<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 5, 1996
REGISTRATION NO. 333-06349
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
DOCUMENT SCIENCES CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7372 33-0485994
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
6333 GREENWICH DRIVE
SUITE 100
SAN DIEGO, CA 92122
(619) 625-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
TONY N. DOMIT
PRESIDENT AND CHIEF EXECUTIVE OFFICER
DOCUMENT SCIENCES CORPORATION
6333 GREENWICH DRIVE
SUITE 100
SAN DIEGO, CA 92122
(619) 625-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
MARK A. BERTELSEN, ESQ. GREGORY M. GALLO, ESQ.
KATHLEEN B. BLOCH, ESQ. DOUGLAS J. REIN, ESQ.
BETSEY SUE, ESQ. JEFFREY T. BAGLIO, ESQ.
DON S. WILLIAMS, ESQ. NOEL C. HOWE, ESQ.
WILSON SONSINI GOODRICH & ROSATI GRAY CARY WARE & FREIDENRICH
650 PAGE MILL ROAD 4365 EXECUTIVE DRIVE, SUITE 1600
PALO ALTO, CA 94304 SAN DIEGO, CA 92121
(415) 493-9300 (619) 677-1400
</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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
DOCUMENT SCIENCES CORPORATION
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF FORM S-1
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING IN
FORM S-1 REGISTRATION STATEMENT LOCATION IN PROSPECTUS
- ------------------------------------------------ -------------------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus... Facing Page of Registration Statement;
Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Inside Front and Outside Back Cover Pages
3. Summary Information, Risk Factors, and
Ratio of Earnings to Fixed Charges....... Prospectus Summary; The Company; Risk
Factors
4. Use of Proceeds............................ Use of Proceeds
5. Determination of Offering Price............ Outside Front Cover Page; Underwriting
6. Dilution................................... Dilution
7. Selling Security Holders................... Principal and Selling Stockholders
8. Plan of Distribution....................... Outside Front and Inside Front Cover Pages;
Underwriting
9. Description of Securities to be
Registered............................... Description of Capital Stock
10. Interests of Named Experts and Counsel..... Legal Matters; Experts
11. Information with Respect to the
Registrant............................... Outside Front and Inside Front Cover Pages;
Prospectus Summary; The Company; Risk
Factors; Dividend Policy; Capitalization;
Selected Financial Information;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Management; Certain
Transactions; Principal and Selling
Stockholders; Description of Capital
Stock; Shares Eligible for Future Sale;
Consolidated Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. Inapplicable
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED AUGUST 5, 1996
LOGO
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2,300,000 SHARES
COMMON STOCK
- --------------------------------------------------------------------------------
Of the 2,300,000 shares of Common Stock being offered hereby, 1,837,500
shares are being sold by Document Sciences Corporation ("Document Sciences"
or the "Company") and 462,500 shares are being sold by the Selling
Stockholders. See "Principal and Selling Stockholders." The Company will not
receive any of the proceeds from the sale of shares by the Selling
Stockholders.
Prior to this offering, there has been no public market for the Common Stock
of the Company. It is currently anticipated that the initial public offering
price will be between $10.00 and $12.00 per share. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price. The Company has applied for quotation of its Common Stock on
the Nasdaq National Market under the symbol DOCX.
FOR INFORMATION CONCERNING CERTAIN FACTORS WHICH SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS, SEE "RISK FACTORS" COMMENCING ON PAGE 5.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
PROCEEDS TO
PRICE UNDERWRITING PROCEEDS TO SELLING
TO PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS
<S> <C> <C> <C> <C>
Per share $ $ $ $
Total(3) $ $ $ $
</TABLE>
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $600,000.
(3) The Company has granted the several Underwriters an option to purchase up
to an additional 345,000 shares of Common Stock to cover over-allotments.
If all such shares are purchased, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
The shares of Common Stock are offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by them, and subject to the
approval of certain legal matters by counsel and certain other conditions.
The Underwriters reserve the right to withdraw, cancel or modify such offer
and to reject orders in whole or in part. It is expected that delivery of the
shares of Common Stock will be made in New York, New York against payment
therefor on or about , 1996.
DEUTSCHE MORGAN GRENFELL SOUNDVIEW FINANCIAL GROUP, INC.
The date of this Prospectus is , 1996
<PAGE> 4
LOGO
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
The Company intends to furnish its stockholders with annual reports
containing consolidated financial statements audited by an independent public
accounting firm, and make available to its stockholders quarterly reports for
the first three quarters of each year containing interim unaudited financial
information.
Autograph, CompuBuild, CompuSet, CompuMerge, CompuPrep, CompuSeries,
CompuView Navigator, DVS and View on Demand are trademarks of the Company. All
other brand names or trademarks appearing in this Prospectus are the property of
their respective holders.
This Prospectus contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. The Company's
actual results or experience could differ significantly from those discussed in
the forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in "Risk Factors,"
as well as those discussed elsewhere in this Prospectus.
<PAGE> 5
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information and consolidated financial statements and notes
thereto appearing elsewhere in this Prospectus. The Common Stock offered
hereby involves a high degree of risk. See "Risk Factors."
THE COMPANY
Document Sciences Corporation develops, markets and supports a family
of document automation software products and services used in high volume
electronic publishing applications. Autograph, the Company's document
automation software architecture, enables personalized and customized
publishing solutions for many industries including insurance, managed
healthcare, financial services, telecommunications,
manufacturing/distribution, government agencies and commercial print
service bureaus. The Company's products enable an important form of
communication between organizations and customers by employing enterprise
database assets to produce high-quality documents that are ready to print
on demand and distribute in high volume. Additionally, the Company's core
technology can be extended to provide electronic document automation
solutions for the Internet, intranets and commercial on-line services.
CompuSet, Autograph's flagship product, is licensed by approximately 400
customers worldwide who collectively produce an estimated one billion
customized pages per month. The fully portable Autograph platform enables
cost-effective, just-in-time, on-demand, high volume publishing that is
fully automated, capable of quality document composition, and flexible for
end-user customization. The Company's products are used in a wide array of
computing environments from client/server to large computer systems.
Document Sciences' objective is to be the leading worldwide supplier
of document automation software and services. The Company sells its
products domestically principally through a direct sales force, and
internationally principally through distributors and value added resellers
and, to a lesser extent, through its direct sales force. The Company
expects to invest significantly in sales, marketing, professional services
and development infrastructure. The Company's end user customers include
Aetna Life Insurance Co., The Prudential Life Insurance Company of
America, Foundation Health, Compaq Computer Corporation, Bell Atlantic
Services, Inc., Morgan Grenfell Asset Management, Ace Hardware Corporation
and CAM-NET Communications Network Inc. The Company was incorporated in
Delaware in October 1991 as a wholly-owned subsidiary of Xerox Corporation
("Xerox"), which currently owns approximately 84% of the Company's
outstanding Common Stock. Upon completion of this offering, Xerox will
continue to own approximately 65% of the Company's outstanding Common
Stock.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered................................... 2,300,000 shares, including
1,837,500 shares by the Company and
462,500 shares by the Selling Stockholders
Common Stock outstanding after the offering............ 10,374,657 shares(1)
Use of proceeds........................................ For general corporate purposes, including working capital. See "Use
of Proceeds."
Proposed Nasdaq National Market symbol................. DOCX
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
-------------------------------------- -------------------
1992(2) 1993 1994 1995 1995 1996
------- ------ ------ ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:(3)
Total revenues................................................. $1,567 $3,491 $7,171 $10,512 $4,164 $6,350
Gross profit................................................... 1,331 3,052 6,439 9,368 3,708 5,470
Income (loss) from operations.................................. (268 ) 720 1,354 1,685 290 400
Net income (loss).............................................. (174 ) 413 712 1,052 188 246
Pro forma net income (loss) per share(4)....................... $ (.02 ) $ .06 $ .08 $ .12 $ .02 $ .03
Shares used to compute pro forma net income (loss) per share... 7,416 7,416 8,382 8,418 8,382 9,017
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
DECEMBER 31, ------------------------------------------------
1995 ACTUAL PRO FORMA(5) AS ADJUSTED(6)
-------------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:(3)
Cash and cash equivalents................................ $1,271 $1,466 $1,466 $ 18,282
Working capital.......................................... 1,353 1,040 1,040 17,856
Total assets............................................. 6,289 7,102 7,102 23,918
Obligations under capital leases, less current portion... 99 145 145 145
Series A Redeemable Preferred Stock...................... 1,251 1,417 -- --
Total stockholders' equity............................... 856 976 2,393 19,209
</TABLE>
- ---------------
(1) Based on shares outstanding as of June 30, 1996. Excludes 373,368
shares of Common Stock issuable upon exercise of options outstanding.
See "Management -- Employee Benefit Plans," "Description of Capital
Stock," and Note 7 of Notes to Consolidated Financial Statements.
(2) The Company was incorporated on October 18, 1991, and had
insignificant activities from inception through December 31, 1991.
(3) See Note 9 of Notes to Consolidated Financial Statements for
information concerning transactions with affiliates.
(4) Assumes the repayment of the current income tax payable to Xerox out
of the proceeds of this offering, and assumes as outstanding the pro
forma shares outstanding plus 125,645 shares of the shares being
offered by the Company hereby which represent the shares deemed to be
sold to fund such repayment. See "Use of Proceeds" and Note 1 of Notes
to Consolidated Financial Statements.
(5) Reflects the conversion of all outstanding shares of Series A
Redeemable Preferred Stock into Common Stock at a conversion ratio of
1.19 to 1, before giving effect to adjustment for the 3-for-1 stock
split. See "Management -- Certain Transactions."
(6) Adjusted to give effect to the sale of 1,837,500 shares of Common
Stock by the Company at an assumed initial public offering price of
$11.00 per share and the application of the net proceeds therefrom.
See "Use of Proceeds" and "Capitalization."
Except as set forth in the Consolidated Financial Statements or as
otherwise indicated, all information in this Prospectus (i) reflects the
3-for-1 split of the Company's Common Stock to be effected prior to the
closing of this offering, (ii) reflects the conversion, at a ratio of 1.19
to 1 before giving effect to adjustment for the 3-for-1 stock split, of
all of the Company's outstanding shares of Series A Redeemable Preferred
Stock into shares of Common Stock, which will occur automatically upon the
closing of this offering, and (iii) assumes that the Underwriters'
over-allotment option is not exercised. See "Description of Capital
Stock," "Underwriting" and Note 7 of Notes to Consolidated Financial
Statements.
- --------------------------------------------------------------------------------
3
<PAGE> 6
THE COMPANY
Document Sciences Corporation ("Document Sciences" or the "Company")
develops, markets and supports a family of document automation software products
and services used in high volume electronic publishing applications. Autograph,
the Company's document automation software architecture, enables personalized
and customized publishing solutions for many industries including insurance,
managed healthcare, financial services, telecommunications,
manufacturing/distribution, government agencies and commercial print service
bureaus. The Company's products enable an important form of communication
between organizations and customers by employing enterprise database assets to
produce high-quality documents that are ready to print on demand and distribute
in high volume. Additionally, the Company's core technology can be extended to
provide electronic document automation solutions for the Internet, intranets and
commercial on-line services. CompuSet, Autograph's flagship product, is licensed
by approximately 400 customers worldwide who collectively produce an estimated
one billion customized pages per month. The fully portable Autograph platform
enables cost-effective, just-in-time, on-demand, high volume publishing that is
fully automated, capable of quality document composition, and flexible for
end-user customization. The Company's products are used in a wide array of
computing environments from client/server to large computer systems.
The market for document automation software is growing rapidly as companies
recognize the need to increase document effectiveness through high quality
composition and assembly. Document automation capitalizes on the investments
corporations have made in traditional mainframe and newer client/server
computing platforms. Growth in the paper-based portion of the market is also
fueled by the increasing popularity of lower-cost midrange electronic printers
and the continuing cost/performance improvements in computing and communications
technologies. Organizations are producing increasing amounts of data and
information and consequently are demanding more effective documents and
delivery. The effectiveness includes customized and personalized content, more
robust documents, and improved forms of document delivery. In addition, in many
current and future applications, the fundamental nature of the document is
shifting from static paper-based documents to more robust interactive electronic
documents published on the Internet, intranets and commercial on-line services.
The Company's objective is to be the leading worldwide supplier of document
automation software and services. The Company's strategy includes extending its
technology leadership, leveraging its installed base of customers, expanding its
distribution channels, expanding professional services, and expanding into
electronic documents including the Internet, intranets and commercial on-line
services. The Company expects to continue to invest significantly in sales,
marketing, professional services, and development infrastructure. The Company
sells its products domestically principally through a direct sales force, and
internationally principally through distributors and value added resellers
("VARs") and, to a lesser extent, through its direct sales force. The Company
derived approximately 14%, 26%, 42% and 30% of its total revenues from export
sales, including sales through its foreign subsidiary, in 1993, 1994, 1995 and
the first half of 1996, respectively. The Company's sales and marketing
organization targets vertical industry segments that require document automation
and high volume document personalization and customization. The Company's end
user customers include Aetna Life Insurance Co., The Prudential Life Insurance
Company of America, Foundation Health, Compaq Computer Corporation, Bell
Atlantic Services, Inc., Morgan Grenfell Asset Management, Ace Hardware
Corporation and CAM-NET Communications Network Inc.
The Company was incorporated in Delaware in October 1991 as a wholly-owned
subsidiary of Xerox Corporation ("Xerox"), which currently owns approximately
84% of the Company's outstanding Common Stock. Upon completion of this offering,
Xerox will continue to own approximately 65% of the Company's outstanding Common
Stock (63% if the Underwriters' over-allotment option is exercised in full). The
Company acquired certain technology from Xerox pursuant to a Transfer and
License Agreement in July 1992. See "Certain Transactions." All references in
this Prospectus to "Document Sciences" or the "Company" refer to Document
Sciences Corporation and its consolidated subsidiary. The Company's executive
offices are located at 6333 Greenwich Drive, Suite 100, San Diego, California
92122, and its telephone number is (619) 625-2000.
4
<PAGE> 7
RISK FACTORS
The following risk factors should be considered carefully in addition to
the other information contained in this Prospectus before purchasing the Common
Stock offered hereby. This Prospectus contains forward-looking statements, and
actual results could differ materially from those projected in the
forward-looking statements as a result of numerous factors, including the
factors set forth below and elsewhere in this Prospectus.
Limited Operating History. The Company was incorporated in October 1991 as
a wholly-owned subsidiary of Xerox, and Xerox currently owns approximately 84%
of the Company's outstanding shares of Common Stock. The Company's limited
operating history makes the prediction of future operating results difficult,
and the Company's operating history during prior periods cannot necessarily be
regarded as indicative of the Company's prospects as an independent company,
especially in light of the Company's investments in sales, marketing,
professional services and development infrastructure. Accordingly, although the
Company has experienced revenue growth in recent years, there can be no
assurance that the Company will sustain such growth in revenues, if any, or that
the Company will remain profitable on a quarterly or annual basis.
Uncertainty of Future Operating Results; Fluctuations in Quarterly
Operating Results. The Company's total revenues and operating results can vary,
sometimes substantially, from quarter to quarter and are expected to vary
significantly in the future. The Company's revenues and operating results are
difficult to forecast. Future results will depend upon many factors, including
the demand for the Company's products, the level of product and price
competition, the length of the Company's sales cycle, the size and timing of
individual license transactions, the delay or deferral of customer
implementations, the budget cycles of the Company's customers, the level of
commissions on the sale of Xerox printers under the strategic marketing alliance
between the Company and Xerox, the Company's success in expanding its direct
sales force and indirect distribution channels, the timing of new product
introductions and product enhancements by the Company and its competitors, the
mix of products and services sold, levels of international sales, activities of
and acquisitions by competitors, the timing of new hires, changes in foreign
currency exchange rates, the ability of the Company to develop and market new
products and control costs and general domestic and international economic
conditions. In addition, the Company's sales generally reflect a relatively high
amount of revenues per order, and the loss or delay of individual orders,
therefore, could have a significant impact on the revenues and quarterly
operating results of the Company. Moreover, the timing of license revenue is
difficult to predict because of the length of the Company's sales cycle, which
is typically three to twelve months from the initial customer contact.
The Company's initial software license products generally are shipped as
orders are received. As a result, initial license fee revenues are substantially
dependent on orders booked and shipped in that quarter. Because the Company's
operating expenses are based on anticipated revenue levels and because a high
percentage of the Company's expenses are relatively fixed, a delay in the
recognition of revenue from a limited number of license transactions could cause
significant variations in operating results from quarter to quarter and could
result in losses. To the extent such expenses precede increased revenues, the
Company's operating results would be materially adversely affected.
The Company's business has experienced and is expected to continue to
experience seasonality, in part due to customer purchasing patterns and the
Company's expense patterns. The Company believes that fourth quarter revenues
are positively impacted by year-end capital purchases by large corporate
customers and strong fourth quarter sales of printers by Xerox (which may
generate sales of the Company's products), as well as the Company's sales
compensation plans. As reflected in the fourth quarter of 1995, these seasonal
factors have historically resulted in fourth quarter revenues being
substantially higher than revenues in the preceding three quarters, as well as
being higher than revenues in each of the first two quarters of the next year.
In addition, a significant amount of the Company's revenues occur predominantly
in the third month of each fiscal quarter and tend to be concentrated in the
latter half of the third month.
5
<PAGE> 8
As a result of these factors, revenues for any quarter are subject to
significant variation, and 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. Furthermore, due
to all of the foregoing factors, it is likely that in some future quarter the
Company's operating results will be below the expectations of public market
analysts and investors. In such event, the price of the Company's Common Stock
would likely be materially adversely affected. See "Risk Factors -- Expansion of
Sales and Distribution Channels," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business -- Sales and
Marketing."
Control by Xerox. Upon completion of this offering, Xerox will own
approximately 65% of the outstanding shares of Common Stock of the Company (63%
if the Underwriters' over-allotment option is exercised in full). Xerox has not
expressed to the Company any present intention to sell additional shares of the
Company's Common Stock following completion of the offering. Consequently, Xerox
will control the Company, be able to elect the entire Board of Directors of the
Company and continue to have significant input into the Company's operations. In
addition, Xerox will be able to determine the outcome of all corporate actions
requiring stockholder approval, including potential mergers, acquisitions,
consolidations and sales of all or substantially all of the assets of the
Company. The voting power of Xerox could have the effect of delaying or
preventing a change in control of the Company, and may prevent or discourage
tender offers for the Company's Common Stock at a premium price by another
person or entity. At present, Xerox affiliates hold three of the six seats on
the Company's Board of Directors. See "Risk Factors -- Reliance on Relationships
with Xerox; Lack of Independent Sales and Marketing Channels," "Principal and
Selling Stockholders" and "Certain Transactions."
Reliance on Relationships with Xerox; Lack of Independent Sales and
Marketing Channels. The Company currently has, and will continue to have after
this offering, a variety of contractual and informal relationships with Xerox
and affiliates of Xerox, including a Strategic Marketing Alliance Agreement, a
Transfer and License Agreement and various distribution agreements. The Company
relies on these relationships and agreements for a significant portion of its
total revenues. In 1994, 1995 and the first half of 1996, total revenues derived
from relationships with Xerox and affiliates of Xerox accounted for
approximately $1.9 million, $3.9 million and $1.3 million, representing 27%, 37%
and 20% of the Company's total revenues, respectively. In addition, through
December 31, 1995 substantially all of the Company's domestic license revenues
were dependent on sales leads generated as a result of the Company's
relationship with Xerox and a substantial portion of the Company's international
revenues were made through distributors and distribution channels affiliated
with Xerox. Further, the commissions received by the Company from sales of Xerox
printers under the strategic marketing alliance, which were $490,400, $752,000
and $586,600 in 1994, 1995 and the first half of 1996, respectively, have little
or no associated costs, have contributed a substantial portion of the Company's
income from operations and net income for certain prior operating periods, have
had a high degree of inconsistency from quarter to quarter and are difficult to
estimate. Failure to continue to receive such commissions would have a material
adverse effect on the Company's business, operating results and financial
condition. Although neither Xerox nor its affiliated entities has expressed to
the Company any intention to terminate their respective agreements with the
Company, these agreements generally may be terminated on no more than 90 days'
notice. Accordingly, there can be no assurance that Xerox or its affiliates will
continue these relationships or, if they do, that they will be on terms
favorable to the Company. Furthermore, there can be no assurance that existing
and potential customers will not be deterred by the existence of these
relationships or by the historical ties between the Company and Xerox and its
affiliates. Following consummation of this offering, though it intends to
continue its existing relationships with Xerox, the Company's strategy is to
lessen its dependence on Xerox. However, there can be no assurance that the
Company will be able to do so and, because of the Company's current level of
dependence on Xerox there can be no assurance that the Company's transition to a
more independent company will not adversely affect its business, financial
condition or results of operations. The failure by the Company to maintain these
relationships, particularly with Xerox and
6
<PAGE> 9
its affiliates, or to establish new relationships in the future, could have a
material adverse effect on the Company's business, operating results and
financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Risk Factors -- Expansion of Sales and
Distribution Channels" and "Certain Transactions."
Xerox has strategic alliances and other business relationships with other
companies who supply software and services used in high volume electronic
publishing applications and who now or in the future may be a competitor of the
Company. Xerox could in the future expand these relationships or enter into
additional ones, and as a result the Company's business could be materially
adversely affected. There can be no assurance that Xerox or one of its
affiliated companies will not engage in business directly competitive with the
Company. Xerox owns approximately 34% of Image Sciences, a direct competitor of
the Company. In addition, Xerox has on-going internal development activities
which could in the future lead to products that compete with the Company. See
"Business -- Competition" and "Certain Transactions."
Expansion of Sales and Distribution Channels. The Company has
substantially increased expenditures in support of its strategy to expand its
global marketing, sales and customer support infrastructure in order to expand
the market for the Company's products by providing direct sales and support
services and increased channel distribution throughout the major markets of the
world. Through this expansion, the Company hopes to lessen its dependence on
Xerox and certain Xerox affiliates. In addition, the Company intends to increase
both its product offerings and markets through marketing, sales and distribution
and development relationships with other companies. The Company intends to
increase the number of these strategic relationships as well as form alliances
with system integrators and consultants. Whether the Company can successfully
generate its own sales leads, introduce new products and enter into new markets
will depend on its ability to expand its direct sales and support services,
expand its indirect channel distribution, and increase its relationships and
alliances with other companies. As a result of its planned expansion, the
Company has and will continue to incur significant costs to build such corporate
infrastructure ahead of anticipated revenues, and any failure to achieve growth
in revenues in excess of increased expenses would have a material adverse affect
on the Company's business, operating results and financial condition. There can
be no assurance that the Company will be able to successfully expand its direct
sales and support services force, expand its indirect channel distribution, or
establish or maintain successful third party relationships. Any failure to do so
will have a material adverse affect on the Company's business, operating results
and financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Sales and Marketing."
Dependence on Success of New Products and Expansion of Professional
Services. The Company's Autograph architecture has been applied mainly to
document automation applications producing paper based documents. The Company
believes its core technology can be extended to address applications requiring
the delivery of customized and personalized electronic documents over electronic
networks such as the Internet, intranets or commercial on-line services.
The Company has recently introduced Document Viewing Service (DVS), an
optional on-line viewer for electronic documents produced by document automation
applications, and Document Library Services (DLS), an optional document
management tool. The Company began shipping DVS in October 1995, and DLS is
currently in limited release, with certain configurations still in beta testing.
Prior to the quarter ended June 30, 1996, revenues derived from license fees of
DVS and DLS have not been material as a percentage of revenues. In addition, the
Company is increasing its focus on the consulting services component of its
Professional Services to assist customers in the planning and implementation of
enterprise-wide, mission critical document automation applications. The Company
has directed a significant amount of its product development expenditures to the
on-going development of DVS and DLS and plans to devote a significant amount of
future sales and marketing resources to the full commercial introduction of DVS
and DLS.
7
<PAGE> 10
The Company believes that the long-term growth of license and service
revenue will be dependent, in part upon the success of DVS, DLS and the
expansion of Professional Services. The Company has limited experience in
developing new products, and DVS and DLS have not been widely deployed. Because
of such limited experience, there can be no assurance that DVS and DLS will not
require substantial software enhancements or modifications to satisfy
performance requirements of clients or to correct design defects. Further, there
can be no assurance that the Company will be successful in expanding its
consulting services as part of its Professional Services. If the Company fails
to fully deploy its DVS and DLS products, or if clients experience significant
problems with implementation of the software or are otherwise dissatisfied with
the functionality or performance of DVS and DLS, or if DVS or DLS fails to
achieve market acceptance for any reason, or if the Company fails to
successfully expand its Professional Services, the Company's business, operating
results and financial condition will be materially adversely affected. See
"Business -- Products."
Lengthy Sales and Implementation Cycles. The license of the Company's
software products is often an enterprise-wide decision by prospective customers
and generally requires the Company to engage in a lengthy sales cycle, typically
between three and twelve months, to provide a significant level of education to
prospective customers regarding the use and benefits of the Company's products.
In addition, the implementation of the Company's products by customers involves
a significant commitment of resources by such customers over an extended period
of time, and is commonly associated with substantial customer business process
reengineering efforts. For these and other reasons, the sales and customer
implementation cycles are subject to a number of significant delays over which
the Company has little or no control. Delay in the sale or customer
implementation of a limited number of license transactions could have a material
adverse effect on the Company's business and results of operations and cause the
Company's operating results to vary significantly from quarter to quarter. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Sales and Marketing."
Product Concentration. The Company currently derives substantially all of
its license revenues from licenses of CompuSet and related CompuSet option
products and from fees for services related to the CompuSet software. As a
result, factors adversely affecting the pricing of or demand for CompuSet and
related products, such as competition from other products, negative publicity or
obsolesce of the hardware or software environments in which the Company's
products run, could have a material adverse effect on the Company's business,
operating results and financial condition. The Company's financial performance
will continue to depend, in significant part, on the successful development,
introduction and customer acceptance of new and enhanced versions of the
CompuSet software and related products. There can be no assurance that the
Company will continue to be successful in developing and marketing CompuSet
products and related services. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and "Business -- Products" and
"-- Research and Development."
Industry Concentration. Licenses to end users in the insurance and
commercial print services industries for 1994, 1995 and the first half of 1996
accounted for 65%, 61% and 55%, respectively, of total revenues. The future
success of the Company will depend on its ability to continue to successfully
market its products in such industries, and to successfully market its products
in other industries. The failure of the Company to do so would have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Dependence on New Products and Product Enhancements. The Company's future
business, operating results and financial condition will continue to depend upon
its ability to develop new products that address the future needs of its target
markets and to respond to emerging industry standards and practices. The Company
believes that its core technology can be extended to the Internet, intranets and
commercial on-line services, and has only recently begun initial development
activity in this area. There can be no assurance that the Company will be
successful in developing, introducing and marketing new products or product
enhancements, including new products or the
8
<PAGE> 11
extension of existing products for the Internet, intranets and commercial
on-line services, on a timely and cost effective basis, if at all, or that its
new products and product enhancements, will adequately meet the requirements of
the marketplace or achieve market acceptance. Delays in the commencement of
commercial shipments of new products or enhancements, including DVS and DLS, may
result in client dissatisfaction and delay or loss of product revenues. If the
Company is unable, for technological or other reasons, to develop and introduce
new products or enhancements of existing products in a timely manner in response
to changing market conditions or client requirements, or if new products or new
versions of existing products do not achieve market acceptance, the Company's
business, operating results and financial condition will be materially adversely
affected. In order to provide its customers with integrated product solutions,
the Company's future success will also depend in part upon its ability to
maintain and enhance relationships with its technology partners, such as
Computer Associates and Data Retrieval. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and
"Business -- Products" and "-- Research and Development."
International Operations. Revenues from export sales, including sales
through its foreign subsidiary accounted for 26%, 42% and 30% of the Company's
total revenues in 1994, 1995 and the first half of 1996, respectively. The
Company's wholly owned subsidiary, Document Sciences Europe, markets and
supports the Company's products in Europe. The Company licenses its products in
Europe through value added resellers and to a lesser extent, direct sales. The
value added resellers are principally Xerox affiliates who re-market the
Company's products. In Australia and Canada, the Company distributes its
products through Fuji Xerox Co., Ltd. and Xerox Canada, Limited, respectively.
Revenues generated by these Xerox affiliates were $1.3 million, $3.1 million and
$675,900 in 1994, 1995 and the first half of 1996, respectively. In 1994 and
1995, a substantial portion of the Company's revenues from export sales were
generated through entities affiliated with Xerox. In order to successfully
expand export sales, the Company must establish additional foreign operations,
hire additional personnel and develop relationships with additional
international resellers. To the extent that the Company is unable to do so in a
timely manner, the Company's growth, if any, in international export sales will
be limited, and the Company's business, operating results and financial
condition could be materially adversely affected. In addition, there can be no
assurance that the Company will be able to maintain or increase international
market demand for its products. Additional risks inherent in the Company's
international business activities generally include currency fluctuations,
unexpected changes in regulatory requirements, tariffs and other trade barriers,
costs of and the Company's limited experience in localizing products for foreign
countries, lack of acceptance of localized products in foreign countries, longer
accounts receivable payment cycles, difficulties in managing international
operations, potentially adverse tax consequences including restrictions on the
repatriation of earnings, and the burdens of complying with a wide variety of
foreign laws. A portion of the Company's business is conducted in currencies
other than the U.S. dollar, primarily the French franc. Although to date
exchange rate fluctuations have not had a significant impact on the Company,
fluctuations in the value of the currencies in which the Company conducts its
business relative to the U.S. dollar could cause currency transaction gains and
losses in future periods. The Company does not currently engage in currency
hedging transactions, and there can be no assurance that fluctuations in the
currency exchange rates in the future will not have a material adverse impact on
international revenues and thus the Company's business, operating results or
financial condition. There can be no assurance that such factors will not have a
material adverse effect on the Company's future international operations and,
consequently, the Company's results of operations. See "Risk Factors -- Control
by Xerox," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business -- Sales and Marketing," "Certain
Transactions" and Notes 3 and 9 of Notes to Consolidated Financial Statements.
Dependence on Emerging Markets for Document Automation Software. The
market for document automation software is relatively new, intensely
competitive, highly fragmented, underdeveloped and subject to rapid change.
Marketing and sales techniques in the document automation
9
<PAGE> 12
software marketplace, as well as the bases for competition, are not well
established. There can be no assurance that the market for document automation
software will develop or that, if it does develop, organizations will adopt the
Company's products. The Company has spent, and intends to continue to spend,
significant resources educating potential customers about the benefits of its
products. However, there can be no assurance that such expenditures will enable
the Company's products to achieve further market acceptance, and if the document
automation software market fails to develop or develops more slowly than the
Company currently anticipates, the Company's business, operating results and
financial condition would be materially adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business -- The Document Sciences Strategy."
In addition, the commercial market for document automation of electronic
documents designed for use with the Internet, intranets and commercial on-line
services has only recently begun to develop, and the success of the Company's
products designed for this market will depend, in part, on their compatibility
with such services. It is difficult to predict with any assurance whether the
Internet, intranets and commercial on-line services will prove to be a viable
commercial marketplace or whether the demand for related products and services
will increase or decrease in the future. Since the increased commercial use of
the Internet, intranets and commercial on-line services could require
substantial modification and customization of certain of the Company's products
and services and the introduction of new products and services, there can be no
assurance that the Company will be able to effectively or successfully compete
in this emerging market.
Intense Competition. The market for the Company's document automation
products is intensely competitive, subject to rapid change and significantly
affected by new product introductions and other market activities of industry
participants. The Company's software products are targeted at document intensive
organizations that require the ability to produce large quantities of customized
and personalized documents in paper or electronic form. The Company faces direct
and indirect competition from a broad range of competitors who offer a variety
of products and solutions to the Company's current and potential customers. The
Company's principal competition currently comes from (i) systems developed
in-house by the internal MIS departments of large organizations, (ii) direct
competition in a number of its vertical markets, including Image Sciences, which
is partially owned by Xerox, and FormMaker Software, Inc. in the insurance
industry, M&I DataServices, Inc. in banking and financial services and Group 1
Software, Inc. in commercial direct mailing, and (iii) direct competitors such
as IBM's Direct Composition Facility (DCF) and Group 1 Software's recently
introduced DOC1 product. The Company faces market resistance from the large
installed base of systems because of the reluctance of these customers to commit
the time and effort necessary to convert their document automation processes to
the Company's document automation software. Several of the Company's competitors
have longer operating histories, significant greater financial, technical,
marketing and other resources than the Company, greater name recognition and a
larger installed base of customers.
It is also possible that the Company will face competition from new
competitors. These include large independent software companies offering
personal computer-based application software solutions, such as Microsoft
Corporation and Adobe Corporation, and from large corporations providing
database management software solutions, such as Oracle Corporation. In addition,
Xerox, either directly or through affiliated entities, could compete with the
Company. Moreover, as the market for document automation software develops, a
number of these or other companies with significantly greater resources than the
Company could attempt to enter or increase their presence in the Company's
market either independently or by acquiring or forming strategic alliances with
competitors of the Company or to otherwise increase their focus on the industry.
In addition, current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties to increase the
ability of their products to address the needs of the Company's current and
prospective customers, and it is possible that new competitors or alliances
among competitors may emerge and rapidly acquire significant market share.
Increased competition
10
<PAGE> 13
may result in price reductions, reduced gross margins and loss of market share,
any of which could have a material adverse effect on the Company's business,
operating results and financial condition. There can be no assurance that the
Company will be able to compete successfully against current or future
competitors or that competitive pressures faced by the Company will not
materially adversely affect its business, operating results and financial
condition. See "Business -- Competition."
Management of Change; Dependence Upon Key Personnel. The Company has
recently experienced a period of growth in total revenues. The Company's ability
to compete effectively and to manage future change will require the Company to
continue to improve its financial and management controls, reporting systems and
procedures on a timely basis and to expand, train and manage its employee work
force. There can be no assurance that the Company will be able to do so
successfully. The Company's failure to do so could have a material adverse
effect on the Company's business, operating results and financial condition. The
Company's future performance depends in significant part upon the continued
service of its key technical, sales and senior management personnel, none of
whom are parties to employment agreements with the Company. The loss of the
services of one or more of the Company's executive officers could have a
material adverse effect on the Company's business, operating results and
financial condition. The Company's future success also depends on its continuing
ability to attract and retain highly-qualified product development, sales and
managerial personnel. Competition for such personnel is intense, and there can
be no assurance that the Company will be able to retain its key employees or
that it will be able to attract, assimilate or retain other highly qualified
product development, sales and managerial personnel in the future. See "Risk
Factors -- Control by Xerox," "Business -- Sales and Marketing" and
"Management."
Dependence on Proprietary Technology; Risks of Infringement. The Company's
success is dependent, in part, upon its ability to protect its proprietary
technology. The Company relies primarily on a combination of copyright and
trademark laws, trade secrets, confidentiality procedures and contractual
provisions to protect its proprietary rights. The Company seeks to protect its
software, documentation and other written materials under trade secret and
copyright laws, which afford only limited protection. The Company presently has
no patents or patent applications pending. Despite the Company's efforts to
protect its proprietary rights, unauthorized parties may attempt to copy aspects
of the Company's products or to obtain and use information that the Company
regards as proprietary. Policing unauthorized use of the Company's products is
difficult, and while the Company is unable to determine the extent to which
piracy of its software products exists, software piracy can be expected to be a
persistent problem. In addition, the laws of some foreign countries do not
protect the Company's proprietary rights to as great an extent as do the laws of
the United States. There can be no assurance that the Company's means of
protecting its proprietary rights will be adequate or that the Company's
competitors will not independently develop similar technology. The Company is
not aware that any of its products infringe the proprietary rights of third
parties. There can be no assurance, however, that third parties will not claim
infringement by the Company with respect to current or future products. The
Company expects that software product developers will increasingly be subject to
infringement claims as the number of products and competitors in the Company's
industry segment grows and the functionality of products in different industry
segments overlaps. Any such claims, with or without merit, could be time-
consuming, result in costly litigation, cause product shipment delays or require
the Company to enter into royalty or licensing agreements. Such royalty or
licensing agreements, if required, may not be available on terms acceptable to
the Company or at all, which could have a material adverse effect upon the
Company's business, operating results and financial condition. In addition, the
Company also relies on software that it licenses from third parties, including
software that is integrated with internally developed software and used
primarily in the Company's DLS product, to perform key functions. There can be
no assurances that such firms will remain in business, that they will continue
to support their products or that their products will otherwise continue to be
available to the Company on commercially reasonable terms. The loss or inability
to maintain any of these software licenses could result in delays or reductions
in product shipments until equivalent software
11
<PAGE> 14
can be developed, identified, licensed and integrated, which would adversely
affect the Company's business, operating results and financial condition. See
"Business -- Intellectual Property and Other Proprietary Rights."
Product Liability. The Company's license agreements with its customers
typically contain provisions designed to limit the Company's exposure to
potential product liability claims. However, it is possible that the limitation
of liability provisions contained in the Company's license agreements may not be
effective under the laws of certain jurisdictions. Although the Company has not
experienced any product liability claims to date, the sale and support of
products by the Company may entail the risk of such claims, and there can be no
assurance that the Company will not be subject to such claims in the future. A
successful product liability claim or claim arising as a result of professional
services rendered by the Company brought against the Company could have a
material adverse effect upon the Company's business, operating results and
financial condition.
Risk of Product Defects. Software products as complex as those offered by
the Company, particularly the Company's new DVS and DLS products, may contain
undetected defects or errors when first introduced or as new versions are
released. As a result, the Company could in the future lose or delay recognition
of revenues as a result of software errors or defects. In addition, the
Company's products are typically intended for use in applications that may be
critical to a customer's business. As a result, the Company expects that its
customers and potential customers have a greater sensitivity to product defects
than the market for software products generally. Although the Company's business
has not been adversely affected by any such errors to date, there can be no
assurance that, despite testing by the Company and by current and potential
customers, errors will not be found in new products or releases after
commencement of commercial shipments, resulting in loss of revenue or delay in
market acceptance, diversion of development resources, damage to the Company's
reputation, or increased service and warranty costs, any of which would have a
material adverse effect upon the Company's business, operating results and
financial condition. See "Business -- Research and Development."
No Prior Public Market for Common Stock; Possible Volatility of Stock
Price. Prior to this offering, there has been no public market for the 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 negotiations between the Company, the
Selling Stockholders and the representatives of the Underwriters. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price. The trading price of the Company's Common
Stock could be subject to significant fluctuations in response to variations in
quarterly operating results, the gain or loss of significant orders, changes in
earning estimates by analysts, announcements of technological innovations or new
products by the Company or its competitors, general conditions in the software
and computer industries and other events or factors. In addition, the stock
market in general has experienced extreme price and volume fluctuations which
have affected the market price for many companies in industries similar or
related to that of the Company and which have been unrelated to the operating
performance of these companies. These market fluctuations may adversely affect
the market price of the Company's Common Stock.
Anti-takeover Effects of Certificate of Incorporation, Bylaws and Delaware
Law. Upon the closing of this offering, the Company's Board of Directors will
have the authority to issue up to 2,000,000 shares of Preferred Stock and to
determine the price, rights, preferences, privileges and restrictions, including
voting rights, of those shares without any further vote or action by the
stockholders. The Preferred Stock could be issued with voting, liquidation,
dividend and other rights superior to those of the Common Stock. The rights of
the holders of Common Stock will be subject to, and may be adversely affected
by, the rights of the holders of any Preferred Stock that may be issued in the
future. The issuance of Preferred Stock, while providing desirable flexibility
in connection with possible acquisitions and other corporate purposes, could
have the effect of making it more difficult for a third party to acquire a
majority of the outstanding voting stock of the Company. The Company has no
current plans to issue any shares of Preferred Stock. Further, certain
12
<PAGE> 15
provisions of the Company's Amended and Restated Bylaws and of Delaware law
could delay or make more difficult a merger, tender offer or proxy contest
involving the Company. See "Description of Capital Stock."
Shares Eligible for Future Sale. Sales of a substantial number of shares
of Common Stock in the public market following this offering could adversely
affect the market price of the Common Stock. See "Management -- Employee Benefit
Plans," "Description of Capital Stock" and "Shares Eligible for Future Sale."
Uncertainty as to Use of Proceeds. The principal purposes of this offering
are to strengthen the Company's equity capital base, obtain additional working
capital, create a public market for the Common Stock, facilitate future access
by the Company to public capital markets and retire the Company's current income
tax liability to Xerox. The Company expects to use the net proceeds of the
offering for general corporate purposes, including working capital and expansion
of the Company's product development and sales, marketing and customer support
organizations. A portion of the net proceeds may also be used to acquire or
invest in complementary businesses, products or otherwise to obtain the right to
use complementary technologies which broaden or enhance the Company's current
product offerings. There are no current agreements or negotiations with respect
to any acquisitions, investments or other transactions. As of this date of this
Prospectus, other than as set forth above, the Company has no specific plans as
to the use of the net proceeds from this offering, and will have broad
discretion in the application of the proceeds. Pending any such uses, the net
proceeds will be invested in interest-bearing securities. See "Use of Proceeds."
Immediate and Substantial Dilution. Purchasers of the Common Stock offered
hereby will suffer immediate and substantial dilution in the net tangible book
value per share of the Common Stock from the initial public offering price. To
the extent outstanding options to purchase the Company's Common Stock are
exercised, there will be further dilution. See "Dilution."
13
<PAGE> 16
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,837,500 shares of
Common Stock offered by the Company hereby, at an assumed initial public
offering price of $11.00 per share, are estimated to be approximately
$18,198,000 ($21,727,000 if the Underwriters' over-allotment option is exercised
in full), after deducting the estimated underwriting discount and estimated
offering expenses. In addition, the Company will retire its current tax
liability to Xerox in the amount of $1,382,100 for the period from the Company's
inception through December 31, 1995. See "Certain Transactions -- Tax Sharing
Agreement." The Company will not receive any proceeds from the sale of shares of
Common Stock by the Selling Stockholders. See "Principal and Selling
Stockholders."
The primary purposes of this offering are to strengthen the Company's
equity capital base, obtain additional working capital, create a public market
for the Common Stock and facilitate future access to public markets.
The Company intends to use the net proceeds of this offering primarily for
general corporate purposes, including working capital and expansion of the
Company's product development and sales, marketing and customer support
organizations. The amounts actually expended by the Company for working capital
purposes may vary significantly depending upon a number of factors, including
future revenues, the amount of cash generated by the Company's operations, the
success of the Company's expansion of its sales and distribution channels and
the progress of the Company's product development efforts.
In addition the Company may from time to time consider acquisitions of
complementary technologies, products or businesses that will broaden or enhance
the Company's current product offerings. However, the Company has no specific
agreements or commitments, and is not currently engaged in any negotiations for
any such acquisition. Pending such uses, the net proceeds will be invested in
short-term, interest-bearing, investment grade securities. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operation -- Liquidity and Capital Resources."
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain any future earnings to finance
the growth and development of its business and therefore does not anticipate
paying any cash dividends in the foreseeable future. Under the terms of the
Company's bank line of credit, the Company may not pay any dividends on its
capital stock without the bank's prior written consent. See Note 4 of Notes to
Consolidated Financial Statements.
14
<PAGE> 17
CAPITALIZATION
The following table sets forth at June 30, 1996 (i) the actual
capitalization of the Company after giving effect to the 3-for-1 split of the
Company's Common Stock, (ii) the pro forma capitalization of the Company after
giving effect to the conversion, on a 1.19 to 1 basis prior to giving effect to
the stock split, of all outstanding shares of Series A Redeemable Preferred
Stock into Common Stock upon the closing of this offering and the change in the
authorized number of shares of Preferred Stock and Common Stock and (iii) the
pro forma capitalization of the Company as adjusted to give effect to the sale
of the Common Stock offered by the Company hereby at an assumed initial public
offering price of $11.00 per share (after deducting estimated underwriting
discount, estimated offering expenses and payment to Xerox of the Company's
current income tax liability in the amount of $1.4 million for the period from
inception through December 31, 1995).
<TABLE>
<CAPTION>
JUNE 30, 1996
--------------------------------
ACTUAL PRO FORMA AS ADJUSTED
------ --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Obligations under capital leases, less current portion(1)..... $ 145 $ 145 $ 145
------ ------ ------
Series A Redeemable Preferred Stock, $.001 par value,
2,000,000 shares authorized, issued and outstanding actual,
no shares issued and outstanding pro forma and as
adjusted(2)................................................. 1,417 -- --
Stockholders' equity:
Preferred Stock, $.001 par value, 2,000,000 shares
authorized, no shares issued and outstanding, pro forma
and as adjusted.......................................... -- -- --
Common Stock, $.001 par value, 3,000,000 shares authorized
1,397,157 shares issued and outstanding actual;
30,000,000 shares authorized, 8,537,157 shares issued and
outstanding pro forma, and 10,374,657 shares issued and
outstanding as adjusted(3)............................... 1 8 10
Additional paid-in capital.................................. 557 1,967 18,781
Deferred compensation....................................... (406) (406) (406)
Retained earnings........................................... 824 824 824
------ ------ ------
Total stockholders' equity............................... 976 2,393 19,209
------ ------ ------
Total capitalization................................ $2,538 $ 2,538 $19,354
====== ====== ======
</TABLE>
- ---------------
(1) See Note 5 of Notes to Consolidated Financial Statements.
(2) See Note 6 of Notes to Consolidated Financial Statements.
(3) Excludes (i) 373,368 shares of Common Stock issuable upon the exercise of
options outstanding as of June 30, 1996 with a weighted average exercise
price of $.37 per share, and (ii) an aggregate of 654,225 shares of Common
Stock available as of June 30, 1996 for future grant under the Company's
equity incentive plans. See "Management -- Employee Benefit Plans" and Note
7 of Notes to Consolidated Financial Statements.
15
<PAGE> 18
DILUTION
The pro forma net tangible book value of the Company as of June 30, 1996,
was approximately $1,965,000, or $.23 per share of Common Stock. Pro forma net
tangible book value per share is determined by dividing the amount of the
Company's tangible net worth (total tangible assets less total liabilities) by
the number of shares of Common Stock outstanding, after giving effect to the
anticipated conversion of all outstanding shares of Series A Redeemable
Preferred Stock into Common Stock upon the closing of this offering. After
giving effect to the sale by the Company of 1,837,500 shares of Common Stock
offered hereby at an assumed initial public offering price of $11.00 per share
(after deducting estimated underwriting discounts, estimated offering expenses
and payment to Xerox of the Company's current income tax liability in the amount
of $1,382,100 for the period from inception through December 31, 1995), and the
application of the estimated net proceeds therefrom, the pro forma net tangible
book value, as adjusted, of the Company as of June 30, 1996 would have been
approximately $18,781,000, or $1.81 per share based on 10,374,657 shares of
Common Stock to be outstanding after the offering. This represents an immediate
increase in such pro forma net tangible book value of $1.58 per share to
existing stockholders and an immediate dilution of $9.19 per share to new
investors purchasing shares of Common Stock in this offering. The following
table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................. $11.00
Pro forma net tangible book value per share as of June 30,
1996........................................................... $ .23
Increase in pro forma net tangible book value per share
attributable to new investors.................................. 1.58
------
Pro forma net tangible book value per share after this
offering....................................................... 1.81
------
Dilution per share of Common Stock to new investors.............. $ 9.19
======
</TABLE>
The following table summarizes on a pro forma basis as of June 30, 1996,
the differences between the number of shares purchased from the Company,
assuming conversion of all outstanding shares of Preferred Stock into Common
Stock, the total consideration paid and the average price paid per share by the
existing holders of Common Stock and by the new investors at an assumed initial
public offering price of $11.00 per share (before deduction of estimated
underwriting discounts and estimated offering expenses):
<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED(1) CONSIDERATION(1) AVERAGE
-------------------- --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE(1)
---------- ------- ----------- ------- ------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(2)....... 8,537,157 82% $ 118,462 1% $ .01
New investors(2)............... 1,837,500 18 20,212,500 99% 11.00
------- ----- -------- ---- -
Total.......................... 10,374,657 100% $20,330,962 100%
========== === ========== ===
</TABLE>
- ---------------
(1) Assuming the exercise of options to purchase 373,368 shares of the Company's
Common Stock outstanding, at June 30, 1996 after the offering: (i) shares
purchased by existing stockholders would total 8,910,525 (approximately 83%
of total shares purchased) and shares purchased by new investors will total
1,837,500 (approximately 17% of total shares purchased); (ii) consideration
paid by existing stockholders would amount to $256,608 (approximately 1% of
total consideration paid) and consideration paid by new investors would
total $20,212,500 (approximately 99% of total consideration paid); and
(iii) average price per share paid by existing stockholders would equal
$.03 and average price per share paid by new investors will equal $11.00.
(2) Sales by the Selling Stockholders in this offering will reduce the number of
shares held by existing stockholders to 8,074,657 shares or approximately
78% of the total shares of Common Stock outstanding after this offering and
will increase the number of shares held by new investors to 2,300,000 shares
or approximately 22% of the total shares of Common Stock outstanding after
this offering. Assuming the exercise of options to purchase 373,368 shares
of
16
<PAGE> 19
the Company's Common Stock outstanding at June 30, 1996, after the offering,
sales by the Selling Stockholders in this offering would cause such
percentages to be 79% and 21%, respectively.
The foregoing tables and calculations assume no exercise of options
outstanding as of June 30, 1996. At June 30, 1996 there were 373,368 shares of
Common Stock reserved for issuance upon exercise of outstanding options at a
weighted average exercise price of approximately $.37 per share, and an
additional 654,225 shares were reserved for issuance in connection with future
grants under the 1995 Stock Incentive Plan. To the extent that outstanding
options are exercised or shares reserved for future grant of options under the
1995 Stock Incentive Plan are issued, there will be further dilution to new
investors. See "Management -- Employee Benefit Plans" and Note 7 of Notes to
Consolidated Financial Statements.
17
<PAGE> 20
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data presented below should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
and notes thereto included elsewhere in this Prospectus. The consolidated
statement of income data for each of the three years in the period ended
December 31, 1995 and the consolidated balance sheet data at December 31, 1994
and 1995 are derived from the consolidated financial statements audited by Ernst
& Young LLP, independent auditors, which are included elsewhere in this
Prospectus. The consolidated statement of income data for the year ended
December 31, 1992 and the consolidated balance sheet data at December 31, 1992
and 1993 are also derived from consolidated financial statements audited by
Ernst & Young LLP which are not included in this Prospectus. The consolidated
statements of income for the six-month periods ended June 30, 1995 and 1996 and
the consolidated balance sheet data at June 30, 1996 are derived from unaudited
consolidated financial statements. In the opinion of management, the unaudited
consolidated financial statements have been prepared on the same basis as the
audited consolidated financial statement and contain all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of the
Company's results of operations for such periods and financial condition at such
dates. The results of operations for the six months ended June 30, 1996 are not
necessarily indicative of the results to be expected for the full year or future
periods.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
----------------------------------------- ------------------
1992(1) 1993 1994 1995 1995 1996
------- ------- ------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA(2):
Revenues:
Initial license fees......................................... $ 585 $ 1,980 $ 4,426 $ 6,299 $ 2,492 $ 3,503
Annual renewal license and support fees...................... 628 980 1,521 1,942 894 1,100
Services and other........................................... 354 531 1,224 2,271 778 1,747
------ ------ ------ ------- ------ ------
Total revenues......................................... 1,567 3,491 7,171 10,512 4,164 6,350
------ ------ ------ ------- ------ ------
Cost of revenues:
Initial license fees......................................... 24 145 273 351 98 314
Annual renewal license and support fees...................... 149 217 267 369 179 245
Services and other........................................... 63 77 192 424 179 321
------ ------ ------ ------- ------ ------
Total cost of revenues................................. 236 439 732 1,144 456 880
------ ------ ------ ------- ------ ------
Gross profit................................................... 1,331 3,052 6,439 9,368 3,708 5,470
------ ------ ------ ------- ------ ------
Operating expenses:
Research and development..................................... 408 401 1,045 1,748 819 1,085
Selling and marketing........................................ 581 935 2,765 4,415 1,866 3,249
General and administrative................................... 610 996 1,275 1,520 733 736
------ ------ ------ ------- ------ ------
Total operating expenses............................... 1,599 2,332 5,085 7,683 3,418 5,070
------ ------ ------ ------- ------ ------
Income (loss) from operations.................................. (268) 720 1,354 1,685 290 400
Interest income (expense), net................................. (1) (23) (9) 5 9 16
------ ------ ------ ------- ------ ------
Income before provision (credit) for income taxes.............. (269) 697 1,345 1,690 299 416
Provision (credit) for income taxes............................ (95) 284 633 638 111 170
------ ------ ------ ------- ------ ------
Net income (loss).............................................. $ (174) $ 413 $ 712 $ 1,052 $ 188 $ 246
====== ====== ====== ======= ====== ======
Pro forma net income (loss) per share(3)....................... $ (.02) $ .06 $ .09 $ .13 $ .02 $ .03
====== ====== ====== ======= ====== ======
Shares used to compute pro forma net income (loss) per
share(3)..................................................... 7,290 7,290 8,256 8,292 8,256 8,891
====== ====== ====== ======= ====== ======
Supplemental pro forma net income (loss) per share(4).......... $ (.02) $ .06 $ .08 $ .12 $ .02 $ .03
====== ====== ====== ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------- JUNE 30,
1992 1993 1994 1995 1996
------ -------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA(2):
Cash and cash equivalents................................................. $ 1 $ 112 $ 584 $ 1,271 $ 1,466
Working capital (deficit) (319) 84 537 1,353 1,040
Total assets.............................................................. 744 1,805 4,209 6,289 7,102
Obligations under capital leases, less current portion.................... 10 18 20 99 145
Series A Redeemable Preferred Stock....................................... 252 585 918 1,251 1,417
Total stockholders' equity (deficit)...................................... (388) (308) 71 856 976
</TABLE>
- ---------------
(1) The Company was incorporated on October 18, 1991, and had insignificant
commercial activities from inception through December 31, 1991.
(2) See Note 9 of Notes to Consolidated Financial Statements for information
concerning transactions with affiliates.
(3) See Note 1 of Notes to Consolidated Financial Statements for information
concerning the computation of pro forma net income per share.
(4) Assumes the repayment of the current income tax payable to affiliate out of
the proceeds of this offering, and assumes as outstanding the pro forma
shares outstanding plus 125,645 shares of the shares being offered by the
Company hereby which represent the shares deemed to be sold to fund such
repayment. See "Use of Proceeds" and Note 1 of Notes to Consolidated
Financial Statements.
18
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company's revenues and results of operations are difficult to forecast
and could differ materially from those discussed in the forward-looking
statements contained in this Prospectus as a result of a number of factors,
including, without limitation, those discussed under "Risk Factors" above.
OVERVIEW
Document Sciences develops, markets and supports a family of document
automation software and services used in high volume electronic publishing
applications. The Company's revenues are divided into three categories: initial
license fees, annual renewal license and support fees, and services and other
revenues. Initial license fees are comprised principally of license fees for the
first year of use of the Company's products by end user customers. Annual
renewal license and support fees are comprised principally of mandatory fees
paid by customers annually for continued use and support of the licensed
products. Services and other revenues are comprised principally of fees for
consulting, application development and training services performed by the
Company as well as fees received from Xerox in connection with the sale of
certain Xerox printer products. The Company recognizes revenue in accordance
with AICPA Statement of Position on Software Revenue Recognition No. 91-1.
Initial license revenue is recognized upon shipment of the product to customers
if no significant Company obligations remain and collection of the receivable is
deemed probable. The portion of the initial license revenue which represents the
software support for the first year is deferred and recognized ratably over the
contract period. Annual renewal license and support revenue is deferred and
recognized ratably over the contract period. Revenues from commissions paid by
Xerox in connection with the sale of Xerox printer products are recognized upon
installation of the printer products. Revenues generated from consulting and
training services are recognized as the related services are performed. See Note
1 of Notes to Consolidated Financial Statements.
Revenues from the Company's CompuSet software and related products
comprised approximately 100%, 100%, 97% and 85% of initial license fees for
years 1993, 1994, 1995 and the first half of 1996, respectively. The Company
expects that its CompuSet products will continue to account for a substantial
majority of initial license fee revenue for the foreseeable future.
The Company's business has experienced and is expected to continue to
experience seasonality, in part due to customer purchasing patterns and the
Company's expense patterns. The Company believes that fourth quarter revenues
are positively impacted by year-end capital purchases by large corporate
customers, and strong fourth quarter sales of printers by Xerox (which may
generate sales of the Company's products, as well as commissions to the
Company), as well as the Company's sales compensation plans. These seasonal
factors typically result in fourth quarter revenues being substantially higher
than revenues in each of the preceding three quarters, as well as being higher
than revenues in each of the first two quarters of the next year. In addition, a
significant amount of the Company's revenues occur predominantly in the third
month of each fiscal quarter and tend to be concentrated in the latter half of
that third month.
The Company has substantially increased expenditures in support of its
strategy to expand its global marketing, sales and customer support
infrastructure in order to expand the market for the Company's products by
providing direct sales and support services and increased channel distribution
throughout the major markets of the world. Through this expansion, the Company
hopes to lessen its dependence on Xerox Corporation and certain Xerox
affiliates. In addition, the Company's strategy is to increase both its product
offerings and markets through marketing, sales and distribution, and its product
development relationships with other companies. The Company intends to increase
the number of these strategic relationships as well as form alliances with
system integrators and consultants. Whether the Company can successfully
generate its own sales leads,
19
<PAGE> 22
introduce new products and enter into new markets will depend on its ability to
expand its direct sales and support services, expand its indirect channel
distribution, and increase its relationships and alliances with other companies.
As a result of its planned expansion, the Company has and will continue to incur
significant costs to build such corporate infrastructure ahead of anticipated
revenues, and any failure to achieve growth in revenues would have a material
adverse affect on the Company's business, operating results and financial
condition. See "Risk Factors -- Expansion of Sales and Distribution Channels."
The license of the Company's software products is often an enterprise-wide
decision by prospective customers and generally requires the Company to engage
in a lengthy sales cycle, typically between three and twelve months, to provide
a significant level of education to prospective customers regarding the use and
benefits of the Company's projects. In addition, the implementation by customers
of the Company's products involves a significant commitment of resources by such
customers over an extended period of time and is commonly associated with
substantial customer reengineering efforts. For these and other reasons, the
sales and customer implementation cycles are subject to a number of significant
delays over which the Company has little or no control. Delay in the sale or
customer implementation of a limited number of license transactions could have a
material adverse effect on the Company's business, operating results and
financial condition.
The Company sells its products principally through a direct sales force
domestically, and internationally principally through distributors and value
added resellers ("VARS") and, to a lesser extent, through its direct sales
force. The Company derived approximately 14%, 26%, 42% and 30% of its total
revenues from export sales, including sales through its foreign subsidiary, in
1993, 1994, 1995 and the first half of 1996, respectively. International
revenues reflect the start-up and expansion of the Company's international
operations. The Company's international business is subject to various risks
common to international activities, including currency fluctuations. Revenues
and expenses of the Company's international operations are translated at the
average exchange rate in effect during the period. Although to date exchange
rate fluctuations have not had a significant impact on the Company, fluctuations
in the value of the currencies in which the Company conducts its business
relative to the U.S. dollar could cause currency transaction gains and losses in
future periods. Such fluctuations could affect the Company's operating results
and financial condition. The Company does not currently engage in currency
hedging transactions. See Notes 3 and 9 of Notes to Consolidated Financial
Statements.
The Company and Xerox maintain a strategic marketing alliance agreement
under which the parties have agreed to pay each other fees on referrals that
lead to the successful licensing or sales of each other's products. The
Company's revenues from the strategic marketing alliance, principally
commissions from sales of Xerox printers, were $490,400, $752,000 and $586,600
in 1994, 1995 and the first half of 1996, respectively, and payments to Xerox
under this agreement were $113,500, $167,200 and $67,300 in 1994, 1995 and the
first half of 1996, respectively. The commissions received by the Company from
sales of Xerox printers under the strategic marketing alliance have little
associated costs, have had a high degree of inconsistency from quarter to
quarter and are difficult to estimate. Failure to continue to receive such
commissions would have a material adverse effect on the Company's business,
operating results and financial condition. In addition, the Company has entered
into distributorship agreements with various Xerox foreign affiliates to re-
market the Company's products internationally. The Company's revenues from such
distributorship agreements related to the licensing, maintenance and support of
the Company's products were $1.3 million, $3.1 million and $675,900 in 1994,
1995 and the first half of 1996, respectively. When initial licenses of the
Company's software products are installed with Xerox products, from time to time
Xerox bills and collects for the licensed software on behalf of the Company.
Funds collected and remitted by Xerox to the Company for these end user software
products were $835,200 in 1994, $1.2 million in 1995 and $821,600 in the first
half of 1996. See Note 9 of Notes to Consolidated Financial Statements.
20
<PAGE> 23
RESULTS FROM OPERATIONS
The following table sets forth the percentage of total revenues for certain
items in the Company's consolidated statement of income for the periods
indicated:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------ --------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues:
Initial license fees.............................. 57 % 62 % 60 % 60 % 55 %
Annual renewal license and support fees........... 28 21 18 21 17
Services and other................................ 15 17 22 19 28
--- --- --- --- ---
Total revenues............................ 100 100 100 100 100
--- --- --- --- ---
Cost of revenues:
Initial license fees.............................. 4 3 3 3 5
Annual renewal license and support fees........... 6 4 4 4 4
Services and other................................ 3 3 4 4 5
--- --- --- --- ---
Total cost of revenues.................... 13 10 11 11 14
--- --- --- --- ---
Gross profit........................................ 87 90 89 89 86
--- --- --- --- ---
Operating expenses:
Research and development.......................... 11 14 17 20 17
Selling and marketing............................. 27 39 42 45 51
General and administrative........................ 28 18 14 17 12
--- --- --- --- ---
Total operating expenses.................. 66 71 73 82 80
--- --- --- --- ---
Income from operations.............................. 21 19 16 7 6
Interest income (expense), net...................... (1 ) -- -- -- --
--- --- --- --- ---
Income before provision for income taxes............ 20 19 16 7 6
Provision for income taxes.......................... 8 9 6 2 2
--- --- --- --- ---
Net income................................ 12 % 10 % 10 % 5 % 4 %
=== === === === ===
</TABLE>
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
Revenues
Total revenues were $3.5 million in 1993, $7.2 million in 1994, and $10.5
million in 1995, representing increases from the prior year of 105% in 1994 and
47% in 1995. The increases were primarily attributable to increases in revenues
from initial licenses of software and growth in services and other revenue. In
addition, the Company's revenues from export sales and sales through its foreign
subsidiary increased from 14% of total revenues in 1993 to 26% in 1994 and 42%
in 1995.
Initial license fees. Initial license revenues increased 124% from $2.0
million in 1993 to $4.4 million in 1994 and 42% to $6.3 million in 1995,
representing 57%, 62% and 60% of total revenues in the respective years. The
increase in initial licenses of software was due principally to sales to new
customers and expansion of the Company's indirect distribution channel,
especially the value added reseller channel in Europe, and to a lesser extent to
the release in October 1993 of the Windows-based CompuSeries products.
Annual renewal license and support fees. Revenues from annual renewal
license and support fees increased 55% from $980,700 in 1993 to $1.5 million in
1994, and by 28% to $1.9 million in 1995. The increase was principally due to
expansion in the installed base of the users of the Company's software products.
As a percentage of total revenues, annual renewal license and support fees have
decreased from approximately 28% in 1993 to 21% in 1994 and 18% in 1995. This
decrease is principally due to the strong increase in initial license revenues
in 1994 and 1995 and, to a lesser extent, to licenses of CompuSeries products in
1994 and 1995 when such products did not carry a follow-on annual license
obligation.
21
<PAGE> 24
Services and other. Revenues from services and other increased 131% from
$530,900 in 1993 to $1.2 million in 1994, and 86% to $2.3 million in 1995 and
have increased as a percentage of total revenues from 15% in 1993 to 17% in 1994
and 22% in 1995. The increase in revenues was the result of increasing demand
from customers for consulting services due principally to the increased number
of new customer licenses of the Company's software generating increased demand
for services, and the increase in commissions from $198,600 in 1993 to $490,400
and $752,000 in 1994 and 1995, respectively, under the strategic marketing
alliance from the sale of Xerox printers.
Cost of Revenues
Total cost of revenues have remained relatively constant at 10% to 13% of
total revenues during the last three fiscal years.
Cost of initial license fees. Cost of initial license fees of software
includes documentation, reproduction costs, product packaging, packaging design,
product media, employment costs for training, installation and distribution
personnel. The cost of initial licenses has ranged between 5% to 7% of initial
license revenues during the last three years. The cost of third party software
has been insignificant to date; however, these costs will increase in the future
to the extent that the Company integrates third party software into its Document
Library software products and to the extent that the Document Library software
products become a significant component of initial license revenue. Also
included in the cost of initial license revenues in 1993, 1994 and 1995 was
amortization of capitalized software development costs of $36,600, $103,500 and
$136,100, respectively.
Cost of annual renewal license and support fees. Cost of annual renewal
license and support fees consists principally of the employment-related costs
for the Company's technical support staff, which performs technical software
support services. These costs have increased on an absolute dollar basis from
1993 to 1995 due principally to increases in the Company's technical support
staff. As a percentage of annual renewal license and support fees revenues,
these costs were 22%, 18% and 19% in 1993, 1994 and 1995, respectively,
reflecting significantly increased technical support staff in 1995.
Cost of services and other. Cost of services and other consists
principally of the employment-related costs for the Company's staff of product
consultants and trainers. There are little or no costs related to commissions
from the sale of Xerox printers under the strategic marketing alliance. These
costs have ranged between 15% and 19% of services and other revenues during the
last three years. The increase in these costs in absolute dollars and as a
percentage of services and other revenues resulted principally from the
additional staffing required to perform the Company's professional services.
Operating Expenses
Research and development. Research and development expenses consist
primarily of personnel costs associated with developing new products, enhancing
existing products, testing software products and developing product
documentation as well as other costs directly related to product development.
The Company expenses all costs for research and development of new products
until technological feasibility has been assured. Thereafter, costs of
production are capitalized until general release of the product. The Company
capitalized $74,900, $164,000 and $291,000 in 1993, 1994 and 1995, respectively.
The capitalized costs of software production are amortized using the greater of
the amount computed using the ratio of current product revenues to estimated
total product revenues or the straight-line method over the remaining estimated
economic lives of the products. Research and development expenses increased 161%
from $401,000 in 1993 to $1.0 million in 1994 and 67% to $1.7 million in 1995,
representing 11%, 14% and 17% of total revenues in these periods, respectively.
The increase in these expenses over this period resulted principally from the
increase in the number of engineering and technical employees and related costs.
Engineering and technical employees increased from 6 in 1993 to 15 in 1994 to 22
in 1995.
22
<PAGE> 25
Selling and marketing. Selling and marketing expenses consist primarily of
salaries, commissions, marketing programs and related costs for pre- and
post-sales activity. These expenses increased 196% from $935,000 in 1993 to $2.8
million in 1994 and 60% to $4.4 million in 1995, representing 27%, 39% and 42%
of total revenues in these years, respectively. The growth of these expenses was
due principally to increases in domestic sales and sales support personnel and
related costs, as well as to increases in commissions associated with increased
revenues and increases in expenses for seminars, trade shows, advertising and
other marketing programs. The increase in these expenses as a percentage of
total revenues reflects additional personnel, from 12 in 1993 to 20 in 1994 and
46 in 1995, and expanded marketing programs necessary to address new sales
opportunities and to support an expanded customer base. See "Risk Factors --
Expansion of Sales and Distribution Channels."
General and administrative. General and administrative expenses consist of
employment-related costs for finance, administration and human resources, and
general corporate management and services. These expenses increased 28% from
$996,000 in 1993 to $1.3 million in 1994, and 19% to $1.5 million in 1995,
representing 28%, 18% and 14% of total revenues in 1993, 1994 and 1995,
respectively. The increase in these expenses in absolute dollars from 1993 to
1995 was due principally to growth in the Company's finance and administrative
operations necessary to support business growth. The decrease as a percentage of
total revenues reflects the benefits of economies of scale.
Interest Income (Expense), Net
Interest income (expense), net is primarily composed of interest income
from cash and cash equivalents, offset by financing charges related to equipment
leases and other debt. The Company generally invests cash not required for
immediate working capital needs in United States Government treasury bills,
money market accounts and other investment-grade securities. The amount of
interest income fluctuates based upon the amount of funds available for
investment and the prevailing interest rates.
Provision for Income Taxes
The Company's effective tax rate was 41% in 1993, 47% in 1994 and 38% in
1995. The effective tax rates were based on the federal and state statutory
rates. The effective income tax rate for 1994 increased as a result of operating
losses incurred by the Company's foreign subsidiary. The tax benefits
attributable to these losses cannot be recognized as the realization of such
benefits is uncertain. From its inception to December 31, 1995, the Company's
taxes were included in the consolidated tax returns of Xerox. For reporting
purposes, the Company recognizes income tax expense on pretax income at the tax
rates in effect as if the Company were filing tax returns on a stand-alone
basis. The Company intends to repay its income tax liability to Xerox from the
proceeds of the initial public offering. At such time as Xerox owns less than
80% of the Common Stock of the Company, the Company will not be part of the
consolidated tax returns of Xerox. See "-- Liquidity and Capital Resources,"
"Certain Transactions" and Note 8 of Notes to Consolidated Financial Statements.
SIX MONTHS ENDED JUNE 30, 1995 AND JUNE 30, 1996
Revenues
Total revenues increased 53% from $4.2 million in the first half of 1995 to
$6.3 million for the same period in 1996. Revenues from initial license fees,
annual license renewal and support fees and services and other increased 41%,
23% and 125%, respectively, from the first half of 1995 to the first half of
1996, representing 55%, 17% and 28% respectively, of total revenues. This growth
in revenues reflected increases in licenses of the Company's software products
to new customers and additional licenses to existing customers, annual renewal
license fees from an expanded installed customer base, increases in customer
requirements for consulting services, and the Company's increased focus on
providing such services. The Company also had significantly increased revenues
23
<PAGE> 26
from commissions from the sale of Xerox printers, which are included in services
and other, from $157,700 in the first half of 1995 to $586,600 for the same
period in 1996. In the comparative periods, the Company's total revenues from
Xerox and affiliates of Xerox declined from $1.5 million in the first half of
1995 to $1.4 million in the first half of 1996, due principally to substantially
reduced sales through Fuji Xerox Co. Ltd. in Australia and Xerox Canada Ltd. in
Canada and, to a lesser extent, to reduced European revenues from Xerox
affiliates. These decreases were substantially offset by the increased revenues
from commissions on sales of Xerox printers. In addition, the Company's revenues
from European VARs not affiliated with Xerox increased substantially in the
first half of 1996 from the first half of 1995. The Company also recognized
revenues from the initial licenses of its DLS and DVS products in the first half
of 1996.
Cost of Revenues
Total cost of revenues increased from $456,900 in the first half of 1995 to
$879,800 for the same period in 1996, representing 11% and 14% of total revenues
in the respective periods. These costs increased principally as a result of
expansion of technical support personnel necessary to support the expansion of
the installed customer base of the Company's software products as well as to
increase the level and quality of the technical support provided.
Cost of initial license fees. The cost of initial licenses increased from
$98,300 in the first half of 1995 to $313,700 for the same period in 1996,
representing approximately 4% and 9% of initial license revenues in the
respective periods. This increase was principally due to the changes in mix and
initial shipments of the DLS software, which has higher costs due to the use of
third party software.
Cost of annual renewal license and support fees. These costs increased
from $179,700 in the first half of 1995 to $244,600 in the same period in 1996,
representing approximately 20% and 22%, respectively, of annual renewal license
and support fee revenues in the comparative periods. These costs increased
principally as a result of expansion of technical support personnel necessary to
support the expansion of the installed customer base of the Company's software
products and to increase the level and quality of the technical support
provided.
Cost of services and other. These costs increased from $178,900 in the
first half of 1995 to $321,600 for the same period in 1996, representing 23% and
18%, respectively, of services and other revenues in the respective periods. The
increase in absolute dollars resulted principally from expansion of the
consulting personnel and the increase in the generally high levels of salaries
of the consulting personnel. The decrease as a percentage of related revenue was
the result of the higher percentage of commissions from the sale of Xerox
printers relative to the services revenue, since the cost of services and other
does not include any material expense associated with commissions from the sale
of Xerox printers. The cost of services for both the first half of 1995 and 1996
was 28% of services revenue.
Operating Expenses
Research and development. Research and development expenses increased from
$819,400 in the first half of 1995 to $1.1 million for the same period in 1996,
representing 20% and 17% of total revenues in the respective half year periods.
The increase in absolute dollars was the result of increases in the number of
engineering and technical employees and related costs which the Company incurred
to support the increased focus on product enhancements and product design.
Selling and marketing. These expenses increased from $1.9 million in the
first half of 1995 to $3.2 million for the same period in 1996, representing 45%
and 51%, respectively, of total revenues in the respective periods. The increase
was due to higher personnel costs as a result of an increase in headcount from
27 to 37, higher travel costs, expanded marketing activities and the design and
implementation of professional services methodology, all in support of the
Company's strategy to
24
<PAGE> 27
expand its worldwide marketing, sales and customer support infrastructure. See
"Risk Factors -- Expansion of Sales and Distribution Channels."
General and administrative. These expenses decreased from $732,300 in the
first half of 1995 to $735,600 for the same period in 1996, representing 17% and
12%, respectively, of total revenue in the respective periods. These costs
remained relatively constant in absolute dollars and decreased significantly as
a percentage of total revenues reflecting the benefits of economies of scale.
SELECTED QUARTERLY OPERATING RESULTS
The following tables set forth certain unaudited consolidated financial
information by quarter for each of the six quarters through the quarter ended
June 30, 1996. This quarterly information has been prepared on a consistent
basis with the audited consolidated financial statements appearing elsewhere in
this Prospectus and, in the opinion of management, all necessary adjustments,
consisting only of normal recurring adjustments, have been included in the
amounts stated below to present fairly the unaudited quarterly results when read
in conjunction with the audited consolidated financial statements and related
notes thereto. The operating results for any quarter are not necessarily
indicative of results for any future period. See "Risk Factors -- Uncertainty of
Future Operating Results; Fluctuations in Quarterly Operating Results."
25
<PAGE> 28
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------
1995 1996
-------------------------------------------- -------------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30
------- ------- -------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Initial license fees......................... $ 1,287 $ 1,205 $1,238 $ 2,568 $ 1,564 $ 1,939
Annual renewal license and support fees...... 430 464 514 534 545 555
Services and other........................... 273 505 539 954 579 1,168
------ ------ ------ ------ ------ ------
Total revenues....................... 1,990 2,174 2,291 4,056 2,688 3,662
------ ------ ------ ------ ------ ------
Cost of revenues:
Initial license fees......................... 55 43 34 217 86 228
Annual renewal license and support fees...... 82 97 86 104 134 111
Services and other........................... 75 104 115 130 139 182
------ ------ ------ ------ ------ ------
Total cost of revenues............... 212 244 235 451 359 521
------ ------ ------ ------ ------ ------
Gross profit................................... 1,778 1,930 2,056 3,605 2,329 3,141
------ ------ ------ ------ ------ ------
Operating expenses:
Research and development..................... 373 446 512 417 506 579
Selling and marketing........................ 803 1,063 1,058 1,491 1,462 1,787
General and administrative................... 342 391 387 401 341 395
------ ------ ------ ------ ------ ------
Total operating expenses............. 1,518 1,900 1,957 2,309 2,309 2,761
------ ------ ------ ------ ------ ------
Income from operations......................... 260 30 99 1,296 20 380
Interest income (expense), net................. 2 7 -- (4) 5 11
------ ------ ------ ------ ------ ------
Income before provision for income taxes....... 262 37 99 1,292 25 391
Provision for income taxes..................... 97 14 37 490 9 161
------ ------ ------ ------ ------ ------
Net income..................................... $ 165 $ 23 $ 62 $ 802 $ 16 $ 230
====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------
1995 1996
-------------------------------------------- -------------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30
------- ------- -------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
AS A PERCENTAGE OF TOTAL REVENUES:
Revenues:
Initial license fees......................... 65% 56% 54% 63% 58% 53%
Annual renewal license and support fees...... 21 21 22 13 20 15
Services and other........................... 14 23 24 24 22 32
------ ------ ------ ------ ------ ------
Total revenues....................... 100 100 100 100 100 100
------ ------ ------ ------ ------ ------
Cost of revenues:
Initial license fees......................... 3 2 1 5 3 6
Annual renewal license and support fees...... 4 4 4 3 5 3
Services and other........................... 4 5 5 3 5 5
------ ------ ------ ------ ------ ------
Total cost of revenues............... 11 11 10 11 13 14
------ ------ ------ ------ ------ ------
Gross profit................................... 89 89 90 89 87 86
------ ------ ------ ------ ------ ------
Operating expenses:
Research and development..................... 19 20 22 10 19 16
Selling and marketing........................ 40 49 46 37 54 49
General and administrative................... 17 18 17 10 13 11
------ ------ ------ ------ ------ ------
Total operating expenses............. 76 87 85 57 86 76
------ ------ ------ ------ ------ ------
Income from operations......................... 13 2 5 32 1 10
Interest income (expense), net................. -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Income before provision for income taxes....... 13 2 5 32 1 10
Provision for income taxes..................... 5 1 1 12 -- 4
------ ------ ------ ------ ------ ------
Net income..................................... 8% 1% 4% 20% 1% 6%
====== ====== ====== ====== ====== ======
</TABLE>
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<PAGE> 29
The Company's total revenues and operating results can vary, sometimes
substantially, from quarter to quarter and are expected to vary significantly in
the future. The Company's revenues and operating results are difficult to
forecast. Future results will depend upon many factors, including the demand for
the Company's products, the level of product and price competition, the length
of the Company's sales cycle, the size and timing of individual license
transactions, the delay or deferral of customer implementations, the budget
cycles of the Company's customers, the Company's success in expanding its direct
sales force and indirect distribution channels, the timing of new product
introductions and product enhancements by the Company and its competitors, the
mix of products and services sold, levels of international sales, activities of
and acquisitions by competitors, the timing of new hires, changes in foreign
currency exchange rates, the ability of the Company to develop and market new
products and control costs, and general domestic and international economic
conditions. In addition, the Company's sales generally reflect a relatively high
amount of revenues per order, and the loss or delay of individual orders,
therefore, could have a significant impact on the revenues and quarterly
operating results of the Company. Moreover, the timing of license revenue is
difficult to predict because of the length of the Company's sales cycle, which
is typically three to twelve months from the initial customer contact. In
addition, a significant amount of the Company's revenues occur predominantly in
the third month of each fiscal quarter and tend to be concentrated in the latter
half of that third month.
The Company's business has experienced and is expected to continue to
experience seasonality, in part due to customer purchasing patterns and the
Company's expense patterns. The Company believes that fourth quarter revenues
are positively impacted by year-end capital purchases by large corporate
customers and strong fourth quarter sales of printers by Xerox (which may
generate sales of the Company's products), as well as the Company's sales
compensation plans. As reflected in the fourth quarter of 1995, these seasonal
factors have historically resulted in fourth quarter revenues being
substantially higher than revenues in the preceding three quarters, as well as
being higher than revenues in each of the first two quarters of the next year.
In addition, in the second and third quarters of 1995 and the first and second
quarters of 1996, the Company's operating profitability was substantially
dependent on commissions received from the sale of Xerox printers.
The Company's sales generally reflect a relatively high amount of revenues
per order. The loss or delay of individual orders, therefore, could have a more
significant impact on the revenues and quarterly results of the Company than on
those of companies with higher sales volumes and lower revenues per order. The
Company's software products generally are shipped as orders are received, and
revenues are recognized upon shipment of the products, provided no significant
vendor obligation exists and collection of the related receivable is deemed
probable. As a result, initial license revenues in any quarter are substantially
dependent on orders booked and shipped in that quarter. The timing of receipt of
initial license revenue is difficult to predict because of the length of the
Company's sales cycle, which is typically three to twelve months from the
initial contact. Because the Company's operating expenses are based on
anticipated revenue trends and because a high percentage of the Company's
expenses are relatively fixed, a delay in the recognition of revenue from a
limited number of initial license transactions could cause significant
variations in operating results from quarter to quarter and could result in
losses. To the extent such expenses precede, or are not subsequently followed
by, increased revenues, the Company's operating results would be materially
adversely affected. Further, the Company has experienced variability in quarter-
to-quarter operating expenses. This variability in research and development
expenses is due principally to the timing of completion of software development
projects and the allocation of the time of technical personnel who are
periodically assigned to such development projects. In addition, the Company's
selling and marketing expenses have increased significantly over the last six
quarters, reflecting a significant increase in the Company's sales, marketing
and customer support infrastructure designed to increase revenues. If such
revenue increase does not occur, the Company's operating results will be
materially adversely affected.
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<PAGE> 30
Due to the foregoing factors, revenues and operating results for any
quarter are subject to significant variation, and 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.
Further, it is possible that in some future quarter or quarters the Company's
operating results will be less than the expectations of public market analysts
and investors. In such event, the price of the Company's Common Stock would
likely be materially adversely affected.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since inception through cash flow
from operations, bank lines of credit and long-term capital leases. The Company
has a line of credit with a commercial bank under which the Company may borrow
up to a total of $750,000, secured by substantially all assets of the Company at
the bank's prime rate of interest plus 1%. The Company currently has no
borrowings outstanding under the line of credit. The Company has entered into a
letter of intent to replace such line of credit with a new line of credit from a
commercial bank under which the Company may borrow up to $2,500,000 at the
bank's prime rate plus one half percent. This line of credit will be secured by
substantially all assets of the Company.
The Company generated $90,000, $1.3 million, $1.2 million and $614,100 from
operations in 1993, 1994, 1995 and the first half of 1996, respectively. These
amounts are principally the result of income from operations and increases in
deferred revenue partially offset by growth in accounts receivable, due to
increased revenue. In addition, Xerox paid the Company's current income taxes of
$136,000, $653,700 and $591,400 in 1993, 1994 and 1995, respectively, which the
Company has not been required to settle in cash, which has positively affected
cash generated from operating activities in such periods. Beginning January 1,
1996, the Company will be responsible for the payment of its income taxes, which
will affect cash generated from operations. The Company's investing activities
used cash of $95,400 in 1993, $411,300 in 1994, $588,900 in 1995 and $391,800 in
the first half of 1996. The principal investments have been in purchases of
property and equipment and computer software costs. See "Use of Proceeds."
The Company's financing activities provided $27,200 in 1995 and $116,800 in
1993. In 1995, cash was provided by issuance of common stock pursuant to
exercise of stock options offset by payments of capital lease obligations. In
1993, cash was provided by borrowings under the Company's line of credit offset
by payments of capital lease obligations. In 1994, cash used for financing
activities was $374,400. In this period, cash was used to repay net borrowings
under the Company's line of credit and capital lease obligations. In the first
half of 1996, cash used for financing activities was $27,600. In this period,
cash was used primarily to repay capital lease obligations.
At June 30, 1996, the Company had cash and cash equivalents of $1.5
million. The Company believes that the net proceeds from the sale of Common
Stock in this offering together with existing cash balances, anticipated cash
flow from operations, and its line of credit, will be sufficient to meet its
capital requirements for at least the next twelve months. The Company intends to
invest the Company's cash in excess of cash required for current operations in
short-term, investment grade securities.
28
<PAGE> 31
BUSINESS
Document Sciences Corporation develops, markets and supports a family of
document automation software products and services used in high volume
electronic publishing applications. Autograph, the Company's document automation
software architecture, enables personalized and customized publishing solutions
for many industries including insurance, managed healthcare, financial services,
telecommunications, manufacturing/distribution, government and commercial print
services. The Company's products enable an important form of communication
between organizations and customers by employing enterprise database assets to
produce high-quality documents that are ready to print on demand and distribute
in high volume. Additionally, the Company's core technology is being applied to
provide electronic document automation solutions for the Internet, intranets and
commercial on-line services. CompuSet, Autograph's flagship product, is licensed
by approximately 400 customers worldwide who collectively produce an estimated
one billion customized pages per month. The fully portable Autograph platform
enables cost-effective, just-in-time, on-demand, high volume publishing that is
fully automated, capable of quality document composition, and flexible for
end-user customization. The Company's products are used in a wide array of
computing environments from client/server to large computer systems.
INDUSTRY BACKGROUND
In today's highly competitive and cost conscious marketplace, document
automation is becoming increasingly critical to organizations with large numbers
of customer and document distribution needs. The Company believes producing and
processing business documents may cost up to 15% of a document intensive
organization's revenue. Document automation can reduce labor, inventory, and
distribution costs often found in other forms of publishing. For many companies,
the document is the primary manifestation of the company's products or services.
For example, insurance companies communicate to their policy holders principally
through their insurance policy documents. The insurance company's policy and
periodic premium bill represents its products and services. The production of
these documents through powerful document automation processes can dramatically
improve the company's image in the eyes of its customers. In addition, the role
of the document is becoming increasingly important in helping companies provide
new products and services to their customers. Examples are financial statements
that provide periodic performance reports, suggested investment strategies, and
highly personalized marketing messages integrated into the statements. Using
these documents as cross-marketing tools incorporating information from database
marketing and data mining processes can result in improved customer acquisition
and retention.
Many organizations that rely on documents to communicate with their
customers are seeking solutions which can provide highly customized and
personalized documents. Some markets require documents to be produced in large
quantities and with strong visual appeal. These organizations typically produce
large quantities of documents which are uniquely tailored to each individual
customer, such as insurance policies, financial statements, bills, and high
quality specialized direct mailings. Traditionally, these types of documents
have been created using a variety of in-house software systems augmented with
manual processes, which can be time consuming, costly and inflexible, and then
output to high speed and large volume electronic printers. Introduced by Xerox
and IBM in the late 1970s, electronic printers provide cost and productivity
advantages as well as the ability to produce robust documents in comparison to
the previous generation of high speed electromechanical impact printers.
Nevertheless, in markets requiring personalized and customized documents, high
volume electronic printers are often underutilized when not operated in
conjunction with document automation software.
To fully utilize electronic printers and economically produce documents,
organizations must address four processes: information creation, information
management, information formatting, and
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<PAGE> 32
information presentation and output. These processes, together with their
primary forms or functions, are shown below.
ELECTRONIC PUBLISHING PROCESS
[GRAPHIC]
Many organizations must manage these processes across a variety of
organizational units and computing systems. Companies producing documents in
large quantities must also consider the cost trade-offs between highly
customized and personalized documents versus reproducing standard documents.
Organizations seek to implement flexible document automation processes in order
to produce customized documents in large quantities without the high costs of
traditional production methods. Document automation enables cost effective
production of large volumes of highly personalized and customized documents,
often at production costs similar to mass produced standard documents.
Some organizations that have produced large quantities of customized and
personalized paper documents for communications and information distribution are
exploring alternative and emerging technologies. These emerging document
distribution technologies include CD-ROM, the Internet, intranets, and
commercial on-line services. For example, many organizations are replacing
printed internal documents with electronic postings on enterprise local area
networks (LANs) or intranets. In addition, many companies are beginning to
communicate externally through global electronic networks such as the Internet.
For example, according to a recent industry report, the worldwide installed base
of intranet servers is estimated to grow from 63,500 in 1995 to 8.8 million in
2000, and the worldwide installed base of intranet client browsers is estimated
to grow from 6.4 million in 1995 to 111.9 million in 2000. For some
applications, the cost of implementing and maintaining these document
distribution alternatives is offset by the elimination or reduction of
paper-based document production and distribution. In addition to cost savings,
these technologies enable organizations to provide higher quality and more
robust interactive documents than their paper based counterparts. These
technologies can lead to more effective communications and improved customer
satisfaction, retention, and acquisition.
The market for document automation software is growing rapidly as companies
recognize the need to increase document effectiveness through high quality
composition and assembly. Document automation capitalizes on the investments
companies have made in traditional mainframe and newer client/server computing
platforms. Growth in the paper-based portion of the market is also fueled by the
increasing popularity of lower-cost midrange electronic printers and the
continuing cost/performance improvements in computing and communications
technologies. Organizations are producing increasing amounts of data and
information and consequently are demanding more effective documents and
delivery. The improvements in effectiveness can result from customized and
personalized content, more robust documents, and improved forms of document
delivery. In addition, in many current and future applications, the fundamental
nature of the document is shifting from static paper-based documents to more
robust interactive electronic documents published on the Internet, intranets and
commercial on-line services.
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THE DOCUMENT SCIENCES SOLUTION
Document Sciences provides an integrated family of products and services
which address the enterprises need for document automation across mainframe and
client/server computing environments. The Company's software products and
services enable cost-effective composition and assembly of highly customized and
personalized documents rapidly and in very large quantities. The Company's
products comprise its Autograph document automation software architecture.
Document Sciences' products provide the following key business benefits for
a variety of document automation applications:
High Speed Personalization and Customization. The Company's products
enable large volumes of highly personalized and customized documents to be
composed and assembled faster than by interactive publishing methods and most
other types of current electronic publishing. For example, using CompuSet, more
than 50 complex personalized and customized pages per second can be composed and
assembled using data and information in corporate databases. The customer
satisfaction benefits of personalized and customized documents can be
substantial and can often provide the company's customers with a competitive
advantage.
Just-in-Time, On-Demand Processing. The Company's products are suited to
just-in-time, on-demand environments where customized and personalized documents
must be produced rapidly and in large quantities. Applications can be developed
which operate in both high-volume batch processing environments as well as
transaction initiated settings. Autograph's ability to support both environments
benefits the customer by providing the enterprise with a single document
automation solution which addresses on-demand publishing for both paper based
and electronic document distribution.
Portable, open and scaleable. The Company's software products operate
identically on a large number of computing and software operating systems, and
are easily migrated across heterogeneous computing environments. For example,
the Company's software products and applications operating on IBM mainframe
hardware and software products can be easily moved to industry standard Unix or
PC platforms with little or no modifications. In addition, Autograph supports
high speed electronic printers from Xerox, IBM, Siemens Nixdorf (which has
announced plans to sell its electronic printer business to OCE), and
Hewlett-Packard, which together account for a large majority of the world's
installed base.
Lower Cost. The Company's software products enable significant cost
savings over traditional forms of document development, production and
archiving. Due to their automation capabilities, the Company's products require
less labor for certain applications when compared to other types of electronic
publishing such as interactive or desktop publishing. The on-demand production
capabilities of Autograph help reduce storage, inventory and obsolescence costs.
Document archiving systems that utilize the Company's electronic viewing
products can achieve significant cost savings compared to paper, microfiche, and
microfilm forms of archiving.
THE DOCUMENT SCIENCES STRATEGY
The Company's objective is to be the leading worldwide supplier of document
automation software and services. Autograph, the Company's document automation
software architecture, enables many industries including insurance, managed
health care, financial services, telecommunications, government agencies and
commercial print service bureaus to provide high volume customized and
personalized communication for their customers. The Company's strategy includes
extending its technology leadership, leveraging its installed base of customers,
expanding its distribution channels, expanding professional services and
expanding into electronic documents including the Internet, intranets and
commercial on-line services. The Company expects to invest significantly in
sales, marketing, professional services and product development infrastructure.
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<PAGE> 34
Maintain and Extend Technology Leadership. The Company's technology
strategy is to continue to enhance its industry leading Autograph architecture
with the addition of new products, features, functions, and performance
improvements. The Company intends to enhance Autograph by extending
connectivity, support and compatibility with products and services provided by
complementary suppliers in the industry. The Company intends to continue porting
its software products to additional computing platforms as market needs develop.
Continuing investments will be made in graphical user interfaces for document
design, prototyping and system operation. The Company intends to extend and
modify its core document automation technology to provide support for paperless
document production and distribution. Paperless document production and
distribution include on-line viewing, customized documents prepared for
distribution on optical media such as CD-ROMs, and electronic documents accessed
and delivered via the Internet, intranets and commercial on-line services.
Leverage the Company's Installed Base. The Company has a large installed
base of customers within its targeted markets in the United States, Canada,
Europe, and Australia. In many cases, the Company's customers are expanding or
upgrading their document automation needs, which provides a market for
additional products from the Company. Recently introduced and planned products
and services can also be provided to the Company's current customers as
follow-on sales activities. The Company also intends to leverage this installed
base by utilizing it to facilitate the introduction of major new products into
the market, such as products and services for providing electronic document
distribution over the Internet, intranets and commercial on-line services. The
Company's strategy is to increase its account penetration horizontally and
across multiple departments through Autograph's "sell high, sell wide"
enterprise-wide sales strategy, by further up-market penetration through the
integration and delivery of the total solutions selling process, and by
down-market penetration through increasing product ease of use.
Leverage the Electronic Printing Installed Base. The Company believes that
the worldwide installed base of high speed electronic printers is under utilized
due to the lack of widespread use of high-end document automation software
products. The Company intends to leverage this opportunity by marketing the
benefits of document automation to the high speed electronic printing installed
base which has already made extensive investments in computing and printing
hardware.
Expand Distribution Channels. The Company currently markets and supports
its products in the United States, Canada, Western Europe, and Australia. It
intends to expand marketing, selling and support capacity in its existing
territories as well as expansion into territories not currently served. The
Company intends to expand its direct sales organization in the United States
with additional sales representatives and infrastructure. International sales
are accomplished primarily through indirect sales channels such as value added
resellers (VARs). The Company intends to expand direct sales channels in certain
markets. Both the domestic and international sales activities will continue to
be enhanced through strategic marketing relationships with suppliers of
complementary products and services.
Expand Professional Services. The Company's strategy is to position itself
as a document automation solution provider. Consulting services are currently
focused on assisting in the sale of high margin initial software licenses by
providing project management and application development. The Company intends to
expand consulting services to assist existing customers with the application of
new products offered by the Company. The Company believes this marketing
strategy will provide opportunities to expand the Company's services to include
document design, systems design and integration. In addition to consulting
services, the Company currently offers introductory-level customer education,
which is bundled with CompuSet initial licenses. Additional and advanced
training is provided at the Company's headquarters in San Diego and at customer
sites for additional fees. The Company intends to expand its curriculum to
provide advanced and specialized customer education in response to the unique
needs of certain customers. The Company believes that expanded Professional
Services will enable customers to deploy the Company's document automation
products more rapidly and effectively and will enable the Company to become a
solutions provider, accelerate the development of new products and earn
recurring revenue.
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<PAGE> 35
Expand into Electronic Documents. To date, the Company's Autograph
architecture has been applied mainly to document automation applications
producing paper-based documents. The Company believes that its core technology
can be extended to the Internet, intranets and commercial on-line services, and
has recently begun initial development activity in this area. The short-term
strategy is to engage this emerging opportunity with two complementary
initiatives. First, the Company intends to work closely to define product
requirements with existing customers, many of whom have expressed interest in
using the Internet in their document automation solutions. Second, the Company
intends to develop incremental extensions to Autograph which can be readily
incorporated by current customers into existing document automation products
provided by the Company. These enhancements may provide support for Common
Gateway Interface (CGI) data capture in the Internet environment, support for
embedding links in the composed documents including Universal Resource Locators
(URLs) and multi-media links, and support for Portable Document Format (PDF)
from Adobe.
CUSTOMER CASE STUDIES
Representative examples of customers who are using the Company's products
to address their business production publishing needs are:
Insurance Services
Autograph architecture components such as CompuSet are used by insurance
companies worldwide. These include life insurance providers, property and
casualty insurers, as well as health insurers such as Blue Cross plans and
managed care providers such as HMOs. Autograph products have been used to
automate the production of insurance policies, insurance benefit booklets,
variable annuity statements, as well as personalized correspondence such as
renewal letters and claims processing documents.
A large life insurance company uses Autograph products for automated
insurance policy production. Prior to adopting Autograph, the insurer's process
required manual assembly using policy forms produced by an outside printer. The
number of these policy forms ranges well into the thousands since they vary for
each insurance product type, jurisdiction, and language. Because offset printing
costs necessitate large quantities, the thousands of pre-printed forms were kept
in a large and expensive warehouse facility. With Autograph, the insurer was
able to produce personalized life insurance policies for its clients, and
eliminate the warehouse expenses through on-demand electronic printing. In
addition, the high labor costs and errors inherent in manual document handling
have been minimized through document automation.
Financial and Banking Services
Personalized communications through document automation is rapidly becoming
a key differentiator for many financial and banking services companies as direct
person-to-person contact becomes reduced or eliminated. Reengineering the
document applications is also an opportunity to improve the quality and
readability through the use of composition and dynamic graphics.
Morgan Grenfell Asset Management (MGAM), headquartered in London, is one of
the largest asset management firms in Europe and uses Autograph products to
enhance the quality of its client communications as part of its total service
offering. MGAM was an early adopter of document automation technology and
realized the importance of generating personalized client reports enriched with
data-driven graphics. As part of the Autograph implementation, MGAM clients can
request specific reports which are produced immediately and printed on-demand.
In addition, the Autograph product suite is used to produce quarterly reports
with highly detailed and personalized information, as well as customized
presentation booklets that are distributed during client reviews.
A worldwide management and employee benefits consulting firm uses the
Autograph architecture to produce personalized employee benefit statements. As
part of a strategy to help its clients
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<PAGE> 36
communicate with their employees, the firm produces a comprehensive employee
benefit suite of documents. Through Autographdocument automation, the firm's
clients can effectively communicate the importance of retirement planning to the
clients' employees, and dynamically illustrate how each employee can take
advantage of client-sponsored benefit programs. The firm believes that this
level of personalization and the use of dynamic composition and data-driven
graphics increases employee satisfaction and participation in their retirement
options.
Commercial Print Services
Commercial print service bureaus have been at the forefront of developing
many document automation applications. Such bureaus include large automated
document factories capable of producing upwards of 100 million customized and
personalized pages per month, specialized consulting firms providing unique
document products, and many regional and local electronic printing operations
that cater to smaller mid-size businesses. The flexibility of the Autograph
architecture is ideally suited to such clients, which must produce many varying
document types and provide a superior product for competitive reasons.
International Billing Services, Inc. (IBS), a wholly-owned subsidiary of
USCS International, Inc., and a large provider of outsourced statement
presentment services in the United States, has begun using Autograph as an
important component of its processes. By incorporating Autograph into its
highly-automated statement production centers, IBS has been able to shorten the
time needed to convert new customers to its processes. IBS is also exploring the
use of Autograph to enhance the flexibility of its statement creation services
and to produce richer, more information-oriented documents which are tailored to
each individual customer.
The versatility of Autograph products has allowed Security Mailing
Corporation, a regional document automation provider in Australia that services
the Asia Pacific banking and financial services sectors, to produce a wide
variety of document formats for its many clients. This flexibility insures that
each client is able to differentiate itself from its competitors and achieve the
desired level of document quality and personalization. Security Mailing
Corporation has also extended its services by incorporating Autograph's Document
Viewing capabilities into its offering. As a result, its clients can integrate
electronic document archival and retrieval directly into their customer service
processes. The ability to create hardcopy client documents as well as exact
electronic duplicates for use in customer service applications provides Security
Mailing Corporation with an advantage over competing bureaus that cannot provide
electronic document options.
Communications Industry
An emerging market for Autograph is in the communications arena. The advent
of new technologies is forcing many communications companies such as telephone,
cellular and cable providers to reengineer their own client communications. The
design of these new communications requires flexibility to support increasingly
complex product options and personalization for cross-marketing opportunities.
CAM-NET Communications Network Inc. (CWKTF), one of Canada's top five
long-distance companies, uses the Autograph architecture to produce its
corporate information and billing documents. As CAM-NET grew in the early
1990's, the company realized that it needed a state-of-the-art billing system
that would meet the needs of its expanding customer base, as well as provide a
competitive advantage through improved client communications. By adopting
Autograph products, CAM-NET has provided fully automated bill production, and
has dramatically improved the design, appearance and effectiveness of its
billing documents. Simultaneously, Autograph has increased its processing
capacity by 200 percent. Autograph has also improved CAM-NET's client
satisfaction, by allowing its customers to choose their preferred billing
structure and format -- by area code, by frequently-called numbers, by
personalized billing code, as well as many other options.
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Manufacturing and Distribution
Autograph document automation is also well suited for long document
applications by enabling customization of long documents to reduce document size
and improve document effectiveness.
Ace Hardware Corporation, a dealer-owned multi-billion dollar Fortune 500
wholesale cooperative with more than 5,000 stores located in all 50 states and
55 foreign countries, has been using Autograph products such as CompuSet since
the early 1980's. This has enabled Ace Hardware to fully automate the creation
of its nine-volume product catalog for its membership, including pagination and
indexing, as well as inclusion of over 30,000 images. Because of regional
product offerings, customized catalogs are created for each of its 15 regional
retail support centers. In total, nearly 70,000 industrial items are composed
into over 98,000 CompuSet-generated pages. With CompuSet, Ace Hardware was able
to reduce turnaround time, particularly in the initial layout of the document,
which previously had been done with an expensive manual cut and paste process.
CUSTOMERS
The Company's products are currently licensed to approximately 400 end user
customers in a broad range of industries worldwide including insurance, managed
health care, commercial print services, telecommunication, utilities,
manufacturing, distribution, retail, publishing companies as well as
governmental agencies. The following is a representative list of the Company's
end user customers, each of which is currently paying license fees for the use
of the Company's products.
<TABLE>
<S> <C> <C>
INSURANCE COMMERCIAL PRINT SERVICES BANKING/FINANCE
Aetna Life Insurance Co. Groupe IST Inc. Allmerica Financial, Inc.
Basler Versicherungs Hewitt Associates LLC Banque Nationale de Paris
Gesellschaft International Billing Services, Canada Trust Company and
Chubb & Son, Inc. Inc. The Canada Trustco
Le Gan Moore Communication Services Mortgage Company
Metropolitan Life Insurance Output Technologies Inc. Capital One Bank
Company Paperstream CIBC Insurance
The Prudential Life Insurance R R Donnelley & Sons Merrill Lynch, Pierce, Fenner
Company of America Standard Register &
State Farm Insurance Company Thomson Publications Australia Smith Incorporated
Sun Alliance Holdings Limited P/L Janus Capital Corp.
United Services Automobile Oppenheimer
Association Primerica Life
Insurance Company and
Affiliates
Rothschild Australia Ltd.
Signet Bancard Corp.
Wells Fargo Bank
MANAGED CARE/HEALTH CARE MANUFACTURING/DISTRIBUTION TELECOMMUNICATIONS/TRANSPORTATION
Several Blue Cross/Blue Ace Hardware Corporation Bell Atlantic Services, Inc.
Shield Plans American Honda Motor CAM-NET Communications, Inc.
Cleveland Clinic Foundation Co., Inc. Chessie Computer Services,
Cost Care, Inc. Canadian Tire Corporation, Inc.
Foundation Health Limited Federal Express Corporation
Harvard Community Health Caterpillar Inc. France Telecom
Plans Circuit City Stores Official Airline Guides
HealthNet Compaq Computer Corporation (Business Men's Assurance
MaxiCare Health Plans, Inc. eR3 (Video International) Company of America)
Giant of Landover Inc. U.S. West Marketing
Thrifty Payless Inc. Resources Group
Westinghouse Electric
Corporation
</TABLE>
PRODUCTS
The Company's software products are included in its Autograph architecture,
which currently addresses three major functional areas: Document Composition and
Assembly, Document Management, and Document Viewing, as described below. All of
the Company's software products can be complemented by Professional Services.
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AUTOGRAPH ARCHITECTURE
[GRAPHIC]
The list price for an initial license fee for CompuSet, the Company's core
product, is currently $65,000 for an initial mainframe installation and ranges
down to $35,000 for an initial single PC; options currently range from $1,000 to
$50,000. The Company licenses its products for one year, after which an annual
renewal fee, usually in an amount equal to 15% of the initial license fee, is
required for continued use. A typical new sale is currently about $75,000 for
software licenses and approximately $25,000 for professional services.
Document Composition and Assembly
Composition and Assembly. CompuSet, the Company's flagship product,
automates document composition and assembly using data and information in
corporate databases. It is the Company's core technology. CompuSet software
consists of a rule-based language and a composition engine that provide high
speed composition and assembly of complex documents with high typographic and
aesthetic levels of quality. Information content is marked with CompuSet tags
which, in turn, are defined in logically separate style specifications. Without
requiring real-time user interaction, the composition engine then transforms the
tagged data and information into finished electronic documents that can be
composed and assembled at rates in excess of 50 pages per second, depending on
computing configuration and complexity of the document. Document construction
facilities are extensive, including the full support of dynamic data driven
graphics generation.
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CompuSet operates on a range of computers and operating systems including
mainframes, workstations, network servers and personal computers.
Data Capture and Setup. Data capture and setup products include CompuPrep
and a number of Importers, and prepare data and information for subsequent
composition and assembly by CompuSet. CompuPrep is an optional tool that enables
users to capture and tag raw data and information from a variety of sources,
including corporate databases, for subsequent processing by CompuSet. It is a
high level language that describes the data environment, related data processing
and the tagging instructions for CompuSet. Importers accept externally generated
document objects, including text, static graphics and scanned images, and
convert them into formats compatible with CompuSet. The Importers support Adobe
PostScript, Xerox Metacode and TIFF standard for scanned images.
Document Output and Merge. Emitters transform CompuSet's output into a
number of popular Page Description Languages (PDLs) for printing and viewing.
The PDLs provide instructions for rendering text, forms, bitmaps, and graphics
into documents. The PDL formats currently supported are Xerox Metacode, IBM AFP,
Adobe PostScript and HP PCL5. This part of the architecture is extensible and
new Emitters can be provided as required. For example, the Company expects to
provide support for PDF from Adobe during 1997.
Application Development Tools. CompuSeries applications development tools
run on Microsoft Windows and simplify document design and application
prototyping. CompuSeries currently consists of several modules. CompuSpec is a
tool for defining document formatting rules. Formatting specifications which are
selected from a menu are associated with tags which are referenced in the
document data. The results of the selected formatting specifications are
visually displayed in a preview window. CompuBuild uses a PC version of
CompuSet, combined with an editor to manipulate the tagged document data.
CompuBuild supports all the dynamic functions and features of the CompuSet
production engine. CompuMerge is a tool used to specify the placement of
variable data into fixed document components such as in form-fill applications.
CompuView Proof is a document proofing tool used to preview the document layout
on the computer screen prior to printing. These tools are currently being
integrated into a single Windows application, called CompuSeries II.
Document Management
Document Management tools provide client/server solutions for the creation,
revision and management of document components used in the Company's document
automation solutions. It consists of the Document Library Service (DLS) and
Desktop Document Manager (DDM). DLS manages the document component creation
process required by complex variable documents. In addition, DLS can be used to
define complex assembly rules required for interactive or fully automated
document composition and assembly with CompuSet. DLS uses a client/server
architecture for accessing data and files on a mainframe or network server.
Desktop Document Manager (DDM) is the client component of DLS and manages text
objects created with Microsoft Word. Text objects are tracked and managed in a
multi-author environment by providing access security, revision control and
approval levels. DDM also provides a criteria-based document object selection
capability for customized or personalized documents. These criteria are then
used by DLS to generate a CompuSet-ready tagged data file. The customized or
personalized document assembly can be directed to occur in a high-volume fashion
on the server or in a just-in-time, on-demand fashion on the local DDM PC. DLS
is in a controlled release with a small number of customers.
Document Viewing
Document Viewing enables on-line viewing and archiving of electronic
documents produced by document automation applications. It consists of the
Document Viewing Service (DVS) and CompuView Navigator. DVS uses a client/server
architecture for the creation and access of electronic document files. DVS is
available for a variety of mainframe, Unix and PC platforms. The
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electronic document files are generated in a format called CCIF, which is
optimized for fast, memory-efficient viewing, transport and storage. CCIF files
can then be viewed by CompuView Navigator. CCIF files consist of three major
components: a PDL rendition of the pages for WYSIWYG viewing; various indices
for locating documents; and reusable document elements. CCIF files can also be
distributed, archived or printed through document distribution and archiving
systems offered by third party software developers that have integrated
CompuView Navigator. CompuView Navigator is a Windows application for viewing
CCI files. The view of the document is virtually identical to the printed
document. CompuView Navigator may also be integrated with third party document
retrieval systems. The Company introduced the DVS in October 1995 and has had
limited installations to date.
The following process flow diagram describes each Autograph product within
the context of product functionality and the enterprise. It also includes
possible future Internet extensions, some of which are not currently under
active development. The Company believes that its core technology can be
extended to the Internet, intranets and commercial on-line services and has
recently begun initial development activity in this area, although there can be
no assurance that such development activity will result in commercially
successful products. See "Business -- Research and Development."
[DIAGRAM]
PROFESSIONAL SERVICES
In addition to its software products, the Company provides a comprehensive
suite of services which can assist customers in the implementation of enterprise
wide and mission critical document automation applications. Professional
Services include on-site software installation, customer training programs,
telephone support programs and consulting services. Consulting services are
currently focusing on assisting in the sale of high margin initial software
licenses by providing
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project management and application development. Eventually, the Company intends
to expand Professional Services to include document design, systems design and
integration. In addition to consulting services, the Company currently offers
introductory-level customer education, which is bundled with CompuSet initial
licenses. Additional and advanced classes are provided for additional fees at
the Company's headquarters in San Diego and at customer sites. The Company
intends to expand its curriculum to provide advanced and specialized customer
education in response to the unique needs of certain customers. The Company
believes that expanded Professional Services will enable customers to deploy the
Company's document automation products more rapidly and effectively, and assist
the Company in the development of new products and provide recurring revenue.
The Professional Services organization employed a professional and support staff
of 36 as of June 30, 1996.
SALES AND MARKETING
The Company's sales and marketing organization targets vertical industry
segments that require document automation and high volume document
personalization and customization. The Company currently licenses its products
using a combination of direct sales and alternate channels. In the United
States, the Company markets its products through a direct sales force. Sales
representatives are provided with pre-sales technical support by regional
application specialists. Sales representatives and the regional application
specialists are located in Atlanta, Austin, Chicago, Cleveland, Dallas,
Minneapolis, New York City, Pittsburgh, Richmond, San Antonio, San Diego, San
Francisco, Seattle and Washington, D.C. The Company distributes its products
through VAR relationships with Xerox Canada, Limited in Canada and Fuji Xerox
Co., Ltd. in Australia. The Company's subsidiary, Document Sciences Europe,
markets and supports the Company's products in Europe by providing channel
management, technical support, fee based services, and defining European market
and product requirements. The Company licenses its products in Europe through
VARs and, to a lesser extent, direct sales. The VARs are principally Rank Xerox
Ltd. and other Xerox affiliates who remarket the Company's products. The
Company's revenues from such arrangements were $1.3 million, $3.1 million and
$675,900 in 1994, 1995 and the first half of 1996, respectively. The sales,
marketing and customer support organization currently employs a professional and
support staff of 68.
The Company intends to expand its sales and marketing organization to
provide direct sales and support services throughout the world. Such planned
expansion will occur by first addressing the unique product requirements of a
region followed by developing indirect sales channels to market in the region.
As the Company is able to increase its market presence, it may then augment its
alternate channels with a direct sales capability. See "Risk
Factors -- Expansion of Sales and Distribution Channels."
In addition, the Company intends to increase both its product offerings and
markets through marketing, sales and distribution and development relationships
with other companies. Current relationships include formal and informal
marketing and sales alliances with Xerox, IBM, Siemens Nixdorf, Computer
Associates, New Dimension, RSD, Data/Ware Development, and Data Retrieval. These
relationships provide sales leads for the Company's products and have extended
the Company's sales coverage and networking capabilities.
COMPETITION
The market for the Company's document automation products is intensely
competitive, subject to rapid change and significantly affected by new product
introductions and other market activities of industry participants. The
Company's software products are targeted at document intensive organizations
that require the ability to produce large quantities of customized and
personalized documents in paper or electronic form. The Company faces direct and
indirect competition from a broad range of competitors who offer a variety of
products and solutions to the Company's current and potential customers. The
Company's principal competition currently comes from (i) systems
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<PAGE> 42
developed in-house by the internal MIS departments of large organizations, (ii)
direct competition in a number of its vertical markets, including Image
Sciences, which is partially owned by Xerox, and FormMaker Software, Inc. in the
insurance industry, M&I Data Services, Inc. in banking and financial services
and Group 1 Software, Inc. in commercial direct mailing, and (iii) direct
competitors such as IBM's Direct Composition Facility (DCF) and Group 1's
recently introduced DOC1 product. The Company faces market resistance from the
large installed base of legacy systems because of the reluctance of these
customers to commit the time and effort necessary to convert their document
automation processes to the Company's document automation software. Several of
the Company's competitors have longer operating histories, significantly greater
financial, technical, marketing and other resources than the Company, greater
name recognition and a larger installed base of customers.
It is also possible that the Company will face competition from new
competitors. These include large independent software companies offering
personal computer-based application software solutions, such as Microsoft
Corporation and Adobe Corporation, and from large corporations providing
database management software solutions, such as Oracle Corporation. In addition,
Xerox, either directly or through affiliated entities, could compete with the
Company. Moreover, as the market for document automation software develops, a
number of these or other companies with significantly greater resources than the
Company could attempt to enter or increase their presence in the Company's
market either independently or by acquiring or forming strategic alliances with
competitors of the Company or to otherwise increase their focus on the industry.
In addition, current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties to increase the
ability of their products to address the needs of the Company's current and
prospective customers, and it is possible that new competitors or alliances
among competitors may emerge and rapidly acquire significant market share.
Increased competition may result in price reductions, reduced gross margins and
loss of market share, any of which could have a material adverse effect on the
Company's business, operating results and financial condition. There can be no
assurance that the Company will be able to compete successfully against current
or future competitors or that competitive pressures faced by the Company will
not materially adversely affect its business, operating results and financial
condition.
The Company believes that the principal competitive factors affecting its
market include products performance and functionality, ease of use, scalability,
operation across multiple computer and operating system platforms, product and
company reputation, client service and support, and price. Although the Company
believes that it currently competes favorably with respect to such factors,
there can be no assurance that the Company will be able to maintain its
competitive position against current and future competitors or that the Company
will be successful in the face of increasing competition from new products or
solutions introduced by existing competitors or by new companies entering the
market. Further, there can be no assurance that the Company can maintain its
position against current and future competitors, especially those with greater
financial, marketing, service, support, technical and other resources than the
Company.
RESEARCH AND DEVELOPMENT
In general, the Company's strategy is to build products that augment and
extend the document composition and assembly capabilities of its core products.
Initially, product development investments were primarily focused on completing
the Autograph architecture, which included delivering products for document
viewing as well as adding support for additional print environments. In
addition, there was a substantial investment in product maintenance and in
software integration, testing, and documentation. The Company supplements its
product development efforts by reviewing customer feedback on existing products
and working with customers and potential customers to anticipate future product
needs.
To date, the Company's Autograph architecture has been applied mainly to
document automation applications producing paper based documents. The Company
believes that its core technology
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can be extended to provide document automation for the Internet, intranets, and
commercial on-line services. The short-term strategy is to engage this emerging
opportunity with two complementary initiatives. First, the Company intends to
work closely to define product requirements with existing customers, many of
whom have expressed interest in using the Internet in their document automation
solutions. Second, the Company intends to develop incremental extensions to
Autograph which can be incorporated by current customers into existing document
automation products provided by the Company. The Company believes that its core
technology can be extended to the Internet, intranets and commercial on-line
services, and has only recently begun initial development activity in this area.
There can be no assurance that the Company will be successful in developing,
introducing and marketing new products on a timely and cost-effective basis, if
at all, or that new products will achieve market acceptance. See "Risk
Factors -- Dependence on New Products and Product Enhancements."
The development organization is composed of self-directed teams, in which
representatives from various disciplines within the Company collectively take
responsibility for the development and delivery of each new feature or product.
The development process includes early review of prototypes and demonstrations
to incorporate customer feedback and provide an opportunity for management
review. A formal sequence of project phases organizes the development and review
process for each team. The Company has a formal release planning process for an
annual maintenance release, and delivers interim versions as needed to support
its customers. The development organization maintains a database of all customer
and internal requests which forms the basis for release planning.
The Company expects to continue to enhance its existing products and to
develop new products, particularly as they relate to electronic publishing
applications. Research and development expenditures have grown substantially
since the Company's inception. Such expenditures were $400,800 in 1993, $1.0
million in 1994, $1.7 million in 1995 and $1.1 million in the first half of
1996. These amounts do not include product support activities. The development
organization has grown from 4 people in 1993, to 12 in 1994, 21 in 1995 and 27
at June 30, 1996. The Company employs independent contractors as needed to
supplement the permanent development staff.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
The Company's success is dependent, in part, on its ability to protect its
proprietary technology. The Company relies primarily on a combination of
copyright and trademark laws, trade secrets, confidentiality procedures and
contractual provisions to protect its proprietary rights. The Company seeks to
protect its software, documentation and other written materials under trade
secret and copyright laws, which afford only limited protection. The Company
presently has no patents or patent applications pending. Despite the Company's
efforts to protect its proprietary rights, unauthorized parties may attempt to
copy aspects of the Company's products or to obtain and use information that the
Company regards as proprietary.
Policing unauthorized use of the Company's products is difficult, and while
the Company is unable to determine the extent to which piracy of its software
products exists, software piracy can be expected to be a persistent problem. In
addition, the laws of some foreign countries do not protect the Company's
proprietary rights to as great an extent as do the laws of the United States.
There can be no assurance that the Company's means of protecting its proprietary
rights will be adequate or that the Company's competitors will not independently
develop similar technology. The Company is not aware that any of its products
infringes the proprietary rights of third parties. There can be no assurance,
however, that third parties will not claim infringement by the Company with
respect to current or future products. The Company expects that software product
developers will increasingly be subject to infringement claims as the number of
products and competitors in the Company's industry segment grows and the
functionality of products in different industry segments overlaps. Any such
claims, with or without merit, could be time consuming, result in costly
litigation, cause product shipment delays or require the Company to enter into
royalty or licensing agree-
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ments. Such royalty or licensing agreements, if required, may not be available
on terms acceptable to the Company or at all, which could have a material
adverse effect upon the Company's business, operating results and financial
condition.
In addition, the Company also relies on certain software that it licenses
from third parties, including software that is integrated with internally
developed software and used in the Company's products to perform key functions.
There can be no assurances that such firms will remain in business, that they
will continue to support their products or that their products will otherwise
continue to be available to the Company on commercially reasonable terms. The
loss or inability to maintain any of these software licenses could result in
delays or reductions in product shipments until equivalent software can be
developed, identified, licensed and integrated, which would adversely affect the
Company's business, operating results and financial condition.
EMPLOYEES
As of June 30, 1996 the Company had 105 employees including 68 in sales,
marketing and customer support, 27 in research and development, and 10 in
finance and administration. None of the Company's employees is represented by a
labor union. The Company has experienced no work stoppages and believes its
relationship with its employees is good. Competition for qualified personnel in
the industry in which the Company competes is intensive. The Company believes
that its future success will depend in part on its continued ability to attract,
hire, and retain qualified personnel.
FACILITIES
The Company's principal administrative, sales, marketing, training, and
research and development facilities occupy approximately 15,000 square feet in
San Diego, California, pursuant to a lease which expires on January 31, 2000. In
addition, the Company's subsidiary in France occupies approximately 3,500 square
feet of office space with a renewable lease expiring in February 1999. Sales
representatives and field technical support personnel operate from their homes.
The Company believes its current facilities are adequate to meet its needs
through the next six months. The Company is exploring various alternatives to
house its planned expansion, and believes that additional facilities would be
available on acceptable terms.
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The directors, executive officers and key employees of the Company, and
their ages as of June 30, 1996 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- ------------------------------------------
<S> <C> <C>
Tony N. Domit............................. 58 President, Chief Executive Officer and
Director
Alfred G. Altomare, Jr. .................. 52 Vice President, Consulting
Barbara E. Amantea........................ 51 Vice President, Chief Financial Officer,
Treasurer and Secretary
Thomas Anthony............................ 61 Vice President, Sales
Peter L. Bradshaw......................... 41 Vice President, Development
Daniel J. Fregeau......................... 39 Vice President, Marketing
Judith A. O'Reilly........................ 53 Managing Director, Document Sciences
Europe
E. Mark Palandri, Ph.D. .................. 57 Chief Scientist
Robert V. Adams(2)........................ 64 Chairman of the Board
Thomas L. Ringer(1)....................... 65 Director
Colin J. O'Brien(1)....................... 57 Director
James J. Costello(2)...................... 50 Director
Barton L. Faber........................... 49 Director
</TABLE>
- ---------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Tony N. Domit, a Company founder, has served as President and Chief
Executive Officer since the Company's inception in October 1991. Previously, he
was an Executive Consultant with Xerox Technology Ventures. From 1990 to 1991,
Mr. Domit was President and CEO of Advanced Workstations Products, Inc., a
wholly-owned Xerox subsidiary. Prior to AWPI, Mr. Domit was employed by Xerox
Corporation for 22 years in a variety of Vice Presidential and managerial
positions primarily in the areas of product development and marketing. His
Xerox-related experiences were in the Company's electronic printing, publishing,
workstation and networking businesses. Prior to Xerox, Mr. Domit was an engineer
with Scientific Data Systems, Ampex Computer Products, and Litton Industries.
Barbara E. Amantea has served as Vice President, Chief Financial Officer,
Treasurer and Assistant Secretary since the Company's inception in 1991. Prior
to the formation of the Company, Ms. Amantea served for nine months as a
financial consultant with Xerox Technology Ventures. From 1990 to 1991, Ms.
Amantea was Chief Financial Officer of Advanced Workstation Products, Inc., a
wholly-owned subsidiary of Xerox Corporation. From 1988 to 1990, Ms. Amantea was
Chief Financial Officer of Segue Software, Inc., a provider of automated testing
software. From 1977 to 1987, Ms. Amantea was Controller and Corporate Secretary
to Interactive Systems Corporation, a developer and supplier of UNIX operating
systems, which was subsequently acquired by Kodak Corporation.
Daniel J. Fregeau has served as Vice President, Marketing since 1994. From
1992 to 1994, Mr. Fregeau served as Vice President, Sales for the Company. Prior
to joining the Company, Mr. Fregeau was Marketing Manager for the Networking
Division of Sears Business Centers, San Diego, from 1990 to 1992. Mr. Fregeau
was a founder and principal of MicroAge in San Diego from 1988 to 1990. From
1982 to 1988, Mr. Fregeau held several positions with Xerox Corporation's
Electronic Publishing Business Unit including Manager of Systems Engineering and
Integration,
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Technical Program Manager, and Project Manager. While at Xerox, Mr. Fregeau
designed and directed the development of several publishing products and was a
key contributor to the launch of the XICS (now CompuSet) product in the U.S. and
Canada.
Judith A. O'Reilly, a Company founder, has served as Managing Director of
Document Sciences Europe since its inception in 1993. Prior to the formation of
Document Sciences Europe, Ms. O'Reilly was Director of Customer Support from
1992 to 1993. From 1982 to 1992, Ms. O'Reilly held several positions in
development, product delivery and marketing at Xerox. Prior to joining Xerox,
Ms. O'Reilly was an applications developer for companies in the publishing,
manufacturing, and food sectors.
Alfred G. Altomare has served as Vice President, Consulting since January,
1996. Prior to joining the Company, Mr. Altomare was founder and principal of
Mariner Associates, a business consulting firm, from 1993 to 1996. From 1990 to
1993, Mr. Altomare was Vice President/General Manager, Indirect Channel
Operations of ICL Retail Systems. Prior to joining ICL, Mr. Altomare was Vice
President, Consulting at Gartner Group from 1989 to 1990. From 1985 to 1989, he
was founder and principal of VAR Strategies Group. Mr. Altomare was Principal
and Senior Vice President, Sales and Marketing for InfoCorp/Gartner Group (now
Infocorp/Computer Intelligence) from July 1982 to March 1985. Mr. Altomare
previously he held a variety of sales, marketing and training positions with
IBM.
Dr. E. Mark Palandri, a founder of the Company, has served as Chief
Scientist since 1992. Prior to joining the Company, Dr. Palandri held a variety
of software developer positions at Xerox Corporation from 1982 to 1992. From
1980 to 1982, Mr. Palandri worked at Composition Software Systems until its sale
to Xerox. While at CSS, Mr. Palandri began the development of CompuSet. From
1965 to 1973, Dr. Palandri worked on data handling systems in high energy
physics at the European Organization for Nuclear Research in Geneva,
Switzerland. From 1973 to 1990, Mr. Palandri was Senior Principal Research
Scientist in the Division of Computing Research in the Commonwealth Scientific
and Industrial Research Organization. Mr. Palandri holds a BS from the
University of Western Australia and a Doctorate in Applied Mathematics from
Cambridge University.
Thomas Anthony has served as Vice President, Sales since June 1994. Prior
to joining the Company, Mr. Anthony was Executive Vice President, Marketing and
Sales for Innovatech, Inc. from 1992 to 1994, Acer America from 1990 to 1992,
Sweda International from 1987 to 1990, and Frame Technologies from 1981 to 1987.
Mr. Anthony was Vice President, Sales for Altos Computer Systems from 1983 to
1986 and Vice President Marketing and Sales from 1979 to 1983 for Onyx Systems.
Prior to Onyx, Mr. Anthony was with National Semiconductor as a Vice President
and founder of the Datacheck Business.
Peter L. Bradshaw has served as Vice President of Development since March,
1994. Prior to joining the company, Mr. Bradshaw was manager of the Application
Software Team at Xerox from 1989 to 1994, where he was responsible for
integrating high volume printers with application software. From 1982 to 1989,
Mr. Bradshaw worked in Xerox' Workstation Business Unit where he managed the
development team responsible for the graphical user interface for the 6085
Workstation. From 1977 to 1980, Mr. Bradshaw was at Bell Telephone Laboratories
in system development. Mr. Bradshaw holds an M.S. in Computer, Information, and
Control Engineering and a B.S. in Computer Science and Mathematics from the
University of Michigan and an MBA from the Anderson Graduate School of
Management at UCLA.
Robert V. Adams has served as a director and Chairman of the Board of the
Company since 1991. Since 1989, Mr. Adams has served as President of Xerox
Technology Ventures, a venture capital unit of Xerox. Mr. Adams is also a
director of Tekelec, ENCAD, Inc. and Chairman of Documentum, Inc.
Thomas L. Ringer has been a director of the Company since 1991. Mr. Ringer
is currently Chairman of the Boards of Directors of Wedbush Corporation, Wedbush
Capital Corporation, M.S.
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Aerospace, Inc., Enterprise Solutions Limited and the Center for Innovation and
Entrepreneurship. In addition, he serves on the Boards of Directors of Wedbush
Morgan Securities, Inc. and Applied Retail Solutions.
Colin J. O'Brien has served as a director of the Company since May 1996.
Since 1992, Mr. O'Brien has been employed in various positions at Xerox and
currently serves as Vice President of Xerox and Chief Executive Officer of Xerox
New Enterprise Board. Prior to 1992, Mr. O'Brien was the founder and Chief
Executive Officer of Triax Corporation, an investment company specializing in
defense electronics companies. Prior to joining Triax Corporation, he was the
Chief Executive Officer of Times Fiber Communications Inc., a manufacturer of
fiber optic and coaxial telecommunications systems. Mr. O'Brien is also a
director of Documentum, Inc.
James J. Costello has served as a director of the Company since May 1996.
Since 1975, Mr. Costello has been employed in various positions at Xerox and
currently serves as Chief Financial Officer and Vice President of Xerox New
Enterprise Companies.
Barton L. Faber has served as a director of the Company since July 1996.
From April 1985 to June 1996, Mr. Faber held various positions with R.R.
Donnelley and currently serves as a member of the board of directors of
Alphagraphics, Inc. Dataware Technologies, Inc., GeoSystems Global Corporation
and Xeikon N.V. He is also chairman of the board of directors and a director of
Metromail. Prior to joining R.R. Donnelley, Mr. Faber held various positions
with Mobil Oil Corporation and Ramada Europe.
Executive officers of the Company are appointed by the Board of Directors
and serve at the discretion of the Board. There are no family relationships
among any directors or executive officers of the Company.
BOARD COMMITTEES
The Board of Directors has established an Audit Committee and a
Compensation Committee. The Audit Committee, consisting of Robert V. Adams and
James J. Costello, recommends the selection of independent public accountants to
the Board of Directors, reviews the scope and results of the audit and other
services provided by the Company's independent auditors, and reviews the
Company's accounting practices and its systems of internal accounting controls.
The Compensation Committee, consisting of Thomas L. Ringer and Colin J.
O'Brien, reviews and approves the salaries, bonuses and other compensation
payable to the Company's executive officers and administers and makes
recommendations concerning the Company's employee benefit plans.
NON-EMPLOYEE DIRECTOR COMPENSATION
In July 1996, the Company approved a non-employee director compensation
arrangement pursuant to which the non-employee directors will be compensated as
follows: (i) $4,000 annual retainer; (ii) $1,200 for each meeting of the Board
attended; and (iii) reimbursement for certain expenses in connection with
attendance at Board and committee meetings. In addition, in February 1995,
Thomas L. Ringer was granted an option to purchase 15,750 shares of Common Stock
at an exercise price of $0.17 per share and in July 1996, Barton L. Faber was
granted an option to purchase 10,000 shares of Common Stock at an exercise price
of $10.00 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee of the Company serves as a member
of the board of directors or compensation committee of any entity that has one
or more executive officers serving as a member of the Company's Board of
Directors or Compensation Committee. See "Certain Transactions" for a
description of transactions between the Company and entities affiliated with
members of the Compensation Committee.
45
<PAGE> 48
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Bylaws provide that the Company will indemnify its directors
and officers and may indemnify its employees and other agents to the fullest
extent permitted by Delaware law.
In addition, the Company's Amended and Restated Certificate of
Incorporation provides that, to the fullest extent permitted by Delaware law,
the Company's directors will not be liable for monetary damages for breach of
the directors' fiduciary duty of care to the Company and its stockholders. This
provision in the Amended and Restated Certificate of Incorporation does not
eliminate the duty of care, and in appropriate circumstances equitable remedies
such as an injunction or other forms of non-monetary relief would remain
available under Delaware law. Further, each director will continue to be subject
to liability for breach of the director's duty of loyalty to the Company, for
acts or omissions not in good faith or involving intentional misconduct or
knowing violations of law, for acts or omissions that the director believes to
be contrary to the best interests of the Company or its stockholders, for any
transaction from which the director derived an improper personal benefit, for
acts or omissions involving a reckless disregard for the director's duty to the
Company or its stockholders when the director was aware or should have been
aware of a risk of serious injury to the Company or its stockholders, for acts
or omissions that constitute an unexcused pattern of inattention that amounts to
an abdication of the director's duty to the Company or its stockholders, for
improper transactions between the director and the Company and for improper
distributions to stockholders and loans to directors and officers. This
provision also does not affect a director's responsibilities under any other
laws, such as the federal securities laws or state or federal environmental
laws.
The Company intends to enter into agreements to indemnify its directors and
officers, in addition to indemnification provided for in the Company's Bylaws.
These agreements, among other things, indemnify the Company's directors and
officers for certain expenses (including attorneys' fees), judgments, fines and
settlement amounts incurred by any such person in any action or proceeding,
including any action by or in the right of the Company, arising out of such
person's services as a director or officer of the Company, any subsidiary of the
Company or any other company or enterprise to which the person provides services
at the request of the Company. The Company believes that these provisions and
agreements are necessary to attract and retain qualified directors and officers.
There is no pending litigation or proceeding involving a director, officer,
employee or other agent of the Company as to which indemnification is being
sought, nor is the Company aware of any pending or threatened material
litigation that might result in a claim for such indemnification.
46
<PAGE> 49
EXECUTIVE COMPENSATION
The following table sets forth all compensation earned by the Company's
Chief Executive Officer and the five other most highly compensated executive
officers (collectively, the "Named Executive Officers") whose salary and bonus
for the fiscal year ended December 31, 1995 were in excess of $100,000 for
services rendered in all capacities to the Company and its subsidiary for that
fiscal year:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------------- ------------------
NAME AND SECURITIES UNDERLYING ALL OTHER
PRINCIPAL POSITION SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)(1)
- ----------------------------------- --------- -------- --------------------- ------------------
<S> <C> <C> <C> <C>
Tony N. Domit...................... $ 150,000 -- -- $ 6,348
President and Chief Executive
Officer
Thomas J. Anthony.................. 90,000 46,626 (2) -- 6,780
Vice President, Sales
Peter L. Bradshaw.................. 96,667 5,000 -- 3,286
Vice President of Development
Daniel J. Fregeau.................. 90,000 60,558 (2) 30,000 3,436
Vice President, Marketing
Judith A. O'Reilly................. 108,623 96,442 (2) -- 4,117
Managing Director, Document
Sciences Europe
E. Mark Palandri................... 141,567 -- 112,500 5,052
Chief Scientist
</TABLE>
- ---------------
(1) Includes $3,000 of Company contributions under its 401(k) Plan and the
balance represents life insurance premiums paid by the Company.
(2) Represents commissions earned during the fiscal year ended December 31,
1995.
OPTION GRANTS DURING 1995
The following tables set forth certain information concerning stock options
granted during the fiscal year ended December 31, 1995 to each of the Named
Executive Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------------ VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES PERCENTAGE OF PRICE APPRECIATION
UNDERLYING TOTAL OPTIONS EXERCISE FOR OPTION TERM(4)
OPTIONS GRANTED IN PRICE EXPIRATION ---------------------
NAME GRANTED(#)(1) FISCAL 1995(2) ($/SH)(3) DATE 5% 10%
- ----------------------- ------------- ------------------ --------- ----------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Tony N. Domit.......... -- -- -- -- -- --
Thomas J. Anthony......
Peter L. Bradshaw...... -- -- -- -- -- --
Daniel J. Fregeau...... 30,000 13% $0.17 1/5/05 $ 3,144 $ 7,969
Judith O'Reilly........ -- -- -- -- -- --
E. Mark Palandri....... 112,500 48 0.17 1/5/05 11,792 29,883
</TABLE>
- ---------------
(1) These options are non-statutory stock options granted pursuant to a written
compensatory arrangement and vest over no more than four years.
(2) In 1995, the Company granted options to purchase an aggregate of 232,575
shares.
(3) In determining the fair market value of the Company's Common Stock, the
Board of Directors considered various factors, including the Company's
financial condition and business pros-
47
<PAGE> 50
pects, its operating results, the absence of a market for its Common Stock
and the risks normally associated with high technology companies.
(4) Potential Realizable Value is based on certain assumed rates of appreciation
pursuant to rules prescribed by the Securities and Exchange Commission (the
"SEC"). Actual gains, if any, on stock option exercises are dependent on the
future performance of the stock. There can be no assurance that the amounts
reflected in this table will be achieved. In accordance with rules
promulgated by the SEC, Potential Realizable Value is based upon the
exercise price of the options, which is substantially less than the expected
initial public offering price. If the Potential Realizable Value is
calculated based on an assumed initial public offering price of $12.00 per
share and the assumed rates of appreciation over the ten-year term of the
options, the resulting stock price at the end of the term would be $19.55
and $31.12 per share at 5% and 10%, respectively.
AGGREGATED OPTIONS EXERCISED IN 1995 AND YEAR-END OPTION VALUES
The following table sets forth for each of the Named Executive Officers the
shares acquired and the value realized on each exercise of stock options during
the year ended December 31, 1995 and the number and value of securities
underlying unexercised options held by the Named Executive Officers at December
31, 1995:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
NUMBER OF DECEMBER 31, 1995 AT DECEMBER 31, 1995($)(2)
SHARES ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------- ---------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Tony N. Domit.. 562,500 $ 75,000 -- -- -- --
Thomas J.
Anthony...... 21,249 -- 1,251 37,500 208 6,250
Peter L.
Bradshaw..... 25,530 -- 2,688 36,282 448 6,047
Daniel J.
Fregeau...... 60,000 8,000 26,250 18,750 6,375 3,125
Judith
O'Reilly..... 95,466 12,729 2,034 -- 610 --
E. Mark
Palandri..... 205,620 12,729 4,380 -- 1,001 --
</TABLE>
- ---------------
(1) Based on the difference between the fair market value on the date of
exercise and the exercise price.
(2) Based on the difference between the fair market value on December 31, 1995
($0.33 per share) and the exercise price.
EMPLOYMENT AND SEVERANCE ARRANGEMENTS
The Company has entered into an agreement with Mr. Tony N. Domit, the
Company's Chief Executive Officer, terminable at will by either the Company or
Mr. Domit. The agreement provides for a base salary, effective March 1, 1993, of
$142,800, and a potential annual incentive bonus based on achievement of the
Company's operating plan and other mutually agreed upon objectives as evaluated
by the Board. Pursuant to the agreement, in the event Mr. Domit were terminated,
he would receive a severance payment equal to six months of his salary.
The Company has entered into an agreement with Mr. Thomas J. Anthony, the
Company's Vice President of Sales, terminable at will by either the Company or
Mr. Anthony. The agreement provides for a base salary, effective March 13, 1994,
of $90,000, and a commission equal to 0.75% of domestic booked revenue.
48
<PAGE> 51
The Company has entered into an agreement with Mr. A.G. Altomare, the
Company's Vice President of Consulting Services, terminable at will by either
the Company or Mr. Altomare. The agreement provides for a base salary, effective
January 4, 1996, of $85,000, and a commission equal to 1.5% of recognized
consulting revenue for fiscal 1996. In addition, Mr. Altomare will receive 2.75%
of profit earned on consulting revenue, not to exceed $25,000 per year. Pursuant
to such agreement, Mr. Altomare was granted an option to purchase 24,000 shares
of Common Stock at an exercise price of $0.17 per share.
The Company has entered into an agreement with Ms. Judith A. O'Reilly,
currently the Managing Director of Document Sciences Europe, terminable at will
by either the Company or Ms. O'Reilly. The agreement provides for a base salary,
effective January 2, 1992, of $86,492 and a commission based on certain foreign
revenue.
The Company has entered into an agreement with Mr. Daniel J. Fregeau, the
Company's Vice President of Marketing, terminable at will by either the Company
or Mr. Fregeau. The agreement provides for a base salary, effective January 2,
1992, of $75,000, and a commission based on worldwide revenue.
EMPLOYEE BENEFIT PLANS
1995 Stock Incentive Plan
In October 1995, the Company adopted the Company's 1995 Stock Incentive
Plan (the "1995 Plan") under which 779,250 shares were reserved for issuance
upon exercise of options and purchase rights granted to employees, directors and
consultants. The 1995 Plan supersedes the Company's 1993 Stock Option Plan;
provided, however, that all outstanding options previously issued under the 1993
Plan shall be exercisable according to their terms. The 1995 Plan will terminate
in June 2005, unless sooner terminated by the Board of Directors.
The 1995 Plan provides for grants of incentive stock options intended to
qualify as such under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), non-statutory stock options, and rights to purchase Common
Stock. The 1995 Plan may be administered by the Board or a committee approved by
the Board and is currently administered by the Board of Directors. Subject to
the limitations set forth in the 1995 Plan, the Board or its designated
committee has the authority to select the persons to whom grants are to be made,
to designate the number of shares to be covered by each grant, to determine
whether an option is to be an incentive stock option or a non-statutory stock
option, to establish vesting schedules, to specify the exercise price of options
and purchase rights, the type of consideration to be paid to the Company upon
exercise, and, subject to certain restrictions, to specify other terms of
options and purchase rights.
The maximum term of options granted under the 1995 Plan is ten years. The
aggregate fair market value of the stock with respect to which incentive stock
options are first exercisable in any calendar year may not exceed $100,000. No
person may be granted options and purchase rights under the 1995 Plan covering
more than 100,000 shares during any one year period. Options and purchase rights
granted under the 1995 Plan are non-transferable. Options generally expire three
months after the termination of an optionee's service to the Company. In
general, if an optionee is permanently disabled or dies during his or her
service to the Company, such person's option may be exercised up to one year
following such disability or death.
The exercise price of incentive stock options must equal at least the fair
market value of the Common Stock on the date of grant. The exercise price of
non-statutory stock options and purchase rights may be determined by the Board
or its designated committee in its discretion. The exercise price of incentive
stock options granted to any person who, at the time of grant, owns stock
possessing more than 10% of the total combined voting power of all classes of
stock must be at least 110% of the fair market value of such stock on the date
of grant; and the term of these options cannot exceed five years.
49
<PAGE> 52
As of June 30, 1996, the Company had outstanding options to purchase
191,217 shares of Common Stock under the 1993 Stock Option Plan and 152,151
shares of Common Stock under the 1995 Plan held by an aggregate 88 persons at a
weighted exercise price of $0.39 per share. As of June 30, 1996, options to
purchase an aggregate of 1,278,033 shares of Common Stock under the 1993 Stock
Option Plan and 3,624 shares of Common Stock under the 1995 Plan had been
exercised.
401(k) Plan
The Company contributes to an employee savings and retirement plan (the
"401(k) Plan") that is intended to be a tax-qualified plan, covering
substantially all of the Company's employees. Under the terms of the 401(k)
Plan, employees may elect to contribute up to 15% of their compensation, or the
statutorily prescribed limit, if less, to the 401(k) Plan as a savings
contribution. The Company may, in its discretion, match employee contributions,
at such rate as it determines, but no match will apply to deferrals in excess of
$3,000 or 10% of the employee's compensation. The 401(k) Plan has a profit
sharing element whereby the Company may, in its discretion, contribute annually
an amount determined by the Board of Directors. Such contributions, if any, are
allocated to the accounts of all eligible employees based on their compensation
and Company contributions to Social Security. An employee's interest in his or
her deferrals are vested when contributed. An employee's interest in matching
contributions and profit sharing contributions generally vest over 4 years from
the date of employment. The 401(k) Plan is intended to qualify under Section 401
of the Code. As such, contributions to the 401(k) Plan, and income earned on
such contributions, are intended not to be taxable to the employees until
distributed from the 401(k) Plan and contributions of the Company are intended
to be deductible when made. The 401(k) Plan has not been submitted to the
Internal Revenue Service for a determination letter on its qualified status
under the Code. If the 401(k) Plan is determined not to qualify under Section
401 of the Code, contributions to the 401(k) Plan and earnings on such
contributions would be taxable to the employees when made.
The 401(k) Plan is a single plan covering the employees of four entities
(including the Company) in which Xerox Corporation owns 80 percent or more of
the stock. Following this offering, for purposes of participation in the 401(k)
Plan, the Company will no longer be a part of the Xerox Corporation controlled
group. Accordingly, the Company intends to establish a new plan solely for the
benefit of its employees.
50
<PAGE> 53
CERTAIN TRANSACTIONS
AGREEMENTS WITH XEROX
Transfer and License Agreement
In connection with the transfer of the Company's technology from Xerox, the
Company entered into a Transfer and License Agreement with Xerox in July 1992,
to expire upon the expiration of all of the rights in the items covered thereby.
This Agreement was subsequently amended in September 1994. Pursuant to the terms
of the Agreement, as amended: (i) Xerox transferred all worldwide copyrights in
and to the predecessor product of CompuSet (the "Transferred Software") and
granted the Company a non-exclusive license to use the Xerox trade secrets in
existence as of July 1992 pertaining to the Transferred Software; (ii) the
Company granted Xerox a non-exclusive royalty-free license to use and copy the
Transferred Software for internal purposes only, and to use portions of the code
of the Transferred Software in products of Xerox; (iii) Xerox granted the
Company a non-exclusive, royalty-free license to use, modify and reproduce the
source code of XPS and EVMS, two software products comprising a small portion of
the Company's current CompuSet products, and to distribute derivatives of XPS
and EVMS in object code format; (iv) the Company granted to Xerox ownership of
all technical information not primarily related to computer software that is
generated by the Company while Xerox continues to own a majority of the
outstanding capital stock of the Company, the Company retaining a non-exclusive
license to use such technical information outside of certain eastern Asian and
Pacific Rim countries; (v) the Company granted "most favored nation" status with
respect to the purchase price of software products sold by the Company to Xerox,
Rank Xerox Ltd., Fuji Xerox Co. Ltd., companies jointly owned by Xerox and the
Rank Organization Ltd. and 40% affiliates of the foregoing; and (vi) the Company
granted Fuji Xerox Co., Ltd. a right of first negotiation with respect to
exclusive distribution of the Company's products in certain eastern Asian and
Pacific Rim countries.
Strategic Marketing Alliance Agreement
In September 1993, the Company and Xerox entered into a Strategic Marketing
Alliance Agreement, pursuant to which the Company and Xerox agreed to pay each
other commissions on certain sales of products resulting from successful
referrals from each other. The Agreement may be terminated by either Xerox or
the Company upon thirty days' written notice in certain circumstances, or upon
ninety days' written notice at any time. The Company's revenues from the
strategic marketing alliance, principally commissions from sales of Xerox
printers, were $490,400 and $752,000 in 1994 and 1995, respectively, and
payments to Xerox under the Agreement were $113,500 and $167,200 in 1994 and
1995 respectively.
Relationship with Fuji Xerox Australia
The Company has an arrangement with Fuji Xerox Co., Ltd ("Fuji Xerox")
pursuant to which Fuji Xerox distributes the Company's products in Australia and
New Zealand. For each copy of the Company's products sublicensed by Fuji Xerox,
Fuji Xerox pays the Company initial and annual fees equal to the Company's list
price minus a percentage discount based on annual volume of sublicenses of the
Company's products. Fuji Xerox provides technical support to its end users, with
periodic software upgrades provided to Fuji Xerox by the Company. The
arrangement with Fuji Xerox is terminable at will by either party.
Xerox Canada Agreement
The Company's Value Added Remarketer Agreement with Xerox Canada Limited
("Canada VAR") appoints Xerox Canada as a non-exclusive VAR in Canada for the
Company's products. Under the agreement, Xerox Canada will add value to the
products by giving technical support, assisting end users with application
development, and providing first level hot-line support. For each
51
<PAGE> 54
copy of the Company's products sublicensed by Xerox Canada, Xerox Canada pays
the Company initial and annual fees equal to the Company's suggested retail
initial and annual license fees (net of the customer training uplift built into
the price), minus a percentage discount. The Canada VAR is due to expire in
January 1997; however, it is subject to automatic renewal for successive
one-year terms unless either party gives notice at least 90 days prior to the
expiration of the then current term that it will not renew the agreement.
EUROPEAN/SUB-SAHARAN AFRICA VAR AGREEMENTS
The Company has numerous Value Added Reseller and Value Added Remarketer
agreements in Europe and South Africa, Namibia and Swaziland, many of which are
with Rank Xerox, Ltd. and other Xerox affiliates. The rights granted to the
Company's resellers under these agreements are typically non-exclusive, although
the agreements covering the territories of England, Scotland, Northern Ireland
and Wales and South Africa, Namibia and Swaziland grant the reseller exclusive
rights in its territory. In the usual circumstance, the reseller purchases the
Company's products pursuant to purchase orders and redistributes the products in
its territory, with the reseller having no right to copy the Company's products.
The reseller performs front-line technical support for its end users, and
software upgrades are periodically provided to the reseller by the Company. Each
reseller agreement runs for either a two- or three-year term, with automatic
one-year renewals unless either party gives notice of non-renewal within a
specified period prior to renewal.
TAX SHARING AGREEMENT
Xerox and the Company intend to enter into a Tax Sharing Agreement (the
"Tax Sharing Agreement") that will provide for the allocation between Xerox and
the Company of all responsibilities, liabilities and benefits relating to taxes
paid or payable by either Xerox or the Company for all taxable periods, whether
beginning before, on, or after this offering. Prior to the consummation of this
offering, the Company has been included in the consolidated tax returns of
Xerox. The Company's share of Xerox's consolidated income tax liability for the
pre-offering period has been determined on a separate company basis computed
under Internal Revenue Code and applicable state guidelines and was $136,000,
$653,700 and $591,400 for the years ended December 31, 1993, 1994 and 1995,
respectively. The Company intends to repay such liability from the proceeds of
the initial public offering. For the period from January 1, 1996 through the
date on which Xerox owns less than 80% of the Company (which will occur upon the
consummation of this offering), the Company's separate tax liability will also
be settled with Xerox in cash. For the post-offering period, the Company will
file its own income tax returns. Any adjustments (for example, pursuant to an
Internal Revenue Service audit) made during the post-offering period, but
relating to the pre-offering period, will be settled between the Company and
Xerox in cash.
The Company has entered into employment agreements with certain of its
executive officers. See "Management -- Employment and Severance Arrangements."
The Company intends to enter into indemnification agreements with each of its
officers and directors. See "Management -- Limitation of Liability and
Indemnification Matters."
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<PAGE> 55
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information known to the Company
with respect to the beneficial ownership of the Company's outstanding Common
Stock as of June 30, 1996, and as adjusted to reflect the sale of the Common
Stock being offered hereby by (i) each person (or group of affiliated persons)
who is known by the Company to own beneficially more than 5% of the Company's
Common Stock, (ii) each of the Company's directors, (iii) each of the Named
Executive Officers, (iv) all executive officers and directors of the Company as
a group, and (v) each of the Selling Stockholders. The table assumes the
conversion of all outstanding Preferred Stock into Common Stock upon the
completion of this Offering. Unless otherwise specified, the address of the
stockholder is the address of the Company as set forth herein.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED NUMBER OF SHARES OWNED AFTER
PRIOR TO OFFERING(1) BEING OFFERED OFFERING(2)
DIRECTORS, NAMED OFFICERS --------------------- ---------------- ---------------------
AND 5% STOCKHOLDERS NUMBER PERCENT NUMBER NUMBER PERCENT
- ---------------------------- --------- ------- ---------------- --------- -------
<S> <C> <C> <C> <C> <C>
Xerox Corporation(3)........ 7,143,000 83.7% 388,500 6,754,500 65.1%
800 Long Ridge Road
Stamford, CT 06904
Tony N. Domit(4)............ 562,500 6.6 23,370 539,130 5.2
Barbara E. Amantea.......... 105,000 1.2 4,330 100,670 1.0
Thomas J. Anthony(5)........ 32,499 * -- 32,499 *
Peter L. Bradshaw(6)........ 38,967 * -- 38,967 *
Daniel J. Fregeau(7)........ 91,251 1.1 3,750 87,501 *
Judith A. O'Reilly(8)....... 97,500 1.1 4,040 93,460 *
E. Mark Palandri............ 210,000 2.5 8,660 201,340 1.9
Thomas L. Ringer(9)......... 32,155 * 9,180 22,975 *
Robert V. Adams(10)......... 7,143,000 83.7 388,500 6,754,500 65.1
Colin J. O'Brien(10)........ 7,143,000 83.7 388,500 6,754,500 65.1
James J. Costello(10)....... 7,143,000 83.7 388,500 6,754,500 65.1
Barton L. Faber............. -- * -- -- *
Richard Busch(11)........... 52,374 * 2,020 50,354 *
James Cowell................ 45,000 * 1,730 43,270 *
Michael Kramer(12).......... 62,577 * 2,600 59,977 *
John Schermerhorn(13)....... 60,000 * 2,320 57,680 *
J.J. Keil(14)............... 32,157 * 12,000 20,157 *
All Directors and Executive
Officers as a group (13
persons)(15).............. 8,312,872 96.8% 441,830 7,871,042 75.5
</TABLE>
- ---------------
* Less than 1 percent
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Except as indicated by
footnote, and subject to community property laws where applicable, the
persons or entities named in the table above have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them. Percentage of beneficial ownership is based on
8,537,157 shares of Common Stock outstanding as of June 30, 1996 and
10,374,657 shares of Common Stock outstanding after completion of this
Offering.
(2) Assumes no exercise of the Underwriters' over-allotment option to purchase
up to an aggregate of 345,000 shares of Common Stock from the Company.
(3) Mr. Adams, a director of the Company, is a principal of Xerox Technology
Ventures, a unit of Xerox Corporation. Mr. O'Brien is a director of the
Company, is a corporate Vice President of Xerox Corporation and Chief
Executive Officer of Xerox New Enterprises Companies, a unit of Xerox
Corporation. Mr. Costello is a director of the Company and Chief Financial
Officer of Xerox New Enterprises Companies, a unit of Xerox Corporation.
Mr. Adams disclaims
53
<PAGE> 56
beneficial ownership of such shares held by Xerox Corporation except to the
extent of his profit sharing interests therein. Messrs. O'Brien and
Costello disclaim beneficial ownership of such shares held by Xerox
Corporation.
(4) Pursuant to a trust, Mr. Domit and his spouse share voting and dispositive
powers as co-trustees with respect to 562,500 shares of Common Stock.
(5) Includes 2,499 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days of June 30, 1996.
(6) Includes 13,437 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days of June 30, 1996.
(7) Includes 31,251 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days of June 30, 1996.
(8) Includes 2,034 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days of June 30, 1996.
(9) Includes 987 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days of June 30, 1996. Pursuant to a trust, Mr.
Ringer and his spouse share voting and investment powers as co-trustees
with respect to 10,390 shares of Common Stock.
(10) Represents 7,143,000 shares and 6,754,500 shares held by Xerox Corporation
prior to and after the offering, respectively. See footnote (3) above.
(11) Includes 624 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days of June 30, 1996.
(12) Includes 7,077 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days of June 30, 1996.
(13) Includes 1,251 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days of June 30, 1996.
(14) Includes 633 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days of June 30, 1996.
(15) Includes 50,208 shares of Common Stock issuable pursuant to stock options
exercisable within 60 days of June 30, 1996 and 7,143,000 shares and
6,754,500 shares held by Xerox Corporation prior to and after the offering,
respectively. See footnote (3) above.
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<PAGE> 57
DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of the Company and certain
provisions of the Company's Amended and Restated Certificate of Incorporation
and Amended and Restated Bylaws is a summary and is qualified in its entirety by
the provisions of the Amended and Restated Certificate of Incorporation and
Bylaws, which have been filed as exhibits to the Company's Registration
Statement, of which this Prospectus is a part.
Upon the closing of this offering, the authorized capital stock of the
Company, after giving effect to the conversion of all outstanding Preferred
Stock into Common Stock, will consist of 30,000,000 shares of Common Stock,
$.001 par value, and 2,000,000 shares of Preferred Stock, $.001 par value.
COMMON STOCK
As of June 30, 1996 there were 8,537,157 shares of Common Stock outstanding
held of record by 30 stockholders.
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to
preferences that may be applicable to any then outstanding Preferred Stock,
holders of Common Stock are entitled to receive ratably such dividends as may be
declared by the Board of Directors out of funds legally available therefor. In
the event of a liquidation, dissolution or winding up of the Company, holders of
Common Stock are entitled to share ratably in all assets remaining after payment
of liabilities and the liquidation preferences of any outstanding shares of
Preferred Stock, if any. Holders of Common Stock have no preemptive rights and
no right to convert their Common Stock into any other securities. There are no
redemption or sinking fund provisions applicable to the Common Stock. All
outstanding shares of Common Stock are, and all shares of Common Stock to be
outstanding upon completion of the offering will be, fully paid and
nonassessable. The rights of holders of Common Stock are subject to, and may be
adversely affected by, the rights of any series of Preferred Stock which the
Company may issue in the future.
PREFERRED STOCK
Effective upon the closing of this offering, the Board of Directors will
have the authority, without further action by the stockholders, to issue up to
2,000,000 shares of Preferred Stock in one or more series, and to fix the
rights, designations, preferences, privileges, qualifications and restrictions
thereof, including dividend rights, conversion rights, voting rights, rights and
terms of redemption, liquidation preferences and sinking fund terms, any or all
of which may be greater than the rights of the Common Stock. The issuance of
Preferred Stock could adversely affect the voting power of holders of Common
Stock and the likelihood that such holders will receive dividend payments and
payments upon liquidation. Such issuance could have the effect of decreasing the
market price of the Common Stock. The issuance of Preferred Stock may have the
effect of delaying, deterring or preventing a change in control of the Company
without any further action by the stockholders. The Company has no present plans
to issue any shares of Preferred Stock.
REGISTRATION RIGHTS
Upon completion of this offering, Xerox will be entitled to certain
"piggyback" registration rights with respect to all of the 6,754,500 shares of
Common Stock then beneficially owned by it. See "Certain Transactions" and
"Principal and Selling Stockholders."
55
<PAGE> 58
CERTAIN ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION,
BY-LAWS AND DELAWARE LAW
GENERAL
Certain provisions of the Delaware General Corporation Law and the
Company's Certificate of Incorporation and Bylaws could have the effect of
making it more difficult for a third-party to acquire, or of discouraging a
third-party to acquire, control of the Company. Such provisions could limit the
price that certain investors might be willing to pay in the future for shares of
the Company's Common Stock. These provisions of Delaware law and the Company's
Certificate of Incorporation and Bylaws may also have the effect of discouraging
or preventing certain types of transactions involving an actual or threatened
change of control of the Company (including unsolicited takeover attempts), even
though such a transaction may offer the Company's stockholders the opportunity
to sell their stock at a price above the prevailing market price. The
Certificate of Incorporation allows the Company to issue Preferred Stock with
rights senior to those of the Common Stock and other rights that could adversely
affect the interests of holders of Common Stock without any further vote or
action by the stockholders. The issuance of Preferred Stock, for example, could
decrease the amount of earnings or assets available for distribution to the
holders of Common Stock or could adversely affect the rights and powers,
including voting rights, of the holders of Common Stock. In certain
circumstances, such issuance could have the effect of decreasing the market
price of the Common Stock, as well as having the anti-takeover effect discussed
above.
DELAWARE TAKEOVER STATUTE
The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203"), which prohibits a Delaware corporation from engaging in a
"business combination" with certain persons ("Interested Stockholders") for
three years following the date any such person becomes an Interested
Stockholder. Interested Stockholders generally include (i) persons who are the
beneficial owners of 15% or more of the outstanding voting stock of the
corporation, and (ii) persons who are affiliates or associates of the
corporation and who hold 15% or more of the corporation's outstanding voting
stock at any time within three years before the date on which such person's
status as an Interested Stockholder is determined. Subject to certain
exceptions, a business combination includes, among other things, (i) mergers or
consolidations, (ii) the sale, lease, exchange, mortgage, pledge, transfer or
other disposition of assets having an aggregate market value equal to 10% or
more of either the aggregate market value of all assets of the corporation
determined on a consolidated basis or the aggregate market value of all the
outstanding stock of the corporation, (iii) transactions that result in the
issuance or transfer by the corporation of any stock of the corporation to the
Interested Stockholder, except pursuant to a transaction that effects a pro rata
distribution to all stockholders of the corporation, (iv) any transaction
involving the corporation that has the effect of increasing the proportionate
share of the stock of any class or series, or securities convertible into the
stock of any class or series, of the corporation that is owned directly or
indirectly by the Interested Stockholder, of (v) any receipt by the Interested
Stockholder of the benefit (except proportionately as a stockholder) of any
loans, advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
Section 203 does not apply to a business combination if (i) before a person
becomes an Interested Stockholder, the board of directors of the corporation
approves the transaction in which the Interested Stockholder became an
Interested Stockholder or approved the business combination, (ii) upon
consummation of the transaction that resulted in the Interested Stockholder
becoming an Interested Stockholder, the Interested Stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commences, other than certain excluded shares, or (iii) following a
transaction in which the person became an Interested Stockholder, the business
combination is (a) approved by the board of directors of the corporation and (b)
authorized at a regular or special meeting of stockholders, and not by written
consent, by
56
<PAGE> 59
the affirmative vote of the holders of at least two-thirds of the outstanding
voting stock of the corporation not owned by the Interested Stockholder.
CERTIFICATE OF INCORPORATION AND BYLAWS
The Company's Bylaws also require that special meetings of the stockholders
of the Company may be called only by the Board of Directors, the Chief Executive
Officer of the Company or by any person or persons holding shares representing
at least 20% of the outstanding capital stock. The Company's Bylaws also require
advance written notice, which must be received by the Secretary of the Company
not less than 90 days prior to the meeting, by a stockholder of a proposal or
director nomination which such stockholder desires to present at an annual or
special meeting of stockholders. The Company's Certificate of Incorporation does
not include a provision for cumulative voting in the election of directors.
Under cumulative voting, a minority stockholder holding a sufficient number of
shares may be able to ensure the election of one or more directors. The absence
of cumulative voting may have the effect of limiting the ability of minority
stockholders to effect changes in the Board of Directors and, as a result, may
have the effect of deterring hostile takeover or delaying or preventing changes
in control or management of the Company.
The Company's Bylaws provide that the authorized number of directors may be
changed by an amendment to the Bylaws adopted by the Board of Directors or by
the stockholders. Vacancies in the Board of Directors may be filled either by
holders of a majority of the Company's voting stock or a majority of directors
in office, although less than a quorum.
TRANSFER AGENT AND REGISTRAR
U.S. Stock Transfer Corporation has been appointed as transfer agent and
registrar for the Company's Common Stock.
The Company has applied to have the Common Stock listed on the Nasdaq
National Market under the trading symbol DOCX.
57
<PAGE> 60
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the Common
Stock. Future sales of substantial amounts of Common Stock in the public market
could adversely affect market prices prevailing from time to time. Furthermore,
since only a limited number of shares will be available for sale shortly after
this offering because of certain contractual and legal restrictions on resale
(as described below), sales of substantial amounts of Common Stock in the public
market after such restrictions lapse could adversely affect the prevailing
market price at such time and the ability of the Company to raise equity capital
in the future.
Upon completion of this offering, the Company will have outstanding an
aggregate of 10,374,657 shares of Common Stock assuming no exercise of the
Underwriters' over-allotment option and no exercise of outstanding options to
purchase Common Stock. Of these shares, the shares of Common Stock to be sold in
this offering will be freely tradable without restriction or further
registration under the Securities Act, unless such shares are held by
"affiliates" of the Company, as that term is defined in Rule 144 under the
Securities Act (the "Affiliates"). The remaining 8,074,657 shares held by
existing stockholders of the Company were sold by the Company in reliance on
exemptions from the registration requirements of the Securities Act and are
"restricted" securities within the meaning of Rule 144 under the Securities Act
(the "Restricted Shares"). Restricted Shares may be sold in the public market
only if registered or if they qualify for an exemption from registration under
Rules 144, 144(k) or 701 promulgated under the Securities Act, which rules are
summarized below. As a result of the contractual restrictions described below
and the provisions of Rules 144, 144(k) and 701, the Restricted Shares will be
available for sale in the public market as follows (based on the number of
shares outstanding as of June 30, 1996): (i) no Restricted Shares will be
eligible for immediate sale upon completion of this offering, and (ii) all
Restricted Shares will be eligible for sale upon expiration of the lock-up
agreements 180 days after the date of this Prospectus (regardless of whether
certain proposed amendments to Rule 144 are adopted in the currently proposed
form prior to such date).
Upon completion of this offering, Xerox, or certain transferees, will be
entitled to certain rights with respect to the registration of 6,754,500 shares
of Common Stock under the Securities Act. See "Description of Capital
Stock -- Registration Rights." Registration of such shares under the Securities
Act would result in such shares becoming freely tradable without restriction
under the Securities Act (except for shares purchased by Affiliates) immediately
upon the effectiveness of such registration.
All officers and directors, Xerox and substantially all other stockholders
and option holders of the Company have agreed not to sell, make any short sale
of, grant any option for the purchase of, or otherwise transfer or dispose of,
any shares of Common Stock or any securities convertible into or exercisable for
Common Stock held by such persons prior to the date hereof for a period of 180
days after the date of this Prospectus, without the prior written consent of
Deutsche Morgan Grenfell. When determining whether or not to release shares from
the lock-up agreements, Deutsche Morgan Grenfell will consider, among other
factors, the stockholder's reasons for requesting the release, the number of
shares for which the release is being requested and market conditions at the
time.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an Affiliate, who has beneficially owned
shares for at least two years is entitled to sell, within any three-month period
commencing 90 days after the date of this Prospectus, a number of shares that
does not exceed the greater of (i) 1% of the then outstanding shares of Common
Stock (103,746 shares immediately after this offering) or (ii) the average
weekly trading volume of the Common Stock on the Nasdaq National Market during
the four calendar weeks preceding such sale, subject to the filing of a Form 144
with respect to such sale. Sales under Rule 144 are also subject to certain
manner of sale provisions and notice requirements and to the availability of
current public information about the Company. Pursuant to a recent proposal of
the
58
<PAGE> 61
Securities and Exchange Commission (the "Commission") that has not yet been
adopted, the two-year holding period described in the preceding sentence would
be reduced to one year. In addition, a person who is not deemed to have been an
affiliate of the Company at any time during the 90 days preceding a sale, and
who has beneficially owned the shares proposed to be sold for at least three
years, would be entitled to sell such shares under Rule 144(k) without regard to
the requirements described above. Pursuant to a recent proposal of the
Commission that has not yet been adopted, the three-year holding period
described in the preceding sentence would be reduced to two years.
Under Rule 144(k), a person who is not deemed to have been an Affiliate of
the Company at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least three years
(including the holding period of any prior owner except an Affiliate), is
entitled to sell such shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. Therefore,
unless otherwise restricted, "144(k) shares" may be sold immediately following
completion of this offering. Under the proposed amendments to Rule 144, the
holding period applicable under Rule 144(k) would be reduced from three years to
two years. In general, under Rule 701 of the Securities Act as currently in
effect, any employee, consultant or advisor of the Company who purchased shares
from the Company in connection with a compensatory stock or option plan or
written employment agreement is eligible to resell such shares 90 days after the
effective date of this offering in reliance on Rule 144, but without compliance
with certain restrictions, including the holding period, contained in Rule 144.
Within 90 days of the date of this Prospectus, the Company intends to file
a registration statement under the Securities Act to register shares of Common
Stock reserved for issuance under its equity incentive plans, thus permitting
the resale of such shares by non-affiliates in the public market without
restriction under the Securities Act. See "Management -- Employee Benefit
Plans." Such registration statements will become effective immediately upon
filing. As of June 30, 1996, 373,368 options to purchase shares of Common Stock
were outstanding under the Company's stock option plans and agreements, none of
which are subject to the lock-up agreements described above.
59
<PAGE> 62
UNDERWRITING
The Underwriters named below, for whom Deutsche Morgan Grenfell/C.J.
Lawrence Inc., and SoundView Financial Group, Inc. are acting as representatives
(the "Representatives"), have severally agreed, subject to the terms and
conditions contained in the Underwriting Agreement (the form of which is filed
as an exhibit to the Company's Registration Statement, of which this Prospectus
is a part), to purchase from the Company and the Selling Stockholders the
respective number of shares of Common Stock indicated below opposite their
respective names. The Underwriters are committed to purchase all of the shares,
if they purchase any.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
---------
<S> <C>
Deutsche Morgan Grenfell/C. J. Lawrence Inc......................
SoundView Financial Group, Inc. .................................
---------
Total.................................................. 2,300,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions.
The Representatives have advised the Company that the Underwriters propose
initially to offer the Common Stock to the public on the terms set forth on the
cover page of this Prospectus. The Underwriters may allow to selected dealers
(who may include the Underwriters) a concession of not more than $ per share.
The selected dealers may reallow a concession of not more than $ to certain
other dealers. After the initial public offering, the price and concessions and
re-allowances to dealers and other selling terms may be changed by the
Representatives. The Common Stock is offered subject to receipt and acceptance
by the Underwriters, and to certain other conditions, including the right to
reject orders in whole or in part. The Underwriters do not intend to sell any of
the shares of Common Stock offered hereby to accounts for which they exercise
discretionary authority.
The Company has granted an option to the Underwriters to purchase up to a
maximum of 345,000 additional shares of Common Stock to cover over-allotments,
if any, at the public offering price, less the underwriting discount set forth
on the cover page of this Prospectus. Such option may be exercised at any time
until 30 days after the date of the Underwriting Agreement. To the extent the
Underwriters exercise this option, each of the Underwriters will be committed,
subject to certain conditions, to purchase such additional shares in
approximately the same proportion as set forth in the above table. The
Underwriters may purchase such shares only to cover over-allotments made in
connection with the Offering.
The Underwriting Agreement provides that the Company and the Selling
Stockholders will indemnify the several Underwriters against certain liabilities
including civil liabilities under the Securities Act of 1933, as amended, or
will contribute to payments the Underwriters may be required to make in respect
thereof.
In connection with the Offering, the Company and the directors, executive
officers and stockholders of the Company have agreed not to offer, sell or
otherwise dispose of any shares of Common Stock for a period of 180 days after
the later of: (i) the date of this Prospectus; and (ii) the first date on which
shares of Common Stock hereby are offered to the public, without the prior
written consent of Deutsche Morgan Grenfell/C.J. Lawrence Inc.
60
<PAGE> 63
Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price will be determined by negotiation
between the Company, the Selling Stockholders and the Representatives. The
principal factors to be considered in determining the public offering price
included the information set forth in this Prospectus and otherwise available to
the Representatives; the history and the prospects for the industry in which the
Company will compete; the ability of the Company's management; the prospectus
for future earnings of the Company; the present state of the Company's
development and its current financial condition; the general condition of the
securities markets at the time of the offering; and the recent market prices of,
and the demand for, publicly traded common stock of generally comparable
companies.
LEGAL MATTERS
Certain legal matters with respect to the validity of the issuance of the
shares of Common Stock offered hereby will be passed upon for the Company by
Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California. Certain legal matters in connection with this offering will be
passed upon for the Underwriters by Gray Cary Ware & Freidenrich, A Professional
Corporation, San Diego, California.
EXPERTS
The consolidated financial statements of Document Sciences Corporation at
December 31, 1994 and 1995, and for each of the three years in the period ended
December 31, 1995, appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1
under the Securities Act, and the rules and regulations promulgated thereunder,
with respect to the Common Stock offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. Statements contained in the Prospectus as to the contents of
any contract or other document that is filed as an exhibit to the Registration
Statement are not necessarily complete and each such statement is qualified in
all respects by reference to the full text of such contract or document. For
further information with respect to the Company and the Common Stock, reference
is hereby made to such exhibits and schedules thereto, which may be inspected
and copied at the principal office of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices at 5670
Wilshire Blvd., Los Angeles, California 90036 and at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of each such
document may be obtained from the Commission at its principal office in
Washington, D.C. upon payment of the charges prescribed by the Commission.
61
<PAGE> 64
DOCUMENT SCIENCES CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors..................................... F-2
Consolidated Balance Sheets........................................................... F-3
Consolidated Statements of Income..................................................... F-4
Consolidated Statements of Redeemable Preferred Stock and Stockholders' Equity........ F-5
Consolidated Statements of Cash Flows................................................. F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE> 65
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Document Sciences Corporation
We have audited the accompanying consolidated balance sheets of Document
Sciences Corporation as of December 31, 1994 and 1995, and the related
consolidated statements of income, redeemable preferred stock and stockholders'
equity 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Document
Sciences Corporation at 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.
ERNST & YOUNG LLP
San Diego, California
July 12, 1996
F-2
<PAGE> 66
DOCUMENT SCIENCES CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
UNAUDITED
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY AT
------------------------- JUNE 30, JUNE 30,
1994 1995 1996 1996
---------- ---------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Assets (Note 4)
Current assets:
Cash and cash equivalents (Note 2)............. $ 583,834 $1,271,120 $ 1,465,784
Accounts receivable, less allowance for
doubtful accounts of $13,613, $22,957 and
$28,939 in 1994, 1995 and 1996,
respectively................................. 1,948,591 2,152,732 2,181,087
Due from affiliates (Note 9)................... 905,200 1,612,600 1,536,329
Deferred income taxes (Note 8)................. 62,700 79,200 79,200
Other current assets........................... 140,975 164,233 184,367
---------- ---------- ----------
Total current assets................. 3,641,300 5,279,885 5,446,767
Property and equipment, net (Note 2)........... 345,005 632,225 907,996
Computer software costs, net of accumulated
amortization of $144,651, $280,719 and
$333,568 in 1994, 1995 and 1996,
respectively................................. 222,260 377,172 428,559
Deferred financing costs....................... -- -- 318,806
---------- ---------- ----------
$4,208,565 $6,289,282 $ 7,102,128
========== ========== ==========
Liabilities, redeemable preferred stock and
stockholders' equity
Current liabilities:
Accounts payable............................... $ 119,522 $ 328,609 $ 471,015
Accrued compensation........................... 936,944 444,409 522,043
Other accrued liabilities...................... 146,623 130,487 371,833
Deferred revenue............................... 1,081,715 1,596,965 1,594,357
Current income tax expense payable to
affiliate.................................... 790,700 1,382,100 1,382,100
Current portion of obligations under capital
leases (Note 5).............................. 30,249 44,100 65,223
---------- ---------- ----------
Total current liabilities............ 3,105,753 3,926,670 4,406,571
Obligations under capital leases (Note 5)...... 20,490 98,500 144,902
Deferred income taxes (Note 8)................. 93,500 157,000 157,000
Commitments and contingencies
Series A Redeemable Preferred Stock, $.001 par
value; 2,000,000 shares authorized, issued
and outstanding (no shares issued and
outstanding pro forma); (liquidation
preference of $2,000,000) (Note 6)........... 917,750 1,250,750 1,417,250 $ --
Stockholders' equity (Note 7)
Common stock, $.001 par value;
Authorized shares -- 3,000,000
Issued and outstanding shares -- 3,000,
1,311,423 and 1,397,157 in 1994, 1995
and 1996, respectively (8,537,157 shares
issued and outstanding pro forma)............ 3 1,311 1,397 8,537
Additional paid-in capital..................... 45,593 110,550 557,065 1,967,175
Deferred compensation.......................... -- -- (406,475) (406,475)
Retained earnings.............................. 25,476 744,501 824,418 824,418
---------- ---------- ----------
Total stockholders' equity........... 71,072 856,362 976,405 2,393,655
========== ==========
---------- ----------
$4,208,565 $6,289,282 $ 7,102,128
========== ========== ==========
</TABLE>
See accompanying notes.
F-3
<PAGE> 67
DOCUMENT SCIENCES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
---------------------------------------- -------------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues (Notes 3 and 9):
Initial license fees (including
$439,500, $1,098,400 and
$2,518,700 from affiliates in
1993, 1994 and 1995,
respectively)................... $1,979,776 $4,425,970 $6,299,230 $2,492,407 $3,503,292
Annual renewal license and support
fees (including $144,000,
$312,800, and $461,500 from
affiliates in 1993, 1994 and
1995, respectively)............. 980,729 1,521,389 1,942,353 894,021 1,100,355
Services and other (including
$216,900, $528,000 and $934,700
from affiliates in 1993, 1994
and 1995, respectively)......... 530,922 1,223,897 2,270,460 778,051 1,746,407
---------- ---------- ---------- ---------- ----------
Total revenues............. 3,491,427 7,171,256 10,512,043 4,164,479 6,350,054
Cost of revenues:
Initial license fees............... 144,991 273,667 350,860 98,332 313,664
Annual renewal license and support
fees............................ 217,312 266,902 369,732 179,675 244,588
Services and other................. 77,583 191,865 423,888 178,854 321,572
---------- ---------- ---------- ---------- ----------
Total cost of revenues..... 439,886 732,434 1,144,480 456,861 879,824
---------- ---------- ---------- ---------- ----------
Gross profit............... 3,051,541 6,438,822 9,367,563 3,707,618 5,470,230
Operating expenses:
Research and development........... 400,796 1,044,761 1,747,194 819,371 1,085,470
Selling and marketing (including
$113,500 and $167,200 to
affiliates in 1994 and 1995,
respectively) (Note 9).......... 934,897 2,765,414 4,415,158 1,866,071 3,249,009
General and administrative......... 996,195 1,274,847 1,519,865 732,274 735,617
---------- ---------- ---------- ---------- ----------
Total operating expenses... 2,331,888 5,085,022 7,682,217 3,417,716 5,070,096
---------- ---------- ---------- ---------- ----------
Income from operations............... 719,653 1,353,800 1,685,346 289,902 400,134
Interest income (expense), net....... (22,863) (9,125) 5,079 9,227 15,839
---------- ---------- ---------- ---------- ----------
Income before provision for income
taxes.............................. 696,790 1,344,675 1,690,425 299,129 415,973
Provision for income taxes
(Note 8)........................... 283,400 632,900 638,400 110,959 169,556
---------- ---------- ---------- ---------- ----------
Net income........................... $ 413,390 $ 711,775 $1,052,025 $ 188,170 $ 246,417
========== ========== ========== ========== ==========
Pro forma net income per share....... $ .06 $ .09 $ .13 $ .02 $ .03
========== ========== ========== ========== ==========
Shares used to compute pro forma net
income per share................... 7,290,165 8,256,165 8,291,732 8,256,165 8,891,176
========== ========== ========== ========== ==========
</TABLE>
See accompanying notes.
F-4
<PAGE> 68
DOCUMENT SCIENCES CORPORATION
CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY
<TABLE> SERIES A
<CAPTION> REDEEMABLE
PREFERRED STOCK STOCKHOLDERS' EQUITY
----------------------- -------------------------------------------------------------------------------
DEFERRED
COMPENSATION TOTAL
COMMON STOCK ADDITIONAL RELATED TO RETAINED STOCKHOLDERS'
------------------- PAID-IN STOCK EARNINGS EQUITY
SHARES AMOUNT SHARES AMOUNT CAPITAL OPTIONS (DEFICIT) (DEFICIT)
--------- ---------- --------- ------ ---------- ------------ --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December
31, 1992.......... 2,000,000 $ 251,750 3,000 $ 3 $ 45,593 $ -- $(433,689) $ (388,093)
Accretion on
Series A
Redeemable
Preferred
Stock........... -- 333,000 -- -- -- -- (333,000) (333,000)
Net income........ -- -- -- -- -- -- 413,390 413,390
--------- ---------- ------- ---- ---------- ---------- ---------- ----------
Balance at December
31, 1993.......... 2,000,000 584,750 3,000 3 45,593 -- (353,299) (307,703)
Accretion on
Series A
Redeemable
Preferred
Stock........... -- 333,000 -- -- -- -- (333,000) (333,000)
Net income........ -- -- -- -- -- -- 711,775 711,775
--------- ---------- ------- ---- ---------- ---------- ---------- ----------
Balance at December
31, 1994.......... 2,000,000 917,750 3,000 3 45,593 -- 25,476 71,072
Issuance of common
stock for
cash............ -- -- 1,308,423 1,308 64,957 -- -- 66,265
Accretion on
Series A
Redeemable
Preferred
Stock........... -- 333,000 -- -- -- -- (333,000) (333,000)
Net income........ -- -- -- -- -- -- 1,052,025 1,052,025
--------- ---------- ------- ---- ---------- ---------- ---------- ----------
Balance at December
31, 1995.......... 2,000,000 1,250,750 1,311,423 1,311 110,550 -- 744,501 856,362
Issuance of common
stock for cash
(unaudited)..... -- -- 85,734 86 6,515 -- -- 6,601
Accretion on
Series A
Redeemable
Preferred
Stock
(unaudited)..... -- 166,500 -- -- -- -- (166,500) (166,500)
Deferred
compensation
related to stock
options
(unaudited)..... -- -- -- -- 440,000 (440,000) -- --
Amortization of
deferred
compensation
related to stock
options
(unaudited)..... -- -- -- -- -- 33,525 -- 33,525
Net income
(unaudited)..... -- -- -- -- -- -- 246,417 246,417
--------- ---------- ------- ---- ---------- ---------- ---------- ----------
Balance at June 30,
1996
(unaudited)....... 2,000,000 $1,417,250 1,397,157 $1,397 $ 557,065 $ (406,475) $ 824,418 $ 976,405
========= ========== ========= ====== ========== ========== ========== ==========
</TABLE>
See accompanying notes.
F-5
<PAGE> 69
DOCUMENT SCIENCES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
---------------------------------------- -----------------------
1993 1994 1995 1995 1996
----------- ----------- ---------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income................................ $ 413,390 $ 711,775 $1,052,025 $ 188,170 $ 246,417
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization........... 33,040 63,102 141,685 58,408 113,560
Amortization of computer software
costs................................ 36,595 103,483 136,068 16,979 52,849
Amortization of deferred compensation... -- -- -- -- 33,525
Current income tax expense payable to
affiliate............................ 136,000 653,700 591,400 116,927 --
Deferred income taxes................... 147,400 (20,800) 47,000 (5,968) --
Provision for doubtful accounts......... 10,000 3,613 9,344 16,795 5,982
Changes in operating assets and
liabilities:
Accounts receivable.................. (1,037,103) (1,461,372) (920,885) 561,574 41,934
Other current assets................. (5,568) (114,934) (23,258) 25,385 (20,134)
Accounts payable..................... 28,728 82,693 209,087 15,743 (176,400)
Accrued liabilities.................. (7,109) 892,877 (508,671) (710,887) 318,980
Deferred revenue..................... 334,587 343,777 515,250 8,111 (2,608)
----------- ----------- ---------- ---------- ----------
Net cash provided by operating
activities.............................. 89,960 1,257,914 1,249,045 291,237 614,105
INVESTING ACTIVITIES
Purchases of property and equipment....... (20,504) (247,660) (297,964) (316,098) (287,562)
Additions to computer software costs...... (74,859) (163,629) (290,980) (128,991) (104,236)
----------- ----------- ---------- ---------- ----------
Net cash used for investing activities.... (95,363) (411,289) (588,944) (445,089) (391,798)
FINANCING ACTIVITIES
Proceeds from note payable to bank........ 120,000 100,000 -- -- --
Repayments of note payable to bank........ -- (445,000) -- -- --
Principal payments under capital lease
obligations............................. (3,209) (29,379) (39,080) (22,642) (34,244)
Issuance of common stock.................. -- -- 66,265 -- 6,601
----------- ----------- ---------- ---------- ----------
Net cash provided by (used for) financing
activities.............................. 116,791 (374,379) 27,185 (22,642) (27,643)
----------- ----------- ---------- ---------- ----------
Increase (decrease) in cash and cash
equivalents............................. 111,388 472,246 687,286 (176,494) 194,664
Cash and cash equivalents at beginning of
period.................................. 200 111,588 583,834 583,834 1,271,120
----------- ----------- ---------- ---------- ----------
Cash and cash equivalents at end of
period.................................. $ 111,588 $ 583,834 $1,271,120 $ 407,340 $1,465,784
=========== =========== ========== ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid............................. $ 22,863 $ 15,800 $ 12,283 $ 3,751 $ 12,246
=========== =========== ========== ========== ==========
Capital lease obligations entered into for
property and equipment.................. $ 12,269 $ 55,592 $ 130,941 $ -- $ 101,769
=========== =========== ========== ========== ==========
</TABLE>
See accompanying notes.
F-6
<PAGE> 70
DOCUMENT SCIENCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE SIX-MONTH PERIODS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Document Sciences Corporation (the "Company") was incorporated on October
18, 1991 in Delaware as a subsidiary of Xerox Corporation ("Xerox"). The Company
develops, markets and supports a family of document automation software products
and services used in high volume electronic publishing applications. Autograph,
the Company's document automation software architecture, enables personalized
publishing solutions for many industries including insurance, managed
healthcare, financial services, telecommunications, government agencies and
commercial print service bureaus.
The Company currently derives substantially all of its license revenues
from licenses of CompuSet, Autograph's flagship product, and related products
and from fees for services related to the CompuSet software. The Company's
financial performance will continue to depend, in significant part, on the
successful development, introduction and customer acceptance of new and enhanced
versions of the CompuSet software and related products. There can be no
assurance that the Company will continue to be successful in developing and
marketing CompuSet products and related services.
Management believes that fourth quarter revenues are positively impacted by
year-end capital purchases by large corporate customers, as well as the
Company's sales compensation plans. These seasonal factors typically result in
fourth quarter revenues being substantially higher than revenues in each of the
preceding three quarters.
The Company currently has a variety of contractual and informal
relationships with Xerox and affiliates of Xerox, including a strategic
marketing alliance agreement, a transfer and license agreement and various
distribution agreements. There can be no assurance that Xerox or its affiliates
will continue these relationships. The failure by the Company to maintain these
relationships with Xerox and its affiliates could have a material adverse effect
on the Company's financial statements.
BASIS OF PRESENTATION
In 1994, the Company established a wholly-owned subsidiary, Document
Sciences Europe, in Sophia Antipolis, France in order to market and support its
products to the European community. The accompanying consolidated financial
statements include the accounts of the Company and its subsidiary. Significant
intercompany accounts and transactions have been eliminated in consolidation.
INTERIM FINANCIAL INFORMATION
The financial statements at June 30, 1996 and for the six-month periods
ended June 30, 1995 and 1996 are unaudited, but include all adjustments
(consisting only of normal recurring adjustments) which management considers
necessary for a fair statement of the financial position at such dates and the
operating results and cash flows for such periods. Results for interim periods
are not necessarily indicative of results for the entire year or any future
periods.
F-7
<PAGE> 71
DOCUMENT SCIENCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30 AND FOR THE SIX-MONTH PERIODS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
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.
FOREIGN OPERATIONS
The functional currency of the Company's France subsidiary is the French
Franc. The balance sheet accounts of the subsidiary are translated into United
States dollars at exchange rates prevailing at the balance sheet dates.
Operating results are translated at weighted average exchange rates in effect
during the year. Net unrealized translation adjustments were insignificant in
1994, 1995 and the six month period ended June 30, 1996. Foreign currency
transaction gains and losses are included in the consolidated statements of
income and were not material during the years ended December 31, 1994 and 1995
and the six month periods ended June 30, 1995 and 1996.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and highly liquid investments
which include debt securities with remaining maturities when acquired of three
months or less and are stated at market. The Company evaluates the financial
strength of institutions at which significant investments are made and believes
the related credit risk is limited to an acceptable level.
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 115, Accounting for Certain Investments in Debt and Equity
Securities, and has classified its investments as available-for-sale in
accordance with that standard. Available-for-sale securities are carried at
amounts which approximate fair value. Unrealized gains and losses, net of tax,
are reported in stockholders' equity. Realized gains and losses and declines in
value judged to be other-than-temporary, if any, on available-for-sale
securities are included in investment income. The cost of securities sold is
based on the specific identification method.
CONCENTRATION OF CREDIT RISK
The Company sells its products primarily to large, multinational customers
in the United States, Europe, Canada and Australia. The Company derived 14%,
26%, 42% and 30% of its total revenues from customers outside the United States
in the years ended December 31, 1993, 1994 and 1995 and the six months ended
June 30, 1996, respectively. A significant concentration of the Company's
customers are in the insurance and commercial print service industries. No
customer has accounted for 10% or more of the Company's revenue in any one year.
Credit is extended based on an evaluation of the customer's financial
condition and a cash deposit is generally not required. The Company estimates
its potential losses on trade receivables on an ongoing basis and provides for
anticipated losses in the period in which the revenues are recognized. Credit
losses have historically been minimal and have been within management's
expectations.
F-8
<PAGE> 72
DOCUMENT SCIENCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30 AND FOR THE SIX-MONTH PERIODS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
DEFERRED FINANCING COSTS
Costs incurred through June 30, 1996 in connection with the offering
contemplated by this Prospectus have been deferred. Such costs will be charged
against the proceeds of the offering upon completion, or expensed if the
offering is not completed.
ACCOUNTING STANDARD ON IMPAIRMENT OF LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, which requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. Statement 121 also addresses
the accounting for long-lived assets that are expected to be disposed of. The
Company adopted SFAS 121 in 1996 and the adoption had no impact on the Company's
financial statements.
COMPUTER SOFTWARE COSTS
In accordance with SFAS No. 86, Accounting for the Costs of Computer
Software to be Sold, Leased or Otherwise Marketed, costs incurred in the
research and development of new software products and significant enhancements
to existing software products are expensed as incurred until the technological
feasibility of the product has been established. After technological feasibility
has been established, direct production costs, including programming and
testing, are capitalized until general release of the product.
Capitalized software costs are amortized using the greater of the amount
computed using the ratio of current period product revenues to estimated total
product revenues or the straight-line method over the remaining estimated
economic lives of the products (generally five years). It is possible that
estimated total product revenues, the estimated economic life of the product, or
both, will be reduced in the future. As a result, the carrying amount of
capitalized software costs may be reduced in the future, which could result in
charges to the results of operations in future periods.
DEPRECIATION AND AMORTIZATION
Depreciation is provided on a straight-line method over the estimated
useful lives of the assets (generally five years). Amortization of leasehold
improvements is provided over the lesser of the remaining lease term or the
estimated useful life of the improvements.
REVENUE RECOGNITION
The Company recognizes revenue in accordance with AICPA Statement of
Position on Software Revenue Recognition No. 91-1. Initial licensing revenue is
recognized upon shipment of the product to customers if no significant Company
obligations remain and collection of the receivable is deemed probable. The
portion of the initial licensing revenue which represents the software support
for the first year is deferred and recognized ratably over the contract period.
In subsequent years, customers pay annual license fees for continued use and
support of licensed software. Annual renewal license and support revenue is
deferred and recognized ratably over the contract period. Revenues from
commissions paid by Xerox in connection with the sale of Xerox printer products
are
F-9
<PAGE> 73
DOCUMENT SCIENCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30 AND FOR THE SIX-MONTH PERIODS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
recognized upon installation of the printer products. Revenues generated from
consulting and training services are recognized as the related services are
performed.
PRO FORMA NET INCOME PER SHARE
Pro forma net income per share is computed using the weighted average
number of common shares outstanding during the period and includes the effect of
dilutive common stock equivalents arising from stock options, using the treasury
stock method. Pursuant to the requirements of the Securities and Exchange
Commission, Common Stock issued by the Company during the twelve months
immediately preceding the initial public offering, plus the number of common
equivalent shares which became issuable during the same period pursuant to the
grant of stock options, have been included in the calculation of the shares used
in computing pro forma net income per share as if these shares were outstanding
for all periods presented using the treasury stock method. In addition, the
calculation of the shares used in computing pro forma net income per share also
includes the Series A Redeemable Preferred Stock, which will convert into Common
Stock upon completion of the initial public offering contemplated by this
Prospectus, as if they were converted into Common Stock as of the original dates
of issuance. Historical earnings per share have not been presented since such
amounts are not deemed meaningful due to the significant change in the Company's
capital structure that will occur in connection with the initial public
offering.
SUPPLEMENTAL PRO FORMA NET INCOME PER SHARE
The computation of supplemental pro forma net income per share is based on
pro forma net income per share as described above, adjusted to assume the
repayment of the current income tax payable to affiliate out of the proceeds of
this offering. As a result, the shares used to compute supplemental pro forma
net income per share include 125,645 shares of the shares being offered by the
Company hereby which represent the shares deemed to be sold to fund such
repayment. Supplemental pro forma net income per share was $.06, $.08 and $.12
for the years ended December 31, 1993, 1994 and 1995, respectively, and $.02 and
$.03 for the six months ended June 30, 1995 and 1996, respectively.
STOCK OPTIONS
In October 1995, the FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation, which is effective for the Company's 1996 consolidated financial
statements. SFAS 123 allows companies to either account for stock-based
compensation under the new provisions or under the provisions of APB 25, but
requires pro-forma disclosure in the footnotes to the financial statements as if
the measurement provisions of SFAS 123 had been adopted. The Company intends to
continue accounting for its stock-based compensation in accordance with the
provisions of APB 25. As such, the new provisions of SFAS 123 will not impact
the financial position or results of operations of the Company.
INCOME TAXES
The Company follows the liability method of accounting for income taxes, as
set forth in SFAS No. 109.
Xerox and the Company intend to enter into a Tax Sharing Agreement that
provides for the allocation between Xerox and the Company of all
responsibilities, liabilities and benefits relating to
F-10
<PAGE> 74
DOCUMENT SCIENCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30 AND FOR THE SIX-MONTH PERIODS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
taxes paid or payable by either Xerox or the Company for all taxable periods,
whether beginning before, on, or after this offering. Through December 31, 1995,
the Company has been included in the consolidated tax returns of Xerox. The
Company's share of Xerox's consolidated income tax liability through December
31, 1995 has been determined on a separate company basis computed under Internal
Revenue Code guidelines and was $136,000, $653,700 and $591,400 for the years
ended December 31, 1993, 1994 and 1995, respectively, which has been accounted
for as a current liability. The Company intends to repay such liability from the
proceeds of the initial public offering contemplated by this Prospectus. For the
period from January 1, 1996 through the date on which Xerox owns less than 80%
of the Common Stock of the Company, the Company's separate tax liability will be
settled with Xerox in cash. The Company intends to pay any such liabilities with
cash generated from operations. At such time as Xerox owns less than 80% of the
Common Stock of the Company, the Company will not be part of the consolidated
tax returns of Xerox and will file separate tax returns.
2. FINANCIAL STATEMENT INFORMATION
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JUNE 30,
1994 1995 1996
--------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment.................. $ 338,310 $ 625,591 $ 783,454
Office furniture and fixtures....... 74,015 171,399 208,325
Office equipment.................... 32,075 46,367 166,770
Leasehold improvements.............. 16,642 46,590 120,729
--------- --------- ----------
461,042 889,947 1,279,278
Less accumulated depreciation and
amortization...................... (116,037) (257,722) (371,282)
--------- --------- ----------
$ 345,005 $ 632,225 $ 907,996
========= ========= ==========
</TABLE>
Equipment acquired under capital leases totaled $66,255, $145,112 and
$221,012 (net of accumulated amortization of $16,259, $35,085 and $60,954) at
December 31, 1994 and 1995 and June 30, 1996, respectively.
INVESTMENTS
Included in cash and cash equivalents were the following debt securities
which were classified as available-for-sale:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1994 1995 1996
-------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
U.S. treasury securities.................. $ -- $398,889 $ --
U.S. government agency obligations........ 199,435 298,470 198,315
-------- -------- --------
$199,435 $697,359 $198,315
======== ======== ========
</TABLE>
As of December 31, 1994, 1995 and June 30, 1996, the difference between
amortized cost and the estimated fair value of the available-for-sale securities
was not material.
F-11
<PAGE> 75
DOCUMENT SCIENCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30 AND FOR THE SIX-MONTH PERIODS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
3. DOMESTIC AND FOREIGN OPERATIONS
The table below summarizes the Company's domestic operations and those of
its subsidiary, Document Sciences Europe.
<TABLE>
<CAPTION>
UNITED
STATES FRANCE ELIMINATIONS TOTAL
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Year ended December 31,
1995
Sales to unaffiliated
customers............. $5,350,838 $1,246,305 $ -- $ 6,597,143
Sales to affiliates (Note
9).................... 1,929,300 1,985,600 -- 3,914,900
Transfers between
geographic areas...... 1,528,352 -- (1,528,352) --
---------- ---------- ----------- -----------
Revenues................. $8,808,490 $3,231,905 $(1,528,352) $10,512,043
========== ========== =========== ===========
Operating income (loss).. $1,696,153 $ (5,728) $ -- $ 1,690,425
========== ========== =========== ===========
Identifiable assets...... $4,748,787 $1,557,161 $ (16,666) $ 6,289,282
========== ========== =========== ===========
Year ended December 31,
1994
Sales to unaffiliated
customers............. $4,861,398 $ 370,658 $ -- $ 5,232,056
Sales to affiliates (Note
9).................... 1,405,800 533,400 -- 1,939,200
Transfers between
geographic areas...... 507,388 -- (507,388) --
---------- ---------- ----------- -----------
Revenues................. $6,774,586 $ 904,058 $ (507,388) $ 7,171,256
========== ========== =========== ===========
Operating income (loss).. $1,727,707 $ (383,032) $ -- $ 1,344,675
========== ========== =========== ===========
Identifiable assets...... $3,475,168 $ 750,063 $ (16,666) $ 4,208,565
========== ========== =========== ===========
</TABLE>
The Company uses affiliated distributors to sell its products in Canada,
Australia and New Zealand (See Note 9).
4. CREDIT FACILITY
The Company had an agreement with a bank to provide a working capital line
of credit which allows maximum borrowings at the lesser of $750,000 or 75% of
eligible accounts receivable (as defined). The agreement also provided for
letters of credit up to an aggregate of $100,000. Borrowings under the line of
credit are collateralized by substantially all assets of the Company and bear
interest at the bank's prime rate plus 1%. The line of credit agreement contains
certain covenants, including a limit on the amount of debt to tangible net worth
and restrictions on the payment of dividends. The line of credit is renewable
annually at the sole discretion of the bank and expired on July 5, 1996. The
Company had no outstanding borrowings or letters of credit as of December 31,
1995.
On July 12, 1996, the Company signed a letter of intent to renew the line
of credit to provide borrowings up to $2,500,000, with the line of credit to
expire in July 1997.
F-12
<PAGE> 76
DOCUMENT SCIENCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30 AND FOR THE SIX-MONTH PERIODS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
5. LEASES
The Company leases its corporate office facilities in San Diego, California
under an operating lease, signed by Xerox, which expires in 2000. Under the
terms of the lease, effective February 1, 1997, monthly rental payments will be
increased annually by 4%. The lease provides the Company with an option to
extend the lease term for an additional three years at the base rent in effect
for the last year of the initial lease term. In addition, the Company may
exercise a one-time cancellation option effective any time after January 31,
1998 with the payment of certain penalties. The Company also leases certain
equipment under capital leases.
Annual future minimum lease payments, which include $121,400 for the effect
of the potential exercise of the cancellation option, are as follows:
<TABLE>
<CAPTION>
YEARS ENDING OPERATING CAPITAL
DECEMBER 31, LEASES LEASES
------------ -------- --------
<S> <C> <C>
1996.............................................. $206,800 $ 58,700
1997.............................................. 214,300 46,100
1998.............................................. 177,600 41,300
1999.............................................. -- 27,500
-------- --------
$598,700 173,600
========
Less amount representing interest.................... (31,000)
--------
Present value of net minimum lease payments.......... 142,600
Less current portion................................. (44,100)
--------
Long-term portion of capital lease obligations....... $ 98,500
========
</TABLE>
Rent expense for the years ended December 31, 1993, 1994 and 1995 was
$126,441, $137,160 and $255,599, respectively. Rent expense for the six months
ended June 30, 1995 and 1996 was $114,967 and $134,317, respectively.
6. SERIES A REDEEMABLE PREFERRED STOCK
Each share of Series A Redeemable Preferred Stock is convertible into
Common Stock at the option of the holder. The initial conversion rate for the
Series A Redeemable Preferred Stock is on a one-to-one basis. The conversion
rate is subject to adjustment to take into account any dilutive issuance of
stock and will be 1.19 to 1 as a result of such dilutive issuance. The Series A
Redeemable Preferred Stock is automatically convertible into Common Stock, at
the then applicable conversion rate, upon the closing of an underwritten public
offering of shares of Common Stock of the Company for total gross offering
proceeds of not less than $5,000,000, but only if the public offering price of
the Company's Common Stock in such offering is not less than $1.00 per share.
Each share of Series A Redeemable Preferred Stock is entitled to one vote for
each common share into which it would convert. The Series A Redeemable Preferred
Stock is entitled to annual noncumulative dividends at $.017 per share, when, as
and if declared by the Board of Directors.
Upon dissolution, liquidation or winding up of the Company, before any
distribution or payment of amounts to the holders of Common Stock, the holders
of Series A Redeemable Preferred Stock are entitled to receive preference of
$.33 per share plus all declared but unpaid dividends on such shares.
F-13
<PAGE> 77
DOCUMENT SCIENCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30 AND FOR THE SIX-MONTH PERIODS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
The holders of the Series A Redeemable Preferred Stock have an option, at
any time subsequent to March 31, 1998, to require the Company to repurchase up
to one-third of the shares at $.33 per share. In addition, one-third of the
shares can be redeemed at any time subsequent to each of March 31, 1999 and
March 31, 2000. The difference between the issuance price and the redemption
value is being amortized to retained earnings on a straight-line basis, which
approximates the interest method.
7. STOCKHOLDERS' EQUITY
STOCK SPLIT
On June 19, 1996, the Company's Board of Directors authorized a 3 for 1
stock split for all outstanding Common Stock and Series A Redeemable Preferred
Stock, subject to stockholder approval, to become effective on the date of this
Prospectus. All share and per share amounts in the accompanying consolidated
financial statements have been retroactively restated to reflect the stock
split. Upon completion of the public offering contemplated by this Prospectus,
the authorized capital stock of the Company will consist of 30,000,000 shares of
Common Stock and 2,000,000 shares of Preferred Stock.
STOCK INCENTIVE PLANS
The Company's Stock Incentive Plans (the "Plans") provide for the issuance
of incentive and nonstatutory options to purchase Common Shares to eligible
employees, officers, directors of, and consultants to, the Company. The
Company's 1993 Stock Incentive Plan (the "1993 Plan") provided for the issuance
of up to 1,500,000 shares. In October 1995, the Board of Directors approved the
1995 Stock Incentive Plan (the "1995 Plan"), which provided for the issuance of
an additional 779,250 shares, which include 30,750 shares previously reserved
for issuance under the 1993 Plan. The 1995 Plan replaces the 1993 Plan. All
outstanding options under the 1993 Plan remain exercisable in accordance with
their original terms. Terms of the stock purchase or stock option agreements,
including vesting requirements, are determined by the Board of Directors,
subject to the provisions of the 1995 Plan. The maximum term of options granted
under the 1995 Plan is ten years. The exercise price of incentive stock options
must equal at least the fair market value on the date of grant. The exercise
price of nonstatutory stock options and stock issued under purchase rights must
equal at least 85% of the fair market value on the date of grant or time of
issuance. The Company has the option, in the event of termination of employment,
to repurchase shares issued under stock purchase agreements or upon exercise of
stock options at the lesser of the original issue price or fair market value on
the date of termination of employment.
F-14
<PAGE> 78
DOCUMENT SCIENCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30 AND FOR THE SIX-MONTH PERIODS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
The following table summarizes stock option activity under the stock
incentive plans:
<TABLE>
<CAPTION>
WEIGHTED
OPTION AVERAGE
PRICE PRICE PER
SHARES PER SHARE SHARE
---------- ------------- ---------
<S> <C> <C> <C>
Balance as of December 31, 1992 and 1993................ 1,207,500 $ .03 $ .03
Granted............................................... 251,250 $.03 - $ .17 $ .15
Canceled.............................................. (18,000) $ .17 $ .17
--------
Balance as of December 31, 1994......................... 1,440,750 $.03 - $ .17 $ .05
Granted............................................... 232,575 $ .17 $ .17
Exercised............................................. (1,308,423) $.03 - $ .17 $ .05
Canceled.............................................. (3,000) $ .17 $ .17
--------
Balance at December 31, 1995............................ 361,902 $.03 - $ .17 $ .09
Granted (unaudited)................................... 100,500 $.67 - $8.50 $1.09
Exercised (unaudited)................................. (85,734) $.03 - $ .17 $ .08
Canceled (unaudited).................................. (3,300) $.17 - $ .67 $ .21
--------
Balance at June 30, 1996 (unaudited).................... 373,368 $.03 - $8.50 $ .37
========
</TABLE>
As of June 30, 1996, 102,618 of the options were vested and exercisable and
654,225 shares were available for future grant.
Through June 30, 1996, the Company has recorded $440,000 of deferred
compensation on options granted to employees, representing the difference
between the option grant price and the deemed fair market value of the related
shares. The Company is amortizing such amount ratably over the vesting period of
the options, generally 48 months.
8. INCOME TAXES
The provision for income taxes is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal............................... $ 89,700 $542,000 $469,700
State................................. 46,300 111,700 121,700
-------- -------- --------
136,000 653,700 591,400
Deferred (credit):
Federal............................... 126,300 (16,200) 39,500
State................................. 21,100 (4,600) 7,500
-------- -------- --------
147,400 (20,800) 47,000
-------- -------- --------
$283,400 $632,900 $638,400
======== ======== ========
</TABLE>
Deferred income taxes reflect the net effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
F-15
<PAGE> 79
DOCUMENT SCIENCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30 AND FOR THE SIX-MONTH PERIODS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
Significant components of the Company's deferred tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1995
--------- ---------
<S> <C> <C>
Deferred tax liability -- computer software
costs........................................... $ (93,500) $(157,000)
Deferred tax assets:
Foreign operating loss carryforwards............ 134,060 136,065
Accrued vacation................................ 55,500 75,000
Provision for doubtful accounts................. 7,200 4,200
--------- ---------
Total deferred tax assets......................... 196,760 215,265
Valuation allowance............................... (134,060) (136,065)
--------- ---------
Net deferred tax assets........................... 62,700 79,200
--------- ---------
Net deferred tax liability........................ $ (30,800) $ (77,800)
========= =========
</TABLE>
A valuation allowance has been recognized to offset the deferred tax assets
attributed to foreign operating loss carryforwards, as realization of such
assets is uncertain.
The differences between the Company's income tax provision and the amounts
computed by applying the statutory federal income tax rate (34% in 1993 and 35%
in 1994 and 1995) to income before income taxes are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Provision at statutory rate............. $236,909 $470,636 $591,649
Benefit of graduated rates.............. -- (13,447) (16,904)
State income taxes, net of federal
benefit............................... 44,484 69,550 83,980
Increase in valuation reserves.......... -- 134,060 2,005
Benefit of research credits............. -- (57,733) (57,547)
Permanent differences and other......... 2,007 29,834 35,217
-------- -------- --------
Provision for income taxes.............. $283,400 $632,900 $638,400
======== ======== ========
</TABLE>
9. TRANSACTIONS WITH AFFILIATES
The Company has a strategic marketing alliance with Xerox under which the
parties have agreed to pay each other fees on referrals that lead to the
successful sale or licensing of each other's products. Included in services and
other revenue in the accompanying statements of income are commissions earned
from Xerox totaling $198,600, $490,400 and $752,000 in 1993, 1994 and 1995,
respectively, and $157,700 and $586,600 for the six months ended June 30, 1995
and 1996, respectively. Commissions related to referrals from Xerox are included
in selling and marketing expense in the accompanying statements of income and
totaled $113,500 and $167,200 in 1994 and 1995, respectively. There were no such
commissions in 1993.
The Company has distribution agreements with affiliates which provide the
affiliates with the non-exclusive right to sub-license the Company's software in
Australia, New Zealand and Canada. The terms of the distributor agreements
provide that the affiliates receive a discount from the list price of the
Company's products licensed, including maintenance and support. Revenues from
the affiliates under these agreements, net of discounts, were $284,100, $796,600
and $1,088,200 in
F-16
<PAGE> 80
DOCUMENT SCIENCES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30 AND FOR THE SIX-MONTH PERIODS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
1993, 1994 and 1995, respectively, and $523,300 and $136,300 for the six months
ended June 30, 1995 and 1996, respectively. Included in accounts receivable are
$121,400 and $193,500 from these revenues at December 31, 1994 and 1995,
respectively.
The Company has distribution agreements with affiliates which provide the
affiliates the non-exclusive right to sub-license the Company's software in
Europe. Revenues under these agreements totaled $198,900, $533,400 and
$1,985,600 in 1993, 1994 and 1995, respectively, and $625,100 and $539,600 for
the six months ended June 30, 1995 and 1996, respectively. Related accounts
receivable are $122,900 and $482,900 at December 31, 1994 and 1995,
respectively.
Under the terms of a separate agreement with Xerox, the Company provided
software support services for Xerox Publishing Systems' products. Included in
annual renewal license and support fees are revenues from Xerox under this
agreement of $118,800 in 1993 and 1994 and $89,100 in 1995, respectively, and
$59,400 for the six months ended June 30, 1995.
10. EMPLOYEE RETIREMENT PLAN
401(k) Plan
The Company has an employee savings and retirement plan (the "401(k) Plan")
that is intended to be tax-qualified covering substantially all of the Company's
employees. Under the terms of the 401(k) Plan, employees may elect to contribute
up to 15% of their compensation, or the statutorily prescribed limit, if less,
to the 401(k) Plan as a savings contribution. The Company may, in its
discretion, match employee contributions, at such rate as it determines, up to a
maximum of $3,000 or 10% of the employee's compensation. The 401(k) Plan has a
profit sharing element whereby the Company can contribute annually an amount
determined by the Board of Directors. An employee's interest in matching
contributions and profit sharing contributions generally vest over four years
from the date of employment.
F-17
<PAGE> 81
- ---------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF ANY OFFER TO BUY, THE
COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. EXCEPT WHERE OTHERWISE
INDICATED, THIS PROSPECTUS SPEAKS AS OF THE EFFECTIVE DATE OF THE
REGISTRATION STATEMENT. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
- ---------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary................... 3
The Company.......................... 4
Risk Factors......................... 5
Use of Proceeds...................... 14
Dividend Policy...................... 14
Capitalization....................... 15
Dilution............................. 16
Selected Consolidated Financial
Data............................... 18
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 19
Business............................. 29
Management........................... 43
Certain Transactions................. 51
Principal and Selling Stockholders... 53
Description of Capital Stock......... 55
Shares Eligible for Future Sale...... 58
Underwriters......................... 60
Legal Matters........................ 61
Experts.............................. 61
Additional Information............... 61
Index to Consolidated Financial
Statements......................... F-1
</TABLE>
UNTIL , 1996 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING), 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.
- ---------------------------------------------------------
LOGO
2,300,000 SHARES
COMMON STOCK
DEUTSCHE MORGAN GRENFELL
SOUNDVIEW FINANCIAL GROUP, INC.
PROSPECTUS
, 1996
<PAGE> 82
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the Common Stock being registered. All the amounts shown are estimates,
except for the registration fee and the NASD filing fee.
<TABLE>
<S> <C>
Registration fee.......................................................... $ 10,945
NASD filing fee........................................................... 3,410
Nasdaq National Market Listing Application fee............................ 18,225
Blue sky qualification fees and expenses.................................. 10,000
Printing and engraving expenses........................................... 125,000
Legal fees and expenses................................................... 250,000
Accounting fees and expenses.............................................. 125,000
Transfer agent and registrar fees......................................... 10,000
Fee of Custodian for Selling Stockholders................................. 5,000
Miscellaneous............................................................. 42,420
--------
Total........................................................... $600,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The Registrant's Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws include provisions to (i) eliminate the personal
liability of its directors for monetary damages resulting from breaches of their
fiduciary duty to the extent permitted by Section 102(b)(7) of the General
Corporation Law of Delaware (the "Delaware Law") and (ii) require the Registrant
to indemnify its directors and officers to the fullest extent permitted by
Section 145 of the Delaware Law, including circumstances in which
indemnification is otherwise discretionary. Pursuant to Section 145 of the
Delaware Law, a corporation generally has the power to indemnify its present and
former directors, officers, employees and agents against expenses incurred by
them in connection with any suit to which they are, or are threatened to be
made, a party by reason of their serving in such positions so long as they acted
in good faith and in a manner they reasonably believed to be in, or not opposed
to, the best interests of a corporation, and with respect to any criminal
action, they had no reasonable cause to believe their conduct was unlawful. The
Registrant believes that these provisions are necessary to attract and retain
qualified persons as directors and officers. These provisions do not eliminate
liability for breach of the director's duty of loyalty to the Registrant or its
stockholders, for acts or omissions not in good faith or involving intentional
misconduct or knowing violations of law, for any transaction from which the
director derived an improper personal benefit or for any willful or negligent
payment of any unlawful dividend or any unlawful stock purchase agreement or
redemption.
The Registrant intends to enter into agreements with its directors and
executive officers that require the Registrant to indemnify such persons against
expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred (including expenses of a derivative action) in connection
with any proceeding, whether actual or threatened, to which any such person may
be made a party by reason of the fact that such person is or was a director or
officer of the Registrant or any of its affiliated enterprises, provided such
person acted in good faith and in a manner such person reasonably believed to be
in or not opposed to the best interests of the Registrant and, with respect to
any criminal proceeding, had no reasonable cause to believe his or her conduct
was unlawful. The indemnification agreements also set forth certain procedures
that will apply in the event of a claim for indemnification thereunder.
The Underwriting Agreement to be filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Registrant and
its officers and directors for certain liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act") or otherwise.
II-1
<PAGE> 83
The Registrant intends to obtain an insurance policy covering the officers
and directors of the Registrant with respect to certain liabilities, including
liabilities arising under the Securities Act or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since June 1, 1993 the Registrant has sold and issued the following
unregistered securities:
(1) During the period, the Registrant granted or issued upon exchange stock
options to employees, directors and consultants under its 1993 Stock Plan and
1995 Stock Incentive Plan (the "Option Plans"), and to certain key employees,
covering an aggregate of 1,875,963 shares of the Company's Common Stock, at a
weighted average exercise price of $.69. The Company has issued an aggregate of
1,394,397 shares of its Common Stock as a result of the exercise of such
options.
(2) Concurrent with the effectiveness of this Registration Statement, the
Registrant will effect a three for one stock split, whereby each share of
outstanding Common Stock will be exchanged for three shares of Common Stock. In
connection with the stock split and the automatic conversion of the Preferred
Stock upon effectiveness of this Registration Statement, each share of
outstanding Preferred Stock will become convertible into 1.19 shares of Common
Stock, each share of which will simultaneously be exchanged for three shares of
Common Stock upon the Effective Date of the Company's initial public offering.
All numbers of shares of Common Stock and Preferred Stock set forth in this
Registration Statement have been adjusted to reflect both the stock split and
the conversion of the Preferred Stock into Common Stock.
The sales and issuances of securities under the Option Plans and to key
employees in the transactions described in paragraph (1) above were deemed to be
exempt from registration under the Securities Act by virtue of Rule 701
promulgated thereunder in that they were offered and sold either pursuant to
written compensatory benefit plans or pursuant to a written contract relating to
compensation, as provided by Rule 701.
The recipients represented their intention to acquire the securities for
investment purposes only and not with a view to the distribution thereof.
Appropriate legends are affixed to the stock certificates issued in such
transactions. Similar legends were imposed in connection with any subsequent
sales of any such securities. All recipients either received adequate
information about the Registrant or had access, through employment or other
relationships, to such information.
With respect to the transactions described in paragraphs (1) and (2) above,
exemption from registration under the Securities Act was unnecessary in that
none of such transactions involved a "sale" of securities as such term is used
in Section 2(3) of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ ------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement.
3.1 Restated Certificate of Incorporation of the Company filed May 1, 1992.
3.2 Form of Amended and Restated Certificate of Incorporation of the Company.
3.3 Amended and Restated Bylaws of the Company.
3.4 Form of Certificate of Amendment of Certificate of Incorporation of the Company.
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2 Specimen Stock Certificate.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.*
10.1 Form of Indemnity Agreement between the Company and each of its Officers and
Directors.
10.2 1993 Stock Option Plan and Form of Agreement.
10.3 1995 Stock Incentive Plan and Form of Agreement, as amended.
10.4 Shareholder Agreement dated June 1996 between the Company and Xerox Corporation.*
10.5 Tax Sharing Agreement dated June 1996 between the Company and Xerox Corporation.*
10.6 Transfer and License Agreement dated July 1, 1992, as amended in September 1994,
between the Company and Xerox Corporation.
</TABLE>
II-2
<PAGE> 84
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ ------------------------------------------------------------------------------------
<S> <C>
10.7 Strategic Marketing Alliance Agreement dated September 1, 1993, Between the Company
and Xerox Corporation.
10.8 Value Added Remarketer Agreement Between Xerox Canada Limited and the Company.
10.9 Value Added Reseller Agreement Between N.V. Rank Xerox S.A. and the Company.
10.10 Form of Professional Services Agreement.
10.11 Form of Domestic Value Added Remarketer Agreement.
10.12 Form of International Value Added Reseller Agreement.
10.13 Form of Software License and Software Support Agreement.
10.14 Lease for Company's Principal Facilities, as amended.
10.15 Letter Agreement Between Tony Domit and the Company.
10.16 Letter Agreement Between Thomas Anthony and the Company.
10.17 Letter Agreement Between Judith A. O'Reilly and the Company.
10.18 Letter Agreement Between Daniel Fregeau and the Company.
10.19 Letter Agreement Between Alfred G. Altomare and the Company.
10.20 Value Added Reseller Agreement Between Geneva Digital Ltd. and the Company.
10.21 Value Added Remarketer Agreement Between Business and Business and the Company.
11.1 Statement regarding calculation of net income (loss) per share.
21.1 List of Subsidiaries.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation (included in
Exhibit 5.1).*
24.1 Power of Attorney. (See page II-5.)
</TABLE>
- ---------------
* Indicates the Exhibit to be filed by amendment.
All other schedules are omitted because they are not required, are not
applicable, or the information is included in the consolidated financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes to provide the Underwriters at the closing
specified in the Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 14 above, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer, or
controlling person of the Registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933, and will be governed by the final adjudication of such
issue.
The undersigned Registrant undertakes that: (1) for purposes of determining
any liability under the Securities Act of 1933, the information omitted from the
form of prospectus as filed as part of the registration statement in reliance
upon Rule 430A and contained in the form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it was declared
effective, and (2) for the purpose of determining any liability under the
Securities Act of 1933, 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-3
<PAGE> 85
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-1 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San Diego,
State of California, on the 5th day of August, 1996.
Document Sciences Corporation
By /S/ TONY N. DOMIT
------------------------------------
Tony N. Domit
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement on Form S-1 has been signed by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------- ---------------
<S> <C> <C>
* President, Chief Executive August 5, 1996
- ------------------------------------------ Officer and Director (Principal
Tony N. Domit Executive Officer)
/S/ BARBARA E. AMANTEA Vice President, Chief Financial August 5, 1996
- ------------------------------------------ Officer and Secretary (Principal
Barbara E. Amantea Financial and Accounting
Officer)
* Chairman of the Board of August 5, 1996
- ------------------------------------------ Directors
Robert V. Adams
* Director August 5, 1996
- ------------------------------------------
Colin J. O'Brien
* Director August 5, 1996
- ------------------------------------------
James J. Costello
* Director August 5, 1996
- ------------------------------------------
Thomas L. Ringer
* By /s/ BARBARA E. AMANTEA
-------------------------------------
Barbara E. Amantea
Vice President, Chief Financial
Officer
and Secretary
</TABLE>
II-4
<PAGE> 86
APPENDIX TO ELECTRONIC DOCUMENT FORMAT
DESCRIPTION OF GRAPHICS
Pursuant to Paragraph 625 of the EDGAR User Manual, the following is an
explanation of the differences between the foregoing document in electronic
format and the corresponding printed document on paper.
1. Location: Outside Front Cover Page of Prospectus.
Description: Document Sciences Corporation logo, which is a
registered trademark of the Company, next to which the words
"DOCUMENT SCIENCES" are printed in bold, and beneath which words are
printed the word "CORPORATION."
2. Location: Inside Front Cover Page of Prospectus.
Description: A graphic headed with the Company's logo described in
paragraph 1 above, and entitled "The Power of Personalized
Communications." The graphic depicts information from databases,
on-line transmission and document management being input through the
Company's AUTOGRAPH product family, and creating personalized
documents through printers, CD-ROMs and on-line documents. At the
foot of the graphic are the words "Personalized Communications
through Document Automation," beneath which is the Company's Internet
address, "http://www.docscience.com."
3. Location: "Business -- Industry Background."
Description: A graphic entitled "The Electronic Publishing Process."
The graphic depicts four boxes across the page with arrows between
each box, and with the boxes containing the words "Information
Creation," "Information Management," "Information Formatting" and
"Information Presentation," respectively. Beneath the "Information
Creation" box are listed the words "Computers," "Scanners" and
"Communications." Beneath the "Information Management" box are listed
the words "Database," "Document Management" and "Multiauthoring
Environments." Beneath the "Information Formatting" box are listed
the words "Selection," "Assembly" and "Composition." Beneath the
"Information Presentation" box are listed the words "Printers and
Imagesetters," "Electronic On-Line Documents," "CD-ROM" and "Web."
4. Location: "Business -- Products."
Description: A graphic with symbols depicting Document
Management, Document Composition and Assembly, Data Capture and
Setup, Application Development Tools, Document Output and Merge, and
Document Viewing.
5. Location: "Business -- Products -- Document Viewing."
Description: A graphic with symbols depicting Document Management,
Data, Text and Importers flowing into CompuSet and CompuSeries,
from which flow the Document Outputs of Printing, Archival, Document
Viewing and Web.
6. Location: Outside Back Cover Page of Prospectus.
Description: Document Sciences Corporation logo, described in
paragraph 1 above.
<PAGE> 87
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ------ ------------------------------------------------------------------------------- ----
<C> <S> <C>
1.1 Form of Underwriting Agreement.................................................
3.1 Restated Certificate of Incorporation of the Company filed May 1, 1992.........
3.2 Form of Amended and Restated Certificate of Incorporation of the Company.......
3.3 Amended and Restated Bylaws of the Company.....................................
3.4 Form of Certificate of Amendment of Certificate of Incorporation of the
Company........................................................................
4.1 Reference is made to Exhibits 3.1 and 3.2......................................
4.2 Specimen Stock Certificate.....................................................
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation*.........
10.1 Form of Indemnity Agreement Between the Company and each of its Officers and
Directors......................................................................
10.2 1993 Stock Option Plan and Form of Agreement...................................
10.3 1995 Stock Incentive Plan and Form of Agreement, as amended....................
10.4 Shareholder Agreement dated June 1996 Between the Company and Xerox
Corporation*...................................................................
10.5 Tax Sharing Agreement dated June 1996 Between the Company and Xerox
Corporation*...................................................................
10.6 Transfer and License Agreement dated July 1, 1992, as amended in September
1994, Between the Company and Xerox Corporation................................
10.7 Strategic Marketing Alliance Agreement dated September 1, 1993, Between the
Company and Xerox Corporation..................................................
10.8 Value Added Remarketer Agreement Between Xerox Canada Limited and the
Company........................................................................
10.9 Value Added Reseller Agreement Between N.V. Rank Xerox S.A. and the Company....
10.10 Form of Professional Services Agreement........................................
10.11 Form of Domestic Value Added Remarketer Agreement..............................
10.12 Form of International Value Added Reseller Agreement...........................
10.13 Form of Software License and Software Support Agreement........................
10.14 Lease for Company's Principal Facilities, as amended...........................
10.15 Letter Agreement Between Tony Domit and the Company............................
10.16 Letter Agreement Between Thomas Anthony and the Company........................
10.17 Letter Agreement Between Judith A. O'Reilly and the Company....................
10.18 Letter Agreement Between Daniel Fregeau and the Company........................
10.19 Letter Agreement Between Alfred G. Altomare and the Company....................
10.20 Value Added Reseller Agreement Between Geneva Digital Ltd. and the Company.....
10.21 Value Added Remarketer Agreement Between Business and Business and the
Company........................................................................
11.1 Statement regarding calculation of net income (loss) per share.................
21.1 List of Subsidiaries...........................................................
23.1 Consent of Ernst & Young LLP...................................................
23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation (included
in Exhibit 5.1)*...............................................................
24.1 Power of Attorney (See page II-5)..............................................
</TABLE>
- ---------------
* Indicates the Exhibit to be filed by amendment.
<PAGE> 1
EXHIBIT 1.1
DOCUMENT SCIENCES CORPORATION
COMMON STOCK
UNDERWRITING AGREEMENT
______, 1996
Deutsche Morgan Grenfell/C. J. Lawrence Inc.
SoundView Financial Group, Inc.
As representatives of the several Underwriters
named in Schedule I hereto
c/o Deutsche Morgan Grenfell
31 West 52nd Street, 25th Floor
New York, New York 10019
Ladies and Gentlemen:
Document Sciences Corporation, a Delaware corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the Underwriters named in Schedule I hereto (the "Underwriters"), for whom
Deutsche Morgan Grenfell/C. J. Lawrence Inc. (DMG) is acting as lead
representative, an aggregate of 1,837,500 shares and, at the election of the
Underwriters, up to 345,000 additional shares of Common Stock, par value $.001
("Stock") of the Company. Certain stockholders of the Company named in
Schedule II hereto (the "Selling Stockholders"), which include Xerox
Corporation ("Xerox"), propose, subject to the terms and conditions stated
herein, to sell to the Underwriters an aggregate of 462,500 shares of Stock.
The aggregate of 2,300,000 shares to be sold by the Company and the Selling
Stockholders is herein called the "Firm Shares" and the aggregate of 345,000
additional shares which may be sold by the Company is herein called the
"Optional Shares". The Firm Shares and the Optional Shares that the
Underwriters elect to purchase pursuant to Section 2 hereof are herein
collectively called the "Shares".
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement, including a prospectus, relating to the
Shares. The registration statement as amended at the time it becomes
effective, including the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Securities Act of 1933, as amended (the "Securities Act"), is herein called
the "Registration Statement"; the prospectus in the form first used to confirm
sales of Shares is herein called the "Prospectus."
1. (a) The Company and Xerox, jointly and severally, represent
and warrant to, and agree with, each of the Underwriters that:
(i) On the date the Registration Statement became effective,
or any post-effective amendment thereto shall become effective, on the
date of the Prospectus or of any supplement or amendment to the Prospectus
is filed with the Commission, and on each Time of Delivery (as hereinafter
defined), the Registration Statement and the Prospectus (and any amendment
thereof or supplement thereto) complied or will comply, in all material
respects, with the applicable provisions of the Securities Act and the
rules and regulations (the "Rules") of the
<PAGE> 2
Commission thereunder. Copies of such Registration Statement have been
delivered by the Company to you as the representatives of the
Underwriters. The Registration Statement has become effective, no stop
order suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for such purpose are pending before or
threatened by the Commission. The representations and warranties set
forth in this subsection do not apply to statements or omissions in the
Registration Statement or the Prospectus based upon information relating
to any Underwriter furnished in writing to the Company expressly for use
therein.
(ii) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware. The Company is duly qualified and in good standing as a foreign
corporation in each jurisdiction in which the character or location of its
assets or properties (owned, leased, or licensed) or the nature of its
business makes such qualification necessary, except for such jurisdictions
where the failure to so qualify would not have a material adverse effect
on the assets or properties, business, results of operations, prospects or
financial condition of the Company and the Subsidiary (as hereinafter
defined), taken as a whole. Document Sciences Europe (the "Subsidiary")
has been duly incorporated and is validly existing as a corporation in
good standing under the laws of its jurisdiction of incorporation. The
Company does not control, directly or indirectly, any corporation,
partnership, joint venture, association or other business organization
other than the Subsidiary.
(iii) The Company and the Subsidiary have all requisite
corporate power and authority, and all necessary authorizations,
approvals, consents, orders, licenses, certificates and permits of and
from all governmental or regulatory bodies or any other person or entity,
to own, lease and license their assets and properties and to conduct their
businesses as now being conducted and as proposed to be conducted as
described in the Registration Statement and the Prospectus, except to the
extent that the failure to obtain such authorizations, approvals,
consents, orders, licenses, certificates or permits would not have a
material adverse effect on the assets or properties, business, results of
operations or financial condition of the Company and the Subsidiary, taken
as a whole.
(iv) The Company and the Subsidiary each owns or possesses
adequate licenses or other rights to use all trademarks, trademark
applications, trade names, service marks, copyrights, copyright
applications, patents, patent applications, licenses, maskwork rights,
know-how and other similar rights, technology and proprietary knowledge
(collectively, "Intangibles") necessary for the conduct of the business of
Company as described in the Registration Statement and the Prospectus and
without infringing the rights of others. Except as described in the
Prospectus, neither the Company nor the Subsidiary has received any notice
of any infringement or conflict with (and neither the Company nor the
Subsidiary knows of any infringement or conflicts with) any asserted
rights of others with respect to any Intangibles which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a material adverse effect upon the assets or properties,
business, results of operations, prospects or financial condition of the
Company and the Subsidiary, taken as a whole. The Intangibles are free
and clear of all liens and encumbrances of every nature and kind. Except
in connection with transactions entered into in the ordinary course of
business, neither the Company nor the Subsidiary has granted any licenses
or other rights or has any obligations to grant licenses or any other
rights to any Intangibles. Neither the Company nor the Subsidiary has
made any material claim of violation or infringement by others of rights
to,
2
<PAGE> 3
or in connection with, the Intangibles, and the Company knows of no basis
for making any such claim.
(v) The Company and the Subsidiary have (a) good and valid
title to each of the items of personal property and good, marketable, and
insurable fee title to all real property reflected in its financial
statements referred to in Section 1(xx) or referred to in the Registration
Statement and the Prospectus as being owned by it and (b) valid and
enforceable leasehold interests in each of the items of real and personal
property which are referred to in the Registration Statement and the
Prospectus as being leased by it, in each case free and clear of all
liens, encumbrances, claims, security interests, defects or rights of way,
except as are described in the Registration Statement and the Prospectus
or except as to such exceptions as are not material and do not interfere
with the use made or proposed to be made of such property by the Company
or the Subsidiary, as applicable. All real property of the Company and
the Subsidiary reflected in the financial statements referred in Section
1(xx) or referred to in the Registration Statement and the Prospectus as
being owned thereby is in good condition and conforms in all material
respects with all applicable building, zoning, land use and other laws,
ordinances, codes, orders and regulations, and the use of such real
property, conforms in all material respects with such laws, ordinances,
codes, orders and regulations. Neither the Company nor the Subsidiary has
received any notice of any violations of laws, ordinances, codes, orders
or regulations issued by any governmental authority having jurisdiction
over or affecting any such real or personal property.
(vi) Except as described in the Registration Statement and the
Prospectus, there is no pending or, to the knowledge of the Company,
threatened, lawsuit or claim with respect to the Company or the Subsidiary
which would, if adversely determined, have a material adverse effect on
the assets or properties, business, results of operation, prospects or
financial condition of the Company and the Subsidiary, taken as a whole or
would, if adversely determined, materially and adversely affect the
performance by the Company or the Subsidiary of their obligations pursuant
to this Agreement or the transactions contemplated hereby.
(vii) In the ordinary cause of its business, the Company
conducts a periodic review of its business, operations and properties to
identify and evaluate costs and liabilities associated with compliance
with the Environmental Laws (as defined below). The Company and the
Subsidiary (A) are in compliance with any and all applicable foreign,
federal, state and local laws and regulations relating to the protection
of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or containments (collectively,
"Environmental Laws"), (B) have received all permits, licenses or other
approvals required of each of them under applicable Environmental Laws to
conduct their businesses and (C) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required
permits, licenses or other approvals or failure to comply with the terms
and conditions of such permits, licenses or approvals would not, singly or
in the aggregate, have a material adverse effect on the Company and the
Subsidiary, taken as a whole.
(viii) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, and
except as described therein, (a) there has not been any material adverse
change in the assets or properties, business, results of operations,
prospects or financial condition of the Company or the Subsidiary taken as
a whole, (b) neither
3
<PAGE> 4
the Company nor the Subsidiary has sustained any loss or interference with
its assets, businesses or properties (whether owned or leased) from fire,
explosion, earthquake, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or any court or legislative or other
governmental action, order or decree that would have a material adverse
effect on the Company and the Subsidiary, taken as a whole; and (c) since
the date of the latest balance sheets included in the Registration
Statement and the Prospectus, except as reflected therein, neither the
Company nor the Subsidiary has (1) issued any securities, other than the
issuance by the Company of stock options and securities issued as a result
of the exercise of stock options, (2) materially changed its short-term
debt or long-term debt, except for payments in the ordinary cause of
business, or (3) declared or paid any dividend or made any distribution on
any shares of its stock or redeemed, purchased or otherwise acquired or
agreed to redeem, purchase or otherwise acquire any shares of its stock,
other than pursuant to existing repurchase agreements described in the
Registration Statement.
(ix) There is no document or contract of a character required
to be described in the Registration Statement or Prospectus or to be filed
as an exhibit to the Registration Statement which is not described or
filed as required. Each agreement listed in the exhibits to the
Registration Statement is in full force and effect and is valid and
enforceable by and against the Company or the Subsidiary, as applicable,
in accordance with its terms, assuming the due authorization, execution,
and delivery thereof by each of the other parties thereto, except for
agreements that have expired by their terms or have been fully performed.
Neither the Company nor, to the Company's knowledge, any other party is in
default, nor is the Subsidiary as a party thereto in default, in the
observance or performance of any term or obligation to be performed by it
under any such agreement or other material obligation, agreement,
covenant, or condition contained in any other indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument, and no
event has occurred which, with notice or lapse of time or both, would
constitute such a default, in any such case in which a default or event
would have a material adverse effect on the assets or properties,
business, results of operations, prospects or financial condition of the
Company.
(x) Neither the Company nor the Subsidiary is in violation of
any terms or provision of its charter or bylaws or of any judgment,
decree, order, statute, rule or regulation where the consequences of such
violation would have a material adverse effect on the assets or
properties, business, results of operations, prospects or financial
condition of the Company and the Subsidiary, taken as a whole. There are
no judgments, decrees, orders, statutes, rules or regulations required to
be described in the Registration Statement or Prospectus that are not
described as required.
(xi) There is no labor strike, dispute or work stoppage or
lockout pending, or, to the knowledge of the Company, threatened, against
or affecting the Company or the Subsidiary, and no such labor strike,
dispute, work stoppage or lockout has occurred with respect to any
employees of the Company or the Subsidiary during the two years prior to
the date of this Agreement. None of the employees of the Company are
represented by a union, to the Company's knowledge, no union organization
campaign is in progress with respect to the employees of the Company or
the Subsidiary and no question concerning representation exists with
respect to such employees. No charges with respect to or relating to the
Company or the Subsidiary are pending before the Equal Employment
Opportunity Commission or any state,
4
<PAGE> 5
local or foreign agency responsible for the prevention of unlawful
employment practices, and no such charges have been filed against the
Company or the Subsidiary.
(xii) Each of the Company and the Subsidiary has correctly and
timely filed all necessary federal, state, local and foreign income,
property and franchise tax returns and paid all taxes required to be shown
as due thereon and all assessments received by it to the extent that the
same are material and have become due. The Company has no knowledge of
any tax deficiency of the Company or the Subsidiary that would have a
material adverse effect on the assets or properties, business, results of
operations, prospects or financial condition of the Company and the
Subsidiary, taken as a whole. There are no liens for taxes on the assets
of the Company or the Subsidiary, except for taxes not yet due. Except as
set forth in the Tax Sharing Agreement with Xerox, the Company is not
obligated to pay any taxes with respect to its prior activities, other
than taxes for the current fiscal year.
(xiii) None of the Company, the Subsidiary or any officer or
director purporting to act on behalf of the Company or the Subsidiary has
during the past five years (a) made any contributions to any candidate for
political office, or failed to disclose fully any such contributions, in
violation of law; or (b) made any payment to any foreign, federal, state
or local governmental officer or official, or other person charged with
similar public or quasi-public duties, other than payments required or
allowed by applicable law; or (c) made any payment outside the ordinary
course of business to any purchasing or selling agent or person charged
with similar duties of any entity to which the Company or the Subsidiary
as applicable, sells (or has in the past sold) or from which the Company,
the Subsidiary or any officer or director purporting to act on behalf of
the Company or the Subsidiary, as applicable, buys (or has in the past
bought) products for the purpose of influencing such agent or person to
buy products from or sell products to the Company or the Subsidiary, as
applicable; or (d) engaged in any transaction, maintained any bank account
or used any corporate funds except for transactions, bank accounts and
funds which have been and are reflected in the normally maintained books
and records of the Company or the Subsidiary, as applicable.
(xiv) Each of the Company and the Subsidiary is insured by
insurance policies, issued by insurers of recognized financial
responsibility, against such losses and risks and in such amounts as are
prudent and customary for the business in which they are engaged. Neither
the Company nor the Subsidiary has been refused any insurance coverage
sought or applied for.
(xv) The Company and the Subsidiary maintain a system of
internal accounting controls sufficient to provide reasonable assurance
that (a) transactions are executed in accordance with management's general
or specific authorizations; (b) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (c)
access to assets is permitted only in accordance with management's general
or specific authorization; and (d) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is (or was) taken with respect to any differences.
(xvi) On the date the Registration Statement became effective,
or any post-effective amendment thereto shall become effective and on each
Time of Delivery neither the Registration Statement nor the Prospectus,
nor any amendment thereof or supplement thereto,
5
<PAGE> 6
contained or will contain any untrue statement of a material fact or will
omit to state any material fact required to be stated therein or necessary
in order to make the statements therein (in light of the circumstances in
which they were made) not misleading. When any related preliminary
prospectus was first filed with the Commission (whether filed as part of
the Registration Statement or any amendment thereto or pursuant to Rule
424(a) of the Rules) and when any amendment thereof or supplement thereto
was first filed with the Commission, such preliminary prospectus as
amended or supplemented complied in all material respects with the
applicable provisions of the Securities Act and the Rules and did not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein (in light of the circumstances in which they were
made) not misleading. Notwithstanding the foregoing, the Company makes no
representation or warranty as to the statements contained under the
caption "Underwriting" in the Prospectus. The Company acknowledges that
the statements referred to in the previous sentence constitute the only
information furnished in writing by DMG of behalf of the several
Underwriters specifically for inclusion in the Registration Statement, any
preliminary prospectus or the Prospectus.
(xvii) The Company has all requisite corporate power and
authority to enter into, deliver, and perform this Agreement and to issue
and sell the Shares. All necessary corporate action has been duly and
validly taken by the Company to authorize the execution, delivery, and
performance of this Agreement and the issuance and sale of the Shares by
the Company. This Agreement has been duly and validly authorized,
executed, and delivered by the Company and constitutes the legal, valid,
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except (a) as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and
by general equitable principles and (b) to the extent that rights to
indemnity or contribution under this Agreement may be limited by federal
and state securities laws or the public policy underlying such laws.
(xviii) Neither the execution, delivery and performance of this
Agreement by the Company nor the consummation of any of the transactions
contemplated hereby (including, without limitation, the issuance and sale
by the Company of the Shares to be sold by the Company) will give rise to
a right to terminate or accelerate the due date of any payment due under,
or result in the breach of any term or provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or require any consent or waiver under, or
result in the execution or imposition of any lien, charge or encumbrance
upon any properties or assets of the Company or the Subsidiary pursuant to
the terms of, any material indenture, mortgage, deed of trust or other
agreement or instrument to which the Company or the Subsidiary is a party
or by which it or any of its properties or businesses is bound, or any
franchise, license, permit, judgment, decree, order, statute, rule or
regulation applicable to the Company or the Subsidiary or violate any
provision of the charter or by-laws of the Company or the Subsidiary,
except for such consents or waivers which have already been obtained and
are in full force and effect.
(xix) No authorization, approval, consent, order, license,
certificate or permit is required of or from any governmental or
regulatory body under any foreign, federal, state or local law in
connection with the execution, delivery, and performance of this Agreement
or for the consummation of the transactions contemplated hereby, except
such as have been obtained
6
<PAGE> 7
or as may be required by the securities laws of the various states in
connection with the offer and sale of the Shares.
(xx) The consolidated financial statements of the Company
(including all notes and schedules thereto) included in the Registration
Statement and Prospectus present fairly the financial position, results of
operations and cash flows, and stockholders' equity and the other
information purported to be shown therein of the Company at the respective
dates and for the respective periods to which they apply; and such
consolidated financial statements have been prepared in conformity with
generally accepted accounting principles, consistently applied throughout
the periods involved, and all adjustments necessary for a fair
presentation of the results for such periods have been made.
(xxi) Ernst & Young LLP, whose reports are filed with the
Commission as a part of the Registration Statement and Prospectus, are,
and during the periods covered by their reports were, independent public
accountants as required by the Securities Act and the Rules.
(xxii) The Common Stock and the Shares conform in all material
respect to all statements in relation thereto contained in the
Registration Statement and the Prospectus. The Company has authorized and
outstanding capital stock as set forth under the caption "Capitalization"
and "Description of Capital Stock" in the Prospectus. All of the
outstanding shares of Common Stock have been duly and validly issued and
are fully paid and nonassessable, and none of them was issued in violation
of any preemptive or other similar right. The Shares, when issued and
sold pursuant to this Agreement, will be duly and validly issued, fully
paid and nonassessable, and none of them will be issued in violation of
any preemptive or other similar rights. Except as disclosed in the
Registration Statement and the Prospectus, there is no outstanding option,
warrant or other right calling for the issuance of, and there is no
commitment, plan or arrangement to issue, any share of stock of the
Company or any security convertible into, or exercisable or exchangeable
for, such stock.
(xxiii) All of the outstanding shares of capital stock of the
Subsidiary have been duly and validly issued. All of the outstanding
shares of capital stock of the Subsidiary are owned by the Company (other
than directions qualifying shares), directly or indirectly, free and clear
of any liens, charges or encumbrances, such shares of capital stock are
fully paid and nonassessable, and none of them was issued in violation of
any preemptive or other similar right. Except as disclosed in the
Registration Statement and the Prospectus, there is no outstanding option,
warrant or other right calling for the issuance of, and there is no
commitment, plan or arrangement to issue, any share of capital stock of
the Subsidiary or any security convertible into, or exercisable or
exchangeable for, such stock.
(xxiv) Except as described in the Registration Statement and
Prospectus, there are no persons with registration or other similar rights
to have any securities registered pursuant to the Registration Statement
or otherwise registered by the Company under the Securities Act. There is
no owner of any securities of the Company who has any rights, not
effectively satisfied or waived, to require registration of any shares of
capital stock of the Company in connection with the filing of the
Registration Statement. Each stockholder, director, and executive officer
of the Company has delivered to the Representatives an enforceable written
agreement that such person will not, for a period of 180 days after the
effective date of this offering, offer for sale, sell, distribute, grant
any option for the sale of, or otherwise dispose of, directly or
7
<PAGE> 8
indirectly, or exercise any registration rights with respect to, any
shares of Common Stock (or any securities convertible into, exercisable
for, or exchangeable for any shares of Common Stock) owned by such person,
without the prior written consent of DMG.
(xxv) No transaction has occurred between or among the Company
or the Subsidiary and any of their officers or directors or any affiliate
or affiliates of any such officer or director that is required to be
described in and is not described in the Registration Statement and the
Prospectus.
(xxvi) The Shares have been duly approved for listing on the
Nasdaq National Market.
(xxvii) The Company is not an "investment company" or an entity
"controlled" by an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended.
(xxviii) Neither the Company nor any of its directors, officers or
controlling persons has taken or will take, directly or indirectly, any
action resulting in a violation of Rule 10b-6 under the Exchange Act, or
designed to cause or result under the Securities Act or otherwise in, or
which has constituted or which reasonably might be expected to constitute,
the stabilization or manipulation of the price of any securities of the
Company or facilitation of the sale or resale of the Shares.
(xxix) Neither the Company nor the Subsidiary has incurred any
liability for finder's or broker's fees or agent's commissions in
connection with the execution and delivery of this Agreement, the offer
and sale of the Shares or the transactions contemplated hereby.
(xxx) The Company is not required to register as a "broker" or
"dealer" in accordance with the provisions of the Exchange Act or the
rules and regulations promulgated thereunder.
(xxxi) Neither the Company nor any of its affiliates does
business with the government of Cuba or with any person or affiliate
located in Cuba within the meaning of Section 517.075, Florida Statutes.
(b) Each of the Selling Stockholders severally represents and
warrants to, and agrees with, each of the Underwriters and the Company that:
(i) This Agreement has been duly authorized, executed and
delivered by such Selling Stockholder and constitutes a valid and binding
obligation upon such Selling Stockholder.
(ii) The execution and delivery by such Selling Stockholder
of, and the performance by such Selling Stockholder of its obligations
under, this Agreement, the Custody Agreement signed by such Selling
Stockholder and _________, as Custodian, relating to the deposit of the
Shares to be sold by such Selling Stockholder (the "Custody Agreement"),
and the Power of Attorney in the form furnished to you (the "Power of
Attorney") (which Power of Attorney appoints certain individuals as such
Selling Stockholder's attorney-in-fact to the extent set forth therein,
relating to the transactions contemplated hereby, by the Custody Agreement
and by the Registration Statement), will not contravene any provision of
applicable law, or Certificate
8
<PAGE> 9
of Articles of Incorporation or By-laws of such Selling Stockholder (if
such Selling Stockholder is a corporation), or any agreement or other
instrument binding upon such Selling Stockholder or any judgment, order or
decree of any governmental body, agency or court having jurisdiction over
such Selling Stockholder, and no consent, approval, authorization or order
of or qualification with any governmental body or agency is required for
the performance by such Selling Stockholder of its obligations under this
Agreement, except such as may be required by the securities or Blue Sky
laws of the various states in connection with the offer and sale of the
Shares.
(iii) All consents, approvals, authorizations and orders
necessary for the execution and delivery by such Selling Stockholder of
this Agreement, the Custody Agreement and the Power of Attorney of such
Selling Stockholder or the sale and delivery of the Shares to be sold by
such Selling Stockholder, have been obtained; and such Selling Stockholder
has full right, power and authority to enter into this Agreement and the
Custody Agreement and to sell, assign, transfer and deliver the Shares to
be sold by such Selling Stockholder hereunder.
(iv) Such Selling Stockholder has, and at the First Time of
Delivery (as hereinafter defined) will have, good and marketable title to
the Shares to be sold by such Selling Stockholder, free and clear of all
liens, encumbrances, equities or claims, and the legal right and power,
and all required authorization and approval, to enter into this Agreement
and to sell, transfer and deliver the Shares to be sold by such Selling
Stockholder.
(v) The Shares to be sold by such Selling Stockholder
pursuant to this Agreement have been duly authorized and are validly
issued, fully paid and non-assessable.
(vi) The Custody Agreement and the Power of Attorney have been
duly authorized, executed and delivered by such Selling Stockholder and
are valid and binding agreements of such Selling Stockholder.
(vii) Delivery of the certificates for the Shares to be sold by
such Selling Stockholder pursuant to this Agreement will pass valid and
marketable title to such Shares free and clear of any security interests,
claims, liens, equities and other encumbrances.
(viii) To the extent that any statements or omissions made in
the Registration Statement, any preliminary prospectus, the Prospectus or
any amendment or supplement thereto are made in reliance upon and in
conformity with written information furnished to the Company by such
Selling Stockholder expressly for use therein, such preliminary prospectus
and the Registration Statement did, and the Prospectus and any further
amendments or supplements to the Registration Statement and the
Prospectus, when they become effective or are filed with the Commission,
as the case may be, will, conform in all material respects to the
requirements of the Securities Act and the rules and regulations of the
Commission thereunder and did not and will not contain any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading.
(ix) In order to document the Underwriters' compliance with
the reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein
contemplated, such Selling Stockholder will deliver to you prior to or
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<PAGE> 10
at the First Time of Delivery (as hereinafter defined) a properly
completed and executed United States Treasury Department Form W-9 (or
other applicable form or statement specified by Treasury Department
regulations in lieu thereof).
(x) Certificates in negotiable form representing all of the
Shares to be sold by such Selling Stockholder hereunder have been placed
in custody pursuant to the Custody Agreement, duly executed and delivered
by such Selling Stockholder to the Custodian, and such Selling Stockholder
has duly executed and delivered a Power of Attorney.
2. Subject to the terms and conditions herein set forth:
(a) On the basis of the representations, warranties and
agreements herein contained and subject to all the terms and conditions of this
Agreement, (i) the Company agrees to issue and sell an aggregate of 1,837,500
Firm Shares to the several Underwriters, (ii) each Selling Stockholder agrees
to sell to the several Underwriters the number of Firm Shares set forth
opposite his, her, or its name on Schedule II hereto, and (iii) each of the
Underwriters severally and not jointly, agrees to purchase from the Company and
the Selling Stockholders the respective number of Firm Shares set forth that
Underwriter's name in Schedule I hereto, at the purchase price of $______ for
each Firm Share; and
(b) The Company grants to the several Underwriters an option
to purchase, severally and not jointly, all or any part of the Optional Shares
at the purchase price per share set forth in clause (a) of this Section 2. The
number of Optional Shares to be purchased by each Underwriter shall be the same
percentage (adjusted by DMG to eliminate fractions) of the total number of
Optional Shares to be purchased by the Underwriters as such Underwriter is
purchasing of the Firm Shares. Any such election to purchase Optional Shares
may be exercised only by written notice from DMG to the Company, given within a
period of 30 days after the date of this Agreement and setting forth the
aggregate number of Optional Shares to be purchased and the date on which such
Optional Shares are to be delivered, as determined by you but in no event
earlier than the First Time of Delivery (as defined in Section 4 hereof) or,
unless you and the Company otherwise agree in writing, earlier than two or
later than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares,
the several Underwriters propose to offer the Firm Shares for sale upon the
terms and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as DMG may request upon at least forty-eight hours' prior notice to the
Company and the Selling Stockholders, shall be delivered by or on behalf of the
Company and the Selling Stockholders to DMG, for the account of such
Underwriter, against payment by or on behalf of such Underwriter of the
purchase price therefor by certified or official bank check or checks, payable
to the order of the Company and the Custodian, as their interests may appear,
in next day funds or by wire transfer of next day funds to the account or
accounts specified by the Company and the Custodian. The Company will cause
the certificates representing the Shares to be made available for checking and
packaging at least twenty-four hours prior to the Time of Delivery (as defined
below) with respect thereto at the office of DMG, 31 West 52nd Street, 25th
Floor, New York, New York 10019 (the "Designated Office"). The time and date
of such delivery and payment shall be, with respect to the Firm Shares, on the
third business day following the date of this Agreement (or the fourth business
day if permitted by Rule 15c6-1(c) promulgated under the
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<PAGE> 11
Securities Exchange Act of 1934, as amended (the "Exchange Act") or such other
time and date as DMG, the Company and the Selling Stockholders may agree upon
in writing, and, with respect to the Optional Shares, on the third business day
following exercise of the option by the Underwriters (or the fourth business
day if permitted under Rule 15c6-1(c) of the Exchange Act), or such other time
and date as DMG and the Company may agree upon in writing. Such time and date
for delivery of the Firm Shares is herein called the "First Time of Delivery",
such time and date for delivery of the Optional Shares, if not the First Time
of Delivery, is herein called the "Second Time of Delivery", and each such time
and date for delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by
or on behalf of the parties hereto pursuant to Section 7 hereof, including the
cross receipt for the Shares and any additional documents requested by the
Underwriters pursuant to Section 7(k) hereof, will be delivered at the offices
of Gray Cary Ware & Freidenrich, 4365 Executive Drive, Suite 1600, San Diego,
CA 92121 (the "Closing Location"), and the Shares will be delivered at the
Designated Office, all at such Time of Delivery. A meeting will be held at the
Closing Location at 3:00 p.m., local time, on the business day next preceding
such Time of Delivery, at which meeting the final drafts of the documents to be
delivered pursuant to the preceding sentence will be available for review by
the parties hereto. For the purposes of this Section 4 only, "business day"
shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a
day on which banking institutions in New York are generally authorized or
obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and
to file such Prospectus pursuant to Rule 424(b) under the Securities Act not
later than the Commission's close of business on the second business day
following the execution and delivery of this Agreement, or, if applicable, such
earlier time as may be required by Rule 430A(a)(3) under the Securities Act; to
make no further amendment or any supplement to the Registration Statement or
Prospectus to which you reasonably object; to advise you, promptly after it
receives notice thereof, of the time when any amendment to the Registration
Statement has been filed or becomes effective or any supplement to the
Prospectus or any amended Prospectus has been filed and to furnish you with
copies thereof; to advise you, promptly after it receives notice thereof, of
the issuance by the Commission of any stop order or of any order preventing or
suspending the use of any preliminary prospectus or Prospectus, of the
suspension of the qualification of the Shares for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or supplementing
of the Registration Statement or Prospectus or for additional information; and,
in the event of the issuance of any stop order or of any order preventing or
suspending the use of any preliminary prospectus or Prospectus or suspending
any such qualification, promptly to use its best efforts to obtain the
withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with
such laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution of
the Shares, provided that in connection therewith the Company shall not be
required to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction;
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(c) Prior to 10:00 a.m., New York time, on the business day
next succeeding the date of this Agreement and from time to time, to furnish
the Underwriters with copies of the Prospectus at such locations and in such
quantities as you may reasonably request, and, if the delivery of a Prospectus
is required at any time prior to the expiration of twelve months after the time
of issue of the Prospectus in connection with the offering or sale of the
Shares and if at such time any events shall have occurred as a result of which
the Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not misleading, or, if
in the opinion of your counsel it shall be necessary during such period to
amend or supplement the Prospectus in order to comply with the Securities Act,
to notify you and upon your request to prepare and furnish without charge to
each Underwriter and to any dealer in securities as many copies as you may from
time to time reasonably request of an amended Prospectus or a supplement to the
Prospectus which will correct such statement or omission or effect such
compliance, and in case any Underwriter is required to deliver a prospectus in
connection with sales of any of the Shares at any time twelve months or more
after the time of issue of the Prospectus, upon your request but at the expense
of such Underwriter, to prepare and deliver to such Underwriter as many copies
as you may request of an amended or supplemented Prospectus complying with
Section 10(a)(3) of the Securities Act;
(d) To make generally available to its security holders as
soon as practicable, but in any event not later than fifteen months after the
effective date of the Registration Statement (as defined in Rule 158(c) under
the Securities Act), an earnings statement of the Company and its subsidiary
(which need not be audited) complying with Section 11(a) of the Securities Act
and the rules and regulations of the Commission thereunder (including, at the
option of the Company, Rule 158);
(e) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the Prospectus,
not to offer, sell, contract to sell or otherwise dispose of, except as
provided hereunder, any securities of the Company that are substantially
similar to the Shares, including but not limited to any securities that are
convertible into or exchangeable for, or that represent the right to receive,
Stock or any such substantially similar securities (other than pursuant to
employee stock option plans existing on, or upon the conversion or exchange of
convertible or exchangeable securities outstanding as of, the date of this
Agreement), without your prior written consent;
(f) During the period beginning from the date hereof and
continuing to and including the date 180 days from the date of the Prospectus,
not to grant its consent to release any stockholder of the Company from the
restriction on sales of securities imposed on such stockholder by the Stock
Option Agreements executed by the stockholder in connection with the
acquisition of their Stock or options under the 1993 and 1995 Stock Option
Plans.
(g) During a period of five years from the effective date of
the Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to deliver
to you as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or any national securities
exchange on which any class of securities of the Company is listed.
(h) To use the net proceeds received by it from the sale of
the Shares pursuant to this Agreement in the manner specified in the Prospectus
under the caption "Use of Proceeds";
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(i) To use its best efforts to maintain the listing of the
Shares on the Nasdaq National Market;
(j) If the Company elects to rely upon Rule 462(b), the
Company shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) by 10:00 p.m., Washington, D.C. time, on the date
of this Agreement, and the Company shall at the time of filing either pay to
the Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the Securities Act.
(k) Prior to the First Time of Delivery, the Company will not
issue, directly or indirectly, without the prior written consent of DMG, which
consent shall not be unreasonably withheld, any press release or other
communication or hold any press conference with respect to the Company or its
activities or this offering, other than press releases issued in the ordinary
course of the Company's business with respect to the Company's operations; and
(l) Except as stated in this Agreement and in the Prospectus,
the Company will not take, directly or indirectly (except for any action taken
by the Underwriters), any action designed to or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of
the Common Stock to facilitate the sale or resale of the Shares.
6. The Company and each of the Selling Stockholders covenant and
agree with one another and with the several Underwriters that (a) the Company
will pay or cause to be paid the following: (i) the fees, disbursements and
expenses of the Company's counsel and accountants in connection with the
registration of the Shares under the Securities Act and all other expenses in
connection with the preparation, printing and filing of the Registration
Statement, any Preliminary Prospectus and the Prospectus and amendments and
supplements thereto and the mailing and delivering of copies thereof to the
Underwriters and dealers; (ii) the cost of printing or producing and delivering
any Agreement among Underwriters, this Agreement, the Blue Sky Memorandum,
closing documents (including any compilations thereof) and any other documents
in connection with the offering, purchase, sale and delivery of the Shares;
(iii) all expenses in connection with the qualification of the Shares for
offering and sale under state securities laws as provided in Section 5(b)
hereof, including the fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky survey;
(iv) all fees and expenses in connection with listing the Shares on the Nasdaq
National Market; (v) the expenses incident to securing any required review by
the National Association of Securities Dealers, Inc. of the terms of the sale
of the Shares, including the reasonable fees and disbursements of counsel for
the Underwriters in connection with such review; (vi) the cost of preparing and
delivering stock certificates; (vii) the cost and charges of any transfer agent
or registrar; and (viii) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section and (b) such Selling Stockholder will pay or cause
to be paid all costs and expenses incident to the performance of such Selling
Stockholder's obligations hereunder which are not otherwise specifically
provided for in this Section, including (i) any fees and expenses of counsel
for such Selling Stockholder, (ii) such Selling Stockholder's pro rata share of
the fees and expenses of the attorneys-in-fact and the Custodian, and (iii) all
expenses and taxes incident to the sale and delivery of the Shares to be sold
by such Selling Stockholder to the Underwriters hereunder. It is understood,
however, that, except as provided in this Section, and Sections 8 and 11
hereof, the Underwriters will pay all of their own costs and expenses,
including the fees of their counsel, stock transfer taxes on resale of any of
the Shares by them, and any advertising expenses connected with any offers they
may make.
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7. The obligations of the Underwriters hereunder, as to the Shares
to be delivered at each Time of Delivery, shall be subject, in their
discretion, to the condition that all representations and warranties and other
statements of the Company and the Selling Stockholders herein are, at and as of
such Time of Delivery, true and correct, the condition that the Company and the
Selling Stockholders shall have performed all of its and their obligations
hereunder theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for such
filing by the rules and regulations under the Securities Act and in accordance
with Section 5(a) hereof; if the Company has elected to rely upon Rule 462(b),
the Rule 462(b) Registration Statement shall have become effective by 10:00
p.m., Washington, D.C. time, on the date of this Agreement; no stop order
suspending the effectiveness of the Registration Statement or any part thereof
shall have been issued and no proceeding for that purpose shall have been
initiated or threatened by the Commission; and all requests for additional
information on the part of the Commission shall have been complied with to your
reasonable satisfaction.
(b) Gray Cary Ware & Freidenrich, counsel for the
Underwriters, shall have furnished to you such opinion or opinions, dated such
Time of Delivery, with respect to such customary matters as you may reasonably
request, and such counsel shall have received such papers and information as
they may reasonably request to enable them to pass upon such matters.
(c) Wilson Sonsini Goodrich & Rosati, P.C., counsel for the
Company, shall have furnished to you their written opinion, dated such Time of
Delivery, in form and substance satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and organized and
is validly existing as a corporation in good standing under the laws of
Delaware. The Subsidiary has been incorporated and organized and is
validly existing under the laws of its jurisdiction of incorporation. The
Company and the Subsidiary are in good standing as foreign corporations in
all jurisdictions in which the nature of their business requires them to
be qualified to do business as a foreign corporation, except to the extent
that the failure to be so qualified or to be in good standing would not
have a material adverse effect on the Company.
(ii) The Company [and the Subsidiary] has all requisite
corporate power and authority to own, lease and license their assets and
properties and to conduct their business as now being conducted and as
described in the Registration Statement and the Prospectus. The Company
has all requisite corporate power and authority to enter into, deliver and
perform this Agreement and to issue and sell the Shares being sold by it.
To such counsel's knowledge, the Company does not control, directly or
indirectly, any corporation, partnership, joint venture, association or
other business organization other than the Subsidiary.
(iii) The Company has authorized and issued capital stock as
set forth in the Registration Statement and the Prospectus. The
certificates evidencing the Shares are in due and proper legal form and
have been duly authorized for issuance by the Company. All of the
outstanding shares of Common Stock of the Company have been duly and
validly authorized and have been duly and validly issued and are fully
paid and nonassessable and none of them was issued in violation of any
preemptive or, to such counsel's knowledge, other similar right.
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The Shares, when issued and sold pursuant to this Agreement, will be duly
and validly authorized and issued, fully paid and nonassessable and none
of them will have been issued in violation of any preemptive or, to such
counsel's knowledge, other similar right. To such counsel's knowledge,
except as disclosed in the Registration Statement and the Prospectus,
there is no outstanding subscription, option, warrant or other right
calling for the issuance of any share of stock of the Company or the
Subsidiary or any security convertible into, exercisable for, or
exchangeable for stock of the Company or the Subsidiary. The Common Stock
and the Shares conform as to legal matters in all material respects to the
descriptions thereof contained in the Registration Statement and the
Prospectus.
(iv) All necessary corporate action has been duly and validly
taken by the Company to authorize the execution, delivery and performance
of this Agreement and the issuance and sale of the Shares. This Agreement
has been duly and validly authorized, executed and delivered by the
Company.
(v) Neither the execution, delivery and performance of this
Agreement by the Company nor the consummation of any of the transactions
contemplated hereby (including, without limitation, the issuance and sale
by the Company of the Shares to be sold by it) will contravene any
provision of applicable law or of the certificate of incorporation or
bylaws of the Company, will conflict with or result in the breach of any
term or provision of, or constitute a default (or any event which with
notice or lapse of time, or both, would constitute a default) under, or
require a consent or waiver under, or result in the execution or
imposition of any lien, charge or encumbrance upon any properties or
assets of the Company or the Subsidiary, pursuant to the express terms of
any indenture, mortgage, deed of trust, note or other agreement or
instrument filed as an exhibit to the Registration Statement or otherwise
known to such counsel and to which the Company or the Subsidiary is a
party or by which it or any of its properties or businesses is bound, or
to such counsel's knowledge, any franchise, license, permit, judgment,
decree, order, statute, rule or regulation binding upon or applicable to
the Company or the Subsidiary.
(vi) No authorization, approval, consent, license,
registration, qualification certificate, permit or order of any court or
governmental agency or body is required for the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby, except (a) as disclosed in the Registration
Statement, (b) such as have been obtained, and (c) such as are required
under state and foreign securities laws.
(vii) To such counsel's knowledge, there is no litigation or
governmental, regulatory or other proceeding or investigation before any
court or before or by any public body or board pending or threatened
against the Company or the Subsidiary which is required to be disclosed in
the Registration Statement or the Prospectus and which is not so
disclosed.
(viii) The statements in the Prospectus under the captions
"Management - Limitation of Liability and Indemnification Matters,"
"Management - Employment and Severance Arrangements," "Management -
Employee Benefit Plans," "Certain Transactions," "Description of Capital
Stock," and "Shares Eligible for Future Sale," and (2) in the Registration
Statement in Items 14 and 15, insofar as such statements constitute a
summary of documents referred to therein or matters of law, are fair
summaries as to legal matters in all material respects and accurately
present the information called for by the Securities Act and the Rules
with respect
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to such documents and matters. To such counsel's knowledge, all statutes,
regulations, contracts and other documents required to be described in, or
filed as exhibits to, the Registration Statement have been fairly
described in the Registration Statement or filed with the Commission, as
the case may be.
(ix) The Registration Statement has become effective under the
Securities Act, and, to such counsel's knowledge, no stop order suspending
the effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are threatened,
pending or contemplated.
(x) The Shares have been duly approved for listing on the
Nasdaq National Market.
(xi) To such counsel's knowledge, there are no persons with
registration or other similar rights to have any securities registered
pursuant to the Registration Statement or otherwise registered by the
Company under the Securities Act, except as disclosed in the Registration
Statement and the Prospectus.
(xii) The Registration Statement and Prospectus (except for
financial statements and schedules and other financial and statistical
data derived therefrom included therein as to which such counsel need not
express any opinion) comply as to form in all material respects with the
Securities Act and the Rules.
Such counsel shall also include a statement to the effect that
such counsel has acted as counsel for the Company in connection with the
preparation of the Registration Statement and, based upon the foregoing,
but without independent verification, no facts have come to the attention
of such counsel which leads it to believe that (i) (except for financial
statements and schedules as to which such counsel need not express any
belief) the Registration Statement and the Prospectus did not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading and, (2) (except for financial statements and schedules as
to which such counsel need not express any belief) the Prospectus does not
contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
To the extent deemed appropriate by such counsel, they may rely
as to matters of fact on certificates of officers of the Company and
public officials and on the opinions of other counsel satisfactory to the
Representatives as to matters which are governed by laws other than the
laws of the State of California and the federal laws of the United States.
Copies of such certificates and other opinions shall be furnished upon
request to the Representatives and counsel for Underwriters.
(d) Wilson Sonsini Goodrich & Rosati, or the respective
counsel for each of the Selling Stockholders, shall have furnished to you their
written opinion with respect to each of the Selling Stockholders for whom they
are acting as counsel, dated the First Time of Delivery, in form and substance
satisfactory to you, to the effect that:
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(i) In the case of any Selling Stockholder that is a
corporation, such Selling Stockholder has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
state of its incorporation;
(ii) this Agreement has been duly authorized, executed and
delivered by such Selling Stockholder;
(iii) the execution and delivery by such Selling Stockholder
of, and the performance by such Selling Stockholder of its obligations
under, this Agreement, the Custody Agreement and the Power of Attorney
will not contravene any provision of applicable law, or the articles of
incorporation or bylaws of such Selling Stockholder (if such Selling
Stockholder is a corporation) or, to such counsel's knowledge, any
agreement or other instrument binding upon such Selling Stockholder that
is material to such Selling Stockholder or, to such counsel's knowledge,
any judgment, order or decree of any governmental body, agency or court
having jurisdiction over such Selling Stockholder, and no consent,
approval, authorization or order of or qualification with any governmental
body or agency is required for the performance by such Selling Stockholder
of its obligations under this Agreement, the Custody Agreement, or the
Power of Attorney, except such as may be required by the securities or
Blue Sky laws of the various states in connection with offer and sale of
the Shares;
(iv) such Selling Stockholder has the legal right and power,
and all authorization and approval required, to enter into this Agreement,
the Custody Agreement and the Power of Attorney and to sell, transfer and
deliver the Shares to be sold by such Selling Stockholder; and, to such
counsel's knowledge, the sale, transfer and delivery of the Shares to be
sold by the Selling Stockholder is not subject to any right of first
refusal or other contractual restriction;
(v) a Custody Agreement and Power of Attorney have been duly
authorized, executed and delivered by such Selling Stockholder and each is
a valid and binding agreement of such Selling Stockholder; and
(vi) assuming the Underwriters purchase the Shares to be sold
by such Selling Stockholder for value, in good faith and without any
notice of any adverse claim within the meaning of Article VII of the UCC,
delivery of the certificates for the Shares to be sold by such Selling
Stockholder pursuant to this Agreement will pass good and valid title to
such Shares free and clear of any security interests, claims, liens,
equities and other encumbrances.
With respect to the opinion to be rendered pursuant to paragraph (d),
Wilson Sonsini Goodrich & Rosati may rely upon an opinion or opinions of
counsel for any Selling Stockholders and, as to matters of fact, to the extent
such counsel deems appropriate, upon the representations of each Selling
Stockholder contained herein and in the Custody Agreement and Power of Attorney
of such Selling Stockholder and in other documents and instruments; provided,
however, that (A) a copy of each opinion so relied upon is delivered to you and
is in form and substance satisfactory to your counsel, (B) copies of such
Custody Agreements and Powers of Attorney and of any such other documents and
instruments shall be delivered to you and shall be in form and substance
satisfactory to your counsel, and (C) Wilson Sonsini Goodrich & Rosati shall
state in their opinion that they are relying on each such other opinion.
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(e) On the date of the Prospectus at a time prior to the
execution of this Agreement, on the effective date of any post-effective
amendment to the Registration Statement filed subsequent to the date of this
Agreement and also at each Time of Delivery, Ernst & Young LLP shall have
furnished to you a letter or letters, dated the respective dates of delivery
thereof, in form and substance satisfactory to you, containing statements and
information of the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain financial
information contained in the Registration Statement and Prospectus. The first
such letter delivered shall state that Ernst & Young LLP has performed the
procedures set out in Statement of Accounting Standards No. 71 for a review of
interim financial information with respect to each of the six month periods
ended June 30, 1995 and June 30, 1996 and with respect to each quarter for which
results are set forth under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations," stating that in the course of
such review, nothing came to the attention of such firm that leads it to believe
that any changes need to be made in the financial statements for such periods so
that such financial statements would be in accordance with generally accepted
accounting principles. A copy of Ernst & Young's report to the Company on such
financial statements shall be appended to the first such letter for the use of
the Underwriters.
(f) There shall not have occurred any material adverse
change, or any development involving a prospective material adverse change, in
the condition, financial or otherwise, or in the earnings, business or
operations of the Company from that set forth in the Prospectus.
(g) On or after the date hereof there shall not have occurred
any of the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange or on NASDAQ; (ii) a
suspension or material limitation in trading in the Company's securities on
NASDAQ; (iii) a general moratorium on commercial banking activities declared by
either federal or New York or California State authorities; or (iv) the
outbreak or escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war, if the effect
of any such event specified in this Clause (iv) in the judgment of the
Representatives makes it impracticable or inadvisable to proceed with the
public offering or the delivery of the Shares being delivered at such Time of
Delivery on the terms and in the manner contemplated in the Prospectus.
(h) The Shares at such Time of Delivery shall have been duly
listed on the Nasdaq National Market.
(i) The Company has obtained and delivered to the
Underwriters executed copies of an agreement from the stockholders of the
Company substantially to the effect set forth in Subsection 1(b)(xxiv) hereof
in form and substance satisfactory to you.
(j) The Company and the Selling Stockholders shall have
furnished or caused to be furnished to you at such Time of Delivery
certificates of officers of the Company and of the Selling Stockholders,
respectively, satisfactory to you as to the accuracy of the representations and
warranties of the Company and the Selling Stockholders, respectively, herein at
and as of such Time of Delivery, as to the performance by the Company and the
Selling Stockholders of all of their respective obligations hereunder to be
performed at or prior to such Time of Delivery, and as to such other matters as
you may reasonably request, and the Company shall have furnished or caused to
be furnished certificates as to the matters set forth in subsections (a) and
(f) of this Section and as to such other matters as you may reasonably request.
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(k) The Company shall have complied with the provisions of
Section 5(c) hereof with respect to the furnishing of prospectuses on the
business day next succeeding the date of this Agreement.
8. (a) The Company and Xerox, jointly and severally, will
indemnify and hold harmless each Underwriter, each of their respective
officers, directors, partners, employees, agents, and counsel, and each person,
if any, who controls an Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any losses, claims,
damages or liabilities, joint or several, to which any of them 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 an untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, 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 not
misleading, and will reimburse each of them for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such action or claim as such expenses are incurred; provided, however, that the
Company and Xerox shall not be liable in any such case 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
any preliminary prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through DMG expressly
for use therein provided, further, that the foregoing indemnity agreement with
respect to any preliminary prospectus shall not inure to the benefit of any
Underwriter or any person controlling such Underwriter, from whom the person
asserting any such losses, claims, damages or liabilities purchased Shares, if
a copy of the Prospectus (as then amended or supplemented, if the Company shall
have furnished any amendments or supplements thereto) was not sent or given by
or on behalf of such Underwriter to such person, if required by law so to have
been delivered, at or prior to the written confirmation of the sale of the
Shares to such person, and if the Prospectus (as so amended or supplemented)
would have cured the defect giving rise to such loss, claim, damage or
liability. Notwithstanding the foregoing, Xerox shall not be required to make
any payment required by the provisions of this paragraph unless the parties
indemnified under this paragraph have demanded payment from the Company and the
Company has refused to make such payment or failed to make such payment in full
within 30 days from the date of such demand.
(b) Each of the Selling Stockholders (other than Xerox) will
indemnify and hold harmless each Underwriter, each of their respective
officers, directors, partners, employees, agents, and counsel, and each person,
if any, who controls an Underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, against any losses, claims,
damages or liabilities, joint or several, to which any of them 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 an untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, 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 not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in any preliminary prospectus, the Registration Statement or the
Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such Selling
Stockholder (other than Xerox) expressly for
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use therein; and will reimburse each of them for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such action or claim as such expenses are incurred; provided, however, that
such Selling Stockholder (other than Xerox) shall not be liable in any such
case 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 any preliminary prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through DMG expressly for use therein; provided, further, that the liability of
a Selling Stockholder pursuant to this subsection (b) shall not exceed the
product of the number of Shares sold by such Selling Stockholder and the
initial public offering price of the Shares as set forth in the Prospectus.
(c) Each Underwriter will indemnify and hold harmless the
Company and each Selling Stockholder and each of their respective officers,
directors, partners, employees, agents and counsel and each person, if any, who
controls the Company or a Selling Stockholder within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act against any losses,
claims, damages or liabilities to which the Company or such Selling Stockholder
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 an untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, 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 not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission was made in any preliminary prospectus, the Registration Statement or
the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such
Underwriter through DMG expressly for use therein; and will reimburse the
Company and each Selling Stockholder for any legal or other expenses reasonably
incurred by the Company or such Selling Stockholder in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(d) Promptly after receipt by an indemnified party under
subsection (a), (b) or (c) above 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 under such subsection, notify the indemnifying
party in writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. 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 therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the
indemnifying party), and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under such
subsection for any legal expenses of other counsel or any other expenses, in
each case subsequently incurred by such indemnified party, in connection with
the defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the written consent of the indemnified party,
effect the settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of which
indemnification may
20
<PAGE> 21
be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from
all liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by
or on behalf of any indemnified party.
(e) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a), (b) or (c) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company and the Selling Stockholders on
the one hand and the Underwriters on the other from the offering of the Shares.
If, however, the allocation provided by the immediately preceding sentence is
not permitted by applicable law or if the indemnified party failed to give the
notice required under subsection (d) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of the Company and the Selling Stockholders on the one
hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Stockholders on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company and the Selling
Stockholders bear to the total underwriting discounts and commissions received
by the Underwriters, in each case as set forth in the table on the cover page
of the Prospectus. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Selling Stockholders on
the one hand or the Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company, each of the Selling Stockholders and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (e) were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to above in this subsection (e). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this
subsection (e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (e), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission, and no Selling Stockholder (other than Xerox) shall be required to
contribute any amount in excess of the amount by which the net proceeds of the
offering (before deducting expenses) received by such Selling Stockholder
exceeds the amount of any damages that such Selling Stockholder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such
21
<PAGE> 22
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(e) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(f) The obligations of the Company and the Selling
Stockholders under this Section 8 shall be in addition to any liability which
the Company and the respective Selling Stockholders may otherwise have and
shall extend, upon the same terms and conditions, to each person, if any, who
controls any Underwriter within the meaning of the Securities Act; and the
obligations of the Underwriters under this Section 8 shall be in addition to
any liability which the respective Underwriters may otherwise have and shall
extend, upon the same terms and conditions, to each officer and director of the
Company (including any person who, with his or her consent, is named in the
Registration Statement as about to become a director of the Company) and to
each person, if any, who controls the Company or any Selling Stockholder within
the meaning of the Securities Act.
9. (a) If any Underwriter shall default in its obligation to
purchase the Shares which it has agreed to purchase hereunder at a Time of
Delivery, you may in your discretion arrange for you or another party or other
parties to purchase such Shares on the terms contained herein. If within
thirty-six hours after such default by any Underwriter you do not arrange for
the purchase of such Shares, then the Company and the Selling Stockholders
shall be entitled to a further period of thirty-six hours within which to
procure another party or other parties satisfactory to you to purchase such
Shares on such terms. In the event that, within the respective prescribed
periods, you notify the Company and the Selling Stockholders that you have so
arranged for the purchase of such Shares, or the Company and the Selling
Stockholders notify you that they have so arranged for the purchase of such
Shares, you or the Company and the Selling Stockholders shall have the right to
postpone a Time of Delivery for a period of not more than seven days, in order
to effect whatever changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or arrangements, and the
Company agrees to file promptly any amendments to the Registration Statement or
the Prospectus which in your opinion may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any person substituted
under this Section with like effect as if such person had originally been a
party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting Underwriter or Underwriters by you and
the Company and the Selling Stockholders as provided in subsection (a) above,
the aggregate number of such Shares which remains unpurchased does not exceed
one-eleventh of the aggregate number of all the Shares to be purchased at such
Time of Delivery, then the Company and the Selling Stockholders shall have the
right to require each non-defaulting Underwriter to purchase the number of
Shares which such Underwriter agreed to purchase hereunder at such Time of
Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting Underwriter or Underwriters by you and
the Company and the Selling Stockholders as provided in subsection (a) above,
the aggregate number of such Shares which remains unpurchased exceeds
one-eleventh of the aggregate number of all of the Shares to be purchased at
such Time of Delivery, or if the Company and the Selling Stockholders shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Shares of a defaulting
22
<PAGE> 23
Underwriter or Underwriters, then this Agreement (or, with respect to the
Second Time of Delivery, the obligations of the Underwriters to purchase and of
the Company to sell the Optional Shares) shall thereupon terminate, without
liability on the part of any non-defaulting Underwriter or the Company or the
Selling Stockholders, except for the expenses to be borne by the Company and
the Selling Stockholders and the Underwriters as provided in Section 6 hereof
and the indemnity and contribution agreements in Section 8 hereof; but nothing
herein shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations,
warranties and other statements of the Company, the Selling Stockholders and
the several Underwriters, as set forth in this Agreement or made by or on
behalf of them, respectively, pursuant to this Agreement, shall remain in full
force and effect, regardless of any investigation (or any statement as to the
results thereof) made by or on behalf of any Underwriter or any controlling
person of any Underwriter, or the Company, or any of the Selling Stockholders,
or any officer or director or controlling person of the Company, or any
controlling person of any Selling Stockholder, and shall survive delivery of
and payment for the Shares.
11. This Agreement may be terminated with respect to the Shares to be
purchased on a Time of Delivery by DMG by notifying the Company at any time in
the event of any one of the following:
(a) In the sole discretion and judgment of DMG at or before
any Time of Delivery; (i) if the Company shall have sustained a material or
substantial loss by fire, flood, accident, hurricane, earthquake, theft,
sabotage or other calamity or malicious act which, whether or not said loss
shall have been insured, will make it inadvisable to proceed with the offering;
(ii) if there has been, since the respective dates as of which information is
given in the Registration Statement and the Prospectus, any material adverse
change in the business, operations, earnings, prospects, properties or
financial condition of the Company and the Subsidiary, taken as a whole,
whether or not arising in the ordinary course of business, including, but not
limited to, the commencement of any litigation or other legal action involving
the Company; (iii) if on or prior to such date, any domestic or international
event or act or occurrence has materially disrupted, or in the opinion of the
Representatives will in the future materially disrupt, the securities markets;
(iv) if there has occurred any new outbreak or material escalation of
hostilities or other calamity or crisis the effect of which on the financial
markets of the United States is such as to make it, in the judgment of the
Representatives, inadvisable to proceed with the offering; (v) if there shall
be such a material adverse change in general financial, political or economic
conditions or the effect of international conditions on the financial markets
in the United States is such as to make it, in the judgment of the
Representatives inadvisable or impracticable to market the Shares; (vi) if
trading in the Shares has been suspended by the Commission or trading generally
on any of the New York Stock Exchange, Inc., the American Stock Exchange, Inc.,
or the Nasdaq National Market System has been suspended or limited, or minimum
ranges for prices for securities have been required, by said exchanges or by
order of the Commission, the National Association of Securities Dealers, Inc.,
or any other governmental or regulatory authority; or (vii) if a banking
moratorium has been declared by any state or federal authority, or
(b) At or before any Time of Delivery, that any of the
conditions specified in Section 7 shall not have been fulfilled when and as
required by this Agreement.
If this Agreement is terminated pursuant to any of its provisions, the
Company shall not be under any liability to any Underwriter, and no Underwriter
shall be under any liability to the
23
<PAGE> 24
Company, except that (i) if this Agreement is terminated by DMG or the
Underwriters because of any failure, refusal or inability on the part of the
Company to comply with the terms or to fulfill any of the conditions of this
Agreement, the Company will reimburse the Underwriters for all actual
out-of-pocket expenses (including the reasonable fees and disbursements of
their counsel) reasonably incurred by them in connection with the proposed
purchase and sale of the Shares or in contemplation of performing their
obligations hereunder and (ii) no Underwriter who shall have failed or refused
to purchase the Shares agreed to be purchased by it under this Agreement,
without some reason sufficient hereunder to justify cancellation or termination
of its obligations under this Agreement, shall be relieved of liability to the
Company or to the other Underwriters for damages occasioned by its failure or
refusal.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by DMG on behalf of you as the representatives; and in
all dealings with any Selling Stockholder hereunder (other than Xerox), you and
the Company shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of such Selling Stockholder made or given by any
or all of the attorneys-in-fact for such Selling Stockholder.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex
or facsimile transmission to you as the representatives in care of Deutsche
Morgan Grenfell, 31 West 52nd Street, 25th Floor, New York, New York 10019,
Attention: Corporate Finance Department; if to any Selling Stockholder shall be
delivered or sent by mail, telex or facsimile transmission to such Selling
Stockholder at its address set forth in Schedule II hereto; and if to the
Company shall be delivered or sent by mail, telex or facsimile transmission to
the address of the Company set forth in the Registration Statement, Attention:
Secretary; provided, however, that any notice to an Underwriter pursuant to
Section 8(d) hereof shall be delivered or sent by mail, telex or facsimile
transmission to such Underwriter at its address set forth in its Underwriters'
Questionnaire or telex constituting such Questionnaire, which address will be
supplied to the Company or the Selling Stockholders by you on request. Any
such statements, requests, notices or agreements shall take effect upon receipt
thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company and the Selling Stockholders and, to
the extent provided in Sections 8 and 10 hereof, the officers and directors of
the Company and each person who controls the Company, any Selling Stockholder
or any Underwriter, and their respective heirs, executors, administrators,
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No purchaser of any of the Shares from
any Underwriter shall be deemed a successor or assign by reason merely of such
purchase.
14. Time shall be of the essence of this Agreement. As used herein,
the term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York without regard to principles of conflict
of laws.
24
<PAGE> 25
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
25
<PAGE> 26
If the foregoing is in accordance with your understanding, please sign and
return to us seven counterparts hereof, and upon the acceptance hereof by you,
on behalf of each of the Underwriters, this letter and such acceptance hereof
shall constitute a binding agreement among each of the Underwriters, the
Company and each of the Selling Stockholders. It is understood that your
acceptance of this letter on behalf of each of the Underwriters is pursuant to
the authority set forth in a form of Agreement among Underwriters, the form of
which shall be submitted to the Company and the Selling Stockholders for
examination, upon request, but without warranty on your part as to the
authority of the signers thereof.
Very truly yours,
DOCUMENT SCIENCES CORPORATION
By:
----------------------------------------
Name:
Title:
XEROX CORPORATION
By:
----------------------------------------
Name:
Title:
SELLING STOCKHOLDERS (OTHER THAN XEROX)
Accepted as of the date hereof By:
----------------------------------------
at ___________, California. Attorney-in-Fact
Deutsche Morgan Grenfell/C. J. Lawrence Inc.
SoundView Financial Group, Inc.
By:
----------------------------------------
On behalf of each of the Underwriters
26
<PAGE> 27
SCHEDULE I
<TABLE>
<CAPTION>
Number of Firm
Shares to be
Underwriter Purchased
----------- --------------
<S> <C>
Deutsche Morgan Grenfell/C. J. Lawrence Inc.
SoundView Financial Group, Inc.
--------------
Total 2,300,000
</TABLE>
27
<PAGE> 28
SCHEDULE II
<TABLE>
<CAPTION>
NUMBER OF
FIRM SHARES
TO BE SOLD
-----------
<S> <C>
The Selling Stockholder(s): . . . . . . . . . . . . . . . . . . .
-------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 462,500
</TABLE>
28
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
DOCUMENT SCIENCES CORPORATION
PURSUANT TO SECTIONS 242 AND 245 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
The undersigned, the President and the Assistant Secretary of Document
Sciences Corporation, a corporation organized and existing by virtue of the
General Corporation Law of the State of Delaware, DO HEREBY CERTIFY as follows:
1. The name of the Corporation is Document Sciences Corporation.
2. Pursuant to Sections 242 and 245 of the General Corporation
Law of the State of Delaware, this Restated Certificate of Incorporation
restates and integrates and further amends the provisions of the Certificate of
Incorporation of the Corporation.
3. The text of the Certificate of Incorporation as heretofore
amended or supplemented is hereby restated and further amended to read in its
entirety as follows:
FIRST: The name of the Corporation is Document Sciences Corporation.
SECOND: The address of its registered agent in the State of Delaware
is 32 Loockerman Square, Suite L-100 in the City of Dover, County of Kent. The
name of its registered agent at such address is The Prentice-Hall Corporation
System, Inc.
THIRD: The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares which the Corporation shall have
the authority to issue is 3,000,000 shares of Common Stock par value $.001 per
share, (hereinafter referred to as the "Common Stock") and 2,000,000 shares of
Preferred Stock, par value $.001 per share, (hereinafter referred to as the
"Preferred Stock")
FIFTH: GENERAL. The designations, preferences, privileges and voting
powers of each class of stock of the Corporation, and the restrictions and
qualifications thereof, are as follows;
1. The Preferred Stock may be issued from time to time as
follows:
(a) The Preferred Stock may be issued from time to time
as shares of one or more series of Preferred Stock and the Board of Directors
is expressly authorized, prior to issuance, in the resolution or resolutions
providing for the issue of shares in each particular series, to fix the
following, subject to the other provisions of this Article FIFTH:
<PAGE> 2
(i) The distinctive serial designation, and
number of shares which shall constitute such series;
(ii) The annual dividend rate for such series, and
the date, if any, from which dividends on shares of such series
shall be cumulative;
(iii) The redemption provisions and price or
prices, if any, for such series, which may consist of a
redemption price or scale of redemption prices applicable only
to redemption for a sinking fund and the same or different
redemption price or scale of redemption prices applicable to
any other redemption;
(iv) The amount or amounts which shall be paid to
the holders of the shares of such series in the event of
voluntary or involuntary liquidation, dissolution or winding
up of the Corporation or the sale, lease or conveyance of all
or substantially all of the property or business of the
Corporation, or the consolidation or merger of the corporation
with or into any other entity;
(v) The obligation, if any, of the Corporation to
redeem or retire shares of such series pursuant to a sinking
fund which shall be applied to the redemption of shares of
such series;
(vi) The terms and conditions (with or without
limitations), if any, on which shares of such series shall be
convertible into or exchangeable for, shares of stock of any
other class or classes, including the price and the terms and
conditions of adjustment thereof, if any; and
(vii) The voting rights and any other preferences,
privileges and restrictions or qualifications of such series.
(b) All shares of Preferred Stock, regardless of series,
are of equal rank with each other and are identical with each other in all
respects except as provided in or permitted pursuant to Article FIFTH,
Paragraph 1(a); and the shares of the Preferred Stock of any one series are
identical with each other in all respects.
2. DIVIDENDS.
(a) The holders of the Preferred Stock of each series are
entitled to receive, when and as declared by the Board of Directors, but only
out of funds legally available for the payment of dividends, cash dividends at
the amount for such series as fixed by the Board of Directors in accordance
with Article FIFTH, Paragraph 1(a) in respect of any series.
(b) So long as any shares of the Preferred Stock are
outstanding, no dividend whatever shall be paid or declared at any time, and no
distribution made, on any Common Stock (other than in Common Stock):
(i) unless all dividends on the Preferred Stock
of all series for all past dividends have been paid and the
full dividends thereon for the then current dividend period
have been paid or declared and a sum sufficient for the
payment thereof set apart; and
-2-
<PAGE> 3
(ii) unless the Corporation has redeemed, retired
or purchased all shares of each series of Preferred Stock
required to have been redeemed, retired or purchased at such
time pursuant to any sinking fund, liquidation, retirement or
redemption obligation fixed for such series by the Board of
Directors.
Subject to the foregoing provisions of this paragraph, and to any further
limitations prescribed by the Board of Directors in accordance with Article
FIFTH, Paragraph 1(a), and not otherwise, such dividends (payable in cash,
stock or otherwise) as may be determined by the Board of Directors may be
declared and paid on any Common Stock from time to time out of any funds of the
Corporation legally available therefor.
(c) In the event this Corporation shall declare a
distribution payable in securities of other persons, evidences of indebtedness
issued by this corporation or other persons, assets (excluding cash dividends)
or options or rights not referred to in Paragraph 6(d), then in each such case
for the purpose of this paragraph, the holders of the Preferred Stock shall be
entitled to a proportionate share of any such distribution as though they were
the holders of the number of shares of Common Stock into which their shares of
Preferred Stock are convertible as of the record date fixed for the
determination of the holders of Common Stock entitled to receive such a record
of its are entitled to receive such distribution.
(d) In the event of any taking by Corporation of a record
of its stockholders for the purposes of determining stockholders who are
entitled to receive payment of any dividend (other than a cash dividend) or
other distribution, any right to subscribe for, purchase or otherwise acquire
any shares of any class or any other securities or property, or to receive any
other right, this Corporation shall mail to each holder of shares of Preferred
Stock, at least 20 days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right.
3. VOTING.
(a) Each share of Common Stock shall be entitled to one
vote. Except as provided below and except as provided by law, each share of
Preferred Stock shall be entitled to the number of votes equal to the number of
shares of Common Stock into which such shares could be converted, and the
holders of Common Stock and Preferred Stock shall vote together on an as if
converted basis.
(b) Unless the consent of the holders of a greater number
of shares is then required by law, the consent of the holders of at least a
majority of the shares or of Preferred Stock at the time outstanding, given in
person or by proxy, either in writing or at any special or annual meeting
called for the purpose, at which the Preferred Stock shall vote separately
as a class, shall be necessary to permit, effect or validate any one or
more of the following:
(i) The authorization of, or any increase in the
authorized amount of, any class of stock with rights and
preferences equal to or greater than those of the Preferred
Stock;
(ii) Any amendment to the Certificate of
Incorporation (if any proposed amendment would alter or change
the powers, preferences, or
-3-
<PAGE> 4
special rights of one or more series of any class so as to
affect them adversely or would create a class or series of
stock with rights and preferences equal to or greater than
those of such series, but shall not so affect the entire
class, then only the shares of the series so affected by the
amendment shall be considered a separate class for the
purposes of this paragraph).
(iii) The liquidation, dissolution or winding up of
the corporation, or the sale, lease or conveyance of all or
substantially all the assets or business of the corporation,
or the consolidation or merger of the corporation with or into
any other entity;
(iv) The redemption of any securities, payment of
dividends or distributions on any securities, or, except as
approved by the Board of Directors with respect to employee
stock purchase agreements, the repurchase of any securities;
(v) Any incurring of debt in excess of $500,000
in any one year, except (A) pursuant to a budget approved by
the Board of Directors or (B) short-term bank borrowings for
working capital;
(vi) The undertaking of a fundamental change in
the business of the corporation that is not unanimously
approved by the Board of Directors;
(vii) The sale, through subsidiaries, of securities
to third parties;
(viii) The transaction of any business with
officers, directors, employees, or affiliates except for
normal employment and benefits transactions and except as
contemplated by other provisions of this Restated Certificate
of Incorporation; and
(ix) An increase in the size of the Board of
Directors to more than nine (9) members.
4. LIQUIDATION.
(a) In the event of any liquidation, dissolution or
winding up of the corporation, whether voluntary or involuntary, the holders of
the Preferred Stock of each series shall be entitled to receive out of the
assets of the Corporation, before any distribution or payment is made to the
holders of any Common Stock, (i) if such liquidation, dissolution or winding up
is involuntary, the amount fixed by the Board of Directors in accordance with
Article FIFTH, Paragraph 1(a) but not less than $0.001, and (ii) if such
liquidation, dissolution or winding up is voluntary, the amount per share fixed
by the Board of Directors in accordance with the provisions of Article FIFTH,
Paragraph 1(a) in the case of any series of Preferred Stock, in effect at the
time thereof, together with, in each case, all accrued and unpaid dividends
thereon to the date fixed for the payment of such distributive amounts; and the
holders of Common Stock and Preferred Stock shall be entitled to share ratably
in all the remaining assets of the Corporation on an as-converted basis. The
consolidation or merger of the Corporation with or into any other corporation,
and any sale, lease or conveyance of all or any part of the property or
business of the corporation, shall be deemed to be a liquidation, dissolution
or winding up of the Corporation within the meaning of this Paragraph.
-4-
<PAGE> 5
5. REDEMPTION.
(a) The redemption of any series of Preferred Stock may,
in the sole discretion of the Board of Directors, be payable in three equal
annual installments commencing on the Redemption Date. Subject to the
foregoing, in the event the Corporation has insufficient funds available to
redeem all shares of Preferred Stock for which a demand for redemption has been
made, the funds available for redemption shall be allocated among the series of
Preferred Stock then outstanding in proportion to the aggregate redemption
prices of the shares to be redeemed.
(b) The holders of the redeemable Preferred Stock, when
such stock becomes redeemable, may notify the Corporation in writing of their
intent to redeem all or a part of their shares, in which case the Corporation
shall, upon the earlier of the date specified in the notice of redemption or
thirty (30) days from the date of the notice of redemption, (the "Redemption
Date") repurchase such shares using any source of funds legally available
therefor; provided, however, that at the time of such redemption, the
Corporation shall have outstanding shares of at least one class or series of
stock with full voting powers and which shall not be subject to redemption.
(c) On or prior to the Redemption Date, each holder of
redeemable Preferred Stock shall surrender the certificate or certificates
representing such shares to the Corporation, in the manner and at the place
designated by the Corporation. Upon such surrender, the Redemption Price of
such shares (which shares shall be reduced by the number of shares which have
been converted into Common Stock between the date of such notice and the date
on which the conversion rights to such shares terminate) shall be payable to
the order of the person whose name appears on such certificate or certificates
as the owner thereof and each surrendered certificate shall be cancelled. In
the event that less than all the shares represented by any such certificate are
redeemed, a new certificate shall be issued representing the unredeemed shares.
From and after the Redemption Date, unless there shall have been a default in
payment of the Redemption Price, all rights of the holders of the shares of
Preferred Stock designated for redemption shall cease (except for the right to
receive the Redemption Price without interest) with respect to such shares, and
such shares shall not thereafter be transferred on the books of the Corporation
or be deemed to be outstanding for any purpose whatsoever.
(d) On or prior to the Redemption Date, the Corporation
shall deposit the Redemption Price of all shares of Preferred Stock designated
for redemption and not yet redeemed with a bank or trust company having
aggregate capital and surplus in excess of $20,000,000 as a trust fund for the
benefit of the respective holders of the shares designated for redemption and
not yet redeemed, with irrevocable instructions and authority to the bank or
trust company to pay the Redemption Price for such shares to their respective
holders on or after the Redemption Date upon receipt of notification from the
Corporation that such holder has surrendered the share certificate to the
Corporation pursuant to subparagraph (c) above. Such instructions shall also
provide that any moneys deposited by the Corporation pursuant to this
subparagraph for the redemption of shares thereafter converted into shares of
Common Stock on or before the Redemption Date shall be returned to the
Corporation forthwith upon such conversion. The balance of any moneys
deposited by the Corporation pursuant to this subparagraph remaining unclaimed
at the expiration of six months following the Redemption Date shall thereafter
be returned to the Corporation.
-5-
<PAGE> 6
6. CONVERSION.
(a) Before any holder of shares of Preferred Stock which
are convertible into Common Stock shall be entitled to convert the same into
shares of Common Stock, such holder shall surrender the certificate or
certificates duly endorsed, at the office of the Corporation or of any transfer
agent for such shares, and shall give written notice by mail, postage prepaid,
to the Corporation at its principal corporate office, of the election to
convert the shares and shall state therein the name or names into which the
certificates or certificates for shares of Common Stock shall be issued. A
holder of Preferred Stock may not effect a transfer of shares pursuant to a
conversion unless such holder has complied with all applicable restrictions on
transfer. The Corporation shall, as soon as practicable thereafter, issue and
deliver to such holder of shares of Preferred Stock, or to the nominee or
nominees of such holder, a certificate or certificate for the number of shares
of Common Stock into which such holder shall be entitled under this Certificate
of Incorporation. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
certificate or certificates representing the shares of Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock as of such date.
(b) The Conversion Price of each series of Preferred
Stock which is convertible into Common Stock shall be subject to adjustment
from time to time as follows:
(i) (A) If the Corporation shall issue any
Additional Stock (as defined below) without
consideration or for consideration per share less than
the Conversion Price in effect immediately prior to
the issuance of such Additional Stock, then such
Conversion Price in effect immediately prior to each
such issuance shall (except as otherwise provided in
this clause) be adjusted to:
The lowest per share consideration received
by Corporation for each share of Additional
Stock issued or deemed to be issued.
(B) In the case of the issuance of
Common Stock for cash, the consideration shall be
deemed to be the amount of cash paid there for before
deducting any reasonable discounts, commissions or
other expenses allowed, paid or incurred by this
Corporation for any underwriting or otherwise in
connection with the issuance and sale thereof.
(C) In the case of the issuance of Common
Stock for a consideration in whole or in part other
than cash, the consideration other than cash shall be
deemed to be the fair market value thereof as
determined by the Board of Directors.
(ii) In the case of the issuance of options to
purchase or rights to subscribe for Common Stock, securities
by their terms convertible into or exchangeable for Common
Stock or options to purchase or rights to subscribe for such
convertible or exchangeable securities (where the shares of
Common Stock issuable upon exercise of options or rights or
-6-
<PAGE> 7
upon conversion or exchange of such securities are not
excluded from the definition of Additional Stock), the
following provisions shall apply.
(A) The aggregate maximum number of
shares of Common Stock deliverable upon exercise of
such options to purchase or rights to subscribe for
Common Stock shall be deemed to have been issued at
the time such options or rights were issued and for a
consideration equal to the consideration (determined
in the manner provided in subparagraphs (i)(B) and
(C) above), if any, received by the Corporation upon
the issuance of such options or rights plus the
minimum purchase price provided in such options or
right for the Common Stock covered thereby;
(B) The aggregate maximum number of
shares of Common Stock deliverable upon conversion of
or in exchange for any such convertible or
exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such
convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed to
have been issued at the time such securities were
issued or such options or rights were issued and for
a consideration equal to the consideration, if any,
received by the Corporation for any such securities
and related options or rights (excluding any cash
received on account of accrued interest or accrued
dividends), plus the additional consideration, if
any, to be received by the Corporation upon the
conversion or exchange of such securities or the
exercise of any related options or rights (the
consideration each case to be determined in the
manner provided in subparagraphs (i)(a) and (C)
above,
(C) In the event of any change in the
number of shares of Common Stock deliverable upon
exercise of such options or rights or upon conversion
of or in exchange for such convertible or
exchangeable securities, including, but not limited
to, a change resulting from the antidilution
provisions thereof, the Conversion Price in effect at
the time for each series of Preferred Stock shall
forthwith be readjusted to such Conversion Price as
would have obtained had the adjustment that was made
upon the issuance of such options, rights or
securities not converted prior to such change or the
options or rights related to such securities not
converted prior to such change been made upon the
basis of such change, but no further adjustment shall
be made for the actual issuance of Common Stock upon
the exercise of any such options or rights or the
conversion or exchange of such securities.
(D) Upon the expiration of any such
options or rights, the termination of any such rights
or exchange or the expiration of any options or
rights related to such convertible or exchangeable
securities, the Conversion Price for each series of
Preferred Stock shall forthwith be adjusted to such
Conversion Price as would have been obtained had the
adjustment which was made upon the issuance of such
options, rights or securities or options or rights
related to such securities been made upon the basis
of the issuance of only the number of shares of
Common Stock actually issued upon
-7-
<PAGE> 8
the exercise of such securities or upon the exercise
of the options or rights related to such securities.
(iii) "Effective Date" with respect to each series
of Preferred Stock means the first date on which shares of such
series of Preferred Stock were issued.
"Additional Stock" shall mean any shares of
Common Stock issued (or deemed to have been issued pursuant to
subparagraph 5(b)(ii) by this Corporation after the Effective
Date other than:
(A) Common Stock issued pursuant to a
transaction described in subparagraph (d) below;
(B) An aggregate of 500,000 shares of
Common Stock issued or issuable to employees,
officers, or directors of or consultants to, the
Corporation pursuant to an arrangement approved by
the Board of Directors; provided, however, that the
Corporation may repurchase and re-issue such shares
without diminishing this 500,000 share limit;
(C) An aggregate of 150,000 shares of
Common Stock issuable to equipment lessors, trade
vendors, and the like pursuant to an arrangement
approved by the Board of Directors; and
(D) Common Stock issued or issuable upon
conversion of the shares of Preferred Stock.
(c) No adjustment of the Conversion Price for any series
of Preferred Stock shall be made in an amount less than one cent per share,
provided that any adjustment that is not required to be made by reason of this
sentence shall be carried forward and taken into account in any subsequent
adjustment. Except to the limited extent provided for in subparagraph
(b)(ii)(C), (b)(ii)(D) and (d)(ii), no adjustment of such Conversion Price
shall have the effect of increasing the Conversion Price above the Conversion
Price in effect immediately prior to such adjustment.
(d) (i) In the event the Corporation should at any
time or from time to time after the Effective Date fix a
record date for the effectuation of a split or subdivision of
the outstanding shares of Common Stock or the determination of
holders of Common Stock entitled to receive a dividend or
other distribution payable in additional shares of Common
Stock or other securities or rights convertible into, or
entitling the holder thereof to receive, directly or
indirectly, additional shares of Common Stock ("Common Stock
Equivalents") without payment of any consideration by such
holder for the additional shares of Common Stock or the Common
Stock Equivalents (including the additional shares of Common
Stock issuable upon conversion or exercise thereof), then, as
of such record date (or the date such dividend distribution,
split or subdivision if no record date is fixed), the
Conversion Price of each series of Preferred Stock shall be
appropriately decreased so that the number of shares of Common
Stock issuable on conversion of each such share shall be
increased in proportion to such increase of outstanding shares
as determined by taking subparagraph (b)(ii) into account.
-8-
<PAGE> 9
(ii) if the number of shares of Common Stock
outstanding at any time after the Effective Date is decreased
by a combination of the outstanding shares of Common Stock,
then, as of the record date of such combination, the
Conversion Price for each series of Preferred Stock shall be
appropriately increased so that the number of shares of Common
Stock issuable on conversion of each such shares shall be
decreased in proportion to such decrease in outstanding
shares.
(e) If at any time or from time to time there shall be a
recapitalization of the Common Stock (other than a subdivision, combination or
merger or sale of assets transaction provided for elsewhere in this Certificate
of Incorporation, provision shall be made (in form and substance satisfactory
to the holders of a majority of the Preferred Stock then outstanding) so that
the holders of the Preferred Stock which is convertible into Common Stock shall
thereafter be entitled to receive, upon conversion of the Preferred Stock, such
shares or other securities or property of the Corporation or otherwise, to
which a holder of Common Stock deliverable upon conversion would have been
entitled on such recapitalization. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Certificate of
Incorporation with respect to the rights of the holders of the Preferred Stock
after the recapitalization to the end that the provisions of this Certificate
of Incorporation (including adjustment of the Conversion Prices then in effect
and the number of shares purchasable upon conversion of shares of Preferred
Stock) shall be applicable after that event as nearly equivalent as may be
practicable.
(f) This Corporation shall not, by amendment of its
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist
in the carrying out of all the provisions of this Paragraph and in the
taking of all such action as may be necessary or appropriate in order to
protect the conversion rights of the holders of the Preferred Stock against
impairment.
(g) (i) No fractional shares shall be issued upon
conversion of shares of Preferred Stock. In lieu of fractional
shares, the number of shares of Common Stock to be issued to a
holder of Preferred Stock on conversion of all of the shares
being converted of any series of Preferred Stock held by such
holder shall be rounded to the nearest whole number. Whether
or not fractional shares would be issuable upon such
conversion shall be determined on the basis of the total
number of shares of Preferred Stock the holder is at the time
converting into Common Stock and the number of shares of
Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment of the
Conversion Price of a series of Preferred Stock pursuant to
this Paragraph, the Corporation, at its discretion, shall
promptly compute such adjustment in accordance with the terms
hereof and prepare and furnish to each holder of shares of the
series of Preferred Stock with respect to which the Conversion
Price is being adjusted a certificate setting forth such
adjustment and showing in detail the facts upon which such
adjustment is based. The Corporation shall upon the written
request at any time of any holder of Preferred Stock, furnish
or cause to be furnished to such holder
-9-
<PAGE> 10
a like certificate setting forth (A) such adjustment, (B) the
Conversion Price at the time in effect for each series of
Preferred Stock and (C) the number of shares of Common Stock
and the amount, if any, of other property which at the time
would be received upon the conversion of such holder's shares
of Preferred Stock.
(h) Each share of each series of Preferred Stock shall
automatically be converted into shares of Common Stock at the applicable
conversion price immediately upon the effectiveness of a registration statement
on Form S-1 under the Securities Act of 1933, as amended, in connection with a
firmly underwritten public offering of the Common Stock, provided that the
offering price (net of selling expenses and underwriters' commissions) is at
least $3.00 per share (hereafter adjusted for stock splits and the like) and
(2) the aggregate gross proceeds thereof are not less than $5,000,000.
(i) This Corporation shall at times reserve and
keep available out of its authorized but unissued shares of
Common Stock, solely for the purposes of effecting the
conversion of the shares of Preferred Stock, such number of
shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares
of Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding
shares of Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding
shares of Preferred Stock, this Corporation will take such
corporate action as may, in the opinion, of its counsel, be
necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient
for such purposes.
7. DEFINITIONS.
For purposes of the Certificate of Incorporation:
The term "accrued and unpaid dividends" when used with
references to any share of any series of the Preferred Stock means an amount
computed at the annual dividend rate for the shares of such series from the
date on which dividends on such share became cumulative to and including the
date to which such dividends are to be accrued, less the aggregate amount of
all dividends theretofore paid on such share; but no interest shall be payable
upon any arrearages (except pursuant to a right of Preferred Stock fixed by the
Board of Directors in accordance with Article FIFTH, paragraph 1(a) in respect
of any series).
The term "Certificate of Incorporation" means the certificate
of the Corporation as amended and supplemented by any certificate heretofore or
hereafter filed pursuant to law, including any certificate filed pursuant to
law with respect to, and providing for the issue of, any series of Preferred
Stock.
The term "stock with rights and preferences equal to or
greater than those of the Preferred Stock" means any stock of the Corporation,
now or hereafter authorized, which has rights in preferences or equal to the
Preferred Stock, or a series thereof as the case may be, either in the payment
of dividends or in any liquidation, dissolution or winding up of the
Corporation.
-10-
<PAGE> 11
8. SERIES A PREFERRED STOCK.
(a) The distinctive serial designation of the first
series of Noncumulative Preferred Stock is "Series A Preferred Stock"
(hereinafter called "Series A Preferred Stock"); and the number of shares
constituting the Series A Preferred Stock is 2,000,000 shares and such number
of shares shall not be increased by the Board of Directors.
(b) The annual dividend rate for the Series A Preferred
Stock is $0.05 per share, as adjusted appropriately for stock splits and the
like. Such dividends shall be paid prior and in preference to any payment of
any dividend on, or other distribution with respect to Common Stock. The right
to such dividends shall not be cumulative, and no right shall accrue to holders
of Series A Preferred Stock by reason of the fact that dividends on such shares
are not declared or paid in any prior year. Dividends, if paid, or if declared
and set apart for payment, will be paid on, or declared and set apart for
payment on, all outstanding shares of Series A Preferred Stock. If less than
full dividends are paid or declared and set apart for payment, the same
percentage of the dividend rate will be paid on, or declared and set apart for
payment on, each outstanding share of Series A Preferred Stock.
After payment of the dividend preferences referred to above,
outstanding shares of Series A Preferred Stock shall participate with Common
Stock as to any dividends or distributions paid by the Corporation in cash,
assets, or any securities other than Common Stock with the outstanding shares
of Series A Preferred Stock so participating on an as converted basis.
(c) Upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, or upon the sale, lease or
conveyance (other than the mortgage) of all or substantially all of the
property or business of the Corporation, or upon a merger or consolidation of
the Corporation into or with any other entity except where the Corporation is
the surviving entity and the rights, preferences and privileges of the Series A
Preferred Stock or the holders thereof are not adversely affected, the holders
of the Series A Preferred Stock are entitled to receive out of the assets of
the Corporation, before any distribution or payment is made to the holders of
the Common Stock, the liquidation price of $1.00 per share (the "Series A
Redemption Price"), plus an amount equal to all accrued and unpaid dividends
thereon to the date fixed for the payment of such distributive amount.
(d) The Series A Preferred Stock may be redeemed on or
after the date which is six years from the Effective Date, in whole or in part,
at the option of the holder at the Series A Redemption Price, plus accrued and
unpaid dividends thereon to the Series A Redemption Date (as defined above).
(e) (i) Each share of Series A Preferred Stock shall
be convertible, at the option of the holder thereof, at any
time after the date of issuance of such share, at the office
of the Corporation or any transfer agent for such shares, into
such number of fully paid and nonassessable shares of Common
Stock determined as set forth below.
(ii) Each share of Series A Preferred Stock shall
be convertible into such number of fully-paid and
nonassessable shares of Common Stock as is determined by
dividing $1.00 by the Conversion Price for the Series A
Preferred Stock in effect at the time of conversion. The
initial Conversion Price for the Series A Preferred Stock
shall be $1.00 per share; provided,
-11-
<PAGE> 12
however, that such Conversion Price shall be subject to
adjustment as set forth in this Certificate of Incorporation.
9. NOTICE. Any notice required by the provisions of this
Certificate of Incorporation to be given to the holders of shares of the
Corporation's stock shall be deemed to be delivered which deposited in the
United States mail, postage prepaid, registered or certified, and addressed to
each holder of the record at the address appearing on the stock transfer books
of the Corporation.
SIXTH: The Board of Directors is authorized to make, alter, or repeal
the By-Laws of the Corporation. Election of directors need not be by written
ballot.
SEVENTH: No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that the foregoing shall not eliminate or limit
liability of a director (i) for any breach of such director's duty of loyalty
to the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law, or (iv) for
any transaction from which such director derived an improper personal benefit.
EIGHTH: That the aforesaid Restatement has been duly adopted in
accordance with the provisions of Sections 242 and 245 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned have signed this Certificate as of
this 22nd day of April 1992, hereby declaring and certifying, under penalties
of perjury that this is our act and deed and the facts herein stated are true.
/s/ TONY N. DOMIT
---------------------------------
Tony N. Domit
President
/s/ BARBARA E. AMANTEA
---------------------------------
Barbara Amantea
Assistant Secretary
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<PAGE> 1
EXHIBIT 3.2
DOCUMENT SCIENCES CORPORATION
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
Document Sciences Corporation, a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), hereby certifies
that:
A. The name of this Corporation, and the name under which it was
originally incorporated, is Document Sciences Corporation.
B. The date of filing of this Corporation's original Certificate of
Incorporation with the Secretary of State of Delaware was October 18, 1991.
C. Pursuant to Sections 242 and 245 of the Delaware General Corporation
Law, this Amended and Restated Certificate of Incorporation restates, integrates
and amends the provisions of the Corporation's Certificate of Incorporation as
follows:
FIRST: The name of the Corporation is Document Sciences Corporation.
SECOND: The address of the Corporation's registered office in the State
of Delaware is 32 Lockerman Square, Suite L100, City of Dover, County of Kent,
Delaware. The name of its registered agent at such address is Prentice-Hall
Corporation system, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The Corporation is authorized to issue two classes of stock to
be designated respectively Common Stock and Preferred Stock. The total number of
shares of all classes of stock which the Corporation has authority to issue is
thirty-two million (32,000,000), consisting of thirty million (30,000,000)
shares of Common Stock, $.001 par value (the "Common Stock"), and two million
(2,000,000) shares of Preferred Stock, $.001 par value (the "Preferred Stock").
Upon the filing of this Amended and Restated Certificate of Incorporation, each
one (1) share of Common Stock of the Corporation outstanding immediately prior
to such filing shall be split up and converted into three (3) shares of Common
Stock.
<PAGE> 2
The Preferred Stock may be issued from time to time in one or more
series pursuant to a resolution or resolutions providing for such issue duly
adopted by the Board of Directors (authority to do so being hereby expressly
vested in the Board). The Board of Directors is hereby authorized subject to
limitations prescribed by law, to fix by resolution or resolutions the
designations, powers, preferences and rights, and the qualifications,
limitations or restrictions thereof, of each such series of Preferred Stock,
including without limitation authority to fix the dividend rights, dividend
rate, conversion rights, voting rights, rights and terms of redemption
(including sinking fund provisions), redemption price or prices, and liquidation
preferences of any wholly unissued series of Preferred Stock, and the number of
shares constituting any such series and the designation of any such series of
Preferred Stock.
The Board of Directors is further authorized to increase (but not above
the total number of authorized shares of the class) or decrease (but not below
the number of shares of any such series then outstanding) the number of shares
of any series of Preferred Stock fixed by it subsequent to the issue of shares
of each series then outstanding, subject to the powers, preferences and rights,
and the qualifications, limitations and restrictions thereof stated in the
resolution of the Board of Directors originally fixing the number of shares of
such series. If the number of shares of any series is so decreased, then the
shares constituting such decrease shall resume the status which they had prior
to the adoption of the resolution originally fixing the number of shares of such
series.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: The election of directors need not be by written ballot except
and to the extent provided in the bylaws of the Corporation.
SEVENTH: The number of directors which constitute the whole Board of
Directors of the Corporation shall be designated in the bylaws of the
Corporation.
EIGHTH: In furtherance and not in limitation of the powers conferred by
the laws of the State of Delaware, the Board of Directors is expressly
authorized to adopt, alter, amend or repeal the bylaws of the Corporation.
NINTH: To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or may hereafter be amended, no director of
the Corporation shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except to the extent such exemption from liability or limitation thereof is not
permitted under the Delaware General Corporation Law. Neither any amendment nor
repeal of this Article, nor the adoption of any provision of this Certificate of
Incorporation inconsistent with this Article, shall eliminate or adversely
affect any right or protection of a director of the Corporation existing under
this Article in respect of any act or omission occurring, or any cause of
action, suit or claim that but for this Article would occur or arise, prior to
such amendment, repeal or adoption of an inconsistent provision.
-2-
<PAGE> 3
TENTH: Meetings of stockholders may be held within or without the State
of Delaware, as the bylaws may provide. A special meeting of the stockholders
may be called at any time by the Board of Directors, or by the Chairman of the
Board, or by the Chief Executive Officer, or by one or more stockholders
holding shares in the aggregate entitled to cast not less than twenty percent
(20%) of the votes of all shares of stock owned by stockholders entitled to
vote at that meeting. Notices for meetings of stockholders shall be given in
such manner as the bylaws shall provide.
ELEVENTH: The books of the Corporation may be kept (subject to any
provision contained in the laws of the State of Delaware) outside of the State
of Delaware at such place or places as may be designated from time to time by
the Board of Directors or in the bylaws of the Corporation.
TWELFTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by the laws of the State of Delaware, and all
rights conferred herein are granted subject to this reservation.
IN WITNESS WHEREOF, Document Sciences Corporation has caused this
Amended and Restated Certificate of Incorporation to be signed by Tony N. Domit,
its President, and attested by Barbara E. Amantea, its Secretary, this ______
day of July 1996, each hereby declaring and certifying, under penalties of
perjury, that the facts herein stated are true.
DOCUMENT SCIENCES CORPORATION
______________________________
Tony N. Domit, President
Attested:
_____________________________
Barbara E. Amantea, Secretary
-3-
<PAGE> 1
EXHIBIT 3.3
AMENDED AND RESTATED
BYLAWS
OF
DOCUMENT SCIENCES CORPORATION
(A DELAWARE CORPORATION)
<PAGE> 2
AMENDED AND RESTATED
BYLAWS OF
DOCUMENT SCIENCES CORPORATION
(a Delaware corporation)
TABLE OF CONTENTS
<TABLE>
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<S> <C>
ARTICLE I - CORPORATE OFFICES........................................................................................1
1.1 REGISTERED OFFICE...............................................................................1
1.2 OTHER OFFICES...................................................................................1
ARTICLE II - MEETINGS OF STOCKHOLDERS................................................................................1
2.1 PLACE OF MEETINGS...............................................................................1
2.2 ANNUAL MEETING..................................................................................1
2.3 SPECIAL MEETING.................................................................................2
2.4 NOTICE OF STOCKHOLDERS' MEETINGS................................................................2
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND
STOCKHOLDER BUSINESS............................................................................2
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE....................................................3
2.7 QUORUM..........................................................................................3
2.8 ADJOURNED MEETING; NOTICE.......................................................................4
2.9 VOTING..........................................................................................4
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A
MEETING.........................................................................................4
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING......................................................5
2.12 PROXIES.........................................................................................5
2.13 ORGANIZATION....................................................................................5
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE...........................................................6
ARTICLE III - DIRECTORS..............................................................................................6
3.1 POWERS..........................................................................................6
3.2 NUMBER OF DIRECTORS.............................................................................6
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS........................................................6
3.4 RESIGNATION AND VACANCIES.......................................................................7
3.5 REMOVAL OF DIRECTORS............................................................................8
</TABLE>
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<PAGE> 3
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
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<S> <C>
3.6 PLACE OF MEETINGS; MEETINGS BY TELEPHONE........................................................8
3.7 FIRST MEETINGS..................................................................................8
3.8 REGULAR MEETINGS................................................................................8
3.9 SPECIAL MEETINGS; NOTICE........................................................................9
3.10 QUORUM..........................................................................................9
3.11 WAIVER OF NOTICE................................................................................9
3.12 ADJOURNMENT.....................................................................................9
3.13 NOTICE OF ADJOURNMENT..........................................................................10
3.14 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING..............................................10
3.15 FEES AND COMPENSATION OF DIRECTORS.............................................................10
3.16 APPROVAL OF LOANS TO OFFICERS..................................................................10
ARTICLE IV - COMMITTEES............................................................................................11
4.1 COMMITTEES OF DIRECTORS........................................................................11
4.2 MEETINGS AND ACTION OF COMMITTEES..............................................................11
4.3 COMMITTEE MINUTES..............................................................................12
ARTICLE V - OFFICERS................................................................................................12
5.1 OFFICERS.......................................................................................12
5.2 ELECTION OF OFFICERS...........................................................................12
5.3 SUBORDINATE OFFICERS...........................................................................12
5.4 REMOVAL AND RESIGNATION OF OFFICERS............................................................13
5.5 VACANCIES IN OFFICES...........................................................................13
5.6 CHAIRMAN OF THE BOARD..........................................................................13
5.7 PRESIDENT......................................................................................13
5.8 VICE PRESIDENTS................................................................................14
5.9 SECRETARY......................................................................................14
5.10 CHIEF FINANCIAL OFFICER........................................................................14
5.11 ASSISTANT SECRETARY............................................................................15
5.12 ADMINISTRATIVE OFFICERS........................................................................15
5.13 AUTHORITY AND DUTIES OF OFFICERS...............................................................15
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND
OTHER AGENTS...............................................................................................16
</TABLE>
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<PAGE> 4
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
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<S> <C>
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS......................................................16
6.2 INDEMNIFICATION OF OTHERS......................................................................17
6.3 INSURANCE......................................................................................17
ARTICLE VII - RECORDS AND REPORTS...................................................................................17
7.1 MAINTENANCE AND INSPECTION OF RECORDS..........................................................17
7.2 INSPECTION BY DIRECTORS........................................................................18
7.3 ANNUAL STATEMENT TO STOCKHOLDERS...............................................................18
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.................................................18
7.5 CERTIFICATION AND INSPECTION OF BYLAWS.........................................................18
ARTICLE VIII - GENERAL MATTERS......................................................................................19
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING .........................................19
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS......................................................19
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED.............................................19
8.4 STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES...............................................19
8.5 SPECIAL DESIGNATION ON CERTIFICATES............................................................20
8.6 LOST CERTIFICATES..............................................................................21
8.7 TRANSFER AGENTS AND REGISTRARS.................................................................21
8.8 CONSTRUCTION; DEFINITIONS......................................................................21
ARTICLE IX - AMENDMENTS.............................................................................................21
</TABLE>
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<PAGE> 5
AMENDED AND RESTATED
BYLAWS
OF
DOCUMENT SCIENCES CORPORATION
(a Delaware corporation)
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be fixed in the
certificate of incorporation of the corporation.
1.2 OTHER OFFICES
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place within or outside
the State of Delaware designated by the board of directors. In the absence of
any such designation, stockholders' meetings shall be held at the principal
executive office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date
and at a time designated by the board of directors. In the absence of such
designation, the annual meeting of stockholders shall be held on the second
Friday in May in each year at 3:00 p.m. However, if such day falls on a legal
holiday, then the meeting shall be held at the same time and place on the next
succeeding full business day. At the meeting, directors shall be elected, and
any other proper business may be transacted.
<PAGE> 6
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, or by the chief executive
officer, or by one or more stockholders holding shares in the aggregate entitled
to cast not less than twenty percent (20%) of the votes of all shares of stock
owned by stockholders entitled to vote at that meeting.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings of stockholders shall be sent or otherwise
given in accordance with Section 2.5 of these bylaws not less than ten (10) nor
more than sixty (60) days before the date of the meeting. The notice shall
specify the place, date and hour of the meeting and (i) in the case of a special
meeting, the purpose or purposes for which the meeting is called (no business
other than that specified in the notice may be transacted) or (ii) in the case
of the annual meeting, those matters which the board of directors, at the time
of giving the notice, intends to present for action by the stockholders (but any
proper matter may be presented at the meeting for such action). The notice of
any meeting at which directors are to be elected shall include the name of any
nominee or nominees who, at the time of the notice, the board intends to present
for election.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER
BUSINESS
To be properly brought before an annual meeting or special meeting,
nominations for the election of director or other business must be (a) specified
in the notice of meeting (or any supplement thereto) given by or at the
direction of the board of directors or other person so authorized pursuant to
Section 2.3 of these bylaws, (b) otherwise properly brought before the
meeting by or at the direction of the board of directors or (c) otherwise
properly brought before the meeting by a stockholder. For such nominations or
other business to be considered properly brought before the meeting by a
stockholder, such stockholder must have given timely notice and in proper form
of his intent to bring such business before such meeting. To be timely, such
stockholder's notice must be delivered to or mailed and received by the
secretary of the Corporation not less than 90 days prior to the meeting;
provided, however, that in the case of a meeting called by or on behalf of the
Board of Directors of the Corporation where prior notice, or public disclosure,
of the meeting has not been given or made at least 100 days prior to such
meeting, notice by the stockholder to be timely must be so received not later
than the close of business on the tenth day following the day on which such
notice of the date of the meeting was mailed or such public disclosure was made.
To be in proper form, a stockholder's notice to the secretary shall set forth:
(i) the name and address of the stockholder who intends to
make the nominations, propose the business, and, as the case
may be, the name and address of the person or persons to be
nominated or the nature of the business to be proposed;
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(ii) a representation that the stockholder is a holder of
record of stock of the Corporation entitled to vote at such
meeting and, if applicable, intends to appear in person or by
proxy at the meeting to nominate the person or persons
specified in the notice or introduce the business specified in
the notice;
(iii) if applicable, a description of all arrangements or
understandings between the stockholder and each nominee and
any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made
by the stockholder;
(iv) such other information regarding each nominee or each
matter of business to be proposed by such stockholder as would
be required to be included in a proxy statement filed pursuant
to the proxy rules of the Securities and Exchange Commission
had the nominee been nominated, or intended to be nominated,
or the matter been proposed, or intended to be proposed by the
board of directors' and
(v) if applicable, the consent of each nominee to serve as
director of the Corporation if so elected.
The chairman of the meeting may refuse to acknowledge the nomination of
any person or the proposal of any business not made in compliance with the
foregoing procedure.
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders shall be given either
personally or by first-class mail or by telegraphic or other written
communication. Notices not personally delivered shall be sent charges prepaid
and shall be addressed to the stockholder at the address of that stockholder
appearing on the books of the corporation or given by the stockholder to the
corporation for the purpose of notice. Notice shall be deemed to have been given
at the time when delivered personally or deposited in the mail or sent by
telegram or other means of written communication.
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.7 QUORUM
The holders of a majority in voting power of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
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certificate of incorporation. If, however, such quorum is not present or
represented at any meeting of the stockholders, then either (i) the chairman of
the meeting or (ii) the stockholders entitled to vote thereat, present in person
or represented by proxy, shall have power to adjourn the meeting in accordance
with Section 2.7 of these bylaws.
When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which, by express provision of the laws of the State of Delaware or
of the certificate of incorporation or these bylaws, a different vote is
required, in which case such express provision shall govern and control the
decision of the question.
If a quorum be initially present, the stockholders may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum, if any action taken is approved by a
majority of the stockholders initially constituting the quorum.
2.8 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time and place, unless these
bylaws otherwise require, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the corporation may transact any business
that might have been transacted at the original meeting. If the adjournment is
for more than thirty (30) 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.
2.9 VOTING
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint
owners, and to voting trusts and other voting agreements).
Except as may be otherwise provided in the certificate of incorporation
or these bylaws, each stockholder shall be entitled to one vote for each share
of capital stock held by such stockholder.
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken at any annual or special
meeting of stockholders may be taken without a meeting, without prior notice and
without a vote, if a consent or consents in writing setting forth the action so
taken shall be 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. Such consents shall be delivered to the corporation by delivery to it
registered office in the state of Delaware, its principal
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<PAGE> 9
place of business, or an officer or agent of the corporation having custody of
the book in which proceedings of meetings of stockholders are recorded. Delivery
made to a corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested.
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING
For purposes of determining the stockholders entitled to notice of any
meeting or to vote thereat, the board of directors may fix, in advance, a record
date, which shall not precede the date upon which the resolution fixing the
record date is adopted by the board of directors and which shall not be more
than sixty (60) days nor less than ten (10) days before the date of any such
meeting, and in such event only stockholders of record on the date so fixed are
entitled to notice and to vote, notwithstanding any transfer of any shares on
the books of the corporation after the record date.
If the board of directors does not so fix a record date, 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 business day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held.
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
unless the board of directors fixes a new record date for the adjourned meeting,
but the board of directors shall fix a new record date if the meeting is
adjourned for more than thirty (30) days from the date set for the original
meeting.
The record date for any other purpose shall be as provided in Section
8.1 of these bylaws.
2.12 PROXIES
Every person entitled to vote for directors, or on any other matter,
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the secretary
of the corporation, but no such proxy shall be voted or acted upon after three
(3) years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission, telefacsimile or
otherwise) by the stockholder or the stockholder's attorney-in-fact. The
revocability of a proxy that states on its face that it is irrevocable shall be
governed by the provisions of Section 212(e) of the General Corporation Law of
Delaware.
2.13 ORGANIZATION
The president, or in the absence of the president, the chairman of the
board, shall call the meeting of the stockholders to order, and shall act as
chairman of the meeting. In the absence of the president, the chairman of the
board, and all of the vice presidents, the stockholders shall appoint a chairman
for such meeting. The chairman of any meeting of stockholders shall determine
the order of business and the procedures at the meeting, including such matters
as the regulation of the manner of
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<PAGE> 10
voting and the conduct of business. The secretary of the corporation shall act
as secretary of all meetings of the stockholders, but in the absence of the
secretary at any meeting of the stockholders, the chairman of the meeting may
appoint any person to act as secretary of the meeting.
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city 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.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware
and to any limitations in the certificate of incorporation or these bylaws
relating to action required to be approved by the stockholders or by the
outstanding shares, the business and affairs of the corporation shall be managed
and all corporate powers shall be exercised by or under the direction of the
board of directors.
3.2 NUMBER OF DIRECTORS
The board of directors shall consist of [five (5)] members. The number
of directors may be changed by an amendment to this bylaw, duly adopted by the
board of directors or by the stockholders, or by a duly adopted amendment to the
certificate of incorporation.
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Each director, including a director elected or appointed to fill
a vacancy, shall hold office until the expiration of the term for which elected
and until a successor has been elected and qualified.
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3.4 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the
chairman of the board, the president, the secretary or the board of directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a future time, the
board of directors may elect a successor to take office when the resignation
becomes effective.
Vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote of
the stockholders or by court order may be filled only by the affirmative vote of
a majority of the shares represented and voting at a duly held meeting at which
a quorum is present (which shares voting affirmatively also constitute a
majority of the required quorum). Each director so elected shall hold office
until the next annual meeting of the stockholders and until a successor has been
elected and qualified.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting from
any increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more directors by the provisions of
the certificate of incorporation, vacancies and newly created directorships of
such class or classes or series may be filled by a majority of the directors
elected by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as
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aforesaid, which election shall be governed by the provisions of Section 211 of
the General Corporation Law of Delaware as far as applicable.
3.5 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of
incorporation or by these bylaws, any director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors.
3.6 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
Regular meetings of the board of directors may be held at any place
within or outside the State of Delaware that has been designated from time to
time by resolution of the board. In the absence of such a designation, regular
meetings shall be held at the principal executive office of the corporation.
Special meetings of the board may be held at any place within or outside the
State of Delaware that has been designated in the notice of the meeting or, if
not stated in the notice or if there is no notice, at the principal executive
office of the corporation.
Any meeting of the board, regular or special, may be held by conference
telephone or similar communication equipment, so long as all directors
participating in the meeting can hear one another; and all such participating
directors shall be deemed to be present in person at the meeting.
3.7 FIRST MEETINGS
The first meeting of each newly elected board of directors shall be
held at such time and place as shall be fixed by the vote of the stockholders at
the annual meeting. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
3.8 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice
at such time as shall from time to time be determined by the board of directors.
If any regular meeting day shall fall on a legal holiday, then the meeting shall
be held at the same time and place on the next succeeding full business day.
3.9 SPECIAL MEETINGS; NOTICE
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Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail,
telecopy or telegram, charges prepaid, addressed to each director at that
director's address as it is shown on the records of the corporation. If the
notice is mailed, it shall be deposited in the United States mail at least four
(4) days before the time of the holding of the meeting. If the notice is
delivered personally or by telephone, telecopy or telegram, it shall be
delivered personally or by telephone or to the telegraph company at least
forty-eight (48) hours before the time of the holding of the meeting. Any oral
notice given personally or by telephone may be communicated either to the
director or to a person at the office of the director who the person giving the
notice has reason to believe will promptly communicate it to the director. The
notice need not specify the purpose or the place of the meeting, if the meeting
is to be held at the principal executive office of the corporation.
3.10 QUORUM
A majority of the authorized number of directors shall constitute a
quorum for the transaction of business, except to adjourn as provided in Section
3.12 of these bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the board of directors, subject to the provisions of the
certificate of incorporation and applicable law.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the quorum for that meeting.
3.11 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice, whether before or after the meeting, or (ii) who attends the
meeting other than for the express purposed of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. All such waivers shall be filed with the corporate records
or made part of the minutes of the meeting. A waiver of notice need not specify
the purpose of any regular or special meeting of the board of directors.
3.12 ADJOURNMENT
A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting of the board to another time and place.
3.13 NOTICE OF ADJOURNMENT
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Notice of the time and place of holding an adjourned meeting of the
board need not be given unless the meeting is adjourned for more than
twenty-four (24) hours. If the meeting is adjourned for more than twenty-four
(24) hours, then notice of the time and place of the adjourned meeting shall be
given before the adjourned meeting takes place, in the manner specified in
Section 3.9 of these bylaws, to the directors who were not present at the time
of the adjournment.
3.14 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the board of directors
may be taken without a meeting, provided that all members of the board
individually or collectively consent in writing to that action. Such action by
written consent shall have the same force and effect as a unanimous vote of the
board of directors. Such written consent and any counterparts thereof shall be
filed with the minutes of the proceedings of the board of directors.
3.15 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if
any, for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.15 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services.
3.16 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or any of its
subsidiaries, including any officer or employee who is a director of the
corporation or any of its subsidiaries, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (1) or more committees, each
consisting of one (1) or more directors, to
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serve at the pleasure of the board. The board may designate one (1) or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. The appointment of members
or alternate members of a committee requires the vote of a majority of the
authorized number of directors. Any committee, to the extent provided in the
resolution of the board, shall have and may exercise all the powers and
authority of the board, but no such committee shall have the power or authority
to (i) amend the certificate of incorporation (except that a committee may, to
the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the board of directors as provided in
Section 151(a) of the General Corporation Law of Delaware, fix the designations
and any of the preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the corporation or the
conversion into, or the exchange of such shares for, shares of any other class
or classes or any other series of the same or any other class or classes of
stock of the corporation), (ii) adopt an agreement of merger or consolidation
under Sections 251 or 252 of the General Corporation Law of Delaware, (iii)
recommend to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, (iv) recommend to
the stockholders a dissolution of the corporation or a revocation of a
dissolution or (v) amend the bylaws of the corporation; and, unless the board
resolution establishing the committee, the bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the following provisions of Article III of these
bylaws: Section 3.6 (place of meetings; meetings by telephone), Section 3.8
(regular meetings), Section 3.9 (special meetings; notice), Section 3.10
(quorum), Section 3.11 (waiver of notice), Section 3.12 (adjournment), Section
3.13 (notice of adjournment) and Section 3.14 (board action by written consent
without meeting), with such changes in the context of those bylaws as are
necessary to substitute the committee and its members for the board of directors
and its members; provided, however, that the time of regular meetings of
committees may be determined either by resolution of the board of directors or
by resolution of the committee, that special meetings of committees may also be
called by resolution of the board of directors, and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The board of directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these bylaws.
4.3 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report
the same to the board of directors when required.
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ARTICLE V
OFFICERS
5.1 OFFICERS
The Corporate Officers of the corporation shall be a president, a
secretary and a chief financial officer. The corporation may also have, at the
discretion of the board of directors, a chairman of the board, one or more vice
presidents (however denominated), one or more assistant secretaries, one or more
assistant treasurers, and such other officers as may be appointed in accordance
with the provisions of Section 5.3 of these bylaws. Any number of offices may
be held by the same person.
In addition to the Corporate Officers of the Company described above,
there may also be such Administrative Officers of the corporation as may be
designated and appointed from time to time by the president of the corporation
in accordance with the provisions of Section 5.12 of these bylaws.
5.2 ELECTION OF OFFICERS
The Corporate Officers of the corporation, except such officers as may
be appointed in accordance with the provisions of Section 5.3 or Section 5.5 of
these bylaws, shall be chosen by the board of directors, subject to the rights,
if any, of an officer under any contract of employment, and shall hold their
respective offices for such terms as the board of directors may from time to
time determine.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or may empower the president to
appoint, such other Corporate Officers as the business of the corporation may
require, each of whom shall hold office for such period, have such power and
authority, and perform such duties as are provided in these bylaws or as the
board of directors may from time to time determine.
The president may from time to time designate and appoint
Administrative Officers of the corporation in accordance with the provisions of
Section 5.12 of these bylaws.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of a Corporate Officer under any
contract of employment, any Corporate Officer may be removed, either with or
without cause, by the board of directors at any regular or special meeting of
the board or, except in case of a Corporate Officer chosen by the board of
directors, by any Corporate Officer upon whom such power of removal may be
conferred by the board of directors.
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Any Corporate Officer may resign at any time by giving written notice
to the corporation. Any resignation shall take effect at the date of the receipt
of that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall not
be necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the Corporate
Officer is a party.
Any Administrative Officer designated and appointed by the president
may be removed, either with or without cause, at any time by the president. Any
Administrative Officer may resign at any time by giving written notice to the
president or to the secretary of the corporation.
5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise such other
powers and perform such other duties as may from time to time be assigned to him
by the board of directors or as may be prescribed by these bylaws. If there is
no president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the
board of directors to the chairman of the board, if there be such an officer,
the president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction and control of the business and the officers of the corporation. He or
she shall preside at all meetings of the stockholders and, in the absence or
nonexistence of a chairman of the board, at all meetings of the board of
directors. He or she shall have the general powers and duties of management
usually vested in the office of president of a corporation, and shall have such
other powers and perform such other duties as may be prescribed by the board of
directors or these bylaws.
5.8 VICE PRESIDENTS
In the absence or disability of the president, and if there is no
chairman of the board, the vice presidents, if any, in order of their rank as
fixed by the board of directors or, if not ranked, a vice president designated
by the board of directors, shall perform all the duties of the president and
when so acting shall have all the powers of, and be subject to all the
restrictions upon, the president. The vice presidents shall have such other
powers and perform such other duties as from time to time may be prescribed for
them respectively by the board of directors, these bylaws, the president or the
chairman of the board.
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5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the board of
directors may direct, a book of minutes of all meetings and actions of the board
of directors, committees of directors and stockholders. The minutes shall show
the time and place of each meeting, whether regular or special (and, if special,
how authorized and the notice given), the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the board of directors required to be given by law or
by these bylaws. He or she shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the board of directors or by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings and shares. The books of account shall at all reasonable times
be open to inspection by any director for a purpose reasonably related to his
position as a director.
The chief financial officer shall deposit all money and other valuables
in the name and to the credit of the corporation with such depositaries as may
be designated by the board of directors. He or she shall disburse the funds of
the corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his or
her transactions as chief financial officer and of the financial condition of
the corporation, and shall have such other powers and perform such other duties
as may be prescribed by the board of directors or these bylaws.
5.11 ASSISTANT SECRETARY
The assistant secretary, if any, or, if there is more than one, the
assistant secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or in the event of his or her inability or refusal
to
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act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
5.12 ADMINISTRATIVE OFFICERS
In addition to the Corporate Officers of the corporation as provided in
Section 5.1 of these bylaws and such subordinate Corporate Officers as may be
appointed in accordance with Section 5.3 of these bylaws, there may also be such
Administrative Officers of the corporation as may be designated and appointed
from time to time by the president of the corporation. Administrative Officers
shall perform such duties and have such powers as from time to time may be
determined by the president or the board of directors in order to assist the
Corporate Officers in the furtherance of their duties. In the performance of
such duties and the exercise of such powers, however, such Administrative
Officers shall have limited authority to act on behalf of the corporation as the
board of directors shall establish, including but not limited to limitations on
the dollar amount and on the scope of agreements or commitments that may be made
by such Administrative Officers on behalf of the corporation, which limitations
may not be exceeded by such individuals or altered by the president without
further approval by the board of directors.
5.13 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing powers, authority and duties, all officers
of the corporation shall respectively have such authority and powers and perform
such duties in the management of the business of the corporation as may be
designated from time to time by the board of directors.
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ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner
permitted by the General Corporation Law of Delaware as the same now exists or
may hereafter be amended, indemnify any person against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred in connection with any threatened, pending or completed
action, suit, or proceeding in which such person was or is a party or is
threatened to be made a party by reason of the fact that such person is or was a
director or officer of the corporation. For purposes of this Section 6.1, a
"director" or "officer" of the corporation shall mean any person (i) who is or
was a director or officer of the corporation, (ii) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was a
director or officer of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
The corporation shall be required to indemnify a director or officer in
connection with an action, suit, or proceeding (or part thereof) initiated by
such director or officer only if the initiation of such action, suit, or
proceeding (or part thereof) by the director or officer was authorized by the
board of Directors of the corporation.
The corporation shall pay the expenses (including attorney's fees)
incurred by a director or officer of the corporation entitled to indemnification
hereunder in defending any action, suit or proceeding referred to in this
Section 6.1 in advance of its final disposition; provided, however, that payment
of expenses incurred by a director or officer of the corporation in advance of
the final disposition of such action, suit or proceeding shall be made only upon
receipt of an undertaking by the director or officer to repay all amounts
advanced if it should ultimately be determined that the director or officer is
not entitled to be indemnified under this Section 6.1 or otherwise.
The rights conferred on any person by this Article shall not be
exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the corporation's Certificate of Incorporation,
these bylaws, agreement, vote of the stockholders or disinterested directors or
otherwise.
Any repeal or modification of the foregoing provisions of this Article
shall not adversely affect any right or protection hereunder of any person in
respect of any act or omission occurring prior to the time of such repeal or
modification.
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6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the maximum extent and in the
manner permitted by the General Corporation Law of Delaware as the same now
exists or may hereafter be amended, to indemnify any person (other than
directors and officers) against expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred in
connection with any threatened, pending or completed action, suit, or
proceeding, in which such person was or is a party or is threatened to be made a
party by reason of the fact that such person is or was an employee or agent of
the corporation. For purposes of this Section 6.2, an "employee" or "agent" of
the corporation (other than a director or officer) shall mean any person (i) who
is or was an employee or agent of the corporation, (ii) who is or was serving at
the request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her 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 under the provisions of the General Corporation Law of
Delaware.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at
such place or places as designated by the board of directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books and other records of its business and properties.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or
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other agent is the person who seeks the right to inspection, the demand under
oath shall be accompanied by a power of attorney or such other writing that
authorizes the attorney or other agent to so act on behalf of the stockholder.
The demand under oath shall be directed to the corporation at its registered
office in Delaware or at its principal place of business.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders and its other books and records for a purpose
reasonably related to his or her position as a director.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, if any, the president, any vice president,
the chief financial officer, the secretary or any assistant secretary of this
corporation, or any other person authorized by the board of directors or the
president or a vice president, is authorized to vote, represent and exercise on
behalf of this corporation all rights incident to any and all shares of the
stock of any other corporation or corporations standing in the name of this
corporation. The authority herein granted may be exercised either by such person
directly or by any other person authorized to do so by proxy or power of
attorney duly executed by such person having the authority.
7.5 CERTIFICATION AND INSPECTION OF BYLAWS
The original or a copy of these bylaws, as amended or otherwise altered
to date, certified by the secretary, shall be kept at the corporation's
principal executive office and shall be open to inspection by the stockholders
of the corporation, at all reasonable times during office hours.
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ARTICLE VIII
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the board of directors may fix, in advance, a record date, which shall not
precede the date upon which the resolution fixing the record date is adopted and
which shall not be more than sixty (60) days before any such action. In that
case, only stockholders of record at the close of business on the date so fixed
are entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided by law.
If the board of directors does not so fix a record date, then the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the board of directors adopts the
applicable resolution.
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
The board of directors, except as otherwise provided in these bylaws,
may authorize and empower any officer or officers, or agent or agents, to enter
into any contract or execute any instrument in the name of and on behalf of the
corporation; such power and authority may be general or confined to specific
instances. Unless so authorized or ratified by the board of directors or within
the agency power of an officer, no officer, agent or employee shall have any
power or authority to bind the corporation by any contract or engagement or to
pledge its credit or to render it liable for any purpose or for any amount.
8.4 STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES
The shares of the corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
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<PAGE> 24
shares represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and, upon request,
every holder of uncertificated shares, shall be entitled to have a certificate
signed by, or in the name of the corporation by, the chairman or vice-chairman
of the board of directors, or the president or vice-president, and by the
treasurer or an assistant treasurer, or the secretary or an assistant secretary
of such corporation representing the number of shares registered in certificate
form. Any or all of the signatures on the certificate may be a facsimile. In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate has 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 or she were such officer,
transfer agent or registrar at the date of issue.
Certificates for shares shall be of such form and device as the board
of directors may designate and shall state the name of the record holder of the
shares represented thereby; its number; date of issuance; the number of shares
for which it is issued; a summary statement or reference to the powers,
designations, preferences or other special rights of such stock and the
qualifications, limitations or restrictions of such preferences and/or rights,
if any; a statement or summary of liens, if any; a conspicuous notice of
restrictions upon transfer or registration of transfer, if any; a statement as
to any applicable voting trust agreement; if the shares be assessable, or, if
assessments are collectible by personal action, a plain statement of such facts.
Upon surrender to the secretary or transfer agent of the corporation of
a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, or upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.5 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences and the relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of
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<PAGE> 25
the certificate that the corporation shall issue to represent such class or
series of stock a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, the designations, the preferences
and the relative, participating, optional or other special rights of each class
of stock or series thereof and the qualifications, limitations or restrictions
of such preferences and/or rights.
8.6 LOST CERTIFICATES
Except as provided in this Section 8.6, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The board of
directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; the board
may require indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
8.7 TRANSFER AGENTS AND REGISTRARS
The board of directors may appoint one or more transfer agents or
transfer clerks, and one or more registrars, each of which shall be an
incorporated bank or trust company -- either domestic or foreign, who shall be
appointed at such times and places as the requirements of the corporation may
necessitate and the board of directors may designate.
8.8 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction and definitions in the General Corporation Law of Delaware shall
govern the construction of these bylaws. Without limiting the generality of this
provision, as used in these bylaws, the singular number includes the plural, the
plural number includes the singular, and the term "person" includes both an
entity and a natural person.
ARTICLE IX
AMENDMENTS
The original or other bylaws of the corporation may be adopted, amended
or repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its certificate of incorporation, confer the power to adopt,
amend or repeal bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal bylaws.
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Whenever an amendment or new bylaw is adopted, it shall be copied in
the book of bylaws with the original bylaws, in the appropriate place. If any
bylaw is repealed, the fact of repeal with the date of the meeting at which the
repeal was enacted or the filing of the operative written consent(s) shall be
stated in said book.
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<PAGE> 1
EXHIBIT 3.4
FORM OF CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
DOCUMENT SCIENCES CORPORATION
Document Sciences Corporation, a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), pursuant to the
provisions of the General Corporation Law of the State of Delaware (the "GCL"),
does hereby certify as follows:
FIRST: The Certificate of Incorporation of the Corporation is hereby
amended by deleting Section 6(b)(i)(A), of the Restated Certificate of
Incorporation of the Corporation in its present form and substituting therefor
a new Section 6(b)(i)(A), in the following form:
"If the Corporation shall issue any Additional Stock (as defined below)
without consideration or for consideration per share less than the
Conversion Price in effect immediately prior to the issuance of such
Additional Stock, then such Conversion Price in effect immediately prior
to each such issuance shall (except as otherwise provided in this
clause) be adjusted to equal 0.8403."
SECOND: The amendment to the Amended and Restated Certificate of
Incorporation of the Corporation set forth in this Certificate of Amendment has
been duly adopted in accordance with the provisions of Section 242 of the GCL:
(a) the Board of Directors of the Corporation having duly adopted a resolution
setting forth such amendment and declaring its advisability and submitting it to
the stockholders of the Corporation for their approval, and (b) the
stockholders of the Corporation having duly adopted such amendment by vote of
the holders of a majority of the outstanding Common Stock and a majority of the
outstanding Preferred Stock entitled to vote thereon in an action by written
consent of the stockholders pursuant to Section 228 of the GCL.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by Barbara E. Amantea, Vice President, Chief Financial
Officer, and Secretary, this _____ of July, 1996.
DOCUMENT SCIENCES CORPORATION
By: ________________________________
Barbara E. Amantea
Vice President, Chief Financial
Officer, and Secretary
<PAGE> 1
EXHIBIT 4.2
COMMON STOCK COMMON STOCK
[LOGO] DOCUMENT SCIENCES
C O R P O R A T I O N
INCORPORATED UNDER THE LAWS SEE REVERSE FOR
OF THE STATE OF DELAWARE CERTAIN DEFINITIONS
CUSIP
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK, $.001 PAR VALUE, OF
DOCUMENT SCIENCES CORPORATION
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate is not valid unless countersigned and registered by
the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated:
[SEAL]
/s/ Barbara Amantea /s/ Tony N. Domit
SECRETARY PRESIDENT
<PAGE> 2
The Corporation is authorized to issue Common Stock and Preferred
Stock. The Board of Directors of the Corporation has authority to fix the number
of shares and the designation of any series of Preferred Stock and to determine
or alter the rights, preferences, privileges and restrictions granted to or
imposed upon any unissued series of Preferred Stock.
The Corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative, participating,
optional, or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights, so far as the same shall have been fixed, and a statement of the
authority of the Board of Directors to designate and fix any preferences, rights
and limitations of any wholly unissued series. Such requests shall be made to
the Corporation's Secretary at the principal office of the Corporation.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT-- ______________ Custodian _____________
(Cust) (Minor)
TEN ENT -- as tenants by the entireties under Uniform Gifts to Minors
Act ______________________________________________________
JT TEN -- as joint tenants with right of (State)
survivorship and not as tenants UNIF TRF MIN ACT-- ____________ Custodian (until age _____)
in common (Cust)
____________ under Uniform Transfers
(Minor)
to Minors Act _________________________
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, _________________________ hereby sell, assign and transfer
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated ___________________________
X ______________________________________
X ______________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME(S) AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN
EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By __________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
<PAGE> 1
EXHIBIT 10.1
DOCUMENT SCIENCES CORPORATION
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("AGREEMENT") is entered into as of the
___ day of __________, 1996 by and between Document Sciences Corporation, a
Delaware corporation (the "COMPANY") and ___________________ ("INDEMNITEE").
RECITALS
A. The Company and Indemnitee recognize the continued difficulty in
obtaining liability insurance for its directors, officers, employees, agents
and fiduciaries, the significant increases in the cost of such insurance and the
general reductions in the coverage of such insurance.
B. The Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, agents and fiduciaries to expensive litigation risks at the same time
as the availability and coverage of liability insurance has been severely
limited.
C. Indemnitee does not regard the current protection available as
adequate under the present circumstances, and Indemnitee and other directors,
officers, employees, agents and fiduciaries of the Company may not be willing to
continue to serve in such capacities without additional protection.
D. The Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve the Company and, in part, in
order to induce Indemnitee to continue to provide services to the Company,
wishes to provide for the indemnification and advancing of expenses to
Indemnitee to the maximum extent permitted by law.
E. In view of the considerations set forth above, the Company desires
that Indemnitee be indemnified by the Company as set forth herein.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. Indemnification.
(a) Indemnification of Expenses. The Company shall indemnify
Indemnitee to the fullest extent permitted by law if Indemnitee was or is or
becomes a party to or witness or other participant in, or is threatened to be
made a party to or witness or other participant in, any threatened, pending or
completed action, suit, proceeding or alternative dispute resolution mechanism,
or any hearing, inquiry or investigation that Indemnitee in good faith believes
might lead to the institution of any such action, suit, proceeding or
alternative dispute resolution mechanism, whether civil, criminal,
administrative, investigative or other (hereinafter a "CLAIM") by reason of (or
arising in part out of) any event or occurrence related to the fact that
Indemnitee is or was a director, officer, employee, agent or
<PAGE> 2
fiduciary of the Company, or any subsidiary of the Company, or is or was serving
at the request of the Company as a director, officer, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust or other
enterprise, or by reason of any action or inaction on the part of Indemnitee
while serving in such capacity (hereinafter an "INDEMNIFIABLE EVENT") against
any and all expenses (including attorneys' fees and all other costs, expenses
and obligations incurred in connection with investigating, defending, being a
witness in or participating in (including on appeal), or preparing to defend, be
a witness in or participate in, any such action, suit, proceeding, alternative
dispute resolution mechanism, hearing, inquiry or investigation), judgments,
fines, penalties and amounts paid in settlement (if such settlement is approved
in advance by the Company, which approval shall not be unreasonably withheld) of
such Claim and any federal, state, local or foreign taxes imposed on Indemnitee
as a result of the actual or deemed receipt of any payments under this Agreement
(collectively, hereinafter "EXPENSES"), including all interest, assessments and
other charges paid or payable in connection with or in respect of such Expenses.
Such payment of Expenses shall be made by the Company as soon as practicable but
in any event no later than five days after written demand by Indemnitee therefor
is presented to the Company.
(b) Reviewing Party. Notwithstanding the foregoing, (i) the
obligations of the Company under Section 1(a) shall be subject to the condition
that the Reviewing Party (as described in Section 10(e) hereof) shall not have
determined (in a written opinion, in any case in which the Independent Legal
Counsel referred to in Section 1(c) hereof is involved) that Indemnitee would
not be permitted to be indemnified under applicable law, and (ii) the obligation
of the Company to make an advance payment of Expenses to Indemnitee pursuant to
Section 2(a) (an "EXPENSE ADVANCE") shall be subject to the condition that, if,
when and to the extent that the Reviewing Party determines that Indemnitee would
not be permitted to be so indemnified under applicable law, the Company shall be
entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the
Company) for all such amounts theretofore paid; provided, however, that if
Indemnitee has commenced or thereafter commences legal proceedings in a court of
competent jurisdiction to secure a determination that Indemnitee should be
indemnified under applicable law, any determination made by the Reviewing Party
that Indemnitee would not be permitted to be indemnified under applicable law
shall not be binding and Indemnitee shall not be required to reimburse the
Company for any Expense Advance until a final judicial determination is made
with respect thereto (as to which all rights of appeal therefrom have been
exhausted or lapsed). Indemnitees' obligation to reimburse the Company for any
Expense Advance shall be unsecured and no interest shall be charged thereon. If
there has not been a Change in Control (as defined in Section 10(c) hereof), the
Reviewing Party shall be selected by the Board of Directors, and if there has
been such a Change in Control (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control), the Reviewing Party shall be the
Independent Legal Counsel referred to in Section 1(c) hereof. If there has been
no determination by the Reviewing Party or if the Reviewing Party determines
that Indemnitee substantively would not be permitted to be indemnified in whole
or in part under applicable law, Indemnitee shall have the right to commence
litigation seeking an initial determination by the court or challenging any such
determination by the Reviewing Party or any aspect thereof, including the legal
or factual bases therefor, and the Company hereby consents to service of process
and to appear
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<PAGE> 3
in any such proceeding. Any determination by the Reviewing Party otherwise shall
be conclusive and binding on the Company and Indemnitee.
(c) Change in Control. The Company agrees that if there is a
Change in Control of the Company (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control) then, with respect to all matters
thereafter arising concerning the rights of Indemnitees to payments of Expenses
and Expense Advances under this Agreement or any other agreement or under the
Company's Certificate of Incorporation or Bylaws as now or hereafter in effect,
Independent Legal Counsel (as defined in Section 10(d) hereof) shall be selected
by Indemnitee and approved by the Company (which approval shall not be
unreasonably withheld). Such counsel, among other things, shall render its
written opinion to the Company and Indemnitee as to whether and to what extent
Indemnitee would be permitted to be indemnified under applicable law and the
Company agrees to abide by such opinion. The Company agrees to pay the
reasonable fees of the Independent Legal Counsel referred to above and to fully
indemnify such counsel against any and all expenses (including attorneys' fees),
claims, liabilities and damages arising out of or relating to this Agreement or
its engagement pursuant hereto.
(d) Mandatory Payment of Expenses. Notwithstanding any other
provision of this Agreement other than Section 9 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
action, suit, proceeding, inquiry or investigation referred to in Section (1)(a)
hereof or in the defense of any claim, issue or matter therein, Indemnitee shall
be indemnified against all Expenses incurred by Indemnitee in connection
therewith.
2. Expenses; Indemnification Procedure.
(a) Advancement of Expenses. The Company shall advance all
Expenses incurred by Indemnitee. The advances to be made hereunder shall be paid
by the Company to Indemnitee as soon as practicable but in any event no later
than five days after written demand by Indemnitee therefor to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to Indemnitees' right to be indemnified under this
Agreement, give the Company notice in writing as soon as practicable of any
Claim made against Indemnitee for which indemnification will or could be sought
under this Agreement. Notice to the Company shall be directed to the Chief
Executive Officer of the Company at the address shown on the signature page of
this Agreement (or such other address as the Company shall designate in writing
to Indemnitee). In addition, Indemnitee shall give the Company such information
and cooperation as it may reasonably require and as shall be within Indemnitees'
power.
(c) No Presumptions; Burden of Proof. For purposes of this
Agreement, the termination of any Claim by judgment, order, settlement (whether
with or without court approval) or conviction, or upon a plea of nolo
contendere, or its equivalent, shall not create a presumption that Indemnitee
did not meet any particular standard of conduct or have any particular belief or
that a court
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<PAGE> 4
has determined that indemnification is not permitted by applicable law. In
addition, neither the failure of the Reviewing Party to have made a
determination as to whether Indemnitee has met any particular standard of
conduct or had any particular belief, nor an actual determination by the
Reviewing Party that Indemnitee has not met such standard of conduct or did not
have such belief, prior to the commencement of legal proceedings by Indemnitee
to secure a judicial determination that Indemnitee should be indemnified under
applicable law, shall be a defense to Indemnitee's claim or create a presumption
that Indemnitee has not met any particular standard of conduct or did not have
any particular belief. In connection with any determination by the Reviewing
Party or otherwise as to whether Indemnitee is entitled to be indemnified
hereunder, the burden of proof shall be on the Company to establish that
Indemnitee is not so entitled.
(d) Notice to Insurers. If, at the time of the receipt by the
Company of a notice of a Claim pursuant to Section 2(b) hereof, the Company has
liability insurance in effect which may cover such Claim, the Company shall give
prompt notice of the commencement of such Claim to the insurers in accordance
with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay,
on behalf of Indemnitee, all amounts payable as a result of such action, suit,
proceeding, inquiry or investigation in accordance with the terms of such
policies.
(e) Selection of Counsel. In the event the Company shall be
obligated hereunder to pay the Expenses of any Claim, the Company shall be
entitled to assume the defense of such Claim with counsel approved by
Indemnitee, which approval shall not be unreasonably withheld, upon the delivery
to Indemnitee of written notice of its election so to do. After delivery of such
notice, approval of such counsel by Indemnitee and the retention of such counsel
by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees of counsel subsequently incurred by Indemnitee with
respect to the same Claim; provided that, (i) Indemnitee shall have the right to
employ Indemnitees' counsel in any such Claim at Indemnitee expense and (ii) if
(A) the employment of counsel by Indemnitee has been previously authorized by
the Company, (B) Indemnitee shall have reasonably concluded that there is a
conflict of interest between the Company and Indemnitee in the conduct of any
such defense, or (C) the Company shall not continue to retain such counsel to
defend such Claim, then the fees and expenses of Indemnitee counsel shall be at
the expense of the Company. The Company shall have the right to conduct such
defense as it sees fit in its sole discretion, including the right to settle any
claim against Indemnitee without the consent of the Indemnitee.
3. Additional Indemnification Rights; Nonexclusivity.
(a) Scope. The Company hereby agrees to indemnify Indemnitee
to the fullest extent permitted by law, notwithstanding that such
indemnification is not specifically authorized by the other provisions of this
Agreement, the Company's Certificate of Incorporation, the Company's Bylaws or
by statute. In the event of any change after the date of this Agreement in any
applicable law, statute or rule which expands the right of a Delaware
corporation to indemnify a member of its Board of Directors or an officer,
employee, agent or fiduciary, it is the intent of the parties hereto that
Indemnitee shall enjoy by this Agreement the greater benefits afforded by such
change. In the event of any change in any
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<PAGE> 5
applicable law, statute or rule which narrows the right of a Delaware
corporation to indemnify a member of its Board of Directors or an officer,
employee, agent or fiduciary, such change, to the extent not otherwise required
by such law, statute or rule to be applied to this Agreement, shall have no
effect on this Agreement or the parties' rights and obligations hereunder except
as set forth in Section 8(a) hereof.
(b) Nonexclusivity. The indemnification provided by this
Agreement shall be in addition to any rights to which Indemnitee may be entitled
under the Company's Certificate of Incorporation, its Bylaws, any agreement,
any vote of stockholders or disinterested directors, the General Corporation Law
of the State of Delaware, or otherwise. The indemnification provided under this
Agreement shall continue as to Indemnitee for any action Indemnitee took or did
not take while serving in an indemnified capacity even though Indemnitee may
have ceased to serve in such capacity.
4. No Duplication of Payments. The Company shall not be liable under
this Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, Certificate of Incorporation, Bylaw or otherwise)
of the amounts otherwise indemnifiable hereunder.
5. Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses incurred in connection with any Claim, but not, however, for
all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee are entitled.
6. Mutual Acknowledgement. Both the Company and Indemnitee acknowledge
that in certain instances, Federal law or applicable public policy may prohibit
the Company from indemnifying its directors, officers, employees, agents or
fiduciaries under this Agreement or otherwise. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the Securities and Exchange Commission to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.
7. Liability Insurance. To the extent the Company maintains liability
insurance applicable to directors, officers, employees, agents or fiduciaries,
Indemnitee shall be covered by such policies in such a manner as to provide
Indemnitee the same rights and benefits as are accorded to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, agents or fiduciaries, if Indemnitee
is not an officer or director but is a key employee, agent or fiduciary.
8. Exceptions. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Excluded Action or Omissions. To indemnify Indemnitee for
Indemnitee's acts, omissions or transactions from which Indemnitee or the
Indemnitee may not be relieved of liability under applicable law;
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<PAGE> 6
(b) Claims Initiated by Indemnitee. To indemnify or advance
expenses to Indemnitee with respect to Claims initiated or brought voluntarily
by Indemnitee and not by way of defense, except (i) with respect to actions or
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other agreement or insurance policy or under the Company's
Certificate of Incorporation or Bylaws now or hereafter in effect relating to
Claims for Indemnifiable Events, (ii) in specific cases if the Board of
Directors has approved the initiation or bringing of such Claim, or (iii) as
otherwise required under Section 145 of the Delaware General Corporation Law,
regardless of whether Indemnitee ultimately is determined to be entitled to such
indemnification, advance expense payment or insurance recovery, as the case may
be;
(c) Lack of Good Faith. To indemnify Indemnitee for any
expenses incurred by Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by Indemnitee
in such proceeding was not made in good faith or was frivolous; or
(d) Claims Under Section 16(b). To indemnify Indemnitee for
expenses and the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.
9. Period of Limitations. No legal action shall be brought and no cause
of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's estate, spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a legal
action within such two-year period; provided, however, that if any shorter
period of limitations is otherwise applicable to any such cause of action, such
shorter period shall govern.
10. Construction of Certain Phrases.
(a) For purposes of this Agreement, references to the
"Company" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed
in a consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
employees, agents or fiduciaries, so that if Indemnitee is or was a director,
officer, employee, agent or fiduciary of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee, agent or fiduciary of another corporation, partnership, joint
venture, employee benefit plan, trust or other enterprise, Indemnitee shall
stand in the same position under the provisions of this Agreement with respect
to the resulting or surviving corporation as Indemnitee would have with respect
to such constituent corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on Indemnitee with respect to an employee
benefit plan; and references to "serving at the request of the Company" shall
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<PAGE> 7
include any service as a director, officer, employee, agent or fiduciary of the
Company which imposes duties on, or involves services by, such director,
officer, employee, agent or fiduciary with respect to an employee benefit plan,
its participants or its beneficiaries; and if Indemnitee acted in good faith and
in a manner Indemnitee reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan, Indemnitee shall be
deemed to have acted in a manner "not opposed to the best interests of the
Company" as referred to in this Agreement.
(c) For purposes of this Agreement a "Change in Control" shall
be deemed to have occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than
a trustee or other fiduciary holding securities under an employee benefit plan
of the Company or a corporation owned directly or indirectly by the stockholders
of the Company in substantially the same proportions as their ownership of stock
of the Company, (A) who is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 10% or more of the
combined voting power of the Company's then outstanding Voting Securities,
increases his beneficial ownership of such securities by 5% or more over the
percentage so owned by such person, or (B) becomes the "beneficial owner" (as
defined in Rule 13d-3 under said Act), directly or indirectly, of securities of
the Company representing more than 20% of the total voting power represented by
the Company's then outstanding Voting Securities, (ii) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company and any new director whose election by the
Board of Directors or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the directors then still in office
who either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof, or (iii) the stockholders of the Company approve
a merger or consolidation of the Company with any other corporation other than a
merger or consolidation which would result in the Voting Securities of the
Company outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series of
transactions) all or substantially all of the Company's assets.
(d) For purposes of this Agreement, "Independent Legal
Counsel" shall mean an attorney or firm of attorneys, selected in accordance
with the provisions of Section 1(c) hereof, who shall not have otherwise
performed services for the Company or Indemnitee within the last three years
(other than with respect to matters concerning the rights of Indemnitee under
this Agreement, or of other indemnitees under similar indemnity agreements).
(e) For purposes of this Agreement, a "Reviewing Party" shall
mean any appropriate person or body consisting of a member or members of the
Company's Board of Directors or any other person or body appointed by the Board
of Directors who is not a party to the particular Claim for which Indemnitee are
seeking indemnification, or Independent Legal Counsel.
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<PAGE> 8
(f) For purposes of this Agreement, "Voting Securities" shall
mean any securities of the Company that vote generally in the election of
directors.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. Binding Effect; Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns, including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the Company, spouses, heirs,
and personal and legal representatives. The Company shall require and cause any
successor (whether direct or indirect by purchase, merger, consolidation or
otherwise) to all, substantially all, or a substantial part, of the business
and/or assets of the Company, by written agreement in form and substance
satisfactory to Indemnitee, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform if no such succession had taken place. This Agreement shall
continue in effect with respect to Claims relating to Indemnifiable Events
regardless of whether Indemnitee continues to serve as a director, officer,
employee, agent or fiduciary of the Company or of any other enterprise at the
Company's request.
13. Attorneys' Fees. In the event that any action is instituted by
Indemnitee under this Agreement or under any liability insurance policies
maintained by the Company to enforce or interpret any of the terms hereof or
thereof, Indemnitee shall be entitled to be paid all Expenses incurred by
Indemnitee with respect to such action, regardless of whether Indemnitee is
ultimately successful in such action, and shall be entitled to the advancement
of Expenses with respect to such action, unless, as a part of such action, a
court of competent jurisdiction over such action determines that each of the
material assertions made by Indemnitee as a basis for such action was not made
in good faith or was frivolous. In the event of an action instituted by or in
the name of the Company under this Agreement to enforce or interpret any of the
terms of this Agreement, Indemnitee shall be entitled to be paid all Expenses
incurred by Indemnitee in defense of such action (including costs and expenses
incurred with respect to Indemnitee counterclaims and cross-claims made in such
action), and shall be entitled to the advancement of Expenses with respect to
such action, unless, as a part of such action, a court having jurisdiction over
such action determines that each of Indemnitee material defenses to such action
was made in bad faith or was frivolous.
14. Notice. All notices and other communications required or permitted
hereunder shall be in writing, shall be effective when given, and shall in any
event be deemed to be given (a) five (5) days after deposit with the U.S. Postal
Service or other applicable postal service, if delivered by first class mail,
postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day
after the business day of deposit with Federal Express or similar overnight
courier, freight prepaid, or (d) one day after the business day of delivery by
facsimile transmission, if delivered by facsimile transmission, with copy by
first class mail, postage prepaid, and shall be addressed if to Indemnitee, at
the Indemnitee address as set forth beneath Indemnitee signatures to this
Agreement and if to the Company at the address of its principal
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<PAGE> 9
corporate offices (attention: Secretary) or at such other address as such party
may designate by ten days' advance written notice to the other party hereto.
15. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be commenced, prosecuted and continued only in the Court of
Chancery of the State of Delaware in and for New Castle County, which shall be
the exclusive and only proper forum for adjudicating such a claim.
16. Severability. The provisions of this Agreement shall be severable
in the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including, without limitations, each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable, that is not
itself invalid, void or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.
17. Choice of Law. This Agreement shall be governed by and its
provisions construed and enforced in accordance with the laws of the State of
Delaware, as applied to contracts between Delaware residents, entered into and
to be performed entirely within the State of Delaware, without regard to the
conflict of laws principles thereof.
18. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
19. Amendment and Termination. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless it is in writing
signed by both the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provisions
hereof (whether or not similar) nor shall such waiver constitute a continuing
waiver.
20. Integration and Entire Agreement. This Agreement sets forth the
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.
21. No Construction as Employment Agreement. Nothing contained in this
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries.
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<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
DOCUMENT SCIENCES CORPORATION
By:_____________________________________________
Tony N. Domit
President and Chief Executive Officer
Address: Document Sciences Corporation
6333 Greenwich Drive, Suite 100
San Diego, CA 92122
AGREED TO AND ACCEPTED BY:
____________________________________
Name:_______________________________
Address:____________________________
____________________________________
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<PAGE> 1
EXHIBIT 10.2
DOCUMENT SCIENCES CORPORATION
1993 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Stock Option Plan
are to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to the Employees
and Consultants of the Company and to promote the success of the Company's
business.
Options granted hereunder will be Nonstatutory Stock Options.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Board" shall mean the Committee, if one has been
appointed, or the Board of Directors of the Company, if no Committee is
appointed.
(b) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(c) "Committee" shall mean the Committee appointed by the
Board of Directors in accordance with paragraph (a) of Section 4 of the Plan,
if one is appointed.
(d) "Common Stock" shall mean the Common Stock of the
Company.
(e) "Company" shall mean Document Sciences Corporation, a
Delaware corporation.
(f) "Consultant" shall mean any person who is engaged by
the Company or any Parent or Subsidiary to render consulting services and is
compensated for such consulting services, and any director of the Company who
is not an Employee whether compensated for such services or not; provided that
if and in the event the Company registers any class of any equity security
pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the term Consultant shall thereafter not include directors who
are not compensated for their services or are paid only a director's fee by the
Company.
(g) "Continuous Status as an Employee or Consultant"
shall mean the absence of any interruption or termination of service as an
Employee or Consultant. Continuous Status as an Employee or Consultant shall
not be considered interrupted in the case of sick leave, military leave, or any
other leave of absence approved by the Board; provided that such leave is for a
period of not more than 90 days or reemployment upon the expiration of such
leave is guaranteed by contract or statute.
(h) "Employee" shall mean any person, including officers
and directors, employed by the Company or any Parent or Subsidiary of the
Company. The payment of a director's fee by the Company shall not be
sufficient to constitute "employment" by the Company.
<PAGE> 2
(i) "Incentive Stock Option" shall mean an option
intended to qualify as an incentive stock option within the meaning of Section
422 of the Code.
(j) "Nonstatutory Stock Option" shall mean an option not
intended to qualify as an Incentive Stock option.
(k) "Option" shall mean a stock option granted pursuant
to the Plan.
(l) "Optioned Stock" shall mean the Common Stock subject
to an option.
(m) "Optionee" shall mean an Employee or Consultant who
receives an option.
(n) "Parent" shall mean a "parent corporation", whether
now or hereafter existing, as defined in Section 424(e) of the Code.
(o) "Plan" shall mean this 1993 Stock Option Plan.
(p) "Share" shall mean a share of the Common Stock, as
adjusted in accordance with Section 11 of the Plan.
(q) "Subsidiary" shall mean a "subsidiary corporation",
whether now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of
Section 11 of the Plan, the maximum aggregate number of shares which may be
optioned and sold under the Plan is 500,000 shares of Common Stock. The Shares
may be authorized, but unissued, or reacquired Common Stock.
If an option should expire or become unexercisable for any
reason without having been exercised in full, the unpurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan. Shares issued under the Plan and
later repurchased by the Company shall also become available for future grant
or sale under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Administration With Respect to Directors and
Officers. With respect to grants of Options to Employees who are also officers
or directors of the Company, the Plan shall be administered by (A) the Board if
the Board may administer the Plan in compliance with Rule 16b-3 promulgated
under the Exchange Act or any successor thereto ("Rule 16b-3") with respect to
a plan intended to qualify thereunder as a discretionary plan, or (B) a
Committee designated by the Board to administer the Plan, which Committee shall
be constituted in such a manner as to permit the Plan to comply with Rule 16b-3
with respect to a plan intended to qualify thereunder as a discretionary plan.
Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board
may increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new
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<PAGE> 3
members in substitution there for, fill vacancies, however caused, and remove
all members of the Committee and thereafter directly administer the Plan, all
to the extent permitted by Rule 16b-3 with respect to a plan intended to
qualify thereunder as a discretionary plan.
(ii) Multiple Administrative Bodies. If permitted
by Rule 16b-3, the Plan may be administered by different bodies with respect to
directors, nondirector officers and Employees who are neither directors nor
officers.
(iii) Administration With Respect to Consultants
and Other Employees. With respect to grants of Options to Employees or
Consultants who are neither directors nor officers of the Company, the Plan
shall be administered by (A) the Board or (B) a Committee designated by the
Board, which Committee shall be constituted in such a manner as to satisfy the
legal requirements relating to the administration of incentive stock option
plans, if any, of California corporate and securities laws and of the Code (the
"Applicable Laws"). Once appointed, such Committee shall continue to serve in
its designated capacity until otherwise directed by the Board. From time to
time the Board may increase the size of the Committee and appoint additional
members thereof, remove members (with or without cause) and appoint new members
in substitution therefor, fill vacancies, however caused, and remove all
members of the Committee and thereafter directly administer the Plan, all to
the extent permitted by the Applicable Laws.
(b) Powers of the Administrator. Subject to the
provisions of the Plan and in the case of a Committee, the specific duties
delegated by the Board to such Committee, the Administrator shall have the
authority, in its discretion:
(i) to determine the Fair Market Value of the
Common Stock;
(ii) to select the officers, Consultants and
Employees to whom Options may from time to time be granted hereunder;
(iii) to determine whether and to what extent
Options are granted hereunder;
(iv) to determine the number of Shares to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under
the Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder
(including, but not limited to, the price per Share) based in each case on
such factors as the Administrator shall determine, in its sole discretion;
(vii) to determine whether, to what extent and
under what circumstances Common Stock and other amounts payable with respect to
an award under this Plan shall be deferred either automatically or at the
election of the participant (including providing for and determining the
amount, if any, of any deemed earnings on any deferred amount during any
deferral period); and
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<PAGE> 4
(viii) to reduce the exercise price of any Option to
the then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted.
(c) Effect of Committee's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options
5. Eligibility.
(a) Nonstatutory Stock Options may be granted only to
Employees and Consultants. An Employee or Consultant who has been granted an
Option may, if he is otherwise eligible, be granted an additional Option or
Options
(b) Each Option shall be designated in the written option
agreement as a Nonstatutory Stock Option.
(c) The Plan shall not confer upon any Optionee any right
with respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his right or the Company's right
to terminate his employment or consulting relationship at any time, with or
without cause.
6. Term of Plan. The Plan shall become effective upon the earlier
to occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 17 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 13 of the Plan.
7. Term of Option. The term of each Option shall be ten (10) years
from the date of grant thereof or such shorter term as may be provided in the
Option Agreement.
8. Exercise Price and Consideration.
(a) The per Share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be such price as is determined
by the Board, but shall be subject to the following:
(i) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of
the grant of such Option, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the fair
market value per Share on the date of the grant;
(B) granted to any other person, the per
Share exercise price shall be no less than 85% of the fair market value per
Share on the date of grant.
The exercise price for the Shares to be issued pursuant to exercise of an Option
may not be less than par value. For purposes of this Section 8(a), in the event
that an Option is amended to reduce the exercise price, the date of grant of
such Option shall thereafter be considered to be the date of such amendment.
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<PAGE> 5
(b) The fair market value shall be determined as follows:
(i) If the Common Stock is publicly traded on an active market of substantial
depth, the recent market price of such securities; (ii) If shares of the Common
Stock have not been so publicly traded, the price at which securities of
reasonably comparable corporations (if any) in the same industry are being
traded, subject to appropriate adjustments for the dissimilarities between the
corporations being compared; (c) In the absence of any reliable indicator under
subsection (i) or subsection (ii), the earnings history, book value and
prospects of the Company in the light of market conditions generally.
(c) The consideration to be paid for the Shares to be
issued upon exercise of an Option, including the method of payment, shall be
determined by the Board and may consist entirely of cash, check, promissory
note, other Shares of Common Stock which (i) either have been owned by the
Optionee for more than six (6) months on the date of surrender or were not
acquired, directly or indirectly, from the Company, and (ii) have a fair market
value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, or any combination of such
methods of payment, or such other consideration and method of payment for the
issuance of Shares to the extent permitted under the applicable provisions of
the Delaware Corporation Law.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Board, including performance criteria with
respect to the Company and/or the Optionee, and as shall be permissible under
the terms of the Plan; provided, however, that Options shall vest over a period
of not more than five (5) years and at a rate of not less than twenty percent
(20%) per year.
An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance
with the terms of the Option by the person entitled to exercise the Option and
full payment for the Shares with respect to which the Option is exercised has
been received by the Company. Full payment may, as authorized by the Board,
consist of any consideration and method of payment allowable under Section 8(c)
of the Plan. Until the issuance (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company) of
the stock certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. The Company shall
issue (or cause to be issued) such stock certificate promptly upon exercise of
the Option. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the stock certificate is issued, except as
provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
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<PAGE> 6
(b) Termination of Status as an Employee or Consultant.
Except as provided in Section 11, in the event of termination of an Optionee's
Continuous Status as an Employee or Consultant (as the case may be), the Option
shall terminate, unless otherwise determined by the Board and specified in the
Option Agreement (but in any event not earlier than thirty (30) days after the
date of such termination; or later than the date of expiration of the term of
the Option as set forth in the Option Agreement).
(c) Disability of Optionee. Notwithstanding the
provisions of Section 9(b) above, in the event of termination of an Optionee's
Continuous Status as an Employee or Consultant as a result of his total and
permanent disability (as defined in Section 22(e)(3) of the Code), he may, but
only within six (6) months from the date of such termination (but in no event
later than the date of expiration of the term of such Option as set forth in
the Option Agreement), exercise his Option to the extent he was entitled to
exercise it at the date of such termination. To the extent that he was not
entitled to exercise the Option at the date of termination, or if he does not
exercise such Option (which he was entitled to exercise) within the time
specified herein, the Option shall terminate.
(d) Death of Optionee. Notwithstanding the provisions of
Section 9(b) above, in the event of the death of an Optionee:
(i) during the term of the Option who is at the
time of his death an Employee or Consultant of the Company and who shall have
been in Continuous Status as an Employee or Consultant since the date of grant
of the Option, the Option may be exercised, at any time within twelve (12)
months following the date of death (but in no event later than the date of
expiration of the term of such Option as set forth in the Option Agreement), by
the Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent that the
right to exercise had accrued as of the date of death of the optionee; or
(ii) within the first thirty (30) days of an
exercise period granted by the board after the termination of Continuous Status
as an Employee or Consultant, the Option may be exercised, at any time within
twelve (12) months following the date of death (but in no event later than the
date of expiration of the term of such Option as set forth in the Option
Agreement), by the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that had accrued at the date of termination.
(e) Rule 16b-3. Options granted to persons subject to
Section 16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain
such additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
10. Non-Transferability of Options. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization or Merger. Subject
to any required action by the shareholders of the Company, the number of shares
of
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<PAGE> 7
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the
Company, the Board shall notify the Optionee at least fifteen (15) days prior
to such proposed action. To the extent it has not been previously exercised,
the Option will terminate immediately prior to the consummation of such
proposed action. In the event of a merger of the Company with or into another
corporation, the Option shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation. In the event that such successor corporation does not
agree to assume the Option or to substitute an equivalent option, the Board
shall notify the Optionee at least fifteen (15) days prior to the consummation
of such proposed merger and, to the extent it has not been previously
exercised, the Option will terminate immediately prior to the consummation of
such merger.
12. Time of Granting Options. The date of grant of an Option
shall unless otherwise fixed by the Board, be the date on which the Board makes
the determination granting such Option. Notice of the determination shall be
given to each Employee or Consultant to whom an Option is so granted within a
reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made which would impair the rights of
any optionee under any grant theretofore made without his consent. In addition,
to the extent necessary and desirable to comply with Rule 16b-3 under the
Exchange Act or with Section 422 of the Code (or any other applicable law or
regulation, including the requirements of the NASD or an established stock
exchange), the Company shall obtain shareholder approval of any Plan amendment
in such a manner and to such a degree as required. To the extent required
under then applicable California law and regulations, material amendments to
the Plan shall be qualified, prior to the offer of any options under the
amended Plan, by post effective amendment to the permit application with
respect to the Plan previously filed with the California Department of
Corporations.
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<PAGE> 8
(b) Effect of Amendment or Termination. Any such
amendment or termination of the Plan shall not affect Options already granted
and such Options shall remain in full force and effect as if this Plan had not
been amended or terminated, unless mutually agreed otherwise between the
Optionee and the Board, which agreement must be in writing and signed by the
Optionee and the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be
issued pursuant to the exercise of an Option unless the exercise of such Option
and the issuance and delivery of such Shares pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment
and without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
15. Reservation of Shares. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares
hereunder, shall relieve the Company of any liability in respect of the failure
to issue or sell such Shares as to which such requisite authority shall not
have been obtained.
16. Option Agreement. Options shall be evidenced by written
option agreements in such form as the Board shall approve.
17. Shareholder Approval.
(a) Continuance of the Plan shall be subject to approval
by the shareholders of the Company within twelve (12) months before or after
the date the Plan is adopted.
(b) If and in the event that the Company registers any
class of equity securities pursuant to Section 12 of the Exchange Act, any
required approval of the shareholders of the Company obtained after such
registration shall be solicited substantially in accordance with Section 14(a)
of the Exchange Act and the rules and regulations promulgated thereunder.
(c) If any required approval by the shareholders of the
Plan itself or of any amendment thereto is solicited at any time otherwise than
in the manner described in Section 17(b) hereof, then the Company shall, at or
prior to the first annual meeting of shareholders held subsequent to the later
of (1) the first registration of any class of equity securities of the Company
under Section 12 of the Exchange Act or (2) the granting of an Option hereunder
to an officer or director after such registration, do the following:
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<PAGE> 9
(i) furnish in writing to the holders entitled to
vote for the Plan substantially the same information which would be required
(if proxies to be voted with respect to approval or disapproval of the Plan or
amendment were then being solicited) by the rules and regulations in effect
under Section 14(a) of the Exchange Act at the time such information is
furnished; and
(ii) file with, or mail for filing to, the
Securities and Exchange Commission four copies of the written information
referred to in subsection (i) hereof not later than the date on which such
information is first sent or given to shareholders.
18. Information to Optionees. The Company shall provide to each
Optionee, during the period for which such Optionee has one or more options
outstanding, copies of all annual reports and other information which are
provided to all shareholders of the Company. The Company shall not be required
to provide such information if the issuance of Options under the Plan is
limited to key employees whose duties in connection with the Company assure
their access to equivalent information.
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<PAGE> 10
DOCUMENT SCIENCES CORPORATION
NONSTATUTORY STOCK OPTION AGREEMENT
Document Sciences Corporation, a Delaware corporation (the "Company"),
has granted to (the "Optionee"), an option (the "Option") to purchase
a total of of Common Stock (the "Shares"), at the price
determined as provided herein, and in all respects subject to the terms,
definitions and provisions of the 1993 Stock Option Plan (the "Plan") adopted
by the Company, which is incorporated herein by reference. Unless otherwise
defined herein, the terms defined in the Plan shall have the same defined
meanings herein.
The Company and Optionee hereby acknowledge and agree that the grant
of this Option fulfills any and all obligations of the Company with respect to
the issuance of stock options to Optionee as set forth in the Optionee's
employment offer letter or otherwise arising prior to the date Optionee
executes this Agreement. Optionee shall have no other rights to stock options
or other equity in the Company and any subsequent grant of stock options to
Optionee under the Plan shall be entirely at the discretion of the Company.
1. Nature of the Option. This Option is intended by the Company
and the Optionee to be a nonstatutory Stock Option, and does not qualify for
any special tax benefits to the Optionee. This Option is not an Incentive
Stock Option.
2. Exercise Price. The exercise price is $ for each share of
Common Stock.
3. Exercise of Option. This Option shall be exercisable during
its term in accordance with the provisions of Section 9 of the Plan as follows:
(i) Right to Exercise.
(a) Subject to subsections 3(i)(b), (c) and (d)
below, this Option shall vest and become exercisable cumulatively over four (4)
years, to the extent of 25% of the Shares subject to the Option on the date
twelve (12) months after the Vesting Commencement Date of the Option set forth
at the end of this Agreement, and 2.0833% of the Shares subject to the Option
at the end of each month thereafter. In the event of termination of Optionee's
Continuous Status as an Employee or Consultant (as the case may be), vesting of
the Option shall cease as of the date of termination.
(b) This Option may not be exercised for a
fraction of a share.
(c) In the event of Optionee's death, disability
or other termination of employment or consulting relationship, the
exercisability of the Option is governed by Section 9 of the Plan: provided,
however, that in the event of termination of Optionee's Continuous Status as an
Employee or Consultant (as the case may be) other than by reason of death or
disability, the Option shall terminate sixty (60) days after the date of such
termination.
(d) In no event may this Option be exercised
after the date of expiration of the term of this Option as set forth in Section
8 below.
(ii) Method of Exercise. This Option shall be exercisable
by written notice which shall state the election to exercise the Option and the
number of Shares in respect of which the Option is being exercised. Such
written notice shall be signed by the Optionee and shall be delivered in person
or by certified mail to the Secretary of the
<PAGE> 11
Company. The written notice shall be accompanied by payment of the exercise
price. This Option shall be deemed exercised upon receipt by the Company of
such written notice accompanied by the exercise price.
No Shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant
provisions of law and the requirements of any stock exchange upon which the
Shares may then be listed. Assuming such compliance, for income tax purposes
the Shares shall be considered transferred to the Optionee on the date on which
the Option is exercised with respect to such Shares.
4. Optionee's Representations. In the event the Shares
purchasable pursuant to the exercise of this Option have not been registered
under the Securities Act of 1933, as amended, at the time this Option is
exercised, Optionee shall, concurrently with the exercise of all or any portion
of this Option, deliver to the Company his Investment Representation Statement
in the form attached hereto as Exhibit A, and shall read the applicable rules
of the Commissioner of Corporations attached to such Investment Representation
Statement.
5. Method of Payment. Payment of the exercise price shall be at
the election of the Board, check or surrender of other shares of Common Stock
of the Company which (A) either have been owned by the Optionee for more than
[six (6) months] on the date of surrender or were not acquired, directly or
indirectly, from the Company and (B) have a fair market value on the date of
surrender equal to the exercise price of the Shares as to which the Option is
being exercised.
6. Restrictions on Exercise. This Option may not be exercised
until such time as the Plan has been approved by the shareholders of the
Company, or if the issuance of such Shares upon such exercise or the method
of payment of consideration for such shares would constitute a violation of
any applicable federal or state securities or other law or regulation,
including any rule under Part 207 of Title 12 of the Code of Federal
Regulations ("Regulation G") as promulgated by the Federal Reserve Board.
As a condition to the exercise of this option, the Company may require
Optionee to make any representation and warranty to the Company as may be
required by any applicable law or regulation.
7. Non-Transferability of Option. This Option may not be
transferred by Optionee in any manner otherwise than by will or by the laws of
descent or distribution and may be exercised during the lifetime of Optionee
only by him. The Company may at any time transfer and assign its rights and
delegate its obligations under this Option Agreement to any other person,
corporation, firm or entity, including its officers, directors and
stockholders, with or without consideration. Except to the extent specifically
limited by the terms and provisions of this Option Agreement, the terms of this
Option shall be binding upon and inure to the benefit of the parties hereto and
their respective executors, administrators, heirs, successors and assigns.
8. Term of Option. This option may not be exercised more than
ten (10) years from the date of grant of this option, and may be exercised
during such term only in accordance with the Plan and the terms of this option.
9. Withholding and Employment Taxes Upon Exercise of Option.
Optionee understands that, upon exercise of this option, he will recognize
income for tax purposes in an amount equal to the excess of the then fair
market value of the shares over the exercise price. The Company will be
required to withhold tax from Optionee's current compensation with respect to
such income; to the extent that Optionee's current compensation is insufficient
to satisfy the withholding tax liability, the
2
<PAGE> 12
Company may require the Optionee to make a cash payment to cover such liability
as a condition of exercise of this Option. To the extent authorized by the
Board in its sole discretion, Optionee may make an election, by means of a form
of election to be prescribed by the Board, to have shares of Common Stock or
other securities of the Company which are acquired upon exercise of the Option
withheld by the Company or to tender other shares of Common Stock or other
securities of the Company owned by Optionee to the Company at the time of
exercise of the Option to pay the amount of tax that would otherwise be
required by law to be withheld by the Company as a result of any exercise of
the Option from amounts payable to such person; provided, however, that Section
16 of the Securities Exchange Act of 1934, as amended, shall apply to taxes due
upon exercise.
Any securities so withheld or tendered will be valued by the
Company as of the day of exercise.
10. Right of First Refusal. Before any Shares received under this
Option may be sold or transferred (including transfer by operation of law),
such Shares shall first be offered to the Company as follows:
(i) The Optionee shall deliver a notice to the Company
stating (i) his bona fide intention to sell or transfer such Shares, (ii) the
number of such Shares to be sold or transferred, (iii) the price for which he
proposes to sell or transfer such shares, and (iv) the name of the proposed
purchaser or transferee.
(ii) Within thirty (30) days after receipt of such notice,
the Company or its assignee may elect to purchase all (but not less than all)
Shares to which the notice refers, at the price per share specified in the
notice. All payment for all the Shares to which the notice refers shall be
made by cash, check, or cancellation of indebtedness by the Company or its
assignee to the Optionee within thirty (30) days after receipt of the notice.
(iii) If the Shares to which the notice refers are not
elected to be purchased as provided in Section 10(ii), the Optionee may sell
the Shares to any person named in the notice at the price specified in the
notice or at a higher price, provided that such sale or transfer is consummated
within 60 days of the date of the notice to the Company, and, provided further,
that any such sale is in accordance with all the terms and conditions hereof.
(iv) Any shares so transferred will continue to be subject
to the right of first refusal provided in this Section 10.
The provisions of this Section 10 shall terminate on (i) the
effective date of a registration statement filed by the Company under the
Securities Act of 1933, as amended (the "Act"), with respect to an underwritten
public offering of Common Stock of the Company or (ii) the closing date of a
sale of assets or merger of the Company or other acquisition transaction
pursuant to which shareholders of this Company receive securities of a buyer
whose shares are publicly traded.
The provisions of Sections 10(i), 10(ii) and 10(iii) shall not
apply to a transfer of any Shares by the optionee, either during his lifetime
or on death by will or intestacy, to his ancestors, descendants, or spouse, or
any custodian or trustee for the account of the Optionee or the Optionee's
ancestors, descendants, or spouse; provided that, in each such case, a
transferee shall receive and hold such shares subject to the provisions of this
Section 10, and that there shall be no further transfer of such Shares except
in accordance herewith.
3
<PAGE> 13
The Company shall not be required (i) to transfer on its share
register any Shares which shall have been purportedly sold or transferred if
such transfer would be in violation of this agreement, or (ii) to treat as
owner of such Shares, to accord the right to vote as such owner, or to pay
dividends to any purported transferee to whom such Shares shall have
purportedly been so transferred.
11. Repurchase Option. All of the Shares shall be subject to the
right of the Company to repurchase at the price set forth below (the "Option
Price") all (but not less than all) of the Shares (the "Repurchase Option") as
follows:
(i) In the event that the Optionee resigns from
employment with the Company or the Optionee's employment shall be terminated by
the Company with or without cause, the Option Price shall be the greater of (A)
the fair market value of the Shares on the date of resignation or termination
with or without cause, as such value is determined in good faith by the Board
of Directors of the Company, or (B) the purchase price per share originally
paid as set forth in Section 2, as adjusted for stock splits, consolidation or
merger of the Company described in (iii) below.
(ii) Within 90 days following a termination of Optionee's
employment to which the Repurchase Option applies, the Company may exercise the
Repurchase Option by written notice to the Optionee. At the Company's option,
the Option Price for the Shares repurchased may be paid (a) by delivery with
such notice of a check to the Optionee in the amount of the Option Price for
the Shares being repurchased, or (b) by cancellation by the Company of an
amount of the Purchaser's purchase money indebtedness to the Company for the
Shares equal to the Option Price for the Shares being repurchased, or (c) by a
combination of (a) and (b). Upon delivery of such notice and payment, the
Shares being repurchased and all rights and interests therein shall be
transferred to the Company and the Optionee shall no longer be considered the
owner of the Shares repurchased for record or any other purposes.
(iii) If from time to time during the term of this
Agreement, there is (a) any stock dividend, stock split, or other change in the
character or amount of any of the outstanding the securities of the Company, or
(b) any liquidation or consolidation or merger of the Company with another
corporation not described in (iv) below; then, in such event any and all new,
substituted or additional securities to which the optionee is entitled by
reason of his ownership of the Shares shall be immediately subject to this
Agreement and be included considered "Shares" for all purposes with the same
force and effect as the Shares presently subject to the Repurchase Option, with
the right of first refusal and other terms of this Agreement.
(iv) The provisions of this Section 11 shall terminate on
(i) the effective date of a registration statement filed by the Company under
the Securities Act of 1933, as amended (the "Act"), with respect to an
underwritten public offering of Common Stock of the Company or (ii) the closing
date of a sale of assets or merger of the Company or other acquisition
transaction pursuant to which shareholders of this company receive securities
of a buyer whose shares are publicly traded.
12. Lock-Up. Optionee agrees, in connection with the Company's
initial underwritten public offering of the Company's securities, (1) not to
sell, make a short sale of, loan, grant any options for the purchase of, or
otherwise dispose of any Shares (other than those Shares included in the
registration) without the prior written consent of the Company or the
underwriters managing such initial underwritten public offering of the
Company's securities for one hundred eighty (180) days from the effective date
of such registration, and (2) Optionee agrees to execute any agreement
reflecting (1) above as may be requested by the underwriters at the time of the
public offering; provided however that the officers and directors of the
Company who own the stock of the Company also agree to such restrictions.
4
<PAGE> 14
VESTING COMMENCEMENT DATE:
Document Sciences Corporation
a Delaware corporation
---------------------------------------
Title:
--------------------------------
5
<PAGE> 15
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT
TO SECTION 3 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR
CONSULTANT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED,
BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER
ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S
STOCK OPTION PLAN WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON
OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY
WITH THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH HIS RIGHT OR THE
COMPANY'S RIGHT TO TERMINATE HIS EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR
WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and certain
information related thereto and represents that he is familiar with the terms
and provisions thereof, and hereby accepts this Option subject to all of the
terms and provisions thereof. Optionee has reviewed the Plan and this Option
in their entirety, has had an opportunity to obtain the advice of counsel prior
to executing this Option and fully understands all provisions of the Option.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Board upon any questions arising under the Plan.
Optionee further agrees to notify the Company upon any change in the residence
address indicated below.
Dated:
---------------------
---------------------------------------
, Optionee
--------
Residence Address:
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6
<PAGE> 1
EXHIBIT 10.3
DOCUMENT SCIENCES CORPORATION
1995 STOCK INCENTIVE PLAN
(as amended _________, 1996)
1. Purposes of the Plan. The name of this plan is the Document Sciences
Corporation 1995 Stock Incentive Plan (the "Plan"). The purpose of the Plan is
to enable Document Sciences Corporation, a Delaware corporation (the "Company"),
and any Parent or any Subsidiary to obtain and retain the services of the types
of employees, consultants, officers and Directors who will contribute to the
Company's long range success and to provide incentives which are linked directly
to increases in share value which will inure to the benefit of all shareholders
of the Company.
2. Definitions. For purposes of the Plan, the following terms shall be
defined as set forth below:
"Administrator" shall have the meaning as set forth in Article 3.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor thereto.
"Committee" means a committee of the Board designated by the Board to
administer the Plan and composed of not less than the minimum number of persons
from time to time required both by Rule 16b-3 and Section 162(m) of the Code,
each of whom is a Disinterested Person and an Outside Director.
"Company" means Document Sciences Corporation, a corporation organized
under the laws of the State of Delaware (or any successor corporation).
"Date of Grant" means the date on which the Administrator adopts a
resolution expressly granting a Right to a Participant, or if a different date
is set forth in such resolution as the Date of Grant, then such date as is set
forth in such resolution.
"Director" means a member of the Board.
"Disability" means permanent and total disability as defined by the
Administrator.
"Disinterested Person" shall have the meaning set forth in Rule
16b-3(c)(2)(i) under the Exchange Act, or any successor definition adopted by
the SEC.
"Election" shall have the meaning set forth in Section 10.3(d) of the
Plan.
"Eligible Person" means an employee, officer, consultant or Director of
the Company, any Parent or any Subsidiary.
<PAGE> 2
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" per share at any date shall mean (i) if the Stock
is listed on an exchange or exchanges, or admitted for trading in a market
system which provides last sale data under Rule 11Aa3-1 of the General Rules and
Regulations of the Securities and Exchange Commission under the Securities and
Exchange Act of 1934, as amended (a "Market System"), the last reported sales
price per share on the last business day prior to such date on the principal
exchange on which it is traded, or in such a Market System, as applicable, the
last reported sales price per share on the most recent day prior to such date on
which a sale was reported on such exchange or such Market System, as applicable;
or (ii) if the Common Stock is not then traded on an exchange or in such a
Market System, the average of the closing bid and asked prices per share for the
Common Stock in the over-the-counter market as quoted on Nasdaq on the day prior
to such date; or (iii) if the Common Stock is not listed on an exchange or
quoted on Nasdaq, an amount determined in good faith by the Administrator,
taking into account the price at which securities of reasonably comparable
corporations are being traded, adjusted for any dissimilarities, and the
earnings history, book value and prospects of the Company in light of then
existing general market conditions.
"Incentive Stock Option" means a Stock Option intended to qualify as an
"incentive stock option" as that term is defined in Section 422 of the Code.
"Non-Statutory Option" means a Stock Option intended to not qualify as
an Incentive Stock Option.
"Offeree" means a Participant who is granted a Purchase Right pursuant
to the Plan.
"Optionee" means a Participant who is granted a Stock Option pursuant
to the Plan.
"Outside Director" means a Director who is not (a) a current employee
of the Company (or any related entity), (b) a former employee of the Company (or
any related entity) who is receiving compensation for prior services (other than
benefits under a tax-qualified retirement plan), (c) a former officer of the
Company (or any related entity), or (d) a consultant or person otherwise
receiving compensation or other remuneration, either directly or indirectly, in
any capacity other than as a Director.
"Parent" means any present or future corporation which would be a
"parent corporation" as that term is defined in Section 424 of the Code.
"Participant" means any Eligible Person selected by the Administrator,
pursuant to the Administrator's authority in Article 3, to receive grants of
Rights.
"Plan" means this Document Sciences Corporation 1995 Stock Incentive
Plan, as the same may be amended or supplemented from time to time.
"Purchase Price" shall have the meaning set forth in Section 7.2(b) of
the Plan.
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<PAGE> 3
"Purchase Right" means the right to purchase Stock granted pursuant to
Article 7.
"Rights" means Stock Options and Purchase Rights.
"Retirement" means retirement from active employment with the Company
or any Parent or Subsidiary as defined by the Administrator.
"SEC" means the Securities and Exchange Commission.
"Section 16(b) Person" shall mean a person subject to Section 16(b) of
the Exchange Act.
"Special Terminating Event" with respect to a Participant shall mean
the death, Disability or Retirement of that Participant.
"Stock" means the Common Stock, par value $0.001 per share, of the
Company.
"Stock Option" means an option to purchase shares of Stock granted
pursuant to Article 6.
"Stock Option Agreement" shall have the meaning set forth in Section
6.2 of the Plan.
"Stock Purchase Agreement" shall have the meaning set forth in Section
7.2 of the Plan.
"Subsidiary" means any present or future corporation which would be a
"subsidiary corporation" as that term is defined in Section 424 of the Code.
"Tax Date" shall have the meaning set forth in Section 10.3(d) of the
Plan.
"Ten Percent Shareholder" means a person who on the Date of Grant owns,
either directly or indirectly or through attribution as provided in Section
424(d) of the Code, Stock possessing more than 10% of the total combined voting
power of all classes of stock of his or her employer corporation or of any
Parent or Subsidiary.
"Withholding Right" shall have the meaning set forth in Section 10.3(c)
of the Plan.
3. Administration.
3.1 Administrator. The Plan shall be administered by either (i) the
Board, or (ii) the Committee (the group that administers the Plan is referred to
as the "Administrator").
3.2 Powers in General. The Administrator shall have the power and
authority to grant to Eligible Persons, pursuant to the terms of the Plan: (i)
Stock Options; (ii) Purchase Rights; or (iii) any combination of the foregoing.
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<PAGE> 4
3.3 Specific Powers. In particular, the Administrator shall have the
authority: (i) to construe and interpret the Plan and apply its provisions; (ii)
to promulgate, amend and rescind rules and regulations relating to the
administration of the Plan; (iii) to authorize any person to execute, on behalf
of the Company, any instrument required to carry out the purposes of the Plan;
(iv) to determine when Rights are to be granted under the Plan; (v) from time to
time to select, subject to the limitations set forth in this Plan, those
Eligible Persons to whom Rights shall be granted; (vi) to determine the number
of shares of Stock to be made subject to each Right; (vii) to prescribe the
terms and conditions of each Stock Option, including, without limitation, the
exercise price, medium of payment, right of first refusal and repurchase
provisions and to determine whether the Stock Option is to be an Incentive Stock
Option or a Non-Statutory Option and to specify the provisions of the Stock
Option agreement relating to such Stock Option; (viii) to prescribe the terms
and conditions of each Stock Option and Purchase Right, including, without
limitation, the purchase price and medium of payment, vesting provisions and
repurchase provisions, and to specify the provisions of the Stock Option
Agreement or Stock Purchase Agreement relating to such sale; (ix) to amend any
outstanding Rights for the purpose of modifying the time or manner of vesting,
the purchase price or exercise price, as the case may be, thereunder or
otherwise, subject to applicable legal restrictions and to the consent of the
other party to such agreement; (x) to determine when a consultant's relationship
with the Company is sufficient to constitute the equivalent of employment with
the Company for purposes of the Plan; (xi) to determine the duration and purpose
of leaves of absences which may be granted to a Participant without constituting
termination of their employment for purposes of the Plan; and (xii) to make any
and all other determinations which it determines to be necessary or advisable
for administration of the Plan.
3.4 Decisions Final. All decision made by the Administrator pursuant
to the provisions of the Plan shall be final and binding on the Company and the
Participants.
3.5 The Committee. The Board may, in its sole and absolute discretion,
from time to time delegate any or all of its duties and authority with respect
to the Plan to the Committee whose members are to be appointed by and to serve
at the pleasure of the Board. Once appointed, the Committee shall continue to
serve until otherwise directed by the Board. From time to time, the Board may
increase or decrease (to not less than the minimum number of persons from time
to time required by both Rule 16b-3 and Section 162(m) of the Code) the size of
the Committee, add additional members to, remove members (with or without cause)
from, appoint new members in substitution therefor, and fill vacancies, however
caused, in the Committee. The Committee shall act pursuant to a vote of the
majority of its members or, in the case of a committee comprised of only two
members, the unanimous consent of its members, whether present or not, or by the
written consent of the majority of its members or, in the case of a committee
comprised of only two members, the unanimous written consent of its members, and
minutes shall be kept of all its meetings and copies thereof shall be provided
to the Board. Subject to the limitations prescribed by the Plan and the Board,
the Committee may establish and follow such rules and regulations for the
conduct of its business as it may determine to be advisable.
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<PAGE> 5
4. Stock Subject to Plan.
4.1 Stock Subject to Plan. Subject to an adjustment as provided in
Article 8, the total number of shares of Stock reserved and available for
issuance under the Plan shall be 625,750 shares. Shares reserved hereunder may
consist, in whole or in part, of authorized and unissued shares or treasury
shares.
4.2 Unexercised Rights; Reacquired Shares. To the extent that any
Rights expire or are otherwise terminated without being exercised, the shares
underlying such Rights (and shares related thereto) shall again be available for
issuance in connection with future Rights under the Plan. Shares acquired by the
Company upon exercise of Rights pursuant to Section 6.2(e) or Section 7.2(c) or
Section 10.3 shall not increase the shares available for issuance under the
Plan.
5. Eligibility. Directors, officers, employees and consultants of the
Company, any Parent or any Subsidiary, who are responsible for or contribute to
the management, growth or profitability of the Company, any Parent or
Subsidiary, shall be eligible to be granted Rights hereunder subject to
limitations set forth in this Plan; provided, however, that only officers and
employees shall be eligible to be granted Incentive Stock Options hereunder.
6. Stock Options.
6.1 General. Stock Options may be granted alone or in addition to
other Rights granted under the Plan. Each Stock Option granted under the Plan
shall be in such form and under such terms and conditions as the Administrator
may from time to time approve: provided, that such terms and conditions are not
inconsistent with the Plan. The provisions of Stock Option Agreements entered
into under the Plan need not be identical. Stock Options granted under the Plan
may be either Incentive Stock Options or Non-Statutory Options.
6.2 Terms and Conditions of Stock Options. Each Stock Option granted
pursuant to the Plan shall be evidenced by a written option agreement between
the Company and the Optionee (the "Stock Option Agreement"), which shall comply
with and be subject to the following terms and conditions:
a) Number of Shares. Each Stock Option Agreement shall state the
number of shares of Stock to which the Stock Option relates.
b) Type of Option. Each Stock Option Agreement shall identify the
portion (if any) of the Stock Option which constitutes an Incentive Stock
Option.
c) Exercise Price. Each Stock Option Agreement shall state the
price at which shares subject to the Stock Option may be purchased (the
"Exercise Price"), which shall with respect to Incentive Stock Options be not
less than 100% of the Fair Value of the shares of Stock on the Date of Grant. In
the case of Non-Statutory Options, the Exercise Price shall be determined in the
sole discretion of the Administrator. In the case of either an Incentive Stock
Option or a Non-
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<PAGE> 6
Statutory Option granted to a Ten Percent Shareholder, the Exercise Price shall
not be less than 110% of such Fair Market Value.
d) Value of Shares. The Fair Market Value of the shares of Stock
(determined as of the Date of Grant) with respect to which Incentive Stock
Options are first exercisable by an Optionee under this Plan and all other
incentive option plans of the Company and any Parent or Subsidiary in any
calendar year shall not, for such year, in the aggregate, exceed $100,000; but
this Section 6.2(d) shall not affect the right of the Administrator to
accelerate or otherwise alter the time of vesting of any Options granted as
Incentive Stock Options, even, if as a result thereof, some of such Options
cease being Incentive Stock Options.
e) Medium and Time of Payment. The Exercise Price shall be paid in
full, at the time of exercise, in cash or cash equivalents or, with the approval
of the Administrator, in shares of Stock which have been held by the Optionee
for a period of at least six calendar months preceding the date of surrender and
which have a Fair Market Value equal to the Exercise Price, or in a combination
of cash and such shares, and may be effected in whole or in part (i) with monies
received from the Company at the time of exercise as a compensatory cash
payment; or (ii) to the extent that the Exercise Price exceeds the par value of
the shares so purchased, with monies borrowed from the Company in accordance
with Section 10.5.
f) Term and Exercise of Stock Options. Stock Options shall be
exercisable over the exercise period at the times the Administrator may
determine, as reflected in the related Stock Option Agreements. The Stock Option
Agreements shall provide that Option Holders shall have the right to exercise
the Stock Options at the rate of at least 20% per year over 5 years from the
Date of Grant of such Stock Options. The exercise period of any Stock Option
shall be determined by the Administrator, but shall not exceed ten years from
the Date of Grant of the Stock Option. In the case of an Incentive Stock Option
granted to a Ten Percent Shareholder, the exercise period shall be determined by
the Administrator, but shall not exceed five years from the Date of Grant of the
Stock Option. The exercise period shall be subject to earlier termination upon
the occurrence of either a Special Terminating Event, as provided in Section
10.6, or the Termination of Employment, as provided in Section 10.7. A Stock
Option may be exercised, as to any or all full shares of Stock as to which the
Stock Option has become exercisable, by giving written notice of such exercise
to the Company.
7. Purchase Rights.
7.1 General. Purchase Rights may be granted alone or in addition to
other Rights under the Plan. Each sale of Stock under this Article 7 shall be in
such form and under such terms and conditions as the Administrator shall from
time to time approve; provided, that such terms and conditions are not
inconsistent with the Plan. The provisions of Stock Purchase Agreements entered
into under the Plan need not be identical.
7.2 Terms and Conditions of Purchase Rights. Each Purchase Right
granted pursuant to the Plan shall be evidenced by a written stock purchase
agreement between the Company and the
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<PAGE> 7
Offeree (the "Stock Purchase Agreement"), which shall comply with and be subject
to the following terms and conditions.
a) Number of Shares. Each Stock Purchase Agreement shall state the
number of shares of Stock which may be purchased pursuant to such agreement.
b) Purchase Price. Each Stock Purchase Agreement shall state the
price at which the Stock subject to such Stock Purchase Agreement may be
purchased (the "Purchase Price"), which, with respect to Stock Purchase Rights,
shall be determined in the sole discretion of the Administrator.
c) Medium and Time of Payment. The Purchase Price shall be paid in
full at the time of exercise, in cash or cash equivalent or, with the approval
of the Administrator, in shares of Stock which have been held by the Offeree for
a period of at least six calendar months preceding the date of surrender and
which have a Fair Market Value equal to the Purchase Price or in a combination
of cash or cash equivalent and such shares, and may be effected in whole or in
part (i) with monies received from the Company at the time of exercise as a
compensatory cash payment; or (ii) to the extent the purchase price exceeds the
par value of the shares so purchased, with monies borrowed from the Company in
accordance with Section 10.5 of the Plan.
8. Adjustments.
8.1 Effect of Certain Changes.
a) Stock Dividends, Splits, Etc. If there is any change in the
number of outstanding shares of Stock through the declaration of Stock dividends
or through a recapitalization resulting in Stock splits, or combinations or
exchanges of the outstanding shares, (i) the number of shares of Stock available
for Rights, (ii) the number of shares covered by outstanding Rights and (iii)
the Exercise Price or Purchase Price of any Stock Option or Purchase Right, in
effect prior to such change, shall be proportionately adjusted by the
Administrator to reflect any increase or decrease in the number of issued shares
of Stock; provided, however, that any fractional shares resulting from the
adjustment shall be eliminated.
b) Liquidating Event. In the event of the proposed dissolution or
liquidation of the Company, or in the event of any corporate separation or
division, including, but not limited to, a split-up, split-off or spin-off
(each, a "Liquidating Event"), the Administrator may provide that the holder of
any Right then exercisable shall have the right to exercise such Right (at the
price provided in the Rights) subsequent to the Liquidating Event, and for the
balance of its term, solely for the kind and amount of shares of Stock and other
securities, property, cash or any combination thereof receivable upon such
Liquidating Event by a holder of the number of shares of Stock for or with
respect to which such Right might have been exercised immediately prior to such
Liquidating Event; or the Administrator may provide, in the alternative, that
each Right granted under the Plan shall terminate as of a date to be fixed by
the Board; provided, however, that not less than 30 days written notice of the
date so fixed shall be given to each Rights holder and if such notice is given,
each Rights
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<PAGE> 8
holder shall have the right, during the period of 30 days preceding such
termination, to exercise the Right as to all or any part of the shares of Stock
covered thereby, to the extent that such Right is then exercisable, on the
condition, however, that the Liquidating Event actually occurs; and if the
Liquidating Event actually occurs, such exercise shall be deemed effective (and,
if applicable, the Rights holder shall be deemed a shareholder with respect to
the Rights exercised) immediately preceding the occurrence of the Liquidating
Event, or the date of record for shareholders entitled to share in such
Liquidating Event, if a record date is set.
c) Merger or Consolidation. In the case of any capital
reorganization, any reclassification of the Common Stock (other than a change in
par value or recapitalization described in Section 8.1(a) of the Plan), or the
consolidation of the Company with, or a sale of substantially all of the assets
of the Company to (which sale is followed by a liquidation or dissolution of the
Company), or merger of the Company with another person (a "Reorganization
Event"), the Administrator shall be obligated to determine whether the
Reorganization Event shall constitute a "Liquidity Event," and to deliver to
Rights holders at least 15 days prior to such Reorganization Event (or at least
15 days prior to the date of record for shareholders entitled to share in the
securities or property distributed in the Reorganization Event, if a record date
is set) a notice which shall (i) indicate whether the Reorganization Event is a
Liquidity Event, and (ii) advise the Rights holder of his or her rights pursuant
to the Agreement applicable to such Rights. If the Reorganization Event is
determined to be a Liquidity Event, in its sole and absolute discretion, the
surviving corporation may, but shall not be obligated to, (i) tender stock
options to the Rights holder with respect to the surviving corporation which
shall contain terms and provisions that substantially preserve the rights and
benefits of the applicable Right, and (ii) in the event that no stock options
have been tendered by the surviving corporation pursuant to the terms of item
(i) immediately above, the Rights holder shall have the right exercisable during
a ten-day period ending on the fifth day prior to the Reorganization Event (or
ending on the fifth day prior to the date of record for shareholders entitled to
share in the securities or property distributed in the Reorganization Event, if
a record date is set) to exercise his or her Rights, to the extent that such
Rights are then exercisable, in whole or in part, on the condition, however,
that the Reorganization Event is actually effected; and if the Reorganization
Event is actually effected, such exercise shall be deemed effective (and, if
applicable, the Rights holder shall be deemed a shareholder with respect to the
Rights exercised) immediately preceding the effective time of the Reorganization
Event (or on the date of record for shareholders entitled to share in the
securities or property distributed in the Reorganization Event, if a record date
is set). If the Reorganization Event is not determined to be a Liquidity Event,
the Rights holder shall thereafter be entitled upon exercise of the Right to
purchase the kind and number of shares of stock or other securities property of
the surviving corporation receivable upon such event by a holder of the number
of shares of the common Stock which the Right entitles the Rights holder to
purchase from the Company immediately prior to such event, and in any such case,
appropriate adjustment shall be made in the application of the provisions set
forth in this Plan with respect to the Rights holders' rights and interests
thereafter, to the end that the provisions set forth in the agreement applicable
to such Rights (including the specified changes and other adjustments to the
Exercise Price) shall thereafter be applicable in relation to any shares or
other property thereafter purchasable upon exercise of the Right.
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<PAGE> 9
d) Where Company Survives. Section 8. 1 (c) shall not apply to a
merger or consolidation in which the Company is the surviving corporation,
unless shares of Stock are converted into or exchanged for securities other than
publicly-traded common stock, cash (excluding cash in payment for actual shares)
or any other thing of value. Notwithstanding the preceding sentence, in case of
any consolidation or merger of another corporation into the company in which the
Company is the surviving corporation and in which there is a reclassification or
change (including a change to the right to receive an amount of money payable by
cash or cash equivalent or other property) of the shares of Stock (other than a
change in par value, or from par value to no par value, or as a result of a
subdivision or combination, but including any change in such shares into two or
more classes or series of shares), the Administrator may provide that the holder
of each Right then exercisable shall have the right to exercise such Right
solely for the kind and amount of shares of Stock and other securities
(including those of any new direct or indirect parent of the Company), property,
cash or any combination thereof receivable upon such reclassification change,
consolidation or merger by the holder of the number of shares of Stock for which
such Right might have been exercised.
e) Surviving Corporation Defined. The determination as to which
party to a merger or consolidation is the "surviving corporation" shall be made
on the basis of the relative equity interests of the shareholders in the
corporation existing after the merger or consolidation, as follows: if
immediately following any merger or consolidation the holders of outstanding
voting securities of the Company immediately prior to the merger or
consolidation own equity securities possessing more than 50% of the voting power
of the corporation existing following the merger or consolidation, then for
purposes of this Plan, the Company shall be the surviving corporation. In all
other cases, the Company shall not be the surviving corporation. In making the
determination of ownership by the shareholders of a corporation immediately
after the merger or consolidation, of equity securities pursuant to this Section
8.1(e), equity securities which the shareholders owned immediately before the
merger or consolidation as shareholders of another party to the transaction
shall be disregarded. Further, for purposes of this Section 8.1(e) only,
outstanding voting securities of a corporation shall be calculated by assuming
the conversion of all equity securities convertible (immediately or at some
future time) into shares entitled to vote.
f) Par Value Changes. In the event of a change in the Stock of the
Company as presently constituted which is to a change of all of its authorized
shares with par value, into the same number of shares without par value, or a
change in the par value, the shares resulting from any such change shall be
"Stock" within the meaning of the Plan.
8.2 Decision of Administrator Final. To the extent that the foregoing
adjustments relate to stock or securities of the Company, such adjustments shall
be made by the Administrator, whose determination in respect shall be final,
binding and conclusive; provided, however, that each Incentive Stock Option
granted pursuant to the Plan shall not be adjusted without the prior consent of
the Holder thereof in a manner that causes such Stock Option to fail to continue
to qualify as an Incentive Stock Option.
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<PAGE> 10
8.3 No Other Rights. Except as herein before expressly provided in
this Article 8, no Rights holder shall have any rights by reason of any
subdivision or consolidation of shares of Stock or the payment of any dividend
or any other increase or decrease in the number of shares of Stock of any class
or by reason of any Liquidating Event, merger, or consolidation of assets or
stock of another corporation, or any other issue by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class;
and except as provided in this Article 8, none of the foregoing events shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Stock subject to Rights. The grant of a Right
pursuant to the Plan shall not affect in any way the right or power of the
Company to make adjustments, reclassifications, Exercise Price) shall thereafter
be applicable in relation to any shares or other property thereafter purchasable
upon exercise of the Right.
8.4 No Rights as Shareholder. Except as specifically provided in this
Article 8, a Rights holder or a transferee of a Right shall have no rights as a
shareholder with respect to any shares covered by the Rights until the date of
the issuance of a Stock certificate to him or her for such shares, and no
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions of other rights for which
the record date is prior to the date such Stock certificate is issued, except as
provided in Section 8.1(b) or 8.1(c).
9. Amendment and Termination. The Board may amend, alter or discontinue
the Plan, but no amendment, alteration or discontinuation shall be made which
would impair the rights of a Participant under any Right theretofore granted
without such Participant's consent. The Board shall obtain shareholder approval
of an Plan amendment to the extent necessary and desirable to comply with Rule
16b-3, Section 422 of the Code (or any successor rule or statute) or other
applicable law, rule or regulation, including the requirements of any Market
System on which the Stock is listed or quoted. The Administrator may amend the
terms of any award theretofore granted, prospectively or retroactively, but,
subject to Article 3, no such amendment shall impair the rights of any holder
without his or her consent.
10. General Restrictions.
10.1
a) Limitation on Granting of Rights. Subject to adjustment as
provided in Article 8, no Participant shall be granted Rights with respect to
more than 100,000 shares of Stock during any one-year period.
b) No View to Distribute. The Administrator may require each
person acquiring shares of Stock pursuant to the Plan to represent to and agree
with the Company in writing that such person is acquiring the shares without a
view towards distribution thereof. The certificates for such shares may include
any legend which the Administrator deems appropriate to reflect any restrictions
on transfer.
c) Legends. All certificates for shares of Stock delivered under
the Plan shall be subject to such stop transfer orders and other restrictions as
the Administrator may deem advisable
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<PAGE> 11
under the rules, regulations and other requirements of the Securities and
Exchange Commission, any stock exchange upon which the Stock is then listed and
any applicable federal or state securities laws.
d) Market Stand-Off. All Stock Option Agreements and Stock
Purchase Agreements shall provide that in connection with any underwritten
public offering by the Company of its equity securities pursuant to an effective
registration statement filed under the 1933 Act, including the Company's initial
public offering, the Participant agrees (the "Hold-Back Agreement") not to sell,
make any short sale of, loan, hypothecate, pledge, grant any option for the
purchase of, or otherwise dispose or transfer or otherwise agree to engage in
any of the foregoing transactions with respect to any shares purchased by the
Optionee upon exercise of his or her Option ("Purchased Shares") without the
prior written consent of the Company or its underwriters, for such period of
time from and after the effective date of such registration statement as may be
requested by the Company or such underwriters; provided, however, that in no
event shall such period exceed one hundred-eighty (180) days. Stock Option
Agreements and Stock Purchase Agreements may provide that the Hold-Back
Agreement shall terminate following expiration of the two-year period
immediately following the effective date of the Company's initial public
offering.
10.2 Other Compensation Arrangements. Nothing contained in this Plan
shall prevent the Board from adopting other or additional compensation
arrangements, subject to shareholder approval if such approval is required; and
such arrangements may be either generally applicable or applicable only in
specific cases.
10.3
a) Disqualifying Disposition. If an Optionee makes a "disposition"
(as defined in the Code) of all or any of the Purchased Shares within two years
from the date of Grant of the Incentive Stock Option covering such shares or
within one year after the issuance of such Purchased Shares, he or she shall
immediately advise the Company in writing as to the occurrence of the sale and
the price upon the sale of such Shares. The Optionee agrees that he or she shall
maintain all Purchased Shares in his or her name so long as he or she maintains
beneficial ownership of such Purchased Shares.
b) Withholding Required. Each Participant shall, no later than the
date as of which the value derived from a Right first becomes includable in the
gross income of the Participant for income tax purposes, pay to the Company, or
make arrangements satisfactory to the Administrator regarding payment of, any
federal, state or local taxes of any kind required by law to be withheld with
respect to the Right or its exercise. The obligations of the Company under the
Plan shall be conditioned upon such payment or arrangements and the Participant
shall, to the extent permitted by law, have the right to request that the
Company deduct any such taxes from any payment of any kind otherwise due to the
Participant.
c) Withholding Right. The Administrator may, in its discretion,
grant a Rights holder the right (a "Withholding Right") to elect to make such
payment by irrevocably requiring the Company to withhold from shares issuable
upon exercise of the Right that number of full shares of Common Stock having a
Fair Market Value on the Tax Date (as defined below) equal to the amount
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(or portion of the amount) required to be withheld. The Withholding Right may be
granted with respect to all or any portion of the Right.
d) Exercise of Withholding Right. To exercise a Withholding Right,
the Rights holder must follow the election procedures set forth below, together
with such additional procedures and conditions as may be set forth in the
related Rights agreement or otherwise adopted by the Administrator.
i) The Rights holder must deliver to the Company his or her
written notice of election (the "Election") to have the Withholding Right apply
to all (or a designated portion) of his or her Right.
ii) Unless disapproved by the Administrator as provided in
Subsection (iii) below, the Election once made will be irrevocable.
iii) No election is valid unless the Administrator consents to
the Election; the Administrator has the right and power, in its sole discretion,
with or without cause or reason therefor, to consent to the Election, to refuse
to consent to the Election, or to disapprove the Election; and if the
Administrator has not consented to the Election on or prior to the date that the
amount of tax to be withheld is, under applicable federal income tax laws, fixed
and determined by the Company (the "Tax Date"), the Election will be deemed
approved.
e) Effect. If the Administrator consents to an Election of a
Withholding Right:
i) Upon the exercise of the Right (or any portion thereof) to
which the Withholding Right relates, the Company shall withhold from the shares
otherwise issuable that number of full shares of Stock having an actual Fair
Market Value equal to the amount (or portion of the amount, as applicable)
required to be withheld under applicable federal and/or state income tax laws as
a result of the exercise; and
ii) If the Rights holder is then a Section 16(b) Person who has
made an Election, the related Right may not be exercised, nor may any shares of
Stock issued pursuant thereto be sold, exchanged or otherwise transferred,
unless such exercise, or such transaction, complies with an exemption from
Section 16(b) provided under Rule 16b-3.
10.4 Indemnification. In addition to such other rights of
indemnification as they may have as Directors or members of the Committee, and
to the extent allowed by applicable law, the Administrators shall be indemnified
by the Company against the reasonable expenses, including attorney's fees,
actually incurred in connection with any action, suit or proceeding or in
connection with any appeal therein, to which they or any one of them may be
party by reason of any action taken or failure to act under or in connection
with the Plan or any option granted under the Plan, and against all amounts paid
by them in settlement thereof (provided that the settlement has been approved by
the Company, which approval shall not be unreasonably withheld) or paid by them
in satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to
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which it shall be adjudged in such action, suit or proceeding that such
Administrator did not act in good faith and in a manner in which such person
reasonably believed to be in the best interests of the Company, and in the case
of a criminal proceeding, had no reason to believe that the conduct complained
of was unlawful; provided, however, that within 60 days after institution of any
such action, suit or proceeding, such Administrator shall, in writing, offer the
Company the opportunity at its own expense to handle and defend such action,
suit or proceeding.
10.5 Loans. The Company may make loans to Optionees and Offerees as
the Administrator, in its discretion, may determine in connection with the
exercise of outstanding Stock Options and Purchase Rights granted under the
Plan. Such loans shall (i) be evidenced by promissory notes entered into by the
holders in favor of the Company; (ii) be subject to the terms and conditions set
forth in this Section 10.5 and such other terms and conditions, not inconsistent
with the Plan, as the Administrator shall determine; and (iii) bear interest, if
any, at such rate as the Administrator shall determine. In no event may the
principal amount of any such loan exceed the Exercise Price or the Purchase
Price less the par value of the shares of Stock covered by the Stock Option or
Purchase Right, or portion thereof, exercised by the Optionee or Offeree. The
initial term of the loan, the schedule of payments of principal and interest
under the loan, the extent to which the loan is to be with or without recourse
against the holder with respect to principal and applicable interest and the
conditions upon which the loan will become payable in the event of the holder's
termination of employment shall be determined by the Administrator; provided,
however, that the term of the loan, including extensions, shall not exceed 10
years. Unless the Administrator deems otherwise, when a loan shall have been
made, shares of Stock having a Fair Market Value at least equal to the principal
amount of the loan shall be pledged by the holder to the Company as security for
payment of the unpaid balance of the loan and such pledge shall be evidenced by
a pledge agreement, the terms of which shall be determined by the Administrator,
in its discretion; provided, however, that each loan shall comply with all
applicable laws, regulations and rules of the Board of Governors of the Federal
Reserve System and any other governmental agency having jurisdiction.
10.6 Special Terminating Events. If a Special Terminating Event
occurs, all Rights theretofore granted to such Rights holder may, unless earlier
terminated in accordance with their terms, be exercised by the Rights holder or
by his or her estate or by a person who acquired the right to exercise such
Right by bequest or by reason of the death or Disability of the Rights holder,
at any time within one year after the date of the Special Terminating Event.
Notwithstanding the foregoing, an Incentive Stock Option shall be exercisable at
any time within three months after the date of Retirement or termination of
employment of an Optionee.
10.7 Termination of Employment. Except as provided in this Section
10.7, no Right may be exercised unless the Right holder is then a Director of
the Company, or in the employ of the Company or any Parent or Subsidiary, or
rendering services as a consultant to the Company or any Parent or Subsidiary,
and unless he or she has remained continuously so employed or engaged since the
Date of Grant. If the employment or services of a Right holder shall terminate
(other than by reason of a Special Terminating Event), all Rights previously
granted to the Right holder which are exercisable at the time of such
termination may be exercised for the period ending 90 days after
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<PAGE> 14
such termination, provided, however, that if the employment or services of a
Rights holder is terminated "for cause," such Rights may be exercised for the
period ending 30 days after such termination; provided, further, that no Right
may be exercised following the date of its expiration. Nothing in the Plan or in
any Right granted pursuant to the Plan shall confer upon an employee any right
to continue in the employ of the Company or any Parent or Subsidiary or
interfere in any way with the right of the Company or any Parent or Subsidiary
to terminate such employment at any time.
10.8 Non-Transferability of Rights. Each Stock Option Agreement and
Stock Purchase Agreement shall provide that the Rights granted under the Plan
shall not be transferable otherwise than by will or by the laws of descent and
distribution, and the Rights may be exercised, during the lifetime of the Rights
holder, only by the Rights holder or by his or her guardian or legal
representative.
10.9 Regulatory Matters. Each Stock Option Agreement and Stock
Purchase Agreement shall provide that no shares shall be purchased or sold
thereunder unless and until (i) any then applicable requirements of state or
federal laws and regulatory agencies shall have been fully complied with to the
satisfaction of the Company and its counsel; and (ii) if required to do so by
the Company, the Optionee or Offeree shall have executed and delivered to the
Company a letter of investment intent in such form and containing such
provisions as the Board or Committee may require.
10.10 Recapitalizations. Each Stock Option Agreement and Stock Purchase
Agreement shall contain provisions to reflect the provisions of Article 8.
10.11 Delivery. Upon exercise of a Right granted under this Plan, the
Company shall issue Stock or pay any amounts due within a reasonable period of
time thereafter. Subject to any statutory obligations the Company may have, for
purposes of this Plan, thirty days shall be considered a reasonable period of
time.
10.12 Rule 16b-3. With respect to persons subject to Section 16 of the
Securities Exchange Act of 1934 (the "Exchange Act"), transactions under this
plan are intended to comply with all applicable conditions of Rule 16b-3 or its
successors under the Exchange Act. To the extent any provisions of the plan or
action by the Administrator fails to so comply, it shall be deemed null and
void, to the extent permitted by law and deemed advisable by the Administrator.
10.13 Other Provisions. The Stock Option Agreements and Stock Purchase
Agreements authorized under the Plan may contain such other provisions not
inconsistent with this Plan, including, without limitation, restrictions upon
the exercise of the Rights, as the Administrator may deem advisable.
11. Effective Date of Plan. The Plan shall become effective on the date on
which the Plan is adopted by the Board, subject to the approval by the Company's
shareholders, which approval must be obtained within one year from the date the
Plan is adopted by the Board.
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<PAGE> 15
12. Term of Plan. No Right shall be granted pursuant to the Plan on or
after June 30, 2005, but Rights theretofore granted may extend beyond that date.
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<PAGE> 16
STOCK OPTION AGREEMENT
(NON-STATUTORY STOCK OPTION)
This STOCK OPTION AGREEMENT (this "Option Agreement") is made and
entered into on the execution date of the Option Certificate to which it is
attached (the "Certificate"), by and between Document Sciences Corporation, a
Delaware corporation (the "Company"), and the Director, consultant or employee
named in the Certificate ("Optionee").
Pursuant to the Document Sciences Corporation 1995 Stock Incentive Plan
(the "Plan"), the Board of Directors of the Company (the "Board") has authorized
the grant to Optionee of a non-statutory stock option to purchase shares of the
Company's Common Stock, par value $0.001 per share (the "Common Stock"), upon
the terms and subject to the conditions set forth in this Option Agreement and
in the Plan.
The Company and Optionee agree as follows:
1. GRANT OF OPTION.
The Company hereby grants to Optionee the right and option
(the "Option"), upon the terms and subject to the conditions set forth in this
Option Agreement, to purchase all or any portion of that number of shares of the
Common Stock (the "Shares") set forth in the Certificate (the "Exercise Price").
2. TERM OF OPTION.
The Option shall terminate and expire on the Option Expiration Date set
forth in the Certificate, unless sooner terminated as provided herein.
3. EXERCISE PERIOD.
(a) Subject to the provisions of Paragraphs 3(b), 5, 7(c) and
7(d) of this Option Agreement, the Option shall become exercisable (in whole or
in part) upon and after the dates set forth under the caption "Exercise
Schedule" in the Certificate. The installments shall be cumulative; i.e., the
Option may be exercised, as to any or all Shares covered by an installment, at
any time or times after the installment first becomes exercisable and until
expiration or termination of the Option.
(b) Notwithstanding anything to the contrary contained in this
Option Agreement, the Option may not be exercised, in whole or in part, unless
and until any then-applicable requirements of all federal, state and local laws
and regulatory agencies shall have been fully complied with to the satisfaction
of the Company and its counsel.
4. EXERCISE OF OPTION.
There is no obligation to exercise the Option, in whole or in
part. The Option may be exercised, in whole or in part, only by delivery to the
Company of:
(a) written notice of exercise in form and substance identical
to Exhibit "A" attached to this Option Agreement stating the number of shares of
Common Stock then being purchased (the "Purchased Shares"); and
<PAGE> 17
(b) payment of the Exercise Price of the Purchased Shares,
either in cash, by check, by cancellation of any indebtedness of the Company to
Optionee for accrued and unpaid salary or, with the consent of the Administrator
of the Plan, by transfer to the Company of issued and outstanding shares of
Common Stock, or by any combination of the above methods of payment. If payment
is made, in whole or in part, by transfer to the Company of issued and
outstanding shares of Common Stock, the value (the "Fair Market Value") of such
shares shall be determined as follows: (i) if the Stock is listed on an exchange
or exchanges, or admitted for trading in a market system which provides last
sale data under Rule 11Aa3-1 of the General Rules and Regulations of the
Securities and Exchange Commission under the Securities and Exchange Act of
1934, as amended (a "Market System"), the last reported sales price per share on
the last business day prior to such date on the principal exchange on which it
is traded, or in such a Market System, as applicable; or if no sale was made on
such day on such principal exchange or in such a Market System, as applicable,
the last reported sales price per share on the most recent day prior to such
date on which a sale was reported on such exchange or such Market System, as
applicable; or (ii) if the Common Stock is not then traded on an exchange or in
such a Market System, the average of the closing bid and asked prices per share
for the Common Stock in the over-the-counter market as quoted on Nasdaq on the
day prior to such date; or (iii) if the Common Stock is not listed on an
exchange or quoted on Nasdaq, an amount determined in good faith by the
Administrator.
Following receipt of the notice and payment referred to above, the
Company shall issue and deliver to Optionee a stock certificate or stock
certificates evidencing the Purchased Shares; provided, however, that the
Company shall not be obligated to issue a fraction or fractions of a share of
its Common Stock, and may pay to Optionee, in cash or by check, the Fair Market
Value of any fraction or fractions of a share exercised by Optionee, which Fair
Market Value shall be determined as set forth in the preceding paragraph.
5. TERMINATION OF EMPLOYMENT.
(a) If Optionee shall cease to be a Director of the Company,
or to be in the employ of, or a consultant to the Company, any Subsidiary or any
Parent for any reason other than Optionee's death, permanent disability, or
retirement (a "Special Terminating Event"), Optionee shall have the right to
exercise the Option at any time within 90 days after the date Optionee ceased to
be a Director of the Company, or to be employed by, or to be a consultant to the
Company, and prior to the date of termination of the Option under Paragraph 2 of
this Option Agreement with respect to all shares with respect to which the
Option was exercisable at the date Optionee's employment terminated as to which
the Option had not previously been exercised; and to the extent unexercised at
the end of this period, the Option shall terminate. The Administrator, in its
sole and absolute discretion, shall determine whether or not authorized leaves
of absence shall constitute termination of employment for purposes of this
Option Agreement.
(b) If Optionee shall be terminated "for cause" by the
Company, any Subsidiary or any Parent, Optionee shall have the right to exercise
the Option at any time within 30 days after such termination of employment and
prior to the date of termination of the Option under Paragraph 2 of this Option
Agreement with respect to all Shares with respect to which the Option was
exercisable on the date his employment terminated as to which the Option had not
previously been exercised.
(c) If a Special Terminating Event occurs while Optionee is in
the employ of the Company, any Subsidiary or any Parent, then Optionee,
Optionee's executors or administrators or any person or persons acquiring the
Option directly from Optionee by bequest or inheritance, shall have the right to
exercise the entire Option at any time within one year after such death or
permanent disability, but not later than the Option Expiration Date; to the
extent the Option is unexercised at the end of that period, the Option will
terminated.
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<PAGE> 18
(d) For purposes of this Option Agreement, "cause" shall mean:
(i) with respect to Optionees of the Company:
(1) the failure or refusal by Optionee to perform his
duties to the Company; or
(2) Optionee's willful disobedience of any orders or
directives of the Board or any officers thereof acting under the authority
thereof or Optionee's deliberate interference with the compliance by other
employees of the Company with any such orders or directives; or
(3) the failure or refusal of Optionee to abide by or
comply with the written policies, standard procedures or regulations of the
Company; or
(4) any willful or continued act or course of conduct
by Optionee which the Board in good faith determines might reasonably be
expected to have a material detrimental effect on the Company or the business,
operations, affairs or financial position thereof; or
(5) the committing by the Optionee of any fraud,
theft, embezzlement or other dishonest act against the Company; or
(6) the determination by the Board of Directors of the
Company, in good faith and in the exercise of reasonable discretion, that
Optionee is not competent to perform his duties of employment; and
(ii) with respect to consultants, any material breach of
their consulting agreement with the Company.
(e) For purposes of this Option Agreement, "permanent
disability" shall mean permanent and total disability as defined by the
Administrator. Optionee shall not be considered permanently disabled unless he
furnishes proof of such disability in such form and manner, and at such times,
as the Administrator of the Plan may from time to time require.
6. RESTRICTIONS ON PURCHASED SHARES.
(a) Market Stand-Off.
(i) In connection with any underwritten public offering by
the Company of its equity securities pursuant to an effective registration
statement filed under the 1933 Act, including the Company's initial public
offering, Optionee shall not sell, make any short sale of, loan, hypothecate,
pledge, grant any option for the purchase of, or otherwise dispose or transfer
for value or otherwise agree to engage in any of the foregoing transactions with
respect to any Purchased Shares without the prior written consent of the Company
or its underwriters, for such period of time from and after the effective date
of such registration statement as may be requested by the Company or such
underwriters; provided, however, that in no event shall such period exceed one
hundred-eighty (180) days. This Section 6(a)(i) shall only remain in effect for
the two-year period immediately following the effective date of the Company's
initial public offering and shall thereafter terminate and cease to be in force
or effect. Optionee agrees to execute and deliver to the Company such further
documents or instruments as the Company reasonably determines to be necessary or
appropriate to effect the provisions of this Section 6(a).
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<PAGE> 19
(ii) In the event of any stock dividend, stock split,
recapitalization, or other change affecting the Company's outstanding Common
Stock effected without receipt of consideration, then any new, substituted, or
additional securities distributed with respect to the Purchased Shares shall be
immediately subject to the provisions of this Section 6(a), to the same extent
the Purchased Shares are at such time covered by such provisions.
(iii) In order to enforce the provisions of Section 6(a),
the corporation may impose stop-transfer instructions with respect to the
Purchased Shares until the end of the applicable stand-off period.
(b) Noncomplying Transfers Invalid.
(i) Any attempted Transfer which is not in full compliance
with this Paragraph (6) shall be null and void ab initio, and of no force or
effect.
7. ADJUSTMENTS UPON RECAPITALIZATION.
Subject to any required action by the shareholders of the
Company:
(a) If the outstanding shares of the Common Stock shall be
subdivided into a greater number of shares of the Common Stock, or a dividend in
shares of Common Stock or other securities of the Company convertible into or
exchangeable for shares of the Common Stock (in which latter event the number of
shares of Common Stock issuable upon the conversion or exchange of such
securities shall be deemed to have been distributed) shall be paid in respect of
the shares of Common Stock, the Exercise Price in effect immediately prior to
such subdivision or at the record date of such dividend shall, simultaneously
with the effectiveness of such subdivision or immediately after the record date
of such dividend, be proportionately reduced, and conversely, if the outstanding
shares of Common Stock shall be combined into a smaller number of shares of
Common Stock, the Exercise Price in effect immediately prior to such combination
shall, simultaneously with the effectiveness of such combination, be
proportionately increased.
(b) When any adjustment is required to be made in the Exercise
Price, the number of Shares purchasable upon the exercise of the Option shall be
adjusted to that number of Shares determined by (i) multiplying an amount equal
to the number of Shares purchasable on the exercise of the Option immediately
prior to such adjustment by the Exercise Price in effect immediately prior to
such adjustment, and then (ii) dividing that product by the Exercise Price in
effect immediately after such adjustment.
(c) In case of any capital reorganization, any
reclassification of the Common Stock (other than a change in par value or
recapitalization described in Paragraph 7(a) of this Option Agreement, or the
consolidation of the Company with, or sale of substantially all of the assets of
the Company to (which sale is followed by a liquidation or dissolution of the
Company), or merger of the Company with another person (a "Reorganization
Event"), the Administrator shall be obligated to determine whether the
Reorganization Event shall constitute a "Liquidity Event," and to deliver to
Optionee at least 15 days prior to such Reorganization Event a notice which
shall (i) indicate whether the Reorganization Event is a Liquidity Event and
(ii) advise Optionee of his or her rights pursuant to this Option Agreement. If
the Reorganization Event is determined to be a Liquidity Event, in its sole and
absolute discretion, the surviving corporation may, but shall not be obligated
to, (i) tender to Optionee Stock Options with respect to the surviving
corporation which shall contain terms and provisions that substantially preserve
the rights and benefits of this Option, and (ii) in the event that no Stock
Options have been tendered by the surviving corporation pursuant to the terms of
item (i) immediately above, Optionee shall have the right exercisable during a
ten-day period ending on the fifth day prior to the Reorganization Event to
exercise his or her Stock Options, to the
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extent that such Stock Options are then exercisable, in whole or in part, on the
condition, however, that the Reorganization Event is actually effected; and if
the Reorganization Event is actually effected, such exercise shall be deemed
effective (and, if applicable, the Optionee shall be deemed a shareholder with
respect to the Stock Options exercised) immediately preceding the effective time
of the Reorganization Event (or on the date of record for shareholders entitled
to share in the securities or property distributed in the Reorganization Event,
if a record date is set). If the Reorganization Event is not determined to be a
Liquidity Event, Optionee shall thereafter be entitled upon exercise of the
Option to purchase the kind and number of shares of stock or other securities or
property of the surviving corporation receivable upon such event by a holder of
the number of shares of the Common Stock which the Option entitles Optionee to
purchase from the Company immediately prior to such event, and in any such case,
appropriate adjustment shall be made in the application of the provisions set
forth in this Option Agreement with respect to Optionee's rights and interests
thereafter, to the end that the provisions set forth in this Option Agreement
(including the specified changes and other adjustments to the Exercise Price)
shall thereafter be applicable in relation to any shares or other property
thereafter purchasable upon exercise of the Option.
(d) In the event of the proposed dissolution or liquidation of
the Company, or in the event of any corporate separation or division, including,
but not limited to, a split-up, split-off or spin-off (each, a "Liquidating
Event"), the holder of any Stock Option then exercisable shall have the right to
exercise such Stock Option (at the price provided in the Stock Option Agreement)
subsequent to the Liquidating Event, and for the balance of its term, solely for
the kind and amount of shares of Stock and other securities, property, cash or
any combination thereof receivable upon such Liquidating Event by a holder of
the number of shares of Stock for or with respect to which such Stock Option
might have been exercised immediately prior to such Liquidating Event; or, in
the alternative, that each Stock Option granted under the Plan shall terminate
as of a date to be fixed by the Board; provided, however, that not less than 30
days written notice of the date so fixed shall be given to each Option Holder
and if such notice is given, each Option Holder shall have the right, during the
period of 30 days preceding such termination, to exercise the Stock Option as to
all or any part of the shares of Stock covered thereby, to the extent that such
Stock Option is then exercisable, on the condition, however, that the
Liquidating Event actually occurs; and if the Liquidating Event actually occurs,
such exercise shall be deemed effective (and, if applicable, the Option Holder
shall be deemed a shareholder with respect to the Stock Options exercised)
immediately preceding the occurrence of the Liquidating Event, or the date of
record for shareholders entitled to share in such Liquidating Event, if a record
date is set.
(e) To the extent that the foregoing adjustments related to
stock or securities of the Company, such adjustments shall be made by the
Administrator of the Plan, and its determination shall be final, binding and
conclusive.
(f) The provisions of this Paragraph 7 are intended to be
exclusive, and Optionee shall have no other rights upon the occurrence of any of
the events described in this Paragraph 7.
(g) The grant of the Option shall not affect in any way the
right or power of the Company to make adjustments, reclassifications,
reorganizations or changes in its capital or business structure, or to merge,
consolidate, dissolve or liquidate, or to sell or transfer all or any part of
its business or assets.
8. WAIVER OF RIGHTS TO PURCHASE STOCK.
By signing this Option Agreement, Optionee acknowledges and
agrees that neither the Company nor any other person or entity is under any
obligation to sell or transfer to Optionee any option or equity security of the
Company, other than the shares of Common Stock subject to the Option and any
other right or option to purchase Common Stock which was previously granted to
Optionee by the Board (or a committee thereof). By signing this
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<PAGE> 21
Option Agreement, Optionee specifically waives all rights which he or she may
have had prior to the date of this Option Agreement to receive any option or
equity security of the Company.
9. INVESTMENT INTENT.
Optionee represents and agrees that if he or she exercises the
Option in whole or in part and if at the time of such exercise the Plan and /or
the Purchased Shares have not been registered under the Act, he or she will
acquire the Shares upon such exercise for the purpose of investment and not with
a view to the distribution of such Shares, and that upon each exercise of the
Option he or she will furnish to the Company a written statement to such effect.
10. LEGEND ON STOCK CERTIFICATES.
Optionee agrees that all certificates representing the
Purchased Shares will be subject to such stock transfer orders and other
restrictions (if any) as the Company may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Common Stock is then listed and any applicable
federal or state securities laws, and the Company may cause a legend or legends
to be put on such certificates to make appropriate reference to such
restrictions.
11. NO RIGHTS AS SHAREHOLDER.
Except as provided in Section 8.1 of the Plan, Optionee shall
have no rights as a shareholder with respect to the Shares until the date of the
issuance to Optionee of a stock certificate or stock certificates evidencing
such Shares. Except as may be provided in Paragraph 7 of this Option Agreement,
no adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued.
12. MODIFICATION.
Subject to the terms and conditions and within the limitations
of the Plan, the Board (or a committee thereof) may modify, extend or renew the
Option or accept the surrender of, and authorize the grant of a new option in
substitution for, the Option (to the extent not previously exercised). No
modification of the Option shall be made which, without the consent of Optionee,
would cause the Option to fail to continue to qualify as an "incentive stock
option" within Section 422 of the Code or would alter or impair any rights of
the Optionee under the Option.
13. WITHHOLDING.
(a) The Company shall be entitled to require as a condition of
delivery of any Purchased Shares upon exercise of any Option that the Optionee
agree to remit, at the time of such delivery or later date as the Company may
determine, an amount sufficient to satisfy all federal, state and local
withholding tax requirements relating thereto, and Optionee agrees to take such
other action required by the Company to satisfy such withholding requirements.
(b) With the consent of the Administrator, and in accordance
with any rules and procedures from time to time adopted by the Administrator,
Optionee may elect to satisfy his or her obligations under Paragraph 13(a) above
by (i) directing the Company to withhold a portion of the Shares otherwise
deliverable (or to tender back to the Company a portion of the Shares issued
where the Optionee (a "Section 16(b) Recipient") is required to report the
ownership of the Shares pursuant to Section 16(a) of the Securities Exchange Act
of 1934, as amended, and has
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<PAGE> 22
not made an election under Section 83(b) of the Code (a "Withholding Right"));
or (ii) tendering other shares of the Common Stock of the Company which are
already owned by Optionee which in all cases have a Fair Market Value (as
determined in accordance with the provisions of Paragraph 4(b) hereof) on the
date as of which the amount of tax to be withheld is determined (the "Tax Date")
equal to the amount of taxes to be paid by such method.
(c) To exercise a Withholding Right, the Optionee must follow
the election procedures set forth below, together with such additional
procedures and conditions set forth in this Option Agreement or otherwise
adopted by the Administrator.
(i) the Optionee must deliver to the Company his or her
written notice of election (the "Election") and specify whether all or a stated
percentage of the applicable taxes will be paid in accordance with Paragraph
13(b) above and whether the amount so paid shall be made in accordance with the
"flat" withholding rates for supplemental wages or as determined in accordance
with Optionee's form W-4 (or comparable state or local form);
(ii) unless disapproved by the Administrator as provided
in Subsection (iii) below, the Election once made will be irrevocable; and
(iii) no Election is valid unless the Administrator has
the right and power, in its sole discretion, with or without cause or reason
therefor, to consent to the Election, to refuse to consent to the Election, or
to disapprove the Election; and if the Administrator has not consented to the
Election on or prior to the Tax Date, the Election will be deemed approved.
14. CHARACTER OF OPTION.
The Option is not intended to qualify as an "incentive stock
option" as that term is defined in Section 422 of the Code.
15. GENERAL PROVISIONS.
(a) FURTHER ASSURANCES. Optionee shall promptly take all
actions and execute all documents requested by the Company which the Company
deems to be reasonably necessary to effectuate the terms and intent of this
Option Agreement.
(b) NOTICES. All notices, requests, demands and other
communications under this Option Agreement shall be in writing and shall be
given to the parties hereto as follows:
(i) If the Company, to:
Document Sciences Corporation
6333 Greenwich Drive, Suite 120
San Diego, CA 92112
(ii) If to Optionee, to the address set forth in the
records of the Company,
or at such other address or addresses as may have been furnished by such either
party in writing to the other party hereto. Any such notice, request, demand or
other communication shall be effective (i) if given by mail, 72 hours after such
communication is deposited in the mail by first-class certified mail, return
receipt requested, postage prepaid,
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<PAGE> 23
addressed as aforesaid, or (ii) if given by any other means, when delivered at
the address specified in this subparagraph (b).
(c) TRANSFER OF RIGHTS UNDER THE OPTION AGREEMENT. The Company
may at any time transfer and assign its rights and delegate its obligations
under this Option Agreement to any other person, corporation, firm or entity,
including its officers, directors and stockholders, with or without
consideration.
(d) OPTION NON-TRANSFERABLE. Optionee may not sell, transfer,
assign or otherwise dispose of the Option except by will or the laws of descent
and distribution, and Stock Options may be exercised during the lifetime of the
Option Holder only by the Option Holder or by his or her guardian or legal
representative.
(e) SUCCESSORS AND ASSIGNS. Except to the extent specifically
limited by the terms and provisions of this Option Agreement, this Option
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors, assigns, heirs and personal representatives.
(f) GOVERNING LAW. THIS OPTION AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE
TO CONTRACTS MADE IN , AND TO BE PERFORMED WITHIN, THE STATE.
(g) THE PLAN. This Option Agreement is made pursuant to the
Plan, and it is intended, and shall be interpreted in a manner, to comply
therewith. Any provision of this Option Agreement inconsistent with the Plan
shall be superseded and governed by the Plan.
(h) MISCELLANEOUS. Titles and captions contained in this Option
Agreement are inserted for convenience of reference only and do not constitute a
part of this Option Agreement for any other purpose. Except as specifically
provided herein, neither this Option Agreement nor any right pursuant hereto or
interest herein shall be assignable by any of the parties hereto without the
prior written consent of the other party hereto.
The Signature Page to this Option Agreement consists of the last page
of the Certificate.
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<PAGE> 24
Exhibit "A"
NOTICE OF EXERCISE
(To be signed only upon exercise of the Option)
TO: Document Sciences Corporation
The undersigned, the holder of the enclosed Stock Option Agreement
(NonStatutory Stock Option), hereby irrevocably elects to exercise the purchase
rights represented by the Option and to purchase thereunder _______________*
shares of Common Stock of Document Sciences Corporation (the "Company"), and
herewith encloses payment of $_____________ and/or _________ shares of the
Company's Common Stock in full payment of the purchase price of such shares
being purchased.
Dated:____________________________
------------------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of
the Option)
------------------------------------------
(Please print name)
------------------------------------------
(Address)
* Insert here the number of shares called for on the face of the Option
(or, in the case of a partial exercise, the number of shares being exercised),
in either case without making any adjustment for additional Common Stock of the
Company, other securities or property which, pursuant to the provisions of the
Option, may be deliverable upon exercise.
<PAGE> 25
OPTION CERTIFICATE
(NON-STATUTORY STOCK OPTION)
THIS IS TO CERTIFY that Document Sciences Corporation, a Delaware
corporation (the "Company"), has granted to the person named below a
non-statutory stock option (the "Option") to purchase shares of the Company's
Common Stock, par value $0.001 per share, under its Stock Incentive Plan, as
follows:
Name of Optionee: "Optionee"
Address of Optionee: "Address1"
"Address2"
"Address3"
Number of Shares: "Shares"
Option Exercise Price: $"Price"
Date of Grant: "GrantDate"
Option Expiration Date: "ExpirationDate"
EXERCISE SCHEDULE: The Option shall become exercisable as follows:
25% on "VestDate", and 2.0833% of the total shares each month
thereafter.
SUMMARY OF OTHER TERMS: This option is defined in the Stock Option
Agreement (NonStatutory Stock Option) (the "Option Agreement") which is attached
to this Option Certificate (this "Certificate") as Annex I. This Certificate
summarizes certain of the provisions of the Option Agreement for your
information, but is not complete. Your rights are governed by the Option
Agreement, not by this summary. The Company strongly suggests that you carefully
review the full Option Agreement prior to signing this Certificate or exercising
the Option.
Among the terms of the Option Agreement are the following:
EMPLOYMENT: The Option Agreement does not obligate the Company to
retain you for any period of time. Unless otherwise agreed in writing, the
Company reserves the right to terminate any employee at any time, with or
without cause.
TERMINATION OF EMPLOYMENT: While the Option terminates on the Option
Expiration Date, it will terminate earlier if you cease to be employed by the
Company (or to hold office if you are a director). If your employment ends "for
cause," the Option terminates 30 days after the date of termination of
employment, and is exercisable during such 30 day period as to the portion of
the Option which had vested prior to the date of termination of employment. If
your employment ends due to death, disability or retirement, the Option
terminates one year after the date of death, disability or retirement, and is
exercisable in full during such one year period. In all other cases, the Option
terminates 90 days after the date of termination of employment, and is
exercisable during such 90 day period as to the portion of the Option which had
vested prior to the date of termination of employment. See Section 5 of the
Option Agreement.
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<PAGE> 26
TRANSFER: The Option is personal to you, and cannot be sold,
transferred, assigned or otherwise disposed of to any other person, except on
your death. See Section 15(d) of the Option Agreement.
EXERCISE: You can exercise the Option (once it is exercisable), in
whole or in part, by delivering to the Company a Notice of Exercise identical to
Exhibit "A" attached to the Option Agreement, accompanied by payment of the
Option Exercise Price, set forth above, for the Shares to be purchased. The
Company will then issue a certificate to you for the Shares you have purchased.
You are under no obligation to exercise the Option. See Section 4 of the Option
Agreement.
MARKET STAND-OFF: The Option provides that in connection with any
underwritten public offering by the Company, you may not sell or transfer any of
your Shares without the prior written consent of the Company or its underwriters
for a period of up to 180 days after the effective date of the offering. See
Section 6 of the Option Agreement.
ANTI-DILUTION PROVISIONS: The Option contains provisions which adjust
your Option to reflect stock splits, stock dividends, mergers and other major
corporate reorganizations which would change the nature of the Shares underlying
your Option. See Section 7 of the Option Agreement.
WAIVER: By signing this Certificate, you will be agreeing to all of the
terms of the Option Agreement, including those not summarized in this
Certificate. You will waive your rights to any other options or stock which may
have heretofore been promised to you. See Section 8 of the Option Agreement.
WITHHOLDING: The Company may require you to make any arrangements
necessary to insure the proper withholding of any amount of tax, if any,
required to be withheld by the Company as a result of the exercise of the
Option. See Section 13 of the Option Agreement.
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<PAGE> 27
AGREEMENT
Document Sciences Corporation, a Delaware corporation (the "Company"),
and the above-named person ("Optionee") each hereby agrees to be bound by all of
the terms and conditions of the Stock Option Agreement (Non-Statutory Stock
Option) which is attached hereto as Annex I and incorporated herein by this
reference as if set forth in full in this document.
------------------------------------------
Certificate Date
DOCUMENT SCIENCES CORPORATION
By: Tony N. Domit
Its: President and CEO
OPTIONEE
------------------------------------------
Signature
------------------------------------------
(Please print your name exactly as you wish
it to appear on any stock certificates issued
to you upon exercise of the Option.)
-3-
<PAGE> 1
EXHIBIT 10.6
TRANSFER AND LICENSE AGREEMENT
AGREEMENT made as of July 1,1992, between: XEROX CORPORATION, a New
York corporation having a principal place of business at Stamford, Connecticut
(hereinafter "XEROX"); and Document Sciences, Inc., a Delaware corporation
having a principal place of business at San Diego California (hereinafter
"DSI"); for good and valuable consideration, the parties hereby agree as
follows:
ARTICLE I. DEFINITIONS
1.1 The term "TRANSFERRED SOFTWARE' as used herein means the
identified software programs set forth in Appendix A, including all source
code, test files and maintenance systems.
1.2 The term "TRANSFERRED KNOW-HOW" means knowledge and expertise
held by XEROX employees including that reflected in written records existing as
of the date of this Agreement arising out of, or in connection with, the
TRANSFERRED SOFTWARE. "Written records" shall include, without limitation,
flow charts, designs, descriptions, drawings, blueprints, photographs,
specifications, memoranda, quality control methods, manufacturing techniques,
and methods test data, regardless of the medium of storage.
1.3 The term "XEROX GROUP" shall mean Xerox Corporation, Rank
Xerox Ltd., Fuji Xerox Co. Ltd. and any companies jointly owned by Xerox
Corporation and the Rank organization Ltd. as well as any company which has
forty percent (40%) of its issued voting stock owned or controlled, directly or
indirectly, by Xerox Corporation, Rank Xerox Ltd. Fuji Xerox Ltd., or any
company jointly owned by Xerox Corporation and the Rank Organization Ltd.
1.4 The term "FAR EAST COUNTRIES" shall mean the countries of
Japan, Taiwan, the Philippines, North Korea, South Korea, Thailand, Cambodia,
Laos, Vietnam, Indonesia, Australia, New Zealand, Malaysia, and Singapore.
ARTICLE II. COPYRIGHT ASSIGNMENT
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<PAGE> 2
2.1 XEROX hereby sells, assigns, grants, transfers, sets over,
and delivers to DSI, its successors and assigns, in all countries except the
FAR EAST COUNTRIES the copyrights in and to the TRANSFERRED SOFTWARE, the right
to secure copyright and renewals therefore and to hold such copyright and all
rights of whatsoever nature thereunder in perpetuity and the right to create
and own derivatives thereof.
2.2 Upon request of DSI, XEROX shall execute the short form
assignment of copyright in the TRANSFERRED SOFTWARE which is attached hereto as
Appendix B.
2.3 DSI agrees to place appropriate DSI copyright notice, in
accordance with the Universal Copyright Convention, on each copy of the
TRANSFERRED SOFTWARE and derivatives of the TRANSFERRED SOFTWARE in order to
protect the copyright of XEROX in previous versions.
2.4 DSI hereby grants to XEROX GROUP a non-exclusive royalty free
license to use and copy, for internal XEROX purposes only, and not for use,
sale or distribution to persons other than employees of XEROX, TRANSFERRED
SOFTWARE created prior to the date hereof.
2.5 DSI hereby agrees that only the specific computer programs
identified in this Agreement as transferred and licensed to DSI hereunder, are
so transferred and licensed and that continued use of any other programs not
specifically transferred or licensed to DSI, as of the date of this Agreement,
by the XEROX GROUP, including later derivatives thereof, may continue without
infringement of any of the TRANSFERRED SOFTWARE conveyed or software licensed
hereunder to DSI by XEROX. DSI further agrees that portions of the code
contained in TRANSFERRED SOFTWARE may be used by XEROX in products of XEROX
provided that no such code shall be used in any product which is sold in the
same channels and for the same purpose as the TRANSFERRED SOFTWARE for three
years from the date of this Agreement. Nothing in this Agreement shall prevent
continued use by XEROX of any code or product created by XEROX prior to the
date of this Agreement.
2.6 All DSI and XEROX rights and obligations pursuant to this
Agreement are subject to all licenses and other rights granted by XEROX prior
to the date of this Agreement, including but not limited to a right of first
refusal in FX in its Territory
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<PAGE> 3
to negotiate for exclusive rights in the FX territory for all DSI products
during the period XEROX is a majority owner of DSI.
ARTICLE III. COPYRIGHT LICENSE
3.1 XEROX grants to DSI a non-exclusive royalty-free, source code
license in all countries to use, adapt, modify and duplicate certain computer
software designated XPS (Xerox Publishing System) and EVMS (Ethernet on VMS).
Said license does not include the right to disclose said source code outside of
DSI nor to sublicense said source code to any other entity. DSI shall have the
right to create derivatives of XPS and to sell and distribute said derivatives
in object code format only.
3.2 DSI agrees that no lawsuit for infringement of any aspect of
the programs licensed by paragraph 3.1, shall be brought without the prior
written consent of XEROX.
3.3 DSI agrees to place appropriate DSI copyright notice, in
accordance with the Universal Copyright Convention, on each copy of the licensed
software and derivative works in order to protect the underlying copyright of
Xerox.
ARTICLE IV. KNOW-HOW
4.1 XEROX shall promptly disclose to DSI all TRANSFERRED KNOW-HOW
and grants to DSI the non-exclusive right to use said TRANSFERRED KNOW-HOW in
all countries except the FAR EAST. The parties agree that most TRANSFERRED
KNOW-HOW, on the date of this Agreement is already in the possession of DSI.
Such TRANSFERRED KNOW-HOW need not be disclosed by XEROX.
4.2 DSI shall promptly disclose to Xerox all or portions of DSI
technical information, as requested by Xerox during the term of this Agreement,
which is generated by DSI during the period DSI is majority owned by Xerox and
which is not primarily related to computer software. The original set of such
DSI technical information shall be kept in the possession of DSI. Such
technical information and all corresponding intellectual property, such as
patents, shall be owned and
3
<PAGE> 4
administered by Xerox and Xerox grants to DSI a non exclusive royalty free
license to said intellectual property worldwide except for the Far East.
4.3 During any period DSI is not majority owned by Xerox, DSI
shall promptly return to Xerox any Xerox technical information in written or
other tangible form (including all copies and excerpts) in DSI possession which
is not included in 1.1 TRANSFERRED SOFTWARE or is not 4.2 DSI generated
technical information.
4.4 Subject to 4.1, during any period DSI is not majority owned
by Xerox, DSI and DSI personnel shall have no more rights than an unaffiliated
third party requesting visitor status with respect to access to Xerox' or its
subsidiaries and affiliates facilities or their R & D or technology or
disclosure of their technical information.
4.5 During any period DSI is majority owned by Xerox, DSI shall
have access only to the Xerox TRANSFERRED KNOW HOW portion of Xerox technology,
and shall obtain Xerox TI know how only through or pursuant to the specific
authorization of a Xerox TI Gatekeeper to be named by Xerox, or his designee or
Xerox appointed replacements.
4.6 Subject to the Xerox efforts of 4.1 the cost of which shall be
borne by Xerox, DSI is responsible for providing and paying for all equipment,
tooling, labor, technology, buildings and the like necessary to effectively
exploit and exercise its rights pursuant to this Agreement. Xerox has no
obligation to provide technical assistance to DSI; and subject to 4.2, during
any period DSI is not majority owned by Xerox, DSI has no obligation to provide
technical assistance to Xerox.
4.7 All DSI technical information which is generated by DSI after
DSI ceases to be majority owned by Xerox, and all corresponding intellectual
property, shall be owned and administered by DSI. DSI is not obligated by this
Agreement to disclose any of such technical information to Xerox or any or its
subsidiaries or affiliates.
4.8 Except as provided in Paragraph 4.10 hereof, DSI shall not
communicate TRANSFERRED KNOW-HOW to any third party without the consent of
XEROX and shall use its best efforts to prevent inadvertent disclosure of
TRANSFERRED KNOW-HOW to any third party except as necessarily disclosed in
products sold by DSI. DSI
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use of the procedures it uses for its own confidential information shall
satisfy the requirements of the previous sentence.
4.9 The obligations of Paragraph 4.8 hereof shall terminate with
respect to any particular portion of the TRANSFERRED KNOW-HOW when DSI can
document that
(a) it was in the public domain at the time of XEROX
communication thereof to DSI,
(b) it entered the public domain through no fault of DSI
subsequent to the time of XEROX'S communication to DSI,
(c) it was in DSI'S possession free of any obligation of
confidence prior to the time of XEROX'S communication thereof to DSI,
(d) it was rightfully communicated to DSI free of any
obligation of confidence subsequent to the time of XEROX'S communication
thereof to DSI, or
(e) it was developed by employees or agents of DSI
independently of and without reference to any information or other information
that XEROX has disclosed in confidence to any third party; or
(i) when it is communicated by XEROX to a third
party free of any obligation of confidence; or
(ii) in any event, July 1, 1997.
4.10 To the extent TRANSFERRED KNOW-HOW of this Article IV., is
disclosed to third persons in connection with the manufacture of any products
or components for DSI, such disclosure shall not be a violation of the
obligation of 4.8, provided that such third persons, before any such disclosure
is made, furnish DSI a written undertaking of confidentiality of the same scope
as 4.8 and 4.9.
ARTICLE V. TRADEMARKS
5.1 Not Used
ARTICLE VI. LICENSE OF CUSTOMER TRAINING MATERIALS
6.1 XEROX hereby grants to DSI a non exclusive royalty free
license to all materials set forth in Appendix for the purpose of use by DSI in
connection with
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sale of said TRANSFERRED SOFTWARE and all derivatives thereof. DSI shall have
the right to create derivatives of said material set forth on Appendix and
shall own said derivatives.
ARTICLE VII ACCESS TO INFORMATION
7.1 XEROX hereby agrees to provide access for a period of not less
than three years to DSI, to the font metric information for fonts supplied to
Xerox customers by the Xerox Font Center which are supported by the TRANSFERRED
SOFTWARE, for internal use only by DSI for the sole purpose of supporting the
TRANSFERRED SOFTWARE. DSI shall have no right to relicense said fonts.
7.2 XEROX hereby agrees to provide access for a period of not less
than three years to DSI, to current file formats and internals for XFG - Xerox
Forms Generator, XPSM - Xerox Print Services Manager, XPPI - Xerox Pen Plotter
Interface, XDGI - Xerox DCF and GDDM Interface, RPMF - Remote Printer
Management Facility for internal use only and not for distribution.
ARTICLE VIII. RELEASE
8.1 XEROX hereby releases DSI, its officers, directors, employees
and agents from any obligations to Xerox only to the extent that they would
prevent them from using TRANSFERRED KNOW-HOW pursuant to this AGREEMENT, or any
other XEROX confidential information known to them to develop, have made, make,
use, sell or lease TRANSFERRED SOFTWARE products, but only for the benefit of
DSI, its successor and assigns.
ARTICLE IX. PURCHASE RIGHTS
9.1 XEROX GROUP shall have the right to purchase from DSI,
software products at the best price being offered by DSI for the same quantity
(including all terms and conditions) then being offered by DSI to any customer.
Purchase orders by the XEROX GROUP shall be accepted and goods shipped in
sequence with other orders received by DSI.
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ARTICLE X. ENFORCEMENT
10.1 Any legal action brought by either party against any person or
corporation to enforce any right granted pursuant to this agreement, shall be
initiated and prosecuted at its sole expense. Each party agrees to reimburse
the other for any expenses including salaries of the other party's employees,
incurred by the other party as a result of any such action against any party
other than the other party hereto, provided such action is taken with the prior
written consent of the initiating party.
ARTICLE XI. TERM AND TERMINATION
11.1 The effective date of this Agreement
11.2 The term of this Agreement shall be from the effective date to
the date of expiration of the last to expire of the rights granted hereunder.
11.3 In the event that either party shall at any time fail to abide
by any of the material conditions herein provided, the other party shall have
the right to notify such party of such default and that the other party intends
to terminate this Agreement unless such default is corrected. Unless such
default shall be corrected by such party within sixty (60) days from the
receipt by it of such notice, then, and in such event, this Agreement and the
licenses and rights granted by it shall thereupon automatically terminate. For
purposes of this Paragraph 11.3 products which have been manufactured but have
not been sold or leased at or before the termination of this Agreement may
thereafter be sold or leased by the party whose rights are terminated. Any
such termination shall not effect the transfer of the TRANSFERRED SOFTWARE.
11.4 In the event that either party hereto shall go into
liquidation, or seek the benefit of any bankruptcy or insolvency act, or a
receiver or trustee be appointed for the property or estate of such party, or
either party makes an assignment for the benefit of creditors, or in the event
DSI fails within three years of the date of this agreement to actively continue
the research and development, manufacture or sale of software products, and
whether any of the aforesaid events
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<PAGE> 8
be the outcome of the voluntary act of such party or otherwise, this Agreement
and the licenses and rights granted by it shall thereby automatically
terminate.
ARTICLE XII. REPRESENTATION AND WARRANTY
12.1 Each party represents and warrants that it has the right to
grant the rights, licenses, and assurances granted by it in this Agreement.
12.2 Nothing in this Agreement shall be construed as:
(a) A warranty or representation by XEROX as to the
validity or scope of any patent, trademark or copyright; or
(b) A warranty or representation that anything made or
used under any license granted herein is or will be free from infringement of
patents or copyrights of third persons; or
(c) An obligation to bring or prosecute actions or suits
against third parties for infringement of any copyright; or
(d) Conferring a right to use in advertising, publicity,
or otherwise any trademark or trade name of XEROX except as otherwise provided
herein; or
(e) Granting by implication, estoppel, or otherwise, any
licenses or rights under patents, trademarks or copyrights other than those
expressly licensed by this Agreement.
12.3 During any period DSI is not majority owned by Xerox, DSI
shall not use or refer to this Agreement or any provision of or rights granted
under this Agreement or the "Xerox" name or any Xerox trademark in any
publicity, advertising, or promotional activity without the express written
approval of a Xerox officer.
12.4 NEITHER PARTY MAKES ANY REPRESENTATIONS, EXTENDS ANY
WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED (INCLUDING BUT NOT LIMITED TO
THOSE OF TECHNICAL PERFORMANCE OR OF COMMERCIAL SUCCESS), OR ASSUMES ANY
RESPONSIBILITIES WHATEVER WITH RESPECT TO THE DEVELOPMENT, MANUFACTURE, USE,
SALE, LEASE OR OTHER DISPOSITION BY THE OTHER PARTY OR ITS SUBSIDIARIES OR
AFFILIATES OR THEIR VENDEES OR
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TRANSFEREES OF PRODUCTS INCORPORATING OR MADE BY THE USE OF COPYRIGHTS OR
INFORMATION LICENSED UNDER THIS AGREEMENT.
ARTICLE XIII. NOTICES
13.1 Except as either party may hereafter notify the other with
respect to itself, the addresses of the parties for purposes of this Agreement
shall be:
XEROX CORPORATION
Attention: Director, Software Licensing
P. 0. Box 1600
Stamford, Connecticut 06904
Document Sciences, Inc.
6333 Greenwich Drive, Suite 120
San Diego, California 92122
13.2 All notices, reports, payments and communications pursuant
hereto are to be delivered to the intended receiving party by hand or by mail,
postage prepaid, to the address provided in Paragraph 13.1 hereof, and shall be
deemed delivered when received.
ARTICLE XIV. SEVERABILITY
14.1 This Agreement is intended to be valid and effective
throughout the world and, to the extent permissible under applicable law shall
be construed in a manner to avoid violation of or invalidity under any
applicable law. Should any provision of this Agreement nevertheless be or
become invalid, illegal, or unenforceable under any applicable law, the other
provisions of this Agreement shall not be affected, and, to the extent
permissible under applicable law, any such invalid, illegal, or unenforceable
provision shall be deemed amended lawfully to conform to the intent of the
parties.
ARTICLE XV. MISCELLANEOUS
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<PAGE> 10
15.1 This Agreement embodies the entire understanding between the
parties as to the subject matter hereof and supersedes all previous discussions
and documents respecting such subject matter.
15.2 No amendment or modification to this Agreement shall be
effective or binding on either of the parties unless the same has been reduced
to writing and signed by authorized representatives of both parties.
15.3 The validity, construction and performance of this Agreement
shall be governed by and interpreted in accordance with the laws of the State
of California.
15.4 Notwithstanding any other provision of this Agreement, DSI
agrees that it will not export, directly or indirectly, any U.S. source
technical data acquired from XEROX, or any products using any such data, to
Afghanistan, Albania, Bulgaria, Cuba, Czechoslovakia, Estonia, German
Democratic Republic (including East Berlin), Hungary, Kampuchea, Laos, Latvia,
Libya, Lithuania, Mongolian People's Republic, North Korea, People's Republic
of China, Poland, Romania, Union of Soviet Socialist Republics, Vietnam and to
any other country for which the U.S. Government or any agency thereof at the
time of export requires an export license or other governmental approval,
without first obtaining the written consent to do so from the U.S. Department
of Commerce or other agency of the United States Government when required by an
applicable statute or regulation.
15.5 Public announcements made by either party relating to this
Agreement (except as may be required by DSI in connection with any financing of
DSI) shall not be made without the approval of the other party.
15.6 This Agreement may be assigned after one year from the
effective date by DSI to a third party in connection with and as part of the
sale, lease, assignment, or transfer of all or substantially all of DSI'S
assets and/or business, or upon merger or consolidation of DSI with and into
another entity. This Agreement, nor any rights or items assigned hereunder,
shall not otherwise be assignable by DSI without the prior written consent of
XEROX.
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to
be executed by their duly authorized representatives as of the date first above
written.
XEROX CORPORATION
By /s/ Roland Magnin
------------------------------
Title: Executive Vice President
Date 8-5-92
Document Sciences, INC.
By /s/ Tony N. Domit
------------------------------
Title: President & CEO
Date 8/12/92
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APPENDIX A: TRANSFERRED SOFTWARE
Source Code, Object Code, and all associated documentation as set forth below:
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FIRST AMENDMENT TO
TRANSFER AND LICENSE AGREEMENT
This FIRST AMENDMENT TO TRANSFER AND LICENSE AGREEMENT (the
"Amendment") is entered into this ____ day of August, 1994, by and between
XEROX CORPORATION ("XEROX"), a corporation of the State of New York, having its
principal place of business at Stamford, Connecticut and DOCUMENT SCIENCES
CORPORATION ("DSC"), a corporation of the State of Delaware, having its
principal place of business at San Diego, California.
RECITALS
A. WHEREAS, XEROX and DSC entered into that certain Transfer and
License Agreement dated as of July 1, 1992 (the "Agreement") pursuant to which,
among other provisions, XEROX (1) assigned to DSC the copyrights to certain
software programs described therein as Transferred Software; and (2) granted to
DSC a non-exclusive royalty-free source code license in certain software
described therein as XPS and EVMS;
B. WHEREAS, DSC is negotiating with Summit Ventures III, L.P. and
Summit Investors II, L.P. (collectively, "Summit Partners") to enter into a
financing transaction pursuant to which Summit Partners will invest $3.5
million in DSC in exchange for shares of a new series of Preferred Stock and
for shares of Common Stock; and
C. WHEREAS, the parties desire to amend the Agreement to clarify
the rights of DSC in certain software and to induce Summit Partners to enter
into and consummate its investment in DSC.
AGREEMENT
NOW THEREFORE, the parties hereto agree as follows:
1. AMENDMENT OF AGREEMENT. The Agreement is hereby
amended and revised by the terms of this Amendment, which are hereby
incorporated into the Agreement. The relationship of the parties shall
continue to be governed by the terms of the Agreement as amended hereby.
2. COPYRIGHT ASSIGNMENT.
(a) The language of Section 2.1 of the Agreement is
modified to delete the phrase "except the FAR EAST COUNTRIES" so that Section
2.1 shall read:
XEROX hereby sells, assigns, grants, transfers, sets over, and
delivers to DSI, its successors and assigns, in all countries the
copyrights in and to the
<PAGE> 14
TRANSFERRED SOFTWARE, the right to secure copyright and renewals
therefore and to hold such copyright and all rights of whatsoever
nature thereunder in perpetuity and the right to create and own
derivatives thereof.
(b) The following language is appended to the end of
Section 2.6:
DSC acknowledges and agrees that during such time that DSC is
a majority owned subsidiary of XEROX, Fuji Xerox Co., Ltd. ("FX") is
accorded a right to negotiate with DSC to exclusively distribute all
DSC products, including software, components, services and
publications, in the FAR EAST COUNTRIES before DSC shall offer such
product to any third party. DSC and FX will negotiate in good faith
and if acceptable terms and conditions are agreed in principle and in
writing within 60 days (or such other time as the parties may mutually
agree in writing) of receipt by FX of the offer by DSC for
exclusivity, no other third parties shall be given distribution
rights. If, however, FX is not interested in becoming the exclusive
distributor for such product, or if acceptable terms and conditions
cannot be reached within 60 days (or such other time as the parties
may mutually agree in writing), DSC may grant exclusive or
nonexclusive distribution rights for such product to other third
parties in the FX territory under terms and conditions which are as
favorable or more favorable to DSC in similar order volume and terms
and conditions as those offered to FX.
IN WITNESS WHEREOF, XEROX and DSC have caused this Amendment
to be executed by their respective, duty authorized officers or
representatives, effective as of the date set forth above.
XEROX CORPORATION
By: /s/ William F. Buehler
--------------------------------
William F. Buehler
Its: Senior Vice President and Chief
Staff Officer
Date: August 23, 1994
DOCUMENT SCIENCES CORPORATION
By: /s/ Tony N. Domit
-----------------------------------
Its: President and CEO
Date: 9/1/94
<PAGE> 1
EXHIBIT 10.7
DOCUMENT SCIENCES CORPORATION
STRATEGIC MARKETING ALLIANCE AGREEMENT
Whereas Document Sciences Corporation "DSC" may provide various value added
skills, such as systems management, systems integration, networking, image
management, and have insight concerning the identity of prospects in the
Territory, and have knowledge concerning the applicability of Xerox Products to
the business of such prospects; Whereas Xerox Corporation "Xerox" may provide
various value added skills, such as systems management, systems integration,
networking, image management, and have insight concerning the identity of
prospects. Whereas DSC and Xerox each wish to engage the other as a
non-exclusive, Strategic Marketing Associate within the Territory; and Whereas
each of Xerox and DCS is willing to accept such appointment by the other, and
to undertake to provide such services pursuant to the terms of this Agreement.
Now, therefore DSC and Xerox agree as follows:
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE TITLE
- ------- -----
<S> <C>
ARTICLE I DEFINITIONS
ARTICLE II TERM
ARTICLE III RESPONSIBILITIES OF THE PARTIES
ARTICLE IV PRODUCT TESTING AND DEMONSTRATION
ARTICLE V CUSTOMER SUPPORT
ARTICLE VI TRAINING
ARTICLE VII CONFIDENTIAL INFORMATION
ARTICLE VIII TRADEMARKS AND LOGOS
ARTICLE IX INDEMNIFICATION
ARTICLE X RIGHTS OR PARTIES UNDER DEVELOPED INTELLECTUAL PROPERTY RIGHTS
ARTICLE XI TERMINATION
ARTICLE XII GENERAL PROVISIONS
</TABLE>
DSC and Xerox agree that the terms and conditions of this Agreement will govern
DSC's participation and marketing activities under their mutual Strategic
Marketing Alliance Program. This Strategic Marketing Alliance Agreement is
entered into by and between DSC and Xerox, as of 9/1, 1993.
I. DEFINITIONS
1.01 Confidential Information. All confidential and proprietary information
which in any way relates to the function, description, or operation of Xerox
Products or DSC Products, including, without limitation, data, designs,
processes, specifications, drawings, schematics, software in both source and
object code and trade secrets, together with non-public information such as
that relating to suppliers, manufacturing techniques, service information, know
how, product program schedules, project plans, financial projections, business
correspondence, and such other similar non-public information.
1.02 Customer. An end-user customer in the Territory who purchases, leases
or licenses Xerox Products or DSC Products for its own use and not for
remarketing and who is neither a U.S. government agency, nor a prime contractor
or subcontractor with a U.S. government agency where such purchase, lease
and/or license relates to goods or services to be provided to such agency.
1.03 Effective Date. The date first above written.
1.04 Products. As the context requires, Xerox Products and/or DSC Products.
1.05 Program. Xerox/DSC Alliance Program.
1.06 Territory. Jurisdictions set forth in Exhibit A.
This is page one of a four page Agreement, exclusive of additional Exhibits and
Schedules. The parties acknowledge that they have read this Agreement and its
Exhibits and Schedules and agree to be bound by all terms and conditions.
DOCUMENT SCIENCES CORPORATION XEROX CORPORATION
/s/ Tony N. Domit /s/ Darryl R. Dobin
- ------------------------------------- --------------------------------------
TONY N. DOMIT DARRYL R. DOBIN
- ------------------------------------- --------------------------------------
Printed Name Printed Name
President & CEO Manager, Marketing Partnership Group
- ------------------------------------- --------------------------------------
Title Title
August 18, 1993 September 8, 1993
- ------------------------------------- --------------------------------------
Date Date
6333 Greenwich Dr. Suite 120 100 Clinton Avenue South - 08A
- ------------------------------------- --------------------------------------
Mailing Address Mailing Address
San Diego, Ca. 92122 Rochester, New York 14644
- ------------------------------------- --------------------------------------
(619) 625-2000 (619) 625-2021 (716) 423-5789 (716) 423-1106
- ------------------------------------- --------------------------------------
Phone Fax Phone Fax
Page 1 of 4
<PAGE> 2
1.07 DSC. Document Sciences Corporation, a Delaware Corporation.
1.08 DSC Products. Products and/or services identified in Schedule 1.
1.09 Xerox. Xerox Corporation, a New York corporation.
1.10 Xerox Products. Xerox Products identifed in Schedule 2.
II. TERM
2.01 Term. Subject to earlier termination as provided in Article XI, the
term of this Agreement will commence on the Effective Date and will be for a
period of two years, subject to automatic successive annual one-year renewal
periods.
III. RESPONSIBILITIES OF THE PARTIES
3.01 DSC Responsibilities. If DSC intends to refer Xerox Products to a
Customer in conjunction with DSC Products, DSC will notify the Xerox Sales
Representative responsible for that Customer of such marketing opportunity as
soon as practicable.
3.02 Xerox Responsibilities. If Xerox intends to refer DSC Products to a
Customer in conjunction with Xerox Products, Xerox will notify the DSC Sales
Representative responsible for that Customer of such marketing opportunity as
soon as practicable.
3.03 Joint Responsibilities. (a) Xerox and DSC will each appoint a manager
to oversee the Program. These managers will be responsible for resolving
issues that may from time to time arise, will meet at least twice per calendar
year, and will be responsible for planning and developing a marketing program
plan to facilitate the strategic promotion of Products;
(b) Xerox will supplement Schedule 2 and DSC will supplement Schedule 1 to add
their respective products which each desires to be subject to this Agreement. If
either party discontinues marketing any Products listed on the Schedules hereto,
that party will notify the other of such fact, and that within at least 120 days
from that date of notice, such Products will be deleted from the applicable
Schedule.
(c) Xerox and DSC each will
(i) independently set prices for Products.
(ii) except as otherwise agreed independently market Products to
Customers in the Territory, and
(iii) be responsible for installing and maintaining Products as well as
providing Customer training with respect to such Products;
(d) Xerox and DSC will honor the other's reasonable requests for consultations
and visits to each other's facilities for purposes of fulfilling the intent of
or performing our respective obligations under this Agreement;
(e) Xerox and DSC may develop Customer demonstrations and proposals, and may
conduct joint sales calls and Customer briefings;
(f) Xerox and DSC may incorporate the other's marketing proposals into
marketing proposals for their respective Products;
(g) Xerox and DSC may act as the other's prime contractor or subcontractor as
required by the Customer.
IV. PRODUCT TESTING AND DEMONSTRATION
4.01 Xerox and DSC agreed that each party will be responsible for the
technical and administrative support of its own Products and that Program
Managers will jointly develop procedures to facilitate the resolution of mutual
technical issues and problems regarding our Products.
V. CUSTOMER SUPPORT
5.01 Xerox and DSC agree that each party will be responsible for the
technical and administrative support of its own Products and that both parties
will jointly develop procedures to facilitate resolution of technical problems
affecting Products.
VI. TRAINING
6.01 DSC Product Training. DSC will provide to Xerox, on terms to be agreed
upon by DSC and Xerox, product training sufficient to provide a reasonable
number of Xerox sales representatives and analysts with a working knowledge of
DSC Products.
6.02 Xerox Product Training. Xerox will provide, on terms to be agreed upon
by DSC and Xerox, product training sufficient to provide a reasonable number of
DSC sales representatives and analysts with a working knowledge of Xerox
Products.
6.03 Documentation. The parties will provide to each other one set of
customer and sales representative training documentation and will grant the
other the restricted right to reproduce such documents solely for Customer
demonstrations and training of the our respective sales representatives and
sales management relative to Products.
VII. CONFIDENTIAL INFORMATION
7.01 We agree that it may be necessary from time to time to exchange
Confidential Information.
7.02 We agree to safeguard all Confidential Information received or to be
received from each other and will not disclose such information to any third
party without the prior authorization from the other, and will further restrict
circulation of Confidential Information without our own organization except to
the extent necessary to fulfill the purposes of this Agreement. All
Confidential Information will remain the property of the disclosing party.
7.03 In order to be subject to the provisions of this Article VIII,
Confidential Information which is to be disclosed after the Effective Date must
be disclosed either
(i) by written or electronic communication which is appropriately
labeled so as to give reasonable notice to anyone reading the communication
that the contents thereof are confidential and proprietary or
(ii) by oral disclosure, in which case the party making the disclosure
must, at the time the disclosure is made, state to the recipients thereof that
the contents of the disclosure are confidential and proprietary, and must
further reduce the confidential and proprietary contents of the disclosure to a
written or electronic communication, appropriately labeled as required by
clause (i) above, which is delivered to said recipients within ten (10) days
after the oral disclosure or execution of this Agreement, whichever is later.
7.04 The receiving party will be released from the obligations of Section
7.02 with respect to any particular portion of Confidential Information when:
Page 2 of 4
<PAGE> 3
a) the receiving party can document that:
(i) it was in the public domain at the time of the disclosing party's
communication thereof to the receiving party;
(ii) it entered the public domain through no fault of the receiving
party subsequent to the time of the disclosing party's communication thereof to
the receiving party,
(iii) it was in the receiving party's possession free of any
obligation of confidence at the time of the disclosing party's communication
thereof to the receiving party,
(iv) it was rightfully communicated to the receiving party free of any
obligation of confidence subsequent to the time of the disclosing party's
communication thereof to the receiving party, or
(v) it was independently developed by the receiving party without
reference to the Confidential Information of the disclosing party; or
(b) it is communicated by the disclosing party to a third party free of any
obligation of confidence; or
(c) it is after three (3) years after the disclosing party's communication
thereof to the receiving party.
7.05 All materials including, without limitation, documents, drawings,
models, apparatus, sketches, designs, and lists furnished to one party by
another and which are designated in writing to be the property of such party
will remain the property of such party and will be returned to such party
promptly at its requests with all copies made thereof.
VIII. TRADEMARKS AND LOGOS
8.01 The trademarks and trade names under which each party markets Products
will remain the exclusive property of such party. This Agreement gives the
other party no rights therein except that during the term of this Agreement
each party grants to the other a restricted license to reproduce such
trademarks and trade names in publications and under written terms and
conditions as may hereafter be approved by the granting party.
IX. INDEMNIFICATION
9.01 Intellectual Property. Each party represents and warrants to the other
that it has sufficient right, title and interest in and to the Products to
enter into this Agreement and further warrants that it is not aware that its
Products infringe any patent, copyright or other proprietary right of a third
party and that it has not been notified by a third party of a possibility that
its Products might infringe any patent, copyright or other proprietary right of
a third party.
9.02 General. Each party the "Indemnifying Party") will defend and hold
harmless the other party (the "Indemnified Party") from, and pay any amount
due, any claim, action or other proceeding brought against the Indemnified
Party arising from the use and marketing of the Indemnifying Party's Products,
providing that the Indemnified Party promptly notified the Indemnifying Party
in writing of any action or claim, allows the Indemnifying Party at its
expense, to direct the defense, gives the Indemnifying Party sufficient
information in the Indemnified Party's possession and reasonable assistance
required to defend such suit, claim or proceeding, but at no out-of-pocket
expense to the Indemnified Party, and allows the Indemnifying Party to pay any
judgment, provided further that the Indemnifying Party will have no liability
for any claim, action or other proceeding based upon acts or omissions by the
Indemnified Party or for settlements or costs incurred without the knowledge of
the Indemnifying Party. To avoid infringement the Indemnifying Party may, at
the Indemnifying Party's option, and at no charge to the Indemnified Party,
obtain a license, or modify the Indemnifying Party's Products so that they no
longer infringe, but only if the modification is still an equivalent of the
Indemnifying Party's Products, or substitute an equivalent of the Indemnifying
Party's Products.
X. RIGHTS OF PARTIES UNDER
DEVELOPED INTELLECTUAL PROPERTY RIGHTS
10.01. Unless otherwise agreed in writing by the parties, ownership of any
writings, discoveries, inventions or innovations ("Improvements") arising out
of the cooperation of the parties pursuant to this Agreement will reside with
the party whose employee(s) or agent(s)
(i) first conceived the Improvement, in the case of patentable
Improvements, and
(ii) in the case of copyrightable Improvements, first fix the
Improvement in any tangible medium of expression, now known or later developed,
from which it can be perceived, either directly or with the aid of a machine or
device.
10.02 Each party who is an owner of an Improvement will be responsible in
its sole discretion for conducting its own plans and program relative to filing
for and maintaining patent rights, trade secrets, mask works, copyrights or
other registerable or applied for intellectual property rights in one or more
countries of the world.
XI. TERMINATION
11.01 Termination for Cause. (a) Either party may terminate this Agreement
upon written notice of termination to the other party in any of the following
events:
(i) the other party materially breaches this Agreement and such breach
remains uncured for thirty (30) days following written notice of breach by the
terminating party; provided, however that in the case of a repeat of a material
breach earlier cured, the new cure period will be ten (10) days; or
(ii) causes beyond the reasonable control of the other party delay its
performance for more than thirty (30) days; provided, however, that in the case
of a repeated force majeure delay earlier cured, the new cure period will be
ten (10) days; or
(iii) a petition for relief under any bankruptcy legislation is filed
by or against the other party, or the other party makes an assignment for the
benefit of creditors, or a receiver is appointed for all or a substantial part
of the other party's assets, and such petition, assignment or appointment is
not dismissed or vacated within thirty (30) days; or
(iv) change in majority ownership or change of control of the other
party.
(b) Either party may terminate this Agreement without cause, upon ninety days
written notice of termination to the other party.
Page 3 of 4
<PAGE> 4
11.02 Survival. The provisions of this Agreement will, to the extent
applicable, survive the expiration or any termination hereof.
XII. GENERAL PROVISIONS
12.01 LIMITATION OF LIABILITY. EXCEPT AS SET FORTH HEREIN, NEITHER PARTY
WILL BE LIABLE TO THE OTHER FOR ANY INDIRECT, SPECIAL, CONSEQUENTIAL OR
INCIDENTAL DAMAGES, WHETHER ARISING IN CONTRACT OR IN TORT (INCLUDING BUT NOT
LIMITED TO NEGLIGENCE) ARISING OUT OF OR RELATING TO THIS AGREEMENT.
12.02 Relationship of the Parties. (a) We agree that we are independent
parties and neither of us is authorized to make any commitment or
representation on the other's behalf.
(b) During the term of this Agreement, should the term "partnership", "Partner"
or "development partner" be used to describe the Cooperative development
relationship, we agree to make it clear to third parties that these terms refer
only to the spirit of cooperation between us and do not describe or expressly
or impliedly create the legal status of partners or joint venturers.
12.03 Government Compliance. Each party will comply fully with all federal,
state and local laws and regulations relating to its obligations under this
Agreement.
12.04 Ethical Standards. Each party agrees that, with respect to its
performance under this Agreement including any interaction with any employee of
the other party pursuant to this Agreement, such party will not:
(a) give or offer to give any gift or benefit to said employee,
(b) solicit or accept any information, data services, equipment, or commitment
from said employee unless same is
(i) required or permitted to be solicited or accepted under a contract
or other arrangement between Xerox and DSC, or
(ii) made pursuant to a written disclosure agreement between Xerox and
DSC, or
(iii) specifically authorized in writing by the employee's management,
(c) solicit or accept favoritism from said employee, or
(d) enter into any outside business relationship with said employee without
full disclosure to, and prior approval of, the employee's management. As used
herein, "employee" includes members of the employee's immediate family had
household, plus any other person who is attempting to benefit from his or her
relationship to the employee. A "party" in this context includes all employees
and agents of the party. "Gift or benefit" includes money, goods, services,
discounts, favors and the like in any form but excluding low value advertising
items such as pens, pencils and calendars. "Favoritism" means partiality in
promoting the interest of a party over that of other vendors. Such activity by
either party will constitute breach of this Agreement by that party.
12.05 Force Majeure. Except as otherwise provided herein, neither party will
be liable to the other for its failure to perform any of its obligations
hereunder during any period in which such performance is delayed by
circumstances beyond its reasonable control, provided that the party
experiencing such delay promptly notifies the other party of the delay. In the
event that such a delay by a party continues for more than sixty (60) days, the
other party may, at its sole option, and in addition to its other rights and
remedies under this Agreement or at law or in equity, suspend its obligations
under this Agreement during the period of delay.
12.06 Headings. The headings and titles of the Articles of this Agreement
are inserted for convenience only and will not affect the construction or
interpretation of any provision.
12.07 Amendment. This Agreement may be amended only by a written agreement
duly signed by authorized representatives of both parties.
12.08 Assignment. Neither party will assign this Agreement or any rights and
obligations thereunder to any third party without the express written
permission of the other party, except that each party may assign this Agreement
to an entity directly or indirectly controlling, controlled by, or under common
control with Xerox.
12.09 Severability. If any provision of this Agreement is held invalid by
any law, rule, order or regulation of any government, or by the final
determination of any state or federal court, such invalidity will not affect
the enforceability of any other provisions not held to be invalid.
12.10 Waiver. Any delay by either party to exercise any right or remedy under
this Agreement will not be construed to be a waiver of any other right or
remedy hereunder. All of the rights of either party under this Agreement will
be cumulative and may be exercised separately or concurrently.
12.11 Alternate Dispute Resolution. The parties will attempt to resolve any
dispute, controversy or claim arising under this Agreement in a non-judicial
manner and forum. Any such dispute, controversy, or claim hereunder will be
initially referred for resolution to the respective parties' Program Managers
appointed pursuant to this Agreement. If such individuals cannot resolve the
matter within sixty (60) days after the matter in dispute has been submitted to
them for resolution, then the matter will be referred to one corporate
Vice-President of each of the parties for resolution within a subsequent sixty
day period.
12.12 Publicity. Neither party will publicly disclose any information
concerning this Agreement without the prior written consent of the other party.
12.13. Controlling Law. This Agreement will be governed by and construed in
all respects in accordance with the laws of the State of California.
12.14. Entire Agreement. This Agreement constitutes the entire agreement of
the parties as to the subject matter hereof and supersedes any and all prior
oral or written memoranda, understandings and agreements as to such subject
matter.
12.15 Notices. Any notice which may be or is required to be given under this
Agreement will be written. Any written notices will be sent by registered mail
or certified mail, postage prepaid, return receipt requested.
Page 4 of 4
<PAGE> 5
All such notices will be deemed to have been given
when received, properly addressed pursuant to the
addresses below:
Xerox Corporation
Xerox Square - 08A
- --------------------------------------------------
100 Clinton Avenue South
- --------------------------------------------------
Rochester, New York 14644
- --------------------------------------------------
Attention: Darryl R. Dobin
----------------------------------------
Document Sciences Corporation
- --------------------------------------------------
6333 Greenwich Drive
- --------------------------------------------------
Suite 120
- --------------------------------------------------
San Diego, California 92122
- --------------------------------------------------
Attention: Vice President - Sales and Marketing
----------------------------------------
Page 5 of 4
<PAGE> 6
STRATEGIC MARKETING ALLIANCE AGREEMENT
EXHIBIT A
TERRITORY AND FEE SCHEDULE
FOR THE UNITED STATES OF AMERICA
July 1, 1993
DSC and Xerox Corporation agree that the terms and conditions of this Exhibit
A, an attachment to the Strategic Marketing Alliance Agreement, will govern
their participation and marketing activities within the Territory defined below.
I. DEFINITIONS
1.1 QUALIFIED DSC REFERRAL. The effort undertaken by DSC in marketing Xerox
Products to a Customer where, at a minimum, DSC will: (i) establish contact
with the Customer; (ii) provide information regarding Xerox Products; (iii)
maintain contact with the Customer throughout the sales cycle; (iv) offer to
provide complementary products and or services to support Xerox Products, and
(v) provide Xerox with a prospect name as reflected on Schedule 3, "QUALIFIED
DSC REFERRAL FORM," the form of which will be mutually agreed to, and which
shall be duly signed by DSC's authorized representative and the authorized
Xerox representative.
1.2 QUALIFIED XEROX REFERRAL. The effort undertaken by Xerox in marketing DSC
Products to a Customer where, at a minimum, Xerox will: (i) establish contact
with the Customer; (ii) provide information regarding DSC Products; (iii)
maintain contact with the Customer throughout the sales cycle; (iv) offer to
provide complementary products and or services to support DSC Products, and
(v) provide DSC with a prospect name as reflected on Schedule 4, "QUALIFIED
XEROX REFERRAL FORM," the form of which will be mutually agreed to, and which
shall be duly signed by Xerox authorized representative and the authorized
DSC representative.
1.2 TERRITORY. The jurisdictions of the United States of America, and its
territories and possessions.
1.3 DSC. Document Sciences Corporation, a Delaware corporation.
1.4 DSC PRODUCTS. Those products and/or services identified in Schedule 1.
1.5. PRODUCTS. As the context requires, Xerox Products and/or DSC Products.
1.6. XEROX. Within the context of this Exhibit A, means Xerox Corporation
operations within the United States of America, and its territories and
possessions.
1.7 XEROX PRODUCTS. Those Xerox Products identified in Schedule 2.
II. COMMISSIONS
2.1 COMMISSIONS.
(a) If DSC makes a Qualified DSC Referral to a Customer in the Territory and
Xerox either sells, licenses to or leases (with an initial term of one year) or
licenses to such Customer one or more newly installed Xerox Products where the
Customer's purchase, lease or license or such Xerox Products was based upon a
Qualified Referral, Xerox will either pay a commission equal to a percentage of
the price invoiced to the Customer for such purchase, lease or license net of
any assessed taxes, duties, freight and insurance charges; or a fixed dollar
fee, in each case as set forth in Section 2.4 below.
This Exhibit A (with additional Schedules) is an attachment to the Strategic
Marketing Alliance Agreement. The parties acknowledge that they have read the
Agreement as well as this Exhibit and its Schedules, and agree to be bound by
all terms and conditions.
Document Sciences Corporation XEROX CORPORATION
/s/ TONY N. DOMIT /s/ DARRYL R. DOBIN
- ---------------------------------- -------------------------------------
By By
Tony N. Domit Darryl R. Dobin
- ---------------------------------- -------------------------------------
Printed Name Printed Name
President & CEO Manager, Marketing Partnership Group
- ---------------------------------- -------------------------------------
Title Title
Aug. 18, 1993 September 8, 1993
- ---------------------------------- -------------------------------------
Date Date
6333 Greenwich Dr., Suite 120 100 Clinton Avenue South-08A
- ---------------------------------- -------------------------------------
Mailing Address Mailing Address
San Diego, CA 92122 Rochester, New York 14644
- ---------------------------------- -------------------------------------
(619) 625-2000 (619) 625-2021 (716) 423-5789 (716) 423-1106
- ---------------------------------- -------------------------------------
Phone Fax Phone Fax
Page 1
<PAGE> 7
(b) If Xerox makes a Qualified Xerox Referral to a Customer in the Territory
and DSC either sells, licenses to or leases (with an initial term of one year)
or licenses to such Customer one or more newly installed DSC Products where the
Customer's purchase, lease or license of such DSC Products was based upon a
Qualified Xerox Referral, DSC will either pay a commission equal to a
percentage of the price invoiced to the Customer for such purchase, lease or
license net of any assessed taxes, duties, freight and insurance charges; or a
fixed dollar fee, in each case as set forth in Section 2.5 below.
(c) Either party may, at any time during the term hereof and upon written
notice to the other, amend this Exhibit A to change the commission percentage
or fixed dollar amount for any of that party's Products; provided, however,
that any such change shall be applicable only as to commissions earned after
the effective date of the change.
2.2 PAYMENT. Each party's obligation to pay fees shall accrue upon
installation and acceptance of its Products by the Customer. Each party will
use reasonable efforts to pay such fees to the other within sixty (60) days
after the end of each calendar quarter during which the installation and
acceptance of the party's Product occurred. Each party shall provide to the
other within 60 days of the end of each calendar quarter an installation report
reflecting the number of units of Products installed as the result of a
Qualified Referral by the other, the amount of fees payable for each Product,
and the Customer name and the installation address of the Products for which a
fee is payable.
2.3 REVERSAL. In the event that either party for any reason reverses a sale,
lease and/or license transaction of any Product as to which a commission has
been paid under this Agreement, and such reversal occurs within six (6) months
of the date the Customer accepted such Product following its installation, then
the party shall debit the amount of such commission against the next quarterly
payment to be made by that party under Section 2.1.
Page 2
<PAGE> 8
2.4 COMMISSION SCHEDULE FOR XEROX PRODUCTS:
(A) Commission Schedule for Electronic Printing Products When Sold or Leased
<TABLE>
<CAPTION>
Model Number/Product Name
- -------------------------
Single Unit
Reference
Sale Fee
-----------
<S> <C>
Xerox 4135 Production Laser Printing System $10,400
Xerox 9790 Laser Printing System 10,400
Xerox 8790 Laser Printing System 6,000
Xerox 4090 Laser Printing System 6,700
Xerox 4850 Color Laser Printing System 5,000
Xerox 4650 Professional Printing System 5,300
Xerox 4050 Laser Printing System 3,300
Xerox 4235 Laser Printing System 1,200
Xerox 3700 Distributed Electronic Printer 700
Xerox 4197 Electronic Printer 225
DocuTech Production Publisher
Xerox 4700 Color Document Printer
</TABLE>
(B) Commission Schedule for Electronic Printing Products Which Qualify Under
the Xerox Trade-In Program (XTI)
<TABLE>
<CAPTION>
Model Number/Product Name
- -------------------------
Single Unit
Trade-In Fee (XTI)
------------------
<S> <C>
Xerox 4135 Production Laser Printing System $7,600
Xerox 9790 Laser Printing System 8,000
Xerox 8790 Laser Printing System 3,900
Xerox 4090 Laser Printing System 4,600
Xerox 4850 Color Laser Printing System 3,800
Xerox 4650 Professional Printing System 4,200
Xerox 4050 Laser Printing System 2,000
Xerox 4235 Laser Printing System 800
Xerox 3700 Distributed Electronic Printer 500
Xerox 4197 Electronic Printer 200
DocuTech Production Publisher
Xerox 4700 Color Document Printer
</TABLE>
Page 3
<PAGE> 9
2.5 COMMISSION SCHEDULE FOR DSC PRODUCTS:
The commission is 10% of the invoiced initial license fee. The list of DSC
products and their Initial License Fees are provided below for reference.
MAINFRAME AND DEPARTMENTAL PRODUCTS
PRODUCTS MAINFRAME DEPARTMENTAL
CLASS CLASS
CompuSet 6.0 $32,500 $22,500
CompuPrep 10,000 6,000
Emitter-Meta Code 6,000 4,000
Emitter-XES 6,000 4,000
Emitter-Postscript 6,000 4,000
Emitter-Interpress 6,000 4,000
Importer-PCL 6,000 4,000
IMG Consolidator 3,000 2,000
NetPrint 3,000 2,000
HostPrint 2,000 1,000
Replacement for XICS 10,000 8,000
5.x
Downsize Migration 5,000 4,000
PCL Transformer 15,000 10,000
DESKTOP AND NETWORK PRODUCTS
Number of Licenses 1 2 3 4 5
PRODUCT
CompuSet 6.0 $15,000 $26,000 $33,000 $40,000 $45,000
CompuPrep 3,000 5,000 7,000 8,000 9,000
Emitter-Meta Code 2,250 4,000 5,000 5,500 6,000
Emitter-XES 2,250 4,000 5,000 5,500 6,000
Emitter-Postscript 2,250 4,000 5,000 5,500 6,000
Emitter-Interpress 2,250 4,000 5,000 5,500 6,000
Importer-PCL 2,250 4,000 5,000 5,500 6,000
Importer-TIFF 2,250 4,000 5,000 5,500 6,000
IMG Consolidator 2,000 3,000 4,000 4,500 5,000
NetPrint 2,000 3,000 4,000 4,500 5,000
PCL Transformer 7,000 12,000 16,000 19,000 21,00
COMPUSERIES PRODUCTS
Number of Licenses 1 2 3 4 5
PRODUCT
CompuBuild $5,000 $8,500 $11,000 $13,500 $15,000
CompuSpec 4,000 7,500 9,500 11,000 12,000
CompuMerge 3,000 5,500 7,500 8,500 9,000
CompuView 1,000 2,000 2,750 3,500 4,000
CompuPack 10,000 17,000 22,000 27,000 30,000
Page 4
<PAGE> 10
USCO PRINTING SYSTEMS REVISED FEE SCHEDULE
EFFECTIVE 4-1-94 FOR NEW CONTRACTS
EFFECTIVE 5-1-94 FOR EXISTING CONTRACTS
<TABLE>
<CAPTION>
2.4 Commission Schedule for Electronic Printing (B) Commission Schedule for Electronic Printing Products
Products When Sold or Leased Which Qualify Under the Xerox Trade-in Program (XTI)
Model Number/Product Name Model Number/Product Name
- ------------------------- SINGLE UNIT ------------------------- SINGLE UNIT
REFERENCE SALE FEE TRADE-IN FEE (XTI)
<S> <C> <C> <C>
Xerox 4135 non/DDS Prod. Laser Printing Sys. $9,900 Xerox 4135 non/DDS Prod. Laser Printing Sys. $6,500
Xerox 4135 DDS Prod. Laser Printing Sys. $6,100 Xerox 4135DDS Laser Printing System 0
Xerox 9790 MICR Laser Printing System 5,000 Xerox 9790 MICR Laser Printing System 0
Xerox 4890 H/L Color Laser Printing System 7,300 Xerox 4890 H/L Color Laser Printing System 5,600
Xerox 4850 H/L Color Laser Printing system 4,500 Xerox 4850 H/L Color Laser Printing System 3,500
Xerox 4450 Laser Printing System 4,500 Xerox 4450 Laser Printing System 3,500
Xerox 4050 (reg) Laser Printing System 4,500 Xerox 4050 (reg) Laser Printing System 3,500
Xerox 4050 (budget leas) Laser Printing System 2,750 Xerox 4050 (budget leas) Laser Printing System 0
Xerox 4235 Laser Printing System 2,500 Xerox 4235 Laser Printing System 1,500
Xerox 4700 Laser Printing System 2,500 Xerox 4700 Laser Printing System 1,500
Xerox 4220 MRP 800 Xerox 4220 MRP 675
Xerox 4219 MRP 360 Xerox 4219 MRP 300
Xerox 4215 MRP 300 Xerox 4215 MRP 240
Xerox 4197 Electronic Printer 250 Xerox 4197 Electronic Printer 180
________________________________________________________
</TABLE>
Page 2 of 6
<PAGE> 11
Drag Schedule 11/2/95
<TABLE>
<CAPTION>
Product New Drag Trade Drag
- ------------------------------------------------------------------------
<S> <C> <C>
4135 Production Laser Printing System $ 9,900 $6,500
- ------------------------------------------------------------------------
4135 DDS Prod Laser Printing System $ 6,100 $N/A
- ------------------------------------------------------------------------
4890 Laser Printing System $ 7,300 $5,600
- ------------------------------------------------------------------------
9790 MICR Printer $ 5,000 $N/A
- ------------------------------------------------------------------------
4850 Highlight Color Laser Printing System $ 4,500 $3,500
- ------------------------------------------------------------------------
4450 Laser Printing System $ 4,500 $3,500
- ------------------------------------------------------------------------
4050 Laser Printing System $ 4,500 $3,500
- ------------------------------------------------------------------------
4050 Budget Lease Laser Printing System $ 2,750 $N/A
- ------------------------------------------------------------------------
4235 Laser Printing System $ 2,500 $1,500
- ------------------------------------------------------------------------
4220 MRP $ 800 $ 675
- ------------------------------------------------------------------------
4219 MRP $ 360 $ 300
- ------------------------------------------------------------------------
4215 MRP $ 240 $ 240
- ------------------------------------------------------------------------
4197 MICR Printer $ 250 $ 180
- ------------------------------------------------------------------------
DocuTech Production Publisher 135 $11,700 $3,000
- ------------------------------------------------------------------------
DocuTech Network Publisher 135 (upgrade) $ 3,500 $N/A
- ------------------------------------------------------------------------
DocuTech Network Publisher 135 $12,600 $3,500
- ------------------------------------------------------------------------
DocuTech Network Server $ 1,800 $N/A
- ------------------------------------------------------------------------
DocuTech Media Server $ 1,500 $N/A
- ------------------------------------------------------------------------
DocuTech Extended Storage $ 2,400 $N/A
- ------------------------------------------------------------------------
DocuTech Signature Booklet Maker $ 3,600 $N/A
- ------------------------------------------------------------------------
DocuPrint 390 $ 8,400 $6,400
- ------------------------------------------------------------------------
DocuPrint 350 Highlight Color $ 7,500 $5,700
- ------------------------------------------------------------------------
DocuPrint 390 Highlight Color $12,000 $9,000
- ------------------------------------------------------------------------
DocuColor Scanner $ 2,600 $N/A
- ------------------------------------------------------------------------
5775 Digital Color Copier/Printer $ 2,100 $1,500
- ------------------------------------------------------------------------
5775 Digital Color Copier/Printer (Upgrade) $ 3,500 $N/A
- ------------------------------------------------------------------------
EFI FIERY Controller 150 $ 1,800 $N/A
- ------------------------------------------------------------------------
EFI FIERY Controller 200 $ 2,200 $N/A
- ------------------------------------------------------------------------
4700 Color Laser Printing System $ 2,500 $1,500
- ------------------------------------------------------------------------
</TABLE>
<PAGE> 12
COOPERATIVE MARKETING AGREEMENT
EXHIBIT A
JOINT ENGAGEMENT FEE SCHEDULE
FOR THE UNITED STATES OF AMERICA
JULY 1, 1994
DSC and Xerox Corporation agree that the terms and conditions of this Exhibit
A, an attachment to the Cooperative Marketing Agreement, will govern their
participation and marketing activities within the Territory defined below.
I. DEFINITIONS
1.1 QUALIFIED DSC JOINT ENGAGEMENT. The effort undertaken by You in
marketing Xerox Products to a Customer where, at a minimum, You will: (i)
establish contact with the Customer; (ii) provide information regarding Xerox
Products; (iii) maintain contact with the Customer throughout the sales cycle;
(iv) offer to provide complementary products and or services to support Xerox
Products, and (v) provide Xerox with a prospect name as reflected on Schedule
3, "JOINT ENGAGEMENT TEAMING AGREEMENT," which will be mutually agreed to, and
which shall be duly signed by Your authorized representative and the authorized
Xerox representative.
1.2 QUALIFIED XEROX JOINT ENGAGEMENT. The effort undertaken by Xerox in
marketing Your Products to a Customer where, at a minimum, Xerox will: (i)
establish contact with the Customer; (ii) provide information regarding Your
Products; (iii) maintain contact with the Customer throughout the sales cycle;
(iv) offer to provide complementary products and or services to support Your
Products, and (v) provide You with a prospect name as reflected on Schedule 3,
"JOINT ENGAGEMENT TEAMING AGREEMENT", which will be mutually agreed to, and
which shall be duly signed by Xerox' authorized representative and the
authorized DSC representative.
1.3 DISCLOSED OTHER QUALIFIED PARTICIPANTS. The non-Xerox, non-DSC
parties eligible for a joint engagement commission and disclosed on Schedule 3,
"JOINT ENGAGEMENT TEAMING AGREEMENT".
1.4 TERRITORY. The jurisdictions of the United States of America, and its
territories and possessions.
1.5 YOU. DSC.
1.6 YOUR PRODUCTS. Those products and/or services identified in Schedule 1.
1.7 PRODUCTS. As the context requires, Xerox Products and/or Your Products.
1.8 XEROX. Within the context of this Exhibit A, means Xerox Corporation
operations within the United States of America, and its territories and
possessions.
1.9 XEROX PRODUCTS. Those Xerox Products identified in Schedule 2.
II. COMMISSIONS
2.1 COMMISSIONS.
(a) If You participate in a Qualified DSC Joint Engagement to a Customer in
the Territory and Xerox either sells, licenses to or leases (with an initial
term of one year) or licenses to such Customer one or more newly installed
Xerox Products where the Customer's purchase, lease or license of such Xerox
Products was based upon a Qualified Approved Joint Engagement and there are no
Disclosed Other Qualified Participants, Xerox will either pay a commission
equal to a percentage of the price invoiced to the Customer for such purchase,
lease or license net of any assessed taxes, duties, freight and insurance
charges; or
THIS EXHIBIT A (WITH ADDITIONAL sCHEDULES) IS AN ATTACHMENT TO THE COOPERATIVE
MARKETING AGREEMENT. THE PARTIES ACKNOWLEDGE THAT THEY HAVE READ THE AGREEMENT
AS WELL AS THIS EXHIBIT AND ITS SCHEDULES, AND AGREE TO BE BOUND BY ALL TERMS
AND CONDITIONS.
<TABLE>
<S> <C>
DSC CORPORATION XEROX CORPORATION
By /s/ Tony N. Domit By /s/ Darryl Dobin
----------------------------------- ------------------------------
Tony Domit Darryl Dobin
----------------------------------- ----------------------------------
Printed Name Printed Name
President & CEO Manager, Marketing Partnerships Group
----------------------------------- ----------------------------------
Title Title
8/2/94
------------------------------------ ----------------------------------
Date Date
6333 Greenwich Dr. Suite 120 100 S. Clinton Ave
------------------------------------ ----------------------------------
Mailing Address Mailing Address
San Diego CA 92122 Rochester, NY 14644
------------------------------------ ----------------------------------
619-625-2000 619-625-2021 716) 423-5789 716) 423-1106
------------------------------------- ----------------------------------
Phone FAX Phone FAX
</TABLE>
Page 1 of 6
<PAGE> 13
COOPERATIVE MARKETING AGREEMENT - EXHIBIT A
a fixed dollar fee, in each case as set forth in Section 2.4 below. Amounts
set forth in Section 2.4 below shall be reduced in an equitable manner as
determined by Xerox when there are disclosed other qualified participants.
(b) If Xerox makes a qualified Xerox referral to a Customer in the
Territory and DSC either sells, licenses to or leases (with an initial term of
one year) to such Customer one or more newly installed DSC Products where the
Customer's purchase, lease or license of such Your Products was based upon a
Qualified Xerox Referral, You will either pay a commission equal to a
percentage of the price invoiced to the Customer for such purchase, lease or
license net of any assessed taxes, duties, freight and insurance charges; or a
fixed dollar fee, in each case as set forth in Section 2.5 below. Amounts set
forth in Section 2.5 below shall be reduced in an equitable manner as
determined by DSC when there are disclosed other qualified referrals.
(c) Either party may, at any time during the term hereof and upon written
notice to the other, amend this Exhibit A to change the commission percentage
or fixed dollar amount for any of that party's Products; provided, however,
that any such change shall be applicable only as to commissions earned after
the effective date of the change.
2.2 PAYMENT. Each party's obligation to pay fees shall accrue upon
installation and acceptance of its Products by the Customer. Each party will
use reasonable efforts to pay such fees to the other within thirty (30) days
after the end of each calendar quarter during which the installation and
acceptance of the party's Product occurred. Each party shall provide to the
other within 30 days of the end of each calendar quarter an installation report
reflecting the number of units of Products installed as the result of a
Qualified Engagement by the other, the amount of fees payable for each Product,
and the Customer name and the installation address of the Products for which a
fee is payable.
2.3 REVERSAL. In the event that either party for any reason reverses a
sale, lease and/or license transaction of any Product as to which a commission
has been paid under this Agreement, and such reversal occurs within six (6)
months of the date the Customer accepted such Product following its
installation, then the party shall debit the amount of such commission against
the next quarterly payment to be made by that party under Section 2.1.
2.4 (A) COMMISSION SCHEDULE FOR XEROX PRODUCTS WHEN SOLD OR LEASED
<TABLE>
<CAPTION>
SINGLE UNIT
PRODUCT MODEL/NAME SALE FEE
-------------------- -----------
<S> <C>
4135 Production Laser Printing System $9,900
4135 DDS Prod Laser Printing System 6,100
4890 Laser Printing System 7,300
9790 MICR Printer 5,000
4850 HighlightColor Laser Printing System 4,500
4450 Laser Printing System 4,500
4050 Laser Printing System 4,500
4050 Budget Lease Laser Printing Sys 2,750
</TABLE>
<TABLE>
<CAPTION>
(CONT.) SINGLE UNIT SALE FEE
----------------------------
<S> <C>
4235 Laser Printing System 2,500
4220 MRP 800
4219 MRP 360
4215 MRP 240
4197 MICR Printer 250
DocuTech Production Publisher 135 11,700
DocuTech Network Publisher 135 (upgrade)* 3,500
DocuTech Network Publisher 135 12,600
DocuTech Production Publisher 90 8,100
DocuTech Network Publisher 90 (upgrade)* 3,500
Docutech Network Publisher 90 7,800
DocuTech Network Server 1,800
DocuTech Media Server 1,500
DocuTech Extended Storage 2,400
DocuTech Signature Booklet Maker 3,600
DocuPrint 390 8,400
DocuPrint 350 Highlight Color 7,500
DocuPrint 390 Highlight Color 12,000
5775 Digital Color Copier/Printer 2,100
5775 Digital Color Copier/Printer (upgrade)* 3,500
EN FIERY Controller 150 1,800
EFI FIERY Controller 200 2,200
4700 Color Laser Printing System 2,500
</TABLE>
*Upgrade fees are for connectivity with or without server(s) - no fees are paid
for servers with upgrades.
- -------------------------------------------------------------------------------
2.4 (B) COMMISSION SCHEDULE FOR XEROX PRODUCTS WHICH QUALIFY UNDER THE XEROX
TRADE-IN PROGRAM (XTI)**
<TABLE>
<CAPTION>
SINGLE UNIT
MODEL NUMBER/pRODUCT NAME TRADE-IN FEE (XTI)
-------------------------- ------------------
<S> <C>
4135 Production Laser Printing System $6,500
4890 Laser Printing System 5,600
4850 Color Laser Printing System 3,500
4450 Professional Printing System 3,500
4050 Laser Printing System 3,500
4235 Laser Printing System 1,500
4220 MRP 675
4219 MRP 300
</TABLE>
Page 2 of 6
<PAGE> 14
COOPERATIVE MARKETING AGREEMENT - EXHIBIT A
<TABLE>
<CAPTION>
(CONT.) Single Unit Trade-in (XTI) Fee
- --------------------------------------
<S> <C>
4215 MRP 240
4197 MICR Printer 180
DocuTech Production Publisher 135 3,000
DocuTech Network Publisher 135 3,500
DocuTech Production Publisher 90 2,000
DocuTech Network Publisher 90 2,500
5775 Digital Color Copier/Printer 1,500
4700 Color Laser Printing System 1,500
</TABLE>
** No fees are paid for trades from Xerox 5090s or
Xerox 5390s.
- ------------------------------------------------------------
Page 3 of 6
<PAGE> 15
2.5 COMMISSION SCHEDULE FOR DSC PRODUCTS:
The commission is 10% of the invoiced initial license fee. The list of DSC
products and their initial License Fees are provided below for reference.
MAINFRAME AND DEPARTMENTAL PRODUCTS
<TABLE>
<CAPTION>
PRODUCTS MAINFRAME DEPARTMENTAL
CLASS CLASS
<S> <C> <C>
CompuSet 6.0 $32,500 $22,500
CompuPrep 10,000 6,000
Emitter-Meta Code 6,000 4,000
Emitter-XES 6,000 4,000
Emitter-Postscript 6,000 4,000
Emitter-Interpress 6,000 4,000
Importer-PCL 6,000 4,000
IMG Consolidator 3,000 2,000
NetPrint 3,000 2,000
HostPrint 2,000 1,000
Replacement for XICS 10,000 8,000
5.x
Downsize Migration 5,000 4,000
PCL Transformer 15,000 10,000
</TABLE>
DESKTOP AND NETWORK PRODUCTS
<TABLE>
<CAPTION>
Number of Licenses 1 2 3 4 5
<S> <C> <C> <C> <C> <C>
PRODUCT
CompuSet 6.0 $15,000 $26,000 $33,000 $40,000 $45,000
CompuPrep 3,000 5,000 7,000 8,000 9,000
Em itter-Meta Code 2,250 4,000 5,000 5,500 6,000
Emitter-XES 2,250 4,000 5,000 5,500 6,000
Emitter-Postscript 2,250 4,000 5,000 5,500 6,000
Emitter-Interpress 2,250 4,000 5,000 5,500 6,000
Importer-PCL 2,250 4,000 5,000 5,500 6,000
Importer-TIFF 2,250 4,000 5,000 5,500 6,000
IMG Consolidator 2,000 3,000 4,000 4,500 5,000
NetPrint 2,000 3,000 4,000 4,500 5,000
PCL Transformer 7,000 12,000 16,000 19,000 21,000
</TABLE>
COMPUSERIES PRODUCTS
<TABLE>
<CAPTION>
Number of Licenses 1 2 3 4 5
<S> <C> <C> <C> <C> <C>
PRODUCT
CompuBuild $5,000 $8,500 $11,000 $13,500 $15,000
CompuSpec 4,000 7,500 9,500 11,000 12,000
CompuMerge 3,000 5,500 7,500 8,500 9,000
CompuView 1,000 2,000 2,750 3,500 4,000
CompuPack 10,000 17,000 22,000 27,000 30,000
</TABLE>
<PAGE> 16
XEROX
Cooperative Marketing Agreement
EXHIBIT A
SCHEDULE 1
DSC Products
July 1, 1994
DSC Products. Those products and/or services listed below:
PRODUCTS
Refer to Exhibit A, Section 2.5
Page 4 of 6
<PAGE> 17
XEROX
Cooperative Marketing Agreement
EXHIBIT A
SCHEDULE 2
Xerox Products
July 1, 1994
Xerox Products. The list of Xerox products is provided below:
Product Model/Name
4135 Production Laser Printing System
4135 DDS Production Laser Printing System
9790 Laser Printing System
4890 Laser Printing System
4850 Highlight Color Laser Printing System
4450 Laser Printing System
4050 Laser Printing System
4235 Laser Printing System
4220 MRP
4219 MRP
4215 MRP
4197 MICR Printer
DocuTech Production Publisher 135
DocuTech Production Publisher 90
DocuTech Network Publisher 135
Docutech Network Publisher 90
DocuTech Network Server
DocuTech Media Server
DocuTech Extended Storage
DocuTech Signature Booklet Maker
Docuprint 390
DocuPrint 350 Highlight Color
DocuPrint 390 Highlight Color
5775 Digital Color Copier/ Printer
FI FIERY Controller 150
EFI FIERY Controller 200
4700 Color Laser Printing System
Page 5 of 6
<PAGE> 18
DSC CORPORATION/XEROX
EXHIBIT A JOINT ENGAGEMENT TEAMING AGREEMENT
SCHEDULE 3
I. CUSTOMER INFORMATION
Company Name:
-----------------------------------------
Site Address:
------------------------------------------
Xerox Customer number
---------------------------------
Xerox Product Opportunity
-----------------------------
New Xerox Customer Yes No
--- ---
Products already installed
----------------------------
New DSC Customer Yes No
--- ---
Products Already Installed
-----------------------------
DSC Product Opportunity
------------------------------
Xerox Disclosure of Non-DSC Marketing Partner Involvement:
Company Date
---------------------------------- ----------
Signature of the sales persons creating this teaming agreement indicate their
intent to pursue a joint selling opportunity with the above named customer. If
the sale of a qualified product occurs DSC will be entitled to the applicable
fee.
XEROX CORPORATION:
Sales Rep Name
-----------------------------------
District
----------------------------------------
Telephone
----------------------------------------
Signature Date
------------------------ -----------
DSC CORPORATION:
Sales Rep Name
-----------------------------------
District
-----------------------------------------
Telephone
-----------------------------------------
Signature Date
-------------------------- ---------
II. XEROX AND DSC PRODUCT ORDERS TAKEN
NEW XEROX PRODUCTS ORDERED:
Product Quantity Order Date XRX ORDER #
- -------- ---------- ---------- -----------
- -------- ---------- ---------- -----------
NEW DSC PRODUCTS ORDERED:
Product Quantity Order Date Application
- -------- --------- ---------- ------------
- -------- --------- ---------- ------------
NET NEW TRADE
---------- -----
VALIDATION:
The individuals below have verified that the above listed customer is qualified
as specified in the Xerox/DSC Cooperative Marketing Agreement in that the DSC
Representative has undertaken the following marketing/sales activities to
forward the Customer's decision to order the Xerox product listed above: (a)
established direct contact with the customer, (b) provided the Customer with
relevant information regarding Xerox products; (c) maintained contact with the
Customer; (d) actively assisted the Xerox Sales Representative in the sale,
lease and/or license of such Xerox products; (e) actively cooperated with Xerox
in insuring that such Xerox Products function together with applicable DSC
products in a manner acceptable to the Customer.
XEROX APPROVALS:
Manager's Name
-----------------------------------
Signature
-----------------------------------------
Title Date
--------------------------------- -------
Telephone
-----------------------------------------
DSC APPROVALS:
Manager's Name
------------------------------------
Signature
-----------------------------------------
Title Date
------------------------------------ ------
Telephone
-----------------------------------------
III. XEROX EQUIPMENT INSTALLATION COMPLETE
Product serial number
----------------------------
Date Installed NET NEW TRADE
------------- ---------- ------
XEROX HEADQUARTERS APPROVAL:
Name
----------------------------------------------
Title
---------------------------------------------
Signature
----------------------------------------------
Telephone Date
----------------------------------- --------
Page 6 of 6
<PAGE> 19
XEROX
COOPERATIVE MARKETING AGREEMENT
EXHIBIT B
REFERRAL FEE SCHEDULE
FOR THE UNITED STATES OF AMERICA
JULY 1, 1994
DSC and Xerox Corporation agree that the terms and conditions of this Exhibit
B, an attachment to the Cooperative Marketing Agreement, will govern their
participation and marketing activities within the Territory defined below.
I. DEFINITIONS
1.1 QUALIFIED DSC REFERRAL. The effort undertaken by You in marketing
Xerox Products to a Customer where, at a minimum, You will: (i) establish
contact with the Customer; (ii) provide information regarding Xerox Products;
(iii) introduce Xerox representatives to key decision makers: (iv) provide
Xerox with a prospect name as reflected on the "QUALIFIED REFERRAL FORM,"
which will be mutually agreed to, and which shall be duly signed by Your
authorized representative and the authorized Xerox representative.
1.2 DISCLOSED OTHER QUALIFIED REFERRALS. The non-Xerox, non-DSC parties
eligible for a qualified referral commission and disclosed on the "QUALIFIED
REFERRAL FORM".
1.3 TERRITORY. The jurisdictions of the United States of America, and its
territories and possessions.
1.4 YOU. DSC Corporation.
1.5 PRODUCTS. As the context requires, Xerox Products.
1.6 XEROX. Within the context of this Exhibit B, means Xerox Corporation
operations within the United States of America, and its territories and
possessions.
II. COMMISSIONS
2.1 COMMISSIONS.
(a) If You make a Qualified DSC Referral to a Customer in the Territory and
Xerox either sells, licenses to or leases (with an initial term of one year) or
licenses to such Customer one or more newly installed Xerox Products where the
Customer's purchase, lease or license of such Xerox Products was based upon a
Qualified Referral and there are no Disclosed Other Qualified Referrals, Xerox
will either pay a commission equal to a percentage of the price invoiced to the
Customer for such purchase, lease or license net of any assessed taxes, duties,
freight and insurance charges; or a fixed dollar fee, in each case as set forth
in Section 2.4 below. Amounts set forth in Section 2.4 below shall be reduced
in an equitable manner as determined by Xerox when there are Disclosed Other
Qualified Referrals.
(b) Xerox may, at any time during the term hereof and upon written notice to
DSC, amend this Exhibit B to change the commission percentage or fixed dollar
amount for any Products; provided, however, that any such change shall be
applicable only as to commissions earned after the effective date of the
change.
2.2 PAYMENT. Xerox' obligation to pay fees shall accrue upon installation
and acceptance of its Products by the Customer. Xerox will use reasonable
efforts to pay such fees to the other within thirty (30) days after the end of
each calendar quarter during which the installation and acceptance of the
Product occurred. Xerox will provide to you within 30 days of the end of each
calendar quarter an installation report reflecting the number of units of
Products installed as the result of a Qualified Referral by you, the amount of
fees payable for each
THIS EXHIBIT B IS AN ATTACHMENT TO THE COOPERATIVE MARKETING AGREEMENT. THE
PARTIES ACKNOWLEDGE THAT THEY HAVE READ THE AGREEMENT AS WELL AS THIS EXHIBIT
AND ITS QUALIFIED REFERRAL FORM AND AGREE TO BE BOUND BY ALL TERMS AND
CONDITIONS.
DSC CORPORATION
/s/ TONY N. DOMIT
- ----------------------------------
By
Tony Domit
- ----------------------------------
Printed Name
President & CEO
- ----------------------------------
Title
8/2/94
- ----------------------------------
Date
6333 Greenwich Dr. Suite 120
- ----------------------------------
Mailing Address
San Diego CA. 92122
- ----------------------------------
619-625-2000 619-625-2021
- ----------------------------------
Phone FAX
XEROX CORPORATION
/s/ DARRYL DOBIN
- ----------------------------------
By
Darryl Dobin
- ----------------------------------
Printed Name
Manager, Marketing Partnerships Group
- ----------------------------------
Title
- ----------------------------------
Date
100 S. Clinton Ave
- ----------------------------------
Mailing Address
Rochester, NY 14644
- ----------------------------------
716) 423-5789 716) 423-1106
- ----------------------------------
Phone FAX
Page 1 of 3
<PAGE> 20
COOPERATIVE MARKETING AGREEMENT - EXHIBIT B
Product, and the Customer name and the installation address of the Products for
which a fee is payable.
2.3 REVERSAL. In the event that Xerox for any reason reverses a sale,
lease and/or license transaction of any Product as to which a commission has
been paid under this Agreement, and such reversal occurs within six (6) months
of the date the Customer accepted such Product following its installation, then
Xerox shall debit the amount of such commission against the next quarterly
payment to be made under Section 2.1.
2.4 (A) Commission Schedule for Document Production Systems Products When
Sold or Leased
Single Unit
Model Number/Product Name Sale Fee
------------------------- -------------
<TABLE>
<S> <C>
DocuTech Production Publisher 135 7,800
DocuTech Network Publisher 135 8,400
DocuTech Production Publisher 90 5,400
DocuTech Network Publisher 90 5,200
DocuPrint 390 5,600
DocuPrint 350 Highlight Color 5,000
DocuPrint 390 Highlight Color 8,000
5775 Digital Color Copier/Printer 1,400
EFI FIERY Controller 150 1,200
EFI FIERY Controller 200 1,500
- -------------------------------------------------------------------------------
</TABLE>
2.4 (B) Commission Schedule for Document Production Systems Products Which
Qualify Under the Xerox Trade-In Program (XTI)
<TABLE>
<CAPTION>
Single Unit
Model Number/Product Name Trade-in Fee (XTI)
------------------------- ----------------
<S> <C>
DocuTech Production Publisher 135 2,000
DocuTech Network Publisher 135 2,500
DocuTech Production Publisher 90 1,000
DocuTech Network Publisher 90 1,500
5775 Digital Color Copier/Printer 1,000
</TABLE>
No fees will be paid for trades from 5090's or 5390's
Page 2 of 3
<PAGE> 21
DSC/XEROX
EXHIBIT B QUALIFIED REFERRAL FORM
I. CUSTOMER INFORMATION
Company Name:
------------------------------------
Site Address:
------------------------------------
- -------------------------------------------------
Xerox Customer number
-----------------------------
Xerox Product Opportunity
------------------------
New Xerox Customer Yes No
--- ---
Xerox Products already installed
-----------------
- -------------------------------------------------
XEROX CORPORATION:
Sales Rep Name
------------------------------------
District
-----------------------------------------
Telephone
-----------------------------------------
Signature Date
------------------------- ----------
DSC CORPORATION:
Sales Rep Name
-----------------------------------
District
-----------------------------------------
Telephone
-----------------------------------------
Signature Date
--------------------------- ----------
Signatures of the sales persons creating this referral form indicate that the
customer named is a valid referral and that DSC will earn a referral fee when a
qualified Xerox product is installed.
II. XEROX PRODUCT ORDERS TAKEN
NEW XEROX PRODUCTS ORDERED:
Product Quantity Order Date XRX ORDER #
- ------- -------- ---------- -----------
- ------- -------- ---------- -----------
NET NEW TRADE
---------- -------
Validation:
The individuals below have verified that the above listed customer is a
Qualified Referral as specified in the Xerox / DSC Cooperative Marketing
Agreement in that the DSC Representative has undertaken the following
marketing/sales activities to forward the Customer's decision to order the
Xerox product listed above: (a) established direct contact with the customer,
(b) provided the Customer with relevant information regarding Xerox products;
(c) introduced Xerox representatives to key decision makers; (d) provided Xerox
with a prospect name as reflected above.
XEROX APPROVALS:
Manager's Name
------------------------------------
Signature
-----------------------------------------
Title Date
---------------------------------- ------
Telephone
-----------------------------------------
DSC APPROVALS:
Manager's Name
------------------------------------
Signature
-----------------------------------------
Title Date
----------------------------------- -----
Telephone
-----------------------------------------
III. XEROX EQUIPMENT INSTALLATION COMPLETE
Product serial number
----------------------------
Date Installed NET NEW TRADE
----------- ------- --------
XEROX HEADQUARTERS APPROVAL:
Name
----------------------------------------------
Title
---------------------------------------------
Signature
----------------------------------------
Telephone Date
------------------------------ --------
Page 3 of 3
<PAGE> 1
EXHIBIT 10.8
DOCUMENT SCIENCES CORPORATION VALUE ADDED REMARKETER AGREEMENT
This Value Added Remarketer Agreement ("Agreement"), made and entered into
between Xerox Canada Limited ("VAR") as defined below, and DOCUMENT SCIENCES
CORPORATION, located at 6333 Greenwich Drive, Suite 250, San Diego, California
92122 ("DOCUMENT SCIENCES") is effective January 1, 1995 ("Effective Date").
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Article Title
------- -----
<S> <C>
Article Title
ARTICLE 1 DEFINITIONS
ARTICLE 2 APPOINTMENT AND OBLIGATIONS
ARTICLE 3 ROYALTIES AND PAYMENT
ARTICLE 4 DELIVERABLES AND MODIFICATIONS
ARTICLE 5 WARRANTY DISCLAIMER, INDEMNITIES, AND PATENT AND COPYRIGHT
ARTICLE 6 CONFIDENTIAL INFORMATION
ARTICLE 7 TERM AND TERMINATION
ARTICLE 8 GENERAL PROVISIONS
</TABLE>
The parties agree as follows:
ARTICLE I - DEFINITIONS
1.01 SUBLICENSEES. Persons who acquire Value Added Products and
sublicense the Licensed Software for their own internal use and not for
resale, sublicense or distribution to others.
1.02 DOCUMENT SCIENCES LICENSORS. Persons identified in the Licensed
software as having licensed portions of the Licensed Software to DOCUMENT
SCIENCES.
1.03 END USER LICENSE. DOCUMENT SCIENCES standard end user software
license and warranty terms and conditions.
1.04 LICENSED SOFTWARE. The DOCUMENT SCIENCES software package
(including the Developer's Software package) described in Exhibit A, in object
code format only, manuals and other related documentation and Upgrade Licensed
Software.
1.05 TERRITORY. Geographic or market coverage areas identified in
Exhibit B.
1.06 UPGRADE LICENSED SOFTWARE. New releases of Licensed Software
which are incorporated into the Licensed Software by VAR pursuant to the terms
of this Agreement during the term of this Agreement and which contains
modifications, enhancements and/or improvements to the Licensed Software.
1.07 VALUE ADDED PRODUCT. A product that includes the Licensed Software,
an addition to the Licensed Software as specified in Exhibit C, media on which
the software, in object code format, is loaded, and associated software
documentation, including an End User License.
This is page one of a six page Value Added Remarketer Agreement ending with
Section 8.15, exclusive of Exhibits that are separately attached. The parties
acknowledge they have read this Agreement and its Exhibits and agree to be
bound by all terms and conditions.
XEROX CANADA LIMITED DOCUMENT SCIENCES CORPORATION
/s/ William A. Albino /s/ Tony N. Domit
___________________________________ ______________________________
By By
William A. Albino Tony N. Domit
___________________________________ ______________________________
Printed Name Printed Name
Vice President & GM Printing Systems President and CEO
___________________________________ ______________________________
Title Title
Jan 18 1995 10 Jan 1995
___________________________________ ______________________________
Date Date
___________________________________ ______________________________
Mailing Address Mailing Address
___________________________________ ______________________________
___________________________________ ______________________________
Page 1 of 6
<PAGE> 2
DOCUMENT SCIENCES VALUE ADDED REMARKETER AGREEMENT
ARTICLE 2 - APPOINTMENT AND OBLIGATIONS
2.01 APPOINTMENT AND SOFTWARE LICENSE. DOCUMENT SCIENCES hereby grants to
VAR, during the term of this Agreement, a non-exclusive license under any and
all patents, copyrights, and other proprietary rights licensable by DOCUMENT
SCIENCES to reproduce the Licensed Software for the sole purpose of producing a
Value Added Product and to use and distribute by sublicense the Licensed
Software, in whole or in part, as a part of the Value Added Product. This
grant is exclusively for the Territory. It is a condition to the license grant
set forth in this Agreement that VAR adds value to the Licensed Software in the
manner specified in, and that all Value Added Products must be sublicensed by
VAR with substantial added value as specified by Exhibit C or as otherwise
approved in advance and in writing by DOCUMENT SCIENCES. VAR accepts this
appointment, subject to the terms and conditions of this Agreement. DOCUMENT
SCIENCES further grants to VAR a non-exclusive, non-transferable, royalty-free
license to use the Licensed Software internally for demonstration and training
purposes only, subject to the End User License. VAR shall use the Licensed
Software for general operations purposes or for processing of internal
administrative or customer data only pursuant to a separate End User License
executed between VAR and DOCUMENT SCIENCES.
2.02 LIMITATION UPON SUBLICENSE RIGHTS. VAR shall not distribute the
Value Added Product outside the Territory nor will they authorize distribution
outside the Territory. VAR shall use its best efforts to assure that the
territorial restrictions of the license set forth herein are honored within its
own organization and agents.
2.03 SUBLICENSE TERMS. VAR shall distribute the Value Added Product
pursuant to a sublicense agreement which shall, prior to any distribution of
the Value Added Product, be approved in writing by DOCUMENT SCIENCES and which
shall contain the substance of the conditions and restrictions set forth in the
End User License.
2.04 LIMITED RIGHTS TO LICENSED SOFTWARE. VAR may use, reproduce and
distribute the Licensed Software only to the extent expressly authorized or
licensed under this Agreement. No other rights to such software are granted by
DOCUMENT SCIENCES to VAR, or may be granted by VAR to any third party. In
particular, but not by way of limitation, except as specifically agreed by
DOCUMENT SCIENCES in writing, neither VAR nor any of its employees, agents or
representatives may create, reproduce or distribute derivative works of any
such software. Further, neither VAR nor any of its employees, agents or
representatives will attempt to decompile or otherwise reverse engineer any
such software in order to derive its source code. VAR shall not rent,
electronically distribute or timeshare the Licensed Software or market the
software by interactive cable or remote processing services. Any violation by
VAR of its obligations under this Section would be deemed an incurable material
breach of this Agreement, and would enable DOCUMENT SCIENCES to immediately
terminate this Agreement under Section 7.02(b).
2.05 TERMINATION. Any sublicense or distribution of License Software by
VAR which is not in accordance with its appointment under this Section 2, will
be deemed an incurable material breach of this Agreement and will enable
DOCUMENT SCIENCES to immediately terminate this Agreement under Section 7.02(b).
2.06 LICENSE RECOGNITION; TRADEMARKS.
(a) VAR shall communicate to its customers and End Users the
Licensed Software (distributed pursuant to the license granted in this Section
2) is licensed to it by DOCUMENT SCIENCES by identifying it as [DOCUMENT
SCIENCES DOCUMENT AUTOMATION SOFTWARE] licensed to VAR. During the term of this
Agreement, VAR may also use DOCUMENT SCIENCES name and logo in its advertising,
catalogs, exhibits, public relations materials and manuals covering the Value
Added Products. All such uses will be subject to DOCUMENT SCIENCES prior
written approval and shall not indicate the Licensed Software or any code
contained in the Licensed Software under license from DOCUMENT SCIENCES
Licensors is the proprietary product of VAR or any party other than DOCUMENT
SCIENCES or the original DOCUMENT SCIENCES Licensor, as the case may be.
2.07 GENERAL OBLIGATIONS OF VAR. VAR will (i) actively market, promote and
solicit the sale of Value Added Products to End Users in the Territory, (ii)
establish and maintain appropriate marketing and distribution facilities and
personnel within its organization to create and meet the demand for Value Added
Products among End Users in the Territory including the inclusion of Value
Added Products in VAR's sales compensation plan, (iii) promote the goodwill,
name and reputation of DOCUMENT SCIENCES and all of the Licensed Software, (iv)
represent the Licensed Software accurately and fairly and at all times avoid
misleading or unethical business practices, and (v) at all times comply with
all laws and regulations applicable to the conduct of its business.
2.08 SPECIFIC OBLIGATIONS OF VAR. VAR will have the following specific
obligations:
(a) Distribute the following materials to all of its locations in
the Territory (i) marketing and technical brochures which accurately describe
the functions, features, operation and advantages of the Licensed Software
incorporated within the Value Added Products; and (ii) educational material
relating to the Value Added Products developed by VAR, for training VAR's sales
and support personnel.
(b)
See section 2.09b
Page 2 of 6
<PAGE> 3
DOCUMENT SCIENCES VALUE ADDED REMARKETER AGREEMENT
(c) Provide support to all sublicensees including, without
limitation (i) on-site installation of the Value Added Products and/or customer
documentation sufficient to enable the sublicensees to install the Value Added
Products themselves; (ii) customer training or documentation regarding
operation of the Value Added Products; (iii) telephone hot-line support during
normal business hours.
(d) Promptly inform DOCUMENT SCIENCES about new problems or errors
with any of the Licensed Software which are reported by sublicensees or
discovered by VAR.
(e) Provide DOCUMENT SCIENCES, within thirty (30) days following
the end of each calendar quarter, a report listing the quantity of each Value
Added Product licensed or sold to any End User in the Territory during that
calendar quarter, and the name and address of each End User.
2.09 OBLIGATIONS OF DOCUMENT SCIENCES. DOCUMENT SCIENCES will have the
following obligations:
(a) Make available to VAR, at DOCUMENT SCIENCES standard VAR
pricing, reasonable quantities of sales and technical brochures. Large
quantities of promotional materials can be provided at DOCUMENT SCIENCES actual
costs.
(b)
DOCUMENT SCIENCES will train one Xerox employee at the San Diego
location of DOCUMENT SCIENCES to be certified as a DOCUMENT SCIENCES Customer
Trainer. This training will be of two weeks in duration and will be provided
free of charge to XCL except that any travel and living expenses incurred by
XCL employees while attending such training will be borne by XCL. This
training is to take place in 1995. In the event that additional trainers need
to be trained, DOCUMENT SCIENCES will conduct that additional training on the
same basis.
Two additional Xerox employees to provide hot line services will be
trained by DOCUMENT SCIENCES; one in January 1995, and the second as soon as
possible thereafter. This training will also be of two (2) weeks duration, in
San Diego and will again be provided free of charge to XCL except that any
travel and living expenses incurred by XCL employees while attending such
training will be borne by XCL.
DOCUMENT SCIENCES will provide personnel to deliver two days training
in Toronto, to XCL Printing Systems CSCs and selected analysts from Toronto,
Ottawa and London, Ontario (approximately ten in total). This training will
take place in December 1994.
DOCUMENT SCIENCES will provide personnel to deliver two days training
in Toronto to XCL CSCs from across Canada. This training will take place in
January 1995.
(c) Use reasonable efforts to resolve, within a reasonable period
of time, extraordinary technical problems or errors with any Licensed Software
which are identified by VAR and which VAR is unable to resolve. DOCUMENT
SCIENCES will respond to VAR within one business day for all instances of
extraordinary problems. An extraordinary problem is one in which the
application ceases to run because of a program defect. Each problem or error
must be identified telephonically or, when appropriate, in writing and faxed to
DOCUMENT SCIENCES designated support person or fax number in San Diego,
California. DOCUMENT SCIENCES does not guarantee it will be able to resolve all
identified problems or errors.
(d) Provide maintenance pursuant to and in accordance with the VAR
Maintenance Agreement attached as Exhibit F.
2.10 TITLE TO LICENSED SOFTWARE. It is expressly understood and
agreed that title to and all copyright and other proprietary rights in the
Licensed Software will not pass to VAR. Rather, such title and all such rights
will at all times be and remain with DOCUMENT SCIENCES and/or the DOCUMENT
SCIENCES Licensors.
ARTICLE 3 - ROYALTIES AND PAYMENT
3.01 PURCHASE. VAR agrees to pay royalties to DOCUMENT SCIENCES in respect
of the Licensed Software licensed hereunder and to pay for maintenance provided
pursuant to this Agreement. This Article sets forth the terms and conditions
under which such royalties and sales and technical support fees will be
determined and paid.
3.02 ROYALTY AMOUNT AND FEES. The royalties to be paid by VAR to DOCUMENT
SCIENCES and the prices to be invoiced by DOCUMENT SCIENCES to VAR for sales
and technical support and related materials purchased by VAR hereunder will be
as set forth in Exhibit E. VAR will solely determine the royalties and/or fees
at which it sublicenses and distributes the Value Added Products to End Users
in the Territory.
3.03 TAXES. VAR will furnish DOCUMENT SCIENCES with appropriate tax
exemption certificates.
3.04 REPORTS AND AUDITS. Royalties shall accrue upon the distribution of
Value Added Products by VAR to its customers. Royalties are payable within 30
days of the end of month in which the DOCUMENT SCIENCES products were shipped
to the VAR or the VAR's customer. Overdue payments shall accrue interest at
the rate of twelve per cent (12%) per annum until paid.
3.05 VAR RECORDS. VAR shall keep records adequate to verify reports and
payments to be made pursuant to this Agreement for a period of three (3) years
following date of the reports pursuant to this Article 3.
3.06 INSPECTION. DOCUMENT SCIENCES shall have the right (no more than once
during any calendar year) to inspect the records of VAR on reasonable notice
and during regular business hours to verify the reports and payments required
hereunder. The entire cost of such inspection shall be borne by DOCUMENT
SCIENCES and such Certified Public Accountant shall not disclose to DOCUMENT
SCIENCES any information other than information relating to the computation and
accuracy of such reports. If an inspection reveals an error of at least 5% in
favor of
Page 3 of 6
<PAGE> 4
DOCUMENT SCIENCES VALUE ADDED REMARKETER AGREEMENT
DOCUMENT SCIENCES, VAR shall pay the cost of the inspection, in addition to any
underpayments.
ARTICLE 4 - DELIVERABLES AND
MODIFICATIONS
4.01 DELIVERY OF LICENSED SOFTWARE. Document Sciences will deliver ordered
software to the VAR or the VAR's customer as determined by the VAR. Document
Sciences will distribute all generally available upgrades, temporary fixes and
patches to VAR or VAR's customer as determined by the VAR.
4.02 DOCUMENTATION. VAR may modify and reproduce the contents of the
documentation provided by DOCUMENT SCIENCES, but DOCUMENT SCIENCES reserves the
right to monitor any modifications made to the documentation by VAR. VAR
agrees to abide by any request by DOCUMENT SCIENCES to withdraw or change any
such modification that DOCUMENT SCIENCES reasonably deems undesirable to the
interest of DOCUMENT SCIENCES.
4.03 MODIFICATIONS. All Upgrade Licensed Software made by DOCUMENT
SCIENCES that it intends to release shall be offered to VAR pursuant to
DOCUMENT SCIENCES Maintenance Agreement attached as Exhibit D.
ARTICLE 5 - WARRANTY DISCLAIMER,
INDEMNITIES, AND PATENT AND COPYRIGHT
5.01 WARRANTY DISCLAIMER. DOCUMENT SCIENCES, and VAR, agree the Licensed
Software is provided "AS IS". DOCUMENT SCIENCES DISCLAIMS ALL WARRANTIES,
EXPRESSED OR IMPLIED, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
5.02 GENERAL INDEMNITY. VAR agrees, at its expense, to defend, indemnify
and hold DOCUMENT SCIENCES harmless from and against all liabilities, damages,
costs, fees and expenses, including reasonable attorney's fees, arising out of
suits, claims, actions or proceedings brought by or on behalf of any person on
account of injury or damage proximately caused by VAR, its agents,
representatives, Distributors or employees, in the course of performing VAR's
obligations under this Agreement, provided DOCUMENT SCIENCES will promptly
notify VAR of any such suit, claim, action or proceeding, and VAR will have
control of the defense and all negotiations for its settlement or compromise.
DOCUMENT SCIENCES agrees to fully cooperate with VAR in the conduct of such
defense and negotiations.
5.03 INTELLECTUAL PROPERTY INDEMNITY. DOCUMENT SCIENCES will, at its
expense, defend, indemnify and hold harmless VAR from all liabilities, damages,
costs, fees and expenses, including reasonable attorney's fees, arising out of
suits, claims, actions or proceedings charging infringement in the Territory of
any patents, copyrights, trade secrets or other intellectual property rights
owned or controlled by any third party as a result of the exercise by VAR of
its rights under this Agreement, provided VAR promptly notifies DOCUMENT
SCIENCES in writing of any such suit, claim, action or proceeding, and DOCUMENT
SCIENCES will have control of the defense and all negotiations for its
settlement or compromise. VAR agrees to fully cooperate with DOCUMENT SCIENCES
in the conduct of such defense and negotiations.
5.04 LIMITATION. The indemnity of Section 5.03 will not apply, and VAR
will indemnify DOCUMENT SCIENCES in a manner fully equivalent to such
indemnity, in any suit, claim or proceeding brought against DOCUMENT SCIENCES
for any infringement due to the Licensed Software being modified (by DOCUMENT
SCIENCES or others, including VAR) to VAR's specifications, or being used or
sold in combination with equipment, software, or supplies not provided by
DOCUMENT SCIENCES. DOCUMENT SCIENCES has no other expressed or implied
warranty of noninfringement or liability for infringement or any damages
therefrom.
5.05 COPYRIGHTS. It is expressly understood by VAR that the Licensed
Software in the form of object code on physical media and in the form of
manuals is copyrighted by DOCUMENT SCIENCES. VAR agrees to maintain and
reproduce all copyright notices of DOCUMENT SCIENCES and any DOCUMENT SCIENCES
Licensors contained in the object code of the Licensed Software and on the
manuals. VAR further agrees to have copyright notices as provided by DOCUMENT
SCIENCES appear on media labels.
5.06 ENFORCEMENT OF SUBLICENSES. VAR shall enforce the terms of its
sublicenses with all Sublicensees and shall inform DOCUMENT SCIENCES of any
known breach of such terms.
ARTICLE 6 - CONFIDENTIAL INFORMATION
6.01 CONFIDENTIALITY. Subject to Section 6.02, all DOCUMENT SCIENCES
information which is marked proprietary or confidential and is made available
to VAR will be held in confidence by VAR and will not be disclosed to third
parties, or used by VAR, except to the extent authorized by this Agreement. If
the information is provided orally or visually, DOCUMENT SCIENCES will identify
the disclosure as being proprietary or confidential at the time of disclosure
and, within four (4) weeks thereafter, reduce it to writing and provide it to
VAR. Results of benchmark tests run by VAR may not be disclosed unless
DOCUMENT SCIENCES consents to such disclosure in writing.
6.02 EXCEPTIONS. VAR's obligations under Section 6.01 will not apply with
respect to any DOCUMENT SCIENCES information which:
(a) was known to VAR prior to its first receipt from DOCUMENT
SCIENCES; or
(b) at any time becomes a matter of public knowledge without any
fault of VAR, or
(c) is at any time lawfully received by VAR from a third party
under circumstances permitting its disclosure to others; or
Page 4 of 6
<PAGE> 5
DOCUMENT SCIENCES VALUE ADDED REMARKETER AGREEMENT
(d) is at any time furnished to a third party by DOCUMENT SCIENCES
without restriction on use or disclosure; or
(e) was first disclosed by DOCUMENT SCIENCES to VAR more than three
(3) years earlier.
6.03 EXPIRATION OR TERMINATION. Promptly following the expiration or any
termination of this Agreement, VAR will return to DOCUMENT SCIENCES, at DOCUMENT
SCIENCES expense, all DOCUMENT SCIENCES confidential and proprietary information
then in its possession, and all copies thereof.
6.04 RECIPROCITY. The confidentiality conditions of this section are
reciprocal between Document Sciences and the VAR.
ARTICLE 7 - TERM AND TERMINATION
7.01 TERM. Unless sooner terminated in accordance with Section 7.02, the
term of this Agreement will be for an initial period of two (2) years from
the Effective Date. The term will automatically extend for succeeding one (1)
year periods, unless either party notifies the other in writing within ninety
(90) days prior to expiration of the then current period of its intention not
to further extend this Agreement.
7.02 TERMINATION FOR CAUSE. Either party may terminate this Agreement upon
written notice of termination to the other party in any of the following
events:
(a) the other party materially breaches this Agreement in a manner
which can be cured, and such breach remains uncured for thirty (30) days
following written notice of breach by the terminating party; or
(b) the other party materially breaches this Agreement in a manner
which cannot be cured;
7.03 EFFECT OF TERMINATION OR EXPIRATION. In the event of the expiration
or any termination of this Agreement:
(a) VAR shall (i) be able to retain one copy of the then current
release of the Licensed Software for the sole purpose of maintaining the Value
Added Products for its Sublicensees; and (ii) warrant in writing to DOCUMENT
SCIENCES within thirty (30) days of termination the Licensed Software, related
materials and all copies thereof (except for the one copy) have been either
returned to DOCUMENT SCIENCES and/or destroyed.
(b) Neither party will be liable to the other for any damage,
expenditures, loss of profits or prospective profits of any kind or nature
sustained or arising out of, or alleged to have arisen out of, such termination
or expiration. Termination or expiration of this Agreement will not relieve or
release either party from making payments which may be owing to the other party
under the terms of this Agreement.
(c) VAR will immediately cease representing itself as a DOCUMENT
SCIENCES reseller, and promptly return to DOCUMENT SCIENCES or destroy, at
DOCUMENT SCIENCES sole option, any advertising and other materials furnished to
it by DOCUMENT SCIENCES.
(d) VAR will remove and not thereafter use any signs containing
the name or trademark of DOCUMENT SCIENCES, and will immediately destroy all of
its stationery, advertising matter and other preprinted matter remaining in its
possession or under its control containing the word "DOCUMENT SCIENCES" and
related DOCUMENT SCIENCES trade names or trademarks.
Other than as specified to the contrary in subsection (a) of this
Section 7.02 above, all of VAR's rights to market, reproduce, sublicense and use
the Licensed Programs shall cease. Any obligation of DOCUMENT SCIENCES to
provide maintenance and/or support described in Section 2.08(d) above, or
otherwise shall cease. However, upon agreement of both parties, which
agreement VAR may withhold in the exercise of its absolute discretion, VAR may
arrange to receive continued maintenance and support from DOCUMENT SCIENCES for
the Licensed Software under DOCUMENT SCIENCES then current policies.
7.04 SURVIVAL. The provisions of this Agreement will, to the extent
applicable, survive the expiration or any termination.
ARTICLE 8 - GENERAL PROVISIONS
8.01 FORCE MAJEURE. Except for the payment of money, neither party will be
liable to the other for any failure to perform or delay in the performance of
its obligations caused by circumstances beyond its reasonable control.
8.02 NOTICES. Any notice which may be or is required to be given under this
Agreement will be written or by facsimile, unless otherwise indicated. Any
written notices will be sent by registered mail or certified mail, postage
prepaid, return receipt requested. Any facsimile notice should be followed
within three (3) working days by written notice. Notices will be deemed to have
been given when received, properly addressed. All notices to VAR will be
addressed as shown on the first page of this Agreement. All notices to DOCUMENT
SCIENCES should be addressed to:
DOCUMENT SCIENCES, INC.
Attn: President
6333 Greenwich Drive, Suite 250
San Diego, California 92122
Either party may change its address by giving notice to the other party
pursuant to this Section.
8.03 PUBLICITY. Neither party will issue a press release or other similar
publicity of any nature regarding this Agreement without the other party's
written approval, which will not be unreasonably withheld. Approval will be
deemed to have been given to the extent that the disclosure is required in
order to comply with governmental rules, regulations or requirements. In this
event, the publishing party will review the text of the disclosure with the
other party prior to disclosure.
8.04 HEADINGS. Except for Article 1, Definitions, headings and titles of
the Articles and Sections of this Agreement are inserted for convenience only
and do not affect the construction or interpretation of any provision.
8.05 AMENDMENT. This Agreement may be amended only by written amendment
duly signed by authorized representatives of both parties.
Page 5 of 6
<PAGE> 6
DOCUMENT SCIENCES VALUE ADDED REMARKETER AGREEMENT
8.06 ASSIGNMENT. DOCUMENT SCIENCES entered into this Agreement based on
the personal representations of VAR's principals as to their knowledge and
expertise, ability to add value to the Licensed Software and market the Value
Added Products, and financial status. VAR shall not, therefore assign,
transfer, or sell any of its rights, or delegate any of its responsibilities
under this Agreement without DOCUMENT SCIENCES prior written consent. Any
material change in ownership of VAR without DOCUMENT SCIENCES prior written
consent (which shall not be unreasonably withheld) shall be cause for
termination of this Agreement. DOCUMENT SCIENCES may assign this Agreement
only to a parent, subsidiary or affiliated firm, to a third party in connection
with a consolidation or merger, or to a third party upon a sale or transfer of
substantially all of DOCUMENT SCIENCES business assets.
8.07 SEVERABILITY. If any provision of this Agreement is held invalid by
any law, rule, order or regulation of any government, or by the final
determination of any court, such invalidity will not affect the enforceability
of any other provisions not held to be invalid.
8.08 OMISSIONS. Any delay or omission by either party to exercise any
right or remedy under this Agreement will not be construed to be a waiver of
any such right or remedy or any other right or remedy. All of the rights of
either party under this Agreement will be cumulative and may be exercised
separately or concurrently.
8.09 LIMITATION OF LIABILITY. Subject to Sections 5.02, 5.03 and 5.04:
(a) in no event will either party be liable to the other for any
special, indirect, incidental or consequential damages in any way arising out
of or relating to this Agreement; and
(b) the maximum liability of DOCUMENT SCIENCES to VAR for direct
damages in any way arising out of or relating to this Agreement shall in no
event exceed the total amount of money actually paid by VAR to DOCUMENT
SCIENCES under this Agreement, during the most recently ended twelve (12) month
period during the term hereof which precedes the time of fixing of such
liability or $100,000, whichever is less.
8.10 GOVERNING LAW. This Agreement will be governed in accordance with the
laws of the State of California or Province of Ontario.
8.11 DISPUTE RESOLUTION. The parties will first endeavor to informally
resolve all disputes between them prior to resorting to arbitration under this
Section. In the event the parties are unable to informally resolve any
material dispute, it will be decided through arbitration pursuant to the rules
of the American Arbitration Association or Arbitration Act of Ontario then in
effect. The arbitration, which will be held in San Diego, California, or
Ontario will be binding upon the parties and may be entered by any court of
competent jurisdiction.
8.12 EXPORT. VAR hereby agrees that VAR will not export, directly or
indirectly, any U.S. source Licensed Software or other technical information
acquired from DOCUMENT SCIENCES or any products utilizing any such Licensed
Software or other technical information, to any country for which the U.S.
Government or any agency thereof at the time of export requires an export
license or other governmental approval, without first obtaining the written
consent to do so from (a) the United States Department of Commerce or other
agency of the United States Government when required by an applicable statute
or regulation, and (b) DOCUMENT SCIENCES, which consent DOCUMENT SCIENCES may
withhold if such export would, in the reasonable business judgment of DOCUMENT
SCIENCES, be detrimental to the interests of DOCUMENT SCIENCES.
8.13 NO AGENCY. It is agreed and understood that neither DOCUMENT SCIENCES
nor VAR has any authority to bind the other with respect to any matter
hereunder. Under no circumstances shall either DOCUMENT SCIENCES or VAR have
the right to act or make any commitment of any kind to any third party on
behalf of the other or to represent the other in any way as an agent. VAR is,
and shall perform its obligations hereunder as, an independent contractor and
is not, and shall not be considered to be, an agent or representative of
DOCUMENT SCIENCES.
8.14 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
the parties as to the subject matter hereof, and supersedes any and all prior
oral and written understandings and agreements as to such subject matter.
Page 6 of 6
<PAGE> 7
EXHIBIT A
This agreement covers all the DSC standard products listed on the price sheet
provided in Exhibit E
<PAGE> 8
EXHIBIT B
The VAR's territory is Canada
<PAGE> 9
EXHIBIT C
The licensed software will be value added by:
1) Pre and post sales technical support
2) Assisting the customer with fee based application development
3) Providing first level hotline support
<PAGE> 10
EXHIBIT D
DOCUMENT SCIENCES CORPORATION
SOFTWARE MAINTENANCE AGREEMENT
This Agreement is made and entered into between DOCUMENT SCIENCES Corporation
("DOCUMENT SCIENCES") and VAR is attached to, incorporated within, and
effective as of the date of that certain Value Added Remarketer Agreement
between the parties (the "VAR Agreement"). All Capitalized terms not defined
herein have the meaning set forth in the VAR Agreement.
1. VAR's RESPONSIBILITIES
VAR shall (a) be solely responsible for and bear all costs associated
with determining and maintaining the configuration and operation of the Value
Added Product and all software associated therewith other than the Licensed
Software, and (b) integrating any and all software of VAR or third party
licensors other than DOCUMENT SCIENCES included in or proposed to be included
in the Value Added Product with and into the Licensed Software.
2. DOCUMENT SCIENCES' RESPONSIBILITIES
a. Software Support (defined below) for Licensed Software shall be
included in the initial royalty and annual royalty. For purposes of this
Agreement, Software Support shall consist of:
i. DOCUMENT SCIENCES sending to VAR from time to time, as
DOCUMENT SCIENCES deems appropriate, Licensed Software releases or upgrades
made generally available by DOCUMENT SCIENCES to its customers the primary
purpose of which is to maintain compatibility with the then current supported
host environment and/or add or enhance Licensed Software features and
capabilities. However, DOCUMENT SCIENCES reserves the right to charge VAR a
separate license and/or support fee for a release or upgrade of the primary
feature of which, in DOCUMENT SCIENCES' sole discretion, is a material
enhancement to the features and/or capabilities of the Licensed Software.
ii. The provision by DOCUMENT SCIENCES of a VAR Support Center
Hot-Line number for the resolution of problems and questions relating to the
Licensed Software. The Hot-Line shall be available to the VAR for live
communication during normal business hours, Monday through Friday. For the
remaining periods, DOCUMENT SCIENCES shall provide a telephone message
recording device which will record VAR's reports.
iii. The submission of Licensed Software problems to DOCUMENT
SCIENCES via a Problem Report DOCUMENT SCIENCES does not, however, guarantee
the correction of any Licensed Software problem.
b. The implementation of all software releases/upgrades is mandatory
and the previous release of software will only be supported for 6 months
following the "general availability" of the current release/upgrade as
determined by DOCUMENT SCIENCES.
14 of 20
<PAGE> 11
c. If VAR fails to implement the most current release or upgrade of
the Licensed Software product for any reason whatsoever, DOCUMENT SCIENCES may
discontinue providing Software Support for any affected Licensed Software
product without further liability to VAR.
d. DOCUMENT SCIENCES reserves the right to discontinue Software
Support for any Licensed Software product at any time after the first
anniversary of this Agreement. DOCUMENT SCIENCES shall give the VAR at least
thirty (30) days prior written notice of the effective date of such
discontinuance and shall reimburse VAR the pro rata portion of any prepaid
Annual License Fee for Software Support provided that the VAR is in full
compliance with the terms of this Agreement.
15 of 20
<PAGE> 12
EXHIBIT E
XCL will be entitled to receive a discount of 30% from the "net price". Net
price is defined as DSC's suggested US$ retail price, provided in the following
fee schedule, less the training component. The customer training component
built into the suggested retail price will be separated out, and the 30%
discount applied to the resulting net price for the first $200,000 US$ in any
calendar year. Thereafter, the discount is 40% through the remainder of the
year. Annual license fees payable to DSC are at 50% of the US$ retail price.
XCL will have the authority to license DSC products at such prices and on
XCL's usual trade terms. These prices may be higher or lower than the
suggested retail price.
The revenue for end user training will be collected from the customer by XCL.
DSC will notify XCL in writing of any price changes 60 days prior to the
pricing change.
<PAGE> 13
DOCUMENT SCIENCES SOFTWARE LICENSE FEES
Effective January 1, 1995
MAINFRAME AND DEPARTMENTAL PRODUCTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
System Classification Mainframe(1) Departmental(2)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Product Licenses Initial(4, 5) Annual(4, 5) Initial(4, 5) Annual(4, 5)
- ------------------------------------------------------------------------------------------------------
COMPUSET 6.1(9) $55,000(7) $6,900 $45,000(8) $5,600
- ------------------------------------------------------------------------------------------------------
Upgrade from XICS 5.x(5, 6) 15,000 6,900 12,000 5,600
- ------------------------------------------------------------------------------------------------------
Migration to Workstation Class 6,000 -- 5,000 --
- ------------------------------------------------------------------------------------------------------
COMPUPREP 10,000 1,550 8,000 1,150
- ------------------------------------------------------------------------------------------------------
EMITTER - Meta, PostScript, 8,000 1,250 5,000 950
AFP, PCL, or XES
- ------------------------------------------------------------------------------------------------------
IMPORTER - TIFF or PCL 6,000 1,050 4,000 750
- ------------------------------------------------------------------------------------------------------
CONSOLIDATOR - IMG 3,000 -- 2,000 --
- ------------------------------------------------------------------------------------------------------
HOSTPRINT - Meta 2,000 -- 1,500 --
- ------------------------------------------------------------------------------------------------------
TRANSFORMER - PCL to Meta 15,000 2,600 10,000 1,600
- ------------------------------------------------------------------------------------------------------
DOCUMENT VIEWING SERVICE 50,000 6,250 40,000 5,000
- ------------------------------------------------------------------------------------------------------
</TABLE>
WORKSTATION PRODUCTS(3)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Number of Licenses(4, 5) 1 2 3 4 5
- -----------------------------------------------------------------------------------------------------------------------------------
Product Licenses Initial Annual Initial Annual Initial Annual Initial Annual Initial Annual
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COMPUSET 6.1(9) $32,000 $4,000 $42,000 $5,250 $50,000 $6,250 $57,000 $7,150 $62,000 $7,750
- ------------------------------------------------------------------------------------------------------------------------------------
COMPUPREP 3,000 650 5,000 850 7,000 1,050 8,000 1,250 9,000 1,550
- ------------------------------------------------------------------------------------------------------------------------------------
EMITTER - Meta, PostScript, 2,500 450 4,000 600 5,000 900 5,500 950 6,000 1,050
AFP, PCL, Interpress, or XES
- ------------------------------------------------------------------------------------------------------------------------------------
IMPORTER - TIFF or PCL 2,500 450 4,000 600 5,000 900 5,500 950 6,000 1,050
- ------------------------------------------------------------------------------------------------------------------------------------
CONSOLIDATOR - IMG 2,000 -- 3,000 -- 4,000 -- 4,500 -- 5,000 --
- ------------------------------------------------------------------------------------------------------------------------------------
NETPRINT - Interpress/Meta 2,000 -- 3,000 -- 4,000 -- 4,500 -- 5,000 --
- ------------------------------------------------------------------------------------------------------------------------------------
TRANSFORMER - PCL to Meta 7,000 1,050 12,000 2,050 16,000 2,550 19,000 3,100 21,000 3,600
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
DESKTOP PRODUCTS / COMPUSERIES APPLICATION DEVELOPMENT
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Number of Seats 1 2 3 4 5
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMPUPACK Bundle $10,000 $17,000 $22,000 $27,000 $30,000
- ----------------------------------------------------------------------------------------------------
COMPUBUILD 5,000 8,500 11,000 13,500 15,000
- ----------------------------------------------------------------------------------------------------
COMPUSPEC 4,000 7,500 9,500 11,000 12,000
- ----------------------------------------------------------------------------------------------------
COMPUMERGE 3,000 5,500 7,500 8,500 9,000
- ----------------------------------------------------------------------------------------------------
COMPUVIEW PROOF 1,000 2,000 2,750 3,500 4,000
- ----------------------------------------------------------------------------------------------------
</TABLE>
DESKTOP PRODUCTS / DOCUMENT LIBRARY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Number of Seats 1 5 10 15 20
- -----------------------------------------------------------------------------------------------------------------------------------
Product Licenses Initial Annual Initial Annual Initial Annual Initial Annual Initial Annual
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DOCUMENT LIBRARY SERVICE(10) 10,000 1,500 20,000 3,000 25,000 4,000 30,000 4,500 35,000 5,000
- ------------------------------------------------------------------------------------------------------------------------------------
DDM /Edit Client 2,500 -- 4,500 -- 6,500 -- 8,000 -- 10,000 --
- ------------------------------------------------------------------------------------------------------------------------------------
DDM /Build Client 7,000 -- 15,000 -- 20,000 -- 25,000 -- 30,000 --
- ------------------------------------------------------------------------------------------------------------------------------------
DDM /Generate Client 5,000 -- 12,000 -- 17,000 -- 22,000 -- 25,000 --
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
DESKTOP PRODUCTS / DOCUMENT VIEWING (REQUIRES DVS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Number of Seats 1 5 10 50 100
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMPUVIEW NAVIGATOR $500 $2,250 $4,000 $15,000 $25,000
- ----------------------------------------------------------------------------------------------------
</TABLE>
Pricing in $US. Prices and conditions subject to change without notice.
[LOGO]
<TABLE>
<CAPTION>
<S> <C>
6333 Greenwich Drive, Suite 120 Les Espaces de Sophia-Im. Delta
San Diego, CA 92122 80 route des Lucioles
(619) 625-2000 Fax (619) 625-2021 B.P. 037-06901 Sophia Antipolis Cedex, France
Tel: 33-93-95-52-23 Fax: 33-93-95-52-06
</TABLE>
<PAGE> 14
DOCUMENT SCIENCES SERVICE FEES
Effective January 1, 1995
SERVICES PRICING
SOFTWARE INSTALLATION
<TABLE>
<S> <C>
STANDARD: Included in the Initial License Fees. Software Installation and Setup
at customer site. Included
SUPPLEMENTAL: If additional software installation is desired on-site . . . . . . . . . . . . . . . . . . $2,500/day*
SOFTWARE TRAINING
SAN DIEGO TRAINING CENTER
STANDARD: Included in the Initial License Fees. Four and one-half days for 6 students
including Quick Reference Guide for each student. Additional students, up to 4, will be
billed at $250 per student . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Included
SUPPLEMENTAL: If additional standard training is desired after initial training class has
been conducted, the fee per student (4.5 days) . . . . . . . . . . . . . . . . . . . . . . . . . $1,250/Student
CUSTOMER SITE
STANDARD: Four and one-half days for 6 students including Quick Reference Guide for
each student. Additional students, up to 4, will be billed at $250 per student . . . . . . . . . $7,500*
CUSTOMIZED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,500/day*
APPLICATION CONSULTING
Application Design, StyleSpec/PrepSpec Development, Data Tagging, Text and Graphics
Conversion, DCLIB Creation, Font Database Customization, Printer Integration, and
Creation of Masters or Print-ready files will be priced by job . . . . . . . . . . . . . . . . . Quoted
CUSTOM PROGRAMMING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Quoted
</TABLE>
*Travel and accommodations additional
- --------------------------------------------------------------------------------
1. Mainframe class include IBM 3090, ES9000 larger than Model 320; DEC Vax 9000
series; UNISYS 1100/90, 2200, and A-Series.
2. Departmental class include IBM 43xx, 9370, ES9000 up through Model 320; DEC
Vax up to Model 9000; and Unix Servers (NCR Unix, HP UX; DG Unix, Pyramid
Unix; UNISYS Unix.)
3. Workstation class include Sun Sparc, IBM RISC, Dec Alpha OSF, SCO Unix, PC
OS/2, and PC DOS.
4. Initial License Fee is paid in advance. Beginning on the first day of the
13th month of usage and each year thereafter, the Annual License fee must be
paid to retain use rights. Annual License Fee will be billed annually in
advance.
5. Software support, as defined in Section 11 of the Software License &
Software Support Agreement, is included in the Initial and Annual License
Fee. One week of training at the San Diego Training Center is included in
the Initial License Fee. Software Installation and Setup at Customer Site
is included in the Initial License Fee.
6. CompuSet 6.0 Upgrade for XICS 5.x. Upgrade fee includes software support,
per Section 11 of the Software License & Software Support Agreement.
7. Second and subsequent licenses are $35,000 each. Not included are
installation, training and consulting as noted in the Software License &
Software Support Agreement, Schedule A.
8. Second and subsequent licenses are $25,000 each. Not included are
installation, training and consulting as noted in the Software License &
Software Support Agreement, Schedule A.
9. CompuSet 6.0 includes choice of one emitter (MetaCode, PostScript, AFP, PCL,
XES, or Interpress). Additional Emitters are optional.
10. DLS for NetDrive and OS/2 Server Only. Mainframe and Departmental Class
(MVS or VMS) quoted separately.
- --------------------------------------------------------------------------------
Prices and conditions subject to change without notice
<PAGE> 15
Addendum
The customer training component currently built into the suggested US$ retail
price is US$7,500. In the event that XCL provides training to the customer,
"net price" will be defined as DSC's suggested US$ retail price and the 30% or
40% discount will be applied to that price.
<PAGE> 1
EXHIBIT 10.9
INTERNATIONAL
VALUE ADDED RESELLER AGREEMENT
International Value Added Reseller (VAR) Agreement made as of the 1st day of
January 1996, by and between Document Sciences Corporation (hereinafter called
"Document Sciences"), a corporation organized and existing under the laws of
California, USA having its principal place of business at 6333 Greenwich Drive,
Suite 120, San Diego, CA 92122 and N.V. Rank Xerox S.A. (hereinafter called
"VAR"), a corporation organized and existing under the laws of Belgium having
its principal place of business at Wezembeekstraat 5, 1930 Zaventem, Belgium.
Document Sciences is engaged in the design, manufacture, distribution, sale and
license of the Products and has the right to appoint VAR thereof, and VAR
desires to act as a Non Exclusive VAR appointed by Document Sciences in the
Region. In consideration of the mutual promises and covenants herein
contained, the parties hereto agree as follows:
1. Definitions
For the purpose of this Agreement, the following terms shall have
their meanings specified.
"Customers" means all end users such as large medium and small
accounts, educational, government departments etc in the Region.
"Region" means Belgium and Luxembourg.
"Trademarks" means any trademark owned by Document Sciences from
time to time.
"Pan European Price List" means the prices listed in Appendix A.
"Products" means the software products of Document Sciences
described in Appendix A attached hereto, as modified, enhanced and
updated from time to time.
"Sales Plan" means the agreed upon volume of sales from Document
Sciences to VAR as outlined in Appendix B. Such sales shall be
calculated at "VAR Cost" in accordance with the Pan European Price
List in Appendix A.
"Software Problem Severity Level and Target Resolution Time" means
the information shown in Appendix C.
"Initial Marketing Campaign" means the plan as outlined in and
agreed, Appendix D
"Software License Agreement" means the end user agreement attached
hereto in Appendix E.
DSC VAR Agreement Version 6 Page 1
<PAGE> 2
2. Appointment
2.1 Document Sciences hereby appoints VAR, and VAR agrees to act, as an
appointed VAR for the Products in the Region during the term hereof.
2.2 VAR shall have the right (i) to use the products solely for
demonstration purposes; (ii) to use the Trademarks solely in
connection with its marketing and resale of Products hereunder, in
accordance with applicable law and Document Sciences's policies
regarding Trademark usage as established from time to time; and
(iii) to license the products and their documentation to Customers
on such terms as are set forth or referred to herein, subject to
the terms of the Software License Agreement.
2.3 VAR agrees to use its best efforts to promote the marketing and
resale of the Products within the Region and to support the
Products in accordance with the terms hereof. In carrying out its
duties hereunder, VAR shall use its best efforts to meet with the
Sales Plan attached hereto as Appendix B and with such policies and
standards of Document Sciences as shall be announced by Document
Sciences from time to time. VAR agrees to develop, maintain and
train a competent sales and support organization for the Products
that will be responsible for their support services. VAR shall at
all times have a sufficient number of competent office, sales,
service and other employees to carry out its obligations under this
Agreement and shall conduct its business according to the highest
standards and in a manner calculated to protect and promote the
reputation of the Products.
2.4 VAR's performance shall be measured by mutually agreed sales
targets as set out in Appendix B. As a minimum acceptable
performance level, 75% (seventy-five percent) of this value shall
prevail. If during the term of this Agreement, VAR shall not
achieve minimum acceptable performance as defined in accordance
with the above agreed sales goals, Document Sciences has the right
to issue a Letter of Concern to the VAR that such performance is
deficient. This Letter of Concern would precede a formal probation
period of four (4) months. In the event the minimum performance
level is not achieved within the probation period, Document
Sciences may terminate this Agreement for cause by giving two (2)
months written notice to VAR. After receipt of the Letter of
Concern, alternatively, Document Sciences and the VAR may define,
by mutual agreement only, other yardsticks of performance to be
achieved during the formal four (4) months probation period in lieu
of the minimum performance level.
3. Software Licensing
3.1 Packaging
Each product shall be delivered to VAR in a package (the "package")
containing the Software License and user documentation for such
software. VAR shall provide Document Sciences Corporation with an
executed Software License Agreement from the customer prior to the
delivery of the software products to its customers.
3.2 Title to the Products
Title to the Products shall remain with Document Sciences, VAR
shall not remove, alter, cover or obfuscate any copyright notices
or other proprietary rights notices placed
DSC VAR Agreement Version 6 Page 2
<PAGE> 3
or embedded by Document Sciences on or in any Package or any of the
items contained therein.
Document Sciences shall retain all copyrights to any translated
versions of the Products including the manuals, messages and
documentation. As a matter of record, Document Sciences shall
purchase from the VAR all property rights to localized Document
Sciences software, manuals, documentation and collateral material
for the price of $1.00.
3.3 License
Subject to Section 13.3 ("Proprietary Rights") below Document
Sciences hereby grants to VAR a non-exclusive, non-transferable
license, without right to sublicense any such rights to third
parties. The license shall be renewable each year and the software
is licensed for use on a particular host for the specified period
of time. A security key is inherent in the software to ensure
conformance to the above.
3.3.1 With respect to each copy of the server or client software supplied
by Document Sciences, only:
(a) to deliver the copy of the server or client software to
Customers for use on end user server or client equipment
respectively at designated site or
(b) to load one copy of the server or copies of the client
software onto the server or client equipment respectively, only for
delivery to a customer by VAR pursuant to Section 3.3.2(a) below or
for use by VAR pursuant to Section 3.3.2(b).
3.3.2 With respect to each copy of server or client software loaded onto
server or client equipment respectively by VAR
(a) to deliver this copy of the server of client software
loaded onto server or client equipment respectively only directly
to a customer at a designated site, and ensure the Customers
execute the license agreement prior to the delivery of the
software.
(b) to use this copy of the server or client software
loaded onto server or client equipment respectively only for
development, support and marketing of VAR systems which include
licensed software, and otherwise in accordance with the Software
License Agreement.
3.3.3 In the case of delivery pursuant to Section 3.3.2(a) above to
provide the server or client software diskettes to the Customer for
use only as a back up copy to the copy loaded onto server or
client's equipment respectively, and otherwise to destroy the copy
and in the case of use by VAR pursuant to Section 3.3.2(b) above,
to retain, in the aggregate, one copy as a VAR backup copy and to
destroy all other copies.
3.3.4 No rights are granted with respect to any licensed software source
code, and VAR agrees not to decompile, reverse assemble, or
otherwise attempt to derive source code from the licensed software.
VAR is granted no right to use, reproduce or distribute licensed
software except as expressly set forth herein. All rights not
expressly granted to VAR with respect to the licensed software are
retained by Document Sciences.
DSC VAR Agreement Version 6 Page 3
<PAGE> 4
4. Order Procedure and Terms
4.1 Orders and Credit
Orders for Products will be placed by VAR with Document Sciences or
Document Sciences's authorized source on a form approved by
Document Sciences. Document Sciences may, in its sole discretion,
refuse to accept any order in whole or in part. VAR will make
payment, in US dollars by wire transfer of immediately available
funds to Document Sciences or such bank account as Document
Sciences shall specify to VAR in writing, within 45 days after the
date of delivery of the goods. VAR will provide financial
statements and references for the establishment of its initial
credit line. If VAR fails to make payment according to the terms
set forth above or fails to provide references satisfactory to
Document Sciences, Document Sciences may require VAR to accompany
its orders with irrevocable letters of credit or may impose such
other payment terms as Document Sciences may deem advisable.
4.2 Shipments
All shipments of Products shall be F.O.B. Document Sciences's
facility, currently located in San Diego and shall be shipped to
VAR's address as set forth in this Agreement. VAR will assume all
risks of loss or damage to products upon delivery by Document
Sciences to the carrier at the point of shipment. Unless VAR's
order specifies the name of a carrier, Document Sciences will
select the carrier. All arrangements for transportation and
insurance at full value of Products shipped will be made by
Document Sciences. Document Sciences will use reasonable efforts
to make deliveries promptly of order so accepted, but Document
Sciences will not be liable for any damages to VAR or to any other
person for Document Sciences's failure to fill any order, or for
any delay in delivery or error in filling any order.
4.3 Controlling Terms
The terms and conditions of this Agreement and of the applicable
Document Sciences invoice or confirmation and Standard Terms and
Conditions of Sale will apply to each order accepted or shipped by
Document Sciences hereunder. The provisions of VAR's form of
purchase order or other business forms, if any, will not apply to
any order notwithstanding Document Sciences's acknowledgement or
acceptance of such order.
4.4 Cancellation
Document Sciences reserves the right to cancel orders placed by VAR
and accepted by Document Sciences as set forth above, or to refuse
or delay shipment thereof, if VAR (i) fails to make any payment as
provided in this Agreement or on the terms of payment set forth in
any invoice, (ii) fails to meet reasonable credit or financial
requirements established by Document Sciences, including any
limitations on allowable credit or (iii) otherwise fails to comply
with the terms and conditions of this Agreement. No such
cancellation, refusal or delay shall be deemed a termination
(unless Document Sciences so advises VAR) or breach of this
agreement by Document Sciences.
DSC VAR Agreement Version 6 Page 4
<PAGE> 5
5. Prices
5.1 Document Sciences shall invoice VAR each time Products are shipped.
Prices shall be in accordance with Document Sciences's Pan European
Price List, as in effect when each order is received, less a
discount of 30%. In addition a 5% bonus discount shall be applied
on reaching the appropriate target. The target shall be renewed
annually as detailed in Appendix B, Note (2). The discount of 30%
shall apply in each new year, with the bonus of 5% applied on
reaching the new target. Document Sciences's current Pan European
Price List is attached hereto as Appendix A. All prices are F.O.B.
Document Sciences's facility and include export packaging.
5.2 Prices are also Sole of any sales, use, excise, value-added,
withholding or similar tax of any kind. VAR agrees to pay, and to
indemnify and hold Document Sciences harmless from any sales, use,
excise, value added, withholding or similar tax levied outside of
the United States on the products.
5.3 Quantity discounts will be provided at Document Sciences's
discretion for large orders on a case by case basis, provided VAR
has received prior written approval from Document Sciences.
5.4 Document Sciences agrees to notify VAR at least 90 days in advance
of the effective date of any change in its Pan European Reseller
Price List by delivery to VAR of a new version of Appendix A.
6. Marketing Program
6.1 Document Sciences may update and/or revise the performance and
content of the Product. VAR shall be responsible, to order updates
from Document Sciences for providing customers with same having
become part, or deemed to have been so, of Appendix A, as well as
with training in the use and operation of such updates. Any such
update shall be subject to the terms of this Agreement and be
automatically deemed to be part of Appendix A. Any Product ordered
and/or delivered within sixty (60) days preceding the marketing by
Document Sciences of new versions of the Product may be exchanged
by the VAR for such new versions.
6.2 VAR shall, at its own expense,
(i) Place the Product marketing and resale in VARs' catalogues as
soon as possible; (ii) provide information it may have in order to
assist Document Sciences in assessing customer requirements for the
Products, including modifications and improvements thereto, in
terms of quality, design, functional capability and other
features; (iii) submit the market information, when requested by
Document Sciences, it may have available regarding competition and
changes in the market; (iv) promote the use of the Products in all
market segments; (v) provide Document Sciences with a quarterly
report on customer product registration information.
6.3 VAR shall supply to Document Sciences sufficient customer
information to enable Document Sciences to understand the usage of
the software. The information shall consist of name, address,
computing platform and serial number, applications and number of
users.
DSC VAR Agreement Version 6 Page 5
<PAGE> 6
6.4 VAR is responsible for the translation, production, printing and
distribution of any marketing and technical information. Document
Sciences will assist VAR by providing English language versions of
any marketing materials, including brochures, photographs,
advertisements, copy and other such materials. Document Sciences
is not obligated to translate any materials into foreign language
versions.
6.5 VAR shall initiate and submit to Document Sciences every six months
promotional campaigns and corresponding budgets for the coming
semester. The initial six months campaign is attached as Appendix
D. Document Sciences shall have the right not to approve a campaign
of promotional event, or to request modifications thereto, should
it not correspond to its long term acknowledged interest and
objectives or should it not comply with Document Sciences's
designs, image or trade marks. In such case, the parties shall co-
operate to adapt such promotional campaigns and special events.
VAR shall, at its cost, include advertising, promotional
information, price listing and general information about the
products in all of its own publications and catalogues.
6.6 Document Sciences may provide in conjunction with the VAR but, at
its sole expense, foreign language editions or translations of the
Products (including the user manual, diskette etc). In the event
the distributor is responsible for making the original translation,
Document Sciences will reimburse the distributor in bartered trade
of product at a price derived from Appendix A.
6.7 In the event of the release of any major upgrade or new version of
the Product, Document Sciences will release a new foreign language
version shortly after the English version release if it was
responsible for producing the original translation. In the event
the distributor is responsible for making the original translation,
Document Sciences will co-operate to enable the release of any
major upgrade or new version.
7. Training
VAR shall, within 45 days of signing the Agreement make available
for training, for five days at Document Sciences's facility in
France not less than two technical salesperson skilled in the
document management software marketplace. Document Sciences shall
provide this training free of charge and VAR shall pay all travel
and incidental expenses.
8. Support
VAR shall provide in a timely fashion the same software support
services to Customers as provided by Document Sciences to its US
and European customers.
9. Right of Audit
VAR agrees to maintain at all times a complete, clear and accurate
record of the number of Products, the Customers to whom the
Products were distributed, and the payments received therefore.
Document Sciences may, at Document Sciences's expense, inspect,
copy and audit all relevant books and records of VAR during regular
business hours at VAR's offices to ensure compliance with the terms
of this Agreement. Any such audit may be conducted by a certified
public accountant chosen by Document Sciences.
DSC VAR Agreement Version 6 Page 6
<PAGE> 7
10. Literature, Sales Aids, Demonstration Equipment
Document Sciences will provide an Initial Marketing Package, during
training or shortly after this Agreement is consummated. Document
Sciences also agrees to provide such price lists, photographs,
video-tapes, press releases, demonstration scripts and bulletins
prepared by Document Sciences in the ordinary course of business
useful to the VAR in carrying out its responsibilities hereunder.
Document Sciences will provide customary support in the form of
telephone/fax support, software and documentation updates.
11. Compliance with Governmental Regulations
The obligation of Document Sciences to supply the products shall
be, at all times, subject to any applicable US export control laws
and regulation and import control laws. VAR will comply with such
laws and regulations, including without limitation, record keeping
and inspection requirements. VAR acknowledges that Document
Sciences is subject to regulation under laws of the United States,
under which export or diversion of Document Sciences Products and
software to certain countries is prohibited. VAR agrees that it
will not export or re-export outside the Region, directly or
indirectly, any Products or technical data relating to Products
without the prior written consent of Document Sciences and
complying with all applicable regulations
12. Relationship Between Parties
All Products supplied to VAR hereunder shall be licensed by VAR for
its own account at its own risk and re-licensed only in accordance
with the terms hereof. Document Sciences and VAR are independent
contractors and are not, and shall not represent themselves as,
principal and agent or joint ventures. VAR shall act as a
principal on its own behalf and has no legal power or authority,
express or implied, to act for or obligate Document Sciences in any
manner.
13. Proprietary Rights
13.1 The parties agree not to disclose to a third party any confidential
technical information concerning the Products or any other
information of a confidential nature about Document Sciences. The
parties acknowledge that they each retain all copyrights and other
proprietary rights to the Products and Trademarks, and specifically
the VAR obtains only the rights to the products specifically
granted in Section 2 ("Appointment") hereof.
13.2 Protection of Intellectual Property:
The Licensed Software and any copies thereof, in whole or in part,
and all copyright, patent, trade secret and other intellectual
property rights therein, are and remain the valuable property of
Document Sciences. VAR agrees to make no use of the Licensed
Software except under the terms of, and during the existence of,
this Agreement. The ownership and all right, title and interest in
and to any trademark, trade name, patent, copyright, technology, or
know-how relating to the Licensed Software is and will remain
vested solely in Document Sciences. VAR will use its best efforts
to protect Document Sciences's intellectual property rights,
including, without limitation, enforcement of VAR Sublicense
agreements, and will assist Document Sciences at
DSC VAR Agreement Version 6 Page 7
<PAGE> 8
Document Science's expense to stop any unauthorized use of Document
Science's intellectual property rights. Except to the extent
authorised herein or otherwise agreed in writing by Document
Sciences, copyrighted materials (documents and software) may not be
copied.
13.3 VAR shall transfer no Product to a Customer unless (a) VAR shall
have obtained from the Customer prior to such transfer a signed
copy of the Software License Agreement, attached hereto as Appendix
E, copies of which shall be furnished to Document Sciences.
Document Sciences may amend the Software License Agreement from
time to time. Upon any such amendment, Document Sciences shall
notify VAR of such change and shall furnish VAR with a copy of the
amended Software License Agreement. Upon the next subsequent
delivery of a Product to a Customer, VAR shall obtain from such
customer, and deliver to Document Sciences upon request, an
executed copy of the new version of the Software License agreement,
which shall apply to all Products thereafter delivered to such
Customers until the form of the Software License Agreement is again
amended by Document Sciences.
14. Assignability
Neither this Agreement nor any of the rights granted under it shall
be assignable by VAR without the prior written consent of Document
Sciences.
15. Duration
This agreement shall commence on the date first above written and
shall remain in full force and effect for a term of two years
unless sooner terminated as hereinafter provided, with automatic
renewal at the end of each year for a subsequent one year period,
unless either party notifies the other party at least 90 days prior
to the yearly renewal anniversary, that it wishes the contract to
run out at the end of the then current two year period.
16. Termination Upon Default
This Agreement may also be terminated as follows:
16.1 By either party by written notice to the other party if (i) a
receiver shall have been appointed over the whole or any
substantial part of the assets of the other party, (ii) a petition
or similar document is filed by the other party initiating any
bankruptcy or reorganization proceeding, (iii) such a petition is
filed against the other party and such proceeding shall not have
been dismissed or stayed within 60 days after such filing, or (iv)
upon thirty days prior written notice following the continuance of
an event described in Section 17.2 ("Effect of Termination") for a
period of three months;
16.2 Following the initial 6 months of this agreement, by either party
upon written notice if the other party has breached the terms of
this Agreement in any material respect and fails to cure such
breach within 60 days after such other party's receipt of written
notice of such default;
DSC VAR Agreement Version 6 Page 8
<PAGE> 9
16.3 By Document Sciences at any time after the initial period upon 60
days notice, if VAR falls to meet the minimum purchase obligations
set forth in the Sales Plan; or,
16.4 By Document Sciences upon written notice at any time, for breach of
Section 13 ("Proprietary Rights").
17. Effect Of Termination
Upon any termination or expiration of this Agreement for any
reason:
17.1 Document Sciences, at its option, will repurchase any or all
Products then in VAR's possession at a price not greater than the
price paid by VAR for such Products. Upon receipt of any Products
so repurchased from VAR, Document Sciences shall issue an
appropriate credit to VAR's account.
17.2 The due date of all outstanding invoices to VAR for Products shall
automatically be accelerated to become due and payable by immediate
wire transfer on the effective date of termination, even if longer
terms have been previously agreed to. All order or portions
thereof remaining unshipped as of the effective date of termination
shall automatically be cancelled.
17.3 For a period of one year after the date of termination, VAR shall
make available to Document Sciences for inspection and copying all
books and records of VAR that pertain to VAR's performance of and
compliance with its obligations, warranties and representations
under this Agreement.
17.4 VAR shall forthwith cease all use of Trademarks, and will not use
any mark which is confusingly similar to any Trademark.
17.5 VAR shall return all Document Sciences marketing literature and
materials to Document Sciences.
17.6 NEITHER DOCUMENT SCIENCES NOR DISTRIBUTOR SHALL BE LIABLE TO THE
OTHER FOR DAMAGES OF ANY KIND, INCLUDING INCIDENTAL OR
CONSEQUENTIAL DAMAGES, ON ACCOUNT OF THE TERMINATION OF THIS
AGREEMENT FOR ANY REASON.
17.7 VAR will immediately cease all representations that it is an
Document Sciences distributor.
17.8 Neither party will be entitled to any reimbursement in any amount
for any training, market development, investments or other costs
expended by either party before the termination of this Agreement,
regardless of the reason for, or method of, termination of this
Agreement.
17.9 Document Sciences's right to receive and VAR's obligation to pay
all amounts due hereunder, as well as VAR's obligations under
Sections 9 ("Right of Audit"), 13 ("Proprietary Rights"), 17
("Effect of Termination"), 18 ("Warranty"), and 20
("Miscellaneous") shall survive termination of this Agreement. All
other provisions of this Agreement shall terminate upon the
termination of this Agreement for any reason.
DSC VAR Agreement Version 6 Page 9
<PAGE> 10
18. Warranty
Document Sciences extends no warranty to the Customer. Document
Sciences warrants the products to the VAR only as follows:
18.1 Software Warranty
Software is warranted to conform to Document Sciences's Product
description applicable at the time of order. Document Sciences's
sole obligation shall be to use reasonable effort to remedy any non
conformance as outlined in Appendix C. Such remedy shall be
provided on non conformance reported to Document Sciences in
writing for a period of one hundred and twenty (120) days from the
date of shipment.
18.2 Exclusions from Warranties
The warranties contained in Section 18.1 are contingent upon
Customer's and/or VAR's prior use of the product and shall not
apply (i) if any changes have been made to the code in any way (ii)
if the Product has been modified by Customer or VAR.
18.3 Disclaimer of Warranties
THE STATED EXPRESS WARRANTIES ARE IN LIEU OF ANY OBLIGATIONS OR
LIABILITIES ON THE PART OF DOCUMENT SCIENCES ARISING OUT OF OR IN
CONNECTION WITH THE PERFORMANCE OF THE PRODUCTS.
EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH ABOVE, DOCUMENT
SCIENCES MAKES NO OTHER WARRANTIES RELATING TO THE PRODUCTS EXPRESS
OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING WITHOUT
LIMITATION THE CONDITION OF THE PRODUCTS. ANY AND ALL WARRANTIES
OF NON-INFRINGEMENT OF THIRD PARTY RIGHTS, FITNESS FOR A
PARTICULAR PURPOSE, OR MERCHANTABILITY ARE EXPRESSLY EXCLUDED. NO
PERSON IS AUTHORIZED TO MAKE ANY OTHER WARRANTY OR REPRESENTATION
CONCERNING THE PERFORMANCE OTHER PRODUCTS OTHER THAN AS PROVIDED IN
THIS SECTION 19. DISTRIBUTOR SHALL MAKE NO OTHER WARRANTY, EXPRESS
OR IMPLIED, ON BEHALF OF DOCUMENT SCIENCES.
19. Limited Liability
IN NO EVENT SHALL DOCUMENT SCIENCES BE LIABLE FOR INDIRECT, SPECIAL
INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY NATURE WHATSOEVER,
INCLUDING WITHOUT LIMITATION LOSS OF PROFITS, USE OR DATA OR OTHER
COMMERCIAL LOSS WHETHER OR NOT DOCUMENT SCIENCES HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES. THIS LIMITATION SHALL APPLY TO
ANY CLAIM OR CAUSE OF ACTION WHETHER IN CONTRACT OR TORT (INCLUDING
NEGLIGENCE), IN LAW OR EQUITY, STRICT PRODUCT LIABILITY OR
OTHERWISE, OR UNDER ANY OTHER THEORY INCLUDING CLAIMS CONCERNING
PATENT, COPYRIGHT OR OTHER PROPRIETARY RIGHTS INFRINGEMENT.
DSC VAR Agreement Version 6 Page 10
<PAGE> 11
20. Miscellaneous
20.1 Notices. All notices or reports permitted or required under this
Agreement must be in writing and must be delivered by personal
delivery, telegram, telex, telecopier, facsimile transmission or by
certified or registered mail, return receipt requested, and shall
be deemed given upon personal delivery, ten (10) days after
deposit in the mail, or upon acknowledgement or receipt of
electronic transmission. Notices shall be sent to the address set
forth on the signature page of this Agreement or such other address
as either party may specify in writing. All other notices to
Document Sciences shall be sent to its President.
20.2 Force Majeure. Neither party will be liable hereunder by reason of
any failure of delay in the performance or its obligations
hereunder (except for the payment of money) on account of strikes,
shortages, riots, insurrection, fires, flood, storm, explosions,
acts of God, war, governmental action, labour conditions,
earthquakes, or any other similar cause which is beyond the
reasonable control of such party.
20.3 Waiver. The failure of either party to required performance by the
other party of any provision hereof will not affect the full right
to require such performance at any time thereafter nor will the
waiver by either party of a breach of any provision hereof be taken
or held to be a waiver of the provision itself.
20.4 Severability. In the event that any provision of this Agreement is
found to be unenforceable or invalid under any applicable law or is
so held by a court of competent jurisdiction, such
unenforceability or invalidity will not render this Agreement
unenforceable or invalid as a while, and, in such event, such
provision will be changed and interpreted so as best to accomplish
to objectives of such unenforceable or invalid provision within the
limits of applicable law or applicable court decisions.
20.5 Hiring of Personnel. Both parties agree that the hiring and
training of personnel by each other to carry out duties pursuant
with this contract represents significant investments. In
recognition of this both parties agree:
(i) During the term of this agreement not to enter into any
relationship with of employment, consultancy or agency with any
person who, at any time during the previous year to the
relationship with Document Sciences was an employee of the VAR.
(ii) In the event of termination of this agreement by Document
Sciences with the intent of appointing as a VAR a selling
organization in the territory which is (a) directly or indirectly,
wholly or partially-owned by the Document Sciences, or (b) which,
directly or indirectly, wholly or partially owns Document Sciences,
such organization being either an existing one or one yet to be
formed at the time of notice, then Document Sciences agrees, for
the duration of one year after expiration of this agreement, not to
enter into any relationship of employment, consultancy or agency,
with any person who, at anytime in the twelve months prior to the
expiration date of the contract, was an employee of the VAR.
20.6 Governing Law. This Agreement will be governed in all respects by
the laws of the State of California, USA VAR hereby irrevocably
consents to the personal jurisdiction of the courts of the State of
California, which courts shall have Sole jurisdiction over
DSC VAR Agreement Version 6 Page 11
<PAGE> 12
any claim or dispute arising hereunder, and to service of process
within or without the said State by certified mail requiring a
signed receipt. The parties agree that the United Nations Convention
on Contracts for the International Sales of Goods (1980) is
specifically excluded from application to this Agreement.
20.7 Headings. The section heading appearing in the Agreement are
inserted only as a matter of convenience and in no way define,
limit, construe or describe the scope or extent of such, and in no
manner affects this Agreement.
20.8 Amendments. The parties agree that this Agreement may be amended
upon mutual agreement of Document Sciences and VAR. Each amendment
to this agreement shall be signed by both parties to this
Agreement.
20.9 Counterparts. This Agreement may be signed in two counterparts
each of which shall be deemed to be an original, but which together
will form a single agreement as if both parties had executed the
same document.
20.10 Authority. Each party warrants that (i) it has full power and
authority to enter into an perform its obligations under this
Agreement, (ii) this Agreement has been duly authorized by and is
binding and enforceable upon such party and (iii) the person
signing this Agreement on that party's behalf has been duly
authorized and empowered to enter into this Agreement. Each party
further acknowledges that it had read this Agreement, understands
it, and agrees to be bound by it.
20.11 Approvals . In each case where approvals or consents of either
party are required under this Agreement, such approvals or consents
shall not be unreasonably withheld.
20.12 Indemnity. Both Document Sciences and the VAR agree to indemnify
each other and hold each other harmless from any losses, claims, or
damages (including attorneys' fees) incurred as a result of any
breach of this Agreement by themselves, or incurred as a result of
any negligence, misrepresentation, error, or omission by either
party or its agents or employees.
20.13 Entire Agreement. This Agreement (including the Appendices) sets
forth the entire understanding and agreement of the parties as to
the matter covered hereby. This Agreement supersedes, any prior or
collateral agreements with respect to the matters covered by this
agreement.
Document Sciences The VAR
By: /s/ T.N. Domit By: /s/ Valentin Govaerts
------------------------------ ------------------------------
Duly Authorized Duly Authorized
Date May 1, 1996 Date 26/4/96
Name: T. N. Domit Name:
VALENTIN GOVAERTS
Title: President & CEO Title: DIRECTOR MARKETING IPS.
--------------------------- --------------------------
DSC VAR Agreement Version 6 Page 12
<PAGE> 13
Appendix A
PAN EUROPEAN PRICE LIST
(Attached at the back of this Agreement, Effective 1 August 1995)
These notes are to be read in conjunction with the price list attached at the
back of the Agreement:
(1) Software prices include one year free software updates.
(2) Products are automatic document creation and management software.
(3) Recommended retail price in local currency shall be approximately 15%
up on the Pan European Price to allow for freight, insurance, duty and
currency protection.
(4) VAR cost price shall be a 30% discount off the End User Prices shown
in the Price List. In the event the VAR reaches 75% of the agreed
annual sales target an additional 5% bonus discount shall be applied
on future purchases.
DSC VAR Agreement Version 6 Page 13
<PAGE> 14
Appendix B
SALES PLAN
The agreed sales target shall be:
<TABLE>
<CAPTION>
Product $K Year 1 Period
- ------- ----------------
Q-1 Q2 Q3 Q4
--- -- -- --
<S> <C> <C> <C>
100 100 150 150
</TABLE>
Note:
(1) In the event that the VAR fails to meet the goals in two successive
quarters the VAR will have ten (10) days to justify the failure to
meet the minimum performance level. In the event that Document
Sciences, after reasonable and objective assessment, judge not to
accept the VAR's justification then Document Sciences may issue the
letter of concern.
(2) Subsequent years targets shall be mutually agreed ninety (90) days
prior to the end of the year. Such targets shall be reasonably
determined based on the previous years' performance.
DSC VAR Agreement Version 6 Page 14
<PAGE> 15
Appendix C
SOFTWARE PROBLEM SEVERITY LEVEL
AND TARGET RESOLUTION TIME
Severity Level
Severity 1 Catastrophic problem; the user has no production capability
Severity 2 Severe problem; the user's production capability is seriously
degraded
Severity 3 Moderate problem; the user can proceed but capability is
impaired
Severity 4 Minor problem; the user's production is not diminished
Resolution Time
Best efforts will be made to respond within the four severity levels in the
time shown below:
<TABLE>
<CAPTION>
Severity Level Resolution Time
-------------- ----------
<S> <C>
Level 1 11 days
Level 2 26 days
Level 3 31 days
Level 4 At the next release
</TABLE>
DSC VAR Agreement Version 6 Page 15
<PAGE> 16
APPENDIX D
INITIAL MARKETING CAMPAIGN
DSC VAR Agreement Version 6 Page 16
<PAGE> 17
Appendix E
SOFTWARE LICENCE
(VAR's Software License to be attached)
DSC VAR Agreement Version 6 Page 17
<PAGE> 1
Exhibit 10.10
DOCUMENT SCIENCES CORPORATION
Professional Services Agreement
This Agreement for Professional Services ("the Agreement") is made and entered
into between <<COMPANY>> at <<ADDRESS>> and Document Sciences Corporation,
("Document Sciences") at 6333 Greenwich Drive, Suite 120, San Diego, CA 92122.
1. SERVICES
Document Sciences shall perform the Services specified in Schedule A, the
Statement of Work and Fee Schedule, and any Addendums thereto, if any, attached
hereto and made a part of this Agreement.
2. TERM
This agreement shall become effective on the date it is accepted by Document
Sciences and shall remain in full force and effect until completion of the
services or until terminated as provided in Paragraph 7 of this Agreement.
3. CONSIDERATION
As consideration for Document Sciences performance of the Services, Customer
shall pay the fee listed in the attached Schedule A, payable in accordance with
the payment schedule on said attached schedule.
4. INVOICES
a. Document Sciences will submit itemized invoices to Customer for the Services
performed in accordance with the provisions of Schedule A.
b. All invoices are due and payable within thirty days from date of receipt of
invoice.
5. CONFIDENTIAL INFORMATION
a. Document Sciences and Customer acknowledge that from time to time certain
information may be communicated to either party to enable effective
performance of the Services. Both parties shall treat all such information as
confidential, whether or not so identified, and shall not disclose any part
thereof without the prior written consent of the disclosing party. Both
parties shall limit the use and circulation of such information, even within
its own organization, to the extent necessary to perform the Services. The
foregoing obligation of this Paragraph 5, however, shall not apply to any
part of the information that (i) has been disclosed in publicly available
sources of information, (ii) is, through no fault of either party, hereafter
disclosed in publicly available sources of information, (iii) is now in the
possession of the other party without any obligation of confidentiality, or
(iv) has been or is hereafter rightfully disclosed to the other party by a
third party, but only to the extent that the use or disclosure thereof has
been or is rightfully authorized by that third party.
b. Both parties agree not to disclose any reports, recommendations, conclusions
or other results of the Services or the existence or the subject matter of
this contract without prior written consent to the other party.
6. LIMITATION OF LIABILITY
IN NO EVENT SHALL DOCUMENT SCIENCES BE LIABLE TO CUSTOMER FOR ANY SPECIAL,
INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES IN ANY WAY ARISING OUT OF OR
RELATING TO THIS AGREEMENT. IN ADDITION, DOCUMENT SCIENCES' LIABILITY TO
CUSTOMER FOR DIRECT DAMAGES SHALL IN NO EVENT EXCEED THE TOTAL AMOUNT OF MONEY
ACTUALLY PAID BY CUSTOMER TO DOCUMENT SCIENCES UNDER THIS AGREEMENT.
<PAGE> 2
7. TERMINATION
a. Either party may terminate this Agreement upon thirty (30) days' prior
written notice. If Customer terminates this Agreement for reasons other
than cause, Document Science shall be entitled to compensation for
unbilled hours worked in performing the Services up to the date of
written notification of termination. Such hours will be billed at an
hourly rate of $200.00 per hour, plus unbilled expenses of winding up
the project.
b. In the event that either party fails to perform any obligation hereunder
and fails to cure such non-performance within thirty (30) days following
written notice by the other party of such non-performance, then the
first party shall be in default hereunder and the other party may elect
to terminate this Agreement as set forth in this paragraph.
c. In the event the defaulting party under Paragraph 7.b is the Customer,
Document Sciences may elect to immediately terminate this Agreement by
giving written notice to Customer. In such event Document Sciences shall
have the right to retain all sums previously paid by Customer.
d. In the event the defaulting party under Paragraph 7.b is Document
Sciences, Customer may elect to withhold any payment then due or to
become due under this Agreement until the default is cured and/or to
immediately terminate this Agreement without further liability
therefor by giving written notice to Document Sciences.
8. ASSIGNMENT
This Agreement is not assignable by either party hereto, and any attempt by
either party to assign this Agreement or any rights, duties or obligations
arising hereunder shall be void and of no effect; provided, however, upon
written notice to the other party, either party may assign this Agreement or
any rights, duties or obligations hereunder to a corporation controlling,
controlled by, or under common control with said party.
9. MISCELLANEOUS
a. No delay or failure of either party to exercise any right or remedy will
operate as a waiver if such right or remedy.
b. This Agreement shall be construed in accordance with and be governed by
the laws of the State of California.
c. Any notice given under the Agreement shall be in writing and sent by
prepaid registered mail or certified airmail, or commercial courier
service. All such notices shall be deemed to have been given when
received, addressed in the manner indicated on this Agreement or at
such other addresses as the parties may from time to time notify each
other of.
d. This Agreement is the entire agreement between Customer and Document
Sciences pertaining to the Services and supersedes all proposals or
prior and contemporaneous agreements or understandings of Customer and
Document Sciences regarding the Services. CUSTOMER AGREES THAT ANY
TERMS AND CONDITIONS CONTAINED IN ANY CUSTOMER PURCHASE ORDER OR OTHER
ORDERING DOCUMENT SHALL HAVE NO BINDING EFFECT ON DOCUMENT SCIENCES AND
WILL NOT MODIFY THIS AGREEMENT IN ANY WAY. Modification of this
Agreement shall not be valid unless in writing and signed by duly
authorized representatives of both parties.
e. This Agreement may be executed in two or more counterparts, each of
which when so executed and delivered, shall constitute a single
agreement.
f. If any provision of this Agreement is held invalid, such invalidity
shall not effect the validity or enforceability of the other provisions
of this Agreement or of the Agreement as a whole.
2
<PAGE> 3
g. Document Sciences reserves the right of approval over any travel related
arrangements including but not limited to flight times, accommodations, car
rental, etc. in conjunction with the contracted consulting.
10. CHANGE CONTROL
In the event that Customer desires modifications to the Services as defined in
Schedule A, including, but not limited to, modifications of input data format,
output requirements or general style of the application, such requests for
modification must be submitted in writing and may, at the sole discretion of
Document Sciences, require renegotiation of the Fee and Services.
THE INDIVIDUAL SIGNING BELOW WARRANTS HE/SHE IS AN AUTHORIZED REPRESENTATIVE OF
CUSTOMER. THIS AGREEMENT SHALL NOT BE EFFECTIVE UNTIL EXECUTED BY CUSTOMER AND
ACCEPTED BY AN AUTHORIZED HEADQUARTERS REPRESENTATIVE OF DOCUMENT SCIENCES
CORPORATION.
Executed: Accepted:
<<COMPANY>> DOCUMENT SCIENCES CORPORATION
By:_______________________________ By: ________________________________
Name: ____________________________ Name: ______________________________
Title: ___________________________ Title: _____________________________
Date _____________________________ Date _______________________________
<PAGE> 4
SCHEDULE A
DOCUMENT SCIENCES CORPORATION
STATEMENT OF WORK AND FEE SCHEDULE
CUSTOMER: <<Company>>
SERVICES:
A. The following needs to be in place before services shall be performed by
Document Sciences:
- All software and consulting contracts signed and delivered.
- All software loaded on PC and/or mainframe hosts and printing
connectivity achieved.
- All scanned images required for application submitted electronically.
- Input text data files and any conditions or rules for file processing
submitted electronically.
- Final document format submitted.
B. The following services shall be performed by Document Sciences:
-
C. The resulting application or services delivered are described as:
-
FEE SCHEDULE:
D. The Fee for Services described above is itemized as follows:
-
* Travel and expenses are additional
E. Payable in the following installments: Estimated Date $
-
The undersigned agrees that the products or services listed above are an
accurate and full inventory of deliverables, and that the delivery of the
products or services listed above constitutes fulfillment of this contract.
Executed: Accepted:
<<Company>> DOCUMENT SCIENCES CORPORATION
By: By:
--------------------------------- ------------------------------------
Name: Name: Tony N. Domit
------------------------------- ----------------------------------
Title: Title: PRESIDENT & CEO
------------------------------ ---------------------------------
Date: Date:
------------------------------- ----------------------------------
<PAGE> 1
EXHIBIT 10.11
DOCUMENT SCIENCES CORPORATION VALUE ADDED REMARKETER AGREEMENT
This Value Added Remarketer Agreement ("Agreement"), made and entered into
between ______________________________ ("VAR") as defined below, and DOCUMENT
SCIENCES CORPORATION, located at 6333 Greenwich Drive, Suite 250, San Diego,
California 92122 ("DOCUMENT SCIENCES") is effective_________________________
("Effective Date").
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Title
<S> <C>
ARTICLE 1 DEFINITIONS
ARTICLE 2 APPOINTMENT AND OBLIGATIONS
ARTICLE 3 ROYALTIES AND PAYMENT
ARTICLE 4 DELIVERABLES AND MODIFICATIONS
ARTICLE 5 WARRANTY DISCLAIMER,
INDEMNITIES, AND PATENT AND
COPYRIGHT
ARTICLE 6 CONFIDENTIAL INFORMATION
ARTICLE 7 TERM AND TERMINATION
ARTICLE 8 GENERAL PROVISIONS
</TABLE>
The parties agree as follows:
ARTICLE 1 - DEFINITIONS
1.01 SUBLICENSEES. Persons who acquire Value Added Products and sublicense
the Licensed Software for their own internal use and not for resale,
sublicense or distribution to others.
1.02 DISTRIBUTOR. A third party to whom VAR grants the right to sublicense
and market the Value Added Product under the terms of this Agreement.
1.03 DOCUMENT SCIENCES LICENSORS. Persons identified in the Licensed
Software as having licensed portions of the Licensed Software to DOCUMENT
SCIENCES.
1.04 END USER LICENSE. DOCUMENT SCIENCES standard end user software
license and warranty terms and conditions.
1.05 LICENSED SOFTWARE. The DOCUMENT SCIENCES software package (including
the Developer's Software Package) described in Exhibit A, in object code format
only, manuals and other related documentation and Upgrade Licensed Software.
1.06 TERRITORY. Geographic or market coverage areas identified in
Exhibit B.
1.07 UPGRADE LICENSED SOFTWARE. New releases of Licensed Software which are
incorporated into the Licensed Software by VAR pursuant ot the term of this
Agreement during the term of this Agreement and which contains modifications,
enhancements and/or improvements to the Licensed Software.
1.08 VALUE ADDED PRODUCT. A product that includes the Licensed
Software, an addition to the Licensed Software as specified in Exhibit C,
media on which the software, in object code format is loaded, and associated
software documentation, including an End User License.
This is page one of a six page Value Added Remarketer Agreement ending with
Section 8.15, exclusive of Exhibits that are separately attached. The parties
acknowledge they have read this Agreement and its Exhibits and agree to be
bound by all terms and conditions.
______________________________ DOCUMENT SCIENCES CORPORATION
______________________________ ______________________________
By By
______________________________ ______________________________
Printed Name Printed Name
______________________________ ______________________________
Title Title
______________________________ ______________________________
Date Date
______________________________ ______________________________
Mailing Address Mailing Address
______________________________ ______________________________
______________________________ ______________________________
[FEB 93 Release 1.0] Page 1 of 6
<PAGE> 2
DOCUMENT SCIENCES VALUE ADDED REMARKETER AGREEMENT
ARTICLE 2 - APPOINTMENT AND OBLIGATIONS
2.01 APPOINTMENT AND SOFTWARE LICENSE. DOCUMENT SCIENCES hereby grants to
VAR, during the term of this Agreement, a non-exclusive license under any and
all patents, copyrights, and other proprietary rights licensable by DOCUMENT
SCIENCES to reproduce the Licensed Software for the sole purpose of producing a
Value Added Product and to use and distribute by sublicense the Licensed
Software, in whole or in part, as a part of the Value Added Product. This
grant is exclusively for the Territory. It is a condition to the license grant
set forth in this Agreement that VAR adds value to the Licensed Software in the
manner specified in, and that all Value Added Products must be sublicensed by
VAR with substantial added value as specified by Exhibit C or as otherwise
approved in advance and in writing by DOCUMENT SCIENCES. VAR accepts this
appointment, subject to the term and conditions of this Agreement. DOCUMENT
SCIENCES further grants to VAR a non-exclusive, non-transferable, royalty-free
license to use the Licensed Software internally for demonstration and training
purposes only, subject to the End User License. VAR shall use the Licensed
Software for general operations purposes or for processing of internal
administrative or customer data only pursuant to a separate End User License
executed between VAR and DOCUMENT SCIENCES.
2.02 LIMITATION UPON SUBLICENSE RIGHTS. VAR shall require the written
commitment from each of its distributors, agents, and any other party to whom
VAR distributes or sublicenses the Value Added Product for redistribution by
sublicense, that they will not distribute the Value Added Product outside the
Territory nor will they authorize distribution outside the Territory. VAR
shall use its best efforts to assure that the territorial restrictions of the
license set forth herein are honored within its own organization as well as by
VAR's distributors and agents.
2.03 SUBLICENSE TERMS. VAR shall distribute the Value Added Product
pursuant to a sublicense agreement which shall, prior to any distribution of
the Value Added Product, be approved in writing by DOCUMENT SCIENCES and which
shall contain the substance of the conditions and restrictions set forth in the
End User License.
2.04 DISTRIBUTORS. VAR may appoint Distributors to market and sublicense
the Licensed Software under the terms of this Agreement. Each Distributor
shall execute a written agreement which shall contain such provisions as are
reasonably necessary for VAR to satisfy its commitments under this Agreement.
2.05 LIMITED RIGHTS TO LICENSED SOFTWARE. VAR may use, reproduce and
distribute the Licensed Software only to the extent expressly authorized or
licensed under this Agreement. No other rights to such software are granted by
DOCUMENT SCIENCES to VAR, or may be granted by VAR to any third party. In
particular, but not by way of limitation, except as specifically agreed by
DOCUMENT SCIENCES in writing, neither VAR nor any of its employees, agents or
representatives may create, reproduce or distribute derivative works of any
such software. Further, neither VAR nor any of its employees, agents or
representatives will attempt to decompile or otherwise reverse engineer any such
software in order to derive its source code. VAR shall not rent, electronically
distribute or timeshare the Licensed Software or market the software by
interactive cable or remote processing services. Any violation by VAR of its
obligations under this Section would be deemed an incurable material breach of
this Agreement, and would enable DOCUMENT SCIENCES to immediately terminate
this Agreement under Section 7.02(b).
2.06 TERMINATION. Any sublicense or distribution of License Software by
VAR which is not in accordance with its appointment under this Section 2, will
be deemed an incurable material breach of this Agreement and will enable
DOCUMENT SCIENCES to immediately terminate this Agreement under Section 7.02(b).
2.07 LICENSE RECOGNITION; TRADEMARKS.
(a) VAR shall communicate to its customers and End Users the
Licensed Software (distributed pursuant to the license granted in this Section
2) is licensed to it by DOCUMENT SCIENCES by identifying it as [DOCUMENT
SCIENCES VIEWING SOFTWARE] licensed to VAR. During the term of this Agreement,
VAR may also use DOCUMENT SCIENCES name and logo in its advertising, catalogs,
exhibits, public relations materials and manuals covering the Value Added
Products. All such uses will be subject to DOCUMENT SCIENCES prior written
approval and shall not indicate the Licensed Software or any code contained in
the Licensed Software under license from DOCUMENT SCIENCES Licensors is the
proprietary product of VAR or any party other than DOCUMENT SCIENCES or the
original DOCUMENT SCIENCES Licensor, as the case may be.
2.08 GENERAL OBLIGATIONS OF VAR. VAR will (i) actively market, promote and
solicit the sale of Value Added Products to End Users in the Territory, (ii)
establish and maintain appropriate marketing and distribution facilities and
personnel within its organization to create and meet the demand for Value Added
Products among End Users in the Territory, (iii) promote the goodwill, name and
reputation of DOCUMENT SCIENCES and all of the Licensed Software, (iv)
represent the Licensed Software accurately and fairly and at all times avoid
misleading or unethical business practices, and (v) at all times comply with
all laws and regulations applicable to the conduct of its business.
2.09 SPECIFIC OBLIGATIONS OF VAR. VAR will have the following specific
obligations:
(a) Distribute the following materials to all of its locations
in the Territory (i) marketing and technical brochures which accurately
describe the functions, features,
[FEB 93 Release 1.0] Page 2 of 6
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DOCUMENT SCIENCES VALUE ADDED REMARKETER AGREEMENT
operation and advantages of the Licensed Software incorporated within the Value
Added Products; and (ii) educational material relating to the Value Added
Products developed by VAR, for training VAR's sales and support personnel.
(b) Train an agreed upon number of its sales and customer support
personnel in the features and functions of the Licensed Software and Value
Added Product.
(c) Provide total support to all sublicensees including, without
limitation (i) on-site installation of the Value Added Products and/or customer
documentation sufficient to enable the sublicensees to install the Value Added
Products themselves; (ii) customer training or documentation regarding
operation of the Value Added Products; (iii) telephone hot-line support during
normal business hours.
(d) Promptly inform DOCUMENT SCIENCES about new problems or errors
with any of the Licensed Software which are reported by sublicensees or
discovered by VAR.
(e) Provide DOCUMENT SCIENCES, within thirty (30) days following
the end of each calendar quarter, a report listing the quantity of each Value
Added Product licensed or sold to any End User in the Territory during that
calendar quarter, and the name and address of each End User.
(f) On the date of execution of this Agreement, and thereafter by
the end of each calendar quarter, provide to DOCUMENT SCIENCES a non-binding
forecast setting forth the quantity of royalty bearing sublicenses it then
estimates generating during each of the succeeding four (4) calendar quarters.
The information reported for the first succeeding calendar quarters will be
broken down by calendar month.
2.10 OBLIGATIONS OF DOCUMENT SCIENCES. DOCUMENT SCIENCES will have the
following obligations:
(a) Make available to VAR, at DOCUMENT SCIENCES standard VAR
pricing, reasonable quantities of sales and technical brochures.
(b) Provide agreed upon training to VAR on the features,
functions, operation and installation of the Licensed Software. The training
will be provided at DOCUMENT SCIENCES San Diego offices, or at other agreed
upon locations. VAR will be responsible for the travel and per diem expenses
of its personnel.
(c) Use reasonable efforts to resolve, within a reasonable period
of time, extraordinary technical problems or errors with any Licensed Software
which are identified by VAR and which VAR is unable to resolve. Each problem
or error must be identified telephonically or, when appropriate, in writing and
faxed to DOCUMENT SCIENCES designated support person or fax number in San
Diego, California. DOCUMENT SCIENCES does not guarantee it will be able to
resolve all identified problems or errors.
(d) Provide maintenance pursuant to and in accordance with the VAR
Maintenance Agreement attached as Exhibit F.
2.11 TITLE TO LICENSED SOFTWARE. It is expressly understood and agreed
that title to and all copyright and other proprietary rights in the Licensed
Software will not pass to VAR. Rather, such title and all such rights will at
all times be and remain with DOCUMENT SCIENCES and/or the DOCUMENT SCIENCES
Licensors.
ARTICLE 3 - ROYALTIES AND PAYMENT
3.01 PURCHASE. VAR agrees to pay royalties to DOCUMENT SCIENCES in respect
of the Licensed Software licensed hereunder and to pay for maintenance provided
pursuant to this Agreement. This Article sets forth the terms and conditions
under which such royalties and sales and technical support fees will be
determined and paid.
3.02 ROYALTY AMOUNT AND FEES. The royalties to be paid by VAR to DOCUMENT
SCIENCES and the prices to be invoiced by DOCUMENT SCIENCES to VAR for sales
and technical support and related materials purchased by VAR hereunder will be
as set forth in Exhibit E. VAR will solely determine the royalties and/or fees
at which it sublicenses and distributes the Value Added Products to End Users
in the Territory.
3.03 TAXES. VAR will furnish DOCUMENT SCIENCES with appropriate tax
exemption certificates.
3.04 REPORTS AND AUDITS. Royalties shall accrue upon the distribution of
Value Added Products by VAR to its customers, distributors or dealers or as the
Licensed Software or Value Added Products are distributed for royalty bearing
internal use. Royalties accrued during each calendar quarter shall be paid
within thirty (30) days after the close of that calendar quarter. Overdue
payments shall accrue interest at the rate of twelve per cent (12%) per annum
until paid.
3.05 SUBLICENSE REPORTS. Within twenty (20) days of the last day of each
month, VAR shall send DOCUMENT SCIENCES a report detailing for that month:
(a) Sublicensee name, address, make, model and operating system of
CPU, date of installation, Value Added Product installed, and total royalty
payment and fees due to DOCUMENT SCIENCES for each such Value Added Product;
and
(b) the Distributor Agreements executed during the prior month,
including names and addresses of the Distributors.
VAR shall require its Distributors to report this information to the
VAR and will include it in the report for the month in which VAR received the
information.
Each royalty payment shall be accompanied by a written report
indicating the number of copies of Value Added Products distributed or
sublicensed by VAR to customers, distributors, dealers and distributed for
royalty bearing internal use and non royalty bearing purposes. Overdue
payments shall accrue interest at the rate of twelve per cent (12%) per annum
until paid.
3.06 VAR RECORDS. VAR shall keep records adequate to verify reports and
payments to be made pursuant to this Agreement for a period of three (3) years
following date of the reports pursuant to this Article 3.
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DOCUMENT SCIENCES VALUE ADDED REMARKETER AGREEMENT
3.07 INSPECTION. DOCUMENT SCIENCES shall have the right (no more than once
during any calendar year) to inspect the records of VAR on reasonable notice
and during regular business hours to verify the reports and payments required
hereunder. The entire cost of such inspection shall be borne by DOCUMENT
SCIENCES and such Certified Public Accountant shall not disclose to DOCUMENT
SCIENCES any information other than information relating to the computation and
accuracy of such reports. If an inspection reveals an error of at least 5% in
favor of DOCUMENT SCIENCES, VAR shall pay the cost of the inspection, in
addition to any underpayments.
ARTICLE 4 - DELIVERABLES AND
MODIFICATIONS
4.01 DELIVERY OF LICENSED SOFTWARE. DOCUMENT SCIENCES shall provide VAR
with reproducible copies of all documentation and object code of the Licensed
Software listed in Exhibit A.
4.02 DOCUMENTATION. VAR may modify and reproduce the contents of the
documentation provided by DOCUMENT SCIENCES, but DOCUMENT SCIENCES reserves the
right to monitor any modifications made to the documentation by VAR. VAR agrees
to abide by any request by DOCUMENT SCIENCES to withdraw or change any such
modification that DOCUMENT SCIENCES reasonably deems undesirable to the
interest of DOCUMENT SCIENCES.
4.03 MODIFICATIONS. All Upgrade Licensed Software made by DOCUMENT
SCIENCES that it intends to release shall be offered to VAR pursuant to
DOCUMENT SCIENCES Maintenance Agreement attached as Exhibit D.
ARTICLE 5 - WARRANTY DISCLAIMER,
INDEMNITIES, AND PATENT AND COPYRIGHT
5.01 WARRANTY DISCLAIMER. DOCUMENT SCIENCES, and VAR, agree the Licensed
Software is provided "AS IS". DOCUMENT SCIENCES DISCLAIMS ALL WARRANTIES,
EXPRESSED OR IMPLIED, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
5.02 GENERAL INDEMNITY. VAR agrees, at its expense, to defend, indemnify
and hold DOCUMENT SCIENCES harmless from and against all liabilities, damages,
costs, fees and expenses, including reasonable attorney's fees, arising out of
suits, claims, actions or proceedings brought by or on behalf of any person on
account of injury or damage proximately caused by VAR, its agents,
representatives, Distributors or employees, in the course of performing VAR's
obligations under this Agreement, provided DOCUMENT SCIENCES will promptly
notify VAR of any such suit, claim, action or proceeding, and VAR will have
control of the defense and all negotiations for its settlement or compromise.
DOCUMENT SCIENCES agrees to fully cooperate with VAR in the conduct of such
defense and negotiations.
5.03 INTELLECTUAL PROPERTY INDEMNITY. DOCUMENT SCIENCES will, at its
expense, defend, indemnify and hold harmless VAR from all liabilities, damages,
costs, fees and expenses, including reasonable attorney's fees, arising out of
suits, claims, actions or proceedings charging infringement in the Territory of
any patents, copyrights, trade secrets or other intellectual property rights
owned or controlled by any third party as a result of the exercise by VAR of
its rights under this Agreement, provided VAR promptly notifies DOCUMENT
SCIENCES in writing of any such suit, claim, action or proceeding, and DOCUMENT
SCIENCES will have control of the defense and all negotiations for its
settlement or compromise. VAR agrees to fully cooperate with DOCUMENT SCIENCES
in the conduct of such defense and negotiations.
5.04 LIMITATION. The indemnity of Section 5.03 will not apply, and VAR will
indemnify DOCUMENT SCIENCES in a manner fully equivalent to such indemnity, in
any suit, claim or proceeding brought against DOCUMENT SCIENCES for any
infringement due to the Licensed Software being modified (by DOCUMENT SCIENCES
or others, including VAR) to VAR's specifications, or being used or sold in
combination with equipment, software, or supplies not provided by DOCUMENT
SCIENCES. DOCUMENT SCIENCES has no other expressed or implied warranty of non,
infringement or liability for infringement or any damages therefrom.
5.05 COPYRIGHTS. It is expressly understood by VAR that the Licensed
Software in the form of object code on physical media and in the form of
manuals is copyrighted by DOCUMENT SCIENCES. VAR agrees to maintain and
reproduce all copyright notices of DOCUMENT SCIENCES and any DOCUMENT SCIENCES
Licensors contained in the object code of the Licensed Software and on the
manuals. VAR further agrees to have copyright notices as provided by DOCUMENT
SCIENCES appear on media labels.
5.06 ENFORCEMENT OF SUBLICENSES. VAR shall enforce the terms of its
sublicenses with all Sublicensees and agreements with all Distributors and shall
inform DOCUMENT SCIENCES of any known breach of such terms.
ARTICLE 6 - CONFIDENTIAL INFORMATION
6.01 CONFIDENTIALITY. Subject to Section 6.02, all DOCUMENT SCIENCES
information which is marked proprietary or confidential and is made available
to VAR will be held in confidence by VAR and will not be disclosed to third
parties, or used by VAR, except to the extent authorized by this Agreement. If
the information is provided orally or visually, DOCUMENT SCIENCES will identify
the disclosure as being proprietary or confidential at the time of disclosure
and, within four (4) weeks thereafter, reduce it to writing and provide it to
VAR. Results of benchmark tests run by VAR may not be disclosed unless
DOCUMENT SCIENCES consents to such disclosure in writing.
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DOCUMENT SCIENCES VALUE ADDED REMARKETER AGREEMENT
6.02 EXCEPTIONS. VAR's obligations under Section 6.01 will not apply with
respect to any DOCUMENT SCIENCES information which:
(a) was known to VAR prior to its first receipt from DOCUMENT
SCIENCES; or
(b) at any time becomes a matter of public knowledge without any
fault of VAR; or
(c) is at any time lawfully received by VAR from a third party
under circumstances permitting its disclosure to others; or
(d) is at any time furnished to a third party by DOCUMENT SCIENCES
without restriction on use or disclosure; or
(e) was first disclosed by DOCUMENT SCIENCES to VAR more than
three (3) years earlier.
6.03 EXPIRATION OR TERMINATION. Promptly following the expiration or any
termination of this Agreement, VAR will return to DOCUMENT SCIENCES, at DOCUMENT
SCIENCES expense, all DOCUMENT SCIENCES confidential and proprietary information
then in its possession, and all copies thereof.
6.04 RECIPROCITY. The confidentiality conditions of this section are
reciprocal between Document Sciences and the VAR.
ARTICLE 7 - TERM AND TERMINATION
7.01 TERM. Unless sooner terminated in accordance with Section 7.02, the
term of this Agreement will be for an initial period of two (2) years from the
Effective Date. The term will automatically extend for succeeding one (1) year
periods, unless either party notifies the other in writing within ninety (90)
days prior to expiration of the then current period of its intention not to
further extend this Agreement.
7.02 TERMINATION FOR CAUSE. Either party may terminate this Agreement upon
written notice of termination to the other party in any of the following
events:
(a) the other party materially breaches this Agreement in a
manner which can be cured, and such breach remains uncured for thirty (30) days
following written notice of breach by the terminating party; or
(b) the other party materially breaches this Agreement in a manner
which cannot be cured;
7.03 EFFECT OF TERMINATION OR EXPIRATION. In the event of the expiration
or any termination of this Agreement:
(a) VAR shall (i) be able to retain one copy of the then current
release of the Licensed Software for the sole purpose of maintaining the Value
Added Products for its Sublicensees; (ii) discontinue distribution of the Value
Added Product and shall either deliver to DOCUMENT SCIENCES and/or destroy all
Licensed Software and related materials furnished by DOCUMENT SCIENCES (except
for the one copy), together with all copies thereof (including that in memory
or data storage apparatus under control of Sublicensees); and (iii) warrant in
writing to DOCUMENT SCIENCES within thirty (30) days of termination the
Licensed Software, related materials and all copies thereof (except for the one
copy) have been either returned to DOCUMENT SCIENCES and/or destroyed.
(b) Neither party will be liable to the other for any damage,
expenditures, loss of profits or prospective profits of any kind or nature
sustained or arising out of, or alleged to have arisen out of, such termination
or expiration. Termination or expiration of this Agreement will not relieve or
release either party from making payments which may be owing to the other party
under the terms of this Agreement.
(c) VAR will immediately cease representing itself as a DOCUMENT
SCIENCES reseller, and promptly return to DOCUMENT SCIENCES or destroy, at
DOCUMENT SCIENCES sole option, any advertising and other materials furnished to
it by DOCUMENT SCIENCES.
(d) VAR will remove and not thereafter use any signs containing
the name or trademark of DOCUMENT SCIENCES, and will immediately destroy all of
its stationery, advertising matter and other preprinted matter remaining in its
possession or under its control containing the word "DOCUMENT SCIENCES" and
related DOCUMENT SCIENCES trade names or trademarks.
Other than as specified to the contrary in subsection (a) of this
Section 7.02 above, all of VAR's rights to market, reproduce, sublicense and
use the Licensed Programs shall cease. Any obligation of DOCUMENT SCIENCES to
provide maintenance and/or support described in Section 2.08(d) above, or
otherwise shall cease. However, upon agreement of both parties, which
agreement VAR may withhold in the exercise of its absolute discretion, VAR may
arrange to receive continued maintenance and support from DOCUMENT SCIENCES for
the Licensed Software under DOCUMENT SCIENCES then current policies.
7.04 SURVIVAL. The provisions of this Agreement will, to the extent
applicable, survive the expiration or any termination.
ARTICLE 8 - GENERAL PROVISIONS
8.01 FORCE MAJEURE. Except for the payment of money, neither party will be
liable to the other for any failure to perform or delay in the performance of
its obligations caused by circumstances beyond its reasonable control.
8.02 NOTICES. Any notice which may be or is required to be given under this
Agreement will be written or by facsimile, unless otherwise indicated. Any
written notices will be sent by registered mail or certified mail, postage
prepaid, return receipt requested. Any facsimile notice should be followed
within three (3) working days by written notice. Notices will be deemed to
have been given when received, properly addressed. All notices to VAR will be
addressed as shown on the first page of this Agreement. All notices to
DOCUMENT SCIENCES should be addressed to:
DOCUMENT SCIENCES, INC.
Attn: President
6333 Greenwich Drive, Suite 250
San Diego, California 92122
Either party may change its address by giving notice to the other party
pursuant to this Section.
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DOCUMENT SCIENCES VALUE ADDED REMARKETER AGREEMENT
8.03 PUBLICITY. Neither party will issue a press release or other similar
publicity of any nature regarding this Agreement without the other party's
written approval, which will not be unreasonably withheld. Approval will be
deemed to have been given to the extent that the disclosure is required in
order to comply with governmental rules, regulations or requirements. In this
event, the publishing party will review the text of the disclosure with the
other party prior to disclosure.
8.04 HEADINGS. Except for Article 1, Definitions, headings and titles of
the Articles and Sections of this Agreement are inserted for convenience only
and do not affect the construction or interpretation of any provision.
8.05 AMENDMENT. This Agreement may be amended only by written amendment
duly signed by authorized representatives of both parties.
8.06 ASSIGNMENT. DOCUMENT SCIENCES entered into this Agreement based on
the personal representations of VAR's principals as to their knowledge and
expertise, ability to add value to the Licensed Software and market the Value
Added Products, and financial status. VAR shall not, therefore assign,
transfer, or sell any of its rights, or delegate any of its responsibilities
under this Agreement without DOCUMENT SCIENCES prior written consent. Any
material change in ownership of VAR without DOCUMENT SCIENCES prior written
consent (which shall not be unreasonably withheld) shall be cause for
termination of this Agreement. DOCUMENT SCIENCES may assign this Agreement
only to a parent, subsidiary or affiliated firm, to a third party in connection
with a consolidation or merger, or to a third party upon a sale or transfer of
substantially all of DOCUMENT SCIENCES business assets.
8.07 SEVERABILITY. If any provision of this Agreement is held invalid by
any law, rule, order or regulation of any government or by the final
determination of any court, such invalidity will not affect the enforceability
of any other provisions not held to be invalid.
8.08 OMISSIONS. Any delay or omission by either party to exercise any
right or remedy under this Agreement will not be construed to be a waiver of
any such right or remedy or any other right or remedy. All of the rights of
either party under this Agreement will be cumulative and may be exercised
separately or concurrently.
8.09 LIMITATION OF LIABILITY. Subject to Sections 5.02, 5.03 and 5.04:
(a) in no event will either party be liable to the other for any
special, indirect, incidental or consequential damages in any way arising out
of or relating to this Agreement; and
(b) the maximum liability of DOCUMENT SCIENCES to VAR for direct
damages in any way arising out of or relating to this Agreement shall in no
event exceed the total amount of money actually paid by VAR to DOCUMENT
SCIENCES under this Agreement during the most recently ended twelve (12) month
period during the term hereof which precedes the time of fixing of such
liability or $100,000, whichever is less.
8.10 GOVERNING LAW. This Agreement will be governed in accordance with the
laws of the State of California.
8.11 DISPUTE RESOLUTION. The parties will first endeavor to informally
resolve all disputes between them prior to resorting to arbitration under this
Section. In the event the parties are unable to informally resolve any
material dispute, it will be decided through arbitration pursuant to the rules
of the American Arbitration Association then in effect. The arbitration, which
will be held in San Diego, California, will be binding upon the parties and
may be entered by any court of competent jurisdiction.
8.12 EXPORT. VAR hereby agrees that VAR will not export, directly or
indirectly, any U.S. source Licensed Software or other technical information
acquired from DOCUMENT SCIENCES or any products utilizing any such Licensed
Software or other technical information, to any country for which the U.S.
Government or any agency thereof at the time of export requires an export
license or other governmental approval, without first obtaining the written
consent to do so from (a) the United States Department of Commerce or other
agency of the United States Government when required by an applicable statute
or regulation, and (b) DOCUMENT SCIENCES, which consent DOCUMENT SCIENCES may
withhold if such export would, in the reasonable business judgment of DOCUMENT
SCIENCES, be detrimental to the interests of DOCUMENT SCIENCES.
8.13 NO AGENCY. It is agreed and understood that neither DOCUMENT SCIENCES
nor VAR has any authority to bind the other with respect to any matter
hereunder. Under no circumstances shall either DOCUMENT SCIENCES or VAR have
the right to act or make any commitment of any kind to any third party on
behalf of the other or to represent the other in any way as an agent. VAR is,
and shall perform its obligations hereunder as, an independent contractor and
is not and shall not be considered to be, an agent or representative of
DOCUMENT SCIENCES.
8.14 FEDERAL GOVERNMENT SUBLICENSES. If VAR grants a sublicense to the
United States government the Licensed Software shall be provided with
"Restricted Rights" and the VAR will place a legend, in addition to applicable
copyright notices, on the documentation and on the tape or diskette label,
substantially similar to the follows:
Restricted Rights Legend. "Use, duplication or disclosure by
the Government is subject to restrictions as set forth in
subparagraph (c)(1)(ii) of the Department of Defense
Regulations Supplement (DFARS) 252.227-7013, Rights in
Technical Data and Computer Software (October 1988) and
Federal Acquisition Regulation (FAR) 52.227-14."
VAR will require its Distributors to use such legends when they grant
sublicenses to the U.S. government.
8.15 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
the parties as to the subject matter hereof, and supersedes any and all prior
oral and written understandings and agreements as to such subject matter.
[12/09/93-A] Page 6 of 6
<PAGE> 1
EXHIBIT 10.12
INTERNATIONAL
VALUE ADDED RESELLER AGREEMENT
International Value Added Reseller (VAR) Agreement made as of the ______ day of
_________________, by and between Document Sciences Corporation (hereinafter
called "Document Sciences"), a corporation organized and existing under the laws
of California, USA having its principal place of business at 6333 Greenwich
Drive, Suite 120, San Diego, CA 92122 and ___________________ (hereinafter
called "VAR"), a corporation organized and existing under the laws of
______________ having its principal place of business at _____________________.
Document Sciences is engaged in the design, manufacture, distribution, sale and
license of the Products and has the right to appoint VAR thereof, and VAR
desires to act as a Non Exclusive VAR appointed by Document Sciences in the
Region. In consideration of the mutual promises and covenants herein
contained, the parties hereto agree as follows:
1. Definitions
For the purpose of this Agreement, the following terms shall have
their meanings specified.
"Customers" means all end users such as large medium and small
accounts, educational, government departments etc in the Region.
"Region" means ____________________________.
"Trademarks" means any trademark owned by Document Sciences from time
to time.
"Pan European Price List" means the prices listed in appendix A.
"Products" means the software products of Document Sciences described
in Appendix attached hereto, as modified, enhanced and updated from
time to time.
"Sales Plan" means the agreed upon volume of sales from Document
Sciences to VAR as outlined in Appendix B. Such sales shall be
calculated at "VAR Cost" in accordance with the Pan European Price
List in Appendix A.
"Software Problem Severity Level and Target Resolution Time" means the
information shown in Appendix C.
"Initial Marketing Campaign" means the plan as outlined in and agreed,
Appendix D
"Software License Agreement" means the end user agreement attached
hereto in Appendix E.
DSC VAR Agreement Version 6 Page 1
<PAGE> 2
2. Appointment
2.1 Document Sciences hereby appoints VAR, and VAR agrees to act, as an
appointed VAR for the Products in the Region during the term hereof.
2.2 VAR shall have the right (i) to use the products solely for
demonstration purposes; (ii) to use the Trademarks solely in
connection with its marketing and resale of Products hereunder, in
accordance with applicable law and Document Sciences's policies
regarding Trademark usage as established from time to time; and (iii)
to license the products and their documentation to Customers on such
terms as are set forth or referred to herein, subject to the terms of
the Software License Agreement.
2.3 VAR agrees to use its best efforts to promote the marketing and resale
of the Products within the Region and to support the Products in
accordance with the terms hereof. In carrying out its duties
hereunder, VAR shall use its best efforts to meet with the Sales Plan
attached hereto as Appendix B and with such policies and standards of
Document Sciences as shall be announced by Document Sciences from time
to time. VAR agrees to develop, maintain and train a competent sales
and support organization for the Products that will be responsible for
their support services. VAR shall at all times have a sufficient
number of competent office, sales, service and other employees to
carry out its obligations under this Agreement and shall conduct its
business according to the highest standards and in a manner calculated
to protect and promote the reputation of the Products.
2.4 VAR's performance shall be measured by mutually agreed sales targets as
set out in Appendix B. As a minimum acceptable performance level, %
(________) of this value shall prevail. If during the term of this
Agreement, VAR shall not achieve minimum acceptable performance as
defined in accordance with the above agreed sales goals, Document
Sciences has the right to issue a Letter of Concern to the VAR that
such performance is deficient. This Letter of Concern would precede a
formal probation period of four (4) months. In the event the minimum
performance level is not achieved within the probation period, Document
Sciences may terminate this Agreement for cause by giving two (2)
months written notice to VAR. After receipt of the Letter of Concern,
alternatively, Document Sciences and the VAR may define, by mutual
agreement only, other yardsticks of performance to be achieved during
the formal four (4) months probation period in lieu of the minimum
performance level.
3. Software Licensing
3.1 Packaging
Each product shall be delivered to VAR in a package (the "package")
containing the Software License and user documentation for such
software. VAR shall provide Document Sciences Corporation with an
executed Software License Agreement from the customer prior to the
delivery of the software products to its customers.
3.2 Title to the Products
Title to the Products shall remain with Document Sciences, VAR shall
not remove, alter, cover or obfuscate any copyright notices or other
proprietary rights notices placed
DSC VAR Agreement Version 6 Page 2
<PAGE> 3
or embedded by Document Sciences on or in any Package or any of the
items contained therein.
Document Sciences shall retain all copyrights to any translated
versions of the Products including the manuals, messages and
documentation. As a matter of record, Document Sciences shall purchase
from the VAR all property rights to localized Document Sciences
software, manuals, documentation and collateral material for the price
of $ .
3.3 License
Subject to Section 13.3 ("Proprietary Rights") below Document Sciences
hereby grants to VAR a non-exclusive, non-transferable license, without
right to sublicense any such rights to third parties. The license
shall be renewable each year and the software is licensed for use on a
particular host for the specified period of time. A security key is
inherent in the software to ensure conformance to the above.
3.3.1 With respect to each copy of the server or client software supplied by
Document Sciences, only:
(a) to deliver the copy of the server or client software to
Customers for use on end user server or client equipment respectively
at designated site or
(b) to load one copy of the server or copies of the client
software onto the server or client equipment respectively, only for
delivery to a customer by VAR pursuant to Section 3.3.2(a) below or for
use by VAR pursuant to Section 3.3.2(b).
3.3.2 With respect to each copy of server or client software loaded onto
server or client equipment respectively by VAR
(a) to deliver this copy of the server of client software loaded
onto server or client equipment respectively only directly to a
customer at a designated site, and ensure the Customers execute the
license agreement prior to the delivery of the software.
(b) to use this copy of the server or client software loaded onto
server or client equipment respectively only for development, support
and marketing of VAR systems which include licensed software, and
otherwise in accordance with the Software License Agreement.
3.3.3 In the case of delivery pursuant to Section 3.3.2(a) above to provide
the server or client software diskettes to the Customer for use only
as a back up copy to the copy loaded onto server or client's equipment
respectively, and otherwise to destroy the copy and in the case of use
by VAR pursuant to Section 3.3.2(b) above, to retain, in the
aggregate, one copy as a VAR backup copy and to destroy all other
copies.
3.3.4 No rights are granted with respect to any licensed software source
code, and VAR agrees not to decompile, reverse assemble, or otherwise
attempt to derive source code from the licensed software. VAR is
granted no right to use, reproduce or distribute licensed software
except as expressly set forth herein. All rights not expressly
granted to VAR with respect to the licensed software are retained by
Document Sciences.
DSC VAR Agreement Version 6 Page 3
<PAGE> 4
4. Order Procedure and Terms
4.1 Orders and Credit
Orders for Products will be placed by VAR with Document Sciences or
Document Sciences's authorized source on a form approved by Document
Sciences. Document Sciences may, in its sole discretion, refuse to
accept any order in whole or in part. VAR will make payment, in US
dollars by wire transfer of immediately available funds to Document
Sciences or such bank account as Document Sciences shall specify to
VAR in writing, within 45 days after the date of delivery of the
goods. VAR will provide financial statements and references for the
establishment of its initial credit line. If VAR fails to make
payment according to the terms set forth above or fails to provide
references satisfactory to Document Sciences, Document Sciences may
require VAR to accompany its orders with irrevocable letters of credit
or may impose such other payment terms as Document Sciences may deem
advisable.
4.2 Shipments
All shipments of Products shall be F.O.B. Document Sciences's
facility, currently located in San Diego and shall be shipped to VAR's
address as set forth in this Agreement. VAR will assume all risks of
loss or damage to products upon delivery by Document Sciences to the
carrier at the point of shipment. Unless VAR's order specifies the
name of a carrier, Document Sciences will select the carrier. All
arrangements for transportation and insurance at full value of
Products shipped will be made by Document Sciences. Document Sciences
will use reasonable efforts to make deliveries promptly of order so
accepted, but Document Sciences will not be liable for any damages to
VAR or to any other person for Document Sciences's failure to fill any
order, or for any delay in delivery or error in filling any order.
4.3 Controlling Terms
The terms and conditions of this Agreement and of the applicable
Document Sciences invoice or confirmation and Standard Terms and
Conditions of Sale will apply to each order accepted or shipped by
Document Sciences hereunder. The provisions of VAR's form of purchase
order or other business forms, if any, will not apply to any order
notwithstanding Document Sciences's acknowledgement or acceptance of
such order.
4.4 Cancellation
Document Sciences reserves the right to cancel orders placed by VAR
and accepted by Document Sciences as set forth above, or to refuse or
delay shipment thereof, if VAR (i) fails to make any payment as
provided in this Agreement or on the terms of payment set forth in any
invoice, (ii) fails to meet reasonable credit or financial
requirements established by Document Sciences, including any
limitations on allowable credit or (iii) otherwise fails to comply
with the terms and conditions of this Agreement. No such
cancellation, refusal or delay shall be deemed a termination (unless
Document Sciences so advises VAR) or breach of this agreement by
Document Sciences.
DSC VAR Agreement Version 6 Page 4
<PAGE> 5
5. Prices
5.1 Document Sciences shall invoice VAR each time Products are shipped.
Prices shall be in accordance with Document Sciences's Pan European
Price List, as in effect when each order is received, less a discount
of %. In addition a % bonus discount shall be applied on reaching
the appropriate target. The target shall be renewed annually as
detailed in Appendix B, Note (2). The discount of % shall apply in
each new year, with the bonus of % applied on reaching the new
target. Document Sciences's current Pan European Price List is attached
hereto as Appendix A. All prices are F.O.B. Document Sciences's
facility and include export packaging.
5.2 Prices are also Sole of any sales, use, excise, value-added,
withholding or similar tax of any kind. VAR agrees to pay, and to
indemnify and hold Document Sciences harmless from any sales, use,
excise, value added, withholding or similar tax levied outside of the
United States on the products.
5.3 Quantity discounts will be provided at Document Sciences's discretion
for large orders on a case by case basis, provided VAR has received
prior written approval from Document Sciences.
5.4 Document Sciences agrees to notify VAR at least 90 days in advance of
the effective date of any change in its Pan European Reseller Price
List by delivery to VAR of a new version of Appendix A.
6. Marketing Program
6.1 Document Sciences may update and/or revise the performance and content
of the Product. VAR shall be responsible, to order updates from
Document Sciences for providing customers with same having become
part, or deemed to have been so, of Appendix A, as well as with
training in the use and operation of such updates. Any such update
shall be subject to the terms of this Agreement and be automatically
deemed to be part of Appendix A. Any Product ordered and/or delivered
within sixty (60) days preceding the marketing by Document Sciences of
new versions of the Product may be exchanged by the VAR for such new
versions.
6.2 VAR shall, at its own expense,
(i) Place the Product marketing and resale in VARs' catalogues as
soon as possible; (ii) provide information it may have in order to
assist Document Sciences in assessing customer requirements for the
Products, including modifications and improvements thereto, in terms
of quality, design, functional capability and other features; (iii)
submit the market information, when requested by Document Sciences, it
may have available regarding competition and changes in the market;
(iv) promote the use of the Products in all market segments; (v)
provide Document Sciences with a quarterly report on customer product
registration information.
6.3 VAR shall supply to Document Sciences sufficient customer information
to enable Document Sciences to understand the usage of the software.
The information shall consist of name, address, computing platform and
serial number, applications and number of users.
DSC VAR Agreement Version 6 Page 5
<PAGE> 6
6.4 VAR is responsible for the translation, production, printing and
distribution of any marketing and technical information. Document
Sciences will assist VAR by providing English language versions of any
marketing materials, including brochures, photographs,
advertisements, copy and other such materials. Document Sciences is
not obligated to translate any materials into foreign language
versions.
6.5 VAR shall initiate and submit to Document Sciences every six months
promotional campaigns and corresponding budgets for the coming
semester. The initial six months campaign is attached as Appendix D.
Document Sciences shall have the right not to approve a campaign of
promotional event, or to request modifications thereto, should it not
correspond to its long term acknowledged interest and objectives or
should it not comply with Document Sciences's designs, image or trade
marks. In such case, the parties shall co-operate to adapt such
promotional campaigns and special events. VAR shall, at its cost,
include advertising, promotional information, price listing and
general information about the products in all of its own publications
and catalogues.
6.6 Document Sciences may provide in conjunction with the VAR but, at its
sole expense, foreign language editions or translations of the
Products (including the user manual, diskette etc). In the event the
distributor is responsible for making the original translation,
Document Sciences will reimburse the distributor in bartered trade of
product at a price derived from Appendix A.
6.7 In the event of the release of any major upgrade or new version of the
Product, Document Sciences will release a new foreign language version
shortly after the English version release if it was responsible for
producing the original translation. In the event the distributor is
responsible for making the original translation, Document Sciences
will co-operate to enable the release of any major upgrade or new
version.
7. Training
VAR shall, within 45 days of signing the Agreement make available for
training, for five days at Document Sciences's facility in France not
less than two technical salesperson skilled in the document management
software marketplace. Document Sciences shall provide this training
free of charge and VAR shall pay all travel and incidental expenses.
8. Support
VAR shall provide in a timely fashion the same software support
services to Customers as provided by Document Sciences to its US and
European customers.
9. Right of Audit
VAR agrees to maintain at all times a complete, clear and accurate
record of the number of Products, the Customers to whom the Products
were distributed, and the payments received therefore. Document
Sciences may, at Document Sciences's expense, inspect, copy and audit
all relevant books and records of VAR during regular business hours at
VAR's offices to ensure compliance with the terms of this Agreement.
Any such audit may be conducted by a certified public accountant
chosen by Document Sciences.
DSC VAR Agreement Version 6 Page 6
<PAGE> 7
10. Literature, Sales Aids, Demonstration Equipment
Document Sciences will provide an Initial Marketing Package, during
training or shortly after this Agreement is consummated. Document
Sciences also agrees to provide such price lists, photographs,
videotapes, press releases, demonstration scripts and bulletins
prepared by Document Sciences in the ordinary course of business
useful to the VAR in carrying out its responsibilities hereunder.
Document Sciences will provide customary support in the form of
telephone/fax support, software and documentation updates.
11. Compliance with Governmental Regulations
The obligation of Document Sciences to supply the products shall be,
at all times, subject to any applicable US export control laws and
regulation and import control laws. VAR will comply with such laws
and regulations, including without limitation, record keeping and
inspection requirements. VAR acknowledges that Document Sciences is
subject to regulation under laws of the United States, under which
export or diversion of Document Sciences Products and software to
certain countries is prohibited. VAR agrees that it will not export
or re-export outside the Region, directly or indirectly, any Products
or technical data relating to Products without the prior written
consent of Document Sciences and complying with all applicable
regulations
12. Relationship Between Parties
All Products supplied to VAR hereunder shall be licensed by VAR for
its own account at its own risk and re-licensed only in accordance
with the terms hereof. Document Sciences and VAR are independent
contractors and are not, and shall not represent themselves as,
principal and agent or joint ventures. VAR shall act as a principal
on its own behalf and has no legal power or authority, express or
implied, to act for or obligate Document Sciences in any manner.
13. Proprietary Rights
13.1 The parties agree not to disclose to a third party any confidential
technical information concerning the Products or any other information
of a confidential nature about Document Sciences. The parties
acknowledge that they each retain all copyrights and other proprietary
rights to the Products and Trademarks, and specifically the VAR
obtains only the rights to the products specifically granted in
Section 2 ("Appointment") hereof.
13.2 Protection of Intellectual Property:
The Licensed Software and any copies thereof, in whole or in part, and
all copyright, patent, trade secret and other intellectual property
rights therein, are and remain the valuable property of Document
Sciences. VAR agrees to make no use of the Licensed Software except
under the terms of, and during the existence of, this Agreement. The
ownership and all right, title and interest in and to any trademark,
trade name, patent, copyright, technology, or know-how relating to the
Licensed Software is and will remain vested solely in Document
Sciences. VAR will use its best efforts to protect Document
Sciences's intellectual property rights, including, without
limitation, enforcement of VAR Sublicense agreements, and will assist
Document Sciences at
DSC VAR Agreement Version 6 Page 7
<PAGE> 8
Document Sciences's expense to stop any unauthorised use of Document
Sciences's intellectual property rights. Except to the extent
authorised herein or otherwise agreed in writing by Document Sciences,
copyrighted materials (documents and software) may not be copied.
13.3 VAR shall transfer no Product to a Customer unless (a) VAR shall have
obtained from the Customer prior to such transfer a signed copy of the
Software License Agreement, attached hereto as Appendix E, copies of
with shall be furnished to Document Sciences. Document Sciences may
amend the Software License Agreement from time to time. Upon any such
amendment, Document Sciences shall notify VAR of such change and shall
furnish VAR with a copy of the amended Software License Agreement.
Upon the next subsequent delivery of a Product to a Customer, VAR
shall obtain from such customer, and deliver to Document Sciences upon
request, an executed copy of the new version of the Software License
agreement, which shall apply to all Products thereafter delivered to
such Customers until the form of the Software License Agreement is
again amended by Document Sciences.
14. Assignability
Neither this Agreement nor any of the rights granted under it shall be
assignable by VAR without the prior written consent of Document
Sciences.
15. Duration
This agreement shall commence on the date first above written and
shall remain in full force and effect for a term of two years unless
sooner terminated as hereinafter provided, with automatic renewal at
the end of each year for a subsequent one year period, unless either
party notifies the other party at least 90 days prior to the yearly
renewal anniversary, that it wishes the contract to run out at the end
of the then current two year period.
16. Termination Upon Default
This Agreement may also be terminated as follows:
16.1 By either party by written notice to the other party if (i) a receiver
shall have been appointed over the whole or any substantial part of
the assets of the other party, (ii) a petition or similar document is
filed by the other party initiating any bankruptcy or reorganization
proceeding, (iii) such a petition is filed against the other party and
such proceeding shall not have been dismissed or stayed within 60 days
after such filing, or (iv) upon thirty days prior written notice
following the continuance of an event described in Section 17.2
("Effect of Termination') for a period of three months;
16.2 Following the initial 6 months of this agreement, by either party upon
written notice if the other party has breached the terms of this
Agreement in any material respect and fails to cure such breach with
60 days after such other party's receipt of written notice of such
default;
DSC VAR Agreement Version 6 Page 8
<PAGE> 9
16.3 By Document Sciences at any time after the initial period upon 60 days
notice, VAR fails to meet the minimum purchase obligations set forth
in the Sales Plan; or,
16.4 By Document Sciences upon written notice at any time, for breach of
Section 13 ("Proprietary Rights").
17. Effect Of Termination
Upon any termination or expiration of this Agreement for any reason:
17.1 Document Sciences, at its option, will repurchase any or all Products
then in VAR's possession at a price not greater than the price paid by
VAR for such Products. Upon receipt of any Products so repurchased
from VAR, Document Sciences shall issue an appropriate credit to VAR's
account.
17.2 The due date of all outstanding invoices to VAR for Products shall
automatically be accelerated to become due and payable by immediate
wire transfer on the effective date of termination, even if longer
terms have been previously agreed to. All order or portions thereof
remaining unshipped as of the effective date of termination shall
automatically be cancelled.
17.3 For a period of one year after the date of termination, VAR shall make
available to Document Sciences for inspection and copying all books
and records of VAR that pertain to VAR's performance of and compliance
with its obligations, warranties and representations under this
Agreement.
17.4 VAR shall forthwith cease all use of Trademarks, and will not use any
mark which is confusingly similar to any Trademark.
17.5 VAR shall return all Document Sciences marketing literature and
materials to Document Sciences.
17.6 NEITHER DOCUMENT SCIENCES NOR DISTRIBUTOR SHALL BE LIABLE TO THE OTHER
FOR DAMAGES OF ANY KIND, INCLUDING INCIDENTAL OR CONSEQUENTIAL
DAMAGES, ON ACCOUNT OF THE TERMINATION OF THIS AGREEMENT FOR ANY
REASON.
17.7 VAR will immediately cease all representations that it is an Document
Sciences distributor.
17.8 Neither party will be entitled to any reimbursement in any amount for
any training, market development, investments or other costs expended
by either party before the termination of this Agreement, regardless
of the reason for, or method of, termination of this Agreement.
17.9 Document Sciences's right to receive and VAR's obligation to pay all
amounts due hereunder, as well as VAR's obligations under Sections 9
("Right of Audit"), 13 ("Proprietary Rights"), 17 ("Effect of
Termination"), 18 ("Warranty"), and 20 ("Miscellaneous") shall survive
termination of this Agreement. All other provisions of this Agreement
shall terminate upon the termination of this Agreement for any reason.
DSC VAR Agreement Version 6 Page 9
<PAGE> 10
18. Warranty
Document Sciences extends no warranty to the Customer. Document
Sciences warrants the products to the VAR only as follows:
18.1 Software Warranty
Software is warranted to conform to Document Sciences's Product
description applicable at the time of order. Document Sciences's sole
obligation shall be to use reasonable effort to remedy any non
conformance as outlined in Appendix C. Such remedy shall be provided
on non conformance reported to Document Sciences in writing for a
period of one hundred and twenty (120) days from the date of
shipment.
18.2 Exclusions from Warranties
The warranties contained in Section 18.1 are contingent upon
Customer's and/or VAR's prior use of the product and shall not apply
(i) if any changes have been made to the code in any way (ii) if the
Product has been modified by Customer or VAR.
18.3 Disclaimer of Warranties
THE STATED EXPRESS WARRANTIES ARE IN LIEU OF ANY OBLIGATIONS OR
LIABILITIES ON THE PART OF DOCUMENT SCIENCES ARISING OUT OF OR IN
CONNECTION WITH THE PERFORMANCE OF THE PRODUCTS.
EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH ABOVE, DOCUMENT SCIENCES
MAKES NO OTHER WARRANTIES RELATING TO THE PRODUCTS EXPRESS OR IMPLIED,
AS TO ANY MATTER WHATSOEVER, INCLUDING WITHOUT LIMITATION THE
CONDITION OF THE PRODUCTS. ANY AND ALL WARRANTIES OF NON-
INFRINGEMENT OF THIRD PARTY RIGHTS, FITNESS FOR A PARTICULAR PURPOSE,
OR MERCHANTABILITY ARE EXPRESSLY EXCLUDED. NO PERSON IS AUTHORIZED TO
MAKE ANY OTHER WARRANTY OR REPRESENTATION CONCERNING THE PERFORMANCE
OTHER PRODUCTS OTHER THAN AS PROVIDED IN THIS SECTION 19. DISTRIBUTOR
SHALL MAKE NO OTHER WARRANTY, EXPRESS OR IMPLIED, ON BEHALF OF
DOCUMENT SCIENCES.
19. Limited Liability
IN NO EVENT SHALL DOCUMENT SCIENCES BE LIABLE FOR INDIRECT, SPECIAL
INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY NATURE WHATSOEVER,
INCLUDING WITHOUT LIMITATION LOSS OF PROFITS, USE OR DATA OR OTHER
COMMERCIAL LOSS WHETHER OR NOT DOCUMENT SCIENCES HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES. THIS LIMITATION SHALL APPLY TO ANY
CLAIM OR CAUSE OF ACTION WHETHER IN CONTRACT OR TORT (INCLUDING
NEGLIGENCE), IN LAW OR EQUITY, STRICT PRODUCT LIABILITY OR OTHERWISE,
OR UNDER ANY OTHER THEORY INCLUDING CLAIMS CONCERNING PATENT,
COPYRIGHT OR OTHER PROPRIETARY RIGHTS INFRINGEMENT.
DSC VAR Agreement Version 6 Page 10
<PAGE> 11
20. Miscellaneous
20.1 Notices. All notices or reports permitted or required under this
Agreement must be in writing and must be delivered by personal
delivery, telegram, telex, telecopier, facsimile transmission or by
certified or registered mail, return receipt requested, and shall be
deemed given upon personal delivery, ten (10) days after deposit in the
mail, or upon acknowledgement or receipt of electronic transmission.
Notices shall be sent to the address set forth on the signature page of
this Agreement or such other address as either party may specify in
writing. All other notices to Document Sciences shall be sent to its
President.
20.2 Force Majeure. Neither party will be liable hereunder by reason of
any failure of delay in the performance or its obligations hereunder
(except for the payment of money) on account of strikes, shortages,
riots, insurrection, fires, flood, storm, explosions, acts of God,
war, governmental action, labour conditions, earthquakes, or any other
similar cause which is beyond the reasonable control of such party.
20.3 Waiver. The failure of either party to required performance by the
other party of any provision hereof will not affect the full right to
require such performance at any time thereafter nor will the waiver by
either party of a breach of any provision hereof be taken or held to
be a waiver of the provision itself.
20.4 Severability. In the event that any provision of this Agreement is
found to be unenforceable or invalid under any applicable law or is so
held by a court of competent jurisdiction, such unenforceability or
invalidity will not render this Agreement unenforceable or invalid as
a while, and, in such event, such provision will be changed and
interpreted so as best to accomplish to objectives of such
unenforceable or invalid provision within the limits of applicable law
or applicable court decisions.
20.5 Hiring of Personnel. Both parties agree that the hiring and training
of personnel by each other to carry out duties pursuant with this
contract represents significant investments. In recognition of this
both parties agree :
(i) During the term of this agreement not to enter into any
relationship with of employment, consultancy or agency with any person
who, at any time during the previous year to the relationship with
Document Sciences was an employee of the VAR.
(ii) In the event of termination of this agreement by Document
Sciences with the intent of appointing as a VAR a selling organization
in the territory which is (a) directly or indirectly, wholly or
partially-owned by the Document Sciences, or (b) which, directly or
indirectly, wholly or partially owns Document Sciences, such
organization being either an existing one or one yet to be formed at
the time of notice, then Document Sciences agrees, for the duration of
one year after expiration of this agreement, not to enter into any
relationship of employment, consultancy or agency, with any person
who, at anytime in the twelve months prior to the expiration date of
the contract, was an employee of the VAR.
20.6 Governing Law. This Agreement will be governed in all respects by the
laws of the State of California, USA VAR hereby irrevocably consents
to the personal jurisdiction of the courts of the State of California,
which courts shall have Sole jurisdiction over
DSC VAR Agreement Version 6 Page 11
<PAGE> 12
any claim or dispute arising hereunder, and to service of process
within or without the said State by certified mail requiring a
signed receipt. The parties agree that the United Nations
Convention on Contracts for the International Sales of Goods (1980)
is specifically excluded from application to this Agreement.
20.7 Headings. The section heading appearing in the Agreement are inserted
only as a matter of convenience and in no way define, limit, construe
or describe the scope or extent of such, and in no manner affects this
Agreement.
20.8 Amendments. The parties agree that this Agreement may be amended upon
mutual agreement of Document Sciences and VAR. Each amendment to this
agreement shall be signed by both parties to this Agreement.
20.9 Counterparts. This Agreement may be signed in two counterparts each
of which shall be deemed to be an original, but which together will
form a single agreement as if both parties had executed the same
document.
20.10 Authority. Each party warrants that (i) it has full power and
authority to enter into an perform its obligations under this
Agreement, (ii) this Agreement has been duly authorized by and is
binding and enforceable upon such party and (iii) the person signing
this Agreement on that party's behalf has been duly authorized and
empowered to enter into this Agreement. Each party further
acknowledges that it had read this Agreement, understands it, and
agrees to be bound by it.
20.11 Approvals. In each case where approvals or consents of either party
are required under this Agreement, such approvals or consents shall
not be unreasonably withheld.
20.12 Indemnity. Both Document Sciences and the VAR agree to indemnify each
other and hold each other harmless from any losses, claims, or damages
(including attorneys' fees) incurred as a result of any breach of this
Agreement by themselves, or incurred as a result of any negligence,
misrepresentation, error, or omission by either party or its agents or
employees.
20.13 Entire Agreement. This Agreement (including the Appendices) sets
forth the entire understanding and agreement of the parties as to the
matter covered hereby. This Agreement supersedes, any prior or
collateral agreements with respect to the matters covered by this
agreement.
Document Sciences The VAR
By:____________________ By:____________________
Duly Authorized Duly Authorized
Date Date
Name: Name:
Title:____________________ Title:____________________
DSC VAR Agreement Version 6 Page 12
<PAGE> 13
Appendix A
PAN EUROPEAN PRICE LIST
These notes are to be read in conjunction with the price list attached at the
back of the Agreement:
(1) Software prices include one year free software updates.
(2) Products are automatic document creation and management software.
(3) Recommended retail price in local currency shall be approximately %
up on the Pan European Price to allow for freight, insurance, duty and
currency protection.
(4) VAR cost price shall be a % discount off the End User Prices shown in
the Price List. In the event the VAR reaches % of the agreed annual
sales target an additional % bonus discount shall be applied on
future purchases.
DSC VAR Agreement Version 6 Page 13
<PAGE> 14
Appendix B
SALES PLAN
The agreed sales target shall be:
<TABLE>
<CAPTION>
Product $K Year 1 Period
<S> <C> <C> <C>
Q-1 Q2 Q3 Q-4
</TABLE>
Note:
(1) In the event that the VAR fails to meet the goals in two successive
quarters the VAR will have ten (10) days to justify the failure to
meet the minimum performance level. In the event that Document
Sciences, after reasonable and objective assessment, judge not to
accept the VAR's justification then Document Sciences may issue the
letter of concern.
(2) Subsequent years targets shall be mutually agreed ninety (90) days
prior to the end of the year. Such targets shall be reasonably
determined based on the previous years' performance.
DSC VAR Agreement Version 6 Page 14
<PAGE> 15
Appendix C
SOFTWARE PROBLEM SEVERITY LEVEL
AND TARGET RESOLUTION TIME
Severity Level
Severity 1 Catastrophic problem; the user has no production capability
Severity 2 Severe problem; the user's production capability is seriously
degraded
Severity 3 Moderate problem; the user can proceed but capability is
impaired
Severity 4 Minor problem; the user's production is not diminished
Resolution Time
Best efforts will be made to respond within the four severity levels in the
time shown below:
<TABLE>
<CAPTION>
Severity Level Resolution Time
<S> <C>
Level l days
Level 2 days
Level 3 days
Level 4 At the next release
</TABLE>
DSC VAR Agreement Version 6 Page 15
<PAGE> 16
APPENDIX D
INITIAL MARKETING CAMPAIGN
DSC VAR Agreement Version 6 Page 16
<PAGE> 17
Appendix E
SOFTWARE LICENCE
(VAR'S SOFTWARE LICENSE TO BE ATTACHED)
DSC VAR Agreement Version 6 Page 17
<PAGE> 1
EXHIBIT 10.13
SOFTWARE LICENSE GRANT, TERMS AND CONDITIONS
This Agreement is made and entered into between Document Sciences Corporation
("Document Sciences") and <<Company>> ("Customer"), a corporation, with its
principal place of business at <<Address 1>>.
1. LICENSED SOFTWARE
The term "Licensed Software" shall mean any or all of object code, support
documentation, including but not limited to the Reference Manual, System Guide,
Quick Reference, User Guide, Release Notes, Font Data Base Reference Manual,
Message Guide, PCL Importer Manual, CompuView Manual, CompuPrep Manual, TIFF
Importer Manual, NetPrint Notes, Multi-Graphic Consolidator Manual and other
related material of the Document Sciences Software Products listed in the
Software Schedule(s) and delivered to Customer under this Agreement.
2. LICENSE GRANT
a. Subject to the payment of the Initial License Fees set forth on the
Software Schedule and Addendums thereto, and all other applicable
license fees, if any, and subject to the terms and conditions of this
Agreement, Document Sciences grants to the Customer a non-
transferable, non-assignable (by operation of law or otherwise),
non-exclusive license to use the Licensed Software solely for
Customer's own internal business purposes on the size, type, and
number of central processing units ("CPU") specified on the Software
Schedule(s).
b. Customer expressly acknowledges and agrees that license agreements
shall be required for all CPU's on which Customer uses the Licensed
Software. Customer may license additional Licensed Software for
operation on additional CPU's at Document Sciences' then-current
charges and subject to Document Sciences' then prevailing terms and
conditions, by and through Customer's execution of and Document
Sciences' acceptance of Addendums to the Software Schedule which shall
become effective Upon such acceptance.
c. Title and full ownership rights to the Licensed Software and any
copies thereof, shall at all times reside exclusively with Document
Sciences and/or its licensors.
3. PAYMENT
Following the Customer's receipt of the Licensed Software, Document Sciences
shall invoice the Customer for the amount owed under this Agreement. Such
invoice(s) are payable upon receipt and are considered delinquent if not paid
within thirty (30) days.
4. REDESIGNATION OF HOST COMPUTER SYSTEM
If Customer desires to transfer use of the Licensed Software, either
temporarily or permanently, to a different CPU, or if Customer desires to
change CPU's physical location, Customer shall notify Document Sciences in
writing at least 60 days prior to such proposed transfer or relocation and
specifically designate the new CPU and/or location. In the event that such
prior notice is not possible when the CPU becomes inoperative due to
malfunction, Customer may temporarily transfer use of the Licensed Software to
a back-up system and promptly notify Document Sciences in writing of such
transfer. With respect to any transfer of the licensed Software to a new CPU
and/or location, Customer (a) assumes full responsibility for all operational
changes thereto, and (b) shall bear all costs associated with such transfer
and/or relocation, including but not limited to, any and all additional license
fees and support costs which may be payable to Document Sciences in accordance
with Document Sciences' then-current charges.
5. CUSTOMER'S RESPONSIBILITIES
In addition to the other obligations set forth in this Agreement, Customer
shall (a) be solely responsible for and bear all costs associated with
determining and maintaining the configuration and operation of the CPU and all
associated operating system software and (b) install and operate the Licensed
Software on the CPU in accordance with Document Sciences' support
documentation.
6. CONFIDENTIALITY
Customer acknowledges that the Licensed Software contains confidential
information of Document Sciences and its licensors. Customer agrees to
disclose such confidential information only to its employees and consultants
having a clear need for such information to enable Customer to exercise its
right under this Agreement. This obligation shall not apply to any portion of
the confidential information to the extent that it (a) is or becomes part of
the public domain through no fault of Customer or its employees or consultants
(b) was rightfully communicated to Customer free of any obligation of
confidence subsequent to the time of receipt, (c) was developed by Customer
independently of and without reference to the confidential information, (d) is
communicated by Document Sciences to a third party free of any obligation of
confidence, or (e) is more than five years after termination of this Agreement.
7. COPYING RESTRICTIONS
Customer may copy the Licensed Software, in whole or in part, only for backup
or archive purposes consistent with the license grant in Paragraph 2, but in no
event shall the number of copies exceed two. Each copy shall include in
readable format any and all confidential, proprietary, and copyright notices or
markings contained on the original provided by Document Sciences.
8. UNAUTHORIZED USE AND CUSTOMER COMPLIANCE
Customer agrees to use all reasonable efforts to ensure that persons employed
by Customer or under Customer's direction and control (including consultants)
abide by the terms and conditions of this Agreement including, without
limitation, not knowingly permitting anyone to use any portion of the Licensed
Software for the purpose of deriving its source code. In the event the
Customer becomes aware that the Licensed Software is being used by such persons
in a manner not authorized by this Agreement, Customer shall immediately use
all reasonable efforts to have such unauthorized use of such Licensed Software
immediately cease and shall immediately notify Document Sciences in writing of
the unauthorized use.
<PAGE> 2
9. THIRD PARTY SOFTWARE
The Licensed Software is protected by Copyright and other proprietary rights of
Document Sciences and/or, its licensors. Customer may be held directly
responsible by such third party licensor for acts relating to the Licensed
Software which are not authorized by this Agreement.
10. TERM OF LICENSE AGREEMENT AND RENEWAL OF LICENSE AGREEMENT
The term of the Agreement shall be twelve (12) months commencing on the date
Document Sciences accepts this Agreement and shall be subject to automatic
renewal at Document Sciences' then current Annual License Fee applicable to the
Licensed Software for additional one year terms unless either party notifies
the other of cancellation at least thirty (30) days prior to the end of an
annual term. The Annual License Fee shall be due and payable in full on the
first day of such one year term.
11. SOFTWARE SUPPORT
a. Software Support (defined below) for Licensed Software shall be
included in the Initial License Fees and Annual License Fees. For
purposes of this Agreement, Software Support shall consist of:
1. Document Sciences sending to Customer from time to time, as
Document Sciences deems appropriate, Licensed Software
releases or upgrades the primary purpose of which is to
maintain compatibility with the then current supported host
environment and/or add or enhance Licensed Software features
and capabilities. However, Document Sciences reserves the
right to charge Customer a separate license and/or support fee
for a release or upgrade the primary feature of which, in
Document Sciences' sole discretion, is a material enhancement
to the features and/or capabilities of the Licensed Software.
2. The provision by Document Sciences of a Customer Support
Center Hot-Line number for the resolution of user problems and
questions relating to the Licensed Software. The Hot-Line
shall be available for live communication during normal
business hours, Monday through Friday. For the remaining
periods, Document Sciences shall provide a telephone message
recording device which will record Customer's reports.
3. The submission of Licensed Software problems to Document
Sciences via a Problem Report. Document Sciences does not,
however, guarantee the correction of any Licensed Software
problem.
b. The implementation of all software releases/upgrades is mandatory and
the previous release of software will only be supported for six months
following the "general availability" of the current release/upgrade as
determined by Document Sciences.
c. If Customer fails to implement the most current release or upgrade of
the Licensed Software product for any reason whatsoever, Document
Sciences may discontinue providing Software Support for any affected
Licensed Software product without further liability to Customer.
d. Document Sciences reserves the right to discontinue Software Support
for any Licensed Software product at any time after the first
anniversary of this Agreement. Document Sciences shall give the
Customer at least 30 days prior written notice of the effective date
of such discontinuance and shall reimburse Customer the pro rata
portion of any prepaid Annual License Fee for Software Support
provided that Customer is in full compliance with the terms of this
Agreement.
12. TERMINATION OF AGREEMENT
a. This Agreement shall terminate immediately: (i) upon expiration of its
annual term, with written notification (see Paragraph 10 above); (ii)
if, upon expiration of thirty (30) days from the date of written
notice by Document Sciences of a material curable default under this
Agreement is sent to Customer, such default has not been cured; (iii)
immediately upon notice in the event of a material default which by
its nature cannot be cured; (iv) if Document Sciences elects to accept
return of the Licensed Software under Paragraphs 12b or 13 of this
Agreement; or (v) to the extent permitted by applicable law, if
Customer enters into any composition or arrangement with or for the
benefit of its creditors, becomes bankrupt has a receiver and/or
manager appointed to manage its assets, or goes into liquidation,
voluntarily or under supervision.
b. Following termination Customer shall (i) promptly discontinue use of
the Licensed Software and shall either deliver to Document Sciences
and/or destroy all Licensed Software and related materials furnished by
Document Sciences, together with all copies of the Licensed Software
(including erasing Licensed Software from memory or data storage
apparatus under the control of Customer) and (ii) warrant in writing
to Document Sciences within thirty (30) days of termination that the
Licensed Software, related materials and all copies thereof have been
either returned to Document Sciences and/or destroyed and erased from
such memory and/or data storage apparatus.
c. The obligations of Customer under Paragraph 6 relating to confidential
information shall survive termination of this Agreement.
GENERAL PROVISIONS
13. WARRANTY AND DISCLAIMER
a. Document Sciences warrants the physical media on which the Licensed
Software is embedded or resident will be free from material defects in
material for a period of thirty (30) days from the date of delivery to
Customer. Document Sciences shall replace floppy disks, on which the
Licensed Software is resident, or incomplete or illegible
documentation upon receipt of notification of defect. Customer's sole
remedy shall be for Document Sciences to replace the defective media.
b. Document Sciences warrants that for a period of ninety (90) days from
the date of delivery to Customer of the Licensed Software, the
Licensed Software shall be free from material coding errors. A
"material coding error" is an error which results in the Licensed
Software being in material nonconformity to its published Document
Sciences specifications. Document Sciences does not warrant that the
operation of the Licensed Software will be uninterrupted or
error-free. The Customer must notify Document Sciences in writing of
a material coding error within the 90 day warranty period.
<PAGE> 3
Document Sciences, at its option, may either provide Customer with
Licensed Software which is free from, or a workaround which avoids,
the material coding error or accept return of the Licensed Software
and refund the Customer the license fees paid for such Licensed
Software. Document Sciences shall provide the replacement Licensed
Software or workaround or refund the license fees within a reasonable
time after receiving the notice of a material coding error from
Customer. If Document Sciences does not, within a reasonable time
after notification, provide the replacement Licensed Software or
workaround, Customer's sole remedy shall be to rescind this Agreement.
c. THE EXPRESS WARRANTIES SET FORTH ABOVE ARE THE ONLY EXPRESS
WARRANTIES. DOCUMENT SCIENCES DISCLAIMS THE IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. DOCUMENT
SCIENCES DISCLAIMS ANY AND ALL WARRANTIES AND REPRESENTATIONS MADE BY
PERSONS OTHER THAN DOCUMENT SCIENCES INCLUDING, BUT NOT LIMITED TO,
DISTRIBUTORS OF ANY DOCUMENT SCIENCES LICENSED SOFTWARE.
d. The express warranties set forth above shall be void if Customer fails
to properly use the Licensed Software in the appropriate environment
as specified in the support documentation.
14. PATENT AND COPYRIGHT INDEMNIFICATION
Document Sciences will defend Customer from, and pay any ultimate judgement
for, direct infringement in the United States by the Licensed Software of any
patent, trade secret, or copyright, if Customer promptly notifies Document
Sciences in writing of any alleged infringement, allows Document Sciences to
defend, and cooperates with Document Sciences. Document Sciences is not
responsible for any non-Document Sciences litigation expenses or settlements
unless Document Sciences agrees to them in writing. To avoid infringement,
even if not alleged, Document Sciences may, at its option, and at no charge to
Customer, obtain a license, or modify, or substitute an equivalent of, or
remove the Licensed Software. If Licensed Software is removed by Document
Sciences for this reason, the pro rata portion of any prepaid Initial License
Fee or Annual License Fee will be refunded. Document Sciences is not liable
for any infringement due to the Licensed Software being made or modified (by
Document Sciences or others, including Customer) to Customer specifications, or
being used or sold in combination with equipment, software, or supplies not
provided by Document Sciences. DOCUMENT SCIENCES HAS NO OTHER EXPRESS OR
IMPLIED WARRANTY OF NONINFRINGEMENT OR LIABILITY FOR INFRINGEMENT OR ANY
DAMAGES THEREFROM.
15. LIMITATION OF LIABILITY
EXCEPT AS TO INDEMNIFIED MATTERS UNDER 14 ABOVE, IN NO EVENT SHALL DOCUMENT
SCIENCES BE LIABLE TO CUSTOMER FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES IN ANY WAY ARISING OUT OF OR RELATING TO THIS AGREEMENT.
IN ADDITION, DOCUMENT SCIENCES' LIABILITY TO CUSTOMER FOR DIRECT DAMAGES SHALL
IN NO EVENT EXCEED THE TOTAL AMOUNT OF MONEY ACTUALLY PAID BY CUSTOMER TO
DOCUMENT SCIENCES UNDER THIS AGREEMENT.
16. MISCELLANEOUS
a. No delay or failure of Document Sciences to exercise any right or
remedy will operate as a waiver of such right or remedy.
b. Customer acknowledges that its rights in and to the Licensed Software
may not be assigned, licensed or otherwise transferred by operation of
law or otherwise without the prior written consent of Document
Sciences.
c. This Agreement shall be construed in accordance with and be governed
by the laws of the State of California.
d. Any notice given under this Agreement shall be in writing and sent by
prepaid registered mail or certified airmail, or commercial courier
service, return receipt requested. All such notices shall be deemed
to have been given when received, addressed in the manner indicated
below or at such other addresses as the parties may from time to time
notify each other of.
Notice to Customer: Notice to Document Sciences:
____________________ Barbara E. Amantea, CFO
____________________ Document Sciences Corporation
____________________ 6333 Greenwich Drive - Suite 100
____________________ San Diego, CA 92122
e. This Agreement is the entire agreement between Customer and Document
Sciences pertaining to the Licensed Software and supersedes all
proposals or prior and contemporaneous agreements or understandings of
Customer and Document Sciences regarding the Licensed Software.
CUSTOMER AGREES THAT ANY TERMS AND CONDITIONS CONTAINED IN ANY
CUSTOMER PURCHASE ORDER OR OTHER ORDERING DOCUMENT SHALL HAVE NO
BINDING EFFECT ON DOCUMENT SCIENCES AND WILL NOT MODIFY THIS AGREEMENT
IN ANY WAY. Modification of this Agreement shall not be valid unless
in writing and signed by duly authorized representative of both
parties.
f. This Agreement may be executed in two or more counterparts, each of
which when so executed and delivered, shall constitute a single
agreement.
g. If any provision of this Agreement is held invalid, such invalidity
shall not effect the validity or enforceability of the other
provisions of this Agreement or of the Agreement as a whole.
h. Customer shall be responsible for the payment of any and all taxes on
the Initial License Fee and Annual License Fees, other than taxes
based on Document Sciences' net income or Document Sciences' business
privilege taxes.
THE INDIVIDUAL SIGNING BELOW WARRANTS HE/SHE IS AN AUTHORIZED REPRESENTATIVE OF
CUSTOMER. THIS AGREEMENT SHALL NOT BE EFFECTIVE UNTIL EXECUTED BY CUSTOMER AND
ACCEPTED BY AN AUTHORIZED HEADQUARTERS REPRESENTATIVE OF DOCUMENT SCIENCES
CORPORATION.
Executed: Accepted:
CUSTOMER: <<COMPANY>> DOCUMENT SCIENCES CORPORATION
By: By:
------------------------------ --------------------------------
Name: Name: Tony N. Domit
---------------------------- ------------------------------
Title: Title: PRESIDENT & CEO
----------------------------- ------------------------------
Date: Date:
----------------------------- ------------------------------
<PAGE> 1
EXHIBIT 10.14
THIS LEASE, dated for reference purposes, the 20th day of December, 1991
between Governor Park Plaza Associates a Limited Partnership, having its
principal office at 6333 Greenwich Drive, Ste. 110, San Diego, California, and
having a Federal Tax Identification Number of #33-0142066 (hereinafter referred
to as "Landlord"), and XEROX CORPORATION, a New York corporation, having its
principal office at 800 Long Ridge Road, Stamford, Connecticut 06904
(hereinafter referred to as "Tenant").
WITNESSETH:
1. DESCRIPTION
Landlord has constructed a development on certain land, as shown on
Exhibit A attached hereto and made a part hereof (hereinafter referred
to as the "Complex"), which contains parking areas, common areas and
one or more buildings and/or future building sites, including Building
1 containing 61,808 rentable square feet, known as Governor Park Plaza
and located at 6333 Greenwich Drive in the City of San Diego, State of
California, 92122 (hereinafter referred to as the "Building").
Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord the following space in the Building, the space consisting of
7,042 rentable square feet (6,350 usable square feet) on the first
floor of Building 1 and known as Suite 120, as shown on Exhibit B
attached hereto and made a part hereof (hereinafter referred to as the
"Demised Premises"), together with the use in common with other
tenants of the Building of the hallways, corridors, lobby, lavatories,
elevators, stairways and other common areas and facilities of the
Building appurtenant thereto, and together with the sidewalks,
driveways and parking facilities provided for in Paragraph 10(h)
hereof (all together hereinafter referred to as the "Premises").
2. TERM
The term of this Lease is three (3) years, to scheduled to commence on
the first day of February, 1992 (hereinafter referred to as the
"Commencement Date"), and to end on the thirty first day of January,
1993 (hereinafter referred to as the "Expiration Date"), both dates
inclusive, unless the term be extended pursuant to Paragraph 16 or
Exhibit C hereof, or earlier terminated as provided herein.
3. RENT
The base monthly rental shall be fully serviced and shall be at the
rate of:
$0.80 per rentable square foot for months 1 through 12,
$1.59 per rentable square foot for months 13 through 24,
$1.65 per rentable square foot for months 25 through 36,
to be paid in advance on or before the first day of each month during
the term hereof; provided however, that if the term of this Lease
should commence on the date other than the first day of the month, the
first and last month's rent shall be prorated.
4. USE
The Demised Premises may be used and occupied for general office
purposes, including by way of specification (but without limiting the
generality of the foregoing), offices, research and development,
training, customer service demonstration areas and computer areas.
Landlord covenants, warrants and represents that there are no zoning
ordinances or other prohibitions restricting or limiting the use of
the Demised Premises for the purposes herein specified. Should any
law, regulation or other governmental order restrict or limit Tenant's
use of the Demised Premises, then Tenant
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<PAGE> 2
may cancel this Lease upon written notice to Landlord within ninety
(90) days following that date upon which Tenant shall have become
aware of such law, regulation or order and thereupon Tenant shall have
no further obligation to Landlord either hereunder or otherwise. In
addition, Tenant may use all or any part of the Demised Premises for
any lawful purpose then permitted by the zoning ordinances and the
certificate of occupancy.
Tenant may, if Tenant so elects, and for Tenant's sole use, install
and operate within the Demised Premises microwave ovens and install
and operate within the Demised Premises vending machines to dispense
hot and cold beverages, ice cream, candy, food and cigarettes;
such machines shall be maintained in a neat and sanitary condition and
shall comply with all applicable laws and ordinances.
5. PREPARATION OF PREMISES
Landlord shall, at Landlord's sole cost and expense perform all work
and furnish all materials necessary to complete the Demised Premises
in accordance with Preliminary Plans and Specifications which shall be
agreed to by Tenant and Landlord. Such plans and specifications shall
be deemed to be Exhibit B-1, attached hereto and made a part hereof.
Landlord, using Landlord's Architect and Engineer, at Landlord's sole
cost and expense, shall prepare complete final Architectural and
Engineering drawings and Specifications (hereinafter referred to as
"AE&S Drawings") in accordance with those Preliminary Plans and
Specifications submitted by Tenant and approved, or deemed approved,
by Landlord. Landlord agrees to make revisions to the AE&S Drawings
as required by Tenant, at no additional cost to Tenant. The AE&S
Drawings agreed to by Tenant and Landlord on or before DECEMBER
26, 1991 will be the drawings provided to Landlord's General Contractor
for the construction of the Demised Premises and such drawings shall
be deemed to be Exhibit C, attached hereto and made a part hereof.
Such final AE&S drawings shall be stamped, as may be necessary, by a
licensed Engineer so that Building Permits and/or other required
Permits may be obtained.
Landlord shall provide in the Demised Premises, in addition to the
Tenant Improvements herein described as Exhibit C, the following, all
in good condition and proper working order:
1. Ceiling grid: material and installation.
2. Ceiling tile: material only.
3. Building standard mini blinds: material and installation, on
all exterior and atrium windows.
4. Main HVAC System to include on the floor main supply and
return ductwork: Branch ducts and diffusers to the space are
not included in the shell.
5. Lighting installed in accordance with the building standard
plan.
6. Dry wall, tape and bed the interior of all exterior walls,
cores, demising walls, and all columns.
7. Provide electrical service to, and a distribution panel in,
the Demised Premises.
9. Landlord shall provide an allowance towards the purchase and
installation of a telephone communication system to include
telephone sets, telecommunication wiring and labor to install
to be specified by Tenant as detailed in Exhibit B-1, and such
allowance shall not exceed $12,000.00.
10. Landlord shall provide an allowance towards the purchase and
installation of computer network cabling and such allowance
shall not exceed $3,000.00.
12. Adequate preventive measures so as to eliminate or
substantially reduce noise and/or vibration from external
sources, such as vehicular or railroad traffic.
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<PAGE> 3
13. Complete final architectural and engineering drawings and
specifications, stamped as may be necessary by a licensed
engineer and/or architect so that building and/or other
required permits may be obtained.
Landlord and Tenant acknowledge that Landlord may be performing work
in the Building simultaneously with Tenant's work, and Landlord and
Tenant agree to cooperate with each other in the conduct of their
work, recognizing the amount of space each party will be working on,
in terms of fairly allocating access to the freight elevator, truck
loading dock and like facilities.
If the Premises and Demised Premises are not so completed on or before
the Scheduled Commencement Date as hereinbefore set forth, then the
term of this Lease and the obligation of Tenant to pay rent shall not
commence until the Premises are completed pursuant to the foregoing
paragraph, and Landlord shall have given Tenant at least fifteen (15)
days written notice prior to the date the Premises are so completed.
In the event Landlord fails to so complete the Building and the
Premises for causes beyond Landlord's control, such as strikes,
governmental restrictions, and acts of God, then the Commencement Date
shall be postponed for the period of such delay, provided however,
that if the Landlord fails to so complete the Premises (for a cause
either within or beyond Landlord's control) on or before February 1,
1992, then Tenant, at Tenant's reasonable discretion, may cancel this
Lease by giving written notice to Landlord and thereupon Tenant shall
have no further obligation to Landlord either hereunder or otherwise.
In the event the Demised Premises are not completed on or before the
Commencement Date for the reasons set forth in the preceding paragraph
permitting postponement of the Commencement Date, then Landlord and
Tenant promptly shall execute a document in the form attached hereto
as Exhibit D and made a part hereof, to establish the Commencement
Date. In the event the delay in the Commencement Date was caused by
Tenant, then the Expiration date shall be extended for a like period
so as to provide for the full term as set forth in Paragraph 2 hereof,
but in the event the delay in the Commencement Date was caused by
force majeure or by delay by the Landlord, then Tenant shall have the
option (a) to extend the Expiration Date by a like period so as to
provide for the full term as set forth in Paragraph 2 hereof, or (b)
not to extend the Expiration Date.
Tenant hereby designates JUDY O' REILLY as its representative with
authority to approve changes in design or construction, and to inspect
and approve workmanship and material. In all cases, his/her signature
shall be final and binding upon Tenant with respect to the authority
herein granted to him/her. All alternates either of additions or
deletions, agreed to between Landlord and Tenant must be in writing
and must be agreed to by Tenant's representative to be binding.
Tenant reserves the right to designate an alternate representative by
notice to Landlord.
Landlord hereby guarantees that the work shall be free from defects
for a period of one (1) year from the completion date. Landlord shall
at Landlord's sole cost and expense, promptly correct any portion of
the work found to be defective during the one (1) year period, and any
other portion of the work damaged or destroyed in the course of such
correction.
Upon completion and acceptance of the Demised Premises, Landlord shall
if requested by Tenant at no expense to Tenant furnish Tenant with a
complete set of "As-Built" drawings setting forth all improvements to
the Demised Premises.
6. TELEPHONE EQUIPMENT
Landlord shall provide suitable non-exclusive space for installation
of Tenant's telephone relay cabinets, power panels and electric
panels. Such space will be in addition to the Demised Premises and
shall be provided at no additional cost to Tenant.
3
<PAGE> 4
7. MAINTENANCE AND REPAIRS
Landlord shall, at Landlord's sole expense, maintain and repair the
Premises and the Building in a first-class condition, with all systems
properly functioning. Upon notification by Tenant, Landlord shall
promptly repair any damage to or defect in the Premises and the
Building; provided however, that if such damage is occasioned by fault
or neglect of the Tenant (except as provided in Paragraph 18 hereof)
and there shall not be in effect at the time such damage occurred a
policy or policies of insurance insuring Landlord against any loss
resulting from such damage, then Tenant shall reimburse Landlord for
the cost of repairs, or if the proceeds of such insurance are
insufficient to cover the cost of such repairs, then Tenant shall
reimburse Landlord the difference between such cost and the proceeds
which Landlord received.
8. ALTERATIONS
Tenant shall have the right to make such alterations and modifications
to the Demised Premises as Tenant may deem desirable provided such
non-structural alterations and modifications do not exceed $5,000.00
per occurrence. Should Tenant desire to make any alterations or
modifications which exceed $5,000.00 per occurrence or any structural
alterations or modifications, then Tenant agrees to first obtain
Landlord's consent, which consent shall not be unreasonably withheld or
delayed. Should Landlord fail to respond to Tenant's request within
five (5) days, then Landlord's consent shall be deemd given. All of
Tenant's construction to the Demised Premises shall be performed in a
good and workmanlike manner in accordance with applicable building
codes, regulations and all other legal requirements. Any damage to
the Building resulting from such alterations or modifications shall be
repaired at Tenant's expense.
9. SIGNS AND BUILDING NAME
Tenant at Landlord's expense shall have the right to be listed on the
Building lobby directory, if any, and to have identification signs
outside of the Demised Premises, within the Building in conformance
with Landlord's approved signage plan for the Complex. Tenant at
Tenant's expense shall have the right to require to be installed
and/or removed in conformance with Landlord's approved signage plan
for the Complex, at Tenant's option, an illuminated or nonilluminated
sign on an exterior wall of the Building, and/or a monument sign,
provided such sign does not violate any governmental law, ordinance or
regulation.
10. SERVICES
Landlord shall furnish the following installations and/or services to
Tenant at Landlord's cost and expense, all of which shall be adequate
for the intended use of the Premises and in conformity with that
furnished in local first-class buildings of similar nature. These
services shall be provided between the hours of 7 a.m. to 6 p.m. on
normal business days, and 9 a.m. to 1 p.m.. on Saturdays, except, all
equipment necessary to operate heating, ventilating and air
conditioning systems shall be operate sufficiently in advance and
during these hours so as to provide such services and all cleaning
services shall be provided before or after such hours.
(a) Elevator service, with a minimum of one elevator subject to
call at all times.
(b) Year round air conditioning system capable of producing and
maintaining the following conditions throughout the Demised
Premises, regardless of outside temperature.
(i) Temperature and Humidity - inside temperature to be
maintained at:
Summer: 74 degrees FDB +/- 2 degrees FDB relative
humidity 50% maximum.
Winter: 72 degrees FDB +/- 2 degrees FDB relative
humidity 25% minimum.
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<PAGE> 5
(ii) Temperature Control - areas having excessive heat
gain or heat loss or are affected by solar-radiation
at different times of the day shall be independently
zoned and controlled so that the interior temperature
condition stipulated above can be maintained.
(iii) Air Movement - in conference rooms and toilet areas,
a mechanical ventilation system shall be furnished to
provide for the exhausting of stale air and smoke as
well as providing a comfortable circulation of air.
(iv) Drafts, Noise and Vibration - the heating, air
conditioning and ventilating From systems shall be
free from objectionable drafts, noise and vibration.
(v) Filtration - all air conditioned supply air shall be
adequately filtered so as to maintain a clean, dust
free, non-toxic and odorless environment.
(vi) Ventilation - the air conditioning system shall
supply not less than 25% of fresh air wile in
operation. In toilets exhaust air quantities of at
least 50 cu. ft./minute for each water closet or
urinal or 2 cu. ft. per square foot of floor area,
whichever is greater, is to be provided.
(vii) Service and maintain an existing stand alone air
conditioner in the Demised Premises commonly known as
a CONTEMPO unit.
(c) All utility services. In addition, Landlord shall furnish, at
its sole cost and expense, all necessary utilities including
electricity, to the exterior common areas, including the
walkways, driveways and parking area.
(d) Adequate insect and vermin control.
(e) Adequate security services for the Premises and the Building
including fire and burglar alarm devices.
(f) Initial or first installation of lamps and/or bulbs as well as
future replacement, as required, of lamps and/or bulbs,
ballasts and starters to maintain a light level of 75 foot
candles at desk level.
(g) Landlord acknowledges that the availability of sufficient
parking is a material inducement to the entering into of this
Lease by Tenant. Landlord represents that it has sufficient
parking available to provide at no cost to Tenant and for
Tenant's exclusive use at least 3.9 paved parking spaces for
every 1,000 rentable square feet in the Demised Premises of
which 2 spaces shall be in the open parking area and shall be
marked exclusive to Tenant, all of which shall be no more than
100 feet from any public entrance to the Building. There
shall be a minimum of 350 square feet allocated for each
parking space including aisle and turnaround space.
(i) Landlord shall provide, at no expense to Tenant, cleaning
service, trash removal, and window washing for the Demised
Premises and the Premises in accordance with the Cleaning
Schedule marked Exhibit E and attached hereto and made a part
hereof.
Tenant acknowledges that any one or more of the services provided for
in Paragraph 10 hereof may be interrupted or suspended by reason of
accident, repair, alterations or improvements necessary to be made,
strikes, lockout, and except as hereinafter provided, Landlord shall
not be liable to Tenant therefore, provided however, that (a) Landlord
shall use its best efforts to restore such services as soon as
reasonably possible, (b) in the event such services is not restored
within ten (10) business days, whether or not through the fault of
Landlord, to the extent that Tenant cannot reasonably use all or any
part of the Premises, rent and other charges shall abate as to such
part effective on the eleventh (11) business day and continue abated
until such service is restored, and (c) in the event such interruption
continues for thirty (30) calendar days, whether or not through the
fault of Landlord, then Tenant shall have the right and option to
cancel and terminate this Lease, on ten (10) days written notice to
Landlord, and thereafter shall be relieved of all further liability
under this Lease.
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<PAGE> 6
11. REDECORATING
DELETED IN ITS ENTIRETY
12. COMPLIANCE WITH LAW
Landlord covenants that the Demised Premises, the Premises and the
Building, and the fixtures and appurtenances thereto (except those
installed by Tenant) do conform or that Landlord will promptly cause
them to conform to every applicable requirement of law or duly
constituted authority or the requirements of the carriers of all
insurance on or relating to the Demised Premises, the Premises or the
Building whether such insurance be furnished by Landlord or Tenant and
that Landlord will, at its sole risk and expense, at all times during
the term hereof promptly comply with all such requirements. The
Tenant shall comply with all applicable statutes, ordinances, rules
and regulations of federal, state and municipal governments and all
applicable rules and regulations of the Board of Fire Underwriters as
such statutes, ordinances, rules and regulations pertain to Tenant's
use of the Demised Premises.
Landlord shall also comply with all applicable city, county, state and
federal ordinances in effect from time to time with respect to
facilities for the handicapped in the Demised Premises, the Premises
and the Building.
13. LANDLORD'S TITLE, AUTHORITY AND QUIET ENJOYMENT
Landlord covenants and represents that it has good and marketable
title to the Building and the Complex, free and clear of all ground
leases, liens and mortgages or deeds of trust affecting Tenant's
possession of the Demised Premises, Tenant's use of the Premises, or
the rights granted to Tenant hereunder, except: a mortgage/deed of
trust dated Nov. 2, 1987 from Landlord, as mortgagor, and NEW ENGLAND
MUTUAL LIFE INSURANCE COMPANY, a MASSACHUSETTS CORPORATION, as
mortgagee/beneficiary of deed of trust.
In the event this Lease or the leasehold estate created hereunder is
subject to the prior rights of any mortgagee/beneficiary of deed of
trust or ground lessor, then Landlord shall secure from such
mortgagee/beneficiary of deed of trust or ground lessor a written
agreement in recordable form, in the form of Exhibit "F",
Non-Disturbance and Attornment Agreement (executed and acknowledged by
and on behalf of such mortgagee/beneficiary of deed of trust, or
ground lessor), which provides, among other things that Tenant, so
long as Tenant is not in default hereunder, may remain in possession
of the Demised Premises pursuant to the terms hereof and without
diminution of Tenant's rights should Landlord become in default with
respect to such mortgage or ground lease or should the Premises become
the subject of any action to foreclose any mortgage or to dispossess
Landlord. Such agreement shall be secured and furnished to Tenant at
the same time this executed Lease is delivered to Tenant.
Landlord covenants and represents that it has full and complete
authority to enter into this Lease under all of the terms, conditions
and provisions set forth herein, and so long as Tenant keeps and
substantially performs each and every term, provision and condition
herein contained on the part of Tenant to be kept and performed,
Tenant shall peacefully and quietly enjoy the Premises without
hindrance or molestation by Landlord or by any other person claiming
by, through or under Landlord.
14. SUBORDINATION
The priority of this Lease and the leasehold estate of Tenant created
hereunder are and shall be subject and subordinate to the lien of any
mortgage or ground lease, whether such mortgage is placed against the
fee or leasehold estate, which may now or hereafter affect the
Building and to all renewals, modifications, consolidations,
replacements and extensions thereof, and advances thereunder,
effective upon the date the mortgagee or ground lessor, as the case
may be, shall deliver to Tenant a written agreement in the form of
Exhibit "F", Non-Disturbance and Attornment
6
<PAGE> 7
Agreement (executed and acknowledged by and on behalf of the
mortgagee/beneficiary of deed of trust, or ground lessor) in
recordable form which provides, among other things that Tenant, so
long as Tenant is not in default hereunder, may remain in possession
of the Demised Premises pursuant to the terms hereof and without any
diminution of the Tenant's rights should Landlord become in default
with respect to such mortgage or ground lease or should the Premises
become the subject of any action to foreclose any mortgage or to
dispossess Landlord. Any fee which Landlord's lender or ground lessor
may charge for such agreement shall be paid by Landlord.
15. ASSIGNMENT AND SUBLETTING
Tenant shall have the right to assign this Lease or to sublease all or
any portion of the Demised Premises, with Landlord's consent which
consent shall not be unreasonably withheld or delayed. Should
Landlord fail to respond to Tenant's request within five (5) days
Landlord's consent shall be deemed given. Any such assignment or
subletting shall not relieve Tenant of its obligations hereunder.
In the event Tenant sells the operating unit which occupies the
Demised Premises to another company, then anything to the contrary in
this paragraph notwithstanding, Tenant shall have the right to assign
this Lease to such other company, but Tenant shall not thereby be
released of liability under this Lease.
16. LEASE EXTENSION
If this Lease shall not have been terminated pursuant to any
provisions hereof and Tenant is not in default under the terms
hereunder, then Tenant may, at Tenant's option, extend the term of
this Lease for one (1) successive additional term of three (3) years,
commencing on the expiration of the original term, or the immediately
preceding additional term as the case may be, and in the event Tenant
has elected to exercise its option to lease additional space pursuant
to Paragraph 25 the option provided for herein shall include such
additional space. At least nine (9) months prior to the expiration of
the initial term or any extended term, as the case may be, Tenant
shall request from Landlord the fair market rental rate being charged
in the Building, should Tenant desire to extend the term of this
Lease. At least eight (8) months prior to the expiration of the
initial or any extended term Landlord shall notify Tenant, in writing,
the applicable rental rate for the next succeeding option period.
Tenant may exercise such option by giving Landlord written notice by a
date which is the later to occur of (a) six (6) months prior to the
expiration of the original term or the additional term, as the case
may be, and (b) sixty (60) days after receipt by Tenant of Landlord's
notice of the applicable rental rate, as hereinabove provided, and (c)
fifteen (15) days after the fair market rental rate has been
determined by arbitration. Upon the giving by Tenant to Landlord of
such written notice and the compliance by Landlord and Tenant with the
foregoing provisions of this Paragraph 16, the term of this Lease
shall by deemed to be automatically extended upon all the covenants,
agreements, terms, provisions and conditions, set forth in this Lease,
except rental which:
(a) During the first renewal term shall be limited to a maximum of
90% of the then fair market rental rate,
(b) Or if Tenant elects, the rental rate schedule shall be as
follows:
$1.65 per rentable square foot for months 36 through 48,
$1.70 per rentable square foot for months 49 through 60,
$1.75 per rentable square foot for months 61 through 72,
(c) Upon execution of this extension option, Landlord shall repaint
the Demised Premises with two (2) coats of prime quality paint;
repainting shall be performed in a workmanlike manner with a
minimum of interference with Tenant's normal business
operations and replace all carpeting, with a quality comparable
to the initial installation, in the Demised Premises and in any
adjoining lobby/reception area, and except for such terms and
conditions as shall be inapplicable during any additional term
or in connection with this Paragraph 16.
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The term "month" as used in this paragraph shall mean (a) if the
Expiration Date is the last day of a calendar month, a calendar month,
or (b) if the Expiration Date is not the last day of a calendar month,
the period between the Expiration Date and the date in the preceding
month which is one (1) day after the date in the month of the
Expiration Date, e.g., if the Expiration Date falls on May 19, one (1)
"month" prior thereto would be April 20 and two (2) "months" prior
thereto would be March 20.
With respect to the lease extensions, the applicable "fair market
rental rate" shall be that rate charged for space of comparable size
and condition in comparable buildings, including the Building, located
in the geography commonly known as the Golden Train area of the City
of San Diego, taking into consideration the location, quality and age
of the building, floor level, extent of leasehold improvements
(existing or to be provided) including the amount spent by Tenant for
leasehold improvements over building standard in the Demised Premises,
rental abatements, lease takeover/assumptions, moving expenses and
other concessions, term of lease, extent of services to be provided,
distinction between "gross" and "net" lease, a base year or amount for
escalation purposes "both operating costs and ad valorem/real estate
taxes" and the time the particular rental rate under consideration
becomes or is to become effective, or any other relevant term or
condition, including any allowances for leasehold improvements, thus,
the "fair market value" rental rate may be a rental rate with or
without an allowance and/or with or without various other concessions
as set forth hereinabove.
In the event Tenant disagrees with Landlord's determination of the
fair market rental rate, Tenant shall promptly so notify Landlord and
Landlord and Tenant shall thereupon negotiate in good faith to attempt
to agree upon a mutually acceptable fair market rental rate, but in
the event agreement has not been reached within thirty (30) days after
Tenant's receipt of Landlord's Notice, then Tenant shall have the
option to demand arbitration as provided in Paragraph 46 hereof.
If Tenant fails or omits to so give to Landlord the first written
notice referred to above, it shall be deemed, without further notice
and without further agreement between the parties hereto, that Tenant
elected not to exercise the options granted Tenant pursuant to this
Paragraph 16 to extend the term of this Lease for additional periods.
17. TAXES, ETC.
Landlord shall pay all real estate taxes, assessments, water and sewer
rates and charges, and any other charges which may be levied, assessed
or charged against the Building and/or the Complex. Landlord shall
further make all payments required to be made under the terms of any
mortgage or deed of trust or ground lease which is now or hereafter a
lien on the building or the Complex which is superior to this Lease
and all payments required to be made under any ground lease. Landlord
shall have a reasonable time to cure a default under the terms of the
mortgage or deed of trust, before constituting an event of default by
Landlord as hereinafter described in Paragraph 23 of this Lease.
18. INSURANCE AND WAIVER OF LIABILITY
Landlord shall provide, at its expense, throughout the term of this
Lease, comprehensive general liability insurance covering the Building
and the Premises, except when caused by the sole negligence of Tenant
or Tenant's failure to perform its obligations under this Lease. The
policy or policies evidencing such insurance shall provide that same
may not be cancelled or amended without fifteen (15) days prior
written notice to Tenant, and shall provide for a combined coverage of
bodily injury and property damage in an amount not less than Five
Million Dollars ($5,000,000). Such policy or policies shall be issued
by an insurance company licensed to do business in the state in which
the Building is situate. Upon Tenant's request, Landlord shall submit
to Tenant suitable evidence that the foregoing policy or policies are
in effect.
Tenant shall provide, at its expense, throughout the term of this
Lease, comprehensive general liability insurance covering the Building
and the Premises when caused by the sole negligence of Tenant or
Tenant's failure to perform its obligations under this Lease. The
policy or policies evidencing such insurance shall provide that same
may not be cancelled or amended without fifteen (15) days prior
written notice to Landlord,
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<PAGE> 9
and shall provide for a combined coverage of bodily injury and
property damage in an amount not less than Five Million Dollars
($5,000,000). Such policy or policies shall be issued by an
insurance company licensed to do business in the state in which the
Building is situate. Upon Landlord's request, Tenant shall submit to
Landlord suitable evidence that the foregoing policy or policies are
in effect. Notwithstanding the foregoing, Tenant may insure the
foregoing risks under its blanket policy, or elect to self-insure such
risks.
Landlord, for itself and its insurers, hereby releases Tenant with
respect to any liability (including that deriving from the fault or
neglect of Tenant, assignees, subtenants, its agents, employees or
other persons under its or their direction or control) which Tenant
might otherwise have for any damage to the Building or the Demised
Premises by fire, other casualty or cause which Landlord could have
covered by a standard fire insurance policy with extended coverage
endorsement. The term "Tenant" as used in this paragraph shall
include any subsidiary of Tenant and any assignee or subtenant of
Tenant.
Landlord shall insure the Building against fire or other casualty with
extended coverage endorsement with an insurance company selected by
Landlord and Landlord shall cause the policy evidencing such insurance
to include provision permitting such release of liability if such a
provision is obtainable from such insurer at no additional expense to
Landlord. If such insurer will not include such a provision in such
policy, or if the inclusion of such provision in such policy would
involve an additional expense for Landlord, Landlord shall so notify
Tenant within a reasonable time. Where such a provision is obtainable
from such insurer and Tenant notifies Landlord in writing within a
reasonable time thereafter that Tenant desires Landlord to cause such
a provision to be included in such policy at the expense of Tenant,
Landlord shall cause such a provision to be included, and Tenant
agrees to pay promptly all expenses incurred by Landlord as a result
of such inclusion.
19. DAMAGE
In the event that the Building or Premises are damaged for any reason
whatsoever and Tenant is unable, in Tenant's reasonable business
judgement, to carry on its normal business operations for a period of
forty five (45) days or more, Tenant's shall have the right to
terminate this Lease by giving written notice of such termination to
the Landlord no later than thirty (30) days after the occurrence of
such damage. Upon such termination, Tenant's obligations hereunder
and each of them, including the obligation to pay rent, shall cease
and determine as of the day the Premises were so damaged. If in
Tenant's reasonable business judgement, it is unable to carry on its
normal business operations for a period of less than forty five (45)
days because of such damage, rent shall abate (or any free rent period
provided for in Paragraph 3 hereof shall be extended) for the period
the Premises are untenantable.
In the event the Premises are partially damaged by fire or other
casualty and Tenant shall determine that it is able to carry on its
normal business operations, Tenant shall pay rent for only such
portion of the Premises which Tenant in its determination may
reasonably occupy during the time required to make repairs. All
repairs necessary to restore the Premises to its original condition
shall be:
(a) commenced within thirty (30) days after the occurrence of such
damage;
(b) performed in a diligent and workmanlike manner with material
of at least the same quality utilized originally in the
construction of the Premises;
(c) completed by Landlord at Landlord's sole expense with a
minimum of interference with Tenant's normal business
operations.
If in Tenant's determination Landlord shall not have performed any of
the above obligations in strict compliance therewith, then Tenant may,
but shall not be required to, undertake such obligations, and all
costs and expenses incurred by Tenant as a result thereof may be
deducted from any rent or other payment due or to become due
hereunder.
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<PAGE> 10
20. CONDEMNATION
In the event the Building or the Complex shall be condemned for public
use or voluntarily transferred to a public or quasi-public body in
lieu of proceeding to a judgment of condemnation, this Lease shall
terminate and rent shall be adjusted to the date of termination. In
the event a portion of the Building or the Complex shall be condemned
for public use or voluntarily transferred to a quasi-public body in
lieu of proceeding to a judgment of condemnation and Tenant is unable,
in Tenant's reasonable business judgement, to carry on its normal
business operations for a period of forty five (45) day's or more,
Tenant-shall have the right to terminate this Lease by giving written
notice of such termination to the Landlord no later than thirty (30)
days after the occurrence of such condemnation or transferal. Upon
such termination, Tenant's obligations hereunder and each of them,
including the obligation to pay rent, shall cease and determine as of
the date of termination. If in Tenant's determination, it is unable
to carry on its normal business operations for a period of less than
forty five (45) days because of such partial condemnation, rent shall
abate for the period the Premises are untenantable.
In the event a portion of the Building or Complex shall be condemned
for public use or voluntarily transferred to a public or quasi-public
body in lieu of proceeding to a judgment of condemnation, and Tenant
shall determine that it is able to carry on its normal business
operations, Tenant shall pay rent for only such portion which Tenant
in its determination may reasonably occupy after such partial
condemnation or transfer. All repairs necessary to restore the
Demised Premises, Premises, Building or the Complex as nearly as
possible to its original condition shall be:
(a) commenced within thirty (30) days after the taking or
transfer;
(b) performed in a diligent and workmanlike manner with material
of at least the same quality utilized originally in the
construction of the Building or Complex.
(c) completed by Landlord at Landlord's sole expense with a
minimum of interference with Tenant's normal business
operations.
If in Tenant's determination Landlord shall not have performed any of
the above obligations in strict compliance therewith, then Tenant may,
but shall not be required to, undertake such obligations, and all
costs and expenses incurred by Tenant as a result thereof may be
deducted from any rent or other payment due or to become due
hereunder. Tenant is hereby granted a lien upon any award or
settlement resulting from the condemnation to the extent that Tenant
has not been reimbursed for any cost or expense which Tenant may have
incurred hereunder.
Except as provided in the paragraph immediately preceding, Tenant
shall not be entitled to any award or settlement resulting from the
condemnation, provided that nothing contained herein shall be
construed to in any way restrict or limit Tenant from asserting a
claim for any damages resulting from the taking of any leasehold
improvements paid for by Tenant or moving expenses incurred as a
result of such condemnation.
21. DEFAULT BY TENANT
The occurrence of any one or more of the following events shall
constitute an event of default by Tenant:
(a) the failure by Tenant to make any payment of rent or any
other payment required to be made by Tenant hereunder, as and
when due, where such failure shall continue for a period of ten
(10) days after receipt of written notice thereof by Tenant
from Landlord;
(b) the failure by Tenant to observe or perform any of the
covenants, conditions or provisions of this Lease where such
failure shall continue for a period of thirty (30) days after
receipt of written notice thereof by Tenant from Landlord,
provided, however, that if the nature of Tenant's default is
such that it cannot be cured solely by payment of money and
that more than thirty (30) days may be reasonably required for
such cure, then Tenant shall not be deemed to be in default if
Tenant shall commence such cure within such thirty (30) day
period and shall thereafter diligently prosecute such cure to
completion;
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<PAGE> 11
(c) (i) the making of any general arrangement or any
assignment by Tenant for the benefit of creditors;
(ii) the filing by or against Tenant of a petition to have
Tenant adjudged a bankrupt or a petition of
reorganization or arrangement under any law relating
to bankruptcy (unless, in the case of a petition
filed against Tenant, when such petition is dismissed
within ninety (90) days);
(iii) the appointment of a trustee or receiver to take
possession of substantially all of Tenant's assets;
(iv) the attachment, execution or other judicial seizure
of substantially all of Tenant's assets.
22. LANDLORD'S REMEDIES
Upon the occurrence of an event of default under this Lease by Tenant,
then Landlord in addition to other rights or remedies it may have,
shall have the right to terminate this Lease upon fifteen (15) days
written notice to Tenant, and also the right, with or without
termination of this Lease, of reentry upon and taking possession of
the Demised Premises and Landlord may remove all persons and property
from the Demised Premises; such property may be removed and stored in
any other place in the Building or in any other reasonably secure
place for the account of and at the expense and risk of Tenant.
Tenant hereby waives all claims for damages which may be caused by the
reentry of Landlord and taking possession of the Demised Premises or
removing or storing the furniture and property as herein provided and
shall save Landlord harmless from any costs or damages occasioned
Landlord thereby, and no such reentry shall be considered or be
construed to be a forcible entry. Should Landlord elect to reenter,
as herein provided, or should it take possession pursuant to legal
proceedings or pursuant to any notice provided for by law, Landlord
may either terminate this Lease or, Landlord may from time to time,
without terminating this Lease, relet the Demised Premises or any part
thereof for such term or terms and at such rental or rentals and upon
such other terms and conditions as may be reasonable, with the right
to make minor alterations and repairs to the Demised Premises. Rental
received by Landlord from such reletting shall be applied first, to
the payment of any costs of such reletting including reasonable
brokerage and attorney's fee; and the residue, if any, shall be held
by Landlord and applied in payment of future rent as the same may
become due and payable hereunder. Should such rentals received from
such reletting in any during month be less than one-twelfth (1/12) of
the annual rent reserve hereunder, then Tenant shall pay such
deficiency to Landlord. Such deficiency shall be calculated and paid
monthly. No such reentry or taking possession of the Demised Premises
by Landlord shall be construed as an election on its part to terminate
this Lease, unless written notice of such intention be given to
Tenant, in which event Tenant's obligations to Landlord shall
forthwith cease, or unless the termination thereof be decreed by a
court of competent jurisdiction.
23. DEFAULT BY LANDLORD
The occurrence of any one or more of the following events shall
constitute an event of default by Landlord:
(a) The failure by Landlord to make any payment required to be
made by Landlord hereunder, as and when due, where such
failure shall continue for a period of ten (10) days after
receipt of written notice thereof from Tenant to Landlord;
(b) The failure by Landlord to observe or perform any of the
covenants, conditions or provisions of this Lease where such
failure shall continue for a period of thirty (30) days after
receipt of written notice thereof from Tenant to Landlord;
provided however, that if the nature of Landlord's default is
such that it cannot be cured solely by payment of money and
that more than thirty (30) days may be reasonably required for
such cure, then Landlord shall not be deemed to be in default
if Landlord shall commence such cure within such thirty (30)
day period and shall thereafter diligently prosecute such cure
to completion.
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<PAGE> 12
24. TENANTS REMEDIES
Upon the occurrence of an event of default under this Lease by
Landlord, then Tenant in addition to other rights or remedies it may
have, at Tenant's sole option, may set off any amount owed to Tenant
by Landlord against any rent or other payment due or to become due
hereunder or perform any obligations of Landlord (which Landlord has
failed to perform) in which event Tenant shall have the right to set
off any expense incurred thereby against any rent or other payment due
or to become due hereunder.
25. ADDITIONAL SPACE
Landlord hereby grants to Tenant the right to lease additional space
contiguous to the Demised Premises and any other location in Building
1 upon the following terms and conditions:
(a) No later than four (4) months prior to the time additional
space in Building 1 by Tenant, Tenant shall notify Landlord in
writing that Tenant elects to exercise this right.
(b) Within fifteen (15) days after Landlord receives such notice,
Landlord shall inform Tenant in writing the exact date
additional space shall be available for preparation by Tenant.
Provided that Tenant exercises this right Between months 1 and
12 inclusive of this original Term Landlord agrees to
contribute toward the preparation of additional space the same
sum of dollars per rentable square foot as was required
buildout Tenant's original improvements multiplied by the
number of additional rentable square feet. If however, Tenant
exercises this right between months 13 and 36 inclusive of
this original Term, Landlord agrees to only perform touch-up
painting and carpet cleaning for any additional rentable
square feet to be leased. All improvements required to be
made hereunder shall be of the same and/or similar quality
required to be furnished with respect to the completion of the
Demised Premises.
(c) The rent for any additional space shall be computed at the
same annual rate per square foot as the rent for the space
described in Paragraph 1 hereof and shall commence on the date
the additional space has been completed in accordance with (b)
above as the case may be.
(h) The term of the Lease for such additional space shall be the
balance of the term of this Lease and any additional term
thereof.
(i) Landlord shall provide Tenant with additional parking spaces
in the event Tenant elects to lease additional space in the
same ratio set forth in Paragraph 10 (h).
(j) All of the terms and conditions of this Lease not inconsistent
with this Paragraph 25 shall govern the leasing of any
additional space.
(k) Any space added to the Demised Premises pursuant to this
Paragraph 25 shall thereafter be deemed to be a part of and
included in the Demised Premises.
26. DOWNSIZE AND RETURN OF SPACE
DELETED IN ITS ENTIRETY
27. RIGHT OF FIRST REFUSAL TO PURCHASE
DELETED IN ITS ENTIRETY
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28. FIRST RIGHT TO LEASE
If, during the original or any additional term hereof, Landlord elects
to lease any space in Building 2 of Governor Park Plaza, 6363
Greenwich Drive, then Landlord shall first offer such space in writing
to Tenant on terms and conditions no less favorable than those offered
to third parties. If within twelve (12) days after receipt of such
offer, Tenant does not notify Landlord that Tenant elects to lease
such space, then Landlord shall be relieved of any obligations to
Tenant with regard to any such offering; provided, however, that a
failure by Tenant to lease any specific space when so offered by
Landlord shall not relieve Landlord of its obligation to first offer
Tenant any other space in Building 2 if, as and when Landlord elects
to offer such other space to third parties.
29. RENT ABATEMENT
Should Tenant or those holding by, through or under Tenant not occupy
all or any portion of the Demised Premises for any period during the
term hereof or any additional term for any reason whatsoever, then
anything herein to the contrary notwithstanding, Landlord and Tenant
shall mutually agree to the percentage of the monthly rent for which
Tenant is or might be obligated to pay based on the previous 6 month
Operating Expense history for the Complex, and which the parties agree
constitutes the cost of providing the services set forth in Paragraph
10 shall abate for as long as that portion of the Demised Premises are
not so occupied.
30. DELIVERY OF EXECUTED LEASE AND RELATED DOCUMENTS
Within fifteen (15) days after Tenant delivers to Landlord four (4)
duplicate originals of this Lease duly executed by Tenant, Landlord
shall deliver to Tenant two (2) fully executed originals of this Lease
accompanied by agreements in the Form of Exhibit "F" (Non-Disturbance
and Attornment Agreement) duly executed and acknowledged by and on
behalf of each mortgagee/beneficiary of deed of trust referred to in
Paragraph 13 hereof, and if requested by Tenant, a Memorandum of Lease
in the form of Exhibit "G" duly executed and acknowledged by and on
behalf of Landlord (said executed Lease, Non-Disturbance Agreement(s)
and Memorandum of Lease are together referred to herein as the Lease
and Related Documents"). In the event Landlord shall fail to deliver
the fully executed Lease and Related Documents as herein required,
Tenant may, if Tenant so elects, withdraw its execution and delivery
of this Lease by giving Landlord written notice of such withdrawal.
Upon such withdrawal neither party shall have any rights against the
other either hereunder or otherwise except that Landlord shall
forthwith return to Tenant any sums which Tenant shall have paid to
Landlord prior to such withdrawal.
31. TERMINATION
Landlord hereby grants to Tenant the right to terminate this Lease at
any time during the initial term upon one hundred and eighty (180)
days prior written notice to Landlord. In the event Tenant elects to
terminate the Lease as herein provided, Tenant shall pay to Landlord
an amount equal to thirty-five percent (35%) of the annual rental set
forth in Paragraph 3 hereof (as it may have been amended by Paragraphs
16, 25 and 26 hereof) from the date of termination through the balance
of the unexpired term of the Lease. Such payment shall be made on or
before the date such termination becomes effective.
32. COMPETITORS OF TENANT
DELETED IN ITS ENTIRETY
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33. NOTICES
All notices shall be sent U. S. Registered Mail, Return Receipt
Requested to the following addresses:
TO LANDLORD: TO TENANT:
Governor Park Associates Xerox Corporation
c/o Nexus Development Corp. Attention: RE/GSD Lease Administration
6333 Greenwich Dr., Ste. 110 800 Long Ridge Road
San Diego, CA 92122 P.O. Box 1600
Stamford, Connecticut 06904
WITH A COPY TO:
Xerox Corporation
Attention: Manager,
Real Estate Operations
Western United States
1851 E. 1st St., Ste. 460
Santa Ana, CA 92705
Any notice shall be deemed to have been given on the date set forth on
the Registry Receipt given to the sender at the time of mailing, except
that for purposes of Paragraphs 21 and 23 hereof, such notice shall be
deemed to have been received on the earlier of (a) the date set forth on
the Return Receipt, (b) the date of delivery as shown on the Post Office
records, or (c) the date delivery was refused as shown on the Post
Office records.
Except as otherwise provided in this Lease, all correspondence to Tenant
with respect to this Lease or any of the provisions hereof shall be sent
to the addresses of Tenant set forth above, and any and all
correspondence sent to Tenant at the Demised Premises or any location
other than as stated herein, and any documents signed by Tenant at the
Demised Premises as a result thereof shall be null and void and of no
force and effect. Either party, by notice to the other, shall have the
right to change the address(es) for notice(s) to be sent to such party,
and to add or substitute entities to which a copy of any notice shall be
sent by the other party.
34. BROKERAGE
Landlord and Tenant acknowledge that MR. J. WRIGHT, OF ILIFF-THORN AND
COMPANY, is the real estate broker which brought about this lease
transaction, and Landlord shall pay the brokerage commission to such
broker pursuant to separate agreement. Landlord hereby indemnities
Tenant against the claims of any other broker arising from Landlord's
acts, and Tenant hereby indemnifies Landlord against the claims of any
other broker arising from Tenant's acts.
35. ESTOPPEL CERTIFICATE
Landlord and Tenant shall, at any time upon not less than twenty (20)
days prior written notice, execute and deliver to a prospective new
landlord, lender, or assignee or subtenant of Tenant, as the case may
be, a statement in writing (i) certifying that this Lease is unmodified
and in full force and effect (or if modified, stating the nature of such
modification and certifying that this Lease, as so modified, is in full
force and effect), (ii) the date to which the rent and other charges are
paid in advance, if any, and (iii) acknowledging that there are not, to
the party's knowledge, any uncured defaults or unfulfilled obligations
on the part of the other party hereunder, or specifying such defaults or
unfulfilled obligations if any are claimed.
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<PAGE> 15
36. INDUSTRIAL DEVELOPMENT BONDS
Landlord covenants, warrants and represents that tax exempt Industrial
Development Bonds, sometimes referred to as Industrial Revenue Bonds
("I.R.B.s") were not used in financing the Complex or the Building. If it is
subsequently determined that tax exempt I.R.B.s were used in such financing,
Tenant shall have the right and option to terminate this Lease and thereafter
be relieved of all further liability hereunder.
In the event Landlord elects to finance the Complex or Building with tax
exempt I.R.B.s during the term (or any additional term) of this Lease and
Tenant occupies ten percent (10%) or more of the Building or Complex, then
Landlord shall promptly so notify Tenant and Landlord hereby indemnifies and
holds Tenant harmless from any loss by or claim against Tenant as a result of
such tax exempt I.R.B. financing, and Landlord hereby releases Tenant from
any liability to Landlord as a result of such tax exempt I.R.B. financing.
In addition, Tenant shall have the right and option to terminate this Lease,
as hereinabove provided.
37. ASBESTOS AND CONTAMINATION
Landlord covenants, warrants and represents that the Premises and the
Building are free of any friable asbestos containing materials and that any
non-friable asbestos containing materials in the Premises or the Building are
identified in Exhibit attached hereto.
-----
Landlord covenants, warrants and represents that to the best of its
knowledge, after thorough investigation, the Premises and the Building
(including the land thereunder) do not contain any environmental contaminants
("toxic contamination") of any kind (including PCBs, except for PCBs that are
totally contained within light fixtures and exterior transformers). At any
time during the term of this Lease, Tenant shall have the right and option,
at Tenant's expense, to investigate the Building for the presence of asbestos
and PCBs and to investigate the land for the presence of toxic contamination.
Landlord agrees to indemnify and hold Tenant harmless from any claims or
actions related to or arising out of any subsequent discovery of friable
asbestos or toxic contamination at the Premises or the Building (including
the land thereunder). In the event of such a finding, or in the event of any
breach of a covenant, warranty or representation by Landlord under this
paragraph, Tenant shall have the option of terminating this Lease without
penalty of any kind and be released from any liability under the Lease after
the date of such termination.
38. HOLDOVER
If Tenant shall remain in possession of the Demised Premises after expiration
of the original or any additional term hereof, Tenant's occupancy shall be a
month-to-month tenancy at 1.25 times the rental rate applicable to the last
month of the unexpired term and under all of the other terms, conditions and
provisions hereof except those pertaining to the term of the Lease. Landlord
hereby grants to Tenant the right to holdover for up to three (3) months.
39. SURRENDER
Upon any termination or expiration of this Lease, Tenant shall surrender the
Demised Premises in the same condition as existed at the commencement of the
term, except for normal wear and tear and damage caused by the elements,
casualty, or any other cause for which Tenant might not be liable, provided,
however, that Tenant shall have the option, but not the obligation, to remove
any or all of the improvements and alterations made to the Demised Premises by
Tenant or at Tenant's expense. Any damage to the Demised Premises resulting
from the removal of such improvements or alterations shall be repaired by
Tenant at Tenant's expense.
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<PAGE> 16
40. ROOF-TOP ANTENNA
DELETED IN ITS ENTIRETY
41. MODIFICATION OF LEASE
The terms, covenants and conditions of this Lease may not be changed
orally but only by an instrument in writing signed by the party against
whom enforcement of the change is sought. The failure of either party
hereto to insist in any one or more cases upon the strict performance of
any term, covenant or condition of this Lease to be performed or
observed by the other party hereto shall not constitute a waiver or
relinquishment for the future of any such term, covenant or condition.
42. MEMORANDUM OF LEASE
Neither party shall record this Lease or any of the exhibits and/or
riders attached hereto, (except that Tenant may record the executed
Non-Disturbance and Attornment Agreement) but at the request of either
party, Landlord and Tenant shall enter into a "short form" or Memorandum
of Lease in recordable form, attached hereto as Exhibit "G" and made a
part hereof, which may be recorded and which shall set forth the
parties, the legal description of the land underlying the Building or
Complex, a description of the Demised Premises, the Commencement Date
and Expiration Date of the term of the Lease, and any options and/or
restrictions in this Lease desired to be included by either party.
43. PARAGRAPH CAPTIONS
Paragraph captions herein are for Landlord's and Tenant's convenience
only, and neither limit nor amplify the provisions of this Lease.
44. ENTIRE AGREEMENT
This Lease represents the entire agreement between Landlord and Tenant
and supercedes all prior agreements both written and oral. The terms,
covenants and conditions of this Lease shall be binding upon and shall
inure to the benefit of Landlord and Tenant and their respective
executors, administrators, heirs, distributees, legal representatives,
successors and assigns. The term "Tenant" as used in this Lease shall
include Xerox Corporation and any subsidiary (or any subsidiary of any
subsidiary) of Xerox Corporation.
45. CHOICE OF LAW AND INTERPRETATION
This Lease shall be governed by the law of the State in which the
Complex is situate. Should any provisions of this Lease require
judicial interpretation, it is agreed that the court interpreting or
construing the same shall not apply a presumption that the terms of any
such provision shall be more strictly construed against one party or the
other by reason of the rule of construction that a document is to be
construed most strictly against the party who itself or through its
agent prepared the same, it being agreed that the agents of all parties
hereto have participated in the preparation of this Lease.
46. ARBITRATION OF DISPUTES
All disputes between Landlord and Tenant with respect to Paragraph 16 of
this Lease, with respect to the determination of fair market value
rental rates, shall be decided by arbitration. Tenant shall have the
right, by giving written notice to Landlord, setting forth in detail the
nature of the dispute, to request arbitration. The dispute shall be
submitted to arbitration as follows:
Within fifteen (15) business days after delivery of the above notice,
each party (Landlord and Tenant) shall appoint a person to act as an
arbitrator in its behalf.
16
<PAGE> 17
Within five (5) business days thereafter, the two appointed arbitrators
shall jointly appoint a third arbitrator. The dispute shall be
arbitrated by said three arbitrators. A majority decision of the three
arbitrators shall control. All of the arbitrators shall be persons
having at least ten (10) years experience in dealing with the commercial
leases in office buildings within the City of San Diego, State of
California, and none shall have any interest in the Building or the
Complex or be or have been associated or affiliated with either Landlord
or Tenant.
In the event Landlord and Tenant, or the two arbitrators fail or refuse
to appoint an arbitrator within the time set forth herein, then either
party shall have the right to petition the senior judge (in terms of
years of service), of the United States District Court of the applicable
Federal District in which the Building is situated to appoint such
arbitrator and the arbitrator appointed by said judge shall serve in
said capacity.
NOTICE: BY INITIALLING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY
DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE 'ARBITRATION OF
DISPUTES' PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY
CALIFORNIA LAW, AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO
HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALLING IN
THE SPACE BELOW, YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND
APPEAL, UNLESS SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN THE 'ARBITRATION
OF DISPUTES' PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER
AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE
AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO
THIS ARBITRATION PROVISION IS VOLUNTARY. WE HAVE READ AND UNDERSTAND
THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS
INCLUDED IN THE 'ARBITRATION OF DISPUTES' PROVISION TO NEUTRAL
ARBITRATION.
[SIG] [SIG]
---------------------- --------------------
INITIALLED BY LANDLORD INITIALLED BY TENANT
47. EXHIBITS AND RIDERS
Attached hereto and made a part hereof are the following:
EXHIBIT A: COMPLEX
EXHIBIT B: DEMISED PREMISES
EXHIBIT B-1: PRELIMINARY SPACE PLAN
EXHIBIT C: PLANS AND SPECIFICATIONS
EXHIBIT D: LEASE TERM AGREEMENT
EXHIBIT E: CLEANING SCHEDULE
EXHIBIT F: NON-DISTURBANCE AND ATTORNMENT AGREEMENT
EXHIBIT G: MEMORANDUM OF LEASE
17
<PAGE> 18
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease as of the
day and year first above written.
<TABLE>
<S> <C>
WITNESS: GOVERNOR PARK ASSOCIATES
a California Limited Partnership
By: /s/ MICHAEL J. REIDY
- ------------------------------- ---------------------------------
Michael J. Reidy
Its: Managing Partner
(Landlord)
WITNESS: XEROX CORPORATION
[SIG] By: /s/ MARK A. FLAIM
- ------------------------------- --------------------------------
Mark A. Flaim
Manager, Real Estate Operations
Western United States
(Tenant)
</TABLE>
18
<PAGE> 19
EXHIBIT A
"COMPLEX"
[GRAPHIC]
<PAGE> 20
EXHIBIT B
"DEMISED PREMISES"
Building I
6333 Greenwich Drive
San Diego, CA 92122
Suite 120
1st floor
[GRAPHIC]
<PAGE> 21
EXHIBIT Bl
PRELIMINARY SPACE PLANS
23
<PAGE> 22
EXHIBIT D
LEASE TERM AGREEMENT
AGREEMENT made and entered into the _________ day of ____________________ 19__,
by and between ______________________________, a corporation/partnership,
having its principal office at
__________________________________________________ (hereinafter referred to as
"Landlord"), and XEROX CORPORATION, a New York corporation, having its principal
office at 800 Long Ridge Road, Stanford, Connecticut 06904 (hereinafter referred
to as "Tenant"),
W I T N E S S E T H:
WHEREAS, by Lease (hereinafter called the "Lease") made the __________ day of
____________________, 19__, Landlord demised and leased unto Tenant
certain Demised Premises in a Building known as and/or located at
________________________________________ for a term of __________ (__________)
years commencing on __________ _____, 19__, and ending on __________ _____,
19__ unless sooner terminated or extended as provided therein, and
WHEREAS, the Tenant did not enter into occupancy of the Demised Premises until
__________ _____, 19__ and
WHEREAS, pursuant to Exhibit C of the Lease, Landlord and Tenant now desire to
set forth the correct Commencement Date of the term and to adjust the
Expiration Date of the term to provide for a full term of the Lease of
____________________ (__________) years,
NOW, THEREFORE, Landlord and Tenant do hereby agree as follows:
1. The term of the Lease commenced on ____________________, 19__
and shall continue until ______, 19__ unless sooner terminated or
extended as provided therein.
2. Except as hereby amended, the Lease shall continue in full force and
effect.
3. This agreement shall be binding on the parties hereto, their heirs,
executors, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be duly
executed as of the day and year first above written.
Witness:
____________________ By:____________________
(Landlord)
Witness: XEROX CORPORATION
____________________ By:____________________
(Tenant)
21
<PAGE> 23
EXHIBIT E
CLEANING SCHEDULE
NIGHTLY
(between the hours of 6:00 p.m. and 6:00 a.m., Monday through Friday, Legal
Holidays excepted).
1. Clean lavatories as follows:
(a) Sweep and wash floors, using an odorless disinfectant in wash
water.
(b) Wash and polish all mirrors, powder shelves, bright work, and
enamel surfaces.
(c) Thoroughly scour, wash and disinfect all basins, bowls, and
urinals.
(d) Wash and disinfect all toilet seats, both sides.
(e) Wash all partitions, tile walls, towel, paper, and sanitary
napkin dispensers, and receptacles, as required.
(f) Empty and clean paper towel and sanitary disposal receptacles.
(g) Fill toilet tissue holders, soap dispensers and towel
dispensers, materials to be furnished by Landlord janitorial
service.
2. Empty and clean all waste receptacles, ashtrays and sand urns.
Utilize plastic bag liners in all waste receptacles.
3. Wash, clean and disinfect all water fountains and water coolers.
4. Hand dust all office furniture and fixtures, shelves, sills and other
dust collecting surfaces.
5. Remove all rubbish and trash from premises.
6. Vacuum all rugs and carpeting and remove any spots or stains.
7. Dust mop all uncarpeted areas, using treated mops and damp mop, as
necessary to remove any stains or spills.
8. Damp mop floors in entrance foyers, elevator lobbies, and
public corridors, if applicable.
9. Wet sponge wipe table tops in employee lounge, including cleaning
of any spills, if applicable.
10. During nightly tour, close all windows and blinds, extinguish lights,
lock doors and report any malfunctions.
11. Keep locker, storage and slop sink rooms in a clean and orderly
manner.
12. Keep sidewalks and parking areas clean and rubbish free.
WEEKLY
1. Damp mop and buff polish all uncarpeted areas.
2. Keep lawn and landscaping properly maintained, if applicable.
3. Wash all directory board, display, entry door, and side light glass, as
necessary.
4. Remove all finger marks and smudges from doors, partitions, woodwork,
window ledges and window mullions.
MONTHLY
1. All uncarpeted floor areas to be washed, waxed and machine polished.
2. Clean air conditioning grilles and filters as required.
3. High dusting:
(a) Dust in place all pictures, frames, charts, graphs and similar
wall hangings.
(b) Dust clean all vertical surfaces, such as walls, partitions,
doors, books and other surfaces not reached in nightly
cleaning.
(c) Dust clean all exposed pipes, air conditioning louvers, ducts
and other areas not reached in nightly cleaning.
(d) Dust clean all lighting fixtures.
(e) Vacuum all mini blinds.
4. Wash all windows inside and out as needed but in no event less than 2
times per year.
5. Wash, clean, and disinfect all lavatory vinyl.
ANNUALLY
1. Damp wipe all light fixtures, including lenses and fluorescent tubes.
2. Shampoo all rugs and carpeting.
If the above requirements are not properly complied with and the Demised
Premises and/or the Premises are not maintained in a satisfactory manner, the
Tenant may on 21 days notice to Landlord provide its own cleaning service and
deduct the cost thereof from the rental due Landlord.
22
<PAGE> 24
EXHIBIT F
NON-DISTURBANCE
AND
ATTORNMENT AGREEMENT
This AGREEMENT dated as of the __________ day of ____________________ 19
__________, by and between the ______________________________, having a mailing
address at ______________________________ (hereinafter referred to as
"Mortgagee") and XEROX CORPORATION, a New York Corporation, having a mailing
address at Post Office Box 1600, Stamford, Connecticut 06904 (hereinafter
referred to as "Tenant").
W I T N E S S E T H:
WHEREAS, Mortgagee is the holder of a first mortgage or deed of trust dated as
of the ____________________ and recorded on __________ in _______ __ County, in
an Official Record Book, __________ Page __________ on a certain building
located at ________________________________________; and
WHEREAS, Tenant entered into a Lease dated as of the __________ day of
____________________ 19 __________, with ________________________ (hereinafter
referred to as "Landlord") for ____________________ square feet in that certain
building described in the Lease (hereinafter referred to as "Building" and
Mortgagee and Tenant desire to confirm their understanding with respect to the
Lease and the rights of Tenant thereunder.
NOW THEREFORE, in consideration of One Dollar ($1.00) and other good and
valuable consideration each in hand paid to the other, the receipt and
sufficiency whereof is hereby acknowledged, Mortgagee and Tenant hereby
covenant and agree as follows:
1. Mortgagee agrees unless Tenant shall then be in default under the Lease
and the time to cure such default shall have expired that:
(a) When Tenant or any person claiming through or under Tenant is deemed
a necessary party by the court, such party may be so named or joined,
but such naming or joinder shall not otherwise be in derogation of
the rights of Tenant set forth in this Agreement; and
(b) Neither Tenant nor any person claiming through or under Tenant shall
be evicted from the Building, nor shall the leasehold estate or
possession of Tenant or any person claiming through or under Tenant
be terminated or disturbed, nor (except to the extent provided in
Paragraph 2 of this Agreement) shall any of the rights of Tenant
or any person claiming through or under Tenant, be affected in any
way by reason of any default or event of default under the Mortgage;
and in no case (except as provided in Paragraph 2 hereof) shall the
rights of Tenant under the Lease be diminished, reduced or adversely
affected in any way whatsoever by reason of any default or event of
default under, or foreclosure of, the Mortgage.
1
<PAGE> 25
EXHIBIT F
2. If, at any time Mortgagee (or any person, or such person's successors or
assigns, who acquired the interest of the Landlord under the Lease
through foreclosure action of the Mortgage or otherwise) shall succeed
to the rights of the Landlord under the Lease as a result of a default
or event of default under the Mortgage, and if the Tenant is not then in
default under the lease beyond the time permitted therein to cure such
default, the (i) Lease shall not terminate, (ii) Upon receipt by Tenant
of written notice of such succession of interest, Tenant shall attorn to
and recognize such person so succeeding to the rights of the Landlord
under the Lease (herein sometimes called "Successor Landlord") as
Tenant's Landlord under the Lease, upon the then executory terms and
conditions of the Lease and as hereinafter provided in this Paragraph 2,
and (iii) Successor Landlord shall accept such Attornment and recognize
Tenant as the Successor Landlord's Tenant under the Lease. Upon such
attornment and recognition, the Lease shall continue in full force and
effect as, or as if it were, a direct lease between the Successor
Landlord and Tenant upon all of the then executory terms, conditions and
covenants(including any right under the lease on the part of Tenant to
extend the term of the lease) as are set forth in the Lease and which
shall be applicable after such attornment and recognition.
3. Tenant confirms that the lien or priority of the Lease shall at all
times continue to be subject and subordinate to (a) the lien, security
title and security interests of the Mortgage and (b) any additional
financing of the Building or portions thereof provided by Mortgagee and
the liens, security titles and security interests of the documents
evidencing and securing such additional financing, and to any increases
therein or supplements thereto, it being understood that such
subrogation shall not derogate any of Tenant's rights, or Landlord's
obligations, under said Lease.
4. Tenant certifies that there are no defaults on the part of the Landlord
under the Lease known to Tenant, that the Lease is a complete statement
of the agreement of the parties thereto with respect to the letting of
the Building, that the Lease is in full force and effect and that all
conditions to the effectiveness or continuing effectiveness thereof
required to be satisfied at the date hereof have been satisfied.
5. Tenant will notify Mortgagee of any default of the Landlord under the
Lease which would entitle Tenant to cancel the Lease or abate the rent
or additional rent payable thereunder, and agrees that notwithstanding
any provisions of the Lease, no notice of cancellation thereof shall be
effective unless Mortgagee has received the notice aforesaid and has
failed within thirty (30) days of the date thereof to cure the default,
or if the default cannot be cured within thirty (30) days, has failed to
commence and to diligently prosecute the curing of the default which
gave rise to such right of cancellation or abatement. All such notices
shall be in writing and shall be deemed to have been given when
deposited in the United States mail, registered, postage prepaid,
addressed as follows:
______________________________
______________________________
______________________________
______________________________
6. The provisions of this Agreement shall be self-operative and no further
instrument shall be necessary to effect the aforementioned attornment,
recognition and subordination. Nevertheless, in confirmation thereof,
Tenant shall execute and deliver an appropriate certificate to confirm
such attornment, recognition and subordination upon the request of
Mortgagee or any other party to whom Tenant herein agrees to attorn.
2
<PAGE> 26
EXHIBIT F
7. This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
WITNESS:
____________________ BY:____________________
(TITLE)
(MORTGAGEE)
WITNESS: XEROX CORPORATION
____________________ BY:____________________
(TITLE)
(TENANT)
3
<PAGE> 27
EXHIBIT - G
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE dated, for reference purposes, the __________ day of
____________________, 19 __________, between _____________________ a ________
corporation/partnership, having its principal office at______________,
__________________________, __________________, hereinafter referred to as
"Landlord"), and Xerox Corporation, a New York corporation, having its principal
office at 800 Long Ridge Road, Stamford, Connecticut 06904 (hereinafter referred
to as "Tenant").
W I T N E S S E T H:
Landlord, in consideration of the rents, terms, agreements and conditions
contained in that certain lease between Landlord and Tenant dated the
__________ day of ____________________ 19 __________, leased to Tenant and
Tenant leased from landlord, the premises known as __________ and located in a
building (the "Building') located at _____________,__________ as more
particularly described in Exhibit A, attached hereto and made a part hereof,
under the following terms and conditions:
1. The term of the lease is for____________ years, commencing __________
_____, 19 _____ and ending on __________ _____, 19_____
2. Tenant has a right to extend the term of the lease for __________
(_____) successive additional terms of __________ (_____) years each.
3. Tenant has the option to expand the size of the premises leased from
Landlord by_________________ square feet.
4. Tenant has the option to downsize and return to Landlord,
approximately __________ square feet of space.
5. Tenant has the right of first refusal to purchase the building from
Landlord.
6. Tenant has the first right to lease additional space in the building.
7. Tenant has the right to terminate the lease on ___________________
(________) days prior written notice to Landlord.
8. Tenant has the right and option to participate in the net income of
the building in the net proceeds of refinancing, and in the net
proceeds of sale of the building.
This Memorandum of Lease is not a complete summary of the lease. Provisions in
this Memorandum shall not be used in interpreting the provisions of the lease.
In the event of conflict between this Memorandum and the lease, the lease shall
control.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Memorandum of
Lease as of the day and year first above written.
BY:_________________________
(Title)
(Landlord)
XEROX CORPORATION
BY:_________________________
(Title)
(Tenant)
<PAGE> 28
EXHIBIT - G
STATE OF____________________
COUNTY OF___________________ SS:
On this ___________ day of ______________, 19__, before me personally
appeared, ______________________________, to me personally known, who, being by
me duly sworn did say that he is the___________________________________
of______________________________ and that the foregoing instrument was signed
in behalf of said corporation by authority of its board of directors and said
____________________ acknowledged said instrument to be the free act and deed
of said corporation.
______________________________
NOTARY PUBLIC
MY COMMISSION EXPIRES:__________
STATE OF____________________
SS:
COUNTY OF___________________
On this___________ day of________________, 19__, before me personally
appeared,______________________________, to me personally known, who, being by
me duly sworn did say that he is the ____________________ of Xerox Corporation
and that the foregoing instrument was signed in behalf of said corporation by
authority of its board of directors and said ________________ acknowledged said
instrument to be the free act and deed of said corporation.
______________________________
NOTARY PUBLIC
MY COMMISSION EXPIRES:__________
<PAGE> 29
EXHIBIT - G
EXHIBIT A
LEGAL DESCRIPTION
<PAGE> 30
This Rider is made a part of Lease dated December 20, 1991 for space at 6333
Greenwich Dr., Ste. 120, San Diego, California and in the event of conflict
between this Rider and the printed portion of said Lease, this Rider shall
prevail.
OPERATING EXPENSES, REAL ESTATE TAXES AND UTILITY COSTS ESCALATION RIDER
Landlord and Tenant each acknowledge that the rent specified in Paragraph 3
does not provide for changes in Operating Expenses, Real Estate Taxes, and
Utility Costs which may hereafter pertain to the Demised Premises or the
Building. Therefore, in addition to the rent (but not as additional rent)
Tenant shall pay Landlord its pro rata share of reasonable and customary
Operating Expenses, Real Estate Taxes and Utility Costs as hereinafter
provided:
(a) The term "OPERATING EXPENSES" shall include the following annual
expenses of Landlord for the operation and maintenance of the Complex
of which the Demised Premises are a part:
o janitorial expenses;
o premiums for fire and casualty insurance required to be carried by
Landlord pursuant to this Lease;
o cost of all maintenance and service agreements;
o cost of supplies and materials used in the operation and
maintenance of the Complex;
o employees directly and exclusively involved in the operation
and maintenance of the Building and the Complex;
o all costs and expenses (other than those of a capital nature) of
maintaining and repairing, paving and restriping, curbs,
walkways, landscaping and the common areas of the Building,
except in the event that during the last two (2) years of the
term or extended term, as the case may be, Landlord elects to
perform a single maintenance and repair project which causes
Operating Expenses to be increased during such year by more than
five percent (5%) over the previous years Operating Expenses,
then in such event Tenant's obligation to reimburse Landlord for
Operating Expenses during the year in which Landlord performed
such single maintenance and repair project shall be limited to a
maximum of five percent (5%) over the previous years costs for
Operating Expenses.
o normal maintenance of mechanical and electrical equipment,
including heating, ventilating, and air conditioning equipment
but excluding capital expenditures;
All expenses to be taken into account pursuant to this paragraph shall
be "net" only, and for such purpose shall be deemed reduced by the
amount of reimbursement, recoupment, payment, discount or allowance
received or receivable by Landlord in connection with such expenses.
The term "OPERATING EXPENSES" shall exclude the following annual expenses of
Landlord:
o the cost of any work or service performed or rendered exclusively
for any tenant, including Tenant, and the cost of making any
installation or alteration to the Building and Complex which under
generally accepted accounting principles are properly classified
as capital expenditures;
o premiums for public liability insurance;
o brokerage commissions or other fees and other costs incurred in
procuring tenants;
o management fees and administrative wages and salaries, including
executives and officers of Landlord;
o depreciation, franchise or income taxes imposed on Landlord;
1
<PAGE> 31
o advertising expenses;
o the cost of painting, repainting, decorating and redecorating for
any tenant, including Tenant, of the Building and the Complex;
o maintenance and repair of capital items not a part of the Building;
o the cost of installing, operating and maintaining any specialty
services, such as an observatory, broadcasting and/or
telecommunication facility, data processing facility, luncheon
club, retail store, sundries shop, newsstand, concession, athletic
or recreational club;
o the cost of correcting defects in the construction of the Premises,
Building and the Complex;
o the cost of any work or service performed for any tenant of the
Building and Complex (other than Tenant) to a greater extent
or in a materially more favorable manner than that furnished
generally to the tenants and other occupants;
o the cost of any items for which Landlord is reimbursed by
insurance, condemnation, refund, rebate or otherwise;
o the cost of any addition or additions to the Building or the
Complex after the Commencement Date of this Lease;
o the cost of any repairs made by Landlord pursuant to the Damage or
Condemnation paragraphs in the Lease;
o interest and amortization on any mortgage or deed of trust and any
rent paid on any ground or underlying lease;
o any costs representing an amount paid to an entity related to
Landlord which is in excess of the amount which would have
been paid in the absence of such relationship;
o payments for rented equipment, the cost of which equipment would
constitute a capital expenditure if the equipment were purchased;
o any expenses for repairs or maintenance which are covered by
warranties, guarantees and service contracts (excluding any
mandatory deductible);
o legal expenses arising out of the construction, operation, use,
occupation or maintenance of the Building or Land or the
enforcement of the provisions of any agreements affecting the Land
or Building, including without limitation this Lease;
o increases in premiums for insurance required to be carried by
Landlord pursuant to this Lease when such increase is
caused by use of the Building by Landlord or any other tenant of
Landlord which is hazardous on account of fire or otherwise, or
premiums for any insurance carried by Landlord which is not
required to be carried pursuant to this Lease.
o new items of maintenance or services for all tenants of the
Building not included in the Operating Expense Base Year Statement,
unless the Operating Expense Base Year Statement is revised to
include such new items of maintenance or services.
(b) The term "REAL ESTATE TAXES" shall mean the annual ad valorem taxes
levied against the Building and Complex of which the Demised Premises
are a part, by any authority having the direct power so to tax,
including any city, county, state, or federal government, or any school,
agricultural, transportation or environmental control agency, lighting,
drainage or other improvement district thereof. All expenses to be
taken into account pursuant to this paragraph shall be "net' only, and
for such purpose shall be deemed reduced by the amount of reimbursement,
recoupment, payment, discount or allowance received or receivable by
Landlord in connection with such expenses. The term "Real Estate Taxes"
shall not include any assessment for local improvements, license fee,
penalty, inheritance or estate tax, any tax on Landlord's right to rent
or other income from the Complex or on
2
<PAGE> 32
Landlord's business of leasing the Building, any penalty for delinquent
payment of taxes, increases in taxes arising from additions or
improvements to the Building or Complex (including leasehold improvements
made by or for other tenants made subsequent to the Building having been
assessed as a fully completed building), and increases in taxes due to a
reassessment of the Building and/or Complex due to Landlord's sale
thereof. In the event the Building and/or land or Complex is reassessed
(which term includes the current assessment being increased without
reassessment) and such reassessment is greater than the prior assessment,
then Landlord shall (a) promptly notify Tenant thereof, and (b) if in
Tenant's reasonable determination such reassessment is excessive and
Tenant so notifies Landlord, Landlord shall diligently protest such
reassessment. In the event Landlord fails so to notify Tenant, or to
contest the reassessment (as the case may be), then Tenant's obligation
to pay its share of Real Estate Taxes shall be computed by multiplying
the prior assessment by the then current tax rate.
(c) The term "UTILITY COSTS" shall include the following annual expenses of
Landlord for the operation and maintenance of the Building and the
Complex. Utility charges for water, electricity, sewerage, and gas, all
accrued and based on a calendar year operation. All expenses to be taken
into account pursuant to this paragraph shall be "net" only, and for such
purpose shall be deemed reduced by the amount of reimbursement,
recoupment, payment, discount or allowance received or receivable by
Landlord in connection with such expenses, whether from utilities or any
tenant in the Building.
(d) (1) The Base Year for Operating Expenses and Utility Costs shall
be the calendar year 1992. In the event the Building was not
one hundred percent (100%) occupied at the commencement of the
Base Year, then for purposes of establishing the Base Year
costs, the actual Operating Expenses and Utility Costs shall
be adjusted upward as if the Building were one hundred percent
(100%) occupied.
(2) The Base Year for "Real Estate Taxes" shall be the later of
(a) the annual tax levy year next following that in which the
Commencement Date occurs, and (b) the annual tax levy year
next following the date on which the Building was fully
assessed as a fully completed building (including all tenant
leasehold improvements).
(3) Upon the request of either Landlord or Tenant, Landlord and
Tenant agree to convert the Base Year and each succeeding
twelve (12) month period to a calendar year basis, the
computation in making such a conversion to be acceptable to
both Landlord and Tenant.
(e) Initially, Tenant's pro rata share shall be 6.77% calculated by
dividing the number of rentable square feet demised to Tenant (7,042
rentable square feet) by the number of rentable square feet in the
Building (103,977 rentable square feet). Tenant's pro rata share
shall be adjusted during the term of said Lease and any renewals
thereof by any increases or decreases in the square feet demised to
Tenant and by any increases in the square feet in the Building.
(f) Within ninety (90) days after the end of the Base Year and each
anniversary thereof, the Landlord shall deliver to Tenant in Stamford,
Connecticut (Attention: RE/GSD Lease Administration), a statement
setting forth the amounts of Operating Expenses, Real Estate Taxes,
and Utility Costs for the Base Year, and the amounts relative to the
then current year, together with an invoice showing the amounts of
increase or decrease for reimbursement. Copies of the accounting
statements used in the calculations and copies of receipted real
estate tax bills, shall be furnished with the statements and invoice
for reimbursement, and upon request by Tenant, Landlord shall submit
additional back-up data (including copies of receipted bills) to
permit Tenant to review such statement. Tenant or any authorized
agent of Tenant shall have the right, upon prior written notice, to
audit Landlord's books at any time with respect to the Base Year or
any subsequent year. Upon request by Tenant, Landlord shall submit a
statement signed by an officer (or partner, as the case may be) of
Landlord, setting forth the percentage of occupancy of the Building at
the Commencement of the Base Year.
(g) In the event the Complex contains buildings in addition to the
Building or land in excess of that required to support the Building,
parking and common areas for the Building, and Landlord is unable to
obtain a separate tax assessment of the Building, parking and common
areas, the Landlord shall make a reasonable allocation for the
3
<PAGE> 33
the entire Complex. Landlord shall also make such a reasonable
allocation of any Operating Expenses and Utilities Costs attributable to
the entire Complex. In both cases, Landlord shall submit to Tenant
sufficient back-up data as to the basis for such allocation to permit
Tenant to determine the reasonableness of the allocation. In the event
that Tenant disputes the reasonableness of either such allocation,
Landlord and Tenant agree to submit the determination of such allocation
to arbitration in accordance with the rules of the American Arbitration
Association.
(h) Tenant shall pay such reimbursement due, if any, within thirty (30) days
from receiving the remove statement, the required documentation and the
requested documentation. If Tenant shall dispute, in good faith, any
reimbursement item or other sum (other than Rent) claimed by Landlord
hereunder and Tenant shall give Landlord written notice specifying in
reasonable detail the basis for its dispute, Tenant may withhold payment
of the particular amount in dispute and shall not be deemed to be in
default hereunder by reason of withholding such amount unless and until
such dispute is determined adversely to Tenant and Tenant shall fail to
pay the withheld amount, or the portion thereof as shall be determined to
be payable to Landlord, within fifteen (15) days of the resolution of
such dispute. Tenant and Landlord shall proceed diligently to resolve
any such dispute by agreement or arbitration in accordance with the rules
of the American Arbitration Association.
(i) Tenant shall have the right but not the obligation to pay any
reimbursement due Landlord, as determined above, in twelve (12) equal
monthly payments at the same time and in the same manner as rent.
(j) If the first or final billing period during the term or any additional
term of this Lease for which reimbursement may be due, shall contain less
than twelve (12) months, the reimbursement under this Rider shall be
prorated.
(k) Landlord and Tenant stipulate and agree that of the rent set forth in
Paragraph 3 hereof, $0.55 per rentable square foot per month has been
allocated to the estimated cost of Operating Expenses, Real Estate Taxes
and Utility Costs. In the event the actual Operating Expenses, Real
Estate Taxes and Utility Costs per square foot for the Building or
Complex, as the case may be, for the Base Year or any subsequent year are
less than $0.55 per rentable square foot per month, then the Landlord
shall pay Tenant the difference multiplied by the number of square feet
then leased to Tenant. Landlord shall pay such amount to Tenant within
thirty (30) days from sending the above statement, the required
documentation and the requested documentation.
(1) Tenant's obligation to reimburse Landlord for monies, under this Rider,
shall be limited to a maximum of $0.66 per rentable square foot per month
of space under Lease to Tenant during any one year.
(m) Notwithstanding the foregoing provisions of this Rider, it is understood
and agreed that in the event Landlord fails to bill Tenant for any
amounts which may be due hereunder within four (4) months after the Base
Year or any anniversary thereof, then Tenant shall have no liability or
obligation to make such payment.
4
<PAGE> 34
AMENDMENT TO LEASE
This Amendment To Lease ("Amendment") is made and entered into this first day
of June, 1994 by and among Governor Park Associates, a California limited
partnership ("Landlord"), and XEROX Corporation, New York Corporation,
("Tenant"), with regard to that certain lease dated December 20, 1991
("Lease"), and the Rider to the Lease also dated December 20, 1991 for the
premises known as suite 120 of 6333 Greenwich Drive San Diego California.
Landlord and Tenant mutually agree to amend the Lease and Rider as follows:
SECTION 1, PARAGRAPH 2 shall be amended to read:....... "consisting of 7,042
rentable square feet (6,350 usable square feet) on the first floor and 4,152
rentable square feet (3,695 usable square feet) on the-second floor of building
1 and known as suite 120 and suite 250 respectively.
SECTION 2 shall be amended to read: .... ("Commencement Date"), and to end on
the 31st day of January, 2000.
SECTION 3 shall be amended to read: The initial monthly base rent for the
extended term shall be fully serviced and shall be in the amount of $13,096.68
during the first year of the extended lease term. The rent shall be paid in
advance on or before the first day of each month during the term hereof;
provided however, that if the term of this lease should commence on the date
other than the first day of the month, the first and last month's rent shall be
prorated. Beginning February 1, 1997 and annually thereafter, the rent shall
be increased by 4%, effective the first day of February.
SECTION 5 shall be amended to read: Landlord's Contractor shall construct
Tenant's interior improvements in accordance with plans and specifications
approved by the Tenant.
SECTION 10 (c) "SERVICES" shall be amended to read "All utility services. In
addition, Landlord shall furnish, at its sole cost and expense, all necessary
utilities including electricity to the common areas of the premises, including
the walkways, driveways and parking areas. Tenant shall pay costs of
separately metered electricity consumed within its suite.
SECTION 16 "LEASE EXTENSION" shall be deleted and amended to read:
LEASE EXTENSION
If this Lease shall not have been terminated pursuant to any provisions hereof,
then Tenant may, at Tenant's option, extend the term of this Lease for one (1)
successive additional term of
<PAGE> 35
XEROX
Amendment to Lease
June 1, 1994
page two
three (3) years, commencing on the expiration of the original term, or the
immediately preceding additional term as the case may be. Tenant may exercise
such option by giving Landlord written notice at least six (6) months prior to
the expiration of the original term, as the case may be and in the event Tenant
has elected to exercise its option to lease additional space pursuant to
Paragraph 25, the option provided for herein shall include such additional
space. Upon the giving by Tenant to Landlord of such written notice the
compliance by Tenant with the foregoing provisions of this Paragraph 16, this
Lease shall be deemed to be automatically extended upon all the covenants,
agreements, terms provisions and conditions, set forth in this Lease, except
rental which:
(a) During the extension option shall be limited to the base rent then in
effect in the last year of the initial extended Lease term, and
(b) Upon execution of this extension option, Landlord shall repaint the
Demised premises with two (2) coats of prime quality paint; repainting shall be
performed in a workmanlike manner with a minimum of interference with Tenant's
normal business operations and replace all carpeting, with quality comparable
to the initial installation, in the Demised premises and in any adjoining
lobby/reception area, and
except for such terms and conditions as shall be applicable during any
additional term in connection with this Paragraph 16. If Tenant fails or omits
to so give to Landlord the first written notice referred to above, it shall be
deemed, without further notice and without further agreement between the
parties hereto, that Tenant elected not to exercise the options granted Tenant
pursuant to this Paragraph 16, to extend the term of this lease for additional
periods.
The term "month" as used in this paragraph shall mean (a) if the Expiration
Date is the last day of a calendar month, a calendar month, or (b) if the
Expiration Date is not the last day of a calendar month, the period between the
Expiration Date and the date in the preceding month which is one (1) day after
the date in the month of the Expiration Date, e.g., if the Expiration Date
falls on May 19, one (1) "month" prior thereto would be April 20 and two (2)
"months" prior thereto would be March 20.
<PAGE> 36
XEROX
Amendment to Lease
June 1, 1994
page three
In the event this Lease is extended pursuant to the terms of this Paragraph 16,
then the BASE YEAR OR EXPENSE STOP that shall be used during any such extended
term shall be the amount of Operating Expenses, Real Estate Taxes and Utility
Costs required to be paid by Tenant pursuant to the terms of the Rider for the
twelve (12) month period immediately preceding the beginning of such extended
term (or the immediately preceding calendar year of the operating expense
payment period has been converted to a calendar year).
SECTION 31 "TERMINATION" shall be amended to read "Landlord hereby grants to
Tenant the right to terminate this lease at any time after January 31, 1998
upon one hundred and eighty (180) days prior written notice to Landlord. In
the event Tenant elects to terminate the lease as herein provided, Tenant
shall pay to Landlord an amount equal to thirty-five percent (35%) of the
annual rental set forth in paragraph 3 hereof (as it may have been amended by
Paragraphs 16, 25 and 26 hereof) from the date of termination through the
balance of the unexpired term of the lease. Such payment shall be made on or
before the date such termination becomes effective.
SECTION 34 is amended to read "Landlord and Tenant acknowledge that Terrence
McGrath of COMCORE-Colliers International represents the Tenant in this lease
transaction and Landlord shall pay the brokerage commission pursuant to a
separate agreement. Landlord hereby indemnifies Tenant against claims of any
Broker arising from this lease transaction.
THE RIDER TO THE LEASE DATED DECEMBER 20, 1991 AND MADE A PART THEREOF SHALL
HEREBY BE AMENDED AS FOLLOWS:
The term "Utility Costs" as utilized throughout this Rider is mutually
understood to mean common area utility costs as distinguished from separately
metered utilities within the Tenant's suite.
SECTION (d) (1) OF THE RIDER shall be amended to read "The Base Year for
Operating Expenses and Utility Costs shall be the Calendar year 1994." ......
<PAGE> 37
XEROX
Amendment to Lease
June 1, 1994
page four
SECTION (e) OF THE RIDER shall be amended to read "Initially, Tenant's pro rata
share shall be 10.72% calculated by dividing the number of rentable square feet
demised to Tenant (11,194 rentable square feet) by the number of rentable
square feet in the complex (103,977 rentable square feet)" ....
SECTION (k) OF THE RIDER SHALL BE DELETED AND AMENDED TO READ, "Landlord and
Tenant stipulate and agree that of the rent set forth in Paragraph 3 hereof,
$0.325 per rentable square foot per month has been allocated to the estimated
cost of Operating Expenses, Real Estate Taxes and Common Area Utility Costs.
In the event the actual Operating Expenses, Real Estate Taxes, and Common Area
Utility Costs per Square foot for the Building or Complex, as the case may be,
for the Base Year or any subsequent year are less than $0.325 per rentable
square foot per month, then the Landlord shall pay Tenant the difference
multiplied by the number of square feet then leased to Tenant. Landlord shall
pay such amount to Tenant within thirty (30) days from sending the above
statement, the required documentation and the requested documentation.
SECTION (1) OF THE RIDER SHALL BE DELETED AND AMENDED TO READ, "Tenant's
obligation to reimburse Landlord for monies, under this Rider, shall be limited
to a maximum of $0.50 per rentable square foot per month of space under Lease
to Tenant during any one year.
ALL OTHER TERMS AND CONDITIONS OF THE LEASE SHALL REMAIN IN FULL FORCE AND
EFFECT.
WITNESS WHEREOF, Landlord and Tenant have duly executed this Amendment To Lease
as of the day and year first above written.
GOVERNOR PARK ASSOCIATES XEROX CORPORATION
/s/ MICHAEL J. REIDY /s/ MARK A. FLAIM
- ------------------------ ----------------------
BY: MICHAEL J. REIDY BY: MARK A. FLAIM
ITS: MANAGING PARTNER MANAGER, REAL ESTATE
(LANDLORD) OPERATIONS WESTERN
UNITED STATES (TENANT)
<PAGE> 38
SECOND AMENDMENT TO OFFICE BUILDING LEASE
This Second Amendment dated January 31, 1995 will modify the office
building lease between Governor Park Plaza Associates, a California limited
partnership, as Landlord, and XEROX Corporation, a New York Corporation, as
Tenant, dated December 20, 1991, and amended June 1, 1994. In the event of
conflict between the terms and conditions of the Lease Agreement and this
Second Amendment, the terms and conditions of this Second Amendment shall
control.
SECTION 1, PARAGRAPH 2 shall be amended to read:..... "consisting of 14,727
rentable square feet (13,106 usable square feet) on the first floor of building
1 and known as suite 100 and 120."
SECTION 3 shall be amended to read: "The initial monthly base rent for the
extended term shall be fully serviced (except as provided in the Amendment to
Lease, Section 10) and shall be in the amount of $17,230.59 during the first
year of the extended lease term. The rent shall be paid in advance on or
before the first day of each month during the term hereof; provided however,
that if the term of this lease should commence on the date other than the first
day of the month, the first and last month's rent shall be prorated. Beginning
February 1, 1997 and annually thereafter, the rent shall be increased by 4%,
effective the first day of February."
The terms of this Second Amendment will become effective on March 1, 1995,
which is Tenant's estimated occupancy date of suite 100. On that same date, per
the terms of this Second Amendment as stated in Section 1 above, Tenant's lease
of the 4,152 square feet known as suite 240 will become void.
Landlord agrees to build-out suite 100 to mutually agreeable specifications.
Tenant agrees to pay for $3,169.50 of the costs to reconfigure suite 100.
ALL OTHER TERMS AND CONDITIONS OF THE LEASE SHALL REMAIN IN FULL FORCE AND
EFFECT.
WITNESS WHEREOF, Landlord and Tenant have duly executed this Second Amendment
to Lease as of the day and year first above written.
DOCUMENT SCIENCES CORPORATION,
GOVERNOR PARK ASSOCIATES A XEROX COMPANY
/s/ MICHAEL J. REIDY /s/ TONY N. DOMIT
- -------------------------- ------------------------------
BY: MICHAEL J. REIDY BY: TONY N. DOMIT
ITS: MANAGING PARTNER ITS: CEO AND PRESIDENT
(LANDLORD)
<PAGE> 1
EXHIBIT 10.15
DOCUMENT SCIENCES CORPORATION
6333 GREENWICH DRIVE, SUITE 120
SAN DIEGO, CA 92122
(619) 625-2000
(619) 265-2021 FAX
February 24, 1993
Mr. Tony Domit
12117 Elnora Place
Granada Hills, CA 91344
Dear Tony,
As you discussed with Bob Curtin last week, because as a result of an oversight,
you were never provided with an offer letter, I have prepared this letter to set
out in writing the existing terms of your employment as President and CEO of
Document Sciences Corporation reporting the company's board of Directors. Since
your start date on October 18, 1991, you have been eligible for an annualized
salary of $136,000 per year. Effective march 1, 1993, your base salary will be
increased to $142,800 annually. You are also eligible for a bonus, the details
of which are to be determined by the Board. Payment of the bonus is based on
achievement of the company's operating plan and other mutually agreed objectives
as evaluated by the Board. As an additional incentive, you will receive stock
options to purchase 187,500 shares of Document Sciences common stock subject to
the terms and conditions approved by the Board of Directors at their March 31,
1992 meeting once appropriate securities law filings have been made and permits
obtained. If you are terminated for any reason other than for cause, you will
receive six (6) months of salary continuance.
Document Sciences is a relatively new business venture currently being supported
by Xerox Technology Ventures and is subject to all the risks, uncertainties and
opportunities that go with start-up ventures of this type. Document Sciences is
currently operating as a majority-owned (greater than 50%) subsidiary of Xerox.
Please note that all policies, as well as your entitlement to benefits may
change at any time, including while Xerox continues to own a majority interest
in Document Sciences and, in fact, Document Sciences is currently implementing a
new benefits package to replace the package provided through Xerox. This package
has been discussed with you and is summarized in the benefits change letter you
recently signed (the "Benefits Letter") and delivered to all of the Company's
employees. You will be eligible for the new benefits as described in the
Benefits Letter, and are no longer eligible for any benefits provided by Xerox
(except as described in the Benefits Letter) or subject to any Xerox personnel
policies or procedures.
Consistent with the spirit in which you joined Document Sciences, an entity
separate and distinct from XTB and Xerox, there is no commitment or guarantee of
a job in Xerox or any other Xerox organization should your position with
Document Sciences terminate for any reason.
<PAGE> 2
Should you obtain employment with Xerox at any time while Document Sciences is a
majority-owned subsidiary of Xerox, you will receive credit for service with
Document Sciences for purposes of Xerox' employee benefit plans; however, there
will be no retroactive contributions or awards for Xerox benefit plans while you
were an employee of Document Sciences.
You are an employee at will, and neither this letter nor any of our plans or
policies constitute an employment contract between you and Document Sciences or
Xerox. An employment agreement or commitment may only be established pursuant to
a written employment agreement authorized by resolution of the Board of
Directors of Document Sciences.
Your entitlement to the benefits provided by Document Sciences or Xerox applies
only as long as Document Sciences and/or Xerox chose to maintain those benefits
for Document Sciences employees.
Please indicate your acknowledgment of the terms of your employment by signing
in the space below and returning this letter to me. If you have any questions,
please call.
Very truly yours,
/s/ ROBERT V. ADAMS
- -------------------
Robert V. Adams
Chairman
Document Sciences Corporation
Accepted: /s/ TONY DOMIT
----------------------------
Tony Domit
<PAGE> 1
EXHIBIT 10.16
DOCUMENT SCIENCES CORPORATION
6333 GREENWICH DRIVE, SUITE 120
SAN DIEGO, CA 92122
(619) 625-2000
(619) 265-2021 FAX
May 13, 1994
Mr. Thomas J. Anthony
2 Rollingview Lane
Fallbrook, CA 92028
Dear Tom,
I am pleased to offer you a position in Document Sciences Corporation. The
position is Vice President of Sales reporting to me. Your start date will be
May 25, with a beginning base salary of $90,000 per year, plus a commission
plan. As an additional incentive, you will receive stock options to purchase
20,000 shares of Document Sciences Corporation common stock, subject to
approval of the board of directors and state and federal regulations.
Your payroll and benefits will be administered through the TriNet Employment
Group. In order that you have a clear understanding of your status and
benefits, please refer to the TriNet Employee Handbook and the Addendum to the
Employee Handbook.
You will be an employee at will, and neither this letter nor any of our plans
or policies constitute an employment contract between you and Document Sciences.
In accordance with our standard policy, you will be required to pass a drug
test as part of the employment process. Please contact Jane Branch to arrange
testing for you.
I am looking forward to your accepting this offer and joining us. Please
indicate your acceptance in all respects by signing in the space below and
returning this letter to me. If you have any questions, please call.
Very truly yours,
/s/ TONY N. DOMIT
- -----------------
Tony N. Domit
President and CEO
/s/ THOMAS J. ANTHONY
- ---------------------- -----------------------------
Thomas J. Anthony Date
<PAGE> 2
DOCUMENT SCIENCES CORPORATION
6333 GREENWICH DRIVE, SUITE 120
SAN DIEGO, CA 92122
(619) 625-2000
(619) 265-2021 FAX
June 3, 1994
Mr. Thomas J. Anthony
2 Rollingview Lane
Fallbrook, CA 92028
Dear Tom,
This letter will serve as an addendum to my letter of May 13, 1994 and will
clarify the terms of your employment with Document Sciences Corporation.
For June, July and August of 1994, you will receive a minimum guaranteed
commission of .75% of quota. Quota is understood to be 1994 Plan "booked"
revenue.
Your commission will be .75% on all domestic booked revenue. Booked revenue is
defined as bona fide orders for initial licenses, applications, options,
consulting and training from qualified domestic customers who have signed
license agreements, schedule A's and/or service agreements.
In the event that Document Sciences decides to terminate your employment, you
will be entitled to receive notification three months in advance of the
termination date. During that time, you would be expected to provide services on
a full time basis to Document Sciences. Of course, if you elect to terminate
your employment prior to the end of the three month notification period, your
salary and benefits will be discontinued.
Please acknowledge your agreement with the terms of this letter by signing a
copy and returning it to me.
Sincerely,
/s/ TONY N. DOMIT
- ----------------------------
Tony N. Domit
President and CEO
Agreed
/s/THOMAS J. ANTHONY
- ---------------------------- ---------------------------
Thomas J. Anthony Date
<PAGE> 1
EXHIBIT 10.17
November 13, 1991
Ms. Judith A. O'Reilly
4206 Fanuel Street
San Diego, CA 92109
Dear Ms. O'Reilly:
Judy, I am pleased to offer you a position in Document Sciences Corp. The
position is Director, Customer Support reporting to me. Your start date is
January 2, 1992 with a starting salary the same as your current Xerox salary. As
an incentive, you will receive stock options to purchase 26,000 shares of
Document Sciences Corp. common stock. A formal stock option plan is being
developed by our attorneys and I expect completion of the plan within six
months. In the meantime, I will informally and unofficially discuss the possible
plan with you.
Document Sciences Corp. is a new business venture currently being supported by
Xerox Technology Ventures and is subject to all the risks, uncertainties and
opportunities that go with start-up ventures of this type. Document Sciences
Corp. is currently operating as a majority-owned (greater than 50%) subsidiary
of Xerox. In order to encourage the development of spin-out situations like
Document Sciences Corp., we have developed an employment and benefits policy
that is fair and is designed to encourage your move with minimum disruption.
In order that you have a clear understanding of your Document Sciences Corp.
status and benefits, I have outlined them below. Please note that your
entitlement to these benefits will be warranted by Xerox only for as long as
Document Sciences Corp. remains a majority-owned subsidiary of Xerox.
- - Your move to Document Sciences Corp. will be treated as a transfer from
your current Xerox position. You will retain your current Xerox base
salary. You will become an employee of Document Sciences Corp.
- - As long as Document Sciences Corp. is a majority-owned subsidiary of
Xerox, you are entitled to all current and future Xerox or Xerox
subsidiary benefits as defined in the You and Xerox benefits booklet in
addition to those covered in the Xerox Personnel Manual, with the
exception of the following:
- All future salary increases will be defined by Document
Sciences Corp. policy. You will not be part of the Xerox MPP
or MRP process.
- All relocation benefits will be defined by Document Sciences
Corp.
<PAGE> 2
Ms. Judith A. O'Reilly
November 13, 1991
Page 2
- Document Sciences Corp. employees will not be eligible for any
Xerox Voluntary Reduction in Force (VRIF) Program except as
authorized by Document Sciences Corp.'s CEO and approved by
Document Sciences Corp.'s Board of Directors.
- Redeployment and Severance benefits may be different than
current Xerox policy.
- Termination policy will be based upon the State of California
labor laws and not Xerox corrective action procedures.
- Certain Xerox policies and procedures may be replaced from
time to time by the implementation of specific Document
Sciences Corp. policies and procedures. You will be notified
of any changes and subject to the revised Document Sciences
Corp. policies as they are implemented.
- - Consistent with the spirit in which you joined, Xerox, XTV, and
Document Sciences Corp. do not, under any circumstances, guarantee you
a job in Xerox or any other Xerox organization. In cases where Document
Sciences Corp. continues as a viable business, all requests to pursue a
position or transfer to another Xerox organization must be approved in
advance by the CEO of Document Sciences Corp.
- - If XTV or Document Sciences Corp. provides additional or supplementary
benefits (e.g., stock options in Document Sciences Corp.), these
additional or supplementary benefits will be instead of existing
similar Xerox benefits awarded in the future (e.g. ELTIP), if the
employee is eligible for those benefits.
- - Should you return to Xerox at any time while Document Sciences Corp. is
a majority-owned subsidiary of Xerox, you will do so without loss of
tenure or break in service. However, there will be no retroactive
contributions or awards for Xerox benefit plans while you were an
employee of Document Sciences Corp.
Your entitlement to the Xerox benefits denoted above apply only as long as
Document Sciences Corp. remains a majority-owned Xerox subsidiary. The
forfeiture of the following Xerox benefits will occur when Document Sciences
Corp. becomes a minority-owned (less than 50%) Xerox subsidiary: Health and life
insurance; Profit Sharing; all other benefits in the Xerox Benefits Policy.
Given the venture capital charter of XTV, there is a high probability that
transition to minority ownership will occur. After that transition, employees
will be subject to all subsequent Document Sciences Corp. policies an benefits.
It should also be understood that employees of Document Sciences Corp. will be
expected to remain with Document Sciences Corp. when such a transition occurs.
<PAGE> 3
Ms. Judith A. O'Reilly
November 13, 1991
Page 3
Judy, I am looking forward to your accepting this offer and joining us in this
exciting new venture. Please indicate your acceptance by signing in the space
below and returning this letter to me. If you have any questions, please call.
/s/ Judith A. O'Reilly
_____________________________
Accepted: Judith A. O'Reilly
Sincerely,
/s/ Tony N. Domit
Tony N. Domit
President and CEO
Document Sciences Corp.
TND:ssp
<PAGE> 1
EXHIBIT 10.18
December 18, 1991
Mr. Daniel Fregeau
12520 Heatherfield Lane
San Diego, CA 92128
Dear Mr. Fregeau:
Dan, I am pleased to offer you a position in Document Sciences Corp. The
position is Vice President, Sales reporting to me. Your start date is January 2,
1992 with a starting salary of $75,000 per year. As an incentive, you will
receive stock options to purchase 20,000 shares of Document Sciences Corp.
common stock subject to the terms and condition of a stock plan when, as and if
adopted by the board of directors. This formal stock option plan is being
developed for board review by our attorneys and I expect completion of the plan
within six months. In the meantime, I will informally and unofficially discuss
the possible plan with you. Additionally, we will provide you with a lump sum
hiring bonus, not to exceed $15,000 for your cost associated with leaving your
current employer.
Document Sciences Corp. is a new business venture currently being supported by
Xerox Technology Ventures and is subject to all the risks, uncertainties an
opportunities that go with start-up ventures of this type. Document Sciences
Corp. is currently operating as a majority-owned (greater than 50%) subsidiary
of Xerox. In order to encourage the development of spin-out situations like
Document Sciences Corp., we have developed an employment and benefits policy
that is fair and is designed to encourage your move with minimum disruption.
In order that you have a clear understanding of your Document Sciences Corp.
status and benefits, I have outlined them below. Please note that policies and
your entitlement to benefits may change at any time, including while Xerox
continues to own a majority interest in Document Sciences.
- - For now, you will be entitled to the Xerox benefits as defined in the
"You and Xerox" benefits booklet and the Personnel Policies in the
Xerox Personnel Manual, with the exception of the following:
- All future compensation will be determined by Document
Sciences Corp.
- All relocation benefits will be decided by Document Sciences
Corp.
<PAGE> 2
Mr. Daniel Fregeau
December 18, 1991
Page 2
- Document Sciences Corp. employees will not be eligible for any
Xerox Voluntary Reduction in Force (VRIF) Program except as
authorized by Document Sciences Corp.'s CEO and approved by
Document Sciences Corp.'s Board of Directors.
- Redeployment and Severance benefits will be determined by
Document Sciences and will be different from current Xerox
policy unless Document Sciences determines otherwise.
- The Xerox Separations and Performance Improvement policies do
not apply to Document Sciences employees.
- Xerox policies and procedures may be changed or replaced from
time to time by the implementation of Document Sciences Corp.
policies and procedures.
- - Consistent with the spirit in which you joined Document Sciences Corp.,
XTV and Xerox do not, under any circumstances, guarantee you a job in
Xerox or any other Xerox organization. In cases where Document Sciences
Corp. continues as a viable business, all requests to pursue a position
or transfer to another Xerox organization must be approved in advance
by the CEO of Document Sciences.
- - You will not be eligible for The Xerox Executive Long Term Incentive
Plan or any similar or successor Xerox Plan.
- - Should you move to Xerox at any time while Document Sciences Corp. is a
majority-owned subsidiary of Xerox, you will receive service credit for
service with Document Science for purposes of Xerox' employee benefit
plans; however, there will be no retroactive contributions or awards
for Xerox benefit plans while you were an employee of Document
Sciences.
- - You are an employee at will, and neither this letter nor any of our
plans or policies constitute an employment contract between you and
Document Sciences or Xerox.
In accordance with standard Xerox policy, you will be required to pass a drug
test as part of the employment process. Additional information will be sent to
you separately.
Your entitlement to the Xerox benefits denoted above apply only as long as
Document Sciences and Xerox choose to maintain those benefits for Document
Science employees. In any event, should Document Science cease to be majority
owned by Xerox, Xerox benefits shall cease to apply, including health, life
insurance, profit sharing and retirement plans. There is a high probability that
transition to minority ownership will occur. It should also be understood that
employees of
<PAGE> 3
Mr. Daniel Fregeau
December 18, 1991
Page 3
Document Sciences Corp. will be expected to remain with Document Sciences when
such a transition occurs.
Dan, I am looking forward to your accepting this offer and joining us in this
exciting new venture. Please indicate your acceptance in all respects by signing
in the space below and returning this letter to me. If you have any questions,
Please call.
Very truly yours,
/s/ Tony N. Domit
Tony N. Domit
President and CEO
Document Sciences Corp.
Accepted: /s/ Daniel Fregeau
___________________
Daniel Fregeau
<PAGE> 1
EXHIBIT 10.19
A.G. Altomare
15931 Camino Del Cerro
Los Gatos, CA 95032
Dear Fred:
I am pleased to offer you the position of Vice President Consulting Services
reporting to Tony Domit, President and CEO, at Document Sciences Corporation.
Your proposed start date is January 15, 1996, with a starting salary of
$85,000.00 payable semi-monthly. For 1996 Document Sciences will provide a
commission plan of 1.5% of recognized consulting revenue payable monthly. In
addition, a profit incentive of 2.75% of profit earned on consulting revenue
will be payable quarterly. The profit incentive will be capped at $25,000
annually.
You will receive a $4,000 per month recoverable draw for six months. The
outstanding balance cannot exceed $12,000 for the period.
You will receive stock options to purchase 8,000 shares of Document Sciences
Corporation common stock, subject to approval of the board of directors, and
state and federal regulations.
Document Sciences Corporation will reimburse up to $13,500.00 for moving and
temporary living expenses. All receipts must submitted by December 31, 1996.
You will have the opportunity to participate in our benefit plans. On an annual
basis you will be eligible for ten days of paid vacation, and two personal days
that you may choose to supplement Document Sciences Corporation scheduled
holidays.
In accordance to our standard policy you must pass a drug test as part of the
employment process. If you have any questions regarding the testing please
contact Tiffany Skinner at 619/ 625-3028.
You are an employee at will. Accordingly, either the employee or Document
Sciences Corporation can terminate the employment relationship at will, at any
time, with or without cause or advance notice. Neither this letter nor any of
our plans or policies constitutes an employment contract between you and
Document Sciences.
I am looking forward to you joining our growing team. Please indicate your
acceptance in all respects by signing and returning this letter and the
Proprietary Information and Conflict of Interest Agreement. If you have any
questions please call.
Very truly yours,
/s/ Tony N. Domit ______________________
A. G. Altomare
Tony N. Domit
President & CEO ______________________
Date
enclosures
<PAGE> 1
EXHIBIT 10.20
DOCUMENT SCIENCES CORPORATION
INTERNATIONAL VALUE ADDED REMARKETER AGREEMENT
This International Value Added Remarketer Agreement ("Agreement"), made and
entered into between Geneva Digital Ltd. ("VAR") as defined below, and Document
Sciences Corporation, located at 6333 Greenwich Drive, Suite 250, San Diego, CA
92122 ("DOCUMENT SCIENCES") is effective June 1, 1995 ("Effective Date").
TABLE OF CONTENTS
Article Title
ARTICLE 1 DEFINITIONS
ARTICLE 2 APPOINTMENT AND OBLIGATIONS
ARTICLE 3 PRODUCT PURCHASE AND PAYMENT
ARTICLE 4 SOFTWARE
ARTICLE 5 WARRANTIES AND INDEMNITIES
ARTICLE 6 CONFIDENTIAL INFORMATION
ARTICLE 7 TERM AND TERMINATION
ARTICLE 8 COMPLIANCE WITH EXPORT/IMPORT
REQUIREMENTS AND INTERNATIONAL
PROVISIONS
ARTICLE 9 GENERAL PROVISIONS
The parties agree as follows:
ARTICLE 1 - DEFINITIONS
1.01 BASE PRODUCTS. The DOCUMENT SCIENCES software products identified in
Exhibit A.
1.02 END USERS. Persons who acquire Products for their own internal use and not
for resale or distribution to others.
1.03 END USER LICENSE. DOCUMENT SCIENCES applicable standard end user software
license and warranty terms and conditions to be made between VAR and End User.
1.04 PRODUCTS. Base Products and/or Upgrade Products, collectively. Each Product
will consist of a package containing (i) media on which the software, in object
code format, is loaded, and (ii) associated software documentation.
1.05 TERRITORY. Geographic or market coverage areas identified in Exhibit B.
1.06 UPGRADE PRODUCTS. New releases of Base Products which are issued by
DOCUMENT SCIENCES during the term of this Agreement and contain modifications,
enhancements and/or improvements to Base Products.
ARTICLE 2 - APPOINTMENT AND
OBLIGATIONS
2.01 APPOINTMENT. DOCUMENT SCIENCES appoints VAR, on an exclusive basis, to
resell Products to End Users in the Territory during the term of this Agreement.
DOCUMENT SCIENCES agrees not to (1) appoint any other person, firm or company to
act as its distributor or agent for the Products in the Territory; (2) sell to
any person, firm or company in the Territory any of the Product whether for use
or resale outside the Territory if DOCUMENT SCIENCES knows the licensee intends
to use the Products in the Territory. DOCUMENT SCIENCES agrees to take
reasonable steps to safeguard the exclusive rights hereby granted to VAR. In the
event of another Value Added Reseller of DOCUMENT SCIENCES negotiating an order
for Products which involves delivery of Product in the Territory DOCUMENT
SCIENCES will pay or otherwise procure such Value Added Reseller pays VAR 50% of
the license fees/commission monies due to selling Value Added Reseller in
respect of such Product delivered in the Territory. Additionally DOCUMENT
SCIENCES shall ensure that VAR has first option to support such Products and
receive all revenues arising therefrom (subject to deduction of DOCUMENT
SCIENCES' share of such revenues at the rate specified in Exhibit A). The
exclusivity continues as long as the revenue projections defined in Exhibit C
are met. If they are not met, then the exclusivity may be forfeited at the
discretion of DOCUMENT SCIENCES and rights to sell the Products under this
Agreement become non-exclusive. All Products must be resold by VAR with
substantial added value in the form of marketing, training, installation and
first level End User support. VAR accepts this appointment, subject to the terms
and conditions of this Agreement.
2.02 TERMINATION. Any resale or distribution of Products by VAR which is not in
accordance with its appointment under Section 2.01, will be deemed a material
This is page one of a six page Value Added Remarketer Agreement ending with
Section 8.15, exclusive of Exhibits that are separately attached. The parties
acknowledge they have read this Agreement and its Exhibits and agree to be bound
by all terms and conditions.
<PAGE> 2
DOCUMENT SCIENCES INTERNATIONAL VALUE ADDED REMARKETER AGREEMENT
GENEVA DIGITAL LIMITED DOCUMENT SCIENCES CORPORATION
- ----------------------------------------
/S/ PAUL A. MILTON /S/ JUDITH A. O'REILLY
- ---------------------------------------- -----------------------------------
By By
PAUL A MILTON JUDITH A. O'REILLY
- ---------------------------------------- -----------------------------------
Printed Name Printed Name
COMMERCIAL DIRECTOR MANAGING DIRECTOR
- ---------------------------------------- -----------------------------------
Title Title
JUNE 6, 1995 JUNE 1, 1995
- ---------------------------------------- -----------------------------------
Date Date
- ---------------------------------------- -----------------------------------
Mailing Address Mailing Address:
Walton Lodge Bridge SE 6333 Greenwich Drive
Walton on Thames Suite 250
Sorrey San Diego, CA 92122
KT12 1BT
Page 2 of 10
<PAGE> 3
DOCUMENT SCIENCES INTERNATIONAL VALUE ADDED REMARKETER AGREEMENT
breach of this Agreement and will enable DOCUMENT SCIENCES to terminate this
Agreement under Section 7.02(a).
2.03 TRADEMARKS. VAR may use DOCUMENT SCIENCES' name and logo on the Products
purchased. During the term of this Agreement, VAR may also use DOCUMENT
SCIENCES' name and logo in its advertising, catalogs, exhibits, public relations
materials and manuals covering Products. All such uses will be subject to
DOCUMENT SCIENCES prior written approval which shall not be unreasonable
withheld.
2.04 GENERAL OBLIGATIONS OF VAR. VAR will (i) actively market, promote and
solicit the sale of Products to End Users in the Territory, (ii) establish and
maintain appropriate marketing and distribution facilities and personnel within
its organization to create and meet the demand for Products among End Users in
the Territory, (iii) promote the goodwill, name and reputation of DOCUMENT
SCIENCES and all of the Products, and (iv) represent Products accurately and
fairly and at all times avoid misleading or unethical business practices.
2.05 SPECIFIC OBLIGATIONS OF VAR. VAR will have the following specific
obligations:
(a) Announce to its base of current and prospective End User customers
in the Territory that the Products are or will be available for sale by VAR.
(b) Distribute the following materials to all of its locations in the
Territory: (i) marketing and technical brochures which accurately describe the
functions, features, operation and advantages of the Products; and (ii)
educational material, whether provided by DOCUMENT SCIENCES or developed by VAR,
for training VAR's sales and support personnel.
(c) Regularly promote the products in a commercially acceptable manner.
(d) Train an agreed upon number of its sales and customer support
personnel in the features and functions of the Products.
(e) Implement an incentive sales plan for the Products, including
provisions for commissions and bonuses.
(f) Establish an agreed upon number of marketing centers in the
Territory, each staffed with sufficient marketing and technical support
personnel trained in the features and functionality of the Products to capably
demonstrate the Products and respond to End User customer inquiries.
(g) Provide the following support to its End User customers in the
Territory: (i) on-site installation of the Products and/or technical training or
documentation sufficient to enable the End Users to install the Products
themselves; (ii) technical training regarding operation of the Products; (iii)
consulting support regarding proper utilization, and optimization of use of the
Products; (iv) first and second level support as specified in Exhibit D; and (v)
distribution and application of maintenance releases, patches and other
modifications made to the Products by DOCUMENT SCIENCES in order to correct
program errors.
(h) Promptly inform DOCUMENT SCIENCES about new problems or errors with
any of the Products which are reported by End Users or discovered by VAR, as
well as any problems or errors fixed by VAR or its End Users (to the extent VAR
is aware of same.)
2.06 OBLIGATIONS OF DOCUMENT SCIENCES. DOCUMENT SCIENCES will have the following
obligations:
(a) Make available to VAR, at DOCUMENT SCIENCES standard VAR pricing,
reasonable quantities of sales and technical brochures to support VAR's
marketing and support obligations under Sections 2.04 and 2.05.
(b) Provide, in a timely manner and in an agreed upon quantity,
maintenance releases, patches and other modifications made to the Products by
DOCUMENT SCIENCES in order to correct program errors.
(c) Provide agreed upon training to VAR on the features, functions,
operation and installation of the Products. The training will be provided at
DOCUMENT SCIENCES San Diego offices, or at other agreed upon locations. VAR will
be responsible for the travel and per diem expenses of its personnel.
(d) Provide third level support as defined in Exhibit D for problems or
errors with any of the Products which are identified by VAR and which VAR is
unable to resolve. Each problem or error must be identified telephonically or,
when appropriate, in writing and faxed to DOCUMENT SCIENCES designated support
person or fax number in San Diego, California. DOCUMENT SCIENCES does not
guarantee that it will be able to resolve all identified problems or errors.
2.07 SUBLICENSE TERMS. VAR shall distribute and sublicense the Products to End
Users pursuant to the End User License. Except upon the prior written
authorization of DOCUMENT SCIENCES or in accordance with the following sentence,
VAR shall not make the Products available to any End User or potential End User
for installation, use, duplication or any other purpose unless an End User
License shall have been executed by such person. VAR shall be at liberty to
order from DOCUMENT SCIENCES Products to be temporarily installed on CPUs of
those End Users and potential End Users who wish to test the Software Products
on a trial usage basis and who have entered into an Evaluation Agreement with
VAR in such form as may be approved by DOCUMENT SCIENCES in the exercise of its
discretion. Products shipped for trial purposes shall be shipped after
Page 3 of 10
<PAGE> 4
DOCUMENT SCIENCES INTERNATIONAL VALUE ADDED REMARKETER AGREEMENT
receipt by DOCUMENT SCIENCES of an executed Evaluation Agreement. Subject to
VARs strict compliance with the provisions of this Agreement, VAR is authorized
to make modifications, at VAR's own expense, in the format of the End User
License as may be necessary to conform to local laws. Notwithstanding the
foregoing authorization, no such modification shall:
(i) diminish or limit any of DOCUMENT SCIENCES' rights in the Licensed
Software;
(ii) diminish or limit the enforceability of proprietary rights in and
to the Licensed Software;
(iii) convey any rights of ownership in the
Software Products; or
(iv) permit disclosure of proprietary information regarding the
Licensed Software. Upon modification of the End User License by VAR in
accordance with the terms of this Section, VAR shall submit the modified End
User License to DOCUMENT SCIENCES to receive DOCUMENT SCIENCES' prior written
approval therefor before arranging for the sublicensing of the Software
Products pursuant thereto. In the event that local law or any ruling of law
renders or may render invalid or unenforceable any provision of the End User
License, VAR shall promptly notify DOCUMENT SCIENCES and cooperate fully in
taking such actions to modify the provisions of the End User License Agreement
as DOCUMENT SCIENCES may direct. Unless and until DOCUMENT SCIENCES shall have
received any such modifications or the then current End User License Agreement,
and expressly approved the same in writing, VAR shall not use such modified End
User License Agreement in marketing the Software Products pursuant to this
Agreement in any manner whatsoever.
ARTICLE 3 - PRODUCT PURCHASE AND PAYMENT
3.01 PURCHASE. This Article sets forth the terms and conditions under which VAR
may purchase Products from DOCUMENT SCIENCES for resale. It is expressly
understood and agreed, however, that title to the software loaded on the media
contained in each Product will not pass to VAR upon VAR's purchase of that
Product. Rather, such title will at all times be and remain with DOCUMENT
SCIENCES and/or its licensor(s).
3.02 PRICES. The Prices to be invoiced by DOCUMENT SCIENCES to VAR for Products
purchased by VAR hereunder will be set forth in Exhibit A; provided, however,
that DOCUMENT SCIENCES may change such prices effective upon written notice to
VAR four (4) months in advance of effective date of price changes. VAR will
solely determine the prices at which it resells Products to End Users in the
Territory. Any increase in price will be applied to all DOCUMENT SCIENCES VARs
in the Western European countries.
3.03 PRICE CHANGE EFFECT. All Products shipped after the effective date of any
price decrease will be invoiced at the price in effect at the time of shipment.
VAR will also be entitled to the benefit of any price decrease relative to
Products shipped within two (2) weeks prior to the effective date of the price
decrease. All Products shipped after the effective date of any price increase
will be invoiced at the price in effect at the time of order placement, provided
the order is placed within thirty (30) days prior to shipment.
3.04 TAXES. VAR will furnish DOCUMENT SCIENCES with appropriate tax exemption
certificates.
3.05 PAYMENT. VAR will pay all invoices, in United States Dollars, within thirty
(30) days from the date of invoice provided that this obligation shall in
respect of the Annual License/Maintenance Fee only apply where VAR has received
the same from the End User. Invoices will be dated no sooner than the date of
shipment.
3.06 QUARTERLY FORECASTS. On the date of execution of this Agreement, and
thereafter by the end of each calendar quarter, VAR will issue to DOCUMENT
SCIENCES a non-binding forecast setting forth the quantity of each Product it
then estimates purchasing during each of the succeeding four (4) calendar
quarters. The information reported for the first succeeding calendar quarters
will be broken down by calendar month.
3.07 PURCHASE ORDERS. All purchases of Products by VAR will be authorized, i.e.
become effective and binding upon DOCUMENT SCIENCES only upon issuance of
written documentation, which will expressly reference this Agreement and contain
the following information; (i) name of customer; (ii) description of the
Products to be purchased; (iii) quantity to be purchased; (iv) routing
instructions; (v) requested delivery schedule; (vi) destination; and (vii)
confirmation of price. All purchase orders issued by VAR will be governed
exclusively by the terms and conditions of this Agreement, notwithstanding any
preprinted terms and conditions contained on any VAR purchase orders or DOCUMENT
SCIENCES acknowledgments.
3.08 CANCELLATION AND RESCHEDULE OF ORDERS. VAR may not cancel or reschedule any
purchase order within thirty (30) days prior to the originally scheduled
delivery date without DOCUMENT SCIENCES' prior written consent.
3.09 DELIVERY. All shipments of Products will be made FOB, DOCUMENT SCIENCES
warehouse or distribution facility, located in California, to such
Page 4 of 10
<PAGE> 5
DOCUMENT SCIENCES INTERNATIONAL VALUE ADDED REMARKETER AGREEMENT
destinations within the Territory as may be designated by VAR. The specific FOB
point will be designated by DOCUMENT SCIENCES, at its sole discretion. VAR may
select the carrier and will assume and pay all transportation charges. In the
event VAR fails to select the carrier, DOCUMENT SCIENCES may do so.
3.10 TITLE AND RISK OF LOSS. Risk of loss for each Product, will pass to VAR
upon delivery by DOCUMENT SCIENCES to the designated carrier at DOCUMENT
SCIENCES dock provided that DOCUMENT SCIENCES shall replace free of charge any
Product which VAR can demonstrate to DOCUMENT SCIENCES' reasonable satisfaction
was defective when inspected after delivery.
3.11 RENEWAL KEYS. In addition to supplying the Products hereunder DOCUMENT
SCIENCES agrees, upon receipt of the Annual License Fee due in respect of each
End User, to supply VAR with a copy of the appropriate renewal key for such End
User so as to enable the End User to continue using the Product for a further 12
month period.
ARTICLE 4 - SOFTWARE
4.01 SOFTWARE LICENSE. DOCUMENT SCIENCES grants to VAR a nonexclusive,
nontransferable, royalty free license to (i) use such reasonable number of units
of the Product designated by DOCUMENT SCIENCES as "Demonstration and Training
Copies" internally for demonstration and training purposes only, subject to the
End User License as contained in the package therefor, and (ii) to distribute
the software contained in the package for any Product only to an End User in the
Territory in connection with that End User's purchase of that Product from VAR
and execution of the End User License.
4.02 LIMITED RIGHTS TO SOFTWARE. VAR may use and distribute the software only to
the extent expressly authorized or licensed under this Agreement. No other
rights to such software are granted by DOCUMENT SCIENCES to VAR, or may be
granted by VAR to any third party. In particular, but not by way of limitation,
neither VAR nor any of its employees, agents or representatives may create,
reproduce or distribute derivative works of any such software. Further, neither
VAR nor any of its employees, agents or representatives will attempt to
decompile or otherwise reverse engineer any such software in order to derive its
source code. Any violation by VAR of its obligations under this Section would be
deemed an incurable material breach of this Agreement, and would enable DOCUMENT
SCIENCES to immediately terminate this Agreement under Section 7.02(b).
ARTICLE 5 - WARRANTIES AND INDEMNITIES
5.01 WARRANTIES. The End User License specifies an express limited warranty
extended directly to the End User purchasing that Product from VAR. In the case
of legitimate warranty claims, the End User is entitled to a replacement Product
or refund, at the option of DOCUMENT SCIENCES.
5.02 OBLIGATIONS. VAR agrees to honor all legitimate warranty claims submitted
by any End User to whom it has sold a Product. This may be accomplished through
a Product replacement, refund or credit directly to the End User. In the event
VAR is required to honor a legitimate warranty claim by providing a refund or
credit directly to the End User, VAR will be entitled to a refund or credit
equal to the amount originally paid by VAR to DOCUMENT SCIENCES.
5.03 DISCLAIMER. With the exception of the express limited warranty in the End
User License the Products purchased by VAR are provided on an "AS IS" basis,
with no warranties of any kind or nature. DOCUMENT SCIENCES disclaims, and VAR
waives, all warranties, express or implied, relative to Products purchased by
VAR. DOCUMENT SCIENCES DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE RELATIVE TO SUCH PRODUCTS.
5.04 GENERAL INDEMNITY. Each party agrees, at its expense, to defend, indemnify
and hold harmless the other from and against all liabilities, damages, costs,
fees and expenses, including reasonable attorney fees, arising out of suits,
claims, actions or proceedings brought by or on behalf of any person on account
of injury or damage proximately caused by the indemnifying party, its agents,
representatives or employees, in the course of performing the indemnifying
party's obligations under this Agreement, provided that the other party will
promptly notify the indemnifying party of any such suit, claim, action or
proceeding, and that the indemnifying party will have control of the defense and
all negotiations for its settlement or compromise. Each party agrees to fully
cooperate with the other party in the conduct of such defense and negotiations.
5.05 INTELLECTUAL PROPERTY INDEMNITY. DOCUMENT SCIENCES will, at its expense,
defend, indemnify and hold harmless VAR from all liabilities, damages, costs,
fees and expenses, including reasonable attorney fees, arising out of suits,
claims, actions or proceedings charging infringement in the Territory of any
patents, copyrights, trade secrets or other intellectual property
Page 5 of 10
<PAGE> 6
DOCUMENT SCIENCES INTERNATIONAL VALUE ADDED REMARKETER AGREEMENT
rights owned or controlled by any third party as a result of the exercise by VAR
of its rights under this Agreement, provided that VAR promptly notifies DOCUMENT
SCIENCES of any such suit, claim, action or proceeding, and that DOCUMENT
SCIENCES will have control of the defense and all negotiations for its
settlement or compromise. VAR agrees to fully cooperate with DOCUMENT SCIENCES
in the conduct of such defense and negotiations.
5.06 LIMITATION. To the extent that an alleged infringement arises from the
combination by VAR of any Products purchased under this Agreement with products
not supplied bv DOCUMENT SCIENCES, the indemnity of Section 5.05 will not apply,
and VAR will indemnify DOCUMENT SCIENCES in a manner fully equivalent to such
indemnity, in any suit, claim or proceeding brought against DOCUMENT SCIENCES to
the extent that the infringement arises from the said combination by VAR.
ARTICLE 6 - CONFIDENTIAL INFORMATION
6.01 CONFIDENTIALITY. Subject to Section 6.02, all DOCUMENT SCIENCES information
which is marked proprietary or confidential and is made available to VAR will be
held in confidence by VAR and will not be disclosed by it to third parties, or
used by it, except to the extent authorized by this Agreement. If the
information is provided orally or visually DOCUMENT SCIENCES will identify the
disclosure as being proprietary or confidential at the time of disclosure and,
within two (2) weeks thereafter, reduce it to writing and provide it to VAR.
6.02 EXCEPTIONS. VAR's obligations under Section 6.01 will not apply with
respect to any DOCUMENT SCIENCES information which:
(a) was known to VAR prior to its first receipt from DOCUMENT SCIENCES;
or
(b) at any time becomes a matter of public knowledge without any fault
of VAR; or
(c) is at any time lawfully received by VAR from a third party under
circumstances permitting its disclosure to others; or
(d) is at any time furnished to a third party by DOCUMENT SCIENCES
without restriction on use or disclosure; or
(e) was first disclosed by DOCUMENT SCIENCES to VAR more than three (3)
years earlier.
6.03 EXPIRATION OR TERMINATION. Promptly following the expiration or any
termination of this Agreement, VAR will return to DOCUMENT SCIENCES, at DOCUMENT
SCIENCES' expense, all DOCUMENT SCIENCES confidential and proprietary
information then in its possession.
ARTICLE 7 - TERM AND TERMINATION
7.01 TERM. Unless sooner terminated in accordance with Section 7.02, the term of
this Agreement will be for an initial period of three (3) years from the
Effective Date and shall continue automatically thereafter unless terminated by
either party serving not less than six (6) months written notice upon the other.
7.02 TERMINATION FOR CAUSE. Either party may terminate this Agreement upon
written notice of termination to the other party in any of the following events:
(a) the other party materially breaches this Agreement in a manner
which can be cured, and such breach remains uncured for thirty (30) days
following written notice of breach by the terminating party; or
(b) the other party materially breaches this Agreement in a manner
which cannot be cured; or
(c) a petition for relief under any bankruptcy legislation is filed by
or against the other party, or the other party makes an assignment for the
benefit of creditors, or a receiver is appointed for all or a substantial part
of the other party's assets, and such petition, assignment or appointment is not
dismissed or vacated within thirty (30) days.
7.03 EFFECT OF TERMINATION OR EXPIRATION. In the event of the expiration or any
termination of this Agreement:
(a) The provisions of this Agreement will continue to apply to all VAR
purchase orders for Products accepted by DOCUMENT SCIENCES prior to the
effective date of such termination or expiration.
(b) Neither party will be liable to the other for any damage,
expenditures, loss of profits or prospective profits of any kind or nature
sustained or arising out of, or alleged to have arisen out of, such termination
or expiration. Termination or expiration of this Agreement will not relieve or
release either party from making payments which may be owing to the other party
under the terms of this Agreement.
(c) VAR will promptly return to DOCUMENT SCIENCES or destroy, at
DOCUMENT SCIENCES' sole option, any advertising and other materials furnished to
it by DOCUMENT SCIENCES.
(d) VAR will remove and not thereafter use any signs containing the
name or trademark of DOCUMENT SCIENCES, and will immediately destroy all of its
stationery, advertising matter and other preprinted
Page 6 of 10
<PAGE> 7
DOCUMENT SCIENCES INTERNATIONAL VALUE ADDED REMARKETER AGREEMENT
matter remaining in its possession or under its control containing the word
"DOCUMENT SCIENCES" and related DOCUMENT SCIENCES trade names or trademarks.
(e) The obligation upon DOCUMENT SCIENCES under clause 3.11 to supply
VAR with renewal keys shall continue for so long as VAR is obliged to supply the
same under the terms of the relevant End User License. The price of such renewal
keys shall be equal to the Annual License Fee prevailing at the date of
termination/expiration of this Agreement or such higher fee as DOCUMENT SCIENCES
shall charge its value add resellers in Western Europe. DOCUMENT SCIENCES shall
at the written request of VAR take an assignment of VAR's rights and obligations
under End User Licenses entered into by VAR during the term of this Agreement
(including the right to receive all fees due under such licenses after the date
of assignment).
7.04 SURVIVAL. The provisions of this Agreement will, to the extent applicable,
survive the expiration or any termination.
ARTICLE 8 - COMPLIANCE WITH
EXPORT/IMPORT REQUIREMENTS AND
INTERNATIONAL PROVISIONS
8.01 EXPORT CONTROLS. VAR understands that there have been and may, in the
future, be promulgated by the Office of Export Administration of the United
States Department of Commerce, the United States Department of State and certain
other departments and agencies of the United States of America, rules and
regulations governing the export or re-export of the Products, VAR agrees to
comply fully with all such applicable rules and regulations and the laws related
thereto and to adopt such policies and procedures in connection with the
marketing of the Software Products as may be required thereby. VAR further
agrees to cooperate fully with DOCUMENT SCIENCES in amending this Agreement,
giving consents or information or executing or providing such documents as may
reasonably be required to comply fully with such laws, rules or regulations
existing now or in the future. Notwithstanding any other provision of this
Agreement, in the event that (i) DOCUMENT SCIENCES shall request VAR to execute
any additional amendments to this Agreement which shall be necessary or
advisable in order for DOCUMENT SCIENCES to comply with any export laws, rules
or regulations and VAR shall fail to do so within the period requested, or (ii)
DOCUMENT SCIENCES shall request VAR to comply with or adopt any policies or
procedures (including submission of appropriate reports to DOCUMENT SCIENCES or
to any United States or other governmental agency) which DOCUMENT SCIENCES shall
deem necessary or advisable in order to comply with any export laws, rules or
regulations and VAR shall fail to do so within the specified period, or (iii)
there shall hereafter be enacted or promulgated by any branch, department or
agency of the United States of America any law, regulation, rule or order
prohibiting the export of any of the Products to the Territory or to VAR or any
Reseller or End User, DOCUMENT SCIENCES may immediately terminate this Agreement
by written notice to VAR, or take such other actions as DOCUMENT SCIENCES shall
in its sole discretion deem necessary or appropriate in connection therewith. In
addition, to the extent that VAR's failure to comply with any such export laws,
regulations, rules or orders or such DOCUMENT SCIENCES policies or procedures
shall result in any loss or liability to DOCUMENT SCIENCES (including, without
limitation, fines and governmental sanctions), VAR agrees to indemnify DOCUMENT
SCIENCES and hold DOCUMENT SCIENCES harmless from and against any such loss or
liability. VAR acknowledges and agrees that the obligations of DOCUMENT SCIENCES
to perform hereunder shall be subject to the provisions of the laws,
regulations, rules and orders and DOCUMENT SCIENCES' policies and procedures
referred to herein and that DOCUMENT SCIENCES shall not have any liability
arising or resulting from any delay in obtaining or failure to obtain any
necessary authorizations or approvals relating thereto.
8.02 CUSTOMS AND DUTIES. VAR shall be responsible for and obtain any and all UK
customs, import and other governmental authorizations and approvals and visas in
connection with this Agreement. DOCUMENT SCIENCES' obligations hereunder shall
be subject to confirmation of the grant of all such authorizations and
approvals, VAR shall be responsible for all customs clearance charges, customs
fees and other costs and expenses arising in connection therewith.
8.03 FCPA, ETC. VAR shall comply with, and require its customers to comply with,
the rules and regulations under the United States Export Administration Act, the
United States Anti-Boycott provisions, and the United States Foreign Corrupt
Practices Act (the "FCPA"), as well as all applicable United States federal,
state and municipal statutes, rules and regulations and all export regulations
of the Territory, as the same may be amended from time to time. VAR represents
and warrants to DOCUMENT SCIENCES that it is familiar with the terms and
provisions of the FCPA and the purposes of the FCPA, and particularly that it is
familiar with the FCPA prohibition of the payment or giving of anything of
value, either directly or indirectly by or on behalf of any domestic concern, to
an official of a foreign government for the purpose of influencing an act or
decision in such person's official capacity, or inducing such official to use
his or her
Page 7 of 10
<PAGE> 8
DOCUMENT SCIENCES INTERNATIONAL VALUE ADDED REMARKETER AGREEMENT
influence with the foreign government to assist the domestic concern in
obtaining or retaining business for or with, or directing business to any
person. VAR further represents and warrants that (i) neither it nor any of its
owners, staff members or affiliates are officials, officers or representatives
of any government or candidate for political office, and (ii) that no part of
its proceeds from licensing of the Products will be used by it for any purpose,
or to take any action, which will constitute a violation of any law or any
government in the Territory or any part thereof, or the United States, including
the FCPA. For its part, DOCUMENT SCIENCES represents and warrants that it does
not desire and will not knowingly request any service or action by VAR which
could or might constitute any such violation as described above. The parties
hereto agree that the existence and terms of this Agreement may be disclosed in
full at any time and for any reason to any person that counsel for either party
determines has a legitimate need to know such terms, including, without
limitation, the government of the Territory or any part thereof and the United
States. VAR agrees that its books and records applicable to and relating to
transactions pursuant to this Agreement shall be subject to audit at reasonable
times as necessary to ensure compliance with the FCPA. If DOCUMENT SCIENCES
learns or has reason to believe FCPA or any other applicable United States laws
and regulations in conjunction with this Agreement, it may terminate this
Agreement immediately upon written notice to VAR, notwithstanding any other
provisions of the Agreement to the contrary.
8.04 EXPORT. VAR hereby agrees that VAR will not export, directly or indirectly,
any United States source Products or other technical information acquired from
DOCUMENT SCIENCES or any products utilizing any such Products or other technical
information, to any country for which the United States government or any agency
thereof at the time of export requires an export license or other governmental
approval, without first obtaining the written consent to do so from (i) the
United States Department of Commerce or other agency of the United States
government when required by an applicable statute or regulation, and (ii)
DOCUMENT SCIENCES, which consent DOCUMENT SCIENCES may withhold if such export
would, in the reasonable business judgment of DOCUMENT SCIENCES, be detrimental
to the interests of DOCUMENT SCIENCES. If VAR transfers, directly or indirectly,
and Products or technical information received from DOCUMENT SCIENCES or any
copies thereof, or any product produced from such technical information, in
violation of United States exportation regulations: or (iii) the laws of the
United States prohibit the transfer of the Products or any technical information
covered by this Agreement, DOCUMENT SCIENCES shall have the right immediately to
terminate this Agreement, without any obligation or liability whatsoever to VAR,
notwithstanding any other provision in this Agreement.
8.05 GOVERNING LANGUAGE. This Agreement is in the English language only, and all
communications between the parties relative to this Agreement shall be conducted
in the English language only.
8.06 CURRENCY AND PAYMENT. All amounts payable to DOCUMENT SCIENCES hereunder
shall be calculated and payable in United States Dollars. For purposes of any
determination of amounts payable to DOCUMENT SCIENCES hereunder, any amounts
denominated in any currency other than United States Dollars (a "Local
Currency") shall be converted into United States Dollars based upon the Local
Currency/United States Dollar exchange rate upon the date of order therefore, as
reported by the United States edition of The Wall Street Journal. This Agreement
is an international transaction in which the specification of United States
Dollars and payment in California is of the essence, and United States Dollars
shall be the currency of account in all events. The payment obligations of VAR
shall not be discharged by an amount paid by VAR in another currency or at
another place, whether pursuant to a judgment or otherwise unless such payment
is accepted by DOCUMENT SCIENCES in the exercise of its sole and absolute
discretion.
8.07 SUBMISSION TO JURISDICTION. Each of the parties hereto agrees that any
judgment (i) rendered by a court of competent jurisdiction; and (ii) entered in
any court of record of the United States, may be executed against the assets of
such party in any jurisdiction including, but not limited to, any State of the
United States of America. By its signature to this Agreement, each party
hereunder irrevocably submits to the jurisdiction of the courts of such
jurisdictions in any legal action or proceeding relating to such execution.
8.08 WAIVER OF IMMUNITY AND INCONVENIENT FORUM. Each party irrevocably waives
all immunity from jurisdiction, attachment and execution, whether on the basis
of sovereignty or otherwise, to which it might otherwise be entitled in any
legal action or proceeding in any state or federal court of competent
jurisdiction, including such courts located in the State of California, arising
out of this Agreement. DOCUMENT SCIENCES and VAR each represents that its
obligations hereunder are commercial activities. Each party hereby irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to any suit, action or proceeding arising out of or relating
to this Agreement being brought in the federal or state courts of
Page 8 of 10
<PAGE> 9
DOCUMENT SCIENCES INTERNATIONAL VALUE ADDED REMARKETER AGREEMENT
competent jurisdiction located in the State of California, and hereby further
irrevocably waives any claim that any such suit, action or proceeding brought in
any such court has been brought in an inconvenient forum.
ARTICLE 9 - GENERAL PROVISIONS
9.01 FORCE MAJEURE. Except for the payment of money, neither party will be
liable to the other for any failure to perform or delay in the performance of
its obligations caused by circumstances beyond its reasonable control.
9.02 NOTICES. Any notice which may be of is required to be given under this
Agreement will be written or by facsimile, unless otherwise indicated. Any
written notices will be sent by registered mail or certified mail, postage
prepaid, return receipt requested. Any facsimile notice should be followed
within three (3) working days by written notice. Notices will be deemed to have
been given when received, properly addressed. All notices to VAR will be
addressed as shown on the first page of this Agreement. All notices to DOCUMENT
SCIENCES should be addressed to:
DOCUMENT SCIENCES CORPORATION
Attn: President
6333 Greenwich Drive, Suite 250
San Diego, CA 92122
Either party may change its address by giving notice to the other party pursuant
to this Section.
9.03 PUBLICITY. Neither party will issue a press release or other similar
publicity of any nature regarding this Agreement without the other party's
written approval, which will not be unreasonably withheld. Approval will be
deemed to have been given to the extent that the disclosure is required in order
to comply with governmental rules, regulations or requirements. In this event,
the publishing party will review the text of the disclosure with the other party
prior to disclosure.
9.04 HEADINGS. Except for Article 1, Definitions, headings and titles of the
Articles and Sections of this Agreement are inserted for convenience only and do
not affect the construction or interpretation of any provision.
9.05 AMENDMENT. This Agreement may be amended only by written amendment duly
signed by authorized representatives of both parties.
9.06 ASSIGNMENT. DOCUMENT SCIENCES entered into this Agreement based on the
personal representation of VAR's principals as to their knowledge and expertise,
ability to add value to the Licensed Software and market the Value Added
Products, and financial status. VAR shall not, therefore assign, transfer, or
sell any of its rights, or delegate any of its responsibilities under this
Agreement without DOCUMENT SCIENCES' prior written consent. Any material change
in ownership of VAR without DOCUMENT SCIENCES' prior written consent (which
shall not be unreasonably withheld) shall be cause for termination of this
Agreement. DOCUMENT SCIENCES may assign this Agreement only a parent, subsidiary
or affiliated firm, to a third party in connection with a consolidation or
merger, or to a third party upon a sale or transfer of substantially all of
DOCUMENT SCIENCES' business assets.
9.07 SEVERABILITY. If any provision of this Agreement is held invalid by any
law, rule, order or regulation of any government, or by the final determination
of any court, such invalidity will not affect the enforceability of any other
provisions not held to be invalid.
9.08 OMISSIONS. Any delay or omission by either party to exercise any right or
remedy under this Agreement will not be construed to be a waiver of any such
right or remedy or any other right or remedy. All of the rights of either party
under this Agreement will be cumulative and may be exercised separately or
concurrently.
9.09 LIMITATION OF LIABILITY. Subject to Sections 5.05 and 5.06:
(a) in no event will either party be liable to the other for any
special, indirect, incidental or consequential damages in any way arising out of
or relating to this Agreement; and (b) the maximum liability of DOCUMENT
SCIENCES to VAR and vice versa for direct damages in any way arising out of or
relating to this Agreement shall in no event exceed the total amount of money
actually paid by VAR to DOCUMENT SCIENCES under this Agreement, during the most
recently ended twelve (12) month period during the term hereof which precedes
the time of fixing of such liability or $100,000.00, whichever is less.
9.10 GOVERNING LAW. This Agreement will be governed in accordance with the laws
of the State of California. The parties agree that the "1990 Incoterms", or any
later version thereof, and the Convention of International Sale of Goods, will
not be applicable to this Agreement or any order issued hereunder.
9.11 DISPUTE RESOLUTION. The parties will first endeavor to informally resolve
all disputes between them prior to resorting to arbitration under this Section.
In the event that the parties are unable to informally resolve any dispute, it
will be decided through arbitration pursuant to the rules of the American
Arbitration Association then in effect. The arbitration, which will be held in
San Diego,
Page 9 of 10
<PAGE> 10
DOCUMENT SCIENCES INTERNATIONAL VALUE ADDED REMARKETER AGREEMENT
California, will be binding upon the parties and may be entered by any court of
competent jurisdiction.
9.12 EXPORT. VAR hereby agrees that VAR will not export directly or indirectly,
any United States source Licensed Software or other technical information
acquired from DOCUMENT SCIENCES or any products utilizing any such Licensed
Software or other technical information, to any country for which the United
States government or any agency thereof at the time of export requires an export
license or other governmental approval, without first obtaining the written
consent to do so from (a) the United States Department of Commerce or other
agency of the United States government when required by an applicable statute or
regulation, and (b) DOCUMENT SCIENCES, which consent DOCUMENT SCIENCES may
withhold if such export would, in the reasonable business judgment of DOCUMENT
SCIENCES be detrimental to the interests of DOCUMENT SCIENCES.
9.13 NO AGENCY. It is agreed and understood that neither DOCUMENT SCIENCES nor
VAR has any authority to bind the other with respect to any matter hereunder.
Under no circumstances shall either DOCUMENT SCIENCES or VAR have the right to
act or make any commitment of any kind to any third party on behalf of the other
or to represent the other in any way as an agent. VAR is, and shall perform its
obligations hereunder as, an independent contractor and is not, as shall not be
considered to be, an agent or representative of DOCUMENT SCIENCES.
9.14 FEDERAL GOVERNMENT SUBLICENSES. If VAR grants a sublicense to the United
States government, the Licensed Software shall be provided with "Restricted
Rights"' and the VAR will place a legend, in addition to applicable copyright
notices, on the documentation and on the tape or diskette label, substantially
similar to the following:
Restricted Rights Legend. "Use, duplication or disclosure by the Government
is subject to restrictions as set forth in subparagraph (c)(1)(ii) of the
Department of Defense Regulations Supplement ("DFARS") 252.227-7013, Rights
in Technical Data and Computer Software (October 1988) and Federal
Acquisition Regulation ("FAR") 52.227-14."
VAR will require its Distributors to use such legends when they grant
sublicenses to the United States government.
9.15 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the
parties as to the subject matter hereof, and supersedes any and all prior oral
and written understandings and agreements as to such subject matter.
Page 10 of 10
<PAGE> 11
EXHIBIT A
PRODUCTS
All Document Sciences Software listed below:
CompuSet 6.1
CompuPrep
Metacode Emitter
Postscript Emitter
AFP Emitter
PCL Emitter
XES Emitter
TIFF Importer
PCL Importer
lMG Consolidator
HostPrint-Meta
Transformer - PCL to Meta
Document Viewing Service
CompuPack Bundle:
- CompuBuild
- CompuSpec
- CompuMerge
- CompuView
Document Library Service
DDM / Edit Client
DDM / Build Client
DDM / Generate Client
CompuView Navigator
Discount to Geneva on above Products is calculated as 40% of the list price as
defined on the Price Sheet the current version of which being attached to this
agreement. The price of CompuSet includes 5,OOOGBP for a week of training which
will be collected exclusively by Geneva. This will be subtracted from the price
of CompuSet before the calculation of the discount. Geneva will also receive a
40% discount on the Annual License Fees as defined on the Price Sheet for second
and subsequent years.
<PAGE> 12
EXHIBIT B
TERRITORY
Exclusive Agreement for the Geographic Area of the British Isles (England,
Scotland, Wales, Northern Ireland)
-2-
<PAGE> 13
EXHIBIT C
REVENUE PROJECTION
The revenue targets are:
$ 900 K Year 1
$ 1.8 M Year 2
$ 3.0 M Year 3
The revenue is in US$ based on published list prices (not discounted) and is the
sum of initial licenses, consulting to Document Sciences, and the annual license
fees during subsequent years.
If these revenue targets are not met, it is possible that Geneva might lose
their exclusivity.
-3-
<PAGE> 14
For the purposes of clause 2.05 of our agreement with Geneva Digital Ltd. Dated
June 1, 1995, we confirm that one (1) sales and three (3) account
manager/customer support personnel are satisfactory, that no incentive sales
plan is necessary and that Geneva's existing Document Solutions Laboratory in
Walton on Thames constitutes a satisfactory marketing centre.
EXHIBIT D
SOFTWARE SUPPORT LEVELS AND SERVICE RESPONSE
FIRST LEVEL SUPPORT RESPONSIBILITIES
To act as the point of contact for the customer.
To provide the channel through which customers receive product, documentation,
fixes, workarounds and new releases and versions.
To provide a first level telephone (and on-site) response to customer queries
and requests.
To keep the customer informed on progress in the resolution of any problems that
have been referred to second/third level support.
To present second level support with customer problems that it is unable to
resolve to the customer's satisfaction.
SECOND LEVEL SUPPORT RESPONSIBILITIES:
To verify problems reported by customers through first level support channels
including their duplication in a controlled environment wherever possible.
-4-
<PAGE> 15
To report verified product failures or unresolved problems to third level
support.
To coordinate the comprehensive and clear definition and resolution of all
problems reported by a customer including maintaining contact with first level
support throughout the resolution process and gathering additional diagnostic
information requested by third level support.
THIRD LEVEL SUPPORT RESPONSIBILITIES:
To analyze reported problems and undertake efforts to develop solutions in a
timely fashion in accordance with the SPAR (Software Problem Action Request)
process summarized below.
To provide fixes and workarounds in the appropriate format in response to
reported problems.
To provide software updates, enhancements and releases for onward distribution
to customers via first level support.
-5-
<PAGE> 1
EXHIBIT 10.21
DOCUMENT SCIENCES CORPORATION VALUE ADDED REMARKETER AGREEMENT
This Value Added Remarketer Agreement ("Agreement"), made and entered into
between Business and Business ("VAR") as defined below, and DOCUMENT SCIENCES
CORPORATION, located at 6333 Greenwich Drive, Suite 250, San Diego, California
92122 ("DOCUMENT SCIENCES") is effective December 8, 1994 ("Effective Date").
TABLE OF CONTENTS
Article Title
ARTICLE 1 DEFINITIONS
ARTICLE 2 APPOINTMENT AND OBLIGATIONS
ARTICLE 3 ROYALTIES AND PAYMENT
ARTICLE 4 DELIVERABLES AND MODIFICATIONS
ARTICLE 5 WARRANTY DISCLAIMER,
INDEMNITIES, AND PATENT AND
COPYRIGHT
ARTICLE 6 CONFIDENTIAL INFORMATION
ARTICLE 7 TERM AND TERMINATION
ARTICLE 8 GENERAL PROVISIONS
The parties agree as follows:
ARTICLE 1 - DEFINITIONS
1.01 SUBLICENSEES. Persons who acquire Value Added
Products and sublicense the Licensed Software for their
own internal use and not for resale, sublicense or
distribution to others.
1.02 DISTRIBUTOR. A third party to whom VAR grants
the right to sublicense and market the Value Added Product
under the terms of this Agreement.
1.03 DOCUMENT SCIENCES LICENSORS. Persons
identified in the Licensed Software as having licensed
portions of the Licensed Software to DOCUMENT
SCIENCES.
1.04 END USER LICENSE. DOCUMENT SCIENCES
standard end user software license and warranty terms and
conditions.
1.05 LICENSED SOFTWARE. The DOCUMENT
SCIENCES software package (including the Developer's
Software Package) described in Exhibit A, in object code
format only, manuals and other related documentation and
Upgrade Licensed Software.
1.06 TERRITORY. Geographic or market coverage areas
identified in Exhibit B.
1.07 UPGRADE LICENSED SOFTWARE. New releases of
Licensed Software which are incorporated into the Licensed
Software by VAR pursuant to the terms of this Agreement
during the term of this Agreement and which contains
modifications, enhancements and/or improvements to the
Licensed Software.
1.08 VALUE ADDED PRODUCT. A product that includes
the Licensed Software, an addition to the Licensed Software
as specified in Exhibit C, media on which the software, in
object code format, is loaded, and associated software
documentation, including an End User License.
This is page one of a six page Value Added Remarketer Agreement ending with
Section 8.15, exclusive of Exhibits that are separately attached. The parties
acknowledge they have read this Agreement and its Exhibits and agree to be bound
by all terms and conditions.
<TABLE>
<S> <C>
BUSINESS AND BUSINESS DOCUMENT SCIENCES CORPORATION
- --------------------------------------------
/S/ H. C. BULMAN /S/ JUDITH A. O'REILLY
- -------------------------------------------- ------------------------------------------
By By
HAYRI BULMAN JUDITH O'REILLY
- -------------------------------------------- ------------------------------------------
Printed Name Printed Name
MANAGING DIRECTOR MANAGING DIRECTOR
- -------------------------------------------- ------------------------------------------
Title Title
DECEMBER 15, 1994 JANUARY 10, 1994
- -------------------------------------------- ------------------------------------------
Date Date
SEESTR. 149, 8700 KUSNACHT 7H, SWITZERLAND 6333 GREENWICH DRIVE, SUITE 250, SAN DIEGO
- -------------------------------------------- ------------------------------------------
Mailing Address CALIFORNIA 92122
----------------
Mailing Address
</TABLE>
Page 1 of 7
<PAGE> 2
DOCUMENT SCIENCES VALUE ADDED REMARKETER AGREEMENT
ARTICLE 2 - APPOINTMENT AND OBLIGATIONS
2.01 APPOINTMENT AND SOFTWARE LICENSE. DOCUMENT SCIENCES hereby grants to VAR,
during the term of this Agreement, a non-exclusive license under any and all
patents, copyrights, and other proprietary rights licensable by DOCUMENT
SCIENCES to reproduce the Licensed Software for the sole purpose of producing a
Value Added Product and to use and distribute by sublicense the Licensed
Software, in whole or in part, as a part of the Value Added Product. This grant
is exclusively for the Territory. It is a condition to the license grant set
forth in this Agreement that VAR adds value to the Licensed Software in the
manner specified in, and that all Value Added Products must be sublicensed by
VAR with substantial added value as specified by Exhibit C or as otherwise
approved in advance and in writing by DOCUMENT SCIENCES. VAR accepts this
appointment, subject to the terms and conditions of this Agreement. DOCUMENT
SCIENCES further grants to VAR a non-exclusive, non-transferable, royalty-free
license to use the Licensed Software internally for demonstration and training
purposes only, subject to the End User License. VAR shall use the Licensed
Software for general operations purposes or processing of internal
administrative or customer data only pursuant to a separate End User License
executed between VAR and DOCUMENT SCIENCES.
2.02 LIMITATION UPON SUBLICENSE RIGHTS. VAR shall require the written commitment
from each of its distributors, agents, and any other party to whom VAR
distributes or sublicenses the Value Added Product for redistribution by
sublicense, that they will not distribute the Value Added product outside the
Territory nor will they authorize distribution outside the Territory. VAR shall
use its best efforts to assure that the territorial restrictions of the license
set forth herein are honored within its own organization as well as by VAR's
distributors and agents.
2.03 SUBLICENSE TERMS. VAR shall distribute the Value Added Product pursuant to
a sublicense agreement which shall, prior to any distribution of the Value Added
Product, be approved in writing by DOCUMENT SCIENCES and which shall contain the
substance of the conditions and restrictions set forth in the End User License.
2.04 DISTRIBUTORS. VAR may appoint Distributors to market and sublicense the
Licensed Software under the terms of this Agreement. Each Distributor shall
execute a written Agreement which shall contain such provisions as are
reasonably necessary for VAR to satisfy its commitments under this Agreement.
2.05 LIMITED RIGHTS TO LICENSED SOFTWARE. VAR may reproduce and distribute the
Licensed Software only to the extent expressly authorized or licensed under this
Agreement. No other rights to such software are granted by DOCUMENT SCIENCES to
VAR, or may be granted by VAR to any third party. In particular, but not by way
of limitation, except as specifically agreed by DOCUMENT SCIENCES in writing,
neither VAR nor any of its employees, agents or representatives may create,
reproduce or distribute derivative works of any such software. Further, neither
VAR nor any of its employees, agents or representatives will attempt to
decompile or otherwise reverse engineer any such software in order to derive its
source code. VAR shall not rent, electronically distribute or timeshare the
Licensed Software or market the software by interactive cable or remote
processing services. Any violation by VAR of its obligations under this Section
would be deemed an incurable material breach of this Agreement and would enable
DOCUMENT SCIENCES to immediately terminate this Agreement under Section 7.02(b).
2.06 TERMINATION. Any sublicense or distribution of License Software by VAR
which is not in accordance with its appointment under this Section 2, will be
deemed an incurable material breach of this Agreement and will enable DOCUMENT
SCIENCES to immediately terminate this Agreement under Section 7.02(b).
2.07 LICENSE RECOGNITION; TRADEMARKS.
(a) VAR shall communicate to its customers and End Users the Licensed
Software (distributed pursuant to the license granted in this Section 2) is
licensed to it by DOCUMENT SCIENCES by identifying it as [DOCUMENT SCIENCES
VIEWING SOFTWARE] licensed to VAR. During the term of this Agreement, VAR may
also use DOCUMENT SCIENCES name and logo in its advertising, catalogs, exhibits,
public relations materials and manuals covering the Value Added Products. All
such uses will be subject to DOCUMENT SCIENCES prior written approval and shall
not indicate the Licensed Software or any code contained in the Licensed
Software under license from DOCUMENT SCIENCES Licensors is the proprietary
product of VAR or any party other than DOCUMENT SCIENCES or the original
DOCUMENT SCIENCES Licensor, as the case may be.
2.08 GENERAL OBLIGATIONS OF VAR. VAR will (i) actively market, promote and
solicit the sale of Value Added Products to End Users in the Territory, (ii)
establish and maintain appropriate marketing and distribution facilities and
personnel within its organization to create and meet the demand for Value Added
Products among End Users in the Territory, (iii) promote the goodwill, name and
reputation of DOCUMENT SCIENCES and all of the Licensed Software, (iv) represent
the Licensed Software
Page 2 of 7
<PAGE> 3
DOCUMENT SCIENCES VALUE ADDED REMARKETER AGREEMENT
accurately and fairly and at all times avoid misleading or unethical business
practices, and (v) at all times comply with all laws and regulations applicable
to the conduct of its business.
2.09 SPECIFIC OBLIGATIONS OF VAR. VAR will have the following specific
obligations:
(a) Distribute the following materials to all of its locations in the
Territory (i) marketing and technical brochures which accurately describe the
functions, features, operation and advantages of the Licensed Software
incorporated within the Value Added Products; and (ii) educational material
relating to the Value Added Products developed by VAR, for training VAR's sales
and support personnel.
(b) Train an agreed upon number of its sales and customer support
personnel in the features and functions of the Licensed Software and Value Added
Product.
(c) Provide total support to all sublicensees including, without
limitation (i) on-site installation of the Value Added Products and/or customer
documentation sufficient to enable the sublicensees to install the Value Added
Products themselves; (ii) customer training or documentation regarding operation
of the Value Added Products; (iii) telephone hot-line support during normal
business hours.
(d) Promptly inform DOCUMENT SCIENCES about new problems or errors with
any of the Licensed Software which are reported by sublicensees or discovered by
VAR.
(e) Provide DOCUMENT SCIENCES, within thirty (30) days following the
end of each calendar quarter, a report listing the quantity of each Value Added
Product licensed or sold to any End User in the Territory during that calendar
quarter, and the name and address of each End User.
(f) Q On the date of execution of this Agreement, and thereafter by the
end of each calendar quarter, provide to DOCUMENT SCIENCES a non-binding
forecast setting forth the quantity of royalty bearing sublicenses it then
estimates generating during each of the succeeding four (4) calendar quarters.
The information reported for the first succeeding calendar quarters will be
broken down by calendar month.
2.10 Obligations of DOCUMENT SCIENCES. DOCUMENT SCIENCES will have the
following obligations:
(a) Make available to VAR, at DOCUMENT SCIENCES standard VAR pricing,
reasonable quantities of sales and technical brochures.
(b) Provide agreed upon training to VAR on the features, functions,
operation and installation of the Licensed Software. The training will be
provided at DOCUMENT SCIENCES San Diego offices, or at other agreed upon
locations. VAR will be responsible for the travel and per diem expenses of its
personnel.
(c) Use reasonable efforts to resolve, within a reasonable period of
time, extraordinary technical problems or errors with any Licensed Software
which are identified by VAR and which VAR is unable to resolve. Each problem or
error must be identified telephonically or, when appropriate, in writing and
faxed to DOCUMENT SCIENCES designated support person or fax number in San Diego,
California. DOCUMENT SCIENCES does not guarantee it will be able resolve all
identified problems or errors.
(d) Provide maintenance pursuant to and in accordance with the VAR
Maintenance Agreement attached in Exhibit F.
2.11 TITLE TO LICENSED SOFTWARE. It is expressly understood and agreed that
title to and all copyright and other proprietary rights in the Licensed Software
will not pass to VAR. Rather, such title and all such rights will at all times
be and remain with DOCUMENT SCIENCES and/or the DOCUMENT SCIENCES Licensors.
ARTICLE 3 - ROYALTIES AND PAYMENT
3.01 PURCHASE. VAR agrees to pay royalties to DOCUMENT SCIENCES in respect of
the Licensed Software licensed hereunder and to pay for maintenance provided
pursuant to this Agreement. This Article sets forth the terms and conditions
under which such royalties and sales and technical support fees will be
determined and paid.
3.02 ROYALTY AMOUNT AND FEES. The royalties to be paid by VAR to DOCUMENT
SCIENCES and the prices to be invoiced by DOCUMENT SCIENCES to VAR for sales and
technical support and related materials purchased by VAR hereunder will be as
set forth in Exhibit E. VAR will solely determine the royalties and/or fees at
which it sublicenses and distributes the Value Added Products to End Users in
the Territory.
3.03 TAXES. VAR will furnish DOCUMENT SCIENCES with appropriate tax exemption
certificates.
3.04 REPORTS AND AUDITS. Royalties shall accrue upon the distribution of Value
Added Products by VAR to its customers, distributors or dealers or as the
Licensed Software or Value Added Products are distributed for royalty bearing
internal use. Royalties accrued during each
Page 3 of 7
<PAGE> 4
DOCUMENT SCIENCES VALUE ADDED REMARKETER AGREEMENT
calendar quarter shall be paid within thirty (30) days after the close of that
calendar quarter. Overdue payments shall accrue interest at the rate of twelve
per cent (12%) per annum until paid.
3.05 SUBLICENSE REPORTS. Within twenty (20) days of the last day of each month
VAR shall send DOCUMENT SCIENCES a report detailing for that month:
(a) Sublicensee name, address, make, model and operating system of CPU,
date of installation, Value Added Product installed, and total royalty payment
and fees due to DOCUMENT SCIENCES for each such Value Added Product; and
(b) the Distributor Agreements executed during the prior month,
including names and addresses of the Distributors.
VAR shall require its Distributors to report this information to the
VAR and will include it in the report for the month in which VAR received the
information.
Each royalty payment shall be accompanied by a written report
indicating the number of copies of Value Added Products distributed or
sublicensed by VAR to customers, distributors, dealers and distributed for
royalty bearing internal use and non royalty bearing purposes. Overdue payments
shall accrue interest at the rate of twelve per cent (12%) per annum until paid.
3.06 VAR RECORDS. VAR shall keep records adequate to verify reports and payments
to be made pursuant to this Agreement for a period of three (3) years following
date of the reports pursuant to this Article 3.
3.07 INSPECTION. DOCUMENT SCIENCES shall have the right (no more than once
during any calendar year) to inspect the records of VAR on reasonable notice and
during regular business hours to verify the reports and payments required
hereunder. The entire cost of such inspection shall be borne by DOCUMENT
SCIENCES and such Certified Public Accountant shall not disclose to DOCUMENT
SCIENCES any information other than information relating to the computation and
accuracy of such reports. If an inspection reveals an error of at least 5% in
favor of DOCUMENT SCIENCES, VAR shall pay the cost of the inspection, in
addition to any underpayments.
ARTICLE 4 - DELIVERABLES AND
MODIFICATIONS
4.01 DELIVERY OF LICENSED SOFTWARE. DOCUMENT SCIENCES shall provide VAR with
reproducible copies of all documentation and object code of the Licensed
Software listed in Exhibit A.
4.02 DOCUMENTATION. VAR may modify and reproduce the contents of the
documentation provided by DOCUMENT SCIENCES, but DOCUMENT SCIENCES reserves the
right to monitor any modifications made to the documentation by VAR. VAR agrees
to abide by any request by DOCUMENT SCIENCES to withdraw or change any such
modification that DOCUMENT SCIENCES reasonably deems undesirable to the interest
of DOCUMENT SCIENCES.
4.03 MODIFICATIONS. All Upgrade Licensed Software made by DOCUMENT SCIENCES that
it intends to release shall be offered to VAR pursuant to DOCUMENT SCIENCES
Maintenance Agreement attached as Exhibit D.
ARTICLE 5 - WARRANTY DISCLAIMER,
INDEMNITIES, AND PATENT AND COPYRIGHT
5.01 WARRANTY DISCLAIMER. DOCUMENT SCIENCES and VAR, agree the Licensed Software
is provided "AS IS". DOCUMENT SCIENCES DISCLAIMS ALL WARRANTIES, EXPRESSED OR
IMPLIED, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR ARTICULAR PURPOSE.
5.02 GENERAL INDEMNITY. VAR agrees, at its expense, to defend, indemnify and
hold DOCUMENT SCIENCES harmless from and against all liabilities, damages,
costs, fees and expenses, including reasonable attorney's fees, arising out of
suits, claims, actions or proceedings brought by or on behalf of any person on
account of injury or damage proximately caused by VAR, its agents,
representatives, distributors or employees, in the course of performing VAR's
obligations under this Agreement, provided DOCUMENT SCIENCES will promptly
notify VAR of any such suit, claim, action or proceeding, and VAR will have
control of the defense and all negotiations for its settlement or compromise.
DOCUMENT SCIENCES agrees to fully cooperate with VAR in the conduct of such
defense and negotiations.
5.03 INTELLECTUAL PROPERTY INDEMNITY. DOCUMENT SCIENCES will, at its expense,
defend, indemnify and hold harmless VAR from all liabilities, damages, costs,
fees and expenses, including reasonable attorney's fees, arising out of suits,
claims, actions or proceedings charging infringement in the Territory of any
patents, copyrights, trade secrets or other intellectual property rights owned
or controlled by any third party as a result of the exercise by VAR of its
rights under this Agreement, provided VAR promptly notifies DOCUMENT SCIENCES in
writing of any such suit, claim, action or proceeding, and DOCUMENT SCIENCES
will have control of the defense and all negotiations for its settlement or
compromise. VAR
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DOCUMENT SCIENCES VALUE ADDED REMARKETER AGREEMENT
agrees to fully cooperate with DOCUMENT SCIENCES in the conduct of such defense
and negotiations.
5.04 LIMITATION. The indemnity of Section 5.03 will not apply, and VAR will
indemnify DOCUMENT SCIENCES in a manner fully equivalent to such indemnity, in
any suit, claim or proceeding brought against DOCUMENT SCIENCES for any
infringement due to the Licensed Software being modified (by DOCUMENT SCIENCES
or others, including VAR) to VAR's specifications, or being used or sold in
combination with equipment, software, or supplies not provided by DOCUMENT
SCIENCES. DOCUMENT SCIENCES has no other expressed or implied warranty of
noninfringement or liability for infringement or any damages therefrom.
5.05 COPYRIGHTS. It is expressly understood by VAR that the Licensed Software in
the form of object code on physical media and in the form of manuals is
copyrighted by DOCUMENT SCIENCES. VAR agrees to maintain and reproduce all
copyright notices of DOCUMENT SCIENCES and any DOCUMENT SCIENCES Licensors
contained in the object code of the Licensed Software and on the manuals. VAR
further agrees to have copyright notices as provided by DOCUMENT SCIENCES appear
on media labels.
5.06 ENFORCEMENT OF SUBLICENSES. VAR shall enforce the terms of its sublicenses
with all Sublicensees and agreements with all Distributors and shall inform
DOCUMENT SCIENCES of any known breach of such terms.
ARTICLE 6 - CONFIDENTIAL INFORMATION
6.01 CONFIDENTIALITY. Subject to Section 6.02, all DOCUMENT SCIENCES information
which is marked proprietary or confidential and is made available to VAR will be
held in confidence by VAR and will not be disclosed to third parties, or used by
VAR, except to the extent authorized by this Agreement. If the information is
provided orally or visually, DOCUMENT SCIENCES will identify the disclosure as
being proprietary or confidential at the time of disclosure and, within four (4)
weeks thereafter, reduce it to writing and provide it to VAR. Results of
benchmark tests run by VAR may not be disclosed unless DOCUMENT SCIENCES
consents to such disclosure in writing.
6.02 EXCEPTIONS. VAR's obligations under Section 6.01 will not apply with
respect to any DOCUMENT SCIENCES information which:
(a) was known to VAR prior to its first receipt from DOCUMENT SCIENCES;
or
(b) at any time becomes a matter of public knowledge without any fault
of VAR ; or
(c) is at any time lawfully received by VAR from a third party under
circumstances permitting its disclosure to others; or
(d) is at any time furnished to a third party by DOCUMENT SCIENCES
without restriction on use or disclosure; or
(e) was first disclosed by DOCUMENT SCIENCES to VAR more than three (3)
years earlier.
6.03 EXPIRATION OR TERMINATION. Promptly following the expiration or any
termination of this Agreement, VAR will return to DOCUMENT SCIENCES, at DOCUMENT
SCIENCES expense, all DOCUMENT SCIENCES confidential and proprietary information
then in its possession, and all copies thereof.
6.04 RECIPROCITY. The confidentiality conditions of this section are reciprocal
between Document Sciences and the VAR.
ARTICLE 7 - TERM AND TERMINATION
7.01 TERM. Unless sooner terminated in accordance with Section 7.02, the term of
this Agreement will be for an initial period of two (2) years from the Effective
Date. The term will automatically extend for succeeding one (1) year periods,
unless either party notifies the other in writing within ninety (90) days prior
to expiration of the then current period of its intention not to further extend
this Agreement.
7.02 TERMINATION FOR CAUSE. Either party may terminate his Agreement upon
written notice of termination to the other party in any of the following events:
(a) the other party materially breaches this Agreement in a manner
which can be cured, and such breach remains uncured for thirty (30) days
following written notice of breach by the terminating party; or
(b) the other party materially breaches this Agreement in a manner
which cannot be cured;
7.03 EFFECT OF TERMINATION OR EXPIRATION. In the event of the expiration or any
termination of this Agreement:
(a) VAR shall (i) be able to retain one copy of the then current
release of the Licensed Software for the sole purpose of maintaining the Value
Added Products for its sublicensees; (ii) discontinue distribution of the Value
Added product and shall either deliver to DOCUMENT SCIENCES and/or destroy all
Licensed Software and related materials furnished by DOCUMENT SCIENCES (except
for the one copy), together with all copies thereof (including that in memory or
data storage apparatus under
Page 5 of 7
<PAGE> 6
DOCUMENT SCIENCES VALUE ADDED REMARKETER AGREEMENT
control of sublicensees); and (iii) warrant in writing to DOCUMENT SCIENCES
within thirty (30) days of termination the Licensed Software, related materials
and all copies thereof (except for the one copy) have been either returned to
DOCUMENT SCIENCES and/or destroyed.
(b) Neither party will be liable to the other for any damage,
expenditures, loss of profits or prospective profits of any kind or nature
sustained or arising out of, or alleged to have arisen out of, such termination
or expiration. Termination or expiration of this Agreement will not relieve or
release either party from making payments which may be owing to the other party
under the terms of this Agreement.
(c) VAR will immediately cease representing itself as a DOCUMENT
SCIENCES reseller, and promptly return to DOCUMENT SCIENCES or destroy, at
DOCUMENT SCIENCES sole option, any advertising and other materials furnished to
it by DOCUMENT SCIENCES.
(d) VAR will remove and not thereafter use any signs containing the
name or trademark of DOCUMENT SCIENCES, and will immediately destroy all of its
stationery, advertising matter and other preprinted matter remaining in its
possession or under its control containing the word "DOCUMENT SCIENCES" and
related DOCUMENT SCIENCES trade names or trademarks.
Other than as specified to the contrary in subsection (a) of this
Section 7.02 above, all of VAR's rights to market, reproduce, sublicense and use
the Licensed Programs shall cease. Any obligation of DOCUMENT SCIENCES to
provide maintenance and/or support described in Section 2.08(d) above, or
otherwise shall cease. However, upon agreement of both parties, which agreement
VAR may withhold in the exercise of its absolute discretion, VAR may arrange to
receive continued maintenance and support from DOCUMENT SCIENCES for the
Licensed Software under DOCUMENT SCIENCES then current policies.
7.04 SURVIVAL. The provisions of this Agreement will, to the extent applicable,
survive the expiration or any termination.
ARTICLE 8 - GENERAL PROVISIONS
8.01 FORCE MAJEURE. Except for the payment of money, neither party will be
liable to the other for any failure to perform or delay in the performance of
its obligations caused by circumstances beyond its reasonable control.
8.02 NOTICES. Any notice which may be or is required to be given under this
Agreement will be written or by facsimile, unless otherwise indicated. Any
written notices will be sent by registered mail or certified mail, postage
prepaid, return receipt requested. Any facsimile notice should be followed
within three (3) working days by written notice. Notices will be deemed to have
been given when received, properly addressed. All notices to VAR will be
addressed as shown on the first page of this Agreement. All notices to DOCUMENT
SCIENCES should be addressed to:
DOCUMENT SCIENCES, INC.
Attn: President
6333 Greenwich Drive, Suite 250
San Diego, California 92122
Either party may change its address by giving notice to the other party pursuant
to this Section.
8.03 PUBLICITY. Neither party will issue a press release or other similar
publicity of any nature regarding this Agreement without the other party's
written approval, which will not be unreasonably withheld. Approval will be
deemed to have been given to the extent that the disclosure is required in order
to comply with governmental rules, regulations or requirements. In this event,
the publishing party will review the text of the disclosure with the other party
prior to disclosure.
8.04 HEADINGS. Except for Article 1, Definitions, headings and titles of the
Articles and Sections of this Agreement are inserted for convenience only and do
not affect the construction or interpretation of any provision.
8.05 AMENDMENT. This Agreement may be amended only by written amendment duly
signed by authorized representatives of both parties.
8.06 ASSIGNMENT. DOCUMENT SCIENCES entered into this Agreement based on the
personal representations of VAR's principals as to their knowledge and
expertise, ability to add value to the Licensed Software and market the Value
Added Products, and financial status. VAR shall not, therefore assign, transfer,
or sell any of its rights, or delegate any of its responsibilities under this
Agreement without DOCUMENT SCIENCES prior written consent. Any material change
in ownership of VAR without DOCUMENT SCIENCES prior written consent (which shall
not be unreasonably withheld) shall be cause for termination of this Agreement.
DOCUMENT SCIENCES may assign this Agreement only to a parent, subsidiary or
affiliated firm, to a third party in connection with a consolidation or merger,
or to a third party upon a sale or transfer of substantially all of DOCUMENT
SCIENCES business assets.
8.07 SEVERABILITY. If any provision of this Agreement is held invalid by any
law, rule, order or regulation of any government, or by the final determination
of any court, such
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DOCUMENT SCIENCES VALUE ADDED REMARKETER AGREEMENT
invalidity will not affect the enforceability of any other provisions not held
to be invalid.
8.08 OMISSIONS. Any delay or omission by either party to exercise any right or
remedy under this Agreement will not be construed to be a waiver of any such
right or remedy or any other right or remedy. All of the rights of either party
under this Agreement will be cumulative and may be exercised separately or
concurrently.
8.09 LIMITATION OF LIABILITY. Subject to Sections 5.02, 5.03 and 5.04:
(a) in no event will either party be liable to the other for any
special, indirect, incidental or consequential damages in any way arising out of
or relating to this agreement; and
(b) the maximum liability of DOCUMENT SCIENCES to VAR for direct
damages in any way arising out of or relating to this Agreement shall in no
event exceed the total amount of money actually paid by VAR to DOCUMENT SCIENCES
under this Agreement, during the most recently ended twelve (12) month period
during the term hereof which precedes the time of fixing of such liability or
$100,000.00 whichever is less.
8.10 GOVERNING LAW, This Agreement will be governed in accordance with the laws
of the State of California.
8.11 DISPUTE RESOLUTION. The parties will first endeavor to informally resolve
all disputes between them prior to resorting to arbitration under this Section.
In the event the parties are unable to informally resolve any material dispute,
it will be decided through arbitration pursuant to the rules of the American
Arbitration Association then in effect. The arbitration, which will be held in
Pleasanton, California, will be binding upon the parties and may be entered by
any court of competent jurisdiction.
8.12 EXPORT. VAR hereby agrees that VAR will not export, directly or indirectly,
any U.S. source Licensed Software or other technical information acquired from
DOCUMENT SCIENCES or any products utilizing any such Licensed Software or other
technical information, to any country for which the U.S. Government or any
agency thereof at the time of export requires an export license or other
governmental approval, without first obtaining the written consent to do so from
(a) the United States Department of Commerce or other agency of the United
States Government when required by an applicable statute or regulation, and (b)
DOCUMENT SCIENCES, which consent DOCUMENT SCIENCES may withhold if such export
would, in the reasonable business judgment of DOCUMENT SCIENCES, be detrimental
to the interests of DOCUMENT SCIENCES.
8.13 NO AGENCY. It is agreed and understood that neither DOCUMENT SCIENCES nor
VAR has any authority to bind the other with respect to any matter hereunder.
Under no circumstances shall either DOCUMENT SCIENCES or VAR have the right to
act or make any commitment of any kind to any third party on behalf of the other
or to represent the other in any way as an agent. VAR is, and shall perform its
obligations hereunder as, an independent contractor and is not, and shall not be
considered to be, an agent or representative of DOCUMENT SCIENCES.
8.14 FEDERAL GOVERNMENT SUBLICENSES. If VAR grants a sublicense to the United
States government, the Licensed Software shall be provided with "Restricted
Rights" and the VAR will place a legend, in addition to applicable copyright
notices, on the documentation and on the tape or diskette label, substantially
similar to the follows:
Restricted Rights Legend. "Use, duplication or disclosure by the
Government is subject to restrictions as set forth in subparagraph
(c)(1)(ii) of the Department of Defense Regulations Supplement (DFARS)
252.227-7013, Rights in Technical Data and Computer Software (October
1988) and Federal Acquisition Regulation (FAR)52.227-14."
VAR will require its Distributors to use such legends when they grant
sublicenses to the U.S. government.
8.15 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of the
parties as to the subject matter hereof, and supersedes any and all prior oral
and written understandings and agreements as to such subject matter.
Page 7 of 7
<PAGE> 1
EXHIBIT 11.1
DOCUMENT SCIENCES CORPORATION
COMPUTATION OF PRO FORMA NET INCOME PER SHARE
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
-------------------------- -----------------
1993 1994 1995 1995 1996
------ ------ ------ ------ ------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net income...................................... $ 413 $ 712 $1,052 $ 188 $ 246
====== ====== ====== ====== ======
Weighted average common shares outstanding...... 3 969 1,005 969 1,604
Adjustments to reflect requirements of the
Securities and Exchange Commission (Effect of
SAB 83)....................................... 147 147 147 147 147
Effect of assumed conversion of Series A
Redeemable Preferred Stock from date of
issuance...................................... 7,140 7,140 7,140 7,140 7,140
------ ------ ------ ------ ------
Shares used to compute pro forma net income per
share......................................... 7,290 8,256 8,292 8,256 8,891
====== ====== ====== ====== ======
Pro forma net income per share $ .06 $ 0.09 $ 0.13 $ 0.02 $ 0.03
====== ====== ====== ====== ======
</TABLE>
<PAGE> 1
Exhibit 21.1
SUBSIDIARIES OF DOCUMENT SCIENCES
Document Sciences Europe
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" and
"Selected Consolidated Financial Data" and to the use of our report dated July
12, 1996, in Amendment No. 1 to the Registration Statement (Form S-1) and the
related Prospectus of Document Sciences Corporation for the registration of
2,645,000 shares of its common stock.
ERNST & YOUNG LLP
San Diego, California
August 5, 1996
