<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INFORMATION STATEMENT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 14, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10/A
(AMENDMENT NO. 1)
----------------
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR (G) OF
THE SECURITIES EXCHANGE ACT OF 1934
----------------
DATA TRANSLATION II, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
<TABLE>
DELAWARE
<S> <C>
(STATE OR OTHER JURISDICTION OF 04-3332230
INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
</TABLE>
100 LOCKE DRIVE 01752
MARLBORO, MASSACHUSETTS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
(508) 481-3700
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
<TABLE>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON
TO BE SO REGISTERED: WHICH EACH CLASS IS TO BE REGISTERED:
<S> <C>
Common Stock, par value $.01 per share The Nasdaq National Market
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION STATEMENT
DATA TRANSLATION II, INC.
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
This Information Statement is being furnished in connection with the
distribution (the "Distribution") by Data Translation, Inc. ("DTI") to holders
of record of shares of common stock of DTI, par value $.01 per share (the "DTI
Stock"), at the close of business on [November 25, 1996] (the "Record Date"),
of one share of common stock, par value $.01 per share (the "Common Stock"),
of a newly formed Delaware corporation and wholly-owned subsidiary of DTI,
initially called Data Translation II, Inc. (the "Company"), for every four
shares of DTI Stock owned on the Record Date. Simultaneously with the
Distribution, DTI will change its name to Media 100 Inc. and the Company will
change its name to Data Translation, Inc. As a result of the Distribution,
100% of the outstanding shares of Common Stock will be distributed to holders
of the DTI Stock on a pro rata basis. The Company expects the Distribution to
be effective on December 2, 1996 (the "Distribution Date"). It is expected
that certificates representing shares of Common Stock will be mailed to DTI
stockholders on or about [December 9, 1996].
As a result of certain transactions entered into in connection with the
Distribution, on and after the Distribution Date, the Company will own
substantially all of the businesses and assets of, and will be responsible for
substantially all of the liabilities associated with, DTI's data acquisition
and imaging, commercial products and networking distribution businesses, as
more fully described herein. DTI will retain its digital media business, which
consists of its Media 100(R) product line.
No consideration will be paid by DTI's stockholders for the shares of Common
Stock. There is no current public trading market for the shares of Common
Stock, although it is expected that a "when-issued" trading market will
develop on or about the Record Date. The Company has applied for listing of
the Common Stock on the Nasdaq National Market under the symbol "DATX."
----------------
NO VOTE OF STOCKHOLDERS IS REQUIRED IN CONNECTION WITH THIS DISTRIBUTION.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS INFORMATION STATEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
THIS INFORMATION STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES.
----------------
The date of this Information Statement is November , 1996.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY.................................................................. 1
SUMMARY HISTORICAL FINANCIAL DATA........................................ 3
INTRODUCTION............................................................. 4
THE DISTRIBUTION......................................................... 4
Background and Reasons for the Distribution............................ 4
Manner of Effecting the Distribution................................... 5
No Fractional Shares................................................... 5
Federal Income Tax Aspects of the Distribution......................... 5
Listing and Trading of the Common Stock................................ 7
SPECIAL FACTORS.......................................................... 8
Future Prospects; Dependence on New Products; No Assurance of
Profitability......................................................... 8
Competition............................................................ 8
Capital Requirements................................................... 8
Certain Tax Considerations............................................. 9
Relationship Between the Company and DTI; Conflicts of Interest........ 9
Ability to Attract Qualified Personnel................................. 9
Absence of History as an Independent Company........................... 9
Dependence on Proprietary Technology................................... 9
Absence of Prior Trading Market for the Common Stock................... 10
Common Stock Dividend Policy........................................... 10
Listing and Trading of DTI Stock....................................... 10
Certain Provisions of the Company's Certificate of Incorporation and
By-laws............................................................... 10
Accounting Treatment................................................... 10
RELATIONSHIP BETWEEN THE COMPANY AND DTI AFTER THE DISTRIBUTION.......... 11
Intercompany Agreements................................................ 11
Distribution Agreement............................................... 11
Intellectual Property Agreement...................................... 12
Use and Occupancy Agreements......................................... 12
Corporate Services Agreement......................................... 13
Board of Directors and Management...................................... 13
PRO FORMA CAPITALIZATION OF THE COMPANY.................................. 14
SELECTED HISTORICAL FINANCIAL DATA OF THE COMPANY........................ 15
Consolidated Statements of Operations Data............................. 15
Consolidated Balance Sheet Data........................................ 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OF THE COMPANY............................................ 16
General Overview....................................................... 16
Forward Looking Statements............................................. 16
Discontinued Operations................................................ 16
Results of Operations.................................................. 17
Comparison of Nine Months Ended August 31, 1996 to Nine Months Ended
August 31, 1995....................................................... 17
Comparison of Fiscal Year Ended November 30, 1995 to Fiscal Year Ended
November 30, 1994..................................................... 18
Comparison of Fiscal Year Ended November 30, 1994 to Fiscal Year Ended
November 30, 1993..................................................... 18
Liquidity and Capital Resources........................................ 19
BUSINESS OF THE COMPANY.................................................. 20
Company Overview....................................................... 20
Commercial Products.................................................... 20
Market............................................................... 20
Business Strategy.................................................... 21
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Product and Technology................................................ 21
Customers and Sales................................................... 22
Competition........................................................... 23
Data Acquisition and Imaging............................................ 23
Market................................................................ 23
Business Strategy..................................................... 23
Products and Services................................................. 24
Customers and Sales................................................... 25
Competition........................................................... 25
Research and Development................................................ 25
Manufacturing........................................................... 25
Proprietary Rights...................................................... 26
Backlog................................................................. 26
Employees............................................................... 26
Properties.............................................................. 27
Legal Proceedings....................................................... 27
MANAGEMENT OF THE COMPANY................................................. 28
Directors and Executive Officers........................................ 28
Board of Directors and its Committees................................... 29
Board of Directors Compensation......................................... 29
Executive Compensation.................................................. 29
Summary Compensation Table.............................................. 30
Stock Options........................................................... 31
Option Grants in Last Fiscal Year....................................... 31
Option Exercises and Holdings........................................... 31
Aggregated Option Exercises in Last Fiscal Year and FY-End Option
Values................................................................. 31
Compensation Committee Interlocks and Insider Participation............. 31
Company Stock Plans..................................................... 32
TREATMENT OF EMPLOYEE OPTIONS IN THE DISTRIBUTION......................... 34
CERTAIN RELATIONSHIPS AND TRANSACTIONS.................................... 34
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............ 35
DESCRIPTION OF THE COMPANY'S CAPITAL STOCK................................ 37
Authorized and Outstanding Capital Stock................................ 37
Certain Provisions of the Company's Charter and By-laws................. 37
Statutory Business Combination Provision................................ 39
Transfer Agent and Registrar............................................ 39
INDEPENDENT PUBLIC ACCOUNTANTS............................................ 39
ADDITIONAL INFORMATION.................................................... 40
GLOSSARY.................................................................. 41
</TABLE>
ii
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in this
Information Statement. Reference is made to, and this summary is qualified by,
the more detailed information set forth in this Information Statement, which
should be read in its entirety. Unless the context otherwise requires, (i)
references in this Information Statement to DTI and the Company shall include
DTI's and the Company's respective subsidiaries after the Distribution and (ii)
references in this Information Statement to the Company prior to the
Distribution Date shall refer to the Contributed Businesses as operated by DTI.
DISTRIBUTING CORPORATION: Data Translation, Inc. ("DTI"), which will change
its name to Media 100 Inc. simultaneously with the
Distribution.
DISTRIBUTED CORPORATION: Data Translation II, Inc., a newly formed Delaware
corporation to be renamed Data Translation, Inc.
simultaneously with the Distribution (the
"Company") which, as of the Distribution Date, will
have contributed to it substantially all of the
businesses and assets of, and will be responsible
for substantially all of the liabilities associated
with, DTI's data acquisition and imaging,
commercial products and networking distribution
businesses, as more fully described herein (the
"Contributed Businesses"). On November 11, 1996,
DTI sold a substantial portion of the assets of the
networking distribution business, and the Company
intends to discontinue and wind-up the remainder of
such business as soon as practicable after the
Distribution. See "INTRODUCTION."
PRINCIPAL BUSINESS TO BE
RETAINED BY DTI: DTI will retain its digital media business,
consisting of its Media 100 product line (the
"Retained Business").
PRIMARY PURPOSE OF THE
DISTRIBUTION: To separate the Contributed Businesses from the
Retained Business in order to (i) allow each
company to pursue strategies and investment
opportunities appropriate to its business and size;
(ii) create separate identities for each business
in their respective marketplaces, thereby enhancing
the competitive presence of each company; (iii)
allow management of each of the Company and DTI to
concentrate exclusively on their own businesses,
without regard for the policies and objectives of
the other company; (iv) allow implementation of
more effective equity incentive compensation plans
through the creation of separate publicly traded
equity securities that will be more closely linked
to the separate businesses of the two companies,
thereby enhancing the ability of both companies to
attract, retain, and motivate key personnel; and
(v) allow each of the Company and DTI to position
themselves to obtain lower cost, industry specific
debt and equity financing by presenting the
financial community with simpler, more coherent
credit and investment profiles.
SHARES TO BE DISTRIBUTED: Approximately 2,021,071 shares of Company common
stock, par value $.01 per share (the "Common
Stock") based on the shares of DTI common stock,
par value $.01 per share (the "DTI Stock")
outstanding on November 12, 1996. The shares to be
distributed will be equal to approximately one-
quarter of the number of shares of DTI Stock
outstanding on the Record Date and will constitute
100% of the outstanding shares of Common Stock of
the Company on the Distribution Date.
<PAGE>
DISTRIBUTION RATIO: Each DTI stockholder will receive one share of
Common Stock for every four shares of DTI Stock
held on the Record Date.
FRACTIONAL SHARE Fractional share interests will be sold by the
INTERESTS: Distribution Agent and the cash proceeds
distributed to those stockholders entitled to a
fractional interest. See "THE DISTRIBUTION--No
Fractional Shares."
LISTING AND TRADING
MARKET: The Company has applied for listing of the Common
Stock on the Nasdaq National Market ("Nasdaq")
under the symbol "DATX."
RECORD DATE: Close of business on [November 25, 1996].
DISTRIBUTION DATE: December 2, 1996. The shares of Common Stock to be
distributed will be delivered to the Distribution
Agent for distribution to holders of DTI Stock on
the Distribution Date. The contribution of
substantially all of the assets and liabilities of
the Contributed Businesses from DTI to the Company
will become effective on November 30, 1996.
MAILING DATE: Certificates representing the shares of Common
Stock will be mailed to DTI stockholders on or
about [December 9, 1996].
DISTRIBUTION AGENT: Boston EquiServe, L.P. (the "Distribution Agent").
TAX CONSEQUENCES: See "THE DISTRIBUTION--Federal Income Tax Aspects
of the Distribution."
DIVIDEND POLICY: The Company currently intends to reinvest any
earnings in the Company to finance future growth.
Accordingly, the Board of Directors of the Company
does not anticipate paying any cash or other
dividends in the foreseeable future.
RELATIONSHIP WITH DTI
AFTER THE DISTRIBUTION: Following the Distribution, the Company and DTI
will each be operated as an independent public
company. The Company and DTI will, however,
continue to have a relationship pursuant to certain
agreements being entered into between the Company
and DTI in connection with the Distribution
regarding certain services to be provided by the
Company to DTI, use of leased space by DTI, certain
tax matters and other matters. See "RELATIONSHIP
BETWEEN THE COMPANY AND DTI AFTER THE
DISTRIBUTION," and "MANAGEMENT OF THE COMPANY--
Directors and Executive Officers."
SPECIAL FACTORS: Stockholders should carefully consider the matters
discussed under the section entitled "SPECIAL
FACTORS" in this Information Statement.
2
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
The following summary historical financial data of the Company should be read
in conjunction with the Company's historical financial statements and the notes
thereto included elsewhere in this Information Statement. The following
financial information relates to the Contributed Businesses as they were
operated as part of DTI and is derived from the historical financial statements
of the Company. The Company's historical financial statements include an
allocation of certain general corporate expenses of DTI which were not directly
related to the Contributed Businesses.
The summary historical financial data that relate to the three years in the
period ended November 30, 1995 have been derived from the historical financial
statements audited by Arthur Andersen LLP, independent public accountants. The
historical financial statements of the Company may not reflect the results of
operations or financial position that would have been obtained had the Company
been a separate, independent company during such periods. See "Notes to
Consolidated Financial Statements--Note 2(j) regarding the nine months ended
August 31, 1995 and 1996."
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEARS ENDED NOVEMBER 30, AUGUST 31,
--------------------------------- -------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS
OF OPERATIONS DATA(1):
Net sales............... $ 23,733 $ 22,440 $ 21,826 $ 16,359 $ 15,858
Cost of sales........... 9,412 9,355 8,187 6,087 6,034
Income (loss) from
continuing operations.. 121 1,172 1,436 1,267 (560)
Discontinued
operations(2).......... (126) 381 24 120 (2,625)
Net income (loss)....... $ (5) $ 1,553 $ 1,460 $ 1,387 $ (3,185)
Income (loss) from
continuing operations
per share.............. $ 0.86 $ (0.26)
Discontinued operations
per share.............. $ 0.01 $ (1.23)
Net income (loss) per
share.................. $ 0.87 $ (1.49)
Weighted average number
of shares outstanding.. 1,675 2,130
</TABLE>
<TABLE>
<CAPTION>
AUGUST 31, 1996
NOVEMBER 30, -------------------
1995 ACTUAL PRO FORMA(3)
------------ ------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash.......................................... $ -- $ -- $10,000
Working capital............................... 1,655 2,560 12,560
Total assets.................................. 9,337 7,402 17,402
Long-term debt................................ -- -- --
Total liabilities............................. 3,067 2,606 2,606
Total stockholder's investment................ 6,270 4,796 14,796(4)
</TABLE>
- --------
(1) Does not include incremental annual expenses of approximately $350,000
which the Company expects to incur as the result of being an independent
public company.
(2) Discontinued operations relates to the networking distribution business of
DTI prior to the Distribution. On November 11, 1996, DTI sold a substantial
portion of such business, and the Company intends to discontinue and wind-
up the remainder of such business as soon as practicable after the
Distribution. See "INTRODUCTION."
(3) Adjusted to give effect to the deemed contribution of $10,000,000 from DTI
to the Company after August 31, 1996 and the distribution of its investment
in the Company by DTI to the existing stockholders of DTI in the form of a
one for four stock dividend. The actual amount of cash, which will be
contributed simultaneously with the Distribution, will depend on certain
adjustments based on the net cash flow of the Contributed Businesses after
August 31, 1996 as described in the Distribution Agreement. See
"RELATIONSHIP BETWEEN THE COMPANY AND DTI AFTER THE DISTRIBUTION--
Intercompany Agreements--Distribution Agreement."
(4) Does not include any tax considerations pertaining to the Distribution. See
"SPECIAL FACTORS--Certain Tax Considerations."
3
<PAGE>
INTRODUCTION
On [November 15, 1996], the Board of Directors of DTI (the "DTI Board")
declared a dividend payable to holders of record of DTI Stock at the close of
business on the Record Date of one share of Common Stock for every four shares
of DTI Stock held on the Record Date. The Company expects the Distribution to
be effective on December 2, 1996. Certificates representing the Common Stock
will be mailed to DTI stockholders on or about [December 9, 1996]. As a result
of the Distribution, 100% of the outstanding shares of Common Stock will be
distributed to DTI stockholders. See "THE DISTRIBUTION--Manner of Effecting
the Distribution."
The Company was formed in September 1996 for the purpose of effecting the
Distribution. As of the Distribution Date, DTI will contribute to the Company
substantially all of the assets and liabilities of the Contributed Businesses.
Prior to the Distribution, DTI operated the Contributed Businesses as its data
acquisition and imaging, commercial products and networking distribution
groups. On November 11, 1996, DTI sold a substantial portion of the assets of
the networking distribution business, and the Company intends to discontinue
and wind-up the remainder of such business after the Distribution.
If you have any questions relating to the Distribution and delivery of
certificates representing shares of Common Stock of the Company, please
contact the Distribution Agent, Boston EquiServe, L.P., Investor Relations
Department, P.O. Box 644, Mail Stop 45-02-64, Boston, MA 02102-0644, Tel. No.
(617) 575-3100.
The Company's principal executive offices are located at 100 Locke Drive,
Marlboro, Massachusetts 01752-1192 and its telephone number is (508) 481-3700.
THE DISTRIBUTION
BACKGROUND AND REASONS FOR THE DISTRIBUTION
DTI has historically been a leader in the design, development and
manufacture of high performance digital media and data acquisition and imaging
products, as well as engaged in the distribution of networking products
manufactured by third parties. Each of the Company's major markets have been
served by different business groups which consist of units that focus on
specific business niches within those markets.
In April 1996, DTI received the approval of its stockholders at its annual
meeting of stockholders to transfer its digital media business to a newly-
formed Delaware corporation. At the time of the solicitation of proxies for
the annual meeting, the DTI Board believed that the structure proposed at that
time would be most suitable for the organization of its business units.
Further analysis, however, has since lead the DTI Board to determine that a
transfer of its data acquisition and imaging, commercial products and
networking distribution groups to a new subsidiary and the subsequent
distribution of such subsidiary's stock to DTI's stockholders would be a more
advantageous structure for separating the businesses. The DTI Board has,
therefore, restructured the proposed separation of its business units in the
form described herein. In order to effect the Distribution, DTI recently
formed the Company, a Delaware corporation and wholly-owned subsidiary, to
which it will contribute its data acquisition and imaging and commercial
products business groups, as well as the remainder of its networking
distribution business on the Distribution Date. DTI will retain its digital
media business which consists of its Media 100 product line.
The DTI Board believes that the Distribution will: (i) allow each company to
pursue strategies and investment opportunities appropriate to its business and
size; (ii) create separate identities for each business in their respective
marketplaces, thereby enhancing the competitive presence of each company;
(iii) allow management of each of the Company and DTI to concentrate
exclusively on their own businesses, without regard
4
<PAGE>
for the policies and objectives of the other company; (iv) allow
implementation of more effective equity incentive compensation plans through
the creation of separate publicly traded equity securities that will be more
closely linked to the separate businesses of the two companies, thereby
enhancing the ability of both companies to attract, retain, and motivate key
personnel; and (v) allow each of the Company and DTI to position themselves to
obtain lower cost, industry specific debt and equity financing by presenting
the financial community with simpler, more coherent credit and investment
profiles.
MANNER OF EFFECTING THE DISTRIBUTION
The general terms and conditions relating to the Distribution are set forth
in the Distribution Agreement between DTI and the Company (the "Distribution
Agreement"). See "RELATIONSHIP BETWEEN THE COMPANY AND DTI AFTER THE
DISTRIBUTION--Intercompany Agreements--Distribution Agreement."
On the Distribution Date, all of the shares of Common Stock will be
delivered by DTI to the Distribution Agent. As soon as practicable thereafter,
certificates representing shares of Common Stock will be mailed by the
Distribution Agent to holders of record of DTI Stock as of the Record Date on
the basis of one share of Common Stock for every four shares of DTI Stock held
on that date. The actual number of shares of Common Stock to be distributed
with respect to each outstanding share of DTI Stock will depend upon the
number of shares of DTI Stock outstanding on the Record Date. In any event,
100% of the shares of Common Stock will be distributed in the Distribution. No
holder of DTI Stock will be required to pay any cash or other consideration
for the shares of Common Stock received in the Distribution or to surrender or
exchange shares of DTI Stock in order to receive shares of Common Stock. All
such shares of Common Stock will be fully paid and nonassessable and the
holders thereof will not be entitled to any preemptive rights. See
"DESCRIPTION OF THE COMPANY'S CAPITAL STOCK."
Simultaneously with the Distribution, DTI intends to merge its wholly-owned
subsidiary, Media 100 Inc., a Delaware corporation, into DTI in accordance
with Section 253 of the General Corporation Law of the State of Delaware, and
as a result of such merger, the name of DTI shall be changed to "Media 100
Inc." The Company will also change its name by filing an amendment to its
Certificate of Incorporation changing its name to "Data Translation, Inc."
NO FRACTIONAL SHARES
No certificates or scrip representing fractional shares of Common Stock will
be issued to DTI's stockholders in the Distribution. The Distribution Agent
will aggregate fractional shares into whole shares and sell such shares in the
open market at then prevailing prices on behalf of holders who otherwise would
be entitled to receive fractional share interests and such persons will
receive a cash payment in the amount of their pro rata share of the total sale
proceeds, net of any commissions payable in connection with such sale. Such
sales are expected to be made as soon as practicable after the mailing of the
certificates evidencing shares of Common Stock to DTI's stockholders.
FEDERAL INCOME TAX ASPECTS OF THE DISTRIBUTION
DTI has not requested and does not intend to request a letter ruling from
the Internal Revenue Service (the "IRS"), nor has DTI received an opinion of
counsel on the tax treatment of the Distribution. Further, the Distribution is
not conditioned on the receipt of either a letter ruling from the IRS or an
opinion of counsel that the Distribution qualifies as a tax-free distribution.
The tax treatment of the Distribution is not entirely clear. The
Distribution may not satisfy the IRS' published guidelines for issuing advance
letter rulings on the tax-free treatment of spin-off transactions. However,
based on the law in effect as of the date of this Information Statement and
certain facts beyond the control of the Company and DTI, which are assumed to
be true at the time of the distribution, DTI believes that the Distribution
may qualify as a tax-free distribution under Section 355 of the Internal
Revenue Code of 1986,
5
<PAGE>
as amended (the "Code"), in which case (i) the DTI stockholders would not
recognize income, gain or loss upon the receipt of shares of Common Stock;
(ii) the aggregate tax basis of the shares of DTI Stock and Common Stock held
by the DTI stockholders immediately after the Distribution would be the same
as the tax basis of the shares of DTI Stock held by the DTI stockholders
immediately before the Distribution, allocated in proportion to the fair
market value of each security immediately after the Distribution; (iii) the
holding period of the shares of Common Stock received by the DTI stockholders
would include the holding period of the shares of DTI Stock with respect to
which the Distribution is made, provided that the shares of DTI Stock are held
as a capital asset on the date of the Distribution; and (iv) dispositions of
fractional interests in Common Stock would give rise to capital gain or loss
equal to the difference between the amount of cash received in respect thereof
and the tax basis allocable to such fractional interests, provided that the
shares of DTI Stock are held as capital assets on the Distribution Date.
Provided that certain assumed facts are not determined to be untrue as of
the Distribution Date, DTI intends to take the position that the Distribution
qualifies for tax-free treatment under Section 355 of the Code, and therefore
that it will not recognize gain or loss on the Distribution. Assuming that DTI
takes this position, it will provide each DTI stockholder receiving Common
Stock pursuant to the Distribution with information necessary to comply with
Treasury regulations under Section 355 of the Code requiring that the
stockholder attach a statement to his or her federal income tax return, for
the taxable year in which such Common Stock is received, showing the
applicability of Section 355 of the Code to the Distribution.
The tax-free consequences described above depend on, among other conditions,
there not being sales or other dispositions of Common Stock or DTI Stock
(before or after the Distribution) that would violate the continuity of
interest or anti-device requirements under Section 355 of the Code. If any of
these or other requirements for tax-free treatment is not satisfied, or if the
IRS should successfully assert for any other reason that the Distribution does
not qualify as a tax-free distribution under Section 355(a) of the Code, then
(i) DTI would be required to recognize gain, if any, equal to the excess of
the fair market value of the Common Stock immediately after the Distribution
over DTI's tax basis in that Common Stock; and (ii) each DTI stockholder
receiving shares of Common Stock in the Distribution would be treated as
though each stockholder had received a taxable distribution in an amount equal
to the fair market value of Common Stock received, which would result in (a) a
dividend to the extent of such stockholder's pro rata share of DTI's current
and accumulated earnings and profits, (b) a reduction in such stockholder's
basis in such holder's shares of DTI Stock to the extent that the amount
received exceeds such stockholder's share of earnings and profits, (c) a gain
from the deemed sale or exchange of such shares of DTI Stock and (d) the tax
basis of the Common Stock received in the Distribution would be equal to its
fair market value on the date of the Distribution and a new holding period for
the Common Stock would commence on the day following such date.
In addition, the tax-free consequences to DTI depend on there being no
person (or group of persons subject to the aggregation rules of Section
355(d)(7), (8) or (9) of the Code) who holds a 50-percent interest in the
stock of DTI or the Company that was acquired by purchase (within the meaning
of Section 355(d)(5) of the Code) within the five-year period ending on the
date of the Distribution. Under the consolidated tax return rules of the Code,
each member of DTI's consolidated group (including the Company) would be
severally liable for any tax liability of DTI arising as a result of the
Distribution failing to qualify for tax-free treatment under Section 355 of
the Code. For a description of the tax sharing arrangement entered into
between the Company and DTI in connection with the Distribution, see
"RELATIONSHIP BETWEEN THE COMPANY AND DTI AFTER THE DISTRIBUTION--Intercompany
Agreements--Distribution Agreement."
THE SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE IS
BASED ON THE CODE, THE REGULATIONS PROMULGATED THEREUNDER BY THE TREASURY
DEPARTMENT AND THE INTERPRETATIONS OF THE CODE AND REGULATIONS BY THE COURTS
AND THE IRS, ALL AS THEY EXIST AS OF THE DATE OF THIS INFORMATION STATEMENT.
THE SUMMARY DOES NOT DISCUSS ALL TAX ASPECTS OF THE DISTRIBUTION THAT MAY BE
RELEVANT TO DTI STOCKHOLDERS IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, NOR
DOES IT ADDRESS THE CONSEQUENCES TO CERTAIN
6
<PAGE>
DTI STOCKHOLDERS SUBJECT TO SPECIAL TREATMENT UNDER THE UNITED STATES FEDERAL
INCOME TAX LAWS (SUCH AS NON-RESIDENT ALIEN INDIVIDUALS AND FOREIGN
CORPORATIONS). ALSO THE SUMMARY DOES NOT ADDRESS ANY STATE, LOCAL OR FOREIGN
TAX CONSEQUENCES. DTI STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS AS
TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE DISTRIBUTION, INCLUDING THE
APPLICATION OF STATE, LOCAL AND FOREIGN TAX LAWS AND ANY CHANGES IN FEDERAL
TAX LAWS WHICH OCCUR AFTER THE DATE OF THIS INFORMATION STATEMENT.
LISTING AND TRADING OF THE COMMON STOCK
The Company has applied for listing of the Common Stock on Nasdaq under the
symbol "DATX." The shares of DTI Stock will trade on Nasdaq after the
Distribution Date under the symbol "MDEA." Initially the Company is expected
to have approximately 242 holders of record, based on the number of
stockholders of record of DTI as of November 12, 1996.
A "when-issued" trading market may develop on or about the Record Date. The
term "when-issued" means that shares can be traded prior to the time
certificates are actually available or issued. Prices at which the shares of
Common Stock may trade, on a "when-issued" basis or after the Distribution,
cannot be predicted. See "SPECIAL FACTORS--Absence of Prior Trading Market for
the Common Stock."
The shares of Common Stock distributed to DTI stockholders will be freely
transferable, except for shares of Common Stock received by persons who may be
deemed to be "affiliates" of the Company under the Securities Act of 1933 as
amended (the "Securities Act"). Persons who may be deemed to be affiliates of
the Company after the Distribution generally include individuals or entities
that control, are controlled by, or are under common control with the Company
and may include the directors and principal executive officers of the Company
as well as any principal stockholder of the Company. Persons who are
affiliates of the Company will be permitted to sell their shares of Common
Stock only pursuant to an effective registration statement under the
Securities Act or an exemption from the registration requirements of the
Securities Act, such as the exemptions afforded by Section 4(2) of the
Securities Act and Rule 144 thereunder.
7
<PAGE>
SPECIAL FACTORS
FUTURE PROSPECTS; DEPENDENCE ON NEW PRODUCT; NO ASSURANCE OF PROFITABILITY
Substantially all of the Company's current revenues and operating profits
are derived from its data acquisition and imaging group. During the Company's
last five completed fiscal years, revenues from this group declined an
aggregate of $3.8 million, or 14.9%. There can be no assurance that such
revenues will not continue to decline, or that any such decline would not have
a material adverse effect on the Company's financial condition and results of
operations.
The Company's future operating results depend in large part on the success
of the Company's new video capture and encoding product called Broadway(TM).
DTI began shipping Broadway at the end of June 1996. There can be no assurance
that Broadway will gain the wide market acceptance and generate the
significant revenues necessary for the Company to remain profitable. The
failure of Broadway to generate such revenues for the Company would have a
material adverse effect on the Company's business, financial condition and
results of operations. Further, the Company expects to be required to reduce
the price of Broadway periodically in order to maintain unit sales levels as a
result of competition and reductions in the cost of technology generally.
There can be no assurance that such price reductions will not cause declines
in the Company's revenues and that any such revenue declines will not cause
the Company to become unprofitable.
In addition, the Company anticipates continuing to invest a significant
amount of its resources on research and development for Broadway and other new
products. The Company also expects increases in certain other operating
expenses relating to the marketing and selling of Broadway and other new
products. Such expenses could cause the Company to become unprofitable, and
there can be no assurance as to when the Company would return to
profitability, if at all.
COMPETITION
The markets for the Company's products are highly competitive. The Company
competes in the data acquisition market principally with National Instruments
Corporation, Computer Boards, Inc. and Keithley Instruments, Inc. and in the
imaging market with Matrox and Imaging Technology Inc., some of which have
substantially greater financial, technical or marketing resources than the
Company. The Company also competes with a number of smaller competitors in
each of these markets. The data acquisition and imaging markets and the
Company's share of such markets have been adversely affected in recent years
by reduced government funding of research, increased competition and lower
levels of corporate capital expenditures. There can be no assurance that such
markets will grow in the future or that the Company can maintain its position
in such markets.
In the commercial products area, the Company currently competes with Sigma
Design's Real Magic Producer(R) and Darim Corporation's hardware encoding
product, MPEGator(R) as well as a number of other competitors whose products
are based on platforms and video standards other than those used by the
Company. There can be no assurance that customers in the markets for the
Company's products will not prefer products offered by the Company's
competitors to those currently offered by the Company, or that the Company's
competitors will not adapt more quickly than the Company to new technologies
or evolving customer requirements. There also can be no assurance that
companies with greater financial, technical or marketing resources who do not
currently compete with the Company will not develop products in the future to
compete with products offered by the Company.
CAPITAL REQUIREMENTS
Following the Distribution, the Company will be responsible for obtaining
its own financing. The Company expects to be required to obtain such financing
from time to time due, in particular, to expected increases in research and
development and other operating expenses. The Company believes that
historically DTI was successfully able to raise equity financing in the public
markets due to investors' belief in the future prospects of
8
<PAGE>
DTI's Media 100 product line. No assurance can be given that the Company will
be able to obtain either debt or equity financing on terms acceptable to the
Company, or at all.
CERTAIN TAX CONSIDERATIONS
Based on the law in effect as of the date of this Information Statement and
on certain facts beyond the control of the Company and DTI assumed to be true
at the time of the Distribution, DTI believes that the Distribution may
qualify as a tax-free distribution under Section 355 of the Code. However,
there is a significant risk that the Distribution may not qualify as a tax-
free distribution. DTI has not requested and does not intend to request a
letter ruling from the IRS nor has DTI received an opinion of counsel on the
tax treatment of the Distribution. Further, the tax treatment of the
Distribution is not entirely clear. The Distribution may not satisfy the IRS'
published guidelines for issuing advance letter rulings on the tax-free
treatment of spin-off transactions. The Distribution is not conditioned on
either the receipt of a letter ruling from the IRS or an opinion of counsel
that the Distribution qualifies as a tax-free distribution. If the
Distribution were to fail to qualify for such tax-free treatment, the
Distribution may be taxable to DTI and would be taxable to its stockholders
receiving Company Stock pursuant thereto. See "THE DISTRIBUTION--Federal
Income Tax Aspects of the Distribution."
RELATIONSHIP BETWEEN THE COMPANY AND DTI; CONFLICTS OF INTEREST
Conflicts of interest may arise between the Company and DTI in a number of
areas relating to their past and ongoing relationships, including potential
competitive business activities, international marketing functions, tax and
employee benefit matters and indemnity arrangements. Several of the current
executive officers of the Company are former executive officers of DTI. In
addition, the Chief Executive Officer and Chairman of the Board of the Company
will continue to serve on the Board of Directors of DTI, and his son will be
the Chief Executive Officer and a director of DTI. These relationships may
create conflicts of interest with respect to matters potentially or actually
involving or affecting the Company and DTI. Further, although neither the
Company nor DTI presently intends to engage in the business currently
conducted by the other, neither company is contractually obligated not to do
so. Moreover, following the Distribution, each company will be cross-licensed
to use the technology of the other. See "RELATIONSHIP OF THE COMPANY AND DTI
AFTER THE DISTRIBUTION."
ABILITY TO ATTRACT QUALIFIED PERSONNEL
The businesses of each of the Company and DTI are dependent upon each
company's ability to attract and retain highly qualified managerial, technical
and sales personnel. Competition for such personnel is intense, and following
the Distribution the Company and DTI may compete with each other as well as
third parties for such personnel. There can be no assurance regarding the
impact of the Distribution on the ability of each of the Company and DTI to
retain its key managerial, technical and sales personnel or to attract,
assimilate or retain such personnel in the future. The inability of either
company to attract and retain such personnel could have a material adverse
effect on the business, results of operations and financial condition of such
company.
ABSENCE OF HISTORY AS AN INDEPENDENT COMPANY
The Company was formed for the purpose of effecting the Distribution and
does not have an operating history as an independent company. Accordingly, the
financial statements included herein may not necessarily reflect the results
of operations, financial position and cash flows of the Contributed Businesses
had the Company been operated independently during the periods presented. See
Historical Financial Information.
DEPENDENCE ON PROPRIETARY TECHNOLOGY
The Company's success is heavily dependent upon its proprietary technology.
The Company relies principally upon patent, trademark, copyright and trade
secret protection to protect its proprietary technology. There can be no
assurance such measures are adequate to protect the Company's proprietary
technology or that
9
<PAGE>
third parties will not assert infringement claims in the future or that such
claims will not be successful. See "BUSINESS OF THE COMPANY--Proprietary
Rights" and "RELATIONSHIP BETWEEN THE COMPANY AND DTI AFTER THE DISTRIBUTION--
Intercompany Agreements--Intellectual Property Agreement."
ABSENCE OF PRIOR TRADING MARKET FOR THE COMMON STOCK
There has not been any established public market for the trading of the
Company's Common Stock, although a "when-issued" trading market may develop on
or about the Record Date. The Company has applied for listing of the Common
Stock on Nasdaq. There can be no assurance, however, that a liquid trading
market for the Common Stock will develop, or that listing of the Common Stock
on Nasdaq will be maintained. There also can be no assurance as to the prices
at which the Common Stock will trade before or after the Distribution Date.
Until the Common Stock is fully distributed and an orderly market develops,
the prices at which shares trade may fluctuate significantly. Prices for
shares of Common Stock will be determined in the marketplace and may be
influenced by many factors other than the financial performance and prospects
of the Company, including the depth and liquidity of the market for the
shares, investor perception of the Company and the industry in which the
Company participates and general economic and market conditions.
COMMON STOCK DIVIDEND POLICY
Consistent with DTI's historical policy, the Company currently intends to
reinvest any earnings to finance future growth. Accordingly, the Board of
Directors of the Company does not anticipate paying any cash or other
dividends in the foreseeable future.
LISTING AND TRADING OF DTI STOCK
It is expected that the DTI Stock will continue to be listed and traded on
Nasdaq after the Distribution. Following the Distribution, the Company's
financial results will no longer be consolidated with those of DTI, and DTI's
assets and revenues will be substantially lower than prior to the
Distribution. Accordingly, as a result of the Distribution, the trading price
range of the DTI Stock immediately after the Distribution may be significantly
lower than the trading price range of the DTI Stock prior to the Distribution.
The combined trading prices of the DTI Stock and the Common Stock after the
Distribution may be less than the trading price of the DTI Stock prior to the
Distribution. The prices at which the DTI Stock trades after the Distribution
will be determined by the marketplace and may be influenced by many factors,
other than the financial performance and prospects of the Company, including
the continuing depth and liquidity of the market for the DTI Stock, investor
perception of DTI's remaining businesses, dividend policy and general economic
and market conditions.
CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE OF INCORPORATION AND BY-LAWS
The Company's Certificate of Incorporation and By-laws as of the
Distribution Date and applicable law contain provisions that may have the
effect of delaying, deterring or preventing a change in control of the
Company. In addition, the Company's Certificate of Incorporation authorizes
the issuance of up to 30,000,000 shares of Common Stock and 5,000,000 shares
of preferred stock (the "Preferred Stock"). The Company's Board has the
authority to determine the price and terms under which any such additional
capital stock may be issued and to fix the terms of the Preferred Stock and
stockholders of the Company do not have preemptive rights with respect
thereto. See "PURPOSES AND EFFECTS OF CERTAIN PROVISIONS OF THE CERTIFICATE OF
INCORPORATION AND BY-LAWS--Certain Charter and By-law Anti-Takeover and Other
Provisions."
ACCOUNTING TREATMENT
Effective with its quarterly financial statements with respect to its fiscal
quarter ended August 31, 1996, DTI will present the business of the Company
and its subsidiaries as a discontinued operation to the extent financial
information for periods prior to the Distribution is required to be included
in DTI's historical financial statements.
10
<PAGE>
RELATIONSHIP BETWEEN THE COMPANY
AND DTI AFTER THE DISTRIBUTION
For purposes of an orderly transfer on the Distribution Date of the
Contributed Businesses to the Company and an orderly transition to the status
of two separate independent companies, the Company and DTI have entered or
will enter into various agreements and relationships, including those
described in this section. The forms of agreements summarized in this section
are included as exhibits to the Company's registration statement on Form 10
(the "Registration Statement"), as filed with the Securities and Exchange
Commission (the "Commission") of which this Information Statement forms a
part, and the following summaries are qualified in their entirety by reference
to the agreements as filed.
INTERCOMPANY AGREEMENTS
Distribution Agreement
On or prior to the Distribution Date, the Company and DTI will enter into
the Distribution Agreement, which provides for, among other things, the
principal corporate transactions required to effect the Distribution, the
contribution to the Company of the Contributed Businesses and the assumption
by the Company of related liabilities, the contribution to the Company
simultaneously with the Distribution of an amount in cash and cash equivalents
for use in the Company's business equal to $10 million increased or decreased
based on the net cash flow of the Contributed Businesses after August 31,
1996, less cash used in the disposition of the networking distribution
business, and certain other arrangements between DTI and the Company related
to the Distribution. DTI has agreed to pay fifty-percent of the net costs
incurred by the Company in completing the winding-up of the networking
business, up to a maximum of $500,000. The Contributed Businesses include the
stock of certain of DTI's subsidiaries in Germany and the United Kingdom, the
latter of which includes the networking distribution business.
On November 11, 1996, DTI sold a substantial portion of the assets of the
networking distribution business, and the Company intends to discontinue and
wind-up the remainder of such business as soon as practicable following the
Distribution. Pursuant to the agreement of sale relating to such business, DTI
and the Company have agreed in general not to engage in any business in the
United Kingdom which competes with the business so sold for a period of three
years. The Company and DTI have agreed to provide sufficient funding to the
networking distribution business to ensure the payment of all liabilities
associated therewith (provided that such obligation of DTI shall expire upon
the Distribution Date).
The Distribution Agreement will provide for indemnification of DTI by the
Company in a manner designed to place financial responsibility with the
Company for specified liabilities, such as those relating to the networking
distribution business, arising out of the Contributed Businesses, including
such liabilities prior to the Distribution. DTI will indemnify the Company for
liabilities arising out of the Retained Business both prior to and after the
Distribution.
The Distribution Agreement will contain certain provisions relating to
employee compensation and benefits and the treatment of options to purchase
DTI Stock held by both employees of DTI who will become employees of the
Company and employees of DTI who will remain employees of DTI. The
Distribution Agreement will provide for the establishment by the Company of a
stock option plan, an employee stock purchase plan and retirement and savings
plan similar to those maintained by DTI, and the transfer of certain assets
and liabilities relating to the Company's employees from the DTI plans to the
Company's plans. The Distribution Agreement also will provide for the
establishment by the Company of employee welfare plans similar to those
maintained by DTI.
The Distribution Agreement also will provide for a tax sharing arrangement
between the Company and DTI. Pursuant to such agreement, DTI will be solely
responsible for any tax liabilities relating to periods prior to the
Distribution Date, and is entitled to any tax refunds relating to such
periods. After the Distribution Date, each of the Company and DTI will be
responsible for tax liabilities relating to their respective operations. With
respect to any liability relating to the Distribution being deemed a taxable
transaction, DTI will be responsible for 75% of any such liability and the
Company will be responsible for 25% of any such liability; provided, however,
that
11
<PAGE>
if the Distribution is deemed a taxable transaction as a result of certain
actions taken, caused by or within the control of either DTI or the Company,
such party shall be solely responsible for the resulting tax liability.
The Distribution Agreement will further provide that each of the Company and
DTI shall be granted access to certain records and information in the
possession of the other and, subject to certain exceptions, requires the
retention by each of the Company and DTI of all such information in its
possession in accordance with its record retention program. The Distribution
Agreement will also provide that DTI will bear all expenses incurred by the
Company and DTI in connection with the Distribution. It is expected that such
expenses will be approximately $1.8 million.
Intellectual Property Agreement
On or prior to the Distribution Date, the Company and DTI will enter into an
Intellectual Property Agreement, pursuant to which DTI will assign to the
Company those trademarks, trade secrets, know-how, patents and patent
applications that are used exclusively or primarily in the Contributed
Businesses. DTI will retain the trademarks, trade secrets, know-how, patents
and patent applications that are used exclusively or primarily in the Retained
Business.
The Intellectual Property Agreement will further provide for royalty-free
perpetual cross-licenses to each of DTI and the Company, as the case may be,
for all technologies covered by existing patents and patent applications held
by DTI and the Company, respectively. The parties will also cross-license to
each other technologies under patents issued pursuant to applications made in
the two-year period following the Distribution. The parties may not sell or
sublicense technology to which they are the licensee; rather they may only use
such technology in their own products. The cross-licensed technology may only
be contributed by the licensee in connection with a sale of the licensee's
business as a going concern. The cross-licenses provide for termination upon a
change in control with respect to patents issued pursuant to applications made
after August 31, 1996, although the licensee may continue to use such patents
in products already being shipped or which are substantially near completion
of development.
The parties will also cross-license each other under trade secrets and know-
how. Like the patent cross-licenses, these licenses will be royalty-free and
only transferable in the event of a sale of the business as a going concern.
All employees of each company will sign non-disclosure agreements which
acknowledge non-disclosure obligations with respect to the other company.
Use and Occupancy Agreements
On or prior to the Distribution Date, the Company and DTI will enter into
various use and occupancy agreements (the "Use and Occupancy Agreements") with
respect to use by DTI following the Distribution of facilities leased by the
Company. The Company will grant to DTI a license to use a portion of the
Company's facility in Marlboro, Massachusetts, as well as certain shared
equipment contributed to the Company, so as to enable DTI to conduct
operations at such facility. See "BUSINESS OF THE COMPANY--Properties." DTI
will pay the Company a monthly license fee for the use of such facility and
shared equipment of approximately $105,377. Such license agreement shall
remain in effect until April 30, 1997.
In addition, pursuant to such Use and Occupancy Agreements, the Company
shall also grant to certain subsidiaries of DTI a license to use a portion of
the Company's facilities in Wokingham, Berkshire, England and in Bietigheim-
Bissingen, Germany for a transitional period. See "BUSINESS OF THE COMPANY--
Properties."
DTI has indicated that in each case, it intends to find a new space for its
operations prior to the expiration of the agreements.
12
<PAGE>
Corporate Services Agreement
On or prior to the Distribution Date, the Company and DTI will enter into a
Corporate Services Agreement pursuant to which the Company has agreed to
provide DTI with certain corporate services. The Company will provide DTI with
accounting and finance, information systems and support, purchasing support,
material planning, mail, shipping and receiving, invoicing, document control,
second shift supervision and environmental stress screening. The amount that
DTI initially shall pay for such services will be based upon the particular
service and will initially be an aggregate amount of approximately $35,000 per
month. DTI may terminate any service upon 30 days prior written notice to the
Company, with an appropriate adjustment in the fees . The Company may
terminate any service upon 30 days notice to DTI if it no longer provides such
service to its own organization. The Corporate Services Agreement shall
terminate upon the earlier of the discontinuance or termination of all
services thereunder or December 31, 1997.
BOARD OF DIRECTORS AND MANAGEMENT
Alfred A. Molinari, Jr., who will serve as Chairman of the Board of
Directors and Chief Executive Officer of the Company, will also continue to
serve on the Board of Directors of DTI. See "MANAGEMENT OF THE COMPANY." Mr.
Molinari's son, John A. Molinari, will serve as a director and Chief Executive
Officer of DTI. Alfred A. Molinari, Jr. and members of his family, including
John A. Molinari, who hold a significant number of shares of DTI Stock will
also own a significant number of shares of Common Stock following the
Distribution. See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT." These relationships may give rise to potential conflicts of
interest should the interests of the Company and DTI be different. See
"SPECIAL FACTORS--Relationship Between the Company and DTI; Conflicts of
Interest."
13
<PAGE>
PRO FORMA CAPITALIZATION OF THE COMPANY
The following table sets forth the unaudited pro forma capitalization of the
Company at August 31, 1996. This data should be read in conjunction with the
pro forma balance sheet appearing elsewhere in this Information Statement. The
pro forma information may not reflect the capitalization of the Company in the
future or as it would have been had the Company been a separate, independent
company on August 31, 1996. In addition, it does not include any tax
considerations pertaining to the Distribution. See "SPECIAL FACTORS--Certain
Tax Considerations." Assumptions regarding the number of shares of the
Company's Common Stock may not reflect the actual numbers on the Distribution
Date. See Consolidated Financial Statements and the notes thereto.
<TABLE>
<CAPTION>
AUGUST 31, 1996
----------------------
PRO FORMA
HISTORICAL AS ADJUSTED
---------- -----------
<S> <C> <C>
Long-term debt.......................................... $ -- $ --
Stockholder's Investment:
Investment by DTI..................................... 4,796,000 --
Preferred Stock, $.01 par value per share, 5,000,000
shares authorized, none issued....................... -- --
Common Stock, $.01 par value per share, 30,000,000
shares authorized, 2,017,571 shares issued pro forma
as adjusted.......................................... -- 20,000
Additional paid-in capital............................ -- 14,776,000
Cumulative translation adjustment..................... -- --
---------- -----------
Total Stockholder's Investment.......................... 4,796,000 14,796,000
---------- -----------
Total Capitalization................................ $4,796,000 $17,402,000
========== ===========
</TABLE>
14
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF THE COMPANY
The following data has been derived from the Company's consolidated
financial statements which have been audited by Arthur Andersen LLP,
independent public accountants, as of and for the fiscal years in the five
year period ended November 30, 1995. The data as of August 31, 1996 and for
the nine month periods ended August 31, 1995 and 1996 are derived from the
Company's Unaudited Consolidated Financial Statements that are included
elsewhere in this information statement and include, in the opinion of
management, all adjustments consisting only of normal recurring adjustments
necessary for a fair presentation of this information. The data should be read
in conjunction with "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF THE COMPANY" and the Consolidated
Financial Statements and the notes thereto and other financial information
included elsewhere in this Information Statement.
This selected historical financial data relates to the Contributed
Businesses as they were operated as part of DTI. They also include an
allocation of certain general corporate expenses of DTI which were not
directly related to these businesses. The historical financial data of the
Company may not reflect the results of operations or financial position that
would have been obtained had the Company been a separate, independent company.
The results of operations for the nine month period ended August 31, 1996
should not necessarily be taken as indicative of the results of operations
that may be expected for the entire year 1996.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED NOVEMBER 30, AUGUST 31,
------------------------------------------- ------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS
OF OPERATIONS DATA(1):
Net sales............... $25,647 $24,775 $23,733 $22,440 $21,826 $ 16,359 $ 15,858
Cost of sales........... 10,627 9,793 9,412 9,355 8,187 6,087 6,034
------- ------- ------- ------- ------- -------- ---------
Gross profit........... 15,020 14,982 14,321 13,085 13,639 10,272 9,824
Research and development
expenses............... 4,114 3,820 3,165 3,041 2,806 1,950 2,713
Selling and marketing
expenses............... 8,348 8,681 8,154 6,212 6,799 5,001 6,492
General and
administrative
expenses............... 3,178 2,948 2,580 1,924 1,627 1,210 1,465
------- ------- ------- ------- ------- -------- ---------
Income (loss) from
operations............ (620) (467) 422 1,908 2,407 2,111 (846)
Interest expense, net... (20) (10) (16) (1) (7) 1 --
Other income (expense).. (127) (23) (210) 63 2 -- (88)
------- ------- ------- ------- ------- -------- ---------
Income (loss) from
continuing operations
before provision
(benefit) for income
taxes................. (767) (500) 196 1,970 2,402 2,112 (934)
Provision (benefit) for
income taxes........... -- -- 75 798 966 845 (374)
------- ------- ------- ------- ------- -------- ---------
Income (loss) from
continuing
operations............ (767) (500) 121 1,172 1,436 1,267 (560)
Discontinued
operations(2).......... (455) (142) (126) 381 24 120 (2,625)
------- ------- ------- ------- ------- -------- ---------
Net income (loss)...... $(1,222) $ (642) $ (5) $ 1,553 $ 1,460 $ 1,387 $ (3,185)
======= ======= ======= ======= ======= ======== =========
Income (loss) from
continuing operations
per share.............. $ 0.86 $ (0.26)
Income (loss) from
discontinued operations
per share.............. $ 0.01 $ (1.23)
Net income (loss) per
share.................. $ 0.87 $ (1.49)
======= =========
Weighted average shares
outstanding........... 1,675 2,130
======= =========
</TABLE>
<TABLE>
<CAPTION>
NOVEMBER 30, AUGUST 31, 1996
-------------------- --------------------
1993 1994 1995 ACTUAL PRO FORMA(3)
------ ------ ------ ------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents........... $ -- $ -- $ -- $ -- $10,000
Working capital..................... 627 1,523 1,655 2,560 12,560
Total assets........................ 8,354 7,769 9,337 7,402 17,402
Total liabilities................... 3,332 2,792 3,067 2,606 2,606
Total stockholder's investment...... 5,022 4,977 6,270 4,796 14,796(4)
</TABLE>
- -------
(1) Does not include incremental annual expenses of approximately $350,000
which the Company expects to incur as the result of being an independent
public company.
(2) Discontinued operations relates to the networking distribution business of
DTI prior to the Distribution. On November 11, 1996, DTI sold a
substantial portion of the assets of the networking distribution business,
and the Company intends to discontinue and wind-up the remainder of such
business as soon as practicable after, the Distribution.
(3) Adjusted to give effect to the deemed contribution of $10,000,000 in cash
and cash equivalents from DTI after August 31, 1996 and the distribution
of the investment by DTI to the existing stockholders of DTI in the form
of a one-for-four stock dividend. The actual amount of cash and cash
equivalents, which will be contributed simultaneously with the
Distribution, will depend on certain adjustments based on the net cash
flow of the Contributed Businesses after August 31, 1996 as described in
the Distribution Agreement.
(4) Does not include any tax considerations pertaining to the Distribution.
See "SPECIAL FACTORS--Certain Tax Considerations."
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF THE COMPANY
GENERAL OVERVIEW
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Company is based upon the separate historical
financial statements of the Company, which present the Company's results of
operations, financial position and cash flow. These historical financial
statements include the assets, liabilities, income and expenses that were
directly related to the Contributed Businesses as they were operated within
DTI. In the case of assets and liabilities not specifically allocable to any
particular business of DTI, only those assets and liabilities expected to be
owned by the Company after the Distribution were included in the Company's
separate balance sheets. Regardless of the allocation of these assets and
liabilities, however, the Company's statement of operations includes all of
the related costs of doing business, including charges for the use of
facilities and for employee benefits, and includes an allocation of certain
general corporate expenses of DTI which were not directly related to the
Contributed Businesses, including costs for corporate logistics, corporate
research and development, information technologies, finance, legal and
corporate executives. These allocations were based on a number of factors
including, for example, personnel, space, time and effort, and sales volume.
Management believes these allocations as well as the assumptions underlying
the development of the Company's separate financial statements to be
reasonable.
The financial information included herein may not, however, necessarily
reflect the results of operations, financial position and cash flows of the
Company as it will operate in the future or what the results of operations,
financial position and cash flows would have been had the Company been a
separate, stand-alone entity during the periods presented. This is due, in
part, to the historical operation of the Company as an integral part of the
larger DTI. The historical financial information included herein also does not
reflect any changes which may occur in the operations of the Company following
the Distribution.
The Company historically has operated as part of DTI. Following the
Distribution, the Company will be a stand-alone entity with objectives and
strategies separate from those of DTI. The Company will focus on providing
products in the data acquisition, imaging and consumer video editing
industries.
FORWARD LOOKING STATEMENTS
Certain information, other than the historical information, discussed in the
following Management's Discussion and Analysis of Financial Condition and
Results of Operations of the Company (and elsewhere in this Information
Statement) may constitute forward looking statements and as such may involve
risks and uncertainties. Important factors which may cause actual results to
differ from the forward looking statements contained herein or in other public
statements by the Company are described under the caption titled "SPECIAL
FACTORS," including, in particular, the Company's ability to implement
successfully its reorganization plan and future business strategy. See
"SPECIAL FACTORS."
DISCONTINUED OPERATIONS
On July 30, 1996, DTI announced its strategic decision to discontinue the
operations comprising its networking business. The networking business has
historically been operated by Data Translation Networking Limited
("Networking") which distributed, integrated and supported enterprise-wide
networking products manufactured by third party suppliers in the United
Kingdom. The Company estimates a loss on disposal of $1,563,000 which includes
estimated operating losses of $1,024,000 through the phase out period. Net
sales from Networking were $10,850,000, $15,382,000 and $20,348,000, for the
years ended November 30, 1993, 1994, and 1995, respectively, and $14,604,000
and $16,522,000 for the nine months ended August 31, 1995 and 1996,
respectively. On November 11, 1996, DTI sold a substantial portion of the
assets of the networking distribution business, and the Company intends to
discontinue and wind-up the remainder of such business as soon as practicable
following the Distribution.
16
<PAGE>
RESULTS OF OPERATIONS
The following table shows certain statement of operations data as a
percentage of net sales.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
NOVEMBER 30, AUGUST 31,
-------------------- ------------------
1993 1994 1995 1995 1996
----- ----- ----- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales......................... 100.0 100.0 100.0 100.0 100.0
Gross margin...................... 60.3 58.3 62.5 62.8 62.0
Research and development
expenses......................... 13.3 13.5 12.9 11.9 17.1
Selling and marketing expenses.... 34.3 27.7 31.1 30.6 40.9
General and administrative
expenses......................... 10.9 8.6 7.5 7.4 9.3
----- ----- ----- -------- --------
Income (loss) from operations..... 1.8 8.5 11.0 12.9 (5.3)
Interest (expense) income and
other, net....................... (1.0) 0.3 (0.0) 0.0 (0.6)
----- ----- ----- -------- --------
Income (loss) from continuing
operations before provision
(benefit) for income taxes....... 0.8 8.8 11.0 12.9 (5.9)
Provision (benefit) for income
taxes............................ 0.3 3.6 4.4 5.2 (2.4)
----- ----- ----- -------- --------
Income (loss) from continuing
operations....................... 0.5 5.2 6.6 7.7 (3.5)
(Loss) income from discontinued
operations....................... (0.5) 1.7 0.1 0.8 (16.6)
----- ----- ----- -------- --------
Net income (loss)................. 0.0 % 6.9% 6.7 % 8.5% (20.1)%
===== ===== ===== ======== ========
</TABLE>
COMPARISON OF NINE MONTHS ENDED AUGUST 31, 1996 TO NINE MONTHS ENDED AUGUST
31, 1995
Net sales for the nine months ended August 31, 1996 were $15,858,000
compared to $16,359,000 for the same period in the prior year, which
represents a decrease of 3.1% or $501,000. Net sales decreased due to lower
unit sales of older mature products as well as lower average selling prices,
offset in part by an increase in unit sales of newly introduced products
utilizing the PCI bus architecture.
Gross margin for the period ended August 31, 1996 was 62.0% of net sales,
compared to 62.8% of net sales for the same period in the prior year. The
decrease in gross margins was primarily due to a less favorable product mix
reflecting lower average selling prices.
Loss from operations for the first nine months of fiscal 1996 was $846,000,
compared to income from operations of $2,111,000 for the same period in the
prior year. This change was primarily due to an increase in operating expenses
over the prior year's period of $2,504,000. Total operating expenses increased
to 67.2% of net sales for the period compared to 49.9% in the prior period.
Research and development expenses were $2,713,000 or 17.1% of net sales
compared to $1,950,000 or 11.9% of net sales for the first nine months of
fiscal 1995. The increase in research and development expenses was the result
of continuing investment in the commercial products group's new MPEG-1 encoder
product, Broadway. Selling and marketing expenses were $6,492,000 or 40.9% of
net sales compared to $5,001,000 or 30.6% of net sales for the first nine
months of fiscal 1995. The increase in selling and marketing expenses was due
largely to the initial marketing promotion of the Company's Broadway product,
which began shipping in June 1996.
The Company had an income tax benefit of $374,000 for the nine months ended
August 31, 1996, compared to a provision for income taxes of $845,000 for the
same period in fiscal 1995. The provision (benefit) for income taxes for both
periods has been calculated on a separate tax return basis. Historically, the
Company filed its tax return as part of a consolidated group with DTI. The
offsetting charge for the provision (benefit) for income taxes has been
included as an element of DTI's net investment in the Company as reflected in
the accompanying consolidated statements of stockholder's investment. The
provision (benefit) for income taxes may not necessarily reflect the
consolidated results of operations of the Company in the future or what they
would have been had it been a separate, stand-alone entity during the periods
presented.
17
<PAGE>
Loss from continuing operations was $560,000 for the nine months ended
August 31, 1996, compared to income from continuing operations of $1,267,000
for the same period in the prior year.
The Company incurred a net loss of $3,185,000 for the nine months ended
August 31, 1996 compared to net income of $1,387,000 for the same period in
the prior year. These results take into account a loss on discontinued
operations of $2,625,000 for the nine months ended August 31, 1996 and income
from discontinued operations of $120,000 for the nine months ended August 31,
1995. See "--Discontinued Operations."
COMPARISON OF FISCAL YEAR ENDED NOVEMBER 30, 1995 TO FISCAL YEAR ENDED
NOVEMBER 30, 1994
Net sales for the fiscal year ended November 30, 1995 were $21,826,000,
which represented a decrease of 2.7%, or $614,000, over the same period in the
prior year. The decrease was primarily the result of a continued shift in the
data acquisition and imaging market toward new, lower priced hardware and
software solutions. Despite the decrease in net sales dollars, data
acquisition and imaging experienced an increase in unit sales from the same
period in fiscal 1994.
Gross margin for fiscal 1995 was 62.5% of net sales, compared to 58.3% of
net sales in the comparable period in the prior year. This increase primarily
reflects higher margins on the Company's manufactured products due to higher
utilization of the Company's manufacturing capacity.
Income from operations for fiscal 1995 was $2,407,000 or 11.0% of net sales,
compared to $1,908,000 or 8.5% of net sales in fiscal 1994. The increase in
operating income of $499,000 can primarily be attributed to the increase in
gross margin as discussed above as well as level operating expenses year to
year.
The provision for income taxes was $966,000 for fiscal 1995, compared to
$798,000 for fiscal 1994. The provision for income taxes for both periods has
been calculated on a separate tax return basis. Historically, the Company
filed its tax return as part of a consolidated group with DTI. The offsetting
charge for the provision for income taxes has been included as an element of
DTI's net investment in the Company as reflected in the accompanying
consolidated statements of stockholder's investment. The provision for income
taxes may not necessarily reflect the consolidated results of operations of
the Company in the future or what they would have been had it been a separate,
stand-alone entity during the periods presented.
Income from continuing operations was $1,436,000 for fiscal 1995, compared
to $1,172,000 in fiscal 1994.
Net income for fiscal year 1995 was $1,460,000 compared to net income of
$1,553,000 for fiscal year 1994. These results take into account income from
discontinued operations of $24,000 for fiscal year 1995 compared to net income
of $381,000 from discontinued operations for fiscal year 1994. See "--
Discontinued Operations."
COMPARISON OF FISCAL YEAR ENDED NOVEMBER 30, 1994 TO FISCAL YEAR ENDED
NOVEMBER 30, 1993
Net sales for the fiscal year ended November 30, 1994 were $22,440,000,
which was a decrease of 5.4%, or $1,293,000, over the same period in the prior
year. The decrease was primarily the result of changes in the product mix.
Demand for older, mature data acquisition and imaging products began to
decline over the prior year, partially offset by the introduction of new,
lower priced hardware products.
The gross margin decreased to 58.3% of net sales, compared to 60.3% of net
sales in fiscal 1993. This decrease was, again, the result of changes in
product demand and the lowering of average selling prices.
Although there was a decrease in both net sales and gross profit, income
from operations for fiscal 1994 was $1,908,000, which was an increase of
$1,486,000 over the same period in the prior year. The increase was primarily
the result of a decrease of $1,942,000 in selling and marketing expenses, and
a decrease of $656,000 in general and administrative expenses over the same
period in the prior year.
18
<PAGE>
The provision for income taxes was $798,000 for fiscal 1994, compared to
$75,000 for fiscal 1993. The provision for income taxes for both periods has
been calculated on a separate tax return basis. Historically, the Company
filed its tax return as part of a consolidated group with DTI. The offsetting
charge for the provision for income taxes has been included as an element of
DTI's net investment in the Company as reflected in the accompanying
consolidated statements of stockholder's investment. The provision for income
taxes may not necessarily reflect the consolidated results of operations of
the Company in the future or what they would have been had it been a separate,
stand-alone entity during the periods presented.
Income from continuing operations was $1,172,000 for fiscal 1994 compared to
$121,000 in fiscal 1993.
Net income for fiscal year 1994 was $1,553,000 compared to a net loss of
$5,000 for fiscal year 1993. These results take into account income from
discontinued operations of $381,000 for fiscal year 1994 compared to a loss
from discontinued operations of $126,000 for fiscal year 1993. See "--
Discontinued Operations."
LIQUIDITY AND CAPITAL RESOURCES
Pursuant to the Distribution Agreement, simultaneously with the Distribution
DTI will contribute $10,000,000 in cash and cash equivalents to the Company,
for use in the Company's business, which will be increased or decreased based
upon the net cash flow of the Contributed Businesses after August 31, 1996,
less cash used in the disposition of the networking distribution business
prior to the Distribution. DTI has agreed to pay fifty-percent of the net
costs incurred by the Company in completing the winding-up of the networking
business, up to a maximum of $500,000. The Company plans to fund and support a
business plan which includes continuing investment in channel development,
promotion and product development for Broadway and other new commercial
products, as well as other product areas. Although the Company believes that
the proceeds from the Distribution, together with cash generated from future
operations, should be sufficient to meet the Company's cash requirements for
at least twelve months, it may need to raise additional capital from equity
and/or debt sources in order to finance its anticipated growth. See "RISK
FACTORS--Capital Requirements."
19
<PAGE>
BUSINESS OF THE COMPANY
COMPANY OVERVIEW
Data Translation II, Inc. (the "Company") was incorporated in September,
1996. Following the Distribution, the Company will operate the data
acquisition and imaging and commercial products groups of Data Translation,
Inc. ("DTI") (the "Contributed Business"). The Company will also acquire DTI's
networking distribution group of which the Company intends to divest itself as
soon as practicable after the Distribution. References to "the Company" below
refer to the Contributed Businesses after the Distribution, or as operated by
DTI prior to the Distribution, as the context requires.
The Company has been a leader in the design, development and manufacture of
high performance data acquisition and imaging products. For more than two
decades, the Company's products have provided engineers and scientists with
accurate and timely data for measurement, analysis and process control in a
wide range of industrial, scientific and medical applications. The Company has
sold more than 320,000 data acquisition and imaging products since its
inception. The Company's principal products in this area are data acquisition
and imaging hardware, which are used in personal computers ("PCs") to receive
analog signals, convert them to digital form and process the digital data. The
Company's strategy is to identify existing growth opportunities in the data
acquisition and imaging market.
An outgrowth of the Company's core technology of analog to digital
conversion is its low cost, high performance video capture and encoding system
for Microsoft(R) Windows(R) 95-based PCs called Broadway(TM). Broadway
captures analog video, digitizes it, compresses it into an editable MPEG-1
format, and writes it to disk in real time. The video can then be edited using
the Broadway editing utility or a third-party video editing package, highly
compressed to the MPEG-1 video format, an ISO video compression standard, and
then sent over the Internet or incorporated in presentation packages such as
Microsoft Powerpoint(R). The Company's Broadway product has many applications,
including incorporation of video into home pages on the world wide web (the
"Web"), multimedia presentations, CD-ROM titles and computer-based training.
The Contributed Businesses also include DTI's networking distribution
business in the United Kingdom. On July 31, 1996, DTI announced a plan to
discontinue the networking distribution business. On November 11, 1996, DTI
sold a substantial portion of the assets of the networking distribution
business and the Company intends to discontinue and wind-up of the remainder
of such business as soon as practicable following the Distribution.
COMMERCIAL PRODUCTS
Market
New video and audio technologies are impacting the way in which
presentations and communications are being created and sent. The advancement
of such technologies now allows many PC users to utilize the benefits of video
at increasingly reduced cost. The Company believes the areas offering the
greatest prospects for growth in the use of PC video applications are Web home
pages, business presentations, PC-based training and the production of CD-ROM
titles. OEM Magazine predicts that in 1996, eleven million MPEG-capable PCs
will be shipped. In 1997 thirty-five million will be shipped. The Company
believes this capability to play back high quality MPEG video will inspire
many presentation, training, and Web page authors to use video in their work.
The Company believes that many PC users would consider video clips an
attractive, creative and useful addition to their presentations and other
communications and would utilize them if they were easy to create and it was
affordable to do so. Businesses, for example, could create short, full-motion
video clips to install on their Web home pages showing interviews with
satisfied customers, product demonstrations and personal messages from
celebrity advertisers or corporate executives. Video could also be used to
create multimedia, PC-based corporate training presentations. In addition,
PowerPoint users might also find video an attractive addition to corporate
marketing presentations and other sales and marketing efforts. As a result of
the greatly reduced file sizes created by MPEG-1 compression, video is also
available for use on laptop PCs, even further broadening its
20
<PAGE>
potential applications. For example, sales people could visit prospective
customers and make sophisticated, interactive multimedia presentations,
including video product demonstrations, without the inconvenience of arranging
the availability of TVs, VCRs or overhead or slide projectors.
The Company believes that users in this market will only be attracted by a
high quality product that is easy to use and which can be offered at a
reasonably low price. The Company believes that these users have historically
not utilized video regularly because existing high quality products were too
expensive and too hard to use, and the products which were affordable did not
offer high enough quality for use in professional presentations.
Business Strategy
The Company's strategy for its commercial products, initially Broadway, is
to target low-end business users and consumers with an easy-to-use solution to
create near VHS quality video clips and incorporate such clips into common PC
applications. Historically, the use of video in computer applications was
largely confined to higher-end multimedia professionals. The Company believes
its Broadway product will make video capture and editing available to the low-
end business user and consumer markets due to its relatively lower suggested
retail price of $995 and ease of use compared to traditional systems. Broadway
is an intuitive application which allows virtually anyone to capture and edit
video clips within minutes with very little instruction. The Company believes
that the consumer market for video editing will grow substantially as
technology becomes more affordable and consumers become more familiar with
video applications.
The Company's strategy for its commercial products incorporates the
following critical elements:
. Ease of use. The Company targets customers who do not create video on a
regular basis. Therefore, in order to attract such customers to utilize
products such as Broadway, the product must allow them to incorporate and
edit video simply and easily. The Broadway graphical user interface was
intentionally designed to be used like any other Windows application,
such as Microsoft PowerPoint or Word for Windows(R). A user familiar with
PowerPoint would find using a Broadway system intuitive and could easily
incorporate video into a presentation created with PowerPoint, or with
many other applications.
. Standards based. Historically, video has not been available on
conventional PCs due to the enormous amount of memory and storage space
required to handle traditional video files. In the past several years,
however, compression techniques have been developed to allow standard PCs
to manipulate such files. Such techniques have begun to be standardized
to allow video to be incorporated into the widest variety of
applications. The MPEG-1 format is an ISO standard and is emerging as a
leading industry standard. Most PCs sold today now include playback of
MPEG-1 video as a standard feature. Because Broadway is based on the
MPEG-1 standard, it allows users to incorporate video into many
applications and delivery mechanisms which are also based on such
standard. Broadway allows delivery of MPEG-1 video via the hard drive,
CD-ROM, video CDs, DVD, private networks and the Internet. MPEG video can
be played back on millions of PCs that include either hardware or
software MPEG-1 playback capabilities.
. Affordability. The continued penetration of the PC into the home market
has been brought about by the continuously declining cost of technology.
The Company believes that it is critical to the Company's success to be
able to continue to reduce the cost of its commercial products thereby
making them increasingly affordable for the Company's target customers.
. Distribution to mass market. The Company's marketing strategy for its
commercial products is to achieve broad distribution of such products
through retail outlets, mass distribution centers, value added resellers,
Internet marketers, catalogs, and super stores. This broad distribution
will allow products such as Broadway to be available to consumers at
familiar and convenient purchasing locations.
Product and Technology
Broadway is a high-performance video capture and encoding system for Windows
95 PCs that can be integrated with third party video editing software packages
to edit and produce near VHS quality digital video
21
<PAGE>
clips with CD-quality stereo sound. Using Broadway, a computer user can
capture video from most analog sources, edit the digitized version created by
Broadway, fully compress it to MPEG-1 and then incorporate the finished video
into multimedia applications, such as Web home pages, multimedia presentations
and CD-ROMs. Broadway is comprised of a Peripheral Component Interconnect
("PCI") integrated circuit board and a graphical user interface compatible
with Windows. The Company's standard Broadway package is shipped complete with
Ulead Systems, Inc.'s MediaStudio Pro(TM) video editing software. Broadway is
also designed to be integrated with a variety of other video editing packages,
including Adobe Premiere(R). The standard Broadway package currently has a
manufacturer's suggested retail price of $995.
The first step in the process of creating a video presentation with Broadway
is to capture a clip of analog video from an external source, such as a
camcorder or a VCR. Video capture is the process of converting an analog video
signal into a digital format for storage on a computer disk drive from which
it can be manipulated. To capture a video clip with Broadway, a user first
connects the video source, such as a VCR, to the Broadway PCI board in the
user's PC with a standard video cable. The user then starts the video which
begins to play on the user's computer monitor allowing the user to determine
exactly which video frames to digitize. Using simple point-and-click commands,
the user starts and stops the capture of the video clip from the source video.
The video is automatically digitized and written to the hard disk drive of the
user's PC in an editable digital format.
Once a user has captured the desired video clip and it has been digitized by
Broadway, it can be edited using software utilities which are a part of
Broadway itself. Broadway contains a variety of editing utilities such as
cutting and pasting, saving selections and replacing audio. Broadway also
allows users to combine several video clips in one sequence and to incorporate
fade-to- and fade-from-black transitions. If more sophisticated transitions
are desired, or the user would like to include titles in the video clip, the
third party video editing software integrated with Broadway can perform these
functions. Editing with Broadway is performed in near real time because it
uses hardware to accelerate the editing process.
The final step in creating a video presentation with Broadway is to compress
the edited video clip and to incorporate the edited video into an application
such as a Web home page or a PowerPoint presentation. Compression is necessary
to play back digital video on a PC because of the enormous amount of data
required to create a video image. Fifteen seconds of uncompressed video would
occupy approximately 400 megabytes of disk storage space, far more than the
typical PC could dedicate to one small video clip. In addition, uncompressed
video is infeasible for low bandwidth environments, such as the Internet and
CD-ROMs. There are numerous digital video compression methods, however, the
Company believes that MPEG-1, a standard promulgated by the Moving Picture
Experts Group, is becoming the leading international standard for PC digital
video compression. MPEG-1 reduces digital video file sizes by up to a 200 to 1
ratio, one of the highest data compression ratios of any video compression
standard. Broadway utilizes a robust implementation of the MPEG-1 standard
which uses a combination of hardware and software to fully compress video
clips into the MPEG-1 format at approximately three times real time
(approximately three minutes for a one minute clip). Alternative systems which
use software compression are only able to perform this task at approximately
thirty to sixty times real time (approximately sixty minutes for a one-minute
clip), although such systems are relatively inexpensive. Historically, MPEG-1
compression at the rate provided by Broadway was only available through
service bureaus charging up to $300 per minute of video or sophisticated
computer packages costing in excess of $15,000.
Using the MPEG-1 standard allows Broadway to produce compressed videos which
can be played back at 30 frames per second, the standard, full-motion video
speed. Videos compressed to be played back at speeds slower than 30 frames per
second typically drop frames causing the resulting video to be less than full-
motion and of lower image quality. Once the video clip is compressed and saved
on the user's hard drive in the standard video file format, it is easily
incorporated into applications such as PowerPoint.
Customers and Sales
The Company believes there are three general categories of customers that
will use its commercial products.
. Multimedia content creators and developers. These include CD-ROM title
developers, computer-based training designers, game creators and
professional video service providers.
22
<PAGE>
. Presentation and Web page creators and developers. This group includes
sales and marketing professionals, financial presenters, trainers and
service providers such as advertising agencies, real estate agencies and
talent agencies.
. Home users. This category includes consumers who want to preserve and
archive their family videos. Valuable, irreplaceable home videos can be
preserved on CD-ROM or on a PC whereas they would ordinarily be subject
to deterioration over time. Additionally, consumers can edit these videos
and enhance their presentation.
Worldwide, the Company's commercial products are sold through a two-tier
distribution network. The Company has direct relationships with international
mass market distributors as well as resellers and value-added resellers
("VARs"). The distributors sell the commercial products to retail outlets as
well as smaller computer resellers and VARs. This allows the Company's
products to be available through any method used by its customers to purchase
their products. The strategy is to make it easy for the customer to purchase
the product by offering a 30-day money back guarantee which eliminates any
possible user concerns or hesitations. The product packaging was designed to
be sold through the retail channel with packaging which is attractive to the
retailer and consumer.
The Company provides end users with free technical support with the purchase
of the product. Broadway includes extensive on-line technical support via the
Company's Web site, as well as documentation which provides a video tutorial
to the non-video user and an intuitive installation guide.
Competition
The Company's greatest competition for the Broadway product includes other
products which include MPEG encoding. Sigma Design's Real Magic Producer, like
Broadway, includes hardware and software encoding. Darim Corporation, another
competitor, offers a hardware encoding product at a similar price point to
Broadway. The Company's Broadway product competes principally on the basis of
price and speed of compression of video. In addition, there are a number of
other competitors whose products are based on platforms and video standards
other than those used by the Company. There can be no assurance that customers
in the markets for the Company's products will not prefer products offered by
the Company's competitors to those currently offered by the Company, or that
the Company's competitors will not adapt more quickly than the Company to new
technologies or evolving customer requirements. There also can be no assurance
that companies with greater financial, technical or marketing resources who do
not currently compete with the Company will not develop products in the future
to compete with products offered by the Company.
DATA ACQUISITION AND IMAGING
Market
The market for the Company's data acquisition and imaging products is
comprised primarily of technical users, such as engineers and scientists,
interested in incorporating the Company's systems in their final products.
These products are designed for the scientific research and analysis, test and
measurement and industrial machine vision inspection markets. End users
include original equipment manufacturers, research laboratories, universities,
hospitals and government agencies. Users require highly accurate, real-time
measurement and control of analog signals, such as temperature, pressure,
sound and video.
The Company believes it is one of the top five suppliers in each market
although the data acquisition and imaging markets are highly fragmented. These
markets have been adversely affected in recent years by reduced government
funding of research and lower levels of corporate capital expenditures.
Business Strategy
In the data acquisition and imaging area, the Company is focused on
providing system solutions which include not only exceptional hardware but
also powerful, easy to use software. The Company will continue to
23
<PAGE>
invest in its current data acquisition and imaging markets, while identifying
new applications and growth opportunities in the machine vision and inspection
markets.
In the imaging market, the Company is focused on continuing to develop its
Mach(TM) series of PCI-based frame grabbers, leveraging this technology into
two distinct markets, machine vision and scientific image analysis. Both
markets require high accuracy and low-cost hardware. The Company's strategy
will be to continue to focus on its strengths in these areas. In the data
acquisition market, the Company is focused on expanding its market leadership
through continued development of its PCI-based data acquisition products.
These developments are being driven by rapid adoption of PCI bus slots by
personal computer manufacturers. In both data acquisition and imaging, the
Company is pursuing relationships with software companies who offer
application-specific programs in the Company's markets.
Products and Services
The Company's data acquisition and imaging products are designed to
facilitate (i) the high-speed capture of analog signals representing physical
events, such as temperature, pressure, sound and video, (ii) the fast
conversion of such signals into digital form and (iii) the use of such digital
signals in PCs for processing. These capabilities permit customers to use PCs
to identify, measure, analyze and control physical phenomena (data
acquisition) and to analyze or enhance video images (imaging).
The Company's data acquisition and imaging systems consist of plug-in cards
and Windows-based software which provide an integrated, high performance
systems solution to the general scientific and measurement marketplace. These
systems allow customers to configure their own PC-based data acquisition,
signal processing or imaging system with higher performance and lower cost
than alternative pre-packaged or custom-integrated systems. Users are able to
integrate these products more quickly into their systems, thereby reducing
their development time. Over a three year period the Company defined and
developed DT-Open Layers(R), a standard set of software protocols under the
Microsoft Windows operating system. DT-Open Layers simplifies programming and
accelerates the development of new software products and permits customers to
replace circuit boards and add new functions. These products offer leading-
edge functionality for data acquisition and imaging under Windows while
allowing customers to protect their software investments and develop solutions
more quickly.
The Company sells over 300 data acquisition and imaging products, which
range in retail price as of August 31, 1996 from $199 to $4,995. Domestically,
the Company sells such products to end users, VARs, system integrators and
original equipment manufacturers ("OEMs"). Internationally, the Company sells
through its wholly-owned subsidiaries, as well as through resellers and
independent distributors. Such prices do not reflect distributor discounts for
international sales, which range from approximately 20% to 35% on hardware
products and up to approximately 50% on software applications.
Data acquisition products provide capabilities ranging from simple
measurement to advanced digital signal processing functions. While
researchers, systems integrators and OEMs have been predominant data
acquisition users in the past, new data acquisition markets have emerged in
the industrial and medical areas, such as industrial inspection, medical
diagnostic/therapeutic applications, high-performance control, vibration
analysis, acoustics and test and measurement applications. Customers
incorporate the Company's data acquisition boards into PCs to measure real-
world parameters, including temperature, pressure, acceleration and sound; to
analyze this data; and to use the results to control real-world events and
processes.
The Company's imaging products may be used in a number of applications. In
machine vision applications, images can be captured and processed immediately
in real time for fast, accurate inspection of manufactured parts. In
scientific imaging applications, images can be captured from video cameras for
analysis, or images can be captured from cameras mounted on microscopes to
identify and count cells. In medical applications, images can be captured from
different diagnostic devices, such as CAT scanners or ultrasound imaging
devices, for enhancement, analysis and display.
24
<PAGE>
The Company has incorporated several new technologies in its products. For
example, the Company's frame grabber, a product which combines software with
proprietary circuits that permit users to acquire data from a variety of video
inputs, now utilizes the PCI bus architecture. In addition, the Company has
begun using the Display Connect Interface ("DCI") standard in certain of the
Company's frame grabber products.
Customers and Sales
The Company sells its data acquisition and imaging products to end users,
VARs, system integrators and OEMs for use primarily in the scientific, medical
and industrial markets. End users include manufacturers, research
laboratories, universities, hospitals and government agencies.
The Company sells its data acquisition and imaging products through a
comprehensive, widely distributed annual catalog, an in-house telemarketing
force, OEM-focused direct sales, indirect channels (VARs, distributors and
system integrators), and extensive advertising and promotional campaigns. The
Company has a full-time sales and administrative staff of over 26 employees in
the United States to support sales. International sales are supported by three
subsidiaries and various distributors throughout Europe, Asia and the Pacific
rim.
Competition
The Company competes in the data acquisition market principally with
National Instruments Corporation, Computer Boards, Inc. and Keithley
Instruments, Inc. and in the imaging market with Matrox and Imaging
Technology, Inc., all of which may have substantially greater financial,
technical and marketing resources than the Company. The Company also competes
with a number of smaller companies in each of these markets. The Company's
data acquisition and imaging products compete on the ability to supply
extensive hardware and software components with competitive performance and
price.
RESEARCH AND DEVELOPMENT
The Company intends to continue to invest in research and development for
new products and for enhancements to existing products. The Company is
currently targeting spending on research and development at an annual rate of
approximately 12% of net sales. For the nine months ended August 31, 1996, the
Company invested approximately $2,713,000 in product development.
The Company employed, as of August 31, 1996, 30 full-time engineers whose
primary duties relate to product development. Outside firms and consultants
are selectively engaged to develop or assist with development of products when
favorable opportunities exist.
In the data acquisition and imaging area, the new areas for hardware
development include the integration of ASICs (application specific integrated
circuits) into circuit boards, which will reduce cost and advance the
development of new computer bus technologies (e.g., PCI). The Company's
software development in data acquisition and imaging centers on supporting
Windows 95 and Windows NT(TM).
MANUFACTURING
The Company manufactures all of its products at its facility in Marlboro,
Massachusetts. The Company believes its control of manufacturing significantly
contributes to hardware design improvements, and allows for quicker turn-
around of engineering changes for shipment to the market. The Company
periodically assesses its production efficiencies against the benefits of
outsourcing certain hardware production.
In manufacturing, the Company seeks to be the leader in both technology and
management. The Company has adopted the philosophy of Total Quality
Management, a systematic approach to continuous improvement. The Company uses
work cells with higher volume products which, together with Just-In-Time
techniques, allows the Company to reduce throughput time and provide five day
shipment on most customer orders.
25
<PAGE>
The Company's fully integrated assembly and test operations have sufficient
capacity to meet the Company's needs for assembled printed circuit boards. In
addition, the Company designs circuit boards and modules using advanced
computer-aided-design technology. The Company's manufacturing capabilities
include the assembly of fine pitch, surface mounted electronic devices
utilizing state of the art pick and place robotics for high density, multi-
layered, single or double sided boards. A majority of the Company's shipments
incorporate surface-mount components. Initial testing is performed to assure
that products are free from process-related defects after assembly. Following
this, a complete functional test is performed twice on each board, with an
environmental stress screen between tests to eliminate defects and assure
long-term reliability of products. The Company uses automated test equipment
to assure product quality, improve throughput and increase production yields.
Components used in circuit board assembly are generally available from
several distributors and manufacturers. Suppliers are selected based on their
ability to provide defect-free products quickly at low cost. The Company
continuously measures the performance of key suppliers. Special programs are
used to speed availability of material and protect the Company from unplanned
shifts in product demand. These programs include ship-to-stock, and point-of-
use bonding, a program where suppliers hold material on-site at the Company
and as the material is used, title transfers to the Company and payment is
made. Certain components used by the Company do not have ready substitutes or
have been subject to industry-wide shortages. There can be no assurance that
the Company's inventories would be adequate to meet the Company's production
needs during any interruption of supply. The Company's inability to develop
alternative supply sources, if required, or a reduction or stoppage in supply,
could adversely affect its operations until new sources of supply become
available.
PROPRIETARY RIGHTS
Following the Distribution, the Company will hold eight United States
patents, expiring from March 2001 through August 2013, and have three pending
patent applications in the United States, none of which the Company believes
is material. Pursuant to the Company's Intellectual Property Agreement with
DTI, the Company also will have full cross-licenses to technology under DTI's
current patents and patent applications, together with technology resulting
from patent applications which DTI applies for during the two years following
the Distribution. The cross-licensed technology may only be transferred by the
Company in connection with a sale of the Company's business as a going
concern. The cross-licenses provide for termination upon a change in control
with respect to patents issued pursuant to applications made after August 31,
1996, although the licensee may continue to use such patents in products
already being shipped or which are substantially near completion of
development. See "RELATIONSHIP BETWEEN THE COMPANY AND DTI AFTER THE
DISTRIBUTION--Intercompany Agreements--Intellectual Property Agreement."
The Company believes that its success depends primarily upon the proprietary
know-how, innovative skills, technical competence and marketing abilities of
its employees.
BACKLOG
Most customers order products on an as-needed basis, relying, in the case of
most products, on the Company's five-day delivery capability. As a result, the
Company believes that its backlog at any point in time is not indicative of
its future sales.
EMPLOYEES
As of the Distribution Date, the Company expects to employ approximately 160
persons worldwide. None of the employees is represented by a labor union. The
Company believes it has good relations with its employees.
Competition for employees with the skills required by the Company is intense
in the geographic areas in which the Company's operations are located. The
Company believes that its future success will depend on its continued ability
to attract and retain qualified employees, especially in research and
development.
26
<PAGE>
PROPERTIES
DTI maintains its principal executive, engineering, manufacturing and sales
operations in a 103,000 square foot facility located in Marlboro,
Massachusetts. The building is rented under a lease signed by DTI with a
related party trust expiring in 1999. On the Distribution Date, the lease will
be assigned to the Company which will license a portion of the leased space to
DTI pursuant to a Use and Occupancy Agreement. The minimum annual net basic
rent is approximately $1,092,000, which amount will be divided between the
Company and DTI pursuant to the Use and Occupancy Agreement.
The United Kingdom operations are conducted in an 18,050 square foot
facility in Wokingham, Berkshire, England, that is leased by DTI through a
United Kingdom subsidiary under a twenty-five year net lease. The subsidiary
has an option to terminate the lease in 1997. The minimum annual basic rent is
approximately $257,000 per year. On the Distribution Date the stock of the
subsidiary will be transferred to the Company and the Company will license a
portion of the leased space to DTI for a transitional period.
The German operations are conducted in a 2,420 square foot office facility
in Bietigheim-Bissingen, Germany that is leased under a five-year renewable
lease, expiring in 2000, by Data Translation GmbH. The minimum annual basic
rent is approximately $52,000 per year. On the Distribution Date the stock of
the subsidiary will be transferred to the Company and the Company will license
a portion of the leased space to a subsidiary of DTI for a transitional
period. See "CERTAIN RELATIONSHIPS AND TRANSACTIONS" and "RELATIONSHIP BETWEEN
THE COMPANY AND DTI AFTER THE DISTRIBUTION--Use and Occupancy Agreements."
LEGAL PROCEEDINGS
From time to time, DTI has been involved in disputes and/or litigation with
respect to the products and operations of the Contributed Businesses
encountered in its normal course of business. In accordance with DTI's past
experience, the Company does not believe that the ultimate impact of the
resolution of such other outstanding matters will have a material effect on
the Company's financial condition or results of operations.
27
<PAGE>
MANAGEMENT OF THE COMPANY
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
<S> <C> <C>
Alfred A. Molinari,
Jr..................... 55 Chairman and Chief Executive Officer(1)
Gary B. Godin........... 40 Vice President--Finance and Administration, Chief Financial Officer
Kim J. Gray............. 35 Vice President/General Manager--Data Acquisition and Imaging Group
William T. Hack......... 41 Vice President--Operations
Bruce E. Walsh.......... 38 Vice President--Engineering
Ellen W. Harpin......... 40 Director and Vice President
D'Anne Hurd............. 45 Director(1)(2)(3)
Dr. David Cyganski...... 41 Director(1)(2)(3)
</TABLE>
- --------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
(3) Ms. Hurd and Dr. Cyganski have agreed to serve as Directors of the Company
as of the Distribution Date and the Company will cause such persons to be
appointed to the Board of Directors on such date.
Mr. Molinari is the Chief Executive Officer and Chairman of the Company. Mr.
Molinari is the founder of DTI, and served as the Chief Executive Officer and
a director of DTI from its inception in 1973 and will resign as Chief
Executive Officer as of the Distribution Date. Mr. Molinari will continue to
serve on the Board of Directors of DTI. Mr. Molinari served as director of
Viewlogic Systems, Inc., which is a supplier of electronic design automation
solutions, from July 1992 to February 1995.
Mr. Godin was appointed Vice President Finance and Administration and Chief
Financial Officer of the Company in September 1996. Mr. Godin has served as
Corporate Controller and Chief Accounting Officer of DTI since August 1992. He
was employed by DTI since May, 1987 and served as Corporate Accounting Manager
until August 1992. As of the Distribution Date, Mr. Godin shall resign from
his offices at DTI.
Ms. Gray was appointed Vice President/General Manager--Data Acquisition and
Imaging Group of the Company in September 1996. Ms. Gray has served in the
same position for DTI since January 1996. Prior to that, she served as Vice
President--Operations of DTI beginning July 1995. She was employed by DTI
since 1979, and during her tenure held various positions in materials,
production and manufacturing service. As of the Distribution Date, Ms. Gray
shall resign from her office at DTI.
Mr. Hack was appointed Vice President of Operations of the Company in
September 1996. Prior to that he served as Director of Operations for DTI
since January 1996. Mr. Hack served as Director of Materials from November
1994 to January 1996. He has been employed by DTI since February 1990 and
during his tenure has held various positions within manufacturing operations,
including Production Manager. As of the Distribution Date, Mr. Hack shall
resign from his office at DTI.
Mr. Walsh was appointed Vice President of Engineering of the Company in
September 1996. Prior to that he served as Director of Engineering for the
Commercial Products Group of DTI since June 1995. He also served as Director
of Software Engineering for the Data Acquisition and Imaging Group of DTI from
June 1994 to June 1995. Mr. Walsh has been employed by DTI since June 1991 and
during his tenure has held various engineering and engineering management
positions. As of the Distribution Date, Mr. Walsh shall resign from his office
at DTI.
28
<PAGE>
Ms. Harpin was appointed a Director of the Company in September 1996. Prior
to that she served as Vice President of Administration for DTI since July
1995. She also served as Chief Financial Officer for DTI from November 1991 to
July 1995. Ms. Harpin has been employed by DTI since March 1983 and during her
tenure has served as Vice President--Finance and Administration, Treasurer,
Vice President Manufacturing and Director of Sales. As of the Distribution
Date, Ms. Harpin shall resign from her office at DTI.
Ms. Hurd will become a Director of the Company on the Distribution Date. Ms.
Hurd has served as a business/legal consultant since January 1995,
specializing in initial public offerings and strategic alliances/joint
ventures. From September 1993 until December 1994, Ms. Hurd was Corporate Vice
President, General Counsel and Clerk and from June 1993 until September 1993
General Counsel of MediSense, Inc., a manufacturer of blood glucose monitors
for people with diabetes. From 1985 to 1993 she was associated with the law
firm of Burns & Levinson in Boston, specializing in corporate and securities
law.
Dr. Cyganski will become a Director of the Company on the Distribution Date.
Dr. Cyganski has served in faculty and administrative positions at Worcester
Polytechnic Institute ("WPI") since July 1981. Since October 1992 Dr.
Cyganski, has been a professor in the WPI Electrical and Computer Engineering
Department. From 1987 until resuming his position as Professor, Dr. Cyganski
held the administrative positions of Chief Information Officer, Vice President
of Information Systems and Vice Provost at WPI.
BOARD OF DIRECTORS AND ITS COMMITTEES
As of the Distribution Date, the Board of Directors will be divided into
three classes, each of whose members will serve for a staggered three-year
term. The Board will be comprised of one Class I Director (Ms. Harpin), two
Class II Directors (Ms. Hurd and Dr. Cyganski) and one Class III Director (Mr.
Molinari). At each annual meeting of stockholders, a class of directors will
be elected to a three-year term to succeed the directors of the same class
whose terms are then expiring. The terms of each of the Class I Director,
Class II Directors and Class III Director will expire upon the election and
qualification of successor directors at the annual meeting of stockholders
held following the end of the Company's fiscal years in 1997, 1998 and 1999,
respectively.
Each officer serves at the discretion of the Board of Directors. There are
no family relationships among any of the Directors and executive officers of
the Company.
The Board of Directors has a Compensation Committee and an Audit Committee.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation for employees of and consultants to the Company,
establishes and approves salaries and incentive compensation for certain
senior officers and employees. As of the Distribution Date, the members of the
Compensation Committee shall be Ms. Hurd, Dr. Cyganski and Mr. Molinari. The
Audit Committee reviews the results and scope of the financial audit and other
services provided by the Company's independent public accountants. As of the
Distribution Date the members of the Audit Committee shall be Ms. Hurd and Dr.
Cyganski.
BOARD OF DIRECTORS COMPENSATION
The Company compensates each director who is not also an employee of the
Company $7,500 per year plus $500 per meeting for services as a director. In
addition, each non-employee director is eligible to receive options under the
Company's 1996 Stock Option Plan.
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation paid or accrued by DTI to or on behalf of the Chief Executive
Officer of the Company and each of the executive officers of the Company whose
cash compensation exceeded $100,000 annually (the "Named Executive Officers")
in the most recently ended fiscal year.
29
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------- AWARDS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#)(1) COMPENSATION($)(2)
- --------------------------- ---- --------- -------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Alfred A. Molinari,
Jr. .................... 1995 $223,945 $50,000 100,000 $1,256
Chairman and Chief Exec- 1994 206,700 10,335 -- 422
utive Officer 1993 206,700 -- 20,000 3,138
Kim J. Gray.............. 1995 92,000 25,000 4,000 696
Vice President/General
Manager-- 1994 75,981 2,250 -- 153
Data Acquisition and Im-
aging Group 1993 63,000 -- -- 49
Ellen W. Harpin.......... 1995(3) 93,195 25,000 4,000 364
Director and Vice Presi-
dent 1994 104,712 5,250 20,000 214
1993 100,000 -- 5,000 1,559
</TABLE>
- --------
(1) DTI has not issued stock appreciation rights or granted restricted stock
awards. In addition, DTI does not maintain a "long-term incentive plan,"
as that term is defined in applicable rules.
(2) The amounts for fiscal 1994 represent the dollar value of premiums paid by
DTI on term life insurance for the benefit of the Named Executive
Officers.
(3) Beginning in January 1995, Ms. Harpin has been working a reduced time
schedule.
STOCK OPTIONS
The following table provides information concerning the grant of stock
options under DTI's Key Employee Incentive Plan (1992) to the Named Executive
Officers. For a discussion of the treatment of employee stock options in the
Distribution, see "TREATMENT OF EMPLOYEE OPTIONS IN THE DISTRIBUTION."
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
ANNUAL RATES
OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
-------------------------------------------- -------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS EMPLOYEES IN PRICE EXPIRATION 5% 10%
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE ($) ($)
---- ---------- ------------ -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Alfred A. Molinari,
Jr..................... 30,616(1) 9.31% $14.365 6/28/00 $ 70,613 $ 204,279
69,384(2) 21.09 13.063 6/28/01 308,204 699,252
Kim J. Gray............. 4,000(3) 1.22 11.00 2/28/01 14,964 33,948
Ellen W. Harpin......... 4,000(3) 1.18 11.00 2/28/01 14,964 33,949
</TABLE>
- --------
(1) These incentive options become exercisable over four years, 25% on each
anniversary of the date of grant and expire five years after grant. The
exercise price is 110% of the fair market value of the Common Stock on the
date of grant.
(2) These non-incentive options become exercisable over five years, 20% on
each anniversary of the date of grant and expire six years after grant.
(3) These incentive options become exercisable over five years, 20% on each
anniversary of the date of grant and expire six years after grant.
30
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table provides information, with respect to the Named
Executive Officers, concerning the unexercised DTI options held as of the end
of the fiscal year. For a discussion of the treatment of employee stock
options in the Distribution, see "TREATMENT OF EMPLOYEE OPTIONS IN THE
DISTRIBUTION."
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FY-END (#) OPTIONS AT FY-END ($)(1)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alfred A. Molinari,
Jr. ................... 32,000 $374,295 5,000 115,000 $ 72,750 $831,748
Kim J. Gray............. 11,766 99,675 800 5,600 13,800 61,600
Ellen W. Harpin......... 30,666 333,493 30,000 27,000 497,000 362,250
</TABLE>
- --------
(1) Market value of underlying securities at November 30, 1995, minus the
exercise price of "in-the-money" options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As of the Distribution Date, Mr. Molinari, the Chief Executive Officer and
Chairman of the Board of Directors of the Company will be a member of the
Compensation Committee of the Board of Directors. See "CERTAIN RELATIONSHIPS
AND TRANSACTIONS" for a description of certain lease payments by the Company
in which Mr. Molinari has an interest.
COMPANY STOCK PLANS
1996 Stock Option Plan
As of the Distribution Date, the Board of Directors shall adopt the
Company's 1996 Stock Option Plan (the "1996 Stock Option Plan") pursuant to
which 500,000 shares of Common Stock are authorized and reserved for issuance.
The 1996 Stock Option Plan permits the grant of (i) options to purchase shares
of Common Stock intended to qualify as incentive stock options under Section
422 of the Code ("Incentive Options") and (ii) options that do not so qualify
("Non-Qualified Options"). The 1996 Stock Option Plan is designed and intended
as a performance incentive for officers, directors, employees, consultants and
other key persons performing services for the Company and its subsidiaries to
encourage such persons to acquire or increase a proprietary interest in the
success of the Company.
Plan Administration. The 1996 Stock Option Plan provides that it shall be
administered either by the entire Board of Directors or a Stock Option
Committee as appointed by the Board of Directors from time to time (in either
case, the "Administrator"). If the Company has a Stock Option Committee, each
member of the Stock Option Committee must be a "Non-Employee Director" within
the meaning of rules promulgated by the Securities and Exchange Commission in
order for specific grants of Incentive Options or Non-Qualified Options to
receive favorable treatment under certain relevant securities laws. The
Administrator may delegate to the Chief Executive Officer of the Company
authority to grant options to persons who are not subject to such securities
laws.
The Board of Directors may discontinue or amend the 1996 Stock Option Plan
at any time. Amendments must be approved by the stockholders if required to
ensure that Incentive Options qualify under the Code. In addition, the rights
and obligations under any option issued prior to an amendment of the 1996
Stock Option Plan cannot be adversely affected by such amendment without the
consent of the optionee.
31
<PAGE>
The Administrator has full power to select, from among the persons eligible
for awards under the 1996 Stock Option Plan, the individuals to whom awards
will be granted, to make any combination of awards to participants, and to
determine the specific terms of each award, subject to the provisions of the
1996 Stock Option Plan. Incentive Options may be granted only to officers or
other employees of the Company or certain subsidiaries, including members of
the Board of Directors who are also employees of the Company or such
subsidiaries. Non-Qualified Options may be granted to officers or other
employees of the Company, directors and to consultants and other key persons
who provide services to the Company or any subsidiary (regardless of whether
they are also employees).
The exercise price of each option granted under the 1996 Stock Option Plan
is determined by the Administrator but, in the case of Incentive Options, may
not be less than 100% of the fair market value of the underlying shares on the
date of grant. No Incentive Option may be granted under the 1996 Stock Option
Plan to any employee of the Company or any subsidiary who owns at the date of
grant shares of stock representing in excess of 10% of the voting power of all
classes of stock of the Company or a parent or a subsidiary unless the
exercise price for stock subject to such option is at least 110% of the fair
market value of such stock at the time of grant and the option term does not
exceed five years. Options generally may not be transferred by the optionee
other than by will or the laws of descent or distribution and may be exercised
only by the optionee during his or her lifetime. In limited circumstances, the
Administrator may permit an optionee to transfer his Non-Qualified Options to
members of the optionee's immediate family, family trusts and partnerships,
and charitable organizations.
The term of each option is fixed by the Administrator and, in the case of an
Incentive Option, may not exceed ten years from the date of grant. The
Administrator determines at what time or times each option may be exercised
and, subject to the provisions of the 1996 Stock Option Plan, the period of
time during which options may be exercised, if any, after termination of
employment for any reason. Options may be made exercisable in installments,
and the exercisability of options may be accelerated by the Administrator.
Upon exercise of options, the option exercise price must be paid in full (i)
in cash or by certified or bank check or other instrument acceptable to the
Administrator, (ii) if the applicable option agreement permits, by delivery of
shares of Common Stock already owned by the optionee, or (iii) through a
"cashless" exercise procedure, subject to certain limitations.
Change of Control Provisions. The 1996 Stock Option Plan provides that in
the case of certain transactions constituting a change in control of the
Company, the 1996 Stock Option Plan and the options issued thereunder shall
terminate upon the effectiveness of any such transaction or event, unless
provision is made in connection with such transaction for the assumption of
options theretofore granted, or the substitution for such options of new
options of the successor entity or parent thereof, with appropriate adjustment
as to the number and kind of shares and the per share exercise price. In the
event of such termination, each holder of outstanding options shall be
permitted to exercise all options whether vested or unvested for a period of
at least 15 days prior to the date of such termination.
Replacement Stock Option Plan
The Board of Directors shall adopt the Company's Replacement Stock Option
Plan (the "Replacement Plan"), effective as of the Distribution Date. The
Replacement Plan will provide for the issuance, effective immediately prior to
the Distribution, of options to purchase shares of Common Stock (the
"Replacement Options") to holders of options to purchase shares of DTI Stock
that were granted under DTI's 1992 Key Employee Incentive Plan and its 1982
Key Employee Incentive Plan and are outstanding on the Distribution Date (the
"DTI Options"), as part of an adjustment to the DTI Options. The number of
shares subject to each Replacement Option, the exercise price therefor and the
other terms and conditions of each Replacement Option shall be determined in
accordance with the applicable provisions of the Distribution Agreement. See
"TREATMENT OF EMPLOYEE OPTIONS IN THE DISTRIBUTION". It is intended that
Replacement Options issued to employees of the Company ("Transferred
Employees") in respect of DTI Options that qualify
32
<PAGE>
as Incentive Options shall qualify as Incentive Options pursuant to Section
424(a) of the Code. Replacement Options issued to persons other than
Transferred Employees and Replacement Options issued to Transferred Employees
in respect of DTI Options that do not qualify as Incentive Options will be Non-
Qualified Options.
The Replacement Plan shall be administered by the Board of Directors or by a
stock option committee appointed by the Board of Directors. The Company has
authorized the issuance of up to 275,000 shares of Common Stock under the
Replacement Plan, which the Company expects to be sufficient to satisfy all
purchase requirements under the Replacement Options.
Employee Stock Purchase Plan
The Company Employee Stock Purchase Plan (the "Stock Purchase Plan") provides
an opportunity for eligible employees of the Company and its subsidiaries to
purchase shares of Common Stock, at a discount, through regular monthly payroll
deductions of up to 10% of their pre-tax gross salary. Subject to adjustment
for stock splits, stock dividends and similar events, a maximum of 150,000
shares of Common Stock may be issued under the Stock Purchase Plan. The Stock
Purchase Plan will be administered by an Administrator appointed by the Board
of Directors.
The first offering under the Stock Purchase Plan will begin on January 2,
1997 and end on June 30, 1997. Unless otherwise determined by the
Administrator, subsequent offerings will commence on the first business day
occurred on or after each January 1 and July 1 thereafter and will have a
duration of six months. The Administrator may, in its discretion select a
different offering period for any offering, provided the duration of the
offering is not more than one year. Generally, all employees of the Company and
designated subsidiaries who are customarily employed for more than 20 hours per
week as of the first day of the applicable offering period are eligible to
participate in the Stock Purchase Plan.
The maximum number of shares which may be purchased by a participating
employee of the Company and its subsidiaries during an offering will be
determined by the Administrator on a uniform basis and generally will equal
1,000 shares. An employee may purchase shares under the Stock Purchase Plan by
authorizing payroll deductions, of up to 10% of his regular pay during this
offering period. Unless the employee has previously withdrawn from the
offering, his accumulated payroll deductions will be used to purchase Common
Stock on the last business day of the period at a price equal to 85% of the
fair market value of the Common Stock on the first or last day of this offering
period whichever is lower. Under applicable tax rules, an employee may purchase
no more than $25,000 worth of Common Stock in any calendar year (determined on
the first day of the offering period(s) in which such stock is purchased);
certain other tax limitations may apply.
The Board of Directors has the discretion to designate the subsidiaries of
the Company whose employees are eligible to participate in the Stock Purchase
Plan from time to time. The Board of Directors may at any time amend the Stock
Purchase Plan, subject to the approval of the Company's stockholders if and to
the extent required to preserve the favorable tax treatment of participants, or
discontinue the Stock Purchase Plan.
The Stock Purchase Plan is intended to qualify as an "employee stock purchase
plan" as defined in Section 423 of the Code, which provides that an employee
will not have income for federal income tax purposes at the start of an
offering or upon receipt of shares of Common Stock at the end of an offering,
but generally will recognize ordinary income, in addition to capital gain or
loss, when the employee sells the shares. The Company generally will not be
entitled to a tax deduction upon either the purchase or sale of shares issued
under the Stock Purchase Plan if certain holding period requirements are met.
33
<PAGE>
TREATMENT OF EMPLOYEE OPTIONS IN THE DISTRIBUTION
DTI currently maintains and has outstanding options under its 1992 Key
Employee Incentive Plan and its 1982 Key Employee Incentive Plan (collectively
the "Incentive Plans"). Each current holder of an option to purchase shares of
DTI Stock outstanding under the Incentive Plans (an "Old DTI Option") will
have the exercise price of such Old DTI Options adjusted to give effect to the
Distribution (as so adjusted, a "New DTI Option") and will receive a new
option for one quarter of the number of shares of such holder's Old DTI Option
to purchase Common Stock, at an exercise price proportionate to the exercise
price of such holder's Old DTI Option, under the Replacement Plan (a "Company
Option"). Each New DTI Option and each Company Option will have substantially
the same terms, including expiration dates and vesting provisions, as the Old
DTI Options, except for exercise prices. The exercise prices of the New DTI
Options and Company Options will be determined consistent with the intention
that New DTI Options issued to DTI employees and Company Options issued to
Company employees in respect of Old DTI Options that qualified as Incentive
Options will continue to qualify as Incentive Options.
Subject to certain conditions, employees of the Company and DTI will be paid
an amount in cash intended to compensate them for the loss of incentive stock
option treatment under the Code with respect to options they hold in the
company which is not their employer following the Distribution. Such amount
will be paid by the employer, will be determined by such employer in its
discretion and will not exceed the value of the corresponding tax benefit to
such employer.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
DTI has leased, and upon the Distribution, the Company will lease its
domestic headquarters (the "facilities") from a related party trust, Nason
Hill Trust (the "Trust"), a nominee trust of which Alfred A. Molinari, Jr.,
Chairman and Chief Executive Officer of the Company, and his wife are the sole
trustees and beneficiaries.
The facilities are leased from the Trust under an operating lease agreement
expiring on December 1, 1999. Pursuant to an amendment dated November 29,
1989, the annual lease payments are equal to the sum of (i) $1,092,000 and
(ii) any additional interest costs payable by the Trust in such year under a
note in favor of Fleet National Bank due to the failure of the Company to
maintain the financial ratios required for the most favorable interest rate
under such note. In addition to such lease payments, the Company bears all of
the tax, insurance and other costs of operating the facilities and, under
certain circumstances, various costs and expenses associated with the series
of industrial revenue bonds, the proceeds of which were used in connection
with the facilities. Total rental expense included in the operations of the
Company under the lease agreements for fiscal 1995 was $633,000 and $410,000
for the nine months ended August 31, 1996.
The Company believes that the terms of its leases with the Trust are at
least as favorable as it could have obtained in an arm's-length transaction
with an unrelated third party. The leases were approved by those directors of
DTI who had no beneficial interest in the Trust.
Following the Distribution, DTI will license a portion of the Company's
facilities for a license fee equal to DTI's pro rata portion of the base rent
and operating expenses under the lease. See "RELATIONSHIP BETWEEN THE COMPANY
AND DTI AFTER THE DISTRIBUTION--Intercompany Agreements--Use and Occupancy
Agreements." Alfred A. Molinari is a director of DTI and will continue to be a
director of DTI after the Distribution. See "RELATIONSHIP BETWEEN THE COMPANY
AND DTI AFTER THE DISTRIBUTION--Board of Directors and Management."
34
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the shares of
Common Stock which are expected to be beneficially owned by each person
holding more than 5% of the outstanding securities of any class of the
Company, each director, and the Named Executive Officers of the Company and by
all directors and officers of the Company as a group as of the Distribution
Date based upon their respective holdings of DTI's Stock as of October 31,
1996. The table includes as a basis for calculation options to purchase shares
of Common Stock issued as a result of the Distribution which are exercisable
at or within 60 days of November 30, 1996. See "TREATMENT OF EMPLOYEE OPTIONS
IN THE DISTRIBUTION." The table does not include any options which may be
granted as part of the Company's employee benefit programs following the
Distribution.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
BENEFICIALLY
OWNED(1) PERCENT(1)
------------ ----------
<S> <C> <C>
5% STOCKHOLDERS
Dawson-Samberg Capital Management, Inc.(2)............ 181,900 8.94%
354 Pequot Ave.
Southport, Connecticut 06490
Oppenheimer Funds, Inc.(3)............................ 128,750 6.33
Two World Trade Center, Suite 3400
New York, New York 10048-0203
Twentieth Century Companies, Inc.(4).................. 138,500 6.81
4500 Main Street
P.O. Box 418210
Kansas City, Missouri 64141-9210
West Highland Capital, Inc.(5)........................ 189,425 9.31
300 Drake's Landing Road, Suite 290
Green Brac, California 94904
DIRECTORS AND NAMED EXECUTIVE OFFICERS
Alfred A. Molinari, Jr.(6)............................ 259,150 12.74
100 Locke Drive
Marlboro, Massachusetts 01752
Ellen W. Harpin....................................... 5,814 *
100 Locke Drive
Marlboro, Massachusetts 01752
Kim J. Gray(7)........................................ 494 *
D'Anne Hurd(8)........................................ 125 *
David Cyganski........................................ -- *
All executive officers and directors as a group (8
persons in all)...................................... 269,514 13.25%
</TABLE>
- --------
*Represents less than 1%.
(1) The number and percent of the outstanding shares of Common Stock treat as
outstanding all shares issuable on exercise of options held by a
particular beneficial owner that are exercisable within 60 days of
November 30, 1996 and are included in the first column.
(2) According to a Schedule 13D filed by Dawson-Samberg Capital Management,
Inc. ("Dawson") with the Commission on October 30, 1996. Dawson is a
registered investment advisor and beneficially owns 18,425 shares of the
Company's Common Stock, Pequot General Partners beneficially owns 65,825
shares of the Company's Common Stock, DS International Partners
beneficially owns 59,700 shares of the Company's Common Stock and Pequot
Endowment Partners, L.P. beneficially owns 37,950 shares of the Company's
Common Stock. Jonathan T. Dawson and Arthur J. Samberg are the principal
stockholders of Dawson and are general partners of each of Pequot
Partners, DS International Partners and Pequot Endowment Partners, L.P.
35
<PAGE>
(3) According to Schedule 13G filed with the Commission on February 8, 1996,
Oppenheimer Funds, Inc. ("OFI") is a registered investment advisor to
certain registered investment companies including the Oppenheimer Discover
Fund which holds 87,500 shares of the Common Stock. The Board of Directors
or Trustees of the registered investment companies managed by OFI and
owning shares of the Company can direct the disposition of dividends
received by such funds and can dispose of such securities. Additionally,
OFI shares the power to dispose of such securities with the Board of
Directors or Trustee of such funds; however, the Board of Directors or
Trustees of such fund has delegated these responsibilities to OFI as the
fund's investment advisor under its advisory agreement. In the Schedule
13D, OFI has disclaimed beneficial ownership of the shares held by the
Oppenheimer Discover Fund.
(4) Twentieth Century Companies, Inc. ("TCC") and its affiliates collectively
hold 138,500 shares of the Company's Common Stock. According to Schedule
13G filed with the Commission on February 13, 1996. Investors Research
Corporation ("IRC"), a registered investment advisor, is a wholly-owned
subsidiary of TCC. Mr. James E. Stowers, Jr., controls TCC by virtue of
his beneficial ownership of a majority of the voting stock of TCC. As a
result of its status as investment advisor to six registered investment
companies and to several institutional investors, IRC is deemed to be the
beneficial owner of 138,500 shares or 6.81% of the outstanding common
stock of the Company. TCC, as a result of its control of IRC, and Mr.
Stowers, as a result of his control of TCC, are also deemed to
beneficially own all such shares deemed to be beneficially owned by IRC.
Mr. Stowers, TCC and IRC all disclaim beneficial ownership of the shares.
The ownership of one investment company client of IRC, Twentieth Century
Investors, Inc., totaled 125,000 shares or 6.15% of the outstanding Common
Stock of the Company.
(5) West Highland Capital, Inc. and its affiliates collectively hold 189,425
shares of the Company's Common Stock (the "West Highland Shares").
According to a Schedule 13D filed with the Commission on November 27,
1995, (i) West Highland Capital, Inc. beneficially owns all 189,425 of the
West Highland Shares, (ii) Lang H. Gerhard beneficially owns 161,169 of
the West Highland Shares, (iii) West Highland Partners, L.P. beneficially
owns 132,708 of the West Highland Shares and (iv) Buttonwood Partners L.P.
beneficially owns 28,461 of the West Highland Shares.
(6) Includes 7,883 shares subject to options exercisable on or before January
31, 1997. Does not include 4,404 shares owned by Mr. Molinari's wife as to
which Mr. Molinari disclaims beneficial ownership.
(7) Includes 400 shares subject to options exercisable on or before January
31, 1997.
(8) Does not include 75 shares owned by Ms. Hurd's husband as to which Ms.
Hurd disclaims beneficial ownership.
36
<PAGE>
DESCRIPTION OF THE COMPANY'S CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
The authorized capital stock of the Company consists of 30,000,000 shares of
Common Stock, of which approximately 2,021,071 shares will be issued and
outstanding as of the Distribution Date, and 5,000,000 shares of Preferred
Stock, of which no shares will be issued and outstanding. The following
summary description of the capital stock of the Company is qualified in its
entirety by reference to the Company's Certificate of Incorporation as of the
Distribution Date (the "Certificate") and By-laws, copies of which are filed
as exhibits to the Registration Statement of which this Information Statement
is a part. The Certificate and By-laws have been adopted by the stockholders
and the Board of Directors of the Company.
Common Stock. Holders of Common Stock are entitled to one vote per share on
all matters to be voted on by stockholders. Holders of Common Stock are not
entitled to cumulative voting rights. Therefore, the holders of a majority of
the shares voted in the election of directors can elect all of the directors
then standing for election, subject to the rights of the holders of Preferred
Stock, if and when issued. The holders of Common Stock have no preemptive or
other subscription rights.
The holders of Common Stock are entitled to receive such dividends, if any,
as may be declared from time to time by the Board of Directors from funds
legally available therefor, with each share of Common Stock sharing equally in
such dividends. The possible issuance of Preferred Stock with a preference
over Common Stock as to dividends could impact the dividend rights of holders
of Common Stock.
There are no redemption or sinking fund provisions with respect to the
Common Stock. All outstanding shares of Common Stock, including the shares
offered hereby, are, or will be upon completion of the Offering, fully paid
and non-assessable.
The By-laws provide, subject to the rights of the holders of the Preferred
Stock, if and when issued, that the number of directors shall be fixed by the
Board of Directors. The directors, other than those who may be elected by the
holders of Preferred Stock, if and when issued, are divided into three
classes, as nearly equal in number as possible, with each class serving for a
three-year term, except with respect to the initial term of each class of
directors which shall be for the period described under "Management--Directors
and Executive Officers." Subject to any rights of the holders of Preferred
Stock, if and when issued, to elect directors, and to remove any director,
whom the holders of any such stock had the right to elect, any director of the
Company may be removed from office only for cause and by the affirmative vote
of at least two-thirds of the total votes which would be eligible to be cast
by stockholders in the election of such director.
Undesignated Preferred Stock. The Board of Directors of the Company is
authorized, without further action of the stockholders of the Company, to
issue up to 5,000,000 shares of Preferred Stock in classes or series and to
fix the designations, powers, preferences and the relative, participating,
optional or other special rights of the shares of each series and any
qualifications, limitations and restrictions thereon as set forth in the
Certificate. Any such Preferred Stock issued by the Company may rank prior to
the Common Stock as to dividend rights, liquidation preference or both, may
have full or limited voting rights and may be convertible into shares of
Common Stock.
The purpose of authorizing the Board of Directors to issue Preferred Stock
is, in part, to eliminate delays associated with a stockholder vote on
specific issuances. The issuance of Preferred Stock could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring or seeking to acquire, a significant portion of the
outstanding stock of the Company.
CERTAIN PROVISIONS OF THE COMPANY'S CHARTER AND BY-LAWS
General. A number of provisions of the Certificate and By-laws concern
matters of corporate governance and the rights of stockholders. Certain of
these provisions, as well as the ability of the Board of Directors to
37
<PAGE>
issue shares of Preferred Stock and to set the voting rights, preferences and
other terms thereof, may be deemed to have an anti-takeover effect and may
discourage takeover attempts not first approved by the Board of Directors
(including takeovers which certain stockholders may deem to be in their best
interests). To the extent takeover attempts are discouraged, temporary
fluctuations in the market price of the Common Stock, which may result from
actual or rumored takeover attempts, may be inhibited.
The Certificate provides for the Board of Directors to be divided into three
classes of directors serving staggered three-year terms. As a result,
approximately one-third of the Board of Directors will be elected each year.
In addition, the Certificate provides that stockholders may remove a director
only for cause and only by the vote of the holders of two-thirds of the Common
Stock of the Company. This provision, when coupled with the provision of the
Certificate authorizing only the Board of Directors to fill vacant
directorships, will preclude stockholders from removing incumbent directors
without cause and simultaneously gaining control of the Board of Directors by
filling the vacancies created by such removal with their own nominees, and
will make more difficult, and therefore may discourage, a proxy contest to
change control of the Company. These provisions, together with the ability of
the Board to issue Preferred Stock without further stockholder action, also
could delay or frustrate the removal of incumbent directors or the assumption
of control by stockholders, even if such removal or assumption would be
beneficial to stockholders of the Company. In addition, these provisions could
discourage or make more difficult a merger, tender offer or proxy contest,
even if they could be favorable to the interests of stockholders, and could
potentially depress the market price of the Common Stock. The Board of
Directors of the Company believes that these provisions are appropriate to
protect the interests of the Company and all of its stockholders. The Board of
Directors has no present plans to adopt any other measures or devices which
may be deemed to have an anti-takeover effect.
Meetings of Stockholders. The By-laws provide that, unless otherwise
required by law, a special meeting of stockholders may be called only by the
Board of Directors. The By-laws provide that only those matters set forth in
the notice of special meeting may be considered or acted upon at that special
meeting, unless otherwise provided by law. In addition, the By-laws set forth
certain advance notice and informational requirements and time limitations on
any director nomination or any new business which a stockholder wishes to
propose for consideration at an annual or special meeting of stockholders.
No Stockholder Action by Written Consent. The Certificate provides that any
action required or permitted to be taken by the stockholders of the Company at
an annual or special meeting of stockholders must be effected at a duly called
meeting and may not be taken or effected by a written consent of stockholders
in lieu thereof.
Indemnification and Limitation of Liability. The By-laws provide that
directors and officers of the Company shall be, and, in the discretion of the
Board of Directors, non-officer employees may be, indemnified by the Company
to the fullest extent authorized by Delaware law, as it now exists or may in
the future be amended, against all expenses and liabilities reasonably
incurred in connection with service for or on behalf of the Company. The By-
laws also provide that the right of directors and officers to indemnification
shall be a contract right and shall not be exclusive of any other right now
possessed or hereafter acquired under any by-law, agreement, vote of
stockholders or otherwise. The Certificate contains a provision permitted by
Delaware law that generally eliminates the personal liability of directors for
monetary damages for breaches of their fiduciary duty, including breaches
involving negligence or gross negligence in business combinations, unless the
director has breached his or her duty of loyalty, failed to act in good faith,
engaged in intentional misconduct or a knowing violation of law, paid a
dividend or approved a stock repurchase in violation of the Delaware General
Corporation Law or obtained an improper personal benefit. This provision does
not alter a director's liability under the federal securities laws. In
addition, this provision does not affect the availability of equitable
remedies, such as an injunction or rescission, for breach of fiduciary duty.
Amendment of the Certificate. The Certificate provides that an amendment
thereof must first be approved by, a majority of the Board of Directors and
(with certain exceptions) thereafter approved by the holders of a majority of
the outstanding shares entitled to vote on such amendment or repeal and the
affirmative vote of a
38
<PAGE>
majority of the outstanding shares of each class entitled to vote thereon as a
class; provided however, that the affirmative vote of two-thirds of the
outstanding shares of each class entitled to vote thereon as a class, is
required to amend (i) provisions set forth in Article V therein relating to
stockholder actions at annual or special meetings of stockholders, (ii)
provisions set forth in Article VI therein relating to Directors of the
Company, (iii) provisions set forth in Article VII therein relating to the
limitation of liability of Directors and officers of the Company and (iv)
provisions set forth in Article IX therein relating to amendments to the
Certificate.
Amendment of By-laws. The Certificate provides that the By-laws may be
amended or repealed by the Board of Directors or by the stockholders. Such
action by the Board of Directors requires the affirmative vote of a majority
of the directors then in office. Such action by the stockholders requires the
affirmative vote of the holders of at least two-thirds of the total votes
eligible to be cast by holders of voting stock with respect to such amendment
or repeal at an annual meeting of stockholders or a special meeting called for
such purpose, unless the Board of Directors recommends that the stockholders
approve such amendment or repeal at such meeting, in which case such amendment
or repeal shall only require the affirmative vote of a majority of the total
votes eligible to be cast by holders of voting stock with respect to such
amendment or repeal.
STATUTORY BUSINESS COMBINATION PROVISION
Upon completion of the Offering, the Company will be subject to the
provisions of Section 203 of the Delaware General Corporation Law ("Section
203"). Section 203 provides, with certain exceptions, that a Delaware
corporation may not engage in any of a broad range of business combinations
with a person or affiliate, or associate of such person, who is an "interested
stockholder" for a period of three years from the date that such person became
an interested stockholder unless: (i) the transaction resulting in a person
becoming an interested stockholder, or the business combination, is approved
by the board of directors of the corporation before the person becomes an
interested stockholder, (ii) the interested stockholder acquired 85% or more
of the outstanding voting stock of the corporation in the same transaction
that makes it an interested stockholder (excluding shares owned by persons who
are both officers and directors of the corporation, and shares held by certain
employee stock ownership plans); or (iii) on or after the date the person
becomes an interested stockholder, the business combination is approved by the
corporation's board of directors and by the holders of at least 66 2/3% of the
corporation's outstanding voting stock at an annual or special meeting,
excluding shares owned by the interested stockholder. Under Section 203, an
"interested stockholder" is defined (with certain limited exceptions) as any
person that is (i) the owner of 15% or more of the outstanding voting stock of
the corporation or (ii) an affiliate or associate of the corporation and was
the owner of 15% or more of the outstanding voting stock of the corporation at
any time within the three-year period immediately prior to the date on which
it is sought to be determined whether such person is an interested
stockholder.
A corporation may, at its option, exclude itself from the coverage of
Section 203 by amending its certificate of incorporation or by-laws by action
of its stockholders to exempt itself from coverage, provided that such by-law
or charter amendment shall not become effective until 12 months after the date
it is adopted. Neither the Certificate nor the By-laws contains any such
exclusion.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar of the Common Stock of the Company is
Boston EquiServe, L.P.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company has appointed Arthur Andersen LLP as the Company's independent
public accountants to audit the Company's financial statements as of and for
the year ending November 30, 1996. Arthur Andersen LLP has audited the
Company's historical financial statements as of November 30, 1994 and 1995 and
for each of the three years in the period ended November 30, 1995.
39
<PAGE>
ADDITIONAL INFORMATION
The Company has filed the Registration Statement with the Commission under
the Exchange Act with respect to the shares of Common Stock being received by
DTI stockholders in the Distribution. This Information Statement does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto, to which reference is hereby made. Statements
made in this Information Statement as to the contents of any contract,
agreement or other document referred to herein are not necessarily complete.
With respect to each such contract, agreement or other document filed as an
exhibit to the Registration Statement, reference is made to such exhibit for a
more complete description of the matter involved, and each such statement
shall be deemed qualified in its entirety by such reference.
The Registration Statement and the exhibits thereto filed by the Company
with the Commission may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as at the Regional Offices of the Commission
at Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and 7 World Trade Center, Suite 1300, 13th Floor, New York, New
York 10048. Copies of such information can be obtained by mail from the Public
Reference Branch of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. In addition, the Company is required to file
electronic versions of these documents with the Commission through the
Commission's Electronic Data Gathering, Analysis and Retrieval (EDGAR) system.
The Commission maintains a World Wide Web site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
40
<PAGE>
GLOSSARY
ASICs: An acronym for Application-Specific Integrated
Circuits.
Bandwidth: The throughput or ability to move information to or
from a device. Bandwidth is measured in quantities of
data--usually bits per second.
CD-ROM: An acronym for Compact Disk Read-Only Memory--a high-
capacity optical storage device that can read but not
write data. The desire to deliver video on CD-ROM was
the chief inspiration for the MPEG-1 standard.
Display Connect
Interface (DCI): DCI provides a device-independent method for Microsoft
Windows software, such as 3-D graphics packages or
games interface packages, to display real-time video on
a computer screen without going through the computer's
central processing unit.
DVD: An acronym for Digital Video Disk--optical disks that
contain full-length motion pictures for viewing on a
personal computer or through a set-up box.
Encoding: In the field of digital video, a term meaning
compression.
Frame: A single image of a moving picture. Full-motion video
consists of 30 images or frames per second. The human
eye can detect flicker when the frame rate falls below
30 frames per second. Higher frame rates produce
greater continuity in a video.
Internet: An open global network of interconnected commercial,
educational and governmental computer networks which
utilize a common communications protocol.
MPEG-1: MPEG-1 defines a set of international standards
developed by the Moving Picture Experts Group for the
compression and decompression of digital video signals.
MPEG-1 specifies a video resolution of 352-by-240
pixels compressed at 30 frames per second at a
bandwidth of 150 kilobytes per second.
PCI bus: PCI is an acronym for Peripheral Component
Interconnect, an industry standard. A PCI bus is an
industry standard communication link from external
plug-in devices to the internal processing components
of a personal computer.
Protocol: A formal description of message formats and the rules
two or more machines must follow in order to exchange
such messages.
Video CD: A particular type of compact disk that records and
plays still pictures and video sequences. Video CDs are
used with a Video CD player connected to a television.
World Wide Web: A network of computer servers that uses a special
communications protocol to link different servers
throughout the Internet and permits communication of
graphics, video and sound.
41
<PAGE>
DATA TRANSLATION II, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants................................. F-2
Consolidated Balance Sheets as of November 30, 1994 and 1995 and August
31, 1996 (unaudited) and Pro Forma Consolidated Balance Sheet as of Au-
gust 31, 1996 (unaudited)............................................... F-3
Consolidated Statements of Operations for the Years Ended November 30,
1993, 1994, and 1995 and for the Nine Months Ended August 31, 1995 and
1996 (unaudited)........................................................ F-4
Consolidated Statements of Stockholder's Investment for the Years Ended
November 30, 1993, 1994, and 1995 and for the Nine Months Ended August
31, 1996 (unaudited) and Pro Forma Consolidated Statement of Stockhold-
er's Investment for the Nine Months Ended August 31, 1996 (unaudited)... F-5
Consolidated Statements of Cash Flows for the Years Ended November 30,
1993, 1994, and 1995 and for the Nine Months Ended August 31, 1995 and
1996 (unaudited)........................................................ F-6
Notes to Consolidated Financial Statements............................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Data Translation II, Inc.:
We have audited the accompanying consolidated balance sheets of Data
Translation II, Inc. (a Delaware corporation and wholly-owned subsidiary of
Data Translation, Inc. ("DTI")) and subsidiaries as of November 30, 1994 and
1995 and the related consolidated statements of operations, stockholder's
investment and cash flows for each of the three years in the period ended
November 30, 1995. These financial statements are the responsibility of Data
Translation II, Inc.'s management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Data Translation II, Inc.
and subsidiaries as of November 30, 1994 and 1995 and the results of their
operations and their cash flows for each of the three years in the period
ended November 30, 1995, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Boston, Massachusetts
September 12, 1996
F-2
<PAGE>
DATA TRANSLATION II, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
NOVEMBER 30, NOVEMBER 30, AUGUST 31, PRO FORMA
1994 1995 1996 AUGUST 31, 1996
------------ ------------ ----------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash................... $ -- $ -- $ -- $10,000,000
Accounts receivable,
net of reserves of
$238,000, $156,000 and
$76,000 in 1994, 1995
and 1996,
respectively.......... 2,979,000 3,253,000 2,377,000 2,377,000
Inventories............ 968,000 1,086,000 1,525,000 1,525,000
Prepaid expenses....... 368,000 383,000 790,000 790,000
---------- ---------- ---------- -----------
Total current
assets.............. 4,315,000 4,722,000 4,692,000 14,692,000
Net assets of
discontinued
operations.............. 1,920,000 2,232,000 -- --
Equipment and leasehold
improvements, net....... 1,389,000 2,250,000 2,420,000 2,420,000
Other assets--net........ 145,000 133,000 290,000 290,000
---------- ---------- ---------- -----------
Total Assets......... $7,769,000 $9,337,000 $7,402,000 $17,402,000
========== ========== ========== ===========
CURRENT LIABILITIES:
Accounts payable....... $ 640,000 $ 716,000 $ 383,000 $ 383,000
Due to related party... 546,000 -- 273,000 273,000
Borrowings from bank... -- 39,000 -- --
Accrued expenses....... 1,606,000 2,312,000 1,476,000 1,476,000
---------- ---------- ---------- -----------
Total current
liabilities......... 2,792,000 3,067,000 2,132,000 2,132,000
Net liabilities of
discontinued
operations.............. -- -- 474,000 474,000
Commitments and
Contingencies (Note 9)
STOCKHOLDER'S INVESTMENT:
Investment by DTI...... 4,950,000 6,102,000 4,796,000 --
Preferred stock, $.01
par value,--
Authorized 5,000,000
shares, issued none... -- -- -- --
Common stock, $.01 par
value,--
Authorized 30,000,000
shares, 2,017,571
shares issued and
outstanding at August
31, 1996 pro forma.... -- -- -- 20,000
Additional paid-in
capital............... -- -- -- 14,776,000
Cumulative translation
adjustment............ 27,000 168,000 -- --
---------- ---------- ---------- -----------
Total stockholder's
investment.......... 4,977,000 6,270,000 4,796,000 14,796,000
---------- ---------- ---------- -----------
Total Liabilities and
Stockholder's
Investment............ $7,769,000 $9,337,000 $7,402,000 $17,402,000
========== ========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
DATA TRANSLATION II, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEARS ENDED NOVEMBER 30, AUGUST 31,
------------------------------------- -----------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales............... $23,733,000 $22,440,000 $21,826,000 $16,359,000 $15,858,000
Cost of sales........... 9,412,000 9,355,000 8,187,000 6,087,000 6,034,000
----------- ----------- ----------- ----------- -----------
Gross profit........ 14,321,000 13,085,000 13,639,000 10,272,000 9,824,000
Research and development
expenses............... 3,165,000 3,041,000 2,806,000 1,950,000 2,713,000
Selling and marketing
expenses............... 8,154,000 6,212,000 6,799,000 5,001,000 6,492,000
General and
administrative
expenses............... 2,580,000 1,924,000 1,627,000 1,210,000 1,465,000
----------- ----------- ----------- ----------- -----------
Income from
operations......... 422,000 1,908,000 2,407,000 2,111,000 (846,000)
Interest (expense)
income................. (16,000) (1,000) (7,000) 1,000 --
Other income (expense).. (210,000) 63,000 2,000 -- (88,000)
----------- ----------- ----------- ----------- -----------
Income from
continuing
operations before
tax provision
(benefit).......... 196,000 1,970,000 2,402,000 2,112,000 (934,000)
Provision (benefit) for
income taxes........... 75,000 798,000 966,000 845,000 (374,000)
----------- ----------- ----------- ----------- -----------
Income from
continuing
operations......... 121,000 1,172,000 1,436,000 1,267,000 (560,000)
Discontinued operations
(Note 3):
Income (loss) from
discontinued
operations of Data
Translation
Networking, Limited
(less applicable
provision (benefit)
for income taxes of
$(44,000), $163,000,
$10,000, $54,000, and
$(10,000),
respectively)........ (126,000) 381,000 24,000 120,000 (2,625,000)
----------- ----------- ----------- ----------- -----------
Net income (loss)... $ (5,000) $ 1,553,000 $ 1,460,000 $ 1,387,000 $(3,185,000)
=========== =========== =========== =========== ===========
Income from continuing
operations per common
share.................. $ 0.86 $ (0.26)
Income (loss) from
discontinued operations
per common share....... $ 0.01 (1.23)
----------- -----------
Net income (loss) per
common share........... $ 0.87 $ (1.49)
=========== ===========
Weighted average number
of common and common
equivalent shares
outstanding............ 1,675,000 2,130,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
DATA TRANSLATION II, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S INVESTMENT
<TABLE>
<CAPTION>
PRO FORMA
NINE MONTHS NINE MONTHS
FISCAL YEARS ENDED NOVEMBER 30, ENDED ENDED
----------------------------------- AUGUST 31, AUGUST 31,
1993 1994 1995 1996 1996
----------- ---------- ---------- ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Investment by DTI
Balance--Beginning of
Year.................. $ 6,904,000 $5,018,000 $4,950,000 $ 6,102,000 $ 6,102,000
Net income (loss)..... (5,000) 1,553,000 1,460,000 (3,185,000) (3,185,000)
Impact of income
taxes................ (75,000) (798,000) (966,000) 374,000 374,000
Net activity with
DTI.................. (1,806,000) (823,000) 658,000 1,505,000 1,505,000
Pro forma contribution
from DTI............. -- -- -- -- 10,000,000
Pro forma transfer to
common stock and
additional paid-in
capital.............. -- -- -- -- (14,796,000)
----------- ---------- ---------- ----------- ------------
Balance--End of Year... $ 5,018,000 $4,950,000 $6,102,000 $ 4,796,000 $ --
Common Stock
Balance--Beginning of
Year.................. $ -- $ -- $ -- $ -- $ --
Pro forma issuance of
2,017,571 shares of
common stock, $.01
par value per share.. -- -- -- -- 20,000
----------- ---------- ---------- ----------- ------------
Balance--End of Year... $ -- $ -- $ -- $ -- $ 20,000
Additional Paid-in
Capital
Balance--Beginning of
Year.................. $ -- $ -- $ -- $ -- $ --
Pro forma contribution
from DTI............. -- -- -- -- 14,776,000
----------- ---------- ---------- ----------- ------------
Balance--End of Year... $ -- $ -- $ -- $ -- $ 14,776,000
Cumulative Translation
Adjustment
Balance--Beginning of
Year.................. $ (31,000) $ 4,000 $ 27,000 $ 168,000 $ 168,000
Translation
adjustments.......... 35,000 23,000 141,000 (168,000) (168,000)
----------- ---------- ---------- ----------- ------------
Balance--End of Year... $ 4,000 $ 27,000 $ 168,000 $ -- $ --
----------- ---------- ---------- ----------- ------------
Total Stockholder's
Investment........... $ 5,022,000 $4,977,000 $6,270,000 $ 4,796,000 $ 14,796,000
=========== ========== ========== =========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
DATA TRANSLATION II, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEARS ENDED NOVEMBER 30, AUGUST 31,
------------------------------------- -----------------------
1993 1994 1995 1995 1996
----------- ----------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash Flows from
Operating Activities:
Net income (loss)...... $ (5,000) $ 1,553,000 $ 1,460,000 $1,387,000 $(3,185,000)
Adjustments to
reconcile net income
(loss) to net cash
provided by (used in)
operating activities--
Depreciation and
amortization......... 1,214,000 873,000 836,000 757,000 617,000
Changes in current
assets and
liabilities--
Accounts receivable.. 965,000 (460,000) (274,000) (93,000) 876,000
Inventories.......... 55,000 199,000 (118,000) (255,000) (439,000)
Prepaid expenses..... 279,000 (95,000) (15,000) (60,000) (407,000)
Net assets
(liabilities) of
discontinued
operations.......... (704,000) 350,000 (312,000) (295,000) 2,706,000
Accounts payable..... 71,000 (137,000) 76,000 55,000 (333,000)
Due to related
party............... 546,000 -- (546,000) (273,000) 273,000
Accrued expenses..... 111,000 (403,000) 706,000 345,000 (836,000)
----------- ----------- ----------- ---------- -----------
Net cash provided by
(used in) operating
activities......... 2,532,000 1,880,000 1,813,000 1,568,000 (728,000)
----------- ----------- ----------- ---------- -----------
Cash Flows from
Investing Activities:
Purchases of equipment
and leasehold
improvements.......... (617,000) (217,000) (1,617,000) (1,444,000) (737,000)
Increase in other
assets................ (81,000) (65,000) (68,000) (50,000) (207,000)
----------- ----------- ----------- ---------- -----------
Net cash used in
investing
activities......... (698,000) (282,000) (1,685,000) (1,494,000) (944,000)
----------- ----------- ----------- ---------- -----------
Cash Flows from
Financing Activities:
Net borrowings from
bank.................. 12,000 -- 39,000 -- (39,000)
Impact of income
taxes................. (75,000) (798,000) (966,000) (845,000) 374,000
(Increase) decrease in
investment by DTI..... (1,806,000) (823,000) 658,000 744,000 1,505,000
----------- ----------- ----------- ---------- -----------
Net cash provided by
(used in) financing
activities......... (1,869,000) (1,621,000) (269,000) (101,000) 1,840,000
----------- ----------- ----------- ---------- -----------
Exchange Rate Effects... 35,000 23,000 141,000 27,000 (168,000)
----------- ----------- ----------- ---------- -----------
Change in Cash.......... -- -- -- -- --
Cash, beginning of
period................. -- -- -- -- --
----------- ----------- ----------- ---------- -----------
Cash, end of period..... $ -- $ -- $ -- $ -- $ --
=========== =========== =========== ========== ===========
Supplemental Disclosure
of Cash Flow
Information:
Cash paid for income
taxes................ $ -- $ -- $ -- $ -- $ --
Cash paid for
interest............. 16,000 1,000 7,000 3,000 --
=========== =========== =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
DATA TRANSLATION II, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
1. BACKGROUND AND BASIS OF PRESENTATION
(a) Background
Data Translation II, Inc. (the "Company") was incorporated in September 1996
with 100 shares of Common Stock, $.01 par value, authorized and outstanding,
all of which are owned by Data Translation, Inc. ("DTI"). The Board of
Directors of DTI intends to declare a dividend payable to holders of record of
DTI common stock at the close of business on a record date to be determined of
one share of the Company's common stock for each four shares of DTI's common
stock held (the "Distribution"). As a result of the Distribution, 100% of the
outstanding shares of the Company's common stock will be distributed to DTI
stockholders. The Company expects the Distribution to be effective at or near
the end of its current fiscal year, November 30, 1996 (the "Distribution
Date"). As of the Distribution Date, DTI will contribute to the Company
substantially all of the assets and liabilities of DTI's data acquisition and
imaging and commercial products businesses, as well as the remainder of its
networking distribution business (the "Contributed Businesses"). DTI will
contribute to the Company $10 million which will be increased or decreased
based on the Company's net cash flow after August 31, 1996, less cash used in
the disposition of the networking distribution business. DTI has agreed to pay
fifty-percent of the net costs incurred by the Company in completing the
winding-up of the networking business up to a maximum of $500,000. The
contribution will be made simultaneously with the Distribution.
Based on the law in effect as of the date of this Information Statement and
on certain facts beyond the control of the Company and DTI assumed to be true
at the time of the Distribution, DTI believes that the Distribution may
qualify as a tax-free distribution under Section 355 of the Internal Revenue
Code (the "Code"). However, there is a significant risk that the Distribution
may not qualify as a tax-free distribution. DTI has not requested and does not
intend to request a letter ruling from the Internal Revenue Service (the
"IRS") nor has DTI received an opinion of counsel on the tax treatment of the
Distribution. Further, the tax treatment of the Distribution is not entirely
clear. The Distribution may not satisfy the IRS' published guidelines for
issuing advance letter rulings on the tax-free treatment of spin-off
transactions. The Distribution is not conditioned on either the receipt of a
letter ruling from the IRS or an opinion of counsel that the Distribution
qualifies as a tax-free distribution. If the Distribution were to fail to
qualify for such tax-free treatment, the Distribution may be taxable to DTI
and would be taxable to its stockholders receiving Company Stock pursuant
thereto.
The Company designs, develops and manufactures high performance data
acquisition and imaging products for use with personal computers. The
Company's principal products are digital signal processing boards and software
which receive analog signals, convert them to digital form and process the
digital data.
(b) Basis of Presentation
The consolidated financial statements reflect the results of operations,
financial position, changes in stockholder's investment and cash flows of the
business that will be transferred to the Company from DTI in the Distribution
as if the Company were a separate entity for all periods presented. The
consolidated financial statements have been prepared using the historical
basis in assets and liabilities and historical results of operations related
to the Contributed Businesses. Changes in stockholder's investment represent
DTI's contribution of its net investment after giving effect to the net income
of the Company plus net cash transfers to or from DTI. The Company will begin
accumulating its retained earnings on the Distribution Date.
Additionally, the consolidated financial statements include allocations of
certain DTI corporate assets, liabilities and expenses relating to the
Contributed Businesses that will be transferred to the Company from DTI.
Management believes these allocations are reasonable. All material
intercompany transactions and balances between the Contributed Businesses have
been eliminated.
F-7
<PAGE>
DATA TRANSLATION II, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
General corporate overhead related to corporate headquarters and common
support divisions will be allocated by the Company based on a number of
factors including, for example, personnel, space, time and effort, and sales
volume. Management believes these allocations are reasonable. However, the
costs of these services charged to the Company are not necessarily indicative
of the costs that would have been incurred if the Company had performed these
functions as a stand-alone entity. Subsequent to the Distribution, the Company
will allocate costs associated with certain shared services to DTI as
disclosed in the Corporate Services and Use and Occupancy Agreements (see Note
9(a)(iii)). Additionally, income taxes are calculated on a separate tax return
basis (see Notes 2(i) and 10).
The financial information included herein may not necessarily reflect the
consolidated results of operations, financial position, changes in
stockholder's investment and cash flows of the Company in the future or what
they would have been had it been a separate, stand-alone entity during the
periods presented.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All material intercompany
accounts and transactions have been eliminated in consolidation.
(b) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities 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.
(c) Inventories
Inventories are stated at the lower of first-in, first-out ("FIFO") cost or
market and consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------- AUGUST 31,
1994 1995 1996
-------- ---------- ----------
<S> <C> <C> <C>
Raw materials................................. $564,000 $ 629,000 $ 977,000
Work in-process............................... 18,000 20,000 126,000
Finished goods................................ 386,000 437,000 422,000
-------- ---------- ----------
$968,000 $1,086,000 $1,525,000
======== ========== ==========
</TABLE>
Work in-process and finished goods inventories include material, labor and
manufacturing overhead. Management performs periodic reviews of inventory and
disposes of items not required by their manufacturing plan and reduces the
carrying cost of inventory items to the lower of cost or market (with market
value generally defined as the lower of replacement cost or net realizable
value).
(d) Depreciation and Amortization
The Company provides for depreciation and amortization, using the straight-
line and declining balance methods, by charges to operations in amounts that
allocate the cost of the equipment and leasehold improvements over the
following estimated useful lives:
<TABLE>
<CAPTION>
DESCRIPTION USEFUL LIVES
----------- ------------
<S> <C>
Machinery and equipment...................................... 3 to 7 years
Furniture and fixtures....................................... 7 years
Vehicles..................................................... 3 years
</TABLE>
F- 8
<PAGE>
DATA TRANSLATION II, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Leasehold improvements are amortized over the shorter of their economic life
or the life of the lease.
(e) Equipment and Leasehold Improvements, Net
Equipment and leasehold improvements are stated at cost, less accumulated
depreciation and amortization, and consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
----------------------- AUGUST 31,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Machinery and equipment................ $12,777,000 $14,206,000 $14,542,000
Furniture and fixtures................. 2,046,000 2,171,000 2,085,000
Vehicles............................... 87,000 87,000 73,000
Leasehold improvements................. 1,480,000 1,543,000 2,044,000
----------- ----------- -----------
16,390,000 18,007,000 18,744,000
Less--accumulated depreciation and
amortization.......................... 15,001,000 15,757,000 16,324,000
----------- ----------- -----------
$ 1,389,000 $ 2,250,000 $ 2,420,000
=========== =========== ===========
</TABLE>
(f) Foreign Currency
The Company translates the assets and liabilities of its foreign
subsidiaries at the rates of exchange in effect at year-end. Revenues and
expenses are translated using exchange rates in effect during the year. Gains
and losses from foreign currency translation are credited or charged to
"Cumulative translation adjustment" included in stockholder's investment in
the accompanying consolidated balance sheets. Foreign currency transaction
gains and losses are included in "Other income (expense)" on the accompanying
consolidated statements of operations. Foreign currency transaction losses for
the year ended November 30, 1993 were approximately $180,000. Foreign currency
transaction gains and losses were not significant for the years ended November
30, 1994 and 1995 and for the nine months ended August 31, 1995 and 1996.
(g) Revenue Recognition
The Company recognizes revenue when products are shipped. Costs of service
and warranty are not significant and are charged to operations as incurred.
Revenues from hardware systems with other than incidental software components
and stand alone software sales are recognized upon shipment, provided that no
significant vendor or postcontract support obligations remain outstanding and
collection of the resulting receivable is deemed to be probable.
(h) Research and Development Costs
In accordance with Statement of Financial Accounting Standard ("SFAS") No.
2, Accounting for Research and Development Costs, the Company charges research
and development costs to operations as incurred. However, in accordance with
SFAS No. 86, Accounting for the Costs of Computer Software to Be Sold, Leased,
or Otherwise Marketed, the Company capitalizes certain computer software
development costs upon establishing technological feasibility. Capitalized
costs, net of accumulated amortization, were approximately $119,000, $106,000
and $286,000 as of November 30, 1994, 1995 and August 31, 1996, respectively,
and are included in other assets. These costs are amortized on a straight-line
basis over the lesser of two years or the economic life of the product.
Amortization expense, included in cost of sales in the accompanying
consolidated statements of operations, was $60,000, $90,000, $80,000, $62,000
and $50,000 in 1993, 1994, 1995 and the nine months ended August 31, 1995 and
1996, respectively.
F-9
<PAGE>
DATA TRANSLATION II, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(i) Income Taxes
Historically, the Company's operations have been included in the
consolidated income tax returns filed by DTI. The provision for income taxes
in the Company's consolidated financial statements has been calculated on a
separate tax return basis (see Note 10).
(j) Interim Financial Statements
The financial statements as of August 31, 1996 and for the nine months ended
August 31, 1995 and 1996 are unaudited but, in the opinion of management,
reflect all adjustments of a normal recurring nature necessary for a fair
presentation of results for these interim periods. The results of operations
for the nine months ended August 31, 1996 are not necessarily indicative of
the results to be expected for the entire year or any other interim period.
(k) Concentration of Credit Risk
SFAS No. 105, Disclosure of Information About Financial Instruments with
Off-Balance Sheet Risk and Financial Instruments with Concentration of Credit
Risk, requires disclosure of any significant off-balance sheet and credit risk
concentrations. The Company has no significant off-balance sheet concentration
of credit risk such as foreign exchange contracts, option contracts or other
foreign hedging arrangements.
(l) Disclosure About Fair Value of Financial Instruments
SFAS No. 107, Disclosure About Fair Market Value of Financial Instruments,
requires disclosure of estimated fair values for certain of its financial
instruments. The Company's financial instruments include accounts receivable
and accounts payable. The carrying amounts of these financial instruments
approximate their fair value.
(m) Stock-based Compensation Plans
The Company accounts for its stock-based compensation plans under Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. The
Company has adopted the disclosure option of SFAS No. 123, Accounting for
Stock-Based Compensation. SFAS No. 123 requires that companies which do not
choose to account for stock-based compensation as prescribed by this
statement, shall disclose the pro forma effects on earnings and earnings per
share as if SFAS No. 123 had been adopted. Additionally, certain other
disclosures are required with respect to stock compensation and the
assumptions used to determine the pro forma effects of SFAS No. 123. As of
August 31, 1996, the Company had no reporting requirements under SFAS No. 123
as no stock option grants had been made under the Company's 1996 Stock Option
Plan (see Note 5).
(n) Pro Forma Presentation
The pro forma consolidated balance sheet and pro forma consolidated
statement of stockholder's investment as of August 31, 1996 reflect (1) the
contribution of $10 million from DTI simultaneously with the Distribution,
which will be increased or decreased based on the net cash flow of the
Contributed Businesses after August 31, 1996, less cash used in disposition of
the networking distribution business and (2) the distribution of the
investment by DTI to the existing stockholders of DTI in the form of a one-
for-four stock dividend as discussed in Note 1(a) and reflects the
capitalization of the Company. The pro forma stockholder's investment excludes
any tax considerations pertaining to the Distribution.
3. DISCONTINUED OPERATIONS
On July 30, 1996, the Company announced its strategic decision to
discontinue the operations comprising its networking business. The networking
operations were historically operated by Data Translation Networking Limited
F-10
<PAGE>
DATA TRANSLATION II, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
("Networking") which distributed, integrated and supported enterprise-wide
networking products manufactured by third party suppliers in the United
Kingdom. On November 11, 1996, DTI sold a substantial portion of the assets of
the networking distribution business, and the Company intends to discontinue
and wind-up the remainder of such business after the Distribution.
The Company estimates the loss on disposal to be approximately $1,563,000
before applicable income taxes, which includes estimated operating losses of
$1,024,000 to be incurred during the period from August 31, 1996 to phase-out.
Sales from Networking were approximately $10,850,000, $15,382,000,
$20,348,000, $14,604,000, and $16,522,000 for the years ended November 30,
1993, 1994, and 1995 and the nine months ended August 31, 1995 and 1996,
respectively.
The components of net assets (liabilities) of discontinued operations
included in the accompanying consolidated balance sheets at November 30, 1994
and 1995 and August 31, 1996 follow:
<TABLE>
<CAPTION>
NOVEMBER 30,
---------------------- AUGUST 31,
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Cash................................... $ 814,000 $ -- $ --
Accounts receivable, net............... 3,039,000 5,742,000 3,183,000
Inventories............................ 1,139,000 2,546,000 2,144,000
Prepaid expenses....................... 173,000 337,000 299,000
Equipment and leasehold improvements,
net................................... 199,000 233,000 252,000
Accounts payable....................... (2,728,000) (3,903,000) (2,651,000)
Borrowings from a bank................. -- (657,000) (2,031,000)
Accrued expenses....................... (716,000) (2,066,000) (1,670,000)
---------- ---------- ----------
$1,920,000 $2,232,000 $ (474,000)
========== ========== ==========
</TABLE>
4. NET INCOME PER COMMON SHARE
The Company has 100 shares of Common Stock outstanding, all of which are
owned by DTI. Effective with the Distribution discussed in Note 1(a),
stockholders of DTI would receive one share of the common stock of the Company
for each four shares of common stock held of DTI. Accordingly, the net income
per common share was calculated by dividing net income by the sum of the
weighted average number of shares of common stock plus common equivalent
shares of DTI. Common equivalent shares are calculated using the treasury
stock method and considered outstanding for all periods presented. Fully
diluted net income per common share has not been separately presented, as the
amounts would not be materially different from net income per share.
5. STOCK OPTION PLANS
(a) 1996 Stock Option Plan
Effective with the Distribution, the Company will adopt the 1996 Stock
Option Plan (the "1996 Stock Option Plan") for its key employees, directors,
and others, which permits the grant of stock options as approved by the
Company's Board of Directors. 500,000 shares of common stock have been
reserved for issuance under the 1996 Stock Option Plan. Options granted
pursuant to the 1996 Stock Option Plan may, at the discretion of the Board, be
incentive stock options as defined by the Internal Revenue Code. Subject to
the provisions of the 1996 Stock Option Plan, options granted are at a price
as specified by the Board. The Board will determine when the options will vest
and expire, but in no event will the option period exceed ten years.
Employees of the Company currently participate in DTI's incentive plans. DTI
currently maintains and has outstanding options under its 1992 Key Employee
Incentive Plan and its 1982 Key Employee Incentive Plan
F-11
<PAGE>
DATA TRANSLATION II, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(collectively the "Incentive Plans"). Each current holder of an option to
purchase shares of DTI Stock outstanding under the Incentive Plans (an "Old
DTI Option") will have the exercise price of such Old DTI Options adjusted to
give effect to the Distribution (as so adjusted, a "New DTI Option") and will
receive a new option for one quarter of the number of shares of such holder's
Old DTI Option to purchase Common Stock, at an exercise price proportionate to
the exercise price of such holder's Old DTI Option, under the Replacement Plan
(a "Company Option"). Each New DTI Option and each Company Option will have
substantially the same terms, including expiration dates and vesting
provisions, as the Old DTI Options, except for exercise prices. The exercise
prices of the New DTI Options and Company Options will be determined
consistent with the intention that New DTI Options issued to DTI employees and
Company Options issued to Company employees in respect of Old DTI Options that
qualified as Incentive Options will continue to qualify as Incentive Options.
Subject to certain conditions, employees of the Company and DTI will be paid
an amount in cash intended to compensate them for the loss of incentive stock
option treatment under the Code with respect to options they hold in the
company which is not their employer following the Distribution. Such amount
will be paid by the company which has issued the option, will be determined by
such company in its discretion and will not exceed the value of the
corresponding tax benefit to such company.
(b) Replacement Stock Option Plan
The Board of Directors shall adopt the Company's Replacement Stock Option
Plan (the "Replacement Plan"), effective as of the Distribution Date. The
Replacement Plan will provide for the issuance, effective immediately prior to
the Distribution, of options to purchase shares of Common Stock (the
"Replacement Options") to holders of options to purchase shares of DTI Stock
that were granted under DTI's 1992 Key Employee Incentive Plan and its 1982
Key Employee Incentive Plan and are outstanding on the Distribution Date (the
"DTI Options"), as part of an adjustment to the DTI Options. The number of
shares subject to each Replacement Option, the exercise price therefor and the
other terms and conditions of each Replacement Option shall be determined in
accordance with the applicable provisions of the Distribution Agreement. It is
intended that Replacement Options issued to employees of the Company
("Transferred Employees") in respect of DTI Options that qualify as Incentive
Options shall qualify as Incentive Options pursuant to Section 424(a) of the
Code. Replacement Options issued to persons other than Transferred Employees
and Replacement Options issued to Transferred Employees in respect of DTI
Options that do not qualify as Incentive Options will be Non-Qualified
Options.
The Replacement Plan shall be administered by the Board of Directors or by a
stock option committee appointed by the Board of Directors. The Company has
authorized the issuance of up to 275,000 shares of Common Stock under the
Replacement Plan, which the Company expects to be sufficient to satisfy all
purchase requirements under the Replacement Options.
6. EMPLOYEE STOCK PURCHASE PLAN
Effective with the Distribution, the Company will establish an Employee
Stock Purchase Plan (the "Stock Purchase Plan") which permits the eligible
employees of the Company and its subsidiaries to purchase shares of the
Company's common stock, at a discount, through regular monthly payroll
deductions of up to 10% of their pre-tax gross salary. Subject to adjustment
for stock splits, stock dividends and similar events, a maximum of 150,000
shares of common stock may be issued under the Stock Purchase Plan.
7. RETIREMENT PLAN
The majority of the Company's employees have been eligible to participate in
DTI's employee savings plan (the "Savings Plan") in compliance with Section
401(k) of the Internal Revenue Code. The Company will
F-12
<PAGE>
DATA TRANSLATION II, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
establish a plan similar to the Savings Plan following the Distribution. The
Savings Plan provides for annual Company contributions of up to 15% of the
first 6% of total salary per participant. These contributions vest
incrementally over a five-year period. Contributions to the Savings Plan
charged to operations with respect to Company's employees were $63,000, $0,
$28,000, $11,000 and $32,000 in 1993, 1994 and 1995 and the nine months ended
August 31, 1995 and 1996, respectively.
The Company does not provide postretirement benefits to any employees as
defined under SFAS No. 106, Employer's Accounting for Postretirement Benefits
Other Than Pensions.
8. BANK FACILITIES
The Company's United Kingdom subsidiary, Data Translation Ltd., has a bank
overdraft facility of approximately $150,000. The facility bears interest at
the bank's base rate (5.75% at August 31, 1996) plus 1.75%. No amounts were
outstanding at November 30, 1994 and August 31, 1996. Approximately $39,000
was outstanding at November 30, 1995.
9. COMMITMENTS AND CONTINGENCIES
(a) Intercompany Agreements
(I) DISTRIBUTION AGREEMENT
As discussed in Note 1, the Distribution Agreement will provide for
indemnification of DTI by the Company in a manner designed to place financial
responsibility with the Company for specified liabilities arising out of the
Contributed Businesses, including such liabilities prior to the Distribution.
DTI will indemnify the Company for liabilities arising out of the Retained
Business both prior to and after the Distribution.
The Distribution Agreement will contain certain provisions relating to
employee compensation and benefits and the treatment of options to purchase
DTI Stock held by both employees of DTI who will become employees of the
Company and employees of DTI who will remain employees of DTI. The
Distribution Agreement will provide for the establishment by the Company of a
stock option plan, an employee stock purchase plan and retirement and savings
plan similar to those maintained by DTI, and the transfer of certain assets
and liabilities relating to the Company's employees from the DTI plans to the
Company's plans. The Distribution Agreement also will provide for the
establishment by the Company of employee welfare plans similar to those
maintained by DTI.
The Distribution Agreement also will provide for a tax sharing arrangement
between the Company and DTI. Pursuant to such agreement, DTI will be solely
responsible for any tax liabilities relating to periods prior to the
Distribution Date, and is entitled to any tax refunds relating to such
periods. After the Distribution Date, each of the Company and DTI will be
responsible for tax liabilities relating to their respective operations.
With respect to any liability relating to the Distribution being deemed a
taxable transaction, DTI will be responsible for 75% of any such liability and
the Company will be responsible for 25% of any such liability; provided,
however, that if the Distribution is deemed a taxable transaction as a result
of certain actions taken, caused by or within the control of either DTI or the
Company, such party shall be solely responsible for the resulting tax
liability.
(II) INTELLECTUAL PROPERTY AGREEMENT
On or prior to the Distribution Date, the Company and DTI will enter into an
Intellectual Property Agreement, pursuant to which DTI will assign to the
Company those trademarks, trade secrets, know-how, patents and patent
applications that are used exclusively or primarily in the Contributed
Businesses. DTI will retain the trademarks, trade secrets, know-how, patents
and patent applications that are used exclusively or primarily in the Retained
Business.
F-13
<PAGE>
DATA TRANSLATION II, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Intellectual Property Agreement will further provide for royalty-free
perpetual cross-licenses to each of DTI and the Company, as the case may be,
for all technologies covered by existing patents and patent applications held
by DTI and the company, respectively. The parties will also cross-license to
each other technologies under patents issued pursuant to applications made in
the two year period following the Distribution. The parties may not sell or
sublicense technology to which they are the licensee; rather they may only use
such technology in their own products. The cross-licensed technology may only
be transferred by the licensee in connection with a sale of the licensee's
business as a going concern. The cross-licenses provide for termination upon a
change in control with respect to patents issued pursuant to applications made
after August 31, 1996, although the licensee may continue to use such patents
in products already being shipped or which are substantially near completion
of development.
The parties will also cross-license each other under trade secrets and know-
how. Like the patent cross-licenses, these licenses will be royalty-free and
only transferable in the event of a sale of the business as a going concern.
All employees of each company will sign non-disclosure agreements which
acknowledge non-disclosure obligations with respect to the other company.
(III) CORPORATE SERVICES AND USE AND OCCUPANCY AGREEMENTS
Effective as of the Distribution Date, the Company and DTI will have
corporate services and use and occupancy agreements under which the Company
will provide DTI with certain facilities, equipment and administrative
services including purchasing support, material planning, mail, shipping and
receiving, invoicing, document control, second shift supervision,
environmental screening and other services as required. DTI will pay the
Company in accordance with predetermined rates and fees as mutually agreed
upon.
Management believes that the rates and fees charged by the Company are
reasonable and that such fees are representative of the expenses DTI would
have incurred on a stand-alone basis. The corporate services agreement shall
remain in effect until the earlier of the discontinuance or termination of all
services to be provided or December 31, 1997. The Use and Occupancy Agreement
shall remain in effect until April 30, 1997.
Prior to the corporate services agreement, related expenses were allocated
based on estimated time spent relating directly to the Company's activities.
Management believes these allocations are reasonable. Allocated expenses under
these agreements totaled $4,007,000, $3,567,000, $2,545,000, $1,918,000 and
$3,022,000 in fiscal years 1993, 1994, and 1995 and for the nine months ended
August 31, 1995 and 1996, respectively.
(b) Contingencies
From time to time, the Company is involved in other disputes and/or
litigation encountered in its normal course of business. The Company does not
believe that the ultimate impact of the resolution of such other outstanding
matters will have a material effect on the Company's financial condition or
results of operations.
(c) Lease Commitments
The Company has operating lease agreements expiring December 1, 1999 for a
building and property owned by a related party trust. The agreements provide
for aggregate minimum annual rental payments plus other expenses of the lessor
on a net basis. Total rental expense charged to operations on these leases
included in the accompanying consolidated statements of operations was
approximately $874,000, $732,000, $633,000, $475,000 and $410,000 for each of
the years ended November 30, 1993, 1994, and 1995 and the nine months ended
August 31, 1995 and 1996, respectively.
In addition, the Company leases sales facilities and equipment under leases
expiring through 2000. Rent expense under these agreements totaled $237,000,
$229,000, $425,000, $233,000, and $192,000 in the years ended November 30,
1993, 1994, and 1995 and the nine months ended August 31, 1995 and 1996,
respectively. Future minimum lease payments under all operating leases are as
follows:
F-14
<PAGE>
DATA TRANSLATION II, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED NOVEMBER 30, AMOUNT
------------------------------- ----------
<S> <C>
1996.......................................................... $ 453,000
1997.......................................................... 1,897,000
1998.......................................................... 1,316,000
1999.......................................................... 1,283,000
2000.......................................................... 130,000
Thereafter.................................................... 3,000
----------
Total minimum lease payments.................................. $5,082,000
==========
</TABLE>
10. INCOME TAXES
The income tax provision in the accompanying consolidated statements of
operations has been calculated on a separate tax return basis. Prior to the
spin-off to the stockholders as discussed in Note 1(a), the Company filed its
tax return as part of a consolidated group with DTI. The consolidated group
did not have any net tax requirements during any of the periods presented due
to the utilization of net operating losses of its other entities. Thus, the
offsetting charge for the income tax provision has been included as an element
of the "Investment by DTI" in the accompanying consolidated statements of
stockholder's investment. The financial information included herein may not
necessarily reflect the consolidated results of operations of the Company in
the future or what they would have been had it been a separate, stand-alone
entity during the periods presented.
The Company has accounted for income taxes in accordance with the provisions
of SFAS No. 109. The approximate tax effect of each type of temporary
difference is summarized as follows:
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------ AUGUST 31,
1994 1995 1996
-------- -------- ----------
<S> <C> <C> <C>
Depreciation................................. $304,000 $387,000 $ 449,000
Nondeductible reserves and accruals.......... 385,000 568,000 365,000
Capitalized software development costs....... (47,000) (43,000) (120,000)
-------- -------- ---------
642,000 912,000 694,000
Less--Valuation Allowance.................... 642,000 912,000 694,000
-------- -------- ---------
$ -- $ -- $ --
======== ======== =========
</TABLE>
Due to the uncertainty surrounding the timing of realizing the benefits of
its favorable tax attributes in future income tax returns, the Company has
placed a valuation allowance against its otherwise recognizable deferred tax
assets.
The income tax provision (benefit) shown in the accompanying consolidated
statements of operations comprise the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------------------ AUGUST 31,
1993 1994 1995 1996
--------- -------- --------- ----------
<S> <C> <C> <C> <C>
Federal:
Current........................ $ 565,000 $693,000 $ 920,000 $(435,000)
Deferred....................... (249,000) (27,000) (209,000) 169,000
State:
Current........................ 164,000 202,000 268,000 (125,000)
Deferred....................... (73,000) (8,000) (61,000) 49,000
Foreign--Current (benefit)....... (332,000) (62,000) 48,000 (32,000)
--------- -------- --------- ---------
$ 75,000 $798,000 $ 966,000 $(374,000)
========= ======== ========= =========
</TABLE>
F-15
<PAGE>
DATA TRANSLATION II, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. GEOGRAPHIC INFORMATION
Operations in various geographic areas for the three years ended November
30, 1995 and nine months ended August 31, 1996 are summarized as follows:
<TABLE>
<CAPTION>
UNITED STATES EUROPE ELIMINATIONS CONSOLIDATED
------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
FISCAL 1993
Sales to unaffiliated
customers(1)........... $ 18,689,000 $5,044,000 $ -- $23,733,000
Sales or transfers be-
tween geographic
areas.................. 2,672,000 -- (2,672,000) --
------------ ---------- ----------- -----------
Total net sales......... $ 21,361,000 $5,044,000 $(2,672,000) $23,733,000
------------ ---------- ----------- -----------
Income (loss) before
provision for income
taxes.................. $ 837,000 $ (730,000) $ 89,000 $ 196,000
============ ========== =========== ===========
Identifiable assets from
continuing opera-
tions(2)............... $ 6,502,000 $1,333,000 $(1,751,000) $ 6,084,000
============ ========== =========== ===========
FISCAL 1994
Sales to unaffiliated
customers(1)........... $ 18,272,000 $4,168,000 $ -- $22,440,000
Sales or transfers be-
tween geographic
areas.................. 2,104,000 -- (2,104,000) --
------------ ---------- ----------- -----------
Total net sales......... $ 20,376,000 $4,168,000 $(2,104,000) $22,440,000
------------ ---------- ----------- -----------
Income (loss) before
provision for income
taxes.................. $ 2,185,000 $ (154,000) $ (61,000) $ 1,970,000
============ ========== =========== ===========
Identifiable assets from
continuing opera-
tions(2)............... $ 5,751,000 $1,418,000 $(1,320,000) $ 5,849,000
============ ========== =========== ===========
FISCAL 1995
Sales to unaffiliated
customers(1)........... $ 17,692,000 $4,134,000 $ -- $21,826,000
Sales or transfers be-
tween geographic
areas.................. 1,919,000 -- (1,919,000) --
------------ ---------- ----------- -----------
Total net sales......... $ 19,611,000 $4,134,000 $(1,919,000) $21,826,000
------------ ---------- ----------- -----------
Income before provision
for income taxes....... $ 2,275,000 $ 120,000 $ 7,000 $ 2,402,000
============ ========== =========== ===========
Identifiable assets from
continuing opera-
tions(2)............... $ 7,004,000 $1,557,000 $(1,456,000) $ 7,105,000
============ ========== =========== ===========
FISCAL 1996 (THROUGH AU-
GUST 31, 1996)
Sales to unaffiliated
customers(1)........... $ 12,939,000 $2,919,000 $ -- $15,858,000
Sales or transfers be-
tween geographic
areas.................. 1,500,000 -- (1,500,000) --
------------ ---------- ----------- -----------
Total net sales......... $ 14,439,000 $2,919,000 $(1,500,000) $15,858,000
------------ ---------- ----------- -----------
Income (loss) before
provision for income
taxes.................. $ (1,066,000) $ (81,000) $ 213,000 $ (934,000)
============ ========== =========== ===========
Identifiable assets from
continuing opera-
tions(2)............... $ 7,650,000 $ 909,000 $(1,157,000) $ 7,402,000
============ ========== =========== ===========
</TABLE>
- --------
(1) Foreign sales from the United States to unaffiliated customers for the
years ended November 30, 1993, 1994 and 1995 and the nine months ended
August 31, 1996 were approximately $3,511,000, $3,547,000, $3,748,000 and
$2,690,000, respectively.
(2) Excludes net assets (liabilities) of discontinued operations of
$2,270,000, $1,920,000, $2,232,000, and $(474,000) as of November 30,
1993, 1994, and 1995 and August 31, 1996, respectively.
F-16
<PAGE>
DATA TRANSLATION II, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------- AUGUST 31,
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Payroll and related taxes.................. $ 428,000 $ 551,000 $ 495,000
Bonuses and commissions.................... 50,000 15,000 341,000
Accrued inventory.......................... 111,000 69,000 105,000
Other...................................... 1,017,000 1,677,000 535,000
---------- ---------- ----------
$1,606,000 $2,312,000 $1,476,000
========== ========== ==========
</TABLE>
13. VALUATION AND QUALIFYING ACCOUNTS
The following table sets forth activity in the Company's accounts receivable
reserve account:
<TABLE>
<CAPTION>
BEGINNING COST AND END OF
BALANCE AT OF YEAR EXPENSE DEDUCTIONS PERIOD
---------- --------- -------- ---------- --------
<S> <C> <C> <C> <C>
For the Year Ended November 30, 1993.. $273,000 $148,000 $174,000 $247,000
For the Year Ended November 30, 1994.. $247,000 $172,000 $181,000 $238,000
For the Year Ended November 30, 1995.. $238,000 $(46,000) $ 36,000 $156,000
For the Nine Months Ended August 31,
1996................................. $156,000 $(55,000) $ 25,000 $ 76,000
</TABLE>
F-17
<PAGE>
II. INFORMATION NOT INCLUDED IN INFORMATION STATEMENT
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
The Registrant has issued no securities other than shares of its common
stock issued to Data Translation in September, 1996. Such issuance did not
involve an underwriter, and no discount or commission was paid in connection
therewith. The Registrant relied on the exemption contained in Section 4(2) of
the Securities Act of 1933, as amended.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
Schedules for which provision is made in the applicable regulations of the
Securities and Exchange Commission have been omitted because the information
is disclosed in the financial statements or because such schedules are not
required or are not applicable. See Index to Consolidated Financial
Statements.
(b) Exhibits
<TABLE>
<C> <S>
3.1 Certificate of Incorporation of Registrant
3.2 By-laws of Registrant
4.1 Specimen Stock Certificate of Common Stock (See also Exhibits 3.1 and
3.2)
10.1 Form of Distribution Agreement between Data Translation, Inc. and
Data Translation II, Inc.
10.2 Form of Intellectual Property Agreement between Data Translation,
Inc. and Data Translation II, Inc.
10.3 Form of Corporate Services Agreement between Data Translation, Inc.
and Data Translation II, Inc.
10.4 Form of Use and Occupancy Agreement between Data Translation, Inc.
and Data Translation II, Inc.
10.5 Lease dated December 1, 1979, as amended, for Locke Drive with Nason
Hill Trust
10.6 Form of 1996 Stock Option Plan
10.7 Form of Employee Stock Purchase Plan
10.8 Form of Replacement Stock Option Plan
10.9* Software Bundling Master License Agreement
10.10* Distribution Agreement dated June 26, 1996 by and between Data
Translation, Inc. and DS Datenverarbeitung und Sensortechnik GmbH
21 List of Subsidiaries of the Registrant as of the Distribution Date
99.1 Information Statement of Data Translation II, Inc. (included as Part
I of this Registration Statement)
99.2 Consents of Persons Named to Become Directors
</TABLE>
- --------
* Certain portions have been omitted and filed separately with the Securities
and Exchange Commission
II-1
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 12 OF THE SECURITIES EXCHANGE ACT OF
1934, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Data Translation II, Inc.
By: /s/ Alfred A. Molinari, Jr.
----------------------------------
ALFRED A. MOLINARI, JR., PRESIDENT
Date: November 14, 1996
II-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DOCUMENT DESCRIPTION
------- --------------------
<C> <S>
3.1 Certificate of Incorporation of Registrant
3.2 By-laws of Registrant
4.1 Specimen Stock Certificate of Common Stock (See also Exhibits 3.1 and
3.2)
10.1 Form of Distribution Agreement between Data Translation, Inc. and Data
Translation II, Inc.
10.2 Form of Intellectual Property Agreement between Data Translation, Inc.
and Data Translation II, Inc.
10.3 Form of Corporate Services Agreement between Data Translation, Inc.
and Data Translation II, Inc.
10.4 Form of Use and Occupancy Agreement between Data Translation, Inc. and
Data Translation II, Inc.
10.5 Lease dated December 1, 1979, as amended, for Locke Drive with Nason
Hill Trust
10.6 Form of 1996 Stock Option Plan
10.7 Form of Employee Stock Purchase Plan
10.8 Form of Replacement Stock Option Plan
10.9* Software Bundling Master License Agreement
10.10* Distribution Agreement dated June 26, 1996 by and between Data
Translation, Inc. and DS Datenverarbeitung und Sensortechnik GmbH
21 List of Subsidiaries of the Registrant as of the Distribution Date
99.1 Information Statement of Data Translation II, Inc. (included as Part I
of this Registration Statement)
99.2 Consents of Persons Named to Become Directors
</TABLE>
- --------
*Certain portions have been omitted and filed separately with the Securities
and Exchange Commission
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
DATA TRANSLATION II, INC.
ARTICLE I
NAME
----
The name of the Corporation is Data Translation II, Inc.
ARTICLE II
REGISTERED OFFICE
-----------------
The address of the registered office of the Corporation in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is The Corporation Trust
Company.
ARTICLE III
PURPOSES
--------
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the State of Delaware (the
"DGCL").
ARTICLE IV
CAPITAL STOCK
-------------
Section 1. Number of Shares.
---------------------------
The total number of shares of capital stock which the Corporation shall
have the authority to issue is 35,000,000 shares, of which (a) 5,000,000 shares
shall be preferred stock, par value $.01 per share (the "Undesignated Preferred
Stock") and (b) 30,000,000 shares shall be common stock, par value $.01 per
share (the "Common Stock"). As set forth in this Article IV, the Board of
Directors or any authorized committee thereof is authorized from time to time to
establish and designate one or more series of Undesignated Preferred Stock, to
fix
<PAGE>
and determine the variations in the relative rights and preferences as between
the different series of Undesignated Preferred Stock in the manner hereinafter
set forth in this Article IV, and to fix or alter the number of shares
comprising any such series and the designation thereof to the extent permitted
by law.
The number of authorized shares of the class of Undesignated Preferred
Stock may be increased or decreased (but not below the number of shares
outstanding) by the affirmative vote of the holders of a majority of the Common
Stock entitled to vote, without a vote of the holders of the Undesignated
Preferred Stock, pursuant to the resolution or resolutions establishing the
class of Undesignated Preferred Stock or this Certificate of Incorporation, as
it may be amended from time to time.
Section 2. General.
------------------
The designations, powers, preferences and rights of, and the
qualifications, limitations and restrictions upon, each class or series of stock
shall be determined in accordance with, or as set forth below in, Sections 3 and
4 of this Article IV.
Section 3. Common Stock.
-----------------------
Subject to all of the rights, powers and preferences of the Undesignated
Preferred Stock, and except as provided by law or in this Article IV (or in any
certificate of designation of any series of Undesignated Preferred Stock) or by
the Board of Directors or any authorized committee thereof pursuant to this
Article IV:
(a) the holders of the Common Stock shall have the exclusive right to
vote for the election of directors and on all other matters requiring
stockholder action, each share being entitled to one vote;
(b) dividends may be declared and paid or set apart for payment upon
the Common Stock out of any assets or funds of the Corporation legally available
for the payment of dividends, but only when and as declared by the Board of
Directors or any authorized committee thereof; and
(c) upon the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the net assets of the Corporation shall be
distributed pro rata to the holders of the Common Stock in accordance with their
respective rights and interests.
Section 4. Undesignated Preferred Stock.
---------------------------------------
Subject to any limitations prescribed by law, the Board of Directors or any
authorized committee thereof is expressly authorized to provide for the issuance
of the shares of Undesignated Preferred Stock in one or more series of such
stock, and by filing a certificate
2
<PAGE>
pursuant to applicable law of the State of Delaware, to establish or change from
time to time the number of shares to be included in each such series, and to fix
the designations, powers, preferences and the relative, participating, optional
or other special rights of the shares of each series and any qualifications,
limitations and restrictions thereof. Any action by the Board of Directors or
any authorized committee thereof under this Section 4 shall require the
affirmative vote of a majority of the directors then in office or a majority of
the members of such committee. The Board of Directors or any authorized
committee thereof shall have the right to determine or fix one or more of the
following with respect to each series of Undesignated Preferred Stock to the
extent permitted by law:
(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The dividend rates or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and, if so, from
which date or dates, the payment date or dates for dividends, and the
participating and other rights, if any, with respect to dividends;
(c) The voting powers, full or limited, if any, of the shares of such
series;
(d) Whether the shares of such series shall be redeemable and, if so,
the price or prices at which, and the terms and conditions on which, such shares
may be redeemed;
(e) The amount or amounts payable upon the shares of such series and
any preferences applicable thereto in the event of voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
(f) Whether the shares of such series shall be entitled to the benefit
of a sinking or retirement fund to be applied to the purchase or redemption of
such shares, and if so entitled, the amount of such fund and the manner of its
application, including the price or prices at which such shares may be redeemed
or purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or of any other series of
the same or any other class or classes of stock of the Corporation and, if so
convertible or exchangeable, the conversion price or prices, or the rate or
rates of exchange, and the adjustments thereof, if any, at which such conversion
or exchange may be made, and any other terms and conditions of such conversion
or exchange;
(h) The price or other consideration for which the shares of such
series shall be issued;
3
<PAGE>
(i) Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of Undesignated
Preferred Stock (or series thereof) and whether such shares may be reissued as
shares of the same or any other class or series of stock; and
(j) Such other powers, preferences, rights, qualifications,
limitations and restrictions thereof as the Board of Directors or any authorized
committee thereof may deem advisable.
ARTICLE V
STOCKHOLDER ACTION
------------------
If at any time the Corporation shall have a class of stock registered
pursuant to the provisions of the Securities Exchange Act of 1934, as amended,
for so long as such class is so registered, any action required or permitted to
be taken by the stockholders of the Corporation at any annual or special meeting
of stockholders of the Corporation must be effected at a duly called annual or
special meeting of stockholders and may not be taken or effected by a written
consent of stockholders in lieu thereof.
ARTICLE VI
DIRECTORS
---------
Section 1. General.
-------------------
The business and affairs of the Corporation shall be managed by or under
the direction of the Board of Directors except as otherwise provided herein or
required by law.
Section 2. Election of Directors.
---------------------------------
Election of directors need not be by written ballot unless the By-laws of
the Corporation shall so provide.
Section 3. Terms of Directors.
------------------------------
The number of directors of the Corporation shall be fixed by resolution
duly adopted from time to time by the Board of Directors. The directors, other
than those who may be elected by the holders of any series of Undesignated
Preferred Stock of the Corporation, shall be classified, with respect to the
term for which they severally hold office, into three classes, as nearly equal
in number as possible. The initial Class I Director of the Corporation shall be
Ellen W. Harpin; there shall not be any initial Class II Directors of the
Corporation; and the
4
<PAGE>
initial Class III Director of the Corporation shall be Alfred A. Molinari, Jr.
The initial Class I Director shall serve for a term expiring at the annual
meeting of stockholders to be held in 1997 and the initial Class III Director
shall serve for a term expiring at the annual meeting of stockholders to be held
in 1999. At each annual meeting of stockholders, the successor or successors of
the class of directors whose term expires at that meeting shall be elected by a
plurality of the votes of the shares present in person or represented by proxy
at such meeting and entitled to vote on the election of directors, and shall
hold office for a term expiring at the annual meeting of stockholders held in
the third year following the year of their election. The directors elected to
each class shall hold office until their successors are duly elected and
qualified or until their earlier resignation or removal.
Notwithstanding the foregoing, whenever, pursuant to the provisions of
Article IV of this Certificate of Incorporation, the holders of any one or more
series of Undesignated Preferred Stock shall have the right, voting separately
as a series or together with holders of other such series, to elect directors at
an annual or special meeting of stockholders, the election, term of office,
filling of vacancies and other features of such directorships shall be governed
by the terms of this Certificate of Incorporation and any certificates of
designation applicable thereto, and such directors so elected shall not be
divided into classes pursuant to this Section 3.
During any period when the holders of any series of Undesignated Preferred
Stock have the right to elect additional directors as provided for or fixed
pursuant to the provisions of Article IV hereof, then upon commencement and for
the duration of the period during which such right continues: (a) the then
otherwise total authorized number of directors of the Corporation shall
automatically be increased by such specified number of directors, and the
holders of such Undesignated Preferred Stock shall be entitled to elect the
additional directors so provided for or fixed pursuant to said provisions, and
(b) each such additional director shall serve until such director's successor
shall have been duly elected and qualified, or until such director's right to
hold such office terminates pursuant to said provisions, whichever occurs
earlier, subject to such director's earlier death, disqualification, resignation
or removal. Except as otherwise provided by the Board in the resolution or
resolutions establishing such series, whenever the holders of any series of
Undesignated Preferred Stock having such right to elect additional directors are
divested of such right pursuant to the provisions of such stock, the terms of
office of all such additional directors elected by the holders of such stock, or
elected to fill any vacancies resulting from the death, resignation,
disqualification or removal of such additional directors, shall forthwith
terminate and the total and authorized number of directors of the Corporation
shall automatically be reduced accordingly.
Section 4. Vacancies.
--------------------
Subject to the rights, if any, of the holders of any series of Undesignated
Preferred Stock to elect directors and to fill vacancies in the Board of
Directors relating thereto, any and all vacancies in the Board of Directors,
however occurring, including, without limitation, by
5
<PAGE>
reason of an increase in size of the Board of Directors, or the death,
resignation, disqualification or removal of a director, shall be filled solely
by the affirmative vote of a majority of the remaining directors then in office,
even if less than a quorum of the Board of Directors. Any director appointed in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of directors in which the new directorship was
created or the vacancy occurred and until such director's successor shall have
been duly elected and qualified or until his or her earlier resignation or
removal. Subject to the rights, if any, of the holders of any series of
Undesignated Preferred Stock to elect directors, when the number of directors is
increased or decreased, the Board of Directors shall determine the class or
classes to which the increased or decreased number of directors shall be
apportioned; provided, however, that no decrease in the number of directors
shall shorten the term of any incumbent director. In the event of a vacancy in
the Board of Directors, the remaining directors, except as otherwise provided by
law, may exercise the powers of the full Board of Directors until the vacancy is
filled.
Section 5. Removal.
------------------
Subject to the rights, if any, of any series of Undesignated Preferred
Stock to elect directors and to remove any director whom the holders of any such
stock have the right to elect, any director (including persons elected by
directors to fill vacancies in the Board of Directors) may be removed from
office (a) only with cause and (b) only by the affirmative vote of the holders
of two-thirds of the shares then entitled to vote at an election of directors.
At least 30 days prior to any meeting of stockholders at which it is proposed
that any director be removed from office, written notice of such proposed
removal shall be sent to the director whose removal will be considered at the
meeting. For purposes of this Certificate of Incorporation, "cause," with
respect to the removal of any director shall mean only (i) conviction of a
felony, (ii) declaration of unsound mind by order of court, (iii) gross
dereliction of duty, (iv) commission of any action involving moral turpitude, or
(v) commission of an action which constitutes intentional misconduct or a
knowing violation of law if such action in either event results both in an
improper substantial personal benefit and a material injury to the Corporation.
ARTICLE VII
LIMITATION OF LIABILITY
-----------------------
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (a) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (b) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) under Section 174 of the DGCL or (d) for any transaction
from which the director derived an improper personal benefit. If the DGCL is
6
<PAGE>
amended after the effective date of this Certificate of Incorporation to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the DGCL, as
so amended.
Any repeal or modification of this Article VII by either of (i) the
stockholders of the Corporation or (ii) an amendment to the DGCL, shall not
adversely affect any right or protection existing at the time of such repeal or
modification with respect to any acts or omissions occurring before such repeal
or modification of a person serving as a director at the time of such repeal or
modification.
ARTICLE VIII
AMENDMENT OF BY-LAWS
--------------------
Section 1. Amendment by Directors
---------------------------------
Except as otherwise provided by law, the By-laws of the Corporation may be
amended or repealed by the Board of Directors by the affirmative vote of a
majority of the directors then in office.
Section 2. Amendment by Stockholders
------------------------------------
The By-laws of the Corporation may be amended or repealed at any annual
meeting of stockholders, or special meeting of stockholders called for such
purpose, by the affirmative vote of at least two-thirds of the shares present in
person or represented by proxy at such meeting and entitled to vote on such
amendment or repeal, voting together as a single class; provided, however, that
if the Board of Directors recommends that stockholders approve such amendment or
repeal at such meeting of stockholders, such amendment or repeal shall only
require the affirmative vote of the majority of the shares present in person or
represented by proxy at such meeting and entitled to vote on such amendment or
repeal, voting together as a single class.
ARTICLE IX
AMENDMENT OF CERTIFICATE OF INCORPORATION
-----------------------------------------
The Corporation reserves the right to amend or repeal this Certificate of
Incorporation in the manner now or hereafter prescribed by statute and this
Certificate of Incorporation, and all rights conferred upon stockholders herein
are granted subject to this reservation. No amendment or repeal of this
Certificate of Incorporation shall be made unless the same is first
7
<PAGE>
approved by the Board of Directors pursuant to a resolution adopted by the Board
of Directors in accordance with Section 242 of the DGCL, and, except as
otherwise provided by law, thereafter approved by the stockholders. Whenever
any vote of the holders of voting stock is required to amend or repeal any
provision of this Certificate of Incorporation, and in addition to any other
vote of the holders of voting stock that is required by this Certificate of
Incorporation or by law, the affirmative vote of a majority of the outstanding
shares entitled to vote on such amendment or repeal, and the affirmative vote of
a majority of the outstanding shares of each class entitled to vote thereon as a
class, shall be required to amend or repeal any provision of this Certificate of
Incorporation; provided, however, that the affirmative vote of not less than
two-thirds of the outstanding shares entitled to vote on such amendment or
repeal, and the affirmative vote of not less than two-thirds of the outstanding
shares of each class entitled to vote thereon as a class, shall be required to
amend or repeal any of the provisions of Article V, Article VI, Article VII or
Article IX of this Certificate of Incorporation.
8
<PAGE>
I, Alfred A. Molinari, Jr., being the Incorporator of Data Translation II,
Inc., do make this certificate, hereby declaring and certifying that this is my
act and deed on behalf of the Corporation this 12th day of September, 1996.
/s/ Alfred A. Molinari, Jr.
_____________________________________
Alfred A. Molinari, Jr., Incorporator
Data Translation
100 Locke Drive
Marlborough MA 01752-1192
9
<PAGE>
EXHIBIT 3.2
BY-LAWS
OF
DATA TRANSLATION II, INC.
ARTICLE I
---------
Stockholders
------------
SECTION 1. Annual Meeting. The annual meeting of stockholders shall be
--------------
held at the hour, date and place within or without the United States which is
fixed by the majority of the Board of Directors, the Chairman of the Board, if
one is elected, or the President, which time, date and place may subsequently be
changed at any time by vote of the Board of Directors. If no annual meeting has
been held for a period of thirteen months after the Corporation's last annual
meeting of stockholders, a special meeting in lieu thereof may be held, and such
special meeting shall have, for the purposes of these By-laws or otherwise, all
the force and effect of an annual meeting. Any and all references hereafter in
these By-laws to an annual meeting or annual meetings also shall be deemed to
refer to any special meeting(s) in lieu thereof.
SECTION 2. Matters to be Considered at Annual Meetings. At any annual
-------------------------------------------
meeting of stockholders or any special meeting in lieu of annual meeting of
stockholders (the "Annual Meeting"), only such business shall be conducted, and
only such proposals shall be acted upon, as shall have been properly brought
before such Annual Meeting. To be considered as properly brought before an
Annual Meeting, business must be: (a) specified in the notice of meeting, (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 any
holder of record (both as of the time notice of such proposal is given by the
stockholder as set forth below and as of the record date for the Annual Meeting
in question) of any shares of capital stock of the Corporation entitled to vote
at such Annual Meeting who complies with the requirements set forth in this
Section 2.
In addition to any other applicable requirements, for business to be
properly brought before an Annual Meeting by a stockholder of record of any
shares of capital stock entitled to vote at such Annual Meeting, such
stockholder shall: (i) give timely notice as required by this Section 2 to the
Secretary of the Corporation and (ii) be present at such meeting, either in
person or by a representative. For the first Annual Meeting following the
distribution of the common stock of the Corporation by Data Translation, Inc. to
its stockholders, a stockholder's
<PAGE>
notice shall be timely if delivered to, or mailed to and received by, the
Corporation at its principal executive office not later than the close of
business on the later of (x) the 75th day prior to the scheduled date of such
Annual Meeting or (y) the 15th day following the day on which public
announcement of the date of such Annual Meeting is first made by the
Corporation. For all subsequent Annual Meetings, a stockholder's notice shall
be timely if delivered to, or mailed to and received by, the Corporation at its
principal executive office not less than 75 days nor more than 120 days prior to
the anniversary date of the immediately preceding Annual Meeting (the
"Anniversary Date"); provided, however, that in the event the Annual Meeting is
scheduled to be held on a date more than 30 days before the Anniversary Date or
more than 60 days after the Anniversary Date, a stockholder's notice shall be
timely if delivered to, or mailed to and received by, the Corporation at its
principal executive office not later than the close of business on the later of
(1) the 75th day prior to the scheduled date of such Annual Meeting or (2) the
15th day following the day on which public announcement of the date of such
Annual Meeting is first made by the Corporation.
For purposes of these By-laws, "public announcement" shall mean: (a)
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service, (b) a report or other document filed
publicly with the Securities and Exchange Commission (including, without
limitation, a Form 8-K), or (c) a letter or report sent to stockholders of
record of the Corporation at the time of the mailing of such letter or report.
A stockholder's notice to the Secretary shall set forth as to each matter
proposed to be brought before an Annual Meeting: (i) a brief description of the
business the stockholder desires to bring before such Annual Meeting and the
reasons for conducting such business at such Annual Meeting, (ii) the name and
address, as they appear on the Corporation's stock transfer books, of the
stockholder proposing such business, (iii) the class and number of shares of the
Corporation's capital stock beneficially owned by the stockholder proposing such
business, (iv) the names and addresses of the beneficial owners, if any, of any
capital stock of the Corporation registered in such stockholder's name on such
books, and the class and number of shares of the Corporation's capital stock
beneficially owned by such beneficial owners, (v) the names and addresses of
other stockholders known by the stockholder proposing such business to support
such proposal, and the class and number of shares of the Corporation's capital
stock beneficially owned by such other stockholders, and (vi) any material
interest of the stockholder proposing to bring such business before such meeting
(or any other stockholders known to be supporting such proposal) in such
proposal.
If the Board of Directors or a designated committee thereof determines that
any stockholder proposal was not made in a timely fashion in accordance with the
provisions of this Section 2 or that the information provided in a stockholder's
notice does not satisfy the information requirements of this Section 2 in any
material respect, such proposal shall not be presented for action at the Annual
Meeting in question. If neither the Board of Directors nor
2
<PAGE>
such committee makes a determination as to the validity of any stockholder
proposal in the manner set forth above, the presiding officer of the Annual
Meeting shall determine whether the stockholder proposal was made in accordance
with the terms of this Section 2. If the presiding officer determines that any
stockholder proposal was not made in a timely fashion in accordance with the
provisions of this Section 2 or that the information provided in a stockholder's
notice does not satisfy the information requirements of this Section 2 in any
material respect, such proposal shall not be presented for action at the Annual
Meeting in question. If the Board of Directors, a designated committee thereof
or the presiding officer determines that a stockholder proposal was made in
accordance with the requirements of this Section 2, the presiding officer shall
so declare at the Annual Meeting and ballots shall be provided for use at the
meeting with respect to such proposal.
Notwithstanding the foregoing provisions of this By-Law, a stockholder
shall also comply with all applicable requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and regulations
thereunder with respect to the matters set forth in this Section 2, and nothing
in this Section 2 shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the Corporation's proxy statement pursuant to
Rule 14a-8 under the Exchange Act.
SECTION 3. Special Meetings. Except as otherwise required by law and
----------------
subject to the rights, if any, of the holders of any series of preferred stock,
special meetings of the stockholders of the Corporation may be called only by
the Board of Directors pursuant to a resolution approved by the affirmative vote
of a majority of the directors then in office.
SECTION 4. Matters to be Considered at Special Meetings. Only those
--------------------------------------------
matters set forth in the notice of the special meeting may be considered or
acted upon at a special meeting of stockholders of the Corporation, unless
otherwise provided by law.
SECTION 5. Notice of Meetings; Adjournments. A written notice of each
--------------------------------
Annual Meeting stating the hour, date and place of such Annual Meeting shall be
given by the Secretary or an Assistant Secretary (or other person authorized by
these By-laws or by law) not less than 10 days nor more than 60 days before the
Annual Meeting, to each stockholder entitled to vote thereat and to each
stockholder who, by law or under the Certificate of Incorporation of the
Corporation (as the same may hereafter be amended and/or restated, the
"Certificate") or under these By-laws, is entitled to such notice, by delivering
such notice to him or by mailing it, postage prepaid, addressed to such
stockholder at the address of such stockholder as it appears on the
Corporation's stock transfer books. Such notice shall be deemed to be delivered
when hand delivered to such address or deposited in the mail so addressed, with
postage prepaid.
3
<PAGE>
Notice of all special meetings of stockholders shall be given in the same
manner as provided for Annual Meetings, except that the written notice of all
special meetings shall state the purpose or purposes for which the meeting has
been called.
Notice of an Annual Meeting or special meeting of stockholders need not be
given to a stockholder if a written waiver of notice is signed before or after
such meeting by such stockholder or if such stockholder attends such meeting,
unless such attendance was for the express purpose of objecting at the beginning
of the meeting to the transaction of any business because the meeting was not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any Annual Meeting or special meeting of stockholders need be
specified in any written waiver of notice.
The Board of Directors may postpone and reschedule any previously scheduled
Annual Meeting or special meeting of stockholders and any record date with
respect thereto, regardless of whether any notice or public disclosure with
respect to any such meeting has been sent or made pursuant to Section 2 of this
Article I or Section 3 of Article II hereof or otherwise. In no event shall
the public announcement of an adjournment, postponement or rescheduling of any
previously scheduled meeting of stockholders commence a new time period for the
giving of a stockholder's notice under Section 2 of Article I and Section 3 of
Article II of these By-laws.
When any meeting is convened, the presiding officer may adjourn the meeting
if (a) no quorum is present for the transaction of business, (b) the Board of
Directors determines that adjournment is necessary or appropriate to enable the
stockholders to consider fully information which the Board of Directors
determines has not been made sufficiently or timely available to stockholders,
or (c) the Board of Directors determines that adjournment is otherwise in the
best interests of the Corporation. When any Annual Meeting or special meeting
of stockholders is adjourned to another hour, date or place, notice need not be
given of the adjourned meeting other than an announcement at the meeting at
which the adjournment is taken of the hour, date and place to which the meeting
is adjourned; provided, however, that if the adjournment is for more than 30
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote thereat and each stockholder who, by law or under the
Certificate or these By-laws, is entitled to such notice.
SECTION 6. Quorum. A majority of the shares entitled to vote, present in
------
person or represented by proxy, shall constitute a quorum at any meeting of
stockholders. If less than a quorum is present at a meeting, the holders of
voting stock representing a majority of the voting power present at the meeting
or the presiding officer may adjourn the meeting from time to time, and the
meeting may be held as adjourned without further notice, except as provided in
Section 5 of this Article I. At such adjourned meeting at which a quorum is
present, any business may be transacted which might have been transacted at the
meeting as
4
<PAGE>
originally noticed. The stockholders present at a duly constituted meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough stockholders to leave less than a quorum.
SECTION 7. Voting and Proxies. Stockholders shall have one vote for each
------------------
share of stock entitled to vote owned by them of record according to the books
of the Corporation, unless otherwise provided by law or by the Certificate.
Stockholders may vote either in person or by written proxy, but no proxy shall
be voted or acted upon after three years from its date, unless the proxy
provides for a longer period. Proxies shall be filed with the Secretary of the
meeting before being voted. Except as otherwise limited therein or as otherwise
provided by law, proxies shall entitle the persons authorized thereby to vote at
any adjournment of such meeting, but they shall not be valid after final
adjournment of such meeting. A proxy with respect to stock held in the name of
two or more persons shall be valid if executed by or on behalf of any one of
them unless at or prior to the exercise of the proxy the Corporation receives a
specific written notice to the contrary from any one of them. A proxy
purporting to be executed by or on behalf of a stockholder shall be deemed
valid, and the burden of proving invalidity shall rest on the challenger.
SECTION 8. Action at Meeting. When a quorum is present, any matter before
-----------------
any meeting of stockholders shall be decided by the affirmative vote of the
majority of shares present in person or represented by proxy at such meeting and
entitled to vote on such matter, except where a larger vote is required by law,
by the Certificate or by these By-laws. Any election by stockholders shall be
determined by a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote on the election of
directors, except where a larger vote is required by law, by the Certificate or
by these By-laws. The Corporation shall not directly or indirectly vote any
shares of its own stock; provided, however, that the Corporation may vote shares
which it holds in a fiduciary capacity to the extent permitted by law.
SECTION 9. Stockholder Lists. The Secretary or an Assistant Secretary (or
-----------------
the Corporation's transfer agent or other person authorized by these By-laws or
by law) shall prepare and make, at least 10 days before every Annual Meeting or
special meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least 10 days prior to the meeting, either at a place within the 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 hour, date and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
5
<PAGE>
SECTION 10. Presiding Officer. The Chairman of the Board, if one is
-----------------
elected, or if not elected or in his or her absence, the President, shall
preside at all Annual Meetings or special meetings of stockholders and shall
have the power, among other things, to adjourn such meeting at any time and from
time to time, subject to Sections 5 and 6 of this Article I. The order of
business and all other matters of procedure at any meeting of the stockholders
shall be determined by the presiding officer.
SECTION 11. Voting Procedures and Inspectors of Elections. The
---------------------------------------------
Corporation shall, in advance of any meeting of stockholders, appoint one or
more inspectors to act at the meeting and make a written report thereof. The
Corporation may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate is able to act at
a meeting of stockholders, the presiding officer shall appoint one or more
inspectors to act at the meeting. Any inspector may, but need not, be an
officer, employee or agent of the Corporation. Each inspector, before entering
upon the discharge of his or her duties, shall take and sign an oath faithfully
to execute the duties of inspector with strict impartiality and according to the
best of his or her ability. The inspectors shall perform such duties as are
required by the General Corporation Law of the State of Delaware, as amended
from time to time (the "DGCL"), including the counting of all votes and ballots.
The inspectors may appoint or retain other persons or entities to assist the
inspectors in the performance of the duties of the inspectors. The presiding
officer may review all determinations made by the inspectors, and in so doing
the presiding officer shall be entitled to exercise his or her sole judgment and
discretion and he or she shall not be bound by any determinations made by the
inspectors. All determinations by the inspectors and, if applicable, the
presiding officer, shall be subject to further review by any court of competent
jurisdiction.
ARTICLE II
----------
Directors
---------
SECTION 1. Powers. The business and affairs of the Corporation shall be
------
managed by or under the direction of the Board of Directors except as otherwise
provided by the Certificate or required by law.
SECTION 2. Number and Terms. The number of directors of the Corporation
----------------
shall be fixed by resolution duly adopted from time to time by the Board of
Directors. The directors shall hold office in the manner provided in the
Certificate.
SECTION 3. Director Nominations. Nominations of candidates for election
--------------------
as directors of the Corporation at any Annual Meeting may be made only (a) by,
or at the direction of, a majority of the Board of Directors or (b) by any
holder of record (both as of the
6
<PAGE>
time notice of such nomination is given by the stockholder as set forth below
and as of the record date for the Annual Meeting in question) of any shares of
the capital stock of the Corporation entitled to vote at such Annual Meeting who
complies with the timing, informational and other requirements set forth in this
Section 3. Any stockholder who has complied with the timing, informational and
other requirements set forth in this Section 3 and who seeks to make such a
nomination, or his, her or its representative, must be present in person at the
Annual Meeting. Only persons nominated in accordance with the procedures set
forth in this Section 3 shall be eligible for election as directors at an Annual
Meeting.
Nominations, other than those made by, or at the direction of, the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation as set forth in this Section 3. For the first Annual Meeting
following the distribution of the common stock of the Corporation by Data
Translation, Inc. to its stockholders, a stockholder's notice shall be timely if
delivered to, or mailed to and received by, the Corporation at its principal
executive office not later than the close of business on the later of (i) the
75th day prior to the scheduled date of such Annual Meeting or (ii) the 15th day
following the day on which public announcement of the date of such Annual
Meeting is first made by the Corporation. For all subsequent Annual Meetings, a
stockholder's notice shall be timely if delivered to, or mailed to and received
by, the Corporation at its principal executive office not less than 75 days nor
more than 120 days prior to the Anniversary Date; provided, however, that in the
event the Annual Meeting is scheduled to be held on a date more than 30 days
before the Anniversary Date or more than 60 days after the Anniversary Date, a
stockholder's notice shall be timely if delivered to, or mailed and received by,
the Corporation at its principal executive office not later than the close of
business on the later of (x) the 75th day prior to the scheduled date of such
Annual Meeting or (y) the 15th day following the day on which public
announcement of the date of such Annual Meeting is first made by the
Corporation.
A stockholder's notice to the Secretary shall set forth as to each person
whom the stockholder proposes to nominate for election or re-election as a
director: (1) the name, age, business address and residence address of such
person, (2) the principal occupation or employment of such person, (3) the class
and number of shares of the Corporation's capital stock which are beneficially
owned by such person on the date of such stockholder notice, and (4) the consent
of each nominee to serve as a director if elected. A stockholder's notice to
the Secretary shall further set forth as to the stockholder giving such notice:
(a) the name and address, as they appear on the Corporation's stock transfer
books, of such stockholder and of the beneficial owners (if any) of the
Corporation's capital stock registered in such stockholder's name and the name
and address of other stockholders known by such stockholder to be supporting
such nominee(s), (b) the class and number of shares of the Corporation's capital
stock which are held of record, beneficially owned or represented by proxy by
such stockholder and by any other stockholders known by such stockholder to be
supporting such nominee(s) on the record date for the Annual Meeting in question
(if such date shall then have been made publicly available) and on the date of
such stockholder's notice, and
7
<PAGE>
(c) a description of all arrangements or understandings between such 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 such
stockholder.
If the Board of Directors or a designated committee thereof determines that
any stockholder nomination was not made in accordance with the terms of this
Section 3 or that the information provided in a stockholder's notice does not
satisfy the informational requirements of this Section 3 in any material
respect, then such nomination shall not be considered at the Annual Meeting in
question. If neither the Board of Directors nor such committee makes a
determination as to whether a nomination was made in accordance with the
provisions of this Section 3, the presiding officer of the Annual Meeting shall
determine whether a nomination was made in accordance with such provisions. If
the presiding officer determines that any stockholder nomination was not made in
accordance with the terms of this Section 3 or that the information provided in
a stockholder's notice does not satisfy the informational requirements of this
Section 3 in any material respect, then such nomination shall not be considered
at the Annual Meeting in question. If the Board of Directors, a designated
committee thereof or the presiding officer determines that a nomination was made
in accordance with the terms of this Section 3, the presiding officer shall so
declare at the Annual Meeting and ballots shall be provided for use at the
meeting with respect to such nominee.
Notwithstanding anything to the contrary in the second paragraph of this
Section 3, in the event that the number of directors to be elected to the Board
of Directors of the Corporation is increased and there is no public announcement
by the Corporation naming all of the nominees for director or specifying the
size of the increased Board of Directors at least 75 days prior to the
Anniversary Date, a stockholder's notice required by this Section 3 shall also
be considered timely, but only with respect to nominees for any new positions
created by such increase, if such notice shall be delivered to, or mailed to and
received by, the Corporation at its principal executive office not later than
the close of business on the 15th day following the day on which such public
announcement is first made by the Corporation.
No person shall be elected by the stockholders as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section. Election of directors at an Annual Meeting need not be by written
ballot, unless otherwise provided by the Board of Directors or presiding officer
at such Annual Meeting. If written ballots are to be used, ballots bearing the
names of all the persons who have been nominated for election as directors at
the Annual Meeting in accordance with the procedures set forth in this Section
shall be provided for use at the Annual Meeting.
8
<PAGE>
SECTION 4. Qualification. No director need be a stockholder of the
-------------
Corporation.
SECTION 5. Vacancies. Subject to the rights, if any, of the holders of
---------
any series of preferred stock to elect directors and to fill vacancies in the
Board of Directors relating thereto, any and all vacancies in the Board of
Directors, however occurring, including, without limitation, by reason of an
increase in size of the Board of Directors, or the death, resignation,
disqualification or removal of a director, shall be filled solely by the
affirmative vote of a majority of the remaining directors then in office, even
if less than a quorum of the Board of Directors. Any director appointed in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of directors in which the new directorship was
created or the vacancy occurred and until such director's successor shall have
been duly elected and qualified or until his or her earlier resignation or
removal. Subject to the rights, if any, of the holders of any series of
preferred stock to elect directors, when the number of directors is increased or
decreased, the Board of Directors shall determine the class or classes to which
the increased or decreased number of directors shall be apportioned; provided,
however, that no decrease in the number of directors shall shorten the term of
any incumbent director. In the event of a vacancy in the Board of Directors,
the remaining directors, except as otherwise provided by law, may exercise the
powers of the full Board of Directors until the vacancy is filled.
SECTION 6. Removal. Directors may be removed from office in the manner
-------
provided in the Certificate.
SECTION 7. Resignation. A director may resign at any time by giving
-----------
written notice to the Chairman of the Board, if one is elected, the President or
the Secretary. A resignation shall be effective upon receipt, unless the
resignation otherwise provides.
SECTION 8. Regular Meetings. The regular annual meeting of the Board of
----------------
Directors shall be held, without notice other than this Section 8, on the same
date and at the same place as the Annual Meeting following the close of such
meeting of stockholders. Other regular meetings of the Board of Directors may
be held at such hour, date and place as the Board of Directors may by resolution
from time to time determine without notice other than such resolution.
SECTION 9. Special Meetings. Special meetings of the Board of Directors
----------------
may be called, orally or in writing, by or at the request of a majority of the
directors, the Chairman of the Board, if one is elected, or the President. The
person calling any such special meeting of the Board of Directors may fix the
hour, date and place thereof.
SECTION 10. Notice of Meetings. Notice of the hour, date and place of all
------------------
special meetings of the Board of Directors shall be given to each director by
the Secretary or an Assistant Secretary, or in case of the death, absence,
incapacity or refusal of such persons, by
9
<PAGE>
the Chairman of the Board, if one is elected, or the President or such other
officer designated by the Chairman of the Board, if one is elected, or the
President. Notice of any special meeting of the Board of Directors shall be
given to each director in person, by telephone, or by facsimile, telex,
telecopy, telegram, or other written form of electronic communication, sent to
his or her business or home address, at least 24 hours in advance of the
meeting, or by written notice mailed to his or her business or home address, at
least 48 hours in advance of the meeting. Such notice shall be deemed to be
delivered when hand delivered to such address, read to such director by
telephone, deposited in the mail so addressed, with postage thereon prepaid if
mailed, dispatched or transmitted if faxed, telexed or telecopied, or when
delivered to the telegraph company if sent by telegram.
When any Board of Directors meeting, either regular or special, is
adjourned for 30 days or more, notice of the adjourned meeting shall be given as
in the case of an original meeting. It shall not be necessary to give any
notice of the hour, date or place of any meeting adjourned for less than 30 days
or of the business to be transacted thereat, other than an announcement at the
meeting at which such adjournment is taken of the hour, date and place to which
the meeting is adjourned.
A written waiver of notice signed before or after a meeting by a director
and filed with the records of the meeting shall be deemed to be equivalent to
notice of the meeting. The attendance of a director at a meeting shall
constitute a waiver of notice of such meeting, except where a director attends a
meeting for the express purpose of objecting at the beginning of the meeting to
the transaction of any business because such meeting is not lawfully called or
convened. Except as otherwise required by law, by the Certificate or by these
By-laws, neither the business to be transacted at, nor the purpose of, any
meeting of the Board of Directors need be specified in the notice or waiver of
notice of such meeting.
SECTION 11. Quorum. At any meeting of the Board of Directors, a majority
------
of the directors then in office shall constitute a quorum for the transaction of
business, but if less than a quorum is present at a meeting, a majority of the
directors present may adjourn the meeting from time to time, and the meeting may
be held as adjourned without further notice, except as provided in Section 10 of
this Article II. Any business which might have been transacted at the meeting
as originally noticed may be transacted at such adjourned meeting at which a
quorum is present.
SECTION 12. Action at Meeting. At any meeting of the Board of Directors
-----------------
at which a quorum is present, a majority of the directors present may take any
action on behalf of the Board of Directors, unless otherwise required by law, by
the Certificate or by these By-laws.
SECTION 13. Action by Consent. Any action required or permitted to be
-----------------
taken at any meeting of the Board of Directors may be taken without a meeting if
all members of the Board of Directors consent thereto in writing. Such written
consent shall be filed with the
10
<PAGE>
records of the meetings of the Board of Directors and shall be treated for all
purposes as a vote at a meeting of the Board of Directors.
SECTION 14. Manner of Participation. Directors may participate in
-----------------------
meetings of the Board of Directors by means of conference telephone or similar
communications equipment by means of which all directors participating in the
meeting can hear each other, and participation in a meeting in accordance
herewith shall constitute presence in person at such meeting for purposes of
these By-laws.
SECTION 15. Committees. The Board of Directors, by vote of a majority of
----------
the directors then in office, may elect from its number one or more committees,
including, without limitation, an Executive Committee, a Compensation Committee,
a Stock Option Committee and an Audit Committee, and may delegate thereto some
or all of its powers except those which by law, by the Certificate or by these
By-laws may not be delegated. Except as the Board of Directors may otherwise
determine, any such committee may make rules for the conduct of its business,
but unless otherwise provided by the Board of Directors or in such rules, its
business shall be conducted so far as possible in the same manner as is provided
by these By-laws for the Board of Directors. All members of such committees
shall hold such offices at the pleasure of the Board of Directors. The Board of
Directors may abolish any such committee at any time. Any committee to which
the Board of Directors delegates any of its powers or duties shall keep records
of its meetings and shall report its action to the Board of Directors. The
Board of Directors shall have power to rescind any action of any committee, to
the extent permitted by law, but no such rescission shall have retroactive
effect.
SECTION 16. Compensation of Directors. Directors shall receive such
-------------------------
compensation for their services as shall be determined by a majority of the
Board of Directors provided that directors who are serving the Corporation as
employees and who receive compensation for their services as such, shall not
receive any salary or other compensation for their services as directors of the
Corporation.
ARTICLE III
-----------
Officers
--------
SECTION 1. Enumeration. The officers of the Corporation shall consist of
-----------
a President, a Treasurer, a Secretary and such other officers, including,
without limitation, a Chairman of the Board of Directors, a Chief Executive
Officer and one or more Vice Presidents (including Executive Vice Presidents or
Senior Vice Presidents), Assistant Vice Presidents, Assistant Treasurers and
Assistant Secretaries, as the Board of Directors may determine.
11
<PAGE>
SECTION 2. Election. At the regular annual meeting of the Board following
--------
the Annual Meeting of stockholders, the Board of Directors shall elect the
President, the Treasurer and the Secretary. Other officers may be elected by
the Board of Directors at such regular annual meeting of the Board of Directors
or at any other regular or special meeting.
SECTION 3. Qualification. No officer need be a stockholder or a director.
-------------
Any person may occupy more than one office of the Corporation at any time. Any
officer may be required by the Board of Directors to give bond for the faithful
performance of his or her duties in such amount and with such sureties as the
Board of Directors may determine.
SECTION 4. Tenure. Except as otherwise provided by the Certificate or by
------
these By-laws, each of the officers of the Corporation shall hold office until
the regular annual meeting of the Board of Directors following the next Annual
Meeting of stockholders and until his or her successor is elected and qualified
or until his or her earlier resignation or removal.
SECTION 5. Resignation. Any officer may resign by delivering his or her
-----------
written resignation to the Corporation addressed to the President or the
Secretary, and such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
SECTION 6. Removal. Except as otherwise provided by law, the Board of
-------
Directors may remove any officer with or without cause by the affirmative vote
of a majority of the directors then in office.
SECTION 7. Absence or Disability. In the event of the absence or
---------------------
disability of any officer, the Board of Directors may designate another officer
to act temporarily in place of such absent or disabled officer.
SECTION 8. Vacancies. Any vacancy in any office may be filled for the
---------
unexpired portion of the term by the Board of Directors.
SECTION 9. President. The President shall, subject to the direction of
---------
the Board of Directors, have general supervision and control of the
Corporation's business. If there is no Chairman of the Board or if he or she is
absent, the President shall preside, when present, at all meetings of
stockholders and of the Board of Directors. The President shall have such other
powers and perform such other duties as the Board of Directors may from time to
time designate.
SECTION 10. Chairman of the Board. The Chairman of the Board, if one is
---------------------
elected, shall preside, when present, at all meetings of the stockholders and of
the Board of Directors. The Chairman of the Board shall have such other powers
and shall perform such other duties as the Board of Directors may from time to
time designate.
12
<PAGE>
SECTION 11. Chief Executive Officer. The Chief Executive Officer, if one
-----------------------
is elected, shall have such powers and shall perform such duties as the Board of
Directors may from time to time designate.
SECTION 12. Vice Presidents and Assistant Vice Presidents. Any Vice
---------------------------------------------
President (including any Executive Vice President or Senior Vice President) and
any Assistant Vice President shall have such powers and shall perform such
duties as the Board of Directors or the Chief Executive Officer may from time to
time designate.
SECTION 13. Treasurer and Assistant Treasurers. The Treasurer shall,
----------------------------------
subject to the direction of the Board of Directors and except as the Board of
Directors or the Chief Executive Officer may otherwise provide, have general
charge of the financial affairs of the Corporation and shall cause to be kept
accurate books of account. The Treasurer shall have custody of all funds,
securities, and valuable documents of the Corporation. He or she shall have
such other duties and powers as may be designated from time to time by the Board
of Directors or the Chief Executive Officer.
Any Assistant Treasurer shall have such powers and perform such duties as
the Board of Directors or the Chief Executive Officer may from time to time
designate.
SECTION 14. Secretary and Assistant Secretaries. The Secretary shall
-----------------------------------
record all the proceedings of the meetings of the stockholders and the Board of
Directors (including committees of the Board) in books kept for that purpose.
In his or her absence from any such meeting, a temporary secretary chosen at the
meeting shall record the proceedings thereof. The Secretary shall have charge of
the stock ledger (which may, however, be kept by any transfer or other agent of
the Corporation). The Secretary shall have custody of the seal of the
Corporation, and the Secretary, or an Assistant Secretary, shall have authority
to affix it to any instrument requiring it, and, when so affixed, the seal may
be attested by his or her signature or that of an Assistant Secretary. The
Secretary shall have such other duties and powers as may be designated from time
to time by the Board of Directors or the Chief Executive Officer. In the
absence of the Secretary, any Assistant Secretary may perform his or her duties
and responsibilities.
Any Assistant Secretary shall have such powers and perform such duties as
the Board of Directors or the Chief Executive Officer may from time to time
designate.
SECTION 15. Other Powers and Duties. Subject to these By-laws and to such
-----------------------
limitations as the Board of Directors may from time to time prescribe, the
officers of the Corporation shall each have such powers and duties as generally
pertain to their respective offices, as well as such powers and duties as from
time to time may be conferred by the Board of Directors or the Chief Executive
Officer.
13
<PAGE>
ARTICLE IV
----------
Capital Stock
-------------
SECTION 1. Certificates of Stock. Each stockholder shall be entitled to a
---------------------
certificate of the capital stock of the Corporation in such form as may from
time to time be prescribed by the Board of Directors. Such certificate shall be
signed by the Chairman of the Board of Directors, the President or a Vice
President and by the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary. The Corporation seal and the signatures by the
Corporation's officers, the transfer agent or the registrar may be facsimiles.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed on such certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he or she were such
officer, transfer agent or registrar at the time of its issue. Every
certificate for shares of stock which are subject to any restriction on transfer
and every certificate issued when the Corporation is authorized to issue more
than one class or series of stock shall contain such legend with respect thereto
as is required by law.
SECTION 2. Transfers. Subject to any restrictions on transfer and unless
---------
otherwise provided by the Board of Directors, shares of stock may be transferred
only on the books of the Corporation by the surrender to the Corporation or its
transfer agent of the certificate theretofore properly endorsed or accompanied
by a written assignment or power of attorney properly executed, with transfer
stamps (if necessary) affixed, and with such proof of the authenticity of
signature as the Corporation or its transfer agent may reasonably require.
SECTION 3. Record Holders. Except as may otherwise be required by law, by
--------------
the Certificate or by these By-laws, the Corporation shall be entitled to treat
the record holder of stock as shown on its books as the owner of such stock for
all purposes, including the payment of dividends and the right to vote with
respect thereto, regardless of any transfer, pledge or other disposition of such
stock, until the shares have been transferred on the books of the Corporation in
accordance with the requirements of these By-laws.
It shall be the duty of each stockholder to notify the Corporation of his
or her post office address and any changes thereto.
SECTION 4. Record Date. In order that the Corporation may determine the
-----------
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date: (a) in the case of
14
<PAGE>
determination of stockholders entitled to vote at any meeting of stockholders,
shall, unless otherwise required by law, not be more than sixty nor less than
ten days before the date of such meeting and (b) in the case of any other
action, shall not be more than sixty days prior to such other action. If no
record date is fixed: (i) the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held and (ii) the record date for determining stockholders
for any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
SECTION 5. Replacement of Certificates. In case of the alleged loss,
---------------------------
destruction or mutilation of a certificate of stock, a duplicate certificate may
be issued in place thereof, upon such terms as the Board of Directors may
prescribe.
ARTICLE V
---------
Indemnification
---------------
SECTION 1. Definitions. For purposes of this Article:
-----------
(a) "Director" means any person who serves or has served the Corporation as
a director on the Board of Directors of the Corporation.
(b) "Officer" means any person who serves or has served the Corporation as
an officer appointed by the Board of Directors of the Corporation;
(c) "Non-Officer Employee" means any person who serves or has served as an
employee of the Corporation, but who is not or was not a Director or Officer;
(d) "Proceeding" means any threatened, pending or completed action, suit,
arbitration, alternate dispute resolution mechanism, inquiry, investigation,
administrative hearing or other proceeding, whether civil, criminal,
administrative, arbitrative or investigative;
(e) "Expenses" means all reasonable attorneys' fees, retainers, court
costs, transcript costs, fees of expert witnesses, private investigators and
professional advisors (including, without limitation, accountants and investment
bankers), travel expenses, duplicating costs, printing and binding costs, costs
of preparation of demonstrative evidence and other courtroom presentation aids
and devices, costs incurred in connection with document review, organization,
imaging and computerization, telephone charges, postage, delivery service fees,
and all other disbursements, costs or expenses of the type customarily incurred
in connection
15
<PAGE>
with prosecuting, defending, preparing to prosecute or defend, investigating,
being or preparing to be a witness in, settling or otherwise participating in, a
Proceeding;
(f) "Corporate Status" describes the status of a person who (i) in the case
of a Director, is or was a director of the Corporation and is or was acting in
such capacity, (ii) in the case of an Officer, is or was an officer, employee or
agent of the Corporation or is or was a director, officer, employee or agent of
any other corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise which such Officer is or was serving at the request of the
Corporation, and (iii) in the case of a Non-Officer Employee, is or was an
employee of the Corporation or is or was a director, officer, employee or agent
of any other corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise which such Non-Officer Employee is or was serving at
the request of the Corporation; and
(g) "Disinterested Director" means, with respect to each Proceeding in
respect of which indemnification is sought hereunder, a Director of the
Corporation who is not and was not a party to such Proceeding.
SECTION 2. Indemnification of Directors and Officers. Subject to the
-----------------------------------------
operation of Section 4 of this Article V, each Director and Officer shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the DGCL, as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than such law
permitted the Corporation to provide prior to such amendment) against any and
all Expenses, judgments, penalties, fines and amounts reasonably paid in
settlement that are incurred by such Director or Officer or on such Director or
Officer's behalf in connection with any threatened, pending or completed
Proceeding or any claim, issue or matter therein, which such Director or Officer
is, or is threatened to be made, a party to or participant in by reason of such
Director or Officer's Corporate Status, if such Director or Officer acted in
good faith and in a manner such Director or Officer reasonably believed to be in
or not opposed to the best interests of the Corporation and, with respect to any
criminal proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The rights of indemnification provided by this Section 2 shall
continue as to a Director or Officer after he or she has ceased to be a Director
or Officer and shall inure to the benefit of his or her heirs, executors,
administrators and personal representatives. Notwithstanding the foregoing, the
Corporation shall indemnify any Director or Officer seeking indemnification in
connection with a Proceeding initiated by such Director or Officer only if such
Proceeding was authorized by the Board of Directors of the Corporation.
SECTION 3. Indemnification of Non-Officer Employees. Subject to the
----------------------------------------
operation of Section 4 of this Article V, each Non-Officer Employee may, in the
discretion of the Board of Directors of the Corporation, be indemnified by the
Corporation to the fullest extent authorized by the DGCL, as the same exists or
may hereafter be amended, against any or all
16
<PAGE>
Expenses, judgments, penalties, fines and amounts reasonably paid in settlement
that are incurred by such Non-Officer Employee or on such Non-Officer Employee's
behalf in connection with any threatened, pending or completed Proceeding, or
any claim, issue or matter therein, which such Non-Officer Employee is, or is
threatened to be made, a party to or participant in by reason of such Non-
Officer Employee's Corporate Status, if such Non-Officer Employee acted in good
faith and in a manner such Non-Officer Employee reasonably believed to be in or
not opposed to the best interests of the Corporation and, with respect to any
criminal proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The rights of indemnification provided by this Section 3 shall
continue as to a Non-Officer Employee after he or she has ceased to be a Non-
Officer Employee and shall inure to the benefit of his or her heirs, personal
representatives, executors and administrators. Notwithstanding the foregoing,
the Corporation may indemnify any Non-Officer Employee seeking indemnification
in connection with a Proceeding initiated by such Non-Officer Employee only if
such Proceeding was authorized by the Board of Directors of the Corporation.
SECTION 4. Good Faith. Unless ordered by a court, no indemnification
----------
shall be provided pursuant to this Article V to a Director, to an Officer or to
a Non-Officer Employee unless a determination shall have been made that such
person acted in good faith and in a manner such person reasonably believed to be
in or not opposed to the best interests of the Corporation and, with respect to
any criminal Proceeding, such person had no reasonable cause to believe his or
her conduct was unlawful. Such determination shall be made by (a) a majority
vote of the Disinterested Directors, even though less than a quorum of the Board
of Directors, (b) if there are no such Disinterested Directors, or if a majority
of Disinterested Directors so direct, by independent legal counsel in a written
opinion, or (c) by the stockholders of the Corporation.
SECTION 5. Advancement of Expenses to Directors Prior to Final
---------------------------------------------------
Disposition. The Corporation shall advance all Expenses incurred by or on behalf
of any Director in connection with any Proceeding in which such Director is
involved by reason of such Director's Corporate Status within ten days after the
receipt by the Corporation of a written statement from such Director requesting
such advance or advances from time to time, whether prior to or after final
disposition of such Proceeding. Such statement or statements shall reasonably
evidence the Expenses incurred by such Director and shall be preceded or
accompanied by an undertaking by or on behalf of such Director to repay any
Expenses so advanced if it shall ultimately be determined that such Director is
not entitled to be indemnified against such Expenses.
SECTION 6. Advancement of Expenses to Officers and Non-Officer Employees
-------------------------------------------------------------
Prior to Final Disposition. The Corporation may, in the discretion of the Board
- --------------------------
of Directors of the Corporation, advance any or all Expenses incurred by or on
behalf of any Officer or Non-Officer Employee in connection with any Proceeding
in which such Officer or Non-Officer
17
<PAGE>
Employee is involved by reason of such Officer or Non-Officer Employee's
Corporate Status upon the receipt by the Corporation of a statement or
statements from such Officer or Non-Officer Employee requesting such advance or
advances from time to time, whether prior to or after final disposition of such
Proceeding. Such statement or statements shall reasonably evidence the Expenses
incurred by such Officer or Non-Officer Employee and shall be preceded or
accompanied by an undertaking by or on behalf of such Officer or Non-Officer
Employee to repay any Expenses so advanced if it shall ultimately be determined
that such Officer or Non-Officer Employee is not entitled to be indemnified
against such Expenses.
SECTION 7. Contractual Nature of Rights. The foregoing provisions of this
----------------------------
Article V shall be deemed to be a contract between the Corporation and each
Director and Officer who serves in such capacity at any time while this Article
V is in effect, and any repeal or modification thereof shall not affect any
rights or obligations then existing with respect to any state of facts then or
theretofore existing or any Proceeding theretofore or thereafter brought based
in whole or in part upon any such state of facts. If a claim for
indemnification or advancement of Expenses hereunder by a Director or Officer is
not paid in full by the Corporation within (a) 60 days after the Corporation's
receipt of a written claim for indemnification, or (b) in the case of a
Director, 10 days after the Corporation's receipt of documentation of Expenses
and the required undertaking, such Director or Officer may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim, and if successful in whole or in part, such Director or Officer shall
also be entitled to be paid the expenses of prosecuting such claim. The failure
of the Corporation (including its Board of Directors or any committee thereof,
independent legal counsel, or stockholders) to make a determination concerning
the permissibility of such indemnification or, in the case of a Director,
advancement of Expenses, under this Article V shall not be a defense to the
action and shall not create a presumption that such indemnification or
advancement is not permissible.
SECTION 8. Non-Exclusivity of Rights. The rights to indemnification and
-------------------------
advancement of Expenses set forth in this Article V shall not be exclusive of
any other right which any Director, Officer or Non-Officer Employee may have or
hereafter acquire under any statute, provision of the Corporation's Certificate
or these By-laws, agreement, vote of stockholders or Disinterested Directors or
otherwise.
SECTION 9. Insurance. The Corporation may maintain insurance, at its
---------
expense, to protect itself and any Director, Officer or Non-Officer Employee
against any liability of any character asserted against or incurred by the
Corporation or any such Director, Officer or Non-Officer Employee, or arising
out of any such person's Corporate Status, whether or not the Corporation would
have the power to indemnify such person against such liability under the DGCL or
the provisions of this Article V.
18
<PAGE>
ARTICLE VI
----------
Miscellaneous Provisions
------------------------
SECTION 1. Fiscal Year. Except as otherwise determined by the Board of
-----------
Directors, the fiscal year of the Corporation shall end on the last day of
[NOVEMBER] of each year.
SECTION 2. Seal. The Board of Directors shall have power to adopt and
----
alter the seal of the Corporation.
SECTION 3. Execution of Instruments. All deeds, leases, transfers,
------------------------
contracts, bonds, notes and other obligations to be entered into by the
Corporation in the ordinary course of its business without director action may
be executed on behalf of the Corporation by the Chairman of the Board, if one is
elected, the President or the Treasurer or any other officer, employee or agent
of the Corporation as the Board of Directors or Executive Committee may
authorize.
SECTION 4. Voting of Securities. Unless the Board of Directors otherwise
--------------------
provides, the Chairman of the Board, if one is elected, the President or the
Treasurer may waive notice of and act on behalf of this Corporation, or appoint
another person or persons to act as proxy or attorney in fact for this
Corporation with or without discretionary power and/or power of substitution, at
any meeting of stockholders or shareholders of any other corporation or
organization, any of whose securities are held by this Corporation.
SECTION 5. Resident Agent. The Board of Directors may appoint a resident
--------------
agent upon whom legal process may be served in any action or proceeding against
the Corporation.
SECTION 6. Corporate Records. The original or attested copies of the
-----------------
Certificate, By-laws and records of all meetings of the incorporators,
stockholders and the Board of Directors and the stock transfer books, which
shall contain the names of all stockholders, their record addresses and the
amount of stock held by each, may be kept outside the State of Delaware and
shall be kept at the principal office of the Corporation, at the office of its
counsel or at an office of its transfer agent or at such other place or places
as may be designated from time to time by the Board of Directors.
SECTION 7. Amendment of By-laws.
--------------------
(a) Amendment by Directors. Except as provided otherwise by law, these
----------------------
By-laws may be amended or repealed by the Board of Directors by the affirmative
vote of a majority of the directors then in office.
19
<PAGE>
(b) Amendment by Stockholders. These By-laws may be amended or repealed
-------------------------
at any Annual Meeting of stockholders, or special meeting of stockholders called
for such purpose, by the affirmative vote of at least two-thirds of the shares
present in person or represented by proxy at such meeting and entitled to vote
on such amendment or repeal, voting together as a single class; provided,
however, that if the Board of Directors recommends that stockholders approve
such amendment or repeal at such meeting of stockholders, such amendment or
repeal shall only require the affirmative vote of the majority of the shares
present in person or represented by proxy at such meeting and entitled to vote
on such amendment or repeal, voting together as a single class.
Adopted October 15, 1996 and effective as of October 15, 1996.
20
<PAGE>
DATA TRANSLATION, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFICATE IS TRANSFERABLE IN BOSTON, MASSACHUSETTS AND
IN NEW YORK, NEW YORK
NUMBER SHARES
COMMON STOCK SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP 238016 10 9
THIS IS TO CERTIFY THAT:
is the owner of
fully paid and non-assessable share of COMMON STOCK, $.01 par value, of
DATA TRANSLATION, INC.
CERTIFICATE OF STOCK
transferable only on the books of the Corporation by the holder hereof in person
or by duly authorized attorney upon surrender of the Certificate properly
endorsed. This Certificate and the shares represented hereby are issued under
and subject to the laws of the State of Delaware to the Certificate of
Incorporation and By-Laws of the Corporation, all as in effect from time to
time. The Certificate is not valid until 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/ Gary B. Godin /s/ Alfred A. Molinari, Jr.
TREASURER PRESIDENT
COUNTERSIGNED AND REGISTERED:
BOSTON EQUISERVE, L.P.
TRANSFER AGENT
AND REGISTRAR
BY:
AUTHORIZED SIGNATURE
<PAGE>
DATA TRANSLATION, INC.
The Corporation is authorized to issue more than one class of stock. The
Corporation will furnish without charge to each stockholder who requests a copy
of the powers, designations, preferences and relative, participating, optional,
or other special rights of each outstanding class of stock or series thereof of
the Corporation, and the qualifications, limitations or restrictions of such
preferences and/or rights.
DATA TRANSLATION, INC.
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
JT TEN - As joint tenants with right of Act ________________
survivorship and not as tenants (State)
in common
</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 capital 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 name Company with full power of substitution in the
premises.
Dated ______________________
_______________________________________________
THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE
NOTICE: FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER.
SIGNATURE GUARANTEE: ______________________________________________
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>
Exhibit 10.1
FORM OF
DISTRIBUTION AGREEMENT
----------------------
This Agreement is dated as of , 1996, between Data Translation, Inc., a
Delaware corporation ("Parent"), and Data Translation II, Inc., a Delaware
corporation ("Sub") and a wholly owned subsidiary of Parent.
WHEREAS, Parent has, among other endeavors, been engaged in (i) the design,
development, manufacture and sale of products in its data acquisition and
imaging and commercial products businesses and (ii) the distribution of
networking products in the United Kingdom through its wholly owned subsidiary
Data Translation Networking Limited (collectively, the "Contributed
Businesses"); and
WHEREAS, the Board of Directors of Parent has determined that the interests of
Parent's businesses and stockholders would be best served by separating its
businesses into two companies, one consisting of the Contributed Businesses and
the other consisting of Parent's Media 100 digital media business (the "Retained
Business"); and
WHEREAS, in furtherance of the foregoing, Parent wishes to transfer and assign
to Sub substantially all of the assets and properties of the Contributed
Businesses specified in this Agreement in exchange for (i) the assumption by Sub
of substantially all of the liabilities and obligations relating to the
Contributed Businesses specified in this Agreement and (ii) the issuance to
Parent of shares of its common stock, par value $.01 per share (the "Sub Common
Stock"); and
WHEREAS, Sub is willing to assume such liabilities and obligations and to issue
such shares of Sub to Parent in exchange for such assets and properties; and
WHEREAS, Parent intends to distribute all of the outstanding shares of Sub
Common Stock, on a pro rata basis, to the holders of the common stock of Parent,
par value $.01 per share (the "Parent Common Stock") (such distribution
hereinafter referred to as the "Distribution"); and
WHEREAS, in connection with the Distribution, Media 100 Inc., a wholly owned
subsidiary of Parent, will merge with and into Parent, with Parent being the
surviving corporation and assuming all the rights and obligations of Media 100
Inc. in accordance with Section 253 of the General Corporation Law of the State
of Delaware and, as a result of such merger, the name of Parent will be changed
to Media 100 Inc.; and
WHEREAS, as promptly as practicable following the foregoing merger, Sub will
change its name to "Data Translation, Inc."; and
WHEREAS, Parent and Sub have determined that it is necessary and desirable to
set forth the principal corporate transactions required to effect the
Distribution and to set forth other agreements that will govern certain other
matters in connection with the Distribution;
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and the other agreements and
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
Section 1 DEFINITIONS.
-----------
Section 1.1 General. As used in this Agreement, capitalized terms defined
-------
immediately after their use shall have the respective meanings thereby provided
and the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):
Action: any action, claim, suit, arbitration, inquiry, subpoena, discovery
- ------
request, proceeding or investigation by or before any court or grand jury, any
governmental or other regulatory or administrative agency or commission or any
arbitration tribunal.
Adjusted Options: shall have the meaning set forth in Section 8.7.1 hereof.
- ----------------
Adjustment: any proposed or final change in any Pre-Distribution Income Tax
- ----------
Liabilities (whether creating a tax benefit or tax detriment) initiated by the
IRS or any other relevant taxing authority.
Affiliate: with respect to any specified person or entity, a person or entity
- ---------
that, directly or indirectly, through one or more intermediaries, controls, or
is controlled by, or is under the common control with, such specified person or
entity; provided, however, that Parent and Sub shall not be deemed to be
Affiliates of each other for purposes of this Agreement.
Affiliated Group: an affiliated group of corporations within the meaning of
- ----------------
Code section 1504(a) for the taxable period in question.
Agent: Boston EquiServe Limited Partnership, the distribution agent appointed by
- -----
Parent to distribute shares of Sub Common Stock pursuant to the Distribution.
Assumed Liabilities: collectively, all of the Liabilities and other obligations
- -------------------
of Parent listed on Annex II hereto.
--------
Bids, Quotations and Proposals: the bids, quotations or proposals which have
- ------------------------------
been submitted or made by the Contributed Businesses, or Parent on behalf of the
Contributed Businesses, which are outstanding as of the Distribution Date.
Books and Records: the books and records of Parent (or true and complete copies
- -----------------
thereof), including all computerized books and records owned by Parent, which
relate principally to the Contributed Businesses, including without limitation
all such books and records relating to Transferred Employees, the purchase of
materials, supplies and services, the manufacture and sale of products by the
Contributed Businesses or dealings with customers of the Contributed Businesses
and all files relating to any Action being assumed by Sub as part of the Assumed
Liabilities.
2
<PAGE>
Carryback Item: any net operating loss, net capital loss, unused general
- --------------
business tax credit, or any other Tax Item of the Sub Affiliated Group which
under the Code or any other applicable Income Tax law can be used to generate a
tax benefit for the Parent Affiliated Group.
Cash Amount: an amount of cash and cash equivalents equal to $10,000,000,
- -----------
increased by the sum of cash generated, or decreased by the sum of cash used, as
the case may be, during the period from September 1, 1996 through the
Distribution Date, by the Contributed Businesses by operations, investing
activities, and the effect of exchange rate changes on cash in accordance with
generally accepted accounting principles consistent with the guidance of
Statement of Financial Accounting Standards ("SFAS") No. 95, increased by fifty
percent (50%) of the amount of DTN Expenses paid by Parent prior to the
Distribution Date, and decreased by the net proceeds paid to Data Translation
Ltd. and Data Translation GmbH in connection with the transfers provided for in
Section 2.3 hereof.
COBRA: the Consolidated Omnibus Budget Reconciliation Act of 1985.
- -----
Code: the Internal Revenue Code of 1986, as amended.
- ----
Contributed Assets: collectively, all of the assets and properties of Parent
- ------------------
identified on Annex I hereto.
-------
Contributed Businesses: the businesses referred to as such in the first WHEREAS
- ----------------------
clause of this Agreement.
Conveyancing and Assumption Instruments: collectively, the various agreements,
- ---------------------------------------
instruments and other documents to be entered into in order to effect the
transfer to Sub of the Contributed Assets, and the assumption by Sub of the
Assumed Liabilities in the manner contemplated by this Agreement.
Corporate Services Agreement: the Corporate Services Agreement, substantially
- ----------------------------
in the form of Exhibit A hereto, pursuant to which Sub will provide to Parent
---------
certain corporate services specified therein.
Disclosing party: shall have the meaning set forth in Section 7.5.2 hereof.
- ----------------
Dispute: shall have the meaning set forth in Section 10.1 hereof.
- -------
Distribution: the distribution as a dividend to holders of Parent Common Stock
- ------------
of Sub Common Stock on the basis provided in Section 4.1 hereof, which shall be
effective on the Distribution Date.
Distribution Date: the date as of which the Distribution shall be effected as
- -----------------
determined by Parent's Board of Directors.
DTN Expenses: shall have the meaning set forth in Section 6.11 hereof.
- ------------
Establishment Date: shall have the meaning set forth in Section 8.2.1 hereof.
- ------------------
3
<PAGE>
Event of Loss: the incurrence by Parent or any member of the Parent Affiliated
- -------------
Group of any liability for Income Tax as a result of the failure of the
Distribution to qualify as a transaction described in Code section 355.
Final Determination: the final resolution of any tax liability (including all
- -------------------
related interest and penalties) for a taxable period. A Final Determination
shall result from the first to occur of: (a) the expiration of thirty (30) days
after the official IRS acceptance of a Waiver of Restrictions on Assessment and
Collection of Deficiency in Tax and Acceptance of Overassessment on Federal
Revenue Form 870 or 870-AD (or any successor comparable form or the expiration
of a comparable period with respect to any comparable agreement or form under
the laws of other jurisdictions), unless, within such period, the taxpayer gives
notice to the other party of the taxpayer's intention to attempt to recover all
or part of any amount paid pursuant to the Waiver by the filing of a timely
claim for refund; (b) a decision, judgment, decree or other order by a court of
competent jurisdiction with respect to any tax liability that is not subject to
further judicial review (by appeal or otherwise) has become final; (c) the
execution of a closing agreement under section 7121 of the Code or the official
acceptance by the IRS of an offer in compromise under section 7122 of the Code,
or comparable agreements under the laws of other jurisdictions; (d) the
expiration of the time for filing a claim for refund or for instituting suit in
respect of a claim for refund disallowed in whole or part by the IRS; (e) any
other final disposition of the tax liability for such period by reason of the
expiration of the applicable statute of limitations; or (f) any other event that
the parties agree is a final and irrevocable determination of the liability at
issue.
Form 10: the registration statement on Form 10 filed by Sub with the Securities
- -------
and Exchange Commission to effect the registration of the Sub Common Stock
pursuant to the Securities Exchange Act of 1934, as amended.
Income Taxes: all Federal, state and local taxes imposed upon, or measured by,
- ------------
income and such related franchise, excise and similar taxes as have been
customarily included in the provision for income taxes on Parent's financial
statements, together with all related interest, penalties and additions to tax.
Indemnifiable Losses: with respect to any claim by an Indemnified Party for
- --------------------
indemnification authorized pursuant to Section 5 hereof, any and all losses,
liabilities, claims, damages, obligations, payments, costs and expenses
(including without limitation the costs and expenses of any and all Actions,
demands, assessments, judgments, settlements and compromises relating thereto
and reasonable attorneys' fees and disbursements in connection therewith)
suffered by such Indemnified Party with respect to such claim.
Indemnified Party: any person or entity who is entitled to receive payment from
- -----------------
an Indemnifying Party pursuant to Section 5 hereof.
Indemnifying Party: any party who is required to pay any other person or entity
- ------------------
pursuant to Section 5 hereof.
4
<PAGE>
Indemnity Payment: the amount an Indemnifying Party is required to pay an
- -----------------
Indemnified Party pursuant to Section 5 hereof.
Information: shall have the meaning set forth in Section 7.2 hereof.
- -----------
Information Statement: the information statement to be sent to the holders of
- ---------------------
Parent Common Stock in connection with the Distribution.
Insurance Proceeds: those monies received by an insured from an insurance
- ------------------
carrier or paid by an insurance carrier on behalf of the insured.
Intellectual Property Agreement: the Intellectual Property Agreement,
- -------------------------------
substantially in the form of Exhibit B hereto, pursuant to which Parent and Sub
---------
are providing for certain matters involving intellectual property.
IRS: the United States Internal Revenue Service or any successor thereto,
- ---
including, but not limited to, its agents, representatives and attorneys.
Liabilities: any and all debts, liabilities and obligations, whether or not
- -----------
accrued, contingent (known or unknown) or reflected on a balance sheet,
including without limitation those arising under any law, rule, regulation,
Action, order or consent decree of any governmental entity or any judgment of
any court of any kind or any award of any arbitrator of any kind, and those
arising under any contract, commitment or undertaking.
Other Taxes: all taxes (including all related interest and penalties) other
- -----------
than Income Taxes or Transfer Taxes.
Parent Adjustment Options: Parent Stock Options as adjusted as set forth in
- -------------------------
Section 8.7.1 hereof.
Parent Affiliated Group: for each taxable period, the Affiliated Group of which
- -----------------------
Parent or any successor of Parent is the common parent.
Parent Assets: all assets held by any member of the Parent Group, or a direct or
- -------------
indirect foreign subsidiary of any such member, immediately after the
Distribution Date.
Parent Common Stock: the common stock of Parent, par value $.01 per share.
- -------------------
Parent Group: with respect to any taxable period, the corporations that were
- ------------
members of the Parent Affiliated Group during such period, exclusive of the
corporations that are included in the Sub Affiliated Group immediately after the
Distribution Date.
Parent Insurance Policies: all policies and contracts of any kind pursuant to
- -------------------------
which insurance carriers provide insurance coverage to Parent in respect of
claims or occurrences relating to, without limitation, property damage, business
interruption, transit, extended coverage, fiduciary liability, employee crime,
general liability, products
5
<PAGE>
liability, errors and omissions, automobile liability, employer's liability and
workers' compensation.
Parent Party: shall have the meaning set forth in Section 5.5 hereof.
- ------------
Parent Retirement Plan: shall have the meaning set forth in Section 8.2.1
- ----------------------
hereof.
Parent Stock Option Plans: Parent's Key Employee Incentive Plan (1982) and Key
- -------------------------
Employee Incentive Plan (1992).
Parent Stock Options: options to acquire Parent Common Stock granted under the
- --------------------
Parent Stock Option Plans, prior to adjustment as set forth in Section 8.7
hereof.
Pre-Distribution Income Tax Liabilities: the liability of members of the Parent
- ---------------------------------------
Affiliated Group for Income Taxes for all taxable periods beginning before the
day following the Distribution Date. A liability described in the previous
sentence is a Pre-Distribution Income Tax Liability whether the liability has
been previously assessed in whole or in part or is assessed in whole or in part
after the date of this Agreement, and whether the liability is or was imposed on
the Parent Affiliated Group collectively or on any member of the Parent
Affiliated Group separately.
Privilege: shall have the meaning set forth in Section 7.6.1 hereof.
- ---------
Privileged Information: shall have the meaning set forth in Section 7.6.1
- ----------------------
hereof.
Receiving party: shall have the meaning set forth in Section 7.5.2 hereof.
- ---------------
Record Date: the date determined by Parent's Board of Directors as the record
- -----------
date for the Distribution.
Related Agreements: the Conveyancing and Assumption Instruments, the Corporate
- ------------------
Services Agreement, the Intellectual Property Agreement and the Use and
Occupancy Agreement.
Retained Business: the business referred to as such in the second WHEREAS
- -----------------
clause of this Agreement.
Retained Liabilities: collectively, all of the Liabilities and obligations of
- --------------------
Parent listed on Annex III hereto.
---------
Retirement Plan Transfer Date: shall have the meaning set forth in Section
- -----------------------------
8.2.2 hereof.
Sale of Business Agreement: that certain Sale of Business Agreement made on
- --------------------------
November 11, 1996 among Data Translation Networking Limited, Parent, Applied
Training Limited and Specialist Computer Holdings Limited.
Securities Act: the Securities Act of 1933, as amended, and the rules and
- --------------
regulations promulgated thereunder.
6
<PAGE>
Sub Adjustment Options: options to purchase Sub Common Stock issued as part of
- ----------------------
an adjustment to Parent Stock Options as set forth in Section 8.7.1 hereof.
Sub Adjustment Stock Option Plan: a stock option plan, substantially in the
- --------------------------------
form of Exhibit C hereto, pursuant to which Sub will issue the Sub Adjustment
---------
Options.
Sub Affiliated Group: for each taxable period beginning after the Distribution
- --------------------
Date, the Affiliated Group of which Sub is the common parent, or if Sub is not
the common parent of an Affiliated Group, then Sub.
Sub Assets: all of the assets held by any member of the Sub Affiliated Group,
- ----------
or a direct or indirect foreign subsidiary of any such member, immediately after
the Distribution Date.
Sub Claims: any claim with respect to injury, loss, Liability, damage or
- ----------
expense that (a) is or was incurred or asserted by a third party to have
been incurred on or prior to the Distribution Date in, or in connection with,
the conduct of the Contributed Businesses or the operation of the Contributed
Assets and (b) arose or may have arisen out of one or more occurrences or events
that are or may be insured or insurable under one or more of Parent's Insurance
Policies.
Sub Common Stock: the common stock of Sub, par value $.01 per share.
- ----------------
Sub Party: shall have the meaning set forth in Section 5.5 hereof.
- ---------
Sub Retirement Plan: shall have the meaning set forth in Section 8.2.1 hereof.
- -------------------
Sub Welfare/Fringe Benefit Plans: shall have the meaning set forth in Section
- --------------------------------
8.3.1 hereof.
Tax Indemnitee: shall have the meaning set forth in Section 11.5.1.1 hereof.
- --------------
Tax Indemnitor: shall have the meaning set forth in Section 5.3.1.
- --------------
Third Party Claims: shall have the meaning set forth in Section 5.3.1 hereof.
- ------------------
Transaction Taxes: all U.S. and foreign taxes (including without limitation all
- -----------------
patent, copyright and trademark transfer taxes and recording fees, and all
interest and penalties related thereto), other than Income Taxes, incurred by
any member of the Parent Affiliated Group or the Sub Affiliated Group or any
direct or indirect foreign subsidiary of the foregoing to consummate the
transactions provided for in this Agreement; provided, however, Transaction
Taxes shall not include any costs (as determined in Section 6.11 hereof) or
taxes incurred in connection with Data Translation Networking Limited.
Transferred Employees: the employees of Parent listed on Schedule 1.1 hereof,
- --------------------- ------------
as such schedule shall be amended and updated as of the Distribution Date.
Use and Occupancy Agreement: the Use and Occupancy Agreement, substantially in
- ---------------------------
the form of Exhibit D hereto, relating to the continued use and occupancy of a
---------
portion of the facilities located at 100 Locke Drive, Marlboro, MA by Parent for
a transition period following the Distribution Date.
7
<PAGE>
Section 2 REORGANIZATION AND RELATED TRANSACTIONS.
---------------------------------------
Section 2.1 The Reorganization.
------------------
Section 2.1.1 Subject to the terms and conditions of this Agreement, Parent and
Sub shall use their respective best efforts to cause, on or prior to the
Distribution Date, (a) all of Parent's right, title and interest in and to the
Contributed Assets to be conveyed, assigned, transferred and delivered to Sub,
free and clear of all liens or encumbrances in favor of Parent and (b) all of
Parent's duties, obligations and responsibilities under the Assumed Liabilities
to be assumed by Sub.
Section 2.1.2 At the time of the contribution of the Contributed Assets to Sub
as provided in Section 2.1.1 hereof, Parent shall transfer to Sub an amount in
cash and cash equivalents (the "Interim Cash Amount") determined as if October
31, 1996 had been the Distribution Date for purposes of such determination. As
promptly as practicable after the Distribution Date (but in any event within
twenty (20) days following the Distribution Date), Parent and Sub shall jointly
determine, and shall cause Sub's independent public accountants, Arthur Andersen
LLP, to certify the Cash Amount. If the Interim Cash Amount is less than the
Cash Amount then Parent shall pay to Sub, within five business days after the
final determination of the Cash Amount, the full amount by which the Cash Amount
exceeds the Interim Cash Amount in cash or cash equivalents, without interest
thereon. If the Interim Cash Amount is greater than the Cash Amount then Sub
shall pay to Parent, within five business days after the final determination of
the Cash Amount, the full amount by which the Interim Cash Amount exceeds the
Cash Amount, in cash or cash equivalents, without interest thereon.
Section 2.1.3 Subject to Section 6.3 hereof, to the extent that any such
conveyances, assignments, transfers and deliveries shall not have been so
consummated on the Distribution Date, Parent and Sub shall cooperate to effect
such consummation as promptly thereafter as shall be practicable, it nonetheless
being understood and agreed by Parent and Sub that neither shall be liable in
any manner to any person who is not a party to this Agreement for any failure of
any of the transfers contemplated by this Section 2 to be consummated on or
subsequent to the Distribution Date. Whether or not all of the Contributed
Assets or the Assumed Liabilities shall have been legally transferred to Sub as
of the Distribution Date, Parent and Sub agree that, as of the Distribution
Date, Sub shall have, and shall be deemed to have acquired, complete and sole
beneficial ownership over all of the Contributed Assets, except as described
herein with respect to assets which are non-assignable, together with all of
Parent's rights, powers and privileges (except as
8
<PAGE>
provided in Section 7.6 hereof) incident thereto, and shall be deemed to have
assumed in accordance with the terms of this Agreement all of the Assumed
Liabilities and all of Parent's duties, obligations and responsibilities
incident thereto.
Section 2.1.4 In furtherance of the transfers and assumptions contemplated by
the foregoing Section 2.1.1 and subject to the terms of Section 5 hereof, Parent
and Sub, as between the two of them, acknowledge and agree as follows: (a)
Parent and its Affiliates shall have no obligation or liability of any kind to
Sub or its Affiliates for any condition existing at or prior to the Distribution
Date or for any conduct, act or omission by or on behalf of Parent, its
Affiliates or any other person on, or at any time prior to, the Distribution
Date, and Sub and its Affiliates shall have no claims, or right to bring a claim
or Action, against Parent or its Affiliates with respect thereto, including
without limitation any claim or Action arising out of (i) the operation of the
Contributed Businesses on or before the Distribution Date, (ii) any advice,
rights, products or services made available to the Contributed Businesses, on or
before the Distribution Date, by Parent, its Affiliates or any other person,
(iii) the Assumed Liabilities or (iv) the formation of Sub; except for, and to
the extent of, any responsibilities specifically retained by Parent or any of
its Affiliates pursuant to the terms of this Agreement or any of the Related
Agreements; and (b) Sub and its Affiliates shall have no obligation or liability
of any kind to Parent or its Affiliates for any condition existing at or prior
to the Distribution Date or for any conduct, act or omission by or on behalf of
Sub, its Affiliates or any other person on, or at any time prior to, the
Distribution Date, and Parent and its Affiliates shall have no claims, or right
to bring a claim or Action, against Sub or its Affiliates with respect thereto,
including without limitation any claim or Action arising out of (i) the
operation of the Retained Business on or before the Distribution Date, (ii) any
advice, rights, products or services made available to Parent or its Affiliates,
on or before the Distribution Date, by the Contributed Businesses or any other
person or (iii) the Retained Liabilities; except for, and to the extent of, any
responsibilities specifically assumed by Sub or any of its Affiliates pursuant
to the terms of this Agreement or any of the Related Agreements.
Section 2.2 Consideration. In consideration of the conveyance, assignment,
-------------
transfer and delivery of the Contributed Assets being made pursuant to Section
2.1 hereof, Sub agrees to assume the Assumed Liabilities and to issue and
deliver to the Agent for delivery to stockholders of Parent as of the Record
Date certificates representing the number of shares of Sub Common Stock provided
for in Section 4.1 hereof.
Section 2.3 Foreign Transfers. On or prior to the Distribution Date, (a) all
-----------------
of the assets and liabilities of Data Translation Ltd. and Data Translation GmbH
relating to the Retained Business will be transferred to newly-formed
corporations incorporated under the laws of the respective countries as
subsidiaries of Parent and (b) the stock of Data Translation Networking Limited,
Data Translation Ltd. and Data Translation GmbH will be contributed by Parent to
the capital of Sub.
Section 2.4 Parent Approval. Parent shall cooperate with Sub in effecting, and
---------------
if so requested by Sub, Parent shall, as the sole stockholder of Sub, approve or
ratify any
9
<PAGE>
actions which are reasonably necessary or desirable to be taken by Sub to
effectuate the transactions contemplated by this Agreement in a manner
consistent with the terms of this Agreement, including without limitation (a)
the election or appointment of directors and officers of Sub to serve in such
capacities following the Distribution Date and (b) the approval of appropriate
plans, agreements and arrangements for Transferred Employees and non-employee
members of Sub's board of directors (including without limitation plans,
agreements or arrangements pursuant to which Sub Common Stock would be acquired
by Transferred Employees).
Section 3 ASSUMPTION AND RETENTION OF LIABILITIES.
---------------------------------------
Section 3.1 Assumed Liabilities. Upon the terms and subject to the conditions
-------------------
set forth in this Agreement and in addition to any other Liabilities otherwise
expressly assumed by Sub pursuant to this Agreement, the Related Agreements or
any other agreement contemplated by this Agreement, Sub hereby agrees with
Parent to assume, pay, perform and discharge in due course any and all Assumed
Liabilities.
Section 3.2 Retained Liabilities. Upon the terms and subject to the conditions
--------------------
set forth in this Agreement and in addition to any other Liabilities otherwise
expressly retained by Parent pursuant to this Agreement, the Related Agreements
or any other agreement contemplated by this Agreement, Parent hereby agrees with
Sub that Parent shall pay, perform and discharge in due course any and all
Retained Liabilities.
Section 4 THE DISTRIBUTION.
----------------
Section 4.1 The Distribution. On the Distribution Date, Parent shall deliver
----------------
to the Agent the certificate for 100 shares of Sub Common Stock which were owned
by Parent prior to the Distribution. Upon receipt from Parent of a certificate
as to the number of shares of Parent Common Stock outstanding on the Record
Date, Sub shall deliver to the Agent, for the benefit of holders of record of
Parent Common Stock on the Record Date, a stock certificate representing, in the
aggregate (and rounded down to the nearest whole share), a number of shares
representing one share of Sub Common Stock for every 4 shares of Parent Common
Stock outstanding on the Record Date (less the 100 shares of Sub Common Stock
owned prior to the Distribution Date), and shall instruct the Agent to
distribute as promptly as practicable following the Distribution Date to holders
of record of Parent Common Stock on the Record Date one share of Sub Common
Stock for every 4 shares of Parent Common Stock and cash in lieu of fractional
shares of Sub Common Stock obtained in the manner provided in Section 4.2
hereof. Sub agrees to provide to the Agent sufficient certificates in such
denominations as the Agent may request in order to effect the Distribution. All
of the shares of Sub Common Stock issued in the Distribution shall be fully
paid, nonassessable and free of preemptive rights.
Section 4.2 Fractional Shares. No certificate or scrip representing fractional
-----------------
shares of Sub Common Stock shall be issued as part of the Distribution and in
lieu of receiving fractional shares, each holder of Parent Common Stock who
would otherwise be entitled to receive a fractional share of Sub Common Stock
pursuant to the Distribution will
10
<PAGE>
receive cash for such fractional share. Parent and Sub agree that Parent shall
instruct the Agent to determine the number of whole shares and fractional shares
of Sub Common Stock allocable to each holder of record of Parent Common Stock as
of the Record Date, to aggregate all such fractional shares into whole shares
and to sell the whole shares obtained thereby in the open market at then
prevailing prices on behalf of holders who otherwise would be entitled to
receive fractional share interests and to distribute to each such holder such
holder's ratable share of the total proceeds of such sales (net of any
commissions incurred in connection with such sales), net of any amount required
to be withheld under applicable law.
Section 4.3 Parent Board Action.
-------------------
Section 4.3.1 This Agreement and the Related Agreements have been approved by
the Board of Directors of Parent and the consummation of the transactions
provided for herein or therein shall only be effected after the Distribution has
been declared by the Board of Directors of Parent and the satisfaction of any
other conditions as determined by the Board of Directors of Parent.
Section 4.3.2 The Board of Directors of Parent, in its discretion, shall
establish the Record Date and the Distribution Date and all appropriate
procedures to be followed by Parent's stockholders in connection with the
Distribution.
Section 5 SURVIVAL, INDEMNIFICATION, CLAIMS AND OTHER MATTERS.
---------------------------------------------------
Section 5.1 Survival of Agreements.
----------------------
Section 5.1.1 All covenants and agreements of the parties in this Agreement
shall survive the Distribution Date.
Section 5.1.2 Except as specifically provided herein, the provisions of this
Section 5 shall terminate and be of no further force and effect on the tenth
anniversary of the Distribution Date. Such termination shall in no way limit
the obligations of Sub with respect to the Assumed Liabilities or the
obligations of Parent with respect to the Retained Liabilities and related
indemnification rights under this Agreement, which shall survive indefinitely.
Section 5.1.3 The obligations under Sections 5, 6, 7 and 11 of this Agreement
of Sub and Parent shall survive the sale or other transfer by either of them of
any assets or businesses or the assignment by either of them of any Liabilities.
To the extent that Parent transfers to another party any of its Retained
Liabilities (except for such amounts of Retained Liabilities which in any
individual instance are not material), Parent shall cause such transferee of
such Retained Liabilities to assume specifically its obligations with respect
thereto under this Agreement and to fulfill its obligations related to such
Retained Liabilities. To the extent Sub transfers to another party any of the
Assumed Liabilities (except for such amounts of Assumed Liabilities which in any
individual
11
<PAGE>
instance are not material), Sub shall cause such transferee to assume
specifically its obligations with respect thereto under this Agreement and to
fulfill its obligations related to such Assumed Liabilities. The failure of the
transferee to fulfill its obligations with respect to the Retained Liabilities
or the Assumed Liabilities shall not relieve Parent or Sub, as the case may be,
of its obligations hereunder with respect thereto.
Section 5.2 Indemnification.
---------------
Section 5.2.1 Parent shall indemnify, defend and hold harmless Sub, each of its
directors, officers, employees and agents and each Affiliate of Sub from and
against any and all Indemnifiable Losses of Sub or any of its Affiliates arising
out of or due to, directly or indirectly, (a) any Third Party Claims in
connection with any of the Retained Liabilities, (b) Third Party Claims that the
information included in the Information Statement or the Form 10 under the
captions set forth on Schedule 5.2.1 hereto is false or misleading with respect
--------------
to any 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 under which they were made, not misleading, (c) Third Party Claims
that Parent or its Affiliates failed to perform, or violated, any provision of
this Agreement which is to be performed or complied with by Parent or its
Affiliates or (d) breaches of this Agreement by Parent or its Affiliates.
Section 5.2.2 Sub shall indemnify, defend and hold harmless Parent, each of its
directors, officers, employees and agents and each Affiliate of Parent from and
against any and all Indemnifiable Losses of Parent or any of its Affiliates
arising out of or due to, directly or indirectly, (a) any Third Party Claims in
connection with any of the Assumed Liabilities, (b) Third Party Claims that the
information included in the Information Statement or the Form 10 under the
captions set forth on Schedule 5.2.2 hereto is false or misleading with respect
--------------
to any 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 under which they were made, not misleading, (c) Third Party Claims
that Sub or its Affiliates failed to perform, or violated, any provision of this
Agreement which is to be performed or complied with by Sub or its Affiliates,
(d) breaches of this Agreement by Sub or its Affiliates, (e) subject to Section
6.11 hereof, claims or obligations in connection with the winding down of the
business and affairs of Data Translation Networking Limited, including without
limitation claims or obligations related to or arising out of the Sale of
Business Agreement and the transactions contemplated thereby (excluding any
breach by Parent or its Affiliates of Parent's covenants set forth in clause 12
of such agreement) or (f) subject to Section 6.11 hereof, any guarantees or
similar undertakings which may have been granted prior to the Distribution Date
on behalf of Sub or one of its Affiliates or for the benefit of the Contributed
Businesses.
Section 5.2.3 Amounts required to be paid pursuant to this Section 5 are
hereinafter sometimes collectively called "Indemnity Payments" and are
individually called an "Indemnity Payment." The amount by which any party (an
"Indemnifying Party") is required to pay to any other party (an "Indemnified
Party") pursuant to Section 5.2.1 or Section 5.2.2 shall be reduced (including
retroactively) by any insurance proceeds or
12
<PAGE>
other amounts actually recovered by such Indemnified Party in reduction of the
related Indemnifiable Loss. If an Indemnified Party shall have received an
Indemnity Payment in respect of an Indemnifiable Loss and shall subsequently
actually receive insurance proceeds or other amounts (such as judgment or
settlement amounts) in respect of such Indemnifiable Loss, then such Indemnified
Party shall pay to such Indemnifying Party a sum equal to the lesser of the
amount of such insurance proceeds or other amounts actually received or the net
amount of Indemnity Payments actually received previously. The Indemnified Party
agrees that the Indemnifying Party shall be subrogated to such Indemnified Party
under any insurance policy.
Section 5.2.4 PARENT'S AND SUB'S RESPECTIVE OBLIGATIONS PURSUANT TO SECTION
5.2.1(d) AND SECTION 5.2.2(d) SHALL BE LIMITED TO DIRECT AND ACTUAL DAMAGES, TO
THE EXCLUSION OF INCIDENTAL, CONSEQUENTIAL OR SPECIAL DAMAGES. THIS SECTION
5.2.4 SHALL NOT APPLY TO (a) ANY FAILURE BY SUB OR ITS AFFILIATES TO ASSUME,
PAY, PERFORM OR DISCHARGE ANY AND ALL ASSUMED LIABILITIES OR (b) ANY FAILURE BY
PARENT OR ITS AFFILIATES TO PAY, PERFORM OR DISCHARGE ANY AND ALL RETAINED
LIABILITIES OR (c) ANY BREACH BY PARENT OR SUB OF THEIR RESPECTIVE INDEMNITY
OBLIGATIONS UNDER THIS AGREEMENT, INCLUDING THE INDEMNITY OBLIGATIONS SET FORTH
IN THIS SECTION 5.
Section 5.2.5 Indemnification obligations contained elsewhere in this Agreement
shall be subject to the provisions of this Section 5.
Section 5.3 Procedure for Indemnification of Third Party Claims.
---------------------------------------------------
Section 5.3.1 If either party shall receive notice of any claim or Action
brought, asserted, commenced or pursued by any person or entity not a party to
this Agreement (herein referred to as a "Third Party Claim"), with respect to
which the other party is or may be obligated to make an Indemnity Payment, it
shall give such other party prompt written notice thereof (including any
pleadings relating thereto) after becoming aware of such Third Party Claim,
specifying in reasonable detail the nature of the Third Party Claim and the
amount or estimated amount thereof to the extent then feasible (which estimate
shall not be conclusive of the final amount of such claim); provided, however,
that the failure of a party to give notice as provided in this Section 5.3.1
shall not relieve the other party of its indemnification obligations under this
Section 5, except to the extent that such other party is actually prejudiced by
such failure to give notice.
Section 5.3.2 The Indemnifying Party may elect to defend or seek to settle or
compromise any Third Party claim as to which a claim for indemnification
hereunder has been asserted, at the Indemnifying Party's own expense and by
counsel selected by the Indemnifying Party and reasonably acceptable to the
Indemnified Party, by so notifying the Indemnified Party within thirty (30) days
after the Indemnified Party has given notice of the Third Party Claim in
accordance with Section 5.3.1 hereof (or such earlier time as may be necessary
for the Indemnified Party to submit a responsive pleading required in
13
<PAGE>
connection with the Third Party Claim). Unless the Indemnifying Party fails to
assume the defense or to seek to settle or compromise the Third Party Claim in a
timely manner, the Indemnifying Party shall not be liable to the Indemnified
Party for any legal or other expenses subsequently incurred by the Indemnified
Party in connection with the defense, settlement or compromise of the Third
Party Claim; provided, however, that if, in the reasonable judgment of the
Indemnified Party, based on the advice of counsel, a conflict of interest
between the Indemnified Party and the Indemnifying Party exists with respect to
the Third Party Claim, the Indemnified Party shall have the right to employ one
counsel selected by it and reasonably acceptable to the Indemnifying Party, and
in that event, the reasonable fees and expenses of such separate counsel shall
be paid by the Indemnifying Party. Once the Indemnifying Party has assumed the
defense of any Third Party Claim, it must actively and diligently defend or seek
to settle or compromise the Third Party Claim until conclusion of the matter,
unless the Indemnified Party agrees to the Indemnifying Party's withdrawal.
Section 5.3.3 If the Indemnifying Party responds to a notice of Third Party
Claim by denying its obligation to indemnify the person or entity claiming a
right of defense and indemnification under this Agreement, or if the
Indemnifying Party fails to defend in a timely manner, the Indemnified Party
shall be entitled to defend or seek to settle or compromise such Third Party
Claim by counsel selected by it. In addition, if it is later determined,
through procedures referenced in Section 10 of this Agreement, or by agreement
of the parties, that the Indemnifying Party wrongly denied its indemnification
obligation with respect to, or failed to timely defend, such claim, then the
Indemnifying Party shall (a) reimburse the Indemnified Party for all costs and
expenses (other than salaries of officers and employees) reasonably incurred by
the Indemnified Party in connection with its defense, settlement or compromise
of the Third Party Claim and (b) be estopped from challenging a judgment, order,
settlement or compromise resolving the Third Party Claim entered into in good
faith by the Indemnified Party (if such claim has been resolved prior to the
conclusion of the proceeding between the Indemnified Party and the Indemnifying
Party). The Indemnifying Party, after initially rejecting a claim for defense
or indemnification by the Indemnified Party, may, at any time prior to the
resolution of the Third Party Claim, assume the defense of, or seek to settle or
compromise said claim, provided that (i) the Indemnifying Party reimburses the
Indemnified Party for all costs and expenses (other than salaries of officers
and employees) reasonably incurred by the Indemnified Party in connection with
the defense of such claim (including costs incurred in the transition of the
defense from the Indemnified Party to the Indemnifying Party) and (ii) the
assumption of the defense of the Third Party Claim will not prejudice or cause
harm to the Indemnified Party.
Section 5.3.4 With respect to any Third Party Claim relating to any matter
subject to a claim for indemnification hereunder, no party shall enter into any
compromise or settlement or consent to the entry of any judgment which (a) does
not include as a term thereof the giving by the third party of a release to the
Indemnified Party of all further liability in respect of such Third Party Claim
or (b) imposes any obligation on the Indemnified Party without said Indemnified
Party's written consent (which consent shall not be unreasonably withheld),
except an obligation to pay money which the
14
<PAGE>
Indemnifying Party has agreed to pay on behalf of the Indemnified Party. In the
event that an Indemnified Party enters into any such compromise, settlement or
consent without the written consent of the Indemnifying Party (other than as
contemplated by Section 5.3.3 hereof), the entry of such compromise, settlement
or consent shall relieve the Indemnifying Party of its indemnification
obligation related to the Third Party Claim underlying such compromise,
settlement or consent.
Section 5.3.5 Upon final judgment, determination, settlement or compromise of
any Third Party Claim, and unless otherwise agreed to by the parties in writing,
the Indemnifying Party shall pay promptly on behalf of the Indemnified Party, or
to the Indemnified Party in reimbursement of any amount theretofore required to
be paid by it, the amount so determined by final judgment, determination,
settlement or compromise. Upon the payment in full by the Indemnifying Party of
such amount, the Indemnifying Party shall succeed to the rights of such
Indemnified Party to the extent not waived in settlement, against the third
party who made such Third Party Claim and any other person who may have been
liable to the Indemnified Party with respect to the indemnified matter.
Section 5.3.6 If the Indemnifying Party elects to defend or to seek to settle
or compromise the Third Party Claim, the Indemnified Party shall make available
to the Indemnifying Party any personnel or any books, records or other documents
within its control or which it otherwise has the ability to make available that
are necessary or appropriate for such defense, settlement or compromise, and
shall otherwise cooperate in the defense, settlement or compromise of the Third
Party Claim; provided, however, that nothing in this Section 5.3.6 shall be
deemed to require the waiver of any privilege, including attorney-client
privilege, or protection afforded by the attorney work product doctrine. In
addition, regardless of the party actually defending a Third Party Claim for
which there is an indemnity obligation under Section 5.2 hereof, the parties
shall give each other regular status reports relating to such action with detail
sufficient to permit the other party to assert and protect its rights and
obligations under this Agreement.
Section 5.3.7 The provisions of this Section 5.3 shall survive in perpetuity
and shall be the exclusive procedures for any Third Party Claims subject to the
provisions of Section 5.2.1 or 5.2.2 hereof.
Section 5.4 Other Claims. Any claim on account of an Indemnifiable Loss which
------------
does not result from a Third Party Claim shall be asserted by written notice
from the Indemnified Party to the Indemnifying Party. The Indemnifying Party
shall have a period of sixty (60) days (or such shorter time period as may be
required by law as indicated by the Indemnified Party in the written notice)
within which to respond. If the Indemnifying Party does not respond within such
sixty (60) day (or lesser) period, the Indemnifying Party shall be deemed to
have accepted responsibility to make payment and shall have no further right to
contest the validity of such claim. If the Indemnifying Party does respond
within such sixty (60) day (or lesser) period and rejects such claim in whole or
in part, the Indemnified Party shall be free to pursue resolution of the matter
as provided in Section 10 hereof.
15
<PAGE>
Section 5.5 Certain Losses. If the indemnification provided for in Section 5.2
--------------
is unavailable to an Indemnified Party in respect of any Indemnifiable Loss
arising out of or related to information contained in the Information Statement
of the Form 10, then the Indemnifying Party, in lieu of indemnifying the
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Indemnifiable Loss, in such proportion as
is appropriate to reflect the relative fault of Sub, each of its directors, each
of its officers who have signed any registration statement and each Affiliate of
Sub (a "Sub Party") on the one hand and Parent and each Affiliate of Parent (a
"Parent Party") on the other hand in connection with the statements or omissions
which resulted in such Indemnifiable Loss. The relative fault of a Sub Party on
the one hand and of a Parent Party on the other hand 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 a Sub Party on the one hand or a Parent Party
on the other hand.
Section 5.6 No Beneficiaries. Except to the extent expressly provided
----------------
otherwise in this Section 5, the indemnification provided for by this Section 5
shall not inure to the benefit of any third party or parties and shall not
relieve any insurer who would otherwise be obligated to pay any claim of the
responsibility with respect thereto or, solely by virtue of the indemnification
provisions hereof, provide any subrogation rights with respect thereto and each
party agrees to waive such rights against the other to the fullest extent
permitted.
Section 5.7 Named Parties. The parties hereto acknowledge that it may not be
-------------
feasible to substitute Sub (or one of its Affiliates) for Parent (or one of its
Affiliates) as a named party in Actions, whether domestic or foreign,
constituting Assumed Liabilities. In such event, Parent (or one of its
Affiliates) shall remain as a named party, but, following the Distribution Date,
Sub (or one of its Affiliates) shall assume the defense of any such Action in
accordance with the provisions of Section 5.3 hereof and Parent and its
Affiliates shall cooperate with Sub as contemplated by Section 5.3 and Section 7
hereof. Parent shall as promptly as practicable seek to have its name changed
to "Media 100 Inc." in all Actions, whether domestic or foreign, constituting
Retained Liabilities.
Section 6 CERTAIN ADDITIONAL MATTERS.
--------------------------
Section 6.1 Conveyancing and Assumption Instruments. In connection with the
---------------------------------------
transfer, conveyance, assignment and delivery of the Contributed Assets and the
assumption of the Assumed Liabilities contemplated by this Agreement, Parent and
Sub agree to execute or cause to be executed by the appropriate parties and to
deliver to each other, as appropriate, the Conveyancing and Assumption
Instruments.
Section 6.2 No Representations or Warranties. Except as provided in Section
--------------------------------
2.1 hereof, Sub understands and agrees that Parent is not in this Agreement or
in any other agreement or document contemplated by this Agreement, representing
or warranting in any way (a) as to the value or freedom from encumbrance of, or
as to any other matter concerning, any Contributed Assets or (b) as to the legal
sufficiency to convey title to any
16
<PAGE>
Contributed Assets of the execution, delivery and filing of the Conveyancing
Instruments, IT BEING UNDERSTOOD THAT ALL SUCH ASSETS ARE BEING TRANSFERRED "AS
IS, WHERE IS" and without any representation or warranty of any kind, express or
implied (the implied warranties of merchantability and fitness for a particular
purpose being hereby specifically disclaimed), and that Sub shall bear the
economic and legal risk that any conveyance of such assets shall prove to be
insufficient or that Sub's title to any such assets shall be other than good and
marketable and free from encumbrances. Similarly, Sub understands and agrees
that Parent is not in this Agreement or in any other agreement or document
contemplated by this Agreement representing or warranting in any way that the
obtaining of the consents or approvals, the execution and delivery of any
amendatory agreements and the making of the filings and applications
contemplated by this Agreement shall satisfy the provisions of all applicable
laws or judgments, it being understood and agreed that, subject to Section 6.3
hereof, Sub shall bear the economic and legal risk that any necessary consents
or approvals are not obtained or that any requirements of law or judgments are
not complied with. The foregoing, however, shall not limit any responsibilities
which Parent may have to use its commercially reasonable efforts to effect
transfers under the other provisions of this Agreement.
Section 6.3 Further Assurances; Subsequent Transfers.
----------------------------------------
Section 6.3.1 Each of Parent and Sub will execute and deliver such further
instruments of conveyance, transfer and assignment and will take such other
actions as each of them may reasonably request of the other in order to
effectuate the purposes of this Agreement and to carry out the terms hereof.
Without limiting the generality of the foregoing, at any time and from time to
time after the Distribution Date, at the request of Sub and without the payment
of any further consideration, Parent will execute and deliver to Sub such other
instruments of transfer, conveyance, assignment and confirmation and take such
action as Sub may reasonably deem necessary or desirable in order to more
effectively transfer, convey and assign to Sub and to confirm Sub's title to all
of the Contributed Assets, to put Sub in actual possession and operating control
thereof and to permit Sub to exercise all rights with respect thereto (including
without limitation rights under contracts and other arrangements as to which the
consent of any third party to the transfer thereof shall not have previously
been obtained) and Sub will execute and deliver to Parent all instruments,
undertakings or other documents and take such other action as Parent may
reasonably deem necessary or desirable in order to have Sub fully assume and
discharge the Assumed Liabilities and relieve Parent of any Liability or
obligations with respect thereto and evidence the same to third parties.
Notwithstanding the foregoing, Parent and Sub shall not be obligated, in
connection with the foregoing, to expend monies other than reasonable out-of-
pocket expenses and attorneys' fees.
Section 6.3.2 Parent and Sub will use their best efforts to obtain any consent,
approval or amendment required to novate and/or assign all agreements, leases,
licenses and other rights of any nature whatsoever relating to the Contributed
Assets to Sub; provided, however, that Parent shall not be obligated to pay any
consideration therefor (except for filing fees and other administrative charges)
to the third party from whom such consents, approvals and amendments are
requested. In the event and to the extent that Parent is
17
<PAGE>
unable to obtain any such required consent, approval or amendment, (a) Parent
shall continue to be bound thereby and (b) unless not permitted by law or the
terms thereof, Sub shall pay, perform and discharge fully all the obligations of
Parent thereunder from and after the Distribution Date and indemnify Parent for
all Indemnifiable Losses arising out of such performance by Sub. Parent shall,
without the payment of any further consideration, pay and remit to Sub promptly
any monies, rights and other considerations received in respect of such
performance. Parent shall exercise or exploit its rights and options under all
such agreements, leases, licenses and other rights and commitments referred to
in this Section 6.3.2 only as reasonably directed by Sub and at Sub's expense.
If and when any such consent shall be obtained or such agreement, lease, license
or other right shall otherwise become assignable or able to be novated, Parent
shall promptly assign and novate all its rights and obligations thereunder to
Sub without payment of further consideration and Sub shall, without the payment
of any further consideration, assume such rights and obligations. To the extent
that the assignment of any contract or agreement (or their proceeds) pursuant to
this Section 6.3 is prohibited by law or not otherwise obtained, the assignment
provisions of this Section shall operate to create a subcontract with Sub to
perform each relevant unassignable Parent contract at a subcontract price equal
to the monies, rights and other considerations received by Parent with respect
to the performance by Sub under such subcontract.
Section 6.3.3 All Bids, Quotations and Proposals included in the Contributed
Assets shall be transferred to Sub to the extent permitted by law. Parent and
Sub shall work together and use their best efforts to preserve such Bids,
Quotations and Proposals and facilitate the award of contracts pursuant thereto
consistent with applicable laws and regulations. Any contracts awarded pursuant
to an outstanding Bid, Quotation or Proposal shall be considered an agreement
and treated in the same manner as provided for in the last two sentences of
Section 6.3.2 hereof.
Section 6.4 Sub Officers and Directors. Sub and Parent shall take all actions
--------------------------
which may be required to elect or otherwise appoint, as of the Distribution
Date, those individuals designated in the Information Statement to be directors
or officers of Sub.
Section 6.5 Resignations. On or prior to the Distribution Date, Parent shall
------------
cause all directors and officers of Parent who are not designated in the
Information Statement to be directors or officers of Sub following the
Distribution Date to resign from their position as a director or officer of Sub.
Section 6.6 Change of Name. Immediately following the Distribution, Media 100
--------------
Inc. shall be merged with and into Parent in accordance with, and with the
effects set forth in, Section 253 of the General Corporation Law of the State of
Delaware, and as a result of such merger, the name of Parent shall be changed to
"Media 100 Inc." As promptly as practicable following the foregoing merger, Sub
shall change its name to "Data Translation, Inc."
Section 6.7 Related Agreements. As of the Distribution Date, Parent and Sub
------------------
shall enter, and if applicable shall cause their Affiliates to enter, into the
Related Agreements.
18
<PAGE>
Section 6.8 Certain Intercompany Arrangements. Following the Distribution
---------------------------------
Date, the parties agree to discuss in good faith the provision of any services
and products to be provided by the other, but which inadvertently were not the
subject of a written agreement. Nothing in this Section 6.8, however, shall
require or authorize Parent or Sub to provide and charge each other for any
services other than on the terms and conditions specified in the Corporate
Services Agreement or the other Related Agreements.
Section 6.9 Supplies and Documents. Parent shall have the right to use
----------------------
existing supplies and documents (including without limitation invoices, purchase
orders, forms, labels, shipping materials, catalogues, sales brochures,
operating manuals, instructional documents and similar materials, and
advertising material) which have imprinted thereon the name "Data Translation"
or trademarks, logotypes or variations comprising the name "Data Translation,"
for a period not to exceed six (6) months following the Distribution Date;
provided, however, that Parent agrees (a) to use only such supplies and
documents existing in inventory as of the Distribution Date, to conspicuously
state on such supplies and documents when used that they are not documents of
Sub and (c) not to order or utilize in any manner any additional supplies and
documents containing the name "Data Translation."
Section 6.10 Letters of Credit. Sub shall use all commercially reasonable
-----------------
efforts to substitute Sub letters of credit for any Parent letters of credit
outstanding on the Distribution Date with respect to obligations of the
Contributed Businesses. In addition, Sub shall reimburse Parent for any costs
incurred or funds advanced by Parent following the Distribution Date in respect
of any such letters of credit.
Section 6.11 Reimbursement of Certain Expenses Relating to Data Translation
--------------------------------------------------------------
Networking Limited. Parent hereby agrees to reimburse Sub for fifty percent
- ------------------
(50%) of the net cost incurred by Sub in completing the winding up of the
business of Data Translation Limited ("DTN"); provided that the aggregate amount
Parent shall be obligated to reimburse Sub as provided in this Section 6.11
shall in no event exceed $500,000. For purposes of this Section 6.11, all
amounts paid by Parent prior to the Distribution, and all amounts paid by Sub
after the Distribution, directly or indirectly to DTN or to its creditors or to
others claiming by or through any of them in connection with the sale of DTN's
business or any of its assets or the winding up of DTN's business through a
members' voluntary liquidation or otherwise, shall be deemed to be costs
incurred by Sub in completing the winding-up of DTN's business (collectively,
"DTN Expenses"). In calculating the net cost incurred by Sub in completing such
winding-up, the foregoing costs shall be reduced by the aggregate amount
received by DTN from the collection or assignment of its receivables or from the
recovery by DTN of any other amounts from third parties which is not applied to
the payment of DTN's obligations to third parties in connection with the winding
up of its business (collectively, "DTN Proceeds"). Parent's obligations under
this Section 6.11 with respect to DTN Expenses incurred prior to the
Distribution Date shall be satisfied by appropriate adjustments in connection
with the determination of the Cash Amount. Within fifteen (15) days of the end
of each calendar month following the Distribution Date, Sub shall certify to
Parent in writing as to the aggregate amount of DTN Expenses incurred, and the
aggregate amount of DTN Proceeds received, during the preceding month. If the
aggregate amount of DTN Expenses is greater than the aggregate amount of DTN
Proceeds during such month, Parent will promptly reimburse Sub for fifty percent
(50%) of the amount of such excess, subject to the overall limitations on
Parent's obligations under this Section 6.11. If the aggregate amount of DTN
Proceeds exceeds the aggregate amount of DTN Expenses during such month, Sub
will promptly pay over to Parent an amount equal to fifty percent (50%) of such
excess. Upon completion of the winding up of the business of DTN, Sub shall
certify to Parent in writing that, to the best of its knowledge, all of DTN's
obligations have been discharged, and that no further DTN Proceeds are
reasonably likely to be collected.
Section 7 ACCESS TO INFORMATION AND SERVICES.
----------------------------------
Section 7.1 Provision of Corporate Records. As soon as practicable after the
-------------------------------
Distribution Date, Parent shall deliver to Sub all Books and Records. Such
Books and Records shall be the property of Sub, but shall be retained and made
available readily to Parent for review and duplication until the earlier of (a)
notice from Parent that such records are no longer needed by Parent or (b) the
eighth anniversary of the Distribution Date.
Section 7.2 Access to Information. From and after the Distribution Date,
---------------------
Parent and Sub shall afford to each other and to each other's authorized
accountants, counsel and other designated representatives reasonable access and
duplicating rights (with copying costs to be borne by the requesting party)
during normal business hours to all Books and Records and documents,
communications, items and matters (collectively, "Information") within each
other's knowledge, possession or control and relating to the Contributed Assets,
the Contributed Businesses, the Assumed Liabilities, the Retained Liabilities
and the Transferred Employees, insofar as such access is reasonably required by
Parent or Sub, as the case may be (and shall use reasonable efforts to cause
persons or firms possessing relevant Information to give similar access).
Information may be requested under this Section 7 for, without limitation,
audit, accounting, claims, Actions, litigation
19
<PAGE>
and tax purposes, as well as for purposes of fulfilling disclosure and reporting
obligations, but not for competitive purposes.
Section 7.3 Production of Witnesses and Individuals. From and after the
---------------------------------------
Distribution Date, Parent and Sub shall use reasonable efforts to make available
to each other, upon written request, its officers, directors, employees and
agents for fact finding, consultation and interviews and as witnesses to the
extent that any such person may reasonably be required in connection with any
Actions in which the requesting party may from time to time be involved relating
to the conduct of the Contributed Businesses or Parent's other businesses prior
to the Distribution Date. Except as otherwise agreed between the parties,
Parent and Sub agree to reimburse each other for reasonable out-of-pocket
expenses (but not labor charges or salary payments) incurred by the other in
connection with providing individuals and witnesses pursuant to this Section
7.3.
Section 7.4 Retention of Records. Except when a longer retention period is
--------------------
otherwise required by law or agreed to in writing, Parent and Sub shall retain,
for a period of at least eight (8) years following the Distribution Date, all
material Information relating to the Contributed Businesses. Notwithstanding
the foregoing, in lieu of retaining any specific Information, Parent or Sub may
offer in writing to deliver such Information to the other and, if such offer is
not accepted within ninety (90) days, the offered Information may be destroyed
or otherwise disposed of at any time. If the recipient of such offer shall
request in writing prior to the scheduled date for such destruction or disposal
that any of the Information proposed to be destroyed or disposed of be delivered
to such requesting party, the party proposing the destruction or disposal shall
promptly arrange for the delivery of such of the Information as was requested
(at the cost of the requesting party).
Section 7.5 Confidentiality.
---------------
Section 7.5.1 Each of Parent and Sub shall, and shall use its best efforts to
cause its officers, employees, agents, consultants, advisors and Affiliates to,
hold, in strict confidence and not disclose to another person, except as
provided herein or unless compelled to disclose by judicial or administrative
process or, in the opinion of counsel (which may be in-house counsel), by other
requirements of law, confidential information concerning the other party.
Section 7.5.2 For purposes of this Section 7.5, confidential information about
a particular party (referred to herein as the "disclosing party") shall mean
information known by the other party (referred to herein as the "receiving
party") on the Distribution Date and reasonably understood by the receiving
party to be confidential and related to the disclosing party's business
interests, or disclosed confidentially by the disclosing party to the receiving
party after the Distribution Date under the terms and for the purposes of this
Agreement or any of the Related Agreements except for: (a) information which is
or becomes generally available to the public other than as a result of a
disclosure by the disclosing party; (b) information learned by the receiving
party on a non-confidential basis for the first time after the Distribution
Date, but prior to any disclosure by the disclosing party; (c) information
developed by the receiving party independent of
20
<PAGE>
any confidential information of the disclosing party which is known by the
receiving party on the Distribution Date or disclosed by the disclosing party
thereafter; and (d) information which becomes available to the receiving party
on a non-confidential basis from a source other than the disclosing party if
such source was not subject to any prohibition against transmitting the
information to the receiving party.
Section 7.5.3 Each party shall protect confidential information of the other
party by using the same degree of care, but no less than a reasonable degree of
care, to prevent the unauthorized disclosure of the other party's confidential
information as the party uses to protect its own confidential information of a
like nature.
Section 7.5.4 Each party shall use its best efforts to insure that its
officers, employees, agents, consultants, advisors and Affiliates agree to be
bound by the foregoing restrictions on use and disclosure of confidential
information as a condition to receiving such information; provided, that such
party will be responsible for any breach of such confidentiality provisions by
any such person.
Section 7.6 Privileged Matters.
------------------
Section 7.6.1 Parent and Sub agree to maintain, preserve and assert all
privileges that either party may have, including without limitation any
privilege or protection arising under or relating to any attorney-client
relationship that existed prior to the Distribution Date ("Privilege" or
"Privileges"). Parent and Sub shall be entitled in perpetuity to require the
assertion or decide whether to consent to the waiver of any and all Privileges
which, in the case of Sub, relate to the Contributed Businesses and, in the case
of Parent, relate to the Retained Business. Parent and Sub shall each use the
same degree of care as it would with respect to itself so as not to waive any
Privilege which could be asserted by the other party under applicable law,
without the prior written consent of the other party. The rights and
obligations created by this Section 7.6 shall apply to all information as to
which, but for the Distribution, Parent or Sub would have been entitled to
assert or did assert the protection of a Privilege ("Privileged Information"),
including but not limited to (a) all information generated prior to the
Distribution Date but which, after the Distribution, is in the possession of the
other party or its Affiliates, (b) all communications subject to a Privilege
occurring prior to the Distribution Date between counsel for Parent and any
person who, at the time of the communication, was an employee of Parent,
regardless of whether such employee is or becomes an employee of Sub, and (c)
all information generated, received or arising after the Distribution Date that
refers or relates to Privileged Information generated, received or arising prior
to the Distribution Date.
Section 7.6.2 Upon the receipt by either party of any subpoena, discovery or
other request which arguably calls for production or disclosure of Privileged
Information of the other party and whenever either party obtains knowledge that
any current or former employee of such party has received any subpoena,
discovery or other request which arguably calls of the production or disclosure
of Privileged Information of the other party, such party shall promptly notify
the other party of the existence of the request and shall
21
<PAGE>
provide the other party with a reasonable opportunity to review the information
and to assert any rights it may have under this Section 7.6 or otherwise to
prevent the production or disclosure of Privileged Information. Neither party
will produce or disclose any information covered by a Privilege of the other
party under this Section 7.6 unless (a) the other party has provided its express
written consent to such production or disclosure or (b) a court of competent
jurisdiction has entered a final, non-appealable order finding that the
information is not entitled to protection under any applicable Privilege.
Section 7.6.3 Parent's transfer of Books and Records and any other information
to Sub, and each party's agreement to permit the other party to possess
Privileged Information occurring or generated prior to the Distribution Date,
are made in reliance on each party's agreement, as set forth in this Section
7.6, to maintain the confidentiality of Privileged Information and to maintain,
preserve and assert all applicable Privileges. The access to information granted
or permitted by this Agreement, the agreement to provide witnessees and
individuals pursuant to Section 7.3 hereof and transfer of Privileged
Information to Sub pursuant to this Agreement shall not be deemed a waiver of
any Privilege that has been or may be asserted under this Section 7.6 or
otherwise. Nothing in this Agreement shall operate to reduce, minimize or
condition the rights granted to either party in, or the obligations imposed upon
either party by, this Section 7.6.
Section 7.7 Mail and Other Communications. Each of Parent and Sub agrees to
-----------------------------
forward or direct (as appropriate) to the other party any mail or other
communications intended for such other party which is received by it.
Section 7.8 Order of Precedence. To the extent that the provisions of this
-------------------
Section 7 are inconsistent with the provisions of Section 11 hereof with respect
to the subject matter thereof, the provisions of Section 11 shall control.
Section 8 EMPLOYEE MATTERS AND BENEFITS.
-----------------------------
Section 8.1 Employment. At the Distribution Date, Sub shall employ each
----------
Transferred Employee at an annual compensation rate no less than such
Transferred Employee's current annual compensation rate with Parent. Following
the Distribution, such compensation shall be subject to Sub's normal review
procedures with respect to compensation. Sub shall continue the status of a
Transferred Employee on leave of absence or short or long term disability
absence, and shall recall, reinstate or terminate the employment of such
Transferred Employee in accordance with the leave of absence policy applicable
to the Transferred Employee that was in effect when the Transferred Employee's
leave of absence began. Anything contained in this Section 8.1 to the contrary
notwithstanding, Sub shall not be obligated to employ any person who declines
employment with Sub and such person shall not be considered a Transferred
Employee.
Section 8.2 Retirement Plan.
---------------
Section 8.2.1 Not later than January 1, 1997 (the "Establishment Date"), Sub
shall establish a defined contribution plan for the benefit of its employees
(the "Sub Retirement
22
<PAGE>
Plan") intended to qualify under Sections 401(a) and 401(k) of the Code and a
trust under the Sub Retirement Plan intended to qualify under Section 501(a) of
the Code. Prior to the Establishment Date, Sub shall continue to participate in
Parent's Double Sheltered Retirement Plan (the "Parent Retirement Plan") as a
participating employer, and Parent shall cause the Parent Retirement Plan to be
amended as necessary to accommodate such continued participation. Sub shall be
responsible for all contributions with respect to its employees under the Parent
Retirement Plan and shall cooperate fully with Parent, to the extent requested
by Parent, in the preparation, distribution or filing of all participant
communications and governmental filings relating to the Parent Retirement Plan,
in each case with respect to those periods during which Sub continues to
participate in the Parent Retirement Plan.
Section 8.2.2 On or as soon as practicable after the Establishment Date, Parent
shall direct the Trustees of the Parent Retirement Plan to transfer from the
trust established thereunder to the trust under the Sub Retirement Plan, and Sub
shall cause the trustee(s) of the Sub Retirement Plan to accept and receive, an
amount (in the form determined by Parent) equal to the sum of the account
balances (including liabilities associated with outstanding participant loans)
as of the date of transfer (the "Retirement Plan Transfer Date") with respect to
each participant who is a Transferred Employee (or the beneficiary of any such
participant) or who is employed by Sub immediately prior to the Establishment
Date, including such participant who is on leave of absence or disability. If
any Form 5310A is required to be filed with respect to such transfer, Sub and
Parent shall cooperate in the filing of the necessary Forms 5310A. Effective as
of the Retirement Plan Transfer Date, Sub and the Sub Retirement Plan shall
assume and become solely responsible for the satisfaction of all liabilities
under the Parent Retirement Plan in respect of the Transferred Employees (or the
beneficiaries of any such participants) or any other participants who are
employed by Sub, and Parent and the Parent Retirement Plan shall be relieved of
and shall cease to have any responsibility for the satisfaction of such
liabilities, other than for any reconciliations required after the Retirement
Plan Transfer Date.
Section 8.2.3 Parent and Sub shall provide each other such records and
information as may be necessary or appropriate to carry out their respective
obligations under this Section 8.2 or for purposes of administration of the
Parent Retirement Plan and the Sub Retirement Plan, and they shall cooperate in
the filing of documents required by the transfer of assets and liabilities
described herein.
Section 8.3 Welfare Plans.
-------------
Section 8.3.1 Effective as of the Distribution Date, Sub shall establish
welfare and fringe benefit plans and programs for the benefit of the Transferred
Employees (the "Sub Welfare/Fringe Benefit Plans") that are substantially
similar in the case of each such plan or program to the corresponding plan or
program maintained prior to the Distribution Date by Parent. Upon the
Distribution Date, each Transferred Employee and his or her dependents (if any)
who were participating in a welfare or fringe benefit plan of Parent immediately
prior to the Distribution Date shall cease participating therein and shall
23
<PAGE>
thereafter participate in the corresponding successor Sub Welfare/Fringe Benefit
Plan, without limitation for any preexisting conditions or exclusions.
Section 8.3.2 Parent agrees to be solely responsible for all liabilities and
obligations whatsoever of Parent in connection with covered claims for benefits
incurred before the Distribution Date by or in respect of Transferred Employees
under and covered by the welfare and fringe benefit plans maintained by Parent
for employees and the workers' compensation, unemployment compensation and other
legally required employee benefits programs maintained by Parent. For purposes
of applying this Section 8.3.2 to medical and dental benefits and to death
benefits, "incurred" shall mean (a) with respect to medical and dental benefits,
the date that services are performed, and (b) with respect to survivor benefits,
the date of death. Sub shall be solely responsible for, and shall indemnify
Parent against, any and all other claims under such plans or the Sub
Welfare/Fringe Benefit Plans with respect to Transferred Employees and their
dependents. Nothing in this Section 8.3.2 shall be construed as an assumption
by Parent or Sub of any liability of an insurer with respect to either party or
with respect to either party's plans or programs.
Section 8.3.3 Sub and the Sub Welfare/Fringe Benefit Plans shall recognize all
employment service and earnings of a Transferred Employee recognized by Parent
as employment service and earnings of Sub for purposes of applying the
provisions of any Sub Welfare/Fringe Benefit Plan or similar program, including
any vacation plan or program, where the Transferred Employee's benefits
thereunder are a function of the employee's employment service or earnings or a
combination thereof. Under its successor dependent care program, Sub shall
credit to the account of each Transferred Employee participating in that program
all amounts credited under the corresponding Parent program and such Transferred
Employees shall look solely to the Sub program for dependent care reimbursement
benefits.
Section 8.3.4 Sub agrees to assume and be solely responsible for all
liabilities and obligations whatsoever of Parent, as of the Distribution Date,
in connection with (a) the Tuition Assistance Policy obligations of Parent for
courses or degrees which were approved for Transferred Employees prior to the
Distribution Date and (b) any requirement under COBRA to provide continuation of
health care coverage to any Transferred Employee or "qualified beneficiary" (as
defined in COBRA) of a Transferred Employee who loses coverage as a result of a
"qualifying event" (as defined in COBRA) that occurs on or after the
Distribution Date.
Section 8.4 Other Liabilities and Obligations. As of the Distribution Date,
---------------------------------
Sub shall assume and be solely responsible for all liabilities and obligations
whatsoever of Parent with respect to claims made by or with respect to
Transferred Employees, relating to their employment with the Contributed
Businesses not otherwise provided for in this Agreement, including without
limitation earned salary, wages and other incentive or bonus compensation earned
but not paid on or before the Distribution Date and accrued holiday, vacation
and other termination (including severance) benefits. Without limiting the
foregoing, nothing in this Agreement or in the transactions contemplated hereby
shall
24
<PAGE>
be construed as giving any Transferred Employee rights to termination (including
severance) benefits on account of the Distribution.
Section 8.5 Preservation of Rights to Amend or Terminate Plans. No provision
--------------------------------------------------
of this Agreement, including without limitation the agreement of Parent or Sub
that it will make a contribution or payment to or under any plan referred to
herein for any period, shall be construed as a limitation on the right of Parent
or Sub to amend or terminate such plan which Parent or Sub would otherwise have
under the terms of such plan or otherwise; provided, however, that no amendment
shall reduce the Transferred Employees' unused vacation benefits as of the
Distribution Date.
Section 8.6 Reimbursement. Parent and Sub acknowledge that each may incur
-------------
costs and expenses (including without limitation contributions to plans and the
payment of insurance premiums) pursuant to any of the employee benefit or
compensation plans, programs or arrangements which are, as set forth in this
Agreement, the responsibility of the other party. Accordingly, Parent and Sub
agree to reimburse each other, as soon as practicable but in any event within
thirty (30) days of receipt from the other of appropriate verification, for all
such costs and expenses, except to the extent that such reimbursement would be
duplicative.
Section 8.7 Stock Option Plans.
------------------
Section 8.7.1 Parent and Sub shall cooperate and take all action necessary to
amend or otherwise provide for adjustments of outstanding awards under the
Parent Stock Option Plans, to adopt the Sub Adjustment Stock Option Plan and to
grant the Sub Adjustment Options, so that effective as of the Distribution Date,
each Parent Stock Option which is outstanding and not exercised will have been
adjusted immediately prior to the Distribution so as to represent two separately
exercisable options consisting of a Parent Adjustment Option for the same number
of shares as the related Parent Stock Option, and a Sub Adjustment Option for
one quarter (1/4) of the number of shares as the related Parent Stock Option
(rounded down to the nearest whole share) (collectively, the "Adjusted
Options").
Section 8.7.2 If there is an ex-dividend market for the Parent Common Stock
prior to the Distribution Date, (a) the exercise price per share of each Parent
Adjustment Option shall be determined, in accordance with Treasury Regulations
Section 1.425-1(e)(5)(ii)(b), by multiplying the exercise price per share of the
related Parent Stock Option by a fraction, the numerator of which is the fair
market value of the Parent Common Stock on the ex-dividend date and the
denominator of which is the fair market value of the Parent Common Stock on the
last trading day immediately preceding the ex-dividend date, provided that such
fraction shall not be greater than one, and the resulting price shall be rounded
up to the nearest whole cent; and (b) the exercise price per share of each Sub
Adjustment Option shall be determined in accordance with Treasury Regulation
1.425-1(a)(4) and (7), by multiplying the fair market value of the Sub Common
Stock on the first trading day following the Distribution Date by a fraction,
the numerator of which is the exercise price per share of the related Parent
Adjustment Option and the denominator of which is the fair market value of the
Parent Common Stock on the last trading day prior to the Distribution Date, and
the resulting price shall be rounded up to the nearest whole cent.
Section 8.7.3 If there is no ex-dividend market for the Parent Common Stock
prior to the Distribution Date, (a) the exercise price per share of each Parent
Adjustment Option shall be determined, in accordance with Treasury Regulations
Section 1.425-1(e)(5)(ii)(b), by multiplying the exercise price per share of the
related Parent Stock Option by a fraction, the numerator of which is the fair
market value of the Parent Common Stock on the first trading day that the Parent
Common Stock begins trading on the Nasdaq National Market without the Sub
dividend (i.e. without due bills) and the denominator of which is the fair
market value of the Parent Common Stock on the last trading day immediately
preceding the date on which the Parent Common Stock begins trading on the Nasdaq
National Market without the Sub dividend (i.e. without due bills), provided that
such fraction shall not be greater than one, and the resulting price shall be
rounded up to the nearest whole cent; and (b) the exercise price per share of
each Sub Adjustment Option shall be determined, in accordance with Treasury
Regulation 1.425-1(a)(4) and (7), by multiplying the fair market value of the
Sub Common Stock on the first trading day following the date on which the
Parent Common Stock begins trading on the Nasdaq National Market without the Sub
dividend (i.e. without the bills) by a fraction, the numerator of which is the
exercise price per share of the related Parent Stock Option and the denominator
of which is the fair market value of the Parent Common Stock on the last trading
day immediately preceding the date on which the Parent Common Stock begins
trading on the Nasdaq National Market without the Sub dividend (i.e. without due
bills), and the resulting price shall be rounded up to the nearest whole cent.
25
<PAGE>
Section 8.7.4 The boards of directors of Parent and Sub shall jointly determine
the fair market values referred to in Sections 8.7.2 and 8.7.3 hereof based on
the trading prices of the Parent Common Stock and Sub Common Stock or, in the
event that an adequate trading market in the Sub Common Stock does not develop,
in such manner as they determine to be equitable and appropriate for valuing the
Sub Common Stock. To the extent possible, the adjustments required by this
Section 8.7 shall be effected as follows: (a) for holders of Parent Stock
Options other than Transferred Employees, the adjustments described in this
Section 8.7 shall be effected in a manner that does not adversely affect the
continued qualification of Parent Adjustment Options as incentive stock options
under Section 422 of the Code, and (b) for holders of Parent Stock Options who
are Transferred Employees, the Adjusted Options shall be effected as (i) a
substitution of the Sub Adjustment Options for a portion of the related Parent
Adjustment Options or Parent Stock Options, as the case may be, qualifying under
Section 424(a) of the Code, so as to result in the continued qualification of
Sub Adjustment Options as incentive stock options, and (ii) a simultaneous
issuance of additional Parent Adjustment Options. Subject to the foregoing, the
Adjusted Options shall have terms, including expiration dates and vesting
provisions substantially equivalent to those of the related Parent Stock
Options, with appropriate alterations to the Sub Adjustment Options to reflect
Sub's substitution for Parent as the issuer of the stock subject to the Sub
Adjustment Options and, in the case of Sub Adjusted Options issued to
Transferred Employees, as the employer of the Transferred Employees.
Section 8.7.5 Parent shall cause the Parent Stock Option Plans to be interpreted
so that employment of the Transferred Employee with Sub shall be treated as
employment with Parent for purposes of the Parent Stock Options Plans provisions
causing outstanding Parent Adjustment Options to expire upon the termination of
employment of the option holder. Sub agrees to promptly notify Parent of the
termination of employment for any reason of each Transferred Employee who is a
holder of Adjusted Options for Parent's use in administering the Parent Stock
Option Plans with respect to outstanding Parent Adjustment Options. Parent
agrees to promptly notify Sub of the termination of employment for any reason of
each of its employees who is a holder of Adjusted Options for Sub's use in
administering the Sub Adjustment Stock Option Plan. For so long as any Parent
Adjustment Options remain outstanding, Parent shall provide to Sub, and Sub
shall deliver to the Transferred Employees who are holders of Parent Adjustment
Options, copies of the prospectus or prospectuses and all amendments and
supplements thereto prepared in accordance with the Securities Act relating to
the Parent Adjustment Options. Prior to the Distribution Date, Sub shall
register the shares of Sub Common Stock issuable upon exercise of the Sub
Adjustment Options on Form S-8 under the Securities Act, and shall use its best
efforts to keep such registration continuously effective until all the Sub
Adjustment Options have been exercised or have expired or been cancelled. For so
long as any Sub Adjustment Options remain outstanding, Sub shall provide to
Parent, and Parent shall deliver to its employees who are holders of Sub
Adjustment Options, copies of the prospectus or prospectuses and all amendments
and supplements thereto prepared in accordance with the Securities Act relating
to the Sub Adjustment Options.
Section 8.7.6 If the exercise of a Parent Adjustment Option by a Transferred
Employee would have qualified for incentive stock option treatment under the
Code if such person had at all times through the time of such exercise remained
an employee of Parent, Sub shall pay to the Transferred Employee an amount in
cash intended to compensate such person for the loss of such treatment as a
result of failing to satisfy the employment requirements of Section 422(a)(2) of
the Code with respect to such option, such amount to be determined by Sub in its
discretion, but not to exceed the value of the corresponding tax benefit to Sub.
If the exercise of a Sub Adjustment Option by an employee of Parent would have
qualified for incentive stock option treatment under the Code if such person had
at all times through the time of such exercise been an employee of Sub, Parent
shall pay to the employee an amount in cash intended to compensate such person
for the loss of such treatment as a result of failing to satisfy the employment
requirements of Section 422(a)(2) of the Code with respect to such option, such
amount to be determined by Parent in its discretion, but not to exceed the value
of the corresponding tax benefit to Parent. In either of the foregoing cases,
payment will be made no later than three months following the date of exercise,
and will be conditioned upon the receipt of an undertaking from the holder not
to dispose of the stock underlying the option in a disposition described in
Section 422(a)(1) of the Code (in each case treating the date of grant of the
related Parent Stock Option as the date of grant of such option).
Section 8.7.7 Any and all tax withholding and employment taxes (including the
paying over of such taxes to the government) and related reporting required in
connection with the exercise of an Adjusted Option or in connection with a
payment described in Section 8.7.6 hereof shall be the responsibility of the
employer (Parent or Sub, as the case may be) of the individual to whom the
Adjusted Option was granted, and the employer shall be entitled to claim any tax
deduction arising in connection with such Adjusted Option. The issuer of the
shares subject to the Adjusted Option shall promptly notify the employer of the
exercise and shall not be required to deliver any such shares upon exercise of
the option until it shall have received satisfactory evidence that the person
exercising the
26
<PAGE>
Section 8.7.8 The provisions of Sections 8.7.1, 8.7.2, 8.7.3, 8.7.4, 8.7.5. and
8.7.6 hereof shall not apply with respect to any Parent Stock Options awarded
pursuant to the Parent Stock Option Plans' UK Addendums.
Section 8.8 Stock Purchase Plans.
--------------------
Section 8.8.1 Transfer of employment of the Transferred Employees from Parent
to Sub on the Distribution Date shall be deemed to be termination of employment
with Parent for purposes of the Parent Stock Purchase Plan, resulting in the
cancellation of all options held by Transferred Employees who are participants
in such plan and entitling all such Transferred Employees to a return of any
balances in such participants' withholding accounts under the plan.
Section 8.8.2 Sub shall adopt a stock purchase plan (the "Sub Stock Purchase
Plan") pursuant to which its eligible employees will be entitled to purchase Sub
Common Stock on substantially the same terms as set forth in the Parent Stock
Purchase Plan. Sub shall recognize all employment service of a Transferred
Employee recognized by Parent as employment service for purposes of determining
employee eligibility under the Sub Stock Purchase Plan.
Section 8.9 Limitation on Enforcement. This Section 8 is an agreement solely
-------------------------
between Parent and Sub. Nothing in this Agreement or any Related Agreement,
whether express or implied, confers upon any employee of Parent or Sub, any
Transferred Employee, any former employee of Parent, any beneficiary of a
Transferred Employee or former employee of Parent or any other person, any
rights or remedies, including without limitation (a) any right to employment,
(b) any right to continued employment for any specified period or (c) any right
to claim any particular compensation, benefit or aggregation of benefits, of any
kind or nature whatsoever, as a result of this Section 8.
Section 9 INSURANCE.
---------
Section 9.1 General. Parent shall keep in effect all policies under the Parent
-------
Insurance Policies in effect as of the date hereof insuring the Contributed
Assets and operations of the Contributed Businesses until the end of the day on
which the Distribution occurs, unless Sub shall have earlier obtained
appropriate coverage and notified Parent in writing to that effect. Beginning
at 12:01 a.m. on the day following the Distribution Date, Sub and its Affiliates
will cease to be covered under the Parent Insurance Policies with respect to any
injury, loss, Liability, damages or expense that is incurred or asserted by a
third party to have been incurred after the Distribution Date in, or in
connection with, the conduct of the Contributed Businesses or the operation of
the Contributed Assets. Sub will obtain an Incurred But Not Reported ("IBNR")
policy extending to Sub the rights of Parent, if any, as an insured party under
Parent's Insurance Policies with respect to Sub Claims. Parent shall pay the
initial cost of obtaining the IBNR policy.
27
<PAGE>
Section 10 DISPUTE RESOLUTION.
------------------
Section 10.1 Mediation and Binding Arbitration. Except with respect to matters
---------------------------------
involving Section 7.6 hereof ("Privileged Matters") and except as may be
expressly provided in any other agreement between the parties entered into
pursuant hereto, if a dispute, controversy or claim (collectively, a "Dispute")
between Parent and Sub or any of their respective Affiliates arises out of or
relates to this Agreement, the Related Agreements or any other agreement entered
into pursuant hereto or thereto, including without limitation the breach,
interpretation or validity of any such agreement or any matter involving an
Indemnifiable Loss, Parent and Sub agree to use the following procedures, in
lieu of either party pursuing other available remedies and as the sole remedy,
to resolve the Dispute.
Section 10.2 Mediation.
---------
Section 10.2.1 A party seeking to initiate the procedures shall give written
notice to the other party, describing briefly the nature of the Dispute. A
meeting shall be held between the parties within ten (10) days of the receipt of
such notice, attended by individuals with decision-making authority regarding
the dispute, to attempt in good faith to negotiate a resolution of the Dispute.
Section 10.2.2 If, within thirty (30) days after such meeting, the parties have
not succeeded in negotiating a resolution of the Dispute, they agree to submit
the Dispute at the earliest possible date to mediation in accordance with the
Center for Public Resources
28
<PAGE>
Model ADR Procedures - Mediation of Business Disputes, as modified herein, and
to bear equally the costs of the mediation. The parties will jointly appoint a
mutually acceptable mediator. If they are unable to agree upon such appointment
within twenty (20) days from the conclusion of the negotiation period, either
party may request the Center for Public Resources or another mutually agreed-
upon organization to appoint the mediator. The parties agree to participate in
good faith in the mediation and negotiations related thereto for a period of
thirty (30) days or such longer period as they may mutually agree following the
initial mediation session.
Section 10.3 Arbitration.
-----------
Section 10.3.1 In the event that one party fails to participate in mediation,
the Dispute may be referred immediately to arbitration and the time of such
failure shall constitute the end of the mediation period. If the parties are
not successful in resolving the Dispute by the end of the mediation period, then
the parties agree to submit the matter to binding arbitration in Boston,
Massachusetts pursuant to the Commercial Rules of Arbitration of the American
Arbitration Association (the "AAA"), as modified herein, by a sole arbitrator
selected in accordance with the provisions of Section 10.3.2 hereof. In the
arbitration, (a) the parties may require reasonable discovery, pursuant to the
Massachusetts Rules of Civil Procedure then in effect, (b) each party shall have
the right to cross-examine witnesses of other parties, (c) testimony shall be
transcribed and (d) any award shall be accompanied by written findings of fact
and statement of reasons. Any arbitration proceeding shall be concluded in a
maximum of sixty (60) days from the commencement of such proceeding. Any
arbitration award shall be final and binding on the parties and judgment may be
entered thereon, upon the application of either party by any court of competent
jurisdiction.
Section 10.3.2 The parties shall have ten (10) days from the end of the
mediation period to agree upon a mutually acceptable neutral person not
affiliated with either of the parties to act as arbitrator. If no arbitrator
has been selected within such time, either party may request the AAA or another
mutually agreed-upon organization to supply within ten (10) days of such request
a list of potential arbitrators with qualifications reasonably required to
settle the dispute. Within five (5) days of each party receiving the list, the
parties shall independently rank the proposed candidates, shall simultaneously
exchange rankings, and shall be deemed to have selected as the arbitrator the
individual receiving the highest combined ranking who is available to serve. If
there is a tie, then the tie shall be broken by lot. If one party shall not
cooperate in the selection of the arbitrator, the other party may solely select
the arbitrator utilizing the procedures set forth in this Section 10.3.2.
Section 10.3.3 The costs of arbitration shall be apportioned between Parent and
Sub as determined by the arbitrator in such manner as the arbitrator deems
reasonable taking into account the circumstances of the case, the conduct of the
parties during the proceeding, and the result of the arbitration.
Section 10.4 Treatment of Negotiation and Mediation. All negotiations and
--------------------------------------
mediations pursuant to this Section 10 shall be treated as compromise and
settlement
29
<PAGE>
negotiations for purposes of Rule 408 of the Federal Rules of Evidence and
comparable state rules of evidence. All negotiation, mediation and arbitration
proceedings under this Section 10 shall be treated as confidential information
in accordance with the provisions of Section 7.5 hereof. Any mediator or
arbitrator shall be bound by an agreement containing confidentiality provisions
at least as restrictive as those contained in Section 7.5 hereof.
Section 10.5 Equitable Relief. Nothing contained herein shall preclude either
----------------
party from seeking equitable relief to prevent any immediate, irreparable harm
to its interests, including multiple breaches of this Agreement or the relevant
Related Agreement by the other party. Otherwise, these procedures are exclusive
and shall be fully exhausted prior to the initiation of any litigation. Either
party may seek specific enforcement of any arbitrator's decision under this
Section 10. The other party's only defense to such a request for specific
enforcement shall be fraud by or on the arbitrator.
Section 10.6 Consolidation. The arbitrator may consolidate an arbitration
-------------
under this Agreement with any arbitration arising under or relating to the
Related Agreements or any other agreement between the parties entered into
pursuant hereto, as the case may be, if the subject of the Disputes thereunder
arise out of or relate essentially to the same set of facts or transactions.
Such consolidated arbitration shall be determined by the arbitrator appointed
for the arbitration proceeding that was commenced first in time.
Section 11 TAX MATTERS.
-----------
Section 11.1.1 Tax Returns. Parent shall file all consolidated Federal income
-----------
tax returns (and combined or consolidated state and local tax returns) for each
member of the Parent Affiliated Group that are required to be filed for periods
beginning before (or beginning and ending on) the Distribution Date. All
returns with respect to Other Taxes for a period beginning before (or beginning
and ending on) the Distribution Date shall be filed or caused to be filed by the
party that under Section 11.2.2 is responsible for paying the tax to which the
return relates. For all other taxable periods relating to taxes other than
Transaction Taxes (a) Parent shall be responsible for filing tax returns
relating to members of the Parent Group and (b) Sub shall be responsible for
filing tax returns relating to members of the Sub Affiliated Group. Parent
shall file or cause to be filed all tax returns relating to Transfer Taxes.
Section 11.1.2 Income Tax Return Positions. Parent and Sub agree that, except
---------------------------
as otherwise required by a Final Determination, the transactions contemplated in
this Agreement, except those transactions described in Section 2.3 hereof and
transfers of stock in any foreign corporations, shall be treated by Parent and
Sub as being described in Section 355 of the Code.
Section 11.2 Responsibility for Taxes Generally.
----------------------------------
Section 11.2.1 Pre-Distribution Income Taxes. Except as otherwise provided
-----------------------------
herein, the Parent Group shall pay, and shall indemnify and hold harmless each
member of the
30
<PAGE>
Sub Affiliated Group from, all Pre-Distribution Income Tax Liabilities, and the
Parent Group shall be entitled to receive and retain all refunds of Income Taxes
for which the Parent Group would have been responsible hereunder in the absence
of the refund.
Section 11.2.2 Other Taxes. Except as otherwise provided herein, the Parent
-----------
Group shall pay, and shall indemnify and hold harmless each member of the Sub
Affiliated Group and each direct or indirect foreign subsidiary thereof from,
all Other Taxes (and shall be entitled to receive and retain all refunds of
Other Taxes) attributable to Parent Assets or the operation of the business of
any member of the Parent Group or any direct or indirect foreign subsidiary
thereof immediately after the Distribution Date. Except as otherwise provided
herein, Sub shall pay, and shall indemnify and hold harmless each member of the
Parent Group and each direct or indirect foreign subsidiary thereof from, all
Other Taxes (and shall be entitled to receive and retain all refunds of Other
Taxes) attributable to Sub Assets or the operation of the business of any member
of the Sub Affiliated Group or any direct or indirect foreign subsidiary thereof
immediately after the Distribution.
Section 11.2.3 Carrybacks. Sub agrees that, to the extent that any carryback
----------
period for a Carryback Item would include any taxable period beginning on or
before the Distribution Date, Sub shall elect (under Code section 172(b)(3) and
any other applicable Code provision relating to the carry back of any Carryback
Item and, to the extent feasible, any similar provision of any applicable state
or local Income Tax law) to relinquish such carryback period as to any Carryback
Item which can thereby be used to create or carry forward a tax benefit. In no
event shall Parent have any obligation to pay to Sub any amount in respect of a
Carryback Item.
Section 11.2.4 Transaction Taxes. The Parent Group shall pay, and shall
-----------------
indemnify and hold harmless each member of the Sub Affiliated Group and each
direct or indirect foreign subsidiary thereof from, all liabilities for
Transaction Taxes, and the Parent Group shall be entitled to receive and retain
all refunds of Transaction Taxes for which the Parent Group would have been
responsible hereunder in the absence of the refund.
31
<PAGE>
Section 11.3 Responsibility for an Event of Loss.
-----------------------------------
Section 11.3.1 Sub Responsibility. Sub and any successor shall be responsible
------------------
for, and shall indemnify and hold harmless Parent and each member of the Parent
Group from, Income Taxes, Other Taxes and all reasonable out-of-pocket costs and
expenses directly caused by an Event of Loss which is attributable to one or
more of the following described events or transaction occurring after the
Distribution Date and within two years after the Distribution Date with respect
to Sub or any successor: a reorganization, consolidation, merger or acquisition
by any person of a fifty percent (50%) or greater interest in Sub as determined
under Section 355(d)(4) of the Code, applying the aggregation and attribution
rules under subparagraphs (d)(7) and (8) of that Section, which is in any way
solicited or approved by the Board of Directors of Sub (other than in connection
with a hostile takeover); the sale or disposition of Sub Assets other than those
assets relating to Sub's networking business and other than in the ordinary
course of business; Sub's ceasing to conduct its data acquisition and imaging
business as an active trade or business within the purview of Section 355 of the
Code; the issuance, redemption or repurchase of shares of Sub Common Stock by
Sub or any successor or any subsidiary of the foregoing; the purchase of Parent
Common Stock by Sub or any successor or any subsidiary of the foregoing; the
recapitalization or other reclassification of the shares of Sub or any
successor; or the complete or partial liquidation of Sub or any successor.
Section 11.3.2 Parent Responsibility. Parent and any successor shall be
---------------------
responsible for, and shall indemnify and hold harmless Sub and each member of
the Sub Affiliated Group from, Income Taxes, Other Taxes and all reasonable out-
of-pocket costs and expenses directly caused by an Event of Loss which is
attributable to one or more of the following described events or transactions
occurring within two years of the Distribution Date with respect to Parent or
any successor; a reorganization, consolidation, merger or acquisition by any
person of a fifty percent (50%) or greater interest in Parent as determined
under Section 355(d)(4) of the Code, applying the aggregation and attribution
rules under subparagraphs (d)(7) and (8) of that Section, which is in any way
solicited or approved by the Board of Directors of Parent (other than in
connection with a hostile takeover); the sale or disposition of assets of any
member of Parent, other than in the ordinary course of business; Parent's
ceasing to conduct its digital media business as an active trade or business
within the purview of Section 355 of the Code; the issuance, redemption or
repurchase of shares of Parent Common Stock by Parent or any successor or any
subsidiary of the foregoing; the purchase of Sub Common Stock by Parent or any
successor or any subsidiary of the foregoing; the purchase of Sub Common Stock
by Parent or any successor or any subsidiary of the foregoing; the
recapitalization or other reclassification of the shares of Parent or any
successor; or the complete or partial liquidation of Parent or any successor.
Section 11.3.3 Shared Responsibility. If an Event of Loss shall occur and
---------------------
responsibility for the Event of Loss under Section 11.3.1 and Section 11.3.2
rests either with both parties or neither party, each party shall share the
Income Taxes, Other Taxes and reasonable out-of-pocket costs and expenses
directly caused by such Event of Loss in the ratio of seventy-five percent (75%)
for Parent and twenty-five percent (25%) for Sub, and each party shall indemnify
and hold harmless the other party for its share of that liability.
Section 11.4 Payments. If Parent is required to make a payment to Sub under
--------
this Section 11, such payment shall be made to Sub or any successor, and any
payment due under this Section 11 from Sub to Parent shall be made by Sub to
Parent or any successor. The payment shall be made by the earlier of (a) twenty
(20) days after Parent (or a member of Sub, as applicable) makes a tax payment
(including without limitation any payment made in connection with either an
estimated or annual tax liability) or (b) twenty (20) days after a Final
Determination with respect to such tax. The amount of any payment required to
be made by any party to another under this Section 11 shall be an amount which,
after subtraction of any additional federal, state or local taxes payable by the
recipient in respect of the receipt of such payment (the "Gross-Up Amount"), is
equal to the amount payable hereunder; provided, however, if a payment is made
pursuant to Section 11.3.3 hereof and if a Gross-
32
<PAGE>
Up Amount is includable in the payment, the Gross-Up Amount so includable in the
payment shall be reduced by seventy-five percent (75%) in the case of payments
from Sub to Parent or twenty-five percent (25%) in the case of payments from
Parent to Sub. Parent and Sub agree that, without limiting the ultimate payment
obligation of the payor set forth in the preceding sentence, any payment shall
be reported for U.S. Federal income tax purposes as non-deductible and non-
taxable unless, by reason of changes in the law or new interpretations of the
law by the Internal Revenue Service, there is not substantial authority (within
the meaning Code section 6662(d)(2)(B)(i)) for such position or such position is
otherwise not permissible under applicable law.
Section 11.5 Cooperation and Exchange of Information.
---------------------------------------
Section 11.5.1 Matters Giving Rise to Indemnity.
--------------------------------
(a) Notice. If during the course of an audit any tax authority indicates an
------
intention to propose an Adjustment to the tax liability of either the Sub
Affiliated Group or the Parent Group ("Indemnitee") which would result, if such
Adjustment were to be confirmed by a Final Determination, in a loss against
which the other party ("Indemnitor") may be required to indemnify Indemnitee
pursuant to this Agreement, Indemnitee shall promptly notify Indemnitor thereof
in writing. Such notice to Indemnitor shall include sufficient information with
respect to the issues as to which indemnity may be sought to enable Indemnitor
to determine whether to request Indemnitee to contest the Adjustment.
(b) Contest Rights and Conditions. If Indemnitor shall request that Indemnitee
-----------------------------
contest the Adjustment in writing within 20 days of the receipt of the
notification referred to in Section 11.5.1(a) hereof, Indemnitee will contest
the Adjustment, provided that: in no event shall Indemnitee be required to
--------
contest any Adjustment unless coincident with Indemnitor's request (A)
Indemnitee shall have received (i) a written acknowledgment from Indemnitor of
its obligation to indemnify Indemnitee hereunder in the event it does not
prevail in such contest and (ii) an opinion of independent tax counsel to
Indemnitor (which counsel shall be reasonably acceptable to Indemnitee) to the
effect that a reasonable basis exists for contesting the Adjustment; and (B) if
such contest is to be conducted in a manner requiring payment of a proposed tax
deficiency, Indemnitor shall have advanced to Indemnitee, on an interest-free
basis, an amount sufficient to make payment of the amount attributable to the
issues being contested, together with any required interest or penalties. If any
funds are advanced by Indemnitor in connection with any tax contest, any refund
received to the extent fairly attributable to such advance shall be returned to
Indemnitor, together with any interest thereon paid by the relevant taxing
authority, promptly upon Parent's receipt of such funds. If Indemnitor shall
have requested Indemnitee to contest an Adjustment and complied with each of the
terms and conditions set forth above, such contest shall be conducted, at the
direction of the Indemnitor, by independent tax counsel selected by Indemnitor
and reasonably acceptable to Indemnitee. If Indemnitor or counsel selected by
Indemnitor shall advocate, propose to advocate or fail to protest before any
taxing authority a position with would result in a tax detriment to Indemnitee
not subject to indemnification in order to reduce Indemnitor's obligation
hereunder, Indemnitee may replace such counsel with counsel of its own selection
and any tax detriment suffered by Indemnitee attributable to such position shall
be included among the Income Taxes, Other Taxes and related expenses for which
Indemnitee is entitled to indemnification hereunder.
(c) Settlement: Release of Indemnification. If Indemnitor shall have requested
--------------------------------------
Indemnitee to contest an Adjustment and complied with each of the terms and
conditions set forth above, Indemnitee shall not settle or compromise any
Adjustment for which indemnity is sought hereunder without the consent of
Indemnitor unless it simultaneously releases Indemnitor from its obligations to
indemnify and reimburse Indemnitee with respect to the issues so settled or
comprised. If Indemnitor shall fail to request Indemnitee to contest any
Adjustment or shall fail to comply with the terms and conditions entitling it to
make such request as set forth in subparagraph (b), Indemnitee may in its sole
discretion elect to contest (or not contest) such Adjustment with counsel
selected by it and may at any time settle or compromise the matter without the
consent of Indemnitor and without releasing its rights to indemnity from
Indemnitor.
(d) Joint Responsibility. If for the reasons described in Section 11.3.3 an
--------------------
Event of Loss shall occur or is proposed by the IRS (or other taxing authority)
to have occurred, the notice provisions in paragraph (a) above shall apply, and
notwithstanding paragraphs (b) or (c) above, the Parent shall have sole control
over all decisions regarding any contest, dispute, litigation or settlement
relating to the Event of Loss (the "Proceedings") and the incurrence of related
reasonable expenses; provided, however, that Parent shall keep Sub informed of
the Proceedings and shall consult with Sub regarding the material issues
relating to the Event of Loss raised in the Proceedings and that the Parent's
decisions regarding the choice of forum of the Proceedings, any decision to
appeal and any settlement relating to the Event of Loss by Parent with any tax
authority shall each be subject to the approval of Sub, which approval shall not
be unreasonably withheld.
Section 11.5.1.1 Notice. If during the course of an audit any tax authority
------
indicates an intention to propose an Adjustment to the tax liability of either
the Sub Affiliated Group or the Parent Group (the "Tax Indemnitee") which would
result, if such Adjustment were to be confirmed by a Final Determination, in a
loss against which the other party (the "Tax Indemnitor") may be required to
indemnify the Tax Indemnitee pursuant to this Section 11, the Tax Indemnitee
shall promptly notify the Tax Indemnitor thereof in writing. Such notice to the
Tax Indemnitor shall include sufficient information with respect to the issues
as to which indemnity may be sought to enable Tax Indemnitor to determine
whether to request the Tax Indemnitee to contest the Adjustment.
Section 11.5.1.2 Contest Rights and Conditions. If the Tax Indemnitor shall
-----------------------------
request that the Tax Indemnitee contest the Adjustment in writing within twenty
(20) days of the receipt of the notification referred to in Section 11.5.1.1
hereof, the Tax Indemnitee will contest the Adjustment; provided that in no
event shall the Tax Indemnitee be required to contest any Adjustment unless
coincident with the Tax Indemnitor's request (a) the Tax Indemnitee shall have
received (i) a written acknowledgment from the Tax Indemnitor of its obligation
to indemnify the Tax Indemnitee hereunder in the event it does not prevail in
such contest and (ii) an opinion of independent tax counsel to the Tax
Indemnitor (which counsel shall be reasonably acceptable to the Tax Indemnitee)
to the effect that a reasonable basis exists for contesting the Adjustment; and
(b) if such contest is to be conducted in a manner requiring payment of a
proposed tax deficiency, the Tax Indemnitor shall have advanced to the Tax
Indemnitee, on an interest-free basis, an amount sufficient to make payment of
the amount attributable to the issues being contested, together with any
required interest or penalties. If any funds are advanced by the Tax Indemnitor
in connection with any tax contest, any refund received to the extent fairly
attributable to such advance shall be returned to the Tax Indemnitor, together
with any interest thereon paid by the relevant taxing authority, promptly upon
Parent's receipt of such funds. If the Tax Indemnitor shall have requested the
Tax Indemnitee to contest an Adjustment and complied with each of the terms and
conditions set forth above, such contest shall be conducted, at the direction of
the Indemnitor, by independent tax counsel selected by the Tax Indemnitor and
reasonably acceptable to the Tax Indemnitee. If the Tax Indemnitor or counsel
selected by the Tax Indemnitor shall advocate, propose to
33
<PAGE>
advocate or fail to protest before any taxing authority a position which would
result in a tax detriment to the Tax Indemnitee not subject to indemnification
in order to reduce the Tax Indemnitor's obligation hereunder, the Tax Indemnitee
may replace such counsel with counsel of its own selection and any tax detriment
suffered by the Tax Indemnitee attributable to such position shall be included
among Income Taxes, Other Taxes and related expenses for which the Tax
Indemnitee is entitled to indemnification hereunder.
Section 11.5.1.3 Settlement; Release of Indemnification. If the Tax Indemnitor
--------------------------------------
shall have requested the Tax Indemnitee to contest an Adjustment and complied
with each of the terms and conditions set forth above, the Tax Indemnitee shall
not settle or compromise any Adjustment for which indemnity is sought hereunder
without the consent of the Tax Indemnitor unless it simultaneously releases the
Tax Indemnitor from its obligations to indemnify and reimburse the Tax
Indemnitee with respect to the issues so settled or compromised. If the Tax
Indemnitor shall fail to request the Tax Indemnitee to contest any Adjustment or
shall fail to comply with the terms and conditions entitling it to make such
request as set forth in Section 11.5.1.2 hereof, the Tax Indemnitee may in its
sole discretion elect to contest (or not contest) such Adjustment with counsel
selected by it and may at any time settle or compromise the matter without the
consent of the Tax Indemnitor and without releasing its rights to indemnity from
the Tax Indemnitor.
Section 11.5.1.4 Joint Responsibility. If for the reasons described in Section
--------------------
11.3.3 hereof an Event of Loss shall occur or is proposed by the IRS (or other
taxing authority) to have occurred, the notice provisions in Section 11.5.1.1
hereof shall apply, and notwithstanding Sections 11.5.1.2 and 11.5.1.3 hereof,
Parent shall have control over decisions regarding any contest, dispute,
litigation or settlement relating to the Event of Loss (the "Proceeding") and
the incurrence of related reasonable expenses, including without limitation the
choice of tax counsel to represent it before any tax authority in matters
relating to the Event of Loss; provided, however, that Parent shall keep Sub
informed of the Proceedings and shall consult with Sub regarding the material
issues relating to the Event of Loss raised in the Proceedings; and provided,
further, that (a) the choice of forum for such Proceeding, and any decision to
appeal, (b) any settlement relating to the Event of Loss by Parent with any tax
authority shall each be subject to the approval of Sub, which approval shall not
be unreasonably withheld.
Section 11.5.2 Tax Return Information. Without limiting Section 11.5.1 hereof,
----------------------
Parent and Sub agree to cooperate fully with each other in connection with the
preparation of any tax return or claim for refund or in defending any audit or
other proceeding in respect of taxes for all open taxable periods. Such
cooperation shall include making personnel and records available promptly and
within thirty (30) days (or such other period as may be reasonable under the
circumstances) after a request for such personnel or records is made by the tax-
imposing authority or the other party. If Parent or Sub, as the case may be,
fails to provide any information requested pursuant to this Section 11.5.2, then
the requesting party shall have the right to engage a public accountant of its
choice to gather such information. Parent and Sub public accountant full access
to all appropriate records or other information in the
34
<PAGE>
possession of any member of the Parent Affiliated Group or the Sub Affiliated
Group, as the case may be, during reasonable business hours, and to reimburse or
pay directly all costs and expenses in connection with the engagement of such
public accountant. Parent agrees to indemnify and hold harmless each member of
the Sub Affiliated Group and its officers and employees, and Sub agrees to
indemnify and hold harmless each member of the Parent Affiliated Group and its
officers and employees against any cost, fine, penalty or other expense of any
kind attributable to the negligence or misconduct of a member of the Parent
Affiliated Group or the Sub Affiliated Group, as the case may be, in supplying a
member of the other group with inaccurate or incomplete information; provided,
that, nothing set forth in this Section 11.5.2 shall require either party to
permit the other to participate in any audit even though issues are raised for
which an indemnity may be sought if such issues result in an Adjustment at the
conclusion of such audit.
Section 11.5.3 Record Retention. Parent and Sub agree to retain all records
----------------
which may contain information or provide evidence relevant to the determination
of the Income Tax liability of the Parent Affiliated Group or the Sub Affiliated
Group or the stockholders of either for any taxable period until such time as a
Final Determination occurs with respect to such taxable period; provided,
however, that such records need not be retained longer than fifteen (15) years
after the end of the latest taxable period to which they relate so long as such
records do not relate to an ongoing contest.
Section 12 MISCELLANEOUS.
-------------
Section 12.1 Amendment and Waiver. No amendment of any provision of this
--------------------
Agreement shall in any event be effective, unless the same shall be in writing
and signed by the parties hereto. Any failure of any party to comply with any
obligation, agreement or condition hereunder may only be waived in writing by
the other party but such waiver shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. No failure by any party to
take any action against any breach of this Agreement or default by the other
party shall constitute a waiver of such party's right to enforce any provisions
hereof or to take any such action.
Section 12.2 Expenses. Except as otherwise provided in this Agreement, any
--------
Related Agreement or any other agreement being entered into by Parent and Sub
pursuant to this Agreement, Parent shall pay all investment banking, legal,
accounting, printing, governmental filing, listing, distribution agent and
similar fees, costs and expenses incurred in connection with the Distribution
(whether or not payable as of the Distribution Date) and with the consummation
of the transactions contemplated by this Agreement.
Section 12.3 Notices. All notices, requests, demands and other communications
-------
under this Agreement shall be in writing and shall be deemed to have been duly
given (a) on the date of service if served personally on the party to whom
notice is given, (b) on the day of transmission if sent via facsimile
transmission to the facsimile number given below, provided that telephonic
confirmation of receipt is obtained promptly after completion of the
transmission, (c) on the business day after delivery to a nationally recognized
35
<PAGE>
overnight courier service or the Express Mail service maintained by the United
States Postal Service, provided receipt of delivery has been confirmed, or (d)
on the fifth day after mailing, provided receipt of delivery is confirmed, if
mailed to the party to whom notice is to be given, by first class mail,
registered or certified, postage prepaid, properly addressed and return receipt
requested, to the party as follows:
If to Parent, at:
Media 100 Inc.
100 Locke Drive
Marlboro, MA 01752-1192
Attn.: General Counsel
Fax: (508) 481-5670
If to Sub, at:
Data Translation, Inc.
100 Locke Drive
Marlboro, MA 01752-1192
Attn.: President
Fax: (508) 481-8620
Either party may change its address for receiving notices by written notice
given to the other party in the manner provided above.
Section 12.4 Termination. This Agreement may be terminated and the
-----------
Distribution abandoned at any time prior to the Distribution Date by and in the
sole discretion of Parent without the approval of Sub. In the event of such
termination, no party shall have any liability of any kind to any other party.
Section 12.5 Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of, and be binding upon and enforceable against the respective successors and
assigns of the parties hereto, provided that this Agreement may not be assigned
by either party without the prior written consent of the other party, and any
attempt to assign any rights or obligations hereunder without such consent shall
be void.
Section 12.6 Entire Agreement; Parties in Interest. This Agreement (including
-------------------------------------
the schedules, annexes and exhibits hereto) comprises the entire agreement
between the parties hereto as to the subject matter hereof and supersedes all
prior agreements and understandings between them relating thereto and, except as
provided in Section 5.2 hereof, is not intended to confer upon any person other
than the parties hereto (including their successors and permitted assigns) any
rights or remedies hereunder.
Section 12.7 Severability. If any term or provision of this Agreement or the
------------
application thereof to any person or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Agreement or the application of such
terms or provisions to persons or circumstances other than those as to which it
is invalid or
36
<PAGE>
unenforceable shall not be affected thereby and each term and provision of this
Agreement shall be valid and enforced to the fullest extent permitted by law.
Section 12.8 Captions. Captions and headings are supplied herein for
--------
convenience only and shall not be deemed a part of this Agreement for any
purpose.
Section 12.9 Annexes, Etc. The Annexes, Schedules and Exhibits shall be
------------
construed with and as part of this Agreement to the same extent as if the same
had been set forth verbatim herein.
Section 12.10 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the internal substantive laws of the Commonwealth of
Massachusetts, without giving effect to the principles of conflicts of laws
thereof.
Section 12.11 Counterparts. This Agreement may be executed in several
------------
counterparts, and all counterparts so executed shall constitute one agreement,
binding upon the parties hereto, notwithstanding that the parties are not
signatory to the same counterpart.
IN WITNESS WHEREOF, Parent and Sub have caused this Agreement to be duly
executed by their authorized representatives as an agreement under seal, all as
of the day and year first written above.
DATA TRANSLATION, INC.
By:
------------------------------------------
Name:
Title:
DATA TRANSLATION II, INC.
By:
------------------------------------------
Name:
Title:
37
<PAGE>
ANNEX I
-------
CONTRIBUTED ASSETS
------------------
Contributed Assets: all tangible and intangible assets owned by Parent relating
principally to the Contributed Businesses as of the Distribution Date, including
but not limited to:
(a) all assets and properties which should be set forth or reflected on a
balance sheet for Sub as of the Distribution Date prepared in the same manner as
the August 31, 1996 balance sheet of Sub included in the Information Statement
(after giving effect to the pro forma adjustments reflected or described in the
Information Statement);
(b) all of Parent's right and interest in, to, under and relating to all
agreements, contracts and leases, whether written or oral, of Parent
relating to the Contributed Businesses, including without limitation the
Lease dated as of December 1, 1979 between Alfred A. Molinari, Jr. and
Maureen K. Molinari, Trustees of Nason Hill Trust under a Declaration of
Trust dated November 15, 1979 and recorded with the Middlesex County
Registry of Deeds (Southern District) in Book 13839, Page 406, on November
16, 1979, as Landlord, and Parent, as Tenant, as amended (the "Locke Drive
Lease");
(c) all of Parent's right and interest in, to and under all outstanding Bids,
Quotations and Proposals pertaining to the Contributed Businesses to the
extent that such Bids, Quotations and Proposals can be transferred or
assigned; all of Parent's right and interest in, to and under all contracts
and agreements awarded to Parent before or after the Distribution Date
pertaining to the Contributed Businesses, as assignee if those contracts
are assignable and assigned or transferred by operation of law; or as a
right to payment by Parent to Sub of a subcontract price equal to the
monies, rights and other considerations received by Parent under contracts
and agreements awarded to Parent before or after the Distribution Date
pertaining to the Contributed Businesses if assignment of those contracts
and/or agreements and/or the proceeds therefrom is prohibited by law or not
otherwise obtained;
(d) all machinery, equipment and other items of tangible personal property
owned by Parent other than those items which are utilized principally by
the Retained Business and are listed in Exhibit A to this Annex I, as such
exhibit shall be amended and updated as of the Distribution Date;
(e) all of Parent's rights with respect to receivables relating to the
Contributed Businesses;
(f) all rights and interests of Parent in and with respect to the patents,
trademarks, copyrights, trade secrets, know-how and other intellectual
property concerning the Contributed Businesses to the extent, but only to
the extent, such rights are being licensed and assigned to Sub pursuant to,
and in accordance with, the Intellectual Property Agreement;
(g) all of the Books and Records;
38
<PAGE>
(h) all inventories of raw materials, work-in-process, finished products,
supplies and spare parts which at the Distribution Date are owned by Parent
and relate principally to the Contributed Businesses and any property under
bailment relating to the Contributed Businesses;
(i) all permits and licenses held by Parent which are transferable and which
relate principally to the Contributed Businesses or the use or occupancy of
the Locke Drive premises (other than those permits or licenses which relate
principally to Parent's conduct of the Retained Business at such premises);
(j) all intangible assets, other than intellectual property rights, of Parent
used in the Contributed Businesses, including customer lists, marketing and
other data;
(k) employee receivables, temporary and permanent travel advances and funds
advanced for travel not yet taken relating to Transferred Employees;
(l) all supplies, purchase orders, forms, labels, shipping material,
catalogues, sales brochures, operating manuals, instructional documents and
advertising material held for use by the Contributed Businesses;
(m) all shares of Data Translation Networking Limited, Data Translation Ltd.
and Data Translation GmbH owned by Parent immediately prior to the
Distribution; and
(n) all trucks, automobiles and other vehicles owned by Parent which are used
in the Contributed Businesses.
ANYTHING CONTAINED IN THIS ANNEX I TO THE CONTRARY NOTWITHSTANDING, TRANSFERRED
ASSETS SHALL NOT INCLUDE:
(i) cash and cash equivalents, including cash on hand or in bank accounts,
certificates of deposit, commercial paper and other similar securities or
other marketable securities other than the Cash Amount;
(ii) any books and records relating to the Contributed Businesses which
Parent is required by law to retain in its possession; and
(iii) any right, title or interest of Parent in any Federal, state or local tax
refund (including any income in respect thereto) relating to the
operations of the Contributed Businesses prior to the Distribution Date.
39
<PAGE>
ANNEX II
--------
ASSUMED LIABILITIES
-------------------
Assumed Liabilities: all Liabilities and obligations relating to or arising
from the operation of the Contributed Businesses (other than Retained
Liabilities), whether before or after the Distribution Date, including but not
limited to:
(a) all Liabilities and obligations which should be set forth, reflected,
disclosed or reserved for on a balance sheet (including the footnotes
thereto) for Sub as of the Distribution Date prepared in the same manner as
the August 31, 1996 balance sheet of Sub included in the Information
Statement (after giving effect to any pro forma adjustments reflected or
described in the Information Statement);
(b) all Liabilities and obligations of Parent pursuant to, under or relating to
all agreements, contracts and leases, whether written or oral, of Parent
relating to the Contributed Businesses, including without limitation all
Liabilities and obligations as Tenant under the Locke Drive Lease;
(c) all outstanding Bids, Quotations and Proposals pertaining to the
Contributed Businesses to the extent such Bids, Quotations and Proposals
can be transferred or assigned; and all contracts awarded to Parent before
or after the Distribution Date pertaining to the Contributed Businesses, as
(i) an assignee if those contracts are assignable and assigned or
transferred by operation of law, or (ii) subcontractor if assignment of
those contracts and/or proceeds therefrom is prohibited by law or not
otherwise obtained;
(d) all warranty, performance and similar obligations entered into or made in
the course of business of the Contributed Businesses with respect to their
products;
(e) all Liabilities and obligations to or with respect to Transferred Employees
not specifically retained by Parent pursuant to the Agreement, including
without limitation withholding, payroll and employment taxes pursuant to
Section 8 of the Agreement;
(f) the Liabilities and obligations being assumed by or agreed to be performed
by Sub pursuant to any other agreement being entered into in connection
with the Agreement, including without limitation the Related Agreements;
(g) all Liabilities and obligations relating to all Actions relating
principally to or arising principally out of the operations of the
Contributed Businesses; and
(h) all Liabilities and obligations under corporate credit cards which had been
issued by Parent to Transferred Employees.
40
<PAGE>
ANNEX III
---------
RETAINED LIABILITIES
--------------------
Retained Liabilities: all Liabilities and obligations of Parent and its
subsidiaries (other than Sub and its subsidiaries), except those set forth in
Annex II, including without limitation:
(a) all Liabilities and obligations to or with respect to Transferred Employees
provided in Section 8 of the Agreement as being Liabilities and obligations
of Parent;
(b) all Liabilities and obligations being assumed by or agreed to be performed
by Parent pursuant to any other agreement being entered into in connection
with this Agreement, including without limitation the Related Agreements;
(c) all Liabilities and obligations arising out of checks which have been
mailed, but not presented for payment, prior to the Distribution Date; and
(d) all Liabilities and obligations relating to all Actions other than those
referred to in Annex II, including without limitation the litigation
entitled Avid Technology, Inc. v. Data Translation, Inc., Civil Action No.
-----------------------------------------------
95-11193 JLT, pending in the United States District Court for the District
of Massachusetts.
41
<PAGE>
SCHEDULE 5.2.1
The information contained under the following captions of the Information
Statement and Form 10 is subject to the indemnification provisions of Section
5.2.1 of the Agreement:
INFORMATION STATEMENT COVER PAGE
SUMMARY - Distributing Corporation; Principal Business to be Retained by DTI;
Primary Purpose of the Distribution; Shares to be Distributed; Distribution
Ratio; Fractional Share Interests; Record Date; Distribution Date; Mailing
Date; Distribution Agent; Tax Consequences; Relationship with DTI after the
Distribution*
SUMMARY HISTORICAL FINANCIAL DATA*
INTRODUCTION
THE DISTRIBUTION - Background and Reasons for the Distribution; Manner of
Effecting the Distribution; No Fractional Shares; Federal Income Tax Aspects of
the Distribution; Listing and Trading of Common Stock
SPECIAL FACTORS - Certain Tax Considerations; Relationship Between the Company
and DTI; Conflicts of Interest*; Listing and Trading of DTI Stock; Accounting
Treatment
RELATIONSHIP BETWEEN THE COMPANY AND DTI AFTER THE DISTRIBUTION - All
subheadings*
PRO FORMA CAPITALIZATION OF THE COMPANY*
SELECTED HISTORICAL FINANCIAL DATA OF THE COMPANY*
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF THE COMPANY*
BUSINESS OF THE COMPANY - Data Acquisition and Imaging (including subheadings
thereunder)*, Manufacturing*, Proprietary Rights*, Properties*, Legal
Proceedings*
TREATMENT OF EMPLOYEE OPTIONS IN THE DISTRIBUTION*
* Liability to be shared with Sub on a 50/50 basis.
42
<PAGE>
EXHIBIT 10.2
FORM OF
INTELLECTUAL PROPERTY AGREEMENT
-------------------------------
This Agreement is dated as of , 1996, between Media 100 Inc.
-------------
(f/k/a Data Translation, Inc.), a Delaware corporation ("Parent"), and Data
Translation, Inc. (f/k/a Data Translation II, Inc.), a Delaware corporation
("Sub").
WHEREAS, Parent and Sub have entered into a Distribution Agreement dated as of
, 1996 (the "Distribution Agreement"), pursuant to which Parent is
- -------------
assigning and transferring to Sub certain businesses and assets associated with
Parent's data acquisition and imaging, commercial products and networking
distribution businesses (the "Contributed Businesses") in exchange for the
assumption by Sub of certain liabilities and obligations associated with such
businesses and the issuance by Sub to Parent of shares of Sub common stock on
such terms and conditions as are contained therein; and
WHEREAS, on , 1996 the Board of Directors of Parent declared a dividend
--------
of all outstanding shares of Sub to the holders of record of the outstanding
common stock of Parent, such dividend to be made on , 1996 (the
-----------
"Distribution Date"); and
WHEREAS, in connection with the transactions contemplated by the Distribution
Agreement, Parent and Sub desire that certain of Parent's intellectual property
rights relating to the Contributed Businesses be assigned and transferred to
Sub, and that Parent and Sub each grant licenses to the other covering the use
of their respective intellectual property rights, all as more particularly set
forth herein;
NOW, THEREFORE, in consideration of the foregoing and the other agreements and
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1 Assignment of Intellectual Property Rights.
------------------------------------------
Section 1.1 Patents and Patent Applications. Subject to the terms and
-------------------------------
conditions of this Agreement, Parent does hereby assign and transfer to Sub its
entire right, title and interest in and to the patents and patent applications
listed on Schedule A hereto, including without limitation, income, royalties,
----------
damages, claims and payments now and hereafter due and/or payable in respect
thereto and rights to sue and collect damages for past, present and future
infringements thereof. Parent shall promptly execute assignments contemplated
by the foregoing sentence and requested by Sub, and shall provide the same to
Sub for filing by Sub, as Sub deems appropriate.
Section 1.2 Trademarks. Subject to the terms and conditions of this Agreement,
----------
Parent does hereby assign and transfer to Sub its entire right, title and
interest in and to the trademarks (and corresponding registrations and
applications for registration) listed on Schedule B hereto, including without
----------
limitation, income, royalties, damages, claims and payments now or hereafter due
and/or payable with respect thereto and rights to sue and collect damages for
past, present and future infringements thereof, together with the goodwill of
the businesses symbolized by such trademarks, and that portion of the on-going
and existing business to which the marks pertain, as required by 15 U.S.C. 1060.
Parent shall promptly execute assignments contemplated by the foregoing sentence
and requested by Sub, and shall provide the same to Sub for filing by Sub, as
Sub deems appropriate.
Section 1.3 Other Assignments. Subject to the terms and conditions of this
-----------------
Agreement, Parent does hereby assign and transfer to Sub its entire right, title
and interest in and to all trade secrets, know-how, proprietary information and
other similar intellectual property relating primarily to the Contributed
Businesses, including without limitation, income, royalties, damages, claims and
payments now and hereafter due and/or payable in respect thereto and rights to
sue and collect damages for past, present and future infringements thereof.
Parent shall be under no obligation to provide Sub with any documentation with
respect to any of the intellectual property referred to in this Section 1.3 not
already in existence as of the Distribution Date. The intellectual property
being
<PAGE>
assigned and transferred pursuant to Sections 1.1, 1.2 and 1.3 of this Agreement
is hereinafter referred to collectively as the "Assigned Intellectual Property."
Section 1.4 Disclaimer of Warranties. NOTHING IN THIS AGREEMENT SHALL BE
------------------------
DEEMED TO BE A REPRESENTATION OR WARRANTY BY PARENT OF THE SCOPE, VALIDITY,
ENFORCEABILITY, VALUE OR FREEDOM FROM INFRINGEMENT OF THIRD PARTY INTELLECTUAL
PROPERTY RIGHTS OF ANY OF THE ASSIGNED INTELLECTUAL PROPERTY. PARENT SHALL HAVE
NO LIABILITY WHATSOEVER TO SUB OR ANY OTHER PERSON ON ACCOUNT OF ANY INJURY,
LOSS OR DAMAGE, OF ANY KIND OR NATURE, SUSTAINED BY, OR ANY DAMAGE ASSESSED OR
ASSERTED AGAINST, OR ANY OTHER LIABILITY INCURRED BY OR IMPOSED UPON SUB OR ANY
OTHER PERSON, ARISING OUT OF OR IN CONNECTION WITH OR RESULTING FROM (a) THE
PRODUCTION, USE OR SALE OF ANY APPARATUS OR PRODUCT THROUGH THE USE OR PRACTICE
OF ANY OF THE ASSIGNED INTELLECTUAL PROPERTY, (b) THE OTHER USE OF ANY OF THE
ASSIGNED INTELLECTUAL PROPERTY OR (c) ANY ADVERTISING OR OTHER PROMOTIONAL
ACTIVITIES WITH RESPECT TO ANY OF THE FOREGOING.
Section 1.5 Infringement of Third Party Intellectual Property Rights. In no
--------------------------------------------------------
event shall Parent be required to assume the defense of or pay any costs of
settlement of any alleged unauthorized use or infringement of any third party
patent, trademark or other intellectual property rights arising out of or in
connection with or resulting from any use of the Assigned Intellectual Property
by the Contributed Businesses or by Sub, either before or after the Distribution
Date, and Sub shall hold Parent harmless from any damages, costs or liabilities
incurred by any of them arising from or in connection with any such alleged
unauthorized use or infringement; provided, however, that Parent shall
reasonably cooperate with Sub in the defense of any such alleged unauthorized
use or infringement and Sub shall reimburse Parent for all reasonable attorneys'
fees and other out-of-pocket expenses incurred by Parent in connection
therewith.
Section 1.6 Payment of Costs of Assignment. From and after the Distribution
------------------------------
Date, Sub assumes all responsibility for paying any costs, including but not
limited to legal fees and government fees, associated with the Assigned
Intellectual Property, excluding any costs associated with the filing of
assignments with the appropriate patent or trademark offices for any of the
Assigned Intellectual Property.
Section 2 Cross-Licenses.
--------------
Section 2.1 Grant of License by Parent. Subject to the terms and conditions of
--------------------------
this Agreement, Parent, as licensor, does hereby grant to Sub, as licensee, a
non-exclusive, perpetual, fully paid-up, royalty-free, world-wide license to
make, have made, import, export, use, sell or otherwise dispose of products or
services using or embodying (a) the patents, patent applications, trade secrets,
know-how, proprietary information and other similar intellectual property owned
by Parent as of the Distribution Date other than the Assigned Intellectual
Property, including, with respect to the patents and patent applications
included therein, any re-issues, continuations, continuations-in-part,
divisionals and patents of addition thereof and corresponding foreign patents,
and excluding any trademarks otherwise included therein, and (b) any patents
issuing from patent applications filed by Parent within two years of the
Distribution Date, and any re-issues, continuations, continuations-in-part,
divisionals and patents of addition thereof and corresponding foreign patents
(collectively, the "Parent Licensed Intellectual Property"). Parent shall be
under no obligation to provide Sub with any documentation with respect to the
any of the Parent Licensed Intellectual Property.
Section 2.2 Grant of License by Sub. Subject to the terms and conditions of
-----------------------
this Agreement, Sub, as licensor, does hereby grant to Parent, as licensee, a
non-exclusive, perpetual, fully paid-up, royalty-free, world-wide license to
make, have made, import, export, use, sell or otherwise dispose of products or
services using or embodying (a) the Assigned Intellectual Property, including,
with respect to the patents and patent applications included therein, any re-
issues, continuations, continuations-in-part,
2
<PAGE>
divisionals and patents of addition thereof and corresponding foreign patents,
and excluding the trademarks otherwise included therein, and (b) any patents
issuing from patent applications filed by Sub within two years of the
Distribution Date, and any re-issues, continuations, continuations-in-part,
divisionals and patents of addition thereof and corresponding foreign patents
(collectively, the "Sub Licensed Intellectual Property"). Sub shall be under no
obligation to provide Parent with any documentation with respect to the any of
the Sub Licensed Intellectual Property. References herein to the "Licensed
Intellectual Property" shall refer to the Parent Licensed Intellectual Property
in the context where Parent is the licensor and Sub is the licensee, and to the
Sub Intellectual Property in the context where Sub is the licensor and Parent is
the licensee.
Section 2.3 Disclaimer of Warranties. NOTHING IN THIS AGREEMENT SHALL BE
------------------------
DEEMED TO BE A REPRESENTATION OR WARRANTY BY EITHER PARENT OR SUB, AS LICENSOR,
OF THE SCOPE, VALIDITY, ENFORCEABILITY, VALUE OR FREEDOM FROM INFRINGEMENT OF
THIRD PARTY INTELLECTUAL PROPERTY RIGHTS OF ANY OF THE LICENSED INTELLECTUAL
PROPERTY. NEITHER PARENT OR SUB, AS LICENSOR, SHALL HAVE ANY LIABILITY
WHATSOEVER TO THE OTHER PARTY HERETO, AS LICENSEE, OR TO ANY OTHER PERSON ON
ACCOUNT OF ANY INJURY, LOSS OR DAMAGE, OF ANY KIND OR NATURE, SUSTAINED BY, OR
ANY DAMAGE ASSESSED OR ASSERTED AGAINST, OR ANY OTHER LIABILITY INCURRED BY OR
IMPOSED UPON SUB OR PARENT, AS LICENSEE, OR ANY OTHER PERSON, ARISING OUT OF OR
IN CONNECTION WITH OR RESULTING FROM (a) THE PRODUCTION, USE OR SALE OF ANY
APPARATUS OR PRODUCT THROUGH THE USE OR PRACTICE OF ANY OF THE LICENSED
INTELLECTUAL PROPERTY, (b) THE OTHER USE OF ANY OF THE LICENSED INTELLECTUAL
PROPERTY OR (c) ANY ADVERTISING OR OTHER PROMOTIONAL ACTIVITIES WITH RESPECT TO
ANY OF THE FOREGOING.
Section 2.4 Infringement of Licensed Intellectual Property. In the event that
----------------------------------------------
the licensee or licensor hereunder of Licensed Intellectual Property learns that
any entity is or may be infringing in any way on any of the Licensed
Intellectual Property licensed to the licensee hereunder, or is engaged in
conduct which is liable to cause deception or confusion to the public, or is
diluting or infringing any right of the licensee or the licensor, the licensee
or licensor, as the case may be, shall notify the other party. The licensor
shall have the sole initial right to determine whether or not any action shall
be taken against such unauthorized use or infringement. The licensor shall
promptly notify the licensee of its determination and shall briefly describe the
action, if any, which it shall take. In the event that the licensor initiates
litigation against any entity, the licensor shall choose the attorneys, control
the litigation, pay the litigation expenses, and retain any settlement amount or
damages recovered as a result of any judgment in favor of the licensor. In the
event that the licensor takes no action to stop such alleged unauthorized use or
infringement within sixty (60) days following notice by the licensee or the
licensor, as the case may be (or such earlier date as the licensee reasonably
determines is necessary to avoid prejudicing the licensor's or the licensee's
ability to bring an action with respect to such alleged unauthorized use or
infringement), of such unauthorized use or infringement, then the licensee may
by written notice to the licensor request that the licensor bring an action with
respect to such alleged unauthorized use or infringement at the expense of the
licensee, in which event the licensor shall promptly commence such action, but
only if the licensee certifies to the licensor that in the licensee's good faith
judgment failure to take action against the unauthorized use or infringement in
question is likely to have a material adverse effect on the business of the
licensee. Any settlement amount or damages awarded in any such suit referenced
in the preceding sentence shall, after payment of expenses incurred by the
parties, be paid to the licensee. In any action taken pursuant to this Section
2.4, the licensee shall reasonably cooperate with the licensor in all respects,
to have the appropriate employees of the licensee assist in the preparation of
the suit and testify if requested by the licensor, and to make available any
records, papers, information, specimens and the like. Except as expressly
provided herein, all expenses incurred in connection with actions taken pursuant
to this Section 2.4 shall be borne independently by
3
<PAGE>
each of the parties, with each party being liable solely for the fees and
expenses it incurs in connection with such action.
Section 2.5 Infringement of Third Party Intellectual Property Rights. In no
--------------------------------------------------------
event shall the licensor hereunder be required to assume the defense of or pay
any costs of settlement of any alleged unauthorized use or infringement of any
third party patent or other intellectual property rights arising out of or in
connection with or resulting from any use of the Licensed Intellectual Property
by the licensee hereunder, and the licensee shall hold the licensor harmless
from any damages, costs or liabilities incurred by the licensor arising from or
in connection with any such alleged unauthorized use or infringement; provided,
however, that the licensor shall reasonably cooperate with the licensee in the
defense of any such alleged unauthorized use or infringement and the licensee
shall reimburse the licensor for all reasonable attorneys' fees and other out-
of-pocket expenses incurred by the licensor in connection therewith.
Notwithstanding the foregoing, nothing contained in this Agreement shall be
deemed to limit Parent's indemnification obligations, as set forth in the
Distribution Agreement, with respect to the litigation entitled Avid Technology,
----------------
Inc. v. Data Translation, Inc., Civil Action No. 95-11193 JLT, pending in the
- ------------------------------
United States District Court for the District of Massachusetts.
Section 2.6 Prosecution of Licensed Patent Applications and Maintenance of
--------------------------------------------------------------
Issued Patents. It is understood and agreed between the parties hereto that
- --------------
nothing contained in this Agreement creates any obligation on Parent or Sub, in
each case as licensor hereunder, to further prosecute before the U.S. Patent and
Trademark Office or before any foreign patent office any patent application
included in the Licensed Intellectual Property, or to file a corresponding
patent application in any foreign country based on any such U.S. patent
application, or to pay any maintenance fee which is due or which may become due
in respect of any patent or patent application included in the Licensed
Intellectual Property. In the event that the licensor decides to cease
prosecution of any patent application or to cease paying maintenance fees on any
issued patent, the licensor shall notify the licensee hereunder in writing at
least sixty (60) days prior to taking any such action, and, in the event that
the licensee desires that the licensor continue the prosecution of any such
patent application or that the licensor pay such maintenance fee and the
licensee reimburses the licensor for all costs thereafter incurred, the licensor
shall continue the prosecution of such patent application or pay the maintenance
fee for such issued patent. In the event that the licensor later earns any
royalty income from any such patent for which the licensee incurred any such
costs, the licensor shall pay to the licensee an amount equal to the lesser of
(a) the amount of such royalty income and (b) the amount of such costs incurred
by the licensee with respect to such patent.
Section 2.7 Transferability. The license granted to Sub or Parent pursuant to
---------------
Section 2.1 or 2.2 hereof, respectively, shall not be sublicensed, sold or
otherwise transferable by the licensee in whole or in part other than in
connection with (a) the distribution and sale by the licensee of its products
and services in the ordinary course of business or (b) a sale or transfer, on a
going concern basis, by the licensee of its entire business, through merger or
sale of stock or substantially all of the assets related thereto; provided that
any sale or transfer permitted by clause (b) above shall be subject to the
provisions of Section 2.8 hereof; and provided, further, that no such transfer
shall be effective unless the transferee shall have agreed in writing to be
bound by the terms and provisions of this Agreement applicable to the
transferor.
Section 2.8 Termination. The license granted to Sub or Parent, as licensee,
-----------
under Section 2.1 or 2.2 hereof, respectively, will terminate automatically,
without notice, with respect to any patents issuing from patent applications
filed after August 31, 1996 and included in the Licensed Intellectual Property
(unless such application claims the benefit of the filing date of an application
filed on or before August 31, 1996 under 35 U.S.C. 120 or 121), in the event
that there is a change in control of the licensee or the licensee's business;
provided, however, that such patents may continue to be used or embodied in
products which have been shipped commercially, or with respect to which the
licensee is substantially near completion of development prior to first
commercial shipment, on or prior to the date the license would otherwise
terminate as provided above. The license granted to Sub or Parent, as licensee,
under Section 2.1 or 2.2 hereof will terminate
4
<PAGE>
automatically, without notice, with respect to all the Licensed Intellectual
Property licensed thereby (a) upon the institution by or against the licensee of
insolvency, receivership or bankruptcy proceedings, or any other proceedings for
the settlement of the licensee's debts, (b) upon the licensee's making an
assignment for the benefit of creditors, or (c) upon the licensee's dissolution.
In the event that any license granted to Sub or Parent is terminated pursuant to
this Section 2.8, the applicable licensee shall promptly return any
documentation reflecting or embodying the Licensed Intellectual Property with
respect to which such termination applies. Each of Sub and Parent, as licensee,
shall notify the licensor immediately upon becoming aware of any change in
ownership or control of the licensee which could result in a termination of the
applicable license.
Section 3 Non-Disclosure Agreements.
-------------------------
Parent and Sub shall cause their respective employees, promptly after the
Distribution Date, to enter into and execute non-disclosure agreements, in form
and substance reasonably satisfactory to the other company, governing the use by
such employees of confidential information relating to the other company,
including without limitation confidential information relating to the Assigned
Intellectual Property and the Licensed Intellectual Property, and shall take all
reasonable steps necessary to enforce each such non-disclosure agreement after
its execution.
Section 4 MISCELLANEOUS.
-------------
Section 4.1 Confidentiality. The provisions of the Distribution Agreement
---------------
relating to confidentiality shall apply with respect to any information obtained
or learned by either party from the other party in connection with the
assignments and licenses contemplated hereby. This Section shall survive the
termination of this Agreement.
Section 4.2 Dispute Resolution. All disputes, controversies or claims between
------------------
Parent and Sub arising out of or relating to this Agreement, including without
limitation the breach, interpretation or validity of any term or condition
hereof, shall be resolved in accordance with the provisions of the Distribution
Agreement relating to dispute resolution.
Section 4.3 Amendment and Waiver. No amendment of any provision of this
--------------------
Agreement shall in any event be effective unless the same shall be in writing
and signed by the parties hereto. Any failure of any party to comply with any
obligation, agreement or condition hereunder may only be waived in writing by
the other party but such waiver shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. No failure by any party to
take any action against any breach of this Agreement or default by the other
party shall constitute a waiver of such party's right to enforce any provisions
hereof or to take any such action.
Section 4.4 Notices. Any notice to any party hereto given pursuant to this
-------
Agreement shall be in writing and shall be given by the means, and to the
addresses, set forth in the "Notices" section of the Distribution Agreement.
Section 4.5 Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of, and be binding upon and enforceable against the respective successors and
assigns of the parties hereto, provided that, except as expressly provided in
Section 2.7 hereof, this Agreement may not be assigned by either party without
the prior written consent of the other party, and any attempt to assign any
rights or obligations hereunder without such consent shall be void.
Section 4.6 Entire Agreement; Parties in Interest. This Agreement (including
-------------------------------------
the Schedules hereto and the provisions of the Distribution Agreement
incorporated herein by reference) comprises the entire agreement between the
parties hereto as to the subject matter hereof and supersedes all prior
agreements and understandings between them relating thereto and is not intended
to confer upon any person other than the parties hereto (including their
successors and permitted assigns) any rights or remedies hereunder.
5
<PAGE>
Section 4.7 Severability. If any term or provision of this Agreement or the
------------
application thereof to any person or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Agreement or the application of such
terms or provisions to persons or circumstances other than those as to which it
is invalid or unenforceable shall not be affected thereby and each term and
provision of this Agreement shall be valid and enforced to the fullest extent
permitted by law.
Section 4.8 Captions. Captions and headings are supplied herein for
--------
convenience only and shall not be deemed a part of this Agreement for any
purpose.
Section 4.9 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the internal substantive laws of the Commonwealth of
Massachusetts, without giving effect to the principles of conflicts of laws
thereof.
Section 4.10 Counterparts. This Agreement may be executed in several
------------
counterparts, and all counterparts so executed shall constitute one agreement,
binding upon the parties hereto, notwithstanding that the parties are not
signatory to the same counterpart.
IN WITNESS WHEREOF, Parent and Sub have caused this Agreement to be duly
executed by their authorized representatives as an agreement under seal, all as
of the day and year first written above.
MEDIA 100 INC.
By:
------------------------------------------
Name: John A. Molinari
Title: President and Chief Executive Officer
DATA TRANSLATION, INC.
By:
-----------------------------------------
Name: Alfred A. Molinari, Jr.
Title: Chairman and Chief Executive Officer
6
<PAGE>
SCHEDULE A
TO
INTELLECTUAL PROPERTY AGREEMENT
BETWEEN
MEDIA 100 INC. AND DATA TRANSLATION, INC.
ASSIGNED PATENTS AND PATENT APPLICATIONS
----------------------------------------
<TABLE>
<CAPTION>
Title of Application Serial No. Patent No.
(Inventor and Country) Status Filing Date Issue Date
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Color Video Processing Circuitry Issued 07/172,017 4,916,531
(Genz - U.S.) 03/23/88 04/10/90
Circuitry for Conditioning Analog Issued 07/618,722 5,111,203
Signals and Converting to Digital Form 11/27/90 05/05/92
(Calkins - U.S.)
Calkins - Canada Pending 2050093
08/28/91
System for Locating Failure Signals Issued 07/603,791 5,185,883
by Comparing Input Data, etc. 10/26/90 02/09/93
(Ianni - U.S.)
Data Acquisition Apparatus Issued 06/242,840 4,380,764
(Connors - U.S.) 03/12/81 04/19/83
Continuous Data Transfer System Issued 06/470,402 4,599,689
(Berman - U.S.) 02/28/83 07/08/86
Interrupt Driven Multi-Buffer DMA Issued 06/868,257 4,703,449
Circuit for Enabling Continuous 05/28/86 10/27/87
Sequential Data Transfers
(Berman - U.S.)
Oscillator and Voltage-to-Frequency Issued 07/724,528 5,168,247
Converter Employing the Same 06/28/91
(Tarr - U.S.)
Storing a Digitized Stream of Issued 08/111,390 5,406,311
Interlaced Video Image Data in a 08/25/93 04/11/95
Memory in Non-Interlaced Form
(Michelson - U.S.)
Reprogrammable PCMCIA Card Pending 08/397,390
(Michelson - U.S.) 03/02/95
Computer Based Video System Pending 08/666,960
(Walsh - U.S.) 06/20/96
</TABLE>
7
<PAGE>
SCHEDULE B
TO
INTELLECTUAL PROPERTY AGREEMENT
BETWEEN
MEDIA 100 INC. AND DATA TRANSLATION, INC.
ASSIGNED TRADEMARKS
-------------------
<TABLE>
<CAPTION>
Mark Jurisdiction Serial Number
- ------------------------------------------------------------
<S> <C> <C>
Broadway United States 75/006,321
Broadway European Union 17848
Broadway Japan 8-503
Colorcapture United States 73/753,301
Data Translation United States 73/358,372
Data Translation Canada 498,887
Data Translation France 643,945
Data Translation Japan 95114/1982
Data Translation & Design United States 74/059,156
DT-Connect United States 74/180,184
DT-Open Layers United States 74/229,369
Global Lab United States 74/008,545
Global Lab & Design United States 74/118,765
Vision-EZ United States 74/403,329
</TABLE>
8
<PAGE>
EXHIBIT 10.3
FORM OF
CORPORATE SERVICES AGREEMENT
----------------------------
This Agreement is dated as of , 1996, between Media 100 Inc.
----------------
(f/k/a Data Translation, Inc.), a Delaware corporation ("Parent"), and Data
Translation, Inc. (f/k/a Data Translation II, Inc.), a Delaware corporation
("Sub").
WHEREAS, Parent and Sub have entered into a Distribution Agreement dated as of
, 1996 (the "Distribution Agreement"), pursuant to which Parent is
- -------------
assigning and transferring to Sub certain businesses and assets associated with
Parent's data acquisition and imaging, commercial products and networking
distribution businesses in exchange for the assumption by Sub of certain
liabilities and obligations associated with such businesses and the issuance by
Sub to Parent of shares of Sub common stock on such terms and conditions as are
contained therein; and
WHEREAS, on , 1996 the Board of Directors of Parent declared a dividend
---------
of all outstanding shares of Sub to the holders of record of the outstanding
common stock of Parent, such dividend to be made on ,1996 (the "
---------
Distribution Date"); and
WHEREAS, the Distribution Agreement provides that Parent and Sub shall enter
into an agreement relating to certain transition services to be provided by Sub
to Parent with respect to Parent's retained business after the Distribution
Date, and this Agreement is entered into in order to fulfill that provision;
NOW, THEREFORE, in consideration of the foregoing and the other agreements and
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1 SERVICES TO BE PROVIDED.
-----------------------
Section 1.1 Types of Services. During the term of this Agreement, Sub agrees
-----------------
to provide or to cause to be provided to Parent, and Parent agrees to purchase
from Sub, on the terms provided herein the services described in Schedule A
hereto (collectively, the "Services").
Section 1.2 Additional Services. During a period of transition following the
-------------------
Distribution Date, Parent may request that Sub provide additional administrative
and support services to Parent until it is able to otherwise contract or arrange
for such services. Upon a request for such additional services, Parent and Sub
shall negotiate in good faith as to the scope of such services and the terms and
conditions under which such services may be provided; provided that, unless
otherwise agreed to by the parties, such services will be provided only to the
extent, and on a basis comparable to that provided by Sub with respect to its
own operations. A brief description of any mutually agreed-upon additional
services to be provided will be added to Schedule A, and such additional
services will be deemed to be a "Service" for all purposes under this Agreement
unless expressly stated otherwise in such Schedule.
<PAGE>
Section 1.3 Scope of Services. Each Service furnished pursuant to this
-----------------
Agreement shall be in all material respects equivalent to and limited to the
same type, quality, quantity and timeliness of such service that Sub provides to
its own organization and personnel, and to those of its other divisions. Parent
acknowledges that such Services will be performed by those employees of Sub who
perform similar services for Sub in the normal course of their employment.
Accordingly, Sub shall not be obligated to make available any incremental
Services to the extent that doing so would unreasonably interfere with the
performance of any employee of Sub in connection with his or her
responsibilities to Sub, require additional staff or otherwise cause an
unreasonable burden to Sub. Duly authorized agents of Sub shall have the right
to enter the premises of Parent to the extent reasonably necessary or convenient
to provide the Services.
If Sub ceases to provide any of the Services to its own business units or if the
level of such Services is reduced for any reason, Sub may also cease to provide
or reduce the level of such Services provided to Parent under this Agreement.
In the event of any substantial reduction or a substantial increase or other
material change in the level or scope of any of the Services required by Parent
during the term of this Agreement, the parties agree to negotiate in good faith
an equitable adjustment of the fee payable therefor. Sub agrees to provide
Parent as promptly as practicable notice of any substantial change in the level
of such Services provided under this Agreement, but in no event shall Sub
provide less than thirty (30) days advance notice of such date of any service
discontinuance.
Section 2 CHARGES AND PAYMENTS.
--------------------
Section 2.1 Charges for Services. It is the intention of the parties hereto
--------------------
that the charges for Services to be provided pursuant to this Agreement shall be
determined and allocated according to methods consistent with past practices and
procedures observed by Parent prior to the Distribution Date concerning
intercompany services and accounts, with a view in every case toward providing
Sub with a reimbursement of fully allocated direct and indirect costs of
providing Services but without any profit to Sub, or as may otherwise be
mutually agreed upon by the parties. Charges for each Service shall be
determined on a monthly basis. With respect to any Services which are provided
for a period which is less than a full calendar month, or where the scope of
such services is changed in accordance with Section 1.3 during such period, the
charges with respect to such Service shall be appropriately pro-rated.
Section 2.2 Payments for Services. As soon as practicable, but in no event
---------------------
more than fifteen (15) days, following the last business day of a calendar month
during which this Agreement is in effect, Sub shall submit to Parent a written
invoice for the aggregate amount to be charged to Parent for Services rendered
during the just completed month; provided that each such invoice shall indicate
the amount of charges being assessed for each Service provided and shall include
such documentation as is reasonably necessary to substantiate such amounts.
Parent shall pay to Sub the invoiced amount within thirty (30) days after
receipt of an invoice.
2
<PAGE>
Whenever the provision of any Service pursuant to this Agreement is terminated
for any reason, Sub shall, as promptly as practicable, but in no event more than
fifteen (15) business days, after the termination of such Service, submit to
Parent a written invoice for the aggregate amount still owed to Sub with respect
to such Service, together with such documentation as is reasonably necessary to
substantiate such amounts. Parent shall pay to Sub the invoiced amount within
thirty (30) days after receipt of an invoice.
Section 2.3 Taxes or Other Governmental Charges. All federal, state and local
-----------------------------------
taxes, charges, fees and similar liabilities, except taxes based on Sub's net
income, which are levied on either party in connection with the provision of any
Services hereunder, shall be for Parent's account and paid directly by Parent
or, if required to be paid by Sub, shall be added to the next invoice. Sub
shall provide Parent with evidence of the payment of any such taxes by Sub with
such invoice.
Section 2.4 Out-of-Pocket/Direct Expenses. Parent agrees to pay directly or to
-----------------------------
reimburse Sub for all reasonable out-of-pocket and direct expenses incurred by
Sub in respect of the provision of any Services, including all reasonable
expenses for outside accounting, legal, recruiting, consulting, marketing and
other professional services. All payments or reimbursements to be made under
this Section 2.4 by Parent shall, except as otherwise provided herein, be made
not later than thirty (30) days following receipt by Parent of an invoice
therefor.
Section 3 INDEPENDENT CONTRACTOR STATUS.
-----------------------------
In carrying out the provisions of this Agreement, each party is and shall be
deemed to be for all purposes separate and independent entities. Sub shall
select its employees and agents, and such employees and agents shall be under
the exclusive and complete supervision and control of Sub. Sub hereby
acknowledges responsibility for full payment of wages and other compensation to
all employees and agents engaged in the performance of the Services hereunder.
It is the express intent of this Agreement that Sub shall render and perform the
Services as an independent contractor in accordance with its own standards,
subject to its compliance with the provisions of this Agreement.
Section 4 LIMITED LIABILITY; INDEMNIFICATION.
----------------------------------
Section 4.1 Limited Liability. Neither party shall be liable to the other
-----------------
party for any special, indirect, incidental, exemplary or consequential damages,
or for loss of profits or revenues, whether arising in contract, tort (including
negligence), under any warranty or otherwise, arising out of its performance or
non-performance under this Agreement or the termination of this Agreement, even
if Parent or Sub, as the case may be, has been advised of the possibilities of
such damages.
Section 4.2 Disclaimer of Warranty. SUB MAKES NO REPRESENTATIONS OR WARRANTIES
----------------------
WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE SERVICES TO BE PROVIDED BY
IT UNDER THIS AGREEMENT. In the event the performance or non-performance of any
Service to be provided hereunder results in direct
3
<PAGE>
damages to Parent, Sub shall be liable only to the extent such performance or
non-performance was the result of Sub's gross negligence or willful misconduct,
and Sub's maximum, cumulative and sole liability to Parent for such direct
damages shall be limited to an amount up to the aggregate amount actually paid
by Parent to Sub for such Service up to the date of the performance or non-
performance giving rise to the direct damages. Parent acknowledges that such
payment constitutes fair and reasonable compensation for any direct damages.
Notice of any claim for direct damages must be made within one (1) year of the
date of the event giving rise to such claim and such claim must specify the
damage amount claimed and a description of the Service and the act or omission
giving rise to the claim.
Section 4.3 Indemnification. Parent hereunder agrees to indemnify and hold
---------------
harmless Sub, its directors, officers, employees, agents, representatives,
shareholders, transferees, successors and assigns against any claims, actions,
demands, judgments, losses, costs, expenses, damages and liabilities (including
reasonable attorneys' fees and disbursements) related to or arising out of or
connected with such Services, regardless of the legal theory asserted. The
foregoing indemnity applies to claims, actions and demands for which Sub may be,
or may be claimed to be, partially or solely liable; provided that the foregoing
indemnity will not apply with respect to any claim for direct damages asserted
by Parent against Sub as provided in Section 4.2 above.
Section 5 TERM OF AGREEMENT.
-----------------
Section 5.1 Term. This Agreement shall become effective on the Distribution
----
Date and shall remain in effect until the earlier of (a) the discontinuance or
termination of all Services to be provided hereunder in accordance with the
terms of this Agreement and (b) December 31, 1997.
Section 5.2 Discontinuation or Termination of Services. Parent may discontinue
------------------------------------------
its use of any such Service upon written notice given to Sub not less than
thirty (30) days prior to the proposed date of service discontinuance. In
addition, upon the occurrence and continuance of a default by either party in
connection with the provision of, or payment for, any Service hereunder for a
period of ten (10) days after written notice thereof has been given to the
defaulting party, the non-defaulting party may terminate such Service and shall
have no further obligation to the other party with respect thereto.
Notwithstanding any termination of this Agreement or any Services to be provided
hereunder, the provisions of Sections 2 and 4 shall remain in effect
indefinitely or until such time as the obligations of both parties hereunder
shall have been fully discharged.
Once a Service is discontinued or terminated in accordance with the terms of
this Agreement, Sub shall not again be obligated to later reinstate such
Service; provided, however, that to the extent Sub is thereafter requested to
provide any discontinued or terminated Service to Parent, including any
transition-related assistance necessary for any other organization to perform
the discontinued or terminated Service, and Sub consents to provide such
Service, Sub shall be entitled to compensation reflecting incurred costs with
respect thereto.
4
<PAGE>
Section 6 MISCELLANEOUS.
-------------
Section 6.1 Force Majeure. Anything contained in this Agreement to the
-------------
contrary notwithstanding, Sub's performance of its duties and obligations
hereunder shall be excused to the extent that failure of performance is caused
by any act of force majeure, including but not limited to acts of God or the
public enemy, acts of the government in its sovereign capacity, fires, floods,
epidemics, quarantine restrictions, freight embargoes, strikes, unusually severe
weather, sabotage or any other or similar event or casualty beyond the
reasonable control of Sub; provided that Parent shall not be obligated to pay
such party for such Services to the extent that Sub is unable to perform as a
result of a force majeure condition. Sub shall promptly notify Parent of such
events and make every reasonable effort to restore such Services.
Notwithstanding the foregoing, Parent shall be responsible for making its own
alternative arrangements with respect to interrupted Services during the
pendency of any force majeure condition.
Section 6.2 Access to Information; Confidentiality. The provisions of the
--------------------------------------
Distribution Agreement relating to the access to information and confidentiality
shall apply with respect to any information obtained or learned by either party
from the other party in connection with the parties' performance of their
respective obligations hereunder. This Section shall survive the termination of
this Agreement.
Section 6.3 Dispute Resolution. All disputes, controversies or claims between
------------------
Parent and Sub arising out of or relating to this Agreement, including without
limitation the breach, interpretation or validity of any term or condition
hereof, shall be resolved in accordance with the provisions of the Distribution
Agreement relating to dispute resolution.
Section 6.4 Amendment and Waiver. No amendment of any provision of this
--------------------
Agreement shall in any event be effective unless the same shall be in writing
and signed by the parties hereto. Any failure of any party to comply with any
obligation, agreement or condition hereunder may only be waived in writing by
the other party but such waiver shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. No failure by any party to
take any action against any breach of this Agreement or default by the other
party shall constitute a waiver of such party's right to enforce any provisions
hereof or to take any such action.
Section 6.5 Notices. Any notice to any party hereto given pursuant to this
-------
Agreement shall be in writing and shall be given by the means, and to the
addresses, set forth in the "Notices" section of the Distribution Agreement.
Section 6.6 Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of, and be binding upon and enforceable against the respective successors and
assigns of the parties hereto, provided that this Agreement may not be assigned
by either party without the prior written consent of the other party, and any
attempt to assign any rights or obligations hereunder without such consent shall
be void.
5
<PAGE>
Section 6.7 Entire Agreement; Parties in Interest. This Agreement (including
-------------------------------------
the Schedules hereto and the provisions of the Distribution Agreement
incorporated herein by reference) comprises the entire agreement between the
parties hereto as to the subject matter hereof and supersedes all prior
agreements and understandings between them relating thereto and, except as
provided Section 4.3, is not intended to confer upon any person other than the
parties hereto (including their successors and permitted assigns) any rights or
remedies hereunder.
Section 6.8 Severability. If any term or provision of this Agreement or the
------------
application thereof to any person or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Agreement or the application of such
terms or provisions to persons or circumstances other than those as to which it
is invalid or unenforceable shall not be affected thereby and each term and
provision of this Agreement shall be valid and enforced to the fullest extent
permitted by law.
Section 6.9 Captions. Captions and headings are supplied herein for
--------
convenience only and shall not be deemed a part of this Agreement for any
purpose.
Section 6.10 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the internal substantive laws of the Commonwealth of
Massachusetts, without giving effect to the principles of conflicts of laws
thereof.
Section 6.11 Counterparts. This Agreement may be executed in several
------------
counterparts, and all counterparts so executed shall constitute one agreement,
binding upon the parties hereto, notwithstanding that the parties are not
signatory to the same counterpart.
IN WITNESS WHEREOF, Parent and Sub have caused this Agreement to be duly
executed by their authorized representatives as an agreement under seal, all as
of the day and year first written above.
MEDIA 100 INC.
By:
------------------------------------------
Name: John A. Molinari
Title: President and Chief Executive Officer
DATA TRANSLATION, INC.
By:
------------------------------------------
Name: Alfred A. Molinari, Jr.
Title: Chairman and Chief Executive Officer
6
<PAGE>
SCHEDULE A
TO
CORPORATE SERVICES AGREEMENT
BETWEEN
MEDIA 100 INC. AND DATA TRANSLATION, INC.
1. Accounting and Finance:
----------------------
Cost accounting - tracking of inventory accounts (record work order
variances, purchase order variances, material transactions and consignment
usage; reclassify no charge items; verify scrap costs; record closed for
manufacturing work orders; reclassify direct labor from indirect labor -
assembly and test; and standards revaluation); Accounts payable (track, pay
and file invoices); Payroll (maintain payroll function and train new
personnel)
2. Information Systems Service and Support:
---------------------------------------
VAX hardware, software support services, Net connections, dial-in access,
back-ups; Intervoice IVR use, maintenance; offsite storage; Internet
connectivity; use of telephone system, installation of telephones and voice
mail and related maintenance and support; e-mail systems support and
maintenance
3. Purchasing Support (Dept. 423):
------------------------------
Provide procurement and delivery for all Media 100 materials and equipment,
including manufacturing inventory, capital equipment and miscellaneous
support items; maintain all corporate agreements and follow-up corrective
actions with outside suppliers; identify and execute cost reduction
opportunities
4. Material Planning (Dept. 428):
-----------------------------
Provide forecasting and planning support for Media 100 materials and
manufacturing, including loading material forecasts into MRP, verifying
material availability, reviewing ECO's for material impact and periodically
programming parts
5. Mail, Shipping and Receiving, Invoicing (Dept. 428):
---------------------------------------------------
Provide shipping and receiving support for all Media 100 material including
manufacturing and miscellaneous equipment; incoming inspection to be
performed as required on PCB's, cables, junction boxes, etc.; distribution
of out-going mail; preparation of invoices
6. Document Control (Dept. 535):
----------------------------
Provide complete document control services to Media 100, including LOM and
price file maintenance, master document and disk control and duplication,
and MRP data entry; conduct weekly ECO reviews and ensure ECO's are properly
reviewed and authorized
7
<PAGE>
7. Second Shift Supervision:
------------------------
Provide administrative support to Parent second shift manufacturing
operations at Sub's facilities
8. Environmental Stress Screening (ESS):
------------------------------------
Provide ESS service to Media 100 including maintenance of equipment and
loading and unloading of chambers when necessary
8
<PAGE>
EXHIBIT 10.4
FORM OF
USE AND OCCUPANCY AGREEMENT
---------------------------
This Agreement is dated as of , 1996, between Media 100 Inc.
-----------------
(f/k/a Data Translation, Inc.), a Delaware corporation ("Parent"), and Data
Translation, Inc. (f/k/a Data Translation II, Inc.), a Delaware corporation
("Sub").
WHEREAS, Alfred A. Molinari, Jr. and Maureen K. Molinari, Trustees of Nason Hill
Trust under a Declaration of Trust dated November 15, 1979 and recorded with the
Middlesex County Registry of Deeds (Southern District) in Book 13839, Page 406,
on November 16, 1979, as Landlord ("Landlord"), and Parent, as Tenant, entered
into a Lease dated as of December 1, 1979, as amended (the "Lease"), pursuant to
which Parent has leased its facilities located at 100 Locke Drive, Marlboro,
Massachusetts (the "Leased Premises"), including the building located thereon
(the "Building"); and
WHEREAS, the Parent and Sub have entered into a Distribution Agreement dated as
of , 1996 (the "Distribution Agreement"), pursuant to which Parent
-------------
is assigning and transferring to Sub certain businesses and assets associated
with Parent's data acquisition and imaging, commercial products and networking
distribution businesses (including all of Parent's rights in, to and under the
Lease) in exchange for the assumption by Sub of certain liabilities and
obligations associated with such businesses (including all of Parent's
obligations under the Lease) and the issuance by Sub to Parent of shares of Sub
common stock on such terms and conditions as are contained therein; and
WHEREAS, on , 1996 the Board of Directors of Parent declared a dividend
---------
of all outstanding shares of Sub to the holders of record of the outstanding
common stock of Parent, such dividend to be made on , 1996 (the
-----------
"Distribution Date"); and
WHEREAS, Parent's remaining Media 100 digital media business has heretofore
occupied a portion of the Leased Premises; and
WHEREAS, the Distribution Agreement provides that Parent and Sub shall enter
into an agreement relating to the continued use and occupancy of a portion of
the Leased Premises by Parent for a transition period following the Distribution
Date, and this Agreement is entered into in order to fulfill that provision;
NOW, THEREFORE, in consideration of the foregoing and the other agreements and
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1 LICENSE.
-------
Section 1.1 License of Sub Space. Sub hereby grants Parent a license to (a)
--------------------
use and occupy approximately 24,770 square feet of office space and 6,000 square
feet of manufacturing space located in the Building, such space to be demarcated
by the mutual agreement of the parties (the "Parent Space"), (b) utilize all
rest rooms, cafeteria and fitness center facilities, outdoor facilities
generally available to employees of Sub,
<PAGE>
sidewalks, driveways and parking lots (the "Common Areas") and (c) cross other
portions of the Building to maintain convenient access to, from and between the
Parent Space and the Common Areas, subject in all cases to the provisions of
this Agreement. Parent hereby acknowledges that Sub is licensing the Parent
Space to Parent "as is," and that Sub makes no warranty, covenant or
representation that the Parent Space shall be other than in its present
condition. The parties expressly acknowledge that this Agreement does not
constitute a demise by Sub of any real property interest in the Leased Premises
(including without limitation the Parent Space) and, consequently, Parent shall
not be entitled to any rights or remedies to which a subtenant may be entitled
at law or in equity, unless Parent shall have been expressly afforded such
rights and remedies pursuant to the provisions of this Agreement. This Agreement
is subject and subordinate to the Lease and, consequently, if the Lease expires
or terminates for any reason whatsoever, this Agreement shall immediately
terminate and Parent's license hereunder shall expire.
Section 1.2 Modifications to Parent Space. Sub and Parent agree to negotiate
-----------------------------
in good faith any reconfigurations of the Parent Space reasonably requested from
time to time by either party that improve the efficient utilization of the
Building by both parties (but in no event resulting in a reduction of the
aggregate square footage of the Parent Space). Each party will bear its own
moving expenses incurred in connection with any reconfiguration of the Parent
Space. If Parent requests the use of additional space in the Building, Sub and
Parent agree to negotiate in good faith the availability and configuration of
such additional space. The monthly License Fee (as hereinafter defined) for any
such additional space will be $3.47 per square foot.
1.3 Cafeteria and Fitness Center Facilities. The cafeteria and fitness
---------------------------------------
center facilities located in the Building will be made available to employees of
Parent and their guests to the same extent that such facilities are made
available to employees of Sub and their guests. All users of the fitness center
will be required to give such releases and obtain such medical clearances in
connection with such use as Sub shall from time to time require in its sole
discretion. If Sub ceases to provide the service of the cafeteria or fitness
center facilities to its own employees or if the level of such service is
reduced for any reason, Sub may also cease to provide or reduce the level of
such service provided to Parent under this Agreement. Sub agrees to provide
Parent with reasonable advance notice of any substantial change in the level of
such services to be provided hereunder.
Section 1.4 Shared Equipment. The parties recognize that certain manufacturing
----------------
equipment heretofore utilized by Parent in the manufacture of its Media 100(R)
products has been has been included in the Contributed Assets (as defined in the
Distribution Agreement) (the "Shared Equipment"). Sub hereby agrees that,
during the term of this Agreement, Parent and its employees shall have access to
the Shared Equipment in connection with Parent's manufacturing requirements, and
Sub will use commercially reasonable efforts to repair and maintain the Shared
Equipment in good operating condition suitable for Parent's requirements.
Utilization of the Shared Equipment by the respective manufacturing operations
of Parent and Sub shall be consistent with historical practice, provided that
the parties agree to negotiate in good faith any adjustments to their respective
utilization to accommodate any future material change in their respective
2
<PAGE>
manufacturing requirements. Sub's provision of access and maintenance with
respect to the Shared Equipment as described above shall be deemed for all
purposes under this Agreement to be a Service provided by Sub to Parent.
In the event Sub desires to sell or otherwise dispose of any of the Shared
Equipment or Sub is either unwilling or unable to repair and maintain the Shared
Equipment in good operating condition suitable for Parent's requirements, Sub
shall first provide written notice thereof to Parent, which notice shall
constitute an offer to sell such equipment to Parent free of any liens and
encumbrances, but otherwise on an "as is, where is" basis, for a purchase price
equal to the net book value of such equipment as shown in Sub's financial
records. If Parent elects to purchase the offered equipment, it shall so notify
Sub in writing within fifteen (15) days following receipt of Sub's offer notice,
and the parties shall consummate such purchase and sale as promptly as
practicable thereafter. Failure of Parent to so notify Sub of its election
shall be deemed to be a determination by Parent not to purchase the offered
equipment.
Section 1.5 Related Services. During the term of this Agreement, Sub will
----------------
provide, or cause to be provided, the following services (the "Related
Services") related to Parent's use and occupancy of the Parent Space:
(a) all utilities consumed on or in connection with the use and occupancy
of the Parent Space, including but not limited to water, sewer, gas,
electricity, heat, ventilation and air conditioning;
(b) maintenance services for the Building (e.g., janitorial/custodial,
repairs, elevators, plants) and for the grounds on the Leased Premises
(e.g., landscaping, snow removal, paving) with respect to the Parent
Space (including all rest rooms located in the Building and all
parking lots and walkways, sidewalks, and driveways providing for
access to and from the Parent Space);
(c) receipt and distribution of Parent's incoming mail;
(d) use of the Building's photocopy center for photocopy and binding
services for business documents and printing services; and
(e) reception and security services.
Sub will provide, or cause to be provided, each of the Related Services with
respect to the Parent Space and Parent's operations conducted therein to the
extent required to accommodate Parent's reasonable needs, and in the same manner
of quality, quantity and timeliness as such services are provided to the rest of
the Building and the Leased Premises and the operations conducted therein, but
in no event in a materially lesser manner than such services were provided prior
to the date hereof.
3
<PAGE>
Section 2 LICENSE FEE.
-----------
Parent agrees to pay to Sub a monthly license fee (the "License Fee") for the
use and occupancy of the Parent Space, the use of the Common Areas, and the
provision of the Related Services in the amount of $102,977.00, and for the use
of the Shared Equipment in the amount of $2,400 in each case payable on the
first business day of each calendar month during the term of this Agreement.
With respect to any period of use or occupancy of the Parent Space which is less
than a full calendar month, the License Fee with respect to such period shall be
appropriately pro-rated. In the event any of the Shared Equipment is sold to
Parent or otherwise disposed of by Sub, the parties agree that the License Fee
with respect thereto shall be equitably adjusted.
Section 3 INDEMNIFICATION.
---------------
Each of Parent and Sub shall indemnify and hold harmless the other against any
claims, liability, loss, damage or expense (including reasonable attorneys' fees
and disbursements) incurred or sustained by such other party arising out of any
personal injury or property damage caused by the fault of the invitees, agents,
servants or employees of such party in connection with their activities under or
related to this Agreement.
Section 4 TERM OF AGREEMENT.
-----------------
Section 4.1 Term. This Agreement shall become effective on the Distribution
----
Date and shall remain in effect until April 30, 1997.
Section 4.2 Termination. Upon the occurrence and continuance of a default by
-----------
either party hereunder, including the defaulting party's failure to keep,
observe or perform any covenant, agreement, term or provision of this Agreement,
for a period of ten (10) days after written notice thereof has been given to the
defaulting party, the non-defaulting party may terminate this Agreement and
shall have no further obligation to the defaulting party hereunder.
Notwithstanding any termination of this Agreement, the provisions of Section 3
shall remain in effect indefinitely or until such time as the obligations of
both parties hereunder shall have been fully discharged.
Section 5 ADDITIONAL COVENANTS.
--------------------
Section 5.1 No Alterations; Surrender. Parent may not make any physical
-------------------------
alterations to the Parent Space (including without limitation structural
alterations, construction or removal of interior walls, painting or other
decoration) without the prior written consent of Sub, which consent shall not be
unreasonably withheld or delayed. Parent shall surrender the Parent Space upon
termination of this Agreement in the same condition as it now exists, except for
normal wear and tear, damage caused by fire or other casualty, and other
alterations made with Sub's approval. Sub agrees to provide reasonable
assistance to Parent in connection with Parent's vacating of the Parent Space
and the removal of its property therefrom.
Section 5.2 Access to Parent Space. Sub, its agents and representatives shall
----------------------
have the right to enter the Parent Space without prior notice to inspect the
same, to exercise such
4
<PAGE>
rights as Sub may have under the Lease or this Agreement with respect to such
space, to permit the Landlord, its agents or representatives to access such
space to the extent permitted under the Lease, or for any other purpose which
Sub may reasonably determine to be necessary or desirable; provided, however,
that Sub shall not unreasonably interfere with Parent's use and enjoyment of the
Parent Space. Parent shall not be entitled to any abatement of any portion of
the License Fee by reason of the exercise of any such right of entry.
Section 5.3 Fire, Casualty and Eminent Domain. In the event of a fire,
---------------------------------
casualty or taking that affects the Parent Space to the extent that Parent is
unable to operate its business therein without unreasonable interference or
additional expense, but that does not result in termination of the Lease, Parent
may elect to terminate this Agreement by giving written notice to Sub within
fifteen (15) days of said event.
Section 6 MISCELLANEOUS.
-------------
Section 6.1 Access to Information; Confidentiality. The provisions of the
--------------------------------------
Distribution Agreement relating to the access to information and confidentiality
shall apply with respect to any information obtained or learned by either party
from the other party in connection with the parties' performance of their
respective obligations hereunder. This Section shall survive the termination of
this Agreement.
Section 6.2 Dispute Resolution. All disputes, controversies or claims between
------------------
Parent and Sub arising out of or relating to this Agreement, including without
limitation the breach, interpretation or validity of any term or condition
hereof, shall be resolved in accordance with the provisions of the Distribution
Agreement relating to dispute resolution.
Section 6.3 Amendment and Waiver. No amendment of any provision of this
--------------------
Agreement shall in any event be effective, unless the same shall be in writing
and signed by the parties hereto. Any failure of any party to comply with any
obligation, agreement or condition hereunder may only be waived in writing by
the other party but such waiver shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. No failure by any party to
take any action against any breach of this Agreement or default by the other
party shall constitute a waiver of such party's right to enforce any provisions
hereof or to take any such action.
Section 6.4 Notices. Any notice to any party hereto given pursuant to this
-------
Agreement shall be in writing and shall be given by the means, and to the
addresses, set forth in the "Notices" section of the Distribution Agreement.
Section 6.5 Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of, and be binding upon and enforceable against the respective successors and
assigns of the parties hereto, provided that this Agreement may not be assigned
by either party without the prior written consent of the other party, and any
attempt to assign any rights or obligations hereunder without such consent shall
be void.
5
<PAGE>
Section 6.6 Entire Agreement; Parties in Interest. This Agreement comprises
-------------------------------------
the entire agreement between the parties hereto as to the subject matter hereof
and supersedes all prior agreements and understandings between them relating
thereto and is not intended to confer upon any person other than the parties
hereto (including their successors and permitted assigns) any rights or remedies
hereunder.
Section 6.7 Severability. If any term or provision of this Agreement or the
------------
application thereof to any person or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Agreement or the application of such
terms or provisions to persons or circumstances other than those as to which it
is invalid or unenforceable shall not be affected thereby and each term and
provision of this Agreement shall be valid and enforced to the fullest extent
permitted by law.
Section 6.8 Captions. Captions and headings are supplied herein for
--------
convenience only and shall not be deemed a part of this Agreement for any
purpose.
Section 6.9 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the internal substantive laws of the Commonwealth of
Massachusetts, without giving effect to the principles of conflicts of laws
thereof.
6
<PAGE>
Section 6.10 Counterparts. This Agreement may be executed in several
------------
counterparts, and all counterparts so executed shall constitute one agreement,
binding upon the parties hereto, notwithstanding that the parties are not
signatory to the same counterpart.
IN WITNESS WHEREOF, Parent and Sub have caused this Agreement to be duly
executed by their authorized representatives as an agreement under seal, all as
of the day and year first written above.
MEDIA 100 INC.
By:
------------------------------------------
Name: John A. Molinari
Title: President and Chief Executive Officer
DATA TRANSLATION, INC.
By:
------------------------------------------
Name: Alfred A. Molinari, Jr.
Title: Chairman and Chief Executive Officer
CONSENT OF LANDLORD
-------------------
The undersigned, as Landlord under the Lease referred to in the foregoing Use
and Occupancy Agreement, hereby consent to all of the terms and conditions of
such Use and Occupancy Agreement, approve its execution and delivery by the
parties, and waive any and all notice of such execution and delivery.
NASON HILL TRUST
By:
------------------------------------------
By:
------------------------------------------
As Trustees of Nason Hill Trust
but not individually
7
<PAGE>
EXHIBIT 10.5
FORM OF
LEASE
-----
THIS LEASE dated as of this first day of December, 1979, by and between
ALFRED A. MOLINARI, JR. AND MAUREEN K. MOLINARI, TRUSTEES OF NASON HILL TRUST
under a Declaration of Trust dated November 15, 1979 and recorded with the
Middlesex County Registry of Deeds (Southern District) in Book 13839, Page 406,
on November 16, 1979, hereinafter referred to as the "Lessor", and DATA
TRANSLATION, INC., a Massachusetts corporation with a usual place of business in
Natick, Massachusetts, hereinafter referred to as the "Lessee".
W I T N E S S E T H :
-------------------
PREMISES
- --------
1. The Lessor hereby leases to the Lessee and the Lessee leases from the
Lessor upon the terms and conditions herein set forth the land and premises
located at Locke Drive, Marlborough Industrial Park, Malborough, Massachusetts,
as more particularly described in Exhibit A attached hereto, with all buildings,
additions, improvements and fixtures now or hereafter located thereon or therein
(hereinafter referred to as the "Premises") and all personal or real and
personal property acquired with the proceeds of the $750,000 principal amount of
Industrial Revenue Bond (Data Translation, Inc.) of the City of Marlborough (the
"Project Bond"), including without limitation the property described in Exhibit
B attached hereto, and any modification thereof, substitutions therefor and
additions thereto made in pursuance of the loan agreement (the "Loan Agreement")
of even date and delivery herewith between the City of Marlborough, acting by
and through its Industrial Development Financing Authority, as lender, and the
Lessor, as borrower (the "Leased Machinery"). The Premises and Leased Machinery
as they may at any time exist are collectively referred to herein as the
"Project".
TERM
- ----
2. To have and to hold the Project for a term of fifteen (15) years,
commencing on this first day of December, 1979, and ending on the first day of
December, 1994, unless sooner terminated as herein provided.
<PAGE>
BASIC AND ADDITIONAL RENT
- -------------------------
3. The Lessee agrees to pay as rent hereunder the aggregate amount for
which provision is made as follows:
A. The Lessee shall pay to the Indenture Trustee, in immediately
available funds for deposit in the Bond Fund for account of the Issuer on or
before each Loan Payment Date a sum which, together with other monies available
for such purpose in the Bond Fund, will equal the payment coming due on such
date under Section 5.1 of the Loan Agreement.
B. The Lessee shall pay to the Lessor annually during the term
hereof, on or before the thirtieth day of November of each year of such term,
the sum of Fifteen Thousand Dollars ($15,000).
C. The Lessee shall also pay to the Lessor annually during the term
hereof, on or before the thirtieth day of November of each year of such term,
the Cost of Living Payment to be determined as follows: The Cost of Living
Payment shall be zero for the first year (December 1, 1979 - November 30, 1980)
hereof. For each succeeding year of the term hereof (the Current Lease Year"),
(a) the percentage increase in the cost of living (the "Percentage") shall be
computed using as the basis of such computation the "Consumer Price Index for
Urban Wage Earners and Clerical Workers, Boston, Mass., All Items - Series A
(1967 = 100)" (the "Index") published by the Bureau of Labor Statistics of the
United States Department of Labor. The Index number for the month of December,
1979 (or for the nearest reported preceding month) shall be the "Base Index
Number", and the corresponding number for the month of December which starts the
Current Lease Year (or for the nearest reported preceding month) shall be the
"Current Index Number". The Percentage shall be ascertained by dividing the
Current Index Number by the Base Index Number and subtracting the integer 1 from
the quotient. (b) The Cost of Living Payment shall be zero if the Percentage is
less than zero. Otherwise, the Cost of Living Payment shall be the Percentage
multiplied by the sum of the rental payments called for during the Current Lease
Year by Sections 3A and 3B hereof. In the event (i) that the publication of the
Index shall be discontinued for the City of Boston or (ii) that the Index shall
be published at other than quarterly intervals, there shall be made in the
method of calculation herein provided such revisions as the circumstances may
require to carry out the intent of this Section 3C.
D. The Lessee agrees during each year of the term hereof to pay as
additional rent hereunder (a) the Additional Payments required to be paid
pursuant to Section 5.2 of the Loan Agreement and (b) all taxes and governmental
charges of
-2-
<PAGE>
any kind whatsoever that may at any time be lawfully assessed or levied against
or with respect to the Project or any machinery or other property installed or
brought by the Lessee therein thereon, all utility and other charges incurred
in the operation, maintenance, use, occupancy and upkeep of the Project and all
assessments and charges lawfully made by any governmental body for public
improvements that may be secured by a lien on the Project. Such additional rent
shall be paid to the Lessor or, at the Lessor's option, directly to the person
or entity to whom or to which such additional rent is due.
E. So long as the Bond is outstanding, if at any time there is a
final determination that the interest on the Bond is subject to federal income
taxation, the Lessee shall make any additional payments required to be made by
the Lessor under the Loan Agreement as a result of such final determination.
F. Notwithstanding any other provisions of this Section 3, the
Lessee shall at all times be obligated to pay as rental hereunder not less than
such amounts as will provide monies sufficient at all times to satisfy the
Lessor's obligations to make all payments required to be made by it under the
Loan Agreement to the Indenture or with respect to the Bond as such payments
become due and payable.
G. The Lessee shall have the right to apply for an abatement of
real estate or personal property taxes at any time, and from time to time, in
its own name or in the name of the Lessor. If at least thirty (30) days prior to
the last day for filling application for abatement of real estate or personal
property taxes for any year, the Lessor shall give notice to the Lessee that it
desires to file an application for abatement of real estate or personal property
taxes for said tax year, and if within twenty (20) days after the receipt of
said notice the Lessee shall not give notice to the Lessor that it shall file
such application, the Lessor shall have the right, at its own cost and expense,
to file such application. If either party shall prosecute an application for an
abatement, the other will cooperate and furnish any pertinent information in its
files reasonably required by the prosecuting party.
UTILITIES
- ---------
4. The Lessee shall, during the term hereof, pay for all utilities
consumed on or in connection with the use and occupancy of the Project,
including but not limited to all water, gas, sewer, electricity and fuel
charges. The Lessee also agrees to indemnify the Lessor against any damage
caused by any overloading of any utility system on the Premises or connected
with the same.
-3-
<PAGE>
CONDITION OF PROJECT: REPAIRS AND MAINTENANCE: USES
- ---------------------------------------------------
5. A. The Lessee accepts the Premises and Leased Machinery in the
condition in which they are on the date of the commencement of the term hereof
and as they may subsequently be acquired, constructed and installed, and
acknowledges that they are in good order and condition and sufficient for the
uses intended by the Lessee.
B. The Lessee shall be responsible for the maintenance and repair of
the Project, and the Lessee shall, at its own expense, maintain, repair and
renew (as necessary) the Project, including but not limited to the maintenance
and repair of any structure on the Premises, the parking lots, the landscaping,
the mechanical and utility systems, the sidewalks, curbs, entrances,
passageways, and other areas adjoining the Premises and the Leased Machinery.
C. The Lessee shall, at its own expense, keep the said sidewalks,
curbs, entrances, passageways, parking lot areas adjoining the Premises in a
clean and orderly condition, free from snow, ice, rubbish and obstructions.
D. The Lessor reserves the right to enter upon the Premises to
inspect, maintain and repair the Project if the Lessee does not adequately do
so, and to charge to the Lessee the cost thereof. The Lessee agrees to pay said
cost charges when and if such charges are presented for payment.
E. The Lessee agrees that it will maintain the Project as a
"project" within the meaning of Chapter 40D of the Massachusetts General Laws,
as from time to time amended.
ALTERATIONS AND IMPROVEMENTS
- ----------------------------
6. A. The Lessee shall have the right to make such nonstructural
alterations, additions and improvements to the Project as may be necessary or
desirable for its business, provided that in each instance the Lessee shall
obtain the Lessor's written consent thereto.
B. The Lessee shall, before making any alterations, additions or
improvements, at its own expense, obtain all permits, approvals and certificates
required by any governmental authority and shall promptly deliver copies of same
to the Lessor. The Lessee will cause Lessee cause Lessee's contractors and
subcontractors to carry such workers' compensation, general liability and
personal and property damage insurance as the Lessor may reasonable require.
The Lessee agrees to hold the Lessor free and harmless from any liability for
labor or materials supplied for such work, and shall keep the Project free from
mechanics' liens of any kind by obtaining waivers
-4-
<PAGE>
thereof, by removing or bonding any lien filed within ten (10) days from
receipt of notice of the filing thereof.
C. Any and all alterations, addition or improvements to the Project
made by the Lessee during the term of this Lease shall become the property of
the Lessor without payment therefor by the Lessor.
INDEMNIFICATION AND LIABILITY
- -----------------------------
7. The Lessee shall indemnify and hold the Lessor harmless from any and
all claims for injury to person or damage to property by reason of any accident
or happening on the Project unless caused by the fault of the Lessor or its
agents, servants or employees. The Lessee shall carry public liability insurance
in limits of at least $1,000,000 for injury or death to one person and
$1,000,000 for injury or death to more than one person in the same accident and
$500,000 for damage to property. On the commencement of the term of this Lease
and thereafter within thirty (30) days after each December 31, the Lessee shall
deliver to the Lessor copies of such policies or certificates of the insurer
with respect thereto, reasonably satisfactory to the Lessor, accompanied by
evidence of the payment of the premiums for the policies. All such insurance
policies shall provide that no cancellation thereof or material change therein
shall be made unless the Lessor and the Trustee shall have been given twenty
(20) days prior written notice thereof and that no act or omission by the Lessee
shall invalidate such policies as they apply to the Lessor.
FIRE AND EXTENDED COVERAGE INSURANCE
- ------------------------------------
8. A. In addition to the public liability insurance provided for in
paragraph 7 hereof, the Lessee shall keep the Project insured against loss or
damage of the kinds usually insured against by similar businesses in the area,
including, without limitation, insurance against loss or damage by fire,
lightning, and other risks from time to time included under extended coverage
policies with an insurance company or companies authorized to do business in
The Commonwealth of Massachusetts, and approved by the Lessor and the Trustee,
which approval shall not be unreasonably withheld. Such insurance shall be in an
amount not less than the full insurable value (actual replacement value) of the
Project. Each such insurance policy shall name the Lessor as the insured, with
loss payable to the Trustee.
B. Each insurance policy required hereunder shall provide that no
cancellation thereof or material change therin shall be made unless the Lessor
and the Trustee shall have first been given at least twenty (20) days' written
notice thereof, that no act or omission by the Lessee shall invalidate such
policy as it applies to the Lessor and that the Lessor shall not be liable for
any premiums for the assessments on such policy.
-5-
<PAGE>
On the commencement of the term of this Lease and thereafter within thirty (30)
days after each December 31, the Lessee shall deliver to the Lessor copies of
such policies or certificates of the insurer with respect thereto, reasonable
satisfactory to the Lessor, accompanied by evidence of the payment of the
premium for the policies.
C. The Lessee shall not violate or permit violation of any of the
conditions and provisions contained in the insurance policies provided for
hereunder. The Lessee shall perform and satisfy the requirements of the
insurance company writing any such policy, so that at all times insurance
companies of good standing shall be willing to write or to continue such
insurance policies. Nothing herein shall prevent the Lessor from carrying
additional insurance.
LESSEE'S FAILURE TO PERFORM
- ---------------------------
9. A. If the Lessee shall at any time fail to pay any tax or assessment
as required in this Lease or to take out, pay for, maintain, or deliver any of
the insurance policies provided for in this Lease or shall fail to make any
other payment or fail to perform any other act on its part to be made or
performed under this Lease, then the Lessor, without waiving or releasing the
Lessee from any obligation of the Lessee contained in this Lease, may (but shall
be under no obligation to): (1) pay any tax or assessment so payable by the
Lessee or (2) take out, pay for and maintain any of the insurance policies
provided for in this Lease or (3) after ten (10) days notice to the Lessee, make
any other payments or perform or cause to be performed any act on the Lessee's
part to be made or performed as in this Lease provided, and may enter upon the
Premises for any such purpose and take all such action thereon as may be
necessary therefor.
B. All sums so paid by the Lessor and all cost and expenses
incurred by the Lessor in connection with the performance of any such act
shall be paid by the Lessee to the Lessor on demand as if the same were
additional rent hereunder (and nonpayment of which shall have the same
consequences as nonpayment of rent).
MECHANICS' LIENS
- ----------------
10. Notice is hereby given that the Lessor shall not be liable for any
labor or materials furnished or to be furnished to the Lessee and that no
mechanics' liens or other liens for any such labor or materials shall attach to
or affect the reversionary interests of the Lessor in and to the Project. The
Lessee further agrees to indemnify and hold harmless the Lessor against any and
all costs it may suffer on account of the same.
-6-
<PAGE>
EXPIRATION OF TERM
- ------------------
11. A. The Lessee, at the expiration of the term hereof or at any prior
termination as herein provided, shall peaceably yield up the Project in the same
condition and repair as the same were in at the commencement of the term hereof
or as may have been put in thereafter, loss by eminent domain and ordinary wear
and tear expected.
B. The Lessee may, at any time prior to the expiration of the term
or prior termination thereof, then or within a reasonable time thereafter, not
to exceed twenty (20) days, remove its personal property, trade fixtures and
other equipment installed by it from the premises, provided that if any such
removal causes any damage to the Leased Machinery or Premises, the Lease shall
promptly repair the same. Any property, fixtures or equipment of the Lease
remaining on the Premises after said twenty-day period shall be deemed to be
abandoned and may be removed and disposed of by the Lessor as the Lessor shall
determine, and the Lessor shall charge the cost of such removal and any repairs
or replacements to the Premises necessitated thereby to the Lessee.
ASSIGNMENT AND SUB-LETTING
- --------------------------
12. The Lessee shall not transfer, sublet, assign or otherwise alienate
this Lease or the Lessee's interest in and to all or any part of the Project,
nor shall the lessee grant any person any license or permission to use the
Project without the Lessor's prior written consent on each occasion.
DESTRUCTION BY CASUALTY
- -----------------------
13. A. If the Project is wholly or partially damaged or destroyed by
strom, fire, lightning, earthquake or other casualty, even if said damage or
destruction is so extensive as to render the Project unsuitable for the conduct
of the Lessee's business, this Lease shall not be considered terminated, and the
Lease shall have the obligation and agree hereunder to repair and restore the
Project and to render said Project tenantable. The rental obligation hereunder
shall not be considered to have been suspended or held in abeyance or abated
during said term of restoration or repair.
B. Upon such damage or destruction and during such period or repair
and restoration, there shall be applied for such purpose so much as may be
necessary of any net proceeds of insurance policies resulting from claims for
such losses, as well as any additional monies of the Lessee necessary therefor.
-7-
<PAGE>
EMINENT DOMAIN
- --------------
14. A. If title to or the temporary use of the Project, or any part
thereof, shall be taken under the exercise of the power of eminent domain by any
governmental body or by any person acting under governmental authority during
the term of this Lease, then there shall be no abatement or reduction in the
rental and other payments to be made by the Lessee hereunder and any proceeds
received from any award made in such eminent domain proceedings shall be paid to
and held by the Trustee in a separate condemnation award account and used, at
the discretion of the Lessor, for one or more of the purposes described in
Section 8.2 of the Loan Agreement.
B. If all of the outstanding Bonds are paid and discharged in
accordance with the provisions of the Indenture at any time after the entry of a
final order in a condemnation proceeding reducing the floor area of the
buildings on the Premises by more than one-fifth or rendering the portion not
taken permanently untenantable for Lessee's uses; either party may by notice to
the other within thirty (30) days thereafter terminate this Lease.
DEFAULT AND TERMINATION OF LEASE
- --------------------------------
15. If the rent herein reserved shall not have been paid when due and
shall remain unpaid for a period of three calendar days thereafter; or if any of
the other covenants, conditions and obligations of the Lessee under this Lease
shall not be performed within thirty (30) days after notice by the Lessor or the
Trustee to the Lessee thereof; the Lessor (with the prior written consent of the
Trustee if any Bond is then outstanding) may, at its option, declare the term of
this Lease ended and enter upon the Premises, or any part thereof, either with
or without process of law, expel the Lessee or any person or persons occupying
in or upon the Premises, to repossess and enjoy the Project as of the Lessor's
former estate, without being guilty of trespass, forcible entry, detainer or
other tort.
ADDITIONAL REMEDIES ON DEFAULT
- ------------------------------
16. Notwithstanding any termination pursuant to Paragraph 15 above or any
entry or re-entry by the Lessor, the Lessee agrees to pay and be liable on the
days originally fixed herein for the payment thereof of amounts equal to the
several installments of rent and any other charges herein reserved as they would
under the terms of this Lease become due if this Lease had not been terminated
or if the Lessor had not entered or re-entered as aforesaid and whether the
Project be re-let
-8-
<PAGE>
or remain vacant in whole or in part or for a period less than the remainder of
the term or for the whole thereof; but in the event the Project be re-let in
whole or in part by the Lessor, the Lessee shall be entitled to a credit of the
net amount of rent received by the Lessor in re-letting after deduction of
reasonable expenses incurred in re-letting the Project and collecting the rent
in connection therewith. The Lessee shall also be liable to the Lessor for all
expenses, including reasonable attorneys' fees, incurred by the Lessor in
enforcing its rights under this Lease.
ASSENTS
- -------
17. No assent, express or implied, by one party to any breach of any
convenant or condition herein contained on the part of the other to be performed
or observed and no waiver, express or implied, of a failure by one party to
insist on the other's prompt performance or observance of any such covenant or
condition shall be deemed to be a waiver or assent to any succeeding breach of
the same. The payment by the Lessee and acceptance of the Lessor of rent or
other payments hereunder or silence by either party as to any breach shall not
be construed as waiving any of such party's rights hereunder unless such waiver
is in writing. No payment by the Lessee or acceptance by the Lessor of a lesser
amount than shall be due the Lessor from the Lessee shall be deemed to be
anything but payment on account.
OBLIGATIONS UNCONDITIONAL
- -------------------------
18. Subject to the provisions of Paragraph 20 hereof, the obligations of
the Lessee to pay basic rent and supplemental rent hereunder and to perform and
observe the other agreements on its part contained herein shall be absolute and
unconditional and shall not be subject to any right of recoupment or set-off.
Until such time as the term of this Lease expires or is terminated prior thereto
as herein provided, the Lease (i) will not suspend or discontinue payment of any
basic rent or supplemental rent pursuant to this Lease or (ii) fail to perform
and observe any of its other agreements contained in this Lease for any cause
including, without limiting the generality of the foregoing, failure of the
Lessor to complete construction of any structure on the Premises or to acquire
any portion of the Leased Machinery, any acts or circumstances that
may constitute failure of consideration, destruction of or damage to the
Project, any exercise of eminent domain, commercial frustration of purpose, any
change in the tax or other laws or administrative rulings of or administrative
actions by or under authority of the United States of America or of The
Commonwealth of Massachusetts or any failure of the Lessor, the City of
Marlborough or the Trustee to perform and observe
-9-
<PAGE>
any agreement, whether expressed or implied, or any duty, liability or
obligation arising out of or connected with this Lease, the Loan Agreement, the
Indenture or any other instrument or document executed in connection with the
issuance of the Project Bond.
DEFINITIONS
- -----------
19. In addition to the words and terms elsewhere defined in this Lease,
the following words and terms as used in this Lease shall have the following
meanings:
(a) "Additional Payments" means the payments required to be paid
pursuant to Section 5.2 of bthe Loan Agreement.
(b) "Bonds" means the bonds issued and to be issued pursuant to the
Indenture.
(c) "Indenture" means the Mortgage and Indenture of Trust of even
date herewith among the City of Malborough, acting by and through its
Industrial Development Financing Authority, the Lessor and the Trustee,
securing the Project Bond.
(d) "Trustee" means Worcester County National Bank or a successor
serving as trustee under the Indenture.
CONSENT
- -------
20. Notwithstanding any other provision contained herein to the contrary,
no amendment, change, modification or alteration of the Loan Agreement or the
Indenture shall be made which would in any way increase the obligations of the
Lessee under this Lease without obtaining the Lessee's prior written consent
thereto.
NOTICES
- -------
21. All notices or other communications hereunder shall be sufficiently
given and shall be deemed given when mailed by registered or certified mail,
postage prepaid, or sent by telegram addressed as follows: if to the Lessee, c/o
4 Strathmore Road, Natick, Massachusetts 01760, Attention: President, and if to
the Lessor, at 4 Strathmore Road, Natick, Massachusetts 01760, Attention:
President. A dublicate copy of each notice, certificate or other communication
given hereunder by either party to the other shall also be given to the Trustee
at 446 Main Street, Worcester, Massachusetts 01608, Attention: Trust Department.
The parties hereto and the Trustee may, by notice given hereunder, designate any
further or different addresses to which subsequent notices, certificates, or
other communications shall be sent.
-10-
<PAGE>
22. The parties hereto agree that upon request by either party, the other
party will execute whatever instruments may be necessary for the recording of a
short form or notice of this Lease.
ENTIRE AGREEMENT
- ----------------
23. This instrument contains the entire and exclusive agreement between
the parties and supersedes all prior or contemporaneous arrangements,
understandings and agreements, whether oral or written. This Lease may not be
amended or modified except by a written instrument executed by the Lessor and
the Lessee and approved by the Trustee.
GOVERNING LAW AND SEVERABILITY
- ------------------------------
24. This Lease shall be governed by and interpreted in accordance with the
laws of Massachusetts. In the event any provision of this Lease shall be
determined invalid or unenforceable under applicable law, such provision shall,
insofar as possible, be construed or applied in such manner as will permit
enforcement. Otherwise, this Lease shall be construed as if such provision had
never been made part hereof.
HEADINGS
- --------
25. The headings used herein are used only for convenience of reference
and are not to be considered as part of this Lease or to be used in determining
the intent of the parties hereto.
BINDING EFFECT
- --------------
26. This Lease shall be binding upon and inure to the benefit of all
administrators, executors, personal representatives, heirs, successors and
permitted assigns, including all permitted subtenants of the parties hereto.
Each subtenant or assignee shall, as a pre-condition to the Lessor's approval of
the Lessee's sub-letting the Project or assigning this Lease, execute such
written instruments as the Lessor shall reasonably require evidencing his
agreement to be bound by each and every term of this Lease, provided that such
an agreement shall not, unless specifically provided, operate to release the
Lessee from its obligation hereunder.
-11-
<PAGE>
No trustee individually and no beneficiary of Nason Hill Trust shall be
personally liable for the obligations of the Lessor hereunder, all such
liability being limited to the trust estate of Nason Hill Trust.
IN WITNESS WHEREOF, the parties hereto set their hands and seals the day
and year first above written.
Nason Hill Trust
/s/ Alfred A. Molinari, Jr.
-----------------------------------
/s/ Maureen K. Molinari
-----------------------------------
As Trustees of Nason Hill Trust
but not individually
Data Translation, Inc.
By /s/ Alfred A. Molinari, Jr.
---------------------------------
President
-12-
<PAGE>
EXHIBIT A
---------
The real property component of the Project consists of a certain parcel of land
with buildings to be constructed thereon in Marlborough, Middlesex County,
Massachusettes, being shown as Lot 2F on Plan entitled "Plan of Land in
Marlborough, Mass., prepared for Marlborough Industrial Park Trust," dated
December 12, 1979, drawn by Schofield Brothers, Inc., registered land surveyors,
recorded with the Middlesex South District Registry of Deeds, Book , Page
, and bounded and described as follows:
NORTHEASTERLY by Locke Drive as shown on said plan by three lines
measuring respectively, Fifty-eight and 26/100 (58.26)
feet, One Hundred two and 84/100 (102.84) feet, and One
Hundred seventy-three and 90/100 (173.90) feet;
SOUTHEASTERLY by Lot 2G shown on said plan Five Hundred ninety-five
and 36/100 (595.36) feet:
SOUTHWESTERLY by Bigelow Street shown on said plan by two lines
measuring respectively, Two Hundred eighty-two and
34/100 (282.34) feet and Eighty-six and 14/100 (86.14)
feet: and
NORTHWESTERLY by land now formerly of Maurice S. Whitman, Jr. and
Elaine Whitman and by land of Eleanor Thanos, Trustee
of First Marlboro Development Trust, indicated on said
plan by three lines measuring respectively, Two Hundred
eighty-three and 78/100 (283.78) feet, One Hundred
three and 36/100 (103.36) feet, and Two Hundred thirty-
seven and 88/100 (237.88) feet.
Containing 5.00 acres of land according to said plan.
<PAGE>
Exhibit B
---------
The personal property component of the Project consists of the following
machinery, equipment, and other property owned or to be purchased by the
Borrower:
machinery and equipment related to the manufacture of microcomputer
products.
-14-
<PAGE>
LEASE
-----
THIS LEASE, dated as of the first day of April, 1981, is made by and between
ALFRED A. MOLINARI, JR. AND MAUREEN K. MOLINARI, TRUSTEES OF NASON HILL TRUST
under a Declaration of Trust dated November 15, 1979 and recorded with the
Middlesex County Registry of Deeds (Southern District) in Book 13839, Page 406,
on November 16, 1979, hereinafter referred to as the "Lessor", and DATA
TRANSLATION, INC., a Massachusettes corporation with a usual place of business
in Marlborough, Massachusettes, hereinafter referred to as the "Lessee". Terms
defined in the Mortgage and Indenture of Trust and Agreement of even date
herewith (the "Indenture") between the city of Marlborough, acting by and
through its Industrial Development Financing Agency, the Lessor, and the
Worcester County National Bank, as Trustee, and not otherwise defined herein are
used herein with the meanings so defined.
A G R E E M E N T:
-----------------
PREMISES
- --------
1. The Lessor hereby leases the Project to the Lessee and the Lessee
leases the Project from the Lessor upon the terms and conditions herein set
forth.
TERM
- ----
2. To have and to hold the Project for a term commencing on the first day
of April, 1981, and ending on June 1, 1991, inclusive, unless sooner terminated
as herein provided.
BASIC AND ADDITIONAL RENT
- ------------------------
3. The Lessee agrees to pay as rent hereunder during the term hereof the
aggregate amount for which provision is made as follows:
A. The Lessee shall pay to the Lessor, in immediately available
funds for deposit in the Bond Fund for account of the Issuer, on or before the
date for each Loan payment referred to in Section 1001 of the Indenture, a sum
which, together with other monies available for such purpose
<PAGE>
in the Bond Fund, will equal the Loan payments coming due on such date under
said Section 1001 of the Indenture.
B. The Lessee agrees to pay as additional rent hereunder (a) any
additional payments required to be paid pursuant to Section 1001 of the
Indenture and (b) all taxes and governmental charges of any kind whatsoever that
may be lawfully assessed or levied against or with respect to the Project or any
machinery or other property installed or brought by the Lessee therein or
thereon, all utility and other charges incurred in the operation, maintenance,
use, occupancy and upkeep of the Project and all assessments and charges
lawfully made by any governmental body for public improvements that may be
secured by an lien on the Project. Such additional rent shall be paid to the
Lesser or, at the Lessor's option, directly to the person or entity to whom or
to which such additional rent is due.
C. If there is a final determination that the interest on any Bond
is subject to federal income taxation, the Lessee shall make any additional
payments required to be made by the Lesser under Indenture during the term
hereof as a result of such final determination.
D. Notwithstanding any other provision of this Section 3, the Lessee
shall be obligated to pay as rental hereunder not less than such amounts as will
provide monies sufficient to satisfy the Lessor's obligations to make all
payments required to be made by it under the Indenture or with respect to the
Bonds as such payments become due and payable.
E. The Lessee shall have the right to apply for an abatement of real
estate or personal property taxes at any time, and from time to time, in its own
name or in the name of the Lessor. If at least thirty (30) days prior to the
last day for filing application for abatement of real estate or personal
property taxes for any year, the Lessor shall give notice to the Lessee that it
desire to file an application for abatement of real estate or personal property
taxes for said tax year, and if within twenty (20) days after the receipt of
said notice the Lessee shall not give notice to the Lessor that it shall file
such application, the Lessor shall have the right, at its own cost and expense,
to file such application. If either party shall prosecute an application for an
abatement, the other will cooperate and furnish any pertinent information in its
files reasonably required by the prosecuting party.
UTILITIES
- ---------
- 2 -
<PAGE>
4. The Lessee shall, during the term hereof, pay for all utilities
consumed on or in connection with the use and occupancy of the Project,
including but not limited to all water, gas, sewer, electricity and fuel
charges. The Lessee caused by any overloading of any utility system at the
Project or connected with the same.
CONDITION OF PROJECT; REPAIRS AND MAINTENANCE; USES
- ---------------------------------------------------
5. A. The Lessee accepts the Project in the condition in which it is on
the date of the commencement of the term hereof and as it may subsequently be
acquired, constructed or equipped, and acknowledge that it is in good order and
condition and sufficient for the uses intended by the Lessee.
B. The Lessee shall be responsible for the maintenance and repair of
the Project, and the Lessee shall, at its own expense, maintain, repair and
renew (as necessary) the Project, including but not limited to the maintenance
and repair of any structure included in the Project, the parking lots, the
landscaping, the mechanical and utility systems, the sidewalks, curbs,
entrances, passageways and other areas adjoining the Project.
C. The Lessee shall, at its own expense, keep the said sidewalks,
curbs, entrances, passageways and parking lot areas adjoining the Project in a
clean and orderly condition, free from snow, ice, rubbish and obstructions.
D. The Lessor reserves the right to enter upon the Project to
inspect, maintain and repair the Project if the Lessee does not adequately do
so, and to charge to the Lessee the cost thereof. The Lessee agree to pay said
cost charges when and if such charges are presented for payment.
E. The Lessee agrees that it will maintain the Project as a
"project" within the meaning of Chapter 40D of the Massachusetts General Laws,
as from time to time amended.
ALTERATIONS AND IMPROVEMENTS
- ----------------------------
6. A. The Lessee shall have the right to make such nonstructural
alterations, additions and improvements to the Project as may be necessary or
desirable for its business, provided that in each instance the Lessee shall
obtain the Lessor's written consent thereto.
B. The Lessee shall, before making any alterations, additions or
improvements, at its own expense,
- 3 -
<PAGE>
obtain all permits, approvals and certificates required by any governmental
authority and shall promptly deliver copies of same to the Lessor. The Lessee
will cause Lessee's contractors and subcontractors to carry such workers'
compensation, general liability and personal and property damage insurance as
the Lessor may reasonably require. The Lessee agrees to hold the Lessor free and
harmless from any liability for labor or materials supplied for such work, and
shall keep the Project free from mechanics' liens of any kind by obtaining
waivers thereof, by removing or bonding any lien filed within ten (10) days from
receipt of notice of the filing thereof.
C. Any and all alterations, additions or improvements to the Project
made by the Lessee during the term of this Lease shall become the property of
the Lessor without payment thereof by the Lessor.
INDEMNIFICATION AND LIABILITY
- -----------------------------
7. The Lessee shall indemnify and hold the Lessor harmless from any and
all claims for injury to person or damage to property by reason of any accident
or happening the Project unless caused by the fault of the Lessor or its agents,
servants or employees. The Lessee shall carry public liability insurance in
limits of at least $1,000,000 for injury or death to one person and $1,000,000
for injury or death to more than one person in the same accident and $500,000
for damage to property. On the commencement of the term of this Lease and
thereafter within thirty (30) days after each December 31, the Lessee shall
deliver to the Lessor copies of such policies or certificates of the insurer
with respect thereto, reasonably satisfactory to the Lessor, accompanied by
evidence of the payment of the premiums for the policies. All such insurance
policies shall provide that no cancellation thereof or material change therein
shall be made unless the Lessor and the Trustee shall have been given twenty
(20) days, prior written notice thereof and that no act or omission by the
Lessee shall invalidate such policies as they apply to the Lessor.
FIRE AND EXTENDED COVERAGE INSURANCE
- ------------------------------------
8. A. In addition to the public liability insurance provided for in
paragraph 7 hereof, the Lessee shall keep the Project insured against loss or
damage of the kinds usually insured against by similar businesses in the area,
including, without limitation, insurance against loss or damage by fire,
lightning, and other risk from time to time included under extended coverage
policies with an insurance company or companies authorized to do business in The
- 4 -
<PAGE>
Commonwealth of Massachusetts, and approved by the Lessor and the Trustee, which
approval shall not be unreasonably withheld. Such insurance shall be in an
amount not less than the full insurable value (actual replacement value) of the
Project. Each such insurance policy shall name the Lessor as the insured, with
loss payable to the Trustee.
B. Each insurance policy required hereunder shall provide that no
cancellation thereof or material change therein shall be made unless the Lessor
and the Trustee shall have first been given at least twenty (20) days' written
notice thereof, that no act or omission by the Lessee shall invalidate such
policy as it applies to the Lessor and that the Lessor shall not be liable for
any premiums for or assessments on such policy. On the commencement of the term
of this Lease and thereafter within thirty (30) days after each December 31, the
Lessee shall deliver to the Lessor copies of such policies or certificates of
the insurer with respect thereto, reasonably satisfactory to the Lessor,
accompanied by evidence of the payment of the premium for the policies.
C. The Lessee shall not violate or permit violation of any of the
conditions and provisions contained in the insurance policies provided for
hereunder. The Lessee shall perform and satisfy the requirements of the
insurance company writing any such policy, so that at all times insurance
companies of good standing shall be willing to write or to continue such
insurance policies. Nothing herein shall prevent the Lessor from carrying
additional insurance.
LESSEE'S FAILURE TO PERFORM
- ---------------------------
9. A. If the Lessee shall at any time fail to pay any tax or assessment
as required in this Lease or to take out, pay for, maintain or deliver any of
the insurance policies provided for in this Lease or shall fail to make any
other payment or fail to perform any other act on its part to be made or
performed under this Lease, then the Lessor, without waiving or releasing the
Lessee from any obligation of the Lessee contained in this Lease, may (but shall
be under no obligation to): (1) pay any tax or assessment so payable by the
Lessee or (2) take out, pay for and maintain any of the insurance policies
provided for in this Lease or (3) after ten (10) days' notice to the Lessee,
make any other payments or perform or cause to be performed any act on the
Lessee's part to be made or performed as in this Lease provided, and may enter
the project for any such purpose and take all such action therein as may be
necessary therefor.
- 5 -
<PAGE>
B. All sums so paid by the Lessor and all costs and expenses
incurred by the Lessor in connection with the performance of any such act shall
be paid by the Lessee to the Lessor on demand as if the same were additional
rent hereunder (and nonpayment of which shall have the same consequences as
nonpayment of rent).
MECHANICS' LIENS
- ----------------
10. Notice is hereby given that the Lessor shall not be liable for any
labor or materials furnished or to be furnished to the Lessee and that no
mechanics' liens or other liens for any other such labor or materials shall
attach to or affect the reversionary interests of the Lessor in and to the
Project. The Lessee further agrees to indemnify and hold harmless the Lessor
against any and all costs it may suffer on account of the same.
EXPIRATION OF TERM
- ------------------
11. A. The Lessee, at the expiration of the term hereof or at any prior
termination as herein provided, shall peaceably yield up to the Project in the
same condition and repair as the same were in at the commencement of the term
hereof or as may have been put in thereafter, loss by eminent domain and
ordinary wear and tear excepted.
B. The Lessee may, at any time prior to the expiration of the term
or prior termination thereof, then or within a reasonable time thereafter, not
to exceed twenty (20) days, remove its personal property, trade fixtures and
other equipment installed by it from the Project, provided that if any such
removal causes any damage to the Project, the Lessee shall promptly repair the
same. Any property, fixtures or equipment of the Lessee remaining on the
Project after said twenty-day period shall be deemed to be abandoned and may be
removed and disposed of by the Lessor as the Lessor shall determine, and the
Lessor shall charge the cost of such removal and any repairs or replacements to
the Project necessitated thereby to the Lessee.
ASSIGNMENT AND SUBLETTING
- -------------------------
12. The Lessee shall not transfer, sublet, assign or otherwise alienate
this Lease or the Lessee's interest in and to all or any part of the Project,
nor shall the Lessee grant any person any license or permission to use the
Project without the Lessor's prior written consent on each occasion.
- 6 -
<PAGE>
DESTRUCTION BY CASUALTY
- -----------------------
13. A. If the Project is wholly or partially damaged or destroyed by
storm, fire, lightning, earthquake or other casualty, even if said damage or
destruction is so extensive as to render the Project unsuitable for the conduct
of the Lessee's business, this Lease shall not be considered terminated, and the
Lessee shall have the obligation and agrees hereunder to repair and restore the
Project and to render said Project tenantable. The rental obligation hereunder
shall not be considered to have been suspended or held in abeyance or abated
during said term of restoration or repair.
B. Upon such damage or destruction and during such period of repair
and restoration, there shall be applied for such purpose so much as may be
necessary of any net proceeds of insurance policies resulting from claims for
such losses, as well as any additional monies of the Lessee necessary therefor.
EMINENT DOMAIN
- --------------
14. A. If the title to or the temporary use of the Project, or any
part thereof, shall be taken under the exercise of the power of eminent domain
by any governmental body or by any person acting under governmental authority
during the term of this Lease, then there shall be no abatement of reduction in
the rental and other payments to be made by the Lessee hereunder and any
proceeds received from any award made in such eminent domain proceedings shall
be paid to and held by the Trustee in a separate condemnation award account and
used, at the discretion of the Lessor, for one or more of the purposes described
in Section 702 of the Indenture.
B. If all of the outstanding Bonds are paid and discharged in
accordance with the provisions of the indenture at any time after the entry of a
final order in a condemnation proceeding reducing the floor area of the
buildings in the Project by more than one-fifth or rendering the portion not
taken permanently untenable for Lessee's uses, either party may by notice to the
other within thirty (30) days thereafter terminate this Lease.
DEFAULT AND TERMINATION OF LEASE
- --------------------------------
15. If the rent herein reserved shall not have been paid when due and
shall remain unpaid for a period of three calendar days thereafter; or if any
of the other covenants,
- 7 -
<PAGE>
conditions and obligations of the Lessee under this Lease shall not be performed
within thirty (30) days after notice by the Lessor or the Trustee to the Lessee
thereof; then the Lessor (with the prior written consent of the Trustee if any
Bond is then outstanding) may, at its option, declare the term of this Lease
ended and enter upon the Project, or any part thereof, either with or without
process of law, expel the Lessee or any person or persons occupying in or upon
the Project, to repossess and enjoy the Project as of the Lessor's former
estate, without being guilty of trespass, forcible entry, detainer or other
tort.
ADDITIONAL REMEDIES ON DEFAULT
- ------------------------------
16. Notwithstanding any termination pursuant to Paragraph 15 above or any
entry or reentry by the Lessor the Lessee agrees to pay and be liable on the
days originally fixed herein for the payment thereof of amounts equal to the
several installments of rent and any other charges herein reserved as they would
under the terms of this Lease become due if this Lease had not been terminated
or if the Lessor had not entered or reentered as aforesaid and whether the
Project by relet or remain vacant in whole or in part or for a period less than
the remainder of the term or for the whole thereof; but in the event the Project
be relet in whole or in part by the Lessor, the Lessee shall be entitled to a
credit of the net amount of rent received by the Lessor in reletting after
deduction of reasonable expenses in reletting after deduction of reasonable
expenses in reletting the Project and collecting the rent in connection
therewith. The Lessee shall also be liable to the Lessor for all expenses,
including reasonable attorneys' fees, incurred by the Lessor in enforcing its
rights under this Lessee.
ASSENTS
- -------
17. No assent, express or implied, by one party to any breach of any
covenant or condition herein contained on the part of the other to be performed
or observed and no waiver, express or implied, of a failure by one party to
insist on the other's prompt performance or observance of any such covenant or
condition shall be deemed to be a waiver or assent to any succeeding breach of
the same. The payment by the Lessee and acceptance by the Lessor of rent or
other payments hereunder or silence by either party as to any breach shall not
be construed as waiving any of such party's rights hereunder unless such waiver
is in writing. No payment by the Lessee or acceptance by the Lessor of a lesser
amount than shall be due the Lessor from the Lessee shall be deemed to be
anything but payment on account.
- 8 -
<PAGE>
OBLIGATIONS UNCONDITIONAL
- -------------------------
18. The obligations of the Lessee to pay basic rent and additional rent
hereunder and to perform and observe the other agreements on its part contained
herein shall be absolute and unconditional and shall not be subject to any right
of recoupment or setoff. Until such time as the term of this Lease expires or is
terminated prior thereto as herein provided, the Lessee (i) will not suspend or
discontinue payment of any basic rent or additional rent pursuant to this Lease
or (ii) fail to perform and observe any of its other agreements contained in
this Lease for any cause including, without limiting the generality of the
foregoing, failure of the Lessor to complete construction of or to acquire any
portion of the Project, any acts or circumstances that may constitute failure of
consideration, destruction of or damage to the Project, any exercise of eminent
domain, commercial frustration of purpose, any change in the tax or other laws
or administrative rulings of or administrative actions by or under authority of
the United States of America or of the Commonwealth of Massachusetts or any
failure of the Lessor, the City of Marlborough or the Trustee to perform and
observe any agreement, whether expressed or implied, or any duty, liability or
obligation arising out of or connected with this Lease, the Indenture or any
other instrument or document executed in connection with the issuance of the
Project Bonds.
CONSENT; AMENDMENTS
- -------------------
19. Notwithstanding any other provision contained herein to the contrary,
no amendment, change, modification or alteration of the Indenture shall be made
which would in any way increase the obligations of the Lessee under this Lease
without obtaining the Lessee's prior written consent thereto. This Lease may not
be amended or modified except by a written instrument executed by the Lessor and
the Lessee and approved by the Trustee.
NOTICES
- -------
20. All notices or other communications hereunder shall be sufficiently
given and shall be deemed given when mailed by registered or certified mail,
postage prepaid, or sent by telegram addressed as follows: if to the Lessor, c/o
120 Nason Hill Road, Sherborn, Massachusetts, Attention: Alfred A Molinari, Jr.,
and if to the Lessee, at 100 Locke Drive, Marlborough, Massachusetts, Attention:
President. A duplicate copy of each notice, certificate or other communication
given hereunder by either party to the other shall also be given to the Trustee
at 446 Main Street,
- 9 -
<PAGE>
Worcester, Massachusetts 01608, Attention: Trust Department. The parties hereto
and the Trustee may, by notice given hereunder, designate any further or
different addresses to which subsequent notices, certificates or other
communications shall be sent.
21. The parties hereto agree that upon request by either party, the other
party will execute whatever instruments may be necessary for the recording of a
short form or notice of this Lease.
ENTIRE AGREEMENT
- ----------------
22. This instrument contains the entire and exclusive agreement between
the parties relating to the Project and supersedes all prior or contemporaneous
arrangements, understandings and agreements relating to the Project, whether
oral or written.
GOVERNING LAW AND SEVERABILITY
- ------------------------------
23. This Lease shall be governed by and interpreted in accordance with the
laws of Massachusetts. In the event any provision of this Lease shall be
determined invalid or unenforceable under applicable law, such provision shall
insofar as possible, be construed or applied in such manner as will permit
enforcement. Otherwise, this Lease shall be construed as if such provision had
never been made part hereof.
HEADINGS
- --------
24. The headings used herein are used only for convenience of reference
and are not to be considered as part of this Lease or to be used in determining
the intent of the parties hereto.
BINDING EFFECT
- --------------
25. This Lease shall be binding upon and inure to the benefit of all
administrators, executors, personal representatives, heirs, successors and
permitted assigns, including all permitted subtenants of the parties hereto.
Each subtenant or assignee shall, as a pre-condition to the Lessor's approval of
the Lessee's subletting the Project or assigning this Lease, execute such
written instruments as the Lessor shall reasonably require evidencing his
agreement to be bound by each and every term of this Lease, provided that such
an agreement shall not; unless specifically provided, operate to release the
Lessee from its obligations hereunder.
- 10 -
<PAGE>
No trustee individually and no beneficiary of Nason Hill Trust shall be
personally liable for the obligations of the Lessor hereunder, all such
liability being limited to the trust estate of Nason hill Trust.
IN WITNESS WHEREOF, the parties hereto set their hands and seals the day
and year first above written.
NASON HILL TRUST
By:/s/ Alfred A. Molinari, Jr.
-------------------------------------
By:/s/ Maureen K. Molinari
-------------------------------------
As Trustees of Nason Hill Trust,
but not individually
DATA TRANSLATION, INC.
By:/s/ Alfred A. Molinari, Jr.
-------------------------------------
President and Treasurer
- 11 -
<PAGE>
FIRST AMENDMENT TO LEASE
------------------------
THIS FIRST AMENDMENT TO LEASE dated as of this first day of April, 1980,
amending and supplementing the Lease dated as of December 1, 1979 (the "Original
Lease"), by and between ALFRED A. MOLINARI, JR. AND MARUREEN K. MOLINARI,
TRUSTEES OF NASON HILL TRUST under a Declaration of Trust dated November 15,
1979 and recorded with the Middlesex County Registry of Deeds (Southern
District) in Book 13839, Page 406, on November 16, 1979, hereinafter referred to
as the "Lessor", and DATA TRANSLATION, INC., a Massachusetts corporation with a
usual place of business in Natick, Masschusetts, hereinafter referred to as the
"Lessee".
W I T N E S S E T H:
-------------------
1. Section 1 of the Original Lease shall be and is hereby amended to read
as follows:
"The Lessor hereby leases to the Lessee and the Lessee leases from the
Lessor upon the terms and conditions herein set forth the land and premises
located at Locke Drive, Marlborough Industrial Park, Marlborough,
Massachusetts, as more particularly described in Exhibit A attached hereto,
with all buildings, additions, improvements and fixtures now or hereafter
located thereon or therein (hereinafter referred to as the 'Premises') and
all personal or real and presonal property acquired with the proceeds of
the $750,000 principal amount of Industrial Revenue Bond (Data Translation,
Inc.) of the City of Marlborough (the 'Original Bond') or with the proceeds
of the $600,000 principal amount of Industrial Revenue Bond (Data
Translation, Inc.-- Second Series) of the City of Marlborough (the
'Additional Bond') (the Original Bond and the Additional Bond being
sometimes hereinafter called collectively the 'Project Bond'), including
without limitation the property described in Exhibit B attached to this
Lease, and any modification thereof, substitutions therefor and additions
thereto made in pursuance of the loan agreement dated as of December 1,
1979, as amended and supplemented by the First Amendment to Loan Agreement
dated as of April 1, 1980 and as may be further amended and supplemented
(the 'Loan Agreement'), between the City of Marlborough, acting by and
through its Industrial Development Financing Authority, as lender, and the
Lessor, as borrower (the 'Leased Machinery'). The Premises and Leased
Machinery as they may at any time exist are collectively referred to herein
as the 'Project'."
<PAGE>
2. Section 3(D) of the Original Lease shall be and hereby is amended to
read:
"D. The Lessee agrees during each year of the term hereof to pay as
additional rent hereunder (a) the Additional Payments required to be paid
pursuant to Section 5.2 of the Loan Agreement, (b) all legal, accounting
and other out-of-pocket expenses incurred by the Lessor in connection with
its obligation as contemplated by the Indenture, the Loan Agreement, or
this Lease and (c) all taxes and governmental charges of any kind
whatsoever that may at any time be lawfully assessed or levied against or
with respect to the project or any machinery or other property installed or
brought by the Lessee therein or thereon, all utility and other charges
incurred in the operation, maintenance, use, occupancy and upkeep of the
Project and all assessments and charges lawfully made by any governmental
body for pubic improvements that may be secured by a lien on the Project.
Such additional rent shall be paid to the Lessor or, at the Lessor's
option, directly to the person or entity to whom or to which such
additional rent is due."
3. The parties hereto expressly agree that the rental payments under
Section 3(A) of the Original Lease shall be computed so as to include the
payments due under Section 5.1 of the Loan Agreement on account of both the
Original Bond and the Addition Bond to the same extent as originally therein
provided on account of the Original Bond.
4. References in the Original Lease to the Indenture shall be deemed to
refer to the Mortgage and Indenture of Trust dated as of December 1, 1979, as
amended and supplemented by the First Supplemental Mortgage and Indenture of
Trust dated as of April 1, 1980 and as may be further amended and supplemented,
among the City of Marlborough, acting by and through its Industrial Development
Financing Authority, the Lessor and the Trustee, unless the context clearly
requires otherwise.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto set their hands and seals the day
and year first above written.
Nason Hill Trust
/s/ Alfred A. Molinari Jr.
----------------------------------------
/s/ Maureen K. Molinari
----------------------------------------
As Trustee of Nason Hill Trust but not
individually
Data Translation, Inc.
By /s/ Alfred A. Molinari Jr.
--------------------------------------
President
THE COMMONWEALTH OF MASSACHUSETTS) SS.
COUNTY OF WORCESTER )
On this day of , 1980, personally appeared before me Alfred A.
Molinari, Jr. and Maureen K. Molinari to me personally known, who, being by me
duly sworn, did say that they are Trustees of Nason Hill Trust, under a
Declaration of Trust dated November 15, 1979 and said Trustees acknowledged the
foregoing to be their free act and deed as Trustees of Nason Hill Trust.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year last above written.
[SEAL]
____________________________________
Notary Public
My Commission Expires:
-3-
<PAGE>
FIRST AMENDMENT TO LEASE
------------------------
THIS FIRST AMENDMENT TO LEASE dated as of the first day of November, 1984,
amending and supplementing the Lease dated as of April 1, 1981, as in effect on
the date hereof (the "Lease"), by and between ALFRED A. MOLINARI, JR. AND
MAUREEN K. MOLINARI, TRUSTEES OF NASON HILL TRUST under a Declaration of Trust
dated November 15, 1979 and recorded with the Middlesex County Registry of Deeds
(Southern District) in Book 13839, Page 406, on November 16, 1979 (the
"Lessor"), and DATA TRANSLATION, INC., a Massachusetts corporation with a
principal place of business in Marlborough, Massachusetts
W I T N E S S E T H
That the parties hereby agree that Section 2 of the Lease is hereby amended
to read as follow:
"2. To have and to hold the Project for a term commencing on this
first day of April, 1981, and ending on December 1, 1994, inclusive, unless
sooner terminated as herein provided."
IN WITNESS WHEREOF, the parties hereto have set their hands as of the day
and year first above written.
NASON HILL TRUST
By _____________________________________
Alfred A. Molinari, Jr., Trustee
By _____________________________________
Maureen K. Molinari, Trustee
As Trustees of Nason Hill Trust but not
individually
DATA TRANSLATION, INC.
By _____________________________________
President and Treasurer
<PAGE>
CONSENT OF TRUSTEE
------------------
The undersigned, as Trustee under a Mortgage and Indenture of Trust (the
"Indenture") dated as of April 1, 1981, as in effect, among the City of
Marlborough, acting by and through its Industrial development Financing
Authority, the Lessor and the undersigned, hereby consents to all the terms and
conditions of the foregoing First Amendment to Lease, approves its execution and
delivery by the parties, and waives any and all notice of such execution and
delivery.
SHAWMUT WORCESTER COUNTY BANK, N.A.
As Trustee
By ________________________________
A duly authorized officer
As of November 1, 1984
CONSENT AND AGREEMENT OF BONDHOLDER
-----------------------------------
The undersigned certifies that it is the holder of all of the City of
Marlborough Industrial Revenue Bonds (Data Translation, Inc,--Third Series)
currently issued and outstanding pursuant to the Indenture hereinabove referred
to, and hereby consents to all the terms and conditions of the foregoing First
Amendment to Lease, approves its execution and delivery by the parties, and
waives any and all notice of such execution and delivery. The undersigned
further directs the Trustee under such Indenture to accept all payments,
prepayments and tenders of performance made on behalf of the Borrower (as
defined in such Indenture) by any third party with the same force and effect as
though made by the Borrower.
CURTIS L. BLAKE 1974 TRUST
By ____________________________________
Curtis L. Blake, Trustee
By ____________________________________
Alfred W. Fuller, Trustee
As Trustee of Curtis L. Blake 1974
Trust but not individually
As of November 1, 1984
- 2 -
<PAGE>
SECOND AMENDMENT TO LEASE
-------------------------
THIS SECOND AMENDMENT TO LEASE dated as of this first day of November,
1980, amending and supplementing the Lease dated as of December 1, 1979, as
amended and supplemented by a First Amendment to Lease dated as of April 1, 1980
(said lease, as amended by said First Amendment to Lease, being hereinafter
referred to as the "Amended Lease"), by and between ALFRED A. MOLINARI, JR. AND
MAUREEN K. MOLINARI, TRUSTEES OF NASON HILL TRUST under a Declaration of Trust
dated November 15, 1979 and recorded with the Middlesex County Registry of Deeds
(Southern District) in Book 13839, Page 406, on November 16, 1979, hereinafter
referred to as the "Lessor", and DATA TRANSLATION, INC., a Massachusetts
corporation with a usual place of business in Marlborough, Massachusetts,
hereinafter referred to as the "Lessee".
W I T N E S S E T H:
-------------------
1. Section 2 of the Amended Lease shall be and is hereby amended to read
as follows:
"2. To have and to hold the Project for a term of ten (10) years,
commencing on the first day of December, 1979, and ending on the first day
of December, 1989, unless sooner terminated as herein provided."
2. The first two lines of Section 3 of the Amended Lease shall be and are
hereby amended to read as follows:
"3. The Lessee agrees to pay rent hereunder, but only insofar as the
same is due and payable during the term hereof, the aggregate amount for
which provision is made as follow:"
IN WITNESS WHEREOF, the parties hereto have set their hands and seals as of
the day and year first above written.
Nason Hill Trust, as Lessor
/s/ Alfred A. Molinari, Jr.
----------------------------------
/s/ Maureen K. Molinari
----------------------------------
As Trustees of Nason Hill Trust
but not individually
Data Translation, Inc., as Lessee
/s/ Alfred A. Molinari, Jr.
By -------------------------------
President and Treasurer
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS)
COUNTY OF ) SS.
On this day of , 1980, personally appeared before me Alfred A.
Molinari, Jr. and Maureen K. Molinari to me personally known, who, being by me
duly sworn, did say that they are Trustees of Nason Hill Trust, under a
declaration of Trust dated November 15, 1979 and said Trustees acknowledged the
foregoing to be their free act and deed as Trustees of Nason Hill Trust.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year last above written.
[SEAL]
________________________________
Notary Public
My Commission Expires:
<PAGE>
CONSENT AND WAIVER
Worcester County National Bank, as Trustee (the "Trustee") and as owner of
all the Bonds presently outstanding under a Mortgage and Indenture of Trust
dated as of December 1, 1979, as amended and supplemented by a First
Supplemental Mortgage and Indenture of Trust dated as of April 1, 1980, among
the City of Marlborough, acting by and through its Industrial Development
Financing Authority, the Lessor, and the Trustee, hereby consents to and
approves the execution by the Lessor and the Lessee and the delivery of the
foregoing Second Amendment to Lease, and hereby waives any and all notice of the
proposed execution and delivery of said Second Amendment to Lease.
WORCESTER COUNTY NATIONAL BANK,
as owner of all of the Bonds
presently outstanding
By [SIGNATURE ILLEGIBLE]
--------------------------------
Vice President
WORCESTER COUNTY NATIONAL BANK,
as Trustee
By [SIGNATURE ILLEGIBLE]
--------------------------------
<PAGE>
THIRD AMENDMENT TO LEASE
------------------------
THIS THIRD AMENDMENT TO LEASE dated as of the thirtieth day of November,
1983, amending and supplementing the Lease dated as of December 1, 1979, as
amended and in effect on the date hereof (the "Lease"), by and between ALFRED A.
MOLINARI, JR. AND MAUREEN K. MOLINARI, TRUSTEES OF NASON HILL TRUST under a
Declaration of Trust dated November 15, 1979 and recorded with the Middlesex
County Registry of Deeds (Southern District) in Book 13839, Page 406, on
November 15, 1979, hereinafter referred to as the "Lessor," and DATA
TRANSLATION, INC., a Massachusetts corporation with a usual place of business in
Marlboro, Massachusetts, hereinafter referred to as the "Lessee"
W I T N E S S E T H
That the parties hereto hereby agree as follows:
1. Section 3C of the Lease is hereby deleted in its entirety.
2. Any payments to Lessor pursuant to Section 3C of the Lease not
heretofore made by Lessee are hereby forgiven, and Lessee shall have no further
liability with respect to the same.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals as of
the day and year first above written.
NASON HILL TRUST
/s/ Maureen K. Molinari
--------------------------------------
/s/ Alfred A. Molinari, Jr.
--------------------------------------
As Trustees of Nason Hill Trust
but not individually
DATA TRANSLATION, INC.
BY /s/ Alfred A. Molinari, Jr.
--------------------------------------
President
<PAGE>
CONSENT OF TRUSTEE
The undersigned, as Trustee under a Mortgage and Indenture of Trust dated
as of December 1, 1979, as amended and in effect, among the City of Marlboro,
acting by and through its Industrial Development Financing Authority, the Lessor
and the undersigned, hereby consents to all the terms and conditions of the
foregoing Second Amendment to Lease, approves its execution and delivery by the
parties, and waives any and all notice of such execution and delivery.
SHAWMUT WORCESTER COUNTY BANK, N.A.
As Trustee
By [SIGNATURE ILLEGIBLE]
-------------------------------
A duly authorized officer
November 30, 1983
CONSENT OF BONDHOLDER
The undersigned certifies that it is the holder of all of the City of
Marlboro Industrial Revenue Bonds (Data Translation, Inc. and Data Translation,
Inc.--Second Series) currently issued and outstanding pursuant to the Indenture
hereinabove referred to, and hereby consents to all the terms and conditions of
the foregoing Second Amendment to Lease, approves its execution and delivery by
the parties, and waives any and all notice of such execution and delivery.
SHAWMUT WORCESTER COUNTY BANK, N.A.
As Trustee
By [SIGNATURE ILLEGIBLE]
-------------------------------
A duly authorized officer
November 30, 1983
-2-
<PAGE>
FOURTH AMENDMENT TO LEASE
-------------------------
THIS FOURTH AMENDMENT TO LEASE, dated as of the first day of November,
1984, amending and supplementing the Lease dated as of December 1, 1979, as
amended and in effect on the date hereof (the "Lease") by and between ALFRED A.
MOLINARI, JR. AND MAUREEN K. MOLINARI, TRUSTEES OF NASON HILL TRUST under a
Declaration of Trust dated November 15, 1979 and recorded with the Middlesex
County Registry of Deeds (Southern District) in Book 13839, Page 406, on
November 16, 1979, hereinafter referred to as the "Lessor", and DATA
TRANSLATION, INC., a Massachusetts, corporation with a usual place of business
in Marlborough, Massachusettes, hereinafter referred to as the "Lessee"
W I T N E S S E T H
-------------------
That the parties hereby agree as follows:
1. Section 1 of the Lease shall be and is hereby amended to read in its
entirety as follows:
"1. The Lessor hereby leases to the Lessee and the Lessee leases
from the Lessor upon the terms and conditions herein set forth the land and
premises located at Locke Drive, Marlborough Industrial Park, Marlborough,
Massachusetts, as more particularly described in Exhibit A attached to
this Lease, with all buildings, additions, improvements and fixtures now or
hereafter located on any of said land or in any of said premises
(hereinafter referred to as the 'Premises'), and all personal or real and
personal property acquired with the proceeds of the $750,000 principal
amount of Industrial Revenue Bond (Data Translation, Inc.) of the City of
Marlborough (the 'Original Bond') or with the proceeds of the $600,000
principal amount of Industrial Revenue Bond (Data Translation, Inc.--Second
Series) of the City of Marlborough (the 'Second Bond') or with the proceeds
of the $1,700,000 principal amount of Industrial Revenue Bond (Data
Translation, Inc.--Fourth Series) of the City of Marlborough (the 'Fourth
Bond') (the Original Bond, the Second Bond and the Fourth Bond being
sometimes hereinafter called collectively the 'Project Bond'), including
<PAGE>
without limitation the property described in Exhibit B attached to this
Lease, and any modification thereof, substitutions therefor and additions
thereto made in pursuance of the Loan Agreement dated as of December 1,
1979, as from time to time amended and in effect (the 'Loan Agreement'),
between the City of Marlborough, acting by and through its Industrial
Development Financing Authority, as lender, and the Lessor, as borrower
(the 'Leased Machinery'). The Premises and Leased Machinery as they may at
any time exist are collectively referred to herein as the 'Project'."
2. Section 2 of the Lease shall be and is hereby amended to read as
follows:
"2. To have and to hold the Project for a term commencing on the
first day of December, 1979 and ending on the first day of December,
1994, unless sooner terminated as herein provided."
3. The parties hereto expressly agree that the rental payments under
Section 3(A) of the Lease shall be computed so as to include the payments due
under Section 5.1 of the Loan Agreement on account of each of the Original Bond,
the Second Bond and the Fourth Bond to the same extent as originally therein
provided on account of the Original Bond.
- 2 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto set their hands and seals the day
and year first above written.
NASON HILL TRUST
By /s/ Alfred A. Molinari, Jr.
-------------------------------------
By /s/ Maureen K. Molinari
-------------------------------------
As Trustees of Nason Hill Trust,
but not individually
DATA TRANSLATION, INC.
By /s/ Alfred A. Molinari, Jr.
-------------------------------------
President and Treasurer
THE COMMONWEALTH OF MASSACHUSETTS)
COUNTY OF WORCESTER ) SS.
On this 7th day of November, 1984, personally appeared before me Alfred A.
Molinari, Jr. and Maureen K. Molinari to me personally known, who, being by me
duly sworn, did say that they are Trustee of Nason Hill Trust, under a
Declaration of Trust dated November 15, 1979 and said Trustees acknowledged the
foregoing to be their free act and deed as Trustees of Nason Hill Trust.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year last above written.
[SEAL]
/s/ [SIGNATURE ILLEGIBLE]
-------------------------------------
Notary Public
My Commission Expires: 7/6/96
- 3 -
<PAGE>
FIFTH AMENDMENT TO LEASE
------------------------
THIS FIFTH AMENDMENT TO LEASE, dated as of April 22, 1987, amending and
supplementing the Lease dated as of December 1, 1979, as amended and in effect
on the date hereof (the "Lease") by the between ALFRED A. MOLINARI, JR. AND
MAUREEN K. MOLINARI, TRUSTEES OF NASON HILL TRUST under a Declaration of Trust
dated November 15, 1979 and recorded with the Middlesex County Registry of Deeds
(Southern District) in Book 13839, Page 406, on November 16, 1979, hereinafter
referred to as the "Lessor", and DATA TRANSLATION, INC., a Massachusetts
corporation with a usual place of business in Marlborough, Massachusetts,
hereinafter referred to as the "Lessee"
W I T N E S S E T H
-------------------
That the parties hereby agree as follows:
1. Section 1 of the Lease shall be and is hereby amended by adding the
phrase "the $1,000,000 Promissory Note dated April 22, 1987 of the Lessor in
favor of Shawmut Worcester County Bank, N.A. (the "Note") or with the proceeds
of" immediately after the phrase "property acquired with the proceeds of"
appearing in the first sentence thereof.
2. Section 3(A) of the Lease is hereby amended by adding a new second
sentence at the end thereof reading in its entirety as follows: "The Lessee
shall also pay, to the holders of the Note and in immediately available funds,
on or prior to the date on which such payment is due, an amount equal to the
payment coming due on such date under the Note."
3. The parties hereto expressly agree that any rental payments under
Section 3(F) of the Lease shall be computed so as to include payments due with
respect to the Note to the same extent as therein provided with respect to the
Bond.
4. Section 14(A) of the Lease is hereby amended by adding a new second
sentence at the end thereof reading in its entirety as follows: "Any amount
remaining after application as provided in the preceding sentence shall be paid
over to the holders of the Note to the extent necessary to prepay the Note in
full, together with any accrued
<PAGE>
interest and premium thereon, and any further amount thereafter remaining shall
be paid over to the Lessor."
5. So long as any portion of the Note is outstanding, the Lease may not be
terminated under Section 14(B) or Section 15 of the Lease or otherwise, or
amended under Section 20 of the Lease or otherwise, without, in addition to any
other consents required under the Lease, the written consent of all holders of
the Note.
- 2 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto set their hand under seal as of the
day and year first above written.
NASON HILL TRUST
/s/ Alfred A. Molinari Jr.
By --------------------------------
/s/ Maureen K. Molinari
By --------------------------------
As Trustees of Nason Hill Trust,
but not individually
DATA TRANSLATION, INC.
/s/ Alfred A. Molinari Jr.
By --------------------------------
President
THE COMMONWEALTH OF MASSACHUSETTS)
COUNTY OF WORCESTER ) SS.
On this Monday of April, 1987, personally appeared before me Alfred A.
Molinari, Jr. and Maureen K. Molinari to me personally known, who, being by me
duly sworn, did say that they are Trustees of Nason Hill Trust, under a
Declaration of Trust dated November 15, 1979 and said Trustees acknowledged the
foregoing to be their free act and deed as Trustees of Nason Hill Trust.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year last above written.
[SEAL]
[SIGNATURE ILLEGIBLE]
-----------------------------
Notary Public
My Commission Expires: [DATE ILLEGIBLE]
- 3 -
<PAGE>
CONSENT OF TRUSTEE
------------------
The undersigned, as Trustee under a Mortgage and Indenture of Trust (the
"Indenture") dated as of December 1, 1979, as amended and in effect, among the
City of Marlborough, acting by and through its Industrial Development Financing
Authority, the Lessor and the undersigned, hereby consents to all the terms and
conditions of the foregoing Fifth Amendment to Lease, approves its execution and
delivery by the parties, and waives any and all notice of such execution and
delivery.
SHAWMUT WORCESTER COUNTY BANK, N.A.
As Trustee
[SIGNATURE ILLEGIBLE]
By ---------------------------------
A duly authorized officer
CONSENT AND AGREEMENT OF BONDHOLDER
-----------------------------------
The undersigned certifies that it is the holder of all of the City of
Marlborough Industrial Revenue Bonds (Data Translation, Inc.--First, Second and
Fourth Series) currently issued and outstanding pursuant to the Indenture
hereinabove referred to, and herby consents to all the terms and conditions of
the foregoing Fifth Amendment to Lease, approves its execution and delivery by
the parties, and waives any and all notice of such execution and delivery.
SHAWMUT WORCESTER
COUNTY BANK, N.A.
[SIGNATURE ILLEGIBLE]
By -----------------------------------
A duly authorized officer
- 4 -
<PAGE>
SIXTH AMENDMENT TO LEASE
------------------------
THIS SIXTH AMENDMENT TO LEASE, dated as of April 5, 1988, amending and
supplementing the Lease as of December 1, 1979, as amended and in effect on the
date hereof (the "Lease") by and between ALFRED A. MOLINARI, JR. AND MAUREEN K.
MOLINARI, TRUSTEES OF NASON HILL TRUST under a Declaration of Trust dated
November 15, 1979 and recorded with the Middlesex County Registry of Deeds
(Southern District) in Book 13839, Page 406, on November 16, 1979, hereinafter
referred to as the "Lessor", and DATA TRANSLATION, INC., a Massachusetts
corporation with a usual place of business in Marlborough, Massachusetts,
hereinafter referred to as the "Lessee".
W I T N E S S E T H
-------------------
That the parties hereby agree as follows:
1. Section 1 of the Lease shall be and is hereby amended by deleting the
phrase "the $1,000,000 Promissory Note dated April 22, 1987 of the Lessor in
favor of Shawmut Worcester County Bank, N.A. (the "Note") or with the proceeds
of" immediately after the phrase "property acquired with the proceeds of
appearing in the first sentence thereof and inserting in lieu thereof the
following: "the $5,000,000 Promissory Note dated April 5, 1988 of the Lessor in
favor of the Shawmut Worcester County Bank, N.A. (and any extensions, renewals
and refinancings thereof) (together, the "Note") or with the proceeds of."
2. The term "Premises" as defined in Section 1 of the Lease shall include
any structures built on the land known as Lot 2G in Marlboro Industrial Park.
3. The parties hereto expressly agree that any rental payments under
Section 3(F) of the Lease shall be computed so as to include payments due with
respect to the Note to the same extent as therein provided with respect to the
Bond.
4. So long as any portion of the Note is outstanding, the Lease may not
be terminated under Section 14(B) or Section 15 of the Lease or otherwise, or
amended under Section 20 of the Lease or otherwise, without, in addition to any
other consents required under the Lease, the written consent of all holders of
the Note.
<PAGE>
IN WITNESS WHEREOF, the parties hereto set their hands under seal as of
the day and year first above written.
NASON HILL TRUST
By /s/ Alfred A. Molinari Jr.
-----------------------------------
By /s/ Maureen K. Molinari
-----------------------------------
As Trustees of Nason Hill Trust,
but not individually
DATA TRANSLATION, INC.
By /s/ Alfred A. Molinari Jr.
-----------------------------------
President
THE COMMONWEALTH OF MASSACHUSETTS)
COUNTY OF WORCESTER ) ss.
On this 5th day of April, 1988, personally appeared before me Alfred A.
Molinari, Jr. and Maureen K. Molinari to me personally known, who, being by me
duly sworn, did say that they are Trustees of Nason Hill Trust, under a
Declaration of Trust dated November 15, 1979 and said Trustees acknowledged the
foregoing to be their free act and deed as Trustees of Nason Hill Trust.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year last above written.
[SEAL]
[SIGNATURE ILLEGIBLE]
-----------------------------------
Notary Public
My Commission Expires: 7/6/90
- 2 -
<PAGE>
CONSENT OF TRUSTEE
------------------
The undersigned, as Trustee under a Mortgage and Indenture of Trust (the
"Indenture") dated as of December 1, 1979, as amended and in effect, among the
City of Marlborough, acting by and through its Industrial Development Financing
Authority, the Lessor and the undersigned, hereby consents to all the terms and
conditions of the foregoing Sixth Amendment to Lease, approves its execution and
delivery by the parties, and waives any and all notice of such execution and
delivery.
SHAWMUT WORCESTER COUNTY BANK, N.A.
As Trustee
[SIGNATURE ILLEGIBLE]
By -----------------------------------
A duly authorized officer
CONSENT AND AGREEMENT OF BONDHOLDER
-----------------------------------
The undersigned certifies that it is the holder of all of the City of
Marlborough Industrial Revenue Bonds (Data Translation, Inc.--First, Second and
Fourth Series) currently issued and outstanding pursuant to the Indenture
hereinabove referred to, and hereby consents to all the terms and conditions of
the foregoing Sixth Amendment to Lease, approves its execution and delivery by
the parties, and waives any and all notice of such execution and delivery.
SHAWMUT WORCESTER
COUNTY BANK, N.A.
[SIGNATURE ILLEGIBLE]
By ---------------------------------
A duly authorized officer
- 3 -
<PAGE>
SEVENTH AMENDMENT TO LEASE
--------------------------
THIS SEVENTH AMENDMENT TO LEASE, dated as of June 22, 1988, amending and
supplementing the Lease dated as of December 1, 1979, as amended and in effect
on the date hereof (the "Lease") by and between ALFRED A. MOLINARI, JR. AND
MAUREEN K. MOLINARI, TRUSTEES OF NASON HILL TRUST under a Declaration of trust
dated November 15, 1979 and recorded with the Middlesex County Registry of
Deeds (Southern District) in Book 13839, Page 406, on November 16, 1979,
hereinafter referred to as the "Lessor", and DATA TRANSLATION, INC., a
Massachusetts corporation with a usual place of business in Marlborough,
Massachusetts, hereinafter referred to as the "Lessee".
W I T N E S S E T H
-------------------
The Parties hereby agree as follows:
1. The Lessor may apply up to $500,000 of the proceeds of the Note (as
defined in the Lease) for purposes other than the acquisition, construction or
equipping of structures built on the land known as Lots 2F and 2G in Marlboro
Industrial Park, any proceeds so applied being referred to herein as "Excluded
Proceeds."
2. The term "Premises" as defined in Section 1 of the Lease shall exclude
any real or personal property acquired, constructed or equipped with the
Excluded Proceeds.
3. The parties hereto expressly agree that all rental payments under
Section 3(F) of the Lease shall be computed so as to exclude payments of
principal and interest due with respect to a principal amount of the Note (as
defined in the Lease) equal to the Excluded Proceeds.
4. The Lease as modified hereby is hereby confirmed as being in full force
and effect.
<PAGE>
IN WITNESS WHEREOF, the parties hereto set their hands under seal as of the
day and year first above written.
NASON HILL TRUST
/s/ Alfred A. Molinari, Jr.
By: ------------------------------
/s/ Maureen K. Molinari
By: ------------------------------
As Trustees of Nason Hill
Trust, but not
individually
DATA TRANSLATION, INC.
/s/ Alfred A. Molinari, Jr.
By: -------------------------------
President
THE COMMONWEALTH OF MASSACHUSETTS )
COUNTY OF MIDDLESEX ) SS.
------------------
On this day of , 1988, personally appeared before me Alfred A.
Molinari, Jr. and Maureen K. Molinari to me personally known, who, being by me
duly sworn, did say that they are Trustees of Nason Hill Trust, under a
Declaration of Trust dated November 15, 1979 and said Trustees acknowledged the
foregoing to be their free act and deed as Trustees of Nason Hill Trust.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year last above written.
[SEAL]
/s/ Catherine L. Grady
-----------------------------------
Notary Public
Catherine L. Grady
My Commission Expires:5/9/91
-2-
<PAGE>
CONSENT OF TRUSTEE
------------------
The undersigned, as Trustee under a Mortgage and Indenture of Trust (the
"Indenture") dated as of December 1, 1979, as amended and in effect, among the
City of Marlborough, acting by and through its Industrial Development Financing
Authority, the Lessor and the undersigned, hereby consents to all the terms and
conditions of the foregoing Seventh Amendment to Lease, approves its execution
and delivery by the parties, and waives any and all notice of such execution and
delivery.
SHAWMUT WORCESTER COUNTY BANK, N.A.
As Trustee
By: [SIGNATURE ILLEGIBLE]
-------------------------------------
A duly authorized officer
CONSENT AND AGREEMENT OF BOND AND NOTE HOLDER
---------------------------------------------
The undersigned certifies that (1) it is the holder of all of the City of
Marlborough Industrial Revenue Bonds (Data Translation, Inc. -- First, Second
and Fourth Series) currently issued and outstanding pursuant to the Indenture
hereinabove referred to and is the holder of the Note (as defined in the Lease
hereinabove referred to), (2) it hereby consents to all the terms and conditions
of the foregoing Seventh Amendment to Lease and approves its execution and
delivery by the parties, and (3) it hereby waives any and all notice of such
execution and delivery.
SHAWMUT WORCESTER COUNTY BANK, N.A.
By: [SIGNATURE ILLEGIBLE]
-------------------------------------
A duly authorized officer
- 3 -
<PAGE>
EIGHTH AMENDMENT TO LEASE
-------------------------
THIS EIGHTH AMENDMENT TO LEASE, dated as of November 29, 1989, amending and
supplementing the Lease dated as of December 1, 1979, as amended and in effect
on the date hereof (the "Lease") by and between ALFRED A. MOLINARI, JR. AND
MAUREEN K. MOLINARI, TRUSTEES OF NASON HILL TRUST under a Declaration of Trust
dated November 15, 1979 and recorded with the Middlesex County Registry of Deeds
(Southern District) in Book 13839, Page 406, on November 16, 1979, hereinafter
referred to as the "Lessor", and DATA TRANSLATION, INC., a Massachusetts
corporation with a usual place of business in Marlborough, Massachusetts,
hereinafter referred to as the "Lessee".
W I T N E S S E T H
-------------------
That the parties hereby agree as follows:
1. Section 1 of the Lease shall be and is hereby amended by deleting the
phrase "the $5,000,000 Promissory Note dated April 15, 1988 of the Lessor in
favor of Shawmut Worcester County Bank, N.A. (and any extensions, renewals and
refinancings thereof (the "Note") or with the proceeds of" immediately after
the phrase "property acquired with the proceeds of" appearing in the first
sentence thereof and inserting in lieu thereof the following: "the $6,000,000
Promissory Note dated November 29, 1989 of the Lessor in favor of the Shawmut
Worcester County Bank, N.A. (and any extensions, renewals and refinancings
thereof) (together, the "Note") or with the proceeds of."
2. The Lessor may apply any portion of the proceeds of the Note (as
defined in the Lease) not used for purposes of acquisition construction or
equipping of structures built on the land known as Lots 2F and 2G in Malboro
Industrial Park as it sees fit, such proceeds as so applied being referred to
herein as "Excluded Proceeds."
3. The term "Premises" as defined in Section 1 of the Lease shall exclude
any real or personal property acquired, constructed or equipped with the
Proceeds but shall include the land and improvements leased to Lessee under a
certain lease between Lessor and Lessee dated as of April 1, 1981, upon the
expiration of the term of said Lease.
4. Section 2 of the Lease is hereby amended by deleting the existing text
and replacing it with:
"To have and to hold the Project for a term of ten (10) years,
commencing on the first day of November, 1989, and ending on the first day
of December, 1999 unless sooner terminated as herein provided."
5. Section 3 of the Lease is hereby amended as follows:
5.1. Sections 3(A), 3(B) and 3(F) of the Lease are hereby deleted.
5.2. The following shall be added as Section 3(A):
<PAGE>
"The Lessee shall pay semi-annually during the term hereof, on or before
the twenty-ninth day of May and the twenty-ninth day of November of each year of
such term, the Basic Rent for such year. "Basic Rent" shall mean the sum of (i)
One million, ninety-two thousand dollars ($1,092,000) per annum and (ii) any
additional interest costs payable by Lessor in such year under the Note due to
the failure of Lessee to maintain the financial ratios required for the most
favorable rate of interest under said Note, Less any amounts payable by Lessee
in such year under Sections 3(A) and 3(D) of a certain Lease dated as of April
1, 1981 between Lessor and Lessee. Of such Basic Rent, the amount necessary to
provide for debt service on the Bonds shall be paid to the Indenture Trustee,
and the balance shall be paid to the Lessor."
6. The Lease as modified hereby is hereby confirmed as being full force
and effect.
IN WITNESS WHEREOF, the parties hereto set their hands and seals as of the
day and year first above written.
NASON HILL TRUST
/s/ Alfred A. Molinari Jr.
By --------------------------------
/s/ Maureen K. Molinari
By --------------------------------
As Trustees of Nason Hill Trust
but not individually
DATA TRANSLATION, INC.
/s/ Alfred A. Molinari Jr.
By --------------------------------
President
THE COMMONWEALTH OF MASSACHUSETTS)
COUNTY OF WORCESTER ) SS.
On this 29th day of November, 1989, personally appeared before me Alfred A.
Molinari, Jr. and Maureen K. Molinari, to me personally know, who, being by me
duly sworn, did say that they are Trustees of Nason Hill Trust, under a
Declaration of Trust dated November 15, 1979, and said Trustees acknowledged the
foregoing to be their free act and deed as Trustees of Nason Hill Trust.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year last above written.
[SIGNATURE ILLEGIBLE]
-----------------------------------
(Seal) Notary Public
My Commission Expires: 7/6/90
2
<PAGE>
CONSENT OF TRUSTEE
------------------
The undersigned, as Trustee under a Mortgage and Indenture of Trust (the
"Indenture") dated as of December 1, 1979, as amended and in effect, among the
City of Marlborough, acting by and through its Industrial Development Financing
Authority, the Lessor and the undersigned, hereby consents to all the terms and
conditions of the foregoing Eighth Amendment to Lease, approves its execution
and delivered by the parties, and waives any and all notice of such execution
and delivery.
SHAWMUT WORCESTER COUNTY BANK, N.A.
As Trustee
[SIGNATURE ILLEGIBLE]
By: -----------------------
A duly authorized officer
CONSENT AND AGREEMENT OF BONDHOLDER
-----------------------------------
The undersigned certifies that is the holder of all of the City of
Marlborough Industrial Revenue Bonds (Data Translation - First, Second and
Fourth Series) currently issued and outstanding pursuant to the Indenture
hereinabove referred to, and hereby consents to all the terms and conditions of
the foregoing Eight Amendment to Lease, approves its execution and delivery by
the parties, and waives any and all notice of such execution and delivery.
SHAWMUT WORCESTER
COUNTY BANK, N.A.
[SIGNATURE ILLEGIBLE]
By: ---------------------------
A duly authorized officer
-3-
<PAGE>
EXHIBIT 10.6
FORM OF
DATA TRANSLATION II, INC.
1996 STOCK OPTION PLAN
----------------------
1. Purpose
-------
This 1996 Stock Option Plan (the "Plan") is intended as a performance
incentive for officers, employees, consultants, directors and other key persons
of Data Translation II, Inc. (the "Company") and its Subsidiaries (as
hereinafter defined) to enable the persons to whom options are granted (the
"Optionees") to acquire or increase a proprietary interest in the success of the
Company. The Company intends that this purpose will be effected by the granting
of incentive stock options ("Incentive Options") as defined in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), and nonqualified
stock options ("Nonqualified Options"). The term "Subsidiaries" means any
corporations in which stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock is owned directly or indirectly by
the Company.
2. Options to be Granted; Administration of the Plan
-------------------------------------------------
(a) Options granted under the Plan may be either Incentive
Options or Nonqualified Options, and shall be designated as such at the
time of grant. To the extent that any option intended to be an
Incentive Option shall fail to qualify as an Incentive Option under the
Code, such option shall be deemed to be a Nonqualified Option. Each
option granted hereunder shall be embodied in a written agreement, as
described in Section 5 hereof, that is signed by the Optionee and an
authorized officer of the Company.
(b) The Plan shall be administered either by the Board of
Directors of the Company (the "Board of Directors") or by a committee
(the "Option Committee") of not fewer than two directors of the Company
appointed by the Board of Directors (in either case, the
"Administrator"). None of the members of the Option Committee shall be
an officer or other full-time employee of the Company. It is the
intention of the Company that each member of the Option Committee shall
be a "Non-Employee Director" as that term is defined and interpreted
pursuant to Rule 16b-3(b)(3)(i) or any successor rule thereto
promulgated under the Securities Exchange Act of 1934, as amended (the
"Act"). Subject to the foregoing requirements of Section 2(b), the
Compensation Committee of the Board of Directors may serve as the
Option Committee. Action by the Option Committee shall require the
affirmative vote of a majority of all its members.
(c) Subject to the terms and conditions of the Plan, the
Administrator shall have the power:
<PAGE>
(i) To determine from time to time the options to
be granted to eligible persons under the Plan and to prescribe
the terms and provisions (which need not be identical) of
options (including, without limitation, the number of shares
subject to each such option, the effects upon such options of
any change in control of the Company and any vesting
provisions with respect to such options) granted under the
Plan to such persons;
(ii) To construe and interpret the Plan and grants
thereunder and to establish, amend, and revoke rules and
regulations for administration of the Plan (including to
correct any defect or supply any omission, or reconcile any
inconsistency in the Plan, in any option agreement, or in any
related agreements, in the manner and to the extent the
Administrator shall deem necessary or expedient to make the
Plan fully effective);
(iii) To amend from time to time, as the
Administrator may determine is in the best interests of the
Company, the terms of any outstanding options, including
without limitation, to modify the vesting schedule, exercise
price or expiration date thereof in a manner not inconsistent
with the terms of the Plan; and
(iv) Generally, to exercise such powers and to
perform such acts as are deemed necessary or expedient to
promote the best interests of the Company with respect to the
Plan.
All decisions and determinations by the Administrator in the exercise
of these powers shall be final and binding upon the Company and the
Optionees.
(d) Delegation of Authority to Grant Options. The
----------------------------------------
Administrator, in its discretion, may delegate to the Chief Executive
Officer of the Company or any Subsidiary all or part of the
Administrator's authority and duties with respect to Options, including
the granting thereof, to individuals who are not subject to the
reporting and other provisions of Section 16 of the Act. The
Administrator may revoke or amend the terms of a delegation at any
time, but such action shall not invalidate any prior actions of the
Administrator's delegate or delegates that were consistent with the
terms of the Plan.
3. Stock Subject to the Options
----------------------------
The stock granted under the Plan, or subject to the options granted
under the Plan, shall be shares of the Company's authorized but unissued Common
Stock, par value $.01 per share (the "Common Stock"), which may either be
authorized but unissued shares or treasury shares or shares previously reserved
for issuance upon exercise of options under the Plan, and allocable to one or
more options (or portions of options) which have expired or been canceled
2
<PAGE>
or terminated (other than by exercise). The total number of shares that may be
issued under the Plan shall not exceed an aggregate of 500,000 shares of Common
Stock. Such number of shares shall be subject to adjustment as provided in
Section 7 hereof.
4. Eligibility
-----------
(a) Incentive Options may be granted only to officers and
other employees of the Company or any Subsidiary that is a "subsidiary
corporation" within the meaning of Section 424(f) of the Code,
including members of the Board of Directors who are also employees of
the Company or any such Subsidiary. Nonqualified Options may be granted
to officers, other employees and directors of the Company or any
Subsidiary, and to consultants and other key persons who provide
services to the Company or any Subsidiary (regardless of whether they
are also employees).
(b) No person shall be eligible to receive any Incentive
Option under the Plan if, at the date of grant, such person owns or is
considered to own (by reason of the attribution rules of Section 424(d)
of the Code) stock representing in excess of ten percent of the voting
power of all outstanding capital stock of the Company (or of any
"parent corporation" or "subsidiary corporation" within the meaning of
Section 424(e) or (f) of the Code, respectively), unless
notwithstanding anything in this Plan to the contrary (i) the purchase
price for Common Stock subject to such option is at least 110% of the
fair market value of such Common Stock at the time of the grant and
(ii) the option by its terms is not exercisable more than five years
from the date of grant thereof.
(c) Notwithstanding any other provision of the Plan, the
aggregate fair market value (determined as of the time the option is
granted) of the Common Stock with respect to which Incentive Options
are exercisable for the first time by any individual during any
calendar year (under all plans of the Company and its parent and
subsidiary corporations, within the meaning of Sections 424(e) and (f)
of the Code) shall not exceed $100,000. Any option granted under the
Plan in excess of the foregoing limitations shall be deemed to be a
Nonqualified Option.
5. Terms of the Option Agreements
------------------------------
Subject to the terms and conditions of the Plan, each option agreement
shall contain such provisions as the Administrator shall from time to time deem
appropriate. Option agreements need not be identical, but each option agreement
by appropriate language shall include the substance of all of the following
provisions:
(a) Expiration; Termination of Employment. Each option shall
-------------------------------------
expire no later than the date specified in the option agreement, which
date in the case of any Incentive Option shall not be later than the
tenth anniversary of the date on which the
3
<PAGE>
option was granted. Each option may be subject to earlier termination,
as specified in the option agreement, if the Optionee's employment or
other business relationship with the Company and its Subsidiaries shall
terminate before such expiration date.
(b) Exercise. Each option shall be exercisable in such
--------
installments (which need not be equal) and at such times as may be
designated in the option agreement. To the extent not exercised,
installments shall accumulate and be exercisable, in whole or in part,
at any time after becoming exercisable, but not later than the date the
option expires.
(c) Purchase Price. The purchase price per share of Common
--------------
Stock subject to each option shall be the price specified in the option
agreement; provided, however, that the purchase price per share of
Common Stock subject to each Incentive Option shall be not less than
the fair market value of the Common Stock on the date such Incentive
Option is granted. For the purposes of the Plan, the fair market value
of the Common Stock shall be determined in good faith by the
Administrator; provided, however, that (i) if the Common Stock is
admitted to trading on a national securities exchange or the Nasdaq
National Market on the date the option is granted, the fair market
value shall not be less than the closing price reported for the Common
Stock on such exchange or system for such date or, if no sales were
reported for such date, for the last date preceding such date for which
a sale was reported, or (ii) if clause (i) does not apply but the
Common Stock is admitted to quotation on the National Association of
Securities Dealers Automated Quotation System Small-Cap Market
("NASDAQ") on the date the option is granted, the fair market value
shall not be less than the average of the highest bid and lowest asked
prices reported for the Common Stock on NASDAQ for such date or, if no
bid and asked prices were reported for such date, for the last date
preceding such date for which such prices were reported.
(d) Rights of Optionees. No Optionee shall be deemed for any
-------------------
purpose to be the owner of any shares of Common Stock subject to any
option unless and until (i) the option shall have been exercised
pursuant to the terms thereof, (ii) all requirements under applicable
law and regulations shall have been complied with to the satisfaction
of the Company, (iii) the Company shall have issued and delivered the
shares to the Optionee, and (iv) the Optionee's name shall have been
entered as a stockholder of record on the books of the Company.
Thereupon, the Optionee shall have full voting, dividend and other
ownership rights with respect to such shares of Common Stock.
(e) Transfer. No option granted hereunder shall be
--------
transferable by the Optionee other than by will or by the laws of
descent and distribution, and such option may be exercised during the
Optionee's lifetime only by the Optionee, or his or her guardian or
legal representative. Notwithstanding the foregoing, the terms of a
Nonqualified Option may provide that the Optionee may transfer such
option, without consideration for the transfer, to members of his
immediate family, to trusts for the
4
<PAGE>
benefit of such family members, to partnerships in which such family
members are the only partners, or to charitable organizations, provided
that the transferee agrees in writing with the Company to be bound by
all of the terms and conditions of the Plan and the applicable option
agreement.
(f) Minimum Shares Exercisable. Option agreements may set
--------------------------
forth a minimum number of shares with respect to which an option may be
exercised at any one time.
6. Method of Exercise; Payment of Purchase Price
---------------------------------------------
(a) Any option granted under the Plan may be exercised by the
Optionee in whole or in part by delivering to the Company on any
business day a written notice specifying the number of shares of Common
Stock the Optionee then desires to purchase (the "Notice").
(b) Payment for the shares of Common Stock purchased pursuant
to the exercise of an option shall be made either: (i) in cash, or by
certified or bank check or other payment acceptable to the Company,
equal to the option exercise price for the number of shares specified
in the Notice (the "Total Option Price"); (ii) if authorized by the
applicable option agreement and if permitted by law, by delivery of
shares of Common Stock that the optionee may freely transfer having a
fair market value, determined by reference to the provisions of Section
5(c) hereof, equal to or less than the Total Option Price, plus cash in
an amount equal to the excess, if any, of the Total Option Price over
the fair market value of such shares of Common Stock; or (iii) by the
Optionee delivering the Notice to the Company together with irrevocable
instructions to a broker to promptly deliver the Total Option Price to
the Company in cash or by other method of payment acceptable to the
Company; provided, however, that the Optionee and the broker shall
comply with such procedures and enter into such agreements of indemnity
or other agreements as the Company shall prescribe as a condition of
payment under this clause (iii).
(c) The delivery of certificates representing shares of Common
Stock to be purchased pursuant to the exercise of an option will be
contingent upon the Company's receipt of the Total Option Price and of
any written representations from the Optionee required by the
Administrator, and the fulfillment of any other requirements contained
in the option agreement or applicable provisions of law (including
payment of any amount required to be withheld by the Company pursuant
to applicable law).
7. Adjustment Upon Changes in Capitalization
-----------------------------------------
(a) If the shares of the Company's Common Stock as a whole are
increased, decreased, changed into or exchanged for a different number
or kind of shares or
5
<PAGE>
securities of the Company, whether through reorganization,
recapitalization, reclassification, stock dividend, stock split,
combination of shares, exchange of shares, change in corporate
structure or the like, an appropriate and proportionate adjustment
shall be made in the number and kind of shares subject to the Plan, and
in the number, kind, and per share exercise price of shares subject to
unexercised options or portions thereof granted prior to any such
change. In the event of any such adjustment in an outstanding option,
the Optionee thereafter shall have the right to purchase the number of
shares under such option at the per share price, as so adjusted, which
the Optionee could purchase at the total purchase price applicable to
the option immediately prior to such adjustment.
(b) Adjustments under this Section 7 shall be determined by
the Administrator and such determinations shall be conclusive. The
Administrator shall have the discretion and power in any such event to
determine and to make effective provision for acceleration of the time
or times at which any option or portion thereof shall become
exercisable. No fractional shares of Common Stock shall be issued under
the Plan on account of any adjustment specified above.
8. Effect of Certain Transactions
------------------------------
In the case of the dissolution or liquidation of the Company or a
Change of Control (as hereinafter defined), the Plan and the options issued
hereunder shall terminate upon the effectiveness of any such transaction or
event, unless provision is made in connection with such transaction for the
assumption of outstanding options by, or the substitution for such options of
new options of, the successor entity or parent thereof, with appropriate
adjustment as to the number and kind of shares and the per share exercise
prices, as provided in Section 7. In the event of such termination, all
outstanding options shall be exercisable in full for at least fifteen days prior
to the date of such termination whether or not otherwise exercisable during such
period.
"Change of Control" shall mean the occurrence of any one of the
following events:
(a) any "person," as such term is used in Sections 13(d) and
14(d) of the Act (other than the Company, any Subsidiary, or any
trustee, fiduciary or other person or entity holding securities under
any employee benefit plan or trust of the Company or any Subsidiary),
together with all "affiliates" and "associates" (as such terms are
defined in Rule 12b-2 under the Act) of such person, shall become the
"beneficial owner" (as such term is defined in Rule 13d-3 under the
Act), directly or indirectly, of securities of the Company representing
50 percent or more of either (i) the combined voting power of the
Company's then outstanding securities having the right to vote in an
election of the Board of Directors ("Voting Securities") or (ii) the
then outstanding shares
6
<PAGE>
of Common Stock of the Company (in either such case other than as a
result of an acquisition of securities directly from the Company); or
(b) Incumbent Directors, as hereinafter defined, cease for any
reason, including, without limitation, as a result of a tender offer,
proxy contest, merger or similar transaction, to constitute at least a
majority of the Board of Directors; or
(c) the stockholders of the Company shall approve (i) any
consolidation or merger of the Company or any Subsidiary where the
shareholders of the Company, immediately prior to the consolidation or
merger, would not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, shares representing in the aggregate 80 percent
or more of the voting shares of the corporation issuing cash or
securities in the consolidation or merger (or of its ultimate parent
corporation, if any), (ii) any sale, lease, exchange or other transfer
(in one transaction or a series of transactions contemplated or
arranged by any party as a single plan) of all or substantially all of
the assets of the Company or (iii) any plan or proposal for the
liquidation or dissolution of the Company.
Notwithstanding the foregoing, a "Change of Control" shall not be
deemed to have occurred for purposes of the foregoing clause (a) solely as the
result of an acquisition of securities by the Company which, by reducing the
number of shares of Common Stock or other Voting Securities outstanding,
increases (x) the proportionate number of shares of Common Stock beneficially
owned by any person to 50 percent or more of the shares of Common Stock then
outstanding or (y) the proportionate voting power represented by the Voting
Securities beneficially owned by any person to 50 percent or more of the
combined voting power of all then outstanding Voting Securities; provided,
however, that if any person referred to in clause (x) or (y) of this sentence
shall thereafter become the beneficial owner of any additional shares of Common
Stock or other Voting Securities (other than pursuant to a stock split, stock
dividend, or similar transaction), then a "Change of Control" shall be deemed to
have occurred for purposes of the foregoing clause (a).
"Incumbent Directors" means the members of the Board of Directors on
the effective date of the Plan (the "Original Directors") and each person who
thereafter becomes a director whose appointment, election or nomination for
election is approved by a vote of at least a majority of those Original
Directors and directors whose appointment, election or nomination have been so
approved who are then serving as directors.
7
<PAGE>
9. Tax Withholding
---------------
(a) Payment by Optionee. Each Optionee shall, no later than
-------------------
the date as of which the value of any option granted hereunder or of
any Common Stock issued upon the exercise of such option first becomes
includible in the gross income of the Optionee for federal income tax
purposes (the "Tax Date"), 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 such income. In the event that an Optionee has not made the
arrangements described in this Section 9(a) and has not made an
election under Section 9(b) on or before the Tax Date, the Company is
hereby authorized to withhold the amount of any federal, state or local
taxes of any kind required by law with respect to such income from any
payment otherwise due to the Optionee.
(b) Payment in Shares. Subject to approval by the
-----------------
Administrator, an Optionee may elect to have such tax withholding
obligation satisfied, in whole or in part, by (i) authorizing the
Company to withhold from shares of Common Stock to be issued pursuant
to an option exercise a number of shares with an aggregate fair market
value (determined by the Administrator in accordance with Section 5(c)
as of the date the withholding is effected) that would satisfy the
withholding amount due, or (ii) transferring to the Company shares of
Common Stock owned by the Optionee with an aggregate fair market value
(determined by the Administrator in accordance with Section 5(c) as of
the date the withholding is effected) that would satisfy the
withholding amount due.
10. Amendment of the Plan
---------------------
The Board of Directors may discontinue the Plan or amend the Plan at
any time, and from time to time, subject to any required regulatory approval,
provided that any such amendment is also approved by the stockholders of the
Company if required by the Code to ensure that Incentive Options granted under
the Plan are qualified under Section 422 of the Code. Except as otherwise
provided, an amendment shall be binding upon options previously granted under
the Plan unless the amendment adversely affects the rights of an Optionee, in
which event the consent of the Optionee shall be required with respect to any
portion of such amendment having such effect.
11. Nonexclusivity of the Plan
--------------------------
Neither the adoption of the Plan by the Board of Directors nor the
submission of the Plan to the stockholders of the Company for approval shall be
construed as creating any limitations on the power of the Board of Directors to
adopt such other incentive arrangements as it may deem desirable, including,
without limitation, the granting of stock or stock options otherwise than under
the Plan, and such arrangements may be either applicable generally or
8
<PAGE>
only in specific cases. Neither the Plan nor any option granted hereunder shall
be deemed to confer upon any employee any right to continued employment with the
Company.
12. Government and Other Regulations; Governing Law
-----------------------------------------------
(a) The obligation of the Company to sell and deliver shares
of Common Stock with respect to options granted under the Plan shall be
subject to all applicable laws, rules and regulations, including all
applicable federal and state securities laws, and the obtaining of all
such approvals by governmental agencies as may be deemed necessary or
appropriate by the Administrator.
(b) The Plan shall be governed by Delaware law, except to the
extent that such law is preempted by federal law.
13. Effective Date of the Plan; Stockholder Approval
------------------------------------------------
The Plan shall become effective upon the date that it is approved by
the Board of Directors of the Company; provided, however, that the Plan shall be
subject to the approval of the Company's stockholders in accordance with
applicable laws and regulations within twelve months after such effective date.
No options granted under the Plan prior to such stockholder approval may be
exercised until such approval has been obtained. No options may be granted under
the Plan after the tenth anniversary of the effective date of the Plan.
* * *
Approved by Board of Directors: _____________, 1996
Approved by Stockholders: _______________, 1996
9
<PAGE>
EXHIBIT 10.7
FORM OF
DATA TRANSLATION II, INC.
EMPLOYEE STOCK PURCHASE PLAN
The purpose of the Data Translation II, Inc. Employee Stock Purchase
Plan ("the Plan") is to provide eligible employees of Data Translation II, Inc.
(the "Company") and certain of its subsidiaries with opportunities to purchase
shares of the Company's common stock, par value $.01 per share (the "Common
Stock"). One hundred fifty thousand (150,000) shares of Common Stock in the
aggregate have been approved and reserved for this purpose. The Plan is intended
to constitute an "employee stock purchase plan" within the meaning of Section
423(b) of the Internal Revenue Code of 1986, as amended (the "Code"), and shall
be interpreted in accordance with that intent.
1. Administration. The Plan will be administered by the person or
--------------
persons (the "Administrator") appointed by the Company's Board of Directors (the
"Board") for such purpose. The Administrator has authority to make rules and
regulations for the administration of the Plan, and its interpretations and
decisions with regard thereto shall be final and conclusive. No member of the
Board or individual exercising administrative authority with respect to the Plan
shall be liable for any action or determination made in good faith with respect
to the Plan or any option granted hereunder.
2. Offerings. The Company will make one or more offerings to
---------
eligible employees to purchase Common Stock under the Plan ("Offerings"). Unless
otherwise determined by the Administrator, the initial Offering will begin on
January 2, 1997 and will end on June 30, 1997 (the "Initial Offering").
Thereafter, unless otherwise determined by the Administrator, an Offering will
begin on the first business day occurring on or after each
1
<PAGE>
July 1 and January 1 and will end on the last business day occurring on or
before the following December 31 and June 30, respectively. The Administrator
may, in its discretion, designate a different period for any Offering, provided
that no Offering shall exceed one year in duration or overlap any other
Offering.
3. Eligibility. All employees of the Company (including employees
-----------
who are also directors of the Company) and all employees of each Designated
Subsidiary (as defined in Section 11) are eligible to participate in any one or
more of the Offerings under the Plan, provided that as of the first day of the
applicable Offering (the "Offering Date") they are customarily employed by the
Company or a Designated Subsidiary for more than twenty (20) hours a week.
4. Participation. An employee eligible on any Offering Date may
-------------
participate in such Offering by submitting an enrollment form to his appropriate
payroll location at least fifteen (15) business days before the Offering Date
(or by such other deadline as shall be established for the Offering). The form
will (a) state a whole percentage to be deducted from his Compensation (as
defined in Section 11) per pay period, (b) authorize the purchase of Common
Stock for him in each Offering in accordance with the terms of the Plan and (c)
specify the exact name or names in which shares of Common Stock purchased for
him are to be issued pursuant to Section 10. An employee who does not enroll in
accordance with these procedures will be deemed to have waived his right to
participate. Unless an employee files a new enrollment form or withdraws from
the Plan, his deductions and purchases will continue at the same percentage of
Compensation for future Offerings, provided he remains
2
<PAGE>
eligible. Notwithstanding the foregoing, participation in the Plan will neither
be permitted nor be denied contrary to the requirements of the Code.
5. Employee Contributions. Each eligible employee may authorize
----------------------
payroll deductions at a minimum of one percent (1%) up to a maximum of ten
percent (10%) of his Compensation for each pay period. The Company will maintain
book accounts showing the amount of payroll deductions made by each
participating employee for each Offering. No interest will accrue or be paid on
payroll deductions.
6. Deduction Changes. Except as may be determined by the
-----------------
Administrator in advance of an Offering, an employee may not increase or
decrease his payroll deduction during any Offering, but may increase or decrease
his payroll deduction with respect to the next Offering (subject to the
limitations of Section 5) by filing a new enrollment form at least fifteen (15)
business days before the next Offering Date (or by such other deadline as shall
be established for the Offering). The Administrator may, in advance of any
Offering, establish rules permitting an employee to increase, decrease or
terminate his payroll deduction during an Offering.
7. Withdrawal. An employee may withdraw from participation in
----------
the Plan by delivering a written notice of withdrawal to his appropriate payroll
location. The employee's withdrawal will be effective as of the next business
day. Following an employee's withdrawal, the Company will promptly refund to him
his entire account balance under the Plan (after payment for any Common Stock
purchased before the effective date of withdrawal). Partial withdrawals are not
permitted. The employee may not begin participation again during
3
<PAGE>
the remainder of the Offering, but may enroll in a subsequent Offering in
accordance with Section 4.
8. Grant of Options. On each Offering Date, the Company will grant
----------------
to each eligible employee who is then a participant in the Plan an option
("Option") to purchase on the last day of such Offering (the "Exercise Date"),
at the Option Price hereinafter provided for, a maximum of one thousand five
hundred (1,500) shares of Common Stock reserved for the purposes of the Plan, or
such other maximum number of shares as shall have been established by the
Administrator in advance of the Offering. The purchase price for each share
purchased under such Option (the "Option Price") will be 85% of the Fair Market
Value of the Common Stock on the Offering Date or the Exercise Date, whichever
is less.
Notwithstanding the foregoing, no employee may be granted an option
hereunder if such employee, immediately after the option was granted, would be
treated as owning stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or any
Parent or Subsidiary (as defined in Section 11). For purposes of the preceding
sentence, the attribution rules of Section 424(d) of the Code shall apply in
determining the stock ownership of an employee, and all stock which the employee
has a contractual right to purchase shall be treated as stock owned by the
employee. In addition, no employee may be granted an Option which permits his
rights to purchase stock under the Plan, and any other employee stock purchase
plan of the Company and its Parents and Subsidiaries, to accrue at a rate which
exceeds $25,000 of the fair market value of such stock (determined on the option
grant date or dates) for each calendar year in which the Option
4
<PAGE>
is outstanding at any time. The purpose of the limitation in the preceding
sentence is to comply with Section 423(b)(8) of the Code.
9. Exercise of Option and Purchase of Shares. Each employee who
-----------------------------------------
continues to be a participant in the Plan on the Exercise Date shall be deemed
to have exercised his Option on such date and shall acquire from the Company
such number of whole shares of Common Stock reserved for the purpose of the Plan
as his accumulated payroll deductions on such date will purchase at the Option
Price, subject to any other limitations contained in the Plan. Any amount
remaining in an employee's account at the end of an Offering solely by reason of
the inability to purchase a fractional share will be carried forward to the next
Offering; any other balance remaining in an employee's account at the end of an
Offering will be refunded to the employee promptly.
10. Issuance of Certificates. Certificates representing shares of
------------------------
Common Stock purchased under the Plan may be issued only in the name of the
employee, in the name of the employee and another person of legal age as joint
tenants with rights of survivorship, or in the name of a broker authorized by
the employee to be his, or their, nominee for such purpose.
11. Definitions.
-----------
The term "Compensation" means the amount of base pay and commissions,
prior to salary reduction pursuant to either Section 125 or 401(k) of the Code,
but excluding overtime, incentive or bonus awards, allowances and reimbursements
for expenses such as relocation allowances or travel expenses, income or gains
on the exercise of Company stock options, and similar items.
5
<PAGE>
The term "Designated Subsidiary" means any present or future Subsidiary
(as defined below) that has been designated by the Board to participate in the
Plan. The Board may so designate any Subsidiary, or revoke any such designation,
at any time and from time to time, either before or after the Plan is approved
by the stockholders.
The term "Fair Market Value of the Common Stock" means (i) if the
Common Stock is admitted to trading on a national securities exchange or the
NASDAQ National Market, the closing price reported for the Common Stock on such
exchange or system for such date or, if no sales were reported for such date,
for the next preceding date for which a sale was reported, or (ii) if clause (i)
does not apply but the Common Stock is admitted to quotation on the National
Association of Securities Dealers Automated Quotation System Small-Cap Market
("NASDAQ"), the average of the highest bid and lowest asked prices reported for
the Common Stock on NASDAQ for such date or, if no bid and asked prices were
reported for such date, for the next preceding date for which such prices were
reported.
The term "Parent" means a "parent corporation" with respect to the
Company, as defined in Section 424(e) of the Code.
The term "Subsidiary" means a "subsidiary corporation" with respect to
the Company, as defined in Section 424(f) of the Code.
12. Rights on Termination of Employment. If a participating
-----------------------------------
employee's employment terminates for any reason before the Exercise Date for any
Offering, no payroll deduction will be taken from any pay due and owing to the
employee and the balance in his account will be paid to him or, in the case of
his death, to his designated beneficiary as if he had withdrawn from the Plan
under Section 7. An employee will be deemed to have
6
<PAGE>
terminated employment, for this purpose, if the corporation that employs him,
having been a Designated Subsidiary, ceases to be a Subsidiary, or if the
employee is transferred to any corporation other than the Company or a
Designated Subsidiary.
13. Special Rules. Notwithstanding anything herein to the contrary,
-------------
the Administrator may adopt special rules applicable to the employees of a
particular Designated Subsidiary, whenever the Administrator determines that
such rules are necessary or appropriate for the implementation of the Plan in a
jurisdiction where such Designated Subsidiary has employees; provided that such
rules are consistent with the requirements of Section 423(b) of the Code. Such
special rules may include (by way of example, but not by way of limitation) the
establishment of a method for employees of a given Designated Subsidiary to fund
the purchase of shares other than by payroll deduction, if the payroll deduction
method is prohibited by local law or is otherwise impracticable. Any special
rules established pursuant to this Section 13 shall, to the extent possible,
result in the employees subject to such rules having substantially the same
rights as other participants in the Plan.
14. Optionees Not Stockholders. Neither the granting of an Option
--------------------------
to an employee nor the deductions from his pay shall constitute such employee a
holder of the shares of Common Stock covered by an Option under the Plan until
such shares have been purchased by and issued to him.
15. Rights Not Transferable. Rights under the Plan are not
-----------------------
transferable by a participating employee other than by will or the laws of
descent and distribution, and are exercisable during the employee's lifetime
only by the employee.
7
<PAGE>
16. Application of Funds. All funds received or held by the
--------------------
Company under the Plan may be combined with other corporate funds and may be
used for any corporate purpose.
17. Adjustment in Case of Changes Affecting Common Stock. In the
----------------------------------------------------
event of a subdivision of outstanding shares of Common Stock, or the payment of
a dividend in Common Stock, the number of shares approved for the Plan, and the
share limitation set forth in Section 8, shall be increased proportionately, and
such other adjustment shall be made as may be deemed equitable by the
Administrator. In the event of any other change affecting the Common Stock, such
adjustment shall be made as may be deemed equitable by the Administrator to give
proper effect to such event.
18. Amendment of the Plan. The Board may at any time, and from time
---------------------
to time, amend the Plan in any respect, except that without the approval, within
twelve (12) months of such Board action, by the holders of a majority of the
shares of stock of the Company present or represented and entitled to vote at a
meeting of stockholders, no amendment shall be made increasing the number of
shares approved for the Plan or making any other change that would require
stockholder approval in order for the Plan, as amended, to qualify as an
"employee stock purchase plan" under Section 423(b) of the Code.
19. Insufficient Shares. If the total number of shares of Common
-------------------
Stock that would otherwise be purchased on any Exercise Date plus the number of
shares purchased under previous Offerings under the Plan exceeds the maximum
number of shares issuable under the Plan, the shares then available shall be
apportioned among participants in proportion to the amount of payroll deductions
accumulated on behalf of each participant that would otherwise be used to
purchase Common Stock on such Exercise Date.
8
<PAGE>
20. Termination of the Plan. The Plan may be terminated at any
-----------------------
time by the Board. Upon termination of the Plan, all amounts in the accounts of
participating employees shall be promptly refunded.
21. Governmental Regulations. The Company's obligation to sell
------------------------
and deliver Common Stock under the Plan is subject to obtaining all governmental
approvals required in connection with the authorization, issuance, or sale of
such stock.
The Plan shall be governed by Delaware law except to the extent that
such law is preempted by federal law.
22. Issuance of Shares. Shares may be issued upon exercise of an
------------------
Option from authorized but unissued Common Stock, from shares held in the
treasury of the Company, or from any other proper source.
23. Tax Withholding. Participation in the Plan is subject to any
---------------
required tax withholding on income of the participant in connection with the
Plan. Each employee agrees, by entering the Plan, that the Company and its
Subsidiaries shall have the right to deduct any such taxes from any payment of
any kind otherwise due to the employee, including shares issuable under the
Plan.
24. Notification Upon Sale of Shares. Each employee agrees, by
--------------------------------
entering the Plan, to give the Company prompt notice of any disposition of
shares purchased under the Plan where such disposition occurs within two years
after the date of grant of the Option pursuant to which such shares were
purchased.
25. Effective Date and Approval of Shareholders. The Plan shall
-------------------------------------------
take effect on the later of the date it is adopted by the Board and the date it
is approved by the holders of a
9
<PAGE>
majority of the shares of stock of the Company present or represented and
entitled to vote at a meeting of stockholders, which approval must occur within
twelve (12) months of the adoption of the Plan by the Board.
175044.b1
10
<PAGE>
EXHIBIT 10.8
FORM OF
DATA TRANSLATION II, INC.
REPLACEMENT STOCK OPTION PLAN
-----------------------------
1. Purpose
-------
This Replacement Stock Option Plan (the "Plan") provides for the issuance
of options to purchase shares of the Common Stock of Data Translation, Inc.
(formerly known as Data Translation II, Inc., the "Company") to participants in
the Key Employee Incentive Plan (1982) and the Key Employee Incentive Plan
(1992) of Media 100 Inc. (formerly known as Data Translation, Inc.) (the
"Optionees") as part of an adjustment to their outstanding stock options awarded
under such plans (the "Predecessor Plans") in connection with the spin-off of
the Company by Data Translation, Inc.
2. Administration
--------------
The Plan shall be administered either by the Board of Directors of the
Company (the "Board of Directors") or by a committee of not fewer than two
directors of the Company appointed by the Board of Directors (in either case,
the "Administrator"). Subject to the terms and conditions of the Plan, the
Administrator shall have the power:
(i) To determine who shall receive options under the Plan and to
prescribe the terms and provisions of options issued under the Plan;
(ii) To construe and interpret the Plan and the options issued
hereunder and to establish, amend, and revoke rules and regulations for
administration of the Plan (including to correct any defect or supply
any omission, or reconcile any inconsistency in the Plan, in any
option, or in any related agreements, in the manner and to the extent
the Administrator shall deem necessary or expedient to make the Plan
fully effective);
(iii) To amend from time to time, as the Administrator may
determine is in the best interests of the Company, the terms of any
outstanding options, including without limitation, to modify the
vesting schedule, exercise price or expiration date thereof; and
(iv) Generally, to exercise such powers and to perform such acts
as are deemed necessary or expedient to promote the best interests of
the Company with respect to the Plan.
All decisions and determinations by the Administrator in the exercise of these
powers shall be final and binding upon the Company and the Optionees.
<PAGE>
3. Stock Subject to the Options
----------------------------
The stock subject to the options issued under the Plan, shall be shares of
the Company's authorized but unissued Common Stock, par value $.01 per share
(the "Common Stock"), which may either be authorized but unissued shares or
treasury shares or shares previously reserved for issuance upon exercise of
options under the Plan, and allocable to one or more options (or portions of
options) which have expired or been canceled or terminated (other than by
exercise). The total number of shares that may be issued under the Plan shall
not exceed an aggregate of 275,000 shares of Common Stock. Such number of shares
shall be subject to adjustment as provided in Section 6 hereof.
4. Eligibility
-----------
Each holder of an option to purchase common stock of Data Translation, Inc.
that was granted under a Predecessor Plan and is outstanding on the Distribution
Date, as defined in the distribution agreement (the "Distribution Agreement")
between Data Translation, Inc. and the Company dated as of ___________, 1996 (a
"Predecessor Option"), shall be eligible to receive one or more options under
the Plan.
5. The Options
-----------
It is intended that each person determined by the Administrator to be
eligible under Section 4 shall be issued an option under the Plan in respect of
each Predecessor Option held by such person, as contemplated by Section 8.7.1 of
the Distribution Agreement. The number of shares of Common Stock subject to
each option and the exercise price therefor shall be determined by the
Administrator in accordance with Section 8.7 of the Distribution Agreement.
Subject to the foregoing and except as otherwise provided in the Plan, each
option issued under the Plan shall have substantially the same terms as the
related Predecessor Option, with appropriate alterations to reflect the
Company's substitution for Data Translation, Inc. as the issuer of the stock
subject to such options and, in the case of Transferred Employees (as defined in
the Distribution Agreement), as the employer of the Optionee. Without limiting
the generality of the foregoing, in construing the terms and conditions of
options issued under the Plan:
(i) an option shall be deemed to have been granted on the date
the related Predecessor Option was granted; and
(ii) references in a Predecessor Plan or Predecessor Option to
Data Translation, Inc., its board of directors or its common stock
shall, for periods on and after the Distribution Date, be treated as
referring to the Company, the Administrator and the Common Stock,
respectively; except that
2
<PAGE>
(iii) in the case of Optionees other than Transferred
Employees, references in a Predecessor Plan or Predecessor Option to
termination of employment or other service with Data Translation, Inc.
or a subsidiary shall be treated as continuing to refer to Data
Translation, Inc. and its subsidiaries.
Options issued to Transferred Employees in respect of Predecessor Options that
qualify as "incentive stock options" under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), on the Distribution Date are intended to
be issued in substitution for a portion of such Predecessor Options, so that
they qualify as incentive stock options under Section 424(a) of the Code and the
regulations promulgated thereunder, and shall be interpreted in accordance with
that intent.
No Optionee shall be deemed for any purpose to be the owner of any shares
of Common Stock subject to any option unless and until (i) the option shall have
been exercised pursuant to the terms thereof, (ii) all requirements under
applicable law and regulations shall have been complied with to the satisfaction
of the Company, (iii) the Company shall have issued and delivered the shares to
the Optionee, and (iv) the Optionee's name shall have been entered as a
stockholder of record on the books of the Company. Thereupon, the Optionee
shall have full voting, dividend and other ownership rights with respect to such
shares of Common Stock.
6. Adjustment Upon Changes in Capitalization
-----------------------------------------
(a) If the shares of the Company's Common Stock as a whole are
increased, decreased, changed into or exchanged for a different number or
kind of shares or securities of the Company, whether through
reorganization, recapitalization, reclassification, stock dividend, stock
split, combination of shares, exchange of shares, change in corporate
structure or the like, an appropriate and proportionate adjustment shall be
made in the number and kind of shares subject to the Plan, and in the
number, kind, and per share exercise price of shares subject to unexercised
options or portions thereof granted prior to any such change. In the event
of any such adjustment in an outstanding option, the Optionee thereafter
shall have the right to purchase the number of shares under such option at
the per share price, as so adjusted, which the Optionee could purchase at
the total purchase price applicable to the option immediately prior to such
adjustment.
(b) Adjustments under this Section 6 shall be determined by the
Administrator and such determinations shall be conclusive. The
Administrator shall have the discretion and power in any such event to
determine and to make effective provision for acceleration of the time or
times at which any option or portion thereof shall become exercisable. No
fractional shares of Common Stock shall be issued under the Plan on account
of any adjustment specified above.
3
<PAGE>
(c) The provisions of this Section 6 shall apply to the exclusion of
any provision in any Predecessor Plan or Predecessor Option.
4
<PAGE>
7. Tax Withholding
---------------
Each Optionee shall, no later than the date as of which the value of any
option issued hereunder or of any Common Stock issued upon the exercise of such
option first becomes includible in the gross income of the Optionee for federal
income tax purposes (the "Tax Date"), pay to the Company, or make arrangements
satisfactory to the Administrator (which, in the case of an Optionee other than
a Transferred Employee, shall include payment to Media 100 Inc. or arrangements
satisfactory to Media 100 Inc.) regarding payment of, any federal, state, or
local taxes of any kind required by law to be withheld with respect to such
income. In the event that an Optionee has not made the arrangements described in
this Section 8 on or before the Tax Date, the Company is hereby authorized to
withhold the amount of any federal, state or local taxes of any kind required by
law with respect to such income from any payment otherwise due to the Optionee.
8. Amendment of the Plan
---------------------
The Board of Directors may discontinue or amend the Plan, and the
Administrator may amend any option granted hereunder at any time, and from time
to time, subject to any required regulatory approval, provided that no amendment
shall adversely affect the rights of an Optionee without such Optionee's
consent.
5
<PAGE>
9. Nonexclusivity of the Plan
--------------------------
The adoption of the Plan by the Board of Directors shall not be construed
as creating any limitations on the power of the Board of Directors to adopt such
other incentive arrangements as it may deem desirable, including, without
limitation, the granting of stock or stock options otherwise than under the
Plan, and such arrangements may be applicable either generally or only in
specific cases. Neither the Plan nor any option granted hereunder shall be
deemed to confer upon any person any right to employment or continued employment
with the Company.
10. Government and Other Regulations; Governing Law
-----------------------------------------------
(a) The obligation of the Company to sell and deliver shares of Common
Stock with respect to options granted under the Plan shall be subject to
all applicable laws, rules and regulations, including all applicable
federal and state securities laws, and the obtaining of all such approvals
by governmental agencies as may be deemed necessary or appropriate by the
Administrator.
(b) The Plan shall be governed by Delaware law, except to the extent
that such law is preempted by federal law.
11. Effective Date of the Plan
--------------------------
The Plan shall become effective on the Distribution Date.
6
<PAGE>
EXHIBIT 10.9
Execution Copy
SOFTWARE BUNDLING MASTER LICENSE AGREEMENT
LICENSEE: Data Translation, Inc.
Organized under the laws of: Massachusetts
Address: 100 Locke Drive
Marlborough, MA 01752
Effective as of March 1, 1996
Licensee and ULEAD Systems, Inc., a California corporation with its principal
place of business at 970 West 190th Street, Suite 520, Torrance, CA ("ULEAD"),
agree as follows:
1. DEFINITIONS
1.1. "Master" means a copy of the Software entrusted to Licensee from
which reproductions of the Software shall be made pursuant to this
Agreement, as more fully described in Exhibit B.
1.2. "Effective Date" shall mean March 1, 1996.
1.3. "Term" means the duration of this Agreement as stated in Exhibit A,
unless earlier terminated in accordance with this Agreement.
1.4. "Territory" means the area specified in Exhibit A.
1.5. "Bundled Product" means, collectively, Licensee's products specified
in Exhibit B and the Software.
1.6. "License Fee" means the license fee for one copy of the Software in
U.S. dollars as specified in Exhibit B.
1.7. "Quantity" means the estimated number of units of Software to be
reproduced as stated in Exhibit B, during the Term; provided that
Licensee may make additional reproductions pursuant to this
Agreement.
1.8. "Documentation" means instructional, promotional and other matter,
other than Software, customarily provided by ULEAD to its end users
with the Software.
1.9. "Software" means the English, German and French versions of the
computer programs and electronic instructions listed in Exhibit B,
including Update Release and Version Release, comprising of object
code version of computer
<PAGE>
programs having the functional and operational specifications as set
forth in the Documentation, together with any supplementary programs,
utilities, tutorials, Documentation and other material that ULEAD
customarily provides to its end users with such computer programs and
electronic instructions.
1.10. "Update Release" means a release of Software containing primarily
corrections that ULEAD in its sole discretion designate as a change
in the digit to the right of the tenth's digit in the Software
version number.
1.11. "Version Release" means a release of Software containing changes in
the functions of the Software that ULEAD in its sole discretion
designates as a change in the tenth's digit in the Software version
number.
1.12. "Product Release" means a release of Software containing major
changes in the Software that ULEAD in its sole discretion designates
as a change in the first digit in the Software version number;
provided that any release of the Software containing digital video
editing functionality shall be deemed to be an Update Release or a
Version Release and not a Product Release.
1.13. "Support Services" means installation, maintenance and technical
support services.
1.14. "End User Agreement" means ULEAD's then current license agreement and
warranty with respect to the Software which will grant to Licensee's
end users a limited warranty and rights to use the Software.
1.15. "Writing" means any communication on a paper or via facsimile.
1.16. "Late Payment Charges" means the amount calculated by multiplying the
amount delinquent from forty-five (45) days after the due date until
the date of actual payment with an annual rate equal to the higher of
(a) twelve percent (12%) or (b) three percent (3%) above the prime
rate published by the Wall Street Journal on the date it first
becomes due.
1.17. "Report" means a report containing information related to the
inventory of, distribution of, and other information related to
Software, completed and duly signed, from time to time, by an
authorized representative of Licensee.
1.18. "Reproduction Site" means the location stated in Exhibit B.
1.19. "Reproduction Guideline" means the procedures established by ULEAD on
the reproduction and packaging of the Software, and previously
provided to Licensee, which ULEAD may amend from time to time with
prior written
-2-
<PAGE>
consent of Licensee, which consent shall not be unreasonably withheld
or delayed.
2. GRANT OF LICENSE
2.1. Subject to the terms and conditions of this Agreement, ULEAD grants
to Licensee a non-exclusive right and license, during the term of
this Agreement, to load, utilize, execute, reproduce, have
reproduced, market, promote and distribute, directly and indirectly,
the Software for the purpose of evaluating, testing, supporting and
including the Software as a components of the Bundled Products, and
to sublicense such Software, as a component of the Bundled Products,
to end user, distributor and Original Equipment Manufacturer ("OEM")
customers throughout the Territory.
2.2. Subject to the terms and conditions of this Agreement, ULEAD grants
to Licensee a non-exclusive right and license, during the term of
this Agreement: (i) to reproduce and have reproduced the Software's
Documentation, or portions thereof, solely for the purpose of
providing the Documentation or portions thereof throughout the
Territory to sublicensees of the Software contained in the Bundled
Products; and (ii) to create, reproduce, and have reproduced,
modified versions of the Documentation or portions thereof ("Modified
Manuals") which comply with Licensee's style and procedures
guidelines, solely for the purpose of providing the Modified Manuals
throughout the Territory to sublicensees of the Software contained in
the Bundled Products. Any such modifications to the Documentation or
portions thereof will be subject to the prior approval of ULEAD,
provided such approval is not unreasonably withheld, delayed or
conditioned. If ULEAD has not objected to a Modified Manual created
from the Documentation or portions thereof within thirty (30) days of
receiving notice of the production of such Modified Manual, the
approval right shall be deemed waived as to that Modify Manual, and
that Modified Manual may be supplied with the related Software for
the term of the Agreement without further approval required from
ULEAD. Licensee may add its own copyright notice to those of ULEAD,
if any, for the Modified Manuals.
2.3. Subject to the terms and conditions of this Agreement, ULEAD grants
to Licensee a non-exclusive right and license, during the term of
this Agreement, to use ULEAD's trade names, trademarks and service
marks listed in Appendix A hereto (hereinafter collectively referred
to as the "Trademarks") throughout the Territory solely for labeling
reproductions of the Software and Documentation or portions thereof
that are permitted under this Agreement and for advertising the
Bundled Products. Licensee shall not at any time do or permit any act
to be done which may in any way impair the rights of ULEAD in the
Trademarks. In order to comply with ULEAD's quality control
standards,
-3-
<PAGE>
Licensee shall (a) use the Trademarks in compliance with all relevant
material laws and regulations; (b) accord ULEAD the right to inspect
during normal business hours, upon reasonable advance notice,
Licensee's facilities in order to confirm that Licensee's use of the
Trademarks is in compliance with this provision, provided that no
more than two inspections be made in any 12-month period (unless
Licensee has breached its obligations under this Section 2.3 in a
material manner and ULEAD has notified Licensee to that effect in
writing); (c) not modify any of the Trademarks in any way and not use
any of the Trademarks on any goods or services other than the
Software, the Documentation, or portions thereof, and the Modified
Manuals, and the advertising therefor and for the Bundled Products.
If Licensee fails to use the Trademarks in material compliance with
this provision, ULEAD may instruct Licensee to immediately cease use
of the Trademarks, and Licensee shall immediately cease such use.
2.4. In exchange for the grant of the licenses set forth in this Section
2, Licensee shall pay to ULEAD, in accordance with the provisions of
Section 4, a License Fee as set forth in Appendix B of this Agreement
and shall perform its other obligations under this Agreement.
2.5. All rights not expressly granted to licensee with respect to the
Software, the Documentation and the Trademarks under this Agreement
are reserved by ULEAD.
3. DISTRIBUTION
3.1. Licensee will not cause any translation of the Software to be created
without ULEAD's express written consent which consent shall not be
unreasonably withheld. All rights and title to the translated work
are hereby assigned to ULEAD without further consideration.
3.2. Licensee agrees to include with every Software included as a
component of the Bundled Products or portions thereof, to the extent
mutually agreed to by ULEAD and Licensee, ULEAD's Documentation or
portions thereof, user registration card, End User Agreement, and any
other material reasonably requested by ULEAD. The limitations of
liability and remedies in Licensee's end user agreement will inure to
the benefit of ULEAD.
3.3. ULEAD agrees, from time to time, to supply to Licensee, upon two
weeks notice and for no additional cost, sufficient quantities of
user registration cards, End User Agreements, authenticity stickers
and upgrade coupons for the shipment of the Bundled Products.
-4-
<PAGE>
3.4. Promptly after the Effective Date, and as from time to time requested
by Licensee, upon reasonable notice, ULEAD shall, at no additional
cost, supply to Licensee logos, slides of box shots, fifty word and
other descriptive text and CD ROM artwork for Media Studio Video
Edition.
3.5. Licensee will instruct its distributors and dealers to not distribute
the Software except as part of the Bundled Products and to comply
with the licensing restrictions set forth herein. Licensee will cease
supplying any Software to any dealer or distributor which ULEAD
reasonably believes to be violating the preceding sentence and has
notified Licensee to that effect in writing.
4. ROYALTIES AND PAYMENT
4.1. Licensee agrees to pay ULEAD the License Fee on or prior to thirty
(30) days after the last day of each fiscal month for all the units
of the Software shipped by Licensee during that month.
Notwithstanding the foregoing, no License Fee is payable for (i) any
shipment of the Software which is an Update Release or a Version
Release, (ii) any shipment of the Software which is a replacement for
a defective disk and (iii) any copies of the Software distributed by
Licensee to its employees, agents or consultants for the purpose of
testing, evaluating and supporting the Software and the Bundled
Products.
4.2. All payments shall be made by check or by wire transfer to such bank
account as ULEAD may from time to time designate in writing.
4.3. Any late payment will bear Late Payment Charges as set forth herein.
These charges will accrue beginning forty-five (45) days from the
date payment is due. Any acceptance of Late Payment Charges will not
be deemed a waiver of any right which ULEAD may have under law and
equity, including the right to terminate this agreement.
4.4. Licensee may not delay payment due to any currency shortage or
exchange control. In the event any currency legislation or exchange
control precludes Licensee from making payments to ULEAD at ULEAD's
address in U.S. dollars for a period exceeding forty-five (45) days,
ULEAD will have the right to terminate this Agreement.
4.5. Any Software shipped by ULEAD will be shipped FOB ULEAD's warehouse
in California. Licensee will pay to ULEAD all freight, insurance,
duty and sales tax, if any, incurred by ULEAD (when the Software is
shipped from ULEAD's warehouse in California) when invoiced by ULEAD.
However, no sales tax will be charged if, prior to the issuance of
invoice, Licensee has
-5-
<PAGE>
supplied ULEAD with appropriate tax exemption certificates reasonably
satisfactory to ULEAD.
4.6. Any returns may only be made for credit against future License Fees
pursuant to ULEAD's Return Material Authorization (R. M. A.)
procedure, which has been previously provided to Licensee and which
may not be modified without prior written consent of Licensee, which
consent shall not be unreasonably withheld or delayed; provided,
however, that in the event that Licensee does not ship any additional
Software during the month that the Software is returned to ULEAD,
ULEAD shall refund the Licensee Fee paid by Licensee for the returned
Software on or prior to thirty (30) days after the last day of such
month. Licensee agrees to pay any restocking charges which ULEAD may
impose for such returns; provided that such restocking charges shall
not exceed 10% of the License Fee paid for such returned Software.
4.7. Taxes (which may include foreign and domestic sales, use, personal
property, excise or other similar taxes, or export/import taxes, but
expressly excluding income or other business or property taxes
customarily payable by a party upon its own commercial activities),
duties and charges, however designated, imposed during the term of
this Agreement on the reproduction, distribution, marketing and
sublicensing of Bundled Products which include the Software shall be
the responsibility of Licensee, as between ULEAD and Licensee
hereunder; provided that Licensee reserves the right, at is
discretion, to contest, object to or refuse payment of any such tax,
duty or charge, in whole or in part, which Licensee determines is not
rightfully imposeable upon the reproduction, distribution, marketing
and sublicensing of Bundled Products which include the Software. Any
such taxes, duties and charges which would be the responsibility of
Licensee hereunder, but which instead are actually paid by ULEAD,
shall be reimbursed by Licensee to ULEAD in Licensee's next payment
to ULEAD.
5. REPORT & AUDIT
5.1. Each monthly payment shall be accompanied by a Report of reproduction
and shipment activity for the Software during that period.
5.2. Through an independent CPA firm, ULEAD shall have the right to audit
Licensee's records twice per year during regular business hours upon
forty-eight (48) hours written notice, to verify Licensee's
compliance with the payment of royalties, as described in this
Agreement. Such audit shall pertain only to the financial matters
pertinent to the royalties payable to ULEAD and to matters pertinent
to Licensee's licensing and composition of Bundled Products. ULEAD
will pay all costs associated with such audit unless it is determined
that a material discrepancy exists, in which case Licensee will pay
such costs. A
-6-
<PAGE>
material discrepancy shall be defined as a deficiency of 10% or more
(such percentage calculation to be made based on the amount of
royalties that should have been paid) in unpaid royalties over the
previous 12-month period. In the event of such discrepancy, Licensee
will pay to ULEAD: (a) the amount of the discrepancy; (b) interest on
the amount at a annual rate of the higher of (1) twelve percent (12%)
or (2) three percent (3%) above the prime rate published by the Wall
Street Journal on the date it first becomes due; and (c) the costs of
the audit, within 10 business days after receipt of the audit report.
6. REPRODUCTION
6.1. ULEAD will promptly furnish to Licensee a Master for the most recent
version of the Software, but no later than 10 days after the
Effective Date. ULEAD will promptly furnish to Licensee, at no
additional cost, a Master for each Update Release and each Version
Release, within 10 days that such Release is shipped to any other
licensee or end-user of ULEAD.
6.2. Licensee will reproduce the Software according to the Reproduction
Guidelines and pursuant to this Agreement.
6.3. Any reproduction of the Software must be performed at the
Reproduction Site. Prior to changing the outside contractor that will
reproduce the Software, Licensee shall provide to ULEAD a written
notice to that effect, setting forth the new contractor's name,
address, phone number and the contact person. ULEAD may seek
assurances in writing from such outside contractor that such outside
contractor is reproducing the Software only for Licensee and not for
its own use or distribution.
6.4. Licensee will submit two (2) units of the Bundled Products including
the Software, and two (2) copies of any material referring to ULEAD,
ULEAD's products or any of its trademark in a proposed finished
version to ULEAD for written approval before distribution, which
approval will not be unreasonably withheld, delayed or conditioned.
If ULEAD has not objected to the materials submitted in accordance
with the foregoing sentence within three weeks of receiving the same,
the approval right shall be deemed waived as to such materials and
such materials may be distributed by Licensee without further
approval required from ULEAD; provided that the approval of a
Modified Manual shall be governed by Section 2.2. Any hardware or
software (other than the Software) included in such Bundled Product
must either be returned to Licensee or be paid by ULEAD, as invoiced
by Licensee, within five (5) weeks of receiving the same.
-7-
<PAGE>
6.5. Besides being a breach of this Agreement, Licensee agrees that any
reproduction, distribution or use of the Software in breach of this
Agreement is an infringement of ULEAD's copyright and trademark,
rights, including the distribution of any Software without a Bundled
Product or distributing any elements of the Software apart from each
other, except for purposes of evaluating, testing or supporting the
Software.
7. INTELLECTUAL PROPERTY
7.1. Licensee will reproduce all the proprietary rights notices that ULEAD
places on the applicable release of the Software as provided to
Licensee wherever such notices may appear and at the same location
and size as they appear in or on the Software or on the disks
containing the Software.
7.2. Licensee will clearly show ULEAD's ownership of the Trademarks and
adhere to ULEAD's trademark usage guideline, which has been
previously provided to Licensee and which may not be modified without
prior written consent of Licensee, which consent shall not be
unreasonably withheld or delayed. Licensee agrees that the level of
quality of the Software that it markets shall be reasonably
consistent with the level of quality of the Software marketed by
ULEAD under ULEAD's trademarks.
7.3. Licensee will not adopt or register any trademark reasonably deemed
by ULEAD to be confusingly similar to ULEAD's trademarks.
7.4. Licensee agrees that any modification, translation, reverse
engineering, decompilation or disassembly (except pursuant to this
Agreement) is prohibited under this Agreement and any such act is an
infringement of Licensee's intellectual property rights.
8. SUPPORT
8.1. To the extent provided for in Licensee's end-user agreements for the
Bundled Products, Licensee shall be responsible, at its own expense,
for providing telephone assistance and support to its customers and
end-users with respect to the Software. ULEAD shall, at its own
expense, provide prompt, reasonable and professional technical
assistance and support to Licensee with respect to the Software and,
if reasonably possible, shall answer technical questions from
Licensee within two business days.
8.2. ULEAD shall use its reasonable best efforts to correct any errors or
"bugs" in the Software of which it is notified, including any failure
of the Software to conform substantially to the specifications set
forth in the Documentation and
-8-
<PAGE>
any deviation from commonly accepted standards for operation of
computer software. Not limiting the generality of the foregoing,
ULEAD shall, within five business days after notice from Licensee
which specifies in reasonable detail the nature of the errors or
"bugs," correct any errors or "bugs" that cause the Software to crash
or cease operating and shall correct other errors or "bugs" within a
reasonable period of time.
8.3. Prior to the first shipment of the Bundled Products, ULEAD will
provide, at its expense, one trainer to give a full day of technical
support training to Licensee's support staff at Licensee's facilities
in Marlborough, Massachusetts, or elsewhere in the United States, as
designated by Licensee. ULEAD will provide, at its expense, an
additional day of technical support training to Licensee's support
staff at Licensee's facilities in Marlborough, Massachusetts, or
elsewhere in the United States as designated by Licensee, every time
any Version Release of the Software is made.
9. LIMITED WARRANTY
ULEAD warrants that the original disks for the Master and for any Update
Releases and Version Releases are free from material defects in material
and workmanship under normal use, provided ULEAD receives written notice
stating in detail the defect or nonperformance within one year from the
date of delivery. ULEAD warrants that the Software will perform
substantially in accordance with ULEAD's specifications set forth in the
Documentation. ULEAD's sole and exclusive obligation under this limited
warranty is to replace the defective disks and to use reasonable best
efforts to cause the Software to substantially conform to its published
specifications. Unless expressly provided in this Agreement, ULEAD MAKES NO
OTHER WARRANTY OR REPRESENTATION REGARDING THE SOFTWARE, DOCUMENTATION,
SUPPORT SERVICE, OR ULEAD'S PERFORMANCE UNDER THIS AGREEMENT, EXPRESS OR
IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE OR CONDITIONS.
10. REPRESENTATIONS AND WARRANTIES
10.1. Each party represents and warrants that:
(a) such party has all requisite corporate power and authority to
execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby;
(b) the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby by such party have been duly
authorized by all
-9-
<PAGE>
requisite corporate action and will not result in a violation by such
party of, or constitute a default by such party under, any
contractual obligation or any organizational documents of such party
or any legal requirement applicable to such party;
(c) this Agreement has been duly executed and delivered by such party
and constitutes the legal, valid and binding obligations of such
party, enforceable in accordance with its terms, subject to laws of
general application relating to bankruptcy, insolvency and the relief
of debtors, the enforcement of creditors' rights generally, rules of
law governing specific performance, injunctive relief and other
equitable remedies; and
(d) no filing with or consent, approval, or authorization of any
governmental authority with jurisdiction over such party is required
for such party's performance or execution of this Agreement.
10.2. ULEAD represents and warrants that it has sufficient rights in the
Software and the Documentation, including all intellectual property
rights therein, to make the grants and commitments made in this
Agreement.
10.3. ULEAD represents and warrants that the Software and the
Documentation, or any portions thereof, do not infringe or violate
any patent, copyright, trademark or trade secret rights of any third
party in the United States or in any other country. ULEAD shall give
Licensee prompt written notice if it receives notice involving the
Software or the Documentation of any infringement or violation of any
patent or copyright, trademark or trade secret rights of any third
party.
11. INDEMNIFICATION
11.1. ULEAD shall indemnify, hold harmless and defend Licensee from and
against any and all suits, actions, damages, costs, losses, expenses
(including settle awards and reasonable attorney's fees) and other
liabilities arising from or in connection with any claim that the
Software, the Documentation, the Modified Manuals (to the extent
reproduced in whole or in part from the Documentation) or any other
material that ULEAD has provided to Licensee to be included in the
Bundled Products infringes or violates any patent, copyright,
trademark, trade secret or other proprietary right of any third party
in the United States or in any other country. Promptly after receipt
by Licensee of notice of the commencement of any action or proceeding
involving a claim of the type referred in the sentence above,
Licensee shall give written notice to ULEAD of the commencement of
such action; provided, however, that
-10-
<PAGE>
the failure of Licensee to give notice as provided herein shall not
relieve ULEAD of its obligations hereunder, except to the extent that
ULEAD is actually prejudiced by such failure to give notice. In case
any such action is brought against Licensee, ULEAD shall be entitled
to participate in and to assume the defense thereof to the extent
that it may wish, with counsel reasonably satisfactory to Licensee.
ULEAD may settle any such claim on a basis requiring ULEAD to
substitute for the Software and the Documentation alternative
substantially equivalent non-infringing programs and supporting
documentation; provided, however, that ULEAD shall not consent to
entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant
or plaintiff to Licensee of a release from all liability in respect
to such claim or litigation.
11.2. Licensee shall indemnify, hold harmless and defend ULEAD from and
against any and all suits, actions, damages, costs, losses, expenses
(including settle awards and reasonable attorney's fees) and other
liabilities arising from or in connection with any claim that the
Bundled Product (other than the Software, the Documentation, the
Modified Manuals (to the extent reproduced in whole or in part from
the Documentation) or any other material that ULEAD has provided to
Licensee to be included in the Bundled Products) infringes or
violates any patent, copyright, trademark, trade secret or other
proprietary right of any third party in the United States or in any
other country. Promptly after receipt by ULEAD of notice of the
commencement of any action or proceeding involving a claim of the
type referred in the sentence above, ULEAD shall give written notice
to Licensee of the commencement of such action; provided, however,
that the failure of ULEAD to give notice as provided herein shall not
relieve Licensee of its obligations hereunder, except to the extent
that Licensee is actually prejudiced by such failure to give notice.
In case any such action is brought against ULEAD, Licensee shall be
entitled to participate in and to assume the defense thereof to the
extent that it may wish, with counsel reasonably satisfactory to
ULEAD. Licensee may settle any such claim on a basis requiring
Licensee to substitute for the Bundled Product alternative
substantially equivalent non-infringing programs, hardware and
supporting documentation; provided, however, that Licensee shall not
consent to entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving by the
claimant or plaintiff to ULEAD of a release from all liability in
respect to such claim or litigation.
-11-
<PAGE>
12. CONFIDENTIALITY
As used in this section, "Confidential Information" means any information
related to price, technical aspects of the software or the Bundled
Products, the Software's marketing plan, the Bundled Products' marketing
plan, products under development, the terms of this Agreement and any other
information marked confidential by the furnishing party (the "Furnishing
Party") All Confidential Information shall be and shall remain the
exclusive property of the Furnishing Party, and the receiving party (the
"Receiving Party") shall keep, and have its employees and agents keep, any
and all such Confidential Information confidential and shall not copy,
publish or disclose it to others, or authorize its employees or agents or
any one else to copy, publish or disclose it to others, without the
Furnishing Party's written approval, and shall return such Confidential
Information to the Furnishing Party upon its request or in the event of
termination of this Agreement; unless such information (a) is known to the
Receiving Party at the time of receiving the information, (b) is available
in the public or furnished by a third party, through no breach of this
Agreement, (c) is independently developed by the Receiving Party, or (d) is
required to be disclosed in a judicial or administrative proceeding,
provided the Receiving Party gives immediate notice and opportunity to the
furnishing party to oppose the disclosure. Each party acknowledges that use
of the other's Confidential Information in a manner contrary to the
provisions of this Agreement would cause the other irreparable harm for
which money damages would not make the injured party whole.
13. COMPLIANCE WITH LAWS
Each of the parties agrees to comply with any material law governing such
party's performance under this Agreement.
14. LIMITATION OF REMEDIES
14.1. Either party's aggregate liability for damages to the other party
pursuant to Section 10.3 or Section 11 of this Agreement for any
cause whatsoever, whether in contract or in tort, including
negligence, cannot exceed $1,000,000. Either party's aggregate
liability for damages to the other party pursuant to this Agreement
(other than pursuant to Section 10.3 or Section 11) for any cause
whatsoever, whether in contract or in tort, including negligence,
cannot exceed the amount equal to the aggregate payments actually
made by Licensee to ULEAD under this Agreement.
14.2. IN NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY DAMAGES CAUSED BY THE
OTHER PARTY'S FAILURE TO PERFORM ITS OBLIGATIONS OR FOR ANY BUSINESS
INTERRUPTION, LOSS OF PROFITS, SAVINGS, INDIRECT, SPECIAL, INCIDENTAL
OR
-12-
<PAGE>
CONSEQUENTIAL DAMAGES, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF THE DAMAGES.
15. TERMINATION
15.1. Either party may terminate this Agreement upon thirty (30) days
written notice to the other party.
15.2. ULEAD may immediately terminate this Agreement if any of the
following events occur: (a) Licensee becomes insolvent or makes a
general assignment for benefit of creditors; (b) the filing of a
petition by Licensee for relief under the laws of bankruptcy; (c) the
filing of a petition against Licensee for relief under the laws of
bankruptcy, and such petition shall remain undismissed for thirty
(30) days; (d) the petition for an appointment or an actual
appointment of a receiver or other custodians for the business or
assets of Licensee, and such petition shall remain undismissed for
thirty (30) days; and (e) Licensee admits in writing of its inability
to pay its debts generally as they become due.
15.3. Upon termination of this Agreement, any provisions of this Agreement
which by its terms is applicable to actions or periods occurring
after termination of the Agreement, including, but not limited to
Sections 1, 7, 8, (to the extent set forth in Section 15.5), 9, 10,
11, 12, 14, 15 and 16, will remain in full force and effect; provided
that Sections 7, 9 and 10.1 shall remain in effect for one year after
such termination; Sections 10.2, 10.3 and 12 shall remain in effect
for two years after such termination; and Sections 15.5 and 15.6
shall remain in effect to the extent set forth therein.
15.4. Upon termination of this Agreement, except as set forth in Section
15.5 or 15.6, Licensee shall promptly undertake the necessary steps
to terminate Licensee's reproduction, marketing, promotion and
distribution of the Software, as such are then in progress under its
grant of license under Section 2 herewith.
15.5. Licensee will continue to provide end-user support for the Software,
and ULEAD will continue to provide support to Licensee, under Section
8 herein for ninety (90) days following the termination of this
Agreement to facilitate transition of end-user support services to
ULEAD. ULEAD agrees to provide, at its expense, in accordance with
the terms of the End-User Agreement, technical assistance and support
with respect to the Software to the Licensee's end-users following
such ninety-day period.
15.6. For ninety (90) days following the date of termination of this
Agreement, Licensee may dispose of any remaining inventory of the
Software contained in
-13-
<PAGE>
the Bundled Products including work-in-progress (which may be
completed), held by Licensee at the time the termination/expiration
occurs, and fill any binding orders it has theretofore received and
accepted for the Bundled Products containing the Software. Licensee
shall have a limited license, under the terms of Section 2 herein,
for the sole purpose of fulfilling such close-out contractual
obligations, and for providing the end-user support described in
Section 15.5, provided that Licensee's obligation to pay License Fees
to ULEAD, in accordance with Section 4 herein, shall continue as to
all such close-out transactions.
15.7. Any end user, distributor and OEM licenses properly granted prior to
the date of termination of this Agreement shall survive the
termination of this Agreement.
15.8. Neither party shall be liable to the other for damages, losses or
expenses which may subsequently result from a permitted termination
of this Agreement; provided, however, that such permitted termination
shall not affect any claim, demand or liability of either party
otherwise created or arising hereunder prior to such termination or
under Sections 15.5 or 15.6 after such termination.
16. DISPUTE RESOLUTION
16.1. The Agreement is entered into in the State of California, and its
validity, construction, interpretation, and legal effect will be
governed by U.S. laws and the laws applicable to contracts entered
into and performed entirely within the State of California.
16.2. Any dispute, controversy, or claim arising out of or relating to this
Agreement, or the breach, termination, or invalidity thereof, will be
settled by arbitration in Chicago following the arbitration and
conciliation procedures set forth in the Commercial Arbitration Rules
of the American Arbitration Association in force on the date of the
mailing of the notice of arbitration, provided that each of the
parties reserves the right to seek interim relief, including
temporary restraining order from any court and the parties may pursue
discovery following the local Code of Civil Procedure. The sole
arbitrator or one of the arbitrators, if more than one is required,
will have more than five (5) years experience in computer law. The
place of arbitration will be Chicago. The parties want to close the
arbitral hearing within six (6) months from the date of the
commencement of the arbitral proceedings and the arbitral award will
be made within thirty (30) days after the close of hearings and will
be final and binding upon the parties. The judgment upon the award
may be entered in any court having jurisdiction.
-14-
<PAGE>
17. GENERAL
17.1. Entire Agreement. This Agreement represents both parties' entire
----------------
understanding and agreement regarding the matters stated herein and
supersedes any prior communications, advertising, or representations.
This Agreement may only be modified in a written amendment signed by
an authorized officer of ULEAD and by an authorized officer of the
Licensee. Any terms stated in Licensee's purchase order contrary to
or in addition to the terms in this Agreement is hereby deleted and
of no effect.
17.2. Assignment. This Agreement may not be assigned or sublicensed by
----------
either party without the prior written consent of the other party.
Each party agrees not to unreasonably withhold or delay consent to
any assignment. Any assignment contrary to this section is void and
unenforceable.
17.3. Severability. If any provisions hereof is found invalid or
------------
unenforceable pursuant to a final judicial decree, the remainder of
this Agreement will remain valid and enforceable according to its
terms.
17.4. Delay. Except regarding performance under Section 4 of this
-----
Agreement, neither party will be deemed in default due to causes
beyond its reasonable control.
17.5. Relationship. Nothing in this Agreement is intended to create,
------------
or will be construed as creating, a joint venture, partnership,
franchise, agency, or employment relationship, it being understood
that ULEAD and Licensee are independent contractors vis-a-vis one
another.
17.6. Drafter. No party will be deemed the drafter of this Agreement
-------
which will be deemed to have been jointly prepared by the parties. If
this Agreement is ever construed, whether by a court or by an
arbitrator, such court or arbitrator will not construe this Agreement
or any provisions hereof against any party as the drafter.
17.7. Notice. Except as provided herein, all notices required hereunder
------
will be in writing and will be given by personal delivery, by
certified mail, or by facsimile transmission. All notice will be
deemed effective upon personal delivery or upon receipt of the
facsimile transmission, or on the fifth day of the date of the
postmark if solely by mail.
17.8. Waiver. A waiver of any breach or provision of this Agreement
------
will not be construed as a continuing waiver of other breaches of the
same or other provisions of this Agreement.
-15-
<PAGE>
17.9. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which will be deemed an original and all of
which together will constitute one instrument.
17.10.Language. This Agreement is in the English language only, which
--------
language is controlling in all respects, and any other versions in
any other language is not binding on the parties. All communications
and notices to be made or given pursuant to this Agreement will be in
the English language.
17.11.Heading. The headings of this Agreement are provided for convenience
-------
and will not control the interpretation of the Agreement.
IN WITNESS WHEREOF, the parties hereby execute this Agreement as of
the date first above written.
ULEAD Systems, Inc. Data Translation, Inc.
By: /s/ Steven L. Staurenbach By: /s/ Ellen W. Harpin
-------------------------------- -------------------------------------
Name: Steven L. Staurenbach Name: Ellen W. Harpin
-------------------------------- -----------------------------------
Title: Director of Sales Title: Vice President
------------------------------- ----------------------------------
Date: February 23, 1996 Date: February 26, 1996
-------------------------------- -----------------------------------
-16-
<PAGE>
Appendix A
Trademarks
----------
Ulead is a trademark of Ulead Systems, Inc.
MediaStudio is a trademark of Ulead Systems, Inc.
MediaStudio VE is a trademark of Ulead Systems, Inc.
MediaStudio Pro is a trademark of Ulead Systems, Inc.
<PAGE>
EXHIBIT A
TERRITORY & TERM
Territory: Worldwide
Term: Fourteen (14) months, and automatically renewed on a year-to-year basis,
unless earlier terminated pursuant to the Agreement.
<PAGE>
EXHIBIT B
PRODUCT AND LICENSE FEES
ULEAD Software: MediaStudio /TM/ Pro Video Edition, English, German and
French Language Version.
Quantity: 5,000 units to be reproduced for Licensee's end users
20 units to be reproduced for evaluation, testing and
support purposes.
License Fees: [material omitted and filed separately with the Securities
and Exchange Commission] per unit
Licensee product: MPEG creation board product
Reproduction Site: US Optical Disk Inc.
One Eagle Drive
Sanford, Maine 04073-1124
Phone Number: (207) 324-1124
Contact Person: Frank Delarosa
Master: The Master shall contain:
English, French and German language editions of the
MediaStudio application and on-line help files;
English, French and German language versions of the user
manual in Adobe Acrobat PDF file format along with the
Acrobat reader application;
Software codecs including Cinepak and Intel Video
Interactive;
Approximately 400 MB of sample materials;
English language tours and tutorials; and
Installation applications for all of the above.
<PAGE>
EXHIBIT 10.10
DISTRIBUTION AGREEMENT
between
DS Datenverarbeitung und Sensortechnik GmbH
Neckarstrasse 76/1
71686 Remseck
Germany
(hereinafter referred to as "DS")
and
DATA TRANSLATION Inc.
100 Locke Drive
Marlboro, MA 01752-1192
USA
(hereinafter referred to as "DT")
<PAGE>
Art. 1
Object of the Agreement
DS has developed the Machine-Vision Software Product "NeuroCheck".
DT will distribute that product subject to the terms of the present Agreement.
Art. 2
Obligations and Services of DS
(1) DS herewith grants to DT the worldwide distribution rights, on a
non-exclusive basis, for the Machine-Vision Software Product "NeuroCheck",
with the exception of the distribution in the Federal Republic of Germany
where an existing cooperation agreement with the subsidiary of DT shall
continue in effect.
(2) During the term of the present Distribution Agreement DS shall offer
"NeuroCheck" exclusively in support of DT hardware, so long as DT
continues to meet the Imaging HW needs of the Machine Vision market.
(3) DS shall terminate at the earliest possible date any and all distribution
agreements existing with companies abroad. The distribution
<PAGE>
agreements in question are specified in Annex 1 to the present
Agreement, together with the dates on which the termination as provided
for herein will take effect.
(4) During the term of the present Agreement, DS shall allow DT to
participate in the development of concepts for future versions of
"NeuroCheck". The exclusive rights of DS to "NeuroCheck", including the
version described in clause (7) below, shall, however, not be affected
thereby.
(5) For test purposes, a suitable customer, to be named by DT, will be
worked by DS directly.
(6) DS intends to complete in each year two new versions of "Neuro-Check" in
English and German language. Generally, the English version shall have
priority.
(7) DS commits to offer, during the period July - September of 1996, a
version of "NeuroCheck" that will be capable of running under Windows/NT
4.0, which version shall be distributed by DT on the terms and
conditions of this present Agreement.
(8) DS shall make available to DT on a regular basis preliminary versions
("Betas") of any "NeuroCheck" version under development.
(9) DS shall meet DT packaging and shipping requirements for "NeuroCheck" by
ensuring that the product name and SW version number are clearly set
forth both on the individual "NeuroCheck" boxes as well as on the
outside of the shipping container. Should further
<PAGE>
requirements develop in the future, DS will make its best efforts to
accommodate these new requirements.
(10) DS will make available to DT, free of charge, a 3.5" floppy disk
containing a demonstration version of "NeuroCheck"; the same applies for
all future versions. DT has the right to redistribute, free of charge, the
demonstration version of "NeuroCheck", to its distributors and customers.
(11) DS will develop a two day instructional "NeuroCheck" training course. DS
will offer the course, to be attended by DT personnel and
distributors/VARs/Integrators, two times a year in the United States, free
of charge. Additionally, DS will provide additional, more in depth
training to nor more than 5 key DT people and provide the two day training
course materials to them so that they may conduct subsequent training,
support, and sales training at will. Place and date of these additional
trainings are coordinated by DT and DS together. If the fixed date
requires a separate journey for the qualified teacher of DS, these
additional trainings and the travel expenses will be charged by DS. With
new versions of "NeuroCheck", incremental training as specified above will
be provided and the training materials will be updated and provided to DT.
<PAGE>
Art. 3
Obligations and Services of DT
(1) DT shall actively distribute all versions of "NeuroCheck" (including
successor versions and supplements) on the terms of the present
Agreement through its U.S. and International distribution channel, with
the exception of the Federal Republic of Germany.
(2) So long as DS is complying with its obligations under this Agreement,
including its obligation to develop new versions every year, and so long
as such versions are up to date in the industry, DT shall not select
another vendor with product that is directly competitive as to quality,
price, features and intended customers (OEM, end-user or other) with the
Product sold to DT hereunder.
(3) DT shall include "NeuroCheck" in the next version of its product
catalogue, where "NeuroCheck" will be devoted at least two full pages in
each case, and will to include "NeuroCheck" in subsequent catalogues for
as long as this agreement is in force.
(4) DT will reasonably present "NeuroCheck" at all relevant fairs and other
sales events attended by DT.
(5) During the third quarter of 1996, DT will run a promotional campaign for
"NeuroCheck" in the USA, the details of which are laid down in Annex 2
to the present Agreement.
<PAGE>
(6) DT shall advise DS of intended promotional activities for "NeuroCheck",
shall allow DS to provide feedback on these activities and shall inform DS
of their evaluation after conclusion of such promotional efforts.
(7) DT shall advise DS of any planned new development in the image-processing
hardware sector and shall allow DS to provide input and feedback during
the concept and development stages.
(8) DT shall make available to DS, for development purposes, new hardware
components that are to be integrated into "NeuroCheck", in sufficient
numbers and free of charge. DS shall retain these components and not
redistribute said components.
(9) DT will name a suitable engineering contact person for hardware and
software matters.
(10) DT commits to the development of a suitable digital I/O plug-in card for
the Machine Vision market on the ISA bus. DT shall make available plug in
cards, on the same basis as the hardware components in paragraph (8)
above, and its drivers for Windows95 and Windows/NT required for linking
the card with "NeuroCheck".
(11) DT will keep DS currently informed about its activities, the general
development of the market and the purchasers.
<PAGE>
Art. 4
Supply and Prices
(1) DT undertakes to maintain sufficient stocks of "NeuroCheck" in order to
meet the current demand.
(2) DS undertakes to advise DT of its delivery dates and times and to keep
its delivery times as short as possible within the limits of its own
capacity.
(3) All deliveries shall be made based on the DS list prices as specified in
Annex 3 of the present Agreement. DS will review, and amend as
necessary, the prices bi-annually unless business conditions warrant a
pricing review prior to bi-annually. DS will consult with DT on any
intended price changes; price changes are subject to not less than three
months prior notice.
(4) The risk of loss and title shall pass to DT upon shipment of the
Products.
(5) All prices are for delivery ex DS' seat. Delivery shall be made by UPS
or FedEx, as requested by DT; the costs of packing, shipment and
transport will be charged separately.
(6) DS, for a period of one year after delivery of the product to DT,
warrants that its product will be free from defects in materials and
workmanship under normal use and service. DS's obligation under this
warranty shall not arise until the Buyer returns the defective product,
<PAGE>
freight prepaid, to DS. The only responsibility of DS under this
warranty is, at its option, to replace or repair, free of charge, any
defective component part of such products or return or credit of an
appropriate portion of any payment made or to be made by the Buyer with
respect to the applicable portion of the products. Any additional
claims, especially any claims for damages, based on defective delivery
are herewith excluded, unless they should result from intent or gross
negligence on the part of DS.
(7) DS warrants
(A) that it has full legal right to manufacture, license and sell the
Products and to enter into and perform this Agreement,
(B) that it has no knowledge, that it is not the owner of, or that it is
not the licensee of all patents, copyrights, trade secrets and other
intellectual property rights (collectively "Intellectual Property
Rights") incorporated in or used with the Product,
(C) that it has no knowledge, that the use, marketing, sale and
licensing of the products by DT and its customers does, and will,
infringe any intellectual property right of any third party. DS shall
indemnify and hold harmless DT and its customers from and against
losses, liabilities, damages, costs or expenses (including without
limitations reasonable attorneys' fees and costs) arising out of or in
connection with any suit, proceeding or claim based on an allegation
that any of the Products infringes any Intellectual Property Right.
<PAGE>
(8) All invoices shall be payable without any deduction within 30 days from
the date of the invoice. In the event of overdue payments, DS will be
entitled to hold back all future deliveries until all payments due for
former deliveries have been paid in full, and to request advance payment
for future deliveries.
Art.5
Advance Payment
(1) DT shall make a non-recurrent advance payment of [material omitted and
filed separately with the Securities and Exchange Commission] which
shall be due for a payment on July 1, 1996.
(2) The payment made under (1) above will be amortized exclusively by an
increase of the discount by 20% off the current price (Annex 3) granted
on all deliveries made by DS to DT, including deliveries made to DT's
subsidiaries, until full amortization of the payment.
(3) The advance payment to be made by DT under (1) above shall bear no
interest. DS shall not be obliged to repay the advance payment made
under (1) above if and to the extent it should not have been amortized
by the increased discount provided for under (2) above, except that it
shall be obliged to repay in the event of termination by DT with cause.
<PAGE>
(4) DT reserves the right to determine where shipments and invoices should
be directed.
Art.6
Duration, Termination
(1) The present Agreement shall come into force at the date of signature
thereof, and shall remain in effect thereafter for an unlimited period
of time.
(2) The present Agreement may be terminated at the end of each calendar year
without cause, subject to twelve month's prior notice, provided that DS
undertakes to supply DT with "NeuroCheck", at the relevant price and
warranty terms of the present Agreement, during an additional time of
twelve months after the effective date of any such termination of the
present Agreement, except only if DS should have terminated the
Agreement for a material breach of this agreement by DT. DS may not
terminate this agreement without cause prior to 12/31/1997.
(3) Each party shall be entitled to terminate the present Agreement
forthwith in the presence of a material breach of this agreement by the
other party, which shall be deemed to exist if the other party should
have violated its obligations under the present Agreement in a
<PAGE>
culpable, willful way or have violated the obligations in material
respects and in each case should not, in spite of having been requested in
writing to do so, restore its proper performance of the Agreement within
30 days after notice.
(4) In order to be legally effective, notice of termination must be given in
writing.
(5) Except for prior breaches of the Agreement, there shall be no payment or
liability upon a termination of this agreement.
Art. 7
Secrecy
(1) Both parties undertake to treat as business secret of the other party, and
to maintain secrecy in respect of, any and all facts relating to the other
party that may have come to their knowledge as a result of the cooperation
under the present Agreement, except that this undertaking shall not apply
to any facts that are already in the public domain or come into the public
domain through no fault of the party or to any information that was
already known by a party prior to the date it received such information
from the other party.
<PAGE>
(2) Both parties undertake to oblige their employees to secrecy in respect
of the facts to be kept secret under (1) above.
(3) The obligation to maintain secrecy, as provided for under (1) and (2)
above, shall continue in effect even after termination of the present
Agreement for 5 years.
Art.8
Final Clauses
(1) This is the sole and entire agreement between the parties. There do not
exist any ancillary oral agreements. Any changes or amendments to the
present Agreement, including any waiver to the written form, shall be
valid only if made in writing and signed by both partners.
(2) In the event one or more of the provisions of the present Agreement
should be ineffective, this shall not affect the validity of the
remaining provisions. Both parties agree that they will replace any such
ineffective provisions by effective terms by which the economic purposes
of the ineffective provisions will be achieved as fully as possible; the
same shall apply in the event any gap should be found to exist in the
present Agreement.
<PAGE>
(3) The present Agreement and all deliveries and services made or rendered
thereunder shall be subject to the Laws of the Federal Republic of Germany.
The application of the CISG is herewith excluded.
(4) The exclusive place of jurisdiction is Stuttgart provided that DS herewith
names Mr. Christian Demant and DT herewith names Mrs. Kim J. Gray as
arbitrators to mediate between the parties in the event of any disputes.
The rules of these arbitration are fixed in a separate agreement.
(5) The provisions of Article 8, Clauses (4) and (5), Article 4, Clause (6) and
Article 7 shall survive any termination or expiration of this Agreement.
Remseck, this 06/24/1996 Marlboro, this 6/26/1996
----------
[LOGO AND SIGNATURE OF DS DATENVERARBEITUNG UND
SENSORTECHNIK GMBH APPEARS HERE]
/s/ Kim J. Gray
---------------------------
(DATA TRANSLATION Inc.)
<PAGE>
ANNEX 1
- -------
List of existing distribution contracts:
- -----------------------------------------------------------
Company name Date of termination
- -----------------------------------------------------------
HARTOGS INGENIEURSBUREAU 12/31/1996
3007 AJ Rotterdam
Netherlands
- -----------------------------------------------------------
FABRIMEX AG 12/31/1996
8603 Schwerzenbach
Switzerland
- -----------------------------------------------------------
LB ELECTRONICS 12/31/1996
1190 Vienna
Austria
- -----------------------------------------------------------
<PAGE>
Annex 2
- -------
DT plans on promoting "NeuroCheck" in the following manner:
. Inclusion of "NeuroCheck" in DT's product catalogue
. Featured in DT's Imaging newsletter, which is mailed to over 15,000 U.S.
prospects as well as being placed on DT's Internet website
. Referenced in DT's future Machine Vision advertising
. Included in DT's PR efforts, including press tours with magazine editors,
featured in relevant press releases, identified in magazine PR pick-ups
. Featured in relevant Machine Vision internal and external trade shows
demonstrations
. Featured in future direct mail campaigns
<PAGE>
ANNEX 3
- -------
<TABLE>
<CAPTION>
Royalties:
- ----------
<S> <C>
NeuroCheck full licensed version, 3.5" discs,
incl. "Getting Started" manual and security key [material omitted
and filed separately
with the Securities
and Exchange Commission]
NeuroCheck light version, 3.5" discs,
reduced communication capabilities,
support for only one camera,
incl. "Getting Started" manual and security key [material omitted
and filed separately
with the Securities
and Exchange Commission]
NeuroCheck upgrade from light to full licensed version [material omitted
and filed separately
with the Securities
and Exchange Commission]
</TABLE>
Discount:
- --------
DS sells NeuroCheck at a discount of [material omitted
and filed separately with the Securities and Exchange
Commission] to DT. All prices - if required - plus legal
Value Added Tax (VAT).
<PAGE>
A G R E E M E N T O F A R B I T R A T I O N
between
DS Datenverarbeitung und Sensortechnik GmbH
Neckarstrasse 76/1
71686 Remseck
Germany
(hereinafter referred to as "DS")
and
DATA TRANSLATION Inc.
100 Locke Drive
Marlboro, MA 01752-1192
USA
(hereinafter referred to as "DT")
<PAGE>
Art 1
All disputes between the parties with respect to the Agreement dated 06/24/1996/
_____________ between DT and DS, in compliance with the provisions of said
Agreement or any termination of said Agreement shall be decided solely by
binding arbitration in London, in the English language pursuant to the rules of
the London Court of International Arbitration (or its successor). Each party
shall select one arbitrator and these two arbitrators shall select a third
arbitrator, except as otherwise provided in said rules. Any award of the
arbitrators may be enforced by a court of competent jurisdiction.
Remseck, this 06/24/1996 Marlboro, this 6/26/1996
------------
[LOGO AND SIGNATURE OF DS DATENVERARBEITUNG UND
SENSORTECHNIK GMBH APPEARS HERE]
/s/ Kim J. Gray
---------------------------
(DATA TRANSLATION Inc.)
<PAGE>
EXHIBIT 21
List of Subsidiaries of the Registrant as of the Distribution Date
------------------------------------------------------------------
Data Translation Networking, Limited Workingham, Berkshire, England
Data Translation Ltd. Workingham, Berkshire, England
Data Translation GmbH Bietigheim - Bissingen, Germany
<PAGE>
EXHIBIT 99.2
CONSENT TO SERVE AS A DIRECTOR
I hereby agree to serve as a director of Data Translation II, Inc. (the
"Company") following its registration of shares of common stock. I also agree
to the inclusion of the references to me in the Company's Registration Statement
on Form 10 and any prospectus included therein as a person who has agreed to
serve as a director of the Company.
/s/ D'Anne Hurd
--------------------
Ms. D'Anne Hurd
<PAGE>
CONSENT TO SERVE AS A DIRECTOR
I hereby agree to serve as a director of Data Translation II, Inc. (the
"Company") following its registration of shares of common stock. I also agree
to the inclusion of the references to me in the Company's Registration Statement
on Form 10 and any prospectus included therein as a person who has agreed to
serve as a director of the Company.
/s/ David Cyganski
-----------------------
Dr. David Cyganski
