered to the Secured
Party its promissory note in the original principal amount of $500,000 (the
"Revolving Note") in order to evidence loans (the "Revolving Loans") which may
be made by the Secured Party from time to time to the Debtor pursuant to a
certain letter agreement (the "Letter Agreement") of even date herewith between
the Debtor and the Secured Party; and
WHEREAS, the Debtor has today executed and delivered to the Secured
Party its promissory note in the original principal amount of $1,500,000 (the
"Term Note") in order to evidence a term loan (the "Term Loan") which may be
made in one or more advances by the Secured Party to the Debtor pursuant to the
Letter Agreement; and
WHEREAS, as a condition to making any Revolving Loan or any advance
of the Term Loan, the Secured Party requires that the Debtor grant to the
Secured Party a security interest in the Collateral (as defined in Section 1);
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby act and agree
as follows:
1. Definitions. As used in this Security Agreement, the following terms
have the following meanings:
"Accounts" - All of the Debtor's accounts (as defined in the UCC),
accounts receivable, notes, bills, drafts, acceptances, instruments, documents,
chattel paper and all other debts, obligations and liabilities in whatever form
owing to the Debtor from any Person for goods (as defined in the UCC) sold by it
or for services rendered by it, or however otherwise established or created, all
guaranties and security therefor, all right, title and interest of the Debtor in
the goods or services which gave rise thereto, including rights to reclamation
and stoppage in transit and all rights of an unpaid seller of goods or services;
all whether any of the foregoing be now existing or hereafter
<PAGE> 2
arising, now or hereafter received by or owing or belonging to the Debtor.
"Collateral" - All of the following now or hereafter existing or owned
by the Debtor or in which the Debtor shall now or hereafter have any interest:
(a) all Accounts;
(b) all Equipment;
(c) all Related Collateral; and
(d) all liens, guaranties, securities, rights, remedies and privileges
pertaining to, and all products and proceeds (including, without limitation,
insurance proceeds) of and all accessions to, any of the foregoing items of
Collateral.
"Equipment" - All of the Debtor's machinery, equipment, motor vehicles,
tools, furniture, furnishings, fixtures and other goods used or purchased or
held for use in the Debtor's business and all accessions, additions,
substitutions or replacements to or for any of the foregoing and all
attachments, components, accessories, parts and supplies relating thereto; all
whether now owned or hereafter arising or acquired and wherever located. The
Equipment includes, without limitation, the items of Equipment described on
Exhibit A hereto.
"Event of Default" - The occurrence of any one or more of the
following: (i) any "Event of Default" as defined in any Loan Document, (ii) any
failure to pay when due any of the Obligations relating to the payment of money
or (iii) any failure by the Debtor to perform or observe any of its obligations
or agreements under this Security Agreement.
"Lien" - Any lien, charge, encumbrance or security interest, whether
voluntary or involuntary.
"Loan Documents" - This Security Agreement, the Letter Agreement, the
Notes and any other instruments or documents, letters of credit or other
agreements made by the Debtor with or in favor of the Secured Party, all whether
now existing or hereafter entered into or delivered.
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<PAGE> 3
"Loans" - Collectively, the Term Loan and the Revolving Loans.
"Notes" - Each of the Revolving Note and the Term Note.
"Obligations" - The Revolving Loans, the Term Loan and any and all
other indebtedness, liabilities and obligations of the Debtor, sole, joint or
several, direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, to or for the benefit of the Secured Party, such
term to include obligations to perform acts and refrain from taking action as
well as obligations to pay money.
"Person" - As defined in the Letter Agreement.
"Premises" - All locations owned, leased, operated or used by the
Debtor, all of which are listed on Exhibit B hereto together with the record
owner of each such location.
"Qualifying Equipment" - As defined in the Letter Agreement.
"Related Collateral" - All of the following property of the Debtor: all
of the Debtor's general intangibles (as defined in the UCC) relating to the use
or enjoyment of Accounts and/or Equipment; rights of set off against account
debtors; rights under judgments relating to any loss or damage to Accounts
and/or Equipment; tort claims and choses in action relating to any loss or
damage to Accounts and/or Equipment; computer programs and software relating to
Accounts and/or Equipment; information, data, files, writings, correspondence,
books and records (including, without limitation, all electronically recorded
data) relating to Accounts and/or Equipment; and contract rights which upon
performance would become Accounts, all whether any of the foregoing be now
existing or hereafter arising, now or hereafter received by or belonging to the
Debtor.
"UCC" - The Uniform Commercial Code as in effect from time to time in
Massachusetts, except that with respect to Collateral located or deemed located
in any other jurisdiction, such term shall refer to the Uniform Commercial Code
as in effect in each such other jurisdiction.
Any defined term used in the plural preceded by the definite article
shall be taken to encompass all members of the relevant
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<PAGE> 4
class. Any defined term used in the singular preceded by "any" shall be taken to
indicate any number of the members of the relevant class.
2. Grant of Security Interest. As security for the full and timely
satisfaction of the Obligations, the Debtor hereby grants to the Secured Party a
continuing security interest in the Collateral, and in each item thereof, all to
the maximum extent that the Debtor has an interest therein or at any time in the
future obtains such an interest.
3. Representations and Warranties. The Debtor represents and warrants
to the Secured Party that:
(a) The execution, delivery and performance by the Debtor of this
Security Agreement, including the security interests herein granted or intended
to be granted, has been duly authorized by all necessary corporate and other
action and does not and will not:
(i) require any consent or approval of its stockholders, any
governmental authority or any other Person;
(ii) contravene its charter or by-laws;
(iii) violate any provision of, or require any filing (other
than the filing of financing statements with respect to the security
interests herein granted), registration, consent or approval under, any
law, rule, regulation (including, without limitation, Regulation U),
order, writ, judgment, injunction, decree, determination or award
presently in effect having applicability to the Debtor;
(iv) result in a breach of or constitute a default or require
any consent (other than consent of Silicon Valley Bank heretofore
obtained) under any indenture or loan or credit agreement or any other
agreement, lease or instrument to which the Debtor is party or by which
it or any of its properties may be bound or affected; or
(v) result in, or require, the creation or imposition of any
Lien (other than as created hereunder) upon or with
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<PAGE> 5
respect to any of the properties now owned or hereafter acquired by the
Debtor.
(b) This Security Agreement has been duly executed and delivered on
behalf of the Debtor and is a legal, valid and binding obligation of the Debtor,
enforceable in accordance with its terms.
(c) No Obligation has been or will hereafter be incurred on account of
personal, family or household purposes.
(d) The principal place of business and chief executive offices of the
Debtor are located at One New England Executive Park, Burlington, MA and all of
the financial books and records of the Debtor are located at such address.
Except as described on Exhibit B hereto, none of the Collateral and no other
assets of the Debtor are located at any other address. The Debtor is a tenant in
its Premises and the record owners of the Debtor's Premises are as set forth on
Exhibit B hereto.
(e) Except as set forth on Exhibit C hereto, the Debtor conducts
business (and in the last year has conducted business) under no trade name or
style other than its corporate name.
(f) The Debtor owns the Collateral free and clear of all Liens except
(a) Liens in favor of the Secured Party, and (b) Liens, if any, listed on
Exhibit D hereto.
(g) The Equipment now owned by Debtor (including, without limitation,
those items of Equipment listed on Exhibit A hereto) has been accepted by the
Debtor and is in good repair, working order and condition, and the Debtor has
asserted and knows of no basis for any material warranty or other claim against
any seller or manufacturer thereof.
(h) This Agreement, coupled with the filing of appropriate UCC
financing statements with the Secretary of The Commonwealth of Massachusetts,
the Town Clerk of Burlington, MA and Middlesex South Registry of Deeds (these
being the only locations in which such filing is required by the UCC in order to
perfect the security interest granted herein), creates a valid and perfected
security interest (of first priority, except as shown on Exhibit D) in favor of
the Secured Party in all of the Collateral.
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<PAGE> 6
4. Covenants. (a) Payment and Performance. The Debtor shall
unconditionally pay when due (or on demand if so payable) each obligation and
shall duly and punctually perform each obligation.
(b) Further Assurances. The Debtor will from time to time at its
expense, upon the Secured Party's reasonable request, promptly execute and
deliver all such further instruments and documents, and take all such further
action, as may be necessary or that the Secured Party may reasonably request in
order to perfect and protect the security interests granted or intended to be
granted hereby or to enable the Secured Party to enforce its rights and remedies
hereunder with respect to any Collateral, including, without limitation: marking
or otherwise identifying Equipment; furnishing copies of customer invoices and
original shipping documents; furnishing the originals of all bills of lading,
trust receipts and warehousemen's receipts, with such endorsements as may be
required by the Secured Party; stamping chattel paper to reflect the Secured
Party's security interest or delivering the same to the Secured Party; and
executing and filing financing statements. Further, the Debtor hereby authorizes
the Secured Party to file financing or continuation statements and amendments
thereto relating to Collateral without the signature of the Debtor where
permitted by law.
(c) Information. The Debtor shall maintain accurate and complete
records of all Collateral and its dealings with respect thereto in accordance
with generally accepted accounting principles applied on a consistent basis.
Upon reasonable notice from time to time (and at any time and without notice
after the occurrence of an Event of Default), the Debtor shall permit the
Secured Party and its employees, representatives and agents to conduct field
audits (at the Debtor's expense) and to inspect and/or make copies of such
records and/or the Collateral. The Debtor shall from time to time furnish to the
Secured Party such information concerning Collateral as the Secured Party may
reasonably request, and will promptly notify the Secured Party if any
representation or warranty of the Debtor in Section 3 hereof or in the Letter
Agreement becomes inaccurate, incomplete or misleading in any material respect.
Without limiting the generality of the foregoing, the Debtor will upon the
Secured Party's request, with reasonable promptness, provide the Secured Party
with a written listing of all Collateral, and will provide
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<PAGE> 7
the Secured Party with such a listing immediately upon the occurrence of any
Event of Default.
(d) Accounts. The Debtor shall notify the Secured Party promptly of all
material returns and recoveries of merchandise and claims. The Debtor shall not
without the consent of the Secured Party (such consent not to be unreasonably
withheld) settle or adjust any dispute or claim which (together with all other
such settlements or adjustments relating to the Accounts of the Debtor) would
exceed $50,000 in the aggregate per fiscal quarter of the Debtor; and the Debtor
shall not grant any discount, credit or allowance except in the ordinary course
of the Debtor's business nor accept any return of merchandise except in the
ordinary course of the Debtor's business without the Secured Party's consent,
such consent not to be unreasonably withheld. Upon the occurrence of any Event
of Default and during the continuance of such Event of Default, the Secured
Party may settle or adjust disputes or claims directly with customers or account
debtors for amounts and upon terms which it considers reasonably advisable; in
all such cases, the Debtor's loan account will be credited only with amounts
actually received by the Secured Party; and where the Debtor receives collateral
of any kind by reason of transactions between itself and its customers or
account debtors, it will hold the same on the Secured Party's behalf, subject to
the Secured Party's instructions, and as property forming part of the
Collateral. Upon the occurrence of an Event of Default and during the
continuance of such Event of Default, the Secured Party or its designee may at
any time notify customers or account debtors of the Secured Party's security
interest in Accounts, collect the same directly and charge the reasonable
collection costs and expenses to the Debtor's loan account; whenever the Secured
Party deems it desirable that any legal or other action be instituted in order
to collect any Account, the Secured Party may at its option reassign any such
Account to the Debtor (and any such reassignment shall be deemed to be without
recourse to the Secured Party in any event) and require the Debtor to proceed
with such legal or other action at the Debtor's sole liability, cost and
expense, in which event all amounts collected by the Debtor on such Accounts
shall nevertheless be subject to this Security Agreement; and the Debtor further
agrees to pay to the Secured Party a reasonable collection charge on all
Accounts collected by the Secured Party under this Security Agreement. If the
Secured Party elects that the Debtor continue to collect the
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<PAGE> 8
Accounts after the occurrence of an Event of Default, the Debtor will hold such
collections in trust for the Secured Party without commingling the same with any
other funds of the Debtor and, if requested by the Secured Party, will promptly,
on the day of receipt thereof, transmit such collections to the Secured Party in
the identical form in which they were received by the Debtor, with such
endorsements as may be appropriate. The Secured Party may, in its discretion, at
any time after the occurrence of an Event of Default, require the Debtor to
establish a lock box with the Secured Party. If such a lock box is established,
the Debtor will thereafter require its account debtors to make payment directly
to such lock box.
(e) Insurance. The Debtor shall at its expense maintain fire and
extended coverage insurance policies insuring the Equipment, with responsible
and reputable insurance companies or associations, in amounts sufficient to
provide for full replacement cost coverage (with agreed amount endorsement) and
in any event not less than the amount necessary to avoid co-insurance. All such
insurance shall name the Secured Party as secured party and loss payee. All
policies of such insurance shall contain a provision forbidding cancellation of
such insurance either by the carrier or by the insured without at least 15 days'
prior written notice to the Secured Party. The Debtor shall, as often as the
Secured Party shall reasonably request, deliver to the Secured Party duplicate
policies of such insurance and/or binders, certificates or other evidence
thereof (with evidence of premiums having been paid) from the insurer or a
reputable insurance broker. In case of any casualty, loss or damage to which the
following sentence is not applicable, the Debtor shall make the necessary
repairs or replacements and shall be entitled to be reimbursed therefor from and
to the extent of the proceeds of such insurance. Upon the occurrence and during
the continuance of any Event of Default, all insurance payments in respect of
Equipment shall be paid and applied as specified in Subsection 8(c) below.
(f) Title; Sale or Removal of Collateral. The Debtor shall not create
or suffer to exist any Lien in or on any of the Collateral except as otherwise
expressly permitted by Section 4.2 of the Letter Agreement. The Debtor shall not
without the Secured Party's prior written approval, sell, transfer or otherwise
dispose of any Accounts or sell, transfer or remove from the Premises or
otherwise dispose of any of the Collateral except
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<PAGE> 9
that (i) the Debtor may remove and dispose of obsolete and worn out equipment
(other than any item of Equipment listed on Exhibit A hereto) and (ii) items of
Equipment (other than the Equipment listed on Exhibit A hereto) may from time to
time be temporarily located at trade shows, test sites and/or customers'
premises. Except as provided in the immediately preceding sentence, no
Collateral of the Debtor will be located at any premises other than the Premises
described in Subsection 3(d) above. The Debtor shall maintain the books and
records relating to Collateral only at its chief executive offices described in
Subsection 3(d) above. All Equipment listed on Exhibit A hereto will be kept
only at said chief executive offices. The Debtor will not (i) move its chief
executive office or principal place of business from the location described in
Subsection 3(d) above, (ii) change identity (or use any trade name or style
except Subsection 3(e) above), (iii) make or suffer to change in its corporate
structure, or (iv) have or acquire any office or facility in any other location
until, in each case, after receipt of a certificate from the Secured Party,
signed by an officer thereof, stating that the Secured Party has, to its
satisfaction, obtained all documentation that it deems necessary or desirable to
obtain, maintain, perfect and/or confirm the first priority security interests
granted or intended to be granted herein.
(g) Maintenance and Use of Collateral. The Debtor will maintain all
tangible Collateral in good order and condition, making all necessary repairs
thereto. The Debtor will not use any Collateral in violation of any applicable
law or any insure,- ice thereon. Nothing contained herein shall require the
Debtor to maintain or repair any tangible Collateral (other than any item of
Equipment listed on Exhibit A hereto or other item of Qualifying Equipment)
which is obsolete or worn out.
(h) Access. The Debtor shall accord the Secured Party and the Secured
Party's representatives with such access from time to time, upon reasonable
notice, during normal business hours as the Secured Party and its
representatives may reasonably require to all properties owned by or over which
the Debtor has control, and in connection with such access, will permit the
Secured Party and such representatives, from time to time as may be requested,
to examine and inspect any and all of the Collateral and any and all of the
Debtor's books, records, electronically stored data, papers and files related to
the Collateral. The Debtor shall provide the Secured Party with such information
concerning the
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<PAGE> 10
Debtor, the Collateral, the operation of the Debtor's business and the Debtor's
financial condition as the Secured Party may reasonably request from time to
time. Except as otherwise permitted by the Letter Agreement and/or this Security
Agreement, the Secured Party will not at any time use (for any purpose other
than in connection with monitoring the loan facilities described in the Letter
Agreement and/or enforcing its rights hereunder and thereunder) any information
of any kind to which the Secured Party is given access or which is provided to
the Secured Party by the Debtor pursuant to this Subsection 4(h) (such
information being hereinafter referred to, subject to the last sentence of this
Subsection 4(h), as the "Confidential Information"). The Secured Party agrees
that it will use reasonable efforts to ensure that Confidential Information will
not be disclosed to any other Person without the Debtor's consent; provided,
however, that nothing contained herein will be deemed to preclude any such
disclosure: (1) to employees, officers, directors and/or agents of the Secured
Party in connection with the approval of Loans, letters of credit and/or other
facilities or in connection with the administration of this Security Agreement,
the Letter Agreement, any such Loans, letters of credit and/or other facilities;
(2) to internal or independent auditors; (3) to any examiners or other
officials, employees or agents of any federal or state governmental regulatory
agency, board, commission, public corporation or similar entity; (4) if ordered
by any court or governmental agency having or claiming jurisdiction; (5) to any
actual or proposed assignee of or participant in any Loan; and/or (6) in
connection with any suit, action or other proceeding to collect any Loans or
enforce any other right under the Letter Agreement, this Security Agreement
and/or any of the Notes. Notwithstanding the foregoing, it is agreed that
"Confidential Information" expressly excludes: (1) any information filed with a
public agency or otherwise within the public domain, (2) any information
supplied to the Secured Party by a third party under circumstances in which the
recipient of such information does not know of (and should not reasonably have
known of) any confidential relationship between such third party and the Debtor
which would restrict dissemination of such information, and (3) any information
supplied by or on behalf of the Debtor which is not labelled "confidential" or
as to which the Debtor has not otherwise indicated that disclosure is
prohibited.
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<PAGE> 11
(i) Taxes. The Debtor promptly shall pay, as they become due and
payable, all taxes, unemployment contributions and all other charges of any kind
or nature levied, assessed or claimed against the Collateral by any Person whose
claim could result in a Lien, except any of the foregoing which is being
contested in good faith and by appropriate proceedings which serve as a matter
of law to stay the enforcement of any such Lien and as to which the Debtor has
established and is maintaining adequate reserves. At its option, the Secured
Party may, but shall not be obligated to, pay all taxes, unemployment
contributions and any and all other charges levied, assessed or claimed against
the Collateral by any Person as the Secured Party may, in its discretion, deem
necessary or desirable to protect, maintain, preserve, collect or realize upon
any or all of the Collateral or the value thereof or any right or remedy
pertaining thereto.
5. Secured Party Appointed Attorney-in-Fact. (a) The Debtor hereby
irrevocably appoints the Secured Party as the Debtor's attorney-in-fact, with
full authority in the name, place and stead of the Debtor, from time to time in
the Secured Party's discretion, effective upon the occurrence and during the
continuance of an Event of Default, to take any action and to execute any
instrument which the Secured Party may deem necessary or advisable to accomplish
the purposes of this Security Agreement, including, without limitation:
(i) to obtain and adjust any insurance required pursuant to this
Security Agreement and/or the Letter Agreement;
(ii) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance for monies due and to become due under or in respect of any of
the Collateral;
(iii) to receive, endorse and collect any notes, drafts or other
instruments, documents and chattel paper;
(iv) to file any claims or take any action or institute any proceedings
which the Secured Party may deem necessary or desirable for the collection of
any of the Collateral or otherwise to enforce the rights of the Secured Party
with respect to any of the Collateral;
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<PAGE> 12
(v) to sign the name of the Debtor on invoices or bills of lading,
drafts against customers, notices of assignment, verifications and schedules;
(vi) to defend any suit, action or proceeding brought against the
Debtor in respect of any Collateral or the goods which have given rise thereto,
to settle, compromise or adjust any suit, action or proceeding hereinbefore
described and, in connection therewith, to give such discharges or releases as
the Secured Party may deem appropriate;
(vii) to notify the U.S. Postal Service authorities to change the
address of delivery of mail to an address designated by the Secured Party and to
open and dispose of mail addressed to the Debtor; and, generally,
(viii) to do all things necessary to carry out the intent of this
Security Agreement.
(b) The power of attorney granted pursuant to this Section 5 is a power
coupled with an interest and shall be irrevocable until the obligations are paid
indefeasibly in full and no commitment on the part of the Secured Party to make
loans remains outstanding under the Letter Agreement.
6. Secured Party May Perform. If the Debtor fails to perform any
agreement contained herein, the Secured Party may itself perform, or cause
performance of, such agreement, and the reasonable expenses of the Secured Party
incurred in connection therewith shall be payable by the Debtor as provided
under Section 9 hereof, with interest as provided in the Letter Agreement.
7. Secured Party's Duties. The powers conferred on the Secured Party
hereunder are solely to protect its interests in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody
of any Collateral actually in its possession and the accounting for monies
actually received by it hereunder, the Secured Party shall have no duty as to
any Collateral. The Secured Party shall not be liable for any acts, omissions,
errors of judgment or mistakes of fact or law including, without limitation,
acts, omissions, errors or mistakes with respect to the Collateral, except for
those arising out of or in connection with the Secured Party's gross negligence
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<PAGE> 13
or willful misconduct. The Secured Party shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment substantially equal to that
which the Secured Party accords its own like property, it being understood that
the Secured Party shall be under no obligation to take any necessary steps to
collect any Collateral or preserve rights against prior parties or any other
rights pertaining to any Collateral, but may do so at its option, and all
reasonable expenses incurred in connection therewith shall be for the sole
account of the Debtor and shall be added to the Obligations.
8. Remedies. If any Event of Default shall have occurred and be
continuing:
(a) The Secured Party may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party under the UCC and also may
without limitation:
(i) require the Debtor to, and the Debtor hereby agrees that
it will at its expense and upon request of the Secured Party forthwith,
assemble all or any part of the Collateral as directed by the Secured
Party and make it available to the Secured Party at a place or places
to be designated by the Secured Party which is or are reasonably
convenient to the respective parties;
(ii) itself or through agents, without notice to any Person
and without judicial process of any kind, enter any of the Debtor's
offices and facilities (or any other premises or location where any
Collateral may be) and take physical possession of any Collateral or
disassemble, render unusable and/or repossess any of the same, and the
Debtor shall peacefully and quietly yield up and surrender the same;
and
(iii) without notice except as specified below, sell, lease,
assign, grant an option or options to purchase or otherwise dispose of
the Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange, broker's board or at the Secured Party's
offices or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as are commercially reasonable.
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<PAGE> 14
(b) The Secured Party may maintain possession of Collateral at the
Premises or remove the same or any part thereof to such places as the Secured
Party may elect. The Debtor waives all rights which it would otherwise have
under any applicable law to prohibit entry to any premises or to require notice
of any such action, to the extent permitted by law. The Debtor agrees that, to
the extent notice of sale shall be required by law, 10 days' prior written
notice to the Debtor shall constitute reasonable notification. Notice of any
public sale shall be sufficient if it describes the Collateral to be sold in
general terms, stating the items or amounts thereof and the location and nature
thereof, and is published at least once in any newspaper selected by the Secured
Party and of general circulation in the locale of such sale, not less than 10
days prior to the sale. The Secured Party shall not be obligated to make any
sale of Collateral regardless of notice of sale having been given and may be the
purchaser at any such sale, if public, to the extent permitted by applicable
law, free from any right of redemption. The Debtor shall be fully liable for any
deficiency. The Secured Party may adjourn any public or private sale from time
to time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.
(c) Any cash held by the Secured Party as Collateral and all cash or
other proceeds received by the Secured Party in respect of any sale of,
collection from, or other realization upon all or any part of the Collateral,
shall be applied by the Secured Party in the following order of priorities:
First, to the payment of the reasonable costs and expenses of
any sale or other reasonable expenses (including, without limitation,
any reasonable legal fees and expenses), liabilities and advances made
or incurred by the Secured Party in connection therewith or referred to
in Section 9 or provided for by the Letter Agreement;
Next, to payment of interest on and principal of the
Notes (in such order as may be provided for in the Letter
Agreement or as otherwise determined by the Secured Party);
Next, to the payment of any other Obligations; and
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<PAGE> 15
Finally, after payment in full of all obligations, to the
payment to the Debtor or its successors or assigns, or to whomsoever
may be lawfully entitled to receive the same or as a court of competent
jurisdiction may direct, of any surplus then remaining of such cash.
9. Expenses and Indemnification. The Debtor agrees to reimburse the
Secured Party for and indemnify and hold harmless the Secured Party from and
against any and all liability, loss, damage, cost or expense (including, without
limitation, reasonable fees and disbursements of counsel, experts and agents)
imposed on, incurred by or asserted against the Secured Party arising out of or
in connection with: preparation of this Security Agreement, the documents
relating hereto, or amendments, modifications or waivers hereof; taxes
(excluding any corporate excise or income taxes payable by the Secured Party by
reason hereof or otherwise) and other governmental charges in connection with
this Security Agreement and the Collateral; exercise of the Secured Party's
rights with respect to this Security Agreement and the Collateral; any
enforcement, collection or other proceedings resulting therefrom or any
negotiations or other measures to preserve the Secured Party's rights hereunder;
the custody or preservation of, or the sale of or other realization upon, any of
the Collateral; any failure by the Debtor to perform or observe any of the
provisions of this Security Agreement; any investigative, administrative or
judicial proceeding (whether or not the Secured Party is designated a party
thereto) relating to or arising out of this Security Agreement; or any
bankruptcy, insolvency or other similar proceeding relating to the Debtor,
unless the Secured Party was at fault with respect to such liability, loss,
damage, cost or expense or acted in bad faith with respect thereto. The Debtor's
obligations under the preceding sentence shall constitute Obligations and shall
survive the termination of this Security Agreement.
10. Termination. This Security Agreement shall remain in full force and
effect so long as any Obligations remain outstanding or any commitment remains
in effect under the Letter Agreement or otherwise. Upon the satisfaction in full
of all of the Obligations and termination of all credit facilities established
under the Letter Agreement or otherwise, the Secured Party shall, at the
Debtor's expense, execute and deliver to the Debtor all instruments of
assignment or otherwise as may be necessary to establish full title of the
Debtors to any of the
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<PAGE> 16
Collateral, subject to any prior sale or other disposition thereof pursuant to
Section 8. Until then, this Security Agreement shall itself constitute
conclusive evidence of the validity, effectiveness and continuing force hereof,
and any Person may rely hereon.
11. Waiver; Rights Cumulative. No failure to exercise and no delay in
exercising, on the part of the Secured Party, any right or remedy hereunder or
otherwise shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right or remedy. Waiver by the Secured Party of any right or remedy
on any one occasion shall not be construed as a bar to or waiver thereof or of
any other right or remedy on any future occasion. The Secured Party's rights and
remedies hereunder and under the Loan Documents shall be cumulative, may be
exercised singly or concurrently and are not exclusive of any rights or remedies
provided by law.
The provisions of this Security Agreement are not in derogation or
limitation of any obligations, liabilities or duties of the Debtor under any of
the other Loan Documents or any other agreement with or for the benefit of the
Secured Party. No inconsistency in default provisions between this Agreement and
any of the other Loan Documents or any such other agreement will be deemed to
create any additional grace period or otherwise derogate from the express terms
of each such default provision. No covenant, agreement or obligation of the
Debtor contained herein, nor any right or remedy of the Secured Party contained
herein, shall in any respect be limited by or be deemed in limitation of any
inconsistent or additional provisions contained in any of the other Loan
Documents or any such other agreement.
12. Severability. In the event that any provision of this Agreement or
the application thereof to any Person, property or circumstance shall be held to
any extent to be invalid or unenforceable, the remainder of this Security
Agreement and the application of such provision to Persons, properties and
circumstances other than those as to which it has been held invalid or
unenforceable shall not be affected thereby, and each provision of this Security
Agreement shall be valid and enforceable to the fullest extent permitted by law.
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<PAGE> 17
13. Binding Effect; Assignment. This Security Agreement shall be
binding upon the Debtor and its successors and assigns and shall inure to the
benefit of the Debtor and the Secured Party and their respective successors and
assigns.
14. Notices. All notices and other communications under or relating to
this Security Agreement shall be given in the manner and to the addresses of the
parties provided for in Section 6.6 of the Letter Agreement.
15. Headings. Section headings in this Security Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
16. Governing Law. This Security Agreement shall be governed by, and
construed and enforced in accordance with, the laws of The Commonwealth of
Massachusetts (without regard to its principles of conflicts of law), except
that the creation, perfection and enforcement of security interests in
Collateral located in jurisdictions other than Massachusetts will be governed by
the laws of the respective jurisdictions in which such Collateral is located.
IN WITNESS WHEREOF, the Debtor and the Secured Party have caused this
Security Agreement to be executed, as an instrument under seal, by their
respective officers thereunto duly authorized, as of the date first above
written.
OBJECT DESIGN, INC.
By:_____________________________________________
Its
FLEET BANK OF MASSACHUSETTS, N.A.
By:_____________________________________________
Its
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<PAGE> 18
EXHIBIT A - Equipment List
EXHIBIT B - Debtor's offices and other locations, including owners of
real estate
EXHIBIT C - Trade names
EXHIBIT D - Other existing encumbrances
<PAGE> 19
EXHIBIT B
Premises
1. CORPORATE OFFICE
One New England Executive Park
Burlington, MA 01803
Landlord and Record Owner: Trustees of New England
Executive Park Trust (Andrew Spaulding, Jody Hartley, Steven
H. Anthony, Daniel J. Coughlin and James D. Flynn)
Landlord Rep: Andrew Spaulding
2. DISTRICT OFFICES
A) 242 Old New Brunswick Road
Piscataway, N.J.
Landlord: Corporate Locations & Secretarial Services
B) One Metro Square Bldg Suite 1700
51 Monroe Street
Rockville, Maryland 20850
Landlord: Satellite Office Suites, Inc.
C) 1450 East American Lane
Schaumburg, IL 60173
Landlord: Omni Offices/Chicago Northwest Office
D) 6033 West Century Blvd Suite 400
Los Angeles, CA 90045
Landlord: South Bay Executives (Head Qtr Comp.)
E) 1875 South Grant Street
San Mateo, CA
Landlord: Computer Associates Inc.
3. INTERNATIONAL OFFICES
A) 604 Delta Business ParkWelton Road
Swindon
Wiltshire SN5 7XF, UK
<PAGE> 20
Landlord: Applied Materials Inc.
B) Bierstadter StraBe 7
Voigt, Marketing
D-6200 Wiesbaden Germany
Landlord: Patzschke & Rasp GmbH
<PAGE> 21
C) 65 Level 4
330 Wattle Street
Ultimo NSW 2007
Australia
Landlord: Meriton Apartments PTY LTD.
D) Hiroya Bldg. 6F
1-2-3 Kanda Awaji-Cho
Chiyoda-Ku, Tokyo 101 Japan
Landlord: HIROYA RASRATEN
<PAGE> 22
EXHIBIT C
Trade Names
The Company conducts business in the State of Maryland under the name
"Database by Object Design, Inc."
<PAGE> 23
EXHIBIT D
Liens
1. Security interest of and UCC-1 filed by Toshiba America Information
Systems, Inc. on August 27, 1990 covering a telephone system,
telephones and circuit boards.
2. Security interest of and UCC-1s filed by Pacificorp Credit, Inc. d/b/a
Pacific Ventures Finance, Inc. (the "Lessor") on and after October 4,
1990 covering all presently existing and hereafter acquired equipment
leased by the Lessor to the Company pursuant to any present or future
equipment lease, together with all general intangibles relating to the
Company's rights to acquire or use such equipment and all
substitutions, replacements, additions, accessions, proceeds and
products to or of any of the foregoing.
3. Security interest of and UCC-1 filed by Xerox Corporation on April 27,
1992 covering a Xerox 5065 FIN copier together with any and all
additions, substitutions, accessories or other or different equipment
added to or replacing part of the specified equipment, and all proceeds
including, without limitation, all equipment and specified items of
collateral which are acquired with any cash proceeds.
4. Security interest of and UCC-1 filed by Silicon Valley Bank on April
27, 1992, as amended by UCC-3, covering the specific equipment listed
therein, all accessions to same and all proceeds (including insurance
proceeds) thereof.
<PAGE> 1
EXHIBIT 10.10
PLEDGE AGREEMENT
PLEDGE AGREEMENT dated as of August 20, 1993 from Object Design, Inc.,
a Massachusetts corporation (the "Pledgor") to Fleet Bank of Massachusetts, N.A.
(the "Pledgee").
1. PLEDGE. The Pledgor hereby pledges and assigns to the Pledgee, and
hereby grants a security interest to the Pledgee in, 1,000 shares of Common
Stock, $0.01 par value, of Object Design Security Corporation, a Massachusetts
corporation (the "Company"), such shares (together with any other shares or
property which hereafter is required to be pledged tot he Pledgee) being herein
called the "Collateral". The Pledgor is simultaneously herewith delivering to
the Pledgee certificates representing the Collateral, together with duly
executed blank stock powers transferring same.
2. SECURITY. This Agreement is made by the Pledgor with the Pledgee to
secure the following (collectively, the "Obligations"): (i) payment and
performance of the obligations of the Pledgor under that certain letter
agreement dated June 23, 1993, as amended (as so amended, the "Letter
Agreement") between the Pledgor and the Pledgee, (ii) payment of the $500,000
promissory note dated June 23, 1993 (the "revolving Note") made by the Pledgor
and payable to the order of the Pledgee, (iii) payment of the $1,500,000
promissory note dated June 23, 1993 (the "Term Note") made by the Pledgor and
payable to the order of the Pledgee and (iv) payment and performance of all
other obligations, agreements, covenants, undertakings and liabilities of the
Pledgor to the Pledgee, all whether now existing or hereafter arising.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS. The Pledgor represents,
warrants and covenants that: (a) the Collateral is validly issued, fully paid
and non-assessable, and the Pledgor has good and valid title to the same, free
and clear of any liens, charges or encumbrances thereon or affecting the title
thereto (except for the security interest created hereby), (b) the Pledgor has
good right and lawful authority to pledge, assign, transfer, deliver, deposit,
set over and confirm unto the Pledgee the Collateral as provided herein and will
warrant and defend the title thereto and the lien thereon conveyed to the
Pledgee by this Agreement against all claims of all persons and
<PAGE> 2
will maintain and preserve such lien, (c) the execution, delivery and
performance of this Agreement and the delivery of the Collateral to the Pledgee
do not and will not contravene the charter documents or by-laws of the Pledgor
or the Company or any agreement, commitment, indenture, contract or other
obligation or restriction affecting the Company or the Pledgor or any of their
respective properties, (d) this Agreement and the delivery of the Collateral to
the Pledgee create in the Pledgee a fully perfected first security interest in
the Collateral, (e) the Pledgor owns and will at times own 100% of each class of
outstanding equity securities of the Company and the Collateral constitutes and
will at all times continue to constitute 100% of each class of outstanding
equity securities of the Company, and (f) this Agreement is the legal, valid and
binding obligation of the Pledgor, enforceable in accordance with its like title
to and right to pledge any other property of the Pledgor at any time hereafter
required to be pledged to the Pledgee hereunder, that the Pledgee will have a
like security interest in such other property and that the Pledgor will likewise
defend such other property and that the Pledgor will likewise defend the
Pledgee's rights and security interest therein.
4. EVENTS OF DEFAULT. As used herein, an "Event of Default" shall be
deemed to have occurred upon the occurrence of any one or more of the following:
(a) any representation or warranty of the Pledgor made herein or in the Letter
Agreement or in connection with any of the transactions contemplated thereby (or
any representation made by the Company in its inducement letter of even date
herewith) shall at any time prove to have been incorrect in any material respect
when made; or (b) the Pledgor shall fail to perform, fulfill or observe any
covenant or agreement contained herein and such failure shall continue
unremedied for ten (10) days after written notice thereof to the Pledgor; or (c)
any "Event of Default" (as defined in the Letter Agreement) shall exist; or (d)
any other failure or default shall exist, beyond the expiration of any
applicable notice an/or grace period, under any other Obligation or any other
agreement, understanding or undertaking, now existing or hereafter arising or
entered into, which is given or made by the Pledgor and/or the Company to, with
or for the benefit of the Pledgee (including, without limitation, the aforesaid
inducement letter); or (e) the Collateral pledged hereunder in which the Pledgee
has a fully perfected first priority security interest shall for any reason
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<PAGE> 3
not constitute 100% of the outstanding shares of each class of equity securities
of the Company. Unless and until an Event of Default shall have occurred and be
continuing, the Pledgor shall be entitled to vote any and all shares of the
Collateral and give consents, waivers and ratifications in respect thereof;
PROVIDED, HOWEVER, that no vote shall be cast of consent, waiver or ratification
given or action taken which would be inconsistent with any of the provisions
hereof or of the Letter Agreement or which would involve any violation of any
such provisions. All such rights of the Pledgor to vote and give consents,
waivers and ratifications shall cease in case an Event of Default shall occur
and be continuing and the Pledgee shall give the notice referred to in the
following sentence. At any time after the occurrence and during the continuance
of an Event of Default, and upon written notice by the Pledgee of its intention
to do so, the Pledgee may vote any or all shares of the Collateral (whether or
not transferred as hereinafter provided) and give all consents, waivers and
ratifications in respect thereof and otherwise act with respect thereto as
though it were the outright owner thereof (the Pledgor hereby irrevocably
constituting and appointing the Pledgee the proxy and attorney-in-fact of the
Pledgor, with full power of substitution, so to do), and at any such time the
Pledgee may transfer into the Pledgee's name, or into the name of the Pledgee's
nominee, any or all shares of the Collateral. The Pledgor hereby irrevocably
constitutes and appoints the Pledgee the Pledgor's agent and attorney-in-fact,
with full power of substitution, to execute (in the name and on behalf of the
Pledgor) and deliver all stock transfer powers and other documents which the
Pledgee may reasonably require in order to carry out the intent of this Section
4. The Pledgee being a secured party with respect to the Collateral, the rights
and powers conferred by this Section are expressly agreed to be coupled with an
interest and, therefore, irrevocable.
5. DIVIDENDS. Unless and until an Event of Default shall have occurred
and be continuing, all such cash dividends paid by the Company in respect of the
Collateral may be received by the Pledgor; otherwise all dividends shall be paid
to the Pledgee.
6. REMEDIES IN CASE OF AN EVENT OF DEFAULT. In case an Event of Default
shall have occurred and be continuing, the Pledgee shall have the rights and
remedies available to a secured party under the Uniform Commercial Code in
effect at the time in
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<PAGE> 4
The Commonwealth of Massachusetts. The Pledgee may, upon ten (10) days' notice
in writing to the Pledgor (the Pledgor agreeing that such notice shall be deemed
to meet any requirement for reasonable notice), sell, assign and deliver the
whole or, from time to time, any part of the Collateral, or any interest in any
part thereof, at any private sale or at public auction, for cash, on credit or
for other property, for immediate or future delivery, and for such price or
prices and on such terms as the Pledgee in its uncontrolled discretion may
determine, the Pledgor hereby waiving and releasing any and all right or equity
of redemption whether before of after sale hereunder; at any such public auction
the Pledgee may bid for and purchase the whole or any portion of the Collateral
and may make payment therefor by any means. The Pledgee shall apply the cash
proceeds received by it from any sale or other disposition, together with any
other moneys at the time held by it hereunder, to the reasonable expenses of
retaking, holding, preparing for sale, selling and the like, to reasonable
attorneys' fees, and all legal expenses, travel and other reasonable expenses
which may be incurred by the Pledgee in collecting or attempting to collect any
of the Obligations or to enforce this Agreement or in the prosecution or defense
of any action or proceeding related to the subject matter of this Agreement; and
then to such sums in such order as to principal or interest remaining unpaid as
the Pledgee in its sole discretion may reasonably determine, and any surplus
shall be paid to the Pledgor. The Pledgee shall not be required to resort to or
marshall any present of future security for, or guaranties of, the Obligations
secured hereby (including, but not limited to, this Agreement and the Collateral
pledged hereunder), or to resort to any such security or guaranties in any
particular order. The Pledgee's remedies shall be cumulative with all other
rights, however existing or arising, and may be exercised concurrently or
separately. Neither failure nor delay on the Pledgee's part to exercise any
right, remedy, power or privilege provided for herein or by statute or at law or
in equity shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, remedy, power or privilege preclude any other
further exercise thereof or the exercise of any other right, remedy, power or
privilege.
The Pledgor recognizes that the Pledgee may be unable to effect a
public sale of the collateral by reason of certain prohibitions contained in the
Securities Act of 1993, as amended
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<PAGE> 5
(the "Act"), but may be compelled to resort to one or more private sales thereof
to a restricted group of purchasers who will be obligated to agree, among other
things, to acquire such securities for their own account, for investment and not
with a view to the distribution of resale thereof. The Pledgor agrees that any
such private sales shall not be deemed to have been made in a commercially
unreasonable manner because they were private sales. The Pledgee shall be under
no obligation to delay a sale for the period of time necessary to permit the
issuer of the securities to register such securities for public sale under the
Act, even if the issuer would agree to do so. The Pledgee agrees that it will
not offer for sale or sell any of the Collateral in violation of any applicable
securities laws.
7. PLEDGOR'S OBLIGATIONS NOT AFFECTED. The obligations of the Pledgor
under this Agreement shall remain in full force and effect without regard to,
and shall remain in full force and effect without regard to, and shall not be
impaired or affected by: (a) any amendment or modification of or addition of
supplement to the Letter Agreement, the Revolving Note, the Term Note or any
other instrument referred to therein or delivered in connection with the
Revolving Loans and/or the Term Loan (each as defined in the Letter Agreement),
or any assignment or transfer of any thereof; (b) any exercise or non-exercise
by the Pledgee of any right, remedy, power or privilege under or in respect of
this Agreement, the Letter Agreement, the Revolving Note, the Term Note or any
such other instrument or any Obligation; (c) any waiver, consent, extension,
indulgence or other action or inaction in respect of this Agreement, the Letter
Agreement, the Revolving Note, the Term Note or any such other instrument or any
Obligation; or readjustment, composition, liquidation, or the like, of the
Pledgor and/or the Company; all whether or not the Pledgor shall have notice or
knowledge of any of the foregoing.
8. TRANSFER BY THE PLEDGOR. Without the prior written consent of the
Pledgee, the Pledgor will not sell, assign, transfer or otherwise dispose of,
grant any option with respect to, or mortgage, pledge or otherwise encumber any
of, the Collateral or any interest therein, other than the pledge contained in
this Agreement.
9. TERMINATION. Upon the payment and performance of all Obligations and
the termination of any and all commitments and
-5-
<PAGE> 6
credit facilities now or hereafter made available by the Pledgee to or for the
benefit of the Pledgor, this Agreement shall terminate and such of the
Collateral as has not theretofore been sold or otherwise applied pursuant to the
provisions of this Agreement shall be delivered to the Pledgor.
10. NOTICE. All notices and other communications hereunder shall be in
writing and shall be given to the respective addresses and in the manner
provided for in the Letter Agreement.
11. FURTHER ASSURANCES. The Pledgor will do all such acts, and will
furnish to the Pledgee all such financing statements, certificates, opinions and
other documents, and will do or cause to be done all such other things, as the
Pledgee may reasonably request from time to time in order to give full effect to
this Agreement and to secure the rights of the Pledgee hereunder.
12. PLEDGEE'S EXONERATION. Under no circumstances shall the Pledgee be
deemed to assume any responsibility for or obligation or duty with respect to
any party or all of the Collateral beyond the safe custody thereof, and the same
shall be at the Pledgor's sole risk at all times except as aforesaid. The
Pledgee shall not be required to take any action of any kind to collect,
preserve or protect its or the Pledgor's rights in the Collateral or against any
other parties. The Pledgor hereby releases the Pledgee from any claims, causes
of action and demands at any time arising out of or with respect to this
Agreement, the use of the Collateral and/or any actions reasonably taken or
omitted to be taken by the Pledgee with respect thereto, and the Pledgor hereby
agrees to hold the Pledgee harmless from and with respect to any and all such
claims, causes of action and demands. The Pledgee's, prior recourse to any part
or all of the collateral or to any other collateral or obligor shall not
constitute a condition of any demand, suit or proceeding for payment or
collection with respect to any of the Obligations.
13. REORGANIZATIONS. In the event of any one or more reclassifications,
changes, exchanges, stock splits, stock dividends, stock consolidations or other
subdivisions or combinations of the shares of the capital stock of the Company
or any immediate or remote successor to substantially all of the business or
assets of the Company pursuant to any one or more of
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<PAGE> 7
the events described in this sentence, or consolidations of the Company or any
such successor into other corporations, or other recapitalizations or
reorganizations affecting the Company or any such successor, or any one or more
sales or conveyances to another corporation of the property of the Company or
any such successor as an entirety or substantially as an entirety (each, a
"Reorganization"), the Pledgor will deliver to the Pledgee, in readily
transferable form, all securities and property which come to the Pledgor with
respect to the Collateral as a result of that and any subsequent Reorganization,
except for securities and property surrendered or cancelled pursuant to any of
same, and such securities and property shall thereupon become and constitute all
or part of the Collateral, as the case may be. All sums of money and property
paid or distributed in respect of the Collateral which are received by the
Pledgor pursuant to a Reorganization shall, until paid or delivered to the
Pledgee, be held in trust for the Pledgee to secure the Payment and the due
performance of and compliance with the Obligations. Any and all shares of any
class of equity securities of the Company which may be issued or sold after the
date hereof shall be deemed further Collateral hereunder and the certificates
representing same shall be delivered to the Pledgee in readily transferable form
to be held and dealt with pursuant to this Agreement.
14. MISCELLANEOUS. Neither this Agreement nor any provisions hereof may
be amended, modified, waived, discharged or terminated orally, but only be an
instrument in writing signed by the party against whom enforcement of the
amendment, modification, waiver, discharge or termination is sought. The
provisions of this Agreement shall inure to the benefit of the successors and
assigns of the Pledgee, and shall be binding upon the successors and assigns of
the Pledgor. The captions in this Agreement are for convenience of reference
only and shall not define or limit the provisions hereof. This Agreement shall
be construed and enforced in accordance with the laws of The Commonwealth of
Massachusetts. This Agreement may be executed simultaneously in several
counterparts, each of which will be deemed an original, but all of which
together shall constitute one instrument. If any term or provision of this
Agreement or the application thereof to any person, property or circumstance
shall to any extent be invalid or unenforceable, the remainder of this Agreement
and the application of such term or provision to persons, properties and
circumstances other than those as to
-7-
<PAGE> 8
which it is invalid or unenforceable shall not be affected thereby, and each
term and provision of this Agreement shall be valid and enforced to the fullest
extent permitted by law.
IN WITNESS WHEREOF, the Pledgor and the Pledgee have caused this
Agreement to be duly executed, as an instrument under seal, as of the day an
year first above written.
PLEDGOR:
OBJECT DESIGN, INC.
By_________________________________
Its
PLEDGEE:
FLEET BANK OF MASSACHUSETTS,
N.A.
By_________________________________
-8-
<PAGE> 9
EXHIBIT 10.10
OBJECT DESIGN SECURITY CORPORATION
One New England Executive Park
Burlington, MA 01803
August 20, 1993
Fleet Bank of Massachusetts, N.A.
75 State Street
Boston, MA 02109
Gentlemen:
In order to induce Fleet Bank of Massachusetts, N.A. (the "Bank") to
enter into an amendment to its June 23, 1993 letter agreement (the "Letter
Agreement") with Object Design, Inc. (the "Borrower") and to make one more loans
(collectively, the "Loan") thereunder to the Borrower, the undersigned Object
Design Security Corporation ("ODSC") represents and warrants to, and agrees
with, the Bank as follows:
1. ODSC represents that the Borrower is the owner of 100% if the
outstanding stock of ODSC.
2. ODSC agrees that at the date hereof and so long as all or any
portion of the Loan is outstanding:
a. ODSC does not have and will not incur any Indebtedness (as
defined in the Letter Agreement ) to any Person (as defined in the Letter
Agreement), other than taxes not yet due and payable. There are no liens on any
of the assets of ODSC and ODSC will not incur, assume or suffer any such lien to
exist. ODSC is not liable under any guaranty of Indebtedness of another Person
and will not make, assume or be liable with respect to any guaranty.
b. ODSC has and will have no employees.
c. ODSC conducts and will conduct no business other than
buying, selling, dealing in or holding securities on its own behalf and not as a
broker.
d. ODSC will maintain books and records separate from those of
the Borrower and will conduct its corporate affairs in
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<PAGE> 10
all respects as a separate corporation and not as the agent or alter ego of the
Borrower.
Executed, as an instrument under seal, as of the day and year first
above written.
Very truly yours,
OBJECT DESIGN SECURITY CORPORATION
By_________________________________
Its Treasurer
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<PAGE> 1
EXHIBIT 10.11
LOAN MODIFICATION AGREEMENT AND WAIVER
--------------------------------------
This Loan Modification Agreement and Waiver ("this Agreement") is made as
of January 17, 1996 between Object Design, Inc., a Delaware corporation (the
"Borrower") and Fleet Bank of Massachusetts, N.A. (the "Bank"). For good and
valuable consideration, receipt and sufficiency of which are hereby
acknowledged, the Borrower and the Bank act and agree as follows:
1. Reference is made to (i) that certain letter agreement dated April 18,
1995 between the Borrower and the Bank (the "Letter Agreement"), (ii) that
certain $5,000,000 face amount promissory note dated April 18, 1995 (the
"Revolving Note") made by the Borrower and payable to the order of the Bank,
(iii) that certain $1,500,000 original principal amount promissory note dated
November 19, 1993, as amended by Allonge to Note dated as of April 18, 1995 (as
so amended, "Term Note I") made by the Borrower and payable to the order of the
Bank, (iv) that certain $1,500,000 original principal amount promissory note
dated June 24, 1994, as amended by Allonge to Note dated as of April 18, 1995
(as so amended, "Term Note II"), (v) that certain Security Agreement dated June
23, 1993 given by the Borrower to the Bank, as amended (as so amended, the
"Security Agreement") and (vi) that certain Pledge Agreement dated August 20,
1993 from the Borrower to the Bank relating to the stock of Object Design
Security Corporation, as amended (as so amended, the "Pledge"). The Letter
Agreement, the Revolving Note, Term Note I, Term Note II, the Security Agreement
and the Pledge are hereinafter collectively referred to as the "Financing
Documents".
2. The Borrower has failed to comply with each of Sections 3.7 and 3.10 of
the Letter Agreement as at June 30, 1995 and for the fiscal quarter then ended.
The Borrower has also failed to comply with each of Sections 3.7, 3.8 and 3.10
of the Letter Agreement as at September 30, 1995 and for the fiscal quarter then
ended. The Bank hereby waives compliance with each of said Sections 3.7 and 3.10
of the Letter Agreement as at June 30, 1995 and for the fiscal quarter then
ended and each of said Sections 3.7, 3.8 and 3.10 of the Letter Agreement as at
September 30, 1995 and for the fiscal quarter then ended, but not as at any
other date or dates nor for any other period or periods. Moreover, this waiver
does not affect any other provision of the Letter Agreement nor any of the other
Financing Documents.
3. The Letter Agreement is hereby amended, effective as of December 31,
1995:
a. By deleting from the first sentence of Section 1.8 of the Letter
Agreement the amount "$5,000,000" and by substituting in its stead the
following:
"the Maximum Credit Amount"
b. By deleting in their entireties Sections 3.7 - 3.10, inclusive, of the
Letter Agreement and by substituting in their stead the following:
"3.7. DEBT TO WORTH. The Borrower will maintain as at the end of each
fiscal quarter of the Borrower (commencing with December 31, 1995) on a
consolidated basis a Leverage Ratio of not more than the
<PAGE> 2
following: not more than 2.0 to 1 as at December 31, 1995; and not more
than 1.5 to 1 as at March 31, 1996 and as at the end of each fiscal
quarter thereafter.
3.8. CAPITAL BASE. The Borrower will maintain as at the end of each
fiscal quarter of the Borrower (commencing with December 31, 1995) a
consolidated Capital Base which shall not be less than the then-effective
Capital Base Requirement. As used herein, the 'Capital Base Requirement' in
effect at any quarter-end will be deemed to be the sum of (i) the then
applicable Minimum TCB plus (ii) 75% of the net proceeds of any equity
securities sold by the Borrower after September 30, 1995 through the end of
the relevant fiscal quarter and 75% of the net amount received by the
Borrower with respect to any Subordinated Debt issued by the Borrower or
any Subsidiary of the Borrower after September 30, 1995 through the end of
the relevant fiscal quarter (nothing contained herein being deemed to
approve the issuance of any such Subordinated Debt). As used herein, the
'Minimum TCB' will be deemed to be $3,350,000 as at December 31, 1995 and
will be deemed to be $7,000,000 as at March 31, 1996 and as at each
subsequent fiscal quarter-end.
3.9. QUICK RATIO. The Borrower will maintain as at the end of each
fiscal quarter of the Borrower (commencing December 31, 1995) a ratio of
(x) Net Quick Assets to (y) Current Liabilities, which ratio shall not be
not less than 1.5 to 1.
3.10. PROFITABILITY. The Borrower will not incur a quarterly
consolidated Net Loss in excess of $750,000 for its fiscal quarter ending
December 31, 1995, nor will the Borrower incur a quarterly consolidated Net
Loss in excess of $1,000,000 for its fiscal quarter ending March 31, 1996.
Thereafter, during each fiscal quarter (beginning with its fiscal quarter
ending June 30, 1996) the Borrower will earn quarterly consolidated Net
Income of at least $1.00."
c. By inserting into Section 7.1 of the Letter Agreement, immediately after
the definition of "Loan Documents", the following:
"'Maximum Credit Amount' - $1,000,000 at all times when the Borrower
has a Capital Base which is less than $7,000,000; and $5,000,000 at all
times when the Borrower has a Capital Base of $7,000,000 or more."
d. By deleting from the definition of Maximum Revolving Amount" appearing
in Section 7.1 of the Letter Agreement the amount "$5,000,000" and by
substituting in its stead the following:
"the Maximum Credit Amount"
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<PAGE> 3
4. In order to induce the Bank to enter into this Agreement, the Borrower
is paying to the Bank a non-refundable amendment fee of $5,000. This amendment
fee is in addition to and is not to be reduced by nor applied against any fees,
interest or other charges or amounts now or hereafter paid by the Borrower to
the Bank in connection with the revolving and term loan facilities described in
Letter Agreement.
5. Wherever in any Financing Document, or in any certificate or opinion to
be delivered in connection therewith, reference is made to a "letter agreement"
or to the "Letter Agreement" from and after the date hereof same will be deemed
to refer to the Letter Agreement, as hereby amended.
6. In order to induce the Bank to enter into this Agreement, the Borrower
further represents and warrants to the Bank as follows:
a. The execution, delivery and performance of this Agreement have been
duly authorized by the Borrower by all necessary corporate and other
action, will not require the consent of any third party and will not
conflict with, violate the provisions of, or cause a default or constitute
an event which, with the passage of time or the giving of notice or both,
could cause a default on the part of the Borrower under its charter
documents or by-laws or under any contract, agreement, law, rule, order,
ordinance, franchise, instrument or other document, or result in the
imposition of any lien or encumbrance on any property or assets of the
Borrower (except liens in favor of the Bank).
b. The Borrower has duly executed this Agreement and has delivered
same to the Bank.
c. This Agreement is the legal, valid and binding obligation of the
Borrower, enforceable against the Borrower in accordance with its terms.
d. The statements, representations and warranties made in the Letter
Agreement continue to be correct as of the date hereof, except as
supplemented and/or modified on the attached supplemental disclosure
schedule.
e. Giving effect to the waivers and the amendments set forth above,
the covenants and agreements of the Borrower contained in the Letter
Agreement (as amended hereby) and/or in the Security Agreement have been
complied with on and as of the date hereof.
f. Giving effect to the waivers and the amendments set forth above, no
event which constitutes or which, with notice or lapse of time, or both,
could constitute, an Event of Default (as defined in the Letter Agreement)
has occurred and is continuing.
-3-
<PAGE> 4
g. Except for the losses heretofore disclosed by the Borrower to the
Bank in writing, no material adverse change has occurred in the financial
condition of the Borrower from that disclosed in the financial statements
of the Borrower as at December 31, 1994.
7. Except as expressly affected hereby, the Letter Agreement and each of
the other Financing Documents remains in full force and effect as heretofore.
8. Except as expressly set forth above, nothing contained herein will be
deemed to constitute a waiver or a release of any provision of any of the
Financing Documents. Nothing contained herein will in any event be deemed to
constitute an agreement to give a waiver or release or to agree to any amendment
or modification of any provision of any of the Financing Documents on any other
or future occasion.
Executed, as an instrument under seal, as of the day and year first above
written.
OBJECT DESIGN, INC.
By: /s/ Stanley J. Miller
---------------------------------------
Name: Stanley J. Miller
Title: Chief Financial Officer
FLEET BANK OF MASSACHUSETTS, N.A.
By: /s/ Cathy Bruton
--------------------------------------
Its Vice President
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<PAGE> 5
SUPPLEMENTAL DISCLOSURE SCHEDULE
[To be provided by Borrower]
<PAGE> 1
EXHIBIT 10.12
COMMENCEMENT DATE AGREEMENT
The undersigned parties, to a Lease between them dated September 15, 1993 and a
First Amendment to Lease dated June 28, 1994, of Premises in 25 Burlington Mall
Road, Burlington, Massachusetts, more particularly described therein, hereby
agree, pursuant to Section 1.1 thereof, that the Commencement Date of said First
Amendment is June 24, 1994; rent for the additional 3,724 RSF to commence on
June 24, 1994.
Executed as a sealed instrument on the day of , 1994.
LANDLORD: 25 MALL ROAD TRUST
By its Agent, Spaulding and Slye
Services Limited Partnership
________________________________
Peter A. Bailey
Vice President
TENANT: OBJECT DESIGN, INC.
________________________________
________________________________
Please print name and title
<PAGE> 2
EXHIBIT 10.12
DATE OF LEASE EXECUTION:
(To be Completed by Landlord)
ARTICLE I
REFERENCE DATA
1.1 SUBJECTS REFERRED TO: Each reference in this Lease to any of the
following subjects shall be construed to
incorporate the data stated for that subject
in Section 1.1:
LANDLORD: 25 MALL ROAD TRUST
MANAGING AGENT: SPAULDING AND SLYE COMPANY
LANDLORD'S & MANAGING AGENT'S ADDRESS: c/o Spaulding and Slye
Company
25 Burlington Mall Road
Burlington, MA 01803
Attention: Treasurer
LANDLORD'S REPRESENTATIVE: Lauren M. Murphy
TENANT: OBJECT DESIGN, INC.
TENANT'S ADDRESS (For notice and Billing): 25 BURLINGTON MALL ROAD,
BURLINGTON, MA 01803
TENANT'S REPRESENTATIVE: TIMOTHY J. ALLEN, VICE PRESIDENT, CHIEF FINANCIAL
OFFICER
BUILDING ADDRESS: 25 BURLINGTON MALL ROAD, BURLINGTON, MA 01803
RENTABLE FLOOR AREA OF TENANT'S SPACE: 45,815 Square Feet (r.s.f.) approximately
TOTAL RENTABLE FLOOR AREA OF BUILDING: 277,647 Square Feet (r.s.f.)
approximately
TENANT'S DESIGN COMPLETION DATE: August 23, 1993
SCHEDULED TERM COMMENCEMENT DATE: NOVEMBER 19, 1993
TERM EXPIRATION DATE: NOVEMBER 30, 2001 APPROXIMATE TERM: 8 YEARS
ANNUAL BASE RENT: Per Rentable Square Foot (p.r.s.f.) (SUBJECT TO
ADJUSTMENT PER EXHIBIT B ATTACHED)
ANNUAL ESTIMATED OPERATING COSTS: $2,012,940.75 for the Building $7.25
(p.r.s.f.)
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<PAGE> 3
ANNUAL ESTIMATED ELECTRICAL COSTS TO TENANT'S SPACE (included in Annual Rent):
$38,942.75 $0.85 (p.r.s.f.)
OTHER: N/A for the Building: $ = (p.r.s.f.)
ANNUAL RENT: $ (Subject to an Annual Adjustment as provided in
Article IV), computed as follows:
ANNUAL RENT: $ Annual Base Rent (p.r.s.f.) + $7.25 Annual
Estimated Operating Costs (p.r.s.f.) + $0.85 Annual Estimated Electrical Costs
to Tenant's Space (p.r.s.f.) + N/A Other (p.r.s.f.) = $
Total Rate (p.r.s.f.) x 45,815 rentable square feet = $
Annual Rent
FIRST FISCAL YEAR FOR TENANT'S PAYING OPERATING COST ESCALATION: YEAR
ENDING: DECEMBER 31, 1995
SECURITY DEPOSIT: $ GUARANTOR:
TENANT IMPROVEMENT REIMBURSEMENT TO LANDLORD: See Exhibit B, Rider to Lease,
Item 3
PERMITTED USES: GENERAL OFFICE USE
PUBLIC LIABILITY INSURANCE: BODILY INJURY: $2,000,000
PROPERTY DAMAGE: $1,000,000
SPECIAL PROVISIONS: SEE EXHIBIT B, RIDER TO LEASE
1.2 EXHIBITS
The Exhibits listed below in this section are incorporated in this
Lease by reference and are to be construed as part of this Lease:
Exhibit A - Plan showing Tenant's Space.
Exhibit B - Riders (if applicable).
Exhibit C - Specifications of Leasehold Improvements and Tenant Layout
(if applicable).
Exhibit D - Landlord's Services.
Exhibit E - Rules and Regulations.
Exhibit F - Fair Market Rent Appraisal Method.
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<PAGE> 4
1.3 TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I REFERENCE DATA................................................................................ 1
ARTICLE II PREMISES AND TERM............................................................................. 5
2.1 PREMISES...................................................................................... 5
2.2 TERM.......................................................................................... 5
ARTICLE III CONSTRUCTION.................................................................................. 6
3.1 INITIAL CONSTRUCTION.......................................................................... 6
3.2 PREPARATION OF PREMISES FOR OCCUPANCY......................................................... 7
3.3 GENERAL PROVISIONS APPLICABLE: TO CONSTRUCTION................................................ 8
3.4 REPRESENTATIVES............................................................................... 9
ARTICLE IV RENT.......................................................................................... 9
4.1 RENT.......................................................................................... 9
4.2 OPERATING COSTS; ESCALATION................................................................... 9
4.3 ESTIMATED ESCALATION PAYMENTS................................................................. 11
4.4 CHANGE OF FISCAL YEAR......................................................................... 11
4.5 PAYMENTS...................................................................................... 11
ARTICLE V LANDLORD'S COVENANTS.......................................................................... 12
5.1 LANDLORD'S COVENANTS DURING THE TERM.......................................................... 12
5.1.1 Building Services. ................................................................. 12
5.1.2 Additional Building Services. ...................................................... 12
5.1.3 Repairs. ........................................................................... 12
5.1.4 Quiet Enjoyment. ................................................................... 12
5.1.5 Food Service. ...................................................................... 12
5.1.6 Landlord's Property Insurance. ..................................................... 13
5.2 INTERRUPTIONS................................................................................. 13
ARTICLE VI TENANT'S COVENANTS............................................................................ 14
6.1 TENANT'S COVENANTS DURING THE TERM............................................................ 14
6.1.1 Tenant's Payments. ................................................................. 14
6.1.2 Repairs and Yielding Up. ........................................................... 14
6.1.3 Occupancy and Use. ................................................................. 14
6.1.4 Rules and Regulations. ............................................................. 15
6.1.5 Safety Appliances. ................................................................. 15
6.1.6 Assignment and Subletting. ......................................................... 15
6.1.7 Indemnity. ......................................................................... 16
6.1.8 Tenant's Liability Insurance. ...................................................... 16
6.1.9 Tenant's Worker's Compensation Insurance. .......................................... 16
6.1.10 Landlord's Right of Entry. ......................................................... 16
6.1.11 Loading. ........................................................................... 16
6.1.12 Landlord's Costs. .................................................................. 16
6.1.13 Tenant's Property. ................................................................. 17
6.1.14 Labor or Materialmen's Liens. ...................................................... 17
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C> <C>
6.1.15 Changes or Additions. .............................................................. 17
6.1.16 Holdover. .......................................................................... 17
ARTICLE VII CASUALTY AND TAKING........................................................................... 17
7.1 CASUALTY AND TAKING........................................................................... 17
7.2 RESERVATION OF AWARD.......................................................................... 18
ARTICLE VIII RIGHTS OF MORTGAGEE........................................................................... 18
8.1 PRIORITY OF LEASE............................................................................. 18
8.2 MORTGAGEE PROTECTION CLAUSE................................................................... 19
8.3 NO PREPAYMENT OR MODIFICATION, ETC............................................................ 19
8.4 NO RELEASE OR TERMINATION..................................................................... 19
8.5 CONTINUING OFFER.............................................................................. 19
8.6 MORTGAGEE'S APPROVAL.......................................................................... 20
ARTICLE IX DEFAULT....................................................................................... 20
9.1 EVENTS OF DEFAULT............................................................................. 20
9.2 TENANT'S OBLIGATIONS AFTER TERMINATION ........................................................21
ARTICLE X MISCELLANEOUS................................................................................. 21
10.1 NOTICE OF LEASE............................................................................... 21
10.2 RELOCATION.................................................................................... 21
10.3 NOTICES FROM ONE PARTY TO THE OTHER........................................................... 22
10.4 BIND AND INURE................................................................................ 22
10.5 NO SURRENDER.................................................................................. 22
10.6 NO WAIVER, ETC................................................................................ 22
10.7 NO ACCORD AND SATISFACTION.................................................................... 22
10.8 CUMULATIVE REMEDIES........................................................................... 23
10.9 LANDLORD'S RIGHT TO CURE...................................................................... 23
10.10 ESTOPPEL CERTIFICATE.......................................................................... 23
10.11 WAIVER OF SUBROGATION......................................................................... 23
10.12 ACTS OF GOD................................................................................... 24
10.13 BROKERAGE..................................................................................... 24
10.14 SUBMISSION NOT AN OFFER....................................................................... 24
10.15 APPLICABLE LAW AND CONSTRUCTION............................................................... 24
10.16 TENANT CONDENSER WATER SYSTEM CHARGES......................................................... 25
ARTICLE XI SECURITY DEPOSIT.............................................................................. 25
11.1 SECURITY DEPOSIT.............................................................................. 25
11.2 LETTER OF CREDIT.............................................................................. 26
11.3 LETTER OF CREDIT AS SECURITY.................................................................. 26
</TABLE>
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<PAGE> 6
ARTICLE II
PREMISES AND TERM
2.1 PREMISES
Subject to and with the benefit of the provisions of this Lease
relating to the parcel on which the Building is located (the "Lot"), Landlord
hereby leases to Tenant, and Tenant leases from Landlord, Tenant's Space in the
Building, excluding exterior faces of exterior walls, the common facilities area
and building service fixtures and equipment serving exclusively or in common
other parts of the Building. Tenant's Space, with such exclusions, is
hereinafter referred to as the "Premises."
Tenant shall have, as appurtenant to the Premises, the right to use in
common with others entitled thereto: (a) the common facilities included in the
Building or on the Lot, including the parking facility, if any, on a first-come,
first-served basis, to the extent and in the location from time to time
designated by Landlord, and (b) the building service fixtures and equipment
serving the Premises.
Landlord reserves the right from time to time, without unreasonable
interference with Tenant's use, (a) to install, repair, replace, use, maintain
and relocate for service to the Premises and to other parts of the Building or
either, building service fixtures and equipment wherever located in the Building
and (b) to alter or relocate any commercial facilities, it being understood that
if any parking spaces are provided, the same may be relocated on or off the Lot
from time to time by Landlord, provided that in all events substitutions are
substantially equivalent in usefulness to Tenant.
2.2 TERM
To have and to hold for a period (the "Term") commencing on the
earliest of (a) if Landlord is not obligated to perform construction work, on
the Scheduled Term Commencement Date, or (b) if Landlord is obligated to perform
construction work pursuant to Exhibit C, on the date on which the Premises are
deemed ready for occupancy as provided in Section 3.2, and (c) in all events,
the date on which Tenant occupies all or any part of the Premises for the
purpose of carrying on Tenant's business (whichever of said dates is appropriate
being hereafter referred to as the "Commencement Date"), and continuing until
the Term Expiration Date, unless sooner terminated as provided in Section 3.2 or
7.1 or in Article IX. Landlord and Tenant will execute, upon request of either,
a certificate acknowledging the Commencement Date of this Lease once such
commencement date has occurred.
Notwithstanding anything to the contrary provided herein, in the event
that the Commencement Date has not occurred on or prior to November 19, 1993,
and further provided that any such delay in the Commencement Date is due to any
delay within Landlord's control, Tenant shall not be required to take occupancy
of the Promises, and the Commencement Date shall not occur until January 15,
1994; In the event that any such delay in the Commencement Date is due to any
delay caused by municipal authorities, then the Commencement Date shall not
occur until December 15, 1993 and rent in the amount of $44,814.00 shall be
amortized over the initial forty-eight (48) months of the Term at an annual
interest rate of ten percent (10%) payable monthly with installments of Annual
Rent and further provided that the Term Expiration Date shall be extended one
(1) month to December 31, 2001; in the event any such delay in the Commencement
Date is due to any delay caused by Tenant, then the Commencement Date shall
remain at November 19, 1993.
ARTICLE III
CONSTRUCTION
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3.1 INITIAL CONSTRUCTION
Subject to Paragraph 3 of Exhibit 8, on or before Tenant's Design
Completion Date, if such date is indicated in Section 1.1 Tenant shall provide
to Landlord for approval complete sets of construction drawings and
specifications (the "Complete Plans") Prepared by Landlord's architect or an
architect approved by Landlord and Landlord's engineer, including but not
limited to:
a. Furniture and Equipment Layout Plans
b. Dimensioned Partition Plans
c. Dimensioned Electrical and Telephone Outlet Plans
d. Reflected Ceiling Plans
e. Door and Hardware Schedules
f. Room Finish Schedules including wall, carpet and floor tile
colors
g. Electrical, mechanical and structural engineering plans
h. All necessary construction details and specifications for work
not specified in Exhibit C.
Landlord and Tenant shall initial the Complete Plans after the same
have been submitted by Tenant and approved by Landlord.
All of Tenant's construction, installation of furnishings, and later
changes or additions shall be coordinated with any work being performed by
Landlord in such manner as to maintain harmonious labor relations and not to
damage the Building or Lot or interfere with Building operations. Except for
installation of furnishings and the installation of telephone outlets which must
be performed by a local telephone company at Tenant's direction and expense, all
work described in the Complete Plans (the "Leasehold Improvements") shall be
performed by Landlord's general contractor, Spaulding and Slye Construction
Company, Incorporated.
Tenant shall pay to Landlord as additional rent a sum equal to all
costs incurred by Landlord on account of the Leasehold improvements (excluding,
however, the Tenant Allowance, but including in the costs so incurred the cost
to Landlord of Landlord's Contractor's overhead and profit equal to 15% of the
costs of work not covered by the Tenant Allowance), hereinafter called "Tenant
Improvement Reimbursement to Landlord" or "TIR." Tenant shall pay to Landlord
fifty percent (50%) of the TIR prior to Landlord's commencement of construction
of the Leasehold Improvements, and thereafter as construction of the Leasehold
Improvements progresses, on submission by Landlord to Tenant of a statement on
or about the first day of each month showing construction and design costs
incurred. Such statements shall be accompanied by a certificate of Landlord's
Contractor that all payments then due to laborers, materialmen and
subcontractors have been made, less the aggregate amount of prior monthly
progress payments made by Tenant. On the earlier of occupancy or the
Commencement Date, Tenant shall pay to Landlord a sum equal to the unpaid
balance of TIR. In addition to paying TIR as above provided, Tenant shall pay an
amount equal to all costs incurred by Landlord as a result of any change orders
signed by Tenant and Landlord affecting the Complete Plans, including the cost
to Landlord of Landlord's Contractor's overhead and profit equal to 15% of those
costs exclusive of overhead and profit. Amounts due and payable on account of
such change occurs shall be included in the monthly statements relating to TIR
provided for above, and Tenant shall pay therefor in accordance with each such
statement within thirty (30) days, and in all events by the Commencement Date.
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Landlord will not approve any construction, alterations, or additions
requiring unusual expense to readapt the Premises to normal off ice use on lease
termination or increasing the cost of construction, insurance or taxes on the
Building or of Landlord's services called for by Section 5.1 unless Tenant first
gives assurances acceptable to Landlord that such readaptation will be made
prior to such termination without expense to Landlord and makes provisions
acceptable to Landlord for payment of such increased cost. Landlord will also
disapprove any alterations or additions requested by Tenant which wail delay
completion of the Premises or the Building. All changes and additions shall be
part of the Building except such items as by writing at the time of approval the
parties agree either shall be removed by Tenant on termination of this Lease, or
shall be removed or left at Tenant's election.
3.2 PREPARATION OF PREMISES FOR OCCUPANCY
Landlord shall prepare the Premises for Tenant's occupancy by
constructing the improvements in accordance with the plans and specifications
listed in section 3.1 and in Exhibit C attached hereto and the Complete Plans,
and the working drawings to be prepared by The Kuhn Group and Kodis Associates.
Landlord shall use its diligent efforts to substantially complete (as
hereinafter defined) the construction of improvements to the Premises by
November 19, 1993 provided that (a) Landlord has received the Complete Plans by
August 23, 1993 and that there are no material changes to the Complete Plans,
and (b) such date shall be extended for a period equal to that of any delay due
to governmental regulations, unusual scarcity of or inability to obtain labor or
materials, labor difficulties beyond Landlord's reasonable control and not
reasonably anticipated.
Landlord agrees to cooperate with Tenant with the objective of avoiding
labor disruptions with respect to the installation of telephone and computer
facilities provided non-union labor is utilized.
The construction in the Premises shall be "substantially complete" when
the work has been sufficiently completed in accordance with the Complete Plans
so that Tenant can occupy and utilize the Premises for its intended use and so
that the completion of punch list items can be effected within sixty days
(subject to seasonal items), each without material interference with Tenant's
use and occupancy of the Premises. Landlord shall notify Tenant when Landlord
determines that the Premises are substantially complete. As soon as is
practicable thereafter, but in no event later than ten days after Tenant's
receipt of such notice, Landlord and Tenant shall jointly inspect the Premises
and Landlord and Tenant shall prepare and approve a list of items to be
completed or corrected (the "Punch List").
Landlord shall complete or correct, or cause the completion or
correction of the items on the Punch List within sixty days of the date of such
inspection. If such inspection determines that the Premises are not
substantially complete, Landlord shall undertake to substantially complete the
Premises and notify Tenant in accordance with the terms thereof, when the
Premises are in fact substantially complete, at which time the Premises shall be
reinspected and the Punch List updated.
Notwithstanding the foregoing, should Tenant not participate in the
inspection, or having participated should there be a dispute regarding whether
the Premises are substantially complete, the Premises shall be deemed
substantially complete on the date on which the Leasehold improvements, as
specified in Exhibit C and in the Complete Plans, are substantially complete (i)
as certified by the Landlord's architect and (ii) as evidenced by the issuance
of the Certificate of Occupancy by the Building Inspector; provided, however,
that if Landlord is unable to complete construction due to delay in Tenant's
compliance with the provisions of Section 3.1 of this Lease, then the Premises
shall be deemed substantially complete on the date the Premises would have been
complete but for Tenant's delay.
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Landlord shall permit Tenant access for installing equipment and
furnishings in the Premises Prior to the Term if it can be done without material
interference with completion of the Building or remaining portions of the
Leasehold Improvements.
In the event of Tenant's failure to comply with the provisions of
Section 3.1 to submit information or to deliver construction drawings and
specifications which meet Landlord's approval, Landlord may, at Landlord's
option, exercisable by notice to Tenant, either (a) terminate this Lease on the
date specified in said notice to Tenant, and upon such termination Landlord
shall have all the rights provided in Article IX of this Lease in the event of
Tenant's default or (b) assess Tenant liquidated damages in an amount equal to
the Annual Rent divided by 365 for each day such failure continues, which
damages shall be paid to Landlord on the Commencement Date. Notwithstanding the
foregoing provisions, if the Premises are not deemed ready for occupancy as
determined by receipt of a Certificate of Occupancy within 4" 90 days after the
Scheduled Term Commencement Date for whatever reason, other than Tenant's
default, Tenant may elect to cancel this Lease at any time thereafter while the
Premises are not deemed, ready for occupancy by giving notice to Landlord of
such cancellation which shall be effective when given, it being understood that
said election shall be Tenant's sole remedy at law or in equity for Landlord's
failure to nave the Premises ready for occupancy.
3.3 GENERAL PROVISIONS APPLICABLE: TO CONSTRUCTION
All construction work required or permitted by this Lease, whether by
Landlord or by Tenant, shall be done in a good and workmanlike manner and in
compliance with all applicable laws and all lawful ordinances, regulations and
orders of governmental authority and insurers of the Building. Either party may
inspect the work of the other at reasonable times and promptly shall give notice
of observed defects. Landlord's obligations under Section 3.1 shall be deemed to
have been performed when Tenant commences to occupy any portion of the Premises
for the Permitted Uses except for items which are incomplete or do not conform
with the requirements of Section 3.1 and as to which Tenant shall in either case
have given written notice to Landlord prior to such commencement. If Tenant
shall not have commenced to occupy the Premises for the Permitted Uses within 30
days after they are deemed ready for occupancy as determined by receipt of a
Certificate of Occupancy as provided in Section 3.2, a certificate of completion
by a licensed architect or registered engineer and the issuance of a Certificate
of Occupancy by the Town of Burlington shall be conclusive evidence that
Landlord has performed all such obligations except for items stated in such
certificate to be incomplete or not in conformity with such requirements.
Landlord agrees to repair or correct any item of construction which do not
comply with the Complete Plans, Exhibit C or any other provision of this lease
if Landlord receives notice of such defects on or before the first anniversary
date of the Commencement Date; however, in no event shall Landlord be required
to repair or correct any items referenced above if such defect occurs beyond the
manufacturer's warranty period.
3.4 REPRESENTATIVES
Each party authorizes the other to rely in connection with their
respective rights and obligations under this Article Ill upon approval and other
actions on the party's behalf by Landlord's Representative in the case of
Landlord or Tenant's Representative in the case of Tenant or by any person
designated in substitution or addition by notice to the party relying.
ARTICLE IV
RENT
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4.1 RENT
Tenant agrees to pay rent to Landlord without any offset or reduction
whatever (except as made in accordance with the express provisions of this
Lease), equal to 1/12th of the Annual Rent in equal installments in advance on
the first day of each calendar month included in the Term; and for any portion
of a calendar month at the beginning or end of the Term, at the proportionate
rate payable for such portion, in advance.
4.2 OPERATING COSTS; ESCALATION
Tenant's proportionate share of the Annual Estimated Operating Costs
shall be determined by multiplying Annual Estimated Operating Costs by a
fraction, the numerator of which is the Rentable Floor Area of Tenant's Space,
and the denominator of which is the Total Rentable Floor Area of the Building.
With respect to the First Fiscal Year for Tenant's Paying Operating
Cost Escalation, or fraction thereof, and any fiscal year or fraction thereof
thereafter, Tenant shall pay to Landlord, as additional rent, Operating Cost
Escalation (as defined below), if any, on or before the thirtieth (30th) day
following receipt by Tenant of Landlord's Statement (as defined below). As soon
as practicable after the end of each Fiscal Year ending during the Term and
after Lease termination, Landlord shall render a statement ("Landlord's
Statement") in reasonable detail and according to usual accounting practices
certified by Landlord and showing for the preceding Fiscal Year or traction
thereof, as the case may be, Landlord's Operating Costs,
EXCLUDING the interest and amortization on mortgages for the Building
and Lot or leasehold interests therein and the cost of special services rendered
to tenants (including Tenant) for which a special charge is made,
BUT INCLUDING, without limitation: real estate taxes on the Building
and Lot: installments and interest on assessments for public betterments or
public improvements; expenses of any proceedings for abatement of taxes and
assessments with respect to any fiscal year or fraction of a fiscal year;
premiums for insurance; fees payable to third parties for financial audits of
Landlord's Operating Costs; compensation and all fringe benefits, worker's
compensation insurance premiums and payroll taxes paid by Landlord to, for or
with respect to all persons engaged in the operating, maintaining, or cleaning
of the Building and Lot; all utility charges not billed directly to tenants by
Landlord or the utility; payments to independent contractors under service
contracts for cleaning, operating, managing, maintaining and repairing the
Building and Lot (which payments may be to affiliates of Landlord provided the
same are at reasonable rates consistent with the type of occupancy and the
services rendered) rent paid by the managing agent or imputed cost equal to the
loss of rent by Landlord for making available to the managing agent space for a
Building office on the ground floor or above; if the Building shares common
areas or facilities with another building or buildings, the Buildings' pro rata
share (as reasonably determined by Landlord) of the cost of cleaning, operating,
managing (including the cost of the management office for such buildings and
facilities), maintaining and repairing such common areas and facilities; and all
other reasonable and necessary expenses paid in connection with the cleaning,
operating, managing, maintaining and repairing of the Building and Lot, or
either, and properly chargeable against income, it being agreed that if Landlord
installs a new or replacement capital item for the purpose of reducing
Landlord's Operating Costs, the cost thereof as reasonably amortized by
Landlord, with interest at the average prime commercial rate in effect from time
to time at the three largest national banks in Boston, Massachusetts on the
unamortized amount, shall be
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included in Landlord's Operating Costs. Landlord's Statement shall also show the
average number of square feet of the Building which were occupied for the
preceding fiscal year or fraction thereof.
"Operating Cost Escalation" shall be equal to the difference, it any,
between: (a) the product of Landlord's Operating Costs as indicated in
Landlord's Statement and a traction, the numerator of which shall be the
Rentable Floor Area of Tenant's Space and the denominator of which shall be
one-half of the Total Rentable Floor Area of the Building plus one-half of the
average number of such square feet as are occupied during such fiscal year or
fraction thereat however, in no event shall the denominator be less than 90% of
the Total Rentable Floor Area of the Building) and (b) the product of the Annual
Estimated Operating Costs (as reduced pursuant to this Section 4.2) and a
fraction, the numerator of which shall be the Rentable Floor Area of Tenant's
Space and the denominator of which shall be the Total Rentable Floor Area the
Building.
If the management fee is reduced by reason of a tenant's default in the
payment of Annual Rent or additional rent, Landlord shall reduce the Annual
Estimated Operating Costs by the amount of such reduction in the management fee.
In case of special services which are not rendered to all areas on a comparable
basis, the proportion allocable to the Premises shall be the same proportion
which the Rentable Floor Area of Tenant's Space bears to the total rentable
floor area to which such service is so rendered (such latter area to be
determined in the same manner as the Total Rentable Floor Area of the Building).
The term "real estate taxes" as used above shall mean all taxes of
,very kind and nature assessed by any government authority on the Lot, the
Building and improvements, or both, which the Landlord shall become obligated to
pay because of or in connection the ownership, leasing and operation of the Lot,
the Building and improvements, or both, subject to the following: There shall be
excluded from such taxes all income taxes, excess profits taxes, excise taxes,
franchise taxes, and estate, succession, inheritance and transfer taxes,
provided, however, that if at any time during the Term the present system of ad
valorem taxation of real property shall be changed so that in lieu of the whole
or, any part of the ad valorem tax on real property, there shall be assessed on
Landlord a capital levy or other tax on the gross rents received with respect to
the Lot. Building, and improvements, or both, or a federal, state, county,
municipal or other local income, franchise, excise or similar tax, assessment,
levy or charge (distinct from any now in effect) measured by or based, in whole
or in part, upon any such gross rents, then any and all of such taxes,
assessments, levies or charges, to the extent so measured or based, shall be
deemed to be included within the term "real estate taxes".
Notwithstanding any other provision of this Section 4.2, if the Term
expires or is terminated as of a date other than the last day of a fiscal year,
then for such fraction of a fiscal year at the end of the Term, Tenant's last
payment to Landlord under this Section 4.2 shall be made on the basis of
Landlord's best estimate of the items otherwise includable in Landlord's
Statement and shall be made on or before the later of (a) 10 days after Landlord
delivers such estimate to Tenant or (b) the last day of the Term, with an
appropriate payment or refund to be made upon submission of Landlord's
Statement.
The Tenant or any of its agents may review Landlord's financial records
relating to all charges to Tenant under this Lease, at Landlord's and managing
Agent's office during normal business hours upon 30 days written advance notice
and at Tenant's sole expense.
4.3 ESTIMATED ESCALATION PAYMENTS
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If, with respect to any fiscal year or fraction thereof during the
Term, Landlord estimates that Tenant shall be obligated to pay Operating Cost
Escalation, then Tenant shall pay, as additional rent, on the first day of each
month of such fiscal year and each ensuing fiscal year thereafter, Estimated
Monthly Escalation Payments equal to 1/12th of the estimated Operating Cost
Escalation for the respective fiscal year, with an appropriate additional
payment or refund to be made within 30 days after Landlord's Statement is
delivered to Tenant. Landlord may adjust such Estimated Monthly Escalation
Payment from time to time and at any time during a fiscal year, and Tenant shall
pay, as additional rent, on the first day of each month following receipt of
Landlord's notice thereof, the adjusted Estimated Monthly Escalation Payment.
4.4 CHANGE OF FISCAL YEAR
Landlord shall have the right from time to time to change the periods
of accounting under Section 4.2 to any annual period other than a fiscal year,
and upon any such change all items referred to in this Section 4.4 shall be
appropriately apportioned. In all Landlord's Statements rendered under this
Section 4.4, 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 Landlord's Statement shall ne included therein
on the basis of Landlord's estimate, and with respect thereto Landlord shall
render promptly after determination a supplemental Landlord's Statement, and
appropriate adjustment shall be made according thereto. All Landlord's
Statements shall be prepared on an accrual basis of accounting.
4.5 PAYMENTS
All payments of Annual Rent and additional rent shall be made to
Managing Agent, or to such other person as Landlord may from time to time
designate. If any installment of Annual Rent or additional rent or on account of
leasehold improvements is paid more than 5 days after the due date thereof, at
Landlord's election, it shall bear interest at a rate equal to the average prime
commercial rate from time to time established by the three largest national
banks in Boston, Massachusetts plus 4% per annum from such due date, which
interest shall be immediately due and payable as further additional rent.
ARTICLE V
LANDLORD'S COVENANTS
5.1 LANDLORD'S COVENANTS DURING THE TERM
Landlord covenants during the Term:
5.1.1 Building Services. To furnish, through Landlord's employees or
independent contractors, the services listed in Exhibit D.
5.1.2 Additional Building Services. To furnish, through Landlord's
employees or independent contractors, reasonable additional Building operation
services upon reasonable advance request of Tenant at equitable rates from time
to time established by Landlord to be paid by Tenant.
5.1.3 Repairs. Except as otherwise provided in Article VII, to make
such repairs to the roof, exterior walls, floor slabs, other structural
components and common facilities of the Building including
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Building utility systems as may be necessary to keep them in serviceable
condition consistent with the standard of maintenance for a first class office
building.
5.1.4 Quiet Enjoyment. That Landlord has the right to make this Lease
and that Tenant on paying the rent and performing its obligations hereunder,
shall peacefully and quietly have, hold and enjoy the Premises throughout the
Term without any manner of hindrance or molestation from Landlord or anyone
claiming under Landlord, subject however to all the terms and provisions hereof.
5.1.5 Food Service. Landlord may provide, within the building, a food
service facility of a size, type, location and serving capacity as Landlord
shall deem suitable, in its sole discretion. In the event Landlord elects to
provide a food service facility, then the facility will serve a luncheon meal
and, at Landlord's election, a breakfast meal or some other breakfast food and
beverage service, five days per week excluding weekends and holidays. All losses
incurred by Landlord in operating the food service facility during any fiscal
year (the "Food Service Losses") shall be added to the Landlord's Operating
Costs for the year in which such losses were incurred for the purpose of
calculating the Operating Costs Escalation pursuant to Section 4.2; provided,
however, that the amount of such food service losses added to Landlord's
Operating Costs in any one year shall not, except as otherwise set forth below,
exceed one percent of the sum of Annual Rent and additional rent from all
tenants in the building. All profits realized by the Landlord in operating the
food service facility during any fiscal year (the "Food Service Profits") shall
be credited against the Landlord's Operating Costs for such year. For the
purposes of this Section 5.1.5, the Food Service Profits or Losses for any year
shall be calculated by deducting from the gross receipts of the food service (as
hereinafter defined) all expenses of operation (as hereinafter defined). Gross
receipts of the food service as used herein are defined to mean the total amount
in dollars of the actual prices charged, in cash, for food and beverages served
at the facility, excluding sums collected for any sales tax or excise tax. The
Expense of Operation of the food service shall mean all expenses of operating
the food service facility, including without limitation, salaries, wages,
employment taxes and fringe benefits, food service administrative costs, food
costs, concessionaire's fees, operating costs, equipment maintenance and repair
costs, if any.
If during any six-month period, the mathematical average of the number
of luncheon meals served by the food service facility per day is fewer than 300,
or the Food Service Losses incurred by the Landlord in operating the food
service facility during such six-month period exceed $25,000, then the Landlord
shall have the right and option, in its sole discretion, to take any steps
necessary to reduce or eliminate the losses (including without limitation,
modification or termination of the food service), unless one hundred percent
(100%) of the tenants occupying the building agree that Landlord's Operating
Costs hereunder for the Purpose of calculating the Operating Expense Escalation
shall include one hundred percent (100%) of the food Service Losses, without
limitation.
The terms of this Section 5.1.5 shall not apply to any restaurant or
other food service facility which leases space in the Building as a tenant and
is not owned, operated or controlled by Landlord.
Landlord reserves the right to approve any tenant's use of a food
service operator other than the Landlord's food service operator, if any, such
approval will not be unreasonably withheld.
5.1.6 Landlord's Property Insurance. During the Term, Landlord shall
maintain a policy of insurance covering loss or damage to the Premises, which
policy or policies shall include protection from rental loss, coverage for
operating expenses resulting from loss or damage to the Premises and protection
from such other hazards (i) as are normally insured in the industry and (ii) as
are required to be insured against by Landlord's lender(s). Such insurance shall
be in an amount at least equal to the
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full replacement cost of the Premises as the same may change from time to time.
All proceeds under such policies shall be payable exclusively to Landlord.
5.2 INTERRUPTIONS
Landlord shall not be liable to Tenant for any compensation or
reduction of rent by reason of inconvenience or annoyance or for loss of
business arising from power losses or shortages or from the necessity of
Landlord's entering the Premises for any of the purposes in this Lease
authorized, or for repairing the Premises or any portion of the Building or Lot,
or for interruption or termination (by reason of any cause reasonably beyond
Landlord's control, including without limitation, loss of any applicable license
or governmental approval), of the food service provided by Landlord pursuant to
Section 5.1.5, or for excessive losses pursuant to Section 5.1.5. In case
Landlord is prevented or delayed from making any repairs, alterations or
improvements, or furnishing any service or performing any other covenant or duty
to be performed on Landlord's I)art, by reason of any cause reasonably beyond
Landlord's control, Landlord shall not be liable to Tenant therefor, nor except
as expressly otherwise provided in Article VII, shall Tenant be entitled to any
abatement or reduction of rent by reason thereof, nor Shall the same give rise
to a claim in tenant's favor that such failure constitutes actual or
constructive, total or partial, eviction from the Premises. Landlord shall use
reasonable efforts in case of power losses or shortages or repairs to restore
the services required to be provided under this Lease. However Landlord agrees
to use its best efforts to diligently remedy the situation and minimize the
disruption to Tenant's business.
Landlord reserves the right to stop any service or utility system when
necessary by reason of accident or emergency or until necessary repairs have
been completed. Except in case of emergency repairs, Landlord will give Tenant
reasonable advance notice of any contemplated stoppage and will use reasonable
efforts to avoid unnecessary inconvenience to Tenant by reason thereof.
Landlord also reserves the right to institute such policies, programs
and measures as may be necessary, required or expedient to comply with
applicable codes, rules, regulations or standards.
ARTICLE VI
TENANT'S COVENANTS
6.1 TENANT'S COVENANTS DURING THE TERM
Tenant covenants during the Term and such further time as Tenant
occupies any part of the Premises:
6.1.1 Tenant's Payments. To pay when due (a) all Annual Rent and
additional rent, (b) all taxes which may be imposed on Tenant's personal
property in the Premises (including, without limitation, Tenant's fixtures and
equipment) regardless to whomever assessed, (c) all charges by public utilities
for telephone and other utility services (including service inspections
therefor) rendered to the Premises not otherwise required hereunder to be
furnished by Landlord without charge and not consumed in connection with any
services required to be furnished by Landlord without charge, and (d) as
additional rent, all charges to Landlord for services rendered pursuant to
Section 5.1.2 hereof.
6.1.2 Repairs and Yielding Up. Except as otherwise provided in Article
VII and Section 5.1.3, to keep the Premises in the same order, repair and
condition as on the Commencement Date or as items may be put in during the Term,
reasonable wear damage by casualty or eminent domain only
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excepted; and at the expiration or termination of this Lease peaceably to yield
up the Premises and all changes and additions therein in such order, repair and
condition, first removing all goods and effects of Tenant and any items, the
removal of which is required by agreement or specified herein to be removed at
Tenant's election and which Tenant elects to remove, and repairing all damage
caused by such removal and restoring the Premises and leaving them clean and
neat.
6.1.3 Occupancy and Use. Continuously from the Commencement Date, to
use and occupy the Premises only for the Permitted Uses; not to injure or deface
the Premises, Building, or Lot; and not to permit in the Premises any use
thereof which is improper, offensive, contrary to law or ordinances, or liable
to create a nuisance or to invalidate or increase the premiums for any insurance
on the Building or its contents or liable to render necessary any alteration or
addition to the Building; not to dump, flush, or in any way introduce any
hazardous substances or any other toxic substances into the septic, sewage or
other waste disposal system serving the Premises, not to generate, store or
dispose of hazardous substances in or on the Premises or dispose of hazardous
substances from the Premises to any other location without the prior written
consent of Landlord and then only in compliance with the Resource Conservation
and Recovery Act of 1976, as amended, 42 U.S.C. SectionSection 6901 et seq., and
all other applicable laws, ordinances and regulations; to notify Landlord of any
incident which would require the filing of a notice under applicable federal,
state, or local law; not to store or dispose of hazardous substances on the
Premises without first submitting to Landlord a list of all such hazardous
substances and all permits required therefor and thereafter providing to
Landlord on an annual basis Tenant's certification that all such permits have
been renewed with copies of such renewed permits; and to comply with the orders
and regulations of all governmental authorities with respect to zoning,
building, fire, health, and other codes, regulations, ordinances or laws
applicable to Tenant's specific use of the Premises as opposed to those
applicable to the use of the Building as a whole. "Hazardous substances" as used
in this paragraph shall mean "'hazardous substances" as defined in the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601 and regulations adopted pursuant to said Act.
Notwithstanding anything to the contrary provided in this Lease, Tenant shall
have the right, without notice or approval from Landlord, to store and use on
the Premises such quantities of hazardous substances as are customarily
found on premises used for General Office purposes, provided that such storage
and use complies with all legal requirements.
6.1.4 Rules and Regulations. To comply with the Rules and Regulations
set forth in Exhibit E and all other reasonable Rules and Regulations hereafter
made by Landlord, of which Tenant has been given notice, for the care and use of
the Building and Lot and their facilities and approaches, it being understood
that Landlord shall not be liable to Tenant for the failure of other tenants of
the Building to conform to such Rules and Regulations. The Rules and Regulations
shall be uniformly applied to and enforced against all Tenants in the Building.
6.1.5 Safety Appliances. To keep the Premises equipped with all safety
appliances required by law or ordinance or any other regulation of any public
authority because of any use made by Tenant and to procure all licenses and
permits so required because of such use and, if requested by Landlord, to do any
work so required because of such use, it being understood that the foregoing
provisions shall not be construed to broaden in any way Tenant's Permitted Uses.
Landlord warrants and represents that when the work contemplated by the Complete
Plans is substantially completed, the Premises will comply with all then
applicable legal requirements.
6.1.6 Assignment and Subletting. Not without the prior written consent
of Landlord which consent shall not be unreasonably withheld, to assign this
Lease, to make any sublease, or to permit
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occupancy of the Premises or any part thereof by anyone other than Tenant,
voluntarily or by operation of law; as additional rent, to reimburse Landlord
promptly for reasonable legal and other expenses incurred by Landlord in
connection with any request by Tenant for consent to assignment or subletting;
no assignment or subletting shall affect the continuing primary liability of
Tenant (which, following assignment, shall be joint and several with the
assignee); no consent to any of the foregoing in a specific instance small
operate 6.1.7 as a waiver in any subsequent instance. Landlord's consent to any
proposed assignment or subletting is required both as to the terms and
conditions thereof, and the consistency of the proposed assignee's or
subtenant's business with other uses and tenants in the Building. Landlord's
consent to assignment or subletting by Tenant shall not be unreasonably
withheld, provided that Tenant is not then in default under this Lease and such
assignee or subtenant pays therefor the greater of the Annual Rent and
additional rent then payable hereunder, or the then fair market rent for the
Premises. In the event that any assignee or subtenant pays to Tenant any amounts
in excess of the Annual Rent and additional rent then payable hereunder, or pro
rata portion thereof on a square footage basis for any portion of the Premises,
Tenant shall promptly pay 50% of said excess to Landlord net of all reasonable
costs incurred by Tenant in entering into such sublease or assignment as and
when received by Tenant. If Tenant requests Landlord's consent to assign this
Lease or sublet more than 50% of the Premises, Landlord shall have the option,
exercisable by written notice to Tenant given within 10 days after receipt of
such request, to terminate this Lease as of a date specified in such notice
which shall not be less than 30 or more than 60 days after the date of such
notice.
If, at any time during the Term of this Lease, Tenant is: (i) a
corporation or a trust (whether or not having shares of beneficial interest) and
there shall occur any change in the identity of any persons then having power to
participate in the election or appointment of the directors, trustees or other
persons exercising like functions and managing the affairs of Tenant; or (ii) a
partnership or association or otherwise not a natural person (and is not a
corporation or a trust) and there shall occur any change in the identity of any
of the persons who then are members of such partnership or association or who
comprise Tenant, Tenant shall so notify Landlord.
6.1.7 Indemnity. To defend, with counsel approved by Landlord, all
actions against Landlord, any partner, trustee, stockholder, officer, director,
employee or beneficiary of Landlord, holders of mortgages secured by the
Premises or the Building and Lot and any other parry having an interest in the
Premises ("Indemnified Parties") with respect to, and to pay, protect, indemnify
and save harmless, to the extent permitted by law, all Indemnified Parties from
and against, any and all liabilities, losses, damages, costs, expenses
(including reasonable attorney's fees and expenses) causes of action, suits,
claims, demands or judgements of any nature arising from (i) injury to or death
or any person, or damage to or loss of property, on the Premises, or connected
with the use, condition or occupancy thereof unless caused by the negligence of
Landlord or its servants or agents, (ii) violation of this Lease, or (iii) any
act, fault, omission or other misconduct of Tenant or its agents, contractors,
licensees, sublessees or invitees.
6.1.8 Tenant's Liability Insurance. To maintain public liability
insurance on the Premises indemnifying Landlord and Tenant against all claims
and demands for (i) injury to or death of any person or damage to or loss or
property, on the Premises or connected with the use, condition or occupancy
thereof unless caused by the negligence of Landlord or its servants or agents,
(ii) violation of this Lease, or (iii) any act, fault or omission, or other
misconduct of Tenant or its agents, contractors, licensees, sublessees or
invitees, in amounts which shall, at the beginning of the Term, be at least
equal to the limits set forth in Section 1.1, and from time to time during the
Term, shall be for such higher limits, if any, as are customarily carried in the
area in which the Premises are located on
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property similar to the Premises and used for similar purposes, and shall be
written on the "Occurrence Basis" and include Host Liquor liability insurance,
and to furnish Landlord with certificates thereof.
6.1.9 Tenant's Worker's Compensation Insurance. To keep all of Tenant's
employees working in the Premises covered by worker's compensation insurance in
statutory amounts and to furnish Landlord with certificates thereof.
6.1.10 Landlord's Right of Entry. To permit Landlord and Landlord's
agents entry upon reasonable notice to Tenant other than in the case of an
emergency: to examine the Premises at reasonable times and, if Landlord shall so
elect, to make repairs or replacements; to remove, at Tenant's expense, any
changes, additions, signs, curtains, blinds, shades, awnings, aerials,
flagpoles, or the like not consented to in writing; and to show the Premises to
prospective tenants during the 12 months preceding expiration of the Term and to
prospective purchasers and mortgagees at all reasonable times.
6.1.11 Loading. Not to place Tenant's Property, as defined in Section
6.1.13, upon the Premises so as to exceed a rate of 50 sounds of live load per
square foot and not to move any safe, vault or other heavy equipment in, about
or out of the Premises except in such manner and at such times as Landlord shall
in each instance approve; Tenant's business machines and mechanical equipment
which cause vibration or noise that may be transmitted to the Building structure
or to any other leased space in the Building shall be placed and maintained by
Tenant in settings of cork, rubber, spring, or other types of vibration
eliminators sufficient to eliminate such vibration or noise.
6.1.12 Landlord's Costs. In case Landlord shall be made party to any
litigation commenced by or against Tenant or by of against any parties in
possession of the Premises or any part thereof claiming under Tenant, to pay, as
additional rent, all costs including, without implied limitation, reasonable
counsel fees incurred by or imposed upon Landlord in connection with such
litigation, and, as additional rent, also to pay afl such costs and fees
incurred by Landlord in connection with the successful enforcement by Landlord
of any obligations of Tenant under this Lease. In the event of litigation
between the parties, the prevailing party's reasonable legal fees and expenses
shall paid by the losing party.
6.1.13 Tenant's Property. All the furnishings, fixtures, equipment,
effects and property of every kind, nature and description of Tenant and of all
persons claiming by, through or under Tenant which, during the continuance of
this Lease or any occupancy of the Premises by Tenant or anyone claiming under
Tenant, may be on the Premises or elsewhere in the Building or on the Lot shall
be at the sole risk and hazard of Tenant, and if the whole or any part thereof
shall be destroyed or damaged by fire, water or otherwise, or by the leakage or
bursting of water pipes, steam pipes, or other pipes, by theft, or from any
other cause, no part of said loss or damage is to be charged to or to be borne
by Landlord unless due to the gross negligence of Landlord.
6.1.14 Labor or Materialmen's Liens. To pay promptly when due the
entire cost of any work done on the Premises by Tenant, its agents, employees,
or independent contractors; not to cause or permit any liens for labor or
materials performed or furnished in connection therewith to attach to the
Premises; and immediately to bond or discharge any such liens which may so
attach.
6.1.15 Changes or Additions. Not to make any material changes or
additions to the Premises without Landlord's prior written consent, provided
that Tenant shall reimburse Landlord for all costs incurred by Landlord in
reviewing Tenant's proposed changes or additions, and provided, further, that,
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in order to protect the functional integrity of the Building, all such changes
and additions shall be performed by contractors approved by Landlord, which
approval shall not be unreasonably withheld.
6.1.16 Holdover. To pay to Landlord the greater of one and one-half
times (150%) the total of the Annual Rent and additional rent then applicable
for such month or portion thereof Tenant shall retain possession of the Premises
or any part thereof after the termination of this Lease, whether by lapse of
time or otherwise, and also to pay all damages sustained by Landlord on account
thereof; the provisions of this subsection shall not operate as a waiver by
Landlord of the right of re-entry provided in this Lease.
ARTICLE VII
CASUALTY AND TAKING
7.1 CASUALTY AND TAKING
In case during the Term all or any substantial part of the Premises,
Building, or Lot or any one or more of them, are damaged materially by fire or
any other cause, or by action of the public or other authority in consequence
thereof or are taken by eminent domain or Landlord receives compensable damage
by reason of anything lawfully done in pursuance of public or other authority,
this Lease shall terminate at Landlord's election, which may be made,
notwithstanding Landlord's entire interest may have been divested, by notice to
Tenant within 30 days after the occurrence of the event giving rise to the
election to terminate, which notice shall specify the effective date of
termination which shall be not less than 30 nor more than 60 days after the date
of notice of such termination. If in any such case the Premises are rendered
unfit for use and occupation and the Lease is not terminated, Landlord shall use
due diligence to put the Premises, or, in case of a taking, what may remain
thereof (excluding any items installed or paid for by Tenant which Tenant may be
required or permitted to remove) into proper condition for use and occupation to
the extent Permitted by the net award of insurance or damages available to
Landlord, and a just proportion of the Annual Rent and additional rent according
to the nature and extent of the injury shall be abated until the Premises or
such remainder shall have been put by Landlord in such condition; and in case of
a taking which permanently reduces the area of the Premises, a just proportion
of the Annual Rent and additional rent shall be abated for the remainder of the
Term and an appropriate adjustment shall be made to the Annual Estimated
Operating Expenses.
Tenant may, by notice given to Landlord within 30 days after the date
of any casualty or taking which renders the Premises unsuitable for the uses
permitted hereunder, notify Landlord of its desire to terminate this Lease. If
such a notice is given, this Lease shall terminate 90 days after such notice is
given unless, within 90 days of the giving of such notice, Landlord delivers to
Tenant its certifications (a "Landlord's Restoration Certification") that the
Landlord intends to restore the Premises to substantially the condition they
were in prior to such casualty or taking within 270 days of the event giving
rise to such notice (the "Outside Restoration Date"). Unless terminated pursuant
to the foregoing provision, this Lease shall remain in full force and effect
following any casualty or taking; subject, however, to Landlord's termination
right set forth above, and subject further to the additional right of Tenant to
terminate this Lease if the restoration of the Premises has not occurred by the
Outside Restoration Date (such date being extended by the number of days, not to
exceed 90 in the aggregate, specified in a notice or notices given from time to
time by Landlord to Tenant prior to the then applicable Outside Restoration
Date, of delays in completion attributable to the occurrence of an event of
force majeure). Tenant may not exercise such additional right to terminate this
Lease except within 30 days after the Outside Restoration Date (as so extended
by such a notice or notices).
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7.2 RESERVATION OF AWARD
Landlord reserves to itself any and all rights to receive awards made
for damages to the Premises, Building or Lot and the leasehold hereby created,
or any one or more of them, accruing by reason of exercise of eminent domain or
by reason of anything lawfully done in pursuance of public or other authority.
Tenant hereby releases and assigns to Landlord all Tenant's rights to such
awards, and covenants to deliver such further assignments and assurances thereof
as Landlord may from time to time request, and hereby irrevocably designates and
appoints Landlord its attorney-in-fact to execute and deliver in Tenant's name
and behalf all such further assignments thereof. It is agreed and understood,
however, that Landlord does not reserve to itself, and Tenant does not assign to
Landlord, any damages payable for (i) movable trade fixtures installed by Tenant
or anybody claiming under Tenant, at its own expense or (ii) relocation expenses
recoverable by Tenant from such authority in a separate action.
ARTICLE VIII
RIGHTS OF MORTGAGEE
8.1 PRIORITY OF LEASE
This Lease is and shall continue to be subject and subordinate to any
presently existing mortgage or deed of trust of record covering the Lot or
Building or both (the "mortgaged premises"). The holder of any such presently
existing mortgage or deed of trust shall have the election to subordinate the
same to the rights and interests of Tenant under this Lease exercisable by
filing with the appropriate recording office a notice of such election,
whereupon the Tenant's rights and interests hereunder shall have priority over
such mortgage or deed of trust.
8.2 MORTGAGEE PROTECTION CLAUSE
Tenant agrees to give any Mortgagees and/or Trust/Deed Holders by
Registered Mail, a copy of any Notice of Default served upon the Landlord,
provided that prior to such notice Tenant has been notified, in writing (by way
of Notice of Assignment of Rents and Leases, or otherwise) of the address of
Such Mortgagees and/or Trust Deed Holders. Tenant further agrees that if
Landlord shall have failed to cure such default within the time provided for in
the Lease; then the Mortgagees and/or Trust Deed Holders shall have an
additional sixty (60) days within which to cure such default or if such default
cannot be cured within that time, then such additional time as may be necessary
if within such sixty (60) days, any Mortgagee and/or Trust Deed Holder has
commenced and is diligently pursuing the remedies necessary to cure such
default, (including but not limited to commencement of foreclosure proceedings,
if necessary to effect such cure) in which event this Lease shall not be
terminated while such remedies are being so diligently pursued.
8.3 NO PREPAYMENT OR MODIFICATION, ETC.
Tenant shall not pay Annual Rent, additional rent, or any other charge
more than 10 days prior to the due date thereof. No prepayment of Annual Rent,
additional rent or other charge, no assignment of this Lease and no agreement to
modify so as to reduce the rent, change the Term, or otherwise materially change
the rights of the Landlord under this Lease, or to relieve Tenant of any
obligations or liability under this Lease, shall be valid unless consented to in
writing by Landlord's mortgagees of record, if any.
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8.4 NO RELEASE OR TERMINATION
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 of 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 whom Tenant has received notice, 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
failed or refused to correct or cure the condition complained of within a
reasonable time thereafter, but nothing contained in this Section 8.5 shall be
deemed to imposes any obligation on any such mortgagee to correct or cure any
such condition. "Reasonable time" as used above means and includes a reasonable
time to obtain possession of the mortgaged premises, if the mortgagee elects to
do so, and a reasonable time to correct or cure the condition if such condition
is determined to exist.
8.5 CONTINUING OFFER
The covenants and agreements contained in this Lease with respect to
the rights, powers and benefits of a mortgagee (particularly, without limitation
thereby, the covenants and agreements contained in this Article VIII) constitute
a continuing offer to any person, corporation or other entity, which by
accepting or requiting an assignment of this Lease or by entry or foreclosure
assumes the obligations herein set forth with respect to such mortgagee; such
mortgagee is hereby constituted a party to this Lease as an obligee hereunder to
the same extent as though its name were written hereon as such; and such
mortgagee shall be entitled to enforce such provisions in its own name. Tenant
agrees on request of Landlord to execute and deliver from time to time any
agreement which may reasonably be deemed necessary to implement the provisions
of this Article VIII. Landlord agrees to use reasonable efforts to obtain a
Non-Disturbance Agreement on behalf of Tenant.
8.6 MORTGAGEE'S APPROVAL
Landlord's obligation to perform its covenants and agreements hereunder
is subject to the condition precedent that this Lease be approved by the holder
of any mortgage of which the Premises are a part and by the issuer of any
commitment to make a mortgage loan which is in effect on the date hereof. Unless
Landlord gives Tenant written notice within 30 business days after the date
hereof that such holder or issuer, or both, disapprove this Lease, then this
condition shall be deemed to have been satisfied or waived and the provisions of
this Section 8.6 shall be of no further force or effect.
ARTICLE IX
DEFAULT
9.1 EVENTS OF DEFAULT
If any default by Tenant continues after notice, in case of Annual
Rent, additional rent, Tenant Improvement Reimbursement or any other monetary
obligation to Landlord for more than 10 days after receipt by Tenant of notice
from Landlord of such default, or in any other case for more than 30 days after
receipt by Tenant of notice from Landlord of such default and such additional
time, if any, as is reasonably necessary to cure the default if the default is
of such a nature that it cannot reasonably be cured in 30 days and Tenant
diligently endeavors to cure such default: or if Tenant becomes insolvent, fails
to pay its debts as they fall due, files a petition under any chapter of the
U.S. Bankruptcy Code, 11 U.S.C. 101 et seq., as it may be amended (or any
similar petition under any insolvency law of any
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jurisdiction), or if such petition is filed against Tenant and is not
dismissed within 30 days; or if Tenant proposes any dissolution, liquidation,
composition, financial reorganization or recapitalization with creditors, makes
an assignment or trust mortgage for benefit of creditors, or if a receiver,
trustee, custodian or similar agent is appointed or takes possession with
respect to any property of Tenant; or if the leasehold hereby created is taken
on execution or other process of law in any action against Tenant; then, and in
any such case, Landlord and the agents and servants of Landlord may, in addition
to and not in derogation of any remedies for any preceding breach of covenant,
immediately or at any time thereafter while such default continues and without
further notice, at Landlord's election, do any one or more of the following: (1)
give Tenant written notice stating that the Lease is terminated, effective upon
the giving of such notice or upon a date stated in such notice, as Landlord may
elect, in which event the Lease shall be irrevocably extinguished and terminated
as stated in such notice without any further action, or (2) with or without
process of law, in a lawful manner, enter and repossess the Premises as of
Landlord's former estate, and expel Tenant and those claiming through or under
Tenant, and remove its and their effects, without being guilty of trespass, in
which event the Lease shall be irrevocably extinguished and terminated at the
time of such entry, or (3) pursue any other rights or remedies Permitted by law.
Any such termination of the Lease shall be without prejudice to any remedies
which might otherwise be used for arrears of rent or prior breach of covenant,
and in the event of such termination Tenant shall remain liable under this Lease
as hereinafter provided. Tenant hereby waives all statutory rights (including,
without limitation, rights of redemption, if any) to the extent such rights may
be lawfully waived, and Landlord, without notice to Tenant, may store Tenant's
effects and those of any person claiming through or under Tenant at the expense
and risk of Tenant and, if Landlord so elects, may sell such effects at Public
auction or private sale and apply the net proceeds to the payment of all sums
due to Landlord from tenant, if any, and pay over the balance, if any, to
Tenant.
9.2 TENANT'S OBLIGATIONS AFTER TERMINATION
In the event that this Lease is terminated under any of the provisions
contained in Section 9.1 or shall be otherwise terminated for breach of any
obligation of Tenant, Tenant covenants to pay forthwith to Landlord, as
compensation, the excess of the total rent reserved for the residue of the Term
over the rental value of the Premises for said residue of the Term. In
calculating the rent reserved, there shall be included, in addition to the
annual Rent and all additional rent, the value of all other consideration agreed
to be paid or performed by Tenant for said residue. Tenant further covenants as
an additional and cumulative obligation after any such ending to pay punctually
to Landlord all the sums and perform all the obligations which Tenant covenants
in this Lease to pay and to perform in the same manner and to the same extent
and at the same time as if this Lease had not been terminated. In calculating
the amounts to be paid by Tenant under the next foregoing covenant, Tenant shall
be credited with any amount paid to Landlord as compensation as provided in the
first sentence of this Section 9.2 and also with the net proceeds of any rents
obtained by Landlord by reletting the Premises, after deducting all Landlord's
reasonable expenses in connection with such reletting, including, without
implied limitation, all repossession costs, brokerage commissions, fees for
legal services and expenses of repairing the Premises for such reletting, it
being agreed by Tenant that Landlord may (i) relet the Premises or any part or
parts thereof for a term or terms which may at Landlord's option be equal to or
less than or exceed the period which would otherwise have constituted the
balance of the Term and may grant such concessions and free rent as Landlord in
its reasonable judgment considers advisable or necessary to relet the same and
(ii) make such alterations, repairs and decorations in the Premises as Landlord
in its reasonable judgement considers advisable or necessary to relet the same,
and no action of Landlord in accordance with the foregoing or failure to relet
or to collect rent under reletting shall operate or be construed to release or
reduce Tenant's liability as aforesaid; Landlord agreeing hereby to make
reasonable efforts to relet the Premises.
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Nothing contained in this Lease shall, however, limit or prejudice the
right of Landlord to prove and obtain in proceedings for bankruptcy or
insolvency by reason of the termination of this Lease, an amount equal to the
maximum allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, the damages are to be proved, whether or not
the amount be greater, equal to, to less than the amount of the loss or damages
referred to above.
ARTICLE X
MISCELLANEOUS
10.1 NOTICE OF LEASE
Upon request of either party, Loth parties shall execute and deliver, a
short form of this Lease in form appropriate for recording or registration, and
if this Lease is terminated before the Term expires, an instrument in such form
acknowledging the date of termination.
10.2 RELOCATION
[Crossed out]
10.3 NOTICES FROM ONE PARTY TO THE OTHER
All notices required or permitted hereunder shall be in writing and
addressed, if to the Tenant, at Tenant's Address or such other address as Tenant
shall have last designated by notice in writing to Landlord and, if to Landlord,
at Landlord's Address or such other address as Landlord shall have last
designated by notice in writing to the Tenant. Any notice shall have been deemed
duly given if mailed to such address postage prepaid, registered or certified
mail, return receipt requested, when deposited with the U.S. Postal Service, or
if delivered to such address by hand, when so delivered.
10.4 BIND AND INURE
The obligations of this Lease shall run with the land, and this Lease
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Landlord named herein and
each successive owner of the Premises shall be liable only for the obligations
accruing during the period of its ownership. The obligations of Landlord shall
be binding upon the assets of Landlord which comprise the Premises but not upon
other assets of Landlord. No individual partner, trustee, stockholder, officer,
director, employee or beneficiary of Landlord shall be personally liable under
this Lease and Tenant shall look solely to Landlord's interest in the Premises
in pursuit of its remedies upon an event of default hereunder, and the general
assets of the individual partners, trustees, stockholders, officers, employees
or beneficiaries of Landlord shall not be subject to levy, execution or other
enforcement procedure for the satisfaction of the remedies of Tenant.
10.5 NO SURRENDER
The delivery of keys to any employee of Landlord or to Landlord's agent
or any employee thereof shall not operate as a termination of this Lease or a
surrender of the Premises.
10.6 NO WAIVER, ETC.
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The failure of Landlord or of Tenant to seek redress for violation of,
or to insist upon the strict performance of any covenant or condition of this
Lease or, with respect to such failure of Landlord, any of the Rules and
Regulations referred to in Section 6.1.4, whether heretofore or hereafter
adopted by Landlord, shall not be deemed a waiver of such violation nor prevent
a subsequent act, which would have originally constituted a violation, from
having all the force and effect of an original violation, nor shall the failure
of Landlord to enforce any of said Rules and Regulations against any other
tenant in the Building be deemed a waiver of any such Rules or Regulations. The
receipt by Landlord of Annual Rent or additional rent with knowledge of the
breach of any covenant of this Lease shall not be deemed a waiver of such breach
by Landlord, unless such waiver be in writing and signed by Landlord. No consent
or waiver, express or implied, by Landlord or Tenant to or of any breach of any
agreement or duty shall be construed as a waiver or consent to or of any other
breach of the same or any other agreement or duty.
10.7 NO ACCORD AND SATISFACTION
No acceptance by Landlord of a lesser sum than the Annual Rent and
additional rent then due shall be deemed to be other than on account of the
earliest installment of such rent due, nor shall any endorsement or statement on
any check or any letter accompanying any check or payment as rent be deemed as
accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such installment or
pursue any other remedy in this Lease provided.
10.8 CUMULATIVE REMEDIES
The specific remedies to which Landlord may resort under the terms of
this Lease are cumulative and are not intended to be exclusive of any other
remedies or means of redress to which it may be lawfully entitled in case of any
breach or threatened breach by Tenant of any provisions of this Lease. In
addition to the other remedies provided in this Lease, Landlord shall be
entitled to the restraint by injunction of the violation or attempted or
threatened violation of any of the covenants, conditions or provisions of this
Lease or to a decree compelling specific performance of any such covenants,
conditions or provisions.
10.9 LANDLORD'S RIGHT TO CURE
If Tenant shall at any time default in the performance of any
obligation under this Lease, Landlord shall have the right, but shall not be
obligated, to enter upon the Premises upon reasonable notice 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. All sums so paid by Landlord (together with interest
at the rate of 4% per annum in excess of the then average prime commercial rate
of interest being charged by the three largest national banks in Boston,
Massachusetts) and all necessary incidental costs and expenses in connection
with the performance of any such act by Landlord, shall be deemed to be
additional rent under this Lease and shall be payable to Landlord immediately on
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.
10.10 ESTOPPEL CERTIFICATE
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Tenant and Landlord each agree, time to time, upon not less than 15
days' prior written request by the other party, to execute, acknowledge and
deliver to the other party a statement in writing certifying that this Lease is
unmodified and in full force and effect; that (in the case of a Tenant estoppel)
Tenant has no defenses, offsets or counterclaims against its obligations to pay
the Annual Rent and additional rent and to perform its other covenants under
this Lease; that there are no uncured defaults of Landlord or Tenant under this
Lease (or, if there have been modifications, that this Lease is in full force
and effect as modified and staring the modifications, and, if there are any
defenses, offsets, counterclaims, or defaults, setting them forth in reasonable
detail); and the dates to which the Annual Rent, additional rent and other
charges have been paid. Any such statement delivered pursuant To this Section
10.10 shall be in a form reasonably acceptable to and may be relied upon by any
prospective purchaser or mortgagee of the premises which include the Premises or
any prospective assignee of any such mortgagee.
10.11 WAIVER OF SUBROGATION
Any insurance carried by either parry with respect to the Premises and
property therein or occurrences thereon shall include a clause or endorsement
denying to the insurer rights of subrogation against the other party to the
extent rights have been waived by the insured prior to occurrences of injury or
loss. Each party, notwithstanding any provisions of this Lease to the contrary,
hereby waives any rights of recovery against the other for injury or loss due to
hazards covered by insurance containing such clause or endorsement to the extent
of the indemnification received thereunder.
10.12 ACTS OF GOD
In any case where either parry hereto is required to do any act, delays
caused by or resulting from Acts of God, war, civil Commotion, fire, flood or
other casualty, labor difficulties, shortages of labor, materials or equipment,
government regulations, unusually severe weather, or other causes beyond such
party's reasonable control shall not be counted in determining the time during
which work shall be completed, whether such time be designated by a fixed date,
a fixed time or a "reasonable time," and such time shall be deemed to be
extended by the period of such delay.
10.13 BROKERAGE
Tenant represents and warrants that it has dealt with no broker in
connection with this transaction other than Spaulding and Slye Colliers Limited
ParTnership and agrees to defend, with counsel approved by Landlord, indemnify
and save Landlord harmless from and against any and all cost, expense or
liability for any compensation, commissions or charges claimed by a broker or
agent, other than Spaulding and Slye Colliers Limited Partnership with respect
to Tenant's dealings in connection with this Lease.
10.14 SUBMISSION NOT AN OFFER
The submission of a draft of this Lease or a summary of some or all of
its provisions does not constitute an offer to lease or demise the Premises, it
being understood and agreed that neither Landlord nor Tenant shall be legally
bound with respect to the leasing of the Premises unless and until this Lease
has been executed by both Landlord and Tenant and a fully executed copy has been
delivered to each of them.
10.15 APPLICABLE LAW AND CONSTRUCTION
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<PAGE> 25
This Lease shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts. If any term, covenant, condition or
provision of this Lease or the application thereof to, any person or
circumstances shall be declared invalid or unenforceable by the final ruling of
a court of competent jurisdiction having final review, the remaining terms,
covenants, conditions and provisions of this Lease and their application to
persons or circumstances shall not be affected thereby and shall continue to be
enforced and recognized as valid agreements of the parties, and in the place of
such invalid or unenforceable provision, there shall be substituted a like, but
valid and enforceable provision which comports to the findings of the aforesaid
court and most nearly accomplishes the original intention of the parties.
There are no oral or written agreements between Landlord and Tenant
affecting this Lease. This Lease may be amended, and the provisions hereof may
be waived or modified, only by instruments in writing executed by Landlord and
Tenant.
The titles of the several Articles and Sections contained herein are
for convenience only and shall not be considered in construing this Lease.
Unless repugnant to the context, the words "Landlord" and "Tenant"
appearing in this Lease shall be construed to mean those named above and their
respective heirs, executors, administrators, successors and assigns, and those
claiming through or under them respectively. If there be more than one Tenant,
the obligations imposed by this Lease upon Tenant shall be joint and several.
10.16 TENANT CONDENSER WATER SYSTEM CHARGES
The Building is equipped with a separate tenant condenser water system
to accommodate the special HVAC requirements of tenants.
The initial charge for tying into the tenant condenser water system,
(the "hook-up charge") shall be equal to $ 1,000 per ton of capacity connected,
payable within 30 days of Landlord's notice that the hook-up has been performed.
The annual operating charge for using the tenant condenser water system
(the "Annual Cooling Operating Charge") shall be equal to $365 per ton of
capacity connected and is payable as additional rent to Landlord, in equal
monthly installments in accordance with Article IV of the Lease. The Annual
Cooling Operating Charge shall be subject to escalation for any increases in
energy, maintenance and/or labor costs incurred by Landlord with respect to the
operation and maintenance of such system.
In the event that Tenant disconnects from the tenant condenser water
system, the costs associated therewith shall be borne by Tenant.
Landlord reserves the right to refuse access to the tenant condenser
water system in its reasonable judgement based on the capacity of such system
that is available and/or the amount of capacity that tenant requires.
ARTICLE XI
SECURITY DEPOSIT
11.1 SECURITY DEPOSIT
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<PAGE> 26
Landlord acknowledges receipt from Tenant of the Security Deposit, to
be held by Landlord, as security, without interest, for and during the Term,
which deposit shall be returned to Tenant, pursuant to the terms of Section 11.2
hereunder, provided exists no breach of any undertaking of Tenant. If all or any
part of the Security Deposit is applied to an obligation of Tenant hereunder,
Tenant shall immediately upon request by Landlord restore the Security Deposit
to its original amount. Tenant shall not have the right to call upon Landlord to
apply all or any part of the Security Deposit to cure any default or fulfill any
obligation of Tenant, but such use shall be solely in the discretion of
Landlord. Upon any conveyance by Landlord of its interest under this Lease, the
Security Deposit shall be delivered by Landlord to Landlord's grantee or
transferee. Upon any such delivery, Tenant hereby releases Landlord herein named
of any and all liability with respect to the SecuritY Deposit, its application
and return, and Tenant agrees to look solely to such grantee or transferee. It
is further understood that this provision shall also apply to subsequent
grantees and transferees.
11.2 LETTER OF CREDIT
Notwithstanding anything to the foregoing, Tenant may, at Tenant's sole
cost and expense, deliver to Landlord an irrevocable and unconditional letter of
credit in the face amount of the Security Deposit, as set forth in Article 1.1,
in lieu of a cash Security Deposit. Such letter of credit shall be in favor of
Landlord with a lending institution satisfactory to Landlord, together with a
copy of the issuer's corporate resolution authorizing execution of the letter of
credit. The letter of credit shall have an expiration date no earlier than the
first anniversary of the Commencement Date, which expiration date shall be
automatically extended without amendment for additional periods of one year
through the forty-eighth (48th) month from the Commencement Date at which time
the Letter of Credit may be reduced to the face amount per the following
schedule:
First day of the forty-ninth (49th) month: $
First day of the sixty-first (61st) month: $
First day of the seventy-third (73rd) month: $
First day of the eighty-fifty (85th) month: $
and further provided that so long as Tenant is in occupancy of any part of the
Premises, unless Landlord notifies the issuer of the Letter of Credit not to so
renew the Letter of Credit or the issuer of the letter of credit notifies
Landlord in writing that it elects not to renew the letter of credit for such
additional period. In the event Landlord is so notified by the issuer, Landlord
shall so notify Tenant and Tenant shall, within 15 days after Landlord's notice,
deliver to Landlord a replacement letter of credit, such that the first letter
of credit or replacement letter of credit shall be in effect at all times. In
the event, at any time, Landlord in good faith becomes concerned that the issuer
may not be able to honor the letter of credit, Landlord shall so notify Tenant
and Tenant shall, within 15 days thereafter, deliver to Landlord a replacement
letter of credit, which replacement letter of credit shall become effective no
later than expiration of said 15-day period. Any replacement letter of credit
shall be issued by a lending institution satisfactory to Landlord, and delivered
to Landlord together with a copy of the issuer's corporate resolution
authorizing execution of the replacement letter of credit. If Tenant fails to
deliver to Landlord a replacement letter of credit with the time limits set
forth in this paragraph, it shall be a default under this Lease and Landlord
shall be entitled to draw down the full amount of the letter of credit without
further notice or demand and retain the proceeds thereof as substitute security,
subject to the provisions of Section 11.3. At such time as Tenant is entitled to
reduce the amount of the Security Deposit, as more particularly provided in
Section 1.1, Tenant shall have the right to reduce the face value of the letter
of credit required hereunder accordingly or to substitute a replacement letter
of credit in such amount.
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<PAGE> 27
11.3 LETTER OF CREDIT AS SECURITY
Landlord shall hold the letter of credit as security for the faithful
performance and observance beyond applicable cure periods by Tenant of the
terms, provisions and conditions of this Lease. It is understood and agreed that
if any default by Tenant occurs hereunder, Landlord shall have the right from
time to time, without further notice or demand and without prejudice to any
other remedy Landlord may have on account thereof, to draw down the letter of
credit In the amount of the default; should acid default continue beyond four
(4) months, then Landlord shall have the right, at Landlord's sole discretion to
draw down the full amount of the letter of credit, and Landlord may use, apply
or retain the whole or any part of the proceeds to the extent required for
payment of any Annual Rent of additional rent or any other sum as to which
Tenant is in default or for any sum which Landlord may expend or may be required
to expend by reason of any default by Tenant hereunder, including, but not
limited to, any damage or deficiency accrued before or after summary proceedings
or other re-entry by Landlord. It is agreed that Landlord shall always have the
right to apply the proceeds or any part thereof, as aforesaid, without prejudice
to any other remedy or remedies which Landlord amy have, or Landlord may pursue
any other such remedy or remedies in lieu of applying the proceeds or any part
thereat. Tenant shall not have the right to call upon Landlord to apply ail or
any part of the proceeds to cure any default or fulfill any obligation of
Tenant, such use shall be solely in the discretion of Landlord. The proceeds
will be held by Landlord as security and without any obligation to segregate the
proceeds from any other funds held by Landlord to accrue interest thereon for
the benefit of Tenant. It Landlord shall apply the proceeds or any part thereof,
as aforesaid, Tenant shall upon demand restore the letter of credit to the face
amount required under the previous paragraph or pay to Landlord the amount
necessary to restore the Security Deposit to its original amount. In the event
that Tenant shall fully and faithfully comply with all of the terms, provisions,
covenants and conditions of this Lease, the letter of credit, or any remaining
proceeds, shall be returned to Tenant within 30 days after the expiration of the
Term and after delivery of entire possession of the Premises to Landlord unless
sooner returned in accordance with the provisions hereof. In the event of a sale
or other transfer of the Premises, or leasing of the Premises, Landlord shall
transfer the letter of credit, or any remaining proceeds, to the grantee,
transferee or lessee (if the letter of credit is not assignable, Tenant shall
furnish Landlord's successor with a replacement Letter of credit showing such
successor as payee, provided that the original letter of credit then outstanding
shall be simultaneously returned to Tenant) and Landlord shall thereupon be
released by Tenant from any and all liability with respect to the letter of
credit, or any remaining proceeds, its application and return, and Tenant agrees
to look solely to the grantee, transferee or lessee. It is further understood
that this provision shall also apply to subsequent grantees, transferees and
lessees. Tenant further covenants that it will not assign or encumber nor
attempt to assign or encumber the letter of credit or its proceeds and that
neither Landlord nor its successor or assigns shall be bound by any such
assignment, encumbrance, attempted assignment or attempted encumbrance. Any
assignment or encumbrance of the letter of credit or its proceeds by Tenant
shall be null and void and without force or effect at law or in equity.
(SIGNATURE PAGE FOLLOWS)
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<PAGE> 28
EXECUTED a sealed instrument in three or more counterparts on the day and year
first written above.
LANDLORD: 25 MALL ROAD TRUST
By its Agent, Spaulding and Slye
Services Limited Partnership
____________________________________
Peter A. Bailey
Vice President
TENANT: OBJECT DESIGN, INC.
____________________________________
____________________________________
Please print name and title
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<PAGE> 29
EXHIBIT B
RIDER TO LEASE
between
25 MALL ROAD TRUST
and
OBJECT DESIGN, INC.
The following provisions are incorporated as an integral part of the captioned
Lease.
1. ANNUAL RENT INCREASE. The Annual Base Rent shall be adjusted as
follows:
For the period November 1, 1995 to October 31, 1998 The Annual Base
Rent shall be increased to $11.75/RSF
For the period November 1, 1998 to November 30, 2001 The Annual Base
Rent shall be increased to $13.75/RSF.
2. RENT ABATEMENT. Tenant and Landlord acknowledge that Tenant is
currently a tenant under a lease, at One New England Executive Park,
Burlington, Massachusetts (the "Current Lease") and that Tenant will be
vacating those premises prior to the expiration of the term of the
Current Lease in order to occupy the Premises demised under this lease.
Notwithstanding anything herein to the contrary, Landlord agrees to
abate Tenant's Annual Base Rent and additional rent due hereunder in an
amount equal to the lesser of (a) $22,000.00 per month or (b) Tenant's
rent under the Current Lease, as such rent may be adjusted by Tenant
and Tenant's landlord under the Current Lease, commencing upon the
Commencement Date of this Lease (or a prorated portion of such rent for
the partial initial month should this Lease not commence on the first
day of the month) and terminating on March 31, 1994.
Tenant agrees, within thirty (30) days of each month's abatement, to
provide Landlord with copies of Tenant's check for such rent payment
accompanied by a copy of an invoice from the Landlord under the Current
Lease or other evidence satisfactory to Landlord setting forth the rent
payment made by Tenant. In the event Tenant fails to timely provide
Landlord with such documentation, Tenant shall not be entitled to any
additional monthly abatements to Tenant hereunder, until such time as
Tenant provides such documentation to Landlord.
Tenant agrees not to in any way act or fail to act in such manner which
results in Landlord's obligation hereunder being increased, such
obligation being limited to Tenant's existing obligation under the
Current Lease for the period as defined herein.
3. ADDITIONAL LANDLORD CONTRIBUTION. Landlord agrees to provide Tenant
with an allowance of up to $20.00 per rentable square foot to be
applied toward the cost of leasehold improvements and architectural and
engineering costs to prepare the Complete Plans. Landlord
<PAGE> 30
further agrees to amortize up to an additional $2.00 per rentable
square foot should Tenant's actual leasehold improvement costs so
require, such costs to be amortized over the initial forty-eight (48)
months of the Term at an annual interest rate of ten percent (10%)
payable monthly with installments of Annual Rent.
4. OPTION OF EARLY TERMINATION. Notwithstanding anything herein to the
contrary, provided a) Tenant has not expanded after August 1, 1995
pursuant to Tenant's Right of First Offer hereunder; and b) at the time
Tenant exercises its option to terminate and at the effective date of
such termination, this Lease is in full force and effect, Tenant has
not been in monetary default under the terms of this Lease at any time
during the term of the Lease and has not been in any other default
under the terms of this Lease at any time during the term of the Lease
whereby Tenant has not cured such default within the allotted cure
period, and (c) Tenant has not assigned or sublet the Premises or any
portion thereof, and Tenant is the then occupant of the entire
Premises, Tenant shall have an option to terminate the Lease upon the
terms and conditions set forth herein. Tenant shall have a one-time
option to terminate this Lease at the end of the initial sixty (60)
months of the Term by written notice to Landlord on or before that date
which is nine (9) months prior to the expiration of the initial sixty
(60) months of the Term, provided Tenant includes with said notice
payment in an amount equal to (x) seven (7) months rent and additional
rent based upon current monthly charges at the time of said notice plus
(y) the unamortized portion of costs incurred by Landlord on account of
Tenant Improvements, including the cost to Landlord of preparing the
Complete Plans, and leasing commissions based on an amortization
schedule of eight (8) years at a rate of interest of 10% per annum
(notice of which costs shall be given to Tenant no later than ninety
(90) days after the Commencement Date), as a termination payment. If
Tenant does not provide both written notice and the termination payment
on or before the dates specified herein, this option to terminate the
Lease shall be null and void and Tenant shall have no right to so
terminate this Lease.
5. OPTION TO EXTEND. Provided that this Lease is in full force and effect,
Tenant has not been in monetary default under the terms of this Lease
at any time during the term of the Lease or at the time that Tenant
exercises its option to extend the term or at the commencement of such
extension term and has not been in any other default under the terms of
this Lease at any time during the term of the Lease whereby Tenant has
not cured such default within the allotted cure period and further
provided that Tenant has not assigned or sublet the Premises or any
portion thereof, and Tenant is the then occupant of the entire
Premises, Tenant shall have the right to extend the Term hereof for one
(1) additional term of five (5) years, to commence immediately upon the
exercise of the initial eight (8) year term, by written notice
("Tenant's Extension Notice") to the Landlord given on or before that
date which is nine (9) months prior to the expiration of the initial
Term.
Such extension term shall be upon all of the same terms and conditions
as are contained herein except that Annual Rent payable shall be
ninety-five percent (95%) of the then applicable fair market rent
("Fair Market Rent") as defined below for the Premises. In the event
Landlord and Tenant cannot agree upon the Fair Market Rent within ten
(10) business days of Landlord's receipt of Tenant's extension notice,
then the Fair Market Rent shall be determined pursuant to the Appraisal
Method set forth in Exhibit "F" attached hereto and incorporated herein
by reference.
If Tenant does not provide written notice of its option to extend on or
before the dates specified herein, Tenant's option to extend shall be
null and void and Tenant shall have no right to extend the Term.
<PAGE> 31
6. RIGHT OF FIRST OFFER. Subject to the conditions subsequently set forth,
and provided this Lease is in full force and effect, and provided that
Tenant has not been in monetary default under the terms of this Lease
at any time during the term of the Lease or at the time Tenant
exercises its right of first offer or at the commencement of the term
for the Additional Space (as defined herein) and has not been in any
other default under the terms of this Lease at any time during the term
of the Lease whereby Tenant has not cured such default within the
allotted cure period, and provided further that Tenant has not assigned
or sublet the Premises or any portion thereof and Tenant is the then
occupant of the entire Premises, Tenant shall have the Right of First
Offer (the "Right of First Offer") to lease the rentable area outlined
on Exhibit A-1 (the "Additional Space"). Tenant's right to lease the
Additional Space shall arise only upon the expiration of the term of
any leases for this rentable area, including extensions or renewals of
such leases and shall be subject to such options to extend or expand or
rights of first refusal or first offer or similar rights as may be held
by any other tenant in the Building, pursuant to the terms of its
lease.
In the event Landlord intends to lease the Additional Space, and this
Right of First Offer is applicable in accordance with the foregoing,
Landlord shall give written notice to Tenant of the availability of
such space for leasing and on what terms Landlord intends to lease such
space. Upon receipt of Landlord's notice, Tenant shall have five (5)
business days from the date of Landlord's notice to advise Landlord in
writing of Tenant's election to exercise its right hereunder. If Tenant
fails to notify Landlord within such time period, Tenant shall be
deemed to have rejected Landlord's offer and Tenant's right of first
offer shall be null and void. If Tenant accepts Landlord's offer, then
the Additional Space offered shall be taken by Tenant upon all of the
terms and conditions contained in Landlord's offer. If requested by
Landlord, Tenant shall execute a new lease or amend the existing Lease
to include the Additional Space.
If Tenant fails to accept Landlord's offer within the time specified
herein or rejects Landlord's offer, then this Right of First Offer
shall terminate and Landlord shall be free to lease such space in its
sole discretion to other parties on substantially the same terms as
offered to Tenant.
7. FIRST OPTION TO EXPAND. Provided that this Lease is in full force and
effect, Tenant has not been in monetary default under the terms of this
Lease at any time during the term of the Lease or at the time Tenant
exercises its option to expand or at the commencement of the term for
such expansion space and has not been in any other default under the
terms of this Lease at any time during the term of the Lease whereby
Tenant has not cured such default within the allotted cure period, and
further provided that Tenant has not assigned or sublet the Premises or
any portion thereof, and Tenant is the then occupant of the entire
Premises, Tenant shall have the First Option to Expand exercisable by
written notice to Landlord on or before May 1, 1994 to lease the
additional premises consisting of approximately 13,963 RSF on the fifth
floor and ------ sixth floor in the area shown on Exhibit A-2 attached
(the "First Expansion Area"). Tenant and Landlord further agree that
the Commencement Date for the First Expansion Area shall be no later
than August 1, 1994, or earlier if the First Expansion Area is ready
for occupancy.
If Tenant timely exercises the First Option To Expand, Tenant shall
lease the First Expansion Area upon all of the same terms and
conditions contained in the Lease except the Rentable Floor Area of
Tenant's space which shall be adjusted to include the First Expansion
Area and all other sections of the Lease which require corresponding
adjustments.
<PAGE> 32
If Tenant fails to exercise the First Option to Expand in a timely
manner, the First Option to Expand shall be null and void and Landlord
shall be free to lease the First Expansion Area in its sole discretion
to other parties on such terms as Landlord may elect.
<PAGE> 33
If requested by Landlord, Tenant shall execute a new lease or amend the
existing Lease to include the First Expansion Area.
Time is of the essence in regards to this First Option to Expand.
8. SECOND OPTION TO EXPAND. Provided that this Lease is in full force and
effect, Tenant has not been in monetary default under the terms of this
Lease at any time during the term of the Lease or at the time Tenant
exercises its Option to Expand or at the commencement of the term for
such expansion space and has not been in any other default under the
terms of this Lease at any time during the term of the Lease whereby
Tenant has not cured such default within the allotted cure period, and
further provided that Tenant has not assigned or sublet the Premises or
any portion thereof, and Tenant is the then occupant of the entire
Premises, Tenant shall have the Second Option to Expand exercisable by
written notice to Landlord on or before February 1, 1995 to lease a)
the additional premises consisting of approximately 13,963 RSF on the
fifth floor and sixth floor in the area shown on Exhibit A-2 attached
in the event Tenant has not exercised its First Option to Expand
hereunder and the space remains available to lease or b) the additional
premises consisting of approximately 11,926 RSF on the fifth floor in
the area shown on Exhibit A-3 attached (the "Second Expansion Area").
Tenant and Landlord further agree that the Commencement Dale for the
Second Expansion Area shall not be prior to May 1, 1995, but in no
event shall the Commencement Date for the Second Expansion Area be
later than August 1, 1995.
If Tenant timely exercises the Second Option to Expand, Tenant shall
lease the Second Expansion Area upon the terms and conditions that the
Landlord is offering comparable space within the building. If Tenant
fails to exercise the Second Option to Expand in a timely manner, the
Second Option to Expand shall be null and void and Landlord shall be
free to lease the Second Expansion Area in its sole discretion to other
parties on such terms as Landlord may elect.
If requested by Landlord, Tenant shall execute a new lease or amend the
existing lease to include the Second Expansion Area.
Time is of the essence in regards to the Second Option to Expand.
9. EXTERIOR SIGNAGE. Landlord shall, at Landlord's cost, provide Tenant a
listing on the granite directory sign located at the main entrance of
25 Burlington Mall Road consistent with other Tenant listings on said
granite directory sign.
Provided that Tenant is leasing a minimum of 100,000 RSF within the
building, and provided that this Lease is in full force and effect,
Tenant has not been in monetary default under the terms of this Lease
at any time during the term of the Lease and has not been in any other
default under the terms of this Lease at any time during the term of
the Lease whereby Tenant has not cured such default within the allotted
cure period, and further provided that Tenant has not assigned or
sublet the Premises or any portion thereof, and Tenant is the then
occupant of the entire Premises, Tenant shall have the right, at its
sole cost and expense, subject to approvals required from any
appropriate governmental authority, which Tenant shall obtain in
advance, to install a sign on the exterior of the Building. Such sign
shall be subject to Landlord's approval of the signage size,
<PAGE> 34
design, and location, such approval not to be unreasonably withheld.
The cost to restore the building facade to its condition prior to
installation of such sign upon the termination of this Lease shall be
paid for by the Tenant.
<PAGE> 35
EXHIBIT C
SPECIFICATIONS OF LEASEHOLD IMPROVEMENTS
1. FLOORING
Tenant will have its choice of carpeting from building standard
samples.
2. PARTITIONS
(a) Partitions will be 2 1/2" metal studs 16" o.c. with one layer
of 1'2" gypsum board on each side. Partition will extend from
floor to 6" above acoustic tile ceiling.
(b) All partitions will have a vinyl base 4" high, color selection
to be from building standards.
(c) The total lineal footage of partitions provided within this
allowance, exclusive of demising partitions, shall not exceed
one lineal foot for each 15 square feet of rentable area.
3. DOORS
(a) Entrance Doors. Entrance doors will be ceiling high (3'0" x
8'4") sliced oak face, solid core, 1 3/4" thick, finished with
two coats clear polyurethane. Door frames will be made of oak.
Hardware will include 2 pair of butts, one lever action
lockset and one doorstop. Entrance doors will be provided in
sufficient quantity to meet load code requirements. In
selected locations opposite elevators, full height glass doors
will be provided in place of standard oak door.
(b) Interior Doors. Interior doors will be 3'0" x 7'0" stained oak
face, solid core, 3 3/4" thick, finished with two coats
polyurethane. Door frames will be pressed metal. Hardware will
include one-and-one-half pair of butts, one standard duty
latchset and one doorstop. The number of doors provided within
this allowance shall not exceed one door for each 25 lineal
feet of interior (non-demising) partitions allowed above.
4. PAINTING AND WALL COVERING
(a) All wall surfaces shall receive two coats of eggshell finish
latex paint. Color selection will be Tenant's discretion with
not more than one color per room.
(b) All metal door frames shall receive two coats of semi-gloss
enamel.
(c) If Tenant desires a special wall covering, it shall be
furnished and installed at Tenant's expense with a credit
provided for the value of the painting being eliminated.
5. CEILING
24" x 48" x 5/8" lay-in mineral acoustical tile on an exposed grid "T"
white suspension system. Ceiling height will be 8'6".
6. WINDOW TREATMENT
<PAGE> 36
Horizontal blinds will be installed at exterior windows throughout the
Tenant area. Blinds will be uniform in color throughout the Building.
7. LIGHTING
(a) Low brightness, 2' x 4', three-tube parabolic reflector
fixtures will be provided at a ratio of one fixture for each
110 square feet of rentable area.
(b) One single-pole light switch will be provided for each 400
square feet of rentable area.
8. ELECTRICAL OUTLETS
One duplex outlet will be provided for each 120 square feet of rentable
area.
9. TELEPHONE OUTLETS
Telephone outlets and wiring shall be installed by the telephone
company, which shall be employed by the Tenant.
10. SPRINKLERS
A complete fire protection sprinkler system using fully concealed
sprinkler heads will be provided to protect normal office use.
Additional fire protection for special uses will be provided at
Tenant's expense.
11. HEATING, VENTILATING AND AIR CONDITIONING
A zoned variable air volume HVAC system will be provided including
distribution ductwork, diffusers, return air grilles and thermo-static
controls for a normal office layout. Heating and cooling will be
performed by centralized rooftop equipment.
The system is designed as follows:
1. Zones on the Building perimeter
(a) A typical perimeter zone is a maximum of 50 feet
long.
(b) Each perimeter zone will be served by a combination
variable volume cooling/constant volume heating
terminal unit controlled by a dedicated thermostat.
(c) Perimeter air will be supplied by 4'0" linear
diffusers spaced ten feet on center.
2. Interior Zones
(a) A typical interior zone serves a maximum of 1,200
square feet of usable area.
(b) Each interior zone will be served by a variable air
volume terminal unit controlled by a dedicated
thermostat.
<PAGE> 37
(c) Interior air will be supplied by one 2'0" diffuser
for each 180 square feet of usable area.
Additional zones or special equipment for areas such as computer rooms,
copier rooms, conference rooms or cafeterias will be provided at
Tenant's expense.
12. MISCELLANEOUS INFORMATION AND BUILDING AMENITIES
(a) All floors are designed for a live load of 60 pounds per
square foot plus 20 pounds for partitions.
(b) If necessary, cold water supply and waste facilities are
available at the Building core and designated wet columns (D-8
and E-3) for connection to Tenant facilities at Tenant's
expense.
(c) Three fully automatic elevators are located adjacent to the
lobbies for Tenant's use.
(d) Men's and women's toilet facilities are provided on each
floor. Provisions have been made for the physically
handicapped in each toilet facility.
(e) The Building is equipped with a full emergency lighting
system.
<PAGE> 38
EXHIBIT D
LANDLORD'S SERVICES
1. CLEANING
A. General
1. All cleaning work will be performed between 8 a.m.
and 12 midnight, Monday through Friday, unless
otherwise necessary for stripping, waxing, etc.
2. Abnormal waste removal (e.g., computer installation
paper, bulk packaging, wood or cardboard crates,
refuse from cafeteria operation, etc.) shall be
Tenant's responsibility.
B. Daily Operations (5 times per week)
1. Tenant Areas
a. Empty and clean all waste receptacies; wash
receptacles as necessary.
b. vacuum all rugs and carpeted areas.
c. Empty, damp-wipe and dry all ashtrays.
2. Lavatories
a. Sweep and wash floors with disinfectant.
b. Wash both sides of toilet seats with
disinfectant.
c. Wash all mirrors, basins, bowls, urinals.
d. Spot clean toilet partitions.
e. Empty and disinfect sanitary napkin disposal
receptacles.
f. Refill toilet tissue, towel, soap, and
sanitary napkin dispensers.
3. Public Areas
a. Wipe down entrance doors and clean glass
(interior and exterior).
b. Vacuum elevator carpets and wipe down doors
and walls.
c. Clean water coolers.
C. Operations as Needed (but not less than every other day)
1. Tenant and Public Areas
a. Buff all resilient floor areas.
D. Weekly Operations
1. Tenant Areas, Lavatories, Public Areas
a. Hand-dust and wipe clean all horizontal
surfaces with treated cloths to include
furniture, office equipment, window sills,
door ledges, chair rails, baseboards,
convector tops, etc., within normal reach.
b. Remove finger marks from private entrance
doors, light switches, and doorways.
c. Sweep all stairways.
E. Monthly Operations
1. Tenant and Public Areas
a. Thoroughly vacuum seat cushions on chairs,
sofas, etc.
<PAGE> 39
b. Vacuum and dust grillwork.
2. Lavatories
a. Wash down interior walls and toilet
partitions.
F. As Required and Weather Permitting
1. Entire Building
a. Clean inside of all windows.
b. Clean outside of all windows.
G. Yearly
1. Tenant and Public Areas
a. Strip and wax all resilient tile floor
areas.
II. HEATING, VENTILATING, AND AIR CONDITIONING
1. Heating, ventilating, and air conditioning as
required to provide reasonably comfortable
temperatures for normal business day occupancy
(excepting holidays); Monday through Friday from 8:00
a.m. to 6:00 p.m. and Saturday from 8:00 a.m. to 1:00
P.M.
2. Maintenance of any additional or special air
conditioning equipment and the associate operating
cost will be at Tenant's expense.
III. WATER
Hot water for lavatory purposes and cold water for drinking,
lavatory and toilet purposes.
IV. ELEVATORS (if Building is Elevatored)
Elevators for the use of all tenants and the general public
for access to and from all floors of the Building. Programming
of elevators (including, but not limited to, service
elevators) shall be as Landlord from time to time reasonably
determines best for the Building as a whole.
V. RELAMPING OF LIGHT FIXTURES
Tenant will reimburse Landlord for the cost of lamps, ballasts
and starters and the cost of replacing same within the
Premises.
VI. CAFETERIA AND VENDING INSTALLATIONS
1. Any space to be used primarily for lunchroom or
cafeteria operation shall be Tenant's responsibility
to keep clean and sanitary, it being understood that
Landlord's approval of such use must be first
obtained in writing.
2. Vending machines or refreshment service installations
by Tenant must be approved by Landlord in writing and
shall be restricted in use to employees and business
callers. All cleaning necessitated by such
installations shall be at Tenant's expense.
VIII. ELECTRICITY
<PAGE> 40
A. Landlord, at Landlord's expense, shall furnish electrical
energy required for lighting, electrical facilities,
equipment, machinery, fixtures, and appliances used in or for
the benefit of Tenant's Space, in accordance with the
provisions of the Lease of which this Exhibit is part.
B. Tenant shall not, without prior written notice to Landlord in
each instance, connect to the Building electric distribution
system any fixtures, appliances or equipment other than normal
office machines such as desk-top calculators and typewriters,
or any fixtures, appliances or equipment which Tenant on a
regular basis operates beyond normal building operating hours.
In the event of any such connection, Tenant agrees to an
increase in the ANNUAL ESTIMATED ELECTRICAL COST TO TENANT'S
SPACE and a corresponding increase in Annual Rent by an amount
which will reflect the cost to Landlord of the additional
electrical service to be furnished by Landlord, such increase
to be effective as of the date of any such installation. If
Landlord and Tenant cannot, agree thereon, such amount shall
be 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, and the
cost to Landlord will be included in Landlord's Operating
Costs provided in Section 4.2 hereof.
C. Tenant's use of electrical energy in Tenant's Space shall not
at any time exceed the capacity of any of the electrical
conductors or equipment in or otherwise serving Tenant's
Space. In order to insure that such capacity is not exceeded
and to avert possible adverse effect upon the Building
electric service, 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 Tenant's Space. Unless Landlord shall reasonably
object to the connection of any such fixtures, appliances or
equipment, all additional risers or other equipment required
therefor shall be provided by Landlord, and the cost thereof
shall be paid by Tenant upon Landlord's demand. In the event
of any such connection, Tenant agrees to an Increase in the
ANNUAL ESTIMATED ELECTRICAL COST
<PAGE> 41
EXHIBIT E
RULES AND REGULATIONS
1. The entrances, lobbies, passages, corridors, elevators, hails, courts,
sidewalks, vestibules, and stairways shall not be encumbered or
obstructed by Tenant, Tenant's agents, servants, employees, licensees
or visitors or used by them for any purposes other than ingress or
egress to and from the Premises.
2. The moving in or out of all safes, freight, furniture, or bulky matter
of any description shall take place during the hours which Landlord may
determine from time to time. Landlord reserves the right to inspect all
freight and bulky matter to be brought into the Building and to exclude
from the Building all freight and bulky matter which violates any of
these Rules and Regulations or the Lease of which these Rules and
Regulations are a part. Landlord reserves the right to have Landlord's
structural engineer review Tenant's floor loads on the Premises at
Tenant's expense.
3. Tenant, or the employees, agents, servants, visitors or licensees of
Tenant shall not at any time place, lease or discard any rubbish,
paper, articles, or objects of any kind whatsoever outside the doors of
the Premises or in the corridors or passageways of the Building. No
animals or birds shall be brought or kept in or about the Building.
Bicycles shall be permitted only in the area of the loading dock
assigned to Tenant. Bicycles shall be brought into the Building through
the loading dock door only. If Tenant abuses this privilege, as
determined by Landlord, Landlord reserves the right to eliminate this
privilege.
4. Tenant shall not place objects against glass partitions or doors or
windows or adjacent to any common space which would be unsigned, from
the Building corridors or from the exterior of the Building and will
promptly remove the same upon notice from Landlord.
5. Tenant shall not make noises, cause disturbances, create vibrations,
odors or noxious fumes or use or operate any electric or electrical
devices or other devices that emit sound waves or are dangerous to
other tenants and occupants of the Building or that would interfere
with the operation of any device or equipment or radio or television
broadcasting or reception from or within the Building or elsewhere, or
with the operation of roads or highways in the vicinity of the
Building, and shall not place or install any projections, antennae,
aerials, or similar devices inside or outside of the Premises, without
the prior written approval of Landlord.
6. Tenant may not (without Landlord's approval therefor, which approval
will be signified on Tenant's Plans submitted pursuant to the Lease)
and Tenant shall not permit or suffer anyone to (a) cook in the
Premises; (b) place vending or dispensing machines of any kind in or
about the Premises; (c) at any time sell, purchase or give away, or
permit the sale, purchase, or gift of food in any form.
7. Tenant shall not: (a) use the Premises for lodging, manufacturing or
for any immoral or illegal purposes; (b) use the Premises to engage in
the manufacture or sale of, or permit the use of spirituous, fermented,
intoxicating or alcoholic beverages on the Premises; (c) use the
Premises to engage in the manufacture or sale of, or permit the use of,
any illegal drugs on the Premises.
8. No awning or other projections shall be attached to the outside wails
or windows. No curtains, blinds, shades, screens or signs other than
those furnished by Landlord shall be attached to, hung
<PAGE> 42
in, or used in connection with any window or door of the Premises
without prior written consent of Landlord.
9. No signs, advertisement, object, notice or other lettering shall be
exhibited, inscribed, paint or affixed on any part of the outside or
inside of the Premises if visible from outside of the Premises.
Interior signs on doors shall be painted or affixed for Tenant by
Landlord or by sign painters first approved by Landlord at the
expense of Tenant and shall be of a size, color and style acceptable
to Landlord.
10. Tenant shall not use the name of the Building or use pictures or
illustrations of the Building advertising or other publicity without
prior written consent of Landlord. Landlord shall have the right to
prohibit any advertising by Tenant which, in Landlord's opinion, tends
to impair the reputation of the Building or its desirability for
offices, and upon written notice from Landlord, Tenant will refrain
from or discontinue such advertising.
11. Door keys for doors in the Premises will be furnished at the
Commencement of the Lease by Landlord. Tenant shall not affix
additional locks on doors and shall purchase duplicate keys only from
Landlord and will provide to landlord the means of opening of safes,
cabinets, or vault left on the Premises. In the event of the loss of
any keys so furnished by Landlord, Tenant shall pay to Landlord the
cost thereof.
12. Tenant shall cooperate and participate in all security programs
affecting the Building.
13. Tenant assumes full responsibility for protecting its space from theft,
robbery and pilferage, which includes keeping doors locked and other
means of entry to the Premises Closed and secured.
14. Tenant shall not make any room-to-room canvass to solicit business from
other tenants in the Building, and shall not exhibit, sell or offer to
sell, use, rent or exchange any item or services in or from the
Premises unless ordinarily embraced within Tenant's use of the Premises
as specified in its Lease. Canvassing, soliciting and peddling in the
Building are prohibited and Tenant shall cooperate to prevent the same.
Peddlers, solicitors and beggars shall be reported to the Management
Office.
15. Tenant shall not mark, paint, drill into, or in any way deface any part
of the Building or Premises. No boring, driving of nails, or screws,
cutting or stringing of wires shall be permitted, except with the prior
written consent of Landlord, and as Landlord may direct. Tenant shall
not install any resilient tile or similar floor covering the Premises
except with the prior written approval of Landlord. The use of cement
or other similar adhesive material is expressly prohibited.
16. Tenant shall not waste electricity or water and agrees to cooperate
fully with Landlord to assure the most effective operation of the
Building's heating and air conditioning and shall refrain from
attempting to adjust controls. Tenant shall keep corridor doors closed
except when being used for access.
17. The water and wash closets and other plumbing fixtures shall not be
used for any purposes other than those for which they were constructed,
and no sweepings, rubbish, rags, or other substances shall be thrown
therein.
<PAGE> 43
18. Building employees shall not be required to perform, and shall not be
requested by any tenant or occupant to perform, any work outside of
their regular duties, unless under specific instructions from the
office of the Managing Agent of the Building.
19. Tenant may request heating and/or air conditioning during other per oas
in addition to normal working hours by submitting its request in
writing to the office of the Managing Agent of the Building no later
than 2:00 pm the preceding work day (Monday through Friday) on form
available from the office of the Managing Agent. The request shall
clearly state the start an stop hours of the "off-hour" service. Tenant
shall submit to the Building Manager a list o Personnel authorized to
make such request. The Tenant shall be charged for such operation i the
form of additional rent; such charges are to be determined by the
Managing Agent and shall be fair and reasonable and reflect the
additional operating costs involved.
20. Tenant covenants and agrees that its use of the Premises shall not
cause a discharge of more than the gallonage per foot of Premises
Design Floor Area per day of sanitary (non-industrial) sewage allowed
under the sewage discharge permit for the Building. Discharges in
excess o that amount, and any discharge of industrial sewage, shall
only be permitted if Tenant, at its sole expense, shall have obtained
all necessary permits and licenses therefor, including without
limitation permits from state and local authorities having jurisdiction
thereof. Tenant shall submit to Landlord on December 31 of each year of
the Term of this Lease a statement, certified by an authorized officer
of Tenant, which contains the following information: name of all
chemicals, gases, and hazardous substances, used, generated, or stored
on the Premises: type of substance (liquid, gas or granular); quantity
used, stored or generated per year; method of disposal; permit number,
if any, attributable to each substance, together with copies of all
permits for such, substances; and permit expiration date for each
substance.
<PAGE> 44
EXHIBIT F
FAIR MARKET RENT
APPRAISAL METHOD
1. Arbitration. In the event of a dispute as to Fair Market Rent under
this Lease, such dispute shall be determined by arbitration conducted
in the manner hereafter specified:
(a) The Party demanding such arbitration shall give notice thereof
to the other party and shall in such notice appoint an
arbitrator.
(b) Within 15 days thereafter, the other party shall by notice to
the original party appoint an arbitrator.
(c) If the second arbitrator shall not have been appointed as
aforesaid, the first arbitrator shall alone proceed to
determine such matter.
(d) The two arbitrators or the sole arbitrator, as the case may
be, shall, within 15 days after the sooner of the designation
of the second arbitrator or the expiration of the 15-day
period provided for such designation, make their
determinations with respect to such matter in writing and give
notice thereof to each other and to Landlord and Tenant.
(e) The two arbitrators shall have 15 days after the receipt of
notice of each other's determinations to confer with each
other and to attempt to reach agreement as to the
determination of such matter. If the two arbitrators shall
concur as to such determination, they shall give notice
thereof to Landlord and Tenant and such concurrence shall be
final and binding upon Landlord and Tenant. If such
arbitrators shall fall to concur as to such determination,
they shall give notice thereof to Landlord and Tenant and
shall immediately designate a third arbitrator.
(f) If the two arbitrators shall fail to agree upon the
designation of such third arbitrator within 5 days after the
15-day period described in clause (e) above, then they or
either of chem shall give notice of such failure to agree to
Landlord and Tenant and, If Landlord and Tenant fall to agree
upon the selection of such third arbitrator within 5 days
after the arbitrators appointed by the parties give notice as
aforesaid, then either party on behalf of both may apply to
the president of the Greater Boston Real Estate Board, or on
his or her failure, refusal or inability to act, to a court of
competent jurisdiction, for the designation of such third
arbitrator.
(g) All arbitrators shall be real estate brokers or consultants
who shall have had at least 5 years continuous experience
acting as real estate agents or brokers of rental office space
in the Burlington area.
(h) The third arbitrator shall conduct such hearings and
investigations as he or she may deem appropriate and shall,
within 10 days after the date of his or her designation,
choose one of the determinations of the two arbitrators
originally selected by the parties which, in his or her view,
is closest to the Fair Market Rent. The third arbitrator shall
give notice
<PAGE> 45
thereof to Landlord and Tenant and the choice by the third
arbitrator shall be binding upon Landlord and Tenant.
(i) The parries shall be entitled to present evidence to the
arbitrators in support of their respective Positions.
(j) The arbitrators may not make any determination inconsistent
with any of the terms of this Lease or deprive any parties
thereto of any right or warranty reserved in this Lease or
decide any matter other than the specific issue of Fair Market
Rent or abatement or withholding referred to arbitration as
herein provided. The arbitrators shall not have the power to
add to, modify or change any of the provisions of this Lease.
(k) The determination of the arbitrator(s), as provided above,
shall be conclusive upon the parties and shall have the same
force and effect as a judgement made in a court of competent
jurisdiction. Judgment un the determination made by the
arbitrator(s) under the foregoing provisions may be entered in
any court of competent jurisdiction pursuant to the provisions
of Section 14 of Chapter 251 of the General Laws of
Massachusetts.
(l) Each party shall pay the fees, costs and expenses of the
arbitrator appointed by such party and of the attorneys and
expert witnesses of such party, and one-half of the other
fees, cost and expenses of the arbitration properly incurred
hereunder.
<PAGE> 1
Exhibit 10.15
Employment Agreement
--------------------
This Employment Agreement made as of the 21st day of December, 1995 by and
between Object Design, Inc., a Delaware corporation (the "Company"), and Robert
N. Goldman of Westwood, Massachusetts (the Employee").
WHEREAS, the Company wishes to employ the Employee as the President and
Chief Executive Officer; and
WHEREAS, the Employee desires to serve as the President and Chief Executive
Officer of the Company;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Company and the Employee agree as follows:
1. EMPLOYMENT. The Company hereby employs the Employee, and the Employee
accepts employment with the Company. The Employee's title and duties at the
start of this agreement shall be those of President and Chief Executive Officer
of the Company. As such, the Employee shall report directly to the Company's
Board of Directors.
2. TERM OF EMPLOYMENT. There shall be no definite term of employment, and
Employee shall be an employee at will. However, if the Employee's employment
hereunder terminates for any reason, other than by the Company for cause or
death or disability, the Company shall make Severance Payments to Employee equal
to one year of Base Salary, payable over twelve (12) months. The Severance
Payments shall be reduced, dollar for dollar, from any compensation received by
Employee from other employment. "Cause" shall mean dishonesty or
misappropriation of assets of the Company, gross failure to perform duties to
the Company, or the Commission of a crime involving moral turpitude or
constituting a felony.
3. Compensation.
------------
(a) During the term of this Agreement, the Company shall pay the Employee a
Base Salary, payable in accordance with the Company's standard schedule for
salary payments to its executives (but no less frequently than monthly) in
arrears, in equal installments at an annual rate equal to $190,000. At the
beginning of each fiscal year, the Board of Directors shall consider in its
discretion increases in the base salary.
(b) The Company shall pay Employee the Bonus set forth in Exhibit A upon
the sale of the Company (including a change of control) or upon an initial
public offering. Change of control shall include a merger in which the
stockholders of the Company immediately before the merger own less than fifty
percent (50%) of the voting securities of the surviving corporation immediately
after the merger.
<PAGE> 2
(c) All payments of salary and incentive compensation to the Employee shall
be made after deduction of any taxes which are required to be withheld with
respect thereto under applicable federal and state laws.
4. OFFICE AND FRINGE BENEFITS. The Employee shall be provided with an
office, secretary and other facilities and services commensurate with his
position as a senior executive of the Company.
5. EXPENSES. The Company shall reimburse the Employee for all reasonable
business expenses incurred by the Employee in connection with his employment by
the Company, including, without limitation, expenses of travel and
entertainment. The Company shall promptly reimburse the Employee for all such
expenses upon presentation of appropriate vouchers, receipts and other
supporting documents as reasonably required by the Company.
6. DUTY TO PERFORM SERVICES. The Employee shall devote his full time during
normal business hours to rendering services to the Company hereunder, and shall
exert all reasonable efforts in the rendering of such services. Nothing in this
Agreement shall prohibit the Employee from:
(a) making and managing passive investments;
(b) serving on the Board of Directors of any company; and
(c) engaging in religious, charitable or other community or nonprofit
activities, provided none of the foregoing shall interfere with
Employee's duties hereunder.
The Employee agrees that in the rendering of all services to the Company
and in all aspects of his employment as a senior level executive of the Company,
he will comply in all material respects with all directives, policies, standards
and regulations from time to time established by the Board of Directors of the
Company to the extent they are not in conflict with this Agreement.
8. VACATIONS; HOLIDAYS; SICK TIME. The Employee shall be entitled to
vacation time, holiday time and sick leave in accordance with the Company's
policies for senior executive officers, as in effect from time to time.
9. CONFIDENTIAL INFORMATION. The Employee agrees to be bound by all other
agreements between him and the Company.
-2-
<PAGE> 3
10. NOTICES. All notices, requests, demands and other communications
required by or permitted under this Agreement shall be in writing and shall be
sufficiently delivered if delivered by hand or sent by registered or certified
mail, postage prepaid, to the parties at their respective addresses listed
below:
(a) if to the Employee:
(b) if to the Company:
Object Design, Inc.
25 Mall Road
Burlington, MA 01803
Any party may change such party's address by such notice to the other parties.
11. GOVERNING LAW. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of The Commonwealth of Massachusetts.
12. BINDING UPON SUCCESSORS. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective heirs,
legal representatives, successors and assigns.
13. WAIVERS AND AMENDMENTS.
(a) This Agreement may be amended, modified or supplemented, and any
obligation hereunder may be waived, only by a written instrument executed by the
parties hereto. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate as a waiver of any subsequent breach.
(b) No failure on the part of any party to exercise, and no delay in
exercising, any right or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or remedy by such party
preclude any other or further exercise thereof or the exercise of any other
right or remedy. All rights and remedies hereunder are cumulative and are in
addition to all other rights and remedies provided by law, agreement or
otherwise.
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement on the date first above written.
OBJECT DESIGN, INC.
By: /s/ Gerald B. Bay
----------------------------
Its
/s/ Robert N. Goldman
----------------------------
Robert N. Goldman
-3-
<PAGE> 4
SCHEDULE A
----------
ODI Goldman
Equity Performance
Value ($) Fee ($)
------------ ------------
20,000,000 750,000
25,000,000 1,125,000
30,000,000 1,500,000
35,000,000 1,875,000
40,000,000 2,250,000
45,000,000 2,625,000
50,000,000 4,000,000
55,000,000 4,500,000
60,000,000 4,885,000
65,000,000 3,798,000
70,000,000 3,240,000
75,000,000 3,004,000
80,000,000 4,932,000
85,000,000 4,959,000
90,000,000 5,032,000
95,000,000 5,082,000
100,000,000 5,155,000
105,000,000 5,274,000
110,000,000 5,416,000
115,000,000 5,558,000
120,000,000 5,723,000
125,000,000 5,888,000
130,000,000 6,053,000
135,000,000 6,236,852
140,000,000 6,409,408
145,000,000 6,581,668
150,000,000 6,754,224
155,000,000 6,926,780
160,000,000 7,099,040
165,000,000 7,271,596
170,000,000 7,443,856
175,000,000 7,616,412
180,000,000 7,788,672
185,000,000 7,961,228
190,000,000 8,133,784
195,000,000 8,306,044
200,000,000 8,478,600
205,000,000 8,666,000
210,000,000 8,854,000
215,000,000 9,042,000
220,000,000 9,230,000
225,000,000 9,418,000
230,000,000 9,629,000
235,000,000 9,817,000
240,000,000 10,005,000
245,000,000 10,193,000
250,000,000 10,381,000
Page 1 of 2
<PAGE> 5
Schedule A (cont'd)
-------------------
ODI Goldman
Equity Performance
Value ($) Fee ($)
------------ ------------
255,000,000 10,592,000
260,000,000 12,189,778
265,000,000 12,411,907
270,000,000 12,634,012
275,000,000 12,856,116
280,000,000 13,078,218
285,000,000 13,300,323
290,000,000 13,522,427
295,000,000 13,744,530
300,000,000 13,966,634
305,000,000 14,188,737
310,000,000 14,410,841
315,000,000 14,632,945
320,000,000 14,855,049
325,000,000 15,077,152
330,000,000 15,299,256
335,000,000 15,521,360
340,000,000 15,743,463
345,000,000 15,965,567
350,000,000 16,187,671
355,000,000 16,409,775
360,000,000 16,631,878
365,000,000 16,853,982
370,000,000 17,076,084
375,000,000 17,298,189
380,000,000 17,520,293
385,000,000 17,742,397
390,000,000 17,964,501
395,000,000 18,186,604
400,000,000 18,408,708
Notes:
1 The performance bonus will be paid in the same medium of consideration
as is paid upon a liquidity event.
2 At ODI equity values between those shown in the above schedule, the
performance bonuses will be calculated by linearly interpolating
between the two closest values.
Page 2 of 2
<PAGE> 1
Exhibit 10.16
Employment Aqreement
--------------------
This Employment Agreement made as of the 21st day of December, 1995 by and
between Object Design, Inc., a Delaware corporation (the "Company"), and Justin
Perreault of Boston, Massachusetts (the Employee").
WHEREAS, the Company wishes to employ the Employee at the senior executive
level, and, at the outset of this Agreement, as the Executive Vice President and
Chief Operating officer; and
WHEREAS, the Employee desires to serve in a senior executive capacity and,
at the outset of this Agreement, as the Executive Vice President and Chief
Operating Officer of the Company;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Company and the Employee agree as follows:
1. EMPLOYMENT. The Company hereby employs the Employee, and the Employee
accepts employment with the Company at the senior executive level upon the terms
and conditions hereinafter set forth. The Employee's title and duties at the
start of this agreement shall be those of Executive Vice President and Chief
Operating Officer of the Company. As such, the Employee shall report directly to
the President.
2. TERM OF EMPLOYMENT. There shall be no definite term of employment, and
Employee shall be an employee at will. However, if the Employee's employment
hereunder is terminated by the Company other than for cause or death or
disability, the Company shall make Severance Payments to Employee equal to six
(6) months of Base Salary, payable over six (6) months. The Severance Payments
shall be reduced, dollar for dollar, from any compensation received by Employee
from other employment. "Cause" shall mean dishonesty or misappropriation of
assets of the Company, gross failure to perform duties to the Company, or the
commission of a crime involving moral turpitude or constituting a felony.
3. COMPENSATION.
(a) During the term of this Agreement, the Company shall pay the Employee
a Base Salary, payable in accordance with the Company's standard schedule for
salary payments to its executives (but no less frequently than monthly) in
arrears, in equal installments at an annual rate equal to $160,000. At the
beginning of each fiscal year, the Board of Directors shall consider in its
discretion increases in the base salary.
(b) The Company shall pay Employee the Bonus set forth in Exhibit A upon
the sale of the Company (including a change of control) or upon an initial
public offering. Change of control
<PAGE> 2
shall include a merger in which the stockholders of the Company immediately
before the merger own less than fifty percent (50%) of the voting securities of
the surviving corporation immediately after the merger.
(c) All payments of salary and incentive compensation to the
Employee shall be made after deduction of any taxes which are required to be
withheld with respect thereto under applicable federal and state laws.
4. OFFICE AND FRINGE BENEFITS. The Employee shall be provided with an
office, secretary and other facilities and services commensurate with his
position as a senior executive of the Company.
5. EXPENSES. The Company shall reimburse the Employee for all reasonable
business expenses incurred by the Employee in connection with his employment by
the Company, including, without limitation, expenses of travel and
entertainment. The Company shall promptly reimburse the Employee for all such
expenses upon presentation of appropriate vouchers, receipts and other
supporting documents as reasonably required by the Company.
6. DUTY TO PERFORM SERVICES. The Employee shall devote his full time during
normal business hours to rendering services to the Company hereunder, and shall
exert all reasonable efforts in the rendering of such services. Nothing in this
Agreement shall prohibit the Employee from:
(a) making and managing passive investments;
(b) serving on the Board of Directors of any company; and
(c) engaging in religious, charitable or other community or nonprofit
activities, provided none of the foregoing shall interfere with
Employee's duties hereunder.
The Employee agrees that in the rendering of all services to the Company
and in all aspects of his employment as a senior level executive of the Company,
he will comply in all material respects with all directives, policies, standards
and regulations from time to time established by the Board of Directors of the
Company to the extent they are not in conflict with this Agreement.
8. VACATIONS; HOLIDAYS; SICK TIME. The Employee shall be entitled to
vacation time, holiday time and sick leave in accordance with the Company's
policies for senior executive officers, as in effect from time to time.
-2-
<PAGE> 3
9. CONFIDENTIAL INFORMATION. The Employee agrees to be bound by all other
agreements between him and the Company.
10. NOTICES. All notices, requests, demands and other communications
required by or permitted under this Agreement shall be in writing and shall be
sufficiently delivered if delivered by hand or sent by registered or certified
mail, postage prepaid, to the parties at their respective addresses listed
below:
(a) if to the Employee:
(b) if to the Company:
Object Design, Inc.
25 Mall Road
Burlington, MA 01803
Any party may change such party's address by such notice to the other parties.
11. GOVERNING LAW. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of The Commonwealth of Massachusetts.
12. BINDING UPON SUCCESSORS. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective heirs,
legal representatives, successors and assigns.
13. WAIVERS AND AMENDMENTS.
(a) This Agreement may be amended, modified or supplemented, and any
obligation hereunder may be waived, only by a written instrument executed by the
parties hereto. The waiver by any party hereto of a breach of any provision of
this Agreement shall not operate as a waiver of any subsequent breach.
(b) No failure on the part of any party to exercise, and no delay in
exercising, any right or remedy hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or remedy by such party
preclude any other or further exercise thereof or the exercise of any other
right or remedy. All rights and remedies hereunder are cumulative and are in
addition to all other rights and remedies provided by law, agreement or
otherwise.
-3-
<PAGE> 4
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement on the date first above written.
OBJECT DESIGN, INC.
By: /s/ Gerald B. Bay
-----------------------
Its
/s/ Justin Perreault
-----------------------
Justin Perreault
-4-
<PAGE> 5
SCHEDULE A
----------
ODI Perreault
Equity Performance
Value ($) Fee ($)
------------ ------------
20,000,000 150,000
25,000,000 225,000
30,000,000 300,000
35,000,000 375,000
40,000,000 450,000
45,000,000 525,000
50,000,000 800,000
55,000,000 900,000
60,000,000 977,000
65,000,000 759,600
70,000,000 648,000
75,000,000 600,800
80,000,000 986,400
85,000,000 991,800
90,000,000 1,006,400
95,000,000 1,016,400
100,000,000 1,031,000
105,000,000 1,054,800
110,000,000 1,083,200
115,000,000 1,111,600
120,000,000 1,144,600
125,000,000 1,177,600
130,000,000 1,210,600
135,000,000 1,247,370
140,000,000 1,281,882
145,000,000 1,316,334
150,000,000 1,350,845
155,000,000 1,385,356
160,000,000 1,419,808
165,000,000 1,454,319
170,000,000 1,488,771
175,000,000 1,523,282
180,000,000 1,557,734
185,000,000 1,592,246
190,000,000 1,626,757
195,000,000 1,661,209
200,000,000 1,695,720
205,000,000 1,733,200
210,000,000 1,770,800
215,000,000 1,808,400
220,000,000 1,846,000
225,000,000 1,883,600
230,000,000 1,925,800
235,000,000 1,963,400
240,000,000 2,001,000
245,000,000 2,038,600
250,000,000 2,076,200
Page 1 of 2
<PAGE> 6
SCHEDULE A (cont'd)
-------------------
ODI Perreault
Equity Performance
Value ($) Fee ($)
------------ ------------
255,000,000 2,118,400
260,000,000 2,437,956
265,000,000 2,482,381
270,000,000 2,526,802
275,000,000 2,571,223
280,000,000 2,615,644
285,000,000 2,660,065
290,000,000 2,704,485
295,000,000 2,748,906
300,000,000 2,793,327
305,000,000 2,837,747
310,000,000 2,882,168
315,000,000 2,926,589
320,000,000 2,971,010
325,000,000 3,015,430
330,000,000 3,059,851
335,000,000 3,104,272
340,000,000 3,148,693
345,000,000 3,193,113
350,000,000 3,237,534
355,000,000 3,281,955
360,000,000 3,326,376
365,000,000 3,370,796
370,000,000 3,415,217
375,000,000 3,459,638
380,000,000 3,504,059
385,000,000 3,548,479
390,000,000 3,592,900
395,000,000 3,637,321
400,000,000 3,681,742
Notes:
1 The performance bonus will be paid in the same medium of consideration
as is paid upon a liquidity event.
2 At ODI equity values between those shown in the above schedule, the
performance bonuses will be calculated by linearly interpolating
between the two closest values.
Page 2 of 2
<PAGE> 1
Exhibit 10.17
March 1, 1996
Mr. Thomas M. Atwood
18 Nirvana Drive
Swampscott, MA 01907
Dear Tom:
This letter will confirm that the Board of Directors has
accepted your resignation as a Director of Object Design, Inc.
(the "Company") effective as of April 1, 1996 and your
resignation as an employee of the Company effective September
30, 1996.
Twenty Five As we have discussed, you will no longer have day-to-day
operating responsibilities within the Company effective March
Mall Road 31, 1996. However, you will devote as much time as may be
required through September 30, 1996 to help the Company during
Burlington the transition of your responsibilities to other employees.
Massachusetts You will continue to receive your present salary during
this period and will be paid for any vacation accrued as of the
01803-4194 date hereof. You will not receive any additional vacation
benefits after the date hereof. Your incentive stock options
617.674.5000 will continue to vest through September 30, 1996 but will cease
to vest at that time and will be exercisable in accordance with
617.674.5010 their terms.
Through September 30, 1996, you will also be permitted to
participate in the health and dental plans maintained by the
Company for its employees, as such plans may be in effect from
time to time. Should you cease to be a full-time employee of
the Company during this period, you may elect to continue this
coverage under the federal COBRA law, and the Company will make
appropriate payments so that your payments for this coverage
through September 30, 1996 will not exceed those in effect from
time to time for a full-time employee of the Company.
At the conclusion of this Agreement, the Company will
transfer to you title to the Apple computer that you presently
use. At any time prior to September 30, 1996, you may take
possession of the furniture personally purchased by you that is
located at the Company's San Mateo office after presenting an
inventory of such furniture to the Company.
You acknowledge and confirm your obligations under the
Non-Competition, Nondisclosure and Development Agreement
between you and the Company dated December 22, 1988, attached
hereto as
OBJECT DESIGN
<PAGE> 2
Exhibit A; provided, however, that your non-competition and other obligations
under Section 1 thereof ("Non-Competition Obligations") shall terminate on
September 30, 1996.
This Agreement and the Non-Competition Agreement attached as Exhibit A
constitute the entire Agreement between you and the Company with respect to the
subject matter hereof and supersede all prior agreements and understandings,
whether written or oral, between us concerning this subject matter.
This Agreement will enure to the benefit of and be binding upon you and
your heirs and legal representatives, and upon the Company and its successors
and assigns.
You agree to execute and deliver releases to the Company at the termination
of your employment under this Agreement in or substantially in the forms
attached hereto as Exhibits B and C.
You and the Company each agree not to make any statements, take any
actions, or conduct yourself in any way that adversely affects the reputation or
goodwill of the other.
The Company will reimburse you for any expenses you incur in connection
with providing services to the Company in connection with this Agreement subject
to the Company's standard reimbursement policies.
If this letter correctly sets forth our understanding, please sign the
enclosed copy and return it to the undersigned, whereupon this will become a
binding agreement.
Sincerely,
OBJECT DESIGN, INC.
By: /s/ Robert N. Goldman
-----------------------------------
Robert N. Goldman, President
ACCEPTED:
/s/ Thomas M. Atwood
- ------------------------
Thomas M. Atwood
<PAGE> 3
EXHIBIT A
NON-COMPETITION, NON-DISCLOSURE
AND DEVELOPMENTS AGREEMENT
In consideration of my employment, consulting or advisory relationship
("Employment"), as the case may be, with Object Design, Inc., a Delaware
corporation with its principal place of business in Burlington, Massachusetts,
and in recognition of the pact that as a result of such relationship I will or
may have access to confidential information, I agree with the Company (as
defined below) as follows:
1. Agreement Not to Compete with the Company.
-----------------------------------------
(a) As long as I am employed or retained by the Company and for a period of
one year after the termination of my Employment with the Company by me for any
reason, including expiration of the previously agreed upon term of my
Employment, or by the Company for Cause (as defined below), I shall not, on my
behalf, or as owner, manager, stockholder, consultant, director, officer or
employee of any business entity, participate in the development or provision of
goods or services which are competitive with goods or services sold or
licensed, or under development, by the Company without the prior written
authorization of the Company; provided, however, that I may, without the
Company's prior written authorization, own (i) up to one percent (1%) of the
issued and outstanding securities of any publicly held corporation or (ii) any
securities in any nonpublic corporation which I owned prior to the date of my
Employment. In the event that the Company and I disagree about whether any
business entity develops or provides goods or services which are competitive
with goods or services sold or licensed, or under development, by the Company,
the disagreement shall be resolved either (i) by decision of the Company's Board
of Directors at their next regularly scheduled board meeting acting in good
faith after giving me a suitable opportunity to present my view in person and/or
in writing or (ii) if either I or the Company gives notice to the Board of our
objection to the decision of the Board within 30 days after such decision, by
arbitration as provided herein. The Company and I agree that goods or services
which are competitive with goods or services developed or provided, or under
development, by the Company shall not include goods and services used by any
person or entity (i) for such person or entity's non-public, in house use, or
(ii) for use as a component in a good or service which is not competitive with
goods or services developed or provided, or under development, by the Company.
If after the commencement of my Employment with the Company the Company
determines to change its line of business so as to provide goods or services
other than those sold or licensed, or under development, by the Company at the
commencement of my Employment, then the Company shall give me notice of such
determination.
<PAGE> 4
(b) For a period of one year after the termination of my Employment with
the Company by me for any reason, including expiration of the previously agreed
upon term of my Employment, or by the Company for Cause, I shall not, on my own
behalf, or as owner, manager, stockholder, consultant, director, officer or
employee of any business entity, take away any of the customers that the Company
had enjoyed during my Employment with the company.
(c) For a period of one year after the termination of my Employment with
the Company by me for any reason, including expiration of the previously agreed
upon term of my Employment, or by the Company for Cause, I shall not solicit,
induce, attempt to hire, or hire any employee of the Company (or any other
person who may have been employed by the Company during the six months prior to
the termination of my Employment), or assist in such hiring by any other person
or business entity or encourage any such employee to terminate his or her
employment with the Company.
(d) As used herein the term "Cause" shall mean: (i) conviction of a crime,
whether a felony or misdemeanor; (ii) deliberate dishonesty with respect to the
Company; or (iii) documented failure to materially perform my duties on behalf
of the Company.
(e) I recognize that the Company is developing highly specialized products
and services in competition with the other business entities throughout the
United States and the world, which products and services are designed to compete
in regional, nation-wide and world-wide markets. In light of the competitive
nature of the Company's products and services, I agree that the restrictions
contained in this Section 1 cannot be limited to any geographic area.
2. Confidentiality Agreement.
-------------------------
(a) I will not at any time, whether during or after the termination of my
Employment, reveal to any person or entity any of the Confidential Information
of the Company or of any third party which the Company is under an obligation to
keep confidential. The term "Confidential Information" as used throughout
this Agreement shall mean all trade secrets, proprietary information and other
data or information (and any tangible evidence, record or representation
thereof), whether prepared, conceived or developed by an employee of the
Company (including myself) or received by the Company from an outside source,
which is in the possession of the Company (whether or not the property of the
Company), which in any way relates to the present or future business of the
Company or any customer or supplier of the Company, and which is maintained in
confidence by the Company. Without limiting the generality of the foregoing,
"Confidential Information" shall mean all trade secrets, know-how, proprietary
information and other information or data relating to
-2-
<PAGE> 5
the present or future business of the Company, including but not limited to:
(i) any idea, improvement, invention, innovation, development
technical data, design, formula, device, pattern, concept, computer
program, software, firmware, source code, object code, algorithm,
subroutine, object module, schematic, model, diagram, flow chart, chip
masking specification, user manual, training or service manual, product
specification, plan for a new or revised product, compilation of
information, or work in process, and any and all revisions and improvements
relating to any of the foregoing (in each case whether or not reduced to
tangible form); and
(ii) the name of any customer, employee, prospective customer or
consultant, any sales plan, marketing material, plan or survey, business
plan, product or development plan or specification, business proposal,
financial record, or business record or other record or information
relating to the business of the Company.
Notwithstanding the foregoing, the term Confidential Information shall not
apply to information (i) which the Company has voluntarily disclosed to the
public without restriction, (ii) which has otherwise lawfully entered the public
domain, (iii) which the Company has permitted me to disclose by its prior
written consent; or (iv) which I may disclose at a forum, workshop or round
table conference with the prior knowledge of the Company.
(b) I further represent that my performance of all of the terms of this
Agreement and as an employee, consultant or advisor of the Company does not and
will not breach any agreement to keep in confidence Confidential Information
acquired by me prior to my Employment by the Company. I have not entered into,
and I agree I will not enter into, any agreement either written or oral in
conflict herewith.
(c) Further, I agree that during my Employment I shall not make, use or
permit to be used any notes, memoranda, reports, lists, records, drawings,
sketches, specifications, software programs, data, documentation or other
materials of any nature relating to any matter within the scope of the business
of the Company or concerning any of its dealings or affairs otherwise than for
the benefit of the Company. I further agree that I shall not, after the
termination of my Employment, use or permit to be used any such notes,
memoranda, reports, lists, records, drawings, sketches, specifications, software
programs, data, documentation or other materials, it being agreed that all of
the foregoing shall be and remain the sole and exclusive property of the Company
and that within ten (10) days after the termination of my Employment I shall
either (i) deliver all of the foregoing, and all copies thereof, to the Company,
at its main office or (ii) destroy all of the foregoing, and all copies thereof,
and
-3-
<PAGE> 6
deliver a sworn notice to the Company certifying to such destruction.
(d) The Company shall make adequate provision for the safekeeping of any
notes, memoranda, reports, lists, records, drawings, sketches, specifications,
software programs, data, documentation or other materials of any nature relating
to any matter within the scope of the business of the Company or concerning
any of its dealings or affairs, as requested by me upon notice to the Company
given within 10 days after the termination of my Employment, and the Company
shall provide me with a notice setting forth that it has complied with such
request.
3. Developments Agreement.
----------------------
(a) If at any time or times during my Employment, I shall (either alone or
with others) make, conceive, discover or reduce to practice any invention,
modification, discovery, design, development, improvement, process, software
program, work of authorship, documentation, formula, data, technique, know-how,
secret or any interest therein (whether or not patentable or registrable under
copyright or similar statutes or subject to analogous protection) (herein
called "Developments") that relate to the business of the Company or that of
any supplier to the Company or any of the goods and services sold, licensed or
under development by the Company or result from the use of premises or personal
property tangible or intangible owned, leased or contracted for by the Company
such Developments and the benefits thereof shall immediately become the sole
and absolute property of the Company and its assigns, and I shall promptly
disclose to the Company (or any persons designated by it) each such Development
and hereby assign any rights I may have or acquire in the Developments and
benefits and/or rights resulting therefrom to the Company and its assigns
without further compensation and shall communicate, without cost or delay, and
without publishing the same, all available information relating thereto (with
all necessary plans and models) to the Company.
(b) Upon disclosure of each Development to the Company, I will, during my
Employment and at any time thereafter, at the request and cost of the Company,
sign, execute, make and do all such deeds, documents, acts and things as the
Company and its duly authorizes agents may reasonably require:
(i) to apply for, obtain and vest in the name of the Company alone
(unless the Company otherwise directs) letters patent, copyrights or other
analogous protection in any country throughout the world and when so
obtained or vested to renew and restore the same; and
(ii) to defend any opposition proceedings in respect of such
applications and any opposition proceedings or petitions or applications
for revocation of such letters patent, copyright or other analogous
protection.
-4-
<PAGE> 7
In the event the Company is unable, after reasonable effort, to secure my
signature on any letters patent, copyright or other analogous protection
relating to a Development, whether because of my physical or mental incapacity
or for any other reason whatsoever, I hereby irrevocably designate and appoint
the Company and its duly authorized officers and agents as my agent and
attorney-in-fact, to act for and in my behalf and stead to execute and file any
such application or applications and to do all other lawfully permitted acts to
further the prosecution and issuance of letters patent, copyright or other
analogous protection thereon with the same legal force and effect as if executed
by me.
(c) I understand that the Developments including, but not limited to, those
identified in the pages, if any, attached hereto which I can demonstrate to the
satisfaction of the Company that I have made or conceived prior to my Employment
by the Company are excluded from this Agreement. I understand that it is only
necessary to list the title and purpose of such Developments but not details
thereof.
4. Miscellaneous.
-------------
(a) I understand that this Agreement does not create an obligation on the
Company or any other person or entity to continue my Employment.
(b) Any waiver by the Company of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent breach
of such provision or any other provision hereof.
(c) I hereby agree that each provision herein shall be treated as a
separate and independent clause, and the unenforceability of any one clause
shall in no way impair the unenforceability of any of the other clauses herein.
Moreover, if one or more of the provisions contained in this Agreement shall for
any reason be held to be excessively broad as to scope, activity or subject so
as to be unenforceable at law, such provision or provisions shall be construed
by the appropriate judicial body by limiting and reducing it or them, so as to
be enforceable to the maximum extent compatible with the applicable law as it
shall then appear.
(d) I recognize that money damages alone would not adequately compensate
the Company in the event of breach by me of this Agreement, and I therefore
agree that, in addition to all other remedies available to the Company at law or
in equity, the Company shall be entitled to injunctive relief for the
enforcement hereof. Failure by the Company to insist upon strict compliance with
any of the terms, covenants or conditions hereof shall not be deemed a waiver of
such terms, covenants or conditions.
-5-
<PAGE> 8
(e) My obligations under this Agreement shall survive the termination of my
Employment regardless of the manner of which termination except that the
provisions of Section 1 (a) shall survive in accordance with their terms only if
I terminate my Employment with the Company for any reason, including expiration
of the previously agreed upon term of my Employment, or if the Company
terminates my Employment for Cause.
(f) The term "Company" shall include Object Design, Inc. and any of its
subsidiaries, subdivisions or affiliates. The Company shall have the right to
assign this Agreement to its successor and assigns, and all covenant and
agreements hereunder shall inure to the benefit of and be enforceable by said
successors or assigns.
(g) This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts.
(h) This Agreement contains the entire and only agreement between me and
the Company respecting the subject matter hereof, and no modification, renewal,
extension, waiver or termination of this Agreement or any of the provisions
herein contained shall be binding upon me or the Company unless made in writing
and signed by an authorized officer of the Company. In the event of any
inconsistency between this Agreement and any other contract between me and the
Company, the provisions of this Agreement shall prevail.
(i) Any notices to be given hereunder shall be in writing and shall be
delivered by hand, by registered, certified or overnight mail to the appropriate
address set forth below or to such other address as specified by notice.
(j) Any controversy or claim arising out of or relating to this Agreement,
or the breach thereof, shall be settled by arbitration in Boston, Massachusetts
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof and shall be final and binding
upon the parties hereto. Notwithstanding anything to the contrary contained in
this Section 4(j), the Company shall have the right to seek injunctive relief,
specific performance or other equitable relief against me in a court of
competent jurisdiction. If any party fails to comply with the arbitration
provision contained herein, the other parties shall be entitled to costs and
attorneys' fees in connection with any action brought to compel arbitration
hereunder.
-6-
<PAGE> 9
BY PLACING MY SIGNATURE HEREUNDER, I ACKNOWLEDGE THAT I HAVE READ ALL OF
THE PROVISIONS OF THIS AGREEMENT AND THAT I AGREE TO ALL OF ITS TERMS.
/s/ Thomas M. Atwood
-----------------------------
Signature
Address:
-----------------------------
-----------------------------
Date: December 22, 1988
-----------------
Accepted:
OBJECT DESIGN, INC.
By: /s/ Thomas M. Atwood
-----------------------------
Title: Chairman
Address:
1 New England Executive Park
-----------------------------
Burlington, MA 01803
-----------------------------
-7-
<PAGE> 10
Exhibit B
---------
GENERAL RELEASE
---------------
I, Thomas M. Atwood, for good and valuable consideration the receipt of
which is hereby acknowledged, do for myself and my legal representatives,
successors, and assigns, hereby remise, release, and forever discharge Object
Design, Inc., a11 of its parents, subsidiaries, and affiliates, and their
respective past, present and future officers, directors, employees, and agents
(hereinafter collectively referred to as "Object Design") and all of Object
Design's heirs, successors, predecessors, and assigns, of and from all manner of
actions, causes of actions, debts, obligations, agreements, and claims
whatsoever, at law, in equity, or otherwise, known or unknown, which I now have,
ever had, or may have against Object Design, including but not limited to any
claims arising out of or in any way related to my employment by Object Design,
the termination of my employment by Object Design, and/or the exercise of any
stock options (other than the exercise of stock options held by me as of the
date hereof in accordance with their terms and the terms of the Agreement
between the Company and me dated as of March 1, 1996 (the "Agreement")), and
including but not limited to claims under Massachusetts General Laws c.151B
(unlawful discrimination), Massachusetts General Laws c.93, [section]102 (equal
rights), Massachusetts General Laws c.12 [sections]11H and 11I (civil rights),
Title VII of the Civil Rights Act of 1964, the Employee Retirement Income
Security Act; the Older Workers Benefit Protection Act, and the Americans with
Disabilities Act, but
OBJECT DESIGN
<PAGE> 11
excepting those claims which may arise out of Object Design's obligations under
the Agreement.
IN WITNESS WHEREOF, Thomas M. Atwood has set his hand and seal as of
the 1st day of March, 1996.
Witness: Thomas M. Atwood
/s/ Andrea Johnson /s/ Thomas M. Atwood
- --------------------- -----------------------
OBJECT DESIGN
<PAGE> 12
Exhibit C
---------
AREA RELEASE
------------
I, Thomas M. Atwood, for good and valuable consideration over and above
any other money or benefits that would be due to me, the receipt of which is
acknowledged, hereby release and waive any and all existing claims arising
under the Age Discrimination in Employment Act against Object Design, Inc., all
of its parents, subsidiaries, and affiliates, and their respective past,
present, and future directors, officers, employees, and agents. I acknowledge
that Object Design has advised me to consult with an attorney before signing
this release and that Object Design has given me at least 21 days to consider
signing this release. I also acknowledge that, in signing this release, I am
not relying on any other statements or explanations made by Object Design.
This release will become effective seven (7) days after it is signed. I
understand that I may revoke this release within seven days after it is signed,
and it shall not become effective until this seven-day revocation period has
expired. If I choose to revoke the release, I understand that I will be required
to repay to Object Design all consideration paid to me.
/s/ Thomas M. Atwood
--------------------------
Witness: Thomas M. Atwood
Dated as of: March 1, 1996
/s/ A. Johnson
- ----------------
OBJECT DESIGN
<PAGE> 1
Exhibit 10.18
OBJECT DESIGN, INC.
25 Mall Road
Burlington, MA 01803
May 24, 1995
Kenneth E. Marshall
17 Kress Farm Road
Hingham, MA 02043
Dear Ken:
This letter will confirm that the Board of Directors has accepted your
resignation as President and CEO of Object Design, Inc. effective the date of
this letter. The Board has also elected you Chairman of the Board of Directors.
As we have discussed, you will no longer have day-to-day operating
responsibilities within the Company. However, you will devote as much time as
may be required through the end of the current quarter (June 30, 1995) to help
the Company close business with customers and prospects and otherwise assist the
Company during this transition period. During this period, you shall continue to
devote your full-time skill and energy diligently, loyally and effectively and
to the best of your ability in the performance of your duties hereunder.
Beginning July 1, 1995 through June 30, 1996, you will act as a consultant
for the Company at mutually convenient times. Your responsibilities to ODI will
be subordinate to your efforts to find a position with another company. As a
consultant, your services will be limited to assisting the Company to obtain
business from companies with which you have developed a relationship and other
mutually agreeable tasks.
During the one-year period beginning July 1, 1995 ("Consulting Period"),
the Company will pay you at the rate of $8,333.33 per pay period (based on 24
pay periods per year)--the "Salary," payable in accordance with the Company's
payroll practices in effect from time to time; provided, however, that if you
should obtain employment elsewhere during this one-year period, your Salary will
be reduced by any amounts paid to you with respect to such other employment;
provided, that any Director's fees earned during the Consulting Period would not
reduce your Salary and only 50% of any consulting fees earned by you during
the Consulting Period would be deducted from your Salary. The Company may deduct
from any amounts otherwise payable to you hereunder any withholding taxes and
other amounts required by law to be withheld by the Company.
You will also be permitted, together with your family, to participate
during the Consulting Period in the health and dental
<PAGE> 2
Letter to Mr. Marshall
May 24, 1995
Page 2
plans maintained by the Company for its employees, as such plans may be in
effect from time to time; if the Company is unable to continue this coverage
during the Consulting Period, it will make appropriate payments under any COBRA
coverage so that your payments for health and dental coverage will not increase.
You will make any required contributions with respect to these plans to the same
extent as any other full-time employee of the Company. Upon termination of the
one-year period, you will be offered the opportunity to continue this coverage
at your sole expense in a manner consistent with applicable Federal law. The
Company will continue to pay for your existing life insurance coverage during
the Consulting Period. The Company's obligation to provide insurance under this
agreement during the Consulting Period will terminate when you obtain
employment that provides such insurance coverage.
Your incentive stock options ("ISOs") will cease to vest as of June 30,
1995. However, the vesting schedule will be accelerated by one year, so that
they will be treated as having vested through June 30, 1996. The number of
shares that have vested (through June 30, 1996) under your various stock options
is included in the following paragraph.
The Company will issue you, no later than June 30, 1995, nonqualified stock
options in exchange for your ISOs, which you will surrender to the Company. The
nonqualified stock options will terminate on June 30, 2000 and will include the
options to purchase 295,250 shares at $.10 per share, 15,000 shares at $.20 per
share, 23,375 shares at $.25 per share, 21,000 shares at $.75 per share, 25,000
shares at $3.00 per share and 15,000 shares at $6.00 per share, reduced by the
number of shares you purchase upon the exercise of ISOs between the date of this
letter and June 30, 1995.
You have agreed that you will exercise options to purchase between 5,000
and 10,000 shares prior to June 30, 1995.
The Company will reimburse you for up to $5,000 in outplacement services if
they are required. Your reasonable attorneys' fees, if any, will also be
reimbursed by the Company. At the conclusion of this Agreement, the Company will
transfer to you title to the Apple computer, powerbook, two printers and fax
machine and related software that you presently have at your home office.
You acknowledge and confirm your obligations under the Non-Competition,
Nondisclosure and Development Agreement between you and the Company dated May
18, 1990, attached hereto as Exhibit A; provided, however, that your
non-competition and other obligations under Section 1 thereof ("Non-Competition
Obligations") shall terminate on June 30, 1996; provided, however, that the
Company may elect to extend your Non-
<PAGE> 3
Letter to Mr. Marshall
May 24, 1995
Page 3
Competition Obligations until June 30, 1997, in which case the Company will
issue to you as of June 30, 1996 a fully-vested 5 year nonqualified stock option
to purchase the following number of shares of common stock at the following
prices: 4,125 shares at $.25 per share, 6,000 shares at $.75 per share, 10,000
shares at $3.00 per share and 10,000 shares at $6.00 per share. The Company will
exercise this election no later than June 1, 1996.
This Agreement and the Non-Competition Agreement attached as Exhibit A
constitute the entire Agreement between you and the Company with respect to the
subject matter hereof and supersede all prior agreements and understandings,
whether written or oral, between us concerning this subject matter.
This Agreement will enure to the benefit of and be binding upon you and
your heirs and legal representatives, and upon the Company and its successors
and assigns.
You and the Company agree to execute and deliver releases to the other at
the termination of this Agreement in or substantially in the forms attached
hereto as Exhibits B, C and D.
You and the Company each agree not to make any statements, take any
actions, or conduct yourself in any way that adversely affects the reputation or
goodwill of the other.
The Company will reimburse you for any expenses you incur in connection
with providing services to the Company in connection with this Agreement subject
to the Company's standard reimbursement policies.
If this letter correctly sets forth our understanding, please sign the
enclosed copy and return it to the undersigned, whereupon this will become a
binding agreement.
Sincerely,
OBJECT DESIGN, INC.
By: /s/ Gerald B. Bay
------------------------
Gerald Bay, Director
ACCEPTED:
- ----------------------
Kenneth E. Marshall
<PAGE> 4
Exhibit B
---------
GENERAL RELEASE
---------------
I, Kenneth E. Marshall, for good and valuable consideration the receipt of
which is hereby acknowledged, do for myself and my legal representatives,
successors, and assigns, hereby remise, release, and forever discharge Object
Design, Inc., all of its parents, subsidiaries, and affiliates, and their
respective past, present and future officers, directors, employees, and agents
(hereinafter collectively referred to as "Object Design") and all of Object
Design's heirs, successors, predecessors, and assigns, of and from all manner of
actions, causes of actions, debts, obligations, agreements, and claims
whatsoever, at law, in equity, or otherwise, known or unknown, which I now have,
ever had, or may have against Object Design, including but not limited to any
claims arising out of or in any way related to my employment by Object Design,
the termination of my employment by Object Design, and/or the exercise of any
stock options (other than the exercise of stock options held by me as of the
date hereof in accordance with their terms and the terms of the Employment
Agreement between me and the Company dated as of May 24, 1995), and including
but not limited to claims under Massachusetts General Laws c.151B (unlawful
discrimination), Massachusetts General Laws c.93, [Section]102 (equal rights),
Massachusetts General Laws c. 12 [Sections]11H and 11I (civil rights), Title
VII of the Civil Rights Act of 1964, the Employee Retirement Income Security
Act; the Older Workers Benefit Protection Act, and the Americans with
Disabilities Act.
<PAGE> 5
IN WITNESS WHEREOF, Kenneth E. Marshall, has set his hand and seal as of
the 30th day of June, 1995.
Witness: Kenneth E. Marshall:
- ----------------------------- ---------------------------
<PAGE> 6
Exhibit C
---------
ADEA RELEASE
------------
I, Kenneth E. Marshall, for good and valuable consideration over and above
any other money or benefits that would be due to me, the receipt of which is
acknowledged, hereby release and waive any and all existing claims arising under
the Age Discrimination in Employment Act against Object Design, Inc., all of its
parents, subsidiaries, and affiliates, and their respective past, present, and
future directors, officers, employees, and agents. I acknowledge that Object
Design has advised me to consult with an attorney before signing this release
and that Object Design has given me at least 21 days to consider signing this
release. I also acknowledge that, in signing this release, I am not relying on
any other statements or explanations made by Object Design.
This release will become effective seven (7) days after it is signed. I
understand that I may revoke this release within seven days after it is signed,
and it shall not become effective until this seven-day revocation period has
expired. If I choose to revoke the release, I understand that I will be
required to repay to Object Design all consideration paid to me.
-------------------------
Witness: Kenneth E. Marshall
- -------------------------- Dated as of: June 30, 1995
<PAGE> 7
Exhibit D
---------
RELEASE
-------
Object Design, Inc., its parents, subsidiaries, affiliates, successors and
assigns (ODI), for good and valuable consideration the receipt of which is
acknowledged, does hereby remise, release and forever discharge Kenneth E.
Marshall ("Marshall") and his heirs, successors, predecessors, and assigns, of
and from all known causes of action, debts, obligations, and claims (at law or
in equity) arising out of Marshall's employment by Object Design, Inc.;
provided, however, that this Release shall not release Marshall from any of his
obligations under his Non-Competition, Non-Disclosure and Development Agreement
with Object Design, Inc., executed on May 18, 1990 and as modified by the
Agreement between Marshall and ODI dated as of May 24, 1995.
IN WITNESS WHEREOF, Object Design, Inc. has set its hand and seal as of the
30th day of June, 1995.
Witness: Object Design, Inc.
- ---------------------------- -------------------------------
By:
<PAGE> 8
Exhibit A
---------
NON-COMPETITION, NON-DISCLOSURE
AND DEVELOPMENTS AGREEMENT
In consideration of my employment, consulting or advisory relationship
("Employment"), as the case may be, with Object Design, Inc., a Delaware
corporation with its principal place of business in Burlington, Massachusetts,
and in recognition of the fact that as a result of such relationship I will or
may have access to confidential information, I agree with the Company (as
defined below) as follows:
1. Agreement Not to Compete with the Company.
-----------------------------------------
(a) As long as I am employed or retained by the Company and for a period of
one year after the termination of my Employment with the Company by me for any
reason, including expiration of the previously agreed upon term of my
Employment, or by the Company for Cause (as defined below), I shall not, on my
behalf, or/as owner, manager, stockholder, consultant, director, officer or
employee of any business entity, participate in the development or provision of
goods or services which are competitive with goods or services sold or licensed,
or under development, by the Company without the prior written authorization of
the Company; provided, however, that I may, without the Company's prior written
authorization, own (i) up to one percent (1%) of the issued and outstanding
securities of any publicly held corporation or (ii) any securities in any
non-public corporation which I owned prior to the date of my Employment. In the
event that the Company and I disagree about whether any business entity develops
or provides goods or services which are competitive with goods or services sold
or licensed, or under development, by the Company, the disagreement shall be
resolved either (i) by decision of the Company's Board of Directors at their
next regularly scheduled board meeting acting in good faith after giving me a
suitable opportunity to present my view in person and/or in writing or (ii) if
either I or the Company gives notice to the Board of our objection to the
decision of the Board within 30 days after such decision, by arbitration as
provided herein. The Company and I agree that goods or services which are
competitive with goods or services developed or provided, or under development,
by the Company shall not include goods and services used by any person or entity
(i) for such person or entity's non-public, in house use, or (ii) for use as a
component in a good or service which is not competitive with goods or services
developed or provided, under development, by the Company.
If after the commencement of my Employment with the Company the Company
determines to change its line of business so as to provide goods or services
other than those sold or licensed, or under development, by the Company at the
commencement of my Employment, then the Company sha11 give me notice of such
determination.
<PAGE> 9
(b) For a period of one year after the termination of my Employment with
the Company by me for any reason, including expiration of the previously agreed
upon term of my Employment, or by the Company for Cause, I shall not, on my own
behalf, or as owner, manager, stockholder, consultant, director, officer or
employee of any business entity, take away any of the customers that the Company
had enjoyed during my Employment with the Company.
(c) For a period of one year after the termination of my Employment with
the Company by me for any reason, including expiration of the previously agreed
upon term of my Employment, or by the Company for Cause, I shall not solicit,
induce, attempt to hire, or hire any employee of the Company (or any other
person who may have been employed by the Company during the six months prior to
the termination of my Employment), or assist in such hiring by any other person
or business entity or encourage any such employee to terminate his or her
employment with the Company.
(d) As used herein the term "Cause" shall mean: (i) conviction of a crime,
whether a felony or misdemeanor; (ii) deliberate dishonesty with respect to the
Company; or (iii) documented failure to materially perform my duties on behalf
of the Company.
(e) I recognize that the Company is developing highly specialized products
and services in competition with the other business entities throughout the
United States and the world, which products and services are designed to compete
in regional, nation-wide and world-wide markets. In light of the competitive
nature of the Company's products and services, I agree that the restrictions
contained in this Section 1 cannot be limited to any geographic area.
2. Confidentiality Agreement.
-------------------------
(a) I will not at any time, whether during or after the termination of my
Employment, reveal to any person or entity any of the Confidential Information
of the Company or of any third party which the Company is under an obligation to
keep confidential. The term "Confidential Information" as used throughout this
Agreement shall mean all trade secrets, proprietary information and other data
or information (and any tangible evidence, record or representation thereof),
whether prepared, conceived or developed by an employee of the Company
(including myself) or received by the Company from an outside source, which is
in the possession of the Company (whether or not the property of the Company),
which in any way relates to the present or future business of the Company or any
customer or supplier of the Company, and which is maintained in confidence by
the Company. Without limiting the generality of the foregoing, "Confidential
Information" shall mean all trade secrets, know-how, proprietary information
and other information or data relating to
-2-
<PAGE> 10
the present or future business of the Company, including but not limited to:
(i) any idea, improvement, invention, innovation, development
technical data, design, formula, device, pattern, concept, computer
program, software, firmware, source code, object code, algorithm,
subroutine, object module, schematic, model, diagram, flow chart, chip
masking specification, user manual, training or service manual, product
specification, plan for a new or revised product, compilation of
information, or work in process, and any and all revisions and improvements
relating to any of the foregoing (in each case whether or not reduced to
tangible form); and
(ii) the name of any customer, employee, prospective customer or
consultant, any sales plan, marketing material, plan or survey, business
plan, product or development plan or specification, business proposal,
financial record, or business record or other record or information
relating to the business of the Company.
Notwithstanding the foregoing, the term Confidential Information shall not
apply to information (i) which the Company has voluntarily disclosed to the
public without restriction, (ii) which has otherwise lawfully entered the public
domain, (iii) which the Company has permitted me to disclose by its prior
written consent, or (iv) which I may disclose at a forum, workshop or round
table conference with the prior knowledge of the Company.
(b) I further represent that my performance of all the terms of this
Agreement and as an employee, consultant or advisor of the Company does not and
will not breach any agreement to keep in confidence Confidential Information
acquired by me prior to my Employment by the Company. I have not entered into,
and I agree I will not enter into, any agreement either written or oral in
conflict herewith.
(c) Further, I agree that during my Employment I shall not make, use or
permit to be used any notes, memoranda, reports, lists, records, drawings,
sketches, specifications, software programs, data, documentation or other
materials of any nature relating to any matter within the scope of the business
of the Company or concerning any of its dealings or affairs otherwise than for
the benefit of the Company. I further agree that I shall not, after the
termination of my Employment, use or permit to be used any such notes,
memoranda, reports, lists, records, drawings, sketches, specifications, software
programs, data, documentation or other materials, it being agreed that all of
the foregoing shall be and remain the sole and exclusive property of the Company
and that within ten (10) days after the termination of my Employment I shall
either (i) deliver all of the foregoing, and all copies thereof, to the Company,
at its main office or (ii) destroy all of the foregoing, and all copies
thereof, and
-3-
<PAGE> 11
deliver a sworn notice to the Company certifying to such destruction.
(d) The Company shall make adequate provision for the safekeeping of
any notes, memoranda, reports, lists, records, drawings, sketches,
specifications, software programs, data, documentation or other materials of
any nature relating to any matter within the scope of the business of the
Company or concerning any of its dealings or affairs, as requested by me upon
notice to the Company given within 10 days after the termination of my
Employment, and the Company shall provide me with a notice setting forth
that it has complied with such request.
3. Developments Agreement.
----------------------
(a) If at any time or times during my Employment, I shall (either alone or
with others) make, conceive, discover or reduce to practice any invention,
modification, discovery, design, development, improvement, process, software
program, work of authorship, documentation, formula, data, technique, know-how,
secret or any interest therein (whether or not patentable or registrable under
copyright or similar statutes or subject to analogous protection) (herein called
"Developments") that relate to the business of the Company or that of any
supplier to the Company or any of the goods and services sold, licensed or under
development by the Company or result from the use of premises or personal
property tangible or intangible owned, leased or contracted for by the Company
such Developments and the benefits thereof shall immediately become the sole and
absolute property of the Company and its assigns, and I shall promptly disclose
to the Company (or any persons designated by it) each such Development and
hereby assign any rights I may have or acquire in the Developments and benefits
and/or rights resulting therefrom to the Company and its assigns without further
compensation and shall communicate, without cost or delay, and without
publishing the same, all available information relating thereto (with all
necessary plans and models) to the Company.
(b) Upon disclosure of each Development to the Company, I will, during my
Employment and at any time thereafter, at the request and cost of the Company,
sign, execute, make and do all such deeds, documents, acts and things as the
Company and its duly authorizes agents may reasonably require:
(i) to apply for, obtain and vest in the name of the Company alone
(unless the Company otherwise directs) letters patent, copyrights or other
analogous protection in any country throughout the world and when so
obtained or vested to renew and restore the same; and
(ii) to defend any opposition proceedings in respect of such
applications and any opposition proceedings or petitions or applications
for revocation of such letters patent, copyright or other analogous
protection.
-4-
<PAGE> 12
In the event the Company is unable, after reasonable effort, to secure my
signature on any letters patent, copyright or other analogous protection
relating to a Development, whether because of my physical or menta1 incapacity
or for any other reason whatsoever, I hereby irrevocably designate and appoint
the Company and its duly authorized officers and agents as my agent and
attorney-in-fact, to act for and in my behalf and stead to execute and file any
such application or applications and to do all other lawfully permitted acts to
further the prosecution and issuance of letters patent, copyright or other
analogous protection thereon with the same legal force and effect as if executed
by me.
(c) I understand that the Developments including, but not limited to, those
identified in the pages, if any, attached hereto which I can demonstrate to the
satisfaction of the Company that I have made or conceived prior to my Employment
by the Company are excluded from this Agreement. I understand that it is only
necessary to list the title and purpose of such Developments but not details
thereof.
4. Miscellaneous.
-------------
(a) I understand that this Agreement does not create an obligation on the
Company or any other person or entity to continue my Employment.
(b} Any waiver by the Company of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent breach
of such provision or any other provision hereof.
(c) I hereby agree that each provision herein shall be treated as a
separate and independent clause, and the unenforceability of any one clause
shall in no way impair the unenforceability of any of the other clauses herein.
Moreover, if one or more of the provisions contained in this Agreement shall for
any reason be held to be excessively broad as to scope, activity or subject so
as to be unenforceable at law, such provision or provisions shall be construed
by the appropriate judicial body by limiting and reducing it or them, so as to
be enforceable to the maximum extent compatible with the applicable law as it
shall then appear.
(d] I recognize that money damages alone would not adequately compensate
the Company in the event of breach by me of this Agreement, and I therefore
aqree that, in addition to all other remedies available to the Company at law
or in equity, the Company shall be entitled to injunctive relief for the
enforcement hereof. Failure by the Company to insist upon strict compliance
with any of the terms, covenants or conditions hereof shall not be deemed a
waiver of such terms, covenants or conditions.
-5-
<PAGE> 13
(e) My obligations under this Agreement shall survive the termination of my
Employment regardless of the manner of which termination except that the
provisions of Section 1 (a) shall survive in accordance with their terms only if
I terminate my Employment with the Company for any reason, including expiration
of the previously agreed upon term of my Employment, or if the Company
terminates my Employment for Cause.
(f) The term "Company" shall include Object Design, Inc. and any of its
subsidiaries, subdivisions or affiliates. The Company shall have the right to
assign this Agreement to its successor and assigns, and all covenant and
agreements hereunder shall inure to the benefit of and be enforceable by said
successors or assigns.
(g) This Agreement sha11 be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts.
(h) This Agreement contains the entire and only agreement between me and
the Company respecting the subject matter hereof, and no modification, renewal,
extension, waiver or termination of this Agreement or any of the provisions
herein contained shall be binding upon me or the Company unless made in
writing and signed by an authorized officer of the Company. In the event of any
inconsistency between this Agreement and any other contract between me and the
Company, the provisions of this Agreement shall prevail.
(i) Any notices to be given hereunder shall be in writing and shall be
delivered by hand, by registered, certified or overnight mail to the appropriate
address set forth below or to such other address as specified by notice.
(J) Any controversy or claim arising out of or relating to this Agreement,
or the breach thereof, shall be settled by arbitration in Boston, Massachusetts
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association, and Judgment upon the award rendered by the arbitrator(s) may be
entered in any court having Jurisdiction thereof and shall be final and binding
upon the parties hereto. Notwithstanding anything to the contrary contained in
this Section 4(j), the Company shall have the right to seek injunctive relief,
specific performance or other equitable relief against me in a court of
competent jurisdiction. If any party fails to comply with the arbitration
provision contained herein, the other parties shall be entitled to costs and
attorneys' fees in connection with any action brought to compel arbitration
hereunder.
-6-
<PAGE> 14
BY PLACING MY SIGNATURE HEREUNDER, I ACKNOWLEDGE THAT I HAVE READ ALL OF
THE PROVISIONS OF THIS AGREEMENT AND THAT I AGREE TO ALL OF ITS TERMS.
/s/ Kenneth E. Marshall
-----------------------------------
Signature
Address:
-----------------------------------
-----------------------------------
Date: 5/18/90 Accepted:
------------------
OBJECT DESIGN, INC.
By: Thomas M. Atwood
-----------------------------------
Address:
Object Design, Inc
-----------------------------------
25 Mall Rd. Burlington, MA 01803
-----------------------------------
-7-
<PAGE> 1
EXHIBIT 10.19
November 28, 1995
Mr. David Stryker
69 Old North Road
Carlisle, MA 01741
Dear David:
This letter will confirm our understandings concerning
your resignation effective November 30, 1995 as an employee
and Chief Technical Officer at Object Design, Inc.
Twenty Five In consideration of your resignation and the release of
any and all claims that you may have against Object Design,
Mall Road Inc. (as described more fully in Exhibits A and B attached
hereto), Object Design, Inc. agrees to pay you your salary at
Burlington the same rate as you were receiving on November 1, 1995 for the
period December 1, 1995 through April 30, 1995 (the
Massachusetts "Continuation Period"); provided, however, that any
compensation you receive during the Continuation Period from
01803-4194 any other employment (including, without limitation, any
consulting work or self-employment) shall be deducted from the
617.674.5000 salary payment(s) that would otherwise be due under this
Agreement. You agree to notify Object Design, Inc. promptly of
617.674.5010 any compensation you receive during the Continuation Period.
Object Design, Inc. also agrees to pay the premiums on your
group health insurance coverage during the Continuation Period
if you elect to continue such coverage pursuant to COBRA law.
You agree not to make any statements, take any actions, or
conduct yourself in any way that adversely affects the
reputation or good will of Object Design, Inc., or its parent,
subsidiaries, and affiliates and their respective directors,
officers, employees and agents.
It is also understood and agreed that you have no vested
incentive stock options.
You acknowledge and confirm your obligations under the
"Non-Competition, Nondisclosure and Developments Agreement"
(hereinafter "Non-Competition Agreement") between you and the
Company dated December 22, 1988, a copy of which is attached
hereto as Exhibit C.
This Agreement and the Non-Competition Agreement attached
as Exhibit C constitute the entire Agreement between you and
the Company with respect to the subject
OBJECT DESIGN
<PAGE> 2
Mr. David Stryker
November 28, 1995
Page 2
matter hereof and supersede all prior agreements and understandings, whether
written or oral, between us concerning this subject matter. It is understood and
agreed that Massachusetts law shall govern the interpretation of this Agreement.
This Agreement will enure to the benefit of and be binding upon you and
your heirs and legal representatives, and upon the Company and its successors
and assigns.
You agree to execute and deliver releases to Object Design, Inc. at the
time of the execution of this Agreement in or substantially in the forms
attached hereto as Exhibits A and B.
The Company represents and warrants that as of the date hereof the Company
knows of no claims or causes of action of whatever kind or nature which the
Company has or may have against you.
If this letter correctly sets forth our understandings, please sign the
enclosed copy and return it to the undersigned, whereupon this will become a
binding agreement.
Sincerely,
OBJECT DESIGN, INC.
By: /s/ Robert Goldman
------------------------------
Robert Goldman
Chief Executive Officer
ACCEPTED:
/s/ David Stryker
- --------------------------
David Stryker
DATE SIGNED:
Dec 1, 1995
- --------------------------
<PAGE> 3
Exhibit A
---------
GENERAL RELEASE
---------------
I, David Stryker, for good and valuable consideration the receipt of which
is hereby acknowledged, do for myself and my legal representatives, successors,
and assigns, hereby remise, release, and forever discharge Object Design, Inc.,
all of its parents, subsidiaries, and affiliates, and their respective past,
present and future officers, directors, employees, and agents (hereinafter
collectively referred to as "Object Design") and all of Object Design's
successors, predecessors, and assigns, of and from all manner of actions, causes
of actions, debts, obligations, agreements, and claims whatsoever, at law, in
equity, or otherwise, known or unknown, which I now have, ever had, or may have
against Object Design (other than those arising under the letter agreement
between the Company and me dated November 28, 1995), including but not limited
to any claims arising out of or in any way related to my employment by Object
Design or the termination of my employment by Object Design (other than the
terms of the letter agreement between me and the Company dated November 28,
1995) and including but not limited to claims under Massachusetts General Laws
c.151B (unlawful discrimination), Massachusetts General Laws c.93, [section]
102 (equal rights), Massachusetts General Laws c. 12 [sections] 11H and 11I
(civil rights), Title VII of the Civil Rights Act of 1964, the Employee
Retirement Income Security Act, the Older Workers Benefit
<PAGE> 4
Protection Act, and the Americans with Disabilities Act.
IN WITNESS WHEREOF, David Stryker has set his hand and seal as of the 30th
day of November, 1995.
Witness: David Stryker:
/s/ A. Johnson /s/ David Stryker
- ------------------ ----------------------
<PAGE> 5
Exhibit B
---------
ADEA RELEASE
------------
I, David Stryker, for good and valuable consideration over and above any
other money or benefits that would be due to me, the receipt of which is
acknowledged, hereby release and waive any and all existing claims arising under
the Age Discrimination in Employment Act against Object Design, Inc., all of
its parents, subsidiaries, and affiliates, and their respective past, present,
and future directors, officers, employees, and agents. I acknowledge that Object
Design has advised me to consult with an attorney before signing this release
and that Object Design has given me at least 21 days to consider signing this
release.
This release will become effective seven (7) days after it is signed. I
understand that I may revoke this release within seven days after it is signed,
and it shall not become effective until this seven-day revocation period has
expired. If I choose to revoke the release, I understand that I will be required
to repay to Object Design all consideration paid to me.
/s/ David Stryker
--------------------------
Witness: David Stryker
/s/ A. Johnson Dated as of: Nov. 30, 1995
- ---------------------- -------------
<PAGE> 6
Exhibit C
NON-COMPETITION, NON-DISCLOSURE
AND DEVELOPMENTS AGREEMENT
In consideration of my employment, consulting or advisory relationship
("Employment"), as the case may be, with Object Design, Inc., a Delaware
corporation with its principal place of business in Burlington, Massachusetts,
and in recognition of the fact that as a result of such relationship I will or
may have access to confidential information, I agree with the Company (as
defined below) as follows:
1. Agreement Not to Compete with the Company.
-----------------------------------------
(a) As long as I am employed or retained by the Company and for a period of
one year after the termination of my Employment with the Company by me for any
reason, including expiration of the previously agreed upon term of my
Employment, or by the Company for Cause (as defined below), I shall not, on my
behalf, or as owner, manager, stockholder, consultant, director, officer or
employee of any business entity, participate in the development or provision of
goods or services which are competitive with goods or services sold or licensed,
or under development, by the Company without the prior written authorization of
the Company; provided, however, that I may, without the Company's prior written
authorization, own (i) up to one percent (1%) of the issued and outstanding
securities of any publicly held corporation or (ii) any securities in any
non-public corporation which I owned prior to the date of my Employment. In the
event that the Company and I disagree about whether any business entity develops
or provides goods or services which are competitive with goods or services
sold or licensed, or under development, by the Company, the disagreement shall
be resolved either (i) by decision of the Company's Board of Directors at their
next regularly scheduled board meeting acting in good faith after giving me a
suitable opportunity to present my view in person and/or in writing or (ii) if
either I or the Company gives notice to the Board of our objection to the
decision of the Board within 30 days after such decision, by arbitration as
provided herein. The Company and I agree that goods or services which are
competitive with goods or services developed or provided, or under development,
by the Company shall not include goods and services used by any person or entity
(i) for such person or entity's non-public, in house use, or (ii) for use as a
component in a good or service which is not competitive with goods or services
developed or provided, or under development, by the Company.
If after the commencement of my Employment with the Company the Company
determines to change its line of business so as to provide goods or services
other than those sold or licensed, or under development, by the Company at the
commencement of my Employment, then the Company shall give me notice of such
determination.
<PAGE> 7
(b) For a period of one year after the termination of my Employment with
the Company by me for any reason, including expiration of the previously agreed
upon term of my Employment, or by the Company for Cause, I shall not, on my own
behalf, or as owner, manager, stockholder, consultant, director, officer or
employee of any business entity, take away any of the customers that the Company
had enjoyed during my Employment with the Company.
(c) For a period of one year after the termination of my Employment with
the Company by me for any reason, including expiration of the previously agreed
upon term of my Employment, or by the Company for Cause, I shall not solicit,
induce, attempt to hire, or hire any employee of the Company (or any other
person who may have been employed by the Company during the six months prior to
the termination of my Employment), or assist in such hiring by any other person
or business entity or encourage any such employee to terminate his or her
employment with the Company.
(d) As used herein the term "Cause" shall mean: (i) conviction of a
crime, whether a felony or misdemeanor; (ii) deliberate dishonesty with respect
to the Company; or (iii) documented failure to materially perform my duties on
behalf of the Company.
(e) I recognize that the Company is developing highly specialized products
and services in competition with the other business entities throughout the
United States and the world, which products and services are designed to compete
in regional, nation-wide and world-wide markets. In light of the competitive
nature of the Company's products and services, I agree that the restrictions
contained in this Section 1 cannot be limited to any geographic area.
2. Confidentiality Agreement.
-------------------------
(a) I will not at any time, whether during or after the termination of my
Employment, reveal to any person or entity any of the Confidential Information
of the Company or of any third party which the Company is under an obligation to
keep confidential. The term "Confidential Information" as used throughout this
Agreement shall mean all trade secrets, proprietary information and other data
or information (and any tangible evidence, record or representation thereof),
whether prepared, conceived or developed by an employee of the Company
(including myself) or received by the Company from an outside source, which is
in the possession of the Company (whether or not the property of the Company),
which in any way relates to the present or future business of the Company or any
customer or supplier of the Company, and which is maintained in confidence by
the Company. Without limiting the generality of the foregoing, "Confidential
Information" shall mean all trade secrets, know-how, proprietary information and
other information or data relating to
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<PAGE> 8
the present or future business of the Company, including but not limited to:
(i) any idea, improvement, invention, innovation, development
technical data, design, formula, device, pattern, concept, computer
program, software, firmware, source code, object code, algorithm,
subroutine, object module, schematic, model, diagram, flow chart, chip
masking specification, user manual, training or service manual, product
specification, plan for a new or revised product, compilation of
information, or work in process, and any and all revisions and improvements
relating to any of the foregoing (in each case whether or not reduced to
tangible form); and
(ii) the name of any customer, employee, prospective customer or
consultant, any sales plan, marketing material, plan or survey, business
plan, product or development plan or specification, business proposal,
financial record, or business record or other record or information
relating to the business of the Company.
Notwithstanding the foregoing, the term Confidential Information shall not
apply to information (i) which the Company has voluntarily disclosed to the
public without restriction, (ii) which has otherwise lawfully entered the public
domain, (iii) which the Company has permitted me to disclose by its prior
written consent; or (iv) which I may disclose at a forum, workshop or round
table conference with the prior knowledge of the Company.
(b) I further represent that my performance of all of the terms of this
Agreement and as an employee, consultant or advisor of the Company does not and
will not breach any agreement to keep in confidence Confidential Information
acquired by me prior to my Employment, by the Company. I have not entered into,
and I agree I will not enter into, any agreement either written or oral in
conflict herewith.
(c) Further, I agree that during my Employment I shall not make, use or
permit to be used any notes, memoranda, reports, lists, records, drawings,
sketches, specifications, software programs, data, documentation or other
materials of any nature relating to any matter within the scope of the business
of the Company or concerning any of its dealings or affairs otherwise than for
the benefit of the Company. I further agree that I shall not, after the
termination of my Employment, use or permit to be used any such notes,
memoranda, reports, lists, records, drawings, sketches, specifications, software
programs, data, documentation or other materials, it being agreed that all of
the foregoing shall be and remain the sole and exclusive property of the Company
and that within ten (10) days after the termination of my Employment I shall
either (i) deliver all of the foregoing, and all copies thereof, to the Company,
at its main office or (ii) destroy all of the foregoing, and all copies thereof,
and
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<PAGE> 9
deliver a sworn notice to the Company certifying to such destruction.
(d) The Company shall make adequate provision for the safekeeping of any
notes, memoranda, reports, lists, records, drawings, sketches, specifications,
software programs, data, documentation or other materials of any nature
relating to any matter within the scope of the business of the Company or
concerning any of its dealings or affairs, as requested by me upon notice to the
Company given within 10 days after the termination of my Employment, and the
Company shall provide me with a notice setting forth that it has complied with
such request.
3. Developments Agreement.
----------------------
(a) If at any time or times during my Employment, I shall (either alone or
with others) make, conceive, discover or reduce to practice any invention,
modification, discovery, design, development, improvement, process, software
program, work of authorship, documentation, formula, data, technique, know-how,
secret or any interest therein (whether or not patentable or registrable under
copyright or similar statutes or subject to analogous protection) (herein called
"Developments") that relate to the business of the Company or that of any
supplier to the Company or any of the goods and services sold, licensed or under
development by the Company or result from the use of premises or personal
property tangible or intangible owned, leased or contracted for by the Company
such Developments and the benefits thereof shall immediately become the sole and
absolute property of the Company and its assigns, and I shall promptly disclose
to the Company (or any persons designated by it) each such Development and
hereby assign any rights I may have or acquire in the Developments and benefits
and/or rights resulting therefrom to the Company and its assigns without further
compensation and shall communicate, without cost or delay, and without
publishing the same, all available information relating thereto (with all
necessary plans and models) to the Company.
(b) Upon disclosure of each Development to the Company, I will, during my
Employment and at any time thereafter, at the request and cost of the Company,
sign, execute, make and do all such deeds, documents, acts and things as the
Company and its duly authorizes agents may reasonably require:
(i) to apply for, obtain and vest in the name of the Company alone
(unless the Company otherwise directs) letters patent, copyrights or other
analogous protection in any country throughout the world and when so
obtained or vested to renew and restore the same; and
(ii) to defend any opposition proceedings in respect of such
applications and any opposition proceedings or petitions or applications
for revocation of such letters patent, copyright or other analogous
protection.
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<PAGE> 10
In the event the Company is unable, after reasonable effort, to secure my
signature on any letters patent, copyright or other analogous protection
relating to a Development, whether because of my physical or mental incapacity
or for any other reason whatsoever, I hereby irrevocably designate and appoint
the Company and its duly authorized officers and agents as my agent and
attorney-in-fact, to act for and in my behalf and stead to execute and file any
such application or applications and to do all other lawfully permitted acts to
further the prosecution and issuance of letters patent, copyright or other
analogous protection thereon with the same legal force and effect as if executed
by me.
(c) I understand that the Developments including, but not limited to, those
identified in the pages, if any, attached hereto which I can demonstrate to the
satisfaction of the Company that I have made or conceived prior to my Employment
by the Company are excluded from this Agreement. I understand that it is only
necessary to list the title and purpose of such Developments but not details
thereof.
4. Miscellaneous.
-------------
(a) I understand that this Agreement does not create an obligation on the
Company or any other person or entity to continue my Employment.
(b) Any waiver by the Company of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent breach
of such provision or any other provision hereof.
(c) I hereby agree that each provision herein shall be treated as a
separate and independent clause, and the unenforceability of any one clause
shall in no way impair the unenforceability of any of the other clauses herein.
Moreover, if one or more of the provisions contained in this Agreement shall for
any reason be held to be excessively broad as to scope, activity or subject so
as to be unenforceable at law, such provision or provisions shall be construed
by the appropriate judicial body by limiting and reducing it or them, so as to
be enforceable to the maximum extent compatible with the applicable law as it
shall then appear.
(d) I recognize that money damages alone would not adequately compensate
the Company in the event of breach by me of this Agreement, and I therefore
agree that, in addition to all other remedies available to the Company at law or
in equity, the Company shall be entitled to injunctive relief for the
enforcement hereof. Failure by the Company to insist upon strict compliance with
any of the terms, covenants or conditions hereof shall not be deemed a waiver of
such terms, covenants or conditions.
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<PAGE> 11
(e) My obligations under this Agreement shall survive the termination of my
Employment regardless of the manner of which termination except that the
provisions of Section 1 (a) shall survive in accordance with their terms only if
I terminate my Employment with the Company for any reason, including expiration
of the previously agreed upon term of my Employment, or if the Company
terminates my Employment for Cause.
(f) The term "Company" shall include Object Design, Inc. and any of its
subsidiaries, subdivisions or affiliates. The Company shall have the right to
assign this Agreement to its successor and assigns, and all covenant and
agreements hereunder shall inure to the benefit of and be enforceable by said
successors or assigns.
(g) This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts.
(h) This Agreement contains the entire and only agreement between me and
the Company respecting the subject matter hereof, and no modification, renewal,
extension, waiver or termination of this Agreement or any of the provisions
herein contained shall be binding upon me or the Company unless made in writing
and signed by an authorized officer of the Company. In the event of any
inconsistency between this Agreement and any other contract between me and the
Company, the provisions of this Agreement shall prevail.
(i) Any notices to be given hereunder shall be in writing and shall be
delivered by hand, by registered, certified or overnight mail to the appropriate
address set forth below or to such other address as specified by notice.
(j) Any controversy or claim arising out of or relating to this Agreement,
or the breach thereof, shall be settled by arbitration in Boston, Massachusetts
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof and shall be final and binding
upon the parties hereto. Notwithstanding anything to the contrary contained in
this Section 4(j), the Company shall have the right to seek injunctive relief,
specific performance or other equitable relief against me in a court of
competent jurisdiction. If any party fails to comply with the arbitration
provision contained herein, the other parties shall be entitled to costs and
attorneys' fees in connection with any action brought to compel arbitration
hereunder.
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<PAGE> 12
BY PLACING MY SIGNATURE HEREUNDER, I ACKNOWLEDGE THAT I HAVE READ ALL OF
THE PROVISIONS OF THIS AGREEMENT AND THAT I AGREE TO ALL OF ITS TERMS.
/s/ David Stryker
---------------------------
Signature
Address:
74 Chester St.
---------------------------
Winchester, MA 01890
---------------------------
Date: December 22, 1988
-----------------
Accepted:
OBJECT DESIGN, INC.
By: /s/ Thomas M. Atwood
------------------------
Title: Chairman
Address:
1 New England Executive Park
----------------------------
Burlington, MA 01803
----------------------------
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<PAGE> 1
EXHIBIT 10.20
SIXTH AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
AGREEMENT, made as of the 13th day of February, 1996 by and among (i)
Object Design, Inc., a Delaware corporation (the "Company"); (ii) the Investors
listed on Schedule I hereto (the "Investors"); and (iii) the Stockholders listed
on Schedule II hereto and each of the persons who shall, after the date hereof,
acquire shares of the capital stock of the Company and join in and become a
party to this Agreement by executing and delivering to the Company an Instrument
of Accession in the form of Schedule III hereto (collectively, the
"Stockholders" and individually, a "Stockholder".)
Each Stockholder is the holder of that number of shares of the
Company's Common Stock, $.001 par value per share (the "Common Stock"), as is
set forth opposite such Stockholder's name on Schedule II or in the Instrument
of Accession by which such Stockholder became a party hereto. The Investors and
the Stockholders shall sometimes be referred to collectively herein as the
"Holders" and individually as a "Holder".
WHEREAS, the Company, certain of the Stockholders and certain of the
Investors are parties to a Fifth Amended and Restated Stockholders' Agreement
dated as of June 10, 1994, pursuant to which the parties thereto have agreed to
vote their shares in the manner specified therein (the "Prior Stockholders'
Agreement");
WHEREAS, certain of the Investors (the "Purchasers") are agreeing to
acquire, as set forth in the Series J Stock Purchase Agreement (as defined
below), up to an aggregate of 2,166,667 shares of the Series J Convertible
Preferred Stock of the Company (the "Series J Preferred Stock") pursuant to a
certain Series J Convertible Preferred Stock Purchase Agreement by and among the
Company and the Purchasers of even date herewith (the "Series J Stock Purchase
Agreement");
WHEREAS it is a condition to the obligations of the Purchasers under
the Series J Stock Purchase Agreement that the provisions of the Prior
Stockholders' Agreement be amended and restated and that the parties hereto
agree to certain restrictions on the transfer of their shares, all as set forth
herein;
WHEREAS, it is a further condition to the obligations of the Purchasers
under the Series J Stock Purchase Agreement that each Investor and each
Stockholder execute and deliver to the Company a form of this Agreement relating
to all shares of Series A Convertible Preferred Stock, $.01 par value per share
(the "Series A Preferred Stock"), Series B Convertible Preferred Stock, $.01 par
value per share (the "Series B Preferred Stock"),
<PAGE> 2
Series C Convertible Preferred Stock, $.01 par value per share (the "Series C
Preferred Stock"), Series D Convertible Preferred Stock, $.01 par value per
share (the "Series D Preferred Stock"), Series G Convertible Preferred Stock,
$.01 par value per share (the "Series G Preferred Stock"), Series H Convertible
Preferred Stock, $.01 par value per share (the "Series H Preferred Stock"),
Series I Convertible Preferred Stock, $.01 par value per share (the "Series I
Preferred Stock"), the Series J Preferred Stock (the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series G Preferred Stock, Series H Preferred Stock, Series I Preferred Stock and
Series J Preferred Stock, together with shares of any other series of preferred
stock issued by the Company in exchange for shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series G Preferred Stock, Series H Preferred Stock, Series I Preferred Stock and
Series J Preferred Stock pursuant to the Company's Restated Certificate of
Incorporation, as amended and restated from time to time (the "Charter"), are
referred to collectively herein as the "Preferred Stock") and Common Stock (the
Common Stock, the Preferred Stock and any other shares of equity securities of
the Company now or hereafter authorized by the Company are referred to
collectively herein as the "Stock"), as the case may be, issued or to be issued
to such Investors and such Stockholders, and the Company has covenanted that it
shall require, as a condition precedent to the issuance of shares of Common
Stock to any executive officer of the Company subsequent to such date of
closing, that such executive officer become a party to and bound by the
provisions of this Agreement as to such shares of Common Stock.
NOW THEREFORE, in consideration of the foregoing and the agreements set
forth below, the parties agree with each other as follows:
1. Voting.
1.1 [DELETED]
1.2 [DELETED]
1.3 Brentwood Voting Agreement. Brentwood Associates V, L.P.
("Brentwood") agrees:
(i) to vote its shares of Series D Preferred Stock; and
(ii) to act for all purposes with respect to any
amendment, waiver or consent relating to this
Agreement, the Series D Convertible Preferred Stock
Purchase Agreement dated as of March 12, 1992, the
Series I Convertible Preferred Stock Purchase
Agreement dated as of March 31, 1994, the Series J
Stock Purchase Agreement, the Eighth Amended and
Restated Preferred Stock Redemption Agreement dated
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<PAGE> 3
as of February 13, 1996 (the "Redemption Agreement"),
the Amended and Restated Registration Rights
Agreement dated as of June 29, 1990, as amended by
Amendment No. 1 dated as of October 1, 1990,
Amendment No. 2 dated as of July 29, 1991, Amendment
No. 3 dated as of March 12, 1992, Amendment No. 4
dated as of April 12, 1993, Amendment No. 5 dated as
of May 14, 1993, Amendment No. 6 dated as of March
31, 1994 and Amendment No. 7 dated as of February 13,
1996 (the "Registration Rights Agreement"), and the
IBM Stockholders' Agreement, dated May 14, 1993, as
amended (the "IBM Stockholders' Agreement"),
in the same manner as the Investors, other than Brentwood, and their assignees
holding or having the right to acquire an aggregate of at least two-thirds of
the aggregate number of shares of Common Stock issued or issuable upon
conversion of all outstanding shares of Preferred Stock, exclusive of those
shares of Series D Preferred Stock held by Brentwood. Anything herein to the
contrary notwithstanding, the provisions of this Section 1.3 shall not apply in
any case in which such a vote or action by Brentwood would adversely affect the
rights of holders of Series D Preferred Stock materially differently than the
holders of any other series without the prior written consent of the holders of
at least two-thirds of the outstanding shares of Series D Preferred Stock,
voting separately.
1.4 AT&T Voting Agreement. AT&T Venture Company, L.P.
("AT&T") agrees:
(i) to vote its shares of Series G Preferred Stock and
Series H Preferred Stock; and
(ii) to act for all purposes with respect to any
amendment, waiver or consent relating to this
Agreement, the Series G and Series H Stock Purchase
Agreement dated as of May 14, 1993, the Series I
Stock Purchase Agreement dated as of March 31, 1994,
the Series J Stock Purchase Agreement, the Redemption
Agreement, the Registration Rights Agreement and the
IBM Stockholders' Agreement
in the same manner as the Investors, other than AT&T, and their assignees
holding or having the right to acquire an aggregate of at least two-thirds of
the aggregate number of shares of Common Stock issued or issuable upon
conversion of all outstanding shares of Preferred Stock, exclusive of those
shares of Series G Preferred Stock and Series H Preferred Stock held by AT&T.
Anything herein to the contrary notwithstanding, the provisions of this Section
1.4 shall not apply in any case in which such a vote or action by AT&T would
adversely affect the rights of holders of Series G Preferred Stock and Series H
Preferred Stock, respectively, materially differently than the holders of any
other series without the prior written consent of the holders of
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<PAGE> 4
at least two-thirds of the outstanding shares of Series G Preferred Stock and
Series H Preferred Stock respectively, each voting separately.
1.5 Termination of Agreement. The rights and obligations of all parties
under this Section 1 shall terminate on the first to occur of (i) the day
immediately prior to the closing of an underwritten public offering of the
Company's securities; or (ii) March 12, 2002.
2. Restrictions on Transfer.
2.1 Right of Refusal on Dispositions by the Holders. If, at any time,
any of the Holders wishes to sell, assign, transfer or otherwise dispose of any
or all Stock owned by such Holder pursuant to the terms of a bona fide offer
received from a third party, the Holder shall submit a written offer to sell
such Stock to the Company on terms and conditions, including price, not less
favorable to the Company than those on which such Holder proposes to sell such
Stock to such third party (the "Offer"). The Offer shall disclose the identity
of the proposed purchaser or transferee, the Stock proposed to be sold or
transferred (the "Offered Shares"), the agreed terms of the sale or transfer and
any other material facts relating to the sale or transfer. Within 15 days after
receipt of the Offer, the Company shall give notice to the Holder of its intent
to purchase all or any portion of the Offered Shares on the same terms and
conditions as set forth in the Offer. If, for any reason whatsoever, the Company
shall not exercise its right to purchase all of the Offered Shares as provided
herein, the Company shall, within five days after (i) giving notice to the
Holder of its intent to purchase some portion of the Offered Shares, or (ii)
expiration of the 15 day period for exercising its rights hereunder, give notice
to the Investors that it has not elected to purchase all of the Offered Shares.
In such event, each of the Investors shall have the right to purchase that
portion of the Offered Shares which the Company shall not have agreed to
purchase from the Holder (all such remaining shares being referred to as the
"Remaining Offered Shares"). Each Investor shall have the right to purchase that
number of the Remaining Offered Shares as shall be equal to the aggregate
Remaining Offered Shares multiplied by a fraction, the numerator of which is the
number of shares of Common Stock of the Company then owned by such Investor
(including any shares of Common Stock deemed to be owned hereunder, being a
number of shares equal to that into which the Preferred Stock held by such
Investor is convertible on the date of the Offer) and the denominator of which
is the aggregate number of shares of said Common Stock then issued and
outstanding and held by and deemed to be held by all of the Investors. (The
amount of shares each Investor or Qualified Transferee, as that term is defined
below, is entitled to purchase under this Section 2.1 shall be referred to as
such Investor's "Pro Rata Fraction"). Each Investor shall have the right to
transfer such Investor's right to any Pro Rata Fraction or part thereof to any
Qualified Transferee. In the
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<PAGE> 5
event an Investor does not wish to purchase or to transfer such Investor's right
to purchase such Investor's Pro Rata Fraction, then any Investors who so elect
shall have the right to purchase, on a pro rata basis with any other Investors
who so elect, any Pro Rata Fraction not purchased by an Investor or Qualified
Transferee. If the Company and the Investors, taken together, do not elect to
purchase all of the Offered Shares, then there shall be no right to purchase
shares pursuant to this Section 2.1. Each Investor shall act upon the Offer as
soon as practicable after receipt from the Company of notice that it has not
elected to purchase all of the Offered Shares and, in all events, within 15 days
after receipt thereof. Each Investor shall have the right to accept the Offer as
to all or part of the Remaining Offered Shares offered thereby. In the event
that an Investor shall elect to purchase all or part of the Remaining Offered
Shares covered by the Offer, said Investor shall individually communicate in
writing such election to purchase to whichever of the Holders has made the
Offer, which communication shall be delivered by hand or mailed to such Holder
at the address set forth in Section 4.1 below and shall, when taken in
conjunction with the Offer, be deemed to constitute a valid, legally binding and
enforceable agreement for the sale and purchase of the Remaining Offered Shares
covered thereby.
In the event that the Company and Investors, taken together, do not
purchase all of the Offered Shares pursuant to and within 45 days after the
Offer, each such agreement to purchase the Offered Shares and the Remaining
Offered Shares shall be deemed null and void, and such Offered Shares may be
sold by such Holder at any time within 90 days after the expiration of the
Offer, but subject to the provisions of Section 2.2 below. Any such sale shall
be at not less than the price and upon other terms and conditions, if any, not
more favorable to the purchaser than those specified in the Offer. Any Offered
Shares not sold within such 90 day period shall continue to be subject to the
requirements of a prior offer and re-sale pursuant to this Section. In the event
that Offered Shares are sold to any purchaser pursuant to this Section, said
Offered Shares shall no longer be entitled to the benefits conferred by, or
subject to the restrictions imposed by, this Agreement, except that the
purchaser of said Offered Shares shall agree in writing to abide by the
provisions of Section 1 hereof.
For purposes of this Section 2, a Qualified Transferee shall mean any
person (i) who is an Investor, (ii) who is an affiliate, as that term is defined
in the Investment Company Act of 1940, of an Investor, (iii) who is a partner of
an Investor or (iv) who acquires at least 300,000 shares of Preferred Stock (as
adjusted for stock splits, stock dividends, reclassifications, recapitalizations
or other similar events).
2.2 Right of Participation in Sales by Holders. If during any 12 month
period, any Holder wishes to sell or otherwise dispose of such Holder's Stock
representing more than 5% of the
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<PAGE> 6
total number of outstanding shares of Common Stock of the Company (on a fully
diluted basis) to any person (the "Purchaser") in a transaction which is subject
to the provisions of Section 2.1 hereof, each Investor shall have the right to
require, as a condition to such sale or disposition, that the Purchaser purchase
from said Investor at the same price per share and on the same terms and
conditions as involved in such sale or disposition by the Holder the same
percentage of shares of Common Stock owned (and deemed to be owned hereunder) by
such Investor as such sale or disposition (as finally consummated) represents
with respect to said shares of Common Stock then owned or deemed to be owned by
whichever of the Holders is selling. Each Investor wishing so to participate in
any such sale or disposition shall notify the selling Holder of such intention
as soon as practicable after receipt of the Offer made pursuant to Section 2
and, in all events, within 15 days after receipt thereof. In the event that an
Investor shall elect to participate in such sale or disposition, said Investor
shall individually communicate such election to the selling Holder, which
communication shall be delivered by hand or mailed to such Holder at the address
set forth in Section 4.1 below. The provisions of this Section 2.2 shall not
apply to the sale of any Shares by a Holder to the Company or an Investor
pursuant to an Offer under Section 2.1.
2.3 Permitted Transfers. Anything herein to the contrary
notwithstanding, the provisions of Sections 2.1 and 2.2 shall not apply to: (a)
any transfer or other disposition by a Stockholder of up to 5% of such
Stockholder's then vested shares of Common Stock with the prior written consent
of the holders of a majority of the Preferred Stock, which such consent shall
not be unreasonably withheld; (b) any transfer of Stock by a Holder by gift or
bequest or through inheritance to, or for the benefit of, any member or members
of such Holder's immediate family; (c) any transfer of Stock by a Holder to a
trust in respect of which such Holder serves as trustee, provided that the trust
instrument governing said trust shall provide that such Holder, as trustee,
shall retain sole and exclusive control over the voting and disposition of said
Stock until the termination of this Agreement; (d) any transfer of Stock by a
Holder which is a partnership in anticipation of the total liquidation of the
partnership; (e) any transfer by a partnership or corporation to its partners or
stockholders or other affiliates; and (f) any pledge by a Holder of Stock to
secure debt incurred in connection with money advanced by a commercial bank or
other lending institution and any transfer of Stock pursuant to the terms of
such pledge. In the event of any such transfer, the transferee of the Stock
shall hold the Stock so acquired with all the rights conferred by, and subject
to all the restrictions imposed by, this Agreement.
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<PAGE> 7
3. Prior Stockholders' Agreement.
The Company and each Investor and Stockholder who is a party to the
Prior Stockholders' Agreement hereby agrees that this Agreement shall supersede
and replace in its entirety the Prior Stockholders' Agreement which is hereby
terminated and of no further force or effect.
4. Miscellaneous
4.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given when delivered or mailed by first
class, registered or certified mail (air mail if to or from outside the United
States), return receipt requested, postage prepaid, or by recorded delivery
service, if to the Company, 25 Mall Road, Burlington, MA 01803, Attention:
President, if to each Investor, at such Investor's address as set forth on
Schedule I hereto and, if to each Stockholder, at their respective addresses as
set forth on Schedule II hereto or on the Instrument of Accession pursuant to
which such Stockholder became a party to this Agreement, or to such other
address as the addressee shall have furnished to the other parties hereto in the
manner prescribed by this Section 4.1
4.2 Amendments, Waivers and Consents: Any provision in this Agreement
to the contrary notwithstanding, changes in or additions to this Agreement may
be made, and compliance with any covenant or provision herein set forth may be
omitted or waived, only (a) with the written consent of (i) the Company, (ii)
Stockholders holding more than 50% of the aggregate number of shares of Common
Stock held by all of the Stockholders and (iii) Investors or their assignees
holding or having the right to acquire an aggregate of at least two-thirds of
the aggregate number of shares of Common Stock issued or issuable upon
conversion of all outstanding shares of Preferred Stock (or securities issued in
exchange for shares of Preferred Stock pursuant to the Charter) and (b) if the
Company shall, in each such case, deliver copies of such consent in writing to
any Stockholders and Investors who did not execute the same. Notwithstanding the
foregoing, (a) changes in or additions to Section 1.3 of this Agreement may be
made, and compliance with any covenant or provision of Section 1.3 of this
Agreement may be omitted or waived, only (i) with the written consent of
Investors, other than Brentwood, or their assignees holding or having the right
to acquire an aggregate of at least two-thirds of the aggregate number of shares
of Common Stock issued or issuable upon conversion of all outstanding shares of
Preferred Stock, exclusive of those shares of Series D Preferred Stock held by
Brentwood and (ii) if the Company shall, in each such case, deliver copies of
such consent in writing to any Investors who did not execute the same; and (b)
changes in or additions to Section 1.4 of this Agreement may be made, and
compliance with any covenant or provision of Section 1.4 of this Agreement may
be
-7-
<PAGE> 8
omitted or waived, only (i) with the written consent of Investors, other than
AT&T, or their assignees holding or having the right to acquire an aggregate of
at least two-thirds of the aggregate number of shares of Common Stock issued or
issuable upon conversion of all outstanding shares of Preferred Stock, exclusive
of those shares of Series G Preferred Stock and Series H Preferred Stock held by
AT&T and (ii) if the Company shall, in each such case, deliver copies of such
consent in writing to any Investors who did not execute the same.
4.3 Legend. Each certificate evidencing the Stock shall bear a legend
indicating the existence of the restrictions imposed hereby.
4.4 Binding Effect; Assignment. Subject to the provisions of Section
1.2 hereof, this Agreement shall be binding upon and inure to the benefit of the
personal representatives and successors of the respective parties hereto.
4.5 General. The headings contained in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement. This Agreement shall be governed by, and construed and enforced
in accordance with, the laws of The Commonwealth of Massachusetts, without
regard to its principles of conflicts of laws.
4.6 Severability. If any provision of this Agreement shall be found by
any court of competent jurisdiction to be invalid or unenforceable, the parties
hereby waive such provision to the extent that it is found to be invalid or
unenforceable. Such provision shall, to the maximum extent allowable by law, be
modified by such court so that it becomes enforceable, and, as modified, shall
be enforced as any other provision hereof, all the other provisions hereof
continuing in full force and effect.
4.7 Counterparts. This Agreement may be executed in counterparts, all
of which together shall constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-8-
<PAGE> 9
SIXTH AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
THE STOCKHOLDERS: THE COMPANY:
OBJECT DESIGN, INC.
- ----------------------------
Thomas Atwood
By:
-----------------------------
Title:
--------------------------
- ----------------------------
William L. Blundon
THE INVESTORS:
AENEAS VENTURE CORPORATION
- ----------------------------
Eugene Bonte
By:
---------------------------
Title:
------------------------
- ----------------------------
Gregory C. Foudray
ATGF II
- ----------------------------
Kenneth E. Marshall
By:
---------------------------
Title:
------------------------
- ----------------------------
Robert J. Potter
- ----------------------------
David Stryker APERTURE ASSOCIATES, L.P.
By: Horsley Bridge Partners,
Inc., its General Partner
- ----------------------------
Daniel L. Weinreb By:
---------------------------
Title:
------------------------
AT&T VENTURE COMPANY, L.P.
Cooper, Raburn & Kniffin
Limited Partnership
By: By:
------------------------- --------------------------
Title: Its:
---------------------- --------------------------
-9-
<PAGE> 10
SIXTH AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
BRENTWOOD ASSOCIATES V, L.P.
By: Brentwood V Ventures,
its General Partner
By:______________________________
Its:_____________________________
INTEL CORPORATION
By:______________________________
Its:_____________________________
NEW ENTERPRISE ASSOCIATES V,
LIMITED PARTNERSHIP
By: NEA Partners V,
Limited Partnership
By:______________________________
General Partner
OLIVETTI HOLDING N.V.
By:______________________________
Attorney-in-Fact
ORIEN I, L.P.
By: Orien Partners, L.P.,
its General Partner
By:______________________________
Managing General Partner
-10-
<PAGE> 11
SIXTH AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
PHILIPS VENTURE FUND I, L.P.
By: Vista Ventures Partners II
By:________________________________
General Partner
THE SILVERADO FUND I,
LIMITED PARTNERSHIP
By: NEA Silverado Partners I,
Limited Partnership
By:________________________________
General Partner
VISTA, III, L.P.
By: Vista III Partners, L.P.,
its General Partner
By:_________________________________
General Partner
ZUKEN INCORPORATED
By:_________________________________
Title:______________________________
-11-
<PAGE> 12
SCHEDULE I
INVESTORS
<TABLE>
<S> <C>
Aeneas Venture Corporation Intel Corporation
600 Atlantic Avenue 2200 Mission College Blvd.
26th Floor Santa Clara, CA 95052-8119
Boston, MA 02116 Attn: Richard Passov
Treasury Manager
with a copy to: Mergers and
Acquisitions
Larry Jordan Rowe, Esquire
Ropes & Gray New Enterprise Associates V,
One International Place Limited Partnership
Boston, MA 02110 1119 St. Paul Street
Baltimore, MD 21202
ATGF II
c/o Amerindo Investment Olivetti Holding N.V.
Advisors, Inc. c/o Caribbean Management
399 Park Avenue Company
18th Floor P.O. Box 889
New York, NY 10022 Curacao, Netherlands Antilles
Aperture Associates with copies to
c/o N. Dan Reeve
505 Montgomery Street Olivetti Management of
San Francisco, CA 94111 America, Inc.
70 East 55th Street
with a copy to: 24th Floor
New York, NY 10022
Charles P. Jacobs, Esquire
Nixon, Hougrave, Devans & and
Doyle
Clinton Square Ing C. Olivetti & C., S.P.A.
Rochester, NY 14603 Via Jervis, 77
10015 Ivrea (To), Italy
AT&T Venture Company, L.P.
3000 Sand Hill Road, Bldg. 4 Orien I, L.P.
Suite 235 315 Post Road West
Menlo Park, CA 94025 Westport, CT 06880
Attn: Neal Douglas
Philips Venture Fund I, L.P.
with a copy to: 105 N. Second St. Suite 233
P.O. Box 673
William B. Asher, Jr., Esquire Livingston, MT 59047
Testa, Hurwitz & Thibeault
53 State Street The Silverado Fund I, Limited
Boston, MA 02109 Partnership
1119 St. Paul Street
Brentwood Associates V, L.P. Baltimore, MD 21202
c/o John L. Walecka
2730 Sand Hill Road, Suite 250 Vista III, L.P.
Menlo Park, CA 94025 27 Newport Street
Jamestown, RI 02835
</TABLE>
-12-
<PAGE> 13
Zuken Incorporated
2-25-1, Edahigashi, Midori-Ku
Yokohama, 225
JAPAN
Attn: Minoru Kitamura
Manager, Business
Planning Section
with a copy to:
Nicholas Unkovic, Esq.
Graham & James
One Maritime Plaza, Suite 300
San Francisco, CA 94111
-13-
<PAGE> 14
SCHEDULE II
STOCKHOLDERS
<TABLE>
<CAPTION>
Name Shares of Common Stock
- ---- ----------------------
<S> <C>
Thomas M. Atwood 500,000
c/o Object Design, Inc.
25 Mall Road
Burlington, MA 01803
William L. Blundon 25,000
c/o Object Design, Inc.
25 Mall Road
Burlington, MA 01803
Eugene A. Bonte 157,500
c/o Object Design, Inc.
25 Mall Road
Burlington, MA 01803
Gregory C. Foudray 39,750
c/o Object Design, Inc.
25 Mall Road
Burlington, MA 01803
Kenneth E. Marshall 51,000
c/o Object Design, Inc.
25 Mall Road
Burlington, MA 01803
Robert J. Potter 50,000
c/o Object Design, Inc.
25 Mall Road
Burlington, MA 01803
David J. Stryker 250,000
c/o Object Design, Inc.
25 Mall Road
Burlington, MA 01803
Daniel L. Weinreb 125,000
c/o Object Design, Inc.
25 Mall Road
Burlington, MA 01803
Cooper, Raburn & Kniffin 500,000
Limited Partnership
30 Rowes Wharf
Boston, MA 02110
</TABLE>
-14-
<PAGE> 15
SCHEDULE III
OBJECT DESIGN, INC.
INSTRUMENT OF ACCESSION
The undersigned, , as a condition precedent to
becoming the owner or holder of record of ( ) shares of the
Common Stock, $.001 par value per share, of Object Design, Inc., a Delaware
corporation (the "Company"), hereby agrees to become a party to and bound by
that certain Sixth Amended and Restated Stockholders' Agreement dated as of
February 13, 1996, as amended or restated from time to time, by and among the
Company and certain other shareholders of the Company (the "Stockholders'
Agreement"). This Instrument of Accession shall take effect and shall become an
integral part of said Stockholders' Agreement immediately upon execution and
delivery to the Company of this Instrument.
IN WITNESS WHEREOF, this INSTRUMENT OF ACCESSION has been duly executed
by or on behalf of the undersigned, as a sealed instrument under the laws of The
Commonwealth of Massachusetts, without regard to its principles of conflicts of
laws, as of the date below written.
Signature:_________________
Address:___________________
Date:______________________
Accepted
OBJECT DESIGN, INC.
By:______________________
Title:___________________
-15-
<PAGE> 1
Exhibit 10.21
AMENDED AND RESTATED
IBM STOCKHOLDERS' AGREEMENT
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT dated as of May 14, 1993, by
and among OBJECT DESIGN, INC., a Delaware corporation (the "Company"),
INTERNATIONAL BUSINESS MACHINES CORPORATION, a New York corporation ("IBM"),
AENEAS VENTURE CORPORATION, NEW ENTERPRISE ASSOCIATES V, L.P., OLIVETTI HOLDING
N.V., ORIEN I, L.P. and VISTA III, L.P. (each individually an "Investor" and
collectively the "Investors"), Cooper, Raburn & Kniffin Limited Partnership
("CRK"), Philips Venture Fund I, L.P. ("Philips"), and The Silverado Fund I,
Limited Partnership ("Silverado").
WHEREAS, the Company and IBM are parties to a preferred stock purchase
agreement dated as of April 12, 1993 (the "Stock Purchase Agreement"), as
amended, pursuant to which IBM purchased 2,601,877 shares of Series E
Convertible Preferred Stock, $.01 par value per share (the "Series E Stock"),
and 1,148,818 shares of Series F Convertible Preferred Stock, $.01 par value per
share (the "Series F Stock") (the Series E Stock and Series F Stock are
hereafter collectively referred to as the "IBM Preferred Stock");
WHEREAS, simultaneously with the execution of the Stock Purchase Agreement,
the Company, IBM, the Investors, CRK, Philips and Silverado executed a
stockholders' agreement (the "Prior Stockholders' Agreement") in order to
provide for the ownership and transfer of the IBM Preferred Stock, shares of the
Company's common stock, $.001 par value per share (the "Common Stock") and any
other Voting Securities (as defined below) of the Company, and the management of
the Company;
WHEREAS, AT&T Venture Company, L.P. ("AT&T") has, as of the date hereof,
agreed to acquire an aggregate of 250,000 shares of the Series G Convertible
Preferred Stock of the Company, $.01 par value per share (the "Series G
Preferred Stock"), and has received an option, contingent upon the satisfaction
of certain conditions, to purchase up to an aggregate of 400,000 shares of the
Series H Convertible Preferred Stock of the Company, $.01 par value per share
(the "Series H Preferred Stock"), pursuant to the Series G and Series H
Convertible Preferred Stock Purchase Agreement of even date herewith by and
between the Company and AT&T (the "Series G and Series H Stock Purchase
Agreement"); and
WHEREAS, the parties hereto wish to effectuate certain amendments to the
Prior Stockholders' Agreement in connection with the sale of the Series G
Preferred Stock and the Series H Preferred Stock to AT&T.
<PAGE> 2
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Restrictions on Offers and Sales to Designated Transferees.
----------------------------------------------------------
(a) Without the prior written consent of the Company, no Investor shall
offer or sell any shares of Common Stock or any other Voting Securities of the
Company to any Designated Transferee (as defined below). The parties hereto
agree that none of the Investors, so long as each such Investor continues in its
current line of business, is a Designated Transferee.
(b) Subject to (i) the additional purchase rights provisions set forth in
Section 7.20 of the Stock Purchase Agreement, (ii) the right of first refusal
provisions of Section 5.02 of the Series D Convertible Preferred Stock Purchase
Agreement dated as of March 12, 1992 among the Company and the purchasers
therein (the "Series D Stock Purchase Agreement") and of Section 5.02 of the
Series G and Series H Stock Purchase Agreement, and (iii) the restriction on
transfer provisions of Section 2 of the Third Amended and Restated Stockholders,
Agreement dated as of May 14, 1993, whenever the Company or any Investor (a
"Selling Party") proposes to sell any shares of Common Stock or any other Voting
Securities of the Company to a Designated Transferee, then such Selling Party
shall give notice to IBM at least ten (10) days prior to the proposed sale. Such
notice shall specify the name of the Designated Transferee, the number of such
shares which such Selling Party desires to sell (the "Offered Securities"), the
price to be paid for the Offered Securities and all other material terms and
conditions upon which such Selling Party proposes to sell the Offered
Securities.
(c) If the Offered Securities pursuant to such proposed sale to a
Designated Transferee represent five percent (5%) or more of the Total Voting
Power of the Company (as defined below), then the following shall apply:
(i) Each Selling Party shall offer IBM the option to purchase all, but
not less than all, of the Offered Securities at the same price and upon the
same other material terms and conditions upon which such Selling Party
proposes to sell the Offered Securities to such Designated Transferee.
(A) Within three (3) Business Days after the giving of the notice
provided in Section l(b), IBM shall give notice to each Selling Party
specifying that either (x) IBM has elected to purchase all of the
Offered Securities; or (y) IBM does not wish to purchase the Offered
Securities and whether or not, if the sale to a Designated Transferee
is consummated, IBM elects to sell to the Company all, but not less
than
-2-
<PAGE> 3
all, of the IBM Preferred Stock and other Voting Securities it holds.
If IBM does not give timely notice to the Selling Party in answer to
the notice provided in Section l(b) within such three (3) Business
Days, IBM will be deemed to have consented to the sale of the Offered
Securities and the provisions of Section l(c) (iii) shall not apply.
(B) If IBM elects to purchase all of the Offered Securities, IBM
shall purchase the Offered Securities on the date specified in the
notice from the Selling Party pursuant to Section l(b) on the terms
specified in such notice.
(ii) If IBM does not elect to purchase all of the Offered Securities
as provided above, the Selling Party shall have the right, within six (6)
months after the receipt or deemed receipt of IBM's notice, to offer and to
sell the Offered Securities to such Designated Transferee upon terms and
conditions no more favorable to such Designated Transferee than those set
forth in the notice provided pursuant to Section l(b) and upon the
condition that at the closing of such sale such Designated Transferee
agrees to assume all the obligations under this Agreement applicable to the
Investors.
(iii) If IBM does not elect to purchase all the Offered Securities as
provided above, has so indicated in the notice under Section l(c) (i) (A)
above and has indicated in such notice its election to sell all its IBM
Preferred Stock and other Voting Securities to the Company, and the Offered
Securities are sold to such Designated Transferee, IBM shall have the right
to sell to the Company all, but not less than all, of its IBM Preferred
Stock and other Voting Securities it holds at a price per share equal to
the higher of (i) the initial purchase price per share paid by IBM for the
Series E Stock and the Series F Stock plus accrued and unpaid dividends
thereon (whether or not declared) and for any other Voting Securities, as
the case may be, and (ii) the price per share on a Common Stock or Common
Stock Equivalents basis at which the Offered Securities are sold to such
Designated Transferee on the date of the closing of the sale of the Offered
Securities to the Designated Transferee. The Company shall purchase the IBM
Preferred Stock and other Voting Securities owned by IBM and IBM shall
surrender the certificates representing such IBM Preferred Stock and other
Voting Securities at the principal office of the Company free and clear of
any liens, encumbrances or claims thereon against payment of the full
amount of the purchase price therefor, which, at the option of the Company,
shall be payable (i) in immediately available funds, or (ii) by issuance to
IBM, pursuant to mutually acceptable terms and conditions, of a promissory
note with an annual rate of interest of twelve percent (12%),
-3-
<PAGE> 4
principal and interest to be payable quarterly on a level debt service
basis, maturing on the fourth anniversary of the date of issuance, which
shall be accompanied by a grant to IBM of a valid and enforceable perfected
security interest in the lesser of (i) collateral sufficient to secure
payment of an amount equal to the principal amount of such note and
interest thereon, or (ii) all the assets of the Company. All security
documents shall be in form and substance reasonably satisfactory to IBM.
IBM shall continue to be the legal and beneficial owner of such IBM
Preferred Stock until they are purchased from or otherwise transferred by
IBM.
(d) If any transfer or attempted transfer of Offered Securities is made
contrary to the provisions of this Section 1, IBM, and the Company with respect
to the provisions of Section l(a), shall have the right, in addition to other
legal or equitable remedies which it may have, to enforce its rights hereunder
by an action for specific performance; and the Company and the Investors
recognize the rights set forth herein as unique, violations of which cannot be
remedied by an award of monetary damages.
(e) If a Selling Party inquires of IBM about a proposed sale to a party
that may be a Designated Transferee, IBM shall promptly indicate in writing to
such Selling Party whether it deems such party to be a Designated Transferee and
such determination shall be binding upon IBM for purposes of the proposed sale.
(f) This Section 1 shall not apply to any sale of Offered Securities
pursuant to either a registration statement filed and declared effective with
the SEC or through a broker (so long as such sale is through an "ordinary
brokerage transaction" as such term is used in Rule 144 under the Securities Act
of 1933) when the Selling Party does not know the identity of the purchaser or
to any distributions of Voting Securities by any Investor to its partners,
stockholders or holders of beneficial interests, as the case may be, or to sales
or transfers by any partners, stockholders or holders of beneficial interests,
as the case may be, of any Investor of their partnership, stock or other
beneficial interest in such Investor.
(g) The rights provided in this Section 1 shall terminate on the earlier of
(i) the date when counsel for the Company shall deliver an opinion reasonably
acceptable to counsel for IBM that, pursuant to Rule 144 under the Securities
Act of 1933, or otherwise, IBM can sell all the IBM Preferred Stock and other
Voting Securities it then holds without registration under the Securities Act of
1933 without limitation as to the size of the transaction, (ii) the date when
IBM can sell all the IBM Preferred Stock and other Voting Securities it holds
pursuant to an effective registration statement under the Securities Act of
1933, (iii) the date upon which IBM no longer holds a number of
-4-
<PAGE> 5
shares of IBM Preferred Stock representing at least fifty percent (50%) of the
number of shares of IBM Preferred Stock acquired at the closing pursuant to the
Stock Purchase Agreement appropriately adjusted for stock splits, stock
dividends, recombinations, reclassifications or other similar events; (iv) the
Initial Public Offering; or (v) the Break-Up Date as defined in the Break-Up
Agreement.
(h) No Investor shall be subject to the provisions of this Section 1 at any
time that such Investor owns a number of Voting Securities representing less
than five percent (5%) of the Total Voting Power of the Company.
2. IBM Director and Observer.
-------------------------
(a) IBM shall be entitled to propose one person for nomination as a voting
Director of the Company. The Directors of the Company will have the right to
interview and approve such person and, if so approved, such person will be
nominated for election and, pursuant to this Agreement, all Investors will agree
to vote all their Voting Securities in favor of such person's election. The
Company agrees to vote all Voting Securities for which the Company holds
proxies, granting it voting discretion, or is otherwise entitled to vote, in
favor of, and to use its best efforts in all respect to cause, the election of
such individual proposed by IBM. In the event that a vacancy is created on the
Board of Directors at any time by the death, disability, resignation or removal
(with or without cause) of any such individual proposed and nominated by IBM,
pursuant to this Agreement, each Investor shall vote all its Voting Securities
to elect an individual proposed by IBM and approved by the Company and nominated
for election by IBM to fill such vacancy and serve as a voting Director.
(b) In addition to the rights set forth in Section 2(a), IBM shall be
entitled to designate a nonvoting observer who shall be entitled to attend all
meetings of the Board of Directors and any of its committees and who shall be
provided (i) reasonable prior notice of all meetings of the Board of Directors
and any of its committees, (ii) reasonable prior notice of any action that the
Board of Directors or any of its committees may take by written consent, (iii)
promptly delivered copies of all minutes and other records of action by, and all
written information furnished to, the Board of Directors or any of its
committees and (iv) any other information requested by such observer which a
member of the Board of Directors would be entitled to request to discharge his
or her duties. Such IBM observer shall be entitled to the same rights to
reimbursement for the expense of attendance at meeting as any outside Director.
(c) Notwithstanding the foregoing, to the extent permitted by law, the
Company may withhold any information from a Director or observer designated by
IBM which would result in a conflict between the interests of the Company and
the interests of IBM.
-5-
<PAGE> 6
The Company shall use its best efforts to promptly bring to the attention of
such Director or observer any agenda item that, in the good faith judgement of
the Chairman of the Board of Directors, would result in such a conflict of
interest and the Chairman of the Board of Directors may exclude such Director or
observer (or, alternatively, the Director or observer shall be entitled to
exclude himself or herself) from any deliberation or discussion of the Board of
Directors concerning such conflict of interest matter and from the dissemination
of any such information.
(d) If IBM gives notice to the Company and any Investor that IBM desires to
remove a Director proposed by IBM, pursuant to this Agreement, each of the
Investors shall vote all its Voting Securities in favor of removing such
Director if a vote of holders of such securities shall be required to remove the
Director, and the Company agrees to take any action necessary to facilitate such
removal.
(e) IBM's rights under this Section 2 shall terminate at such time as IBM
shall cease to hold Voting Securities representing at least ten percent (10%) of
the Total Voting Power of the Company.
3. Directors.
---------
(a) IBM agrees to vote all Voting Securities held by it as a stockholder
and otherwise to use its best efforts as a Director of the Company to set the
number of Directors of the Company at no more than eight (8) (except as
otherwise permitted in the Amended and Restated Certificate of Incorporation)
and to elect a Board of Directors which consists of the following:
(i) two Directors designated by the management of the Company, one of
whom shall be the Chief Executive Officer of the Company;
(ii) one Director designated by Cooper, Raburn & Kniffin Limited
Partnership, a Stockholder;
(iii) one Director designated by Aeneas Venture Corporation, an
Investor;
(iv) one Director designated by Vista III, L.P., an Investor;
(v) one Director designated by New Enterprise Associates V, L.P., an
Investor;
(vi) one Director designated by Olivetti Holding N.V., an Investor;
and
-6-
<PAGE> 7
(vii) one Director designated by IBM and approved and nominated as
provided in Section 2 hereof or otherwise such directorship shall remain
vacant.
In the event of any vacancy on the Board of Directors, IBM covenants and
agrees that it shall vote all Voting Securities held by it in accordance with
the above provisions in order to fill such vacancy.
(b) IBM agrees:
(i) to vote its Voting Securities; and
(ii) to act for all purposes with respect to any amendment, waiver or
consent relating to this Agreement, the Fifth Amended and Restated
Preferred Stock Redemption Agreement dated as of May 14, 1993 and the
Amended and Restated Registration Rights Agreement dated as of June
29, 1990, as amended by Amendment No. 1 dated as of October 1, 1990,
Amendment No. 2 dated as of July 29, 1991, Amendment No. 3 dated as of
March 12, 1992, Amendment No. 4 dated as of April 12, 1993 and
Amendment No. 5 dated as of May 14, 1993;
in the same manner as the holders of Series A, Series B, Series C and Series D
(other than Brentwood Associates V, L.P.) Convertible Preferred Stock and their
respective assignees holding or having the right to acquire an aggregate of at
least two-thirds of the aggregate number of shares of Common Stock issued or
issuable upon conversion of all outstanding shares of Series A, Series B, Series
C and Series D Convertible Preferred Stock (exclusive of those shares of Series
D convertible Preferred Stock held by Brentwood Associates V, L.P.) and to act
for all purposes to amend, waive or grant its consent under any provisions of
the Stock Purchase Agreement that substantially correspond to any provisions of
the Series D Stock Purchase Agreement which have been amended, waived or
consented to after the date hereof as provided thereunder and under the Third
Amended and Restated Stockholders' Agreement dated May 14, 1993, as amended from
time to time. Anything herein to the contrary notwithstanding, the provisions of
this Section 3(b) shall not apply in any case in which such a vote or action by
IBM would adversely affect the rights of holders of Series E or Series F
Preferred Stock, as the case may be, materially differently than the holders of
any other series without the prior written consent of the holders of at least
two-thirds of the outstanding shares of the Series E or Series F Convertible
Preferred Stock, as the case may be, voting separately.
(c) The rights and obligations of IBM under this Section 3 shall terminate
on the earlier of (i) the day immediately prior to the closing of an
underwritten public offering of the Company's securities; or (ii) March 12,
2002. If not sooner
-7-
<PAGE> 8
terminated pursuant to first sentence of this Section 3(b), the provisions of
Section 3(a) (ii) shall terminate upon the expiration or other termination of
the Management Agreement dated as of December 22, 1988 by and between the
Company and Cooper, Raburn & Kniffin Limited Partnership.
4. Legend on Share Certificates.
----------------------------
Each certificate issued on or after the date hereof representing Voting
Securities owned by any Investor or IBM shall bear the following legend until
such time as the Voting Securities represented thereby are no longer subject to
this Agreement:
"THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A STOCKHOLDERS' AGREEMENT, AS AMENDED FROM TIME TO TIME,
BY AND AMONG INTERNATIONAL BUSINESS MACHINES CORPORATION, OBJECT
DESIGN, INC. , AND CERTAIN OF ITS STOCKHOLDERS AND MAY NOT BE SOLD OR
TRANSFERRED EXCEPT IN ACCORDANCE THEREWITH."
5. Assignment.
----------
IBM's rights under Sections l(b), l(c), l(d), l(e), l(f), l(g), and 2(a)
through 2(e) shall not be assignable or transferrable without the prior written
consent of the Company. Except as provided in the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties hereto and their respective permitted successors and assigns.
6. Amendments.
----------
No amendment to this Agreement shall be effective unless it shall be in
writing and signed by the Company, IBM and the Investors holding at least
two-thirds of the Common Stock issued or issuable upon conversion of all
outstanding shares of Preferred Stock held by all of the Investors.
7. Notices.
-------
All notices and other communications hereunder shall be in writing and
shall be deemed given when delivered personally or by overnight courier service
or five Business Days after being mailed by registered or certified mail,
postage prepaid, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
-8-
<PAGE> 9
(i) if to IBM,
International Business Machines Corporation
2000 Purchase Street
Purchase, New York 10577
Attention: Michael W. Szeto
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Martin L. Senzel.
(ii) if to the Company,
Object Design, Inc.
1 New England Executive Park
Burlington, Massachusetts 01803
Attention: Timothy J. Allen
with a copy to:
Foley, Hoag & Eliot
One Post Office Square
Boston, Massachusetts 02109
Attention: John D. Patterson, Jr.
(iii) if to any Investor, to such Investor's address as set forth in
SCHEDULE I attached hereto.
8. Definitions. As used in this agreement:
-----------
"Designated Transferee" shall mean any person or entity which is, or which
has any Affiliate, (i) engaged in the business of developing, manufacturing,
producing, licensing, selling or otherwise distributing or marketing computer
hardware and having consolidated annual revenues together with its Affiliates
for the most recently completed fiscal year in excess of $1,500,000,000 or (ii)
engaged in the business of developing, producing, licensing, selling or
otherwise distributing or marketing software or computer-related services and
having consolidated annual revenues together with its Affiliates for the most
recently completed fiscal year in excess of $500,000,000.
"Total Voting Power of the Company" shall mean the total number of votes
which may be cast in the election of Directors of the Company at any meeting of
stockholders of the Company if all Voting Securities (assuming full conversion,
exchange or exercise of all securities, including rights, warrants and options,
including outstanding, unexercised and available employee stock options)
convertible into, exchangeable
-9-
<PAGE> 10
for or exercisable for any securities of the Company entitled to vote generally
in the election of directors of the Company were present and voted at such
meeting, other than votes that may be cast only by one class or series of stock
(other than Common Stock) or upon the happening of a contingency.
"Voting Securities" shall mean the shares of Common Stock issued and
outstanding and any other outstanding securities of the Company entitled to vote
generally in the election of Directors of the Company, and any other outstanding
securities (including rights, warrants, options and convertible debt)
convertible into, exchangeable for or exercisable for any Common Stock or other
outstanding securities referred to above (whether or not presently convertible,
exchangeable or exercisable), including the Series E Stock and the Series F
Stock.
Capitalized terms not otherwise defined herein shall have the meaning
ascribed thereto as set forth in the Stock Purchase Agreement.
9. Interpretation.
--------------
The headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
10. Counterparts.
------------
This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same agreement, and shall become effective when
one or more such counterparts have been signed by each of the parties and
delivered to the other parties.
11. Entire Agreement; Severability.
------------------------------
(a) This Agreement contains the entire agreement and understanding between
the parties hereto with respect to matter covered hereby and supersedes all
prior agreements and understandings, written or oral, among the parties with
respect to the subject matter hereof.
(b) If any provision of this Agreement or the application of any such
provision to any person or circumstance shall be held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not effect the remaining
provisions of this Agreement.
12. GOVERNING LAW. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of New York.
-10-
<PAGE> 11
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
OBJECT DESIGN, INC.
By: /s/ Kenneth E. Marshall
-----------------------------------------
Name: Kenneth E. Marshall
----------------------------------------
Title: President & CEO
---------------------------------------
INTERNATIONAL BUSINESS
MACHINES CORPORATION
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
AENEAS VENTURE CORPORATION
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
NEW ENTERPRISE ASSOCIATES V, L.P.
By: NEA Partners V Limited
Partnership
By:
------------------------------------------
General Partner
OLIVETTI HOLDING N.V.
By:
------------------------------------------
Attorney-in-Fact
ORIEN, I, L.P.
By: Orien Partners, L.P., its
General Partner
By:
-----------------------------------------
Managing General Partner
VISTA III, L.P.
By: Vista III Partners, L.P.,
its General Partner
By:
-----------------------------------------
Managing General Partner
-11-
<PAGE> 12
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
OBJECT DESIGN, INC.
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
INTERNATIONAL BUSINESS
MACHINES CORPORATION
By: /s/ V.J. Polus
-----------------------------------------
Name: V.J. Polus
---------------------------------------
Title: AGM, Finance & Planning, PRGS
--------------------------------------
AENEAS VENTURE CORPORATION
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
NEW ENTERPRISE ASSOCIATES V, L.P.
By: NEA Partners V Limited
Partnership
By:
------------------------------------------
General Partner
OLIVETTI HOLDING N.V.
By:
------------------------------------------
Attorney-in-Fact
ORIEN, I, L.P.
By: Orien Partners, L.P., its
General Partner
By:
-----------------------------------------
Managing General Partner
VISTA III, L.P.
By: Vista III Partners, L.P.,
its General Partner
By:
-----------------------------------------
Managing General Partner
-11-
<PAGE> 13
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
OBJECT DESIGN, INC.
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
INTERNATIONAL BUSINESS
MACHINES CORPORATION
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
AENEAS VENTURE CORPORATION
/s/ Michael Thonis By: /s/ Jack R. Meyer
- -------------------- -----------------------------------------
Michael Thonis Name: Jack R. Meyer
- -------------------- ---------------------------------------
AUTHORIZED SIGNATORY Title: AUTHORIZED SIGNATORY
---------------------------------------
NEW ENTERPRISE ASSOCIATES V, L.P.
By: NEA Partners V Limited
Partnership
By: /s/ Arthur Marks
------------------------------------------
General Partner
OLIVETTI HOLDING N.V.
By:
------------------------------------------
Attorney-in-Fact
ORIEN, I, L.P.
By: Orien Partners, L.P., its
General Partner
By:
-----------------------------------------
Managing General Partner
VISTA III, L.P.
By: Vista III Partners, L.P.,
its General Partner
By:
-----------------------------------------
Managing General Partner
-11-
<PAGE> 14
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
OBJECT DESIGN, INC.
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
INTERNATIONAL BUSINESS
MACHINES CORPORATION
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
AENEAS VENTURE CORPORATION
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
NEW ENTERPRISE ASSOCIATES V, L.P.
By: NEA Partners V Limited
Partnership
By: /s/ Arthur Marks
------------------------------------------
General Partner
OLIVETTI HOLDING N.V.
By:
------------------------------------------
Attorney-in-Fact
ORIEN, I, L.P.
By: Orien Partners, L.P., its
General Partner
By:
-----------------------------------------
Managing General Partner
VISTA III, L.P.
By: Vista III Partners, L.P.,
its General Partner
By:
-----------------------------------------
Managing General Partner
-11-
<PAGE> 15
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
OBJECT DESIGN, INC.
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
INTERNATIONAL BUSINESS
MACHINES CORPORATION
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
AENEAS VENTURE CORPORATION
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
NEW ENTERPRISE ASSOCIATES V, L.P.
By: NEA Partners V Limited
Partnership
By:
------------------------------------------
General Partner
OLIVETTI HOLDING N.V.
By: /s/ Alexandra Giurgin
-----------------------------------------
Attorney-in-Fact
ORIEN, I, L.P.
By: Orien Partners, L.P., its
General Partner
By:
-----------------------------------------
Managing General Partner
VISTA III, L.P.
By: Vista III Partners, L.P.,
its General Partner
By:
-----------------------------------------
Managing General Partner
-11-
<PAGE> 16
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
OBJECT DESIGN, INC.
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
INTERNATIONAL BUSINESS
MACHINES CORPORATION
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
AENEAS VENTURE CORPORATION
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
NEW ENTERPRISE ASSOCIATES V, L.P.
By: NEA Partners V Limited
Partnership
By:
------------------------------------------
General Partner
OLIVETTI HOLDING N.V.
By:
------------------------------------------
Attorney-in-Fact
ORIEN, I, L.P.
By: Orien Partners, L.P., its
General Partner
By: /s/ George Kalan
----------------------------------------
Managing General Partner
VISTA III, L.P.
By: Vista III Partners, L.P.,
its General Partner
By:
-----------------------------------------
Managing General Partner
-11-
<PAGE> 17
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
OBJECT DESIGN, INC.
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
INTERNATIONAL BUSINESS
MACHINES CORPORATION
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
AENEAS VENTURE CORPORATION
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
NEW ENTERPRISE ASSOCIATES V, L.P.
By: NEA Partners V Limited
Partnership
By:
------------------------------------------
General Partner
OLIVETTI HOLDING N.V.
By:
------------------------------------------
Attorney-in-Fact
ORIEN, I, L.P.
By: Orien Partners, L.P., its
General Partner
By: /s/
----------------------------------------
Managing General Partner
VISTA III, L.P.
By: Vista III Partners, L.P.,
its General Partner
By: /s/ Gerald B. Bay
---------------------------------------
Managing General Partner
-11-
<PAGE> 18
PHILIPS VENTURE FUND I, L.P.
By: Vista Venture Partners II
By: /s/ Gerald B. Bay
---------------------------------------
General Partner
THE SILVERADO FUND I, LIMITED
PARTNERSHIP
By: NEA Silverado Partners I,
Limited Partnership
By:
----------------------------------------
General Partner
COOPER, RABURN & KNIFFIN LIMITED
PARTNERSHIP
By:
----------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
-12-
<PAGE> 19
PHILIPS VENTURE FUND I, L.P.
By: Vista Venture Partners II
By:
---------------------------------------
General Partner
THE SILVERADO FUND I, LIMITED
PARTNERSHIP
By: NEA Silverado Partners I,
Limited Partnership
By: /s/ Arthur Marks
--------------------------------------
General Partner
COOPER, RABURN & KNIFFIN LIMITED
PARTNERSHIP
By:
----------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
-12-
<PAGE> 20
PHILIPS VENTURE FUND I, L.P.
By: Vista Venture Partners II
By:
--------------------------------------------
General Partner
THE SILVERADO FUND I, LIMITED
PARTNERSHIP
By: NEA Silverado Partners I,
Limited Partnership
By:
---------------------------------------------
General Partner
COOPER, RABURN & KNIFFIN LIMITED
PARTNERSHIP
By: /s/ CKR Limited Partnership, General Partner
--------------------------------------------
Name: /s/ Philip Cooper, General Partner
------------------------------------------
Title:
-----------------------------------------
-12-
<PAGE> 21
SCHEDULE I
----------
INVESTORS
Aeneas Venture Corporation
600 Atlantic Avenue
15th Floor
Boston, MA 02116
New Enterprise Associates V, L.P.
1119 St. Paul Street
Baltimore, MD 21202
Olivetti Holding N.V.
c/o Caribbean Management Company
P.O. Box 889
Curacao, Netherlands Antilles
With a copy to :
Olivetti Management of America, Inc.
70 East 55th Street
24th Floor
New York, NY 10022
and
Ing C. Olivetti & C., S.P.A.
Via Jervis, 77
10015 Ivrea (To), Italy
Orien I, L.P.
315 Post Road West
Westport, CT 06880
Vista III, L.P.
36 Grove Street
New Canaan, CT 06840
-i-
<PAGE> 22
Exhibit 10.21
SECOND AMENDMENT TO
AMENDED AND RESTATED
IBM STOCKHOLDERS' AGREEMENT
AMENDMENT, dated as of March 31, 1994, by and among OBJECT DESIGN, INC., a
Delaware corporation (the "Company"), INTERNATIONAL BUSINESS MACHINES
CORPORATION, a New York corporation ("IBM"), AENEAS VENTURE CORPORATION, NEW
ENTERPRISE ASSOCIATES V, L.P., OLIVETTI HOLDING N.V., ORIEN I, L.P. and VISTA
III, L.P. (each individually an "Investor" and collectively the "Investors"),
Cooper, Raburn & Kniffin Limited Partnership ("CRK"), Philips Venture Fund I,
L.P. ("Philips") and The Silverado Fund I, Limited Partnership ("Silverado").
WHEREAS, the Company and IBM are parties to a preferred stock purchase
agreement dated as of April 12, 1993 (the "Stock Purchase Agreement"), as
amended, pursuant to which IBM purchased 2,601,877 shares of Series E
Convertible Preferred Stock, $.01 par value per share (the "Series E Stock"),
and 1,148,818 shares of Series F Convertible Preferred Stock, $.01 par value per
share (the "Series F Stock") (the Series E Stock and Series F Stock are
hereafter collectively referred to as the "IBM Preferred Stock");
WHEREAS, the Company, IBM, the Investors and certain of the Stockholders
are parties to an amended and restated stockholders' agreement dated as of May
14, 1993 (the "IBM Stockholders' Agreement") which provides for the ownership
and transfer of the IBM Preferred Stock, shares of the Company's common stock,
$.001 par value per share (the "Common Stock") and any other Voting Securities
(as defined below) of the Company, and the management of the Company;
WHEREAS, certain preferred stockholders of the Company and certain other
entities have, as of the date hereof, agreed to purchase, in the aggregate, up
to 1,142,857 shares of the Series I Preferred Stock of the Company, $.01 par
value per share (the "Series I Preferred Stock"), pursuant to the Series I
Convertible Preferred Stock Purchase Agreement of even date herewith by and
among the Company and the purchasers (the "Purchasers") listed on Schedule 1.01
thereto (the "Series I Stock Purchase Agreement"); and
WHEREAS, the parties hereto wish to effectuate certain changes to the IBM
Stockholders' Agreement in connection with the sale of the Series I Preferred
Stock to the Purchasers;
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Section l(b) of the IBM Stockholders' Agreement is hereby amended by
deleting "Series G and Series H Stock Purchase
<PAGE> 23
Agreement" from the seventh and eighth lines thereof and by inserting "Series I
Convertible Preferred Stock Purchase Agreement dated as of March 31, 1994 among
the Company and the purchasers listed on Schedule 1.01 thereto (the "Series I
Stock Purchase Agreement") in its place and stead; by deleting the word "Third"
from the ninth line thereof and by inserting the word "Fourth" in its place and
stead; and by deleting the date "May 14, 1993" from the tenth line thereof and
by inserting the date "March 31, 1994" in its place and stead.
2. Section 3(a) of the IBM Stockholders' Agreement is hereby amended by
deleting "eight (8)" from the fourth line thereof and by inserting the word
"nine" in its place and stead.
3. Section 3(a) (i) of the IBM Stockholders' Agreement is hereby amended by
deleting the word "two" from the first line thereof and by inserting the word
"three" in its place and stead.
4. Section 3(b) (ii) of the IBM Stockholders' Agreement is hereby amended
by deleting the word "Fifth" from the third line thereof and by inserting the
word "Sixth" in its place and stead; by deleting the date "May 14, 1993" from
the fifth line thereof and by inserting the date "March 31, 1994" in its place
and stead; and by inserting "and Amendment No. 6 dated as of March 31, 1994" at
the end of the last line thereof.
5. Section 3(b) of the IBM Stockholders' Agreement is hereby amended by
deleting the word "Third" from the twenty-seventh line thereof and by inserting
the word "Fourth" in its place and stead; and by deleting the date "May 14,
1993" from the twenty-eighth line thereof and by inserting the date "March 31,
1994" in its place and stead.
6. Section 7(ii) of the IBM Stockholders' Agreement is hereby amended by
deleting the address "1 New England Executive Park" from the third line thereof
and by inserting the address "25 Mall Road" in its place and stead.
7. Capitalized terms used, but not otherwise defined herein, shall have the
meanings ascribed to them in the Stock Purchase Agreement.
8. This Amendment shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York.
9. This Amendment may be executed in any number of counterparts, each of
which shall be an original and all of which together shall constitute one
instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-2-
<PAGE> 24
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
OBJECT DESIGN, INC.
By: /s/ Kenneth E. Marshall
-----------------------------------------
Name: Kenneth E. Marshall
----------------------------------------
Title: President & CEO
---------------------------------------
INTERNATIONAL BUSINESS
MACHINES CORPORATION
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
AENEAS VENTURE CORPORATION
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
NEW ENTERPRISE ASSOCIATES V, L.P.
By: NEA Partners V Limited
Partnership
By:
------------------------------------------
General Partner
OLIVETTI HOLDING N.V.
By:
------------------------------------------
Attorney-in-Fact
ORIEN, I, L.P.
By: Orien Partners, L.P., its
General Partner
By:
------------------------------------------
Managing General Partner
-3-
<PAGE> 25
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
OBJECT DESIGN, INC.
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
INTERNATIONAL BUSINESS
MACHINES CORPORATION
By: /s/ R. L. Jones
-----------------------------------------
Name: R. L. Jones
----------------------------------------
Title: Division Director of Finance
---------------------------------------
AENEAS VENTURE CORPORATION
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
NEW ENTERPRISE ASSOCIATES V, L.P.
By: NEA Partners V Limited
Partnership
By:
------------------------------------------
General Partner
OLIVETTI HOLDING N.V.
By:
------------------------------------------
Attorney-in-Fact
ORIEN, I, L.P.
By: Orien Partners, L.P., its
General Partner
By:
------------------------------------------
Managing General Partner
-3-
<PAGE> 26
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
OBJECT DESIGN, INC.
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
INTERNATIONAL BUSINESS
MACHINES CORPORATION
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
AENEAS VENTURE CORPORATION
By: /s/ Scott M. Sperling
-----------------------------------------
Name: Scott M. Sperling
----------------------------------------
Title: AUTHORIZED SIGNATORY
---------------------------------------
By: /s/ Tim R. Palmer
-----------------------------------------
Name: Tim R. Palmer
----------------------------------------
Title: Authorized Signatory
---------------------------------------
NEW ENTERPRISE ASSOCIATES V, L.P.
By: NEA Partners V Limited
Partnership
By: /s/ Charles Newlyan III
------------------------------------------
General Partner
OLIVETTI HOLDING N.V.
By:
------------------------------------------
Attorney-in-Fact
ORIEN, I, L.P.
By: Orien Partners, L.P., its
General Partner
By:
------------------------------------------
Managing General Partner
-3-
<PAGE> 27
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
OBJECT DESIGN, INC.
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
INTERNATIONAL BUSINESS
MACHINES CORPORATION
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
AENEAS VENTURE CORPORATION
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
NEW ENTERPRISE ASSOCIATES V, L.P.
By: NEA Partners V Limited
Partnership
By: /s/ Charles Newlyan III
------------------------------------------
General Partner
OLIVETTI HOLDING N.V.
By:
------------------------------------------
Attorney-in-Fact
ORIEN, I, L.P.
By: Orien Partners, L.P., its
General Partner
By:
------------------------------------------
Managing General Partner
-3-
<PAGE> 28
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
OBJECT DESIGN, INC.
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
INTERNATIONAL BUSINESS
MACHINES CORPORATION
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
AENEAS VENTURE CORPORATION
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
NEW ENTERPRISE ASSOCIATES V, L.P.
By: NEA Partners V Limited
Partnership
By:
------------------------------------------
General Partner
OLIVETTI HOLDING N.V.
By: /s/ Alexandra Giurgin
------------------------------------------
Attorney-in-Fact
ORIEN, I, L.P.
By: Orien Partners, L.P., its
General Partner
By:
------------------------------------------
Managing General Partner
-3-
<PAGE> 29
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
OBJECT DESIGN, INC.
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
INTERNATIONAL BUSINESS
MACHINES CORPORATION
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
AENEAS VENTURE CORPORATION
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
NEW ENTERPRISE ASSOCIATES V, L.P.
By: NEA Partners V Limited
Partnership
By:
------------------------------------------
General Partner
OLIVETTI HOLDING N.V.
By:
------------------------------------------
Attorney-in-Fact
ORIEN, I, L.P.
By: Orien Partners, L.P., its
General Partner
By: /s/ George Kalan
------------------------------------------
Managing General Partner
-3-
<PAGE> 30
VISTA III, L.P.
By: Vista III Partners, L.P.,
its General Partner
By: /s/ Gerald B. Bay
---------------------------------------
Managing General Partner
PHILIPS VENTURE FUND I, L.P.
By: Vista Venture Partners II
By: /s/ Gerald B. Bay
---------------------------------------
General Partner
THE SILVERADO FUND I, LIMITED
PARTNERSHIP
By: NEA Silverado Partners I,
Limited Partnership
By:
----------------------------------------
General Partner
COOPER, RABURN & KNIFFIN LIMITED
PARTNERSHIP
By:
----------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
-4-
<PAGE> 31
VISTA III, L.P.
By: Vista III Partners, L.P.,
its General Partner
By:
---------------------------------------
Managing General Partner
PHILIPS VENTURE FUND I, L.P.
By: Vista Venture Partners II
By:
---------------------------------------
General Partner
THE SILVERADO FUND I, LIMITED
PARTNERSHIP
By: NEA Silverado Partners I,
Limited Partnership
By: /s/ Charles W. Newlyan III
----------------------------------------
General Partner
COOPER, RABURN & KNIFFIN LIMITED
PARTNERSHIP
By:
----------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
-4-
<PAGE> 32
VISTA III, L.P.
By: Vista III Partners, L.P.,
its General Partner
By:
---------------------------------------
Managing General Partner
PHILIPS VENTURE FUND I, L.P.
By: Vista Venture Partners II
By:
---------------------------------------
General Partner
THE SILVERADO FUND I, LIMITED
PARTNERSHIP
By: NEA Silverado Partners I,
Limited Partnership
By:
----------------------------------------
General Partner
COOPER, RABURN & KNIFFIN LIMITED
PARTNERSHIP
By: CKR Limited Partnership,
its G.P.
By: /s/ Philip Cooper
----------------------------------------
Name:
-------------------------------------
Title: General Partner
------------------------------------
-4-
<PAGE> 33
EXHIBIT 10.21
THIRD AMENDMENT TO
AMENDED AND RESTATED
IBM STOCKHOLDERS' AGREEMENT
AMENDMENT, dated as of June 10, 1994, by and among OBJECT DESIGN. INC.,
a Delaware corporation (the "Company"), INTERNATIONAL BUSINESS MACHINES
CORPORATION, a New York corporation ("IBM"), AENEAS VENTURE CORPORATION, NEW
ENTERPRISE ASSOCIATES V, L.P., OLIVETTI HOLDING N.V., ORIEN I, L.P. and VISTA
III, L.P. (each individually an "Investor" and collectively the "Investors"),
Cooper, Raburn & Kniffin Limited Partnership ("CRK"), Philips Venture Fund I,
L.P. ("Philips") and The Silverado Fund I, Limited Partnership ("Silverado").
WHEREAS, the Company and IBM are parties to a preferred stock purchase
agreement dated as of April 12, 1993 pursuant to which IBM purchased 2,601,877
shares of Series E Convertible Preferred Stock, $.01 par value per share (the
"Series E Stock"), and 1,148,818 shares of Series F Convertible Preferred
Stock, $.01 par value per share (the "Series F Stock"; the Series E Stock and
the Series F Stock are hereafter collectively referred to as the "IBM Preferred
Stock");
WHEREAS, the Company, IBM, the Investors and certain of the
Stockholders are parties to an amended and restated stockholders' agreement
dated as of May 14, 1993 (the "IBM Stockholders' Agreement") which provides for
the ownership and transfer of the IBM Preferred Stock, shares of the Company's
common stock, $.001 par value per share and any other Voting Securities of the
Company, and the management of the Company;
WHEREAS, the Company, IBM, the Investors and certain of the Stockholders
are parties to an amendment to the IBM Stockholders' Agreement dated as of
March 31, 1994 which reflects the sale of shares of the Company's Series I
Convertible Preferred Stock, $.01 par value per share, pursuant to the Series I
Convertible Preferred Stock Purchase Agreement dated as of March 31, 1994 by
and among the Company and the purchasers listed on Schedule 1.01 thereto; and
WHEREAS, the parties hereto wish to effectuate certain changes to the
IBM Stockholders' Agreement, as amended (the
<PAGE> 34
"Prior Stockholders' Agreement"), in order to eliminate certain voting
restrictions with respect to the election of directors;
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Section 1(b) of the Prior Stockholders' Agreement is hereby amended
by deleting the word "Fourth" from the ninth line thereof and by inserting the
word "Fifth" in its place and stead, and by deleting the date "March 31, 1994"
from the tenth line thereof and by inserting the date "June __, 1994" in its
place and stead.
2. Section 2(a) of the Prior Stockholders' Agreement is hereby amended
by deleting such Section 2(a) in its entirety and by inserting "[DELETED]" in
its place and stead.
3. Section 2(b) of the Prior Stockholders' Agreement is hereby amended
by deleting the words "In addition to the rights set forth in Section 2(a)"
from the first line thereof.
4. Section 2(c) of the Prior Stockholders' Agreement is hereby amended
by deleting the words "a Director or" from the second and third lines thereof
and inserting the word "an" in their place and stead, and by deleting the words
"Director or" from the sixth, ninth and tenth lines thereof.
5. Section 2(d) of the Prior Stockholders' Agreement is hereby amended
by deleting such Section 2(d) in its entirety and by inserting "[DELETED]" in
its place and stead.
6. Section 3(a) of the Prior Stockholders' Agreement is hereby amended
by deleting such Section 3(a) in its entirety and by inserting "[DELETED]" in
its place and stead.
7. Section 3(b)(ii) of the Prior Stockholders' Agreement is hereby
amended by deleting the word "Sixth" from the third line thereof and by
inserting the word "Seventh" in its place and stead, and by deleting the date
"March 31, 1994" from the fifth line thereof and by inserting the date "June
__, 1994" in its place and stead.
-2-
<PAGE> 35
8. Section 3(b) of the Prior Stockholders' Agreement is hereby amended
by deleting the word "Fourth" from the twenty-seventh line thereof and by
inserting the word "Fifth" in its place and stead, and by deleting the date
"March 31, 1994" from the twenty-eighth line thereof and by inserting the date
"June __, 1994" in its place and stead.
9. Section 3(c) of the Prior Stockholders' Agreement is hereby amended
by deleting the last sentence thereof.
10. Capitalized terms used, but not otherwise defined herein, shall
have the meanings ascribed to them in the Prior Stockholders' Agreement.
11. This Amendment shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York.
12. This Amendment may be executed in any number of counterparts, each
of which shall be an original and all of which together shall constitute one
instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
OBJECT DESIGN, INC.
By:_________________________
Name:_______________________
Title:______________________
INTERNATIONAL BUSINESS
MACHINES CORPORATION
By:_________________________
Name:_______________________
Title:______________________
AENEAS VENTURE CORPORATION
By:_________________________
Name:_______________________
Title:______________________
-3-
<PAGE> 36
By:_________________________
Name:_______________________
Title:______________________
NEW ENTERPRISE ASSOCIATES V, L.P.
By: NEA Partners V Limited
Partnership
By:_________________________
General Partner
OLIVETTI HOLDING N.V.
By:_________________________
Attorney-in-Fact
ORIEN, I, L.P.
By: Orien Partners, L.P., its
General Partner
By:_________________________
Managing General Partner
VISTA III, L.P.
By: Vista III Partners, L.P.,
its General Partner
By:_________________________
Managing General Partner
PHILIPS VENTURE FUND I, L.P.
By: Vista Venture Partners II
By:_________________________
General Partner
-4-
<PAGE> 37
THE SILVERADO FUND I, LIMITED
PARTNERSHIP
By: NEA Silverado Partners I,
Limited Partnership
By:_________________________
General Partner
COOPER, RABURN & KNIFFIN LIMITED
PARTNERSHIP
By:_________________________
Name:_______________________
Title:______________________
-5-
<PAGE> 38
EXHIBIT 10.21
FOURTH AMENDMENT TO
AMENDED AND RESTATED
IBM STOCKHOLDERS' AGREEMENT
AMENDMENT, dated as of February 13, 1996, by and among OBJECT DESIGN,
INC., a Delaware corporation (the "Company"), INTERNATIONAL BUSINESS MACHINES
CORPORATION, a New York corporation ("IBM"), AENEAS VENTURE CORPORATION, NEW
ENTERPRISE ASSOCIATES V, L.P., OLIVETTI HOLDING N.V., ORIEN I, L.P. and VISTA
III, L.P. (each individually an "Investor" and collectively the "Investors"),
Cooper, Raburn & Kniffin Limited Partnership ("CRK"), Philips Venture Fund I,
L.P. ("Philips") and The Silverado Fund I, Limited Partnership ("Silverado").
WHEREAS, the Company and IBM are parties to a preferred stock purchase
agreement dated as of April 12, 1993 (the "Stock Purchase Agreement"), as
amended, pursuant to which IBM purchased 2,601,877 shares of Series E
Convertible Preferred Stock, $.01 par value per share (the "Series E Stock"),
and 1,148,818 shares of Series F Convertible Preferred Stock, $.01 par value per
share (the "Series F Stock") (the Series E Stock and Series F Stock are
hereafter collectively referred to as the "IBM Preferred Stock");
WHEREAS, the Company, IBM, the Investors and certain of the
Stockholders are parties to an amended and restated stockholders' agreement
dated as of May 14, 1993, as amended (the "IBM Stockholders' Agreement"), which
provides for the ownership and transfer of the IBM Preferred Stock, shares of
the Company's common stock, $.001 par value per share (the "Common Stock") and
any other Voting Securities (as defined below) of the Company, and the
management of the Company;
WHEREAS, certain preferred stockholders of the Company and certain
other entities have, as of the date hereof, agreed to purchase, in the
aggregate, up to 2,166,667 shares of the Series J Preferred Stock of the
Company, $.01 par value per share (the "Series J Preferred Stock"), pursuant to
the Series J Convertible Preferred Stock Purchase Agreement of even date
herewith by and among the Company and the purchasers (the "Purchasers") listed
on Schedule 1.01 thereto (the "Series J Stock Purchase Agreement"); and
WHEREAS, the parties hereto wish to effectuate certain changes to the
IBM Stockholders' Agreement in connection with the sale of the Series J
Preferred Stock to the Purchasers;
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto hereby agree as
follows:
<PAGE> 39
1. Section 1(b) of the IBM Stockholders' Agreement is hereby amended by
deleting "Series I Stock Purchase Agreement" from the seventh and eighth lines
thereof and by inserting "Series J Convertible Preferred Stock Purchase
Agreement dated as of February 13, 1996 among the Company and the purchasers
listed on Schedule 1.01 thereto (the "Series J Stock Purchase Agreement") in its
place and stead; by deleting the word "Fifth" from the ninth line thereof and by
inserting the word "Sixth" in its place and stead; and by deleting the date
"June 10, 1994" from the tenth line thereof and by inserting the date "February
13, 1996" in its place and stead.
2. Section 3(b)(ii) of the IBM Stockholders' Agreement is hereby
amended by deleting the word "Seventh" from the third line thereof and by
inserting the word "Eighth" in its place and stead; by deleting the date "June
10, 1994" from the fifth line thereof and by inserting the date "February 13,
1996" in its place and stead; and by inserting "and Amendment No. 7 dated as of
February 13, 1996" at the end of the last line thereof.
3. Section 3(b) of the IBM Stockholders' Agreement is hereby amended by
deleting the word "Fifth" from the twentyseventh line thereof and by inserting
the word "Sixth" in its place and stead; and by deleting the date "June 10,
1994" from the twenty-eighth line thereof and by inserting the date "February
13, 1996" in its place and stead.
4. Section 3(c) of the Prior Stockholders' Agreement is hereby deleted
in its entirety and the following is inserted in its place and stead: "The
rights and obligations of IBM under this Section 3 terminate on the earlier of
(i) the day immediately prior to the closing of an underwritten public offering
of the Company's securities; or (ii) March 12, 2002."
5. Capitalized terms used, but not otherwise defined herein, shall have
the meanings ascribed to them in the Stock Purchase Agreement.
6. This Amendment shall be governed by, and construed and enforced in
accordance with, the laws of the State of New York.
7. This Amendment may be executed in any number of counterparts, each
of which shall be an original and all of which together shall constitute one
instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
- 2 -
<PAGE> 40
FOURTH AMENDMENT TO IBM STOCKHOLDERS' AGREEMENT
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
OBJECT DESIGN, INC.
By:_________________________
Name:_______________________
Title:______________________
INTERNATIONAL BUSINESS
MACHINES CORPORATION
By:_________________________
Name:_______________________
Title:______________________
AENEAS VENTURE CORPORATION
By:_________________________
Name:_______________________
Title:______________________
NEW ENTERPRISE ASSOCIATES V, L.P.
By: NEA Partners V Limited
Partnership
By:_________________________
General Partner
OLIVETTI HOLDING N.V.
By:________________________
Attorney-in-Fact
ORIEN, I, L.P.
By: Orien Partners, L.P., its
General Partner
By:_________________________
Managing General Partner
- 3 -
<PAGE> 41
FOURTH AMENDMENT TO IBM STOCKHOLDERS' AGREEMENT
VISTA III, L.P.
By: Vista III Partners, L.P.,
its General Partner
By:_________________________
Managing General Partner
PHILIPS VENTURE FUND I, L.P.
By: Vista Venture Partners II
By:_________________________
General Partner
THE SILVERADO FUND I, LIMITED
PARTNERSHIP
By: NEA Silverado Partners I,
Limited Partnership
By:_________________________
General Partner
COOPER, RABURN & KNIFFIN LIMITED
PARTNERSHIP
By:_________________________
Name:_______________________
Title:______________________
- 4 -
<PAGE> 1
EXHIBIT 10.22
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
AGREEMENT made as of the 29th day of June, 1990, by and among Object
Design, Inc., a Delaware corporation (the "Company"), each of the purchasers
listed on Schedule I hereto (collectively the "Purchasers") and the stockholders
listed on Schedule II hereto (the "Stockholders").
WHEREAS, certain of the Purchasers and the Company are parties to a
Registration Rights Agreement dated as of December 22, 1988 (the "Prior
Registration Rights Agreement") pursuant to which such Purchasers were granted
registration rights with respect to shares of the Series A Convertible Preferred
Stock, $.01 par value, of the Company (the "Series A Preferred Stock"), issued
to them under a Series A Convertible Preferred Stock Purchase Agreement dated
December 22, 1988.
WHEREAS, the Stockholders hold an aggregate of 1,784,000 shares of Common
Stock, $.001 par value, of the Company, in the respective amounts set forth
opposite their names or Schedule II hereto.
WHEREAS, the Purchasers are purchasing an aggregate of up to 4,517,857
shares of the Series B Convertible Preferred Stock, $.01 par value, of the
Company. (the "Series B Preferred Stock") pursuant to a Series B Preferred
Stock Purchase Agreement of even date herewith (the "Purchase Agreement").
WHEREAS, as an inducement to enter into the Series B Purchase Agreement,
the Company has agreed to grant to the Purchasers certain registration rights
with respect to their shares of Series B Preferred Stock.
WHEREAS, it is a condition to the obligations of the Purchasers under the
Series B Purchase Agreement that the Prior Registration Rights Agreement be
amended and restated in its entirety as set forth herein.
NOW, THEREFORE, in consideration of the premises set forth herein, the
parties hereto agree as follows.
1. Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission, or
any other federal agency at the time administering the Securities Act.
<PAGE> 2
- 2 -
"Common Stock" shall mean the Common Stock, $.001 par value, of the
Company, as constituted as of the date of this Agreement,
"Conversion Shares" shall mean shares of Common Stock issued upon
conversion of the Preferred Shares, as that term is defined below.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the
time.
"Preferred Shares" shall mean the shares of Series A Preferred Stock
and the Series B Preferred Stock, together with shares of any other
series of preferred stock issued by the Company in exchange for shares of
Series A Preferred Stock and the Series B Preferred Stock pursuant to the
Restated Certificate of Incorporation of the Company, as amended.
"Registration Expenses" shall mean the expenses so described in
Section 8.
"Restricted Stock" shall mean (i) the Conversion Shares, excluding
Conversion Shares which have been (a) registered under the Securities Act
pursuant to an effective registration statement filed thereunder and
disposed of in accordance with the registration statement covering them,
or (b) publicly sold pursuant to Rule 144 under the Securities Act, and
(ii) up to twenty percent (20%) of the shares of Common Stock held by
each Stockholder on the date hereof or issued upon exercise of options
held on the date hereof as set forth in Schedule II (as adjusted for
stock splits, stock dividends, combinations, reclassifications or other
similar events).
"Securities Act" shall mean the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean the expenses so described in Section 8.
2. Restrictive Legend. Each certificate representing Preferred Shares
or Conversion Shares shall, except as otherwise provided in this Section 2 or in
Section 3, be stamped or otherwise imprinted with a legend substantially in the
following form:
<PAGE> 3
- 3 -
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS IT
HAS BEEN REGISTERED UNDER THAT ACT OR AN EXEMPTION FROM REGISTRATION
IS AVAILABLE."
A certificate shall not bear such legend if in the opinion of counsel
satisfactory to the Company (it being agreed that Testa, Hurwitz & Thibeault
shall be satisfactory) the securities being sold thereby may be publicly sold
without registration under the Securities Act.
3. Notice of Proposed Transfer. Prior to any proposed transfer of any
Preferred Shares or Conversion Shares (other than under the circumstances
described in Sections 4, 5 or 6), the holder thereof shall give written notice
to the Company of its intention to effect such transfer. Each such notice shall
describe the manner of the proposed transfer and, if requested by the Company,
shall be accompanied by an opinion of counsel satisfactory to the Company (it
being agreed that Testa, Hurwitz & Thibeault shall be satisfactory) to the
effect that the proposed transfer may be effected without registration under the
Securities Act, whereupon the holder of such stock shall be entitled to transfer
such stock in accordance with the terms of its notice; provided, however, that
no such opinion of counsel shall be required for a transfer to one or more
partners of the transferor (in the case of a transferor that is a partnership)
or to an affiliated corporation (in the case of a transferor that is a
corporation). Each certificate for Preferred Shares or Conversion Shares
transferred as above provided shall bear the legend set forth in Section 2,
except that such certificate shall not bear such legend if (i) such transfer is
in accordance with the provisions of Rule 144 (or any other rule permitting
public sale without registration under the Securities Act) or (ii) the opinion
of counsel referred to above is to the further effect that the transferee and
any subsequent transferee (other than an affiliate of the Company) would be
entitled to transfer such securities in a public sale without registration under
the Securities Act. The restrictions provided for in this Section 3 shall not
apply to securities which are not required to bear the legend prescribed by
Section 2 in accordance with the provisions of that Section.
4. Required Registration. (a) At any time after the earlier of (i)
six months after any registration statement covering a public offering of
securities of the Company under the Securities Act shall have become effective,
and (ii) June 29, 1994, the holders of Restricted Stock constituting at least
40% of the total shares of Restricted Stock then outstanding may request the
Company to register under the Securities Act all or any portion of the shares of
Restricted Stock held by such requesting holder or holders for sale in the
manner specified in such notice, provided that the shares of Restricted Stock
for
<PAGE> 4
- 4 -
which registration has been requested shall constitute at least 20% of the total
shares of Restricted Stock originally issued (or any lesser percentage if the
anticipated offering price would exceed $2,000,000) if such holder or holders
shall request the registration of less than all shares of Restricted Stock then
held by such holder or holders. For purposes of this Section 4 and Sections 5,
6, 13(a) and 13(d), the term "Restricted Stock" shall be deemed to include the
number of shares of Restricted Stock which would be issuable to a holder of
Preferred Shares upon conversion of all Preferred Shares held by such holder at
such time, provided, however, that the only securities which the Company shall
be required to register pursuant hereto shall be shares of Common Stock, and
provided, further, however, that, in any underwritten public offering
contemplated by this Section 4 or Sections 5 and 6, the holders of Preferred
Shares shall be entitled to sell, subject to the provisions of Section 3, such
Preferred Shares to the underwriters for conversion and sale of the shares of
Common Stock issued upon conversion thereof. Notwithstanding anything to the
contrary contained herein, no request may be made under this Section 4 within
180 days after the effective date of a registration statement filed by the
Company covering an underwritten public offering in which the holders of
Restricted Stock shall have been entitled to join pursuant to Sections 5 or 6
and in which there shall have been effectively registered all shares of
Restricted Stock as to which registration shall have been requested.
(b) Following receipt of any notice under this Section 4, the Company
shall promptly notify all holders of Restricted Stock from whom notice has not
been received and shall use its best efforts to register under the Securities
Act, for public sale in accordance with the method of disposition specified in
such notice from requesting holders, the number of shares of Restricted Stock
specified in such notice (and in all notices received by the Company from other
holders within 30 days after the giving of such notice by the Company). If such
method of disposition shall be an underwritten public offering, the holders of a
majority of the shares of Restricted Stock to be sold in such offering may
designate the managing underwriter of such offering, subject to the approval of
the Company, which approval shall not be unreasonably withheld or delayed. The
Company shall be obligated to resister Restricted Stock pursuant to this Section
4 on two occasions only.
(c) The Company shall be entitled to include in any registration
statement referred to in this Section 4, for sale in accordance with the method
of disposition specified by the requesting holders, shares of Common Stock or
securities convertible into, exchangeable for, or exercisable for Common Stock,
to be sold by the Company for its own account or by one or more selling
shareholders, If, in the opinion of the managing underwriter (if such method of
disposition shall be an
<PAGE> 5
- 5 -
underwritten public offering), such inclusion would adversely affect the
marketing of the Restricted Stock to be sold, the amount of such securities to
be sold by each of the selling security holders (including the Company) shall be
reduced pro rata in accordance with the amount of securities requested to be
included by each such security holder in such registration statement, whereupon
such registration statement shall not be counted as one of the two registrations
to which the holders of Restricted Stock are entitled under this Section 4,
provided, however that, anything to the contrary herein notwithstanding, the
securities sought to be included by selling shareholders other than pursuant to
this Agreement shall be reduced in full prior to reduction of the Restricted
Stock or the securities to be included for the account of the Company, except
for registration statements on Form S-4, S-8 or any successor thereto, the
Company will not file with the Commission any other registration statement with
respect to its Common Stock, whether for its own account or that of other
stockholders, from the date of receipt of a notice from requesting holders
pursuant to this Section 4 until the completion of the period of distribution of
the registration contemplated thereby.
5. Incidental Registration. If the Company at any time (other than
pursuant to Section 4 or Section 6) proposes to register any of its securities
under the Securities Act for sale to the public, whether for its own account or
for the account of other security holders or both (except with respect to
registration statements on Forms S-4, S-8 or another form not available for
registering the Restricted Stock for sale to the public), each such time it will
give written notice to all holders of outstanding Restricted Stock of its
intention so to do. Upon the written request of any such holder, received by
the Company within 30 days after the giving of any such notice by the Company,
to register any of its Restricted Stock (which request shall state the intended
method of disposition thereof), the Company will use its best efforts to cause
the Restricted Stock as to which registration shall have been so requested to be
included in the securities to be covered by the registration statement proposed
to be filed by the Company, all to the extent requisite to permit the sale or
other disposition by the holder (in accordance with its written request) of such
Restricted Stock so registered. In the event that any registration pursuant to
this Section 5 shall be, in whole or in part, an underwritten public offering of
Common Stock or securities convertible into, exchangeable for or exercisable for
Common Stock, the number of shares of Restricted Stock to be included in such an
underwriting may be reduced (pro rata among the requesting holders based upon
the number of shares of Restricted Stock owned by such holders) if and to the
extent that the managing underwriter shall be of the opinion that such inclusion
would adversely affect the marketing of the securities to be sold by the Company
therein; provided, however, that such number of shares of Restricted Stock
<PAGE> 6
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shall not be reduced if any shares are to be included in such underwriting for
the account of any person other than the Company or requesting holders of
Restricted Stock; and provided, further, however, that in no event may the total
number of shares of Restricted Stock to be included in such underwriting by the
Purchasers and Stockholders, as a group, be less than one-third of the aggregate
number of shares of Restricted Stock requested by the Purchasers and
Stockholders thereof to be included in such underwriting. Notwithstanding the
foregoing provisions, the Company may withdraw any registration statement
referred to in this Section 5 without thereby incurring any liability to the
holders of Restricted stock.
6. Registration on Form S-3. If at any time (i) a holder or holders
of Preferred Shares or Restricted Stock request that the Company file a
registration statement on Form S-3 or any successor thereto for a public
offering of all or any portion of the shares of Restricted Stock held by such
requesting holder or holders, the reasonably anticipated aggregate price to the
public of which would exceed $500,000 for a registration statement on Form S-3
and (ii) the Company is a registrant entitled to use Form S-3 or any successor
thereto to register such shares, then the Company shall use its best efforts to
register under the Securities Act on Form S-3 or any successor thereto, for
public sale in accordance with the method of disposition specified in such
notice, the number of shares of Restricted Stock specified in such notice.
Whenever the Company is required by this Section 6 to use its best efforts to
effect the registration of Restricted Stock, each of the procedures and
requirements of Section 4 (including but not limited to the requirement that the
Company notify all holders of Restricted Stock from whom notice has not been
received and provide them with the opportunity to participate in the offering)
shall apply to such registration provided, however, that there shall be no
limitation on the number of registrations on Form S-3 which may be requested and
obtained under this Section 6, except that, the Company shall not be obligated
to file more than two registration statements on Form S-3 in any twelve month
period, and provided, further, however, that the requirements contained in the
first sentence of Section 4(a) shall not apply to any registration on Form S-3
which may be requested and obtained under this Section 6.
7. Registration Procedures. If and whenever the Company is required
by the provisions of Sections 4, 5 or 6 to use its best efforts to effect the
registration of any shares of Restricted Stock under the Securities Act, the
Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration statement
(which, in the case of an underwritten public offering pursuant to Section 4,
shall be on Form S-1 or other form of general applicability satisfactory to the
managing underwriter selected as therein provided) with respect to such
securities and
<PAGE> 7
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use its best efforts to cause such registration statement to become and remain
effective for the period of the distribution contemplated thereby (determined as
hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period specified in paragraph (a) above and comply with the provisions of
the Securities Act with respect to the disposition of all Restricted Stock
covered by such registration statement in accordance with the sellers' intended
method of disposition set forth in such registration statement for such period;
(c) furnish to each seller of Restricted Stock and to each
underwriter such number of copies of the registration statement and the
prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the public sale or other
disposition of the Restricted Stock covered by such registration statement;
(d) use its best efforts to register or qualify the Restricted Stock
covered by such registration statement under the securities or "blue sky" laws
of such jurisdictions as the sellers of Restricted Stock or, in the case of an
underwritten public offering, the managing underwriter reasonably shall request,
provided, however, that the Company shall not for any such purpose be required
to qualify generally to transact business as a foreign corporation in any
jurisdiction where it is not so qualified or to consent to general service of
process in any such jurisdiction;
(e) use its best efforts to list the Restricted Stock covered by such
registration statement with any securities exchange or quotation system on which
the Common Stock of the Company is then listed;
(f) immediately notify each seller of Restricted Stock and each
underwriter under such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event of which the Company has knowledge as a result of which
the prospectus contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing;
(g) if the offering is underwritten and at the request of any seller
of Restricted Stock, use its best efforts to furnish on the date that Restricted
Stock is delivered to the underwriters for sale pursuant to such registration:
(i) an opinion
<PAGE> 8
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dated such date of counsel representing the Company for the purposes of such
registration, addressed to the underwriters and to such seller, stating that
such registration statement has become effective under the Securities Act and to
such other effects as reasonably may be requested by counsel for the
underwriters or by such seller or its counsel; and (ii) a letter dated such date
from the independent public accountants retained by the Company, addressed to
the underwriters and to such seller, stating that they are independent public
accountants within the meaning of the Securities Act and that, in the opinion of
such accountants, the financial statements of the Company included in the
registration statement or the prospectus, or any amendment or supplement
thereof, comply as to form in all material respects with the applicable
accounting requirements of the Securities Act, and such letter shall
additionally cover such other financial matters with respect to such
registration as such underwriters reasonably may request; and
(h) make available for inspection, for the purposes of such offering,
by each seller of Restricted Stock, any underwriter participating in any
distribution pursuant to such registration statement, and any attorney,
accountant or other agent retained by such seller or underwriter, all financial
and other records, pertinent corporate documents and properties of the Company,
and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement.
For purposes of Section 7(a) and 7(b) and of Section 4(c), the period
of distribution of Restricted Stock in a firm commitment underwritten public
offering shall be deemed to extend until the earlier of (i) the date each
underwriter has completed the distribution of all securities purchased by it,
and (ii) six months after the effective date thereof, and the period of
distribution of Restricted Stock in any other registration shall be deemed to
extend until the earlier of the sale of all Restricted Stock covered thereby and
120 days after the effective date thereof.
In connection with each registration hereunder, the sellers of
Restricted Stock will furnish to the Company in writing such information with
respect to themselves and the proposed distribution by them as reasonably shall
be necessary in order to ensure compliance with federal and applicable state
securities laws.
In connection with each registration pursuant to Sections 4, 5 or 6
covering an underwritten public offering, the Company and each seller agree to
enter into a written agreement with the managing underwriter selected in the
manner herein provided in such form and containing such provisions as are
customary in the securities business for such an arrangement between
<PAGE> 9
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such underwriter and companies of the Company's size and investment stature.
8. Expenses. All expenses incurred by the Company in complying with
Sections 4, 5 and 6, including, without limitation, all registration and filing
fees, printing expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees and expenses (including counsel fees)
incurred in connection with complying with state securities or "blue sky" laws,
fees of the National Association of Securities Dealers, Inc., transfer taxes,
fees of transfer agents and registrars, costs of insurance and fees and
disbursements of one counsel for the sellers of Restricted Stock, but excluding
any Selling Expenses, are called "Registration Expenses". All underwriting
discounts and selling commissions applicable to the sale of Restricted Stock
are called "Selling Expenses".
The Company will pay all Registration Expenses in connection with
each registration statement under Sections 5 and 6, and in addition shall pay
all Registration Expenses in connection with the filing of the first two
registration statements under Section 4. The Registration Expenses associated
with each additional registration statement filed pursuant to Section 4 after
the first two referred to in the preceding sentence, and all Selling Expenses in
connection with each registration statement under Sections 4, 5 or 6 shall be
borne by the participating sellers (including the Company, if the Company shall
be a seller) in proportion to the number of shares sold by each, or by such
participating sellers as they may agree,
9. Indemnification and Contribution. (a) In the event of a
registration of any of the Restricted Stock under the Securities Act pursuant to
Sections 4, 5 or 6, the Company will indemnify and hold harmless each seller of
such Restricted Stock thereunder, each underwriter of such Restricted Stock
thereunder and each other person, if any, who controls such seller or
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which such seller,
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Restricted Stock was registered under the Securities Act
pursuant to Sections 4, 5 or 6, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, and
will reimburse each such seller, each such underwriter and each such controlling
person for any legal or other expenses
<PAGE> 10
- 10 -
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action, provided, however, that the
Company will not be liable in any such case if and to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by any such seller, any such underwriter
or any such controlling person in writing specifically for use in such
registration statement or prospectus,
(b) In the event of a registration of any of the Restricted Stock
under the Securities Act pursuant to Sections 4, 5 or 6, each seller of such
Restricted Stock thereunder, severally and not jointly, will indemnify and hold
harmless the Company, each person, if any, who controls the Company within the
meaning of the Securities Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the Securities Act,
against all losses, claims, damages or liabilities, joint or several, to which
the Company or such officer, director, underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the registration statement under which such Restricted Stock
was registered under the Securities Act pursuant to Sections 4, 5 or 6, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and will reimburse the Company and
each such officer, director, underwriter and controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action, provided, however,
that such seller will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
such seller, as such, furnished in writing to the Company by such seller
specifically for use in such registration statement or prospectus, and provided,
further, however, that the liability of each seller hereunder shall be limited
to the proportion of any such loss, claim, damage, liability or expense which is
equal to the proportion that the public offering price of the shares sold by
such seller under such registration statement bears to the total public offering
price of all securities sold thereunder, but not in any event to exceed the
proceeds received by such seller from
<PAGE> 11
- 11 -
the sale of Restricted Stock covered by such registration statement.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 9 and shall only relieve
it from any liability which it may have to such indemnified party under this
Section 9 if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 9 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected, provided,
however, that, if the defendants in any such action include both the indemnified
party and the indemnifying party, and the indemnified party shall have
reasonably concluded that there may be reasonable defenses available to it which
are different from or additional to those available to the indemnifying party,
or if the interests of the indemnified party reasonably may be deemed to
conflict with the interests of the indemnifying party, the indemnified party
shall have the right to select a separate counsel and to assume such legal
defenses and otherwise to participate in the defense of such action, with the
expenses and fees of such separate counsel and other expenses related to such
participation to be reimbursed by the indemnifying party as incurred. The
indemnifying party shall not be liable for the fees and expenses of more than
one counsel, separate from its own counsel, for all indemnified parties unless
the interests of one or more of the indemnified parties reasonably may be deemed
to conflict with the interests of one or more other indemnified parties,
whereupon the indemnifying party shall be liable for the fees and expenses of
two and no more than two counsel, separate from its own counsel.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Restricted Stock exercising rights under this Agreement, or any controlling
person of any such holder, makes a claim for indemnification pursuant to this
Section 9 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and
<PAGE> 12
- 12 -
the expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case notwithstanding the
fact that this Section 9 provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of any such
selling holder or any such controlling person in circumstances for which
indemnification is provided under this Section 9; then, and in each such case,
the Company and such holder will contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (after contribution from
others) in such proportion so that such holder is responsible for the portion
represented by the percentage that the public offering price of its Restricted
Stock offered by the registration statement bears to the public offering price
of all securities offered by such registration statement, and the Company is
responsible for the remaining portion; provided, however, that, in any such
case, (A) no such holder be required to contribute any amount in excess of the
public offering price of all such Restricted Stock offered by it pursuant to
such registration statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation,
10. Changes in Common Stock or Preferred Stock. If, and as often as,
there is any change in the Common Stock or the Preferred Stock by way of a stock
split, stock dividend, combination or reclassification, or through a merger,
consolidation, reorganization or recapitalization, or by any other means,
appropriate adjustment shall be made in the provisions hereof so that the rights
and privileges granted hereby shall continue with respect to the Common Stock or
the Preferred Stock as so changed.
11. Rule 144 Reporting. With a view to making available the benefits
of certain rules and regulations of the Commission which may at any time permit
the sale of the Restricted Stock to the public without registration, at all
times after 90 days after any registration statement covering a public offering
of securities of the Company under the Securities Act shall have become
effective, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to each holder of Restricted Stock forthwith upon request
a written statement by the Company as to its compliance with the reporting
requirements of such Rule 144 and of the Securities Act and the Exchange Act, a
copy of the most
<PAGE> 13
- 13 -
recent annual or quarterly report of the Company, and such other reports and
documents so filed by the Company as such holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing such holder
to sell any Restricted Stock without registration.
12. Prior Registration Rights Agreement. The Company and each
Purchaser who is also a party to the Prior Registration Rights Agreement hereby
agree that this Agreement shall supersede and replace in its entirety the Prior
Registration Rights Agreement which is hereby terminated and of no further force
or effect.
13. Miscellaneous.
(a) All covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto (including without
limitation transferees of any Preferred Shares or Restricted Stock), whether so
expressed or not, provided, however, that registration rights conferred herein
on the holders of Preferred Shares or Restricted Stock shall inure to the
benefit of a transferee of Preferred Shares or Restricted Stock only if the
Transferor gives the Company notice setting forth the circumstances surrounding
the transfer, and (i) there is transferred to such transferee at least 20% of
the total shares of Restricted Stock originally issued pursuant to the Purchase
Agreement to the direct or indirect transferor of such transferee or (ii) such
transferee is a partner, shareholder or affiliate of a party hereto,
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be mailed by certified or registered
mail, return receipt requested, postage prepaid, or telexed, in the case of
non-U.S. residents, addressed as follows:
if to the Company or any other party hereto, at the address of such
party set forth in the Purchase Agreement;
if to any subsequent holder of Preferred Shares or Restricted Stock,
to it at such address as may have been furnished to the Company in
writing by such holder;
or, in any case, at such other address or addresses as shall have been furnished
in writing to the Company (in the case of a holder of Preferred Shares or
Restricted Stock) or to the holders of Preferred Shares or Restricted Stock (in
the case of the Company) in accordance with the provisions of this paragraph.
(c) This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts.
<PAGE> 14
- 14 -
(d) This Agreement may not be amended or modified, and no provision
hereof may be waived, without the written consent of the Company and the holders
of that number of Preferred Shares and/or shares of Restricted Stock which is at
least two-thirds of the sum of (i) the number of Conversion Shares into which
all outstanding Preferred Shares are convertible, plus (ii) the number of all
outstanding shares of Restricted Stock.
(e) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(f) The obligations of the Company to register shares of Restricted
Stock under Sections 4, 5 or 6 shall terminate on the tenth anniversary of the
date of this Agreement.
(g) If requested in writing by the underwriters for a public offering
of securities of the Company, each holder of Restricted Stock who is a party to
this Agreement shall agree not to sell publicly any shares of Restricted Stock
or any other shares of Common Stock (other than shares of Restricted Stock or
other shares of Common Stock being registered in such offering), without the
consent of such underwriters, for a period of not more than 120 days following
the effective date of the registration statement relating to such offering;
provided, however, that all persons entitled to registration rights with respect
to shares of Common Stock who are not parties to this Agreement, all other
persons selling shares of Common Stock in such offering and all executive
officers and directors of the Company shall also have agreed not to sell
publicly their Common Stock under the circumstances and pursuant to the terms
set forth in this Section 13(g).
(h) Notwithstanding the provisions of Section 7(a), the Company's
obligation to file a registration statement, or cause such registration
statement to become and remain effective, shall be suspended for a period not to
exceed 90 days in any 24-month period if there exists at the time material
non-public information relating to the Company which, in the reasonable opinion
of the Company, should not be disclosed.
(i) The Company shall not grant to any third party any registration
rights more favorable than any of those contained herein, so long as any of the
registration rights under this Agreement remains in effect.
(j) 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.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
<PAGE> 15
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of date first above written.
THE COMPANY:
OBJECT DESIGN, INC.
By: /s/
----------------------------
Title: President & CEO
THE PURCHASERS:
AENEAS VENTURE CORPORATION
By: /s/
----------------------------
Title:
VISTA III, L.P.
By: Vista III Partners, L.P.,
its General Partner
By: /s/
----------------------------
General Partner
ORIEN I, L.P.
By: Orien Partners, L.P.
its General Partner
By: /s/
----------------------------
Managing General Partner
NEW ENTERPRISE ASSOCIATES V
LIMITED PARTNERSHIP
By: NEA Partners V,
Limited Partnership
By: /s/ Charles W. Newlyan III
----------------------------
General Partner
<PAGE> 16
THE SILVERADO FUND I,
LIMITED PARTNERSHIP
By: NEA Silverado
Partners I,
Limited Partnership
By: /s/ Charles W. Newlyan III
-----------------------------
General Partner
OLIVETTI HOLDING N.V.
By: /s/
-----------------------------
Attorney-in-Fact
PHILIPS VENTURE FUND I, L.P.
By: Vista Ventures Partners II
By: /s/
-----------------------------
General Partner
EASTMAN KODAK COMPANY
By: /s/
-----------------------------
Title: Vice-President
THE STOCKHOLDERS:
/s/ Thomas M. Atwood
---------------------------------
Thomas M. Atwood
/s/ David Stryker
---------------------------------
David Stryker
/s/ Eugene Bonte
---------------------------------
Eugene Bonte
<PAGE> 17
COOPER, RAYBURN & KNIFFIN
Limited Partnership
By: /s/
-----------------------------
Title:
---------------------------
/s/ Daniel L. Weinreb
---------------------------------
Daniel L. Weinreb
/s/ Samuel Haradhvala
---------------------------------
Samuel Haradhvala
/s/ Jack Orenstein
---------------------------------
Jack Orenstein
/s/ Charles Lamb
---------------------------------
Charles Lamb
/s/ Stanley B. Zdonik
---------------------------------
Stanley B. Zdonik
/s/ David Maier
---------------------------------
David Maier
/s/ Anne Cuervo
---------------------------------
Anne Cuervo
/s/ Mitchell Model
---------------------------------
Mitchell Model
<PAGE> 18
SCHEDULE I
Purchasers
Aeneas Venture Corporation
600 Atlantic Avenue
15th Floor
Boston, MA 02116
Vista III, L.P.
36 Grove Street
New Canaan, CT 06840
Orien I, L.P.
315 Post Road West
Westport, CT 06880
New Enterprise Associates
V, Limited Partnership
1119 St. Paul Street
Baltimore, MD 21202
The Silverado Fund I, Limited
Partnership
1119 St. Paul Street
Baltimore, MD 21202
Philips Venture Fund I, L.P.
36 Grove Street
New Canaan, CT 06840
Eastman Kodak Corporation
c/o Kevin Wright
Venture Capital Development
343 State Street
Rochester, NY 14650-2114
with overnight deliveries to
1999 Lake Avenue
Rochester, New York 14650-2114
Olivetti Holding, N.V.
c/o Caribbean Management Company
P.O. Box 889
Curacao, Netherlands Antilles
<PAGE> 19
with copy to
Olivetti Management of
America, Inc.
70 East 55th Street
24th Floor
New York, NY 10022
and
Ing C. Olivetti & C., S.P.A.
Via Jervis, 77
10015 Ivrea (To), Italy
<PAGE> 20
SCHEDULE II
Stockholders
<TABLE>
<CAPTION>
Shareholder Number of Shares
- ----------- ----------------
<S> <C>
Thomas M. Atwood 500,000
David Stryker 250,000
Gene Bonte 157,506
Cooper & Raburn
Limited Partnership 500,000
Daniel L. Weinreb 125,000
Samuel Haradhvala 87,500
Jack Orenstein 57,5OO
Charles Lamb 50,000
Stanley B. Zdonik 12,500
David Maier 12,500
Anne Cuervo 61,500
Mitchell Model 25,000
TOTAL 1,784,000
</TABLE>
<PAGE> 21
EXHIBIT 10.22
Amendment No. 1 to Amended and
Restated Registration Rights Agreement
Amendment dated as of the 1st day of October, 1990 by and among Object
Design, Inc., a Delaware corporation (the "Company"), the holders of the shares
of the Company's Series A Convertible Preferred Stock (the "Series A Preferred
Stock"), the holders of the shares of Company's Series B Convertible Preferred
Stock (the "Series B Preferred Stock"), the Stockholders listed on Schedule II
to the Registration Rights Agreement (as defined below) and PacifiCorp Credit,
Inc. d/b/a Pacific Venture Finance, Inc. ("PacifiCorp"), the holder of a warrant
to purchase up to 57,858 shares of the Company's Series B Convertible Preferred
Stock.
Whereas, PacifiCorp and the Company are entering into a master lease and
warrant agreement as of the date hereof;
Whereas, in connection with the Lease Agreement the Company has agreed to
grant PacifiCorp a Warrant to purchase up to 57,858 shares of the Company's
Series B Preferred Stock (the "Warrant");
Whereas, the Company has agreed to grant PacifiCorp certain registration
rights with respect to the shares of the Company's Common Stock issued upon
conversion of Series B Convertible Preferred Stock issued upon exercise of the
Warrant;
Whereas, the Company, the holders of the Series A Stock and Series B
Stock and the Stockholders are parties to an Amended and Restated Registration
Rights Agreement dated as of June 29, 1990 (the "Registration Rights Agreement")
pursuant to which they were granted certain rights with respect to certain
securities held by them; and
Whereas, it is a condition of the obligation of PacifiCorp under the
Lease Agreement that the parties hereto amend certain portions of the
Registration Rights Agreement to provide for certain registration rights to
PacifiCorp.
Now, therefore, and for a valuable consideration, receipt of which is
hereby acknowledged by each party, the parties hereto hereby agree as follows:
l. The fourth introductory paragraph to the Registration Rights Agreement
is hereby amended by deleting the paragraph in its entirety and by inserting the
following in its place and stead:
"WHEREAS, the Purchasers are purchasing an aggregate of up to
4,517,857 shares of the Series B Convertible Preferred Stock, $.01 par
value, of the Company pursuant to a Series B Preferred Stock Purchase
Agreement of even date herewith
<PAGE> 22
(the "Purchase Agreement") and PacifiCorp has been granted a Warrant to
purchase up to 57,858 shares of Series B Convertible Preferred Stock upon
exercise of the Warrant pursuant to the master lease and warrant
agreement between PacifiCorp and the Company (such 4,517,857 shares of
Series B Convertible Preferred Stock and any of the 57,858 shares issued
upon exercise of the Warrant (subject to adjustment as provided in the
Warrant) are hereinafter referred to as the "Series B Preferred Stock")."
Unless otherwise defined herein and as modified herein, defined terms
herein shall have the same meaning as in the Registration Right Agreement.
2. Section 13(a) of the Registration Rights Agreement is hereby amended
by adding the following words after the term "Purchase Agreement." in the
thirteenth line thereof:
"or upon exercise of the Warrant, as the case may be,"
3. Ratification of the Registration Rights Agreement. The Registration
Rights Agreement, as amended to date, is hereby ratified and confirmed, and is
hereby accepted by each party who shall, upon execution of this amendment,
become an additional party to such Registration Rights Agreement.
4. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of The Commonwealth of Massachusetts,
5. Titles and Subtitles. The titles of the paragraphs and subparagraphs
of this Agreement are for convenience and reference only and are not to be
considered in construing this Agreement,
6. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all which together shall
constitute one instrument.
IN WITNESS WHEREOF, the parties have executed this agreement on the day
and year first written above.
OBJECT DESIGN, INC.
By:______________________
Name:
Title:
-2-
<PAGE> 23
THE COMPANY:
OBJECT DESIGN, INC,
By:______________________
Title:___________________
THE PURCHASERS:
AENEAS VENTURE CORPORATION
By:______________________
Title:___________________
VISTA III, L.P.
By: Vista III Partners, L.P.
its General Partner
By:______________________
General Partner
ORIEN I, L.P.
By: Orien Partners, L,P.
its General Partner
By:______________________
Managing General Partner
NEW ENTERPRISE ASSOCIATES V,
LIMITED PARTNERSHIP
By: NEA Partners V,
Limited Partnership
By:______________________
General Partner
-3-
<PAGE> 24
THE SILVERADO FUND I,
LIMITED PARTNERSHIP
By: NEA Silverado Partners I,
Limited Partnership
By:______________________
General Partner
OLIVETTI HOLDING N.V.
By:______________________
Attorney-in-Fact
PHILIPS VENTURE FUND I, L.P.
By: Vista Ventures Partners II
By:______________________
EASTMAN KODAK COMPANY
By:______________________
Title:___________________
-4-
<PAGE> 25
THE STOCKHOLDERS:
________________________
Thomas M. Atwood
________________________
David J. Stryker
________________________
Eugene A. Bonte
________________________
Daniel L. Weinreb
________________________
Sam Haradvala
________________________
Jack A. Orenstein
________________________
Charles W. Lamb
________________________
Stanley B. Zdonik
________________________
David Maier
________________________
Anne Cuervo
________________________
Dr. Mitchell Model
CR&K INVESTMENTS LIMITED
PARTNERSHIP
By:_____________________
-5-
<PAGE> 26
THE WARRANT HOLDER:
PACIFICORP CREDIT, INC. d/b/a
PACIFIC VENTURE FINANCE, INC.
By:__________________________
-6-
<PAGE> 27
EXHIBIT 10.22
Amendment No. 2 to Amended and
Restated Registration Rights Agreement
Amendment dated as of the 29th day of July, 1991 by and among Object
Design, Inc., a Delaware corporation (the "Company"), the holders of the shares
of the Company's Series A Convertible Preferred Stock (the "Series A Preferred
Stock"), and the holders of the shares of the Company's Series B Convertible
Preferred Stock, the Stockholders as listed on Schedule II to the Amended and
Restated Registration Rights Agreement dated as of June 29, 1990 and PacifiCorp
Credit, Inc. d/b/a Pacific Venture Finance, Inc. ("PacifiCorp") and the holders
of the Series C Preferred Stock (as hereafter defined) (the holders of the
Series A Preferred Stock, the Series B Preferred Stock and Series C Preferred
Stock are collectively referred to herein as the "Purchasers").
Whereas, pursuant to a Series C Preferred Stock Purchase Agreement dated
July 29, 1991 by and among the Company and the Purchasers (the "Purchase
Agreement") the Company has agreed to issue and sell shares of Series C
Convertible Preferred Stock (the "Series C Preferred") to the Purchasers;
Whereas, the Company has agreed to grant the Purchasers certain
registration rights with respect to the Series C Preferred Stock;
Whereas, the Company, the Purchasers and the Stockholders are parties to
an Amended and Restated Registration Rights Agreement dated as of June 29,
1990, pursuant to which the Company has granted such parties registration rights
with respect to certain securities held by them;
Whereas, such Amended and Restated Registration Rights Agreement was
amended as of October 1, 1990 in order to grant certain registration rights to
PacifiCorp (such Amended and Restated Registration Rights Agreement, as amended,
is hereafter referred to as the "Registration Rights Agreement");
Whereas, it is a condition of the Purchase Agreement that the parties
hereto amend certain portions of the Registration Rights Agreement to provide
for the grant of certain registration rights to the holders of Series C
Preferred Stock.
Now, therefore, and for a valuable consideration, receipt of which is
hereby acknowledged by each party, the parties hereto hereby agree as follows:
1. The fourth introductory paragraph to the Registration Rights Agreement
is hereby further amended by deleting the paragraph in its entirety and by
inserting the following in its place and stead:
<PAGE> 28
- 2 -
WHEREAS, the Purchasers purchased an aggregate of 4,517,857 shares of
Series B Convertible Preferred Stock, $.01 par value, of the Company
pursuant to the Series B Convertible Preferred Stock Purchase Agreement
dated as of June 29, 1990 and PacifiCorp was granted a warrant to
purchase up to 57,858 shares of Series B Convertible Preferred Stock upon
exercise or conversion of such warrant pursuant to the Master Lease and
Warrant Agreement between PacifiCorp and the Company (such 4,517,587
shares of Series B Convertible Preferred Stock and any of the 57,858
shares issued upon exercise of such warrant (subject to adjustment as
provided in such warrant) are hereinafter referred to as the "Series B
Preferred Stock).
2. Section 1 of the Registration Rights Agreement is hereby amended by
deleting the definition of "Preferred Shares" in its entirety and by inserting
the following in its place and stead:
"Preferred Shares" shall mean the issued shares of Series A Preferred
Stock, the Series B Preferred Stock and the Series C Preferred Stock,
together with shares of any other series of preferred stock issued by
the Company in exchange for shares of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock pursuant to the
Restated Certificate of Incorporation of the Company, as amended or
restated from time to time.
Unless otherwise defined herein and as modified herein, defined terms
herein shall have the same meaning as in the Registration Rights Agreement.
3. Ratification of the Registration Rights Agreement. The Registration
Rights Agreement, as amended to date, is hereby ratified and confirmed.
4 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the Commonwealth of Massachusetts.
5. Titles and Subtitles. The titles of the paragraphs and subparagraphs
of this Agreement are for convenience and reference only and are not to be
considered in construing this Agreement.
6. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all which together shall
constitute one instrument.
<PAGE> 29
- 3 -
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of date first above written.
THE COMPANY:
OBJECT DESIGN, INC.
By: /s/ Kenneth E. Marshall
----------------------------
Title: President & CEO
THE PURCHASERS:
AENEAS VENTURE CORPORATION
By: [SIGNATURE] By: /s/
---------------------- ----------------------------
Title: Title:
------------------- -------------------------
VISTA III, L.P.,
By: Vista III Partners, L.P.
its General Partner
By: /s/ Gerald B. Bay
----------------------------
General Partner
ORIEN I, L.P.
By: Orien Partners, L.P.
its General Partner
By: /s/ George Kalan
----------------------------
Managing General Partner
NEW ENTERPRISE ASSOCIATES V,
LIMITED PARTNERSHIP
By: NEA Partners V,
Limited Partnership
By: /s/ Arthur Marks
----------------------------
General Partner
<PAGE> 30
- 4 -
THE SILVERADO FUND I,
LIMITED PARTNERSHIP
By: NEA Silverado
Partners I,
Limited Partnership
By: /s/ Arthur Marks
-----------------------------------
General Partner
OLIVETTI HOLDING N.V.
By: /s/ Alexandra Giurgin
-----------------------------------
Attorney-in-Fact
PHILIPS VENTURE FUND I, L.P.
By: Vista Ventures Partners II
By: /s/ Gerald B. Bay
-----------------------------------
General Partner
APERTURE ASSOCIATES, L.P.
BY: HORSLEY KEOUGH ASSOCIATES INC.
By: /s/ N. Dan Reeve
-----------------------------------
Title: N. Dan Reeve, Managing Director
PACIFICORP CREDIT, INC.
By: /s/
-----------------------------------
Title: V.P.
THE STOCKHOLDERS:
/s/ Thomas M. Atwood
---------------------------------------
Thomas Atwood
/s/ David Stryker
---------------------------------------
David Stryker
<PAGE> 31
- 5 -
/s/ Eugene Bonte
---------------------------------------
Eugene Bonte
CR&K INVESTMENTS
Limited Partnership
By:
----------------------------------
Title:
----------------------------------
/s/ Daniel L. Weinreb
---------------------------------------
Daniel L. Weinreb
/s/ Sam Hardhvala
---------------------------------------
Sam Haradhvala
/s/ Jack Orenstein
---------------------------------------
Jack Orenstein
/s/ Charles Lamb
---------------------------------------
Charles Lamb
---------------------------------------
Stanley B. Zdonik
---------------------------------------
David Maier
---------------------------------------
Anne Cuervo
---------------------------------------
Mitchell Model
<PAGE> 32
EXHIBIT 10.22
AMENDMENT NO. 3 TO AMENDED AND
RESTATED REGISTRATION RIGHTS AGREEMENT
Amendment dated as of the 12th day of March, 1992 by and among Object
Design, Inc., a Delaware corporation (the "Company") the holders of the shares
of the Company's Series A Convertible Preferred Stock (the "Series A Preferred
Stock"), the holders of the shares of the Company's Series B Convertible
Preferred Stock (the "Series B Preferred Stock"), the holders of the shares of
the Company's Series C Convertible Preferred Stock (the "Series C Preferred
Stock"), the Stockholders as listed on Schedule II to the Amended and Restated
Registration Rights Agreement dated as of June 29, 1990 (the "Stockholders"),
PacifiCorp Credit, Inc. d/b/a Pacific Venture Finance, Inc. ("PacifiCorp") and
the holders of the Series D Preferred Stock (as hereafter defined) (the holders
of the Series A Preferred Stock, the Series B Preferred Stock, the Series C
Preferred Stock and the Series D Preferred Stock are collectively referred to
herein as the "Investors").
Whereas, pursuant to a Series D Convertible Preferred Stock Purchase
Agreement dated March 12, 1992 by and among the Company and certain of the
Investors (the "Purchase Agreement"), the Company has agreed to issue and sell
shares of Series D Convertible Preferred Stock (the "Series D Preferred Stock")
to certain of the Investors (the "Purchasers");
Whereas, the Company has agreed to grant the Purchasers certain
registration rights with respect to the Series D Preferred Stock;
Whereas, the Company, the holders of the Company's Series A and B
Preferred Stock and the Stockholders are parties to an Amended and Restated
Registration Rights Agreement dated as of June 29, 1990, pursuant to which the
Company has granted such parties registration rights with respect to certain
securities held by them;
Whereas, such Amended and Restated Registration Rights Agreement was
amended as of October 1. 1990 in order to grant certain registration rights to
PacifiCorp and was further amended on July 29, 1991 in order to grant certain
registration rights to holders of Series C Preferred Stock (such Amended and
Restated Registration Rights Agreement, as amended, is hereafter referred to as
the "Registration Rights Agreement");
Whereas, it is a condition of the Purchase Agreement the"C. the parties
hereto amend certain portions of the Registration Rights Agreement to provide
for the grant of certain registration rights to the holders of Series D
Preferred Stock.
<PAGE> 33
Now, therefore, and for a valuable consideration, receipt of which is
hereby acknowledged by each party, the parties hereto hereby agree as follows:
1. Section 1 of the Registration Rights Agreement is hereby amended by
deleting the definition of "Preferred Shares" in its entirety and by inserting
the following in its place and stead:
"Preferred Shares" shall mean the issued shares of Series A
Preferred Stock, the Series B Preferred Stock, the Series C
Preferred Stock and the Series D Preferred Stock, together with
shares of any other series of preferred stock issued by the Company
in exchange for shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock pursuant to the Restated Certificate of Incorporation of the
Company, as amended or restated from time to time.
2. Subsection 9(a) of the Registration Rights Agreement is hereby
amended by inserting the following language at the end of said Subsection 9(a):
, provided, further, that the indemnity contained in this Subsection
9(a) shall not apply to amounts paid in settlement of any loss,
claim, damage, liability or action if such settlement is effected
without the written consent of the Company, which such consent shall
not be unreasonably withheld.
3. Subsection 9(b) of the Registration Rights Agreement is hereby
amended by inserting the following language at the end of said Subsection 9(b):
, provided, further, that the indemnity contained in this Subsection
9(b) shall not apply to amounts paid. in settlement of any loss,
claim, damage, liability or action if such settlement is effected
without the written consent of such seller, which such consent shall
not be unreasonably withheld.
4. Section 11 of the Registration Rights Agreement is hereby amended by
deleting said Section 11 in its entirety and by inserting the following in its
place and stead:
11. Rule 144 Reporting. With a view to making available the benefits
of certain rules and regulations of the Commission which may at any
time permit the sale of the Restricted Stock to the public without
registration, the
- 2 -
<PAGE> 34
Company agrees to:
(a) at all times after ninety (90) days following the effective
date of any registration statement covering a public offering of
securities of the Company under the Securities Act, make and keep
public information available, as those terms are understood and defined
in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under
the Securities Act and the Exchange Act; and
(c) furnish to each holder of Restricted Stock forthwith upon
request a written statement by the Company as to its compliance with
the reporting requirements of such Rule 144 and of the Securities Act
and the Exchange Act, a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by
the Company as such holder may reasonably request in availing itself of
any rule or regulation of the Commission allowing such holder to sell
any Restricted Stock without registration.
5. Unless otherwise defined herein and as modified herein, defined
terms herein shall have the same meaning as in the Registration Rights
Agreement.
6. Ratification of the Registration Rights Agreement. The Registration
Rights Agreement, as amended to date, is hereby ratified and confirmed.
7. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of The Commonwealth of Massachusetts without regard to
its principles of conflicts of laws.
8. Titles and Subtitles. The titles of the paragraphs and subparagraphs
of this Agreement are for convenience and reference only and are not to be
considered in construing this Agreement.
9. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all which together shall
constitute one instrument.
- 3 -
<PAGE> 35
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of date first above written.
THE COMPANY:
OBJECT DESIGN, INC.
By: /s/ Kenneth E. Marshall
-------------------------------
Title: President & CEO
THE PURCHASERS:
AENEAS VENTURE CORPORATION
By: /s/ [SIGNATURE]
-------------------------------
Title:
----------------------------
[SIGNATURE]
----------------------------
VISTA III, L.P.
By: Vista III Partners, L.P.
its General Partner
By: /s/ Gerald B. Bay
--------------------------------
General Partner
ORIEN I, L.P.
By: Orien Partners, L.P.
its General Partner
By: /s/ George Kalan
--------------------------------
Managing General Partner
NEW ENTERPRISE ASSOCIATES V,
LIMITED PARTNERSHIP
By: NEA Partners V,
Limited Partnership
By: /s/ Nancy Dorman
--------------------------------
General Partner
-4-
<PAGE> 36
THE SILVERADO FUND I,
LIMITED PARTNERSHIP
By: NEA Silverado
Partners I,
Limited Partnership
By: /s/ Arthur Marks
--------------------------------
General Partner
OLIVETTI HOLDING N.V.
By: /s/ Alexandra Giurgin
--------------------------------
Attorney-in-Fact
PHILIPS VENTURE FUND I, L.P.
By: Vista Ventures Partners II
By: /s/ Gerald B. Bay
--------------------------------
General Partner
APERTURE ASSOCIATES, L.P.
By: Horsley Keogh Associates
Inc., its General Partner
By: /s/ N. Dan Reeve
--------------------------------
Managing Director
BRENTWOOD ASSOCIATES, V, L.P.
By: Brentwood V Ventures,
L.P., its General Partner
By: /s/ John Walecka
--------------------------------
Its: General Partner
-------------------------------
- 5 -
<PAGE> 37
PACIFICORP CREDIT, INC.
By:
-------------------------------
Title:
----------------------------
THE STOCKHOLDERS:
/s/ Thomas M. Atwood
-------------------------
Thomas M. Atwood
/s/ David Stryker
-------------------------
David Stryker
/s/ Eugene Bonte
-------------------------
Eugene Bonte
CR&K INVESTMENTS
Limited Partnership
By: CKR Limited Partnership,
General Partner
By: /s/ Philip Cooper
-------------------------------
Title: General Partner
/s/ Daniel L. Weinreb
-------------------------
Daniel L. Weinreb
/s/ Sam Haradhvala
-------------------------
Sam Haradhvala
/s/ Jack Orenstein
-------------------------
Jack Orenstein
-------------------------
Charles Lamb
-------------------------
Stanley B. Zdonik
-------------------------
David Maier
- 6 -
<PAGE> 38
-------------------------
Anne Cuervo
-------------------------
Mitchell Model, individually
and as custodian for Jonah
Mirah Model and Mirah Aliyah
Model under the Massachusetts
Uniform Transfers to Minors
Act
- 7 -
<PAGE> 39
EXHIBIT 10.22
AMENDMENT NO. 4 TO AMENDED AND
RESTATED REGISTRATION RIGHTS AGREEMENT
Amendment dated as of the 12th day of April, 1993 by and among Object
Design, Inc., a Delaware corporation (the "Company"), the holders of shares of
the Company's Series A Convertible Preferred Stock (the "Series A Preferred
Stock"), the holders of shares of the Company's Series B Convertible Preferred
Stock (the "Series B Preferred Stock"), the holders of shares of the Company's
Series C Convertible Preferred Stock (the "Series C Preferred Stock"), the
holders of shares of the Company's Series D Convertible Preferred Stock (the
"Series D Preferred Stock"), the Stockholders as listed on Schedule II to the
Amended and Restated Registration Rights Agreement dated as of June 29, 1990
(the "Stockholders"), PacifiCorp Credit, Inc. d/b/a Pacific Venture Finance,
Inc. ("PacifiCorp"), the holders of the Series E Preferred Stock (as hereafter
defined) and the holders of the Series F Preferred Stock (as hereafter defined)
(the holders of the Series A Preferred Stock, the Series B Preferred Stock, the
Series C Preferred Stock, the Series D Preferred Stock, the Series E Preferred
Stock and the Series F Preferred Stock are collectively referred to herein as
the "Investors").
WHEREAS, pursuant to a Stock Purchase Agreement dated as of April 12,
1993 by and between the Company and one of the Investors (the "Stock Purchase
Agreement"), the Company has agreed to issue and sell shares of Series E
Convertible Preferred Stock (the "Series E Preferred Stock") and shares of
Series F Convertible Preferred Stock (the "Series F Preferred Stock") to such
Investor (the "Purchaser");
WHEREAS, the Company has agreed to grant the Purchaser certain
registration rights with respect to the Series E Preferred Stock and the Series
F Preferred Stock;
WHEREAS, the Company, the holders of the Company's Series A Preferred
Stock and Series B Preferred Stock and the Stockholders are parties to an
Amended and Restated Registration Rights Agreement dated as of June 29, 1990,
pursuant to which the Company has granted such parties registration rights with
respect to certain securities held by them;
WHEREAS, such Amended and Restated Registration Rights Agreement was
amended as of October 1, 1990 in order to grant certain registration rights to
PacifiCorp, was further amended as of July 29, 1991 in order to grant certain
registration rights to the holders of Series C Preferred Stock and was still
further amended as of March 12, 1992 in order to grant certain registration
rights to the holders of Series D Preferred Stock (such Amended and Restated
Registration Rights Agreement, as
<PAGE> 40
amended, is hereafter referred to as the "Registration Rights Agreement"); and
WHEREAS, it is a condition of the Stock Purchase Agreement that the
parties hereto amend certain portions of the Registration Rights Agreement to
provide for the grant of certain registration rights to the holders of Series E
Preferred Stock and the holders of Series F Preferred Stock.
NOW, THEREFORE, and for a valuable consideration, receipt of which is
hereby acknowledged by each party, the parties hereto hereby agree as follows:
1. Section 1 of the Registration Rights Agreement is hereby amended by
deleting the definition of "Preferred Shares" in its entirety and by inserting
the following in its place and stead:
"Preferred Shares" shall mean the issued shares of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock and Series F
Preferred Stock, together with shares of any other series of
preferred stock issued by the Company in exchange for shares of
Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock
and Series F Preferred Stock, pursuant to the Restated Certificate
of Incorporation of the Company, as amended or restated from time to
time."
2. Subsection 13 (a) of the Registration Rights Agreement is hereby
amended by deleting the term "Purchase Agreement" from the thirteenth line
thereof and by inserting the following in its place and stead:
"Series A Convertible Preferred Stock Purchase Agreement, the Series
B Convertible Preferred Stock Purchase Agreement, the Series C
Convertible Preferred Stock Purchase Agreement, the Series D
Convertible Preferred Stock Purchase Agreement and the Stock
Purchase Agreement, as the case may be,"
3. Subsection 13(b) of the Registration Rights Agreement is hereby
amended by deleting the words "the Purchase Agreement" from the seventh line
thereof and by inserting the following in their place and stead:
"stock record books of the Company;"
4. Unless otherwise defined herein and as modified herein, defined
terms herein shall have the same meaning as in the Registration Rights
Agreement.
-2-
<PAGE> 41
5. The Registration Rights Agreement, as amended to date, is hereby
ratified and confirmed.
6. This Amendment shall be governed by, and construed in accordance
with, the laws of The Commonwealth of Massachusetts, without regard to its
principles of conflicts of laws.
7. This Amendment may be executed in any number of counterparts, each
of which shall be an original and all of which together shall constitute one
instrument.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-3-
<PAGE> 42
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of date first above written.
THE COMPANY:
OBJECT DESIGN, INC.
By: /s/ Kenneth E. Marshall
------------------------------------
Title: President & CEO
THE PURCHASER:
INTERNATIONAL BUSINESS
MACHINES CORPORATION
By: /s/ [SIGNATURE]
------------------------------------
Title: Asst. Gen. Mgr. -- Pkgs
THE INVESTORS:
AENEAS VENTURE CORPORATION
By /s/ Tim R. Palmer By: /s/ [SIGNATURE]
-------------------------- ------------------------------------
AUTHORIZED SIGNATORY Title: AUTHORIZED SIGNATORY
VISTA III, L.P.
By: Vista III Partners, L.P.
its General Partner
By: /s/ Gerald B. Bay
-------------------------------------
General Partner
ORIEN I, L.P.
By: Orien Partners, L.P.
its General Partner
By: /s/ George Kalan
-------------------------------------
Managing General Partner
-4-
<PAGE> 43
NEW ENTERPRISE ASSOCIATES V,
LIMITED PARTNERSHIP
By: NEA Partners V,
Limited Partnership
By: /s/ Arthur J. Marks
-------------------------------------
General Partner
THE SILVERADO FUND I,
LIMITED PARTNERSHIP
By: NEA Silverado
Partners I,
Limited Partnership
By:
-------------------------------------
General Partner
OLIVETTI HOLDING N.V.
By: /s/ Alexandra Giurgin
-------------------------------------
Attorney-in-Fact
PHILIPS VENTURE FUND I, L.P.
By: Vista Ventures Partners II
By: /s/ Gerold B. Bay
-------------------------------------
General Partner
APERTURE ASSOCIATES, L.P.
By: Horsley Keogh Associates
Inc., its General Partner
By: /s/ N. Dan Reeve
-------------------------------------
N. Dan Reeve, Managing Partner
-5-
<PAGE> 44
BRENTWOOD ASSOCIATES V, L.P.
By: Brentwood V Ventures,
L.P., its General Partner
By: /s/ John Walecka
------------------------------------
Its: General Partner
PACIFICORP CREDIT, INC.
By:
------------------------------------
Title:
---------------------------------
THE STOCKHOLDERS:
/s/ Thomas Atwood
---------------------------------------
Thomas Atwood
/s/ David Stryker
---------------------------------------
David Stryker
/s/ Eugene Bonte
---------------------------------------
Eugene Bonte
Cooper, Raburn & Kniffin
Limited Partnership
CKR Limited Partnership General Partner
By: /s/ Philip Cooper
-----------------------------------
Title: General Partner
/s/ Daniel L. Weinreb
---------------------------------------
Daniel L. Weinreb
/s/ Sam Haradhvala
---------------------------------------
Sam Haradhvala
/s/ Jack Orenstein
---------------------------------------
Jack Orenstein
-6-
<PAGE> 45
/s/ Charles W. Lamb
---------------------------------------
Charles W. Lamb
---------------------------------------
Stanley B. Zdonik
---------------------------------------
David Maier
---------------------------------------
Anne Cuervo
---------------------------------------
Mitchell Model, individually
and as custodian for Jonah
Mirah Model and Mirah Aliyah
Model under the Massachusetts
Uniform Transfers to Minors Act
-7-
<PAGE> 46
EXHIBIT 10.22
AMENDMENT NO.5 TO AMENDED AND
RESTATED REGISTRATION RIGHTS AGREEMENT
Amendment dated as of the 14th day of May, 1993 by and among Object
Design, Inc., a Delaware corporation (the "Company"), the holders of shares of
the Company's Series A Convertible Preferred Stock (the "Series A Preferred
Stock"), the holders of shares of the Company's Series B Convertible Preferred
Stock (the "Series B Preferred Stock"), the holders of shares of the Company's
Series C Convertible Preferred Stock (the "Series C Preferred Stock"), the
holders of shares of the Company's Series D Convertible Preferred Stock (the
"Series D Preferred Stock"), the holders of shares of the Company's Series E
Preferred Stock (the "Series E Preferred Stock"), the holders of shares of the
Company's Series F Preferred Stock (the "Series F Preferred Stock"), the
Stockholders as listed on Schedule II to the Amended and Restated Registration
Rights Agreement dated as of June 29, 1990 (the "Stockholders"), PacifiCorp
Credit, Inc, d/b/a Pacific Venture Finance, Inc. ("PacifiCorp"), the holders of
the Series G Preferred Stock (as hereafter defined) and the holders of the
Series H Preferred Stock (as hereafter defined) (the holders of the Series A
Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock, the
Series D Preferred Stock, the Series E Preferred Stock, the Series F Preferred
Stock, the Series G Preferred Stock and the Series H Preferred Stock are
collectively referred to herein as the "Investors").
WHEREAS, pursuant to a Stock Purchase Agreement dated as of May 14, 1993
by and between the Company and one of the Investors (the "Stock Purchase
Agreement"), the Company has agreed to issue and sell shares of Series G
Convertible Preferred Stock (the "Series G Preferred Stock") and, subject to the
terms and conditions set forth in Section 4.02(a) therein, shares of Series H
Convertible Preferred Stock (the "Series H Preferred Stock") to such Investor
(the "Purchaser");
WHEREAS, the Company has agreed to grant the Purchaser certain
registration rights with respect to the Series G Preferred Stock and the Series
H Preferred Stock;
WHEREAS, the Company, the holders of the Company's Series A Preferred
Stock and Series B Preferred Stock and the Stockholders are parties to an
Amended and Restated Registration Rights Agreement dated as of June 29, 1990,
pursuant to which the Company has granted such parties registration rights with
respect to certain securities held by them;
WHEREAS, such Amended and Restated Registration Rights Agreement was
amended as of October 1, 1990 in order to grant certain registration rights to
PacifiCorp, was amended as of July 29, 1991 in order to grant certain
registration rights to the
<PAGE> 47
holders of Series C Preferred Stock, was further amended as of March 12, 1992 in
order to grant certain registration rights to the holders of Series D Preferred
Stock and was still further amended as of April 12, 1993 in order to grant
certain registration rights to the holders of Series E Preferred Stock and to
the holders of Series F Preferred Stock (such Amended and Restated Registration
Rights Agreement, as amended, is hereafter referred to as the "Registration
Rights Agreement"); and
WHEREAS, it is a condition of the Stock Purchase Agreement that the
parties hereto amend certain portions of the Registration Rights Agreement to
provide for the grant of certain registration rights to the holders of Series G
Preferred Stock and the holders of Series H Preferred Stock,
NOW, THEREFORE, and for a valuable consideration, receipt of which is
hereby acknowledged by each party, the parties hereto hereby agree as follows:
1. Section 1 of the Registration Rights Agreement is hereby amended by
deleting the definition of "Preferred Shares" in its entirety and by inserting
the following in its place and stead:
"Preferred Shares" shall mean the issued shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock, Series F Preferred Stock,
Series G Preferred Stock and Series H Preferred Stock, together with
shares of any other series of preferred stock issued by the Company in
exchange for shares of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock, Series G Preferred Stock
and Series H Preferred Stock, pursuant to the Restated Certificate of
Incorporation of the Company, as amended or restated from time to
time."
2. Subsection 13(a) of the Registration Rights Agreement is hereby
amended by deleting the term "Purchase Agreement" from the thirteenth line
thereof and by inserting the following in its place and stead:
"Series A Convertible Preferred Stock Purchase Agreement, the Series B
Convertible Preferred Stock Purchase Agreement, the Series C
Convertible Preferred Stock Purchase Agreement, the Series D
Convertible Preferred Stock Purchase Agreement, the Series E and
Series F Convertible Preferred Stock Purchase Agreement or the Series
G and Series H Convertible Preferred Stock Purchase Agreement, as the
case may be,"
-2-
<PAGE> 48
3. Unless otherwise defined herein and as modified herein, defined terms
herein shall have the same meaning as in the Registration Rights Agreement.
4. The Registration Rights Agreement, as amended to date, is hereby
ratified and confirmed.
5. This Amendment shall be governed by, and construed and enforced in
accordance with, the laws of The Commonwealth of Massachusetts, without regard
to its principles of conflicts of laws.
6. This Amendment may be executed in any number of counterparts, each of
which shall be an original and all of which together shall constitute one
instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-3-
<PAGE> 49
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of date first above written.
THE COMPANY:
OBJECT DESIGN, INC.
By: /s/ Kenneth E. Marshall
-----------------------------
Title: President & CEO
THE PURCHASER:
AT&T VENTURES, L.P.
By: /s/ Neal Douglas
-----------------------------
Title: General Partner
THE INVESTORS:
AENEAS VENTURE CORPORATION
By: /s/ [SIGNATURE]
-----------------------------
Title:
--------------------------
VISTA III, L.P.
By: Vista III Partners, L.P.
its General Partner
By: /s/ Gerald B. Bay
-----------------------------
General Partner
ORIEN I, L.P.
By: Orien Partners, L.P.
its General Partner
By: /s/ George Kalan
-----------------------------
Managing General Partner
-4-
<PAGE> 50
NEW ENTERPRISE ASSOCIATES V,
LIMITED PARTNERSHIP
By: NEA Partners V,
Limited Partnership
By: /s/ Arthur Marks
-----------------------------------
General Partner
THE SILVERADO FUND I,
LIMITED PARTNERSHIP
By: NEA Silverado
Partners I,
Limited Partnership
By: /s/ Arthur Marks
-----------------------------------
General Partner
OLIVETTI HOLDING N.V.
By: /s/ Alexandra Giurgin
-----------------------------------
Attorney-in-Fact
PHILIPS VENTURE FUND I, L.P.
By: Vista Ventures Partners II
By: /s/ Gerald B. Bay
-----------------------------------
General Partner
APERTURE ASSOCIATES, L.P.
BY: Horsley Keogh Associates Inc.,
its General Partner
/s/ N. Dan Reeve
---------------------------------------
N. Dan Reeve, Managing Director
-5-
<PAGE> 51
BRENTWOOD ASSOCIATES V, L.P.
By: Brentwood V Ventures,
L.P., its General Partner
By: /s/ John Walecka
-----------------------------------------------
Its: General Partner
INTERNATIONAL BUSINESS
MACHINES CORPORATION
By: /s/ [SIGNATURE]
-----------------------------------------------
Title: AGM, Finance & Planning, PRGS
PACIFICORP CREDIT, INC.
By:
-----------------------------------------------
Title:
--------------------------------------------
THE STOCKHOLDERS:
/s/ Thomas M. Atwood
---------------------------------------------------
Thomas M. Atwood
/s/ David Stryker
---------------------------------------------------
David Stryker
/s/ Eugene Bonte
---------------------------------------------------
Eugene Bonte
Cooper, Raburn & Kniffin
Limited Partnership
By: /s/ CKR Limited Partnership General Partnership
-----------------------------------------------
Title: By Managing General Partner
/s/ Daniel L. Weinreb
---------------------------------------------------
Daniel L. Weinreb
-6-
<PAGE> 52
/s/ Sam Haradhvala
-----------------------------------
Sam Haradhvala
/s/ Jack Orenstein
-----------------------------------
Jack Orenstein
/s/ Charles W. Lamb
-----------------------------------
Charles W. Lamb
-----------------------------------
Stanley B. Zdonik
-----------------------------------
David Maier
-----------------------------------
Anne Cuervo
-----------------------------------
Mitchell Model, individually
and as custodian for Jonah
Mirah Model and Mirah Aliyah
Model under the Massachusetts
Uniform Transfers to Minors Act
-7-
<PAGE> 53
EXHIBIT 10.22
AMENDMENT NO. 6 TO AMENDED AND
RESTATED REGISTRATION RIGHTS AGREEMENT
Amendment dated as of the 31st day of March, 1994 by and among Object
Design, Inc., a Delaware corporation (the "Company"), the holders of shares of
the Company's Series A Convertible Preferred Stock (the "Series A Preferred
Stock"), the holders of shares of the Company's Series B Convertible Preferred
Stock (the "Series B Preferred Stock"), the holders of shares of the Company's
Series C Convertible Preferred Stock (the "Series C Preferred Stock"), the
holders of shares of the Company's Series D Convertible Preferred Stock (the
"Series D Preferred Stock"), the holders of shares of the Company's Series E
Convertible Preferred Stock (the "Series E Preferred Stock"), the holders of
shares of the Company's Series F Preferred Stock (the "Series F Convertible
Preferred Stock"), the holders of shares of the Company's Series G Convertible
Preferred Stock (the "Series G Preferred Stock"), the holders of shares of the
Company's Series H Convertible Preferred Stock (the "Series H Preferred Stock"),
the Stockholders as listed on Schedule II to the Amended and Restated
Registration Rights Agreement dated as of June 29, 1990 (the "Stockholders"),
PacifiCorp Credit, Inc. d/b/a Pacific Venture Finance, Inc. ("PacifiCorp") and
the holders of the Series I Preferred Stock (as defined below) (the holders of
the Series A Preferred Stock, the Series B Preferred Stock, the Series C
Preferred Stock, the Series D Preferred Stock, the Series E Preferred Stock, the
Series F Preferred Stock, the Series G Preferred Stock, the Series H Preferred
Stock and the Series I Preferred Stock are collectively referred to herein as
the "Investors").
WHEREAS, pursuant to the Series I Convertible Preferred Stock Purchase
Agreement dated as of the date hereof by and among the Company and certain of
the Investors (the "Stock Purchase Agreement"), the Company has agreed to issue
and sell shares of Series I Convertible Preferred Stock (the "Series I Preferred
Stock") to certain of the Investors (the "Purchasers");
WHEREAS, the Company has agreed to grant the Purchasers certain
registration rights with respect to the Series I Preferred Stock;
WHEREAS, the Company, the holders of the Company's Series A Preferred
Stock and Series B Preferred Stock and the Stockholders are parties to an
Amended and Restated Registration Rights Agreement dated as of June 29, 1990,
pursuant to which the Company has granted such parties registration rights with
respect to certain securities held by them;
WHEREAS, such Amended and Restated Registration Rights Agreement was
amended as of October 1, 1990 in order to grant
<PAGE> 54
certain registration rights to PacifiCorp, was amended as of July 29, 1991 in
order to grant certain registration rights to the holders of Series C Preferred
Stock, was amended as of March 12, 1992 in order to grant certain registration
rights to the holders of Series D Preferred Stock, was further amended as of
April 12, 1993 in order to grant certain registration rights to the holders of
Series E Preferred Stock and to the holders of Series F Preferred Stock and was
still further amended as of May 14, 1993 in order to grant certain registration
rights to the holders of Series G Preferred Stock and to the holders of Series H
Preferred Stock (such Amended and Restated Registration Rights Agreement, as
amended, is hereafter referred to as the "Registration Rights Agreement"); and
WHEREAS, it is a condition of the Stock Purchase Agreement that the
parties hereto amend certain portions of the Registration Rights Agreement to
provide for the grant of certain registration rights to the holders of Series I
Preferred Stock;
NOW, THEREFORE, and for a valuable consideration, receipt of which is
hereby acknowledged by each party, the parties hereto hereby agree as follows:
1. The Registration Rights Agreement is hereby amended by deleting
Schedule I thereto in its entirety and by inserting Schedule I attached hereto
in its place and stead.
2. Section 1 of the Registration Rights Agreement is hereby amended by
deleting the definition of "Preferred Shares" in its entirety and by inserting
the following in its place and stead:
"Preferred Shares" shall mean the issued shares of Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock,
Series C Convertible Preferred Stock, Series D Convertible Preferred
Stock, Series E Convertible Preferred Stock, Series F Convertible
Preferred Stock, Series G Convertible Preferred Stock, Series H
Convertible Preferred Stock and Series I Convertible Preferred Stock,
together with shares of any other series of preferred stock issued by
the Company in exchange for shares of Series A Convertible Preferred
Stock, Series B Convertible Preferred Stock, Series C Convertible
Preferred Stock, Series D Convertible Preferred Stock, Series E
Convertible Preferred Stock, Series F Convertible Preferred Stock,
Series G Convertible Preferred Stock, Series H Convertible Preferred
Stock and Series I Convertible Preferred Stock, pursuant to the
Restated Certificate of Incorporation of the Company, as amended or
restated from time to time."
3. Section 4 of the Registration Rights Agreement is hereby amended by
deleting the date "June 29, 1994" from the
-2-
<PAGE> 55
fourth and fifth lines thereof and by inserting the date "June 29, 1996" in its
place and stead.
4. Subsection 13(a) of the Registration Rights Agreement is hereby
amended by deleting the term "Purchase Agreement" from the thirteenth line
thereof and by inserting the following in its place and stead:
"Series A Convertible Preferred Stock Purchase Agreement, the Series B
Convertible Preferred Stock Purchase Agreement, the Series C
Convertible Preferred Stock Purchase Agreement, the Series D
Convertible Preferred Stock Purchase Agreement, the Series E and
Series F Convertible Preferred Stock Purchase Agreement, the Series G
and Series H Convertible Preferred Stock Purchase Agreement or the
Series I Convertible Preferred Stock Purchase Agreement, as the case
may be,"
5. Unless otherwise defined herein and as modified herein, defined terms
herein shall have the same meaning as in the Registration Rights Agreement.
6. By executing this Amendment, each party hereto who or which was not an
original signatory of the Registration Rights Agreement shall become a party to
the Registration Rights Agreement, shall be entitled to the rights and benefits
conferred thereby and shall be bound by the terms thereof as fully as if such
party were an original signatory thereof.
7. The Registration Rights Agreement, as amended to date, is hereby
ratified and confirmed.
8. This Amendment shall be governed by, and construed and enforced in
accordance with, the laws of The Commonwealth of Massachusetts, without regard
to its principles of conflicts of laws.
9. This Amendment may be executed in any number of counterparts, each of
which shall be an original and all of which together shall constitute one
instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-3-
<PAGE> 56
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of date first above written.
THE COMPANY:
OBJECT DESIGN, INC.
By: /s/ Kenneth E. Marshall
------------------------------
Title: President & CEO
THE INVESTORS:
AENEAS VENTURE CORPORATION
By: /s/ [SIGNATURE]
------------------------------
Title: AUTHORIZED SIGNATORY
By: /s/ Tim Palmer
------------------------------
Title: AUTHORIZED SIGNATORY
APERTURE ASSOCIATES, L.P.
BY: Horsley Keogh Associates, Inc.,
its General Partner
/s/ N. Dan Reeve
----------------------------------
N. Dan Reeve, Managing Director
AT&T VENTURE COMPANY, L.P.
By: /s/ Neil Douglas
------------------------------
Title: General Partner
BRENTWOOD ASSOCIATES V, L.P.
By: Brentwood V Ventures,
L.P., its General Partner
By: /s/ John Walecka
------------------------------
Its General Partner
-4-
<PAGE> 57
INTEL CORPORATION
By: /s/ Arvind Sodhani
-------------------------------
Title: Vice President and Treasurer
INTERNATIONAL BUSINESS
MACHINES CORPORATION
By: /s/ [SIGNATURE]
-------------------------------
Title: Division Director of Finance
NEW ENTERPRISE ASSOCIATES V,
LIMITED PARTNERSHIP
By: NEA Partners V,
Limited Partnership
By: /s/ Nancy Dorman
-------------------------------
General Partner
OLIVETTI HOLDING N.V.
By: /s/ Alexandra Giurgin
-------------------------------
Attorney-in-Fact
ORIEN I, L.P.
By: Orien Partners, L.P.,
its General Partner
By: /s/ [SIGNATURE]
-------------------------------
Managing General Partner
PHILIPS VENTURE FUND I, L.P.
By: Vista Venture Partners II
By: /s/ Gerald B. Bay
-------------------------------
General Partner
-5-
<PAGE> 58
THE SILVERADO FUND I,
LIMITED PARTNERSHIP
By: NEA Silverado
Partners I,
Limited Partnership
By: /s/ Charles W. Newlyan III
-------------------------------
General Partner
VISTA III, L.P.
By: Vista III Partners, L.P.,
its General Partner
By: /s/ Gerald B. Bay
-------------------------------
General Partner
ZUKEN INCORPORATED
By: /s/ [SIGNATURE]
-------------------------------
Title: Managing Director
PACIFICORP CREDIT, INC.
By:
-------------------------------
Title:
----------------------------
THE STOCKHOLDERS:
/s/ Thomas M. Atwood
-----------------------------------
Thomas M. Atwood
/s/ Eugene Bonte
-----------------------------------
Eugene Bonte
-6-
<PAGE> 59
Cooper, Raburn & Kniffin
Limited Partnership
By: CKP LP, GP
By: /s/ Philip Cooper
-------------------------------
Title: GP
-----------------------------------
Anne Cuervo
/s/ Sam Haradhvala
-----------------------------------
Sam Haradhvala
/s/ Charles W. Lamb
-----------------------------------
Charles W. Lamb
-----------------------------------
David Maier
-----------------------------------
Mitchell Model, individually
and as custodian for Jonah
Mirah Model and Mirah Aliyah
Model under the Massachusetts
Uniform Transfers to Minors Act
/s/ Jack Orenstein
-----------------------------------
Jack Orenstein
/s/ David Stryker
-----------------------------------
David Stryker
/s/ Daniel L. Weinreb
-----------------------------------
Daniel L. Weinreb
-----------------------------------
Stanley B. Zdonik
-7-
<PAGE> 60
Schedule I
Purchasers
<TABLE>
<S> <C>
1. Aeneas Venture Corporation 7. New Enterprise Associates V,
600 Atlantic Avenue Limited Partnership
15th Floor 1119 St. Paul Street
Boston, Massachusetts 02210 Baltimore, Maryland 21202
2. Aperture Associates, L.P. 8. Olivetti Holding N.V.
c/o N. Dan Reeve c/o Caribbean Management Company
505 Montgomery Street P.O. Box 889
San Francisco, California Curacao, Netherlands Antilles
94111
9. Orien I, L.P.
3. AT&T Venture Company, L.P. 315 Post Road West
3000 Sand Hill Road, Bldg. 4 Westport, Connecticut 06880
Suite 235
Menlo Park, CA 94025 10. Philips Venture Fund I, L.P.
Attn: Neal Douglas 36 Grove Street
New Canaan, Connecticut 06840
4. Brentwood Associates V, L.P.
c/o John L. Walecka 11. The Silverado Fund I Limited
3000 Sand Hill Road Partnership
Building 3, Suite 620 1119 St. Paul Street
Menlo Park, California 94025 Baltimore, Maryland 21202
5. Intel Corporation 12. Vista III, L.P.
2200 Mission College Blvd. 36 Grove Street
Santa Clara, California 95052 New Canaan, Connecticut 06840
Attn: Mr. Richard Passov
Treasury Manager 13. Zuken Incorporated
Mergers and Acquisitions 2-25-1, Edahigashi, Midori-Ku
Yokohama, 225
6. International Business JAPAN
Machines Corporation Attn: Minoru Kitamura
Old Orchard Road Manager, Business Planning
Office 2C-99 Section
Armonk, New York 10504
Attn: Mr. M. W. Szeto
</TABLE>
-8-
<PAGE> 61
EXHIBIT 10.22
AMENDMENT NO. 7 TO AMENDED AND
RESTATED REGISTRATION RIGHTS AGREEMENT
Amendment dated as of the 13th day of February, 1996 by and among
Object Design, Inc., a Delaware corporation (the "Company"), the holders of
shares of the Company's Series A Convertible Preferred Stock (the "Series A
Preferred Stock"), the holders of shares of the Company's Series B Convertible
Preferred Stock (the "Series B Preferred Stock"), the holders of shares of the
Company's Series C Convertible Preferred Stock (the "Series C Preferred Stock"),
the holders of shares of the Company's Series D Convertible Preferred Stock (the
"Series D Preferred Stock"), the holders of shares of the Company's Series E
Convertible Preferred Stock (the "Series E Preferred Stock"), the holders of
shares of the Company's Series F Preferred Stock (the "Series F Convertible
Preferred Stock"), the holders of shares of the Company's Series G Convertible
Preferred Stock (the "Series G Preferred Stock"), the holders of shares of the
Company's Series H Convertible Preferred Stock (the "Series H Preferred Stock"),
the holders of shares of the Company's Series I Convertible Preferred Stock (the
"Series I Preferred Stock"), the Stockholders as listed on Schedule II to the
Amended and Restated Registration Rights Agreement dated as of June 29, 1990
(the "Stockholders"), PacifiCorp Credit, Inc. d/b/a Pacific Venture Finance,
Inc. ("PacifiCorp") and the holders of the Series J Preferred Stock (as defined
below) (the holders of the Series A Preferred Stock, the Series B Preferred
Stock, the Series C Preferred Stock, the Series D Preferred Stock, the Series E
Preferred Stock, the Series F Preferred Stock, the Series G Preferred Stock, the
Series H Preferred Stock, the Series I Preferred Stock and the Series J
Preferred Stock are collectively referred to herein as the "Investors").
WHEREAS, pursuant to the Series J Convertible Preferred Stock Purchase
Agreement dated as of the date hereof by and among the Company and certain of
the Investors (the "Stock Purchase Agreement"), the Company has agreed to issue
and sell shares of Series J Convertible Preferred Stock (the "Series J Preferred
Stock") to certain of the Investors (the "Purchasers");
WHEREAS, the Company has agreed to grant the Purchasers certain
registration rights with respect to the Series J Preferred Stock;
WHEREAS, the Company, the holders of the Company's Series A Preferred
Stock and Series B Preferred Stock and the Stockholders are parties to an
Amended and Restated Registration Rights Agreement dated as of June 29, 1990,
pursuant to which the Company has granted such parties registration rights with
respect to certain securities held by them;
<PAGE> 62
WHEREAS, such Amended and Restated Registration Rights Agreement was
amended as of October 1, 1990 in order to grant certain registration rights to
PacifiCorp, was amended as of July 29, 1991 in order to grant certain
registration rights to the holders of Series C Preferred Stock, was amended as
of March 12, 1992 in order to grant certain registration rights to the holders
of Series D Preferred Stock, was amended as of April 12, 1993 in order to grant
certain registration rights to the holders of Series E Preferred Stock and to
the holders of Series F Preferred Stock, was further amended as of May 14, 1993
in order to grant certain registration rights to the holders of Series G
Preferred Stock and to the holders of Series H Preferred Stock and was still
further amended as of March 31, 1994 in order to grant certain registration
rights to the holders of Series I Preferred Stock (such Amended and Restated
Registration Rights Agreement, as amended, is hereafter referred to as the
"Registration Rights Agreement"); and
WHEREAS, it is a condition of the Stock Purchase Agreement that the
parties hereto amend certain portions of the Registration Rights Agreement to
provide for the grant of certain registration rights to the holders of Series J
Preferred Stock;
NOW, THEREFORE, and for a valuable consideration, receipt of which is
hereby acknowledged by each party, the parties hereto hereby agree as follows:
1. The Registration Rights Agreement is hereby amended by deleting
Schedule I thereto in its entirety and by inserting Schedule I attached hereto
in its place and stead.
2. Section 1 of the Registration Rights Agreement is hereby amended by
deleting the definition of "Preferred Shares" in its entirety and by inserting
the following in its place and stead:
"Preferred Shares" shall mean the issued shares of Series A
Convertible Preferred Stock, Series B Convertible Preferred
Stock, Series C Convertible Preferred Stock, Series D
Convertible Preferred Stock, Series E Convertible Preferred
Stock, Series F Convertible Preferred Stock, Series G
Convertible Preferred Stock, Series H Convertible Preferred
Stock and Series I Convertible Preferred Stock, together with
shares of any other series of preferred stock issued by the
Company in exchange for shares of Series A Convertible
Preferred Stock, Series B Convertible Preferred Stock, Series
C Convertible Preferred Stock, Series D Convertible Preferred
Stock, Series E Convertible Preferred Stock, Series F
Convertible Preferred Stock, Series G Convertible Preferred
Stock, Series H Convertible Preferred Stock, Series I
Convertible Preferred Stock and Series J Convertible Preferred
Stock, pursuant to the Restated Certificate
-2-
<PAGE> 63
of Incorporation of the Company, as amended or restated
from time to time."
3. Section 4 of the Registration Rights Agreement is hereby amended by
deleting the date "June 29, 1996" from the fourth and fifth lines thereof and by
inserting the date "June 29, 1998" in its place and stead.
4. Subsection 13(a) of the Registration Rights Agreement is hereby
amended by deleting the term "Purchase Agreement" from the thirteenth line
thereof and by inserting the following in its place and stead:
"Series A Convertible Preferred Stock Purchase Agreement, the
Series B Convertible Preferred Stock Purchase Agreement, the
Series C Convertible Preferred Stock Purchase Agreement, the
Series D Convertible Preferred Stock Purchase Agreement, the
Series E and Series F Convertible Preferred Stock Purchase
Agreement, the Series G and Series H Convertible Preferred
Stock Purchase Agreement, the Series I Convertible Preferred
Stock Purchase Agreement or the Series J Convertible Preferred
Stock Purchase Agreement, as the case may be,"
5. Unless otherwise defined herein and as modified herein, defined
terms herein shall have the same meaning as in the Registration Rights
Agreement.
6. By executing this Amendment, each party hereto who or which was not
an original signatory of the Registration Rights Agreement shall become a party
to the Registration Rights Agreement, shall be entitled to the rights and
benefits conferred thereby and shall be bound by the terms thereof as fully as
if such party were an original signatory thereof.
7. The Registration Rights Agreement, as amended to date, is hereby
ratified and confirmed.
8. This Amendment shall be governed by, and construed and enforced in
accordance with, the laws of The Commonwealth of Massachusetts, without regard
to its principles of conflicts of laws.
9. This Amendment may be executed in any number of counterparts, each
of which shall be an original and all of which together shall constitute one
instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-3-
<PAGE> 64
AMENDMENT NO. 7 TO REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed as of date first above written.
THE COMPANY:
OBJECT DESIGN, INC.
By:______________________________
Title:___________________________
THE INVESTORS:
AENEAS VENTURE CORPORATION
By:______________________________
Title:___________________________
ATGF II
By:______________________________
Title:___________________________
APERTURE ASSOCIATES, L.P.
By: Horsley Bridge Partners
Inc., its General Partner
By:______________________________
Managing Director
AT&T VENTURE COMPANY, L.P.
-4-
<PAGE> 65
By:______________________________
Title:___________________________
-5-
<PAGE> 66
AMENDMENT NO. 7 TO REGISTRATION RIGHTS AGREEMENT
BRENTWOOD ASSOCIATES V, L.P.
By: Brentwood V Ventures,
L.P., its General Partner
By:______________________________
Its:_____________________________
INTEL CORPORATION
By:______________________________
Its:_____________________________
INTERNATIONAL BUSINESS
MACHINES CORPORATION
By:______________________________
Its:_____________________________
NEW ENTERPRISE ASSOCIATES V,
LIMITED PARTNERSHIP
By: NEA Partners V,
Limited Partnership
By:______________________________
General Partner
OLIVETTI HOLDING N.V.
By:______________________________
Attorney-in-Fact
ORIEN I, L.P.
By: Orien Partners, L.P.,
its General Partner
-6-
<PAGE> 67
By:______________________________
Managing General Partner
-7-
<PAGE> 68
AMENDMENT NO. 7 TO REGISTRATION RIGHTS AGREEMENT
PHILIPS VENTURE FUND I, L.P.
By: Vista Ventures Partners II
By:_________________________________
General Partner
VISTA III, L.P.
By: Vista III Partners, L.P.,
its General Partner
By:_________________________________
General Partner
ZUKEN INCORPORATED
By:_________________________________
Title:______________________________
PACIFICORP CREDIT, INC.
By:_________________________________
Title:______________________________
THE STOCKHOLDERS:
____________________________________
Thomas M. Atwood
-8-
<PAGE> 69
AMENDMENT NO. 7 TO REGISTRATION RIGHTS AGREEMENT
___________________________________
Eugene Bonte
Cooper, Raburn & Kniffin
Limited Partnership
By:________________________________
Title:_____________________________
___________________________________
Anne Cuervo
___________________________________
Sam Haradhvala
___________________________________
Charles W. Lamb
___________________________________
David Maier
___________________________________
Mitchell Model, individually
and as custodian for Jonah
Mirah Model and Mirah Aliyah
Model under the Massachusetts
Uniform Transfers to Minors
Act
___________________________________
Jack Orenstein
-9-
<PAGE> 70
___________________________________
David Stryker
___________________________________
Daniel L. Weinreb
-10-
<PAGE> 71
AMENDMENT NO. 7 TO REGISTRATION RIGHTS AGREEMENT
___________________________________
Stanley B. Zdonik
-11-
<PAGE> 72
Schedule I
Purchasers
<TABLE>
<S> <C>
1. Aeneas Venture Corporation 8. New Enterprise Associates V, Limited
600 Atlantic Avenue Partnership
15th Floor 1119 St. Paul Street
Boston, Massachusetts 02210 Baltimore, Maryland 21202
2. ATGF II 9. Olivetti Holding N.V.
c/o Amerindo Investment c/o Caribbean Management Company
Advisors, Inc. P.O. Box 889
399 Park Avenue Curacao, Netherlands Antilles
18th Floor
New York, New York 10022 10. Orien I, L.P.
315 Post Road West
3. Aperture Associates, L.P. Westport, Connecticut 06880
c/o N. Dan Reeve
505 Montgomery Street 11. Philips Venture Fund I, L.P.
San Francisco, California c/o John Tomlin
94111 105 N. Second Street, Suite 233
P.O. Box 673
4. AT&T Venture Company, L.P. Livingston, Montana 59047
3000 Sand Hill Road, Bldg. 4
Suite 235 12. The Silverado Fund I Limited
Menlo Park, California 94025 Partnership
Attn: Neal Douglas 1119 St. Paul Street
Baltimore, Maryland 21202
5. Brentwood Associates V, L.P.
c/o John L. Walecka 13. Vista III, L.P.
2730 Sand Hill Road c/o Gerry Bay
Suite 250 27 Newport Street
Menlo Park, California 94025 Jamestown, Rhode Island 02835
6. Intel Corporation 14. Zuken Incorporated
2200 Mission College Blvd. 2-25-1, Edahigashi, Midori-Ku
Santa Clara, California 95052 Yokohama, 225
Attn: Mr. Richard Passov JAPAN
Treasury Manager Attn: Minoru Kitamura
Mergers and Manager, Business Planning
Acquisitions Section
7. International Business
Machines Corporation
4L11, Building 1
Route 100
Somers, New York 10584
Attn: John B. Donaldson
</TABLE>
-12-
<PAGE> 1
Exhibit 10.24
The securities evidenced by this Warrant have not been registered under the
Securities Act of 1933 and must be held indefinitely unless they are transferred
pursuant to an effective registration statement under the Act, or after receipt
of an opinion of counsel satisfactory to the Company that registration is not
required.
Warrant No. 1 57,858 Shares
October 1, 1990
PREFERRED STOCK PURCHASE WARRANT
--------------------------------
To Subscribe for Shares of
Series B Convertible Preferred Stock
of
OBJECT DESIGN, INC.
THIS CERTIFIES THAT, for value received, PacifiCorp Credit, Inc. d/b/a
Pacific Venture Finance, Inc. is entitled to subscribe for and purchase from
Object Design, Inc. (the "Company") 57,858 shares of the Company's Series B
Convertible Preferred Stock, par value $.001 per share (the "Stock"), at a price
of $1.40 per share (with adjustments provided for herein, the "Warrant Price")
at any time from the date hereof to and including the earlier of October 1, 2000
and the closing of a Public Offering (as defined in Section 9(b)), subject to
the terms and conditions stated herein. This Warrant (the "Warrant") is issued
under and pursuant to the terms of a Master Lease and Warrant Agreement dated as
of October 1, 1990 between the Company and PacifiCorp Credit, Inc. d/b/a Pacific
Venture Finance, Inc. (the "Lease Agreement").
<PAGE> 2
1. Exercise of Warrant
-------------------
The rights represented by this Warrant may be exercised by the holder
hereof in whole or in part by the surrender of this Warrant and delivery of an
executed Subscription Agreement in the form appended hereto to the Company at
its principal office in Burlington, Massachusetts at any time or times within
the period specified above, accompanied by payment for the Stock so subscribed
for in cash or by certified or bank check. In the event of the partial exercise
of the rights represented by this Warrant, a new Warrant representing the number
of shares as to which this Warrant shall not have been exercised shall be
promptly issued to the holder. In any event, such new Warrant and a certificate
or certificates for the Stock purchased by exercise of this Warrant shall be
delivered by the Company to the holder not later than ten days after payment is
made for the purchased Stock.
2. Investment Representation
-------------------------
The holder by accepting this Warrant represents that the Warrant is
acquired for the holder's own account for investment purposes and not with a
view to any offering or distribution and that the holder has no present
intention of selling or otherwise disposing of the Warrant or any portion
thereof, the underlying shares of Stock or the shares of Common Stock issuable
upon conversion of the Stock in violation of applicable securities laws. Upon
exercise or conversion, as the case may be, the holder will confirm, in respect
of securities obtained upon such exercise or conversion, as the case may be,
that he is acquiring such securities for his own account and not with a view to
any offering or distribution in violation of applicable securities laws.
3. Validity of Issue
-----------------
The Company warrants and agrees that all shares of Stock which may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance, be fully paid and non-assessable and free from all taxes, liens and
charges with respect to the issue thereof. The Company further warrants and
agrees that during the period within which the rights represented by this
Warrant may be exercised the Company will at all times have authorized and
reserved a sufficient number of shares of Stock to provide for the exercise of
the rights represented by this Warrant and a sufficient number of shares of
Common Stock of the Company to provide for the conversion of shares of Stock
purchased pursuant to this Warrant.
4. Adjustments to Prevent Dilution
-------------------------------
(a) If any capital reorganization or reclassification of the capital stock
of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or
-2-
<PAGE> 3
substantially all of its assets or any successor corporation's property and
assets to any other corporation or corporations (any such corporation being
included within the meaning of the term "successor corporation") shall be
effected, then, as a condition of such recapitalization, reclassification,
consolidation, merger, or sale, lawful and adequate provision shall be made
whereby the holder hereof shall thereafter have the right to purchase and
receive upon the basis and upon the terms and conditions specified in this
Warrant and in lieu of the shares of Stock immediately theretofore purchasable
and receivable upon the exercise of the rights represented hereby, such shares
of stock, securities or assets as may be issued or payable with respect to or in
exchange for the number of outstanding shares of such Stock immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby had such recapitalization, reclassification, consolidation,
merger or conveyance not taken place, and in any such case appropriate
provisions shall be made with respect to the rights and interests of the holder
of this Warrant to the end that the provisions hereof (including without
limitation provisions for adjustment of the Warrant Price and of the number of
shares purchasable upon the exercise of this Warrant) shall thereafter be
applicable, as nearly as may be practicable in relation to any shares of stock,
securities or assets thereafter deliverable upon the exercise hereof. Except as
hereinafter provided, the Company shall not effect any consolidation or merger
unless prior to the consummation thereof the successor corporation shall assume
by written instrument executed and mailed to the holder at his address
registered on the books of the Company the obligation to deliver to the holder
hereof such shares of stock, securities or assets as, in accordance with the
foregoing provisions, such holder may be entitled to purchase. Notwithstanding
the foregoing, in the event of a merger or consolidation in which the Company
is not the surviving entity, if the Company concludes that it will be unable to
satisfy the conditions of this paragraph without a material adverse effect on
the terms of such proposed transaction, then the Company shall have the option,
prior to or contemporaneously with the closing of such merger or consolidation,
to purchase the Warrant from the holder thereof at its then fair value,
determined with regard to both the spread between the Warrant Price and the
value of the consideration to be received in the transaction and the remaining
term of the Warrant. The Company and the holder of the Warrant shall agree on
such fair value or, in the event that they are unable to agree, shall submit the
question of fair value to binding arbitration before a single arbitrator
selected in accordance with the commercial rules of the American Arbitration
Association sitting in Boston, Massachusetts, and determined under such rules
(any cost of arbitration to be shared equally.)
(b) In the case of an automatic conversion of the Stock upon the occurrence
of any of the events described in Paragraph 6A(2) of the Company's Articles of
Incorporation, as amended, filed with the Secretary of The State of Delaware as
-3-
<PAGE> 4
they may be further amended from time to time, the holder hereof shall
thereafter be entitled to obtain upon exercise of this Warrant in lieu of the
shares of Stock of the Company immediately theretofore purchasable, the number
of such shares of Common Stock which such holder would have received had he held
the number of shares of Stock subject to the Warrant at the time of the
automatic conversion.
(c) If the Company shall subdivide or combine its shares of outstanding
Stock into a greater or smaller number of shares, then in each such case the
Warrant Price and the number of shares of Stock issuable upon exercise of this
Warrant shall be appropriately adjusted.
(d) Upon any adjustment of the Warrant Price, then and in each such case
the Company shall give written notice of such adjustment and the adjusted number
of shares of Stock issuable upon the exercise of the Warrant by first class
mail, postage prepaid, addressed to the holder of this Warrant at his address
registered on the books of the Company, which notice shall state the Warrant
Price resulting from such adjustment and, if applicable, the increased or
decreased number of shares purchasable at such price upon the exercise of this
Warrant, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based.
5. Notice of Reorganization, etc.
------------------------------
(a) In case at any time:
(1) The Company shall declare any dividend upon its Stock whether payable
in cash, property or Common Stock or make any distribution to the holders of its
Common Stock; or
(2) there shall be any capital reorganization, or reclassification of the
capital stock of the Company, or consolidation or merger of the Company with
another corporation; or
(3) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then, in each one or more of said cases, the Company shall give at least 20
days' prior written notice, by first class mail, postage prepaid, addressed to
the holder at his address registered on the books of the Company of (i) the date
on which the books of the Company shall close or a record shall be taken for
purposes of ascertaining which shareholders will be entitled to participate in
such dividend or distribution or will be entitled to vote on such
reclassification, reorganization, consolidation, merger, dissolution,
liquidation or winding up, as the case may be; (ii) the date on which the vote
shall be taken concerning such reclassification, reorganization, consolidation,
merger, dissolution, liquidation or winding up, as the case may
-4-
<PAGE> 5
be, is to be effective; and (iii) the date on which such dividend or
distribution is to be paid on such reclassification, reorganization,
consolidation, merger, dissolution, liquidation, or winding up, as the case may
be, is to be effective. Such notice shall also specify the date as of which the
holders of Common Stock of record shall participate in such dividend or
distribution or shall be entitled to exchange their stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, dissolution, liquidation or winding up, as the case may
be.
(b) In case at any time the Board of Directors of the Company determines
that it may authorize a Public Offering of the Company's Common Stock, then, in
each of one or more said cases, the Company shall, as soon as practicable but
with no less than 20 days' prior written notice, by first class mail, postage
prepaid, so notify the holder of this Warrant. Upon such notification, the
holder of this Warrant may elect to exercise this Warrant, in whole or in part,
in a manner consistent with Section I hereof, contingent upon the closing of
such Public Offering.
6. Issuance of Additional Stock
----------------------------
The Company shall give to the holder hereof at least 20 days' prior written
notice, by first class mail, postage prepaid, addressed to the holder at his
address registered on the books of the Company, of the record date for
determining the holders of Stock who shall be granted rights as a class to
subscribe for or to purchase, or any options for the purchase of, Common Stock
or convertible securities, to the end that the holder hereof may exercise his
rights to acquire Stock under this Warrant, by delivery of an executed
Subscription Agreement in accordance with Section I prior to such record date,
and may thereby receive the same rights as other holders of Common Stock on such
record date.
7. Transferability
---------------
Without the prior written consent of the Company, this Warrant, the Stock,
the shares of Common Stock issuable upon conversion of such Stock or any other
securities issuable upon exercise of the Warrant or conversion of the securities
issuable upon exercise of the Warrant may not be transferred to any person or
entity which directly or indirectly is in competition with the Company.
8. Right to Convert Warrant.
------------------------
(a) The Warrantholder shall have the right to require the Company to
convert this Warrant (the "Conversion Right"), in whole but not in part, as
provided in Section 8(b) below, into shares of Stock as provided for in this
Section 8. Upon exercise of the Conversion Right, the Company shall deliver to
the Warrantholder (without payment by the Warrantholder of any
-5-
<PAGE> 6
Exercise Price) that number of shares of Stock equal to the quotient obtained by
dividing (x) the value of the Warrant at the time the Conversion Right is
exercised (determined by subtracting the aggregate Exercise Price for the Stock
in effect immediately prior to the exercise of the Conversion Right from the
aggregate Fair Market Value for the Stock immediately prior to the exercise of
the Conversion Right) by (y) the Fair Market Value of one share of Stock
immediately prior to the exercise of the Conversion Right.
(b) The Conversion Right may be exercised by the Warrant holder upon the
closing of the Public Offering or at any time or from time to time after the
Company's Common Stock is traded on an exchange, on the over the counter market
or on the NASDAQ National Market System (as hereafter defined) and prior to its
expiration, on any business day by delivering a written notice in the form
attached hereto (the "Conversion Notice") to the Company at the offices of the
Company exercising the Conversion Right and specifying (i) the total number of
shares of Preferred Stock the Warrant holder will purchase pursuant to such
conversion and (ii) a place and at not less than five nor more than 20 business
days from the date of the Conversion Notice for the closing of such purchase.
(c) At any closing under the Section 8(b) hereof, (i) the Warrant holder
will surrender the Warrant and (ii) the Company will deliver to the
Warrantholder a certificate or certificates for the number of shares of Stock
issuable upon such conversion together with cash, in lieu of any fractional
shares.
(d) Fair Market Value of a share of Stock as of a particular date (the
"Determination Date") shall mean the Fair Market Value of a share of the
Company's Common Stock (the "Common Stock") as of such Determination Date
multiplied by the number of shares of Common Stock into which a share of Stock
is convertible. Fair Market Value of a share of Common Stock as of a
Determination Date shall mean:
(i) If the Company's Common Stock is traded on an exchange or is
quoted on the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") National Market System, then the closing or last sale
price, respectively, reported for the business day immediately preceding the
Determination Date.
(ii) If the Company's Common Stock is not traded on an exchange or on
the NASDAQ National Market System but is traded in the over-the-counter market,
then the mean of the closing bid and asked prices reported for the business day
immediately preceding the Determination Date.
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<PAGE> 7
(iii) If the Company's Common Stock is traded on more than one
exchange or on an exchange or exhanges and the NASDAQ National Market System or
the over the counter market, then the lowest price as determined in Sections
8(d)(i) through (ii) above, as the case may be.
(iv) If the Determination Date is the date on the occurrence of a
Public Offering then the public offering price (before deducting commissions,
discounts or expenses) at which the Common Stock, if any, is sold in such
offering.
(v) Notwithstanding anything to the contrary contained in this Section
8, the holder of the Warrant shall not be entitled to convert the Warrant (i)
unless such holder has paid at least the par value for the Stock issuable upon
conversion and (ii) if, in the opinion of the Company's counsel, the Company is
insolvent at the time of conversion or would be rendered insolvent thereby.
9. Miscellaneous
-------------
(a) As used herein the term "Common Stock" shall mean and include the
Company's presently authorized Common Stock, par value $.001 per share, and
stock of any other class into which such presently authorized Common Stock may
hereafter have been changed. For the purposes of Sections 4, 5 and 6, the term
"Common Stock" shall also include any capital stock of any class of the Company
hereafter authorized which shall not be limited to a fixed sum or percentage in
respect of the rights of the holders thereof to participate in dividends or in
the distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the Company.
(b) As used herein the term "Public Offering" shall mean a public sale for
the account of the Company of Common Stock or securities convertible into or
exchangeable for shares of Common Stock, as specified in Paragraph 6A(2)(ii) of
the Company's Articles of Incorporation, as amended, filed with the Secretary of
The State of Delaware, as they may be further amended from time to time.
(c) This Warrant shall not entitle the holder hereof to any voting rights
or other rights as a stockholder of the Company, or to any other rights
whatsoever except the rights herein expressed, and no cash dividend paid out of
earnings or surplus or interest shall be payable or accrue in respect of this
Warrant or the interest represented hereby or the shares which may be subscribed
for and purchased hereunder until and unless and except to the extent that the
rights represented by this Warrant shall be exercised.
(d) This Warrant is exchangeable, upon the surrender thereof at the office
or agency of the Company, for new Warrants of like tenor representing in the
aggregate the right to
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<PAGE> 8
subscribe for and purchase the number of shares which may be subscribed for and
purchased hereunder, each of such new Warrants to represent the right to
subscribe for and purchase such number of shares as shall be designated by said
holder hereof at the time of such surrender.
(e) This Warrant and the name and address of the holder may have been
registered in a Warrant Register that is kept at the principal office of
the Company, and the Company may treat the holder so registered as the absolute
owner of this Warrant for all purposes.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its President and its corporate seal to be hereunto affixed, and attested by its
Secretary on the date first written above.
OBJECT DESIGN, INC.
By: /s/ Kenneth E. Marshall
----------------------------------
President
[Seal]
Attest:
By: /s/ John Patterson
----------------------
Secretary
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<PAGE> 9
SUBSCRIPTION AGREEMENT
To: Object Design, Inc.
The undersigned, pursuant to the provisions set forth in Warrant No. _____,
hereby agrees to subscribe for the purchase of ______ shares of the Stock
covered by such Warrant, and makes payment herewith in full therefor at the
Warrant Price.
Signature ________________________________
Address _________________________________
Date _____________________________________
* * * * * * * * * *
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<PAGE> 10
ASSIGNMENT
For value received _____________________________________ hereby sells,
assigns and transfers all of the rights of the undersigned under Warrant No.
____________________ with respect to the number of shares of Stock covered
thereby set forth below:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
Dated: ______________, 19___
Signature _______________________________
Address__________________________________
__________________________________
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<PAGE> 1
EXHIBIT 10.25
INTERNAL USE AND SUBSTRATE AGREEMENT
AGREEMENT NUMBER STL92107
This Agreement is made as of the tenth day of April, 1993 by and
between object Design, Inc., a Delaware corporation ("ODI") and International
Business Machines, a New York corporation ("IBM").
WHEREAS, ODI has the right to market certain computer
software; and
WHEREAS, IBM is engaged in the business of developing, marketing and
licensing computer software products in the "Territory" (as hereinafter
defined); and
WHEREAS, IBM desires to obtain a non-exclusive license to use the
Software to develop, market and sublicense Software products in the Territory;
NOW THEREFORE, for and in consideration of the mutual agreements and
covenants hereafter set forth, the parties hereto agree as follows:
1. DEFINITIONS
The following terms are defined for the purposes of this Agreement as
follows:
1.1. "Applications" shall mean the software programs that IBM develops
in accordance with Section 3.1 hereof and which incorporate or are designed to
run with Substrate Software or Framework Software.
1.2. "Backfill Copy" shall mean any copy or instance of an Application
which (a) represents the first IBM Version or IBM Release of such Application
incorporating or running with the software and licensed to a particular Customer
as an upgrade to an existing product already being licensed by that Customer and
(b) for which IBM accrues less revenue (due to upgrade incentives or like
discounts) than it would compared to licensing such Application to a Customer
who was not already licensing the existing product. This would include
situations where IBM adds the Software to an existing product that was already
commercially
<PAGE> 2
available either as the initial substrate or as a replacement to a competitive
substrate.
1.3. "Code" shall mean computer programming code. If not otherwise
specified, Code shall include only object Code. Code shall include any
maintenance modifications to such code in existence from time to time, and shall
include Enhancements to such Code when added to the software pursuant to Section
5.3 hereof.
1.3.1."Object Code" shall mean computer programming code,
substantially or entirely in binary form, which is directly executable
by a computer after suitable processing but without the intervening
steps of compilation or assembly.
1.3.2. "Source Code" shall mean computer programming code,
other than Object Code, and related source code level system
documentation, comments and procedural code such as job control
language, which may be printed out or displayed in a human-intelligible
form.
1.4. "Customer" shall mean a permitted sublicensee of one or more
Applications.
1.5. "Derivative Work" shall mean a work which is based upon one or
more preexisting works, such as a revision, enhancement, modification,
translation, abridgment, condensation, expansion, or any other form in which
such preexisting works may be recast, transformed, or adapted, regardless of
packaging or naming of such work, and which, if prepared without authorization
of the owner of the copyright in such preexisting work, would constitute a
copyright infringement. For purposes hereof, a Derivative Work shall also
include any compilation that incorporates such a preexisting work.
1.6. "Development Environment" shall mean a configuration of
the software intended for use in developing applications which
incorporate or are designed to run with the Software.
1.6.1. "ADCP Development Environment". shall mean the
Development Environment when used in conjunction with an ADCP Framework
Application pursuant to Schedule 4 of this Agreement.
<PAGE> 3
1.6.2. "Internal Use Development Environment" shall mean the
Development Environment when used as Internal Use Software.
1.7. "Documentation" shall mean textual material, whether human or
machine-readable, that describes the design, functions, operations, or use of
the Software and that is delivered by ODI with Software pursuant to Sections
5.1, 5.2, 5.3, 5.4 or 5.5 of this Agreement. Documentation includes
Non-Confidential Documentation.
1.8. "Enhancements" shall mean changes and/or additions, other than
Maintenance Modifications, to code, software or Documentation, including
Derivative Works, that ODI (in the case of Software) or IBM (in the case of an
Application) makes available to any of its customers and that improve function,
add new function, or improve performance by changes in system design or coding.
Notwithstanding the foregoing, Enhancements shall not include Unrelated Products
or Special Products.
1.9. "Error" shall include both Programming Error and Documentation
Error, unless otherwise specified.
1.9.1. "Programming Error" shall mean a statement or omission
in the Software than causes or results in a failure to comply with the
applicable Software Documentation.
1.9.2. "Documentation Error" shall mean an omission or an
incomplete or incorrect statement or graphic in Documentation that, if
followed, can lead to or result in a failure of the Software to comply
with or function as specified in the applicable Software Documentation.
1.10. "Extension Environment" shall mean a configuration of the
Software which allows the Customer to compile, link and execute programs which
use existing Application classes (or third-party vendor classes). The Customer
cannot define new classes, or modify the definitions of existing classes, except
that (a) machine-generated methods, such as constructor, destructor and
constraint methods can be added or modified for an existing model class during
installation of model extensions, providing this doesn't change the layout
(schema) of the class, and (b) the list of SOM superclasses for an existing SOM
class can be modified. For the purposes of the foregoing
<PAGE> 4
sentence only, SOM shall be deemed to mean SOM or any equivalent facility which
allows the addition of superclasses without recompilation of any of the code
that uses the modified SOM class. The Extension Environment provides a limited
form of schema modification, but does not provide full schema generation and
certain other tools that are provided by the Development Environment. The
Extension Environment may only be used in Framework Applications. In general,
there shall only be one Extension Environment per workgroup, which shall be used
for database-administration purposes by one member of that workgroup at a time.
1.11. "Framework Application" shall mean any Application which:
(a) Has an architecture which involves (i) a separate module
or component responsible for storage and exchange of data and metadata
(the "Framework Platform") and (ii) a variable number of modules or
components responsible for data analysis, data manipulation or other
processing which interact with the Framework Platform to store,
retrieve or exchange data (the "Framework Tools"); and
(b) Allows (but does not necessarily require), an openended
set of Framework Tools to interact with the Framework Platform,
including Framework Tools which may be developed, marketed or
distributed not only by IBM, but also by entities other than IBM.
Unless the context indicates otherwise, the use of the term "Framework
Application" in this Agreement shall denote both Framework Tools. If an
Application which is capable of being run stand-alone is connected to a
Framework Application as a Framework Tool, the existence of such connection
shall not affect any royalty obligations in respect of Substrate Software which
might otherwise arise with respect to such Application.
1.12. "Framework Supplement" shall mean a supplement to this Agreement,
substantially in the form of Schedule 4 hereof, which sets forth the terms under
which ODI will license IBM to use the Framework Software in conjunction with a
specific Framework Application.
1.13. "IBM Release" shall mean a new version of an Application (a) the
changes to which are composed primarily of
<PAGE> 5
Maintenance Modifications to that Application and (b) that is normally provided
to IBM customers without a separate charge.
1.14. "IBM version" shall mean a new version of an Application that (a)
provides significant Enhancements to that Application or otherwise provides
substantial additional value or utility and (b) is not made available to IBM's
customers without a separate charge. IBM Versions do not include IBM Releases.
1.15. "Maintenance modification" shall mean any modifications or
revisions, other than Enhancements, to Code, Software or Documentation that
correct Errors, support new releases of the operating system with which the
Software is designed to operate, support new input/output devices, or provide
other incidental updates or corrections and that ODI (in the case of Software)
or IBM (in the case of an Application) makes available to any of its customers.
Notwithstanding the foregoing, maintenance modifications shall not include
Unrelated Products or Special Products.
1.16. "Moral Rights" shall mean the following rights attaching to
individual creators which an author may have under applicable laws rights to
identification of authorship, rights of approval on modifications or limitations
on subsequent modification and rights to withdraw a work from distribution.
Moral rights do not include copyrights, patent rights, trade secrets or other
assignable proprietary rights.
1.17. "Non-Confidential Documentation" shall mean Documentation for ODI
Major Release 3.0 of the Software and any subsequent ODI Releases.
1.18. "ODI Competitor" shall mean any of the following entities, or
subsidiaries or successors thereof, unless such subsidiary or successor is
merged completely into an IBM Subsidiary:
(a) Borland;
(b) Informix;
(c) Microsoft;
(d) Objectivity;
<PAGE> 6
(e) Ontos;
(f) Oracle;
(g) 02;
(h) Servio Logic;
(i) Sybase; or
(j) Versant.
1.19. "ODI Material" shall mean "Type A Material" and "Type B
Material." "Type A Material, shall mean the Source Code for Software,
Documentation for all ODI Releases of the Software prior to ODI Major Release
3.0, Documentation (other than Non-Confidential Documentation) received by IBM
from ODI pursuant to Sections 5.3, 5.4 or 5.5 and Schedule 6 hereof, and any
other information, in whatever form, received by IBM from ODI which is
classified as Class II Confidential Information pursuant to the Agreement
Regarding Confidential Information, number STL92602B, dated February 22, 1993
(the "ARCI"), and all parts, copies and modifications thereof. "Type B Material"
shall mean the Software and Non-Confidential Documentation, and all parts,
copies and modifications thereof.
1.20. "ODI Release" shall mean an ODI Major Release or an ODI minor
Release. Unless the context indicates otherwise, "ODI Release" shall comprise
both ODI Major Releases and ODI Minor Releases.
1.20.1. "ODI Major Release" shall mean a new version of the
Software that (a) provides significant Enhancements or otherwise
provides substantial additional value or utility and (b) is normally
denoted by a change in the major release number (e.g., from Release 2.2
to Release 3.0). ODI Major Releases do not include ODI Minor Releases.
1.20.2. "ODI Minor Release" shall mean a new version of the
software (a) the changes to which are composed primarily of maintenance
modifications to that Software and (b) that is normally denoted by a
change in the minor release number (e.g., from Release 2.1 to Release
2.2).
<PAGE> 7
1.21. "Order Supplement" shall mean an order form, substantially in the
form attached hereto as Schedule 11, which IBM may use to designate products and
services from the Product offering List which IBM wishes to license pursuant to
the terms of this Agreement.
1.22. "Product Offering List" shall mean the list of ODI's products and
services which are then currently offered to IBM pursuant to the terms of this
Agreement and are specified in Schedule 1, "Product offering List." The list
will include an overview description of such products and services. ODI agrees
to offer IBM all ODI products, other than Special Products and Unrelated
Products.
1.23. "Quarterly Accounting Period" shall mean a time frame which is
based on a calendar quarter for U.S. transactions and "Accounting Periods" for
transactions in non-U.S. IBM geographies. For Canada, Latin America and the Far
East, the Accounting Period shall mean the last month of the previous calendar
quarter plus the first two months of the relevant calendar quarter. For Europe,
middle East and Africa, the Accounting Period shall mean a period running from
the last week of the last month in the previous calendar quarter and ending on
the last business day of the third full week in the third month of the relevant
calendar quarter.
1.24. "Runtime Environment" shall mean a configuration of the Software
which is not intended for use in developing applications (except to the extent
that a Customer indirectly uses a Runtime Environment embedded in an
Application, which Application is itself intended for use in developing
applications), but does include all the Code and utilities needed to execute
applications developed using ODI's Software. The Runtime Environment does not
provide certain schema generation facilities and certain other tools that are
provided by the Development Environment.
1.25. "Seat" shall mean (a) as to the Development Environment, each
person who executes the Development Environment, and (b) as to the Runtime
Environment, each unique combination of (i) a workstation, terminal, or other
display device and (ii) an instance of any application or other software program
which linkedits (either dynamically or statically) to, and runs in the same
process-space as, the Runtime Environment. Internal Use Software licenses
granted with respect to a
<PAGE> 8
particular Seat may be transferred from one person to another, but any given
license may not, in general, be transferred more than once in a given month.
Notwithstanding the foregoing,'in the case of the MVS and AS/400 versions of the
Software, Seat shall mean the central processing unit.
1.26. "Software" shall mean ODI's software programs as listed on an
Order Supplement and which IBM has the right to license under this Agreement in
object code (as well as any incidental Source Code which ships as part of the
commercial distribution or equivalent thereof), plus Documentation, maintenance
modifications, Enhancements and all Updates thereof. Software shall not include
Special Products or Unrelated Products. "Software" may comprise the Development
Environment, the Extension Environment or the Runtime Environment.
1.26.1. "Framework Software" shall mean the soft,..;are when
used as Substrate Software in a Framework Platform, Framework Tool,
Framework Application, or any combination thereof. Although Substrate
Software is in general, limited to the Runtime Environment, Framework
Software may be either the Runtime Environment, the Extension
Environment or the ADCP Development Environment.
1.26.2. "Internal Use Software" shall mean the Software when
used internally by IBM, its Subsidiaries or its special Contractors in
accordance with this Agreement (a) for the development of Applications
or (b) for the operation of applications that are not commercially
available. Internal Use Software may be either the Runtime Environment
or the Internal Use Development Environment.
1.26.3. "Substrate Software" shall mean the Software when used
in accordance with this Agreement as a data-storage substrate of an
Application. Unless otherwise agreed to in writing by ODI, Substrate
Software shall only be the Runtime Environment. If a particular usage
of the Software would qualify as both Substrate Software and Framework
Software, such Software shall be deemed to be Framework Software for
the purposes of this Agreement.
1.27. "Special Contractors" shall mean third parties who develop
software products (i) on behalf of or in cooperation with IBM and (ii) in which
IBM will receive substantial ownership or
<PAGE> 9
marketing rights. Special Contractors shall not include any ODI Competitor.
1.28. "Special Products" shall mean ODI products, product features or
projects which ODI does not make generally commercially available and which are
not substantially similar to products which ODI makes generally commercially
available. Special Products shall also mean, during the period before their
general commercial availability, ODI products, product features or projects
which (i) ODI does not make generally commercially available for some period of
time but which are ultimately released commercially, and (ii) are funded
directly by the party or parties receiving such Special Products.
Notwithstanding the foregoing, any Software which would otherwise qualify as a
Special Product under this definition, but which is funded by or licensed to IBM
pursuant to this Agreement, shall be deemed not to be a Special Product.
1.29. "Sub-Distributor" shall mean an IBM Subsidiary or other third
party that has an agreement with IBM or an IBM Sub-Distributor to distribute
Applications to Customers in accordance with the terms of this Agreement.
1.30. "Subsidiary" shall mean a corporation, company or other entirety
(i) at least fifty percent (50%) of whose outstanding shares or securities
(representing the right to vote for the election of directors or other managing
authority) are, or (ii) which does not gave outstanding shares or securities, as
may be the cause in a partnership, joint venture or unincorporated association,
but act least fifty percent (50%) of whose ownership interest representing the
right to make the decisions for such corporation, company or other entity is,
now or hereafter, owned or controlled, directly or indirectly, by a party
hereto, but such corporation, company or other entity shall be deemed to be a
Subsidiary only so long as such ownership or control exists.
1.31. "Technical Support" shall mean ODI's providing to IBM, in
addition to warranty service, (i) telephone hot-line support, including
emergency Level 1, 2 and 3 Service and (ii) updates. Additional details are
described in Schedule 5.
1.32. "Territory" shall be world-wide.
<PAGE> 10
1.33. "Unrelated Products" shall mean any ODI products which are not
object-oriented database products or are not Derivative Works of the Software.
1.34. "Updates" shall mean Maintenance modifications and Enhancements
that ODI incorporates into any ODI Release of the Software.
2. FREEDOM OF ACTION
2.1. Notwithstanding anything to the contrary herein,
nothing in this Agreement shall be deemed to limit or prevent:
(a) ODI, directly or indirectly, from marketing, distributing,
licensing or selling the Software to anyone anywhere throughout the world;
(b) Either party from obtaining services or software programs
from other sources or independently developing or acquiring competitive
materials; or
(c) Either party from making, having made, using, leasing,
licensing, selling or otherwise disposing of any products (other than Software)
or services, nor either party's right to deal with any other vendors, suppliers,
contractors or customers.
2.2. It is understood that use of Software by IBM, its Subsidiaries or
its or their Sub-Distributors pursuant to this Agreement will create no
obligations on IBM, its Subsidiaries or its or their Sub-Distributors to limit
or restrict the assignment or reassignment of their employees.
2.3. It is the intention of the parties to maximize the licensing of
ODI Software by IBM and IBM Subsidiaries. To best accomplish this intention it
is agreed that:
(a) IBM's Internal Programming Systems Line of Business or
successor part of IBM will be the point of contact with, and use
reasonable efforts to encourage the licensing and use of Software,
pursuant to the terms of this Agreement, by, the rest of IBM and IBM
Subsidiaries (hereinafter collectively, "IBM Affiliates"). ODI will
assist in marketing to the IBM Affiliates, especially in situations
involving third-party products that are
<PAGE> 11
competitive to the Software. Programming Systems will have the primary
responsibility to marker: and distribute the Software to these other
IBM entities and to manage the overall relationship with them;
(b) Programming Systems will independently establish the
prices for which it will sublicense and distribute the Software to the
IBM Affiliates, and will provide a list of such internal prices to ODI.
The parties recognize that in certain transactions when an IBM
Affiliate may be considering third-party products that are competitive
to the Software, IBM and ODI will cooperate and may agree on alternate
royalties to be paid by IBM to ODI for any such transaction; and
(b) Both parties will establish the communications necessary
to keep each other aware, in a timely fashion, of significant
opportunities for the licensing of Software by the IBM Affiliates.
Nothing herein prohibits ODI from communicating directly with IBM
Affiliates; however, ODI will give Programming Systems reasonable time
to participate in these contacts with the IBM Affiliates. If ODI
licenses Software directly to an IBM Affiliate, (i) ODI shall have sole
discretion over the amounts of Software license fees, royalties,
Technical Support fees or fees in respect of any distribution or
re-marketing arrangement ODI charges to such IBM Affiliate and (ii) any
such Software license fees, royalties, Technical Support fees or fees
in respect of any distribution or re-marketing arrangement paid to ODI
by IBM or such IBM Affiliates will count towards any of IBM's
obligations under sections 6.4, 6.13, and Schedule 3, in the amounts
ODI would have received if IBM's Programming Systems had sublicensed
such Software to such IBM Affiliate.
3. GRANT OF LICENSES
3.1. ODI hereby grants to IBM, and IBM hereby accepts, the following
non-exclusive, non-transferable world-wide licenses, under ODI's patents,
copyrights and other intellectual property rights, subject to the terms and
conditions of this Agreement:
(a) A license to (i) copy and distribute internally and to
Subsidiaries bound by the agreement specified in Section 3.5 or Section
3.6, and (ii) operate the Internal Use Software in accordance with
ODI's instructional and
<PAGE> 12
operational manuals for the purposes of IBM's internal use and IBM's
development of Applications and provision of support services to
Customers.
(b) A license to use the Internal Use Software for education
and training (i) of employees of IBM or its Subsidiaries in the use of
the Internal Use Software or (11) pursuant to a written agreement which
the parties may execute in the future concerning the provision by IBM
or its Subsidiaries of education and training in the use of the
Development Environment (the "Education Agreement").
(c) A license to use, market, distribute and sublicense by
itself and through authorized Sub-Distributors the Substrate Software
as part of and embedded in Applications. This license includes a
license to copy the Substrate Software in conjunction with copying
Applications and documentation for the purposes of distributing and
sublicensing the Applications. This license also includes the right to
grant sublicenses to Customers to copy the Substrate Software in
conjunction with copying Applications for back-up and archival
purposes.
(d) A license to operate the Substrate Software for the sole
purpose of (i) demonstrating the operation and capabilities of the
Applications to prospective Sub-Distributors and Customers or (ii)
providing training or education in the use of Applications.
(e) A license to copy the Software for archival or backup
purposes. All archival and backup copies of the Software are subject to
the provisions of this Agreement, and all copyright, trademark,
government restricted rights or similar notices shall be reproduced in
such copies.
(f) With the exception of specific Framework Applications
licensed pursuant to a Framework Supplement, IBM shall have no rights
to create Framework Applications or otherwise use the Framework
Software. In the event that the parties execute a Framework Supplement
with respect to a specific Framework Application, then all of the
rights and licenses granted and obligations assumed pursuant to Section
3 with respect to Substrate Software shall be deemed to be granted and
assumed with respect to the Framework Software when used in conjunction
with such Framework Application,
<PAGE> 13
subject to any express provisions set forth in such Framework
Supplement. Unless a particular Framework Supplement expressly provides
otherwise, IBM is not granted any rights hereunder to expose the
Software's API in any Framework Application.
(g) A license to prepare and copy Derivative Works of the
Non-Confidential Documentation, and to distribute and sublicense such
Derivative Works in conjunction with Applications IBM shall reproduce
all copyright, or government restricted rights or similar notices cont
the Non-Confidential Documentation in any such Derivative Works.
(h) Each Internal Use Software license granted hereunder for a
Seat shall be perpetual if such Seat is paidup, unless terminated
pursuant to Section 11 hereof, or unless IBM terminates Technical
Support on such Seats.
3.2. The licenses granted herein do not include the right to distribute
externally to IBM, its Subsidiaries or Special Contractors or sublicense
externally to IBM, its Subsidiaries or Special Contractors, Software separate or
apart from Applications, to modify, enhance, translate or create any Derivative
Works of the Software, other than Applications and Derivative Works of the
Non-Confidential Documentation, or to permit any other person to have access to
the Software (except on mainframe systems) by means of timesharing, remote
computing services, batch processing or to have access to the Software by any
means other than sublicensing Applications in accordance with Section 3.1
hereof, unless the parties mutually agree otherwise in writing. By virtue of
this Agreement, neither party shall acquire any right to use the other party's
trademarks.
3.3. IBM may appoint IBM Subsidiaries or other third parties (other
than an ODI Competitor) as Sub-Distributors for the sublicense of the
Applications pursuant to Sections 3.1(c), 3.1(d), 3.1(f) and 3.2, provided that
each Sub-Distributor shall be bound by a written agreement with IBM that:
(a) Protects ODI's rights in the ODI Material to the
same extent as provided herein;
(b) Limits the liability of ODI to the same extent as
provided herein; and
<PAGE> 14
(c) Limits the warranties which such Sub-Distributors may make
to the same extent as ODI's warranties are limited herein.
IBM shall indemnify and hold harmless ODI for any breach of such agreement,
provided that ODI promptly notifies IBM in writing of any such claim, allows IBM
a reasonable period of time to cure any breach and cooperates with IBM's efforts
to cure any breach.
3.4. IBM shall have the right to sublicense IBM's licensed Internal Use
Software to Special Contractors so long as such special Contractors shall not
have the right to copy Software (except for backup or archival purposes) or to
make available Software to any other Special Contractor or third party. Such
Special Contractors shall otherwise have the same right to use Internal Use
Software and the same obligations as IBM has under this Agreement, provided
that:
(a) Such Special Contractors shall sign an agreement with IBM
imposing upon them substantially the same obligations and restrictions
with respect to protection of the Software pursuant to Section 10,
protection of ODI'S copyrights and other proprietary rights in ODI
Material and limitations on ODI's liability as are imposed upon IBM
under this Agreement;
(b) IBM shall indemnify and hold harmless ODI for all claims,
damages, liabilities, losses and expenses, arising out of any breach of
the agreement specified in section 3.4(a) or the Special contractors'
access to or use of Software, provided that ODI promptly notifies IBM
in writing of any such claim, allows IBM a reasonable period of time co
cure any breach and cooperates with IBM's efforts to cure any breach;
(c) Such Special Contractors shall return or certify
destruction of the sublicensed Software within a reasonable time after
IBM's termination of its substantial rights in the affected software
products;
(d) IBM shall remain solely responsible to ODI for payment of
license fees and support services (if any) associated with such
sublicensed Software; and
<PAGE> 15
(e) IBM shall have paid a license fee to ODI for each
copy of such sublicensed Software.
3.5. IBM may sublicense to an IBM Subsidiary (other than an ODI
Competitor) IBM's rights under the license granted in Section 3.1(a), provided
that each such IBM Subsidiary shall be bound by a written agreement with IBM
that imposes upon the IBM Subsidiary substantially the same obligations and
restrictions with respect to internal use of the Software, protection of the
Software in accordance with Section 10, protection of ODI's copyrights and other
proprietary rights, and limitations on ODI's liability as are imposed upon IBM
under this Agreement, and IBM shall indemnify and hold harmless ODI for any
breach of such agreement, provided that ODI promptly notifies IBM in writing of
any such claim, allows IBM a reasonable period of time to cure any breach and
cooperates with IBM's efforts to cure any breach.
3.6. IBM may sublicense to an IBM Subsidiary (other than an ODI
Competitor) substantially all IBM's rights under this Agreement, provided that
(a) each such Subsidiary shall first enter into a written agreement with IBM
that (i) is substantially similar to this Agreement and (ii) binds such
Subsidiary to all the obligations of IBM hereunder, (b) IBM promptly notifies
ODI and provides ODI with a copy of the relevant portions of such agreement and
(c) IBM shall indemnify and hold harmless ODI for any breach of such agreement,
provided that ODI promptly notifies IBM in writing of any such claim, allows IBM
a reasonable period of time to cure any breach and cooperates with IBM's efforts
to cure any breach.
3.7. ODI shall be under no obligation to seek to obtain any patents,
and does not represent or warrant that any patent will be obtained nor, if
obtained, that any such patent will be valid or enforceable.
3.8. IBM acknowledges that it shall remain directly liable and
responsible to ODI for performance of IBM's obligations under this Agreement,
regardless of whether IBM appoints Sub-Distributors or grants sublicenses and
regardless of the terms of its agreements with sub-Distributors, Special
Contractors and sublicensee IBM Subsidiaries.
3.9. Unless this Agreement is terminated earlier, all royalty
obligations with respect to a particular ODI Release of the Software shall
expire, and all rights and licenses granted
<PAGE> 16
hereunder shall be fully effective and paid-up for such ODI Release of the
Software, ten years following the date of first delivery of such ODI Release of
the Software to IBM hereunder, except for amounts due prior to such date and
unpaid by IBM.
3.10. No royalty or other charge shall be payable by IBM for use in IBM
products of the same or similar Customer user-protocols and/or Customer
user-interfaces related to or contained in the Software. No additional royalty
or other charge shall be payable for use, execution, reproduction, display,
performance or distribution of maintenance modifications or Enhancements;
provided, however, that the foregoing shall in no way mitigate any payment or
other obligations which IBM has with respect to Technical Support.
3.11. Except as expressly provided otherwise in a duly executed
Framework Supplement, this Agreement does not grant IBM any rights or licenses
in Framework Software. The parties agree to negotiate in good faith to execute
Framework Supplements for additional Framework Applications for which IBM may
wish to license Framework Software in the future.
3.12. For purposes of this Section 3.12, "Output" shall mean an
intended tangible result or output from licensed operation of Internal use
Software or Applications in accordance with this Agreement, such as a data
printout, report or software program (other than an Application), including any
pictorial, graphic or audio/visual work (such as an icon, character or musical
work) contained in such a result or output. A license to operate Internal use
Software or Substrate Software granted pursuant to this Section 3 includes the
right to create, reproduce, display, perform, modify, distribute, sell, lease,
license and transfer, and to create Derivative Works of, the output of such
Software. A license to operate Internal Use Software or Substrate Software does
not include the right to create Derivative works of such Software (other than
the right to create Applications) or to reproduce, display, perform, modify,
distribute, sell, lease, license or transfer any pictorial, graphic or
audiovisual work contained in such Software (other than as contained in an
Output) to create a Derivative Work thereof. Nothing set forth in this Section
3.12 is intended to circumvent IBM's obligations to pay fees and royalties
hereunder or to authorize use of such a pictorial, graphic and audiovisual work
apart from an output or to authorize use of a portion of Software apart from
Internal Use Software or an Application, nor
<PAGE> 17
is it intended to increase the fees and royalties which IBM is obligated to pay
hereunder.
4. IBM'S OBLIGATIONS AND REPRESENTATIONS
4.1. IBM shall ensure that ODI's copyright, trademark, government
restricted rights or similar notices are reproduced in each copy of the Software
which is authorized under this Agreement.
4.2. (a) Prior to or upon delivery of an Application to a Customer, IBM
or a Sub-Distributor shall enter into a binding Agreement with the Customer to
sublicense the Software on substantially the same terms, to the extent permitted
by law, as the terms set forth in Schedule 8.
(b) IBM shall enforce the obligations of each Sub-Distributor,
Special Contractor and sublicensed IBM Subsidiary dower the respective
agreements described in Sections 3.3, 3.4, 3.5 and 3.6 hereof and each Customer
under the agreement described section 4.2(a) hereof, and IBM and ODI shall
promptly report to each other any known breach of such a Sub-Distributor,
Special Contractor, IBM Subsidiary or Customer agreement that arises out or
relates to the protection of, or ODI's proprietary rights the ODI Materials or
the limitation of ODI's liability.
(c) IBM may grant to a Customer an Application Temporary trial
sublicense at no charge, provided that:
(i) the Customer enters into a sublicense agreement
in accordance with Section 4.2(a) hereof;
(ii) each trial sublicense shall be for a period not to
exceed one hundred and eighty days; and
(iii) IBM shall pay to ODI a sublicense fee or royalty as
described in Schedule 2, 3 or 4, as applicable, for each copy of an
Application that a trial sublicense Customer retains for longer than
one hundred and eighty days.
4.3. ODI, IBM and IBM's licensed Subsidiaries shall maintain complete
and accurate royalty accounting records, in accordance with sound accounting
practices, sufficient to document their compliance with their obligations under
this Agreement. Such
<PAGE> 18
cords shall be retained for a period of at least seven years after the
obligation to which such records relate have accrued. Each party shall, upon
written request, during normal business hours, but not more frequently than once
each calendar year, provide access to such records to an independent accounting
firm chosen and compensated by the other party, for purposes of audit. Such
accounting firm shall be required to sign an agreement protecting the audited
party's confidential Information and shah be authorized to report to the other
party only such information as is necessary to verify the audited party's
compliance with irs obligations under this Agreement. The party requesting the
audit shall reimburse the audited party for any reasonable expenses incurred by
the audited party in reconstructing data or records which are more than three
years old. IBM will use the same degree of care in auditing its Sub-Distributors
with respect to Applications as it does with respect to other IBM software. If
at: any time IBM discovers any material breach of a Sub-Distributors obligations
with respect to an Application, IBM shall notify ODI of such breach and the
nature thereof within thirty days of the discovery thereof.
4.4. ODI may from time to time and in its sole discretion release a new
ODI Release of the Software, which shall supersede the prior ODI Release. In the
event ODI releases-such a new ODI Release:
(a) ODI shall provide IBM with at least one year's advance
notice of any ODI Major Release, either in writing or via IBM's
membership in the Technical Advisory Committee;
(b) Upon the first delivery of such ODI Release, ODI
shall deliver to IBM two copies of the new ODI Release; and
(c) one year after the first delivery of such ODI Release, ODI
may cease to provide updates or otherwise maintain or service the prior
ODI Release.
Any new ODI Release of the Software shall be capable of executing Applications
or Internal Use Software programs designed for the previous ODI Release of such
Software, and ODI shall provide tools for migrating data from such new ODI
Release to the previous ODI Release of such Software. Applications or Internal
Use Software programs written for a later ODI Release of the Software which do
not use any features of the Software added since a previous ODI Release of the
Software will be capable of
<PAGE> 19
executing with such previous ODI Release (although recompilation and relinking
may be required).
4.5. If IBM requires Technical Support for a given ODI Release of the
Software on a given Architecture (as hereinafter defined) beyond the period
provided pursuant to Section 4.4(c) ("Extended Technical Support"), IBM may
request such Extended Technical Support in writing. After ODI ceases to provide
updates pursuant to Section 4.4(c), ODI will charge IBM on a time and materials
basis for the effort expended in providing Extended Technical Support, at the
rate of $175,000 per man-year. For each such year, IBM shall prepay $43,750 per
Architecture at the beginning of each calendar quarter; provided, however, that
if the actual effort expended in providing Extended Technical Support for such
Architecture in such year is greater than or less than a man-year, ODI shall, at
the end of such year, debit IBM or credit IBM, respectively, with an amount
which reflects the difference between a man-year and the actual effort expended
with respect to such architecture, rounded to the nearest quarter man-year. Any
debit shall be payable within thirty days after ODI notifies IBM of such
adjustment; any credit may be applied by IBM against the next year's Technical
Support for Extended Technical Support. Any Technical Support fees paid by IBM
in a given year with respect to Internal Use Seats running a superseded release
of a given Architecture shall be credited against IBM's payment obligations in
that year with respect to Extended Technical Support for such Architecture under
this Section 4.5.
For the purposes of this Section 4.5, "Architecture" shall mean one of
the following categories of computer architectures:
(i) Any SVR4-compliant version of unix, including AIX;
(ii) OS/2;
(iii) Microsoft Windows (including Windows NT);
(iv) OS-400; and
(v) MVS.
If IBM requires Extended Technical Support for a computer architecture which
does not fall within one of these categories,
<PAGE> 20
the parties shall negotiate in good faith to establish an additional
Architecture category for such computer architecture.
4.6. IBM shall have full freedom and flexibility in its decisions
concerning marketing of Applications, including the decision of whether to
market or discontinue marketing any particular Applications and whether to offer
Applications separately and/or in combination with other Code and documentation
and in its decisions regarding pricing. Nothing in this Agreement shall be
construed as an obligation, guarantee or commitment by IBM that any Applications
shall be announced and marketed by IBM, or that any marketing effort will be
productive of any level of sales. It is understood that IBM may license copies
of Applications in accordance with this Agreement at volume discounts,
promotional or special charges, dealer discounts, special bids or other pricing
arrangements and may increase or decrease any prices, charges or fees relating
to any product, without notice to or approval of ODI. Notwithstanding the
foregoing, if IBM elects to distribute copies of a generally commercially
available Application to ISV'S, VAR's or other entities which develop software
designed to run in conjunction with IBM software, at discounts greater than the
discounts at which IBM distributes other comparable applications to such ISV'S,
VAR, s or other entities (the "Customary ISV Discount") , then IBM shall pay ODI
royalties with respect to such discounted copies in an amount equal to the
royalties which would have been payable had such copies been discounted at the
Customary ISV Discount.
4.7. IBM's Internal "Distribution Group" will assume all responsibility
for Internal Use Software distribution within IBM and its IBM Subsidiaries. A
master tape of ODI's current Software will be delivered to IBM's designated
Distribution Group within ten working days after the signing of this Agreement,
and within five working days after subsequent Updates are made commercially
available. If and when IBM establishes duplicate Distribution Groups, ODI will
provide the master tapes and other related materials to each of them without
additional charge to IBM.
4.8. IBM will initially submit to ODI a quarterly report which
specifies (a) the total number of (i) Internal Use Software Seats (and the
number of such Seats by major IBM site) (ii) Substrate Software Applications and
(iii) IBM Framework Software Applications distributed and (b) a list of the
countries where so
<PAGE> 21
distributed since the commencement of this Agreement. Then, subsequent quarterly
reports to ODI will specify only the total number of such Seats (and the number
of such Seats by major IBM site) and Applications which were distributed and a
list of the countries where so distributed since the previous quarterly period
ended.
5. ODI'S OBLIGATIONS
5.1. ODI shall provide to IBM two copies of the Software indicated in
Schedule 11 in Object Code form for use by IBM in accordance with Section 3.1
hereof.
5.2. ODI shall provide to IBM two machine-readable copies of the
Documentation (other than Documentation provided pursuant to Sections 5.3, 5.4
or 5.5 hereof) associated with the Software. ODI will be responsible for
maintaining and updating such reference documentation as it deems necessary.
5.3. ODI shall provide to IBM and its sublicensee Subsidiaries
Technical Support on the terms set forth in Schedule
5.4. ODI shall, subject to the availability of personnel and other
resources, provide employees of IBM and its Subsidiaries with training on the
terms set forth in Schedule 6.
5.5. ODI shall, subject to the availability of personnel and other
resources, provide consulting services to IBM and its Subsidiaries on the terms
set forth in Schedule 6.
5.6. ODI agrees to provide IBM users of ODI's Internal Use Software
with internal marketing and sales support during the term of this Agreement, at
no additional expense to IBM. ODI shall dedicate a minimum of eight qualified,
full-time persons to providing such support during 1993. Thereafter, ODI may
increase or decrease such staffing levels as appropriate to meet changing demand
for such support, in ODI's sole discretion.
5.7. ODI shall deliver to IBM at such times as IBM may reasonably
request, but in no event more frequently than once a year, a certificate of
originality with respect to Software, in the form set forth in Schedule 9
hereto. If there is any change in the composition or ownership of the Software
which would
<PAGE> 22
materially affect the last certificate delivered pursuant to this Section 5.7,
ODI will include an amended certificate with the next Update of the Software
which reflects such change.
In the event of a material difference between a new certificate of
originality and the prior certificate of originality with respect to third party
material (excluding differences reflecting removal of third party material from
Software), then, within thirty days of receipt of such new certificate of
originality, IBM may request that ODI provide to IBM copies of the relevant
portions of any agreements or other instruments from which ODI derives its
authority to grant IBM the rights and licenses granted under this Agreement with
respect to such new third party material. ODI shall provide such copies to IBM
within thirty days after receiving IBM's request. If ODI does not have full and
sufficient right to grant the rights and/or licenses granted to IBM under this
Agreement with respect to such third party materials, IBM may exercise its
rights under Section 7.5 of this Agreement. Nothing in this Agreement shall
restrict IBM from dealing, at its own expense, directly with any other party
with respect to such third party materials or any other product or service.
5.8. ODI shall obtain a written agreement not to assert any Moral
Rights from any person or entity that, to ODI's knowledge, has moral Rights with
respect to any Software delivered or licensed by ODI to IBM hereunder. ODI
hereby agrees not to assert against IBM, its sublicensee Subsidiaries and its
and their SubDistributors any moral Rights ODI has or may have in the Software
in connection with IBM's permitted use of the Software hereunder.
5.9. In rendering performance pursuant to this Agreement, ODI shall not
incorporate any third party materials in the Software or produce a Derivative
Work of any third party materials for incorporation in the Software unless:
(a) such materials and their owners (including the
owners of any intellectual property rights embodied therein)
are identified in accordance with Section 5.7; and
(b) either ODI has sufficient authority to grant to IBM the
rights and licenses provided in this Agreement, or the third party
owner has granted directly to IBM rights and
<PAGE> 23
licenses in such third party materials under a separate agreement which
is identified in the applicable notice.
In addition, each party shall comply at all times with its obligations with
respect to third party materials. ODI shall have sole responsibility for payment
of ail royalties and other charges with respect to third party materials
incorporated in the Software, including as they may accrue with respect to the
subsequent exercise by IBM and any IBM sublicensees or customers, of IBM's
rights and licenses in the Software under this Agreement and, except for IBM's
express royalty obligations under this Agreement or any agreement between IBM
and a third party to which ODI is not also a party, IBM shall have no obligation
to pay or account for such royalties or other charges. If both IBM and ODI have
rights to license or sublicense a given third party material, IBM and ODI will
expressly resolve which party is responsible for payment of the royalty in
respect of such third party material, unless both parties are obligated to pay
such royalties.
5.10. ODI shall provide IBM with a seat on its Technical Advisory
Committee. IBM shall designate a representative to participate in the activities
and meetings of the Technical Advisory Committee; all expenses incurred by such
representative shall be borne by IBM.
6. PAYMENTS
6.1. IBM shall pay to ODI a non-refundable license fee in accordance
with Schedule 2 hereof for each Seat which uses the Internal Use Software. Such
payments, net of credits and adjustments, shall be due and payable within
forty-five days after the close of the Quarterly Accounting Period in which such
Internal Use Software is first used by such Seat. A statement summarizing the
basis for determining the amount of such payment shall be provided by IBM at the
time of payment.
6.2. IBM shall pay to ODI non-refundable royalties in accordance with
Schedule 3 hereof for each copy of an Application (excluding Framework
Applications) which link-edits (either dynamically or statically) to, and
executes in the same process-space as, the Substrate Software and which is (i)
used internally by IBM, or (ii) delivered to or used by a Sub-Distributor,
sublicensee IBM Subsidiary, Special Contractor or Customer (except where a
royalty has already been paid to ODI in respect
<PAGE> 24
of the delivery of the Software to, or use of the Software by, an earlier link
in the chain of distribution). Such royalties, net of credits and adjustments,
shall be due and payable within forty-five days after the close of the Quarterly
Accounting Period in which the Application revenue upon which such royalty is
based accrues. A statement summarizing the basis for determining the amount of
such payment shall be provided by IBM at the time of payment. IBM shall not be
obligated to pay a Substrate royalty for any of the following:
(a) A copy of an Application delivered pursuant to a
trial license, unless payment of a royalty is required by
Section 4.2(c) hereof; or
(b) A copy of an Application delivered for back-up) or
archival purposes to a Customer, provided that the Customer is charged
no more than a nominal amount in excess of the cost of the media,
packaging, shipping and handling for such copy and IBM has paid the
applicable royalties for all other copies of the Application delivered
to such Customer.
6.3. In the event that the parties execute a Framework Supplement
licensing IBM to use the Framework Software in conjunction with a specific
Framework Application pursuant to Section 3.1(f) hereof, IBM shall pay to ODI
non-refundable royalties in accordance with the terms specified in such
Framework Supplement for each copy of such Framework Application which is (i)
used internally by IBM, or (ii) delivered to or used by a Sub-Distributor,
sublicensee IBM Subsidiary, Special Contractor or Customer (including IBM).
Unless the Framework Supplement provides otherwise, such royalties, net of
credits and adjustments, shall be due and payable within forty-five days after
the close of the Quarterly Accounting Period in which the Framework Application
revenue upon which such royalty is based accrues. A statement summarizing the
basis for determining the amount of such payment shall be provided by IBM at the
time of payment. Unless the Framework Supplement provides otherwise, IBM shall
not be obligated to pay a royalty for any of the following:
(a) A copy of the permitted Framework Application
delivered pursuant to a trial license, unless payment of a
royalty is required by Section 4.2(c) hereof; or
<PAGE> 25
(b) A copy of the permitted Framework Application delivered
for back-up or archival purposes to a Customer, provided that the
Customer is charged no more than a nominal amount in excess of the cost
of the media, packaging, shipping royalties handling for such copy and
IBM has paid the applicable fees for all other copies of the
Application delivered to such Customer.
The pricing and other terms and conditions set forth in any particular Framework
Supplement shall be limited to the particular Framework Application licensed
thereunder. The parties agree to negotiate in good faith the terms and
conditions applicable to any future Framework Application which IBM desires to
license.
6.4. IBM shall pay ODI ten million dollars in non-refundable prepaid
license fees and royalties, which shall be due and payable as follows:
(a) $2,000,000 on December 21, 1992;
(b) $2,000,000 on March 31, 1993;
(c) $2,000,000 on June 30, 1993;
(d) $2,000,000 on December 31, 1993; and
(e) $2,000,000 on March 31, 1994.
The amount of prepaid fees and royalties paid to ODI may be credited in
full by IBM against any license fees or royalties subsequently payable by IBM
under Sections 6.1 or 6.2 of this Agreement or any duly executed Framework
Supplement to this Agreement. ODI acknowledges receipt of the first $2,000,000
payment from IBM pursuant to a Letter Agreement dated December 21, 1992, and the
second $2,000,000 payment from IBM pursuant to a Letter Agreement dated March
31, 1993.
6.5. IBM may deliver one complete copy of the Non-Confidential
]Documentation for the applicable Software, or any excerpt or Derivative work
of such Non-Confidential Documentation, with each Internal Use Seat or
Application delivered pursuant to this Agreement, without incurring any royalty
obligation in respect of such Documentation. If IBM elects to deliver
additional copies of such Non-Confidential
<PAGE> 26
Documentation (or any excerpt or Derivative work thereof, in the case
where such excerpt or Derivative Work represents more than 20% of the content
of ODI's complete set of Non-confidential Documentation), IBM shall pay ODI a
royalty in the amount of 10% of the revenues which IBM accrues in respect of
all IBM or ODI Documentation associated with such Internal Use Seat or
Application; provided, however, that in no event shall such royalty be less
than $10 per copy of Documentation. Such royalties, net of credits and
adjustments, shall be due and payable within forty-five days after the close of
the Quarterly Accounting Period in which the revenue upon which such royalty is
based accrues. A statement summarizing the basis for determining the amount of
such payment shall be provided by IBM at the time of payment.
6.6. IBM shall pay to ODI non-refundable Technical Support fees as set
forth in Schedule 5 hereof for every Internal Use software Seat licensed under
this Agreement.
6.7. If IBM requires on-site installation, consulting or other
technical assistance, ODI shall, subject to availability, provide a consultant
in accordance with Schedule 6. These fees are due and payable within thirty days
after the date of ODI's invoice.
6.8. If IBM requires training, ODI shall, subject to availability,
provide instruction in accordance with Schedule 6. These fees are due and
payable within thirty days after the date of ODI's invoice.
6.9. IBM shall pay all import duties, levies or imposts, and all sales,
use, value added, property, or other taxes of any nature, assessed upon or with
respect to any Software, Applications or other products or services ordered by
IBM from ODI, which are imposed by any community of nations, nation, or
political subdivision thereof, but excluding taxes based on ODI's net income.
IBM shall, and shall cause its Sub-Distributors to, pay on or before their due
dates all such taxes, fees, duties and charges which arise out of or in
connection with this Agreement or any license or sublicense granted herein or
any use of the Software. In the event ODI is required at any time to pay any
such tax, fee, duty or charge, IBM shall promptly reimburse ODI therefor.
<PAGE> 27
6.10. All payments to ODI hereunder shall be paid in U.S. dollars.
6.11. During the term of this Agreement, ODI agrees to offer IBM ODI's
most favorable Software license prices and discount excluding prices and
discounts first offered prior to the terms of this Agreement. ODI agrees that
should it ever, during the term of this Agreement, offer more favorable
financial terms, taken as a whole, for Software or Technical Support (other than
terms first offered prior to the term of this Agreement), as part of any
transaction (other than transactions involving (i) non-profit government or
academic research or (ii) education) which results in more than $250,000 in
non-Special Product software revenue to ODI in the first twelve months thereof,
it shall notify of IBM such transaction. If such transaction results in more
than $500.000 in non-Special Product Software revenue to ODI in the first twelve
months thereof, ODI shall offer IBM more favorable financial terms, and such
newly established terms shall apply to all IBM fees thereafter, starting in the
first full Quarterly Accounting Period following the transaction which gave rise
to such change in terms.
6.12. Pursuant to Sections 3.1(b) and 3.1(d), ODI agrees to waive all
license and Technical Support fees for copies of the Software that IBM or its
sublicensee Subsidiaries (a) use solely for (i) education and training of
employees of IBM or its Subsidiaries in the use of the Internal Use Software,
(ii) education under the Education Agreement (when and if executed) or (iii)
non-revenue bearing demonstration, evaluation, archival or backup purposes, or
(b) sub-license to educational institutions pursuant to HESC/ESAP or similar
programs, and that, in any event, are not employed for production use. ODI shall
have no Technical Support obligations with respect to any such copies of the
Software. As used herein, "HESC/ESAP" shall mean various worldwide programs that
IBM and IBM Subsidiaries have in which a written contract exists with higher
education institutions under which IBM and IBM Subsidiaries license software to
these institutions for academic use and waive any license fees.
6.13. (a) In order to preserve the most-favorable pricing reflected in
this Agreement (the "Low Pricing") after the third anniversary of the effective
date of this Agreement, IBM must pay ODI the following amounts (the "Royalty
Targets") in Software fees or royalties, Technical Support fees and fees in
<PAGE> 28
respect of any distribution or re-marketing arrangement between the parties
("Qualifying Royalties"):
(i) In the fourth and fifth calendar year of this
Agreement, the Royalty Target shall be $6,000,000 per year;
and
(ii) For any subsequent calendar years of this Agreement, the
Royalty Target will be increased by 15% per year. Thus, in the sixth
year, the Royalty Target would be $6,900,000, in the seventh year, the
Royalty Target would be $7,935,000, and so forth; and
(iii) If this Agreement is terminated pursuant to Section 11,
and such termination results in a partial calendar year, the Royalty
Target will be pro-rated accordingly.
(b) If, in any given calendar year, IBM fails to generate enough
Qualifying Royalties to satisfy the applicable Royalty Target for that year, IBM
shall have the option of prepaying an amount equal to the difference between
such Qualifying Royalties and such applicable Royalty Target in order to satisfy
the Royalty Target for such year. Any such prepayment may be credited against
payments in future calendar years in respect of any form of Qualifying Royalty
but shall not qualify as Qualifying Royalties in such future years. IBM must
make any such prepayment to ODI within twenty-one days after the end of the
calendar year with respect to which the prepayment is being made.
(c) If IBM fails to meet the applicable Royalty Target in any given
calendar year, the Software and service prices applicable to IBM in that year
shall be increased as follows (the "Medium Pricing"):
(i) The fees for Internal Use Software, as set forth
in Schedule 2 of this Agreement, shall be increased by a
factor of two;
(ii) The annual Technical Support fees set forth in Schedule 5
will be increased to 15% of the new Internal Use Software fees
resulting from the application of Section 6.13(c)(i) above;
<PAGE> 29
(iii) All Substrate Software royalty rates set
forth in Schedule 3 of this Agreement will be increased by a
factor of two;
(iv) All Framework Software royalty rates and license fees set
forth in Schedule 4 of this Agreement or any other Framework
Supplements to this Agreement will be increased by a factor of two;
(v) The discount for training, as set forth in Section
A of Schedule 6 of this Agreement, will be reduced to 25%;
and
(vi) The discount for consulting, as set forth in Section B of
Schedule 6 of this Agreement, will be reduced to 16.5%.
(d) IBM shall pay royalties during the course of each calendar year as
if the Low Pricing applied. However, in the event that IBM fails to meet the
applicable Royalty Target in any given calendar year, the fees and royalties due
for such calendar year shall be re-calculated in accordance with the medium
Pricing, and IBM shall pay ODI any additional fees and royalties resulting from
such calculation within twenty-one days after the end of the calendar year with
respect to which such recalculation is being made. In no event shall such
additional fees and royalties be considered Qualifying Royalties for such year.
(e) If IBM elects to credit prepayments made in a given calendar year
pursuant to Sections 6.4 or 6.13(b) against its payment obligations in a
subsequent calendar year, the amounts so credited shall not be considered
Qualifying Royalties in such subsequent year.
6.14. ODI shall have no obligation to refund to IBM any fees or
royalties for Software.
6.15. ODI acknowledges the receipt of a $495,000 payment from IBM for,
and IBM acknowledges receipt of, the "Starter-Set", of which, $300,000 was for
the objectstore Development Seats for IBM's RS/6000 System running AIX @ $2,000
per Seat, $45,000.00 for a quantity of 150 objectstore Technical Support
packages @ $300 per package and $150,000 for a quantity of 150 on-Site
Consulting Days @ $1,000 per day.
<PAGE> 30
6.16. ODI agrees to adjust the prices of the Internal Use Software
Seats, Technical support, Consulting and Training already purchased by IBM to
the volume discount prices established within this Agreement. ODI agrees to
convert Internal Use Software Seats, Technical Support, Consulting and Training
quantities as exhibited by the following table:
<TABLE>
<CAPTION>
Description Quantity Price/Unit Extended Price
<S> <C> <C> <C>
OS/2 Development Licenses-USA & Canada 69 $ 975 $ 67,275
OS/2 Development Licenses-International 15 $ 1,073 $ 16,095
AIX Development Licenses 135 $ 1,380 $186,300
AIX Development Licenses-International 20 $ 1,518 $ 30,360
Maint-OS/2 Devel. Licenses-USA & Canada 69 $ 146 $ 10,074
Maint-OS/2 Devel. Licenses-International 15 $ 161 $ 2,415
Maint-AIX Devel- Licenses-USA & Canada 135 $ 207 $ 27,945
Maint-AIX Devel. Licenses-International 20 $ 228 $ 4,560
Training Days 90 $ 1,500 $135,000
Consulting Days 15 $ 1,000 $ 15,000
Total $495,024
</TABLE>
6.17. IBM has already licensed or consumed Internal use Software Seats,
Technical Support, Consulting and Training that will be subtracted from the
quantities purchased as part of the Starter Set. The resulting remaining
quantities will be available for future use as listed below:
<TABLE>
<CAPTION>
Description Starter Converted Installed Remaining
<S> <C> <C> <C> <C>
OS/2 Development Licenses-USA & Canada 69 0 69
OS/2 Development Licenses-International 15 0 15
AIX Development Licenses 150 135 87 48
AIX Development Licenses-International 20 9 11
Maint-OS/2 Devel. Licenses-USA & Canada 69 0 69
Maint-OS/2 Devel. Licenses-International 15 0 15
Maint-AIX Devel. Licenses-USA & Canada 150 135 87 48
Maint-AIX Devel. Licenses-International 20 9 11
Training Days 00 74.5 15.5
Consulting Days 150 15 4 11
</TABLE>
7. WARRANTY AND DISCLAIMER OF WARRANTY
7.1. Subject to the other provisions of this section 7, ODI warrants
that the Software will function substantially in the manner described in the
applicable Documentation provided by ODI on the machines and with the operating
systems for which it is designed.
7.2. ODI shall have no liability under the foregoing warranty (i) to
anyone other than IBM or Subsidiaries which have
<PAGE> 31
entered into the agreement specified in Section 3.6, or (ii) to the extent that:
(a) within one year after delivery of the Software to IBM, IBM
has failed to report in writing any Error claimed to be a breach of
warranty;
(b) the Software media has been misused or exposed to
environmental or operating conditions other than those specified by
ODI, where such misuse of exposure gave rise to any warranty claim;
(c) the software has been damaged, altered by accident,
neglect, misuse or other abuse, where such damage or alteration gave
rise to any warranty claim;
(d) the claimed defect has been caused, in whole or in part,
by a person or persons other than ODI, or by the Application developed
by IBM or other products or equipment not manufactured developed or
specified by ODI; or
(e) the claimed defect is in a superseded ODI Release
of the Software.
7.3. ODI represents and warrants that it is under no obligation or
restriction, nor will it assume any such obligation or restriction, that does or
would substantially interfere or conflict with the performance to be rendered by
ODI or the rights and licenses granted IBM under this Agreement.
7.4. ODI represents and warrants, with respect to all Software
delivered to IBM by ODI, that:
(a) ODI is the sole owner of such Software, except for any
works designated to IBM as third-party materials pursuant to Section
5.7;
(b) ODI has full and sufficient right to grant the rights
and/or licenses granted to IBM in this Agreement;
(c) No such Software has been published to ODI's knowledge
under circumstances which have caused a loss of copyright therein; and
<PAGE> 32
(d) No such Software infringes any patent, copyright,
trademark or other intellectual property rights (including trade
secrets), privacy, publicity or similar rights of any third party, nor
has any claim (whether or not embodied in an action, past or present)
of such infringement been asserted, and no such claim is pending
against ODI. The indemnity set forth in Section 9 shall be IBM's sole
remedy for any claim, damage, liability, loss or expense arising out of
or related to a breach of Section 7.4(b) or Section 7.4(d).
7.5. ODI shall have three years to cure any breach of Section 7.4,
provided that ODI acts diligently throughout such period to cure such breach.
until the earlier of (i) three years after such breach or (ii) ODI's cure of
such breach, IBM may defer any royalty payments which would otherwise be due
with respect to the Software which gave rise to the breach. Such deferred
payments shall be due in full upon ODI's timely cure of such breach.
7.6. ODI represents and warrants that the Software delivered to IBM in
connection with this Agreement does not and shall not contain any Code,
programming instruction or set of instructions that is intentionally constructed
with the ability to damage, interfere with or otherwise adversely affect
computer programs, data files, or hardware without the consent and intent of the
computer user (hereinafter "Harmful Code") . ODI shall establish and enforce a
policy and procedures, which shall be reviewed with IBM at IBM's request, to
prevent any such Harmful Code programming instruction or set of instructions
from being incorporated by ODI employees into the Software delivered to IBM in
connection with this Agreement. ODI shall promptly notify IBM of any ODI
knowledge or suspicion that such Harmful Code has been incorporated therein,
provided, however, that such notification shall not be deemed to relieve ODI of
any responsibility for resulting damages.
7.7. ODI warrants that no individual who is a former officer or
employee of the U.S. Department of Defense ("DOD") who (a) left DOD service on
or after April 16, 1987, and (b) served in a civilian position for which the
rate of pay is equal to or greater than the minimum rate of pay for Grade GS-13,
or served in the Armed Forces in a pay grade of 0-4 or higher, shall be employed
or compensated by ODI for services rendered under this Agreement within two
years after they left service in DOD,
<PAGE> 33
without specific written approval by IBM. If ODI requests such approval, ODI
shall provide IBM with any information needed to comply with 10 USC 2397 (b) and
(c) and IBM shall not unreasonably withhold or delay its approval.
7.8. ODI represents and warrants that all information contained in any
certificate of originality supplied to IBM (excluding any certificates of
originality supplied before December 15, 1992) shall to ODI's knowledge be
complete, correct and not misleading.
7.9. ODI warrants that all consulting and Technical support: services
will be performed in a workmanlike manner. This warranty shall be valid for
ninety days from completion of such service. The re-performance of service shall
be IBM's sole remedy in the event of a defect.
7.10. Each party represents and warrants that it has written agreements
with its employees sufficient to meet its obligations under this Agreement. IBM
further represents and warrants its compliance with its obligations under
Section 10.
7.11. ODI makes the foregoing representations and warranties for the
benefit of IBM, and IBM makes the representations and warranties in Section
7.10, as a present and ongoing affirmation of facts in existence at ail times
when this Agreement is in effect.
7.12. THE EXPRESS WARRANTIES SET FORTH IN THIS SECTION 7 ARE THE ONLY
WARRANTIES MADE BY ODI. ODI MAKES NO OTHER WARRANTIES, EXPRESS, IMPLIED OR
ARISING BY CUSTOM OR TRADE USAGE, AND, SPECIFICALLY, MAKES NO WARRANTY OF
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. ODI'S EXPRESS WARRANTY
SHALL NOT BE ENLARGED, DIMINISHED OR AFFECTED BY, AND NO OBLIGATION OR LIABILITY
SHALL ARISE OUT OF, ODI RENDERING TECHNICAL OR OTHER ADVICE OR SERVICE IN
CONNECTION WITH THE SOFTWARE.
7.13. IBM and its Sub-Distributors shall make no representation or
warranty concerning the quality, performance or other characteristics of the
Software or the Applications other than those which are consistent in all
respects with, and do not expand the scope of, the warranties of ODI set forth
in this Agreement.
8. LIMITATION OF LIABILITY
<PAGE> 34
8.1. Neither party's liability, whether in contract, tort, or
otherwise, arising out of or in connection with the Software or this Agreement
shall exceed the amounts payable to ODI by IBM under this Agreement for the
eight calendar quarters immediately preceding the date upon which the claiming
party first notifies the other party of such claims; provided, however, that the
foregoing limitation of liability shall not apply to claims by IBM arising under
Section 9 of this Agreement or claims by ODI arising under Sections 6.4 or 10 of
this Agreement.
8.2. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR SPECIAL, INCIDENTAL,
CONSEQUENTIAL, PUNITIVE OR TORT DAMAGES, INCLUDING, WITHOUT LIMITATION, ANY
DAMAGES RESULTING FROM LOSS OF USE, LOSS OF DATA, LOSS OF PROFITS OR LOSS OF
BUSINESS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, THE PERFORMANCE OF
THE SOFTWARE OR ODI'S PERFORMANCE OF SERVICES OR EITHER PARTY'S PERFORMANCE OF
ANY OTHER OBLIGATIONS RELATING TO THIS AGREEMENT OR THE SOFTWARE, WHETHER OR NOT
EITHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
8.3. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY DAMAGES OR CLAIMS
ARISING OUT OF OR RELATED TO THE OTHER PARTY'S USE OF TRADEMARKS.
8.4. Neither party shall be responsible for any claim arising under
this Agreement unless the other party provides notice of such claim within three
years after the date upon which such claim first accrued.
8.5. The provisions of this Section 8 allocate the risks under this
Agreement between ODI and IBM. The Software pricing agreements reflected within
this Agreement reflect this allocation of risk and the limitations of liability
specified herein.
9. PATENT, COPYRIGHT AND TRADE SECRET INDEMNITY
9.1. ODI agrees to protect, defend, hold harmless and indemnify IBM and
its sublicensee Subsidiaries from and against any and all claims, damages,
liabilities, losses and expenses, arising out of any alleged or actual
infringement (a) by ODI in rendering performance under this Agreement or (b) by
any Software delivered to IBM in connection with this Agreement of a patent,
copyright, trademark, or other intellectual property right, or privacy,
publicity, or similar right of any third party, except
<PAGE> 35
that ODI shall have no indemnity obligation for any claim alleging infringement
of any trademark (including any trade name, product name or similar right)
resulting from the use of any name or mark by IBM, Special Contractors,
Sub-Distributors or IBM Subsidiaries.
9.2. ODI shall have no liability under this Section 9 unless IBM (a)
promptly notifies ODI in writing of the claim, damage, liability, loss or
expense and (b) in the case of a third-party claim, (i) gives ODI full
authority, information and assistance to defend such claim and (ii) gives ODI
sole control of the defense of such claim and all negotiations for the
compromise or settlement thereof. If the Software or any part thereof becomes,
or is likely to become, the subject of a valid claim of infringement or the like
under any patent, copyright or trade secret law, ODI shall have the right, at:
it:s option and expense, either (c) to obtain for IBM a license permitting the
continued use of the Software or such part, or to replace or modify it so that
it becomes non-infringing, or (d) if the exercise of commercially reasonable
efforts fan to result in such a license, replacement or modification, to refund
an amount equal to the depreciated license fee paid by IBM for the Software
(calculated on a straight line basis over a seven-year life) and to terminate
the license therefor. ODI shall have no liability hereunder with respect to
third-party claims for any costs incurred by IBM or settlement entered into
without ODI's prior written consent. ODI shall have no liability hereunder with
respect to any claim, damage, liability, loss or expense based upon (e) the
operation of an Application or the combination of the Software with other
products not furnished by ODI, (f) any addition to or modification to the
Software by any person or entity other than ODI or (g) ODI furnishing to IBM any
information, data, service-and applications assistance, other than the Software
and the Documentation.
9.3. THE PROVISIONS OF THIS SECTION 9 STATE THE EXCLUSIVE LIABILITY OF
ODI AND THE EXCLUSIVE REMEDY OF IBM WITH RESPECT TO ANY CLAIM OF PATENT,
COPYRIGHT OR TRADE SECRET INFRINGEMENT BY THE SOFTWARE, ANY PART THEREOF OR THE
USE THEREOF, OR CLAIM THAT ODI LACKS THE RIGHT TO GRANT THE LICENSES GRANTED
HEREIN, AND ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, AND
INDEMNITIES WITH RESPECT THERETO.
10. PROTECTION OF SOFTWARE
<PAGE> 36
10.1. IBM acknowledges that ODI and its licensors claim to own
copyrights in, and patents for, the Software. By virtue of this Agreement, IBM
does not acquire any ownership rights to the Software or any other ODI Material.
IBM agrees that ODI and its licensors shall retain all title to ODI Material and
all copies thereof, and shall retain all copyrights and patent rights (except
rights expressly granted to IBM in Section 3 hereof) in ODI material and all
copies thereof. IBM agrees to not remove any copyright, trademark, government
restricted rights or similar notice included in or affixed to Software or any
other ODI Material or any confidentiality or similar notice included in or
affixed to Type A Material, and to reproduce all such notices on any copy,
modification or portion thereof made or merged into another software program.
10.2. IBM and ODI do not expect IBM to obtain pursuant to this
Agreement any Source Code or other Class II Confidential Information, except
that some of the Type A Material obtained pursuant to Section 5.5 and Schedule 6
may include Class II Confidential Information. However, IBM acknowledges that
ODI claims the confidentiality of the Source Code for Software and claims that
the Software and other ODI Material constitute a valuable asset of ODI. ODI
acknowledges that Source Code and any other Type A Material subject to
confidentially shall not be provided to IBM, except pursuant to the ARCI. IBM
acknowledges that Type A Material shall not be provided to any Customer or
Sub-Distributor. IBM and ODI agree that Type A Material is subject to the ARCI
and each party agrees to abide by provisions of the ARCI with respect to Source
Code and other Type A Material. IBM agrees that it shall not use Software for
any purpose other than as authorized in this Agreement. Nothing in this Section
10.2 establishes that any information provided by ODI to IBM is in fact
confidential.
10.3. IBM agrees that it shall not, and it shall not intentionally
permit any third party, to reverse assemble or reverse compile the Software or
otherwise attempt to access Source Code, or to sublicense, rent, lease or assign
the Software to any third party, except as authorized by this Agreement or in a
prior written authorization made by ODI in its sole discretion.
10.4. Nothing in this Agreement confers upon either party any right to
use the other party's trademarks, trade-names or service marks in connection
with any product, service, promotion or publication, or to adopt any trademark
which is
<PAGE> 37
confusingly similar to any of the other party's trademark or which includes a
prominent portion of any of the other party's trademarks.
10.5. The two parties further agree that, should any of their
advertising, promotional or other materials be inaccurate, misleading or
otherwise misuse the other party's trademarks or trade names, the offending
party will, upon reasonable notice from the other party, change or correct such
materials at its own expense.
10.6. IBM agrees that ODI shall be an intended third party beneficiary
of the agreements referred to in this Agreement between IBM and
Sub-Distributors, Customers, Special Contractors and its Subsidiaries. IBM
agrees to cooperate with ODI's efforts to exercise its third party beneficiary
rights and enforce the terms and conditions of such agreements.
11. TERM AND TERMINATION
11.1. This Agreement shall be effective from the date hereof and shall
remain in effect for twenty years, unless earlier terminated as provided herein.
11.2. (a) At any time after the fifth anniversary of this Agreement,
either party may terminate this Agreement for convenience by providing twelve
months, advance notice thereof.
(b) Unless earlier terminated pursuant to Section 11.3, during such
twelve-month notice period, all licenses granted to IBM under this Agreement
shall continue, IBM shall pay all required fees and royalties in accordance with
Low Pricing or medium Pricing, as applicable pursuant to Section 6.13, and all
rights and obligations of the parties under this Agreement shall continue.
(c) Termination of this Agreement for convenience shall be effective at
the end of such twelve-month period. upon such termination:
(i) All Application licenses granted to Customers prior to
termination shall survive in accordance with their terms;
<PAGE> 38
(ii) Internal Use licenses granted with respect to
then-existing Seats shall survive, provided that IBM continues to
purchase Technical Support for such Seats at rates in accordance with
High Pricing (as defined in Section 12) and continues to comply with
all of its obligations under this Agreement with respect to Internal
Use Software. ODI shall continue to provide Technical Support for such
Seats; and
(iii) All other licenses granted to IBM, Special Contractors,
IBM's Subsidiaries and its and their Sub-Distributors shall terminate.
11.3.(a) ODI may terminate this Agreement for cause, by giving written
notice of termination to IBM, effective ten days after IBM's receipt of such
notice, without need of intervention of any court or other authority, if IBM:
(i) fails to make any payment required hereunder promptly and
when due and fails to remedy such failure to pay within forty-five days
after IBM's receipt of notice from ODI with respect thereto;
(ii) materially fails to perform, or is in material breach of,
any of its obligations under Sections 3, or _12 of this Agreement, and
fails to remedy such failure or breach within fifteen days after IBM's
receipt of notice from ODI with respect thereto; or
(iii) materially fails to perform, or is in material breach
of, any of its obligations under Section 3, 4, 5, 6 or 12 of this
Agreement or breaches its obligations under the ARCI with respect to
any Class Ii Information disclosed pursuant to this Agreement, and
fails to remedy such breach within ten days after IBM's receipt of
notice from ODI with respect thereto.
(b) For nine months after ODI's notice of termination for cause (the
"Wind-Down Period"), IBM may continue to perform the limited activities
permitted by Section 11. 3 (c) hereof and the following limited activities (and
only the following activities) in accordance with this Agreement, provided that
it complies with all applicable provisions of this Agreement:
<PAGE> 39
(i) grant licenses for any IBM Release of any Application
which IBM Release was generally commercially available at the time of
such termination notice, at royalties in accordance with High Pricing
(except for the terms of Section 12.2(ix));
(ii) grant licenses for additional Internal Use Seats, and
purchase Technical Support with respect thereto, at fees in accordance
with High Pricing (except for the terms of Section 12.2(ix)); and
(iii) purchase Consulting or Training, at fees in
accordance with High Pricing.
(c) Termination of this Agreement by ODI for cause shall be effective
at the end of the wind-Down Period, and upon such termination:
(i) All Application licenses granted to Customers
prior to termination shall survive in accordance with their
terms;
(ii) Internal Use Software licenses granted with respect to
then-existing Seats shall survive, provided that IBM continues to
purchase Technical Support for such Seats at rates in accordance with
High Pricing and continues to comply with all of its obligations under
this Agreement with respect to Internal Use Software. ODI shall
continue to provide Technical Support for such Seats; and
(iii) All other licenses granted to IBM, Special Contractors,
IBM's Subsidiaries and its and their Sub-Distributors shall terminate.
11.4. (a) IBM may terminate this Agreement for cause, by giving written
notice of termination to ODI, effective ten days after receipt of such notice,
without need of intervention of any court or other authority, if ODI materially
fails to perform, or is in material breach of, any of its obligations under
Sections 2.3, 3, 4, 5, 6, 7 or 9 of this Agreement, and fails to remedy such
failure or breach within fifteen days after ODI's receipt of notice from IBM
with respect thereto.
(b) For nine months after IBM's notice of termination for cause (the
"Wind-Down Period"), IBM may continue to perform the
<PAGE> 40
limited activities (and only those activities) set forth in Section 11.2(b) of
this Agreement.
(c) Termination of this Agreement by IBM for cause shall be effective
at the end of the Wind-Down Period, and such termination shall have the effects
set forth in Section 11.2(c) of this Agreement.
11.5. Expiration or termination of this Agreement shall not relieve
either party of any obligation to pay amounts due as a result of transactions
occurring prior to such expiration or termination.
11.6. IBM may, at its sole discretion, terminate its license rights for
any Seat upon written notice to ODI. License rights for any Seat may also be
terminated pursuant to Section A of Schedule 5. In either case, IBM shall (a)
discontinue use of the Software for which the license has been terminated, and
(b) within ninety days, either return the Software to ODI or certify in writing
that the Software has been destroyed.
11.7. In the event of termination or expiration of this Agreement, ODI,
IBM and IBM Subsidiaries shall have all rights they would have had if they had
never entered into this Agreement, subject to obligations that (a) expressly
survive such termination or expiration or (b) arise under other agreements
between the parties.
11.8. The parties acknowledge that this Agreement is for a limited
period only. The expiration or termination of this Agreement at the end of the
original term or any renewal term shall not give rise to the payment of any
indemnity, compensation or damages whatsoever by either party. Without limiting
the generality of the foregoing, the parties agree that the expiration of this
Agreement or the termination of this Agreement by either party shall not entitle
the other party to any termination or severance compensation or to any payment
in respect of any goodwill established during the initial term of this
Agreement, or any renewals hereof, or render the terminating party liable --For
damages on account of the loss of prospective profits or on account of any
expenditure, investment or obligation incurred or made by the other party. Each
party further agrees to make every effort to minimize its costs and expenses
related to this Agreement in the event this Agreement is terminated or not
extended for an additional term.
<PAGE> 41
12. EFFECT OF BREAK-UP
12.1. In the event that either party exercises the Break-Up option, as
defined in the Break-Up Agreement, #STL93035, dated as of the date hereof (the
"Break-Up Agreement"), and this Agreement has not been earner terminated, the
terms and conditions of this Agreement shall be modified as set forth in this
Section 12.
12.2. As of the Break-up Date (as defined in the Break-
up Agreement), the Software and service prices applicable to IBM
shall be increased as follows (the "High Pricing"):
(i) The fees for Internal Use Software sold in the United
States and Canada, as set forth in Schedule 2 of this Agreement, shall
be increased by a factor of three;
(ii) Fees for Internal Use Software sold outside the United
States and Canada shall be increased by 50% over those set forth in
sub-section (i) above, except for fees for Internal- Use Software sold
i-n Far East countries, which shall be increased by 65% over those set
forth in subsection (i) above;
(iii) The annual Technical Support fees set forth in Schedule
5 will be increased to 15% of ODI's then-current country list price of
Internal Use Software;
(iv) All Substrate Software royalty rates set forth in
Schedule 3 of this Agreement win be increased by a factor of
three;
(v) All Framework Software royalty rates and license fees set
forth in Schedule 4 of this Agreement or any other Framework
Supplements to this Agreement will be increased by a factor of three;
(vi) Training will be charged at ODI's then-current
list rates;
(vii) Consulting will be charged at ODI's then-current
list rates;
(viii) The most-favored-nation provisions of Section
6.il will expire; and
<PAGE> 42
(ix) IBM's rights to perform its own manufacturing and distribution
pursuant to Section 4.7 of this Agreement shall terminate. IBM and ODI shall
negotiate in good faith to determine mutually satisfactory manufacturing and
distribution mechanisms; provided, however, that the rates and fees set forth in
this section 12.2 shall not be increased thereby.
All of the foregoing price adjustments shall be made with respect to the initial
price at which the applicable Software or service is first offered to IBM
pursuant to this Agreement, without regard to any subsequent changes in such
initial price.
12.3. Notwithstanding Section 12.2, if ODI makes the Software generally
available at list prices lower than the High Prices, it will offer the Software
to IBM at such lower prices, provided that IBM agrees to comply with
substantially all of the terms and conditions imposed by ODI when it makes the
Software generally available at such lower prices.
12.4. For the calendar-year in which the Break-Up Date (as defined in
the Break-Up Agreement) occurs, the fees and royalties due from IBM before the
Break-Up Date shall be calculated using Low Pricing or medium Pricing, as the
case may be, as determined in accordance with Section 6.13 of this Agreement,
for the prorated portion of such calendar year until the Break-Up Date. For the
balance of such year after the BreakUp Date, and for all subsequent calendar
years, the fees and royalties due from IBM shall be calculated using the High
Pricing.
12.5. The exercise of the Break-Up option shall not affect the parties'
rights to terminate this Agreement in accordance with Section 11 of this
Agreement. Termination of the Break-Up Agreement, either prior to or after the
Break-Up Date, shall not terminate or affect the terms and conditions of this
Agreement.
13. ENTIRE AGREEMENT
13.1. This Agreement, including the Schedules attached hereto, the
Break-Up Agreement and the ARCI, sets forth the entire agreement and
understanding of the parties with respect to the subject matter hereof, and
supersedes all prior oral and written agreements and understandings relating
thereto.
<PAGE> 43
13.2. The provisions of this Agreement will supersede and replace the
provisions of ODI's standard license agreement that would otherwise be
applicable for Software obtained by IBM subsequent to the date hereof,
irrespective of whether the Software is obtained directly or indirectly (e.g.,
through a distributor) from ODI; provided, however, that the provisions of this
Agreement shall not supersede the provisions of individually negotiated
agreements entered into by IBM regarding ODI's Software.
14. NON-WAIVER AND AMENDMENT
No waiver, alteration, modification, or cancellation of any of the
provisions of this Agreement shall be binding unless made in writing and signed
by both ODI and IBM. The failure of either ODI or IBM at any time or times to
require performance of any provision hereof shall in no manner affect the right
at a later time to enforce such provision.
15. NOTICES
All notices to be given in connection with this Agreement shall be
effective upon receipt, shall be made in writing and shall be sufficiently given
if personally delivered or if sent by registered mail or courier or other
express mail service, postage prepaid, addressed to the party entitled or
required to receive such notice at the following address:
Notices to IBM:
Laboratory Counsel
IBM Corporation
555 Bailey Avenue
San Jose, CA 95141
Tel: (408) 463-3044
Notices to ODI:
Chief Financial officer
object Design, Inc.
One New England Executive Park
Burlington, MA 01803
Tel: (617) 270-9797
<PAGE> 44
16. ASSIGNMENT
This Agreement is not assignable by either party without the prior
written consent of the other party, which consent shall not be unreasonably
withheld. Any action in derogation of the foregoing shall be void and of no
effect.
17. CONFLICT WITH STATUTE OR LAW
If any provision of this Agreement is found by competent authority to
be invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and the remainder of this Agreement shall continue in effect so long as
the Agreement still expresses the intent of the parties. If the intent of the
parties cannot be preserved, this Agreement shall be either renegotiated or
terminated.
18. COMPLIANCE WITH LAWS
18.1. Both parties shall comply with all applicable export control
laws, including export controls imposed by the United States government. Without
limiting the generality of the foregoing, each party agrees that it shall not
export or reexport any Software or the direct product thereof to any country
without: first obtaining all necessary and required licenses, consents,
assurances and approvals. IBM acknowledges that shipments of the Software are
subject to the export laws of the United States and that such laws could delay
or preclude delivery of Software in the future. Both parties shall also comply
with the United States Foreign Corrupt Practices Act.
18.2. For purposes of this Section 18.2, "Filing" shall mean any
submission or approval of this Agreement or another document that is required
under the laws of any country in order to make this Agreement effective or to
make ODI's rights hereunder enforceable or otherwise to protect ODI's
proprietary rights hereunder, or to comply with exchange regulations or other
requirements so as to allow payments to ODI in connection with the licensing of
the Software or Applications. In any country where IBM uses Internal Use
Software or distributes Applications, IBM shall (a) take such action with
respect to Filings for Internal Use Software and Applications as IBM takes on
its own behalf with respect to its software in such countries, at IBM's expense,
(b) if ODI notifies IBM of a Filing and under the laws
<PAGE> 45
of the country such Filing is the responsibility of the licensee, distributor or
domestic party, take actions to meet such Filing requirements, at IBM's expense,
and (c) cooperate with ODI's efforts to meet any Filing requirements, at ODI's
expense. ODI shall have no obligation to allow IBM to export Software to any
country in the Territory until IBM has provided ODI with satisfactory evidence
that either any Filing is not required or all Filing requirements have been met.
18.3. In the performance of their obligations under this Agreement,
IBM and ODI shall each com I with all governmental laws, statutes, ordinances,
administrative orders, rules and regulations.
19. NO PARTNERSHIP OR AGENCY
IBM and ODI warrant that each are independent contractors and that this
Agreement and the relations between IBM and ODI hereby established do not
constitute a partnership, joint venture, agency/ or contract of employment
between them, or any other similar relationship.
20. FORCE MAJEURE
Neither IBM nor ODI shall be liable for any delays in the performance
of any of its obligations hereunder due to causes beyond its reasonable control,
including, without limitation, fire, strike, war, riots, acts of any civil or
military authority, acts of God, judicial action, unavailability or shortages of
labor, materials or equipment, failure or delays in delivery of vendors and
suppliers or delays in transportation.
21. SURVIVAL
The parties agree that those provisions of this Agreement which, by
their nature would survive the expiration or earner termination of this
Agreement, including without limitation those set forth in Sections 4.3, 6,
7.12, 8, 9, 10, 11, 12, 13, 15, 17, 18, 21, 22, 23 and 24, shall survive the
expiration or earlier termination of this Agreement for any reason.
22. JURISDICTION
ODI will not challenge the venue or jurisdiction of any action filed by
IBM in connection with the interpretation or
<PAGE> 46
enforcement of this Agreement in a court of competent subject matter
jurisdiction located in the State of New York and each of the parties hereby
agrees to submit itself to the jurisdiction and venue of such courts for the
purpose of any such action. If ODI files any such action in a court of competent
jurisdiction in the Commonwealth of Massachusetts, IBM shall have the right to
contest the jurisdiction and venue of such court. The parties waive any right to
a jury trial and agree that any proceeding hereunder shall be tried by a judge
without a jury.
23. EQUITABLE RELIEF
The covenants and agreements of IBM in Section 10 hereof are of a
special and unique character, and IBM acknowledges that money damages alone will
not reasonably or adequately compensate ODI for any breach of such covenants and
agreements. Therefore, ODI and IBM expressly agree that in the event of the
knowing or willful breach of any such covenants or agreements, in addition to
other rights or remedies which ODI may have, at law, in equity, or otherwise,
ODI shall be entitled to injunctive or other equitable relief compelling
specific performance of, and other compliance the terms of Section 10.
24. APPLICABLE LAW
This Agreement will be construed and the legal relations herein between
the parties will be determined in accordance with the substantive laws of the
State of New York which pertain to agreements executed in, and fully performed
the State of New York.
FEDERAL GOVERNMENT SUBLICENSE.
IBM grants a sublicense, directly or indirectly, to the United States
government or an agency thereof, IBM shall comply provisions of Schedule 10
hereto, in addition to all provisions hereof relating to sublicensing to
Customers generally.
IN WITNESS WHEREOF, the parties hereto executed this Agreement as of
the date first above written.
ODI:
<PAGE> 47
Object Design, Inc.
1 New England Executive Park
Burlington, MA 01803
By:_____________________
Title:__________________
IBM:
International Business
Machines
555 Bailey Avenue
San Jose, CA 95141
By:_____________________
Title:__________________
<PAGE> 1
EXHIBIT 10.26
BREAK-UP AGREEMENT
Agreement Number: STL93035
THIS AGREEMENT, effective as of the 10th day of April, 1993, is made by
and between Object Design, Inc., a Delaware corporation with its principal
office location at One New England Executive Park, Burlington, Massachusetts
01803 (hereinafter referred to as "ODI") and International Business Machines
Corporation, a New York corporation with an office located at 555 Bailey Ave.,
PO Box 49023 , San Jose, California 95161 (hereinafter referred to as "IBM").
WHEREAS, IBM and ODI are entering into certain transactions involving
the use of ODI's software by IBM; and
WHEREAS, such transactions are of sufficient strategic importance to
IBM that IBM would like the option to acquire certain rights in ODI's source
code and other related materials; and
WHEREAS, ODI is willing to provide such an option to acquire such
rights in ODI's source code and other related materials on the terms set forth
herein; and
WHEREAS, IBM and ODI wish to provide for the terms under which either
of them may terminate certain agreements between them.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth, and other good and adequate consideration the parties hereto agree as
follows:
1. DEFINITIONS
The following terms are defined for the purpose of this Agreement as
follows:
1.1 "Application" shall mean a software program that IBM develops in
accordance with the IUSA and which incorporates or is designed to run with
Software.
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1.1a "Break-Up Application" shall mean an Application designed to run
with Break-Up Software.
1.1b "IUSA Application" shall mean an Application designed to run with
IUSA Software.
1.2 "Break-Up Option" shall mean the option of either IBM or ODI to
terminate certain portions of agreements between them pursuant to Section 2
hereof.
1.3 "Contract Documents" shall mean the Agreement Regarding
Confidential Information between IBM and ODI dated February 22, 1993 ("ARCI"),
the Internal Use and Substrate Agreement between IBM and ODI dated as of the
date hereof ("USA"), the Master Agreement between IBM and ODI dated as of the
date hereof ("Master Agreement"), the Stock Purchase Agreement between IBM and
ODI dated as of the date hereof ("Stock Purchase Agreement"), the Escrow
Agreement dated as of the date hereof among IBM, ODI and Data Securities
International, Inc., the Distribution Agreement, if any, subsequently entered
into by IBM and ODI, and, where the context permits, this Agreement.
1.4 "Custodian" shall mean the person or entity designated as the
Custodian under the Escrow Agreement, as from time to time modified by the
parties hereto.
1.5 "Customer" shall mean a permitted sublicensee of one or more
Applications.
1.6 "Derivative Documents" shall mean any Derivative Work which
consists of written documents other than source-code listings.
1.7 "Derivative Object Code" shall mean any binary, object or
executable file which results from compiling, assembling or link-editing
Derivative Source Code or a combination of Derivative Source Code and Escrowed
Source Code.
1.8 "Derivative Source Code" shall mean any Derivative Work which
consists of computer programming code, or accompanying documentation, in a
human-intelligible form.
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1.9 "Derivative Work" shall mean (a) any work which is based upon or
derived from or contains any portion of the Escrowed Materials, such as a
revision, modification, translation, enhancement, abridgment, combination or any
other form in which such Escrowed Materials may be recast, transformed or
adapted, regardless of packaging or naming of such work, and (b) any other work
which, if prepared without authorization of the owner of the copyright in the
Escrowed Materials, would constitute copyright infringement. For purposes
hereof, a Derivative Work shall also include any compilation that incorporates
any part of such a preexisting work.
1.10 "Development Environment" shall mean a configuration of the
Software intended for use in developing applications which incorporate or are
designed to run with Software.
1.10a "Break-Up Development Environment" shall mean a Development
Environment which uses the Break-Up Software.
1.10b "USA Development Environment" shall mean a Development
Environment which uses the IUSA Software.
1.11 "Documentation" shall mean textual material, whether human- or
machine-readable, that describes the design, functions, operations or use of the
Software.
1.12 "Error" shall mean any mistake, problem or defect in Code or
Documentation which causes (1) an incorrect functioning or non-functioning of
code or (2) an incorrect or incomplete statement or diagram in Documentation, if
such mistake, problem or defect renders the code inoperable, causes the Code to
fail to meet the specifications thereof, causes the Documentation to be
inaccurate or inadequate in any material respect, causes incorrect results or
causes incorrect functions to occur.
1.13 "Escrowed Documents" shall mean that portion of the Escrowed
Materials which consists of written documents other than source code listings.
1.14 "Escrowed Materials" shall mean the materials initially deposited
into escrow pursuant to the Escrow Agreement, all updates thereto subsequently
so deposited, and all other materials subsequently so deposited that are
designated as
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<PAGE> 4
"Escrowed Materials" for purposes hereof by the mutual agreement of the parties.
1.15 "Escrowed object Code" shall mean any binary, object or executable
files which result from compiling, assembling or link-editing the Escrowed
source code.
1.16 "Escrowed Source Code" shall mean that portion of the Escrowed
Materials which consists of computer programming code in a human-intelligible
form.
1.17 "Framework Application" shall mean any Application which:
(a) Has an architecture which involves (i) a separate module
or component responsible for storage and exchange of data and metadata
(the "Framework Platform") and (ii) a variable number of modules or
components responsible for data analysis, data manipulation or other
processing which interact with the Framework Platform to store,
retrieve or exchange data (the "Framework Tools"); and
(b) Allows (but does not necessarily require), an openended
set of Framework Tools to interact with the Framework Platform,
including Framework Tools which may be developed, marketed or
distributed not only by IBM, but also by entities other than IBM.
Unless the context indicates otherwise, the use of the term "Framework
Application" in this Agreement shall denote both Framework Platforms and
Framework Tools. If an Application which is capable of being run stand alone is
connected to a Framework Application as a Framework Tool, the existence of such
connection shall not affect any royalty obligations in respect of Substrate
software which might otherwise arise with respect to such Application.
1.18 "Framework Software" shall mean the Software when used as
Substrate Software in a Framework Platform, Framework Tool,, Framework
Application, or any combination thereof. Although Substrate Software is, in
general, limited to the Runtime Environment, Framework Software may be either
the Runtime
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Environment, the Extension Environment or the ADCP Development Environment.
1.18a "Break-Up Framework Software" shall mean the Break-up Software
when used as Framework Software.
1.18b "IUSA Framework Software" shall mean the IUSA Software when used
as Framework Software.
1.19 "IBM Notes" shall mean that portion of the ARCI Materials (as
defined in Section 2.1-d hereof) that consists of summaries, annotations or
notes prepared by IBM in accordance with the provisions of the ARCI and that
relate directly to Escrowed Materials.
1.20 "Internal Use Software" shall mean the Software when used
internally by IBM, its Subsidiaries or its subcontractors in accordance with
this Agreement (a) for the development of Applications or (b) for the operation
of applications that are not commercially available. Internal Use Software may
be either the Runtime Environment or the Internal Use Development Environment.
1.20a "Break-Up Internal Use Software" shall mean the Break-Up
Software when used as Internal Use Software.
1.20b "IUSA Internal Use Software" shall mean the IUSA
Software when used as Internal Use Software.
1.21 "IUSA" shall mean the Internal Use and Substrate Agreement between
the parties, dated as of the date hereof.
1.22 "Runtime Environment" shall mean a configuration of the Software
which is not intended for use in developing applications (except to the extent
that a Customer indirectly uses a Runtime Environment embedded in an Application
which Application is itself intended for use in developing applications), but
does include all the code and utilities needed to execute applications developed
using ODI's Software. The Runtime Environment does not provide certain schema
generation facilities and certain other tools that are provided by the
Development Environment.
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1.22a "Break-up Runtime Environment" shall mean a Runtime
Environment which uses the Break-Up Software.
1.22b "IUSA" Runtime Environment" shall mean a Runtime
Environment which uses the IUSA Software.
1.23 "Seat" shall mean (a) as to the Break-Up Development Environment,
each person who executes the Break-Up Development Environment, and (b) as to the
Break-Up Runtime Environment, each unique combination of (i) a workstation,
terminal, or other display device and (ii) an instance of any application or
other software program which link-edits (either dynamically or statically) to,
and runs in the same process-space as, the Break-Up Runtime Environment.
Break-Up Internal Use Software licenses granted with respect to a particular
seat may be transferred from one person to another, but any given license may
not, in general, be transferred more than once in a given month. Notwithstanding
the foregoing, in the case of the MVS and AS/400 versions of the Software, Seat
shall mean the central processing unit.
1.24 "Shares" shall mean all of the 2,601,877 shares of ODI Series E
and 1,148,818 shares of Series F Convertible Preferred Stock to be acquired by
IBM, pursuant to the Stock Purchase Agreement, and all shares of capital stock
that IBM may acquire upon conversion or exchange of such Shares, whether
pursuant to the terms of such Shares, recapitalization, merger, combination,
stock dividend, stock split or similar events.
1.25 "Software" shall mean either the IUSA Software or the Break-Up
Software.
1.25a "Break-up Software" shall mean any Derivative object
Code or Escrowed object Code and any associated Documentation.
1.25b "IUSA Software" shall mean any Software (as the term is
defined in the IUSA) which IBM licenses pursuant to the IUSA.
1.26 "Source Code option" shall mean IBM's option to receive the
Escrowed Materials pursuant to Section 3 and certain license grants pursuant to
Section 6 hereof upon payment of the Option Price pursuant to Section 4 of this
Agreement.
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1.27 "Sub-Distributor" shall mean an IBM Subsidiary or other third
party that has an agreement with IBM or an IBM Sub-Distributor to distribute
Applications to Customers in accordance with the terms of this Agreement.
1.28 "Subsidiary" shall mean a corporation, company or other entity (i)
at least fifty percent (50%) of whose outstanding shares or securities
(representing the right to vote for the election of directors or other managing
authority) are, or (ii) which does not have outstanding shares or securities, as
may be the cause in a partnership, joint venture or unincorporated association,
but at least fifty percent (50%) of whose ownership interest representing the
right to make the decisions for such corporation, company or other entity is,
now or hereafter, owned or controlled, directly or indirectly, by a party
hereto, but such corporation, company or other entity shall be deemed to be a
Subsidiary only so long as such ownership or control exists.
1.29 "Substrate Software" shall mean the Software when used in
accordance with this Agreement as a data-storage substrate of an Application.
Unless otherwise agreed to by ODI in writing, Substrate Software shall only
comprise the Runtime Environment. If a particular usage of the Software would
qualify as both Substrate Software and Framework Software, such Software shall
be deemed to be Framework Software for the purposes of this Agreement.
1.29a "Break-Up Substrate Software" shall mean the Break-up
Software when used as Substrate Software.
1.29b "IUSA "Substrate Software" shall mean the IUSA Software
used as Substrate Software.
1.30 "Trigger Certificate" shall mean either the Source Code Trigger
Certificate or the Bankruptcy Trigger Certificate.
1.30a "Bankruptcy Trigger Certificate" shall mean IBM's
certification that a Triggering Event as set forth in Appendix A to the
Escrow Agreement (other than the exercise of the Source Code Option)
has occurred.
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1.30b "Source Code Trigger Certificate" shall mean ODI's
certification substantially in the form of Exhibit II to the Escrow
Agreement to the effect that IBM has duly exercised the Source Code
Option and surrendered the Shares or paid the value thereof in
accordance with Section 4 hereof.
2. EXERCISE OF BREAK-UP OPTION
2.1 At any time during the period beginning on April 10, 1996 and
ending upon the expiration or termination of this Agreement, either party may
terminate or modify the Contract Documents as set forth in this Section 2.1. A
party may effect such termination by delivering written notice to the other
party of such election to terminate at least (9) months prior to the effective
date of such termination (the "Break-Up Date"). On the Break-Up Date,
a. the Master Agreement shall terminate, except to the extent that the
provisions thereof remain applicable to any Statement of Work that may
be in effect on and after the Break-Up Date ("Statement of Work");
b. the IUSA and the Distribution Agreement, if any, described in
Section 8 hereof shall continue in effect, except that the pricing and
other terms thereof shall be changed as provided in such agreements;
c. the ARCI shall continue in effect;
d. IBM shall promptly return to ODI (or certify in writing that it has
destroyed within sixty days after the Break-Up Date) all Confidential
Information (as defined in the ARCI), except (i) IBM may retain one
Archival Copy (as defined in Section 10 of the ARCI) of all
Confidential Information ("ARCI Materials") and (ii) IBM may retain
such ARCI Materials as may be required to complete any Statement of
Work under the Master Agreement, and when such Statement of Work, if
any, is completed, IBM shall then promptly return to ODI (or certify in
writing that it has destroyed within sixty days) all such ARCI
Materials that had been retained by IBM pending completion of the
Statement of-Work. The
-8-
<PAGE> 9
ARCI Materials shall remain subject to the provisions (including
confidentiality provisions) of the ARCI; and
e. the right of first refusal set forth in Section 1 of the
Stockholders' Agreement among ODI, IBM and certain other stockholders
of ODI and the provisions set forth in Sections 9.01, 9.02 and 9.04 of
the Stock Purchase Agreement shall terminate on the Break-Up Date.
2.2 IBM may accelerate the Break-Up Date, as provided in Section 3.2b
hereof, at any time after both (i) April 10, 1996 and (ii) the date on which ODI
has given the notice as described in Section 3.2b.
2.3 Any notice given pursuant to Section 2.1 shall be irrevocable,
unless the parties otherwise agree in writing.
2.4 IBM and ODI each agrees that it will cooperate in good faith to
coordinate the disclosure of the exercise of the BreakUp option or the Source
Code Option. Neither party will disclose the exercise of the Break-Up Option or
the Source Code Option during the period between notice of exercise of either
such option and the Break-Up Date without the consent of the other party, which
consent will not be unreasonably withheld. If either party is required by law to
disclose the Break-Up Option or the Source Code Option, it shall give the other
party as much prior notice as practical of such disclosure.
3. SOURCE CODE OPTION; BANKRUPTCY
3.1 Subject to the terms and conditions of this Agreement, IBM shall
have the right to acquire possession of the Escrowed Materials and licenses to
use and sublicense the Escrowed Materials, but only as set forth in Section 6
hereof (the "Licenses"), (i) on the Break-Up Date in accordance with the
provisions of Section 3.2 hereof or (ii) on the Bankruptcy Date in accordance
with the provisions of Section 3.3 hereof.
3.2 on the Break-Up Date, IBM may acquire possession of the Escrowed
Materials by exercising its Source Code Option as follows:
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a. If IBM shall have given notice of its election to exercise the
Break-Up Option pursuant to Section 2.1 hereof, then it may exercise
its Source Code Option on the Break-Up Date, provided it (i) gives
written notice thereof to ODI within six (6) months after the date on
which ODI received IBM's notice of exercise of the Break-Up Option, and
(ii) delivers the payment for the Escrowed Materials as provided in
Section 4 hereof.
b. If ODI shall have given notice of its election to exercise the
Break-Up Option pursuant to Section 2.1 hereof, then IBM may exercise
its Source Code Option on the Break-Up Date, provided it (i) gives
written notice thereof to ODI within eight (8) months after the date on
which IBM received such notice of ODI's exercise of the Break-Up
Option, and (ii) delivers payment for the Escrowed Materials as
provided in Section 4 hereof. IBM may elect in its notice of exercise
of the Source Code Option under this Section 3.2b to accelerate the
Break-Up Date and the exercise of the Source Code option to a date no
less than thirty (30) days after the date on which ODI receives notice
of IBM's exercise of the Source Code Option.
C. IBM's right to exercise the Source Code Option shall terminate if
IBM has not exercised the Source Code Option in accordance with this
Section 3 and paid the consideration therefor in accordance with
Section 4 hereof.
3.3 IBM shall have the right to acquire possession of the Escrowed
Materials (a) on the date when (i) IBM shall have delivered a Demand Notice to
the Custodian pursuant to Section 9.5.2 of the Escrow Agreement and (ii) ODI has
not opposed the Release of the Escrowed Materials in accordance with Section 9.4
thereof or (b) if ODI shall have challenged such release, on the date when ODI
subsequently withdraws in writing its challenge or a final judgment of a court
of competent jurisdiction decides that IBM has the right to possession of the
Escrowed Materials (in either case the "Bankruptcy Date").
4. PAYMENT FOR ESCROWED MATERIALS
4.1 Subject to the provisions of Section 4.2 hereof, IBM shall pay ODI
for delivery of the Escrowed Materials by
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delivering all of the Shares, duly endorsed for transfer and free of all liens,
encumbrances or other restrictions, to ODI on the Break-Up Date or the
Bankruptcy Date, as the case may be.
4.2 In the event that IBM (i) shall not have purchased all of the
Shares or (ii) shall have sold or otherwise transferred any of the Shares,
whether to ODI or otherwise, on or before the Break-Up Date or the Bankruptcy
Date, as the case may be, then IBM shall pay ODI for any Shares not transferred
to ODI on the Break-Up Date or the Bankruptcy Date, as the case may be, by
delivering to ODI on the Break-Up Date or the Bankruptcy Date, as the case may
be, a bank or certified check in an amount equal to the fair value of the Shares
not being transferred to ODI. The fair value of the Shares shall be determined
as follows:
a. If ODI's common stock is traded on a national stock exchange or a
national over-the-counter market, the fair value of each Share shall be
equal to the average of (x) the average closing price per share of
ODI's common stock reported by such exchange or market on the ten days
immediately preceding the date of the notice described in Section 2.1
and (y) the average closing price per share of ODI's common stack
reported by such exchange or market on the ten days immediately
preceding the Break-Up Date or the Bankruptcy Date, as the case may be.
b. If ODI's shares are not traded on a national stock exchange or a
national over-the-counter market, the fair value of the Shares shall be
equal to (i) the average of (w) the highest price for which ODI could
be sold to an independent third party during the ten days immediately
preceding the date of the notice described in Section 2.1 and (x) the
highest price for which ODI could be sold to an independent third party
during the ten days immediately preceding the Break-Up Date or the
Bankruptcy Date, as the case may be, multiplied by (ii) the amount
obtained by dividing (y) the number of shares of ODI's common stock
represented by the Shares on a fully-converted basis by (z) the total
number of fully diluted shares of common stock of ODI issued and
outstanding. The determination of the highest price for which ODI could
be sold to an independent third party shall be made by an independent
appraiser or investment banking firm of national standing selected by
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mutual agreement of ODI and IBM. ODI and IBM agree to negotiate in good
faith in the selection of such appraiser or investment banking firm.
5. RELEASE FROM ESCROW
5.1 Upon IBM's exercise of the Source Code Option and payment of the
Shares or the fair value thereof, as determined in accordance with Section 4.2,
as the case may be, on the Break-Up Date, ODI shall simultaneously with such
exercise and payment deliver to IBM the Source Code Trigger Certificate which
IBM may in turn deliver to the Custodian under the Escrow Agreement.
5.2 IBM may also receive the Escrowed Materials on the Bankruptcy Date
pursuant to Section 3.3 hereof and Section 9.5.2 of the Escrow Agreement, and
upon delivery of payment for the Escrowed Materials as provided in Section 4
hereof simultaneously with receipt of the Escrowed Materials.
6. LICENSE GRANT
6.1 Subject to the terms and conditions of this Agreement (including
but not limited to Sections 4 and 7 hereof), ODI hereby grants to IBM the
following world-wide, non-exclusive, non-transferable Licenses under ODI's
patents, copyrights and other intellectual property rights. The Licenses granted
in subsections a-d hereof become effective only on either (i) the Break-Up Date,
provided that IBM exercises the Source Code Option in accordance with Section 3
hereof or (ii) the Bankruptcy Date, provided IBM delivers a valid Demand Notice
to the Custodian under the Escrow Agreement in accordance with the provisions of
Section 3.3 hereof and Section 9.5.2 of the Escrow Agreement, and the License
granted under subsection (h) hereof shall become effective only on the seventh
anniversary of the First Date, as defined in Section 7.2a hereof, at which time
it shall replace the License set forth in subsection 6.1(a) hereof which shall
terminate on such date:
a. A license to prepare (and have prepared under the terms and
conditions as set forth in Section 6.1 g hereof), Derivative Works from
(i) the Escrowed Materials and (ii) IBM Notes; provided, however, that
such Derivative Works shall remain subject to the terms and conditions
of this
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Agreement and IBM shall only use, copy, license, sublicense and
otherwise exploit such Escrowed Materials, IBM Notes and Derivative
works as necessary to exercise the Licenses granted herein; and
provided further that IBM shall not sell, license, sublicense,
distribute or in any way transfer, disclose or make available any
Escrowed Source Code or Derivative Source Code to any party other than
to IBM, to any IBM Subsidiary that expressly agrees in writing to
assume the terms and conditions of Sections 6, 10, 11, 13, 15, 16, 23
and 24 of this Agreement and Section 3 of the IUSA, substituting
"Break-Up Internal Use Software" for "Internal Use Software", which
Section 3 is incorporated by reference herein, and to a subcontractor,
if any, that ODI agrees may perform tasks in accordance with the terms
set forth in Section 6.1g of this Agreement.
b. A license to (i) copy and distribute internally and to sublicense to
IBM Subsidiaries and (ii) use the Break-Up Internal Use Software, in
each case to the same extent and subject to the terms set forth, or
referred to, in Section 3 of the IUSA, substituting "Break-Up Internal
Use Software" for "Internal Use Software", which Section 3 is
incorporated by reference herein.
c. A license to use, copy, market, distribute and sublicense by itself
and through authorized Sub-Distributors the Break-Up Substrate Software
as part of and embedded in Applications, to the same extent as set
forth in and subject to the terms and conditions set forth or referred
to in said Section 3 of the IUSA, substituting "Break-Up Substrate
Software" for "Substrate Software" and "Break-Up Application" for
"Application".
d. A license to use, copy, market, distribute and sublicense by itself
and through authorized Sub-Distributors the Break-Up Framework Software
to the same extent as set forth in and subject to said Section 3 of the
IUSA and any Framework Supplement (as defined in the IUSA) that may be
executed by ODI and IBM prior to the Break-Up Date, substituting
"Break-Up Framework Software" for "Framework Software" and "Break-Up
Application" for "Application".
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e. Notwithstanding the foregoing, Section 3.9 of the IUSA shall not
apply to any of the provisions of this section 6.1.
f. From and after the seventh anniversary of the First Date (as defined
in Section 7.2a hereof) the Licenses granted in this Section 6 b-d
shall become royalty-free.
g. Notwithstanding provisions in this Agreement to the contrary, to the
extent that IBM considers it necessary or desirable to subcontract the
creation of Derivative works, IBM will advise ODI, specifying such
portions of Derivative Works and identifying the intended
subcontractor. Any such subcontractor shall be subject to prior written
approval by ODI, which approval ODI will not unreasonably withhold,
taking into account, among other factors, competitive considerations.
Before any such subcontractor begins its performance hereunder:
1. the subcontractor must enter into a written agreement with IBM
that binds such subcontractor to IBM's obligations Sections 6,
10, 11, 13, 15, 16, 23 and 24 of this Agreement;
2. such written agreement must make ODI an intended third party
beneficiary of that agreement;
3. a copy of relevant portions of such agreement must be provided
to ODI;
4. IBM shall indemnify and hold harmless ODI for any breach of
such agreement, provided that ODI notifies IBM in writing of
such claim and allows IBM a reasonable period of time to cure
any breach, and cooperates with IBM's efforts to cure any
breach; and
5. IBM hereby agrees that it will remain directly liable and
responsible to ODI for performance of the Subcontractor's
obligations under the ARCI and this Agreement. Except as
expressly provided above, IBM shall have no right to
subcontract the rights granted under this Section 6.1.
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h. Royalty free Licenses, from and after the seventh anniversary of the
First Date (1) to prepare (and have prepared) Derivative Works from (i)
the Escrowed Materials and (ii) IBM Notes and (2) to use, copy, license
and sublicense the Escrowed Source Code and Derivative Source Code. IBM
shall only use, copy, license, sublicense and otherwise exploit such
Escrowed Materials, IBM Notes, Derivative works, Escrowed Source Code
and Derivative Escrowed Source Code as necessary to exercise the
Licenses granted herein and subject to Sections 6.lb - d, 6.3 and 6.4
hereof and Section 4.1 of the IUSA, except that certain provisions of
Sections 3 of the IUSA as referenced in the Licenses shall not pertain,
namely those provisions requiring IBM to (i) have specific written
agreements with Sub-Distributors, Subsidiaries and Special Contractors,
(ii) indemnify ODI relating to these agreements, or (iii) execute a
Framework Supplement before creating any additional Framework
Applications.
6.2 Any Break-Up Software licensed or sublicensed internally or to IBM
Subsidiaries or to a third party pursuant to Section 6.1 above shall be
sublicensed in accordance with the provisions of Sections 4.1, 4.2, 4.3 and 4.8,
and any schedules referred to therein, of the IUSA substituting "Break-Up
Software" for "Software", which Sections 4.1, 4.2, 4.3 and 4.8 are incorporated
by reference herein.
6.3 This Agreement does not grant or convey any title to or ownership
rights in the Escrowed Materials or any part of the Escrowed Materials, any
copies thereof, or any proprietary rights therein (including, without
limitation, copyrights, patents and trade secrets), which title and ownership
rights shall be and remain vested in ODI or its licensors. Nothing herein shall
be construed to grant IBM any rights by implication or estoppel, and IBM shall
be licensed only those rights expressly enumerated in this section 6. Except as
set forth below in this Section 6.3, all rights in the Escrowed Materials and
the Derivative works not expressly enumerated in this Section 6 shall at all
times remain and inure in ODI. Without limiting the generality of the foregoing,
IBM shall have no rights hereunder in any ODI products, enhancements or
modifications made by ODI other than rights in the Escrowed Materials as
expressly set forth in this Agreement and any other rights as may be set forth
in any other
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agreements between IBM and ODI. However, IBM shall have title to and ownership
rights (including but not limited to patent, copyright, license, sublicense and
other rights, notwithstanding any provisions herein, if any, to the contrary) in
and to all modifications, additions, enhancements and other changes or
improvements made by or for IBM to the Escrowed Materials in accordance with the
terms of this Agreement ("IBM Materials"), subject only to the terms of this
Agreement and proprietary rights (including copyrights and patents) of ODI or
its licensors.
6.4 ODI has incorporated into its Software the certain third party
products set forth in the Certificate of Originality (Schedule 9 to the IUSA)
and may incorporate subsequent third party products in its Software ("Third
Party Products"). The rights granted to IBM hereunder with respect to Third
Party Products (whether listed on Schedule 9 to the IUSA or that subsequently
become part of the Software) shall be limited to such rights as ODI shall have
the right to convey under the terms of the relevant agreements conveying rights
to Third Party Products to ODI.
7. ROYALTIES
7.1 As payment for the Licenses, IBM shall pay fees and royalties to
ODI with respect to the use, license and sublicense of any Break-Up Software for
a period of seven years as set forth below. Such fees and royalties shall be a
declining percentage (as set forth in Section 7.2 hereof) of the license fees
and royalties that would be in effect and payable under the IUSA immediately
prior to the Break-Up Date or the Bankruptcy Date, as the case may be, assuming
that the terms and conditions of the IUSA with respect to Internal Use Software,
Substrate Software and Framework Software, respectively, shall be deemed to
apply to Break-Up Internal Use Software, Break-Up Substrate Software and
Break-Up Framework Software, respectively (the "Pro Forma IUSA Royalties");
provided that the calculation of discounts and royalty payments owed under the
IUSA, the Distribution Agreement, if any, and this Agreement shall be performed
separately and without regard to such calculations under any other agreement.
7.2 The declining percentage of the applicable Pro Forma IUSA Royalties
shall be as follows:
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a. From the Break-Up Date or the Bankruptcy Date, as the case may be,
until the third anniversary date of the first commercial shipment of
the first Break-Up Software by IBM ("First Date"), IBM shall pay ODI
fees and royalties on any Break-Up Software licensed or sublicensed
during this period equal to 100% of the Pro Forma IUSA Royalties.
b. From the date immediately after the third anniversary of the First
Date to the fifth anniversary of such date, IBM shall pay ODI fees and
royalties on any Break-Up Software licensed or sublicensed during this
period equal to 50% of the Pro Forma IUSA Royalties.
c. From the date immediately after the fifth anniversary of the First
Date to the seventh anniversary of such date, IBM shall pay ODI fees
and royalties on any Break-Up Software licensed or sublicensed during
this period equal to 25% of the IUSA Royalties.
7.3 All fees and royalties payable pursuant to this Section 7 shall be
paid in accordance with the terms set forth in the IUSA or the Distribution
Agreement, as applicable; provided, however, that the calculation of discounts
and royalties under the IUSA, the Distribution Agreement, if any, and this
Agreement shall be performed separately, as set forth in Section 7.1 hereof. All
other applicable terms and conditions in the IUSA (including but not limited to
audit provisions) shall be applicable to this Agreement, substituting "Break-Up
Software" for "Software".
8. DISTRIBUTION AGREEMENT
The parties anticipate that they may enter into a Distribution
Agreement covering products that are similar to Runtime Environment, Extension
Environment or Development Environment. If the parties enter into the
Distribution Agreement, each of them agrees to negotiate in good faith to amend
this Agreement to add provisions dealing with, among other things, a license
grant and royalty payments having substantially equivalent terms as those set
forth in Sections 6 and 7 hereof.
9. NON-SOLICITATION
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From the date on which IBM or ODI gives notice of exercise of the
Break-Up Option until two years thereafter (i) IBM shall not solicit, employ or
retain as a consultant any architect, programmer or other technical person who
is then an employee, or at any time during the then-preceding twelve month
period was an employee, of ODI, and (ii) ODI shall not solicit, employ or retain
as a consultant any architect, programmer or other technical person whose
principal responsibility at IBM concerns object oriented database products;
provided, however, that if the Source Code Option is not exercised as provided
herein, then this Section 9 shall terminate on the Break-Up Date or the
Bankruptcy Date, as the case may be.
10. DISCLAIMER OF WARRANTIES
10.1 EXCEPT AS SET FORTH IN SECTION 11, ODI PROVIDES THE ESCROWED
MATERIALS AND THE RIGHTS GRANTED HEREUNDER ON AN AS-IS, WHERE-IS BASIS. ODI
MAKES NO WARRANTIES OF ANY KIND, EXPRESS, IMPLIED OR ARISING BY CUSTOM OR TRADE
USAGE, WITH RESPECT TO THE ESCROWED MATERIALS OR THE RIGHTS GRANTED HEREUNDER OR
OTHERWISE IN CONNECTION WITH THIS AGREEMENT, AND SPECIFICALLY DISCLAIMS ANY
IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE.
10.2 IBM shall be solely responsible for any representations and
warranties made in connection with the provision of Break-Up Software to any
third party.
11. WARRANTIES OF ODI
11.1 ODI represents and warrants, with respect to all Escrowed Source
Code and Escrowed Object Code delivered to IBM by ODI, that:
(a) ODI is the sole owner of such Escrowed Source Code and Escrowed
Object Code, except for any works designated to IBM as Third-Party Products
subject to Section 6.4 hereof.
(b) ODI has full and sufficient right to grant the rights and/or
licenses granted to IBM in this Agreement subject to Section 6.4 hereof.
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(c) No such Escrowed Source Code and Escrowed Object Code have been
published to ODI's knowledge under circumstances which have caused a loss of
copyright therein; and
(d) No such Escrowed Source Code and Escrowed Object Code infringes any
patent, copyright, trademark or other intellectual property rights (including
trade secrets), privacy, publicity or similar rights of any third party, nor has
any claim (whether or not embodied in an action, past or present) of such
infringement been asserted, and no such claim is pending against ODI. The
indemnity set forth in Section 12 shall be IBM's sole remedy for any claim,
damage, liability, loss or expense arising out of or related to a breach of
Section 11.1(b) and (d).
(e) ODI represents and warrants that the Software delivered to IBM in
connection with this Agreement does not and shall not contain any Code,
programming instruction or set of instructions that is intentionally constructed
with the ability to damage, interfere with or otherwise adversely affect
computer programs, data files or hardware without the consent and intent of the
computer user (hereinafter "Harmful Code"). ODI shall establish and enforce a
policy and procedures, which shall be reviewed with IBM at IBM's request, to
prevent any such Harmful Code programming instruction or set of instructions
from being incorporated by ODI employees into the Software delivered to IBM in
connection with this Agreement. ODI shall promptly notify IBM of any ODI
knowledge or suspicion that such Harmful Code has been incorporated therein,
provided, however, that such notification shall not be deemed to relieve ODI of
any responsibility for resulting damages.
12. Patent and Copyright Indemnity.
12.1 ODI agrees to protect, defend, hold harmless and indemnify IBM and
its Subsidiaries from and against any and all claim, damages, liabilities,
losses and expenses, arising out of any alleged or actual infringement by any
Escrowed Source Code or Escrowed Object Code, other than Third-Party Products,
delivered to IBM in connection with this Agreement of a patent, copyright,
trademark or other intellectual property right, or privacy, publicity or similar
right of any third party, except that ODI shall have no indemnity obligation for
any claim alleging infringement of any trademark (including any trade name,
product
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name or similar right) resulting from the use of any name or mark by IBM,
subcontractors, Sub-Distributors or IBM Subsidiaries.
12.2 ODI shall have no liability under this Section 12 unless IBM (a)
promptly notifies ODI in writing of the claim, damage, liability, loss or
expense and (b) in the case of a third-party claim (i) gives ODI full authority,
information and assistance to defend such claim and (ii) gives ODI sole control
of the defense of such claim and all negotiations for the compromise or
settlement thereof. If the Escrowed Source Code or Escrowed Object Code or any
part thereof becomes, or is likely to become, the subject of a valid claim of
infringement or the like under any patent, copyright or trade secret law, ODI
shall have the right, at its option and expense, either (c) to obtain for IBM a
license permitting the continued use of the Software or such part, or to replace
or modify it so that it becomes non- infringing, or (d) if the exercise of
commercially reasonable efforts fail to result in such a license, replacement or
modification, to refund an amount equal to the depreciated license fee paid by
IBM pursuant to Section 7 hereof for the Break-Up Software (calculated on a
straight line basis over a seven-year life) and to terminate the license
therefor. ODI shall have no liability hereunder with respect to third-party
claims for any costs incurred by IBM or settlement entered into without ODI's
prior written consent. ODI shall have no liability hereunder with respect to any
claim, damage, liability, loss or expense based in whole or in part upon (e) the
operation of Break-Up Software or the combination of the Break-Up software with
other software or products not furnished by ODI, (f) any addition to or
modification to the Software by any person or entity other than ODI, or (g) ODI
furnishing to IBM any information, data, service and applications assistance,
other than the Software and the printed manuals relating thereto.
12.3 THE PROVISIONS OF THIS SECTION 12 STATE THE EXCLUSIVE LIABILITY OF
ODI AND THE EXCLUSIVE REMEDY OF IBM WITH RESPECT TO ANY CLAIM OF PATENT,
COPYRIGHT OR TRADE SECRET INFRINGEMENT BY THE BREAK-UP SOFTWARE, ANY PART
THEREOF OR THE USE THEREOF, OR CLAIM THAT ODI LACKS THE RIGHT TO GRANT THE
LICENSES GRANTED HEREIN, AND ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED, AND INDEMNITIES WITH RESPECT THERETO.
13. CONFIDENTIAL MATERIALS
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13.1 IBM acknowledges that ODI and third party vendors claim that the
Escrowed Materials (other than Escrowed Materials previously disclosed as Class
I Confidential Information or non-confidential information pursuant to the ARCI
prior to the Break-Up Date, but including Third Party Products, if any), and the
Derivative Source Code (excluding from such definitions IBM Materials)
(collectively, the "Confidential Materials") contain information that ODI
asserts is confidential and proprietary and constitutes a valuable asset of ODI.
confidential Materials shall not include any information that:
1. is already known by or in the possession of IBM or any of
its Subsidiaries without obligation of confidence;
2. is independently developed by IBM or any of its
Subsidiaries;
3. is or becomes publicly available without breach of any of
the Contract Documents;
4. is rightfully received by IBM from a third party without
obligation of confidence;
5. is released for disclosure by IBM with the Written consent
of ODI.
13.2 Prior to the Break-Up Date or Bankruptcy Date, as the case may be,
IBM's obligations with respect to Confidential Information, as defined in the
ARCI, shall be subject to the provisions of the ARCI. After the Break-Up Date or
Bankruptcy Date, as the case may be, IBM's obligations with respect to
Confidential Information (including any Escrowed Materials) delivered to IBM
prior to either such date shall remain governed by the ARCI. However, the
provisions of this Agreement, including Sections 6 and 13 hereof, and not the
provisions of the ARCI (except to the extent provisions from the ARCI are
incorporated herein), shall govern IBM's obligations with respect to the
Confidential Materials on and after the Break-Up Date or Bankruptcy Date, as the
case may be, except to the extent any portion thereof was delivered to IBM prior
to either such date.
13.3 For a period beginning on the Break-Up Date or Bankruptcy Date, as
the case may be, and ending seven years after
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the First Date, IBM shall hold the Confidential Materials strictly confidential
and shall use them only as expressly permitted by this Agreement. Except as
permitted pursuant to the licenses granted under Section 6 hereof, IBM shall
limit the use of and access to the Confidential Materials to its employees, or
employees of IBM Subsidiaries or subcontractors having access to same pursuant
to Section 6 hereof, who have a need to use the Confidential Materials on behalf
of IBM in order for IBM to exercise its rights hereunder and who have executed
confidentiality agreements that will apply to the Confidential Materials and are
at least as protective as the terms of this Section 13; and IBM shall prevent
unauthorized disclosure, publication, display or use of any Confidential
Materials; provided however, that the exceptions to disclosure set forth in
Section 8.0 of the ARCI are incorporated by reference herein.
13.4 Notwithstanding anything in this Section 13 to the contrary, end
user documentation and end user educational materials, if any, contained in the
Escrowed Materials shall be and remain non-confidential information.
13.5 IBM shall place or maintain appropriate copyright, trademark or
government rights or restrictive notices on or in the Derivative Works to
preserve copyrights therein and shall reproduce all such notices on any copies
of the Escrowed Materials and the Derivative Works, or any part thereof, that
IBM may make.
13.6 IBM agrees that it shall not permit any third party to reverse
assemble or reverse compile the Break-Up Software or otherwise attempt to access
Escrowed Source Code or Derivative Source Code, or to sublicense, rent, lease or
assign the Escrowed Source Code or Derivative Software to any third party,
except as authorized by this Agreement or in a prior written authorization made
by ODI in its sole discretion or as permitted in Section 6.1.g.
13.7 The two parties further agree that, should any of their
advertising, promotional or other materials be inaccurate, misleading or
otherwise misuse the other party's trademarks or trade names, the offending
party will, upon reasonable notice from the other party, change or correct such
materials at its own expense.
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13.8 IBM agrees that ODI shall be an intended third party beneficiary
of the agreements between IBM and Sub-Distributors, Customers, and its
Subsidiaries referred to in this Agreement. IBM agrees to cooperate with ODI's
efforts to exercise its third party beneficiary rights and enforce the terms and
conditions of such agreements.
13.9 Notwithstanding anything herein to the contrary, IBM shall not
directly or indirectly export or re-export any Confidential Materials outside
the United States, without complying with all applicable export control and
other laws and regulations (including providing ODI any required assurances
regarding export and re-export).
13.10 IBM shall not use or adopt the following ODI service marks or
trademarks: OBJECT DESIGN, ODI, OBJECTSTORE, SCHEMADESIGNER, OBJECTSTORE BROWSER
and LEADERSHIP BY DESIGN and the 0 logo or any confusingly similar marks and IBM
agrees not to contest or attack ODI's exclusive rights in the marks listed in
this Section 13.10.
13.11 If IBM grants a sublicense, directly or indirectly, to the United
States Government or any agency thereof, IBM shall comply with the provisions of
Schedule 10 to the IUSA in addition to all provisions hereof relating to
sublicensing to Customers generally.
13.12 (a) Subject to any of ODI's applicable copyrights, trademarks, or
patents, IBM and its Subsidiaries shall be free to use any ideas, concepts,
know-how or techniques retained in the unaided memory of those employees who
have properly had access to Confidential Materials ("residual information") in
the development, manufacture, marketing and maintenance of IBM's products and
services, or for any other purpose, except as provided in paragraph (b) below;
provided in each case that such use does not violate any of the obligations not
to disclose, publish or disseminate such Confidential Materials during the
period of confidentiality specified in Section 13.3; and provided further in
each case that such use is not prohibited or restricted under any of the other
Contract Documents and that nothing in this paragraph shall abrogate or limit
any obligations under any of the Contract Documents.
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(b) Notwithstanding anything in paragraph (a) above to the
contrary, any residual information relating to key ODI technologies (including,
without limitation, virtual memory mapping, relocation, cache coherency,
versioning and schema services) may not be employed in any way from the time of
initial disclosure of such residual information until seven years after the
First Date in the design, development or maintenance of any product (other than
Derivative Works) which (a) supports the persistent storage of complex data
structures and (b) allows dereferencing of pointers to such persistent data at
speeds approaching transient pointer dereferences.
13.13 Neither IBM nor any IBM Subsidiary shall state, in any formal
public announcement or in a writing or record on any tape or storage device,
that any Derivative Work is based on or derived from an ODI product or
technology; provided, that this Section 13.13 will not prohibit IBM from
disclosing such facts if required by law or if ODI has previously disclosed such
facts in writing or on tape as described above; provided further, that nothing
in this Section 13.13 is intended to prevent IBM from making valid product
comparisons.
14. INDEMNITY
IBM agrees to indemnify and hold harmless (provided ODI promptly
notifies IBM in writing of any such claim, allows IBM a reasonable period of
time to cure any such breach, and cooperates with IBM to cure such breach) ODI
and its officers, directors, employees and agents, from and against any and all
claims, demand, damages, losses, liabilities, reasonable costs and expenses,
(including reasonable attorneys' fees) arising out of or related to any actual
or alleged:
(a) unauthorized disclosure of Escrowed Materials or Derivative
Works;
(b) representation, warranty or obligation made or undertaken by
IBM, or any distributor or party under direct or indirect
license from IBM, to any third party regarding any Escrowed
Materials or Derivative Work; or
(c) infringement by a Derivative Work of any patent, copyright or
trade secret or other intellectual
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property right of a third party, except if the infringement is
solely based upon unmodified portions of Escrowed Materials.
IBM shall have no liability under this Section 14 (c) unless
ODI (a) promptly notifies IBM in writing of the claim, damage,
liability, loss or expense and (b) in the case of a
third-party claim (i) gives IBM full authority information and
assistance to defend such claim and (ii) gives IBM sole
control of the defenses of such claim and all negotiations for
the compromise or settlement thereof.
15. TERMINATION
15.1 This Agreement shall terminate one month after the termination of
the IUSA if the Source Code Option has not been exercised by IBM by that date.
15.2 In the event either party (the "breaching party") fails to pay any
sum of money when due hereunder or is otherwise in material breach of Section 4,
Section 6, Section 7, Section 9, or Section 13 of this Agreement, the other
party (the "non-breaching party") shall have the right to terminate this
Agreement. In such event, the non-breaching party shall give the breaching party
notice specifying the nature of the breach, and, if the breaching party fails to
cure the breach within 45 days of receipt of such notice, the non-breaching
party may thereafter terminate this Agreement effective immediately by giving
notice OF same.
15.3 Upon any termination of this Agreement by ODI pursuant to Section
15.2, the licenses granted by ODI to IBM hereunder will terminate immediately
(other than the right to fix Errors pursuant to Section 15.4 hereof) , but each
Customer whom IBM, in accordance with the terms hereof, has previously
sublicensed to use an existing version of the Break-Up Software may continue to
use such existing version of the Break-Up Software so long as the end user is
not in breach of any of the provisions of the license agreement required under
Section 6.2, and provided that IBM continues to monitor and enforce such
compliance; provided further that all rights to license, sublicense, market or
distribute an existing version of the Break-up Software shall terminate three
months after termination of this Agreement. No
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payments previously made hereunder shall be refunded in the event of
termination, provided that neither party hereby waives any right to collect
damages which it may have in accordance with the terms of this Agreement and
applicable law. No termination shall relieve either party of any obligation to
pay amounts due as a result of transactions occurring prior to the effective
date of termination.
15.4 Upon any termination of this Agreement by ODI pursuant to Section
15.2 hereof, IBM may retain the Confidential Materials but may use such
materials solely to fix Errors for then existing IBM internal applications and
then existing Applications for then existing Customers as of the date of
termination and for no other purpose, including, without limitation, preparing
new versions of the Break-Up Software or otherwise preparing Derivative Works.
IBM may also continue to operate then existing IBM internal applications and
then existing Applications incorporating any of the Break-Up Software. IBM shall
thereafter have no right to license additional copies of the Software or to
create any additional Derivative Works. In addition, an authorized
representative of IBM shall certify in writing to ODI that IBM has complied,
within sixty days after termination of this Agreement, with the requirements of
this Section 15.4.
15.5 Notwithstanding anything else herein, the provisions of Sections
7, 10, 11, 12, 13, 14, 15, 16, 20 and 21 shall survive any termination of this
Agreement.
16. EQUITABLE RELIEF
The covenants and agreements of IBM and ODI in Sections 3, 4, 5, 6, 9,
13 and 15 of this Agreement are of a special and unique character, and IBM and
ODI acknowledge that money damages alone will not reasonably or adequately
compensate ODI or IBM for any breach of such covenants and agreements.
Therefore, ODI and IBM expressly agree that in the event of the breach or
threatened breach of any such covenants or agreements, in addition to other
rights or remedies which IBM or ODI may have, at law, in equity, or otherwise,
IBM and ODI shall be entitled to injunctive or other equitable relief compelling
specific performance of, and other compliance with, the terms of this Agreement.
17. INDEPENDENT CONTRACTOR
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Each of the parties is and shall remain an independent contractor with
respect to the other and the parties shall not represent themselves as principal
and agent, partners or joint venturers. Neither party shall attempt to act, or
represent itself as having the power, to bind the other or create any obligation
on behalf of the other. Each party assumes full responsibility for the payment
of all taxes, including social Security, unemployment and withholding taxes for
all persons engaged by it in the performance of this Agreement. Neither party
shall have the right to participate in any employee benefit program of the
other.
18. ASSIGNMENT
IBM shall not assign, sub-contract or otherwise transfer any of its
rights, or delegate any of its duties, hereunder, in whole or in part, except as
authorized under Section 6. ODI may assign any of its rights under this
Agreement to any person and delegate any of its duties under this Agreement to
any person or entity which shall acquire or succeed to any substantial part of
ODI's business. Subject to the foregoing, this Agreement shall be binding upon,
and inure to the benefit of, each of the parties and their respective permitted
successors and assigns.
19. NOTICES
All notices to be given in connection with this Agreement shall be
effective upon receipt, shall be made in writing and shall be sufficiently given
if personally delivered or if sent by courier or other express mail service,
postage prepaid, addressed to the parties entitled or required to receive such
notice as follows:
Notices to IBM Notices to ODI Chief Financial
Officer
Laboratory Counsel Object Design, Inc.
IBM Corporation one New England Executive Park
555 Bailey Avenue Burlington, MA 01803
San Jose, CA 95141
Tel: (617) 270-9797
Tel: (408) 463-3044
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Any party may by such notice to the others change such address.
20. JURISDICTION
ODI will not challenge the venue or jurisdiction of any action filed by
IBM in connection with the interpretation or enforcement of this Agreement in a
court of competent subject matter jurisdiction located in the State of New York
and each of the parties hereby agrees to submit itself to the jurisdiction and
venue of such courts for the purpose of any such action. If ODI files any such
action in a court of competent jurisdiction in Massachusetts, IBM shall have the
right to contest the jurisdiction and venue of such court. The parties hereby
expressly waive any right to a jury trial and agree that any proceeding
hereunder will be tried by a judge without a jury.
21. APPLICABLE LAW
This Agreement shall be governed by, and construed and enforced in
accordance with, the substantive laws of the State of New York without regard to
its principles of conflicts of laws or the United Nations Convention on the
International Sale of Goods.
22. ENTIRE AGREEMENT
This Agreement in conjunction with the IUSA, ARCI, Escrow Agreement,
Master Agreement, Stock Purchase Agreement and the Distribution Agreement (if
any) sets forth the entire agreement and understanding of the parties with
respect to the subject matter hereof, and supersedes all prior oral and written
agreements and understandings relating thereto. There are no representations,
warranties, agreements or understandings relating to the subject matter hereof
that are not set forth herein and therein.
23. NON-WAIVER AND AMENDMENT
No waiver, alteration, modification, or cancellation of any of the
provisions of this Agreement shall be binding unless made in writing, expressly
designated as an amendment hereto and signed by each of the parties hereto. The
failure of any party at any time or times to require performance of any
provision hereof shall in no manner affect the right at a later time to
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enforce such provision. No remedy referred to in this Agreement is intended to
be exclusive, but, subject to the provisions of Section 9, each shall be
cumulative and in addition to any other remedy referred to herein or otherwise
available at law, in equity or otherwise.
24. SEVERABILITY
Whenever possible, each provision of this Agreement will be interpreted
in such manner as to be effective and valid under applicable law. The parties
agree that (i) the provisions of this Agreement shall be severable in the event
that any of the provisions hereof are for any reason whatsoever invalid, void or
otherwise unenforceable, (ii) such invalid, void or otherwise unenforceable
provisions shall be automatically replaced by other provisions which are as
similar as possible in terms and intent to such invalid, void or otherwise
unenforceable provisions but are valid and enforceable, (iii) the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
25. COUNTERPARTS
This Agreement may be executed simultaneously in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
but one agreement binding upon the parties.
26. CAPTIONS
The captions of the sections of this Agreement are for convenience of
reference only and in no way define, limit or affect the scope or substance of
any section of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
INTERNATIONAL BUSINESS MACHINES CORPORATION
By:_____________________________
Name:___________________________
Title:__________________________
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OBJECT DESIGN, INC.
By:_____________________________
Name:___________________________
Title:__________________________
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EXHIBIT 10.27
ESCROW AGREEMENT
Agreement Number: STL92108
Date of Agreement: April 10, 1993
This is an Escrow Agreement among IBM Corporation (hereinafter called "IBM")
with an address for purposes of this Agreement at 555 Bailey Avenue, P.O. Box
49023, San Jose, CA 95161-9023 and Object Design, Inc. (hereinafter called
"ODI") with an address at 1 New England Executive Park, Burlington, MA 01803 and
Data Securities International, Inc. (hereinafter called "Custodian") with an
address at 6165 Greenwich Drive, Suite 220, San Diego, CA 92122.
ODI, Custodian and IBM hereby agree as follows:
1. ORGANIZATION AND PURPOSE OF AGREEMENT
ODI is providing to IBM certain computer programs and documentation ("Licensed
Works"). Although IBM has previously acquired certain rights and licenses to
such Licensed Works, IBM shall not have access to the Escrowed Materials, except
as the Escrowed Materials are released to IBM under this Agreement.
The objectives of this Agreement are as follows: (1) to provide for ODI to
deliver to Custodian, and update with subsequent deliveries, a copy of the
Source Code and other Materials sufficient to comply with the certification in
Section 5.6, for IBM's use in preparing Derivative Works based upon the Licensed
Works after the Break-Up Date; (2) to set forth the Custodian's obligations with
respect to the Escrowed Materials; and (3) to define the events that will
trigger the release of such Materials to IBM.
2. DEFINITIONS
For purposes of this Agreement only, the capitalized terms listed below shall
have the following meanings:
2.1 "ARCI" shall mean the Agreement Regarding Confidential Information, #
STL92602B, dated February 22, 1993, between IBM and ODI.
<PAGE> 2
2.2 "Break-Up Agreement" shall mean the Break-Up Agreement # STL93035, dated as
of the date hereof, between IBM and ODI.
2.3 "Code" shall mean computer programming code including both object Code and
Source Code. Code shall include Maintenance Modifications, Enhancements, or
Derivative to existing Code when added to such Code under the IUSA or Master
Agreement.
2.3.1 "Object Code" shall mean computer programming code, substantially or
entirely in binary form, which is directly executable by a computer after
suitable processing but without the intervening steps of compilation or
assembly.
2.3.2 "Source Code" shall mean computer programming code, other than Object
Code, and related source code level system documentation, comments and
procedural code such as job control language, which may be printed out or
displayed in a human intelligible form. Source Code shall include any
Maintenance Modifications, Enhancements, or Derivative Work to existing Source
Code when added to such Source Code under the IUSA or Master Agreement.
2.4 "Derivative Work" shall mean a work which is based upon one or more
preexisting works, such as a revision, enhancement, modification, translation,
abridgement, condensation, expansion, or any other form in which such
preexisting works may be recast, transformed, or adapted, and which, if prepared
without authorization of the owner o the copyright in such preexisting work,
would constitute a copyright infringement. For purposes hereof, a Derivative
Work shall also include any compilation that incorporates such a preexisting
work.
2.5 "Development Environment" shall mean the object Code and Documentation
created by ODI or licensed by ODI from third parties that are necessary for the
development, maintenance and use of the Licensed Works, as described in
Attachment 1.
2.6 "Documentation" shall mean user manuals and other written materials that
relate to particular Code, including materials useful for design (for example,
design notes, survey notes, logic manuals, flow charts, and principles of
operation), and machine-readable text or graphic files subject to display or
print-out. Documentation shall include any Maintenance Modifications or
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<PAGE> 3
Enhancements to such Documentation when added to the Documentation pursuant to
the IUSA or the Master Agreement.
2.7 "Enhancements" shall mean changes and/or additions, other than Maintenance
Modifications, to Licensed Works and related Documentation that ODI provides to
IBM pursuant to the IUSA or Master Agreement, including all new releases, that
improve functions, add new functions, improve performance by changes in system
design or coding, support new releases of the operating system with which the
Code is designed to operate, support new input/output devices, or provide other
incidental updates.
2.8 "Error" shall mean any mistake, problem, or defect in Code or Documentation
which causes (1) an incorrect functioning or non-functioning of Code, or (2) an
incorrect or incomplete statement or diagram in Documentation, if such mistake,
problem or defect renders the Code inoperable, causes the Code to fail to meet
the specifications thereof, causes the Documentation to be inaccurate or
inadequate in any material respect, causes incorrect results, or causes
incorrect functions to occur.
2.9 "Escrowed Materials" shall mean and include the following Materials for each
Licensed Work:
1. two (2) copies of the Source Code of the Licensed Work
in machine-readable form on two separate media;
2. one (1) complete set of the Documentation related to
the Licensed Work in both hard copy and machine-
readable form;
3. one (1) copy of a comprehensive list of all items in
the Development Environment indicating those items
which are commercially available through readily know
sources;
4. one (1) set of the Development Environment except those
items identified pursuant to 3. above as being
commercially available through readily known sources;
5. one (1) copy of a comprehensive list of all Source Code
modules of the Licensed Work; and
6. one (1) copy of all other Materials described in
Attachment 1, not listed above.
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<PAGE> 4
2.10 "IUSA" shall mean the Internal Use and Substrate Agreement, # STL92107,
dated as of the date hereof, between IBM and ODI.
2.11 "Licensed Work" shall mean the Software, as further identified in the IUSA.
2.12 "Maintenance Modifications" shall mean any modifications or revisions,
other than Enhancements, to Licensed Works or related Documentation that correct
Errors or provide other incidental corrections that ODI provides to IBM pursuant
to the IUSA or Master Agreement.
2.13 "Master Agreement" shall mean the Master Agreement, # STL92105, dated as of
the date hereof, between IBM and ODI.
2.14 "Materials" shall mean Code, Documentation, other written materials or
tangible items, including machine-readable media with Code or Documentation
recorded thereon, or any combination of the foregoing.
2.15 "Update" shall mean a complete replacement of all Escrowed Materials to be
delivered by ODI to Custodian pursuant to Section 5.2.
3. CONTRACT ADMINISTRATION
Appendix B contains the name, business address, telephone and FAX number(s) of
the respective Coordinator for each party, who shall be responsible for all
administrative matters pertaining to this Agreement. Any party can change their
Coordinator by giving thirty (30) days written notice to the other parties and
designating the appropriate contact information.
4. FEE ADMINISTRATION
4.1 Fee Schedule - "EXHIBIT I - Fee Schedule" establishes fees for Custodian's
services rendered during the effective period stated therein. Custodian may
propose a revised Fee Schedule Exhibit to the IBM Coordinator no later than
ninety (90) days before the end of each period for which the fees are effective.
Fees are due upon receipt of a signed copy of this Agreement, receipt of
Escrowed Materials, or when service is requested,
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<PAGE> 5
whichever is earliest. If invoiced fees are not paid within sixty (60) days of
the date of the invoice, Custodian may terminate the Agreement by providing
written notice to IBM and ODI. Renewal fees will be invoice prior to the end of
the current period. In the event renews fees are not received thirty (30) days
prior to the end of the current period, Custodian shall notify IBM and ODI in
writing. If the renewal fees are not received by the end of the current period
or within sixty (60) days of the date of the invoice, whichever is later,
Custodian may terminate the Agreement with written notice and without liability
of Custodian to IBM or ODI.
4.2 Invoices - All fees for services to be provided by Custodian shall be paid
in full by IBM thirty (30) days after receipt by IBM of acceptable invoice from
Custodian. All invoices shall identify this Agreement and the applicable
Attachment (by this Agreement and Attachment numbers) and shall describe the
services for which payment is due. Custodian shall submit all invoices to the
IBM Corporation, Attn: Accounts Payable, Dept. 865 Building 123, 5600 Cottle
Road, San Jose, CA 95193 or such other address as IBM may specify to Custodian.
4.3 Non-Payment - In the event that IBM fails to pay any invoice of Custodian
hereunder in a timely manner, ODI may, at its option, pay such invoice and
obtain reimbursement from IBM. Custodian's sole remedy for IBM's failure to pay
the fees for its services hereunder shall be an action at law against IBM.
5. RESPONSIBILITIES OF ODI
5.1 Initial Deposit - ODI shall deliver the applicable Escrowed Materials to
Custodian within ninety (90) days of the execution of this Agreement by all
parties.
5.2 Updates - Within thirty (30) days after the general availability of any new
ODI Release, as defined in the IUSA ODI shall deliver to Custodian a complete
Update of all Escrowed Materials such that Custodian is in possession of the
most current versions then in ODI's possession. In a case where it is onerous
for ODI to provide a duplicate copy of any Materials in an Update that are
already contained in the existing Escrowed Materials in Custodian's custody, ODI
will have the option to not include such Materials in the Update as long as ODI
(i) provides
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<PAGE> 6
clear written instructions to Custodian as to which Materials in the existing
Escrowed Materials are to be added to the Update, (ii) notifies IBM in writing
at least ten (10) days in advance of such intended delivery, describes the
onerous burden and provides a copy of the same such written instructions to IBM,
and (iii) allows IBM the opportunity to provide funds to ODI to compensate them
for the onerous burden so that a duplicate copy of such Materials may be
included in the Update. IBM will respond within ten (10) days. ODI shall notify
IBM in writing of its intent to deliver an Update at least ten (10) days prior
to the intended delivery and shall include in such notices copies of the
inventories required to be provided to Custodian pursuant to Section 5.5.
5.3 Right to Inspect - IBM shall have the right to inspect at IBM's expense,
each deposit of Escrowed Materials before it is delivered to Custodian, in order
to determine whether it conforms to the description and specifications required
by this Agreement. Upon written request to ODI and in accordance with ODI's
reasonable security procedures, an IBM technical representative may witness (i)
the generation of Object Code from Source Code for each Licensed Work, (ii) the
execution of test cases to verify the functionality of the Licensed Work from
the Source Code, and (iii) the transfer of the verified Source Code to diskettes
or tape. This verification shall take place at ODI's location, and shall be done
in such a way as not to expose directly the Source Code to the IBM
representative. IBM may, at its option, designate the Custodian to perform any
or all verification services on IBM's behalf, at IBM's expense. The ARCI will
apply to any access to or disclosure of Materials in this verification process
by IBM. If the Custodian is asked to perform verification services by IBM, then
Custodian shall sign ODI's standard non-disclosure agreement before Custodian
may perform the verification.
5.4 Loss or Damage of Escrowed Materials - In the event of loss of or damage to
all or any part of the Escrowed Materials, ODI shall use reasonable efforts to
replace immediately, at IBM's expense, all Escrowed Materials which were lost or
damaged.
5.5 Delivery of Escrowed Materials - The Escrowed Material will be delivered to
Custodian in sealed packages or containers in good condition and shall include a
directory listing for each
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<PAGE> 7
machine-readable medium. ODI, shall also provide to Custodian an inventory of
the contents of each container.
5.6 Certification by ODI - ODI represents to IBM that the Escrowed Materials,
together with items in the Development Environment, contain substantially all
necessary and available information and technical documentation which enable ODI
to understand, manufacture, maintain and prepare Derivative Works based upon the
Licensed Works identified in Attachment 1, without the aid of any other person
or reference to any other Materials, other than generally commercially available
products or Third Party Products, as defined in the Break-Up Agreement. This
representation shall be deemed to be made continuously throughout the term of
this Agreement.
5.7 Deficiency of Escrowed Materials - In the event any Escrowed Materials are
determined by IBM or Custodian to fail to satisfy the requirements of this
Agreement, pursuant to the inspection described in Section 5.3, or the
certification delivered pursuant to Section 5.6, IBM shall notify ODI of the
manner in which the Escrowed Materials are deficient. If ODI fails to cure such
deficiency with 30 days of receipt of such notice, IBM may consider such failure
to be a breach of this Agreement and IBM shall be entitled to injunctive relief.
6. RESPONSIBILITIES OF IBM
IBM shall be responsible for all fees owed to Custodian under this Agreement.
7. RESPONSIBILITIES OF CUSTODIAN
7.1 Receipt of Escrowed Materials - Custodian shall accept delivery of the
Escrowed Materials for the benefit of IBM and ODI pursuant to the terms and
conditions of this Agreement. Custodian shall take all reasonable steps to
protect the Escrowed Materials. Such Escrowed Materials shall be stored in a
secure temperature controlled area normally assigned by Custodian for storage of
other Source Code and valuables on behalf of its customers. Additionally,
Custodian agrees to include a copy of this Agreement with the Escrowed
Materials. On the day that Custodian receives a deposit of Escrowed Materials,
it shall open any sealed packages and match the contents against ODI's
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<PAGE> 8
accompanying inventory list and give IBM notice of such receipt by telephone
call to the IBM Coordinator. Custodian shall al send to IBM written confirmation
of such receipt within three (3) working days of the date of delivery.
7.2 Notification of Loss or Damage of Escrowed Materials Custodian shall
immediately give ODI and IBM notice of any loss of or damage to all or any part
of the Escrowed Materials by telephoning the applicable ODI and IBM
Coordinators. Custodian shall also send IBM and ODI written confirmation of such
loss or damage within three (3) working days of such event.
7.3 Replacement Deposits - Custodian shall replace the superseded Escrowed
Materials with the Update delivered to Custodian by ODI as required by Section
5.2, unless within thirty (30) days after Custodian's receipt of such Update,
IBM instructs Custodian to retain the superseded Escrowed Materials in addition
to the Update. In the event of replacement, Custodian shall shred or otherwise
destroy the superseded Escrowed Materials and shall provide written notice to
IBM and ODI certifying such destruction. Alternatively, if IBM instructs
Custodian to retain the superseded Escrowed Materials in addition to the Update,
OD hereby agrees that both together shall be considered part of the Escrowed
Materials for purposes of this Agreement.
7.4 Destruction of Escrowed Materials - From time to time, IBM and ODI may agree
upon the removal and destruction of certain portions of the Escrowed Materials.
In such event, IBM shall send Custodian a "Notice to Destroy". The Notice to
Destroy must be signed by IBM and ODI and must clearly define those portions of
the Escrowed Material to be destroyed. Custodian shall shred or otherwise
destroy the specified Escrowed Materials and shall provide written notice to IBM
and ODI certifying that the contents have been destroyed.
7.5 Confidential Precautions - Custodian acknowledges ODI's assertion that the
Escrowed Materials are confidential and constitute valuable assets of ODI and
their respective owners. Custodian shall hold all Escrowed Materials strictly
confidential and, except as expressly permitted in this Agreement, shall not
disclose, publish, display or otherwise make available to any person or entity
any Escrowed Materials or any part of copy thereof without ODI's prior written
consent. Custodian shall not
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<PAGE> 9
duplicate, copy, reproduce or use any Escrowed Materials, or any portion
thereof. Custodian shall limit access to all Escrowed Materials to its bona fide
employees whose access to Escrowed Materials is necessary to the performance of
Custodian's duties hereunder and shall take all actions and precautions
necessary to prevent unauthorized display, publication, disclosure or use of, or
access to, all Escrowed Materials. Custodian shall not remove any copyright or
proprietary rights notice included in or on an Escrowed Materials.
7.6 Verification - Unless otherwise agreed to in writing with IBM, Custodian
shall not be responsible for determining the adequacy, relevance, completeness,
or accuracy of the Deposit, nor shall Custodian be required to determine whether
the Deposit delivered to it does or does not contain the Escrowed Materials as
defined in this Agreement.
7.7 Delivery - Custodian shall deliver the Escrowed Materials to IBM only in
accordance with Section 9.0.
8. CONVEYANCE
For and in consideration of IBM entering into this Agreement and its
Attachment(s), and other good and valuable consideration, the full receipt and
sufficiency of which ar hereby acknowledged, ODI hereby transfers and conveys to
Custodian all right and title to the media containing the Escrowed Materials,
which Custodian shall hold in trust, subject to the terms and conditions of this
Agreement. IBM's rights and obligations with respect to the Escrowed Materials
are set forth in the Break-Up Agreement.
Notwithstanding any other provision of this Agreement, title to and ownership of
the Escrowed Materials, including without limitation patents, copyrights, trade
secrets and other proprietary rights, shall remain in ODI and its licensors.
9. RELEASE OF ESCROWED MATERIALS TO IBM
9.1 Triggering Events - IBM shall have the right to demand access to the
Escrowed Materials in accordance with the procedures set forth in this Section
9.0, if and only if one or more of the events described in Appendix "A"
(hereinafter referred to as "Triggering Events") occur.
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<PAGE> 10
9.2 Exercise of Source Code Option - Upon IBM's exercise and payment for the
Source Code Option and ODI's delivery to IBM of the Source Code Trigger
Certificate in accordance with Section 3.2 of the Break-Up Agreement, IBM may
deliver the Source Code Trigger Certificate to the Custodian. As used herein,
the Source Code Trigger Certificate shall mean a certificate signed by ODI and
IBM which indicates IBM's due execution of the Source Code Option, substantially
in the form attached hereto as Exhibit II.
9.3 Notification to ODI - Following the occurrence of one or more Triggering
Events (other than exercise of the Break-Up Option pursuant to the Break-Up
Agreement), IBM may initiate a demand for access to the Escrowed Materials by
providing to ODI and Custodian a written notice (the "Bankruptcy Trigger
Certificate") of its intention to make such demand. The notice will specify in
reasonable detail the facts on which such demand is based (that a Triggering
Event has occurred).
9.4 Right to Oppose Release - No provision of this Agreement is intended to
impair any right that ODI has or shall acquire, at law or in equity or
otherwise, to challenge, upon receipt of the notice described in Section 9.3, in
any court of competent jurisdiction, the right of IBM to have the Escrowed
Materials released and delivered to it and title to the media containing the
Escrowed Materials transferred as provided herein, and/or the right or
obligation of Custodian to effect such release, delivery and transfer of title,
including without limitation, seeking to restrain or enjoin such release,
delivery and transfer of title or to obtain money damages from IBM for wrongful
release; provided, however, that ODI may only initiate a challenge on the basis
that a Triggering Event (other than the exercise of the Break-Up Option pursuant
to the Break-Up Agreement) has not occurred. No provision of this Agreement
shall impair (a) any right of ODI to take the foregoing action or any other
action available to it at law, or (b) any legal obligation by Custodian or IBM
to comply with any injunction, order or judgement obtained by ODI with respect
thereto.
9.5 Release by Custodian -
9.5.1 In the event that ODI has delivered to IBM the Source Code Trigger
Certificate described in the Break-Up Agreement, IBM may demand delivery of the
Escrowed Materials from Custodian.
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Custodian shall deliver the Escrowed Materials to IBM and transfer to IBM title
to the media containing the Escrowed Materials upon receipt of the Source Code
Trigger Certificate from IBM and payment by IBM of the fee specified in Exhibit
I for processing the delivery and transfer request. Custodian shall have no
right to refuse to deliver the Escrowed Materials to IBM or transfer title to
the media containing the Escrowed Materials on the grounds that a Triggering
Event has not occurred.
9.5.2 In all other events, IBM may demand delivery of the Escrowed Materials
from Custodian by delivering a "Demand Notice" to Custodian demanding delivery
of the Escrowed Materials on or after the 15th day following receipt by ODI and
Custodian of the Bankruptcy Trigger Certificate pursuant to Section 9.3 hereof.
Such "Demand Notice" must be on IBM letterhead and signed by an IBM authorized
representative or an IBM attorney. IBM shall contemporaneously send a copy of
the Demand Notice to ODI. Custodian shall deliver the Escrowed Materials to IBM
and transfer to IBM title to the media containing the Escrowed Materials upon
receipt of the Demand Notice from IBM and payment by IBM of the fee specified in
Exhibit I for processing the delivery and transfer request. Custodian shall have
no right to refuse to deliver the Escrowed Materials to IBM or transfer title to
the media containing the Escrowed Materials on the grounds that a Triggering
Event has not occurred.
10. USE AND TREATMENT OF ESCROWED MATERIALS-BY IBM
10.1 Possession - IBM shall use the Escrowed Materials only in accordance with
the licenses granted to IBM under the Break-up Agreement.
10.2 Confidentiality - Upon delivery to IBM of the Escrowed Materials, IBM's
obligation of confidentiality with respect to the Escrowed Materials shall be
solely as set forth in the Break-Up Agreement.
11. LIMITATION OF LIABILITY
Custodian shall be liable only for willful failure to comply with this Agreement
and for gross negligence or for fraud in performance of its duties under this
Agreement. Custodian shall not be liable for the failure of ODI or IBM to comply
with any
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provision of this Agreement or any other agreement to which ODI and IBM are
party.
12. INDEMNIFICATION
ODI and IBM agree to protect, defend, hold harmless and indemnify Custodian from
and against any and all claims, damages, liabilities, losses and expenses
incurred by Custodian as a result of performance of this Agreement except in the
event of a judgment which specifies that Custodian acted with willful
misconduct, gross negligence or fraud in performance of its duties under this
Agreement.
13. ASSUMPTION OF VALIDITY
Custodian shall be protected in acting upon any written notice, request, waiver,
consent, receipt or other document furnished to it pursuant to this Agreement,
not only in assuming its due execution and the validity and effectiveness of its
provisions but also as to the truth and acceptability of any information therein
contained, which Custodian in good faith believes to be genuine and what it
purports to be.
14. RECORDKEEPING AND AUDITS
Custodian agrees to keep records of the activities undertaken and materials
delivered pursuant to this Agreement. ODI and IBM shall have access to such
records, upon reasonable notice, for purposes of audit during normal business
hours during the term of this Agreement.
15. TERM AND TERMINATION
15.1 Stated Term - This Agreement shall be effective as of the Date of Agreement
specified at the beginning of this Agreement. This Agreement shall remain in
force for a period of ten (10) years, unless otherwise extended or terminated in
accordance herewith. IBM, at its option, may extend the term of this Agreement
on a year-to-year basis by paying appropriate fees to the Custodian in
accordance with Section 4.0.
15.2 Earlier Termination of Agreement - This Agreement will be terminated 1) by
delivery to IBM of the Escrowed Material pursuant
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to Section 9.0; 2) if the Break-Up Agreement terminates and IBM has not
exercised the Source Code Option prior to termination; or 3) by Custodian for
non-payment of fees after necessary notice and cure provisions in Section 4.0
are exhausted. This Agreement may also be terminated by the mutual written
agreement of IBM and ODI.
15.3 Custodian's Resignation Rights - Custodian may resign its duties as
Custodian by delivering to the IBM and ODI Coordinators at least a ninety (90)
day written notice of resignation. IBM and ODI will work together to find
another appropriate Custodian and arrange to transfer the Escrowed Materials.
15.4 Disposition of Deposit - Unless the Agreement has expired as a result of
the Escrowed Materials being delivered to IBM, upon the expiration or earlier
termination of the Agreement, IBM shall send Custodian a Notice to Destroy in
accordance with Section 7.4.
15.5 Survival - In the event of any termination or expiration of this Agreement,
Sections 7.5, 10.0, 11.0, 12.0, 13.0, 15.4, and 16.0 shall survive and continue
in effect and shall inure to the benefit of and be binding upon the parties and
their legal representatives, heirs, successors and assigns until such
obligations expire in accordance with their terms.
16. GENERAL
16.1 Notice - Except as otherwise set forth in this Agreement, any notice,
payment, or delivery required or permitted to be made or given by any party
hereto pursuant to this Agreement will be sufficiently made or given on the date
of delivery if sent by such party to the other party or parties by certified
mail, commercial courier, personal delivery, or similar reliable delivery
method, addressed to the persons named as Coordinators in Appendix B.
16.2 Trademarks and Advertising - Nothing in this Agreement confers upon any
party the right to use another party's trademarks, trade names or service marks
in connection with any product, service, promotion or publication.
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16.3 Assignment - None of the parties may sell, transfer, assign, delegate, or
subcontract this Agreement or any right or obligation set forth in, or which is
the subject of, this Agreement, except as expressly provided herein, without the
prior written consent of the other parties. Any act in derogation of the
foregoing shall be null and void.
16.4 Amendment/Waiver - No amendment or modification of this Agreement or any
Attachment shall be effective unless it is set forth in a writing which refers
to-the particular provisions so amended or modified and is executed by
authorized representatives of all parties. No waiver of and provision of this
Agreement shall be effective unless it is set forth in a writing which refers to
the provision so waived and the instrument containing such provision and is
executed by an authorized representative of the party waiving its rights. No
failure or delay by either party in exercising any right, power or remedy will
operate as a waiver of any such right, power or remedy.
16.5 Severability - If any provision of this Agreement is held by a court of
competent jurisdiction to be unenforceable or contrary to law, the remaining
provisions of this Agreement will remain in full force and effect.
16.6 Actions - ODI will not challenge the venue or jurisdiction of any action
filed by IBM in connection with the interpretation or enforcement of this
Agreement in a court of competent subject matter jurisdiction located in the
State of New York and each of the parties hereby agrees to submit itself to the
jurisdiction and venue of such courts or the purpose of any such action. If ODI
files any action in a court of competent jurisdiction in Massachusetts, IBM
shall have the right to contest the jurisdiction and venue of such court.
16.7 Dispute Resolution - Each party agrees that any litigation arising under or
related to this Agreement shall only be commenced after good faith attempts to
resolve the subject dispute shall have taken place in a meeting or meetings
between the parties.
16.8 Governing Law - This Agreement will be construed and the legal relations
created herein between the parties will be determined in accordance with the
substantive laws of the State
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of New York which pertain to agreements executed in, and fully performed within,
the State of New York. The parties hereby expressly waive any right to a jury
trial an agree that any proceeding hereunder will be tried by a judge without a
jury.
16.9 Entire Agreement - The provisions of this Agreement and its Attachments, as
in effect from time to time by their terms, and the Break-Up Agreement, the
ARCI, the IUSA and the Master Agreement referenced herein, constitute the entire
agreement between the parties and supersede all prior agreements, oral or
written, and all other communications between the parties relating to the escrow
of the Escrowed Materials.
ODI and IBM acknowledge that Custodian has no knowledge of the terms and
conditions contained in the ARCI, the Break-Up Agreement, the IUSA and the
Master Agreement referenced herein and that Custodian's only obligations shall
be as set forth herein or in any other writing signed by Custodian, ODI and IBM.
IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to be
executed by their respective authorized representatives.
ACCEPTED AND AGREED TO:
INTERNATIONAL BUSINESS
MACHINES CORPORATION
ACCEPTED AND AGREED TO:
OBJECT DESIGN, INC.
By:________________________________ By:__________________________________
Print Name Print Name
-------------------------- -----------------------------
Title______________________________ Title________________________
Date_______________________________ Date_________________________
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<PAGE> 16
ACCEPTED AND AGREED TO:
DATA SECURITIES INTERNATIONAL, INC.
By:________________________________
___________________________________
Print Name
Title______________________________
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<PAGE> 17
EXHIBIT I - FEE SCHEDULE
This Exhibit to Escrow Agreement, Number: STL92108 establishes
committed fees for the services provided by Custodian pursuant to
the Agreement.
<TABLE>
<CAPTION>
1.0 CUSTODIAN'S COMMITTED FEES
- ------------------------------------------------------------------------------------------------------------------------
I Table 1. Effective Period: 1993 through 2003
- ------------------------------------------------------------------------------------------------------------------------
SERVICE FEE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
FIRST YEAR - ONE DEPOSIT, $2,100.00
ONE BENEFICIARY
- ------------------------------------------------------------------------------------------------------------------------
EACH RENEWAL YEAR $ 1,100.00
- ------------------------------------------------------------------------------------------------------------------------
FULL SERVICE OPTION - UNLIMITED UPDATES/ $300.00
REPLACEMENTS.AND ONE ADDITIONAL
STORAGE UNIT (PER YEAR)
- ------------------------------------------------------------------------------------------------------------------------
DEPOSIT UPDATES OR REPLACEMENTS(PER YEAR) $150.00
ADD MATERIALS TO ACCOUNT - $250.00
REPLACE MATERIALS IN ACCOUNT -
- ------------------------------------------------------------------------------------------------------------------------
EACH ADDITIONAL STORAGE UNIT / YEAR $100.00
- ------------------------------------------------------------------------------------------------------------------------
PROCESS INSTRUCTIONS FOR RELEASE OF $300.00
ESCROW MATERIALS
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 18
EXHIBIT II
SOURCE CODE TRIGGER CERTIFICATE
The undersigned, Object Design, Inc. ("ODI"), hereby certifies that IBM
Corporation ("IBM") has duly exercised the Source Code Option and surrendered
the Shares or paid the value thereof in accordance with Section 4 of the
Break-Up Agreement, # STL93035, dated April , 1993.
IN WITNESS WHEREOF, ODI has caused this certificate to executed by its
duly authorized representative this_____________ day of_________________ 199_.
OBJECT DESIGN, INC.
________________________________
By:
Title:
ACKNOWLEDGED:
IBM CORPORATION
________________________________
By:
Title:
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<PAGE> 19
ATTACHMENT 1. DESCRIPTION OF ESCROWED MATERIALS
All of the following items will be initially deposited in the escrow account and
maintained according to the terms of this Agreement. This is an initial
description of Escrowed Materials, which is in addition to those items listed in
Section 2.9, to the extent they are not listed below, and which will change over
time in order for ODI to comply with the certification in Section 5.6.
1. Licensed Work Source Code Files:
a. ODI Materials:
1) Licensed Work core client database libraries
2) Licensed Work server, directory manager and cache
manager programs
3) Licensed Work layered class libraries
4) Associated development tools (including osbrowser,
administrative tools and statistics and monitoring
tools)
5) Make files and associated make macros and make
scripts
b. Third Party Material: This is Third Party Products, as defined in
the Break-Up Agreement, licensed by ODI and any Derivative Works thereof
prepared by ODI. When ODI has the right to place such Third Party Products in
this escrow, such Third Party Products will be deposited in this escrow. When
ODI does not have such rights, ODI will:
1) Identify such Third Party Products in sufficient detail,
including the-name and location of the owner or licensor, and
the name, version or release level of the Code, if
appropriate;
2) As new Third Party Products are added to the Licensed Work,
inform IBM and if requested by IBM, use reasonable efforts at
IBM's expense to acquire the necessary rights from the owner
or licensor to permit
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<PAGE> 20
ODI to place such Third Party Products in this escrow on IBM's
behalf; and
3) Identify changes or modifications made to the Third Party
Products by ODI, describe how to apply the changes or
modifications to the base Third Party Products, and deposit a
copy of such changes or modifications in this escrow to the
extent ODI has such rights to do so.
2. Development Environment.
a. Required tools in Source Code (including shell scripts or
other interpreted programs) used to build and maintain Licensed Work that are
not generally commercially available, including all ODI developed tools and any
tools from category 2.b.2) below pursuant to the requirements in that category.
The current known tools in this category include:
1) TRC and associated documentation
An internally developed set of source code control,
configuration management and development environment
tools used in connection with RCS (public domain Unix
version-control utility).
2) Test Suites and associated documentation
The full set of tests for various aspects of Licensed
Work functionality and performance.
3) TSD and associated documentation
An internally developed automated driver for test
suites.
4) Bill of material, release generation scripts, and
associated documentation
Includes tools for generating a release, producing
tape masters and installing the release at a customer
site.
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<PAGE> 21
5) Amber error tracking system
Set of EMACS macros for managing threaded discussions
on Error resolution.
b. Required tools used to build and maintain Licensed Work that are
generally commercially available need not be deposited in this escrow. However,
ODI will:
1) Identify such tools in sufficient detail, including the
name and location of the owner or licensor, and the name,
version or release level of the tool; and
2) If such tool (i) ceases to become generally commercially
available or (ii) ODI stabilizes its use of such tool on
superseded releases or versions of that tool, the tool will be
placed in escrow as category a. above, if ODI has the right to
do so at no cost. If ODI does not have such right, then ODI
will use reasonable efforts to acquire the right to place such
tools in this escrow at IBM's expense.
3. Internals documentation / other materials
a. A full set of ODI internal design notes, survey notes, and
related documentation, memos, material, etc.
b. Amber Error tracking information - only the final closing
report for each Error will be included.
c. Educational material on externals or internals of Licensed
Work (foils, text, video, etc.) that exists or is created for internal use by
employees.
4. An outline of categories of Materials being escrowed
and the file names and documents that relate to each
category.
APPENDIX A. TRIGGERING EVENTS
1. IBM elects the Option to get access to the Escrowed Materials according to
the terms of the Break-Up Agreement.
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<PAGE> 22
2. ODI is adjudged insolvent or files bankruptcy or insolvency petitions or
bankruptcy proceedings are filed against ODI (and remain undismissed or unstayed
and in effect for a period of at least ninety (90) days).
APPENDIX B. COORDINATORS
IBM: Legal Counsel, Santa Teresa Lab
International
Business Machines Corporation
555 Bailey Avenue
P.O. Box 49023
San Jose, CA 95161-9023
ODI: Mr. Tim Allen
VP of Finance and CFO
Object Design, Inc.
1 New England Executive Park
Burlington, MA 01803
Custodian: Ms. Katherine Young
Contracts Administration
Data Securities International
6165 Greenwich Drive, Suite 220
San Diego, CA 92122
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<PAGE> 1
EXHIBIT 10.29
FIRST AMENDED AND RESTATED
AGREEMENT REGARDING CONFIDENTIAL INFORMATION
Agreement Number: STL92602B
Date of Agreement: February 22, 1993
This is an Agreement Regarding Confidential Information (hereinafter called
"Agreement") between International Business Machines Corporation, with an
address for purpose of this Agreement at Santa Teresa Laboratory, 555 Bailey
Avenue, San Jose, CA 95141, (hereinafter called "IBM") and Object Design, Inc.,
with an address at 25 Burlington Mall Road, Burlington, MA 01803, (hereinafter
called "ODI"). Subsidiaries of IBM and ODI may become additional parties to this
Agreement in accordance with Section 9.1 hereof.
1.0 RECITALS
WHEREAS, it is the intention of the parties to exchange Information in
connection with certain studies, development activities, and licensing
activities under certain other Agreements to be entered into between the parties
that will reference this Agreement;
WHEREAS, the parties desire to maintain the confidential nature of their
Confidential Information and to establish their rights and obligations with
respect to the Information exchanged pursuant to the Other Agreements; and
WHEREAS, the parties have previously entered into certain agreements under which
Confidential Information was exchanged, and the parties desire to replace those
agreements with this Agreement with respect to Information disclosed after the
date hereof;
NOW THEREFORE, for and in consideration of the mutual promises and conditions
set forth herein, the receipt and sufficiency of which are hereby acknowledged,
the parties hereby agree as follows:
2.0 DEFINITIONS
<PAGE> 2
In addition to definitions set forth elsewhere in this Agreement, the
capitalized terms set forth in this section shall have the meanings indicated.
2.1 Authorized Representative shall mean:
1. For IBM, any person listed in Appendix D.
2. For ODI, any person listed in Appendix E.
3. For any Subsidiary of IBM or ODI, any person listed as an Authorized
Representative in a Subsidiary Addendum.
Any party may change the persons listed as their Authorized Representatives by
providing a new Appendix D or E, or a revised Subsidiary Addendum, as
appropriate.
2.2 Class I Confidential Information shall mean all Information of one of the
parties hereto that is disclosed to another party hereto during the term of this
Agreement, other than Non- Confidential Information and Class II Confidential
Information.
2.3 Class II Confidential Information shall mean all Information that is
disclosed as Class II Confidential Information under the provisions of Section
5.0, "DISCLOSURE OF CLASS II CONFIDENTIAL INFORMATION."
2.4 Code shall mean computer programming code.
2.4.1 Object Code shall mean computer programming code, substantially or
entirely in binary form, which is directly executable by a computer after
suitable processing but without the intervening steps of compilation or
assembly.
2.4.2 Source Code shall mean computer programming code, other than Object Code,
and related source code level system documentation, comments and procedural code
such as job control language, which may be printed out or displayed in a human-
intelligible form.
2.5 Confidential Information shall mean all Class I Confidential Information and
Class II Confidential Information.
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2.6 Contracting Party shall mean either IBM or ODI, or a Related Company
permitted pursuant to Section 9.2, in its capacity as a party that has engaged a
Contractor and wishes to disclose Confidential Information of an Unrelated
Company to such Contractor.
2.7 Contractor shall mean any Special Contractor or On-Site Contractor.
2.7.1 On-Site Contractor shall mean a person who has been engaged by a
Contracting Party to provide services as an independent contractor to such
party, where the contractor will perform such services at the facility of such
party and where all of the rights, title and interest in any software or other
developments made by the contractor in the performance of such services will be
owned by such party.
2.7.2 Special Contractor shall mean a third party who has been engaged
by a Contracting Party to develop software products on behalf of or in
cooperation with such party and in which such party will receive substantial
ownership or marketing rights.
2.8 Design Notes shall mean computer programming design documents containing
Information that (a) are marked or identified as (i) "Design Note XXII or "DN
XX" (where "XX" denotes a number) and (ii) "ODI Confidential Restricted" and (b)
have been formally designated as such after the customary ODI peer review
process.
2.9 Information shall mean data, ideas, inventions, concepts, techniques,
know-how, Code, works of authorship, and other information of any kind, whether
presented in oral, visual, machine readable, written, or other form or medium
(including graphic material).
2.10 Information Exchange Coordinator shall mean, for any party, any of the
following persons: (i) its Authorized Representatives; and (ii) any person who
is designated as an Information Exchange Coordinator in a Supplement or in a
written notice to an Unrelated Company which is signed by an Authorized
Representative of the designating party.
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2.11 Non-Confidential Information shall mean any Information that:
1. Is already known by or in the possession of the Receiving Party, or
any of its direct or indirect Subsidiaries or Parents, without obligation of
confidence;
2. Is independently developed by the Receiving Party, or any of its
direct or indirect Subsidiaries or Parents;
3. Is or becomes publicly available without breach of this Agreement;
4. Is rightfully received by the Receiving Party, or any of its direct
or indirect Subsidiaries or Parents, from a third party without obligation of
confidence; or
5. Is released for disclosure by the Receiving Party with the express
written consent of the Disclosing Party.
Notwithstanding any marking or legend to the contrary, Object Code shall be
considered Non-Confidential Information under this Agreement and shall not be
subject to the obligations specified in Section 7.0, unless any two Unrelated
Companies expressly agree otherwise in an applicable Supplement or in any of the
Other Agreements; provided, however, that the Receiving Party shall not, and
shall not permit anyone else to, decompile or disassemble any Object Code of the
other party hereto.
2.12 Non-Contracting Party shall mean either IBM or ODI where an Unrelated
Company is a Contracting Party.
2.13 Other Agreements shall mean agreements existing or contemplated between or
among any two or more Unrelated Companies, including the Internal Use and
Substrate Agreement, the Break-Up Agreement, the Master Agreement (and any
Statements of Work related thereto) and the Escrow Agreement between IBM and
ODI, and any other agreement entered into that references this Agreement.
2.14 Parent shall mean, with respect to a party hereto, a corporation, company
or other entity of which such party is a direct or indirect Subsidiary.
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2.15 Related Companies shall mean, with respect to any party hereto, all other
parties hereto that are related to each other, directly or indirectly, as Parent
and Subsidiary.
2.16 Subsidiary shall mean a corporation, company or other entity (1) at least
fifty percent (50%) of whose outstanding shares or securities (representing the
right to vote for the election of directors or other managing authority) are, or
(2) which does not have outstanding shares or securities, as may be the case in
a partnership, joint venture or unincorporated association, but at least fifty
percent (50%) of whose ownership interest representing the right to make the
decisions for such corporation, company or other entity is, now or hereafter,
owned, directly or indirectly, by a party hereto, but such corporation, company
or other entity shall be deemed to be a Subsidiary only so long as such
ownership exists. A direct or indirect Subsidiary of a Subsidiary of IBM or ODI
shall be deemed for these purposes to be a Subsidiary of IBM or ODI, as the case
may be.
2.17 Subsidiary Addendum shall mean a Subsidiary Addendum in substantially the
form attached hereto as Appendix H.
2.18 Third Party Confidential Information shall mean Information which a party
hereunder received in confidence from a third party (other than a direct or
indirect Parent or Subsidiary of such party) subject to a non-disclosure
obligation.
2.19 Unrelated Companies shall mean, with respect to any party hereto, all other
parties to this Agreement that are not Related Companies of such party.
2.20 Writing shall mean any representation of Information in any tangible form
or medium (including without limitation, machine-readable form).
3.0 PREVIOUS AGREEMENTS
This Agreement replaces the following agreements with respect to Information
disclosed after the Date of Agreement. The original terms and relevant periods
of confidentiality in those agreements shall govern any disclosures made before
this Agreement is signed.
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1. Agreement for the Exchange of Confidential Information, Number
AIX-A-001, dated 1/22/91;
2. Agreement for the Exchange of Confidential Information, Number
071091, dated October 7, 1991, as amended.
4.0 CLASSIFICATION OF INFORMATION GENERALLY
All Information of one party, or of a direct or indirect Parent or Subsidiary of
such party, that is disclosed by that party or one of its Related Companies
(hereinafter the "Disclosing Party") to an Unrelated Company in any manner,
including by means of a Writing, orally or visually (including, without
limitation, all Information disclosed pursuant to any of the Other Agreements),
shall be Class I Confidential Information, other than Non- Confidential
Information and Information that is disclosed as Class II Confidential
Information in accordance with Section 5.0. "Receiving Party" shall mean both
the first Unrelated Company to whom the initial disclosure of Information is
made (the "Initial Receiving Party") and any of its Related Companies to whom
the Information is properly disclosed by either (1) the original Disclosing
Party, (2) the Initial Receiving Party, or (3) any Related Company of the
original Disclosing Party or the Initial Receiving Party; provided, however,
that nothing in this sentence shall be construed as permitting any disclosure by
the Initial Receiving Party or any of its Related Companies that is not
otherwise permitted by this Agreement.
Each party agrees that its rights, obligations and limitations under this
Agreement shall apply to all Information of an Unrelated Company that it
receives under this Agreement, regardless whether the party receives the
Information directly from the Disclosing Party or from another party.
5.0 DISCLOSURE OF CLASS II CONFIDENTIAL INFORMATION
With respect to any Class II Confidential Information to be disclosed, the
Disclosing Party will prepare and deliver to the Initial Receiving Party prior
to the disclosure thereof a Supplement to this Agreement (hereinafter
"Supplement") substantially in the form set out in Appendix C.
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Each Supplement will identify the purpose of the disclosure and the person
designated by the Disclosing Party and by the Initial Receiving Party,
respectively, to be its Information Exchange Coordinator for the disclosure and
will contain the expected initial and final disclosure dates. The obligations of
the parties with respect to Information begin on the date of actual initial
disclosure of such Information. The Supplement will also contain a
non-confidential general description of the Class II Confidential Information to
be disclosed, a statement of the purpose or purposes to which use of such Class
II Confidential Information by the Receiving Party is limited, and any
additional terms and conditions for that Confidential Information. Prior to the
actual initial disclosure of any Class II Confidential Information, the
applicable Supplements must be signed by the Information Exchange Coordinators
for the Disclosing Party and the Initial Receiving Party. In order to facilitate
compliance with the following paragraph, the parties shall endeavor to use a
single Supplement for each project or undertaking requiring ongoing disclosure
of Class II Confidential Information.
When Class II Confidential Information (other than Source Code) is disclosed
through the furnishing of a Writing, the Writing will bear an appropriate
legend, such as "IBM Confidential Restricted," "ODI Confidential Restricted", or
"Class II"; provided however, that omission of such a legend from a copy of a
Writing that has previously been furnished to any Receiving Party with such a
legend will not result in such Writing or its contents ceasing to be Class II
Confidential Information. Writings bearing the legend "Class II" will also bear
a legend such as "IBM Confidential", "IBM Internal Use" "ODI Confidential", or
"ODI Proprietary". At the initial disclosure of a Writing (other than one
electronically transmitted), either the Writing or a transmittal accompanying
the Writing will state the approximate date of disclosure and that the
Information is being disclosed pursuant to a specific Supplement. If the initial
Receiving Party elects to receive the Class II Confidential Information, the
recipient shall (i) sign the Writing, a copy of the Writing, or the accompanying
transmittal, thereby indicating that such Information is Class II Confidential
Information and agreement to receive the same, and (ii) return an appropriate
signed copy to the Disclosing Party. Notwithstanding anything herein to the
contrary, any recognizable amount of Source Code (regardless of whether
disclosed in a Writing or by
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electronic transmission) shall automatically be deemed to be Class II
Confidential Information (regardless whether covered by a Supplement or
otherwise disclosed in accordance with the requirements of this Section 5.0)
unless the parties expressly agree otherwise in the Supplement.
When a disclosure of Class II Confidential Information is first made orally
and/or visually, then it shall be confirmed in a written resume. The resume will
be prepared by the Disclosing Party and delivered to the Initial Receiving Party
within twenty (20) days following such disclosure. The resume will specifically
recite that Information which shall be treated as Class II Confidential
Information and will not be deemed to cover Information that is not summarized.
The resume shall state the approximate date of disclosure and that the
Information was or is being disclosed pursuant to a specific Supplement. If the
Initial Receiving Party elects to receive the Class II Confidential Information,
the recipient shall (i) sign the resume, or a copy thereof, thereby indicating
that such Information is Class II Confidential Information and agreement to
protect the same under the provisions of Section 7.2, and (ii) return an
appropriate signed copy to the Disclosing Party. If the Initial Receiving Party
elects not to sign the resume, or a copy thereof, the Initial Receiving Party
will deliver to Disclosing Party or destroy any materials or written notes in
which the orally and/or visually disclosed Information may have been recorded by
the Initial Receiving Party or any other Receiving Party. Notwithstanding the
foregoing, if Source Code or Design Notes are disclosed visually to the
Receiving Party (for example, if representatives of the Disclosing Party and the
Receiving Party together scroll on-line through portions of a Source Code
listing) and such Source Code or Design Notes are covered by a Supplement, then
the Disclosing Party will not be required to confirm the disclosure in a written
resume and the Source Code or Design Note thus disclosed shall be treated as
Class II Confidential Information.
When Class II Confidential Information is electronically transmitted, the
parties shall adhere to the requirements in Appendix B, paragraph 4. Such
electronic transmissions shall only be sent by the Disclosing Party to those
individual addresses on a list submitted by the Initial Receiving Party and
agreed to by the Disclosing Party. In addition, the Information
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Exchange Coordinator for the Initial Receiving Party shall be copied on all such
electronic transmissions on no less frequently than a monthly basis, the
Disclosing Party shall deliver to the Initial Receiving Party a transmittal
identifying all such Class II Confidential Information disclosed electronically
to the Initial Receiving Party during that period. An Information Exchange
Coordinator for the Initial Receiving Party shall sign and return a copy of such
transmittal. For electronic transmissions of Class II Confidential Information,
the requirements set forth in this paragraph shall be in lieu of all of the
requirements set forth above in this Section 5.0 for disclosures made through a
Writing or orally or visually, except for the Supplement requirement.
For Information first disclosed in a tangible form or medium or by electronic
transmission and sought to be treated as Class II Confidential Information, if
the Disclosing Party inadvertently fails to comply with any applicable
Supplement description, marking, transmittal or other requirements of this
Section 5.0, "DISCLOSURE OF CLASS II CONFIDENTIAL INFORMATION", then, if within
one hundred twenty (120) days from the initial disclosure of such Information,
such Disclosing Party cures such non-compliance in a subsequent disclosure to
the Initial Receiving Party that does meet such requirements, the Initial
Receiving Party and any other Receiving Party shall thereafter treat such
Information as Class II Confidential Information hereunder, but, until such
time, such Information shall be treated as Class I Confidential Information and
the liability for any disclosure of such Information shall be governed by
Section 12.0. If the Disclosing Party wishes to effect such a cure and the
Initial Receiving Party refuses to amend the Supplement description or accept
the Writing with the required marking or under the required transmittal or as
having been transmitted electronically to appropriate recipients, as the case
may be, then the Initial Receiving Party and any other Receiving Party will
deliver to the Disclosing Party or destroy the Writing in question (regardless
whether electronically transmitted), all copies thereof, and any materials and
written notes containing the Information disclosed therein.
The Supplement description, marking, transmittal, and other requirements of this
Section 5.0 apply only to disclosures by the Disclosing Party to the Initial
Receiving Party. Reference is
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made to Section 9.1 hereof which, among other things, imposes certain
obligations in connection with disclosures of Unrelated Company Confidential
Information among Related Companies.
Information that is disclosed as Class II Confidential Information in accordance
with this Section 5.0, may be "declassified" by the Disclosing Party. The
Disclosing Party wishing to declassify any of its Class II Confidential
Information shall send written notice, signed by one of the Disclosing Party's
Information Exchange Coordinators, to the Initial Receiving Party, specifying
which of its Class II Confidential Information it is declassifying and whether
such Information should henceforth be considered Class I Confidential
Information or Non-Confidential Information.
An Information Exchange Coordinator for the Initial Receiving Party shall sign
and return a copy of such written notice.
6.0 NON-CONFIDENTIAL INFORMATION
With respect to all Non-Confidential Information disclosed by one party to
another party hereto, the Disclosing Party grants and agrees to grant to each
Receiving Party, to the extent, if any, of the Disclosing Party's interest
therein, a nonexclusive, irrevocable, unrestricted and worldwide license to use,
have used, disclose to others, to make copies in the case of documents and to
dispose of, all without limitation, such Non-Confidential Information in the
development, manufacturing, marketing and maintenance of products and services
which incorporate such Information, and each Receiving Party shall be free to
use and disclose, for any purpose, any and all of the ideas, concepts, know-how
or techniques contained in the disclosed Non- Confidential Information; provided
that the foregoing license is subject to, and does not include any grant under,
any applicable patent and trademark rights of the Disclosing Party; and provided
further in each case that such use or disclosure is not prohibited or restricted
under any of the Other Agreements and that nothing in this paragraph shall
abrogate or limit any obligations under any of the Other Agreements. Such
license includes the right to sublicense any direct or indirect Parent or
Subsidiary, and others, to do any or all of the foregoing.
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Notwithstanding the foregoing, no license is granted in this Section 6.0,
"NON-CONFIDENTIAL INFORMATION", with respect to any copyrights in any of the
following, or any reasonably recognizable part thereof: (i) any computer
program, in Source Code or executable form, (ii) any deliverable provided
pursuant to any of the Other Agreements, (iii) any Writing consisting of all or
any part of a product (that is reasonably recognizable as such by the Receiving
Party) that the Disclosing Party sells or licenses to third parties, or (iv) any
Writing containing a copyright notice or any of the following legends: "IBM
Confidential," "IBM Confidential Restricted," "IBM Internal Use Only," "ODI
Confidential," "ODI Confidential Restricted," "ODI Proprietary," or "ODI
Internal".
7.0 OBLIGATION OF CONFIDENTIALITY
7.1 Class I Confidential Information. Subject to the provisions of Section 8.0,
"EXCEPTIONS," for the period of three (3) years, as measured from the date of
actual initial disclosure of such Class I Confidential Information by the
Disclosing Party to the Initial Receiving Party, each Receiving Party agrees to
use reasonable care and discretion, at least commensurate.with that degree of
care it uses to protect similar Information of its own, to avoid disclosure,
publication, or dissemination of the Disclosing Party's Class I Confidential
Information outside of the Receiving Party and those Related Companies and
Contractors who are permitted to receive such Confidential Information in
accordance with Section 9.0, "SUBSIDIARIES AND CONTRACTORS," hereof.
The parties agree that the items set forth in Appendix A are the minimum steps
that must be taken by each Receiving Party of the Class 1 Confidential
Information of the Disclosing Party to meet the standard of care and discretion
recited above in this Section 7.1, "Class I Confidential Information". Each
party agrees that on the reasonable request of the Disclosing Party made at any
time, and from time to time, during the term of this Agreement, it will
demonstrate to the Disclosing Party its compliance with the provisions of this
Section 7.1, "Class I Confidential Information", and with any other obligations
set forth in this Agreement regarding the handling of the Class I Confidential
Information of the Disclosing Party.
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Subject to any of the Disclosing Party's, or its direct or indirect Parent's or
Subsidiary's, applicable copyrights, trademarks, or patent rights, each
Receiving Party shall be free to use any such Class Confidential Information of
the Disclosing Party, any Writing prepared by the Disclosing Party and/or by any
Receiving Party containing such Class I Confidential Information, and any ideas,
concepts, know-how or techniques contained in any such Class I Confidential
Information in the development, manufacture, marketing and maintenance of its
products and services, or for any other purpose; provided in ease case that such
use does not violate any of the obligations not to disclose, publish or
disseminate such Class I Confidential Information during the period of
confidentiality specified in this Section 7.1 "Class I Confidential
Information", or an applicable Supplement; and provided further in each case
that such use is not prohibited or restricted under any of the Other Agreements
and that nothing in this paragraph shall abrogate or limit any obligations under
any of the Other Agreements. Any Receiving Party may make written summaries of
Class I Confidential Information, and may make a reasonable number of copies of
any Writing containing Class I Confidential Information, solely for internal use
as required in the performance of the Other Agreements or as required in
furtherance of any joint business activities of the parties, except to the
extent prohibited or restricted in any of the Other Agreements.
7.2 Class II Confidential Information. Subject to the provisions of Section 8.0,
"EXCEPTIONS," for the period of time specified in the Supplement under which the
Class II Confidential Information is disclosed or, in the event that no such
time is specified in such Supplement, for the period of seven (7) years, as
measured from the actual initial date of disclosure of such Class II
Confidential Information by the Disclosing Party to the Initial Receiving Party,
each Receiving Party agrees to use reasonable care and discretion, at least
commensurate with that degree of care it uses to protect similar Information of
its own, to avoid disclosure, publication, or dissemination of the Disclosing
Party's Class II Confidential Information outside of those employees of such
Receiving Party who have a predetermined need to know for the purposes stated in
the applicable Supplement or in a Statement of Work referenced in such
Supplement and those employees of its Related Companies and Contractors who have
a predetermined need to know for such purposes and who are
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permitted to receive such Class II Confidential Information in accordance with
Section 9.0, "SUBSIDIARIES AND CONTRACTORS," hereof. The period of
confidentiality for the Class II Confidential Information shall not exceed seven
(7) years. Each Receiving Party may make written summaries that are ancillary to
the permitted use of such Class II Confidential Information, it being understood
that any such written summaries also shall be subject to the provisions of this
Section 7.2, regardless of any marking thereof. No Receiving Party shall make
copies of any Writing or written summaries containing Class II Confidential
Information, except for one copy thereof which may be retained by the Receiving
Party as an Archival Copy as provided in Section 10.0, "ARCHIVAL COPIES," hereof
and except as provided in the following sentence. If Class II Confidential
Information exists in an electronic format, such as on a computer system, a
single copy may be printed out to effectively read the Information and a single
copy may be made on additional computer storage media as necessary for system
backup, it being understood that any such print-out or copy shall be subject to
the provisions of this Section 7.2, regardless of any marking thereof. If
additional copies of any such Writing are required by any Receiving Party, a
reasonable number of such copies will be provided by the Disclosing Party upon
receipt of a written request from the Receiving Party. The Information Exchange
Coordinator for the relevant Supplement, in his discretion, may provide written
approval to a written request by the Receiving Party to make a specified number
of copies of any such Writing or written summary.
Within two (2) months following the expiration or termination of this Agreement,
each Receiving Party will make reasonable effort to either return to the
Disclosing Party or destroy all Writings (including resumes) received by such
Receiving Party and copies thereof containing Class II Confidential Information
(except for one copy thereof which may be retained by the Receiving Party as an
Archival Copy as provided in Section 10.0, "ARCHIVAL COPIES," hereof) and shall
certify in writing to the Disclosing Party that it has done so. The parties
agree that the items set forth in Appendices A and B are the minimum steps that
must be taken by each Receiving Party of the Class II Confidential Information
of the Disclosing Party to meet the standard of care and discretion recited
above in this Section 7.2, "Class II Confidential Information". Each party
agrees that on the reasonable request
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of the Disclosing Party made at any time, and from time to time, during the term
of this Agreement, it will demonstrate to the Disclosing Party its compliance
with the provisions of this Section 7.2, "Class II Confidential Information",
and with any other obligations set forth in this Agreement regarding the
handling of the Class II Confidential Information of the Disclosing Party.
Except only as provided in the following paragraph with respect to residual
Information, and to the extent permitted in the exceptions in paragraphs (1),
(2) and (3) of Section 8.0.1 "EXCEPTIONS," the Receiving Party, and any of its
Related Companies and Contractors who may be permitted to receive any Class II
Confidential Information, shall use Class II Confidential Information of the
Disclosing Party only for the purposes authorized in the applicable Supplement
or in a Statement of Work referenced in such Supplement.
Subject to any of the Disclosing Party's, its direct or indirect Parent's or
Subsidiary's, applicable copyrights, trademarks, or patent rights, each
Receiving Party shall be free to use any ideas, concepts, know-how or techniques
retained in the unaided memory of its employees who have properly had access to
Class II Confidential Information of the Disclosing Party in the development,
manufacture, marketing and maintenance of the Receiving Party's or its Related
Companies' products and services, or for any other purpose; provided in each
case that such use does not violate any of the obligations not to disclose,
publish or disseminate such Class II Confidential Information during the period
of confidentiality specified in this Section 7.2 "Class II Confidential
Information", or an applicable Supplement; and provided further in each case
that such use is not prohibited or restricted under any of the Other Agreements
and that nothing in this paragraph shall abrogate or limit any obligations under
any of the Other Agreements.
8.0 EXCEPTIONS
Disclosure of Confidential Information shall not be precluded if such disclosure
is:
1. In response to a valid order of a court or other governmental body
of the United States, or any other relevant
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foreign government, or any political subdivision of either; provided, however,
that the party making the disclosure pursuant to the order shall promptly give
notice to the Disclosing Party and make a reasonable effort to obtain a
protective order requiring that the Information and/or documents so disclosed be
used only for the purposes for which the order was issued; or
2. Otherwise required by law; provided, however, that the party making
the disclosure required by law shall, unless prevented by law or regulation,
promptly give notice to the Disclosing Party and make a reasonable effort to
provide that the Information will not be publicly disclosed and will be used
only for the purpose for which such disclosure is required by law; or
3. Necessary to establish rights under this Agreement; provided,
however, that the party making such disclosure shall use reasonable efforts to
provide that the Information will not be publicly disclosed.
The inherent disclosure, in the sale or licensing of any product or service
(including any supporting documentation) by any Receiving Party, of Confidential
Information which such Receiving Party was authorized to receive and so use
under this Agreement and which is reasonably necessary to the permitted use of
such product or service by customers, shall not in itself be deemed disclosure,
publication, or dissemination of such Confidential Information for purposes of
this Agreement.
9.0 SUBSIDIARIES AND CONTRACTORS
9.1 Subsidiaries. Any Subsidiary of IBM or ODI may become a party to
this Agreement upon (i) the written consent of such other party (i.e. ODI in the
case of an IBM Subsidiary, and IBM in the case of an ODI Subsidiary) and (ii)
the execution by such Subsidiary and delivery to all other parties of a
Subsidiary Addendum. As a party, a Subsidiary assumes all the rights,
obligations and limitations of a Disclosing Party and/or Receiving Party, as
appropriate, under this Agreement. A Subsidiary who becomes a party hereto may
disclose Information of its own or of any Related Company, if permitted by that
Related Company. Also, such a Subsidiary may receive Unrelated Company
Confidential Information from a Disclosing Party or from a Related Company of
such Subsidiary. The terms and conditions of
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this Agreement (including, without limitation, the Appendices hereto) shall
govern the receipt, use, and disclosure of Information by each Subsidiary, it
being agreed that:
1. Prior to the initial disclosure of Unrelated Company Confidential
Information to, or receipt of Unrelated Company Confidential Information from,
any such Subsidiary, the Subsidiary shall have become a party to this Agreement
in the manner provided above;
2. A party hereto may disclose to its Related Companies Confidential
Information of an Unrelated Company, provided, however, that each party shall
only disclose Class II Confidential Information to those employees of its
Related Companies, if any, who have a predetermined need to know such
Information for the purposes stated in the applicable Supplement or in a
Statement of Work referenced in such Supplement;
3. For any disclosure of Unrelated Company Confidential Information
from one Related Company to another, the disclosing party shall inform the
recipient that such Information is Confidential Information of the Unrelated
Company, and, in the case of Class II Confidential Information, shall inform the
recipient of the. terms of any applicable Supplements or Other Agreements and
shall provide a copy of such Supplements or Other Agreements to the recipient;
4. For any disclosure of Unrelated Company Confidential Information
from one Related Company to another, the disclosing party shall ensure that all
such Information disclosed in a tangible form or medium is identified as
Information of the appropriate Unrelated Company, that it bears all proprietary
rights notices and legends of the appropriate Unrelated Company that were
contained on the original, and that, in the case of Class II Confidential
Information, it is marked as "Confidential Restricted" or "Class II";
5. All Information that is disclosed to the Initial Receiving Party in
accordance with Section 5.0 of this Agreement shall constitute "Class II
Confidential Information" for all purposes of this Agreement, and if disclosed
to a Related Company shall be treated as such by such Related Company in
accordance with this Agreement and any applicable Supplements or Other
-16-
Agreements (whether or not such Related Company is a party thereto);
6. Each of IBM and ODI shall use reasonable efforts to ensure that each
of its Subsidiaries perform and comply with all of the terms and conditions of
this Agreement, shall promptly inform the other such party of any known material
failure of any such Subsidiary to perform or comply with any such terms and
conditions, and shall cooperate with the other such party (at the first party's
own expense) to remedy any such failure by such Subsidiary; and
7. Each of IBM and ODI shall be fully and directly liable to the other
for any failure of its own Subsidiaries to perform or comply with any of the
terms and conditions of this Agreement as regards the Confidential Information
of the other such party or its Subsidiaries. The foregoing shall not limit any
rights or remedies that any party hereto (including IBM and ODI) may have
against any such Subsidiary.
9.2 Contractors. IBM or ODI may disclose Unrelated Company Confidential
Information to its own Contractors. No Subsidiary of IBM or ODI shall disclose
any Unrelated Company Confidential Information to any Contractor, except that,
upon the prior written consent of both IBM and ODI, a Subsidiary that has become
a party hereto in accordance with Section 9.1 may disclose such Confidential
Information to those of its Contractors as to which such consent has
specifically been given. Each Contractor shall observe and comply with all the
confidentiality obligations and restrictions on use to which the Contracting
Party is bound, and the terms and conditions of this Agreement (including,
without limitation, the Appendices hereto) shall govern the use and disclosure
of such Unrelated Company Confidential Information by or to each Contractor,
provided that:
1. At least ten (10) business days prior to any initial disclosure of
Unrelated Company Confidential Information to (i) any Special Contractor or (ii)
any On-Site Contractor which develops or markets products that are competitive
with those of the Unrelated Company, the Contracting Party shall notify the
Information Exchange Coordinator of the Non-Contracting Party in writing,
identifying such Contractor and stating the Information sought to be disclosed
and the purpose for which such Contractor
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would use the Information. The Contracting Party shall not make such disclosure
if the Non-Contracting Party notifies the Contracting Party in writing within
such ten (10) business days period that it does not approve such disclosure (it
being understood that this requirement is additional to the requirement above
that any Subsidiary of IBM or ODI must obtain prior written consent before
disclosing Unrelated Company Confidential Information to any of its
Contractors);
2. Notwithstanding anything in this Agreement to the contrary, and in
addition to any other restrictions on use or disclosure of Confidential
Information provided elsewhere herein, (i) each Contractor shall use such
Confidential Information only on behalf of and for the benefit of the
Contracting Party, and (ii) no Contractor shall disclose any such Confidential
Information to anyone other than the Contracting Party;
3. Prior to any disclosure of Confidential Information to any
Contractor, the Contracting Party shall have entered into a written agreement
with such Contractor sufficient to require that such Confidential Information
shall be treated in accordance with the terms and conditions of this Agreement
and to make the Non- Contracting Party a third party beneficiary of such
agreement;
4. The Contracting Party shall furnish the Non-Contracting Party, at
the Non-Contracting Party's request, a copy of the relevant portions of each
agreement referred to in preceding clause (3);
5. In connection with any disclosure of Unrelated Company Confidential
Information by the Contracting Party to such Contractor, the Contracting Party
shall inform the Contractor that such Information is the Confidential
Information of the Unrelated Company, and, in the case of Class II Confidential
Information, shall inform the Contractor of the terms of any applicable
Supplements or Other Agreements;
6. In connection with the disclosure of Unrelated Company Confidential
Information by the Contracting Party to such Contractor, the Contracting Party
shall ensure that all such Information disclosed in a tangible form or medium is
marked as "Confidential" Information of the appropriate Unrelated Company, that
it bears all proprietary rights notices and legends of the
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appropriate Unrelated Company that were contained on the original, and that, in
the case of Class II Confidential Information, it is marked as "Confidential
Restricted" or "Class II";
7. The Contracting Party shall use reasonable efforts to ensure that
each such Contractor performs and complies with all of the terms and conditions
of this Agreement as regards such Unrelated Company Confidential Information,
shall promptly inform the Non-Contracting Party of any known material failure of
any such Contractor to perform or comply with any such terms and conditions, and
shall cooperate with the Non-Contracting Party (at the Contracting Party's
expense) to remedy any such failure by such Contractor; and
8. IBM and ODI shall be fully and directly liable to each other for any
failure of their respective Contractors or a Contractor of one of their
respective Related Companies to perform or comply with any of the terms and
conditions of this Agreement as regards such Confidential Information. The
foregoing shall not limit any rights or remedies that any party hereto
(including the Non-Contracting Party) may have against any such Contractor.
10.0 ARCHIVAL COPIES
Each Receiving Party may retain a single archival copy (an "Archival Copy") of
any Writing (including a resume or written summary thereof) received hereunder
containing Confidential Information of the Disclosing Party or of the Disclosing
Party's direct or indirect Parent or Subsidiaries. In addition to the other
obligations and restrictions that are applicable under this Agreement to
Confidential Information generally, the Receiving Party shall maintain each
Archival Copy in locked storage that is accessible only to the persons
designated for IBM and ODI in Appendix F or G or for any other Receiving Party
in a Subsidiary Addendum, and shall remove any Archival Copy from such storage,
and shall use such Archival Copy, only for the purpose of ascertaining or
establishing its obligations or rights under this Agreement, or as may be
expressly permitted in the Break-Up Agreement, # STL93035, dated April 10, 1993.
11.0 THIRD PARTY CONFIDENTIAL INFORMATION
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<PAGE> 19
No Third Party Confidential Information will be disclosed under this Agreement.
No Receiving Party shall have any obligations under this Agreement with respect
to Third Party Confidential Information received, whether or not such Third
Party Confidential Information was disclosed inadvertently.
12.0 LIMITATION OF REMEDIES
For any claim against IBM or its Subsidiaries, or against ODI or its
Subsidiaries, concerning the intentional and knowing breach of any obligation
set out in this Agreement regarding Class I Confidential Information, the
damaged party's sole and exclusive remedy shall be a suit at law for money
damages. In no event shall such damaged party be entitled to collect damages of
any kind in excess of $250,000 cumulatively for any and all such claims arising
at any time under this Agreement.
For any other claim whatsoever against IBM or its Subsidiaries, or against ODI
or its Subsidiaries, concerning breach of the obligations set out in this
Agreement regarding Class I Confidential Information, the damaged party's sole
and exclusive remedy shall be a suit at law for money damages. In no event shall
such damaged party be entitled to collect damages of any kind in excess of
$25,000 for any and all such other claims. The $25,000 shall be cumulative for
any and all such other claims arising at any time under this Agreement.
The foregoing limitations will apply to any and all claims in connection with
this Agreement with respect to Class I Confidential Information (other than any
such claims against Contractors), regardless of the form of action, whether in
contract or in tort, including negligence.
None of the foregoing limitations will apply to any claim or action concerning
breach of any obligation hereunder regarding Class II Confidential Information,
and the injured party may exercise all its rights and remedies, at law or in
equity, in respect of any such breach.
13.0 GENERAL
1. This Agreement does not require any party to disclose or to receive
Information.
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<PAGE> 20
2. It is understood that receipt of any Class I or Class II
Confidential Information pursuant to this Agreement shall not create any
obligation in any way to limit or restrict the assignment and/or reassignment of
IBM and its Related Company employees within and between IBM and those Related
Companies, or of ODI and its Related Company employees within and between ODI
and its Related Companies.
3. Following the period of confidentiality provided in a Supplement or
herein, no obligation of confidentiality is assumed by or implied against the
Receiving Party, its Related Companies or Contractors with respect to any
Confidential Information disclosed hereunder.
4. Neither IBM or any of its Related Companies, nor ODI or any of its
Related Companies, may assign its rights or delegate its duties or obligations
under this Agreement without prior written consent of ODI or IBM, as the case
may be, which consent shall not be unreasonably withheld. Any attempt to do so
is void.
5. All parties will comply with all applicable United States and
foreign export laws and regulations regarding the export of Information.
6. This Agreement can only be modified under a written amendment
thereto signed by IBM and ODI, which shall be binding on all the parties hereto.
After any amendment is signed, IBM and ODI shall each provide a copy to their
respective Related Companies.
7. Upon the expiration or termination of all agreements between and
among IBM, ODI, and their Related Companies that reference this Agreement, this
Agreement shall terminate. Otherwise, this Agreement may only be terminated by
written agreement of IBM and ODI, which shall be binding upon all of the parties
hereto.
8. Except for any provisions that are expressly limited to the term of
this Agreement, the provisions of Sections 3, 6, 7, 8, 9, 10, 12 and 13, and the
sixth paragraph of Section 5, shall survive any termination of this Agreement
and continue
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indefinitely or, with respect to any provision that is expressly limited to a
specified period, for such period.
9. Nothing in this Agreement shall limit or abrogate any royalty or
other payment obligation of either party under any of the Other Agreements.
10. The parties make no warranty whatsoever with respect to any
Information disclosed hereunder, and specifically disclaim any warranty of
noninfringement, provided, however, that this sentence shall not limit or
abrogate any express warranties with respect to any Information in any Other
Agreement.
Except as may be expressly provided to the contrary in any Other Agreement, no
party shall have any liability of any kind as a result of the use of any
Information by any other party or its Contractors.
11. All notices to be given in connection with the Agreement shall be
effective upon receipt, shall be made in writing and shall be sufficiently given
if personally delivered or if sent by courier or other express mail service,
postage prepaid, addressed to the party entitled or required to receive such
notice at the following address for IBM and ODI and at the addresses specified
in a Subsidiary Addendum for a Subsidiary (or such other address as shall be
specified by written notice to the other parties):
Notices to IBM:
Laboratory Counsel
IBM Corporation
555 Bailey Avenue
San Jose, CA 95141
Notices to ODI:
Contract Services
Object Design Inc.
25 Burlington Mall Road
Burlington, MA 01803
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<PAGE> 22
12. The validity, construction and performance of this Agreement shall
be determined in accordance with the substantive law of the State of New York.
The parties hereby expressly waive any right to a jury trial and agree that any
proceeding hereunder shall be tried by a judge without a jury.
13. The parties acknowledge that they have read this Agreement,
understand it, and agree to be bound by its terms and conditions. Further, they
agree that the complete and exclusive statement of this Agreement between the
parties relating to this subject shall consist of this Agreement. This statement
of the agreement supersedes all proposals or other prior agreements, oral or
written, and all other communications between the parties relating to this
subject, including, without limitation, the Agreement Regarding Confidential
Information dated February 22, 1993, between IBM and ODI (the "Original ARCI")
and each Agreement Regarding ARCI among IBM, ODI, and any IBM Subsidiary that
has become a party hereto in accordance with Section 9.1 hereof (each,
"Agreement Regarding ARCI"). All Information disclosed pursuant to the Original
ARCI or any Agreement Regarding ARCI shall be and remain subject to the terms
and conditions hereof. Any reproduction of this Agreement by reliable means will
be considered an original of this document.
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<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective Authorized Representatives.
International Business Object Design, Inc.
Machines Corporation
ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO:
By: By:
------------------------- -------------------------
------------------------ -------------------------
Print Name Print Name
------------------------ -------------------------
Title Title
------------------------ -------------------------
Date Date
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<PAGE> 24
APPENDIX A
MINIMUM STANDARDS OF CARE - CLASS I AND CLASS II
1. Secure all Writings, resumes or other items, including work in progress,
which contain the Confidential Information of any Unrelated Company in a safe,
file, desk, cabinet or other suitable container with locking device, or in a
locked room with restricted access, when such Writings, resumes or other items
are not in use.
2. Reproduce, on all copies (if any copies are permitted) of part or all of any
Writings, resumes or other items that contain the Confidential Information of
any Unrelated Company, any confidentiality, copyright and other proprietary
rights notice included on or in the original.
3. Enter into a binding written agreement with each employee who has access to
Confidential Information of any Unrelated Company that is sufficient to require
that such Confidential Information will be treated in accordance with the terms
and conditions of this Agreement; use reasonable efforts to cause each such
employee to perform and comply with all the terms and conditions of this
Agreement as regards such Confidential Information; promptly inform such
Unrelated Company of any known material failure of any such employee to perform
or comply with any such terms and conditions; and cooperate with such Unrelated
Company (at no expense to such Unrelated Company) to remedy any such failure.
4. Review, with those employees of each Receiving Party and others who have
access to the Confidential Information of any Unrelated Company, the
responsibility of such employees with respect to such Confidential Information
at the time such access is first granted and also at the time such employees are
transferred or reassigned within such Receiving Party or at a time of
termination of employment with such Receiving Party, whichever first occurs.
5. The following security provisions must be implemented should Class I and/or
Class II Information be placed on an electronic data processing system:
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<PAGE> 25
5.1. Data Processing Controls
5.1.1. Each multiple-user information processing system will have password
controlled access. Data sets will be protected and passwords will be controlled
an access control system. Local Area Networks environments will have controls
similar to the controls set forth above. Access to Information on stand-alone
workstations will be controlled.
When such systems are not in use, Information will be secured.
5.1.2. Each system log-on password must not be obvious or trivial, and must be
changed at least every six months.
5.1.3. The display or printing of system log-on and data set passwords and
encryption keys must be either inhibited or masked.
5.2. Control of Information Storage Media
In addition to the controls described above:
5.2.1. When available, security software should be used to protect Information
stored on Information storage media.
5.2.2. When practical, Information storage tapes and disks containing Class I
and/or Class II Confidential Information should only be accessible on data
processing systems during the working hours of its authorized users. When not in
use, the media should be locked in storage cabinets, a library facility or an
office. A listing should be maintained showing the names of persons authorized
to access the tapes and disks.
5.2.3. Before Information storage media containing Class I and/or Class II
Confidential Information is released for reuse, it must be degaussed or
completely overwritten to prevent the unauthorized disclosure of the
Information.
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APPENDIX B
MINIMUM STANDARDS OF CARE - SPECIFIC TO CLASS II
1. Maintain a list of the Writings, resumes or other items (including copies, if
permitted) that contain the Class II Confidential Information of any Unrelated
Company.
2. Promptly report the loss or unauthorized disclosure of Writings, resumes or
other items which contain the Class II Confidential Information of any Unrelated
Company to the Unrelated Company.
3. Periodically audit (no less than quarterly), to assure that there has not
been any loss of any of the Writings, resumes or other items, including any work
that includes or is based on the Confidential Information of the Unrelated
Company classified as Class II.
4. Class II Confidential Information must be encrypted when the Information is
electronically transmitted externally and the decryption and printing of the
Information at the receiving location must be controlled to prevent unauthorized
disclosures. In addition, a log showing these transmissions must be maintained
and the originator of the transmission must communicate with the intended
recipient to ensure the Information was successfully received and processed.
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APPENDIX C
SUPPLEMENT TO AGREEMENT REGARDING CONFIDENTIAL INFORMATION
Reference Agreement Number: STL92602B
Supplement Number:___________________
Disclosing Party Name/Addr: Receiving Party Name/Addr:
___________________________ ______________________________
___________________________ ______________________________
___________________________ ______________________________
Initial Disclosure Date:___________________________________
Final Disclosure Date:_____________________________________
DISCLOSING PARTY INFORMATION RECEIVING PARTY INFORMATION
EXCHANGE COORDINATORS EXCHANGE COORDINATORS
1)_________________________________ 1)_________________________________
2)_________________________________ 2)_________________________________
DISCLOSING PARTY'S CONFIDENTIAL INFORMATION:
(NON-CONFIDENTIAL DESCRIPTION)
PURPOSE OF DISCLOSURE:
(IDENTIFY ANY RELATED STATEMENT OF WORK)
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SUPPLEMENT TO AGREEMENT REGARDING CONFIDENTIAL INFORMATION
(CONTINUED)
PURPOSE(S) TO WHICH USE OF CONFIDENTIAL INFORMATION IS LIMITED,
IF ANY:
ADDITIONAL TERMS AND CONDITIONS:
Please indicate your understanding and acceptance of this information by signing
below.
Accepted and Agreed to:
DISCLOSING PARTY RECEIVING PARTY
By:__________________________________ ___________________________________
Name:________________________________ ___________________________________
Title:_______________________________ ___________________________________
Date:________________________________ ___________________________________
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APPENDIX D IBM AUTHORIZED REPRESENTATIVES
1) Vice President, Data Management Solutions, currently, Mr. C. Arnold
2) Director, Object Database Development, currently, Mr. I. Traiger
3) Manager, OODB Business Relationships, currently Ms. B. Moncrieff
4) Manager, OODB Development, currently Mr. R. Jackson
APPENDIX E ODI AUTHORIZED REPRESENTATIVES
1) Chief Executive officer, currently Mr. K. Marshall
2) Chief Financial officer, currently Mr. T. Allen
3) Vice President of Engineering, currently Mr. D. Stryker
APPENDIX F AUTHORIZED TO ACCESS ARCHIVAL COPIES FOR IBM
1) Manager, OODB Relationships, currently Ms. B. Moncrieff
2) Manager, OODB Development, currently Mr. R. Jackson
APPENDIX G AUTHORIZED TO ACCESS ARCHIVAL COPIES FOR ODI
1) Chief Financial officer, currently Mr. T. Allen
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APPENDIX H
SUBSIDIARY ADDENDUM
Reference Agreement Number: STL92602B
Addendum Number:_____________________
I. Name and Address of Subsidiary:
_________________________________________________
_________________________________________________
_________________________________________________
II. Name of Parent Company:
_________________________________________________
III. Name and Address for the purpose of notices as specified in Section 13.11:
_________________________________________________
_________________________________________________
_________________________________________________
_________________________________________________
IV. Authorized Representatives:
1)_______________________________________________
2)_______________________________________________
V. Persons authorized to access Archival Copies:
1)_______________________________________________
2)_______________________________________________
The undersigned Subsidiary agrees to be a party to, and to be bound by all the
terms and conditions of, the First Amended and Restated Agreement Regarding
Confidential Information, Number STL92602B, dated February 22, 1993, as may be
amended.
Accepted and Agreed to:
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______________________________________
Subsidiary Name
By:___________________________________ Date:______________________________
Name:_________________________________
Title:________________________________
D. Agreement Regarding Confidential Information
Definitions: Writing: tangible representation of information
Design Notes: computer programming design notes
marked as "Design Notes" AND "Company Confidential
Restricted"
CLASS I Data: All information is presumed to be CLASS I
Confidential Information.
CLASS II Data: Prior to disclosure, the Disclosing Party prepares a
Supplement per Exhibit C (covers the Project)
Supplements are signed by both par-ties Information
Control Coordinators and state the purpose of the
disclosure, period of disclosure and non-disclosure.
Actual transmittals of CLASS II data require a
receipt and recipient signs their acceptance, with
reference made to the applicable Supplement.
Must be marked "Company Confidential Restricted" OR
"CLASS II"; or "CLASS II" AND "Company
Confidential"/" Company Internal Use"/"Company
Proprietary"
If orally/visually disclosed, confirm in writing
within 20 days in a "resume". Recipient must accept
resume by signing, and if they do not, they must
destroy or return notes taken if visually/orally
disclosed. If disclosure is in tangible form but
transmitting party fails to properly mark and/or
provide a Supplement, disclosing party can cure
within 120
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days. Until cure, information is treated as CLASS I.
Obligations: Object code is not confidential data, but parties
agree not to decompile or disassemble other's object
code.
CLASS I obligations: data is protected for 3 years
from disclosure against disclosure, publication,
dissemination outside of Receiving Party and
authorized Subsidiaries and Subcontractors in
accordance with minimum standards of care listed in
Appendix A.
Parties must be able to demonstrate compliance with
requirements for handling and disclosing data.
Transmitting party grants receiving party right to
use CLASS I data.
CLASS I Grant: A broad, non-exclusive license is
granted to use without disclosing, any and all
non-confidential information transmitted, subject to
patent and trademark rights of the disclosing party,
and restrictions under Other Agreements. Further, no
license is granted to copyrights (in computer
programs in source code or executable form;
deliverables under any Other Agreement; any Writing
consisting of all or any part of a product; or any
Writing containing a copyright notice or legend of
confidentiality/proprietary specific legends listed
on page 7)
CLASS II obligations: period of confidentiality is
stated in each Supplement, and if omitted, the period
shall be for 7 years following disclosure. People,
Subsidiaries and Subcontractors with a need to know
are predetermined and care shall be in accordance
with minimum standards of care listed in Appendix A
and B. Limited use is specified in each Supplement.
Recipient may make written summaries of CLASS II data
which becomes CLASS 11 data. Only one archival copy
may be made. Additional copies may
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be provided by the disclosing party after a written
request is made - or the Info Exchange Coordinator
may permit requester to make limited number of copies
of the data or the summary.
Within 2 months of termination or expiration of
Agreement, all CLASS II Writings must be returned or
destroyed and so certify.
CLASS II grant: can use the data for the limited
purposes stated in the associated Supplement and can
"use any ideas, concepts, know-how or techniques
retained in the unaided memory of those employees who
have had proper access...in the development,
manufacture, marketing and maintenance of their
products and services or for any other reason
provided there is no unauthorized disclosure.
Exceptions Disclosure permitted where there is a court order,
when required by law, or when necessary to establish
rights under this Agreement. Also, the inherent
disclosure made when selling/ licensing a product or
service is not violative of this Agreement.
Subsidiaries May become a party to the Agreement by executing an
Addendum (Appendix H) with the unrelated company, and
in doing so, assumes all of the rights and
obligations of the Disclosing/Receiving party.
Subcontractors Competing companies of the disclosing party who are
Subs of the receiving party may receive the
disclosing party's confidential information if a
request is made in writing to the disclosing party,
who either assents or fails to object in writing
within 10 business days of the making of the request.
These competing special or on site contractors an use
only the information for the benefit of the receiving
party. All noncompetitor Subs can receive
confidential information.
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Receiving party has the obligation to execute
sufficient NDAs with Subcontractors and will make
disclosing party a third party beneficiary. Copies of
relevant portions of these agreements must be
provided to the disclosing party. The Disclosing
party retains an obligation to ensure that his Sub
complies and is liable to the disclosing party if the
Sub does not.
Archival A single archival copy of any writing may be kept
Copies by a receiving party, maintained in locked storage,
and made available only to those people identified in
the Appendix as having access and only for the
purpose of establishing rights/obligations under the
Agreement.
3rd Party Info No third party confidential info is to be exchanged.
Limitation of CLASS I intentional disclosure: $250K cumulatively
Remedies CLASS I unintentional disclosure: $25K cumulatively.
Appendix A Minimum Standards of Care for CLASS I & II Data
1. Secure all writings with confidential
information in a locked container or
restricted access room when not in use.
2. Use proprietary rights notices on all
created writings containing confidential
information.
3. Written agreements must be signed with each
E'ee having access to confidential
information and enforce.
4. Brief E'ss on obligations upon providing
access to confidential information, and upon
completion of work requiring access.
5. Implement the Security Controls listed for
Data Processing and Information Storage
Media
Appendix B Additional Standards of Care for CLASS II Data
Maintain a log of proprietary writings Promptly
report unauthorized disclosure Perform quarterly
audit
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<PAGE> 35
Ensure that external transmissions are encrypted and
transmission and receipt is logged by originator; and
printed versions are controlled and logged.
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EXHIBIT 10.30
Master OEM Agreement
between
Verity, Inc.
1550 Plymouth Street
Mountain View, CA 94043
and
OBJECT DESIGN, INC.
Licensee
25 Burlington Mall Road
Burlington, MA 01803-4194
This Master Partner Agreement sets forth the terms and conditions which the
parties agree that Verity, Inc. ("Verity") grants the Licensee certain
non-exclusive and nontransferable rights to the software and related documents
identified below. Attached are the general terms and conditions describing and
governing the relationship between Licensee and Verity. In addition, for certain
software, including third party software, execution of additional Product
Addenda or Third Party Adderida, may be necessary, as indicated below.
Verity has three general types of Verity Partners. They are:
VALUE ADDED RESELLER (VAR) PARTNER: A VAR is an application developer who
will bundle or ship Verity's API with their own application solution. They will
have expertise in a particular industry segment or vertical market (such as
manufacturing, distribution, healthcare, or accounting) or horizontal market
(such as document management, interact, email, groupware). The VAR's added value
is in their application and in the form of custom software development and
consulting services. The VAR will use Verity development products for creation
of their own applications and will resell application-specific development and
run-time licenses and support services.
SYSTEMS INTEGRATOR (S) PARTNER: A Systems Integrator acts as a prime
contractor for end user customers who have application projects pending and a
lack of expertise or staff to develop and deploy the project. An SI will work
with the customer to select the appropriate tools such as hardware, networking,
database, and applications to meet the customer's requirements. SI's have
relationships with multiple hardware and software vendors, and are highly
technical. The SI's added value is turnkey implementations with one point
support and will sell to the customer full development, run-time licenses, end
user products and integration services to tie a system all together.
OEM: An OEM is an application developer who will embed Veritys API within
their own application solution. Like a VAIL the OEM's added value is in their
application and in the form of custom software development and consulting
services. The OEM also will use Verity development products for creation of
their own applications and will resell application-specific development and
run-time licenses and support services. However, since the Verity software is
embedded with the application, an OEM is authorized to reproduce the software
and pay royalties to Verity for each copy made.
<TABLE>
<S> <C>
Licensee is a: Software licensed includes:
____ Standard VAR x___ Topic(R) Tools
Premier VAR ___ Topic(R) Enterprise Server
Standard SI ___ Topic(R) Internet Server (Product Addendum Required)
Premier SI ___ Topic(R) Agent Server (Product Addendum Required)
x___ Standard OEM ___ Topic(R) News Server (bundle) (Product Addendum Required)
___ Topic(R) CD Publisher (Product Addendum Required) (OEM Only)
Reproduction Method: ___ Topic(R) Client
____ Standard ___ Topic(R) Client for Lotus Notes (Coming Soon)
____ Disposable CD ___ Topic(R) Client for MS Exchange (Coming Soon)
(Reproduction Addendum ____ Spyglass (Third Party Addendum Required)
Required) ___ Adobe (Third Party Addendum Required)
___ Netscape (Third Party Addendum Required)
</TABLE>
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OEM GENERAL TERMS AND CONDITIONS
1. LlCENSE GRANT.
-------------
1.1 APPOINTMENT OF LICENSEE. Verity hereby appoints Licensee as an OEM and
grants Licensee certain rights to the software products identified on the cover
page of this Agreement ("Software"). The Software may consist of two (2)
separate types of components: (i) that So,are ("Development Software") which is
used to develop application programs ("Applications") and (ii) that Software
("Run-Time Softvare") which must be distributed with the Applications to enable
them to operate. All Software is object, code only. The parties acknowledge that
distribution of certain Software may require the execution of additional Product
Add. endum. In addition, the Software may have embedded within or bundled with
the Verity owned portions, software proprietary to and owned by third parties
(the "Verity Licensors"). All Software shall be subject to the terms and
conditions of this Agreement and to the additional terms and conditions included
in any Product Addendum and Third Party Licensor Addendum. 1.2 The Development
Software.
1.2.1 Licensee shall have a nonexclusive, nontransferable right to use the
number of copies of the Development Software on the platform ("Platform") at
Licensee's location ("Site") for use only by the authorized number of users as
specified in EXHIBIT A for internal development of Applications, to be used
internally by Licenscee pursuant to the terms and conditions of this Agreement,
and related internal demonstration and training purposes. In connection with
such use, Licensee shall have the right to make a reasonable number of copies of
the Development SotSware for normal backup and archival purposes. The
Applications developed shall conform to the Verity Data Access Standards set
forth in EXHIBIT D.
1.2.2 In addition, Licensee shall have a nonexclusive, nontransferable
right to market and distribute the Development Software to those parties who
acquire the Applications for their own business or personal use ("End Users") to
be used only in conjunction with and in support of Licensee's Applications on
the same Platform or CPU as the Application ("Application Specific Development
Software"). Licensee may further distribute the Application Specific Development
So,are to those parties ("Resellers") who acquire Applications for remarketing
to End Users directly or indirectly. Each copy of the Application Specific
Development Software shall be limited to a Platform and an authorized number of
users and shall be reported by Licensee in its quarterly sales report to Verity
along with the End User or Reseller zip code and date of shipment. Application
programs licensed, and maximum number of authorized users. In addition, if
Licensee actively solicits and recommends to its End Users to license
Development Software directly from Verity, Licensee shall be entitled to receive
a commission on sales by Verity to Licensee's End Users resulting fi'om such
referral provided Licensee follows the procedures set forth in EXHIBIT A.
1.3 The Run-Time Software.
---------------------
1.3.1 Licensee shall have a worldwide, nonexclusive, nontransferable right
to use, market, reproduce, and distribute the Run-Time Software bundled with the
Applications. Licensee's right to distribute Run-Time Software is restricted to
End Users and Resellers for use only on those Platforms for which Licensee has
obtained a Development Software license. Licensee agrees that the marketing and
distribution rights granted for the Run-Time Software are conditioned on the
obligation of Licensee to add value to the Run-Time So are in the form of
Applications developed by Licensee, as described in EXHIBIT C. The Application
shall not provide direct or exposed access to the development capabilities of
the Development Software, unless specifically provided for in EXHIBIT C. The
Application shall access, modify, and/or manipulate only those Collections which
it creates, unless specifically provided for in EXHIBIT C. "Collection" shall
mean the data structures created by the Development So are and required for the
Run Time Software to operate. Licensee agrees that Verity reserves the option to
develop and distribute applications that access and enhance Collections created
by the Application. In the event the Application requires a gateway, prior to
the first shipment of the first Application release which incorporates the
gateway, Licensee will provide to Verity and grant a perpetual license to use
the executable implementation of such gateway according to EXHIBIT D. SUBJIECT
TO LICENSEE'S LICENSE AGREEEEMENT.
1.3.2 Any distribution of the Application shall be accomplished under a
written license agreement ("Sublicense Agreement") between the Licensee and the
End User or Reseller to whom such distribution is made. Each Sublicense
Agreement shall contain terms and conditions which are substantially. equivalent
to, or more prohibitive than, the prohibitions contained in Licensee's license
agreement for its own software products." Licensee shall provide Verity a copy
of the standard Sublicense Agreement. Licensee shall use commercially reasonable
efforts to enforce each Sublicense Agreement with at least the same degree of
diligence used in enforcing similar agreements governing end users of Licensee's
own products. If Licensee does not take appropriate action then Licensee will
grant Verity the right to take action to the extent that its' software is
involved in any breach of this Agreement. Licensee shall promptly notify Verity
of any material breach under a Sublicense Agreement of it becomes aware, and
will reasonably cooperate with Verity and/or Verity Licensors in'any legal
action to prevent or stop unauthorized use, reproduction, or, distribution of
the Software. Licensee shall also require its Resellers to include terms and
conditions substantially similar to those in this Section in all similar
sublicense agreements throughout the distribution channel. Licensee acknowledges
that Licensee has no right to (i) use, or sublicense others to use, the Run-Time
Software for commercial time-sharing, rental, or service bureau use, unless
specifically authorized in a Product Addendum.
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<PAGE> 3
1.3.3 Licensee may sublicense its right to reproduce the Run-Time
Software only to those subcontractors who agree in writing to be bound by
the terms of this Agreement, including, but not limited to, Section 8.
Licensee and/or subcontractors will ensure that each copy of the media
containing the Software (i) is manufactured under a quality assurance
program to test for known viruses in the Software; (ii) will not contain
any embedded device or code (e.g. back door, time bomb, Trojan Horse or
worm) that is intended to obstruct or prevent use of the Software; and
(iii) contains all appropriate copyrights and proprietary notices contained
in the original Software.
1.4 DOCUMENTATION. Licensee shall have a nonexclusive and
nontransferable right and license to use, modify, and reproduce the
documentation provided by Verity for the Software ("Documentation") solely
for distribution with such Software and the ApplicatioNs to Resellers and
End Users.
1.5 SAMPLE APPLICATIONS. Licensee agrees to deliver to Verity ten (10)
copies of the Application upon the first commercial shipment of the
Application pursuant to the terms of Licensee's Limited Use License
Agreement. Verity shall have a non. exclusive, nontransferable,
royalty-free, fully-paid right and license to demonstrate and market such
copies. Verity shall have no right to use the Application for any other
purpose including for resale or internally as an end user.
1.6 The rights and obligations of Licensee under this Agreement shall apply
to a subsidiary of Licensee, provided that such subsidiary is bound by the
terms of this Agreement and Licensee remains directly responsible for its
obligations hereunder.
2. TERM. This Agreement shall remain in effect for an initial term of three
(3) years from the Effective Date unless otherwise terminated in accordance
with Section 13. The Agreement will renew automatically for successive one
(1) year terms unless written notice of termination is received by either
party at least thirty (30) days prior to the end of the then-current
initial term or renewal term.
3. LICENSE FEES. Fees (including sublicense fees) for the Software and
for all related support, training and other services offered by Verity are
set forth in EXHIBIT A. Licensee will pay all applicable shipping charges
and taxes (except for taxes based upon Verity's net income). The fee for
Licensee's initial order shall be invoiced upon shipment of initial order
by Verity. All additional amounts required to be paid to Verity hereunder
shall be paid within thirty (30) days from the date of Verity's applicable
invoice.
4. ORDERING AND DELIVERY OF SOFTWARE. All orders for Software or other
products or services issued by Licensee shall be deemed subject to this
Agreement and shall specify the quantity ordered, the discounted price,
Platform, and the location thereof. Licensee understands and agrees that
any additional terms and conditions of the Licensee's order shall be void
and of no effect. No orders shall be binding until the earlier of Verity's
written confirrmation or shipment. Upon receipt of Licensee's initial
purchase order, Verity shall deliver to Licensee (i) the initial order of
Development Software, (ii) one (1) golden master copy of the Run-Time
Software on magnetic media and (iii) one (1) copy of the Documentation.
Verity shall deliver to Licensee one (1) copy of any Error Corrections or
Software Updates to the Software on magnetic media and one (1) copy each of
the applicable Documentation, if any, promptly upon distribution by Verity
of such Error Corrections and Updates to other Verity OEMs. All shipments
shall be FOB shipping point, provided, however, in the event the Software
is damaged in transit, Licensee shall be entitled to replace the Software
for the cost of the media only. All orders delivered shall be deemed
accepted by Licensee upon delivery.
5. SOFTWARE SUPPORT AND TRAINING.
5.1 INTERNAL SOFTWARE SUPPORT. During the term of this Agreement,
Licensee may obtain Software support, as further described in EXHIBIT B
from Verity for each copy of Software used internally by Licensee. All
items delivered by Verity in providing such support, including Error
Corrections and Software Updates, shall be deemed to become a part of the
applicable Software and shall be subject to all terms and conditions of
this Agreement. Fees for internal Software support are described in EXHIBIT
A and are invoiced by Verity annually, at the beginning of the initial term
and upon each anniversary of the execution date.
5.2 SECOND-LINE SOFTWARE SUPPORT (optional). Licensee is responsible
for providing front-line support to its End Users and Resellers with
respect to Software installation, on-going technical support, training and
consultations. Any direct request to Verity for support services by the
Licensee's End Users or Resellers will,be referred to Licensee. In addition
to the fees for support services obtained in Section 5.1, Licensee shall
submit to Verity an annual second-line support fee as set forth in EXHIBIT
A.
5.3 TRAINIG. Licensee may send, at a minimum, one (1) technical
employee to Verity's technical training program within ninet3 (90) days of
the Effective Date of this Agreement, or if no training class is available
during such ninety (90) day period, as soon as such class becomes
available. At all times during the term of this Agreement, Licensee shall
maintain employment of at least one (1~ employee who has received such
training. Licensee shall sign up for initial training upon execution of
this Agreement. Training shal be charged to Licensee as specified in
EXHIBIT A. Licensee shall also be responsible for all travel related
expenses of its employees.
6. RECORDS AND REPORTS.
-------------------
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<PAGE> 4
6.1 RECORDS. Licensee shall keep accurate records and accounts in
accordance with standard business practices in the computer industry and
generally accepted accounting procedures. Verity may inspect Licensee's
records and system for accounting and tracking sublicense fees, on fifteen
(15) days notice to Licensee. Such inspections are solely for the purpose
of verifying Licensee's compliance with the provisions of this Agreement
and will be conducted by independent accountants or consultants, reasonably
acceptable to Licensee, who sign non-disclosure agreements with Licensee to
protect Licensee's confidential information. Verity's rights hereunder
shall remain in effect through the period ending six (6) months from the
termination or expiration of this Agreement. In the event any inspection of
Licensee's records indicate an underpayment of an amount equal to or
greater than five percent (5%) of any amounts due hereunder, Licensee shall
promptly reimburse Verity for all reasonable expenses associated with such
inspection along with the deficient amounts.
6.2 REPORTS. On a quarterly basis, Licensee shall provide Verity with
a written sales report. Such reports shall, at a minimum, contain
information detailing each item of Software distributed for the applicable
reporting quarter, including (i) the number of copies sold during the
reporting period and the location of distributions (county or state),
broken down by month and on a cumul.ative basis; (ii) an accounting of the
sublicense fees associated with such copies; and (iii) second-line support.
fees due to Verity associated with such copies. Such reports shall be
provided no later than sixty (60) days after the end of each calendar
quarter.
7. TITLE, USE OF TRADE NAMES AND TRADEMARKS.
-------------------------------------------
7.1 PROPRIETARY RIGHTS. Title and ownership of all proprietary rights
in the Software, including any copyright, patent, trade secret, trademark
or other intellectual property right, will at all times remain the property
of Verity and the Verity Licensors. Licensee agrees not to remove or
obliterate any copyright, trademark or proprietary rights notices of Verity
or the Verity Licensors from the Software or Documentation and shall
reproduce all such notices on all authorized copies of the Software or
Documentation made by Licensee. Licensee shall not modify, translate,
disassemble, decompile, reverse engineer or cause or allow discovery of the
source code of the Software in any way. In addition, Licensee shall include
a copyright notice in the start-up or "About" screen of the Application
indicating that portions of the Application include technology used under
license from Verity, Inc.
7.2 TRADEMARKS. Licensee will place the relevant Verity and Verity
Licensor logo or trademarks ("Trademarks") and short text provided
pursuant to Exhibit F JJP 2/2/96 by Verity in appropriate packaging,
marketing and/or distribution material, in conjunction with its own logo
and trademarks. Verity hereby grants to Licensee a non-exclusive, limited
license to use the applicable Trademarks solely in Licensee's
distribution, advertising and promotion of the Integrated System.
Licensee's use shall be in accordance with Verity's reasonable policies
regarding advertising and trademark usage as established from time to
time. Licensee agrees not to affix an5 Trademarks to products other than
the Software. Licensee agrees to cooperate with Verity in facilitating
Verity's monitoring ant control of the nature and quality of such products
and services, and to supply Verity with specimens of use of the Trademarks
upor request. Licensee understands and agrees that the use of any
Trademark in connection with this Agreement shall not create any right.
title or interest, in or to the use of the Trademark and that all such use
and good will associated with the Trademark will inure to benefit of
Verity and Verity Licensors. Licensee and its Resellers agree not to
register or attempt to register any Trademarks.
7.3 Nothing in this Agreement shall be construed as prohibiting or
restricting either party from independently developing acquiring and
marketing materials or programs that are competitive with the Software,
provided that such development or acquisitior is accomplished (I) without
the use or reference to the software or other technology or Confidential
Information of the other party ant (ii) without violating the
confidentiality and other provisions of this Agreement.
7.4 Licensee Title to Application Verity acknowledges that subject to
Verity's rights hereunder, that Licensee shall own al copyrights and other
proprietary fights in Applications developed pursuant to the terms and
conditions of this Agreement.
8. CONFIDENTIALITY. Each party shall hold in confidence all materials
or information disclosed to it in confidence hereuncle ("Confidential
Information") which are marked as confidential or proprietary, or if
disclosed verbally, reduced to writing and marke~ confidential within
thirty (30) days after the date of disclosure. Confidential Information
shall also include any new produc information or the results of any bench
mark or similar tests on the Software conducted by Licensee or divulged by
Licensee to Verir~ however Licensee may disclose the results of benchmark
tests it runs on its Application provided such results do not (1) identi~
performance of the Software or (ii) provide comparative information between
the Software and the products of Verity's competitor. Each party agrees to
take precautions to prevent any unauthbrized disclosure or use of
Confidential Information consistent wit precautions used to protect such
party's own confidential information, but in no event less than reasonable
care. The obligations ofth parties hereunder shall not apply to a) any
materials or information that is or becomes a part of the public domain
through no act c omission of the receiving party or b) which is
independently developed by the receiving party; c) Information rightfully
received b receiving party from a third party without confidential
limitations; d)information known to receiving party prior to first receipt
c same by disclosing party; e) information thereafter disclosed by the
disclosing party to a third party without restriction to in disclosure;.f)
information which is disclosed pursuant to court order or by operation of
law provided the party making the disclosure has given prior notice to the
other party so that the other party may attempt to obtain a protective
order limiting disclosure and use such information..
9. WARRANTY. Verity warrants to Licensee that for a period of ninety
(90) days from the date of delivery of the Software Licensee that the
Software used by Licensee shall substantially perform in accordance with
Verity's applicable Documentation.
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Licensee's sole and exclusive remedy shall be for Verity to modify or correct
the Software or, if Verity is unable to provide a reasonable work-around for the
error, Verity will accept the return of the defective Software in Licensee's
possession and Verity will refund the license fees paid by Licensee for such
Software. This warranty shall not apply to any Software which has been modified
by Licensee or by any party other than Verity, which has been improperly
installed or used, or which is used in any manner other than as authorized under
this Agreement. EXCEPT AS SET FORTH IN THIS SECTION, VERITY AND VERITY LICENSORS
MAKE NO OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES
OF THE MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. The Software is
warranted only to Licensee and Licensee shall not extend any warranties for or
on behalf of Verity or Verity Licensors to End Users, Resellers, or any other
third parties.
9.1 Verity represents and warrants that no claim of infringement of any patent,
copyright, trademark, trade secret or other proprietary right is pending against
Verity, where such claim would materially and adversely effect the rights of
the parties hereunder.
9.2 Verity represents and warrants that Verity has not in introduced into the
Software any routines or subroutines which could damage or destroy data or other
materials stored on Licensee's comlbuter system.
9.3 Verity represents and warrants that the services furnished by Verity under
this Agreement will be performed in a manner satisfactory to Licensee. Verity
shall re-perform deficient services and Licensee shall be entitled to recover
the fees paid for services that Verity fails to provide in a satisfactory
manner.
10. INFRINGEMENT INDEMNIFICATION. Verity agrees to indemnify, defend and hold
Licensee harmless from all settlements agreed to by Verity and all costs and
damages awarded to a third party arising out of any legal action based on a
claim that the Verity Software as delivered to Licensee infringes a U.S.
copyright, U.S. patent, U.S. registered trademark or Irade secret under U.S. law
of a third party. Such obligation is subject to the following conditions (i)
Licensee shall notify Verity in writing within thirty (30) days of the date
Licensee f'lrst becomes aware of a claim thereof; (ii) Verity has sole control
of the settlement, compromise, negotiation, and defense of any such action,
provided that Licensee may participate in such action at Licensee's own expense;
and (iii) Verity may, at its option, obtain the right to continue use of the
Software, substitute other equivalent software, or modify the Software so it is
no longer infringing, or if none of the foregoing remedies are available,
terminate Licensee's right to the allegedly infringing Software and refund to
Licensee the mount which Licensee has paid for such Software, depreciated on a
straight-line basis over a five-year period. The foregoing indemnity shall not
apply to any infi'ingement claim arising from Software which has been modified
by parties other than Verity or use of the Software in conjunction with other
software or hardware where use with such other software or hardware gives rise
to an infringement claim. The parties agree to cooperate in good faith in the
defense of any legal action or suit brought by a third party based on any claim
that the Software violates or infringes upon the existing rights of such third
party. THE FOREGOING STATES LICENSEE'S SOLE AND EXCLUSIVE REMEDY WITH RESPECT TO
CLAIMS OF INFRINGEMENT OF THIRD PARTY PROPRIETARY RIGHTS OF ANY KIND, AND VERITY
AND VERITY LICENSORS EXPRESSLY DISCLAIM ANY IMPLIED WARRANTY OF NONINFRINGEMENT.
Licensee shall similarly indemnify and hold Verity harmless from and against any
claim that an Application developed or distributed by Licensee infringes any
U.S. patent, U.S. copyright, U.S. registered wademark, wade secret under U.S.
law of a third party upon the same terms as set forth above.
11. LICENSEE INDEMNIFICATION.
Licensee agrees to indemnify and defend or settle, at Licensee's own expense,
any action or other proceeding brought against Verity by a third party to the
extent it is based upon any act or omission of Licensee in violation of the
terms of this Agreement. Licensee will pay any and all costs, damages, and
expenses (including but no limited to reasonable attorney's fees) awarded
against Verity in any such action or proceeding attributable to any such claim
provided (I) Licensee is notified of it promptly in writing; (ii) Licensee has
primary control of its defense or settlement; and (iii) Verity provides Licensee
with reasonable cooperation in its defense and settlement.
12. LIMITATION OF LIABILITY. VERITY'S AND VERITY LICENSORS' AGGREGATE LIABILITY
UNDER ANY CLAIMS ARISING OUT OF THIS AGREEMENT SHALL NOT EXCEED THE AGGREGATE
FEES PAID BY LICENSEE TO VERITY. VERITY AND VERITY LICENSORS WILL NOT BE LIABLE
FOR LOST PROFITS OR FOR SPECIAL, INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES,
REGARDLESS OF THE FORM OF ACTION, EVEN IF VERITY IS ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES.
LICENSEE WILL NOT BE LIABLE FOR LOST PROFITS OR FOR SPECIAL, INDIRECT,
INCIDENTAL, OR CONSEQUENTIAL DAMAGES, REGARDLESS OF THE FORM OF ACTION, EVEN IF
VERITY IS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, PROVIDED HOWEVER THAT NO
LIMITATION OF LIABILITY SHALL APPLY TO CLAIMS ARISING OUT OF ARTICLE 2.
13. TERMINATION. This Agreement may be terminated earlier by either party on
thirty (30) written days notice to the other party if the other party fails to
materially perform any obligation hereunder and such failure is not cured
within such thirty (30) day period. Upon termination or expiration, Licensee
shall no longer have the right to order or reproduce any Software, all open
orders shall automatically terminate, and Verity shall have no obligation to
fill such orders. In such event, Licensee shall immediately cease using,
marketing, reproducing and distributing the Software and shall return all
copies thereof to Verity along with a certification
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signed by an officer of Licensee that no copies have been retained by Licensee
for any purpose whatsoever. However, if the Agreement terminates or expires for
any reason other than Verity's termination of Licensee in accordance with this
Section, Licensee shall have the right to distribute all copies of the Software
paid for hereunder which is then in its inventory on the effective date of
termination; and Licensee shall have the right to continue to use the Software
internally at no additional charge upon execution of Verity's then-current
applicable end user agreement to support internally deployed Applications, and
End-User customers who have valid Sublicense Agreements in effect on the
effective date of termination. The obligations of each party under Sections 3,
6.1, 6.2, 7.1, 8, 9, 10, 11, 12, 13 and 14 shall survive termination or
expiration of this Agreement.
14. OTHER OBLIGATIONS.
14.1 MARKETING.
---------
Marketing treatment: Partner will use reasonable efforts to provide at least
equal marketing treatment and opportunities to Verity as it provides to other
vendors and product partners of Partner.
Home Page Search: Partner will, during the term of the Agreement, but no later
than one year from the date of execution of this Agreement, set up and use
Verity search technology as the default search used from Partner's web site.
Partner will also feature the Verity logo prominently in its incorporation of
the Verity search technology on its web site.
Link to Verity Home Page: Partner will provide a link on the Partner web site
page to the Verity home page, and similarly Verity will provide a link on its
Partner page to Partner's home page.
Announcement Cooperation: Partner and Verity agree to issue a joint and mutually
agreed upon press release announcing the project involving the Application
("Partnership") and Verity's participation and value not more than 60 days from
the executionof this Agreement. Partner will reasonable efforts to feature
Verity in all press announcements regarding the Project and have Verity's brand
identity included in announcement materials, promotional materials and programs
associated with the introduction of the Partnership to industry, press and
potential Subscribers.
Partner will cooperate with and support Verity in its press release materials,
and provide reasonable efforts in support of an event that Verity might execute
to highlight its inclusion as a key technology within the Project.
15. MISCELLANEOUS
-------------
15.1. NO ASSIGNMENT Neither party may transfer or assign this Agreement by
operation of law, change of control, or otherwise without the prior written
consent of the other party, provided however, either party may assign any of its
rights under this Agreement to any person and delegate any of its duties under
this Agreement to any person or entity which shall acquire or succeed to any
substantial part of its business provided such party is not a competitor ofthe
other party. Verity.
15.2 NOTICES. Any notice required under this Agreement shall be given in
writing and shall be deemed effective upon delivery to the party to whom
addressed by (i) express courier upon written verification of actual receipt or
(ii) facsimile upon conf'u'mation of receipt generated by a person. All notices
shall be sent to the applicable address on the cover page hereof or to such
other address as the parties may designate in writing.
15.3 GOVERNING LAW. This Agreement shall be governed and interpretedby the laws
of the State of California. The parties agree that the United Nations Convention
on Conuacts for the International Sales of Goods is specifically excluded from
application to this AgreemenL. In the event an action is brought to enforce any
provision or declare a breach of this Agreement, the prevailing party shall be
entitled to recover, in addition to any other amounts awarded, reasonable legal
and other related costs and expenses, including attorney's fees, incurred
thereby.
15.4 INJUNCTIVE RELIEF. It is expressly agreed that a material breach of Section
2,7 and 8 this Agreement may cause irreparable harm to Verity and that a remedy
at law would be inadequate. Therefore, in addition to any and all remedies
available at law, Verity and/or Verity Licensors may be entitled to injunctive
relief against Licensee in the event of any threatened or actual violation of
any or all provisions in this Agreement.
15.4.1 SOURCE CODE ESCROW Per Addendum F attached.
15.5 INDEPENDENT CONTRACTOR. Licensee is an independent contractor and nothing
in this Agreement shall be deemed to create a joint venture, partnership, or
agency relationship between the parties. Neither party has the right or
authority to assume or create any obligation or responsibility on behalf of the
other.
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15.2 NOTICES. Any notice required under this Agreement shall be given in writing
and shall be deemed effective upon delevery to the party to whom addressed by
(i) express courier upon written verificatioa of actual receipt or (ii) facimile
upon conffirmation receipt generated by a person. All notices shall be sent to
the applicable address on cover page hereof or to such other address as the
parties may designate in writing.
15.3 GOVERNIG LAW. This Agreement shall be governed and interpreted by the laws
of the State of California. The parties agree that the United Nations Convention
on Contracts for the Internafional Sales of Goods is specifically excluded from
application to this Agreement. In the event an action is brought to enfforce any
provision or declare a breach of this Agreement, the prevailing party shall be
entitled to recover, in addition to any other amount awarded, resonable legal
and other related cost and expenses including attorney's fees, incurred thereby.
15.4 INJUNCTIVE RELIEF. It is expressly that a material breach of Section 2, 7
and 8 this Agreement may cause irreparable harm to Verity and that a remedy at
law would be inadequate. Therefor, in addition to any all remedies available at
law, Verity and/or Verity Licensors may be entitled to injunctive relief agaist
Licensee in the event of any threatened or actual violation of any or all
provisions in this Agreement.
15.4.1 SOURCE CODE ESCROW Per Addendum F attached.
15.5 INDEPENDENT CONTRACTOR. Licensee is an independent contractor and nothing
in this Agreement shall be deemed t o created a joint venture, partnership, or
agency relationship between the parties. Neither party has the right or
authority to assume or create any obligation or responsibility on behalf of the
other.
15.6 EXPORT. Licensee agrees that it will not exprot or reexport the Software
or Applications without the appropriate United States Government or any other
government licenses.
15.7 GOVERNMENT END USERS. The Software: (a) was developed at private expense,
is existing computer software and no part of it was developed with government
funds, (b) is a trade secret of Verity for all purposes of the Freedom of
Information Act, (c) is commercial computer software submitted with only those
rights provided in Verity's then-current standard end-user license agreement,
(d) in all repects is proprietary data belonging solely ot Verity, (e) is
unpublished ad all rights are reserved under the copyright laws of the United
States. For units of the Department of Defense (DoD) this Software is licensed
only with those rights specified in Verity's then-current standard End User
license agreement, and use, duplication or disclosure of the Software is subject
tot the restrrictions set forth in such end-user agreement.
15.8 FORCE MAJEURE. Neither party shall be liable hereunder by reason of any
failure or delay in the performance of its obligations hereunder (except for the
payment of money) on account of strikes, shortages, failure of suppliers, irots,
insurrection, fires, floods, stroms, earthquakes, acts of God, war, governmental
action, labor conditions, or any othr cause which is beyond the reasonable
control of such party.
15.9 ENTIRE AGREEMENT. If any portion of this Agreement is determined to be or
cecomes unenforceable or illegal, such portion shall be deemed eliminated and
the remainder of this Agreement shall remain in effect in accordance with its
terms as modified by such deletion. No waiver of any breach of this Agreement
shall be effective unless in writing, nor shall any breach constitute a waiver
of any subsequent breach of any provision of this Agreement. This Agreement
contains the entire agreement and understanding between the parties with respect
to the subject matter hereof, and supersedes all prior agreements, negotiatons.
Moreover, this Agreement shall replace and supersede any Verity end user license
agreement included with the package of any Software used by Licensee.
The foregoing is agreed to by:
VERITY, INC. LICENSEE
By: By:
----------------------------------- ------------------------------
Name: Tim Moore Name: JUSTIN PERREAAUT
---------------------------------- --------------------------
Title: General Counsel & Vice President Title: Chief Operating Office
-------------------------------- -------------------------
Date: 3-20-96 Date: 2/29/96
----------------------------------- --------------------------
Page 7
<PAGE> 8
VERITY CORPORATION
OEM AGREEMENT (STANDARD OEM)
- -------------------------------------------------------------------------------
EXHIBIT A
FEES FOR STANDARD OEM
I. LICENSED SOFTWARE: as specified on the cover page of this Agreement
-----------------
<TABLE>
2. LIMITED INTERNAL USE LICENSES. The following are licensed hereunder:
-----------------------------
<CAPTION>
INITIAL DEVELOPMENT Additional Development Systems
SYSTEM (including any third-party products)
License License License
------- ------- -------
<S> <C> <C> <C>
Platform:
Make/Model Windows NT;3.5.1 & Solaris 2.4 and above;HP-UX9.x and 10.x; SGI Irix version 5.3,
versions 6._______________ and if currently supported
Operating system/version ------------------------ ------------------------ ------------------------
Serial #
------------------------ ------------------------ ------------------------
Media Type: CD ROM
------------------------ ------------------------ ------------------------
Number of Users:
------------------------ ------------------------ ------------------------
SOFTWARE PRODUCT: TDK
------------------------ ------------------------ ------------------------
Software, at list price: $ 4950.00 $ $
------------------------ ------------------------ ------------------------
Less discount: $ 90% $ $
------------------------ ------------------------ ------------------------
NET LICENSE FEE $ 495.00 per plafform $ $ $
------------------------ ------------------------ ------------------------
Quantity: one of each per nlafform
------------------------ ------------------------ ------------------------
TOTAL LICENSE FEE: $ 495.00 $ $.
------------------------ ------------------------ ------------------------
</TABLE>
Additional Development System licenses may be acquired by Licensee for internal
use solely for development, demonstration and training purposes at Verity's
then-current list price for the Software less the following discount:
LIMITED INTERNAL USE DISCOUNT RATE: 90%
4. SUBLICENSE FEE: The sublicense fee will be calculated by discounting the
current Verity list price ('Sublicense Fee") for each copy of the Software used
for internal business or other productive purposes or distributed by Licensee.
Upon execution of this Agreement, Licensee shall pay to Verity a non-refundable
Sublicensee Fee prepayment ('Prepaid Sublicense Fees') as follows:
Prepaid Sublicense Fees: $25,000.00
The amount of such Prepaid Sublicense Fees shall determine the Sublicense Fee
discount applicable to Licensee which shall be applied to Verity's then-current
price for the Software as follows:
Prepaid Sublicense Fees Sublicense Fee Discount Rates
----------------------- -----------------------------
$ 25,000 50%
$ 50,000 60%
$100,000 70%
Royalty fee of 5% of Net Sales of Object Text Manager. For royalties based on a
percentage of net Sales, net Sales is def~ned as thc Liccnsee's gross sales for
the Application less shipping and handling fees, and any applicable taxes.
The Prepaid Sublicense Fees shall be credited against copies of the Run-Time
Software distributed by Licensee. Upon exhaustion of the Prepaid Sublicense
Fees, Licensee shall pay all Sublicense Fees or other sublicense related fees
within sixty (60) days of the last day of each calendar quarter during which
Licensee distributed the Run-Time Safiware, accompanied by the sales report
described in Section 6.2 of the AGREEMENT.
5. EVALUATION COPIES: Notwithstanding Paragraph 4 above, Verity grants Licensee
and its subsidiaries the right to provide Evaluation copies of the Software to
its distributors, VARs and End Users as follows:
1. TDK Evaluation Software:
- Limited to maximum 25 copies at any given time
- Evaluation period of 60 days from receipt by distributors, VARs or End Users
unless otherwise authorized in writing by Verity - The end user shall be
authorized to use the Software solely for evaluating its applicability to its
requirements and not for any commercial or private benefit use.
- Licensee shall provide Evaluation Copies only to Licensee' s and its
subsidiaries' VAILs or End Users who have executed Liccnsee's written
evaluation agreement. (ODI will provide Verity with a copy of its standard
agreement)
<PAGE> 9
- - Licensee will receive 25 free copies of the Evaluation Software upon the
execution of this agrcemcnL
- -Verity will provide all support directly to the End User or VAR for TDK
Evaluation Software during the Evaluation period.
- -Licensee will provide Verity with customer information contained in its
evaluation agreement in order for Verity to provide support.
2. Run-Time Evaluation Sof~vare:
- - Limited to maximum 100 copies at any given time
- - Evaluation period of 60 days from receipt by distributors, VARs or End Users
unless otherwise authorized in writing by Verity
- - The end user shall be authorized to use the Software solely for evaluating its
applicability to its requirements and not for any commercial or private benefit
use.
- - Licensee shall provide Evaluation Copies only to Licensee* s and
its-subsidiaries* distributors, VAILs or End Users who have executed Licensee's
written evaluation agreement. (ODI will provide Verity with a copy of its
standard agreement)
- - Licensee will receive 100 free copies of the Evaluation Software upon the
execution of this agreement.
- - Verity to provide an additional 50 copies of Run-Time Evaluation Software to
Licensee for use only by Licensee*s sales personnel in demonstrating Verity
software capability. These copies will not be included in 100 maximum total.
7. INTERNAL SUPPORT: The annual fee for internal support for each platform
used by Licensee shall be based on Verity's then-current list price for the
Software used internally multiplied by the following rate:
INTERNAL SUPPORT FEE RATE: 18%
Except that the rate for the Topic Tool Developer Kit shall be
$1,495.00 per annum.
Such fee shall be invoiced by Verity annually, at the beginning of the initial
term and each renewal term of the Agreement.
8. SECOND-LINE SUPPORT: The annual fee for second-line support for all of
Licensee's customers that obtain support services for the Application from
Licensee shall be based on the discounted then-current Verity list price of the
Software multiplied by the following rate:
SECOND-LINE SUPPORT FEE RATE: 7.5%
Such fee to be submitted with the quarterly sales report as described in Section
6.2 of the Agreement for all new customers and all customers renewing annual
maintenance during the applicable quarter.
9. TRAINING. All TDK training for Licensee's employees delivered on site at
Verity, shall be made available at Verity's then-current training rates less the
following discount:
TRAINING DISCOUNT: 20%
10. DOCUMENTATION. Verity shall provide one (1) copy of the applicable user
documentation with each copy of Development Software. Additional copies are
available to Licensee at $65.00.
11. PRICE LIST. Verity reserves the right to withdraw or change the availability
of the Software from its then-current product availability and price list at any
time
<PAGE> 10
VERITY CORPORATION
OEM AGREEMENT
- -------------------------------------------------------------------------------
EXHIBIT B
SOFTWARE SUPPORT TERMS AND CONDITIONS
For all Licensees who purchase Maintenance Services, Verity provides support in
the form of Error Corrections, Software Updates, and Hotlinc Telephone Support.
For Software which is supported, Maintenance Services arc provided only for the
current release and the most. recent previous release of the Software.
The initial effective date of Maintenance Services is the date Software is
shipped from Vefity's facility.
DESCRIPTION OF SERVICES PROVIDED DURING A MAINTENANCE PERIOD
A) ERROR CORECTION. Verity shall exercise commercially reasonable efforts
to correct any error reported by the Licensee in the current unmodified release
of the Software in accordance with the priority level reasonably assigned to
such error by Verity. If a reported error has caused the Software to be
inoperable, or the Licensee's notice to Verity states that the reported error is
substantial and material with respect to the Licensee's use of the product,
Verity shall, as expeditiously as pos.sible; use its best efforts to correct
such error or to provide a software patch or bypass around such error. The
Lieensee acknowledges that all reported errors may not be corrected.
B) SOFTWARE UPDATES. Verity provides, at no additional cost, one (1) copy
of all published revisions to the printed documentation and one (1) copy of, or
authorization to copy, new releases of the products, which are not designated by
Verity as new products for which it charges a separate fee.
c) TELEPHONE HOTLINE SUPPORT. Verity provides telephone assistance to all
Licensees who have purchased Maintenance Services. Verity Support personnel are
available to answer questions related to Verity's supported products and how
they perform with compatible hardware systems. Assistance in the development of
custom applications for Verity's products is not included in standard hotline
support. If Licensees wish to acquire such support, it is available through
Verity's Consulting group at the then-current consulting rates.
PRIORITY LEVELS OF ERRORS
In the performance of Maintenance Services, Verity applies priority ratings to
problems reported by Licensees.
A) Priority I Errors.
-----------------
DESCRIPTION: Program errors that prevent some function or process from
substantially meeting the functional specification and which seriously
affect the overall performance of the function or process and no
work-around is known.
VERITY RESPONSE: Verity shall promptly initiate the following
procedures: (1) assign senior Verity engineers to correct the error;
(2) notify senior Verity Management that such errors have been reported
and that steps are being taken to correct the error; (3) provide
Licensee with periodic reports on the status of corrections; (4)
commence work to provide Licensee with a work-around until final
solution is available; (5) provide final solution to Licensee as soon
as it is available.
B) Priority II Errors.
------------------
DESCRIPTION: Program errors that prevent some function or process from
meeting functional specification, but has a reasonable work-around.
VERITY RESPONSE: Verity shall provide a work-around to the Licensee
and shall exercise commercially reasonable efforts to include the fix
for the error in the next software maintenance release.
C) Priority III Errors.
-------------------
DESCRIPTION: Program errors that prevent some portion of a function
from meeting functional specification but do not seriously affect the
overall performance ofthe function.
VERITY RESPONSE: Verity may include the fix for the error in the next
major release of the Software.
<PAGE> 11
VERITY CORPORATION
OEM AGREEMENT
EXHIBIT C
VAR APPLICATION PACKAGE DESCRIPTION
Name of Application program which Licensee will be sublicensing under the
Agreement: Description of Application Package: Text Object Manager is an
Application that will store and retrieve text data as well as provide full text
retrieval to augment the core ObjectStore.
Modules:
Functions and objectives:
NOTE: Use additional Exhibit(s) if additional Application programs are to be
added to this Agreement.
<PAGE> 12
TOPIC/E INTERNET SERVER PRODUCT ADDENDUM
This Topic Intemet Server Product Addendum sets forth additional and
different terms and conditions applicable to the Topic Internet Server Software
and accessible through an On-Line Service and shall be incorporated by reference
in the OEM Agreement (check off appropriate box) executed by Verity, Inc. and
Licensee ("Partner Agreement"). Such different or additional terms are
applicable only to the distribution of the Topic Internet Server Software and in
no way alter the terms and conditions applicable to other Software incorporated
into the Partner Agreement, other Product Addendum or Third Party Addendum.
1. DEFINITIONS. Except as provided below, all terms used in this Product
Addendum shall retain the same meaning as defined in the Partner Agreement.
1.1 "On-Line Service" shall mean a dial-up, remote access or interactive
service as further described in Attachment 1.
1.2 "Subscribers" shall mean individuals, including End Users, who access
the Application described in Attachment[Dagger] 1 via an On-Line Service.
2. LICENSE GRANT. In addition to the distribution rights granted under
Section 1 of the Partner Agreement, Verity also grants Licensee a non-exclusive
and nontransferable right to create an On-Line Service utilizing the Topic
Internet Server Software which is accessible to Subscribers or to Subscribers of
End User Customers of Licensee (Customer), solely for the purpose of using the
Applications; provided, however, Licensee acknowledges Licensee, nor Customer
has no right to distribute any Software via the On-Line Service.
3. PROPRIETARY RIGHTS NOTICE. In addition to Licensee's obligations, if
any, relating to copyright notices set forth in Section 7.1 of the Partner
Agreement, Licensee shall include, and shall require Customer to include a
copyright notice on the web page of the On-Line Service indicating that portions
of the Application include technology used under license from Verity, Inc. In
addition, Licensee shall include and shall require Customer to include the
Verity logo on any search button in the Application or the web page of the
On-Line Service.
4. OTHER FEES. If Licensee or Customer have any gross revenue (as further
defined in Section 4.1 below) resulting from subscriptions for the On-Line
Service, then in addition to the fees set forth in Exhibit[Dagger] A of the
Partner Agreement Licensee or Customer shall pay to Verity the following fees:
4.1 annually a total Subscription Fee in the amount of the greater of (i)
the percentage set forth in Attachment'{' 1 of aggregate gross revenue arising
from or associated with subscriptions for the On-Line Service, or (ii) the
non-refundable Minimum Annual Subscription Commitment Fee, if any, set forth in
Attachment? 1. For purposes of this Section 4.1, gross revenues in (i) above
would include any revenue resulting directly from Subscribers' use of the
On-Line Service, such as the sale of information or products on-line, on-line
access charges or access fees, but exclude any revenue derived indirectly from
the On-Line Service, such as sales resulting from telephone orders or other
sales channels advertised on the On-Line Service., or sales derived from data
feeds provided to Customer by Licensee. The Minimum Annual Subscription
Commitment Fee shall be paid upon execution of this Product Addendum and upon
each anniversary date thereafter. Any Minimum Annual Subscription Commitment Fee
shall be due and payable whether or not any Subscription Fees are ever received
by Licensee or Customer. All Subscription Fees
<PAGE> 13
owed in excess of the Minimum Annual Subscription Commitment Fee shall be paid
within thirty (30) days after the end of the calendar quarter in which they were
received by Licensee or Customer and shall be accompanied by a report describing
the basis for calculation of such Subscription Fees.
4.2 In addition to the support fees described in Section 5 of the Partner
Agreement, Licensee shall purchase second-line support for the On-Line Service
from Verity for the term of this Product Addendum as set forth in
Attachment[Dagger]1.
5. LICENSEE INDEMNIFICATION. In addition to the indemnification provided by
Licensee to Verity in Section[Dagger]11 of the Partner Agreement, Licensee
agrees to defend, indemnify and hold Verity and Verity Licensors from and
against any claims by a Reseller, End User, Subscriber, or other party arising
out of (i)[Dagger]operation or use of the OnLine Service and (ii)[Dagger]any
claims of infringement arising from or in connection with End Users, Resellers,
Subscribers, or any other party's use of third party content accessed using the
Software or the On-Line Service.
6. RECORDS AND REPORTS. In addition to the parties' rights and obligations
under Section 6 of the Partner Agreement, Licensee and Licensees Customer shall
maintain complete and accurate records relating to any and all information
relevant to or associated with Licenseels determination and calculation of gross
revenues from subscriptions from the On-Line Service (Subscription
Informationi), for purposes of determining Subscription Fees owed to Verity.
Verity shall also have the right to audit Subscription Information records, and
transaction tracking records in accordance with the procedure described in
Section 6 of the Partner Agreement. On a monthly basis (or quarterly basis, if
Licensee is an OEM), Licensee shall provide Verity with a written sales report
in the form to be supplied by Verity. Such reports shall, at a minimum, contain
the following information: (i) an accounting of the Subscription Fees; and
(ii)[Dagger]second-line support fees due to Verity associated with the On-Line
Service. Such reports shall be provided no later than fifteen (15) days after
the end of each month or quarter, as applicable.
7. OTHER TERMS AND CONDITIONS. All other terms and conditions in the
Partner Agreement shall remain in full force and effect with respect to the
Topic Internet Server Software. In the event of a conflict between the term of
this Product Addendum and the Partner Agreement, the terms of this Product
Addendum shall govern.
The foregoing is agreed to by:
Verity, Inc.
Licensee
By: By:
Name: Name:
Title: Title:
Dale: Date:
VERITY CORPORATION
<PAGE> 14
OEM AGREEMENT
EXHIBIT D
VERITY DATA ACCESS STANDARDS
1. QUERY LANGUAGE OPERATORS AND SYNTAX
Query capability enhancements may be created by Verity which rely upon queries
containing Verity Query Language operators and syntax not normally used by the
Application or for functionality not licensed by Licensee.
The Application will not trap, require modification, or otherwise restrict
access to the full Verity Query Language, including all operators and syntax
formats. The Verity Query Language is described in the Verity Developer Kit API
Reference Guide, Appendix A: Verity Query Language.
2. TDK GATEWAYS
If Licensee implements a TDK Gateway for use in the Application, Licensee will
provide Verity with an executable form of the TDK Gateway prior to the first
Application release which uses the TDK Gateway and updates thereto for prior to
each subsequent commercial release of the TDK Gateway. Licensee grants Verity,
at no fee and free of royalties, the unrestricted, perpetual right to modify,
incorporate, reproduce and redistribute the TDK Gateway within Verity software.
TDK Gateway usage is described in the Verity Developer Kit Configuration Options
Guide, Chapters 5-8.
As used in this Agreement, TDK Gateway means code generated by the Licensee
which is used to read in documents or data which is received from sources in a
format not supported natively by the Verity engine. If such documents or data is
delivered from a DBMS, a feed, or other source that is not natively understood
by the Verity engine, a gateway must be written to index that data. In some
cases, the gateway is also required to retrieve the document for viewing.
3. CALLBACKS
A TDK Gateway includes functions which meet the specification for VGW Callbacks
required by a Table of Stream Gateway, as well as any Application functions
invoked by the VGW Callback functions.
The VGW Callbacks for a Table Gateway are:
VgwSessionNewCBFnc
VgwSessionFreeCBFnc
VgwTableNewCBFnc
VgwTableFreeCBFnc
VgwTableGetlnfoCBFnc
VgwTableGetlnfoFreeCBFnc
VgwTableReadCBFnc
VgwTableReadFreeCB Fnc
VgwTableExistCBFnc
VgwTableUpdateCBFnc
VgwTableDeleteCBFnc
The VGW Callbacks for a Stream Gateway are:
<PAGE> 15
VgwSessionNewCBFnc
VgwSessionFreeCBFnc
VgwStreamNewCBFnc
VgwStreamFreeCBFnc
VgwStreamReadCBFnc
<PAGE> 16
VER1TY CORPORATION
OEIH AGREEMENT
- -------------------------------------------------------------------------------
EXHIBIT D
VERITY DATA ACCESS STANDARDS
1. QUERY LANGUAGE OPERATORS AND SYNTAX
Query capability enhacements may be created by Verity which rely upon queries
containing Verity Query Language operators and syntax not normally used by the
Application or for functionally not licensed by License.
The Application will not trap, require modification, or otherwise restrict
access to the full Verity Query Language, including all operators and syntax
formats. The Verity Query Language is described in the Verity Developer Kit API
Reference Guide, Appendix A: Verity Query Language.
2. TDK GATEWAYS
If Licensee implements s TDK Gateway for use in the Application, Licensee will
provide Verity with an excutable form of the TDK Gateway prior to the first
applicaton release which usses the TDK Gateway and updates thereto for prior to
each subsequent commercial release of the TDK Gateway. Licensee grants Verity at
no fee and free or royalties, the unrestricted, perpetual right to modify,
incorporate, reproduce and redistribute the TDK Gateway within Verity software.
TDK Gateway usage is described in the Verity Developer Kit Configuration Options
Guide, Chapters 5-8.
As used in this Agreement, TDK Gateway means code generatd by the License which
is used to read in documents or data which is received from sources in a format
not supported natively by the Verity engine. If such documents or data is
delivered from a DBMS, a feed, or other source that is not matively understood
by the Verity engine, a gateway msut be written to index that data. In some
cases, the gateway is also required to retrieve the document for viewing.
3. CALLBACKS
A TDK Gateway inclucdes functions which meet the specification for VGW Callbacks
required by a Table of Stream Gateway, as well as any Application functions
invoked by the VGW Callbacks functions.
The VGW Callbacks for a Table Gateway are:
VgwSessionNewCBFnc
VgwSessionFreeCBFnc
VgwTableNewCBFnc
VgwTableFreeCBFnc
VgwTableGetlnfoCBFnc
VgwTableGetlnfoFreeCBFnc
VgwTableReadCBFnc
VgwTableReadFreeCB Fnc
VgwTableExistCBFnc
VgwTableUpdateCBFnc
VgwTableDeleteCBFnc
The VGW Callbacks for a Stream Gateway are:
VgwSessionNewCBFnc
VgwSessionFreeCBFnc
VgwStreamNewCBFnc
VgwStreamFreeCBFnc
VgwStreamReadCBFnc
<PAGE> 17
PRODUCT SOURCE CODE ESCROW ADDENDUM - Subscribed License
Verity maintains a Source Code Escrow account with Data Securities
International, Inc. (DSI), 9555 Chesapeake Drive, Suite 200, San Diego, CA
92123. In connection with the OEM Agreement between Verity and Licensee dated
February 29, 1996, Verity agrees to enroll Licensee as a Subscribed Licensee to
its Source Code Escrow Account, under the following terms and conditions:
Product Source Code Escrow Service is available only to Licensees who have
purchased Product Maintenance Service and is provided at no additional charge to
the Lieensee.
Upon receipt of initial Maintenance fees by verity, Verity will register
Licensee with DSI. Licensee's enrollment with DSI shall be renewed annually,
concurrent with the renewal of Maintenance Service by the Licensee.
Verity certifies that a copy of the Product Source Code, defined as the human
readable embodiment of the computer code associated with the Products licensed
pursuant to the Agreement and implementing specif'~e algorithms from which the
Products will be derived, has been deposited with DSI.
Verity shall direct DSI to release a copy of the Product Source Code to Licensee
in the event that:
a) Verity ceases to make Maintenance Service available to its customers
generally for the then current release of the Products(s) licensed by
Licensee; or
b) Verity
(i) files for bankruptcy,
(ii)becomes the subject of any proceedings seeking relief or
reorganization, or rearrangement under any laws relating to
bankruptcy,
(iii) makes an assignment for the benefit of creditors or
(iv) commences the liquidation, dissolution, or winding up of its
business.
In the event Licensee obtains Product Source Code pursuant to this Addendum,
'Licensee will be entitled to use such Product Source Code for the sole purpose
of internal maintenance of the Produets(s) (i.e. error correction), and subject
to Licensee's continued performance and all other terms and conditions under the
Agreement. Licensee is expressly prohibited from the distribution licensing,
sale, modification for distribution or licensing and/or any other disposition,
disclosure or release to third parties of the Product Source Code by any persons
or entities, including but not limited to, Licensee and/or its agents and
employees.
VERITY, INC. LICENSEE: Object Design Inc.
---------------------
/S/ JUSTIN PERREAULT
- ------------------------------- ----------------------------------
Signature Signature
JUSTIN PERREAULT
- ------------------------------- ----------------------------------
Typed or Printed Name Typed or Printed Name
Chief Operating Officer
- ------------------------------- ----------------------------------
Title Title
2/29/96
- ------------------------------- ----------------------------------
Date Date
<PAGE> 18
EXHIBIT F
ATTACHMENT FOR REQUIRED PROPRIETARY NOTICES
FOR PUBLICATIONS AND DOCUMENTATION
Copyright 1994 Verity, Inc. All rights reserved. No part of this publication may
be reproduced, transmitted, stored in a retrieval system, nor translated into
any human or computer language, in any form or by any means, electronic,
mechanical, magnetic, optical, chemical, manual or otherwise, without the prior
written permission of the copyright owner, Verity, Inc., 1550 Plymouth Street,
Mountain View, California 94043-1230. The copyrighted software that accompanies
this manual is licensed to the End User for use only in strict accordance with
the End User License Agreement, which the License should read carefully before
commencing use of the software. English Electronic Thesaurus 1993 by
InfoSoft[Registered Trademark] International, Inc. Adapted from the Oxford
Thesaurus[Copyright] 1991 by Oxford University Press and from Roget's II: The
New World Thesaurus[Copyright] 1980 by InfoSoft International, Inc. All rights
reserved. Reproduction or disassembly of embodied programs and dathbases
prohibited.
Document format filters include software from WORD FOR WORD copyright by
Mastersoft Inc., 1986 through 1994.
Verity[Registered Trademark] and TOPIC[Registered Trademark] are registend
trademarks of Verity, Inc.
Workstation, NFS, and Sun Operating System {SunOS) are trademarks of Sun
Microsystems, Inc.
UNIX is a trademark of UNIX System is a trademark of the Massachusetts Institute
of Technology.
OSF and Motif are trademark of the Open Software Foundation Inc.
VMS is a trademark of Digit Equipment Corporation.
Macintosh is a registend trademark of Apple Computer, Inc.
Microsoft and MS-DOS a registered trademarks, and Windows is a tradehark of
Microsoft Corporation.
IBM and Presentation Manager are registration trademarks, and OS/2 is a
trademark of International Business Machines Corporation.
InfoSoft is a registered trademark of InfoSoft International, Inc.
All other trademarks are owned by their respective claimants.
NOTICE TO GOVERNMENT END USERS
If this product is enquired under the terms era DOD CONTRACT: Use, duplication,
or disclosure by the Government is subject to restrictions as set forth in
subparagraph (c)(1)(ii) of 252.227-7013. Civilian agency contract: Use,
reproduction or disclosure is subject to 52.227-19 (a) through (d) and
restri~ons set forth in the accompanying end user agreement. Unpublished-rights
reserved under the copyright laws of the United States. Verity, Inc., 1550
Plymouth Street, Mountain View, California 94043-1230.
FOR "ABOUT SCREENS" AND PACKAGING
Copyright[Copyright] 1989 - 1994 Verity, Inc. All rights reserved. Reproduction
or disassembly of embodied programs and databases prohibited.
English Electronic Thesaurus[Copyright] 1993 by InfoSoft[Registered Trademark]
International, Inc. Adapted from the Oxford Thesaurus[Copyright] 1991 by Oxford
University Press and from Roget's II: The N~v World Thesaurus[Copyright] 1980 by
InfoSoft International, Inc. All rights reserved. Reproduction or diassembly of
embodied programs and databases prohibited. Document format filter include
software from WORD FOR WORD copyright by Mastersoft Inc., 1986 through 1994.
Verity[Registered Trademark] and TOPIC[Registered Trademark] are registered
trademarks of Verity, Inc.
[LOGO information to be added.l
<PAGE> 1
EXHIBIT 10.32
Software License and Distribution Agreement
THIS AGREEMENT, made and entered into as of the 1st day of December
1995 by and between Object Design, Inc. ("ODI") a Delaware corporation with its
principal offices at 25 Mall Road, Burlington, MA 01803 and ViVi Software,
S.r.l., an Italian limited liability company ("Licensor"), with its principal
offices at Corso Dogali 10-15, 16136 Genoa, Italy:
WITNESSETH:
WHEREAS, Licensor is the author of, or has acquired the rights to,
certain computer programs, documentation, and other related written materials,
and ODI desires to acquire a right and license to use and market such programs
and materials under the terms and conditions set forth herein; and
WHEREAS, Licensor is willing to grant such rights and
licenses on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and intending to be legally bound, the parties hereby agree as
follows:
1. DEFINITIONS
1.1 "ACTIVELY OFFERING THE LICENSED WORK" shall mean including the
Licensed Work as a separate item on ODI's published price or product list,
unless ODI notifies Licensor or ODI's customers that ODI is ceasing to offer the
Licensed Work.
1.2 "CODE" shall mean the Visual Object Manager (VOM) browser product
computer programming code identified in Appendix A attached hereto and all
Releases thereof and all other Derivative Works of Licensed Works created or
acquired by Licensor and any Enhancements agreed to by the parties pursuant to
Appendix D, including object code and source code as well as associated
procedural code. The term "source code" shall mean the source code version of
the Code, including without limitation all information needed to maintain,
support, create Derivative Works from and otherwise fully utilize the source
code.
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1.3 "DERIVATIVE WORK" shall have the meaning given in the Copyright
Act, namely, a work that is based upon one or more preexisting works, such as a
revision, modification, translation, abridgement, condensation, expansion, or
any other form in which such preexisting works may be recast, transformed or
adapted and that if prepared without the authorization of the owner of the
preexisting work would constitute copyright infringement or other infringement
of the proprietary rights of the owner therein.
1.4 "DOCUMENTATION" shall mean all textual material created or acquired
by Licensor that relates to Code, including flow charts, operating instructions,
and related technical information, plus all Releases thereto that generally
relate to the Code. Documentation shall also include customary Code end-user
materials, such as user manuals and related materials.
1.5 "ENHANCEMENTS" shall mean the Code and Documentation for the
Licensed Work enhancements or improvements, if any, that the Licensor undertakes
to deliver to ODI pursuant to this Agreement as described in Appendix D attached
hereto. Enhancements do not include the enhancements and improvements identified
in Appendix A.
1.6 "ERROR" shall mean any error, problem, or defect caused by or
resulting from (a) an incorrect functioning of Code or (b) an incorrect or
incomplete statement or diagram in Documentation, if such error, problem, or
defect renders the Code inoperable, causes the Code to fail to meet the
specifications thereof, causes Documentation to be inaccurate or incomplete in
any material respect, causes incorrect results, or causes incorrect functions to
occur when any such materials are used for their intended purposes.
1.7 "LICENSES" shall mean the licenses described in Section 2.1 (a) and
(b) and Section 2.2(d).
1.8 "LICENSED WORK" shall mean Code and Documentation.
1.9 "LICENSE REVENUE" shall mean all license fees received by ODI with
respect to sublicensing of Licensed Works, net of all refunds, adjustments,
discounts and applicable taxes and net of 50% of any premiums over U.S. list
price imposed in connection with licensing of Products outside the United
States.
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1.10 "MARKETING TRANSFEREE" shall mean any commercial entity, including
a dealer or distributor, to which ODI may transfer, license or otherwise
distribute Product units in connection with the marketing and distribution
thereof.
1.11 "PRODUCT" shall mean a product comprised of (a) Licensed Work, (b)
an ODI prepared Derivative Work of Licensed Work, (c) Licensed Work in
combination with an ODI prepared Derivative Work of the Licensed Work or any
other ODI product or (d) a combination of any or all of the foregoing.
1.12 "RELEASES" shall mean Release 1.5 described in Appendix A and all
other new releases and other additions, modifications or revisions to Code or
Documentation, including both the source code and object code thereto, that
correct Errors, support new releases of the operating systems with which the
Code is designed to operate, provide other updates and corrections, add
significant new functions or substantially improve the performance of Code, and
related Documentation.
1.13 "SUPPORT SERVICES" shall mean the furnishing by Licensor of new
Releases for Licensed Work, as well as all other forms of support specified in
Appendix C attached hereto.
1.14 "TERM" shall mean the Initial Term and, if ODI exercises its
option under Section 9.3, shall also include the Optional Term.
(a) "INITIAL TERM" shall mean the term described in Section 9.1.
(b) "OPTIONAL TERM" shall mean the perpetual term commencing on
the exercise by ODI of its option to acquire the Licensed Work pursuant to
Section 9.3.
2. LICENSE AND RIGHTS TO LICENSED WORK
2.1 INITIAL TERM LICENSE. Licensor hereby grants to ODI for the
Initial Term
(a) the exclusive, irrevocable, worldwide rights and license to
use, reproduce, demonstrate, display, distribute, and sublicense Licensed Works;
and
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(b) the sole license and irrevocable, worldwide rights to provide
Releases and front-line support of Licensed Works to end-user customers,
including the rights to prepare, use, reproduce, demonstrate, display,
distribute and sublicense Derivative Works of License Work.
2.2 OPTION TO ACQUIRE LICENSED WORK. Licensor hereby grants to ODI an
option to acquire Licensed Work following the Initial Term on the following
terms:
(a) ODI shall pay to Licensee the amounts described in Section
4.1 (b);
(b) Licensor shall deliver to ODI the then-current version of the
Licensed Work, including without limitation a full and complete copy of the
then-current source code;
(c) Licensor shall provide to ODI's engineering staff such
training with respect to the design, structure, functionality and techniques
used in the development of such source code and the operation of the Licensed
Work as may be necessary for such staff to perform the support services
previously provided by Licensor;
(d) The License granted to ODI pursuant to Section 2.1 (a) and
(b) shall be converted from exclusive to non-exclusive and from a duration of
the Initial Term to a perpetual duration, and shall thereafter remain in full
force and effect;
(e) Licensor agrees to grant, transfer and convey, and hereby
irrevocably grants, transfers and conveys to ODI worldwide rights, title and
interests, including all copyrights, patents, trade secrets and other
proprietary rights (excluding trademarks) in and to the then-current version of
the Licensed Work, subject to the rights retained by Licensor under the
following clause (f), and ODI shall thereafter have the perpetual, unrestricted
right, title and interest to use, reproduce, demonstrate, display, distribute,
sublicense and sell the then-current version of the Licensed Work and all
Derivative Works thereof created or acquired by ODI; and
(f) Licensor shall retain all rights in its own trademarks and
shall retain nonexclusive perpetual, irrevocable, worldwide rights, title and
interests in and to the then-current
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version of the Licensed Work, including all copyrights, patents, trade secrets
and other proprietary rights, and thereafter shall have the perpetual,
unrestricted right, title and interest to use, reproduce, demonstrate, display,
distribute, sublicense and sell the then-current version of the Licensed Work
and all Derivative Works thereof created or acquired by Licensor.
2.3 SUBLICENSING. The Licenses include the right of ODI to grant
sublicenses to Marketing Transferees, and each such sublicensee shall have the
corresponding right to grant sublicenses to other Marketing Transferees. ODI and
Marketing Transferees shall distribute Licensed Works to end-user customers
pursuant to a sublicense agreement containing prohibitions against unauthorized
duplication and use of Licensed Work that are substantially equivalent to, or
more prohibitive than, the prohibitions contained in ODI's license agreement for
its own software products.
2.4 INCLUDED COPYRIGHT, PATENT AND TRADEMARK LICENSE. The Licenses
include the grant of the Licensor's rights (a) under all trade secrets,
copyrights and patents owned or licensed by Licensor at any time during the Term
of this Agreement (i) to the extent necessary to exercise any right and license
granted under this Agreement and (ii) to combine the Licensed Works or Products
with equipment or other software; and (b) to use Licensor's marks in connection
with the distribution of Licensed Works during the Initial Term and in
compliance with Section 5.3. Licensor agrees that it and its licensors and
employees shall not assert against ODI or any of its licensees or successors any
droit moral or other personal rights in the Licensed Works.
2.5 DERIVATIVE WORKS. Licensor acknowledges that ODI shall own all
copyrights, patents, trade secrets and other proprietary and personal rights in
Derivative Works prepared by ODI.
2.6 EXCLUSIVE RIGHTS. Licensor hereby agrees that during the period
commencing upon execution of this Agreement and thereafter for so long as ODI is
Actively Offering the Licensed Work, the rights granted to ODI under Section
2.1(a) shall be exclusive during the Initial Term and that during the Initial
Term Licensor shall not itself exercise such rights nor shall it license the
rights described in 2.1(a) or (b) to third parties other than ODI. During such
period, in the event that (a) ODI commences distribution of a new product that
provides the
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browsing and editing functionality of Licensed Work or (b) ODI is not Actively
Offering the Licensed Work, and Licensor notifies ODI thereof and ODI fails to
commence Actively Offering the Licensed Work during the thirty day period
following such notice, then upon notice of either such event the License
described in Section 2.1(a) and (b) shall be converted from exclusive to
non-exclusive for the remainder of the Initial Term. During the Initial Term, if
the License is so converted to non-exclusive, neither Licensor nor its licensees
shall distribute or sublicense the Licensed Work to any competitor of ODI. ODI
hereby acknowledges that any license of the Licensed Work granted to an end user
by Licensor during the Initial Term but prior to the execution of this Agreement
shall not constitute a breach of the exclusivity requirements described in this
Section 2.6.
3. DISTRIBUTION AND MARKETING ARRANGEMENTS
3.1 CODE AND DOCUMENTATION DELIVERY. Licensor shall deliver to ODI the
Code and Documentation identified in Appendix A. The first delivery is due
within 20 days after execution of this Agreement. Each delivery shall be
comprised of the following packages: (i) the object code version of the Code and
the related Documentation and (ii) the source code and related Documentation in
a separate, sealed container. ODI shall have 15 days following each delivery to
inspect and accept or reject the Licensed Work.
3.2 ODI ACCOUNTING. ODI shall maintain accurate records with respect to
revenues for Products announced and marketed by ODI and shall pay to Licensor
the amounts set forth in Section 4 hereto.
3.3 ODI DETERMINATION OF MARKETING AND PRICING. Except with respect to
promotion of Licensed Works as described in Appendix E, ODI shall have no
obligation to promote the Products or to continue any such promotion once
commenced. ODI shall retain full discretion with respect to all decisions
relating to distribution and marketing of the Products, including the
determination to introduce or withdraw a Product, and the terms, conditions,
pricing, packaging, trademarks and names of the Products. It is expressly
acknowledged that ODI may elect to introduce, distribute, promote, and support a
product competitive with the Licensed Works or any Products if ODI in its
discretion so elects. Subject to ODI making payments to Licensor pursuant
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to Section 4 hereto, it is understood that ODI may license copies of Products at
volume discounts, promotion or special charges, dealer discounts, special bids,
and other pricing arrangements and may increase or decrease any prices, charges,
or fees relating to any Product without notice to or approval of Licensor.
3.4 CONTINUING RIGHTS OF LICENSOR. Licensor shall retain ownership of
Licensed Works during the Initial Term and, after the Initial Term, shall have
the full right to continue to use and market, the version of the Code and
Documentation existing upon expiration of the Initial Term and any Releases
thereof, provided that such Releases are independently developed by Licensor
without the use of ODI Confidential Information.
3.5 LIMITATIONS UPON LICENSOR. Nothing in this Agreement shall be
construed to grant Licensor any right to use any ODI products, trademarks or
trade names or refer to ODI in Licensor marketing activities without ODI's prior
written consent.
4. PAYMENTS
4.1 OBLIGATION OF ODI TO MAKE PAYMENTS. ODI shall pay Licensor as
follows:
(a) In consideration of the Licenses granted in Section 2.1(a)
and (b), ODI shall make the payments set forth in Appendix B, Paragraph 2(a)
hereto;
(b) if ODI exercises its option under Section 2.2, ODI shall make
the payments set forth in Appendix B, Paragraph 2(c) hereto; and
(c) in consideration of the Support Services provided by Licensor
under Section 7.2, ODI shall make the payments set forth in Appendix B,
Paragraph 2(b) hereto.
4.2 NO ROYALTIES FOR DOCUMENTATION, DEMONSTRATION, OR EDUCATIONAL
USE. No amounts shall be payable to Licensor for the rights and licenses granted
with respect to Documentation. No royalties shall be payable to Licensor in
connection with use in educational activities, trial or evaluation licenses
granted to customers and potential customers, demonstration use (including
self-running demonstrations) of Code or Products or
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use of Licensor-prepared marketing materials or copy, in all such cases whether
by ODI or a Marketing Transferee.
4.3 WITHHOLDING OF PAYMENTS. In the event Licensor fails to perform its
Support Services obligations as set forth in Appendix C or fails to deliver the
Licensed Work in accordance with Section 3.1, and does not cure such failure
within 15 working days following notice of said failure, ODI is hereby
authorized to withhold any payments otherwise due and apply such withheld funds
to the costs incurred by reason of such failure of Licensor to perform,
including, without limitation, amounts calculated at the rate of US$1000 per 8
hour working day of each ODI engineer so engaged. In such event, ODI shall also
be entitled to use of the source code for the Licensed Work pursuant to Section
7.3 below. Such withholding of payments or release of source code shall not
depend on whether or not ODI exercises its right to self help under Section 7.3
and shall not be deemed a waiver of rights of ODI to performance or of any other
remedy.
4.4 ENTIRE PAYMENT OBLIGATION OF ODI. The foregoing provisions of this
Section 4 set forth the entire obligation of ODI for payment with respect to
work performed by Licensor, Licensed Work delivered by Licensor and rights and
licenses granted by Licensor hereunder.
4.5 OBLIGATION OF LICENSOR TO MAKE PAYMENTS. In consideration of the
Support Services that ODI is obligated to provide to certain Licensed Work end
users that were granted a license by Licensor prior to the execution of this
Agreement, Licensor shall make the payments set forth in Appendix B, Paragraph 5
hereto.
5. COPYRIGHT NOTICES, REGISTRATION, AND ENFORCEMENT
5.1 COPYRIGHT NOTICES. Any reproduction of the Licensed Work by either
party shall retain all Licensor's copyright notices and other accurate notices
contained in the Licensed Work delivered to ODI hereunder.
5.2 COPYRIGHT REGISTRATION. If the Code or Documentation have not been
previously registered in the U.S. Copyright Office, Licensor hereby authorizes
ODI or its designee to act as Licensor's agent to so register Licensor's
copyrights in the Code, Documentation, or any portion thereof as deemed
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appropriate by ODI in the name of Licensor. Licensor shall also perform all acts
necessary to enable ODI to maintain or register such copyright, including the
execution of any necessary instruments and documents. In a case where such
materials have been previously registered, copies of the registration
certificate and the registered material shall be delivered to ODI within 30 days
after execution of this Agreement.
5.3 LICENSOR ACKNOWLEDGMENT. The Documentation will identify Licensor
by name and by a black-and-white reproduction of its logo as the original
developer of the Licensed Work. The Code "About" window will identify Licensor
by name and by a color reproduction of its logo as the original developer of the
Licensed Work.
5.4 ENFORCEMENT OF COPYRIGHT AND PATENTS. Licensor shall fully enforce its
rights against infringers of Licensor's copyrights and patents in Licensed Work.
A failure to so enforce rights against infringers of such copyrights within a
reasonable period of time after appropriate notification, if such failure
results in a loss of value of the Licenses granted to ODI herein, shall relieve
ODI of it obligation to make payments hereunder unless and until enforcement is
thereafter undertaken by Licensor and appropriate enforcement orders and
remedies are obtained.
6. WARRANTIES OF LICENSOR
6.1 OWNERSHIP; RIGHT TO LICENSE. Licensor represents and warrants to
ODI that Licensor is the owner of the Code and Documentation and has full and
exclusive right to grant all the licenses and rights granted herein, that the
Licensed Work has not been published or disclosed under circumstances that have
caused loss of copyright or any trade secret therein, and that the Licensed Work
does not infringe any copyright, patent, trade secret, trademark, or other
proprietary rights or droit moral or other personal right of any third party.
6.2 NO INFRINGEMENT CLAIMS. Licensor represents and warrants that no
claim, regardless of whether embodied in an action past or present, of
infringement of any patent, copyright, trademark, trade secret or other
proprietary or personal right, has been made or is pending against Licensor or
any entity from which Licensor has obtained such rights relative to the Code and
Documentation delivered to ODI hereunder.
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6.3 CONFORMING TO SPECIFICATIONS. Licensor represents and warrants to
ODI that the Licensed Work delivered hereunder will function on the machines and
with the operating systems specified in Appendix A or pursuant to Appendix D
hereto, will be substantially free of Errors and will conform in all respects to
the specifications and functions set forth in the Documentation and other
materials furnished to ODI. THE WARRANTIES SET FORTH IN THIS AGREEMENT ARE IN
LIEU OF ALL IMPLIED WARRANTIES AND WARRANTIES ARISING OUT OF CUSTOM OR TRADE
USAGE WITH RESPECT TO LICENSED WORK, INCLUDING WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR ANY PARTICULAR PURPOSE.
6.4 NO VIRUSES. Licensor represents and warrants that Licensor has not
introduced into the Licensed Work any routines or subroutines which could damage
or destroy data or other materials stored on ODI's computer system.
6.5 SERVICES. Licensor represents and warrants that the services
furnished by Licensor under this Agreement will be performed in a manner
satisfactory to ODI. Licensor shall re-perform deficient services and ODI shall
be entitled to recover the fees paid for services that Licensor fails to provide
in a satisfactory manner.
6.6 CONTINUING WARRANTIES. Each of the representations and warranties
made by Licensor herein is a representation as of the date of this Agreement and
a continuing warranty thereafter.
7. OBLIGATIONS OF LICENSOR
7.1 PREPARATION OF RELEASES. During the Initial Term of this Agreement,
Licensor shall continue to develop and maintain Licensed Work in accordance with
Appendix C and shall prepare and deliver to ODI Releases in accordance with
Appendices A and D. When delivering a Release, Licensor shall deliver to ODI (i)
the object code version of the Code and the related Documentation and (ii) the
source code thereto and related Documentation in a separate, sealed container.
7.2 SUPPORT SERVICES. So long as ODI abides by any obligation to pay
royalties pursuant to Appendix B, Paragraph 2(b) hereto, Licensor shall, during
the Initial Term, provide to ODI Support Services in accordance with the
requirements set forth in Appendix C attached hereto.
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7.3 SELF HELP. In the event that Licensor fails to timely perform its
obligations under Sections 7.1 or 7.2, then ODI shall have the option but not
the obligation to use the source code delivered to ODI pursuant to Sections 3.1
and 7.1 to perform itself Licensor's obligations. In the event of the expiration
of this Agreement or termination of this Agreement pursuant to Section 9.5, ODI
shall have the option but not the obligation to use such source code for the
purpose of providing support service to the existing customer base and to retain
the License described in Section 2.1(b), which License shall be then converted
in accordance with Section 2.2(d) hereof.
7.4 MOST FAVORED LICENSEE. If during the Term of this Agreement
Licensor sells, leases, licenses, or otherwise makes available by affirmative
act Licensed Work or any material part thereof, to any third party or parties
under terms and conditions (including compensation and payment provisions) more
favorable than those granted to ODI under this Agreement, then Licensor shall
promptly notify ODI thereof in writing and ODI shall have the right to elect the
substitution of any or all of such different terms and conditions for those of
this Agreement, effective as of the date of availability of such terms and
conditions to such third party. If ODI elects such a substitution, this
Agreement shall be deemed amended to incorporate such substitution and Licensor
shall forthwith pay over to ODI any amounts that have been paid by ODI from the
date of such availability that are in excess of the payments required under such
substituted terms and conditions.
7.5 REJECTION IN BANKRUPTCY. In the event that ODI elects to retain its
rights in the Products following a rejection of the License or this Agreement in
bankruptcy proceedings, immediately, and without the necessity of ODI making any
demand or taking other affirmative action whatsoever, Licensor shall forthwith
provide to ODI all information, including source code, necessary for ODI to
maintain, modify and support Licensed Works, and the License shall include, in
addition to the rights granted under Section 2, a non-exclusive, fully paid up,
perpetual, royalty-free, worldwide license to use, modify, prepare Derivative
Works from, display, disclose to others for purposes of maintenance, and
otherwise utilize the Products and Derivative Works thereof, and any and all
intellectual property rights in any of the foregoing, as defined in Section
101(35A) of Title 11 of the United States Code.
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7.6 ATTENDANCE AT MEETINGS. During the Initial Term, representatives of
Licensor shall attend such ODI sales meetings and such other meetings with ODI
representatives as the parties shall mutually agree upon. ODI will reimburse
Licensor's reasonable lodging, meal and transportation expenses incurred in
connection with such meetings, provided that Licensor obtains advance approval
of its lodging and transportation arrangements from ODI and refrains from
unreasonable meal expenditures.
7.7 MARKETING INFORMATION. Within 5 working days of the execution of
this Agreement, Licensor shall provide to ODI complete lists of all holders of
then-current evaluation licenses and all then-current licensees of Licensed
Work, as well as current Contact Information regarding all Licensed Work sales
leads, sales prospects, evaluation licensees and other licensees and shall cease
all sales and marketing activities directed at such licensees. "Contact
Information" shall include names, addresses, telephone and fax numbers, email
addresses and any documentation of communications between such licensees and
Licensor regarding Licensed Work.
8. INDEMNIFICATION
8.1 INFRINGEMENT OF PROPRIETARY RIGHTS. Licensor hereby agrees to
indemnify and defend ODI, Marketing Transferees and other Product licensees
against all claims that Licensed Work infringes any patent, copyright,
trademark, trade secrets, droit moral or other proprietary or personal rights of
a third party, and Licensor will pay all costs, damages, and attorney fees
incurred by ODI or such licensees or arising from or in connection with any such
claim. Licensor further agrees to submit to personal jurisdiction in any forum
in which ODI or such a licensee may be sued on any claim subject to
indemnification.
8.2 BREACH OF LICENSOR WARRANTIES. Licensor hereby agrees to indemnify
and defend ODI and its Marketing Transferees against any claim relating to any
material breach of Licensor warranties under Section 6 hereof, or based on
material failure by Licensor to perform its Support Services obligations
hereunder, and Licensor shall pay all costs, damages, and attorney fees incurred
by ODI or a Marketing Transferee or arising from or in connection with any such
claim.
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8.3 CONDITIONS TO INDEMNIFICATION. The provisions of the foregoing
indemnities are conditioned on (a) notice to Licensor of the claim or proceeding
subject to indemnity; (b) reasonable cooperation by the indemnified party in the
defense and settlement of such claim at the expense of Licensor; and (c) prior
written approval by the indemnified party of any settlement, which approval
shall not be unreasonably withheld.
9. TERM AND TERMINATION
9.1 INITIAL TERM. The Initial Term of this Agreement shall commence as
of December 1, 1995 and, unless terminated as provided below, shall remain in
force until the later of (i) one year from the date of acceptance of the first
delivery of Licensed Work or (ii) the parties' written agreement not to pursue
the acquisition of Licensor by ODI under Section 9.2. Unless ODI exercises its
option pursuant to Section 9.3 below, this Agreement shall expire upon the
expiration of the Initial Term.
9.2 ACQUISITION OF LICENSOR BY ODI. Each party agrees to consider terms
proposed by the other party for the acquisition of Licensor by ODI prior to or
upon the expiration of the Initial Term.
9.3 ACQUISITION OF LICENSED WORK BY ODI. If at the end of the Initial
Term either (i) the License described in Section 2.1(a) and (b) is exclusive or
(ii) the License described in Section 2.1(a) and (b) is non-exclusive and ODI is
Actively Offering the Licensed Product, then ODI may exercise its option to
acquire the Licensed Work as specified in Section 2.2 above by giving written
notice to Licensor of its exercise of such option upon or prior to expiration of
the Initial Term.
9.4 DISCRETIONARY TERMINATION BY ODI. During the Initial Term only,
ODI, at its option, shall have the right to terminate this Agreement with
respect to any license or right granted herein at any time. Any such termination
shall be made by written notice to Licensor, effective without notice to, or
action by, any court.
9.5 TERMINATION FOR BREACH. During the Initial Term only, either party
shall have the right to furnish notice of termination of this Agreement in the
event of a material and
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continuing breach by the other party of its obligations hereunder, which breach
is not cured within 90 days after delivery written notice identifying the
breach. Notice of termination shall become effective 30 days after delivery
thereof without notice to, or action by, any court. Timely cure of such breach
shall render any notice of termination void.
9.6 POST-TERMINATION PROVISIONS. In the event of any termination or
expiration of the entire Agreement, (a) the provisions of Sections 1, 6, 7.3,
7.5, 8, 9.6, 10 and 12 shall survive as necessary to effectuate their purposes
and shall bind the parties and their legal representatives, successors, and
assigns; (b) licenses and sublicenses then existing by virtue of rights
exercised prior to the effective date of termination or expiration under this
Agreement and any payment obligations of ODI with respect thereto shall survive
and continue; and (c) licenses and rights to copies of source code conditioned
upon expiration or events of termination shall survive and continue.
10. CONFIDENTIAL INFORMATION
10.1 ODI CONFIDENTIAL INFORMATION. "ODI Confidential Information" shall
mean Code and Documentation disclosed to Licensor by ODI and any other
information or material identified as confidential and disclosed to Licensor by
ODI during the term of this Agreement. Licensor shall hold all ODI Confidential
Information in confidence, shall not use ODI Confidential Information other than
for the benefit of ODI during the term of this Agreement and shall not disclose
ODI Confidential Information to any third party during the period of seven years
after ODI disclosed it to Licensor.
10.2 LICENSOR CONFIDENTIAL INFORMATION. "Licensor Confidential
Information" shall mean source code disclosed to ODI by Licensor during the
Initial Term of this Agreement. During the Initial Term, and for a period of
seven years thereafter unless ODI shall exercise its option under Section 2.2
pursuant to Section 9.3, ODI shall hold all Licensor Confidential Information in
confidence, shall not use Licensor Confidential Information other than pursuant
to the terms of this Agreement and shall not disclose Licensor Confidential
Information to any third party.
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10.3 CONFIDENTIALITY OF TERMS. Licensor shall not, without written
authorization of ODI, disclose to any third party the terms, conditions or
existence of this Agreement except as may be necessary to establish or assert
rights hereunder or as required by law; provided, however, that Licensor may, on
a confidential basis, disclose this Agreement to its accountants, attorneys, and
financing organizations.
11. FREEDOM OF INDEPENDENT DEVELOPMENT
During the Initial Term, Licensor shall not independently develop or
acquire and market materials or programs that are competitive with the Code or
Documentation. Nothing in this Agreement shall be construed as prohibiting or
restricting ODI, or, after the Initial Term, Licensor, from independently
developing or acquiring and marketing materials or programs that are competitive
with the Code or Documentation, provided that such development or acquisition is
accomplished without violating the confidentiality and other provisions of this
Agreement.
12. GENERAL
12.1 ENTIRE AGREEMENT. The provisions of this Agreement, including the
Appendices attached hereto, constitute the entire agreement between the parties
with respect to the subject matter hereof and supersede all prior agreements,
oral or written, and all other communications relating to the subject matter
hereof. Regardless of the existence of a translation into Italian or other
language, the English language version of this Agreement shall govern. No
amendment or modification of any provision of this Agreement will be effective
unless set forth in a writing executed by both parties. The following Appendices
may be referenced in the Agreement:
Appendix A: Code and Documentation
Appendix B: Payment Schedule
Appendix C: Support Services
Appendix D: Enhancements
Appendix E: Marketing VOM
12.2 ASSIGNMENT. Neither party may assign this Agreement without the
prior written consent of the other party, except that either party may assign
this Agreement to a purchaser of, or successor to, substantially all of such
party's business and
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assets related to the performance of this Agreement. In the event of such an
authorized assignment, the other party shall be notified of the assignment and
the assignee within thirty days thereafter. Any attempted assignment in
derogation of the foregoing shall be null and void.
12.3 AGENTS AND SUBSIDIARIES. The rights and obligations of ODI under
this Agreement shall apply to an agent or subsidiary of ODI, provided that such
agent or subsidiary is bound by the terms of this Agreement and ODI remains
directly responsible for its obligations hereunder.
12.4 REMEDIES. The remedies of the parties under this Agreement are
cumulative and are in addition to all other rights and remedies which either
party may have at law, equity or otherwise.
12.5 FORCE MAJEURE. Neither party shall be held liable for failure to
fulfill its obligations hereunder if such failure is due to a natural calamity,
act of government, or similar cause beyond the control of such party.
12.6 GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the substantive law of The Commonwealth of
Massachusetts, USA, without regard to its principles of choice of laws or the
Convention for International Sale of Goods.
12.7 SEVERABILITY. If any provision of this Agreement is held by a
court of competent jurisdiction to be contrary to law, the remaining provisions
of the Agreement will remain in full force and effect.
12.8 COMPLIANCE WITH LAWS AND REGULATIONS. Licensor and ODI shall
comply with all laws, rules, and regulations of competent public authorities
relating to the duties, obligations, and performance under this Agreement and
shall procure all licenses and pay all fees and other charges required thereby.
12.9 JURISDICTION AND VENUE. Licensor and ODI agree to submit to the
exclusive jurisdiction and venue of the state and federal courts sitting in the
Commonwealth of Massachusetts, USA.
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12.10 NOTICES. Notices given under this Agreement shall be in writing
and shall be effective upon receipt if delivered by mail, air courier, fax or
hand to the following addresses:
If to ODI:
Object Design, Inc.
25 Mall Road
Burlington, MA 01803
Attn: President
Fax: 617-674-5216
with a copy to:
John D. Patterson, Esq.
Foley, Hoag & Eliot
One Post Office Square
Boston, Massachusetts 02109
Fax: 617-832-7000
If to Licensor:
ViVi Software, S.r.l.
Corso Dogali 10-15
16136 Genoa, ITALY
Attn: President
Fax: 39-10-213-548
12.11 COUNTERPARTS. This Agreement may be executed in counterparts.
IN WITNESS THEREOF, the parties' duly authorized representatives have
executed this Agreement under seal:
OBJECT DESIGN, INC. VIVI SOFTWARE S.R.L.
By: __________________________ By: __________________________
Its: _________________________ Its: _________________________
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<PAGE> 18
Appendix A
CODE AND DOCUMENTATION
1. Code and Documentation. The Code shall include the source code and
object code versions of the Licensor's Visual Object Manager (VOM) software
program, in conformity with Licensor's product description set forth on Schedule
A-1 attached to this Appendix A, as adapted to the platforms and operating
systems set forth on Schedule A-2 attached to this Appendix A and in all cases
including the bug fixes, modifications and additional features described on
Schedule A-3 attached to this Appendix A.
2. Delivery Schedule. The first delivery under Section 3.1 shall be the
Release 1.0 Code and Documentation for Windows 3.1 and Windows NT and shall be
delivered by Licensor to ODI no later than 20 days after the execution of this
Agreement. The remaining Release 1.0 Code and Documentation shall be delivered
in accordance with the delivery schedule set forth in Schedule A- 2 attached to
this Appendix A.
3. Releases. Licensor shall deliver to ODI Release 1.5 Code and
Documentation in conformity with the specifications set forth in Schedule A-4
attached to this Appendix A and in accordance with the delivery schedule set
forth in Schedule A-2 attached to this Appendix A. Licensor shall thereafter
during the Initial Term provide ODI with new Releases of Code and Documentation
on a regular basis and keep ODI advised as to its plans for preparation of
future Releases. The new Releases will be at least sufficient to keep Licensor's
technology compatible with the then-current ObjectStore release on the platforms
identified in Schedule A-2.
4. Documentation. Licensor shall supply all Documentation in a final
source code form (MSWord or Framemaker) for each platform. Errors in
Documentation reported to Licensor shall be corrected by Licensor in the next
Release. Documentation shall be modified by Licensor (a) to ODI's specifications
for the initial Licensed Word delivery, which modifications shall consist
primarily of changing "ViVi Software" references to "Object Design" and (b) to
conform to ODI's standard template for Release 1.5 Documentation.
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<PAGE> 19
Attach Schedules A-1 (Licensor's product description), A-2 (delivery schedule),
A-3 (modifications including safe mode, default, query behavior and debug mode)
and A-4 (Release 1.5 specifications).
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Appendix B
PAYMENT SCHEDULE
1. Prepaid Royalty. In consideration of the grant of the Licenses and
the Support Services, ODI shall pay Licensor nonrefundable, prepaid license
royalties in the amount of US$100,000, to be credited as described in paragraph
4 toward royalties and fees payable under paragraph 2. Such payment shall be due
within 30 days of execution of this Agreement.
2. Royalties and Fees. ODI shall pay the following royalties and fees to
Licensor, subject to the recapture provision of paragraph 4 below:
(a) During the Initial Term only, ODI shall pay Licensor 20% of the
License Revenue received by ODI for each copy of a Licensed Work licensed to an
end user, with a minimum royalty in an amount determined as follows:
Minimum Royalty Per Copy
<TABLE>
<CAPTION>
Copies Licensed
in Transaction Windows 3.1 Windows 95 or NT UNIX
<S> <C> <C> <C>
1 $127 $159 $207
2 to 8 $84 $105 $137
9 or more None None None
</TABLE>
(b) During the Initial Term only, ODI shall pay Licensor 33% of the
annual maintenance fees received by ODI for Licensed Work maintenance services
furnished to end users.
(c) During the first two twelve-month periods of the Optional Term
only, ODI shall pay Licensor 12% of the License Revenue received by ODI for each
copy of a Licensed Work or Derivative Work thereof licensed to an end user with
a minimum royalty in an amount determined as follows:
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<PAGE> 21
Minimum Fee Per Copy
<TABLE>
<CAPTION>
Copies Licensed
in Transaction Windows 3.1 Windows 95 or NT UNIX
<S> <C> <C> <C>
1 $76 $96 $124
2 to 8 $50 $63 $ 82
9 or more None None None
</TABLE>
During the next twelve-month period of the Optional Term, ODI shall
pay Licensor 8% of the License Revenue received by ODI for each copy of a
Licensed Work or Derivative Work thereof licensed to an end user with a minimum
royalty in an amount determined as follows:
Minimum Fee Per Copy
<TABLE>
<CAPTION>
Copies Licensed
in Transaction Windows 3.1 Windows 95 or NT UNIX
<S> <C> <C> <C>
1 $38 $48 $62
2 to 8 $25 $32 $41
9 or more None None None
</TABLE>
The aggregate amount payable by ODI to Licensor under this clause (c)
shall in no event exceed US$800,000 (the "Maximum Amount"). Upon the earlier to
occur of Licensor's receipt of such Maximum Amount or the end of the third
twelve-month period of the Optional Term, no further royalties or fees shall be
payable by ODI to Licensor under this Agreement.
3. Royalty and Fee Payment and Calculation Provisions. All royalties
and fees shall be calculated in U.S. dollars at the end of each calendar quarter
and payable within 60 days of the end of each calendar quarter.
In each of the foregoing cases, the stated minimum royalty or fee shall
be proportionally reduced to reflect any portion of the gross license fee paid
by the end user that is retained by a third party or paid by ODI to a third
party in connection with the distribution of the Products.
If a Licensed Work is licensed with other products, License Revenue
shall be calculated only upon the License Revenue for the Licensed Work.
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<PAGE> 22
If a Licensed Work is licensed with other products in a transaction in
which no separate license fee is stated with respect to the Licensed Work,
License Revenue shall be calculated upon the assumption that each Licensed Work
so licensed was subject to the same percentage discount from its applicable
single-unit U.S. list price.
In the case of sales of pre-paid licenses that do not identify specific
quantities of products, License Revenue shall be determined only when the
Licensed Work is shipped to the customer and the applicable license fee is
charged against the pre-paid license fee.
4. Recapture of Prepaid License Royalties. With respect to royalties
and fees payable on License Revenues under paragraph 2 above, 50% of the amounts
so payable shall be retained by ODI and shall be credited toward prepaid license
royalties paid by ODI to Licensor under paragraph 1 above, until the amount so
retained equals the US$100,000 total amount of such prepaid license royalties.
5. Support Services Payment to ODI. In consideration of the
Front-line support provided by ODI as set forth in Appendix C, Licensor shall
pay to ODI the amount of US$150 for each Licensed Work end user that (a) was
granted a license by Licensor prior to the execution of this Agreement and
identified by Licensor pursuant to Section 7.7 and (b) is entitled to receive
Front-line support from ODI pursuant to Appendix C, Paragraph 1(a) and (b). Such
payment shall be due within 30 days of execution of this Agreement and shall be
nonrefundable.
6. Unbundled Items. ODI shall offer Licensed Work as a separate item
on its product and price lists. However, the parties acknowledge that it may be
beneficial to bundle Licensed Work in the future. If either party wishes to have
ODI offer Licensed Work embedded in, or as a component of, its ObjectStore
database product, then the parties agree to negotiate the terms of an agreement
authorizing ODI's distribution of such a product.
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<PAGE> 23
Appendix C
SUPPORT SERVICES
1. ODI Support. ODI shall provide Front-line support to its end user
licensees of the Licensed Work and, in consideration of payment by Licensor
pursuant to Appendix B, to such other end user licensees as are identified by
Licensor pursuant to Section 7.7, provided that such other end user licensees
(a) agree to ODI's standard terms for such support and (b) upgrade to the
Licensed Work delivered to ODI pursuant to Section 3.1. Front-line support by
ODI shall include, but not be limited to the following:
i. Validating that the end user is a current Licensed Work
licensee and has paid the applicable maintenance fee; and
ii. Handling end user questions related to the functionality,
benefits, use and installation of the Licensed Work; and
iii. Establishing a database which contains all of the Licensed
Work problems that have been reported to ODI, as well as those which were
diagnosed as valid product or documentation Errors and, if an Error correction
has been made available, a description of the Error correction and how to apply
it to the end user's system; and
iv. Attempting to recreate the reported problem; and
v. Creating and executing test cases relevant to the reported
problem; and
vi. Communicating known Errors and Error corrections to end
users; and
vii. End user acknowledgement of a reported problem based upon
the criteria described in Paragraph 4, "Problem Resolution Policy"; and
viii. Working directly with end users to perform an analysis of
the reported problem; the results of which are a "Problem Determination." Such
Problem Determination shall
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<PAGE> 24
include, on a reasonable effort basis, the explicit identification of a Licensed
Work defect and the technical rationale for making such determination of a
Licensed Work defect rather than an ODI product defect; and
ix. Communicating the results and methodology of the problem
analysis to Licensor when the problem has been determined to be caused by a
Licensed Work defect; and
x. Communicating directly with the end user to provide the
results of Licensor's Back-up efforts, as applicable.
2. Licensor Support. In consideration of the royalty paid by ODI
pursuant to Paragraph 2(b) of Appendix B, Licensor shall provide the Support
Services described below during the Initial Term. After such date, if ODI elects
to continue Support Services, ODI shall pay to Licensor the support services
fees and royalties mutually agreed upon by the parties.
(a) Licensor shall perform the following aspects of Front-line
support to end users during the Initial Term:
i. Creation and execution of the test cases relevant to the
end user reported problem when an end user, or ODI, is unable to reproduce the
problem independently; and
ii. Working directly with the end user to perform an analysis
of the reported problem; the results of which are a Problem Determination, when
ODI has tried, but failed to perform a Problem Determination; and
iii. Communicating directly with the end user to provide the
results of Licensor's Back-up support efforts when Licensor has become involved,
and ODI has failed to perform Problem Determination.
(b) Licensor shall also perform Back-up support during the Initial
Term, which shall include but not be limited to the following:
i. Communicating with ODI Front-line support personnel in
order to effectively understand the reported customer problem; such
communication may occur by telephone, fax and/or email; and
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<PAGE> 25
ii. Creation of an Error correction to the source code if the
problem reported is found to be a valid defect in the Licensed Work; and
iii. Integration of all such Error corrections into the next
Release of the Licensed Work; and
iv. Communicating the results of the Licensor effort to
recreate the end user problem(s) and the means by which it is corrected (e.g.
program patches for high severity (0 and 1) defects) and/or may be circumvented
(work-around) to ODI's Front-line support personnel and/or the end user as
appropriate; and
v. Delivery to ODI of a debug version of Code for each Release,
which will enable ODI to perform the Front-line support described in the above
Paragraph 1, clauses iv, v, vi and ix.
3. Problem Severity Level Description. The following severity level
descriptions will be used by ODI to record each end user problem reported to
ODI's Hot-Line support personnel and, if required to report the problem to
Licensor's Back-up support personnel if Licensor's support is necessary for
problem determination and/or resolution:
- Severity 0 - Fatal:
- Reported problem is preventing all useful work
from being performed.
- Severity 1 - Severe Impact:
- Problem is disabling major functions required to
do productive work, and no reasonable workarounds
are known.
- Severity 2 - Degraded Operations:
- Report problem is disabling specific, nonessential
functions, or more serious problems; workarounds are
known and made available.
- Severity 3 - Minimal Impact:
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<PAGE> 26
- Suggestion for improvement, or a cosmetic problem,
with no immediate consequence.
4. Problem Resolution Policy. Licensor shall use its best
efforts to correct all Errors identified by ODI in the Licensed
Work in accordance with the following policy:
- Severity 0 - Fatal
- Acknowledgement: less than 1 hour
- Work around/temporary fix: constant effort until
fixed
- Final fix, update, or new release: less than 28 days
- end user communication: constant
- Severity 1 - Severe Impact
- Acknowledgement: less than 4 hours
- Work around/temporary fix: less than 3 days
- Final fix, update, or new release: less than 28 days
- end user communication: each 4 hours until
acknowledged
- Severity 2 - Degraded Operations
- Acknowledgement: less than 24 hours
- Work around/temporary fix: less than 9 days
- Final fix, update, or new release: less than 58 days
- end user communication: once daily until
acknowledged
- Severity 3 - Minimal Impact
- Acknowledgement: less than 48 hours
- Work around/temporary fix: N/A
- Final fix, update, or new release: less than 88 days
- end user communication: once daily until
acknowledged
NOTE: Resolution times for temporary and final fixes assume the receipt of a
reproducible cause of a problem from the end user and/or ODI Front-line
personnel.
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<PAGE> 27
Appendix D
ENHANCEMENTS
From time to time either party may propose an improvement to or
enhancement of the Licensed Work that is not described in Appendix A. If the
parties agree upon the terms and conditions, including price and delivery
schedule, under which such work will be performed, then Licensor shall perform
such work and such work will become Enhancements.
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<PAGE> 28
Appendix E
MARKETING LICENSED WORK
ODI shall have the right but not the obligation to market and
distribute the Licensed Work in such matter as it may choose, including but not
limited to:
1. Manufacturing: duplicate and label media; print and bind all
documentation; print and assemble product packaging; and maintain adequate
inventory stock to meet customer demand.
2. Marketing: produce and print product collateral meeting ODI's
corporate collateral standards; undertaking the marketing of the Licensed Work
to the installed base of ObjectStore customers; and market the Licensed Work to
prospective new ObjectStore customers by such means and at such level of efforts
as determined solely by ODI.
3. Sales: sell the Licensed Work through all available channels of
distribution, including (but not limited to) direct ODI sales representatives,
authorized ObjectStore distributors, VARs, Systems Integrators and other
channels as deemed necessary.
4. Product Management: maintain a prioritized list of product
requirements in order to guide the development of future releases.
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<PAGE> 1
EXHIBIT 10.33
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (the "Agreement") is made and entered into as of the
23rd day of February 1996, by and between net.Genesis Corp. ("net.Genesis"), a
Delaware corporation and Object Design, Inc., a Delaware corporation ("Object
Design").
WHEREAS, net.Genesis has developed and is the sole owner of the source code
to the database module within net.Form, as described in greater detail on
Exhibit A attached hereto (the Transferred Technology").
WHEREAS, consistent with the intent and understanding of the parties,
net.Genesis desired to document in writing its transfer to Object Design of a
non-exclusive license in and to the Transferred Technology upon the terms and
conditions contained herein.
NOW THEREFORE, in consideration of the foregoing premises and the covenants
and promises set forth below, and such other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1.0. Definitions
(a) "Derivative Work" shall have the meaning given in the Copyright
Act, namely, a work that is based upon one or more preexisting works, such as a
revision, modification, translation, abridgment, condensation, expansion, or any
other form in which such preexisting works may be recast, transformed or adapted
and that if prepared without the authorization of the owner of the preexisting
work would constitute copyright infringement or other infringement of the
proprietary rights of the owner therein.
(b) "Distributor" shall mean any commercial entity, including a dealer,
distributor, value added reseller, original equipment manufacturer, to which
Object Design may transfer, license or otherwise distribute Derivative Works
hereunder.
(c) "Transferred Technology" shall mean the source code to the database
module within net.Form, as described in greater detail on Exhibit A attached
hereto. Transferred Technology shall include documentation.
2.1 License. Subject to the provisions of this Agreement, and on the
basis of the representations, warranties and covenants herein set forth, Object
Design shall license from net.Genesis, and net.Genesis hereby grants and assigns
the following perpetual, irrevocable, non-exclusive, world-wide licenses to
Object Design in the Transferred Technology, including, without limitation, all
source code information for the Transferred Technology, for a one time cash
payment to net.Gensis of $81,250 (the "Purchase Price"):
(a) to copy the Transferred Technology for development and backup
purposes;
(b) to use and modify the Transferred Technology to develop Derivative
1
<PAGE> 2
Works;
(c) to use, reproduce, execute, maintain, demonstrate, distribute and
sublicense Derivative Works to third parties by itself and through Distributors;
(d) to affix Object Design's trademarks to Derivative Works;
(e) to deposit the Transferred Technology and the source code for the
Derivative Works, when required, pursuant to source code escrow agreements,
provided that under the terms of such agreements the Transferred Technology
shall be afforded the same protection as Object Design's software in source
form;
2.2. Subsidiaries. The rights and obligations of Object Design under
this Agreement shall apply to any Subsidiary of Object Design, provided that
such Subsidiary is bound by the terms of this Agreement and Object Design
remains directly responsible for each Subsidiary's obligations hereunder.
2.3. Included Patent and Trademark License. The License includes the
perpetual, worldwide, royalty-free, irrevocable, and non-exclusive right and
license under all patents owned or licensed by net.Genesis at any time during
the term of this Agreement to the extent necessary to exercise any right and
license granted under this Agreement; provided, however, that in the event of
the termination of this Agreement, Object Design's copyrights and the
proprietary rights in Derivative Works shall be limited to that incremental part
of the Derivative Work which does not include the Transferred Technology.
2.4 Derivative Works. Net.Genesis acknowledges that Object Design shall
own all copyrights and other proprietary rights in Derivative Works prepared by
Object Design pursuant to this Agreement.
2.5 Object Design Determination of Marketing and Pricing. Object Design
shall retain full discretion with respect to all decisions relating to
distribution and marketing of the Derivative Works, including the determination
to introduce or withdraw a Derivative Work, and the terms, conditions, and
pricing of the Derivative Works. Object Design shall have no obligation to
promote the Derivative Works or to continue any such promotion once commenced.
It is expressly acknowledged that Object Design may elect to introduce,
distribute, promote, and support a product competitive with the Transferred
Technology if Object Design in its discretion so elects.
3. Purchase Price. The Purchase Price represents Object Design's entire
obligation for payment with respect to the rights and licenses granted by
net.Genesis hereunder. The Purchase Price shall be paid from Object Design to
net.Genesis by wire transfer, cashier's check or in other immediately available
funds and shall be payable immediately upon delivery of the Transferred
Technology to Object Design.
4. License Rights Retained by net.Genesis. Net.Genesis shall retain all
original ownership rights in and to the Transferred Technology to use, maintain,
modify, and create derivative works of the Transferred Technology.
2
<PAGE> 3
a. Right to Sublicense. Net.Genesis shall retain the exclusive,
perpetual, royalty-free, worldwide right to sublicense unaffiliated third
parties to use, maintain, modify, create derivative works from, and further
sublicense the Transferred Technology on such terms and for such purposes (which
may exceed the scope of the license granted to Object Design hereunder) as
net.Genesis may determine; and
b. Marking. Object Design shall properly indicate net.Genesis's
copyright on all copies of the Transferred Technology.
5. Representations and Warranties of net.Genesis. Net.Genesis hereby
represents and warrants as follows:
a. Net.Genesis is a duly organized and validly existing corporation
organized under the laws of the State of Delaware. Net.Genesis' execution and
delivery of the Agreement has been duly and validly authorized, and all
necessary action has been taken to make this Agreement, and this Agreement is, a
legal, valid and binding obligation of net.Genesis enforceable against
net.Genesis in accordance with its terms.
b. Net.Genesis is (excluding the transfer of rights provided in this
Agreement) the sole owner of all right, title and interest (including, without
limitation copyrights) in and to the Transferred Technology free and clear of
all security interests, liens, pledges, charges, options, claims, restrictions
or encumbrances. Net.Genesis has taken all reasonable measures to protect the
proprietary nature of the Transferred Technology.
Except as provided herein, the Transferred Technology is being
delivered to Object Design on an "as is" basis, and Object Design hereby
acknowledges that net.Genesis has made no written or oral representations,
warranties or guarantees regarding the Transferred Technology's usefulness or
functionality.
6. Covenants of Object Design. Object Design hereby covenants that:
(a) it shall not at any time sell the Transferred Technology except as
a component of its own products as provided in this Agreement; and
(b) it shall at no time disclose any Confidential and Proprietary
Information (as defined herein) to any third party without the prior written
consent of net.Genesis, except (i) for disclosure to those of its personnel and
contractors who have a substantial need to know the specific information in
question, and (ii) pursuant to Section 2.1(e), in connection with Object
Design's exercise of its rights or performance of its obligations under this
Agreement. All such personnel will be instructed by Object Design that the
Confidential and Proprietary Information is subject to the obligation of
confidence set forth by this Agreement.
(c) Nothing in this Agreement shall be construed as prohibiting or
restricting either party from independently developing or acquiring and
marketing materials or programs that are competitive with the Transferred
Technology, provided that such development or acquisition is accomplished
3
<PAGE> 4
without violating the covenants set forth in this Section 6.
7. Confidentiality.
(a) The Parties acknowledge that for so long as the Transferred
Technology meets the requirements set forth in 7(b) below, the Transferred
Technology will be deemed Confidential and Proprietary Information whose use and
disclosure is restricted by Section 6.
(b) As used herein, the Confidential and Proprietary Information means
information that:
(i) is disclosed in writing or other tangible form by net.Genesis
to Object Design (or, if disclosure is made orally, is reduced
to or summarized in such a writing or other tangible form
within thirty days after such oral disclosure) and is
designated in such writing or tangible form as proprietary in
a writing by or on behalf of net.Genesis; and
(ii) is not (a) part of the public domain through no act or
omission of the receiving party; or (b) in the receiving
party's lawful possession prior to the disclosure; or (c)
lawfully disclosed to the receiving party by a third party
without restriction on disclosure; or (d) independently
developed by the receiving party; and
(iii) affords the possessor of such information a commercial or
business advantage over others who do not have such
information.
(c) Notwithstanding the foregoing, and subject only to net.Genesis'
copyrights and patents, if any, Object Design shall be free to use any ideas,
concepts, know-how, techniques and the like which Object Design may acquire as
the result of exposure to the Transferred Technology of net.Genesis so long as
Object Design does not violate its obligations under Section 6.
8. Specific Performance; Other Rights and Remedies. The parties hereto
recognize that certain rights granted under this Agreement (including, without
limitation, the rights of net.Genesis arising under Section 6 of this Agreement)
are unique and that monetary damages may not be adequate compensation for any
loss incurred by reason of a breach of such provisions. Accordingly, the parties
agree that, in addition to such other remedies as may be available to it under
this Agreement, each shall have the right to seek injunctive relief and specific
performance to the extent permitted by law.
9. Expenses. Each party shall pay its own expenses incident to the
negotiation, preparation, performance and enforcement of this Agreement
(including all fees and expenses of its counsel, accountants and other
consultants, advisors and representatives for all activities of such persons
undertaken pursuant to this Agreement), whether or not the transactions
contemplated hereby are consummated.
10. Notices and Communications. All notices and other communications
4
<PAGE> 5
which by any provision of this Agreement are required or permitted to be given
shall be given in writing and shall be (i) mailed by first-class or express
mail, postage prepaid, or (ii) personally delivered to an officer of the
receiving party. All such communications shall be mailed, sent or delivered
a. if to net.Genesis, at 68 Rogers Street, Cambridge,
Massachusetts 02139, Attention: Rajat Bhargava, President,
Telephone (617) 577- 9800 (with a copy to Sullivan &
Worcester, One Post Office Square, Boston, Massachusetts
02109, Attention: Joseph G. Hadzima, Esq.), or at any other
address designated by net.Genesis in writing to Object Design;
and
b. if to Object Design, at 25 Mall Road, Burlington,
Massachusetts 01803, Attention: Chief Financial Officer,
Telephone (617) 674- 5000, or at any other address designated
by Object Design in writing to net.Genesis.
11. Miscellaneous. This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts without regard to its principles of choice of
laws. This Agreement contains the full and complete understanding of the parties
with respect to the subject matter hereof and supersedes all prior or
contemporaneous agreements. No waiver of any of the provisions hereof shall be
binding on either party unless in writing and signed by both parties. In the
event that any provision hereof is found invalid or unenforceable pursuant to
judicial decree or decision, any such provision shall be deemed to extend only
to the maximum permitted by law, and the remainder of this Agreement shall
remain valid and enforceable according to its terms. This Agreement may be
executed in one or more counterparts, all of which together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above-written.
NET.GENESIS CORP. OBJECT DESIGN INC.
By: By:
------------------------ ---------------------
Rajat Bhargava Justin Perreault
President Chief Operating Officer
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<PAGE> 6
EXHIBIT A
Transferred Technology is defined as the following net.Form source files and
related net.Form documentation:
Makefile
common.h
defs.cpp
htx.cpp
htx.h
htx.l
htx.tab.c
htx.tab.h
htx.y
lex.yy.c
main.cpp
parsefrm.cpp
util.cpp
util.h
variable.cpp
variable.h
wdg.cpp
wdg.h
6
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of
our report dated May 23, 1996, on our audits of the financial statements of
Object Design, Inc. We also consent to the references to our firm under the
captions "Selected Financial Data" and "Experts".
Coopers & Lybrand L.L.P.
Boston, Massachusetts
June 14, 1996
