<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 27, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
MOBIUS MANAGEMENT SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 7372 13-3078745
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
120 OLD POST ROAD
RYE, NEW YORK 10580
(914) 921-7200
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------
MITCHELL GROSS
CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND PRESIDENT
120 OLD POST ROAD
RYE, NEW YORK 10580
(914) 921-7200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPIES TO:
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<S> <C>
KENNETH P. KOPELMAN, ESQ. MARK G. BORDEN, ESQ.
KRAMER, LEVIN, NAFTALIS & FRANKEL JEFFREY A. STEIN, ESQ.
919 THIRD AVENUE HALE AND DORR LLP
NEW YORK, NEW YORK 10022 60 STATE STREET
(212) 715-9100 BOSTON, MASSACHUSETTS 02109
(617) 526-6000
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
========================================================================================================================
PROPOSED
PROPOSED MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) SHARE(2) OFFERING PRICE(2) REGISTRATION FEE(3)
- ------------------------------------------------------------------------------------------------------------------------
Common Stock, $.0001 par value 3,335,000 shares $13.00 $43,355,000 $12,790
========================================================================================================================
</TABLE>
(1) Includes shares that the Underwriters have an option to purchase from the
Selling Stockholders to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933.
(3) Calculated pursuant to Rule 457(a) based on an estimate of the maximum
offering price.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED FEBRUARY 27, 1998
2,900,000 SHARES
[LOGO]
COMMON STOCK
(PAR VALUE $.0001 PER SHARE)
------------------------
Of the 2,900,000 shares of Common Stock offered hereby, 2,500,000 shares
are being sold by the Company and 400,000 shares are being sold by the Selling
Stockholders. See "Principal and Selling Stockholders". The Company will not
receive any of the proceeds from the sale of the shares being sold by the
Selling Stockholders.
Prior to this offering, there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price per
share will be between $11.00 and $13.00. For factors to be considered in
determining the initial public offering price, see "Underwriting".
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.
Application will be made to list the Common Stock on the Nasdaq National
Market under the symbol "MOBI".
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------------------------------
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INITIAL PUBLIC UNDERWRITING PROCEEDS TO PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2) SELLING STOCKHOLDERS
----------------- ----------------- ----------------- -----------------------
<S> <C> <C> <C> <C>
Per Share............... $ $ $ $
Total(3)................ $ $ $ $
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(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting".
(2) Before deducting estimated expenses of $900,000 payable by the Company.
(3) The Selling Stockholders have granted the Underwriters an option for 30 days
to purchase up to an additional 435,000 shares at the initial public
offering price per share, less the underwriting discount, solely to cover
over-allotments. If such option is exercised in full, the total initial
public offering price, underwriting discount and proceeds to Selling
Stockholders will be $ , $ , and $ ,
respectively. See "Underwriting".
------------------------
The shares offered hereby are offered severally by the Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. It is expected that the shares
will be ready for delivery in New York, New York, on or about , 1998,
against payment therefor in immediately available funds.
GOLDMAN, SACHS & CO.
NATIONSBANC MONTGOMERY SECURITIES LLC
BANCAMERICA ROBERTSON STEPHENS
------------------------
The date of this Prospectus is , 1998.
<PAGE> 3
[PHOTOS TO COME]
DocumentDirect, INFOPAC, TapeSaver, ViewDirect and WriteDirect are registered
trademarks of the Company in the United States. EnterpriseIndex, Mobius,
ServerTransparency, UniArc and Virtual Pocket are unregistered trademarks of the
Company. This Prospectus also contains other product names, trade names and
trademarks of the Company and other companies.
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING
TRANSACTIONS IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN
CONNECTION WITH THE OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING".
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the Consolidated
Financial Statements and Notes thereto appearing elsewhere in this Prospectus.
Except as otherwise indicated, all information contained in this Prospectus
assumes (i) no exercise of the Underwriters' over-allotment option, (ii) the
filing of the Company's Second Amended and Restated Certificate of Incorporation
prior to the closing of the offering, (iii) a 100-to-one stock split of all
outstanding shares of Common Stock of the Company prior to the closing of the
offering and (iv) the conversion of the outstanding shares of the Company's
Series A Convertible Preferred Stock and Class A Non-Voting Common Stock into an
aggregate of 4,171,000 shares of Common Stock effective on the closing of the
offering. All references to the "Company" and "Mobius" shall mean Mobius
Management Systems, Inc. and its subsidiaries unless the context otherwise
requires. All references in this Prospectus to a fiscal year are to the
Company's fiscal year which ends on June 30 of that year. For example, the 1997
fiscal year ended on June 30, 1997.
THE COMPANY
Mobius is a leading provider of enterprise software products designed to
optimize the storage, retrieval and presentation of large volumes of
transactional information. Major financial institutions, healthcare,
manufacturing, retail and telecommunications companies and government entities
use the Company's software products to facilitate customer service and other
mission-critical functions. These products can be used by a single department,
multiple departments or centrally by an entire enterprise. More than 1,200
customers, including 58 of the Fortune 100, have licensed Mobius products.
Organizations are faced with the need to store ever-increasing volumes of
information to meet operational, regulatory and legal requirements. These static
records of individual events and transactions rapidly accumulate and may result
in archives containing billions of individual records, which may increase by
millions of records each day. Furthermore, a single organization must often
manage static information in a wide variety of formats including text, images,
complex data streams and video or audio recordings.
Static information has traditionally been stored as paper or microfiche,
neither of which permits electronic archiving and rapid retrieval. Other
technologies, such as relational databases and data warehouses, do not
economically store and present large volumes of static information created in a
wide variety of formats. The multiple computing platforms and storage devices
used by enterprises further compound the difficulty of efficiently storing,
retrieving and presenting large volumes of information.
The Company's Electronic Document Warehouse ("EDW") products store and
integrate documents of different formats on a wide variety of computing
platforms and electronic storage devices and make these documents available to
the user through a common intuitive interface, including Internet browsers. The
Company's software is designed to utilize an organization's established
infrastructure, thus minimizing storage costs while meeting rapid retrieval
needs. Mobius software products store, retrieve and present computer and
non-computer generated documents, such as text, images, video or audio
recordings, customer statements, checks, external correspondence and remittance
forms. EDW products operate in heterogeneous environments, supporting a broad
range of hardware platforms and operating systems, including OS/390, Windows NT,
Windows 95, UNIX, OS/400, NetWare and others.
Mobius was founded in 1981 by current management to address a market need
for large-scale information storage and retrieval systems. The Company's
objective is to extend its market leadership by: continuing to develop
innovative storage, retrieval and presentation technologies; leveraging its blue
chip customer base; expanding direct and indirect sales channels; increasing its
focus on vertical markets; and further penetrating international markets.
The Company was incorporated in New York in 1981 and was reincorporated in
Delaware in 1997. Its executive offices are located at 120 Old Post Road, Rye,
New York 10580 and its telephone number is (914) 921-7200.
3
<PAGE> 5
THE OFFERING
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<S> <C>
Common Stock offered by the Company...................... 2,500,000 shares
Common Stock offered by the Selling Stockholders......... 400,000 shares
Common Stock to be outstanding after the offering(1)..... 17,580,000 shares
Proposed Nasdaq National Market symbol................... "MOBI"
Use of Proceeds.......................................... General corporate purposes,
including working capital,
product development, capital
expenditures and possible
acquisitions. See "Use of
Proceeds".
</TABLE>
- ---------------
(1) Based upon the number of shares of Common Stock outstanding on February 28,
1998. Excludes 2,493,500 shares of Common Stock issuable pursuant to the
exercise of options outstanding at February 28, 1998, at a weighted average
exercise price of $4.89 per share, of which options to purchase 441,625
shares were then exercisable. Also excludes an additional 1,536,500 shares
reserved for issuance under the Company's 1996 Stock Incentive Plan (the
"1996 Plan"), 1998 Employee Stock Purchase Plan (the "ESPP") and 1998
Non-Employee Directors' Stock Option Plan (the "Directors' Plan"). See
"Capitalization", "Management -- Benefit Plans" and Note 9 of Notes to
Consolidated Financial Statements.
4
<PAGE> 6
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
------------------------------------------------------- -----------------------
1993 1994 1995 1996 1997 1996 1997
------- ------- ------- ------- ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Revenues................................... $13,104 $17,654 $22,405 $30,958 $41,327 $17,398 $23,071
Gross profit............................... 11,292 15,257 19,742 27,616 37,068 15,429 20,839
Income from operations..................... 537 990 1,678 5,048 4,843 1,528 3,386
License and other interest income.......... 125 186 375 339 922 328 832
Income before income taxes and change in
accounting for income taxes.............. 584 1,146 2,029 5,274 5,731 1,846 4,206
Provision for income taxes................. 244 507 880 2,657 3,348 1,043 2,355
Cumulative effect of change in accounting
for income taxes(1)...................... -- 194 -- -- -- -- --
------- -------
Net income................................. $ 340 $ 833 $ 1,149 $ 2,617 $ 2,383 $ 803 $ 1,851
======= =======
Basic earnings per share(2)................ $ 0.02 $ 0.06 $ 0.08 $ 0.17 $ 0.17 $ 0.05 $ 0.17
Basic weighted average shares
outstanding(2)........................... 15,000 15,000 15,000 15,000 14,318 15,000 10,909
Diluted earnings per share(2).............. $ 0.02 $ 0.06 $ 0.08 $ 0.17 $ 0.15 $ 0.05 $ 0.12
Diluted weighted average shares
outstanding(2)........................... 15,000 15,000 15,000 15,000 15,882 15,355 15,785
Pro forma data (unaudited):
Pro forma basic earnings per share(3)...... $ 0.13 $ 0.12
Pro forma basic weighted average shares
outstanding(3)........................... 18,489 15,080
Pro forma diluted earnings per share(3).... $ 0.12 $ 0.12
Pro forma diluted weighted average shares
outstanding (3).......................... 19,371 15,852
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------------------------------
CONVERSION PRO FORMA
ACTUAL PRO FORMA(6) ADJUSTED(6)(7)
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<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents........................................................ $ 7,182 $ 7,182 $ 34,182
Total software license installments(4)........................................... 16,767 16,767 16,767
Total assets..................................................................... 34,347 34,347 61,347
Total deferred maintenance revenue(5)............................................ 16,116 16,116 16,116
Convertible preferred stock...................................................... 12,000 -- --
Stockholders' equity (deficit)................................................... (2,563) 9,437 36,437
</TABLE>
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(1) Represents cumulative effect of change in accounting for the adoption of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes".
(2) For a description of the basic and diluted earnings per share ("EPS")
calculations and the basic and diluted weighted average shares outstanding,
see Note 2 of Notes to Consolidated Financial Statements.
(3) For a description of the pro forma basic and pro forma diluted EPS
calculations and the pro forma basic and pro forma diluted weighted average
shares outstanding, see Note 14 of Notes to Consolidated Financial
Statements. The pro forma basic and diluted earnings per share giving effect
to the 2,500,000 shares in the offering would be $0.11 and $0.11 for the
year ended June 30, 1997 and $0.11 and $0.10 for the six months ended
December 31, 1997 based on the pro forma basic and diluted weighted average
shares outstanding of 20,989,000 and 21,871,000 for the year ended June 30,
1997, respectively, and 17,580,000 and 18,352,000 for the six months ended
December 31, 1997, respectively.
(4) Total software license installments include amounts classified as current
and long term. See Consolidated Financial Statements and Note 3 of Notes to
Consolidated Financial Statements.
(5) Total deferred maintenance revenue includes amounts classified as current
and long term. See Consolidated Financial Statements and Note 2 of Notes to
Consolidated Financial Statements.
(6) Gives effect to the conversion of all outstanding shares of the Company's
Series A Convertible Preferred Stock and Class A Non-Voting Common Stock
into Common Stock. See "Capitalization".
(7) Adjusted to give effect to the sale of 2,500,000 shares of Common Stock
offered by the Company hereby, at an assumed initial public offering price
of $12.00 per share, after deducting the estimated underwriting discount and
offering expenses payable by the Company. See "Use of Proceeds" and
"Capitalization".
5
<PAGE> 7
RISK FACTORS
This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth in the following risk factors and elsewhere in this
Prospectus. In addition to the other information contained in this Prospectus,
the following risk factors should be considered carefully in evaluating the
Company and its business before purchasing the Common Stock offered by this
Prospectus.
FLUCTUATIONS IN PERIOD TO PERIOD RESULTS; SEASONALITY; UNCERTAINTY OF FUTURE
OPERATING RESULTS
The Company's quarterly revenues and operating results have varied
significantly in the past and are likely to vary substantially from quarter to
quarter in the future. Quarterly revenues and operating results are expected to
fluctuate as a result of a variety of factors, including lengthy product sales
cycles, changes in the level of operating expenses, demand for the Company's
products, introductions of new products and product enhancements by the Company
or its competitors, changes in customer budgets, competitive conditions in the
industry and general domestic and international economic conditions.
The timing, size and nature of individual license transactions are
important factors in the Company's quarterly operating results. Many such
license transactions involve large dollar commitments by customers, and the
sales cycles for these transactions are often lengthy and unpredictable. There
can be no assurance that the Company will be successful in closing large license
transactions within the fiscal quarter in which they are budgeted, if at all.
The Company has often recognized a substantial portion of its revenues in
the last month of the quarter and often in the last week of that month. As a
result, license fees in any quarter are often substantially dependent on orders
booked and shipped in the last month or last week of that quarter. Accordingly,
delays in the closing of sales near the end of a quarter could cause quarterly
revenues and, to a greater degree, net income, to fall substantially short of
anticipated levels.
The Company's business has experienced and is expected to continue to
experience significant seasonality, with revenues typically peaking primarily in
its fourth fiscal quarter and to a lesser extent in its second fiscal quarter.
These fluctuations are caused primarily by customer purchasing patterns and the
Company's sales force incentive programs which recognize and reward sales
personnel on the basis of achievement of annual and other periodic performance
quotas, as well as by the factors described above.
The Company recognizes revenue in accordance with Statement of Position
("SOP") 91-1, "Software Revenue Recognition", issued by the American Institute
of Certified Public Accountants ("AICPA"). For transactions occurring on or
after July 1, 1998, the Company will be required to recognize revenue in
accordance with SOP 97-2, "Software Revenue Recognition", issued by the AICPA in
October 1997, which supersedes SOP 91-1. In general terms, SOP 97-2 recognizes
that sales of software products may consist of multiple elements, such as
additional software products, upgrades and enhancements, rights to exchange or
return software, post-contract customer support, or services, including elements
deliverable only on a when-and-if-available basis, and provides that a vendor's
fee must be allocated to the various elements of such sale based on
"vendor-specific objective evidence of fair values" allocable to each such
element. If sufficient vendor-specific objective evidence of fair values does
not exist, all revenue from the sale could be deferred until such sufficient
evidence exists, or until all elements have satisfied the requirements for
revenue recognition. SOP 97-2 is newly issued and has not yet been subject to
interpretation in practice or in applicable accounting guidelines. Although the
Company has reviewed, and is continuing to review, its license agreements in
light of its requirement to adopt SOP 97-2 and believes such adoption will not
have a material effect on its operations, there can be no assurance
6
<PAGE> 8
that the future application of, or subsequent interpretations of, SOP 97-2 will
not require the Company to defer the recognition of certain elements of revenue
or result in revenue patterns in periods subsequent to fiscal 1998 which are
materially different than historical periods. In addition, there can be no
assurance that any adjustments the Company makes to its license agreements or
other contractual arrangements to accommodate the requirements of SOP 97-2 would
not be negatively viewed by prospective customers and therefore have a material
adverse effect on the Company's sales efforts.
Due to all of the foregoing factors and other factors described below,
revenues for any period are subject to significant variation, and the Company
believes that period to period comparisons of its operating results are not
necessarily meaningful and such comparisons may not be reliable indicators of
future performance. Although the Company has been profitable in recent quarterly
periods, there can be no assurance that the Company will remain profitable on a
quarterly basis, if at all. It is also possible that in some future quarter the
Company's operating results will be below the expectations of public market
analysts and investors. In either case, the price of the Company's Common Stock
would likely be materially adversely affected. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations".
TECHNOLOGICAL CHANGE
The market for the Company's software is characterized by a high degree of
technological change, frequent new product introductions, evolving industry
standards and changes in customer demands. The introduction of competitive
products embodying new technologies and the emergence of new industry standards
could render the Company's existing products obsolete and unmarketable. The
Company's future success will depend in part on its ability to enhance existing
products and to develop and introduce new products to meet diverse and evolving
customer requirements and keep pace with technological developments and emerging
industry standards such as new operating systems, hardware platforms, user
interfaces and storage media. The development of new products or enhanced
versions of existing products and services entails significant technical risks.
There can be no assurance that the Company will be successful in developing and
marketing product enhancements or new products that respond to technological
change or evolving industry standards, that the Company will not experience
difficulties that could delay or prevent the successful development,
introduction, implementation and marketing of these products and enhancements,
or that any new products and product enhancements it may introduce will achieve
market acceptance. See "-- Risk of Product Defects", "-- Year 2000 Compliance",
"Business -- Industry Background", "-- The Mobius Solution", "-- Research and
Development" and "-- Competition".
PRODUCT CONCENTRATION
To date, a substantial portion of the Company's revenues has been
attributable to the licensing of its ViewDirect and DocumentDirect software and
the provision of related maintenance services. The Company currently expects
that the licensing of the ViewDirect and DocumentDirect software, and the
provision of related maintenance services, will account for a substantial
portion of its revenues for the foreseeable future. As a result, factors
adversely affecting the pricing of, or demand for, such products and services,
such as competition or technological change, could have a material adverse
effect on the Company's business, operating results and financial condition.
COMPETITION
The market for the Company's products is intensely competitive, subject to
rapid change and significantly affected by new product introductions and other
market activities of industry participants. The Company's products are targeted
at a broad range of hardware and software environments, from PC to mid-range to
mainframe servers. The Company believes that the principal competitive factors
affecting its market include scalability, breadth of supported operating systems
7
<PAGE> 9
and document formats, ease of use, product reputation, quality, performance,
price, sales and marketing effort and customer service. The Company currently
encounters direct competition from a number of public and private companies
including Computer Associates International ("Computer Associates"), Computron
Software, Inc. ("Computron"), FileNet Corporation ("FileNet"), International
Business Machines Corp. ("IBM"), Eastman Kodak Co. ("Kodak"), New Dimension
Software Ltd. ("New Dimension") and RSD S.A. ("RSD"). Due to the relatively low
barriers to entry in the software market, the Company expects additional
competition from other established and emerging companies as the market for
storage, retrieval and presentation software continues to develop and expand.
Some of the Company's current and potential competitors are substantially larger
than the Company and have significantly greater financial, technical and
marketing resources, and a larger installed base of customers, than the Company.
Some of such competitors also have extensive direct and indirect channels of
distribution. As a result, they may be able to respond more quickly to new or
emerging technologies and changes in customer requirements, or to devote greater
resources to the development, promotion and sale of their products than the
Company. In addition, current and potential competitors have established or may
establish cooperative relationships among themselves with prospective customers.
Accordingly, it is possible that new competitors or alliances among competitors
may emerge and rapidly acquire significant market share. Increased competition
may result in price reductions, reduced gross margins and loss of market share,
any of which would have a material adverse effect on the Company's business,
operating results and financial condition. There can be no assurance that the
Company will be able to compete successfully against current or future
competitors or that competitive pressures will not have a material adverse
effect on the Company's business, operating results and financial condition. See
"Business -- Competition".
INTERNATIONAL SALES AND OPERATIONS
Revenues from customers outside of the United States represented 10.8% and
7.7% of the Company's total revenues in fiscal 1996 and fiscal 1997,
respectively, and 8.4% in the first six months of fiscal 1998. The Company
believes that its revenues and future operating results will depend in part on
its ability to increase sales in international markets. An important part of the
Company's strategy is to expand its direct and indirect sales efforts in
international markets. The Company's international subsidiaries have not been
profitable to date, and management expects achieving profitability will require
significant management attention and financial resources. There can be no
assurance that the Company will be able to maintain or increase international
market demand for the Company's products or hire additional qualified personnel
that will successfully be able to market the Company's products internationally.
The Company's international sales are subject to the general risks inherent in
doing business abroad, including unexpected changes in regulatory requirements,
tariffs and other trade barriers, costs and difficulties of localizing products
for foreign countries, lack of acceptance of localized products in foreign
countries, longer accounts receivable payment cycles, difficulties in managing
international operations, potentially adverse tax consequences, restrictions on
the repatriation of earnings, the burdens of complying with a wide variety of
foreign laws and economic instability. There can be no assurance that such
factors will not have a material adverse effect on the Company's future
international revenues and, consequently, on the Company's business, operating
results and financial condition.
An increase in the value of the U.S. dollar relative to foreign currencies
could make the Company's products more expensive, and, therefore, potentially
less competitive in those markets. Although the Company does not currently
engage in international currency hedging transactions, it is exploring the
possibility of doing so in the future. To the extent that the U.S. dollar
strengthens against foreign currencies in international markets in which the
Company maintains operations, the net assets of the Company that are denominated
in such foreign currencies will be devalued, resulting in a foreign currency
translation loss to the Company. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations", "Business -- Strategy",
"-- Sales and Marketing" and Notes 1, 2 and 12 of Notes to Consolidated
Financial Statements.
8
<PAGE> 10
EXPANSION OF INDIRECT CHANNELS
As part of its growth strategy, the Company intends to increase its sales
through indirect channels such as marketing partnerships, joint-selling
opportunities and original equipment manufacturers. To date, sales through
indirect sales channels have been immaterial. The Company intends to invest
resources to develop these channels, which could adversely affect the Company's
operating results if the Company's efforts do not generate sufficient license
revenues. The Company's ability to achieve revenue growth in the future will be
affected by its success in expanding existing and establishing additional
relationships with strategic partners. In addition, if the Company is successful
in selling products through indirect channels, the Company's gross margins as a
percentage of revenue will be negatively affected due to the lower unit prices
that the Company expects to receive when selling through indirect channels. See
"Business -- Strategy".
EXTENDED PAYMENT RISK
Terms of sale are a competitive factor in the Company's markets. The
Company offers extended payment terms to some of its customers, generally three
years for its server products and five years for its client products. The
license revenue for such agreements is recorded at the time of sale as the
present value of the contract payments expected over the life of the agreement,
net of bundled maintenance fees. Interest income from these agreements is
recognized over the term of the financing based on the discount rate used by the
Company to determine present value. To date, the Company has experienced one bad
debt as a result of a customer's bankruptcy and has established reserves against
possible future bad debts. The Company expects to continue its financing
activities to compete effectively in its markets. Although management believes
that its installment contracts are enforceable and that ultimate collection is
probable, there can be no assurances that customers will not default under such
financing arrangements, or that any such default would not have a material
adverse effect on the Company's business, operating results and financial
condition. See Notes 2 and 3 of Notes to Consolidated Financial Statements.
PROTECTION OF INTELLECTUAL PROPERTY
The Company's success is heavily dependent upon its confidential and
proprietary intellectual property. The Company has no patents or patent
applications pending covering any aspect of its software products. The Company
relies primarily on a combination of confidentiality agreements, copyright,
trademark and trade secret laws and confidentiality procedures to protect its
proprietary rights. Trade secret and copyright laws afford only limited
protection to the Company. Despite the Company's efforts to protect its
proprietary rights, unauthorized parties may attempt to copy aspects of the
Company's products or to obtain and use information that the Company regards as
proprietary. In addition, the laws of some foreign countries do not protect the
Company's proprietary rights to as great an extent as do the laws of the United
States. There can be no assurance that the Company's means of attempting to
protect its proprietary rights will be adequate or that the Company's
competitors will not independently develop similar or competitive technology.
The Company's products are generally provided to customers in object code
format only. However, the Company generally enters into arrangements with its
customers pursuant to which the Company's source code will be released to the
customer upon the occurrence of certain events, such as the bankruptcy or
insolvency of the Company or certain material breaches by the Company of the
license agreement. In the event of any release of the source code pursuant to
these arrangements, the customer's license is generally limited to use of the
source code to maintain, support and configure the Company's software products.
Notwithstanding such provision, the delivery of source code to customers may
increase the likelihood of misappropriation or other misuse of the Company's
intellectual property.
The Company is not aware that any of its products infringes the proprietary
rights of third parties. There can be no assurance, however, that third parties
will not claim infringement by the
9
<PAGE> 11
Company with respect to current or future products. The Company expects that
software product developers such as itself will increasingly be subject to
infringement claims as the number of products and competitors in the business
applications software market grows and the functionality of products in this
market overlap. Defense of any such claims, with or without merit, could be
time-consuming, result in costly litigation, cause product shipment delays or
require the Company to enter into royalty or licensing agreements. Such royalty
or licensing agreements, if required, may not be available on terms acceptable
to the Company or at all, which could have a material adverse effect on the
Company's business, operating results and financial condition. See "Business --
Intellectual Property, Proprietary Rights and Licenses".
DEPENDENCE ON LICENSED TECHNOLOGY
The Company relies on certain software and other information that it
licenses from third parties, including software that is used in the Company's
products to perform certain functions. Although the Company believes that there
are alternatives for these products, any significant interruption in the
availability of such third-party software could have a material adverse impact
on the Company's sales unless and until the Company can replace the
functionality provided by these products. In addition, the Company is to a
certain extent dependent upon such third parties' abilities to enhance their
current products, to develop new products on a timely and cost-effective basis
and to respond to emerging industry standards and other technological changes.
There can be no assurance that the Company would be able to replace the
functionality provided by the third party software currently offered in
conjunction with the Company's products in the event that such software becomes
obsolete or incompatible with future versions of the Company's products or is
otherwise not adequately maintained or updated. The absence of or any
significant delay in the replacement of that functionality could have a material
adverse effect on the Company's business, operating results and financial
condition. See "Business -- Intellectual Property, Proprietary Rights and
Licenses".
PRODUCT LIABILITY
The Company's license agreements with its customers typically contain
provisions designed to limit the Company's exposure to potential product
liability claims. However, it is possible that the limitation of liability
provisions contained in the Company's license agreements may not be effective
under the laws of certain jurisdictions. Although the Company has not
experienced any product liability claims to date, the sale and support of
products by the Company may entail the risk of such claims, and there can be no
assurance that the Company will not be subject to such claims in the future. The
Company does not maintain product liability insurance. A successful product
liability claim brought against the Company could have a material adverse effect
on the Company's business, operating results and financial condition.
RISK OF PRODUCT DEFECTS
Software products as complex as those offered by the Company frequently
contain defects, especially when first introduced or when new versions are
released. Although the Company conducts extensive product testing, the Company
has in the past discovered software defects in certain of its new products and
enhancements after their introduction. The Company could in the future lose, or
delay recognition of, revenues as a result of software errors or defects. The
Company believes that its customers and potential customers are highly sensitive
to defects in the Company's software. Although the Company's business has not
been materially adversely affected by any such errors to date, there can be no
assurance that, despite testing by the Company and by current and potential
customers, errors will not be found in new products or releases after
commencement of commercial shipments, resulting in loss of revenue or delay in
market acceptance, diversion of development resources, damage to the Company's
reputation, or increased service and warranty costs, any of which could have a
material adverse effect on the Company's business, operating results and
financial condition. See "Business -- Research and Development".
10
<PAGE> 12
YEAR 2000 COMPLIANCE
Many currently installed operating systems and software products are coded
to accept only two digit entries in the date code field. These date code fields
need additional digits to distinguish 21st century dates from 20th century
dates. As a result, computer systems and/or software used by many companies may
need to be upgraded to comply with such "Year 2000" requirements. Significant
uncertainty exists in the software industry concerning the potential effects
associated with such compliance. Other than INFOPAC-RDS for VSE, for which the
Company expects to release a Year 2000 compliant version in the fourth quarter
of fiscal 1998 or the first quarter of fiscal 1999, the Company believes that
its products are Year 2000 compliant. There can be no assurance that the Company
will successfully release a Year 2000 compliant version of INFOPAC-RDS for VSE,
that its other products will not experience Year 2000 compliance difficulties,
or that third-party products that are not Year 2000 compliant will not have a
detrimental effect on the operation of the Company's products.
The Company believes that the purchasing patterns of customers and
potential customers may be significantly affected by Year 2000 issues. Many
companies are expending significant resources to correct or patch their current
software systems for Year 2000 compliance. These expenditures may result in
reduced funds available to purchase software products such as those offered by
the Company. Conversely, Year 2000 issues may cause other companies to
accelerate purchases, thereby causing an increase in short-term demand and a
consequent decrease in long-term demand for software products.
Additionally, Year 2000 compliance issues could cause a significant number
of companies, including current customers of the Company, to re-evaluate their
current systems' needs, and as a result, consider switching to other systems or
suppliers. This could have a material adverse effect on the Company's business,
operating results and financial condition.
MANAGEMENT OF GROWTH; DEPENDENCE ON SENIOR MANAGEMENT AND OTHER KEY EMPLOYEES
The Company's ability to effectively manage its future growth, if any, will
require it to continue to improve its operational, financial and management
controls, accounting and reporting systems, and other internal processes. There
can be no assurance that the Company will be able to make such improvements in
an efficient or timely manner or that any such improvements will be sufficient
to manage its growth, if any. If the Company is unable to manage growth
effectively, the Company's business, operating results and financial condition
would likely be materially adversely affected.
The Company's success depends to a significant extent upon its senior
management, including Mitchell Gross, Chairman of the Board, Chief Executive
Officer and President, and Joseph J. Albracht, Executive Vice President, Chief
Operating Officer and Secretary, and certain other key employees of the Company,
many of whom have no experience in managing a public software company. The
Company maintains key man life insurance on, and has entered into employment
agreements with, Messrs. Gross and Albracht; however, notwithstanding such
policies and agreements, the loss of the service of either of these individuals,
other members of senior management or other key employees could have a material
adverse effect on the Company. Furthermore, the Company believes that its future
success will also depend to a significant extent upon its ability to attract,
train and retain highly skilled technical, management, sales and marketing
personnel. Competition for such personnel is intense, and the Company expects
that such competition will continue for the foreseeable future. The Company has
from time to time experienced difficulty in locating candidates with appropriate
qualifications. There can be no assurance that the Company will be successful in
attracting or retaining such personnel; the failure to attract or retain such
personnel could have a material adverse effect on the Company's business,
operating results and financial condition. See "Business -- Sales and Marketing"
and "Management".
11
<PAGE> 13
CONCENTRATION OF SHARE OWNERSHIP AND VOTING POWER
Based upon the number of shares of Common Stock that will be outstanding
upon the completion of this offering, Mitchell Gross, the Company's Chairman,
Chief Executive Officer and President, and Joseph J. Albracht, the Company's
Executive Vice President, Chief Operating Officer and Secretary, together will
beneficially own approximately 59.8% of the Company's outstanding Common Stock.
As a result, such individuals will be able to elect the Board of Directors and
will retain the voting power to approve all matters requiring approval by the
stockholders of the Company, regardless of the votes of other stockholders. In
addition, subject to certain limitations imposed by applicable law, Messrs.
Gross and Albracht will be able to, among other things, amend the Company's
Second Amended and Restated Certificate of Incorporation (the "Restated
Certificate of Incorporation") and the Amended and Restated By-Laws (the
"By-Laws") and effect or preclude fundamental corporate transactions involving
the Company, including the acceptance or rejection of any proposals relating to
a merger of the Company or an acquisition of the Company by another entity, in
each case without the approval of any of the Company's other stockholders. See
"Principal and Selling Stockholders" and "Description of Capital Stock".
ANTI-TAKEOVER PROVISIONS
The Company's Restated Certificate of Incorporation requires that any
action required or permitted to be taken by the stockholders of the Company must
be effected at a duly called annual or special meeting of stockholders and may
not be effected by any consent in writing, and the Company's By-Laws require
advance notice by a stockholder of a director nomination which such stockholder
desires to present at any annual or special meeting of stockholders. Pursuant to
the Restated Certificate of Incorporation, special meetings of stockholders may
be called only by the Chairman of the Board, the Chief Executive Officer, the
President, or the Executive Vice President, or the Secretary of the Company upon
the written request of two-thirds of the Board of Directors. The Restated
Certificate of Incorporation provides for a classified Board of Directors, and
members of the Board of Directors may be removed only for cause upon the
affirmative vote of holders of at least 67% of the shares of capital stock of
the Company entitled to vote. In addition, shares of the Company's Preferred
Stock may be issued in the future without further stockholder approval and upon
such terms and conditions, at a price and having such rights, privileges and
preferences, as the Board of Directors may determine. The rights of the holders
of Common Stock will be subject to, and may be adversely affected by, the rights
of the holders of any Preferred Stock that may be issued in the future. The
issuance of shares of Preferred Stock, while potentially providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock of the Company. The Company
has no present intent to issue any shares of Preferred Stock. The Company is
also subject to the anti-takeover provisions of Section 203 of the Delaware
General Corporation Law, which could have the effect of delaying or preventing a
change of control of the Company. The foregoing provisions, and other provisions
of the Restated Certificate of Incorporation, may have the effect of deterring
hostile takeovers or delaying or preventing changes in control or management of
the Company, including transactions in which stockholders might otherwise
receive a premium for their shares over then current market prices. In addition,
these provisions may limit the ability of stockholders to approve transactions
that they may deem to be in their best interests. See "Description of Capital
Stock -- Delaware Law and Certain Provisions of the Company's Certificate of
Incorporation and By-Laws".
NO PRIOR PUBLIC MARKET FOR COMMON STOCK; POTENTIAL VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that an active public market for the Common
Stock will develop or be sustained after the offering or that the market price
of the Common Stock will not decline below the initial public offering price,
which will be determined by negotiations among the Company and representatives
of the Underwriters. See "Underwriting" for a discussion of the factors to be
considered in determining
12
<PAGE> 14
the initial public offering price. Investors should be aware that market prices
for securities of software companies such as Mobius are highly volatile. The
market price of the Common Stock could be subject to wide fluctuations in
response to quarter-to-quarter variations in operating results, the gain or loss
of significant contracts, announcements of technological developments or new
products by the Company and its competitors, changes in earnings estimates by
analysts, market conditions in the industry and general domestic and
international economic conditions. In addition, the stock market has experienced
volatility that has particularly affected the market prices of many companies'
stock and that often has been unrelated to the operating performance of such
companies. These market fluctuations may adversely affect the market price of
the Common Stock. See "-- Fluctuations in Period to Period Results; Seasonality;
Uncertainty of Future Operating Results".
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sales of significant amounts of Common Stock in the public market or the
perception that such sales will occur could adversely affect the market price of
the Common Stock or the future ability of the Company to raise capital through
an offering of its equity securities. Of the 17,580,000 shares of Common Stock
to be outstanding upon completion of the offering, the 2,900,000 shares offered
hereby will be eligible for immediate sale in the public market without
restriction unless the shares are purchased by "affiliates" of the Company
within the meaning of Rule 144 of the Securities Act of 1933, as amended (the
"Securities Act"). See "Underwriting".
The remaining 14,680,000 shares of Common Stock held by existing
stockholders upon completion of the offering will be "restricted" securities as
that term is defined in Rule 144 under the Securities Act. Restricted securities
may be sold in the public market only if registered or if they qualify for an
exemption from registration under Rules 144, 144(k) or 701 promulgated under the
Securities Act. The Company's directors, officers and existing stockholders
(holding all of such 14,680,000 shares) have agreed that they will not sell,
directly or indirectly, any Common Stock without the prior consent of the
representatives of the Underwriters for a period of 180 days from the date of
this Prospectus. Subject to the provisions of Rules 144, 144(k) and 701, all of
such shares will be eligible for sale upon the expiration of these lock-up
agreements. In addition, certain stockholders, representing approximately
14,600,000 shares of Common Stock, have the right, subject to certain
conditions, to include their shares in future registration statements relating
to the Company's securities and to cause the Company to register certain shares
of Common Stock owned by them. See "Shares Eligible for Future Sale" and
"Underwriting".
After the date of this Prospectus, the Company intends to file a Form S-8
registration statement under the Securities Act to register all shares of Common
Stock issuable under the Company's stock-based benefit plans. See
"Management -- Director Compensation" and "-- Benefit Plans". Such registration
statement is expected to become effective immediately upon filing, and shares
covered by that registration statement will thereupon be eligible for sale in
the public markets, subject to Rule 144 limitations applicable to affiliates.
See "Shares Eligible for Future Sale".
NO DIVIDENDS
The Company has never paid or declared a dividend on its Common Stock and
does not anticipate doing so for the foreseeable future. The Company's current
bank line prohibits payment of dividends without the bank's consent. See
"Dividend Policy".
IMMEDIATE AND SUBSTANTIAL DILUTION TO NEW INVESTORS
The initial public offering price of Common Stock is expected to be
substantially higher than the net tangible book value per outstanding share of
Common Stock. Investors purchasing Common Stock in this offering will,
therefore, incur immediate dilution of $9.93 in net tangible book value per
share of Common Stock (based upon an assumed initial public offering price of
$12.00 per share and after deducting the estimated underwriting discount and
offering expenses payable by the Company) from the initial public offering price
and will incur additional dilution upon the exercise of outstanding stock
options. See "Dilution".
13
<PAGE> 15
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,500,000 shares of
Common Stock offered by the Company pursuant to this offering are estimated to
be $27,000,000, after deducting the estimated underwriting discount and offering
expenses payable by the Company. The Company will not receive any proceeds from
the sale of Common Stock by the Selling Stockholders. See "Principal and Selling
Stockholders".
The principal purposes of this offering are to increase the Company's
working capital and equity base, to create a public market for the Company's
Common Stock and to facilitate future access by the Company to the public
capital markets. The Company expects to use the net proceeds for general
corporate purposes, including working capital, product development and capital
expenditures. A portion of the net proceeds may also be used for the acquisition
of businesses, products and technologies that are complementary to those of the
Company. The Company may from time to time consider potential acquisitions,
although there are no commitments or understandings for any material
acquisitions, and no portion of the net proceeds has been allocated for any
specific acquisition. Pending such uses, the Company intends to invest the net
proceeds from this offering in short-term, investment-grade, interest-bearing
securities.
DIVIDEND POLICY
The Company has never paid any cash dividends on its Common Stock and does
not anticipate paying any cash dividends in the foreseeable future. The
Company's current loan agreement with a bank prohibits the payment of dividends
without the bank's consent. The Company currently intends to retain future
earnings to fund the development and growth of its business. Payment of future
dividends, if any, will be at the discretion of the Company's Board of Directors
after taking into account various factors, including the Company's financial
condition, operating results, current and anticipated cash needs and plans for
expansion.
14
<PAGE> 16
CAPITALIZATION
The following table sets forth, as of December 31, 1997, (i) the actual
capitalization of the Company, (ii) the pro forma capitalization of the Company
after giving effect to the conversion of the outstanding Series A Convertible
Preferred Stock and Class A Non-Voting Common Stock into shares of Common Stock
and (iii) the pro forma capitalization of the Company, as adjusted to reflect
the sale of 2,500,000 shares of Common Stock offered hereby by the Company at an
assumed initial public offering price of $12.00 per share and after deducting
the estimated underwriting discount and offering expenses payable by the
Company. This table should be read in conjunction with the Consolidated
Financial Statements and Notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------------
CONVERSION PRO FORMA
ACTUAL PRO FORMA ADJUSTED
-------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Capital lease obligations, less current portion............. $ 66 $ 66 $ 66
-------- ---------- ---------
Series A Convertible Preferred Stock, $.01 par value(1);
40,910 shares authorized; 40,910 shares outstanding
(actual); none authorized or outstanding (conversion pro
forma and pro forma adjusted)............................. 12,000 -- --
-------- ---------- ---------
Stockholders' equity: (1)
Preferred Stock, $.01 par value; 159,090 shares authorized
(actual); 1,000,000 shares authorized (conversion pro
forma and pro forma adjusted); none outstanding (actual,
conversion pro forma and pro forma adjusted)(2)........... -- -- --
Common Stock, $.0001 par value; 40,000,000 shares
authorized; 10,909,000 shares outstanding (actual);
15,080,000 shares outstanding (conversion pro forma)
and 17,580,000 shares outstanding (pro forma
adjusted)(3)........................................... 1 2 2
Class A Non-Voting Common Stock, $.0001 par value;
5,000,000 shares authorized (actual); none authorized
(conversion pro forma and pro forma adjusted); 80,000
shares outstanding (actual); none outstanding
(conversion pro forma and pro forma adjusted).......... -- -- --
Additional paid-in capital................................ -- 11,999 38,999
Retained earnings......................................... 9,487 9,487 9,487
Translation adjustment.................................... (51) (51) (51)
Treasury stock, at cost (4,091,000 shares)................ (12,000) (12,000) (12,000)
-------- ---------- ---------
Total stockholders' equity (deficit)................... (2,563) 9,437 36,437
-------- ---------- ---------
Total capitalization.............................. $ 9,503 $ 9,503 $ 36,503
========= ========= =========
</TABLE>
- ---------------
(1) See Notes 7 and 8 of Notes to Consolidated Financial Statements.
(2) At December 31, 1997, the Company had 200,000 shares of Preferred Stock
authorized, of which 40,910 shares have been designated Series A
Convertible Preferred Stock and 159,090 were undesignated. Upon the
completion of the offering, 1,000,000 shares of Preferred Stock will be
authorized, none of which will be outstanding.
(3) Excludes 1,786,000 shares of Common Stock issuable pursuant to the
exercise of options outstanding at December 31, 1997, at a weighted
average exercise price of $2.64 per share of Common Stock, of which
options to purchase 411,625 shares were exercisable as of February 28,
1998. Also excludes 720,000 shares of Common Stock issuable pursuant to
the exercise of options granted between January 1, 1998 and February
28, 1998 at a weighted average exercise price of $10.45 per share of
Common Stock, of which options to purchase 30,000 shares were
exercisable as of February 28, 1998. Also excludes an additional
1,536,500 shares reserved for issuance under the 1996 Plan, the ESPP
and the Directors' Plan. See "Management -- Benefit Plans" and Note 9
of Notes to Consolidated Financial Statements.
15
<PAGE> 17
DILUTION
The pro forma net tangible book value of the Company as of December 31,
1997, after giving effect to the conversion of the outstanding Series A
Convertible Preferred Stock and Class A Non-Voting Common Stock into Common
Stock, was approximately $9,437,000, or $0.63 per share of Common Stock. Pro
forma net tangible book value per share is equal to the Company's total tangible
assets less total liabilities, divided by the number of shares of Common Stock
outstanding after giving effect to the aforementioned conversions. After giving
effect to the sale by the Company of 2,500,000 shares of Common Stock offered
hereby (at an assumed initial public offering price of $12.00 per share and
after deducting the estimated underwriting discount and offering expenses) the
pro forma net tangible book value of the Company as of December 31, 1997 would
have been approximately $36,437,000, or $2.07 per share. This represents an
immediate increase in pro forma net tangible book value of $1.44 per share to
existing stockholders and an immediate dilution of $9.93 per share to new
investors purchasing shares in this offering. The following table illustrates
the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................... $12.00
Pro forma net tangible book value as of December 31, 1997....... $0.63
Pro forma increase per share attributable to new investors...... 1.44
-----
Pro forma net tangible book value after offering.................. 2.07
-----
Pro forma net tangible book value dilution per share to new
investors....................................................... $ 9.93
=====
</TABLE>
The following table summarizes, on a pro forma basis as of December 31,
1997, after giving effect to the conversion of the outstanding Series A
Convertible Preferred Stock and Class A Non-Voting Common Stock into Common
Stock, the differences between existing stockholders and new investors with
respect to the number of shares of Common Stock purchased from the Company, the
total consideration paid to the Company and the average consideration paid per
share by the existing stockholders and by the new investors (assuming an initial
public offering price of $12.00 per share):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
---------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing
stockholders(1)....... 15,080,000 85.8% $12,101,630 28.7% $ 0.80
New investors(1)........ 2,500,000 14.2 30,000,000 71.3 12.00
---------- ------ ----------- ----- -------
Total................. 17,580,000 100.0% $42,101,630 100.0% $ 2.39
========== ====== =========== ===== =======
</TABLE>
- ---------------
(1) Sales by Selling Stockholders in this offering will reduce the number of
shares held by existing stockholders to 14,680,000 or approximately 83.5% of
the total number of shares of Common Stock outstanding after this offering
(or 14,245,000 shares and approximately 81.0% if the Underwriters'
over-allotment option is exercised in full), and will increase the number of
shares held by new investors to 2,900,000 or approximately 16.5% of the
total number of shares of Common Stock outstanding after this offering (or
3,335,000 shares and approximately 18.9% if the Underwriters' over-allotment
option is exercised in full). See "Principal and Selling Stockholders".
As of February 28, 1998, there were options outstanding to purchase
2,493,500 shares of Common Stock under the 1996 Plan and the Directors' Plan at
a weighted average exercise price of $4.89 per share, of which options to
purchase 441,625 shares were then exercisable. To the extent any such options
are exercised, there will be further dilution to the new investors. An
additional 1,536,500 shares in the aggregate have been reserved for issuance
under the 1996 Plan, the ESPP and the Directors' Plan. See
"Management -- Benefit Plans".
16
<PAGE> 18
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below under the captions
"Consolidated Statement of Income Data" and "Consolidated Balance Sheet Data" as
of and for each of the years in the five-year period ended June 30, 1997 and as
of and for the six months ended December 31, 1997 are derived from the
consolidated financial statements of the Company, which statements have been
audited by KPMG Peat Marwick LLP, independent certified public accountants. The
consolidated financial statements as of June 30, 1996 and 1997 and December 31,
1997, and for each of the years in the three-year period ended June 30, 1997 and
the six months ended December 31, 1997, and the report thereon, are included
elsewhere in this Prospectus. The interim consolidated financial data set forth
below for the six-month period ended December 31, 1996 has been derived from the
unaudited consolidated financial statements included elsewhere in this
Prospectus. The unaudited consolidated financial statements include all
adjustments, consisting only of normal recurring adjustments, that the Company
considers necessary for a fair presentation of the financial position and
results of operations for the period. Operating results for the six-month period
ended December 31, 1997 are not necessarily indicative of the results that may
be expected for the entire fiscal year ending June 30, 1998. The data set forth
below should be read in conjunction with, and are qualified by reference to,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and Notes thereto,
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
------------------------------------------------------- -----------------------
1993 1994 1995 1996 1997 1996 1997
------- ------- ------- ------- ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA):
Revenues:
Software license revenues................ $ 7,821 $10,604 $12,729 $18,769 $26,112 $10,239 $14,293
Maintenance and other revenues........... 5,283 7,050 9,676 12,189 15,215 7,159 8,778
------- ------- ------- ------- ------- ------- -------
Total revenues......................... 13,104 17,654 22,405 30,958 41,327 17,398 23,071
------- ------- ------- ------- ------- ------- -------
Costs of revenues:
Software license revenues................ 534 841 614 626 1,336 528 678
Maintenance and other revenues........... 1,278 1,556 2,049 2,716 2,923 1,441 1,554
------- ------- ------- ------- ------- ------- -------
Total costs of revenues................ 1,812 2,397 2,663 3,342 4,259 1,969 2,232
------- ------- ------- ------- ------- ------- -------
Gross profit............................... 11,292 15,257 19,742 27,616 37,068 15,429 20,839
Operating expenses:
Sales and marketing...................... 8,030 9,687 12,523 15,136 21,971 9,180 10,797
Research and development................. 1,665 2,669 3,478 4,600 5,904 2,810 3,550
General and administrative............... 1,060 1,911 2,063 2,832 4,350 1,911 3,106
------- ------- ------- ------- ------- ------- -------
Total operating expenses............... 10,755 14,267 18,064 22,568 32,225 13,901 17,453
------- ------- ------- ------- ------- ------- -------
Income from operations..................... 537 990 1,678 5,048 4,843 1,528 3,386
License and other interest income.......... 125 186 375 339 922 328 832
Interest expense........................... (79) (61) (58) (41) (22) (11) (6)
Foreign currency transaction gains
(losses)................................. 1 31 34 (72) (12) 1 (6)
------- ------- ------- ------- ------- ------- -------
Income before income taxes and change in
accounting for income taxes.............. 584 1,146 2,029 5,274 5,731 1,846 4,206
Provision for income taxes................. 244 507 880 2,657 3,348 1,043 2,355
------- ------- ------- ------- ------- ------- -------
Income before cumulative effect of change
in accounting for income taxes........... 340 639 1,149 2,617 2,383 803 1,851
Cumulative effect of change in accounting
for income taxes(1)...................... -- 194 -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Net income................................. $ 340 $ 833 $ 1,149 $ 2,617 $ 2,383 $ 803 $ 1,851
======= ======= ======= ======= ======= ======= =======
Basic earnings per share(2)................ $ 0.02 $ 0.06 $ 0.08 $ 0.17 $ 0.17 $ 0.05 $ 0.17
Basic weighted average shares
outstanding(2)........................... 15,000 15,000 15,000 15,000 14,318 15,000 10,909
Diluted earnings per share(2).............. $ 0.02 $ 0.06 $ 0.08 $ 0.17 $ 0.15 $ 0.05 $ 0.12
Diluted weighted average shares
outstanding(2)........................... 15,000 15,000 15,000 15,000 15,882 15,355 15,785
</TABLE>
17
<PAGE> 19
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
------------------------------------------------------- -----------------------
1993 1994 1995 1996 1997 1996 1997
------- ------- ------- ------- ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
PRO FORMA DATA (UNAUDITED):
Pro forma basic earnings per share(3)...... $ 0.13 $ 0.12
Pro forma basic weighted average shares
outstanding(3)........................... 18,489 15,080
Pro forma diluted earnings per share(3).... $ 0.12 $ 0.12
Pro forma diluted weighted average shares
outstanding(3)........................... 19,371 15,852
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
JUNE 30, ------------------------------------
--------------------------------------------- CONVERSION PRO FORMA
1993 1994 1995 1996 1997 ACTUAL PRO FORMA(6) ADJUSTED(7)
------ ------ ------- ------- ------- ------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA
(IN THOUSANDS):
Cash and cash equivalents.................. $ 214 $3,166 $ 2,711 $ 4,447 $ 5,672 $ 7,182 $ 7,182 $34,182
Total software license installments(4)..... 1,006 1,546 1,317 4,990 12,486 16,767 16,767 16,767
Total assets............................... 6,360 9,422 12,713 18,446 28,502 34,347 34,347 61,347
Total deferred maintenance revenue(5)...... 3,039 3,845 5,317 7,154 11,155 16,116 16,116 16,116
Capital lease obligations, less current
portion.................................. 73 23 104 151 95 66 66 66
Convertible preferred stock................ -- -- -- -- 11,898 12,000 -- --
Stockholders' equity (deficit)............. 655 1,465 2,586 5,226 (4,344) (2,563) 9,437 36,437
</TABLE>
- ---------------
(1) Represents cumulative effect of change in accounting for the adoption of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes".
(2) For a description of the basic and diluted earnings per share ("EPS")
calculations and the basic and diluted weighted average shares outstanding,
see Note 2 of Notes to Consolidated Financial Statements.
(3) For a description of the pro forma basic and pro forma diluted EPS
calculations and the pro forma basic and pro forma diluted weighted average
shares outstanding, see Note 14 of Notes to Consolidated Financial
Statements. The pro forma basic and diluted earnings per share giving effect
to the 2,500,000 shares in the offering would be $0.11 and $0.11 for the
year ended June 30, 1997 and $0.11 and $0.10 for the six months ended
December 31, 1997 based on the pro forma basic and diluted weighted average
shares outstanding of 20,989,000 and 21,871,000 for the year ended June 30,
1997, respectively, and 17,580,000 and 18,352,000 for the six months ended
December 31, 1997, respectively.
(4) Total software license installments include amounts classified as current
and long term. See Consolidated Financial Statements and Note 3 of Notes to
Consolidated Financial Statements.
(5) Total deferred maintenance revenue includes amounts classified as current
and long term. See Consolidated Financial Statements and Note 2 of Notes to
Consolidated Financial Statements.
(6) Gives effect to the conversion of all outstanding shares of the Company's
Series A Convertible Preferred Stock and Class A Non-Voting Common Stock
into Common Stock. See "Capitalization".
(7) Adjusted to give effect to the sale of 2,500,000 shares of Common Stock
offered by the Company hereby, at an assumed initial public offering price
of $12.00 per share, after deducting the estimated underwriting discount and
offering expenses payable by the Company. See "Use of Proceeds" and
"Capitalization".
18
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto, and the other financial
information included elsewhere in this Prospectus. The Company's revenues and
costs of operations are difficult to forecast and could differ materially from
those discussed in the forward-looking statements contained in this Prospectus
as a result of a number of factors, including, without limitation, those
discussed under "Risk Factors" above.
OVERVIEW
The Company is a leading provider of enterprise software products designed
to optimize the storage, retrieval and presentation of large volumes of
transactional information. Major financial services, healthcare, manufacturing,
retail and telecommunications companies and governmental entities use the
Company's products to facilitate customer service and other mission-critical
functions. Founded in 1981, the Company provided information storage, retrieval
and presentation products and support, as well as consulting services throughout
its first decade. In 1991, the Company decided to focus primarily on developing
and marketing software products and, as a result, sold its consulting services
business.
Mobius derives its revenues primarily from software license fees and
related annual maintenance fees. In fiscal 1997, 63.2% of the Company's total
revenues were generated by software license fees and 36.8% were generated by
maintenance and other fees. The Company's total revenues have increased over
each of the past five fiscal years, from $13.1 million in fiscal 1993 to $41.3
million in fiscal 1997.
Revenue from software license contracts is recognized upon shipment of the
software to the customer if no significant vendor obligations remain and
collection of the resulting receivable is probable. The Company offers
installment payment terms to some of its customers for the acquisition of
software licenses. The license revenue for such agreements is recorded as the
present value of contract payments, net of bundled maintenance fees. These
installment contracts give rise to the software license installments recorded on
the Company's balance sheet. License interest income represents the portion of
installment contracts allocated by the Company to interest, based on a discount
rate tied to relevant market indices.
Maintenance fees are calculated as a percentage of license fees and are
recognized ratably over the maintenance term, typically one year. Unearned
maintenance revenue from these transactions is reflected on the Company's
balance sheet as deferred maintenance revenue.
Licenses of the Company's ViewDirect and DocumentDirect products have
historically accounted for a majority of the Company's license revenues and for
a significant portion of the Company's total revenues, and the Company
anticipates that this trend will continue for the foreseeable future. In fiscal
1997, license fees for these products accounted for approximately 81.0% of
license revenues and approximately 51.0% of total revenues. The Company's
growing customer base has led to continued growth in maintenance fees. Aside
from the involvement of systems engineers during the sales cycle, Mobius does
not provide implementation services and has trained and certified a group of
independent professional services organizations to provide such services.
International revenues increased in absolute dollar terms in 1995 and 1996
representing 9.9% and 10.8% increases over the respective prior year while 1997
decreases 4.9% as compared to 1996. The Company intends to expand its
international sales activities as part of its business strategy. The majority of
Mobius' current international revenues are derived from the operations of five
wholly-owned subsidiaries. In addition, international revenues include sales
made directly by the Company or through agents located in the United States to
international customers. The Company's
19
<PAGE> 21
subsidiaries conduct business in the currency of the country in which they
operate, exposing Mobius to currency fluctuations and currency transaction
losses or gains which are outside of Mobius' control. To date, all of these
subsidiaries have operated at a loss, which cannot be consolidated for United
States income tax purposes. Consequently, the Company's effective tax rate is
substantially higher than the statutory rate as no benefit has been provided for
the foreign losses. To the extent that Mobius is successful at bringing these
operations to profitability, the Company will have effective tax rates that are
below the statutory rates as a result of realizing the benefit of the tax loss
carryforwards currently being generated outside of the United States. See "Risk
Factors -- International Sales and Operations" and "Strategy -- Increase
Penetration of International Markets".
Capitalization of internally developed software costs is required once
technological feasibility is established. The period between achieving
technological feasibility, which the Company has defined as the establishment of
a working model, and the general availability of such software has been short
and, therefore, software development costs qualifying for capitalization have
been insignificant. Accordingly, the Company has not capitalized any software
development costs. The Company currently anticipates that such eligible amounts
will be insignificant for the foreseeable future. Software development costs are
included in research and development and are expensed as incurred. See Note 2 of
Notes to Consolidated Financial Statements.
RESULTS OF OPERATIONS
The following table sets forth certain items from the Company's
Consolidated Statement of Income as a percentage of total revenues for the
periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
------------------------- ---------------------
1995 1996 1997 1996 1997
----- ----- ----- ----------- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Software license revenues................. 56.8% 60.6% 63.2% 58.9% 62.0%
Maintenance and other revenues............ 43.2 39.4 36.8 41.1 38.0
----- ----- ----- ----- -----
Total revenues......................... 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- -----
Costs of revenues:
Software license revenues................. 2.8 2.0 3.2 3.0 2.9
Maintenance and other revenues............ 9.1 8.8 7.1 8.3 6.8
----- ----- ----- ----- -----
Total costs of revenues................ 11.9 10.8 10.3 11.3 9.7
----- ----- ----- ----- -----
Gross profit................................ 88.1 89.2 89.7 88.7 90.3
Operating expenses:
Sales and marketing....................... 55.9 48.9 53.2 52.8 46.8
Research and development.................. 15.5 14.9 14.3 16.1 15.4
General and administrative................ 9.2 9.1 10.5 11.0 13.4
----- ----- ----- ----- -----
Total operating expenses............... 80.6 72.9 78.0 79.9 75.6
----- ----- ----- ----- -----
Income from operations...................... 7.5 16.3 11.7 8.8 14.7
License and other interest income........... 1.7 1.1 2.3 1.9 3.5
Interest expense............................ (0.3) (0.1) (0.1) (0.1) (0.0)
Foreign currency transaction gains
(losses).................................. 0.2 (0.2) 0.0 0.0 0.0
----- ----- ----- ----- -----
Income before income taxes.................. 9.1 17.1 13.9 10.6 18.2
Provision for income taxes.................. 3.9 8.6 8.1 6.0 10.2
----- ----- ----- ----- -----
Net income.................................. 5.2% 8.5% 5.8% 4.6% 8.0%
===== ===== ===== ===== =====
</TABLE>
20
<PAGE> 22
SIX MONTHS ENDED DECEMBER 31, 1996 COMPARED TO SIX MONTHS ENDED DECEMBER
31, 1997
REVENUES. Total revenues, consisting principally of software license
revenues and maintenance and other revenues, increased 32.6% from $17.4 million
in the first six months of fiscal 1997 to $23.1 million in the first six months
of fiscal 1998. Domestic revenues increased 29.0% from $15.8 million in the
first six months of fiscal 1997 to $20.4 million in the same period in fiscal
1998. International revenues increased 68.6% from $1.6 million in the first six
months of fiscal 1997 to $2.7 million in the same period in fiscal 1998.
Software license revenues increased 39.6% from $10.2 million in the first
six months of fiscal 1997 to $14.3 million in the comparable period of fiscal
1998. The increase was primarily attributable to increased sales of the
ViewDirect and DocumentDirect products and, to a lesser extent, the
INFOPAC-TapeSaver product.
Maintenance and other revenues increased 22.6% from $7.2 million for the
first six months of fiscal 1997 to $8.8 million in the first six months of
fiscal 1998. The increase was primarily attributable to the growth of the
installed base of customers with maintenance contracts, and, to a lesser extent,
increases in the fees charged by the Company. Other revenues for both periods
were not significant.
COSTS OF REVENUES. Costs of license revenues consist primarily of
royalties, amortization of purchased software and sublicense fees. The costs of
license revenues increased 28.4% from $0.5 million in the first six months of
fiscal 1997 to $0.7 million in the comparable period of fiscal 1998,
representing 5.2% and 4.7%, respectively, of license revenues in those periods.
The increase in the costs of license revenues was primarily related to increased
sales of the INFOPAC-TapeSaver and DocuAnalyzer products, which require the
Company to pay third party royalty fees.
Costs of maintenance and other revenues consist primarily of customer
support staff costs. The costs of maintenance revenues increased 7.8% from $1.4
million in the first six months of fiscal 1997 to $1.6 million in the first six
months of fiscal 1998, representing 20.1% and 17.7% of maintenance revenues,
respectively. The increase in the costs of maintenance and other revenues is
primarily attributable to increased staffing and personnel-related costs.
OPERATING EXPENSES. Sales and marketing expenses consist primarily of the
cost of personnel associated with the selling and marketing of the Company's
products, including salaries, commissions and travel and entertainment. Sales
and marketing expenses also include the cost of branch sales offices,
advertising, trade shows, marketing and promotional materials. Sales and
marketing expenses increased 17.6% from $9.2 million in the first six months of
fiscal 1997 to $10.8 million in the comparable period of fiscal 1998. This
increase was primarily attributable to increased commissions associated with
increased revenues and expenses for additional sales staff and personnel-related
costs.
Research and development expenses consist primarily of personnel costs
attributable to the development of new software products and the enhancement of
existing products. Research and development expenses increased 26.3% from $2.8
million in the first six months of fiscal 1997 to $3.6 million in the comparable
period of fiscal 1998. The increase is primarily attributable to increased
staffing and personnel-related costs. The Company believes that a significant
level of research and development expenses will be required to maintain its
competitive position in the future.
General and administrative expenses primarily consist of personnel costs
related to management, accounting, human resources, administration and
associated overhead costs, as well as fees for professional services. General
and administrative expenses increased 62.5% from $1.9 million in the first six
months of fiscal 1997 to $3.1 million in the comparable period of fiscal 1998.
The increase primarily reflects additional personnel-related costs as a result
of the Company's expanded operations. The Company expects general and
administrative expenses to increase in fiscal
21
<PAGE> 23
1998 as a result of the costs associated with the regulatory and communication
requirements applicable to public companies.
LICENSE AND OTHER INTEREST INCOME; INTEREST EXPENSE; FOREIGN CURRENCY
TRANSACTION GAINS (LOSSES). License and other interest income consists
primarily of the portion of license payments under installment contracts
allocated by the Company to interest based on a discount rate. License and other
interest income increased from $0.3 million in the first six months of fiscal
1997 to $0.8 million in the comparable period of fiscal 1998.
Interest expense consists primarily of costs associated with the Company's
capital lease obligations. Foreign currency transaction gains (losses) consists
of income or expenses associated with the valuation of the Company's non-dollar
denominated assets held by its foreign subsidiaries. Both interest expense and
foreign currency transaction gains (losses) were not material in the first six
months of each of fiscal years 1997 and 1998.
PROVISION FOR INCOME TAXES. The provision for income taxes was $1.0
million for the first six months of fiscal 1997 and $2.4 million for the
comparable period of fiscal 1998. The effective tax rates for these respective
periods were 56.5% and 56.0%. The difference between these rates and the
applicable statutory rates is primarily attributable to the unrecognized tax
benefit related to operating losses of the Company's foreign subsidiaries.
YEAR ENDED JUNE 30, 1995 COMPARED TO YEAR ENDED JUNE 30, 1996 COMPARED TO
YEAR ENDED JUNE 30, 1997
REVENUES. Total revenues increased 38.2% from $22.4 million in fiscal 1995
to $31.0 million in fiscal 1996 and increased 33.5% to $41.3 million in fiscal
1997. Domestic revenues increased 36.8% from $20.2 million in fiscal 1995 to
$27.6 million in fiscal 1996 and increased 38.2% to $38.2 million in fiscal
1997. International revenues increased 50.3% from $2.2 million in fiscal 1995 to
$3.3 million in fiscal 1996 and decreased 4.9% to $3.2 million in fiscal 1997.
The increase in total revenues is primarily attributable to increased licensing
of the Company's software products by new and current customers.
Software license revenues increased 47.5% from $12.7 million in fiscal 1995
to $18.8 million in fiscal 1996 and increased 39.1% to $26.1 million in fiscal
1997. The increases in software license revenues were primarily attributable to
increased license revenues from the Company's ViewDirect and DocumentDirect
products, and, to a lesser extent, the INFOPAC-TapeSaver product.
Maintenance and other revenues increased 26.0% from $9.7 million in fiscal
1995 to $12.2 million in fiscal 1996 and increased 24.8% to $15.2 million in
fiscal 1997. The increases in maintenance and other revenues during these years
were primarily attributable to the growth of the installed base of customers
with maintenance contracts, and, to a lesser extent, increases in the
maintenance fees charged by the Company. Other revenues for all periods were not
significant.
COSTS OF REVENUES. The costs of software license revenues remained
relatively constant at $0.6 million in fiscal 1995 and fiscal 1996, and
increased 113.4% to $1.3 million in fiscal 1997, representing 4.8%, 3.3% and
5.1%, respectively, of software license revenues in those years. The increase in
costs of software license revenue in fiscal 1997 was primarily due to increased
sales of the INFOPAC-TapeSaver and DocuAnalyzer products.
The costs of maintenance and other revenues increased 32.6% from $2.0
million in fiscal 1995 to $2.7 million in fiscal 1996 and increased 7.6% to $2.9
million in fiscal 1997, representing 21.2%, 22.3% and 19.2%, respectively, of
maintenance and other revenues in those years. The increases in costs of
maintenance and other revenues were primarily attributable to increased staffing
and personnel-related costs.
OPERATING EXPENSES. Sales and marketing expenses increased 20.9% from
$12.5 million in fiscal 1995 to $15.1 million in fiscal 1996 and increased 45.1%
to $22.0 million in fiscal 1997. The
22
<PAGE> 24
increases in sales and marketing expenses were primarily attributable to
increased commissions associated with increased revenues, the hiring of
additional sales personnel and increased personnel-related costs.
Research and development expenses increased 32.3% from $3.5 million in
fiscal 1995 to $4.6 million in fiscal 1996 and increased 28.3% to $5.9 million
in fiscal 1997, representing 15.5%, 14.9% and 14.3%, respectively, of total
revenues in those years. The increases in research and development expenses were
primarily attributable to increased staffing and personnel-related costs for
technical staff.
General and administrative expenses increased 37.3% from $2.1 million in
fiscal 1995 to $2.8 million in fiscal 1996 and increased 53.6% to $4.4 million
in fiscal 1997. The increases were generally attributable to increased
professional services fees and additional personnel costs.
LICENSE AND OTHER INTEREST INCOME; INTEREST EXPENSE; FOREIGN CURRENCY
TRANSACTION GAINS (LOSSES). License and other interest income decreased from
$0.4 million in fiscal 1995 to $0.3 million in fiscal 1996 and increased to $0.9
million in fiscal 1997. The decrease in license and other interest income from
fiscal 1995 to fiscal 1996 was primarily due to the reduction in the discount
rate used by the Company on installment contracts in 1996 and the completion of
payment obligations on higher rate contracts within fiscal 1996. The increase in
license and other interest income from fiscal 1996 to fiscal 1997 was primarily
due to increases in the number of installment contracts entered into by the
Company, and, to a lesser extent, increased earnings on higher cash balances
held by the Company during that year.
Interest expense decreased from $58,000 in fiscal 1995 to $41,000 in fiscal
1996 and decreased to $22,000 in fiscal 1997. The decreases were primarily due
to reductions in the principal balances associated with the Company's capital
leases.
Foreign currency transaction gains (losses) declined from a gain of $34,000
in fiscal 1995 to a loss of $72,000 in fiscal 1996 primarily due to unfavorable
fluctuations in the Company's functional currencies. The loss diminished to
$12,000 in fiscal 1997 primarily due to declining fluctuations in fiscal 1997 as
compared to fiscal 1996.
PROVISION FOR INCOME TAXES. The provision for income taxes was $0.9
million in fiscal 1995, $2.7 million in fiscal 1996 and $3.3 million in fiscal
1997. The Company had effective tax rates of approximately 43.4%, 50.4% and
58.4% in fiscal years 1995, 1996 and 1997, respectively. The difference between
these rates and the applicable statutory rates is primarily attributable to the
unrecognized tax benefit related to operating losses of the Company's foreign
subsidiaries. The increase in the effective tax rate from fiscal 1995 to fiscal
1996 principally reflects the absence of federal research tax credits due to a
temporary change in the Internal Revenue Code in 1996 and an increase in the
provision for tax contingencies. The increase in the effective tax rate from
fiscal 1996 to fiscal 1997 principally reflects the impact of an increase in the
amount of operating losses of the Company's foreign subsidiaries. See Note 6 of
Notes to Consolidated Financial Statements.
23
<PAGE> 25
SELECTED QUARTERLY OPERATING RESULTS
The following tables present certain consolidated statement of income data
for the eight fiscal quarters in the period ended December 31, 1997. In
management's opinion, this unaudited information has been prepared on the same
basis as the audited Consolidated Financial Statements appearing elsewhere in
this Prospectus and includes all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the information for
the quarters presented, when read in conjunction with the audited Consolidated
Financial Statements and Notes thereto included elsewhere in this Prospectus.
The results of operations for any quarter are not necessarily indicative of
results for any future period.
<TABLE>
<CAPTION>
QUARTERS ENDED
------------------------------------------------------------------------------------------
MARCH JUNE SEPTEMBER DECEMBER MARCH JUNE SEPTEMBER DECEMBER
31, 30, 30, 31, 31, 30, 30, 31,
1996 1996 1996 1996 1997 1997 1997 1997
-------- ------- ------------ ----------- -------- ------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Software license
revenues............. $3,323 $ 7,662 $3,714 $ 6,525 $5,237 $10,636 $5,697 $ 8,596
Maintenance and other
revenues............. 3,203 3,168 3,522 3,637 4,087 3,969 4,183 4,595
----- ----- ----- ----- ----- ----- ----- -----
Total revenues....... 6,526 10,830 7,236 10,162 9,324 14,605 9,880 13,191
Costs of revenues:
Software license
revenues............. 102 303 308 220 276 532 366 312
Maintenance and other
revenues............. 690 797 639 802 751 731 692 862
----- ----- ----- ----- ----- ----- ----- -----
Total costs of
revenues........... 792 1,100 947 1,022 1,027 1,263 1,058 1,174
----- ----- ----- ----- ----- ----- ----- -----
Gross profit............. 5,734 9,730 6,289 9,140 8,297 13,342 8,822 12,017
Operating expenses:
Sales and marketing.... 3,697 4,849 3,616 5,564 5,255 7,536 4,700 6,097
Research and
development.......... 1,228 1,216 1,367 1,443 1,533 1,561 1,681 1,869
General and
administrative....... 649 983 722 1,189 1,136 1,303 1,462 1,644
----- ----- ----- ----- ----- ----- ----- -----
Total operating
expenses........... 5,574 7,048 5,705 8,196 7,924 10,400 7,843 9,610
----- ----- ----- ----- ----- ----- ----- -----
Income from operations... 160 2,682 584 944 373 2,942 979 2,407
License and other
interest income........ 64 164 140 188 223 371 325 507
Interest expense......... (6) (9) (7) (4) (4) (7) (4) (2)
Foreign currency
transaction gains
(losses)............... (54) 18 1 -- (8) (5) (3) (3)
----- ----- ----- ----- ----- ----- ----- -----
Income before income
taxes.................. 164 2,855 718 1,128 584 3,301 1,297 2,909
Provision for income
taxes.................. 86 1,434 351 692 354 1,951 750 1,605
----- ----- ----- ----- ----- ----- ----- -----
Net income............... $ 78 $ 1,421 $ 367 $ 436 $ 230 $ 1,350 $ 547 $ 1,304
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
24
<PAGE> 26
<TABLE>
<CAPTION>
QUARTERS ENDED
------------------------------------------------------------------------------------------
MARCH JUNE SEPTEMBER DECEMBER MARCH JUNE SEPTEMBER DECEMBER
31, 30, 30, 31, 31, 30, 30, 31,
1996 1996 1996 1996 1997 1997 1997 1997
-------- ------- ------------ ----------- -------- ------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AS A PERCENTAGE OF TOTAL
REVENUES
Revenues:
Software license
revenues................ 50.9% 70.7% 51.3% 64.2% 56.2% 72.8% 57.7% 65.2%
Maintenance and other
revenues................ 49.1 29.3 48.7 35.8 43.8 27.2 42.3 34.8
----- ----- ----- ----- ----- ----- ----- -----
Total revenues.......... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Costs of revenues:
Software license
revenues................ 1.6 2.8 4.3 2.2 3.0 3.6 3.7 2.4
Maintenance and other
revenues................ 10.6 7.4 8.8 7.9 8.0 5.0 7.0 6.5
----- ----- ----- ----- ----- ----- ----- -----
Total costs of
revenues.............. 12.2 10.2 13.1 10.1 11.0 8.6 10.7 8.9
----- ----- ----- ----- ----- ----- ----- -----
Gross profit................ 87.8 89.8 86.9 89.9 89.0 91.4 89.3 91.1
Operating expenses:
Sales and marketing....... 56.7 44.7 50.0 54.7 56.4 51.6 47.6 46.2
Research and
development............. 18.8 11.2 18.8 14.2 16.4 10.7 17.0 14.2
General and
administrative.......... 9.9 9.1 10.0 11.7 12.2 8.9 14.8 12.5
----- ----- ----- ----- ----- ----- ----- -----
Total operating
expenses.............. 85.4 65.0 78.8 80.6 85.0 71.2 79.4 72.9
Income from operations...... 2.4 24.8 8.1 9.3 4.0 20.2 9.9 18.2
License and other interest
income.................... 1.0 1.5 1.9 1.8 2.4 2.5 3.2 3.8
Interest expense............ (0.1) (0.1) (0.1) 0.0 0.0 (0.1) 0.0 0.0
Foreign currency transaction
gains (losses)............ (0.8) 0.2 0.0 0.0 (0.1) 0.0 0.0 0.1
----- ----- ----- ----- ----- ----- ----- -----
Income before income
taxes..................... 2.5 26.4 9.9 11.1 6.3 22.6 13.1 22.1
Provision for income
taxes..................... 1.3 13.3 4.8 6.8 3.8 13.4 7.6 12.2
----- ----- ----- ----- ----- ----- ----- -----
Net income.................. 1.2% 13.1% 5.1% 4.3% 2.5% 9.2% 5.5% 9.9%
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
The Company's quarterly revenues and operating results have varied
significantly in the past and are likely to vary substantially from quarter to
quarter in the future. Quarterly revenues and operating results are expected to
fluctuate as a result of a variety of factors, including lengthy product sales
cycles, changes in the level of operating expenses, demand for the Company's
products, introductions of new products and product enhancements by the Company
or its competitors, changes in customer budgets, competitive conditions in the
industry and general domestic and international economic conditions. The
Company's business has experienced and is expected to continue to experience
significant seasonality, with revenues typically peaking primarily in its fourth
fiscal quarter and to a lesser extent in its second fiscal quarter. These
fluctuations are caused primarily by customer purchasing patterns and the
Company's sales force incentive programs which recognize and reward sales
personnel on the basis of achievement of annual and other periodic performance
quotas, as well as the factors described above. The Company expects its
operating results for the third quarter of fiscal 1998 to be consistent with its
historical seasonality patterns. See "Risk Factors -- Fluctuations in Period to
Period Results; Seasonality; Uncertainty of Future Operating Results".
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has funded its operations principally
through cash flows from operating activities and, to a lesser extent, bank
financings and capital leases. As of December 31, 1997, the Company had cash and
cash equivalents of $7.2 million, an increase of $1.5 million from the $5.7
million held at June 30, 1997.
25
<PAGE> 27
Net cash provided by operating activities was $0.3 million, $2.7 million
and $2.5 million in fiscal 1995, 1996 and 1997, and $1.9 million in the first
six months of each of fiscal 1997 and 1998.
Cash used in investing activities, consisting of capital expenditures for
the purchase of computer equipment and software used in product development and
customer support, was $0.4 million, $0.6 million and $1.0 million in fiscal
1995, 1996 and 1997 and $0.3 million in the first six months of each of fiscal
1997 and 1998.
Cash used in financing activities remained relatively consistent at $0.3
million in fiscal 1995, 1996 and 1997 and $28,000 and $26,000 for the first six
months of fiscal 1997 and 1998, respectively. The cash was used primarily for
the repayment of capital lease obligations and the retirement of notes payable.
In addition, in 1997, the Company raised $12.0 million in a private placement of
its Series A Convertible Preferred stock and repurchased $12.0 million of Common
Stock.
The Company currently has a $5.0 million line of credit for working capital
purposes secured by certain assets of the Company. The line of credit expires on
October 20, 1998.
The Company believes that the net proceeds from the offering, combined with
its existing cash balances, its line of credit and cash flows expected from
future operations, will be sufficient to meet the Company's capital requirements
for at least 12 months.
INFLATION
Inflation has not had a significant impact on the Company's operating
results to date, nor does the Company expect it to have a significant impact in
the future.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 1997, the AICPA issued SOP 97-2, "Software Revenue Recognition",
which supersedes SOP 91-1. The Company will adopt SOP 97-2 for software
transactions entered into beginning July 1, 1998. SOP 97-2 generally requires
revenue earned on software arrangements involving multiple elements, such as
additional software products, upgrades or enhancements, rights to exchange or
return software, postcontract customer support, or services, including elements
deliverable only on a when-and-if-available basis, to be allocated to the
various elements of such sale based on "vendor-specific objective evidence of
fair values" allocable to each such element. If sufficient vendor-specific
objective evidence of fair market values does not exist, revenue from the sale
could be deferred until such sufficient evidence exists, or until all elements
have satisfied the requirements for revenue recognition.
SOP 97-2 is newly issued and has not yet been subject to interpretation in
practice or in applicable accounting guidelines. Although the Company has
reviewed, and is continuing to review, its license agreements in light of its
requirement to adopt SOP 97-2 and believes such adoption will have a material
effect on its operations, there can be no assurance that the future application
of or subsequent interpretations to SOP 97-2 will not require the Company to
defer the recognition of certain elements of revenue or result in revenue
patterns in periods subsequent to fiscal 1998 which are materially different
than historical periods. In addition, there can be no assurance that any
adjustments the Company makes to its license agreements or other contractual
arrangements in order to accommodate the requirements of SOP 97-2 would not be
negatively viewed by prospective customers and therefore have a material adverse
effect on the Company's sales efforts.
On February 11, 1998, the AICPA issued an Exposure Draft of a Proposed
Statement of Position "Deferral of the Effective Date of Certain Purchase of SOP
97-2, Software Revenue Recognition, for Certain Transactions". The proposed SOP
defers for one year the application of what constitutes vendor-specific
objective evidence of the fair value of the delivered software element in
certain multiple-element arrangements that include service elements and that are
entered
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into by entities that never sell the software element separately. The Company
believes that the provisions of the Exposure Draft do not apply to the Company.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income" and No. 131, "Disclosures about Segments of an
Enterprise and Related Information". Commencing in 1998, SFAS No. 130 will
require companies to report comprehensive income and SFAS No. 131 will require
companies to report segment performance as it is used internally to evaluate
segment performance.
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<PAGE> 29
BUSINESS
Mobius is a leading provider of enterprise software products designed to
optimize the storage, retrieval and presentation of large volumes of
transactional information. Major financial services, healthcare, manufacturing,
retail and telecommunications companies and government entities use the
Company's software to facilitate customer service and other mission-critical
functions. Mobius' Electronic Document Warehouse ("EDW") products store and
integrate documents of different formats on a wide variety of computing
platforms and electronic storage devices, and make the documents available to
the user through a common intuitive interface, including Internet browsers.
These software products store, retrieve and present computer generated documents
and non-computer generated documents, such as text, images, video or audio
recordings, customer statements, checks, external correspondence and remittance
forms. These products can be used by a single department, multiple departments
or centrally by an entire enterprise. More than 1,200 customers, including 58 of
the Fortune 100, have licensed Mobius products.
INDUSTRY BACKGROUND
Organizations are faced with the need to store ever-increasing volumes of
information. For example, credit card companies store a record of each charge
transaction; brokerage firms store records of every trade; and telephone
companies store records of individual telephone calls. These static records are
transaction "snapshots" which organizations maintain to meet operational,
regulatory and legal requirements. Organizations may retain vast archives of
this static information for long periods of time and access these archives to
satisfy customer or other inquiries. Static information rapidly accumulates and
results in information archives containing billions of individual transaction
records, which often increase by millions of records each day.
The large volumes of static information that organizations maintain create
significant storage, retrieval and presentation challenges. Organizations need
to quickly and accurately retrieve such information to improve customer service,
meet legal requirements and reach more informed business decisions. For example,
customer service departments capable of routinely answering inquiries during a
single telephone call are more responsive and operate more efficiently and cost
effectively than those relying on manual access to information and follow-up
calls. Customers have become dependent upon organizations to accurately account
for transaction and other static information and increasingly demand rapid and
consistent access to their records, including self-service via the Internet.
Furthermore, organizations that quickly and inexpensively access customer data
can incorporate a broader universe of information into their operating decisions
to distinguish themselves from their competitors.
A single organization often creates static information in a wide variety of
formats, including text, images, complex data streams, video and audio
recordings. This proliferation of formats has increased the complexity of
information storage and retrieval. Organizations may maintain a number of
discrete, non-integrated systems, each of which provides access to a portion of
the organization's stored information. When the organization needs to access all
information about a particular customer or transaction, these disparate systems
make retrieval costly and time consuming. As a result, the Company believes
there is a need for an integrated system capable of storing, retrieving and
presenting all information relevant to a customer or transaction, regardless of
formats or storage sites. Moreover, organizations are seeking a comprehensive
solution that can accommodate rapidly evolving techology and is capable of
supporting multiple computing platforms and storage media.
Traditional approaches to the storage, retrieval and presentation of static
information inadequately address the challenges inherent in developing a fully
integrated, comprehensive information management system. Paper and microfiche
archives ensure the integrity of the information, but make retrieval and
presentation costly and slow. Relational databases, while effective for the
initial capture and short-term storage of operational data for business
applications, do not economically
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store and present large amounts of static information created in a wide variety
of formats. Point storage technologies, such as imaging and computer output to
laser disk, while sufficient to address departmental needs, are limited in their
ability to support a wide array of data types, and typically require additional
investments in information technology infrastructure and significant
customization. Data warehousing technologies, such as on-line analytical
processing and query and reporting tools, enable organizations to analyze
certain historical financial and operational data but are not designed to cost
effectively support complex information formats or high volume storage.
Consequently, the Company believes that traditional approaches to static
information management are inadequate in today's competitive business
environment.
THE MOBIUS SOLUTION
Mobius develops, licenses and supports software solutions that are designed
to optimize the enterprise-wide storage, retrieval and presentation of
transactional information. The Company's Electronic Document Warehouse products
store and integrate documents of different formats on a wide variety of
computing platforms and electronic storage devices, making them available to the
user through a common intuitive interface, including Internet browsers. The
Mobius solution offers the following advantages:
- STORAGE OPTIMIZATION. The Company's software is designed to manage the
storage of information across an organization's established
infrastructure, minimizing storage costs while meeting rapid retrieval
needs. For example, the software keeps the most frequently used
information on a fast access medium, such as an on-line direct access
storage device. Infrequently accessed data is automatically migrated to
less expensive storage devices, such as tape or optical disk, for
long-term retention, but remains available for direct access.
- EFFICIENT INFORMATION RETRIEVAL. Mobius' indexing technology provides
quick and easy access to the large volumes of information in EDW
archives. The archiving technology retrieves information without the user
knowing where the information resides in the enterprise, how or when it
was created, or the information's type and format, thereby substantially
enhancing information retrieval productivity. Users can automatically
link disparate documents into virtual folders extending across servers,
applications and formats, providing an easy-to-use path to quickly find
required documents.
- OPEN ARCHITECTURE. The Company's software supports a wide range of
computing platforms and, through its UniversalArchive storage format, a
variety of storage media. As a result, customers can leverage existing
investments in technology and reduce the risks of storage media
obsolescence. The software stores, retrieves and presents a wide range of
information formats including document types such as reports, formatted
statements and images, as well as raw transaction records and audio and
video files. Further, the Company's software is designed to accommodate
evolving formats. Developers can use the Company's application
programming interfaces ("APIs") to incorporate Mobius' products into
their existing application infrastructure.
- ENTERPRISE SCALABILITY. The Mobius solution supports the enterprise-wide
information storage, retrieval and presentation requirements of large
organizations. The Company's solution is scalable in that it is capable
of meeting the information storage needs of organizations regardless of
information volume and the number and type of formats. The system can
operate on PC, mid-range, mainframe or Internet servers. Due to its
enterprise scalability, Mobius software can support many thousands of
concurrent users and store tens of millions of transactions per day.
- EASE OF INSTALLATION AND IMPLEMENTATION. The Company's software is a
packaged solution that is designed to be easily and quickly installed by
the customer. By using an organization's existing storage facilities and
computer capacity, Mobius' software minimizes the need for additional
capital expenditures and is easily implemented. In addition, the software
is easily
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adapted by both users and application developers to effectively deploy
applications tailored to their own business processes.
STRATEGY
The Company's objective is to be a leading provider of enterprise software
solutions that manage the storage, retrieval and presentation of large volumes
of transactional information created in a wide variety of formats. To achieve
this objective, the Company is pursuing the following strategies:
- MAINTAIN AND EXTEND TECHNOLOGICAL LEADERSHIP. Mobius has focused on
developing innovative storage, retrieval and presentation technologies.
As document formats proliferate, computing environments evolve,
Internet/intranet usage continues to grow and the storage and retrieval
demands of organizations escalate, the Company will strive to strengthen
its current market position by developing innovative technologies and new
products, features, functions and performance improvements.
- LEVERAGE INSTALLED BASE. More than 1,200 customers, including 58 of the
Fortune 100, have licensed the Company's products. Mobius plans to use
its blue chip customer base to expand existing relationships and further
extend its customer base. The Company's success in meeting the technology
challenges of sophisticated customers allows it to leverage its
experience into broader market penetration. The Company's sales
infrastructure is organized to expand penetration within existing
accounts at the divisional, departmental and enterprise-wide levels.
- EXPAND DISTRIBUTION CHANNELS. The Company's distribution strategy is to
develop multiple sales channels to reach a broad customer base. Mobius
expects to continue to expand both its field sales force and its
telesales force. In addition, the Company is focused on growing its
indirect sales channels by continuing to develop marketing partnerships
and joint-selling opportunities and by expanding distribution through
original equipment manufacturers ("OEMs").
- INCREASE FOCUS ON VERTICAL MARKETS. Mobius is pursuing a strategy
designed to increase its penetration of targeted vertical industries,
such as financial services and telecommunications. The Company is
developing application templates tailored toward specific industries, the
first two of which, for the banking and brokerage industries, were
recently introduced. In addition, to further enhance the effectiveness of
its selling efforts, the Company has built specialized sales teams
focused on selected vertical markets.
- INCREASE PENETRATION OF INTERNATIONAL MARKETS. Mobius began directly
selling its products in Europe in 1993. The Company has sales offices in
five European countries and one in Australia. In addition, the Company
has direct sales teams focusing on key areas of Canada, Mexico, South
America, Europe, Africa and Asia Pacific. The Company's global strategy
is to continue to expand its direct foreign operations as well as to
enter into joint ventures and other strategic alliances to provide a
sales and marketing presence for its products in key international
markets. Where appropriate, the Company has introduced national language
versions and double-byte character support in its products to meet the
needs of its international customers.
CUSTOMERS
More than 1,200 customers in a wide range of industries have licensed the
Company's products, including approximately 1,000 customers who have licensed
one or more of the Company's EDW products. No single customer accounted for 10%
or more of revenues in fiscal years 1995, 1996 or 1997. The following is a list
of selected customers of the Company, segmented by industry concentration.
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<TABLE>
<S> <C> <C>
BANKING FINANCIAL INSURANCE
ABN AMRO North America, Inc. Chicago Board of Trade Clearing American Family Life Insurance
The Chase Manhattan Bank Corp. Company
Lloyds Bank PLC Securities Industry Automation The Equitable Life Assurance
Mellon Bank, N.A. Corporation Society of the United States
National Westminster Bank PLC Oppenheimer Funds, Inc. John Hancock Mutual Life
NationsBank Corporation VISA International Service Insurance Company
Wells Fargo Bank, N.A. Association Provident Mutual Life Insurance
TELECOMMUNICATIONS The Vanguard Group Company
Ameritech Services, Inc. Zurich Kemper Investments, Inc. MANUFACTURING
BellSouth Telecommunications, Inc. HEALTH CARE SERVICES American Honda Motor Co. Inc.
Century Telephone Enterprises, Inc. Abbott Laboratories Caterpillar Inc.
Cincinnati Bell Inc. Baxter Healthcare Corporation Ford Motor Company
RETAIL BlueCross BlueShield of Illinois Nabisco Brands Company
CVS Corporation Eli Lilly and Company TRANSPORTATION
Land's End, Inc. Johns Hopkins University Medical Alamo Rent-A-Car, Inc.
Nordstrom, Inc. Center Budget Rent A Car Corporation
Safeway Inc. GOVERNMENT The Hertz Corporation
Wal-Mart Stores, Inc. Commonwealth of Massachusetts US Airways Group, Inc.
UTILITIES Social Security Administration
British Gas plc The United Kingdom Ministry of
Consolidated Natural Gas Defence
Company United States Postal Service
Occidental Petroleum Corporation
Pacific Gas and Electric Company
</TABLE>
CUSTOMER APPLICATIONS
The following case studies illustrate applications of the Company's
products. These examples are based upon information provided to the Company by
the customer. The benefits achieved by the following customers may not be
achieved by other customers.
CREDIT CARDS: One of the world's largest credit card processors was
storing nearly 12 million transactions per day on microfiche, generating about
700 sheets of microfiche per day. Copies of these sheets of microfiche were then
distributed to locations throughout the world. Microfiche was often not
available for at least five days following a transaction, and delays of up to
fifteen days between transaction and record availability were common. Using
Mobius' EDW software and a tape storage system to index, store and retrieve
transactions, data currently representing 30 million transactions per day is
available to users the next day.
TELECOMMUNICATIONS: A major telecommunications company was storing the
current and previous month's billing information for its 14 million customers,
then moving it to microfiche. Manual retrieval of information from microfiche to
satisfy a customer query could take up to two weeks. Further, neither the
on-line data nor the microfiche presented the information to the customer
service representative in the same format as the customer's bill. Using Mobius'
EDW software and dedicated tape silos, the company has virtually eliminated
microfiche for billing data for its local land-line customers. Each month, 270
million pages of customer bills -- about half a terabyte -- are archived to the
system. Six thousand customer service representatives retrieve and view the
bills in the same format the customer sees in an average retrieval time of under
45 seconds. New uses for the archived data, such as fraud research and
litigation-related inquiries, continue to provide added benefits.
INSURANCE: One of the largest insurers in the U.S. chose Mobius' EDW
software to enhance its remittance processing operations by implementing an
on-line check image archive. Up to one million items, from three different
processing centers, are imaged and stored each day. The system has reduced the
time to research and resolve errors and has reduced the number of people needed
to support check processing operations. Customer service representatives have
timely access to
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check images to respond to inquiries and overpayments. Back office personnel use
images to research items and handle bank reconciliation. Lookups that had taken
15 minutes per item using microfilm are now done in seconds.
FINANCIAL SERVICES: A major brokerage firm uses mobius EDW products to
store annual statements and confirmations for 4.6 million customers. The
documents, originally created with Xerox DJDE, are being converted from an
existing computer-output-to-laser-disk system. All documents since 1992 that
have to be retained to meet either regulatory or service requirements will be
available to customer service representatives for desktop viewing.
SecuritiesDirect, an option of DocumentDirect Application Suite, facilitates
fast, easy navigation of the archive, letting the user apply Boolean logic to
locate documents that meet specified criteria. Documents can be instantaneously
printed or faxed to customers.
FINANCIAL SERVICES: A major financial services organization uses Mobius
EDW products to support its 401(k) services, comprising the management of $16
billion in assets and more than 350 plans. DocumentDirect for the Internet
provides 401(k) plan sponsors who subscribe to the service direct access to
information about their accounts over a private network. The system, operational
since mid-1997, currently has 200 internal users and over 40 plan sponsors
subscribed. Previously, reports were mailed and were available to the customer
three days after they were generated. Now, using Internet browsers, plan
managers can view their reports immediately.
TECHNOLOGY
The Company's technology is designed to optimize the performance of
mission-critical information storage, retrieval and presentation processes on a
variety of computing platforms, information formats and storage media. Mobius'
Electronic Document Warehouse solutions have the following key technological
attributes:
- ENTERPRISEINDEX. Mobius' EnterpriseIndex technology provides a
multi-level, multi-key index for maximum information access flexibility.
EnterpriseIndex allows EDW users to create virtual folders of disparate
documents. Documents can be associated across time, servers and formats
and presented to the user in a consistent viewing format.
- UNIVERSALARCHIVE. The Company's UniversalArchive storage format
(trademarked as UniArc) supports a wide range of storage media from
traditional disk drives to optical disk to robotically-controlled
magnetic tape. As information ages and is accessed less frequently,
migration utilities move the archive from direct access storage devices
("DASD") to less expensive tape or optical storage. Users view documents,
and applications access information, directly from tape or optical disk
devices, eliminating expensive recalls, reducing DASD use and providing
low cost, direct access to long-term, infrequently-accessed data. The
UniversalArchive facilitates the integration of new hardware as
technology enhancements occur, and reduces the risk of media obsolescence
by ensuring that as equipment ages, information can be migrated without
reprocessing.
- SERVERTRANSPARENCY. The Company's ServerTransparency architecture enables
the user to retrieve documents without knowing where they are located in
the heterogeneous computing environment. ServerTransparency alleviates
the need for the end user to keep track of the location of documents
across the supported platforms, which include OS/390, Windows NT, Windows
95, UNIX, OS/400, NetWare and others. In addition, the Company's archive
replication facilities enable Mobius customers to position archives
throughout the computing complex so as to optimize information retrieval.
- ASSOCIATED DATATYPE. The Company's software provides a way to build EDW
archives that contain application-specific data streams such as HTML,
Java, Adobe PDF, word processor and spreadsheet formats. These archives
can be associated with external software products
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that render and display the archived objects. This capability enables
implementation of both Internet and "thick client" information retrieval
and object processing applications.
- VISUAL PARSER. The visual parser feature of ViewDirect for Networks
provides a powerful and easy-to-use graphical interface through which
customers visually define document identifiers and indexing information,
prescribe access privileges and validate the proper extraction of these
parameters from the data stream. Using these visually-defined parameters,
the Mobius software parses defined fields within the data stream to
extract and populate the ViewDirect for Networks' databases. The visual
parser facility reduces the expertise level needed to set up Mobius
software.
- LPFD VIEWING. Many organizations create and store large volumes of static
documents using printer definition languages. This laser printer
formatted data ("LPFD") contains variable data as well as all the
resources (shading, grids, logos, signatures, etc.) needed to print or
view a stylized document. The Company's software, in addition to
supporting traditional data streams, supports IBM AFP and Xerox
DJDE/Metacode LPFD formats. A Total Resource Management facility manages
the retention and caching of these resource objects throughout the
network to minimize network traffic and maximize the speed of rendering
complex data streams.
- FUNCTIONAL ISOLATION. The multi-dataset architecture of the Mobius
software makes it possible to isolate specific functions, such as
retrieval, viewing and data migration, thereby eliminating unnecessary
contention for computing resources and preventing performance
degradation, even during peak usage periods.
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PRODUCTS
The following chart describes the Company's primary products and highlights
the key features of each:
<TABLE>
<CAPTION>
====================================================================================================
YEAR OF SUPPORTED
FIRST CURRENT OPERATING
PRODUCT SALE RELEASE SYSTEMS DESCRIPTION
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDW SERVER PRODUCTS
ViewDirect for MVS 1983 6.1 OS/390 Information archiver and
ViewDirect for Networks 1995 3.1 Windows, OS/2, server
OS/400, UNIX, - Integrates information
Netware created in various formats
- Direct access to disk, tape
and optical disk
- Flexible indexing
- ----------------------------------------------------------------------------------------------------
EDW CLIENT PRODUCTS
DocumentDirect 1992 2.1 Windows, OS/2 Viewing client
- Common user interface to
diverse documents
- Easy navigation of the
archive
- Multiple viewing options
- Exports data to other
applications
DocumentDirect for the 1997 1.1 Windows Document viewing over
Internet Internet/intranets
- Access to archive via
Internet browsers
- Accommodates "thin client"
- Self-service access for
customers
DocumentDirect Application 1997 1.1 Windows, OS/2 Vertical industry application
Suite templates for document
viewing
- Options for banking and
brokerage
- Customizable user interface
- Integrates with external
applications
DocuAnalyzer(1) 1996 2.1 Windows, OS/2 Data mining client
- Loads text and character
data into tables for
analysis
- Drill down and graphical
analysis
- ----------------------------------------------------------------------------------------------------
OTHER PRODUCTS
INFOPAC-TapeSaver 1990 2.1 OS/390 Tape dataset consolidation
- Conserves tape resources
- Improves efficiency of
robotic tape devices
- Forecasts tape storage
requirements
INFOPAC-ABS 1990 1.4 OS/390 Automated balancing
- Ensures data integrity
across applications
- Confirms accuracy of Year
2000 conversions
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) This product is owned by a third party and licensed to Mobius for
resale to customers pursuant to a reseller agreement. The year of first
sale is the date Mobius first licensed the product to a customer.
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<PAGE> 36
ELECTRONIC DOCUMENT WAREHOUSE
The software components of the EDW are shown in the figure below. The EDW
products consist of ViewDirect, the archiving engine and server; DocumentDirect,
the document viewing client; DocumentDirect for the Internet, the viewing
application which makes information available over the Internet and corporate
intranets; and DocuAnalyzer, the data mining client. The Company recently
introduced DocumentDirect Application Suite, a framework for vertical industry
document-centric applications.
[INSERT DIAGRAM]
[The diagram portrays a network configuration of the Company's EDW
products. The diagram shows icons representing the Company's ViewDirect for MVS
and ViewDirect for Networks server products connecting through a network with
the Company's DocumentDirect, DocumentDirect Application Suite, DocuAnalyzer and
DocumentDirect for the Internet client products. The diagram shows icons
representing users' Internet browsers connecting to DocumentDirect for the
Internet through an Internet or corporate intranet link. Icons representing
tape, optical disk and DASD storage media are shown residing on the server
products.]
SERVER PRODUCTS
VIEWDIRECT. ViewDirect is the archiving engine and server of the EDW. It
supports both host-based and client/server implementations, scaling from the
desktop to the department to the largest enterprise OS/390 server. It stores and
presents virtually any record of business transactions, including
computer-generated reports; print-formatted documents, such as customer
statements; scanned images; transparent or undefined transactions created in
other environments; and associated documents, created for display devices such
as generic Internet browsers. ViewDirect provides direct on-line access to
information stored on disk, tape or optical devices. It supports multi-user,
simultaneous random access to information stored on tape or optical devices
without recall to on-line magnetic disk. Flexible indexing facilitates efficient
information retrieval and enables the grouping of disparate documents.
ViewDirect automatically indexes, stores and manages the migration and
archiving of long-term retention documents. It is designed to assure data
integrity and control, providing facilities for backup, off-site storage and
archive duplexing. As a result, ViewDirect maintains the integrity of documents
and transactions as originals while significantly reducing the costs and
enhancing the service levels previously associated with older technologies such
as microfiche.
ViewDirect supports a wide range of operating environments: ViewDirect for
MVS runs on the largest OS/390 servers and ViewDirect for Networks supports
client/server implementations in a variety of distributed environments.
CLIENT PRODUCTS
DOCUMENTDIRECT. DocumentDirect, a document viewing client of the EDW, is a
Windows-based full-function viewer. It provides a common dashboard through which
the user is able to access any type or number of documents stored in ViewDirect
archives on servers distributed across a heterogeneous computing complex.
DocumentDirect provides flexibility for the most demanding user in locating and
displaying documents. DocumentDirect has the ability to simultaneously display
documents of diverse formats and facilitates the annotation and reformatting of
document elements for viewing. DocumentDirect lets the user export documents in
whole or in part to other desktop applications such as spreadsheets, analytical
tools and word processors.
DOCUMENTDIRECT FOR THE INTERNET. DocumentDirect for the Internet is
designed for secure, self-service access to documents over the Internet and
corporate intranets. It is a common gateway interface ("CGI") application that
runs under Windows NT and manages all communications
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between the EDW and the Internet/intranet server. DocumentDirect for the
Internet makes all the documents in EDW archives available for viewing via
Internet browsers. It allows users to leverage installed Internet infrastructure
and reduce the costs and administrative overhead associated with software
distribution of "thick clients".
DOCUMENTDIRECT APPLICATION SUITE. DocumentDirect Application Suite is a
document viewing client designed for users with well defined requirements for
document access. It comprises a framework for the development of application
templates tailored for vertical industry requirements. To date, the Company has
introduced versions of DocumentDirect Application Suite for the banking and
brokerage industries. The DocumentDirect Application Suite user can specify
Boolean logic operators to filter document selection lists, speeding access to
desired documents.
DOCUANALYZER. DocuAnalyzer is a Windows-based data-mining client that
makes the data in the EDW archive available for analysis without re-keying. It
simplifies the conversion of character data into a table format to facilitate
"drill-down", analysis, graphing and creation of new reports. Mobius licenses
DocuAnalyzer from a third party for resale.
OTHER PRODUCTS
Mobius also provides systems software products designed to optimize
resource utilization in the data center and to ensure the accuracy and integrity
of data across applications.
INFOPAC-TAPESAVER. INFOPAC-TapeSaver is an OS/390-based software product
that is designed to optimize the utilization of tape and tape devices. Following
user-defined rules, the product automatically consolidates datasets, eliminating
wasted space and freeing up tape cartridges. INFOPAC-TapeSaver improves the
efficiency of robotic tape devices by ensuring that every cartridge is filled to
its useful capacity and that high-activity datasets are available for automated
mounting.
INFOPAC-TapeSaver's forecasting facility allows data centers to proactively
manage their tape storage environment. For example, the data center can make
informed decisions on migrating datasets and acquiring new hardware.
INFOPAC-ABS. INFOPAC-ABS (Automated Balancing System) is an OS/390 data
integrity and quality control software tool. Data in computer systems,
databases, and end user applications originates from many sources. Due to the
large number of input sources, computer systems can and do become
unsynchronized. INFOPAC-ABS provides cross-application balancing of numerical
data resident in databases, files and reports to detect and assist in the
correction of out-of-balance situations. It eliminates slow and costly manual
balancing, speeding procedures such as item reconciliation and control-total
balancing. INFOPAC-ABS is used in Year 2000 conversions to audit applications,
verify the accuracy of output and load databases that include dates beyond 2000.
PRODUCT AND MAINTENANCE PRICING
The Company's products are licensed under agreements requiring the payment
of fees. The amount of the license fee is based on various factors, including
the number of concurrent users, the functionality of the system, the number of
servers on which the product is installed, and the scope of the business usage.
Typically, the Company's server products are licensed for fifteen years and
client products are licensed for five years. The Company also provides financing
to some of its customers for the purchase of its software licenses; the term of
these financing agreements is typically three years for server products and five
years for client products.
The Company provides product updates and enhancements and customer support
services under annual maintenance agreements. Maintenance fees are calculated as
a percentage of license
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fees and are collected annually in advance. During fiscal 1997, more than 95% of
EDW licensees were covered under maintenance agreements.
During fiscal 1997 and the first six months of fiscal 1998, the average
amount of revenue recognized by the Company for domestic licenses to new
customers was approximately $168,000.
SALES AND MARKETING
The Company sells and markets its products primarily through a direct sales
force based in Chicago and additional sales offices in the Atlanta, Boston,
Dallas, Houston, Lawrenceville (New Jersey), Los Angeles, Madison, Minneapolis,
Rye (New York), St. Louis, Washington, D.C., London, Milan, Paris, Dusseldorf,
Melbourne and Stockholm metropolitan areas. The Company's sales and marketing
organization consisted of 156 employees as of December 31, 1997, of which 84
were direct sales representatives.
A portion of Mobius' direct sales force focuses on sales of products to
large organizations for enterprise-wide use. To support its direct sales
efforts, the Company conducts a number of marketing programs, which include
public relations, seminars, trade shows, product education and user group
conferences, speaking engagements and white papers. Mobius' telesales staff
markets the Company's products to smaller organizations and to departments of
large organizations. Mobius has undertaken a vertical marketing strategy
designed to target large customers in key vertical markets, such as financial
services and telecommunications companies, by emphasizing certain
industry-specific benefits afforded by the Company's products. In addition, the
Company has entered into distribution agreements with distributors in Canada,
Australia, Japan, Europe, South Africa and Latin America.
The Company's direct sales team includes both sales personnel and systems
engineers who conduct multiple presentations and demonstrations of the Company's
products at customer sites as part of the direct sales effort. Systems engineers
provide comprehensive on-site training and pre-sale customer support services.
The Company's sales cycles generally range from three to nine months, depending
on the product and the market segment.
The Company has strategic relationships with a number of organizations that
it believes enhance its worldwide sales, marketing and support activities. These
relationships provide marketing and sales opportunities for the Company's direct
sales team, expand the distribution of its products and broaden its product
offerings through product bundling. The Company is actively seeking strategic
partners with products that are complementary and provide additional
functionality to the Company's products in targeted industries to further
enhance the Company's vertical marketing program.
Mobius began directly selling its products in Europe in 1993, and has since
opened international sales offices in five European countries and one office in
Australia. In addition, the Company has direct sales teams focusing on key areas
of Canada, Mexico, South America, Europe, Africa and Asia Pacific. The Company
believes that an important part of its overall growth strategy is to expand its
foreign operations and enter into joint ventures and other strategic alliances
to provide a worldwide sales and marketing presence for its products.
At the annual Mobius users group conference, Mobius meets with customers to
determine their needs, ascertain their direction and mold the Company's products
to fit the marketplace. At the conference, customers have the opportunity to
work directly with Mobius personnel to explore new product capabilities.
CUSTOMER SATISFACTION
Mobius provides twenty-four hour, seven-day-a-week support services for all
of the Company's products through its United States and European support centers
(based in New York and the United Kingdom, respectively). Complex diagnostics
and product correction are provided exclu-
37
<PAGE> 39
sively through the United States support center. First-line support services for
customers outside North America and the United Kingdom are typically provided by
the Company's subsidiaries. In addition, Mobius has trained and certified five
professional service organizations -- independent companies located across
Europe and North America -- to provide customers with post-sale assistance with
Mobius' products and on-site implementation services, if necessary. As of
December 31, 1997, the Company had 32 employees in its customer satisfaction
department.
RESEARCH AND DEVELOPMENT
The Company intends to continue to make substantial investments in research
and development to maintain and enhance its product lines. The Company believes
that its future success will, in large part, depend on its ability to maintain
and improve current products and develop new products that meet the emerging
needs of the marketplace. Mobius research and development focuses on designing
and developing reliable and easy-to-use products. As of December 31, 1997, the
Company's research and development organization consisted of 58 full-time
employees.
To capitalize on market opportunities and to be responsive to customer
demands, the Mobius product development cycle targets shipment of new products
and enhancements to the marketplace within approximately six months from the
date resources are allocated to a project. Larger projects are typically
disaggregated to provide specific deliverables within a six-month maximum
period. The Company divides its development team into groups delineated by
product functionality and employs advanced Rapid Application Development ("RAD")
tools to facilitate short development cycles for functional enhancements while
maintaining product reliability.
COMPETITION
The market for the Company's products is intensely competitive, subject to
rapid change and significantly affected by new product introductions and other
market activities of industry participants. The Company's products are targeted
at a broad range of hardware and software environments from PCs to mid-range to
mainframe servers. The Company currently encounters direct competition from a
number of public and private companies including Computer Associates, Computron,
FileNet, IBM, Kodak, New Dimension and RSD. Some of these competitors have
longer operating histories, significantly greater financial, technical,
marketing and other resources, significantly greater name recognition and a
larger installed base of customers than the Company. In the future, it is
possible that new competitors or alliances among competitors may emerge and
enter into the Company's market. See "Risk Factors -- Competition".
The Company believes that the principal competitive factors affecting its
market include product features such as scalability, breadth of supported
operating systems and document formats, ease of use, product reputation,
quality, performance, price, sales and marketing effort and customer service.
Although the Company believes that it currently competes favorably with respect
to such factors, there can be no assurance that the Company can maintain its
competitive position against current and potential competitors, especially those
with greater financial, marketing, service, support, technical and other
resources than the Company.
INTELLECTUAL PROPERTY, PROPRIETARY RIGHTS AND LICENSES
The Company regards certain features of its internal operations, software
and documentation as confidential and proprietary, and relies on a combination
of confidentiality agreements, contractual rights, copyright, trademark and
trade secret laws and other measures to protect its intellectual property. The
Company has no patents, and existing trade secret and copyright laws afford only
limited protection. Despite the Company's efforts to protect its proprietary
rights, unauthorized parties may attempt to copy aspects of the Company's
products or to obtain and use information that the Company regards as
proprietary. The Company believes that, because of the rapid rate of
technological change in the computer software industry, trade secret and
copyright protection are
38
<PAGE> 40
less significant than factors such as the knowledge, ability and experience of
the Company's employees, frequent product enhancements and the timeliness and
quality of support services.
Typically, the Company's server products are licensed for fifteen years and
its client products are licensed for five years. The Company generally licenses
its products solely for the customer's internal operations and only on
designated computers. In certain circumstances, the Company makes available
enterprise-wide licenses.
In addition, the Company relies on certain software and other information
that it licenses from third parties, including software that is used in the
Company's products to perform certain functions. See Risk Factors -- "Dependence
on Licensed Technology".
The Company's products are generally provided to customers in object code
format only. However, the Company generally enters into arrangements with its
customers pursuant to which the Company's source code will be released to the
customer upon the occurrence of certain events, such as the bankruptcy or
insolvency of the Company, or certain material breaches by the Company of the
license agreement. In the event of any release of the source code pursuant to
these arrangements, the customer's license is generally limited to use of the
source code to maintain, support and configure the Company's software products.
The provision of source code may increase the likelihood of misappropriation or
other misuse of the Company's intellectual property. See "Risk
Factors -- Protection of Intellectual Property".
EMPLOYEES
As of December 31, 1997, Mobius employed 282 people. None of the Company's
employees is represented by a labor union or is subject to a collective
bargaining agreement. The Company has experienced no work stoppages and believes
its relationship with its employees is good. The Company believes that its
future success will depend to a significant extent upon its ability to attract,
train and retain highly skilled technical, management, sales and marketing
personnel. There can be no assurance that the Company will be successful in
attracting or retaining such personnel, and the failure to attract or retain
such personnel could have a material adverse effect on the Company's business,
operating results and financial condition.
FACILITIES
The Company is headquartered in Rye, New York, where it leases an aggregate
of approximately 43,700 square feet of space. Administrative, marketing, product
development and customer support and service operations are located in the Rye
space, and sales operations are based in Chicago. The Company leases an
aggregate of approximately 34,328 additional square feet of space in the
Atlanta, Boston, Chicago, Dallas, Houston, Lawrenceville (New Jersey), Los
Angeles, Madison, Minneapolis, St. Louis, Washington, D.C., London, Paris,
Milan, Dusseldorf, Melbourne and Stockholm metropolitan areas. The Company
believes that these facilities are adequate to meet its current needs and that
suitable additional space will be available as needed to accommodate physical
expansions of corporate operations and for additional sales and service field
offices.
LEGAL PROCEEDINGS
From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. The Company is
not a party to any legal proceedings, the adverse outcome of which, individually
or in the aggregate, would have a material adverse effect on the Company's
business, operating results and financial condition.
39
<PAGE> 41
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- --- ---------------------------------------------------
<S> <C> <C>
Mitchell Gross..................... 48 Chairman of the Board of Directors, Chief Executive
Officer and President
Joseph J. Albracht................. 48 Executive Vice President, Chief Operating Officer,
Secretary and Director
E. Kevin Dahill.................... 50 Vice President, Finance, Chief Financial Officer
and Treasurer
Anne Ashley........................ 55 Vice President, Customer Satisfaction
Scott Gellis....................... 42 Vice President, Technical Services
Karry Kleeman...................... 35 Vice President, Sales
Robert Lawrence.................... 45 Vice President, Product Engineering
Mario Pelleschi.................... 40 Vice President, Sales (Europe, Middle East and
Africa)
Abby Pinard........................ 55 Vice President, Corporate Marketing
Joseph Tinnerello.................. 41 Vice President, Business Development
Peter J. Barris(1)(2).............. 46 Director
Edward F. Glassmeyer(1)(2)......... 56 Director
Kenneth P. Kopelman(1)............. 47 Director
</TABLE>
- ---------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
MITCHELL GROSS co-founded Mobius and has served as President and a Director
since 1981 and as Chairman of the Board and Chief Executive Officer since 1996.
Prior to co-founding the Company, Mr. Gross was a Senior Consultant at American
Management Systems, Inc. ("AMS"), a consulting and software products
organization, from 1978 to 1981. Mr. Gross was an officer in the U.S. Navy,
serving on nuclear submarines, from 1971 to 1976. He holds an M.B.A. in Finance
from The Wharton School, University of Pennsylvania and a B.S. in Mechanical
Engineering from Columbia University School of Engineering and Applied Science.
JOSEPH J. ALBRACHT co-founded Mobius and has served as Executive Vice
President, Secretary and a Director since 1981, Treasurer from 1981 to 1996 and
Chief Operating Officer since 1996. Prior to co-founding the Company, Mr.
Albracht was a principal at AMS from 1978 to 1981, and held various positions at
Warner-Lambert Co. and RCA Corporation from 1973 to 1977. He holds an M.B.A. and
a B.S. in Operations Research from Pennsylvania State University.
E. KEVIN DAHILL joined Mobius in December, 1996 as Vice President, Finance,
Chief Financial Officer and Treasurer. From 1991 to 1996, Mr. Dahill was
employed by Electronic Information Services, Inc. ("EIS"), a publicly-held
corporation engaged in the supply of systems and software in the outbound call
center market where he served in various capacities including as President from
1995 to 1996, Chief Operating Officer from 1994 to 1996 and Senior Vice
President, Finance and Chief Financial Officer from 1991 to 1994. Mr. Dahill
also served as a member of the EIS Board of Directors from 1992 to 1996. He
holds an M.S. in Management from the Massachusetts Institute
40
<PAGE> 42
of Technology, Sloan School of Management, an M.S. in Mechanical Engineering
from the Georgia Institute of Technology and a B.S. in Mechanical Engineering
from the University of Notre Dame.
ANNE ASHLEY joined Mobius in 1995 as Director of Customer Satisfaction and
has served as Vice President, Customer Satisfaction since August 1997. Prior to
joining the Company, Ms. Ashley worked from 1987 to 1995 for Syncsort, Inc.
where she was responsible for support and service and pre-sales technical
support for MVS products. Ms. Ashley holds a B.S. in Electrical Engineering from
the University of Michigan.
SCOTT GELLIS joined Mobius in 1994 as Director of Technical Services and
has served as Vice President, Technical Services since January, 1998. From 1992
to 1994, Mr. Gellis was Vice President of Data Switch Corporation. During 1992,
Mr. Gellis was employed by Microcom, Inc. as Director of Research and
Development. From 1988 to 1992, he was Vice President, Product Development for
Coordination Technology, Inc. Mr. Gellis holds a B.S. in Computer Sciences from
Union College.
KARRY KLEEMAN joined Mobius in 1990 and has served as Vice President, Sales
since 1997. From 1995 to 1997, he served as the Company's National Sales Manager
and from 1992 to 1995 as a Regional Manager. From 1988 to 1990, Mr. Kleeman was
a sales representative for MUST Software Inc., a subsidiary of French based
Thomson-CSF. Mr. Kleeman holds a B.A. in Marketing from Elmhurst College.
ROBERT LAWRENCE joined Mobius in 1985 and has served as Vice President,
Product Engineering since 1992. Prior to joining the Company, he was a senior
developer with Time Sharing Resources, Inc. developing custom decision support
applications for Fortune 500 clients from 1977 to 1983. In 1983 Mr. Lawrence
joined On-Line Software International, Inc. as a consultant and later as a
software developer. Mr. Lawrence graduated from the University of Massachusetts
in 1974 where he earned the Hasbrook award given each year to the outstanding
physics major.
MARIO PELLESCHI joined Mobius in 1998 as Vice President, Sales (Europe,
Middle East and Africa). Prior to joining the Company, Mr. Pelleschi was
employed by Computer Associates from 1981 to 1997, initially as a Branch
Manager, and as Managing Director of various subsidiaries as follows:
Switzerland, 1981-1985; Brazil, 1985-1987; Germany, 1987-1995; and France,
1995-1997. Mr. Pelleschi holds a Swiss Federal degree in Electronic Engineering.
ABBY PINARD joined Mobius in 1996 as Vice President, Corporate Marketing.
From 1987 to 1996, she served as Vice President of Marketing for Thomson
Software Products, a subsidiary of French-based Thomson-CSF where she was
responsible for corporate and product marketing of a multi-platform suite of
decision support, application development and data warehousing tools. Ms. Pinard
holds a B.S. degree, cum laude, in Mathematics from Brooklyn College.
JOSEPH TINNERELLO joined Mobius in 1990 and has served as Vice President,
Business Development since 1998 and as Vice President, Sales from 1995 to 1997.
Following a personal leave of absence, Mr. Tinnerello left the Company from
October 1, 1997 through January 14, 1998. From 1988 to 1989, he was a Regional
Manager with Legent Software, prior to its acquisition by Computer Associates.
PETER J. BARRIS has served as a director of the Company since 1997. Since
1992, Mr. Barris has served as a partner of New Enterprise Associates, a venture
capital firm, and as a General Partner since 1993. Mr. Barris serves on the
boards of a number of privately-held information technology companies. He holds
a B.S degree in Electrical Engineering from Northwestern University and an
M.B.A. from the Tuck School at Dartmouth College.
41
<PAGE> 43
EDWARD F. GLASSMEYER has served as a director of the Company since 1997.
Since 1978, Mr. Glassmeyer has served as a general partner of Oak Investment
Partners, a venture capital firm, that he co-founded in that year. Mr.
Glassmeyer is a director of Aavid Thermal Technologies, Inc., and is a director
of several privately-held companies in which one of the Oak investment
partnerships is an investor. Mr. Glassmeyer holds a B.A. from Princeton
University and an M.B.A. from the Tuck School at Dartmouth College.
KENNETH P. KOPELMAN, a member of the New York City law firm of Kramer,
Levin, Naftalis & Frankel ("Kramer Levin") since 1984, has served as a Director
of the Company since 1997. He also serves as a Director of Liz Claiborne, Inc.,
a publicly-held apparel company. He attended Cornell University, The London
School of Economics and received his J.D. from the Columbia University School of
Law, and has practiced corporate and securities law for over 20 years. Kramer
Levin has served as legal counsel to the Company since its founding in 1981.
The Company's Board of Directors is divided into three classes. Messrs.
Glassmeyer and Kopelman serve in the class whose term expires in 1999; Messrs.
Albracht and Barris serve in the class whose term expires in 2000; and Mr. Gross
serves in the class whose term expires in 2001. Upon the expiration of the term
of a class of directors, directors within such class will be elected for a
three-year term at the annual meeting of stockholders in the year in which such
term expires. Directors will hold office until the expiration of their term and
until that director's successor has been elected and qualified.
Executive officers of the Company are elected by the Board of Directors on
an annual basis and serve until the next annual meeting of the Board of
Directors and until their successors have been duly elected and qualified. There
are no family relationships among any of the executive officers or directors of
the Company.
BOARD COMMITTEES
The Company's Board of Directors has recently appointed an Audit Committee
and a Compensation Committee. The Audit Committee is responsible for nominating
the Company's independent accountants for approval by the Board of Directors;
reviewing the scope, results and costs of the audit with the Company's
independent accountants; and reviewing the financial statements and accounting
and control practices of the Company. The Compensation Committee is responsible
for recommending compensation and benefits for the executive officers of the
Company to the Board of Directors and for administering the Company's 1996 Plan
and the Company's 1998 Executive Compensation Plan. The entire Board of
Directors fulfilled the functions of these committees during fiscal 1997.
DIRECTOR COMPENSATION
The Company reimburses non-employee directors for expenses incurred in
attending Board meetings. Kramer Levin is paid Mr. Kopelman's standard rates for
all time Mr. Kopelman devotes to the preparation for and attendance at Board
Meetings. No additional compensation is paid to directors for attending Board or
committee meetings. In addition, pursuant to the Directors' Plan each of Messrs.
Barris, Glassmeyer and Kopelman have been granted immediately exercisable
options to purchase 10,000 shares of Common Stock at an exercise price of $11.00
per share. See "-- Benefit Plans".
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid for services rendered to the Company in all capacities during the fiscal
year ended June 30, 1997 by (i) the Company's Chief Executive Officer and (ii)
the five most highly compensated other executive
42
<PAGE> 44
officers who received annual compensation in fiscal 1997 in excess of $100,000
(collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
-------------------------------------
OTHER ANNUAL LONG TERM
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION(2) OTHER(3) UNDERLYING OPTIONS
- ----------------------------- -------- -------- --------------- -------- ------------------
<S> <C> <C> <C> <C> <C>
Mitchell Gross............... $200,000 $150,151 -- $ 62,349 --
Chairman of the Board,
Chief Executive Officer &
President
Joseph J. Albracht........... 200,000 150,366 -- 46,134 --
Executive Vice President,
Chief Operating Officer &
Secretary
E. Kevin Dahill(4)........... 87,579 25,397 -- -- 270,000
Vice President, Finance,
Chief Financial Officer &
Treasurer
Karry Kleeman................ 288,046 10,324 232,782 -- 170,000
Vice President, Sales
Robert Lawrence.............. 156,910 32,509 -- -- 360,000
Vice President, Product
Engineering
Joseph Tinnerello............ 288,836 75,366 145,180 -- 80,000(5)
Vice President, Business
Development
</TABLE>
- ---------------
(1) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits
has been omitted in those instances where the aggregate amount of such
perquisites and other personal benefits constituted less than the lesser of
$50,000 or 10% of the total of annual salary and bonuses for the Named
Executive Officer for such year.
(2) Consists of sales commissions.
(3) Includes premiums on insurance added to compensation. Also includes the
grossed up amount to cover taxes.
(4) Mr. Dahill joined Mobius in December, 1996 and the amounts presented are for
the seven month period ended June 30, 1997.
(5) Mr. Tinnerello was granted options to purchase 720,000 shares during fiscal
1997. Options to purchase 640,000 of these shares lapsed when Mr.
Tinnerello's employment with the Company terminated in October, 1997. Mr.
Tinnerello rejoined the Company in January, 1998. See "-- Agreements with
Employees".
43
<PAGE> 45
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to options granted
during the fiscal year ended June 30, 1997 by the Company to the following the
Named Executive Officers.
<TABLE>
<CAPTION>
PERCENT OF POTENTIAL REALIZABLE
TOTAL VALUE AT ASSUMED ANNUAL
NUMBER OF OPTIONS RATES OF STOCK PRICE
SHARES GRANTED TO APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES EXERCISE TERM(2)
OPTIONS IN FISCAL PRICE -----------------------
NAME GRANTED 1997(1) PER SHARE EXPIRATION DATE 5% 10%
- ------------------------ --------- ---------- --------- ---------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
E. Kevin Dahill......... 270,000 13.2% $1.25 December 2, 2006 $549,752 $ 875,388
Robert Lawrence......... 360,000 17.6 1.25 November 6, 2006 733,003 1,167,184
Karry Kleeman(3)........ 170,000 8.3 1.25 November 6, 2006 346,140 551,170
Joseph
Tinnerello(3)(4)...... 80,000 3.9 1.25 November 6, 2006 162,889 259,374
</TABLE>
- ---------------
(1) In fiscal 1997, the Company granted employees options to purchase an
aggregate of 2,045,500 shares of Common Stock.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. The 5% and
10% assumed annual rates of compounded stock price appreciation are mandated
by rules of the Commission and do not represent the Company's estimate or
projection of the Company's future Common Stock prices. These amounts
represent certain assumed rates of appreciation in the value of the
Company's Common Stock from the fair value on the date of the grant. Actual
gains, if any, will depend on stock market conditions. The amounts reflected
in the table may not necessarily be achieved.
(3) Subsequent to June 30, 1997, the Company granted options to purchase shares
of Common Stock to the following Named Executive Officers: Mr. Kleeman,
170,000 shares at an exercise price of $5.28 per share; and Mr. Tinnerello,
100,000 shares at an exercise price of $6.94 per share and 180,000 shares at
an exercise price of $9.86 per share.
(4) Mr. Tinnerello was granted options to purchase 720,000 shares during fiscal
1997 (35% of total options granted to employees in fiscal 1997). Options to
purchase 640,000 shares lapsed when Mr. Tinnerello's employment with the
Company terminated in October, 1997. Mr. Tinnerello rejoined the Company in
January, 1998. See "-- Agreements with Employees".
44
<PAGE> 46
YEAR-END OPTION TABLE
The following table sets forth certain information concerning the number
and value of unexercised stock options held by each of the Named Executive
Officers as of June 30, 1997. No stock options were exercisable during fiscal
1997.
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISABLE IN-THE-MONEY OPTIONS
NAME OPTIONS AT JUNE 30, 1997(1) AT JUNE 30, 1997(2)
----------------------------------------- --------------------------- --------------------
<S> <C> <C>
E. Kevin Dahill.......................... 270,000 $ 861,300
Robert Lawrence.......................... 360,000 1,148,400
Karry Kleeman............................ 170,000 542,300
Joseph Tinnerello(3)(4).................. 80,000 255,500
</TABLE>
- ---------------
(1) Does not include options to purchase Common Stock granted to Named Executive
Officers after June 30, 1997.
(2) There was no public trading market for the Common Stock as of June 30, 1997.
Accordingly, as permitted by the rules of the Commission, these values have
been calculated on the basis of the fair market value of the Common Stock as
of June 30, 1997 ($4.44), as determined by the Company, less the applicable
exercise price.
(3) Mr. Tinnerello was granted options to purchase 720,000 shares during fiscal
1997. Options to purchase 640,000 shares lapsed when Mr. Tinnerello's
employment with the Company terminated in October, 1997. Mr. Tinnerello
rejoined the Company in January, 1998. See "-- Agreements with Employees".
(4) On December 30, 1997, Mr. Tinnerello exercised options to purchase 80,000
shares at an exercise price of $1.25 per share. The aggregate value realized
upon such exercise, calculated on the basis of the fair value of the Common
Stock on the date of exercise ($9.44), was $655,200.
AGREEMENTS WITH EMPLOYEES
In February, 1998, the Company entered into employment agreements with each
of Messrs. Gross and Albracht providing for the employment of Mr. Gross as
Chairman of the Board, Chief Executive Officer and President of the Company and
Mr. Albracht as Executive Vice President and Chief Operating Officer of the
Company. Each employment agreement provides for a three-year term ending on the
third anniversary of the consummation of the offering (the "Termination Date").
The agreements each provide for an annual base salary of not less than $200,000
as well as an annual bonus based upon the performance of the Company in an
amount determined by the Board of Directors of the Company or an appropriate
committee thereof in its respective sole discretion. Each agreement also
prohibits the executive from using the confidential information of the Company
for a period of three years following the termination of his employment (two
years if he is terminated other than for cause (as defined therein)) and
contains a non-competition covenant pursuant to which the executive is
prohibited from competing with the Company during his employment by the Company
and for two years thereafter (one year in the event the executive is terminated
other than for cause). The agreements further provide that in the event that
employment is terminated by the Company without cause (as defined therein) or by
the executive for good reason (as defined therein), the executive is entitled to
receive (i) his accrued but unpaid base salary and bonus through the Termination
Date; (ii) coverages substantially identical to those provided immediately prior
to the termination for twelve months following the Termination Date; and (iii)
an aggregate amount, payable in equal semi-monthly installments over a one-year
period following the Termination Date, equal to the aggregate of what his base
salary would have been for said period plus his maximum bonus for such period,
but not less than his highest annual bonus during the preceding five years. In
the event of the death or disability of the executive, the Company will continue
to make base salary payments to the executive or his estate for twelve months
following such death or disability.
45
<PAGE> 47
Following a personal leave, on September 30, 1997, the Company and Mr.
Joseph Tinnerello, presently the Company's Vice President, Business Development,
entered into a severance agreement pursuant to which Mr. Tinnerello left the
employment of the Company on October 1, 1997 and agreed to certain
non-competition and non-solicitation restrictions in consideration for (i) the
acceleration of 80,000 options to purchase shares of Common Stock of the Company
previously granted to him and (ii) the grant of 100,000 new options to purchase
shares of Common Stock at an exercise price equal to the fair market value of
the shares at the time of the grant. As a result of such termination and
pursuant to the terms of the 1996 Plan, Mr. Tinnerello forfeited 640,000 options
to purchase shares of Common Stock that were previously granted to him in
November, 1996. On December 26, 1997, Mr. Tinnerello agreed to return to the
Company effective January 15, 1998. On December 28, 1997, the Company agreed to
advance $160,000 to Mr. Tinnerello against certain future commissions. Such
monies (net of applicable taxes) were used by Mr. Tinnerello to exercise options
to purchase 80,000 shares of Common Stock. On January 15, 1998 the Company
granted Mr. Tinnerello options to purchase 180,000 shares of Common Stock in
accordance with, and on terms similar to, its standard hiring practices.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee of the Company's Board of
Directors are Messrs. Barris and Glassmeyer. There are no compensation committee
interlocks which are required to be disclosed by the rules promulgated by the
Commission under the Securities Act. No member of the Compensation Committee of
the Company serves as a member of the board of directors or compensation
committee of any other entity that has one or more executive officers serving as
a member of the Company's Board of Directors or Compensation Committee.
BENEFIT PLANS
401(K) PLAN
In fiscal 1995, the Company established a 401(k) retirement savings plan
(the "401(k) Plan"). The 401(k) Plan provides that each participant may
contribute from 1% to 20% of his or her pre-tax salary (up to a statutorily
prescribed annual limit, $10,000 for 1998) to the 401(k) Plan, although the
percentage elected by certain highly compensated participants may be required to
be lower. All amounts contributed to the 401(k) Plan by employee participants
and earnings on these contributions are fully vested at all times. Employee
participants may elect to invest their contributions in various established
funds, which include fixed income, growth and equity funds. The Company, at the
discretion of the Board of Directors, may match employee contributions. No
matching contributions were made in 1995, 1996 or 1997.
1996 STOCK INCENTIVE PLAN
The Board of Directors and stockholders of the Company have approved and
adopted the 1996 Plan, the terms of which are summarized below.
General. The 1996 Plan provides for the issuance of a total of up to
3,480,000 authorized and unissued shares of Common Stock, treasury shares and/or
shares acquired by the Company for purposes of the 1996 Plan. In addition, as of
any January 1 beginning with January 1, 1999, the Board of Directors, in its
discretion, may increase such share limit by a number that is no more than 3% of
the total number of shares of Common Stock issued and outstanding as of the date
of such increase.
Awards under the 1996 Plan may be made in the form of (i) incentive stock
options, (ii) nonqualified stock options (incentive and nonqualified stock
options are collectively referred to as "options"), (iii) stock appreciation
rights, (iv) restricted stock, (v) restricted stock units, and (vi) other types
of stock-based awards. Awards may be made to such directors, officers and key
employees of the Company and its subsidiaries (including prospective employees
who become
46
<PAGE> 48
employees), and to such consultants to the Company and its subsidiaries, as the
Compensation Committee shall in its discretion select (collectively, "key
persons").
Administration. The 1996 Plan is administered by the Compensation
Committee. The Compensation Committee is authorized to construe, interpret and
implement the provisions of the 1996 Plan, to select the persons to whom awards
will be granted, to determine the terms and provisions of such awards and to
amend outstanding awards. The determinations of the Compensation Committee are
made in its sole discretion and are binding and conclusive.
Grants under the 1996 Plan. Unless the Compensation Committee determines
otherwise, an option grant will become exercisable as to 20% of the shares
subject thereto on the first anniversary of the date of grant and the remainder
will vest ratably over the subsequent 16 quarters. The purchase price per share
payable upon the exercise of an option will be established by the Compensation
Committee.
As of February 28, 1998 the Company had granted 2,463,500 options under the
1996 Plan. These grants were made to 141 employees of the Company (representing
49% of its total employees) at exercise prices equal to the fair market value of
the Company's Common Stock at the time of each such grant, including options to
purchase 270,000, 340,000, 360,000, and 360,000 (net of 640,000 shares which
have lapsed) options to the following named Executive Officers, respectively: E.
Kevin Dahill; Karry Kleeman; Robert Lawrence; and Joseph Tinnerello.
Other features of the 1996 Plan. Awards granted under the 1996 Plan and
shares acquired pursuant thereto are subject to a number of rights and
restrictions, including provisions relating to the termination of employment or
service of the grantee.
The Board of Directors may, without stockholder approval, suspend,
discontinue, revise or amend the 1996 Plan at any time, or from time to time;
provided, however, that stockholder approval shall be obtained for any amendment
for which such approval is required by Section 422 of the Internal Revenue Code
of 1986, as amended, (the "Code") or by other provisions of applicable law.
Unless sooner terminated by the Board of Directors, the provisions of the 1996
Plan relating to the grant of incentive stock options shall terminate on the
tenth anniversary of the adoption of the 1996 Plan by the Board of Directors.
All awards made under the 1996 Plan prior to its termination shall remain in
effect until they are satisfied or terminated.
The vesting of awards granted under the 1996 Plan may be accelerated in the
event of a change in control, as defined in the 1996 Plan.
1998 EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors and stockholders of the Company have approved and
adopted the ESPP. The purpose of the ESPP is to provide eligible employees who
wish to acquire Common Stock of the Company the opportunity to purchase shares
from the Company with accumulated payroll deductions. The ESPP is intended to
constitute an "employee stock purchase plan" under section 423 of the Code.
The ESPP provides for the issuance of an aggregate of up to 300,000
authorized and unissued shares of Common Stock, treasury shares and/or shares
acquired by the Company for the purposes of the ESPP.
The ESPP may be administered by the Board of Directors or by a committee of
the Board of Directors comprised of not less than two directors.
Any employee who has been employed at least six months by the Company, or
by any subsidiary which adopts the ESPP with the consent of the Company, and who
is employed more than twenty hours per week for more than five months per
calendar year is eligible to participate in the ESPP.
47
<PAGE> 49
As of February 28, 1998, there were approximately 232 employees eligible to
participate in the ESPP.
In the event of a merger or consolidation of the Company with or into any
other corporation or entity, payroll deductions will cease and all amounts
previously deducted from participants' pay will be refunded immediately prior to
the consummation of the action.
The Board of Directors may suspend, discontinue, revise or amend the ESPP
at any time and in any respect; provided, however, that stockholder approval
will be obtained to the extent necessary to comply with section 423 of the Code
and other applicable law.
1998 EXECUTIVE INCENTIVE PLAN
The Board of Directors and stockholders of the Company have approved and
adopted the Mobius Management Systems, Inc. Executive Incentive Plan (the
"Incentive Plan"). The Incentive Plan is administered by the Compensation
Committee of the Board. Participation in the Incentive Plan is limited to those
executives and key employees who, in the judgment of the Compensation Committee,
are in a position to have a significant impact on the performance of the
Company.
Awards under the Incentive Plan are based upon the extent to which
performance goals established by the Compensation Committee for a designated
performance period are satisfied. Performance goals are related to criteria
which include net earnings, operating income, earnings per share, cash flow,
absolute and/or relative return on equity or assets, pre-tax profits, earning
growth, revenue growth, comparison to peer companies, any combination of the
foregoing or any other criteria as the Compensation Committee deems appropriate.
The Compensation Committee may provide that the bonuses payable to participants
will vary based upon different levels of achievement of the applicable goals.
The Incentive Plan also provides for grants of discretionary bonuses.
1998 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
The Board of Directors and stockholders of the Company have approved and
adopted the Directors' Plan. The purpose of the Directors' Plan is to provide an
incentive to the Company's non-employee directors to serve on the Board of
Directors and to maintain and enhance the Company's long-term performance.
The Directors' Plan provides for the issuance of a total of 250,000
authorized and unissued shares of Common Stock, treasury shares and/or shares
acquired by the Company for purposes of the Directors' Plan.
The Directors' Plan provides for initial grants (i.e. upon adoption of the
Directors' Plan or upon a non-employee director's initial election to the Board
of Directors) of non-qualified stock options to purchase 10,000 shares of Common
Stock. At each annual meeting thereafter, each non-employee director will
receive an option to purchase 10,000 shares. Each option granted under the
Directors' Plan will have a term of ten years and will become exercisable upon
grant. The exercise price of each option granted under the Directors' Plan will
equal the fair market value of a share of Common Stock on the date of grant.
The Board of Directors may amend the Directors' Plan at any time or from
time to time; provided, that no amendment may impair any material rights or
increase any material obligations under any outstanding option without the
non-employee directors' consent. Stockholder approval of any amendment shall be
obtained to the extent necessary to comply with any applicable law, rule or
regulation.
48
<PAGE> 50
CERTAIN TRANSACTIONS
Since 1981 the Company has engaged, and plans to continue to engage, Kramer
Levin to provide legal counsel to the Company. Mr. Kopelman, a member of the
Company's Board of Directors, is also a member of Kramer Levin. The Company
believes that fees charged by Kramer Levin are at rates and on terms no less
favorable to the Company than could have been obtained from unaffiliated third
parties.
Since November, 1996, the Company has granted options to purchase shares of
Common Stock to certain of its employees, including its Executive Officers. The
Company believes that the exercise prices for all such grants have not been less
than the fair market values of the shares at the time of their respective
grants. See "Management".
On May 12, 1997, the Company issued 40,910 shares of Series A Convertible
Preferred Stock for an aggregate consideration of $12,000,130 pursuant to a
Stock Purchase Agreement by and among the Company, Mitchell Gross, Joseph J.
Albracht, Oak Investment Partners VI, Limited Partnership, Oak VI Affiliates
Fund, Limited Partnership, NEA Ventures 1997, NEA President's Fund L.P., New
Enterprise Associates VII L.P., New Venture Partners III L.P. and Glynn Ventures
III, L.P. Mr. Peter Barris, a member of Mobius' Board of Directors, is
affiliated with NEA Ventures 1997, NEA President's Fund L.P. and New Enterprise
Associates VII L.P. and Mr. Edward Glassmeyer, a member of Mobius' Board of
Directors, is affiliated with the aforementioned Oak entities. Simultaneously
therewith and as a condition thereof, the Company repurchased 2,045,500 shares
of Common Stock from Mr. Gross, the Company's Chairman of the Board, Chief
Executive Officer and President and 2,045,500 shares of Common Stock from Mr.
Albracht, the Company's Executive Vice President, Chief Operating Officer,
Secretary and a member of the Board of Directors, for an aggregate purchase
price of $12,000,130.
From time to time the Company has advanced salaries and/or commissions to
its employees. In particular, in December, 1997 the Company advanced against
certain commissions $160,000 to Mr. Joseph Tinnerello, the Company's Vice
President, Business Development. See "Management -- Agreements with Employees".
49
<PAGE> 51
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of February 28, 1998 and as adjusted
to reflect the sale of the shares offered hereby by (i) each person who is known
by the Company to own beneficially more than 5% of the outstanding shares of
Common Stock, (ii) each director and Named Executive Officer of the Company,
(iii) all directors and executive officers of the Company as a group, and (iv)
each Selling Stockholder. Unless otherwise indicated below, to the knowledge of
the Company, all persons listed below have sole voting and investment power with
respect to their shares of Common Stock, except to the extent authority is
shared by spouses under applicable law.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY NUMBER OF SHARES BENEFICIALLY
OWNED PRIOR TO SHARES OWNED AFTER
5% STOCKHOLDERS, NAMED OFFERING(1) OFFERED OFFERING(1)(2)
EXECUTIVE OFFICERS, DIRECTORS ------------------------ FOR ------------------------
AND SELLING STOCKHOLDERS NUMBER PERCENTAGE SALE(2) NUMBER PERCENTAGE
- ---------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Mitchell Gross(3)....................... 6,204,500 41.1% 200,000 6,004,500 34.2%
Joseph J. Albracht(4)................... 4,704,500 31.2 200,000 4,504,500 25.6
Oak Investment Partners VI, Limited
Partnership(5)........................ 2,045,500 13.6 -- 2,045,500 11.6
New Enterprise Associates VII L.P.(6)... 1,943,200 12.9 -- 1,943,200 11.1
E. Kevin Dahill(7)...................... 67,500 * -- 67,500 *
Karry Kleeman(8)........................ 42,500 * -- 42,500 *
Robert Lawrence(9)...................... 90,000 * -- 90,000 *
Joseph Tinnerello(10)................... 180,000 1.2 -- 180,000 1.0
Peter J. Barris(11)..................... 1,953,200 12.9 -- 1,953,200 11.1
Edward F. Glassmeyer(12)................ 2,055,500 13.6 -- 2,055,500 11.7
Kenneth P. Kopelman(13)................. 10,000 * -- 10,000 *
All Executive Officers and Directors as
a group (13 persons)(3)(11)(12)(14)... 15,325,200 99.3% 400,000 15,005,200 83.3%
</TABLE>
- ---------------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Commission, and includes generally voting power and/or investment power
with respect to securities. Shares of Common Stock subject to options
currently exercisable or exercisable within 60 days of February 28, 1998
("Currently Exercisable Options") are deemed outstanding for computing the
percentage beneficially owned by the person holding such options but are
not deemed outstanding for computing the percentage beneficially owned by
any other person.
(2) Assumes no exercise of the Underwriters' over-allotment option.
(3) Includes 41,000 shares of Common Stock held by HARMIT, LP, of which
Mitchell Gross and Harriet Gross, the spouse of Mr. Gross, are general
partners. Mr. Gross's address is c/o the Company at 120 Old Post Road, Rye,
New York 10580.
(4) Mr. Albracht's address is c/o the Company at 120 Old Post Road, Rye, New
York 10580.
(5) Includes 46,600 shares of Common Stock held by Oak VI Affiliates Fund,
Limited Partnership. The address of such stockholders is 1 Gorham Island,
Westport, Connecticut 06880.
(6) Includes 1,700 shares of Common Stock held by NEA Ventures 1997, 27,300
shares held by NEA President's Fund L.P. and 102,300 shares held by New
Venture Partners III L.P. The address of such stockholders is 1911 Freedom
Drive, Reston, Virginia 20190.
(7) Represents 67,500 shares issuable pursuant to Currently Exercisable
Options.
(8) Represents 42,500 shares issuable pursuant to Currently Exercisable
Options.
(9) Represents 90,000 shares issuable pursuant to Currently Exercisable
Options.
(10) Includes 100,000 shares issuable pursuant to Currently Exercisable Options.
(11) Includes 1,811,900 shares of Common Stock held by New Enterprise Associates
VII L.P., 1,700 shares held by NEA Ventures 1997, 27,300 shares held by NEA
President's Fund L.P. and 102,300 shares held by New Venture Partners III
L.P. Mr. Barris disclaims beneficial ownership of these shares except to
the extent of his pecuniary interest therein arising from his affiliation
with such entities. Also includes 10,000 shares issuable pursuant to
Currently Exercisable Options.
(12) Includes 1,998,900 shares of Common Stock held by Oak Investment Partners
VI, Limited Partnership and 46,600 shares held by Oak VI Affiliates Fund,
Limited Partnership. Mr. Glassmeyer disclaims beneficial ownership of these
shares except to the extent of his pecuniary interest therein arising from
his affiliation with such entities. Also includes 10,000 shares issuable
pursuant to Currently Exercisable Options.
(13) Includes 10,000 shares issuable pursuant to Currently Exercisable Options.
(14) Includes 347,500 shares issuable pursuant to Currently Exercisable Options.
50
<PAGE> 52
DESCRIPTION OF CAPITAL STOCK
Effective upon the filing of the Restated Certificate of Incorporation and
the conversion of the Series A Convertible Preferred Stock and Class A
Non-Voting Common Stock upon the closing of the offering, the authorized capital
stock of the Company will consist of 40,000,000 shares of Common Stock, $.0001
par value per share, and 1,000,000 shares of Preferred stock, $.01 par value per
share (the "Preferred Stock"), which may be issued in one or more series.
COMMON STOCK
As of February 28, 1998 there were 10,909,000 shares of Common Stock
outstanding and held of record by three stockholders. Based upon the number of
shares outstanding as of that date and giving effect to the issuance of the
shares of Common Stock offered by the Company hereby and the conversion of the
outstanding Series A Convertible Preferred Stock and Class A Non-Voting Common
Stock into shares of Common Stock upon consummation of the offering, there will
be 17,580,000 shares of Common Stock outstanding upon the closing of the
offering.
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election (other than those directors, if any, who are to be elected
by the holders of any series of preferred stock, if any). Holders of Common
Stock are entitled to receive ratably such dividends, if any, as may be declared
by the Board of Directors out of funds legally available therefor, subject to
any preferential dividend rights of outstanding Preferred Stock. Upon the
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to receive ratably the net assets of the Company available
after the payment of all debts and other liabilities and subject to the prior
rights of any outstanding Preferred Stock. Holders of the Common Stock have no
preemptive, subscription, redemption or conversion rights. The outstanding
shares of Common Stock are, and the shares offered by the Company in this
offering will be, when issued and paid for, fully paid and nonassessable. The
rights, preferences and privileges of holders of Common Stock are subject to,
and may be adversely affected by, the rights of the holders of shares of any
series of Preferred Stock which the Company may designate and issue in the
future. Upon the closing of this offering, there will be no shares of Preferred
Stock outstanding.
PREFERRED STOCK
The Board of Directors is authorized, without further stockholder approval,
subject to certain limitations prescribed by law, to issue from time to time up
to an aggregate of 1,000,000 shares of Preferred Stock in one or more series and
to fix or alter the designations, preferences, rights and any qualifications,
limitations or restrictions of the shares of each such series thereof, including
the dividend rights, dividend rates, conversion rights, voting rights, terms of
redemption (including sinking fund provisions), redemption price or prices,
liquidation preferences and the number of shares of Preferred Stock constituting
any series or designations of such series of Preferred Stock.
The purpose of authorizing the Board of Directors to issue Preferred Stock
and determine its rights and preferences is to eliminate delays associated with
a stockholder vote on specific issuances. The issuance of Preferred Stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire, or of discouraging a third party from acquiring, a
majority of the outstanding voting stock of the Company. The Company has no
present plans to issue any shares of Preferred Stock. See "Risk
Factors -- Anti-Takeover Provisions".
DELAWARE LAW AND CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE OF
INCORPORATION AND BY-LAWS
The Company is a Delaware corporation and subject to Section 203 of the
Delaware General Corporation Law (the "Delaware Law"), an anti-takeover law. In
general, Section 203 of the
51
<PAGE> 53
Delaware Law prohibits a publicly held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
A "business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. Subject to
certain exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns, or within three years did own, 15% or more of
the corporation's voting stock. The existence of this provision would be
expected to have an anti-takeover effect, including attempts that might result
in a premium over the market price for the shares of Common Stock held by
stockholders.
The Restated Certificate of Incorporation provides for the division of the
Board of Directors into three classes as nearly equal in size as possible with
staggered three-year terms. See "Management". In addition, the Restated
Certificate of Incorporation provides that directors may be removed only for
cause by the affirmative vote of the holders of 67% of the shares of capital
stock of the corporation entitled to vote. Under the Company's By-Laws, any
vacancy on the Board of Directors, however occurring, including a vacancy
resulting from an enlargement of the Board, may be filled by vote of a majority
of the directors then in office, although less than a quorum, or by a sole
remaining director, and may be filled by the stockholders only if the Board has
not filled such vacancy. The classification of the Board of Directors and the
limitations on the removal of directors and filling of vacancies could have the
effect of making it more difficult for a third party to acquire, or of
discouraging a third party from acquiring, control of the Company.
The Restated Certificate of Incorporation also provides that any action
required or permitted to be taken by the stockholders of the Company at an
annual meeting or special meeting of stockholders may only be taken if it is
properly brought before such meeting and may not be taken by written action in
lieu of a meeting. The Restated Certificate of Incorporation further provides
that special meeting of the stockholders may only be called by the Chairman of
the Board of Directors, the Chief Executive Officer, the President or the
Executive Vice President of the Company, or by the Secretary upon the written
request of two-thirds of the Board of Directors. Under the By-Laws, in order for
any matter to be considered "properly brought" before a meeting, a stockholder
must comply with certain requirements regarding advance notice to the Company.
The foregoing provisions could have the effect of delaying until the next
stockholders meeting stockholders' actions which are favored by the holders of a
majority of the outstanding voting securities of the Company. These provisions
may also discourage another person or entity from making a tender offer for the
Company's Common Stock, because such person or entity, even if it acquired a
majority of the outstanding voting securities of the Company, would be able to
take action as a stockholder (such as electing new directors or approving a
merger) only at a duly called stockholders' meeting, and not by written consent.
The Restated Certificate of Incorporation contains certain provisions
permitted under the General Corporation Law of Delaware relating to the
liability of directors. The provisions eliminate a director's liability for
monetary damages for a breach of fiduciary duty, except in certain circumstances
involving wrongful acts, such as the breach of a director's duty of loyalty or
acts or omissions which involve intentional misconduct or a knowing violation of
law. Further, the Restated Certificate of Incorporation contains provisions to
indemnify the Company's directors and officers to the fullest extent permitted
by the General Corporation Law of Delaware. The Company believes that these
provisions will assist the Company in attracting and retaining qualified
individuals to serve as directors.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is the American Stock
Transfer and Trust Company, New York, New York.
52
<PAGE> 54
SHARES ELIGIBLE FOR FUTURE SALE
Upon the closing of this offering, the Company will have an aggregate of
17,580,000 shares of Common Stock outstanding, assuming no exercise of the
Underwriters' over-allotment option and no exercise of outstanding options to
purchase Common Stock. Of these Shares, the 2,900,000 shares sold in this
offering are freely tradeable without restriction or further registration under
the Securities Act of 1933, as amended (the "Securities Act"), except that any
shares held by "affiliates" of the Company, as that term is defined in Rule 144
("Rule 144") under the Securities Act ("Affiliates"), may generally only be sold
in compliance with the limitations of Rule 144 described below.
SALES OF RESTRICTED SHARES
The remaining 14,680,000 shares of Common Stock are deemed "Restricted
Shares" under Rule 144. In general, under Rule 144 as currently in effect, a
person (or persons whose shares are aggregated), including an affiliate of the
Company, who has beneficially owned Restricted Shares for at least one year is
entitled to sell, within any three-month period, a number of such shares that
does not exceed the greater of (i) one percent of the then outstanding shares of
Common Stock (approximately 175,800 shares immediately after this offering) or
(ii) the average weekly trading volume in the Common Stock in the
over-the-counter market during the four calendar weeks preceding the date on
which notice of such sale is filed. In addition, under Rule 144(k), a person who
is not an affiliate of the Company and has not been an affiliate of the Company
for at least three months prior to the sale and who has beneficially owned
Restricted Shares for at least two years may resell such shares without
compliance with the foregoing requirements. In meeting the one-and two-year
holding periods described above, a holder of Restricted Shares can include the
holding periods of a prior owner who was not an affiliate. See "Risk
Factors -- Shares Eligible for Future Sale; Registration Rights".
Rule 701 under the Securities Act provides that the shares of Common Stock
acquired upon the exercise of currently outstanding options may be resold by
persons, other than affiliates of the Company, beginning 90 days after the date
of the Company's initial public offering, subject only to the manner of sale
provisions of Rule 144, and by affiliates of the Company under Rule 144 without
compliance with its one-year minimum holding period, subject to certain
limitations.
OPTIONS
Upon completion of this offering, it is anticipated that options to
purchase a total of 2,493,500 shares of Common Stock will be outstanding. As of
February 28, 1998, an additional approximately 1,536,500 shares of Common Stock
were available for future issuance under the Company's 1996 Plan, 1998 ESPP and
the 1998 Directors' Plan. See "Management -- Benefit Plans".
After the date of this Prospectus, the Company intends to file a Form S-8
registration statement under the Securities Act to register all shares of Common
Stock issuable under the Company's stock-based benefit plans. See
"Management -- Director Compensation" and "-- Benefit Plans". Such registration
statement is expected to become effective immediately upon filing, and shares
covered by that registration statement will thereupon be eligible for sale in
the public markets, subject to Rule 144 limitations applicable to affiliates.
See "Risk Factors -- Shares Eligible for Future Sale; Registration Rights".
LOCK-UP AGREEMENTS
Certain stockholders, who upon the closing of this offering will hold in
the aggregate approximately 14,680,000 shares of Common Stock and options to
purchase additional 1,624,000 shares of Common Stock, have agreed, pursuant to
the Lock-Up Agreements, that they will not, without the prior written consent of
the representatives of the Underwriters, directly or indirectly offer to sell,
sell, or otherwise dispose of any shares of Common Stock beneficially owned by
them for a period
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<PAGE> 55
of 180 days after the date of this Prospectus, subject to certain exceptions.
Subject to the provisions of Rules 144, 144(k) and 701, all of such shares will
be eligible for sale upon the expiration of these lock-up agreements.
LEGAL MATTERS
The validity of the shares of Common Stock offered by this Prospectus will
be passed upon for the Company and the Selling Stockholders by Kramer, Levin,
Naftalis & Frankel, New York, New York. Mr. Kopelman, a partner at Kramer Levin,
is a director of the Company and owns options to purchase 10,000 shares of
Common Stock that were granted to him pursuant to the Directors' Plan. Certain
legal matters will be passed upon for the Underwriters by Hale and Dorr LLP,
Boston, Massachusetts.
EXPERTS
The consolidated financial statements and schedule of the Company as of
June 30, 1996, 1997 and as of December 31, 1997 and for each of the years in the
three-year period ended June 30, 1997, and the six months ended December 31,
1997 have been included herein and in the registration statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (including all amendments and
exhibits thereto, the "Registration Statement") under the Securities Act with
respect to the offer and sale of shares of Common Stock pursuant to this
Prospectus. As permitted by the rules and regulations of the Commission, this
Prospectus omits certain information contained in the Registration Statement.
For further information with respect to the Company and the Common Stock offered
hereby, reference is hereby made to the Registration Statement and to the
exhibits and schedules filed therewith. Statements contained in this Prospectus
regarding the contents of any agreement or other document filed as an exhibit to
the Registration Statement are not necessarily complete, and in each instance
reference is made to the copy of such agreement filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
The Registration Statement, including the exhibits and schedules thereto,
may also be inspected, without charge, and copied at prescribed rates at the
public reference facilities maintained by the Commission at Judiciary Plaza, 450
Fifth Street N.W., Washington, D.C. 20549, and at the Commission's regional
offices at Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois, and 7 World Trade Center, Suite 1300, New York, New York. This
material may also be inspected at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006. 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.
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<PAGE> 56
MOBIUS MANAGEMENT SYSTEMS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditors' Report........................................................... F-2
Consolidated Balance Sheets as of June 30, 1996 and 1997 and December 31, 1997......... F-3
Consolidated Statements of Income for the Years Ended June 30, 1995, 1996 and 1997, and
for the Six Month Periods Ended December 31, 1996 (Unaudited) and 1997............... F-4
Consolidated Statements of Stockholders' Equity for the Years Ended June 30, 1995,
1996, and 1997, and for the Six Month Period Ended December 31, 1997................. F-5
Consolidated Statements of Cash Flows for the Years Ended June 30, 1995, 1996, and
1997, and for the Six Month Periods Ended December 31, 1996 (Unaudited) and 1997..... F-6
Notes to Consolidated Financial Statements............................................. F-7
</TABLE>
F-1
<PAGE> 57
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Mobius Management Systems, Inc.:
We have audited the accompanying consolidated balance sheets of Mobius
Management Systems, Inc. and subsidiaries as of June 30, 1996 and 1997 and
December 31, 1997 and the related consolidated statements of income,
stockholders' equity and cash flows for each of the years in the three-year
period ended June 30, 1997 and the six month period ended December 31, 1997.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Mobius
Management Systems, Inc. and subsidiaries as of June 30, 1996 and 1997 and
December 31, 1997 and the results of their operations and their cash flows for
each of the years in the three-year period ended June 30, 1997 and the six month
period ended December 31, 1997, in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
February 23, 1998
Stamford, CT
F-2
<PAGE> 58
MOBIUS MANAGEMENT SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA AND PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30,
-------------------- DECEMBER 31,
1996 1997 1997
------- -------- ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 4,447 $ 5,672 $ 7,182
Accounts receivable, net of allowance for doubtful
accounts of $423, $308 and $611, respectively..... 7,328 7,793 6,238
Software license installments, current portion....... 1,614 4,615 5,158
Other current assets................................. 251 474 1,655
------- -------- --------
Total current assets......................... 13,640 18,554 20,233
Software license installments, non-current portion, net
of allowance for doubtful accounts of $0, $413 and
$577, respectively................................... 3,376 7,871 11,609
Property and equipment, net............................ 1,356 1,990 2,007
Other assets........................................... 74 87 498
------- -------- --------
Total assets................................. $18,446 $ 28,502 $ 34,347
======= ======== ========
LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses................ $ 4,479 $ 6,593 $ 4,689
Deferred maintenance revenue......................... 6,494 7,494 10,669
Deferred income taxes................................ 286 1,551 1,593
Other liabilities.................................... 322 134 59
------- -------- --------
Total current liabilities.................... 11,581 15,772 17,010
------- -------- --------
Deferred maintenance revenue, non-current portion...... 660 3,661 5,447
Deferred income taxes.................................. 828 1,420 2,387
Capital lease obligations, less current portion........ 151 95 66
Convertible preferred stock, $.01 par value; 40,910
shares outstanding................................... -- 11,898 12,000
Stockholders' equity (deficit):
Common stock $.0001 par value; authorized 40,000,000
shares; issued 16,727,200, 15,000,000 and
15,000,000 shares, outstanding 15,000,000,
10,909,000 and 10,909,000 respectively............ 2 1 1
Additional paid-in capital........................... 77 -- --
Retained earnings.................................... 5,306 7,636 9,487
Cumulative foreign currency translation adjustment... (28) 19 (51)
Treasury stock, at cost, 1,727,200, 4,091,000 and
4,091,000 shares, respectively.................... (131) (12,000) (12,000)
------- -------- --------
Total stockholders' equity (deficit)......... 5,226 (4,344) (2,563)
------- -------- --------
Total liabilities, preferred stock and stockholders'
equity............................................... $18,446 $ 28,502 $ 34,347
======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 59
MOBIUS MANAGEMENT SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
----------------------------- ----------------------
1995 1996 1997 1996 1997
------- ------- ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Software license revenues............. $12,729 $18,769 $26,112 $10,239 $14,293
Maintenance and other revenues........ 9,676 12,189 15,215 7,159 8,778
---------
-
------ ------ ------ ------
Total revenues..................... 22,405 30,958 41,327 17,398 23,071
---------
-
------ ------ ------ ------
Costs of revenues:
Software license revenues............. 614 626 1,336 528 678
Maintenance and other revenues........ 2,049 2,716 2,923 1,441 1,554
---------
-
------ ------ ------ ------
Total costs of revenues............ 2,663 3,342 4,259 1,969 2,232
---------
-
------ ------ ------ ------
Gross profit............................ 19,742 27,616 37,068 15,429 20,839
---------
-
------ ------ ------ ------
Operating expenses:
Sales and marketing................... 12,523 15,136 21,971 9,180 10,797
Research and development.............. 3,478 4,600 5,904 2,810 3,550
General and administrative............ 2,063 2,832 4,350 1,911 3,106
---------
-
------ ------ ------ ------
Total operating expenses........... 18,064 22,568 32,225 13,901 17,453
---------
-
------ ------ ------ ------
Income from operations.................. 1,678 5,048 4,843 1,528 3,386
License and other interest
income................................ 375 339 922 328 832
Interest expense........................ (58) (41) (22) (11) (6)
Foreign currency transaction gains
(losses).............................. 34 (72) (12) 1 (6)
---------
-
------ ------ ------ ------
Income before income taxes.............. 2,029 5,274 5,731 1,846 4,206
Provision for income taxes.............. 880 2,657 3,348 1,043 2,355
---------
-
------ ------ ------ ------
Net income.............................. $ 1,149 $ 2,617 $ 2,383 $ 803 $ 1,851
====== ====== ========== ====== ======
Basic earnings per share................ $ 0.08 $ 0.17 $ 0.17 $ 0.05 $ 0.17
Basic weighted average shares
outstanding........................... 15,000 15,000 14,318 15,000 10,909
Diluted earnings per share.............. $ 0.08 $ 0.17 $ 0.15 $ 0.05 $ 0.12
Diluted weighted average shares
outstanding........................... 15,000 15,000 15,882 15,355 15,785
Pro forma data (unaudited):
Pro forma basic earnings per share.... $ 0.13 $ 0.12
Pro forma basic weighted average
shares outstanding................. 18,489 15,080
Pro forma diluted earnings per
share.............................. $ 0.12 $ 0.12
Pro forma diluted weighted average
shares outstanding................. 19,371 15,852
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 60
MOBIUS MANAGEMENT SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
COMMON STOCK ADDITIONAL CURRENCY
--------------------- PAID-IN RETAINED TRANSLATION
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT
----------- ------ ---------- -------- -----------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1995................................ 16,727,200 $2 $ 77 $2,689 $ (51)
Net income.............................................. -- -- -- 2,617 --
Unrealized translation gain............................. -- -- -- -- 23
----------- --- ---- ------ ------
Balance at June 30, 1996................................ 16,727,200 2 77 5,306 (28)
Net income.............................................. -- -- -- 2,383 --
Unrealized translation gain............................. -- -- -- -- 47
Retirement of treasury stock............................ (1,727,200) (1) (77) (53) --
Share repurchase in connection with issuance of
preferred stock....................................... (4,091,000) -- -- -- --
----------- --- ---- ------ ------
Balance at June 30, 1997................................ 10,909,000 1 -- 7,636 19
Net Income.............................................. -- -- -- 1,851 --
Unrealized translation loss............................. -- -- -- -- (70)
----------- --- ---- ------ ------
Balance at December 31, 1997............................ 10,909,000 $1 $ -- $9,487 $ (51)
=========== === ==== ====== ======
<CAPTION>
TREASURY STOCK TOTAL
----------------------- STOCKHOLDERS'
SHARES AMOUNT EQUITY (DEFICIT)
----------- -------- ----------------
<S> <C<C> <C> <C>
Balance at June 30, 1995................................ 1,727,200 $ (131) $ 2,586
Net income.............................................. -- -- 2,617
Unrealized translation gain............................. -- -- 23
--------- -------- --------
Balance at June 30, 1996................................ 1,727,200 (131) 5,226
Net income.............................................. -- -- 2,383
Unrealized translation gain............................. -- -- 47
Retirement of treasury stock............................ (1,727,200) 131 --
Share repurchase in connection with issuance of
preferred stock....................................... 4,091,000 (12,000) (12,000)
--------- -------- --------
Balance at June 30, 1997................................ 4,091,000 (12,000) (4,344)
Net Income.............................................. -- -- 1,851
Unrealized translation loss............................. -- -- (70)
--------- -------- --------
Balance at December 31, 1997............................ 4,091,000 $(12,000) $ (2,563)
========= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 61
MOBIUS MANAGEMENT SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
------------------------------ ----------------------
1995 1996 1997 1996 1997
------- ------- -------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.......................... $ 1,149 $ 2,617 $ 2,383 $ 803 $ 1,851
------- ------- -------- ------- -------
Adjustments to reconcile net income to
net cash provided by operating
activities:
Deferred income taxes............... 139 700 1,857 372 1,009
Depreciation and amortization....... 416 381 406 220 305
Accretion of Preferred Stock........ -- -- -- -- 102
Change in operating assets and
liabilities:
Accounts receivable, net......... (3,434) (56) (465) (537) 1,555
Software license installments.... 229 (3,673) (7,497) (1,803) (4,281)
Other assets..................... (59) (21) (235) (635) (1,592)
Accounts payable and accrued
expenses....................... 333 1,059 2,112 (322) (1,904)
Other liabilities................ 37 (179) (94) 99 (78)
Deferred maintenance revenue..... 1,472 1,837 4,002 3,722 4,961
------- ------- -------- ------- -------
Total adjustments........... (867) 48 86 1,116 77
------- ------- -------- ------- -------
Net cash provided by
operating activities...... 282 2,665 2,469 1,919 1,928
------- ------- -------- ------- -------
Cash flows used in investing
activities:
Capital expenditures................ (434) (628) (1,039) (348) (322)
------- ------- -------- ------- -------
Cash flows from financing activities:
Cash received from sale of preferred
stock, net of issuance costs..... -- -- 11,898 -- --
Cash payment for repurchase of
common stock..................... -- -- (12,000) -- --
Payments on capital lease
obligations...................... (185) (55) (150) (28) (26)
Payments on notes payable........... (89) (269) -- -- --
------- ------- -------- ------- -------
Net cash used by financing
activities................ (274) (324) (252) (28) (26)
------- ------- -------- ------- -------
Effect of exchange rate changes on
cash and cash equivalents........... (29) 23 47 153 (70)
------- ------- -------- ------- -------
Net change in cash and cash
equivalents......................... (455) 1,736 1,225 1,696 1,510
Cash and cash equivalents at beginning
of period........................... 3,166 2,711 4,447 4,447 5,672
------- ------- -------- ------- -------
Cash and cash equivalents at end of
period.............................. $ 2,711 $ 4,447 $ 5,672 $ 6,143 $ 7,182
======= ======= ======== ======= =======
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest......................... $ 58 $ 41 $ 22 $ 11 $ 6
Income taxes..................... 612 1,779 1,544 948 1,756
Capital lease obligations
incurred......................... 464 219 -- -- --
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 62
MOBIUS MANAGEMENT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(1) ORGANIZATION
Mobius Management Systems, Inc., together with its wholly-owned
subsidiaries (the "Company"), is a provider of enterprise software products
designed to optimize the storage, retrieval and presentation of large volumes of
transactional information.
The Company was incorporated in the State of New York in 1981 and in 1997
the Company was reincorporated in the State of Delaware. In March 1993, the
Company established its first wholly-owned subsidiary, Mobius U.K., in
Basingstoke, England and subsequently relocated to Shepperton, England. The
purpose of this subsidiary is to provide direct sales within the U.K. In fiscal
1995, the Company established wholly-owned subsidiaries in Nogent sur Marne,
France, Dusseldorf, Germany, and Assago, Italy, and in fiscal 1998, the Company
established an additional wholly-owned subsidiary in Upplands Vasby, Sweden, to
broaden the reach of its direct sales force in Europe.
(2) SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The Company and its subsidiaries are consolidated for financial statement
purposes after the elimination of all significant intercompany transactions.
REVENUE RECOGNITION
Revenue from software license contracts includes license fees related to
long-term licenses, typically 5 or 15 years, and fees for term license
contracts, which are generally 3 to 5 years. Such license revenue and
maintenance and service revenue are recognized in accordance with Statement of
Position 91-1 Software Revenue Recognition.
Revenue from executed software license contracts is recognized upon
delivery of the software to the customer if no significant vendor obligations
remain and collection of the resulting receivable is probable. Software license
revenue includes the present value of future payments under non-cancelable
license arrangements which provide for payment in installments generally over
periods from 3 to 5 years. A portion of the discount is recognized as interest
income over the term of the arrangement.
Revenue on maintenance contracts is recognized on a straight-line basis
over the term of the maintenance contract, generally twelve months, except for
maintenance on term license contracts, which extends to the contract term. The
unearned portion of maintenance revenue is classified as deferred maintenance
revenue.
When the software license contract includes maintenance, the Company
unbundles maintenance revenue from the initial license fee and recognizes it
ratably over the maintenance period, starting from the inception of the software
license agreement. The unearned portion of such maintenance revenue is
classified as deferred maintenance revenue with amounts extending beyond
one-year reported as non-current.
SOFTWARE DEVELOPMENT COSTS
Statement of Financial Accounting Standards No. 86 (SFAS No. 86) requires
the capitalization of certain software development costs once technological
feasibility is established. The capitalized costs are then amortized on a
straight-line basis over the estimated product life, or on the ratio of current
revenues to total projected product revenues, whichever is greater.
F-7
<PAGE> 63
MOBIUS MANAGEMENT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company determines technological feasibility based on the working model
method. The period between establishment of a working model and the general
availability of its software has historically been short and, accordingly,
software development costs qualifying for capitalization have been
insignificant. As a result, the Company has expensed all software development
costs.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation is computed on a
straight-line basis over the estimated life of the related asset, ranging from
five to seven years. Assets acquired under capital leases are depreciated on a
straight-line basis over the shorter of the asset's life or the respective
lease.
INCOME TAXES
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109). SFAS
No. 109 requires using the asset and liability method of accounting for income
taxes. Under this method, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities, and their
respective tax bases. Deferred tax assets are recognized for deductible
temporary differences, net operating loss carryforwards, and tax credit
carryforwards if it is more likely than not that the tax benefits will be
realized. A valuation allowance is established if it is not more likely than not
that a deferred tax asset will be realized.
FOREIGN CURRENCY TRANSLATION
Balance sheet accounts of the Company's foreign subsidiaries are translated
into U.S. dollars at exchange rates in effect at the balance sheet date.
Revenues, costs and expenses are translated into U.S. dollars at average rates
for the year. Gains or losses that result from translation are shown as a
separate component of stockholders' equity. Net gains and losses resulting from
foreign exchange transactions are included in the determination of net income.
CASH EQUIVALENTS
The Company considers investments with maturities at the date of purchase
of three months or less to be cash equivalents.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to a
concentration of credit risk consist of substantially all of the trade accounts
receivables and software license installments. The Company sells its products to
a large number of customers in diversified industries across many domestic and
international geographies.
USE OF ESTIMATES
The preparation of financial statements in accordance 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 revenue and expenses during the
reporting period. Actual results could differ from those estimates.
F-8
<PAGE> 64
MOBIUS MANAGEMENT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments" (SFAS 107) defines the fair value of a
financial instrument as the amount at which the instrument could be exchanged in
a current transaction between willing parties. The fair value of the Company's
cash and cash equivalents, accounts receivable, software license installments
and accounts payable and accrued expenses and deferred maintenance amounts
approximates their carrying value.
EARNINGS PER SHARE
Effective December 1997, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings Per Share". SFAS No. 128
stipulates that the calculation of earnings per share (EPS) be shown for all
historical periods as Basic EPS and Diluted EPS. Basic EPS is computed by
dividing income available to common shareholders by the weighted average number
of common shares outstanding during the period. The computation of Diluted EPS
is similar to the computation of Basic EPS except that it gives effect to all
potentially dilutive instruments that were outstanding during the period. Such
dilutive instruments include stock options, the conversion of Series A
Convertible Preferred Stock, and the conversion of the Class A Non-Voting Common
Stock.
The following is a reconciliation of the numerators and denominators for
the basic and diluted EPS calculations (in thousands, except per share data):
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31,
----------------------------------------------------------------------------
YEAR ENDED JUNE 30, 1997 1996 1997
------------------------------------- ------------------------------------- -------------------------------------
NET INCOME SHARES PER SHARE NET INCOME SHARES PER SHARE NET INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- --------- ----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS:
Net income... $ 2,383 $ 803 $ 1,851
====== ==== ======
Weighted
average
shares
outstanding... 14,318 15,000 10,909
Basic EPS.... $0.17 $0.05 $0.17
===== ===== =====
Diluted EPS:
Net income... $ 2,383 $ 803 $ 1,851
====== ==== ======
Dilutive
effect of
convertible
securities... 682 4,104
Dilutive
effect of
stock
options..... 882 355 772
------ ------ ------
Diluted
EPS......... 15,882 $0.15 15,355 $0.05 15,785 $0.12
====== ===== ====== ===== ====== =====
</TABLE>
STOCK BASED COMPENSATION
The Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation", and elected to continue to apply the provisions of Accounting
Principles Board (APB) Opinion No. 25 in determining measurement of compensation
expense and provide pro forma net income and pro forma earnings per share
disclosures for employee stock option grants made in 1995 and future years as if
the fair value-based method, as defined in SFAS No. 123, had been applied. As
such, compensation expense is generally recorded on the date of grant only if
the current fair market value of the underlying stock exceeded the exercise
price.
F-9
<PAGE> 65
MOBIUS MANAGEMENT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
During the third quarter of 1996, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of". The adoption of
SFAS 121 had no effect on the Company's financial statements.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 1997, the AICPA issued SOP 97-2, "Software Revenue Recognition",
which supersedes SOP 91-1. The Company will adopt SOP 97-2 for software
transactions entered into beginning July 1, 1998. SOP 97-2 generally requires
revenue earned on software arrangements involving multiple elements, such as
additional software products, upgrades or enhancements, rights to exchange or
return software, postcontract customer support, or services, including elements
deliverable only on a when-and-if-available basis, to be allocated to the
various elements of such sale based on "vendor-specific objective evidence of
fair values" allocable to each such element. If sufficient vendor-specific
objective evidence of fair market values does not exist, revenue from the sale
could be deferred until such sufficient evidence exists, or until all elements
have satisfied the requirements for revenue recognition.
SOP 97-2 is newly issued and has not yet been subject to interpretation in
practice or in applicable accounting guidelines. Although the Company has
reviewed, and is continuing to review, its license agreements in light of its
requirement to adopt SOP 97-2 and believes such adoption will not have a
material effect on its operations, there can be no assurance that the future
application of or subsequent interpretations to SOP 97-2 will not require the
Company to defer the recognition of certain elements of revenue or result in
revenue patterns in periods subsequent to fiscal 1998 which are materially
different than historical periods. In addition, there can be no assurance that
any adjustments the Company makes to its license agreements or other contractual
arrangements in order to accommodate the requirements of SOP 97-2 would not be
negatively viewed by prospective customers and therefore have a material adverse
effect on the Company's sales efforts.
On February 11, 1998, the AICPA issued an Exposure Draft of a Proposed
Statement of Position "Deferral of the Effective Date of Certain Purchase of SOP
97-2, Software Revenue Recognition, for Certain Transactions". The proposed SOP
defers for one year the application of what constitutes vendor-specific
objective evidence of the fair value of the delivered software element in
certain multiple-element arrangements that include service elements and that are
entered into by entities that never sell the software element separately. The
Company believes that the provisions of the Exposure Draft do not apply to the
Company.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income" and No. 131, "Disclosures about Segments of an
Enterprise and Related Information". Commencing in 1998, SFAS No. 130 will
require companies to report comprehensive income and SFAS No. 131 will require
companies to report segment performance as it is used internally to evaluate
segment performance. These statements merely provide for additional disclosure
requirements.
INTERIM RESULTS
The financial statements for the six-month period ended December 31, 1996
are unaudited, but include all adjustments (consisting only of normal recurring
adjustments) that management considers necessary for a fair presentation of the
Company's operating results and cash flows for
F-10
<PAGE> 66
MOBIUS MANAGEMENT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
such period. Results for interim periods are not necessarily indicative of
results for the entire year or for future periods.
(3) SOFTWARE LICENSE INSTALLMENTS
The Company offers extended payment terms to some of its customers. For
software license contracts of 15 years, the related financing period is
generally 5 years. For software installment contracts of 3 to 5 years, the
payments are generally spread ratably over the term. Software license
installments are discounted at a market rate of interest at the date the
software license contract revenue is recognized. Associated interest income is
earned using the interest method over the term of the license contract.
The present values of software license installments to be received after
December 31, 1997 are as follows (in thousands):
<TABLE>
<S> <C>
Six months ended June 30, 1998.................................... $ 1,998
Year ended June 30, 1999.......................................... 6,442
Year ended June 30, 2000.......................................... 5,347
Year ended June 30, 2001.......................................... 3,871
Year ended June 30, 2002.......................................... 2,370
-------
Total minimum payments to be received............................. 20,028
Less unearned interest income..................................... (2,684)
Less allowance for doubtful accounts.............................. (577)
-------
Present value of software license installments, net............... 16,767
Less current portion, net......................................... (5,158)
-------
Non-current portion, net.......................................... $11,609
=======
</TABLE>
(4) PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30,
------------------- DECEMBER 31,
1996 1997 1997
------- ------- ------------
<S> <C> <C> <C>
Furniture, fixtures and office equipment......... $ 860 $ 700 $ 868
Computer equipment............................... 1,789 2,985 3,140
Leasehold improvements........................... 311 315 314
------- ------- -------
2,960 4,000 4,322
Less accumulated depreciation and amortization... (1,604) (2,010) (2,315)
------- ------- -------
Property and equipment, net...................... $ 1,356 $ 1,990 $ 2,007
======= ======= =======
</TABLE>
Depreciation and amortization expense on property and equipment, including
capital leases, was $416,000, $381,000 and $406,000 for the twelve months ended
June 30, 1995, 1996 and 1997, respectively, and $220,000 (unaudited) and
$305,000 for the six-month periods ended December 31, 1996 and December 31,
1997, respectively. The net book value of equipment under capital leases
included in property and equipment at June 30, 1996 and 1997 and December 31,
1997 was $278,000, $175,000 and $159,000, respectively.
F-11
<PAGE> 67
MOBIUS MANAGEMENT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(5) ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following (in
thousands):
<TABLE>
<CAPTION>
JUNE 30,
----------------- DECEMBER 31,
1996 1997 1997
------ ------ ------------
<S> <C> <C> <C>
Accounts payable................................... $ 615 $1,002 $1,054
Compensation and related benefits.................. 2,924 4,196 1,334
Other.............................................. 940 1,395 2,301
------ ------ ------
$4,479 $6,593 $4,689
====== ====== ======
</TABLE>
(6) INCOME TAXES
Income before provision for income taxes is as follows (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
------------------------- ---------------------
1995 1996 1997 1996 1997
------ ------ ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Domestic income....................... $2,612 $6,072 $ 7,923 $ 2,554 $ 5,467
Foreign losses........................ (583) (798) (2,192) (708) (1,261)
------ ------ ------- ------ -------
$2,029 $5,274 $ 5,731 $ 1,846 $ 4,206
====== ====== ======= ====== =======
</TABLE>
The components of the provision for income taxes for the years ended June
30, 1995, 1996 and 1997 and the six-month periods ended December 31, 1996
(unaudited) and December 31, 1997, are as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------------------------------------------------------------------------
1995 1996 1997
-------------------------- --------------------------- ---------------------------
CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL
------- -------- ----- ------- -------- ------ ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Federal............. $ 450 $160 $ 610 $ 1,577 $573 $2,150 $ 1,200 $1,521 $2,721
State............... 195 (21) 174 336 127 463 276 336 612
Foreign............. 96 -- 96 44 -- 44 15 -- 15
---- ---- ---- ------ ---- ------ ------ ------ ------
$ 741 $139 $ 880 $ 1,957 $700 $2,657 $ 1,491 $1,857 $3,348
==== ==== ==== ====== ==== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31,
--------------------------------------------------------------------
1996 1997
------------------------------- --------------------------------
CURRENT DEFERRED TOTAL CURRENT DEFERRED TOTAL
------- -------- ------ ------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Federal......................... $ 534 $305 $ 839 $ 1,126 $ 827 $ 1,953
State........................... 129 67 196 208 182 390
Foreign......................... 8 -- 8 12 -- 12
---- ---- ------ ------ ------ ------
$ 671 $372 $1,043 $ 1,346 $1,009 $ 2,355
==== ==== ====== ====== ====== ======
</TABLE>
F-12
<PAGE> 68
MOBIUS MANAGEMENT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table reconciles the Federal statutory corporate rate to the
effective income tax rate for the years ended June 30, 1995, 1996 and 1997 and
the six-month periods ended December 31, 1996 (unaudited) and 1997:
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
JUNE 30, DECEMBER 31,
---------------------- --------------------
1995 1996 1997 1997
---- ---- ---- 1996 ----
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Federal statutory corporate rate.......... 34% 34% 34% 34% 34%
State income taxes, net of Federal
benefit................................. 6 6 6 6 6
Losses of foreign subsidiaries............ 10 6 14 14 13
Research credit........................... (5) -- (1) -- --
Other..................................... (2) 4 5 3 3
-- -- -- -- --
43% 50% 58% 57% 56%
== == == == ==
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below (in thousands):
<TABLE>
<CAPTION>
JUNE 30,
------------------ DECEMBER 31,
1996 1997 1997
------ ------- ------------
<S> <C> <C> <C>
Deferred tax assets:
Accounts receivable, principally due to
allowance for doubtful accounts.............. $ 163 $ 216 $ 325
Foreign net operating loss carryforwards........ 708 1,677 2,172
------ ------- -------
871 1,893 2,497
Valuation allowance............................... (708) (1,677) (2,172)
------ ------- -------
Net deferred tax assets......................... 163 216 325
Deferred tax liabilities:
Software license installments................... 1,277 3,111 4,196
Depreciation.................................... -- 76 109
------ ------- -------
Net deferred tax liability...................... $1,114 $ 2,971 $ 3,980
====== ======= =======
</TABLE>
The valuation allowance increased by $380,000, $328,000 and $969,000 for
the years ended June 30, 1995, 1996 and 1997 and $495,000 for the six months
ended December 31, 1997 primarily due to uncertainty of realization of net
operating losses incurred by certain foreign subsidiaries. The Company will
reduce the valuation allowance when it is concluded that it is more likely than
not that these deferred tax assets will be realized.
The expiration of net operating loss carryforwards varies by foreign
jurisdiction; some begin to expire in fiscal 2000 and others extend
indefinitely.
(7) COMMON STOCK
COMMON STOCK
The Company has authorized 40,000,000 shares of Common Stock with a $.0001
par value. This includes 1,727,200 shares of Common Stock that were retired
during 1997, having previously been held in treasury stock.
On May 12, 1997, as part of the Preferred Stock Agreement (see note 8) the
Company repurchased 4,091,000 shares of Common Stock, $.0001 par value, from its
founders for $12,000,130. Such amount is being held in treasury stock at
December 31, 1997.
F-13
<PAGE> 69
MOBIUS MANAGEMENT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CLASS A NON-VOTING COMMON STOCK
The Company has authorized 5,000,000 shares of Class A Non-Voting Common
Stock with a $.0001 par value. As of December 31, 1997, 80,000 shares have been
issued and are outstanding and 1,786,000 shares have been reserved for issuance
to officers, employees or directors of, or consultants to the Company in
connection with the Company's stock incentive plan. Upon the completion of the
offering, all shares of the Class A Non-Voting Common Stock will be converted to
Common Stock.
STOCK SPLIT
The Board of Directors authorized a 100-to-one stock split of the Company's
common stock which was approved by the stockholders on February 19, 1998. All
common share and per share amounts have been retroactively adjusted in the
accompanying consolidated financial statements to reflect the stock split.
(8) PREFERRED STOCK
The Company has authorized 200,000 shares of Preferred Stock with a par
value of $.01. Before any shares are issued, the Board of Directors shall fix
the specific provisions of the shares including the designation of series,
voting rights, dividend features, redemption and liquidation provision and other
features.
On May 12, 1997, the Company entered into a Stock Purchase Agreement (the
"Agreement") whereby certain investors purchased 40,910 shares of the Preferred
Stock that the Board of Directors designated as Series A Convertible Preferred
Stock ("Convertible Preferred Stock") for $12,000,130.
On or after May 8, 2002, each holder of Convertible Preferred Stock can at
their option, request redemption of their Convertible Preferred Stock at a price
equal to the original issuance price per share plus any accrued dividends on
such Convertible Preferred Stock. In addition, Preferred Stockholders are
entitled to receive dividends and other distributions equivalent to those
declared or paid on Common Stock as if all Convertible Preferred Stock had been
converted into Common Stock. At December 31, 1997, no dividends have been
declared on the Convertible Preferred Stock.
Each share of Convertible Preferred Stock is convertible at the option of
the holder and is mandatorily converted into Common Stock upon the following:
(i) a sale of substantially all of the assets of the Company at an aggregate
purchase price of not less than $100,000,000 up until the first anniversary of
the Agreement, $125,000,000 from the first anniversary of the Agreement to the
second anniversary of the Agreement and $150,000,000 thereafter, (ii) a merger
of the Company with or into another Company in which the Stockholders receive
aggregate consideration having value of not less than $100,000,000 up until the
first anniversary of the Agreement, $125,000,000 from the first anniversary of
the Agreement to the second anniversary of the Agreement and $150,000,000
thereafter, (iii) a designated public offering which results in aggregate net
proceeds of not less than $20,000,000 to the Corporation at an offering price
per share of not less than $5.87, and (iv) a private sale of substantially all
of the Common Stock of the Company at a price per share of not less than $5.87
up until the first anniversary of the Agreement, $7.33 from the first
anniversary of the Agreement to the second anniversary of the Agreement and
$8.80 thereafter. Such Convertible Preferred Stock is convertible into 4,091,000
shares of the Company's Common Stock and will so convert upon consummation of
the offering.
The carry value of the Convertible Preferred Stock has been accreted to its
redemption value by a charge to general and administrative expenses during the
six months ended December 31, 1997.
F-14
<PAGE> 70
MOBIUS MANAGEMENT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(9) STOCK INCENTIVE PLAN
In November 1996, the Company adopted a stock incentive plan (the "Plan")
pursuant to which the Company's Board of Directors may grant stock options to
officers, employees, directors and consultants. The Plan authorizes grants of
options to purchase up to 3,480,000 shares of authorized but unissued Common
Stock. Stock options are granted with an exercise price equal to the stock's
fair market value at the date of grant as determined by the Company's Board of
Directors. Stock options generally vest as to 20% of the shares subject thereto
on the first anniversary of the date of grant and the remainder vest ratably
over the subsequent 16 quarters.
Stock option activity during the periods indicated was as follows:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Balance at June 30, 1996............................... -- --
Granted.............................................. 2,045,500 $ 1.25
Exercised............................................ -- --
Forfeited............................................ -- --
Expired.............................................. -- --
--------- -----
Balance at June 30, 1997............................... 2,045,500 1.25
Granted.............................................. 485,500 6.36
Exercised............................................ (80,000) 1.25
Forfeited............................................ (665,000) 1.25
Expired.............................................. -- --
--------- -----
Balance at December 31, 1997........................... 1,786,000 $ 2.64
========= =====
</TABLE>
At June 30, 1997 and December 31, 1997, the range of exercise price was
$1.25 and $1.25 - $6.94, respectively. At June 30, 1997 and December 31, 1997,
the weighted average remaining contractual life of outstanding options was 8.92
and 9.13 years, respectively.
At June 30, 1997 and December 31, 1997, the number of options exercisable
was 0 and 360,100, respectively, and the weighted average exercise price of the
exercisable options was $0.00 and $2.83, respectively.
At December 31, 1997, there were 1,134,000 shares available for grant under
the plan. In January and February 1998, the Company granted a total of 720,000
options, with exercise prices from $9.86 to $11.00 per share.
The Company applies APB Opinion No. 25 in measuring compensation expense
for options issued under the Plan. Had the Company determined compensation cost
based on the fair value on the grant date for its stock options under SFAS No.
123, the Company's net income and earnings per share would have been reduced to
the amounts indicated below.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
JUNE 30, DECEMBER 31,
1997 1997
---------- ----------------
<S> <C> <C>
Net income and earnings per share as would be
reported under SFAS No. 123:
Net income................................... $2,317 $1,758
Basic earnings per share..................... $ 0.16 $ 0.16
Diluted earnings per share................... $ 0.15 $ 0.11
</TABLE>
F-15
<PAGE> 71
MOBIUS MANAGEMENT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The per share weighted average fair value of stock options granted during
the year ended June 30, 1997 and the six months ended December 31, 1997 was
$0.84 and $4.31 on the date of grant using the modified Black Scholes option
pricing model, excluding volatility assumption, with the following weighted
average assumptions: expected dividend yield of 0.0%, risk free interest rate of
6.5%, and an expected life of 7 years.
(10) EMPLOYEE SAVINGS PLAN
In fiscal 1995, the Company established a savings plan that qualifies under
Section 401(k) of the Internal Revenue Code. Under the plan, participating U.S.
employees may defer up to 20% of their pre-tax compensation, but not more than
Internal Revenue Code limitations. The Company, at the discretion of the Board
of Directors, may match the employee contributions. No matching contributions
were made in the years ended June 30, 1995, 1996 and 1997 or for the six months
ended December 31, 1997.
(11) LEASE COMMITMENTS
The Company has operating leases for its office facilities which expire on
various dates through fiscal 2008 and provide for escalation and additional
payments relating to operating expenses. The Company leases some of its computer
and office equipment under capital leases expiring on various dates through
fiscal 2000.
The following is a schedule of future minimum lease payments for capital
and operating leases as of December 31, 1997 (in thousands):
<TABLE>
<CAPTION>
CAPITAL LEASES OPERATING LEASES
-------------- ----------------
<S> <C> <C>
Six months Ended June 30, 1998....................... $ 33 $ 744
Year Ended June 30, 1999............................. 65 1,690
Year Ended June 30, 2000............................. 37 1,580
Year Ended June 30, 2001............................. -- 1,525
Year Ended June 30, 2002............................. -- 1,258
Year Ended June 30, 2003............................. -- 1,154
Thereafter........................................... -- 5,264
---- -------
Total minimum lease payments......................... 135 $ 13,215
=======
Less interest component.............................. (12)
----
Present value of minimum lease payments.............. 123
Less current portion................................. (57)
----
Non-current portion.................................. $ 66
====
</TABLE>
Rental expense for all operating leases was approximately $520,000,
$873,000 and $1,046,000 for the years ended June 30, 1995, 1996 and 1997,
respectively, and $498,000 (unaudited) and $697,000 for the six months ended
December 31, 1996 and 1997, respectively.
F-16
<PAGE> 72
MOBIUS MANAGEMENT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(12) GEOGRAPHIC AREA INFORMATION AND FOREIGN OPERATIONS
<TABLE>
<CAPTION>
UNITED
STATES(a) FOREIGN(b) ELIMINATIONS TOTAL
------------- ---------- ------------ -------
<S> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 1995:
Revenue:
To unaffiliated customers..................... $21,209 1,196 -- $22,405
Between geographic areas(c)................... 455 579 (1,024) --
------- ------- ------- -------
Total Revenue................................... $21,664 1,775 (1,024) $22,405
======= ======= ======= =======
Net income...................................... $ 1,733 (584) -- $ 1,149
Identifiable assets............................. $13,850 1,080 (2,218) $12,712
YEAR ENDED JUNE 30, 1996:
Revenue:
To unaffiliated customers..................... $28,348 2,610 -- $30,958
Between geographic areas(c)................... 899 -- (899) --
------- ------- ------- -------
Total Revenue................................... $29,247 2,610 (899) $30,958
======= ======= ======= =======
Net income...................................... $ 3,417 (800) -- $ 2,617
Identifiable assets............................. $19,169 2,695 (3,418) $18,446
YEAR ENDED JUNE 30, 1997:
Revenue:
To unaffiliated customers..................... $38,716 2,611 -- $41,327
Between geographic areas(c)................... 942 -- (942) --
------- ------- ------- -------
Total Revenue................................... $39,658 2,611 (942) $41,327
======= ======= ======= =======
Net income...................................... $ 4,600 (2,217) -- $ 2,383
Identifiable assets............................. $31,434 3,628 (6,560) $28,502
SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED):
Revenue:
To unaffiliated customers..................... $16,086 1,312 -- $17,398
Between geographic areas(c)................... 449 -- (449) --
------- ------- ------- -------
Total Revenue................................... $16,535 1,312 (449) $17,398
======= ======= ======= =======
Net income...................................... $ 1,511 (708) -- $ 803
Identifiable assets............................. $23,984 3,965 (4,895) $23,014
SIX MONTHS ENDED DECEMBER 31, 1997:
Revenue:
To unaffiliated customers..................... $21,407 1,664 -- $23,071
Between geographic areas(c)................... 586 -- (586) --
------- ------- ------- -------
Total Revenue................................... $21,993 1,664 (586) $23,071
======= ======= ======= =======
Net income...................................... $ 3,133 (1,282) -- $ 1,851
Identifiable assets............................. $38,238 4,747 (8,638) $34,347
</TABLE>
- ---------------
(a) Includes international sales through agents located in the United States.
(b) The Company operates wholly owned subsidiaries in the United Kingdom, Italy,
Germany, France and Sweden.
(c) Represents royalties from foreign subsidiaries generally determined as a
percentage of certain amounts charged to customers.
F-17
<PAGE> 73
MOBIUS MANAGEMENT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(13) COMMITMENTS AND CONTINGENCIES
REVOLVING LINE OF CREDIT
The Company has available as of December 31, 1997 with Silicon Valley Bank
a revolving line of credit of $5,000,000 for working capital purposes, bearing
interest at the prime rate. At December 31, 1997 there were no borrowings on the
line and the agreement expires on October 20, 1998. The line of credit is
secured by certain assets of the Company.
The agreement contains certain financial restrictions and covenants which,
among other things, includes provisions for maintaining a minimum amount of
cash, net worth and profitability.
LETTER OF CREDIT
At December 31, 1997, the Company has established a letter of credit for
$500,000 under the above line of credit with Silicon Valley Bank in connection
with the lease on its corporate office.
(14) PRO FORMA EARNINGS PER SHARE (UNAUDITED)
Pro forma basic earnings per share is calculated by dividing income
available to common stockholders by the pro forma weighted average number of
common shares outstanding for the period. Pro forma diluted earnings per share
is calculated by dividing income available to common stockholders by the pro
forma weighted average number of common shares and potential common shares
outstanding for the period. Both the pro forma basic and diluted weighted
average shares include the conversion of the Series A Convertible Preferred
Stock and the Class A Non-Voting Common Stock into Common Stock. The following
is a reconciliation of the numerators and denominators for the pro forma basic
and pro forma diluted EPS calculation (in thousands, except per share data):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, 1997 DECEMBER 31, 1997
------------------------------------- -------------------------------------
NET PER NET PER
INCOME SHARES SHARE INCOME SHARES SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
------------ ------------- ------ ------------ ------------- ------
<S> <C> <C> <C> <C> <C> <C>
Pro forma basic EPS: Net
income.................... $2,383 $1,851
====== ======
Weighted average shares
outstanding............... 14,318 10,909
Common shares expected to be
issued for conversion of
Preferred Stock........... 4,091 4,091
Common shares expected to be
issued for conversion of
Class A Non-Voting Common
Stock..................... 80 80
------ ------
Pro forma basic EPS......... 18,489 $0.13 15,080 $0.12
===== =====
Pro forma diluted EPS.......
Net income................ $2,383 $1,851
====== ======
Dilutive effect of stock
options................. 882 772
------ ------
Pro forma diluted EPS....... 19,371 $0.12 15,852 $0.12
====== ===== ====== =====
</TABLE>
If the assumed conversion of the Series A Convertible Preferred Stock and
the Class A Non-Voting Common Stock into Common Stock had occurred as of
December 31, 1997, total stockholder's equity would have increased to
$9,437,000.
F-18
<PAGE> 74
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Stockholders have agreed to sell to each of the
Underwriters named below, and each of such Underwriters, for whom Goldman, Sachs
& Co., NationsBanc Montgomery Securities LLC and BancAmerica Robertson Stephens
are acting as representatives, has severally agreed to purchase from the Company
and the Selling Stockholders, the respective number of shares of Common Stock
set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
UNDERWRITER COMMON STOCK
---------------------------------------------------------------------- ------------
<S> <C>
Goldman, Sachs & Co. .................................................
NationsBanc Montgomery Securities LLC.................................
BancAmerica Robertson Stephens........................................
-----------
Total....................................................... 2,900,000
===========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.
The Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at such
price less a concession of $ per share. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $ per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the initial public offering price and other selling terms
may from time to time be varied by the representatives.
The Selling Stockholders have granted the Underwriters an option
exercisable for 30 days after the date of this Prospectus to purchase up to an
aggregate of 435,000 additional shares of Common Stock to cover over-allotments,
if any. If the Underwriters exercise their over-allotment option, the
Underwriters have severally agreed, subject to certain conditions, to purchase
approximately the same percentage thereof that the number of shares to be
purchased by each of them, as shown in the foregoing table, bears to the
2,900,000 shares of Common Stock offered.
The Company, its directors and officers, and certain of its stockholders
have agreed that, subject to certain exceptions, during the period beginning
from the date of this Prospectus and continuing to and including the date 180
days after the date of the Prospectus, they will not offer, sell, contract to
sell or otherwise dispose of any shares of Common Stock or of any other
securities of the Company (other than, in the case of the Company, pursuant to
stock incentive plans existing on the date of this Prospectus) which are
substantially similar to the shares of Common Stock or which are convertible or
exchangeable into securities which are substantially similar to the shares of
Common Stock without the prior written consent of the representatives, except
for the shares of Common Stock offered in connection with the offering.
Prior to the offering, there has been no public market for the shares of
Common Stock. The initial public offering price will be negotiated among the
Company and the representatives. Among the factors to be considered in
determining the initial public offering price of the Common Stock, in addition
to prevailing market conditions, will be the Company's historical performance,
estimates of the business potential and earnings prospects for the Company, an
assessment of the Company's management and the consideration of the above
factors in relation to market valuation of companies in related businesses.
The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed 5% of the total number of shares of Common
Stock offered hereby.
U-1
<PAGE> 75
In connection with the offering, the Underwriters may purchase and sell
Common Stock in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions
created by the Underwriters in connection with the offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of preventing
or retarding a decline in the market price of the Common Stock; and syndicate
short positions created by the Underwriters involve the sale by the Underwriters
of a greater number of shares of Common Stock than they are required to purchase
from the Company in the offering. The Underwriters also may impose a penalty
bid, whereby selling concessions allowed to syndicate members or other
broker-dealers in respect of the securities sold in the offering for their
account may be reclaimed by the syndicate if such shares of Common Stock are
repurchased by the syndicate in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Common Stock, which may be higher than the price that might otherwise prevail in
the open market. These transactions may be effected on the Nasdaq National
Market, in the over-the-counter market or otherwise, and these activities, if
commenced, may be discontinued at any time.
The Company will apply to list the Common Stock on the Nasdaq National
Market under the symbol "MOBI".
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act.
U-2
<PAGE> 76
==========================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
----------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary....................... 3
Risk Factors............................. 6
Use of Proceeds.......................... 14
Dividend Policy.......................... 14
Capitalization........................... 15
Dilution................................. 16
Selected Consolidated Financial Data..... 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 19
Business................................. 28
Management............................... 40
Certain Transactions..................... 49
Principal and Selling Stockholders....... 50
Description of Capital Stock............. 51
Shares Eligible For Future Sale.......... 53
Legal Matters............................ 54
Experts.................................. 54
Additional Information................... 54
Index to Consolidated Financial
Statements............................. F-1
Underwriting............................. U-1
</TABLE>
THROUGH AND INCLUDING , 1998 (THE 25TH DAY AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
==========================================================
==========================================================
2,900,000 SHARES
MOBIUS MANAGEMENT
SYSTEMS, INC.
COMMON STOCK
(PAR VALUE $.0001 PER SHARE)
----------------------
[LOGO]
----------------------
GOLDMAN, SACHS & CO.
NATIONSBANC MONTGOMERY
SECURITIES LLC
BANCAMERICA ROBERTSON
STEPHENS
REPRESENTATIVES OF THE UNDERWRITERS
==========================================================
<PAGE> 77
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimated expenses (other than underwriting discounts and commissions)
payable in connection with the sale of the Common Stock offered hereby are as
follows:
<TABLE>
<S> <C>
SEC Registration fee............................................. $ 12,790
NASD filing fee.................................................. 4,836
Nasdaq National Market fee....................................... 22,580
Printing and engraving expenses.................................. 175,000
Legal fees and expenses.......................................... 300,000
Accounting fees and expenses..................................... 200,000
Blue Sky fees and expenses (including legal fees)................ 10,000
Transfer agent and registrar fees and expenses................... 7,500
Miscellaneous.................................................... 167,294
--------
Total.................................................. $900,000
========
</TABLE>
The Registrant will bear all expenses shown above.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article EIGHTH of the Registrant's Second Amended and Restated Certificate
of Incorporation (the "Restated Certificate of Incorporation") provides that no
director of the Registrant shall be personally liable for any monetary damages
for any breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Registrant or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which the
director derived any improper personal benefit.
Article NINTH of the Registrant's Restated Certificate of Incorporation
provides that the Registrant shall to the fullest extent permitted by Delaware
law, as in effect from time to time, indemnify each director or officer of the
Registrant or of any of its wholly-owned subsidiaries who was or is a party or
is threatened to be made a party to any litigation or other legal proceeding, by
reason of the fact that he or she is or was a director, officer, employee or
agent of the Registrant or of any of its subsidiaries (provided that such
person's actions subject to such proceeding were taken in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Registrant, and, with respect to any criminal proceeding, had
no reasonable cause to believe his or her conduct was unlawful) against all
expense, liability and loss (including, but not limited to, attorneys' fees,
judgments, fines, excise taxes or penalties with respect to any employee benefit
plan or otherwise, and amounts paid or to be paid in settlement) incurred or
suffered by such director or officer in connection with such proceeding;
provided, however, that, except for proceedings to recover claims made by a
director or officer against the Registrant pursuant to such Article NINTH, the
Registrant shall not be obligated to indemnify a director or officer in
connection with a proceeding not authorized by the Board of Directors of the
Registrant and initiated by such director or officer against (i) the Registrant
or any of its subsidiaries, (ii) any person who is or was a director, officer,
employee or agent of the Registrant or any of its subsidiaries and/or (iii) any
person or entity which is or was controlled, controlled by, or under common
control with the Registrant or has or had business relations with the Registrant
or any of its subsidiaries.
II-1
<PAGE> 78
The right to indemnification conferred by such Article NINTH includes the
right to be paid by the Registrant the expenses incurred in connection with the
defense or investigation of any such proceeding in advance of its final
disposition; provided, however, that if and to the extent that Delaware law so
requires, the payment of such expense in advance of the final disposition of a
proceeding shall be made only upon delivery to the Registrant of an undertaking,
by or on behalf of such director or officer or former director or officer, to
repay all amounts so advanced if it shall ultimately be determined that such
director or officer or former director or officer is not entitled to be
indemnified by the Registrant.
Article NINTH of the Registrant's Restated Certificate of Incorporation
further provides that the indemnification provided therein is not exclusive, and
provides that in the event that the Delaware General Corporation Law is amended
to expand the indemnification permitted to directors or officers the Registrant
must indemnify those persons to the fullest extent permitted by such law as so
amended.
Section 145 of the Delaware General Corporation Law provides that a
corporation has the power to indemnify a director, officer, employee or agent of
the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred in
connection with an action or proceeding to which he is or is threatened to be
made by a party by reason of such position, if such person shall have acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, and, in any criminal proceeding, if such
person had no reasonable cause to believe his conduct was unlawful; provided
that, in the case of actions brought by or in the right of the corporation, no
indemnification shall be made with respect to any matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the adjudicating court determines that such indemnification is
proper under the circumstances.
Under the Underwriting Agreement, the Underwriters are obligated, under
certain circumstances, to indemnify the Company, directors, officers and
controlling persons of the Company against certain liabilities, including
liabilities under the Securities Act. Reference is made to the form of
Underwriting Agreement filed as Exhibit 1.1 hereto.
The Company has obtained directors and officers liability insurance for the
benefit of its directors and certain of its officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In the three years preceding the filing of this registration statement, the
Company has granted the following options (and shares issued upon the exercise
thereof) to employees and non-employee directors and Series A Convertible
Preferred Stock to certain investors that were not registered under the
Securities Act:
Since November 1, 1996, the Company has granted options under the 1996 Plan
to purchase an aggregate of 2,438,000 shares of Common Stock at various exercise
prices ranging from $1.25 to $11.00 per share to certain employees of the
Registrant, including 270,000, 340,000, 360,000 and 360,000 (net of 640,000
having lapsed) options for each of the following Named Executive Officers,
respectively: E. Kevin Dahill, Karry Kleeman, Robert Lawrence and Joseph
Tinnerello. These options were granted pursuant to option agreements subject to
certain vesting requirements (other than a September 30, 1997 grant to Mr.
Tinnerello to purchase 100,000 shares of Common Stock, all of which were
exercisable immediately upon the grant). The Company believes that such
issuances were made based upon the exemption from the registration requirements
of the Securities Act of 1933, as amended (the "Securities Act"), contained in
Section 3(b) of the Securities Act because the subject securities were issued
pursuant to a compensatory benefit plan pursuant to Rule 701 under the
Securities Act. Restrictive legends were placed in the agreements relating to
the right to purchase such shares.
II-2
<PAGE> 79
On May 12, 1997, pursuant to a Stock Purchase Agreement, the Company issued
an aggregate of 40,910 shares of the Company's Series A Convertible Preferred
Stock, $.01 par value (the "Series A Preferred Stock") for an aggregate purchase
price of $12,000,130 to Oak Investment Partners VI, L.P., Oak VI Affiliates
Fund, L.P., NEA Ventures 1997, NEA President's Fund L.P., New Enterprise
Associates VII, New Venture Partners III L.P. and Glynn Ventures III, L.P. Upon
consummation of this offering, each of such shares will convert into 100 shares
of Common Stock. The Company believes that such issuance was made based upon the
exemption from the registration requirements of the Securities Act contained in
Section 4(2) of the Securities Act because the subject securities were sold to a
limited group of persons, each of whom was believed to have been a sophisticated
investor. Restrictive legends were placed on the stock certificates evidencing
such shares of Series A Preferred Stock.
On December 30, 1997, the Company issued 80,000 shares of Class A
Non-Voting Common Stock to Mr. Tinnerello upon the exercise of certain vested
options (granted in November, 1996). Upon consummation of this offering, such
shares automatically convert into shares of Common Stock on a one to one basis.
The Company believes that such issuance was made based upon the exemption from
the registration requirements of the Securities Act contained in Section 3(b) of
the Securities Act because the subject securities were issued pursuant to a
compensatory benefit plan pursuant to Rule 701 under the Securities Act.
Restrictive legends were placed on the stock certificates evidencing such shares
of Class A Non-Voting Common Stock.
On February 25, 1998, the Company's stockholders approved the Company's
Directors' Plan. Effective upon such approval, each of Messrs. Barris,
Glassmeyer and Kopelman, non-employee members of the Company's Board of
Directors, were granted immediately exercisable options to purchase 10,000
shares at an exercise price of $11.00 per share. The Company believes that such
issuance was made based upon the exemption from the registration requirements of
the Securities Act contained in Section 3(b) of the Securities Act because the
subject securities were issued pursuant to a compensatory benefit plan pursuant
to Rule 701 under the Securities Act. Restrictive legends were placed in the
agreements relating to the right to purchase such shares.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- --------------------------------------------------------------------------------
<C> <C> <S>
1.1* -- Form of Underwriting Agreement.
3.1* -- Second Amended and Restated Certificate of Incorporation of the Registrant.
3.2* -- Restated By-Laws of the Registrant.
4.1 -- Specimen certificate representing the Common Stock.
5.1* -- Opinion of Kramer, Levin, Naftalis & Frankel.
10.1 -- Mobius Management Systems, Inc. 1996 Stock Incentive Plan.
10.2* -- Amendment No. 1 to Mobius Management Systems, Inc. 1996 Stock Incentive Plan.
10.3* -- Mobius Management Systems, Inc. 1998 Employee Stock Purchase Plan.
10.4* -- Mobius Management Systems, Inc. 1998 Non-Employee Director Stock Option Plan.
10.5* -- Mobius Management System, Inc. 1998 Executive Incentive Plan.
10.6 -- Form of Grantee Option Agreement.
10.7 -- Lease dated December 4, 1997 by and between Old Boston Post Road Associates LLC
and the Registrant.
10.8 -- Lease dated February 14, 1983 by and between American National Bank and Trust
Company of Chicago and the Registrant.
10.9 -- Stock Purchase Agreement dated as of May 12, 1997 by and among the Registrant
and the other parties listed on the signature pages thereto.
10.10 -- Stockholders' Agreement dated as of May 12, 1997 by and among the Registrant and
the other parties listed on the signature pages thereto.
</TABLE>
II-3
<PAGE> 80
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- --------------------------------------------------------------------------------
<C> <C> <S>
10.11 -- Registration Rights Agreement dated May 12, 1997 by and among the Registrant and
the other parties listed on the signature pages thereto.
10.12* -- Employment Agreement between the Registrant and Mitchell Gross, dated February
26, 1998.
10.13* -- Employment Agreement between the Registrant and Joseph Albracht, dated February
26, 1998.
10.14 -- Severance Agreement dated as of September 30, 1997 between the Registrant and
Joseph Tinnerello.
10.15 -- Option Agreement dated as of September 30, 1997 between the Registrant and
Joseph Tinnerello.
10.16 -- Letter Agreement, dated as of December 28, 1997 between the Registrant and
Joseph Tinnerello.
10.17 -- Stockholder Agreement, dated as of December 30, 1997 between the Registrant and
Joseph Tinnerello.
10.18 -- Loan and Security Agreement dated as of October 21, 1997 between Silicon Valley
Bank and the Registrant.
10.19* -- Software Assets Purchase Agreements dated as of December 10, 1990 among the
Registrant, Compucept of Nevada and Software Assist Corporation.
10.20* -- OEM Agreement between the Registrant and CDP Communications, Inc. dated as of
October 15, 1993.
10.21* -- Source Code License and Amendment to OEM Agreement between the Registrant and
CDP Communications Inc. dated as of August 12, 1997.
10.22* -- Amendment #1 to License and Amendment to OEM Agreement between the Registrant
and CDP Communications, Inc. dated November 21, 1997.
21.1 -- Subsidiaries of the Registrant.
23.1 -- Consent of KPMG Peat Marwick LLP.
23.2* -- Consent of Kramer, Levin, Naftalis & Frankel (included in Exhibit 5.1).
24.1 -- Power of Attorney (included on the signature page hereof).
</TABLE>
- ---------------
* To be filed by amendment
(b) Financial Statement Schedule for each of the three years in the period
ended June 30, 1996:
<TABLE>
<CAPTION>
PAGE NUMBER
-----------
<S> <C>
Schedule II -- Valuation and Qualifying Accounts and Reserves II-5
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or the
notes thereto.
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to provisions described in Item 14 above, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the
II-4
<PAGE> 81
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The Registrant hereby undertakes (1) to provide to the Underwriters at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser; (2) that for purposes of determining
any liability under the Act, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part of this
registration statement as of the time it was declared effective; and (3) that
for the purpose of determining any liability under the Act, each post-effective
amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-5
<PAGE> 82
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on February 27, 1998.
MOBIUS MANAGEMENT SYSTEMS, INC.
By: /s/ MITCHELL GROSS
------------------------------------
Mitchell Gross
Chairman of the Board, Chief
Executive
Officer and President
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Mobius Management Systems,
Inc., hereby severally constitute and appoint Mitchell Gross and Joseph J.
Albracht and each of them singly, our true and lawful attorneys, with full power
to them and each of them singly, to sign for us in our names in the capacities
indicated below, all pre-effective and post-effective amendments to this
registration statement and any related subsequent registration statement
pursuant to Rule 462(b) of the Securities Act of 1933, as amended, and generally
to do all things in our names and on our behalf in such capacities to enable
Mobius Management Systems, Inc. to comply with the provisions of the Securities
Act of 1933, as amended, and all requirements of the Securities and Exchange
Commission.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE(S) DATE
- ------------------------------------------ ------------------------------ ------------------
<C> <S> <C>
/s/ MITCHELL GROSS Chairman of the Board, Chief February 27, 1998
- ------------------------------------------ Executive Officer, President
Mitchell Gross (Principal Executive Officer)
and Director
/s/ JOSEPH J. ALBRACHT Executive Vice President, February 27, 1998
- ------------------------------------------ Chief Operating Officer,
Joseph J. Albracht Secretary and Director
/s/ E. KEVIN DAHILL Vice President, Finance, Chief February 27, 1998
- ------------------------------------------ Financial Officer and
E. Kevin Dahill Treasurer (Principal Financial
and Accounting Officer)
/s/ PETER J. BARRIS Director February 27, 1998
- ------------------------------------------
Peter J. Barris
/s/ EDWARD F. GLASSMEYER Director February 27, 1998
- ------------------------------------------
Edward F. Glassmeyer
/s/ KENNETH P. KOPELMAN Director February 27, 1998
- ------------------------------------------
Kenneth P. Kopelman
</TABLE>
II-6
<PAGE> 83
SCHEDULE II
MOBIUS MANAGEMENT SYSTEMS, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
----------------------
BALANCE AT CHARGED TO CHARGES BALANCE
BEGINNING COSTS AND TO OTHER AT END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
- --------------------------------------- ---------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1995:
Deductions from asset account:
Allowance for doubtful accounts...... 80 126 -- (126) 80
Year ended June 30, 1996:
Deductions from asset account:
Allowance for doubtful accounts...... 80 575 -- (232) 423
Year ended June 30, 1997:
Deductions from asset account:
Allowance for doubtful accounts...... 423 817 -- (519) 721
</TABLE>
<PAGE> 84
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ---------------------------------------------------------------------- ----------
<C> <C> <S> <C>
1.1* -- Form of Underwriting Agreement........................................
3.1* -- Second Amended and Restated Certificate of Incorporation of the
Registrant............................................................
3.2* -- Restated By-Laws of the Registrant....................................
4.1 -- Specimen certificate representing the Common Stock....................
5.1* -- Opinion of Kramer, Levin, Naftalis & Frankel..........................
10.1 -- Mobius Management Systems, Inc. 1996 Stock Incentive Plan.............
10.2* -- Amendment No. 1 to Mobius Management Systems, Inc 1996 Stock Incentive
Plan..................................................................
10.3* -- Mobius Management Systems, Inc. 1998 Employee Stock Purchase Plan.....
10.4* -- Mobius Management Systems, Inc. 1998 Non-Employee Director Stock
Option Plan...........................................................
10.5* -- Mobius Management System, Inc. 1998 Executive Incentive Plan..........
10.6 -- Form of Grantee Option Agreement......................................
10.7 -- Lease dated December 4, 1997 by and between Old Boston Post Road
Associates LLC and the Registrant.....................................
10.8 -- Lease dated February 14, 1983 by and between American National Bank
and Trust Company of Chicago and the Registrant.......................
10.9 -- Stock Purchase Agreement dated as of May 12, 1997 by and among the
Registrant and the other parties listed on the signature pages
thereto...............................................................
10.10 -- Stockholders' Agreement dated as of May 12, 1997 by and among the
Registrant and the other parties listed on the signature pages
thereto...............................................................
10.11 -- Registration Rights Agreement dated May 12, 1997 by and among the
Registrant and the other parties listed on the signature pages
thereto...............................................................
10.12* -- Employment Agreement between the Registrant and Mitchell Gross, dated
February 26, 1998.....................................................
10.13* -- Employment Agreement between the Registrant and Joseph Albracht, dated
February 26, 1998.....................................................
10.14 -- Severance Agreement dated as of September 30, 1997 between the
Registrant and Joseph Tinnerello......................................
10.15 -- Option Agreement dated as of September 30, 1997 between the Registrant
and Joseph Tinnerello.................................................
10.16 -- Letter Agreement, dated as of December 28, 1997 between the Registrant
and Joseph Tinnerello.................................................
10.17 -- Stockholder Agreement, dated as of December 30, 1997 between the
Registrant and Joseph Tinnerello......................................
10.18 -- Loan and Security Agreement dated as of October 21, 1997 between
Silicon Valley Bank and the Registrant................................
10.19* -- Software Assets Purchase Agreements dated as of December 10, 1990
among the Registrant, Compucept of Nevada and Software Assist
Corporation...........................................................
10.20* -- OEM Agreement between the Registrant and CDP Communications, Inc.
dated as of October 15, 1993..........................................
</TABLE>
<PAGE> 85
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<C> <C> <S> <C>
10.21* -- Source Code License and Amendment to OEM Agreement between the
Registrant and CDP Communications Inc. dated as of August 12, 1997....
10.22* -- Amendment #1 to License and Amendment to OEM Agreement between the
Registrant and CDP Communications, Inc. dated November 21, 1997.......
21.1 -- Subsidiaries of the Registrant........................................
23.1 -- Consent of KPMG Peat Marwick LLP......................................
23.2* -- Consent of Kramer, Levin, Naftalis & Frankel (included in Exhibit
5.1). ................................................................
24.1 -- Power of Attorney (included on the signature page hereof).............
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
COMMON STOCK
Mobius Management Systems, Inc.
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE
SEE REVERSE FOR
CERTAIN DEFINITIONS
This Certifies that
is the owner of
CUSIP 606925 10 5
FULLY PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE OF $.0001 EACH OF THE
COMMON STOCK OF
Mobius Management Systems, Inc.
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this certificate properly endorsed. This certificate
is not valid unless countersigned by the Transfer Agent and registered by the
Registrar.
Witness the seal of the Corporation and the facsimile signatures of its duly
authorized officers.
Dated:
EXECUTIVE VICE PRESIDENT
AND SECRETARY
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
<PAGE> 2
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED SIGNATURE
MOBIUS MANAGEMENT SYSTEMS, 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:
TEN COM
TEN ENT
JT TEN
?
?
?
as tenants in common
as tenants by the entireties
as joint tenants with right of survivorship and not as tenants in common
UNIF GIFT MIN ACT ? Custodian
(Cust) (Minor)
under Uniform Gifts to Minors
Act
(State)
Additional abbreviations may also be used though not in the above list.
<PAGE> 3
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 named Corporation with
full power of substitution in the premises.
Dated
Notice:
The signature to this assignment must correspond with the name as written upon
the face of the certificate in every particular, without alteration or
enlargement or any change whatever.
Signature(s) Guaranteed:
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
<PAGE> 1
Exhibit 10.1
MOBIUS MANAGEMENT SYSTEMS, INC.
1996 STOCK INCENTIVE PLAN
<PAGE> 2
Table of Contents
Page
ARTICLE I
GENERAL
1.1 Purpose................................................... 1
1.2 Administration............................................ 1
1.3 Persons Eligible for Awards............................... 3
1.4 Types of Awards Under Plan................................ 3
1.5 Shares Available for Awards............................... 3
1.6 Definitions of Certain Terms.............................. 6
ARTICLE II
AWARDS UNDER THE PLAN
2.1 Agreements Evidencing Awards.............................. 9
2.2 Grant of Stock Options, Stock Appreciation
Rights and Dividend Equivalent Rights .................. 9
2.3 Exercise of Options and Stock Appreciation Rights......... 14
2.4 Termination of Employment; Death.......................... 16
2.5 Grant of Restricted Stock................................. 18
2.6 Grant of Restricted Stock Units........................... 20
2.7 Other Stock-Based Awards.................................. 21
2.8 Right of Recapture........................................ 21
ARTICLE III
MISCELLANEOUS
3.1 Amendment of the Plan; Modification of Awards............. 23
3.2 Tax Withholding........................................... 24
3.3 Restrictions.............................................. 25
3.4 Nonassignability.......................................... 26
3.5 Requirement of Notification of
Election Under Section 83(b) of the Code................ 26
3.6 Requirement of Notification Upon Disqualifying
Disposition Under Section 421(b) of the Code............ 26
3.7 Change in Control......................................... 27
3.8 Right of Discharge Reserved............................... 29
3.9 Nature of Payments........................................ 30
3.10 Non-Uniform Determinations................................ 30
3.11 Other Payments or Awards.................................. 31
3.12 Section Headings.......................................... 31
3.13 Effective Date and Term of Plan........................... 31
3.14 Governing Law............................................. 31
-i-
<PAGE> 3
ARTICLE I
GENERAL
1.1 Purpose
The purpose of the Mobius Management Systems, Inc. 1996 Stock
Incentive Plan (the "Plan") is to provide for officers, other employees, and
directors of, and consultants to, Mobius Management Systems, Inc. (the
"Company") an incentive (a) to enter into and remain in the service of the
Company, (b) to enhance the long-term performance of the Company, and (c) to
acquire a proprietary interest in the success of the Company.
1.2 Administration
1.2.1 Subject to Section 1.2.6, the Plan shall be administered by
the Stock Option Committee (the "Committee") of the board of directors of the
Company (the "Board"), which shall consist of not less than two directors. The
members of the Committee shall be appointed by, and serve at the pleasure of,
the Board. To the extent required for transactions under the Plan to qualify for
the exemptions available under Rule 16b-3 ("Rule 16b-3") promulgated under the
Securities Exchange Act of 1934 (the "1934 Act"), the members of the Committee
shall be "non-employee directors" within the meaning of Rule 16b-3.
1.2.2 The Committee shall have the authority (a) to exercise all of
the powers granted to it under the Plan, (b) to
<PAGE> 4
construe, interpret and implement the Plan and any Plan Agreements executed
pursuant to Section 2.1, (c) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules governing its own operations,
(d) to make all determinations necessary or advisable in administering the Plan,
(e) to correct any defect, supply any omission and reconcile any inconsistency
in the Plan, and (f) to amend the Plan to reflect changes in applicable law.
1.2.3 Actions of the Committee shall be taken by the vote of a
majority of its members. Any action may be taken by a written instrument signed
by a majority of the Committee members, and action so taken shall be fully as
effective as if it had been taken by a vote at a meeting.
1.2.4 The determination of the Committee on all matters relating to
the Plan or any Plan Agreement shall be final, binding and conclusive.
1.2.5 No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any award
thereunder.
1.2.6 Notwithstanding anything to the contrary contained herein: (a)
until the Board shall appoint the members of the Committee, the Plan shall be
administered by the Board; and (b) the Board may, in its sole discretion, at any
time and from time to time, resolve to administer the Plan. In either of the
-2-
<PAGE> 5
foregoing events, the Board shall have all of the authority and responsibility
granted to the Committee herein.
1.3 Persons Eligible for Awards
Awards under the Plan may be made to such directors, officers and
other employees of the Company and its subsidiaries (including prospective
employees conditioned on their becoming employees), and to such consultants to
the Company and its subsidiaries (collectively, "key persons") as the Committee
shall in its discretion select.
1.4 Types of Awards Under Plan
Awards may be made under the Plan in the form of (a) incentive stock
options, (b) nonqualified stock options, (c) stock appreciation rights, (d)
dividend equivalent rights, (e) restricted stock, (f) restricted stock units and
(g) other stock-based awards, all as more fully set forth in Article II. The
term "award" means any of the foregoing. No incentive stock option may be
granted to a person who is not an employee of the Company on the date of grant.
1.5 Shares Available for Awards
1.5.1 The total number of shares of Class A Non-Voting Common Stock
of the Company, par value $0.01 per share ("Class A Common Stock"), which may be
transferred pursuant to awards granted under the Plan (the "share limit") shall
be determined as
-3-
<PAGE> 6
follows: (a) upon adoption of the Plan by the Board, the share limit shall be
30,000 shares; (b) upon the completion of an initial public offering of common
stock of the Company, the share limit shall be a number equal to 15% of the
total number of shares issued and outstanding immediately following such
offering; and (c) as of any January 1 following the completion of an initial
public offering of common stock of the Company, the Board in its discretion may
increase the share limit by a number that is no more than 1% of the total number
of shares of common stock issued and outstanding at such date. Notwithstanding
the foregoing, no more than 30,000 shares of Class A Common Stock may be
transferred upon the exercise of incentive stock options (subject to the 15%
adjustment as specified in clause (b), above). Shares transferred pursuant to
awards granted under the Plan may be authorized but unissued Class A Common
Stock or authorized and issued Class A Common Stock held in the Company's
treasury or acquired by the Company for the purposes of the Plan. The Committee
may direct that any stock certificate evidencing shares issued pursuant to the
Plan shall bear a legend setting forth such restrictions on transferability as
may apply to such shares pursuant to the Plan.
1.5.2 Subject to any required action by the shareholders of the
Company, the number of shares of Class A Common Stock covered by each
outstanding award, the number of shares of Class A Common Stock available for
awards, and the price per share of
-4-
<PAGE> 7
Class A Common Stock covered by each outstanding award shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Class A
Common Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Class A Common Stock, or any other
increase or decrease in the number of issued shares of Class A Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Committee, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Class A Common Stock
subject to an award. Without limiting the generality of the foregoing, in the
event of the initial public offering of shares of common stock of the Company,
each share of Class A Common Stock authorized for awards under this Plan
pursuant to Section 1.5.1, including shares subject to awards outstanding at the
time of such offering, shall be converted into a share of such class of common
stock of the Company as is offered to the public in such offering and all
references herein to shares of Class A Common Stock shall thereafter be deemed
to refer to such publicly offered class of common stock.
-5-
<PAGE> 8
1.5.3 Except as provided in Section 2.2.6, there shall be no limit
on the number or the value of the shares of Class A Common Stock that may be
subject to awards to any individual under the Plan.
1.6 Definitions of Certain Terms
1.6.1 The "Fair Market Value" of a share of Class A Common Stock on
any day shall be determined as follows.
(a) If the principal market for the Class A Common Stock (the
"Market") is a national securities exchange or the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") National Market, the
last sale price or, if no reported sales take place on the applicable date, the
average of the high bid and low asked price of Class A Common Stock as reported
for such Market on such date or, if no such quotation is made on such date, on
the next preceding day on which there were quotations, provided that such
quotations shall have been made within the ten (10) business days preceding the
applicable date;
(b) If the Market is the NASDAQ National List, the NASDAQ
Supplemental List or another market, the average of the high bid and low asked
price for Class A Common Stock on the applicable date, or, if no such quotations
shall have been made on such date, on the next preceding day on which there were
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quotations, provided that such quotations shall have been made within the ten
(10) business days preceding the applicable date; or,
(c) In the event that neither paragraph (a) nor (b) shall
apply, the Fair Market Value of a share of Class A Common Stock on any day shall
be determined in good faith by the Committee.
1.6.2 The term "incentive stock option" means an option that is
intended to qualify for special federal income tax treatment pursuant to
sections 421 and 422 of the Internal Revenue Code of 1986 (the "Code"), as now
constituted or subsequently amended, or pursuant to a successor provision of the
Code, and which is so designated in the applicable Plan Agreement. Any option
that is not specifically designated as an incentive stock option shall under no
circumstances be considered an incentive stock option. Any option that is not an
incentive stock option is referred to herein as a "nonqualified stock option."
1.6.3 The term "employment" means, in the case of a grantee of an
award under the Plan who is not an employee of the Company, the grantee's
association with the Company as a director, consultant or otherwise.
1.6.4 A grantee shall be deemed to have a "termination of
employment" upon ceasing to be employed by the Company and all
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of its subsidiaries or by a corporation assuming awards in a transaction to
which section 425(a) of the Code applies. The Committee may in its discretion
determine (a) whether any leave of absence constitutes a termination of
employment for purposes of the Plan, (b) the impact, if any, of any such leave
of absence on awards theretofore made under the Plan, and (c) when a change in a
non-employee's association with the Company constitutes a termination of
employment for purposes of the Plan. The Committee shall have the right to
determine whether the termination of a grantee's employment is a dismissal for
cause and the date of termination in such case, which date the Committee may
retroactively deem to be the date of the action that is cause for dismissal.
Such determinations of the Committee shall be final, binding and conclusive.
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ARTICLE II
AWARDS UNDER THE PLAN
2.1 Agreements Evidencing Awards
Each award granted under the Plan shall be evidenced by a written
agreement ("Plan Agreement") which shall contain such provisions as the
Committee in its discretion deems necessary or desirable. Such provisions may
include, without limitation, a requirement that the grantee become a party to a
shareholders' agreement with respect to any shares of Class A Common Stock
acquired pursuant to the award, a requirement that the grantee acknowledge that
such shares are acquired for investment purposes only, and a right of first
refusal exercisable by the Company in the event that the grantee wishes to
transfer any such shares. By accepting an award pursuant to the Plan, a grantee
thereby agrees that the award shall be subject to all of the terms and
provisions of the Plan and the applicable Plan Agreement.
2.2 Grant of Stock Options, Stock Appreciation Rights and Dividend Equivalent
Rights
2.2.1 The Committee may grant incentive stock options and
nonqualified stock options (collectively, "options") to purchase shares of Class
A Common Stock from the Company, to such key persons, in such amounts and
subject to such terms and conditions, as the Committee shall determine in its
discretion, subject to the provisions of the Plan.
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2.2.2 The Committee may grant stock appreciation rights to such key
persons, and in such amounts and subject to such terms and conditions, as the
Committee shall determine in its discretion, subject to the provisions of the
Plan. Stock appreciation rights may be granted in connection with all or any
part of, or independently of, any option granted under the Plan. A stock
appreciation right granted in connection with a non-qualified stock option may
be granted at or after the time of grant of such option. A stock appreciation
right granted in connection with an incentive stock option may be granted only
at the time of grant of such option.
2.2.3 The grantee of a stock appreciation right shall have the
right, subject to the terms of the Plan and the applicable Plan Agreement, to
receive from the Company an amount equal to (a) the excess of the Fair Market
Value of a share of Class A Common Stock on the date of exercise of the stock
appreciation right over (b) the exercise price of such right determined by the
Committee at the time of the award (or over the option exercise price if the
stock appreciation right is granted in connection with an option), multiplied by
(c) the number of shares with respect to which the stock appreciation right is
exercised. Payment upon exercise of a stock appreciation right shall be in cash
or in shares of Class A Common Stock (valued at their Fair Market Value on the
date of exercise of the stock appreciation right) or both, all as the Committee
shall determine in its
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discretion. Upon the exercise of a stock appreciation right granted in
connection with an option, the number of shares subject to the option shall be
correspondingly reduced by the number of shares with respect to which the stock
appreciation right is exercised. Upon the exercise of an option in connection
with which a stock appreciation right has been granted, the number of shares
subject to the stock appreciation right shall be correspondingly reduced by the
number of shares with respect to which the option is exercised.
2.2.4 Each Plan Agreement with respect to an option shall set forth
the amount (the "option exercise price") payable by the grantee to the Company
upon exercise of the option evidenced thereby. The option exercise price per
share shall be determined by the Committee in its discretion; provided, however,
that the option exercise price shall be at least 100% of the Fair Market Value
of a share of Class A Common Stock on the date the option is granted in the case
of an incentive stock option, and provided further that in no event shall the
option exercise price be less than the par value of a share of Class A Common
Stock.
2.2.5 Each Plan Agreement with respect to an option or stock
appreciation right shall set forth the periods during which the award evidenced
thereby shall be exercisable, whether in whole or in part. Such periods shall be
determined by the Committee in its discretion; provided, however, that no
incentive stock option (or a stock appreciation right granted in connection
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with an incentive stock option) shall be exercisable more than 10 years after
the date of grant.
2.2.6 To the extent that the aggregate Fair Market Value (determined
as of the time the option is granted) of the stock with respect to which
incentive stock options granted under this Plan and all other plans of the
Company and any subsidiary are first exercisable by any employee during any
calendar year shall exceed the maximum limit (currently $100,000), if any,
imposed from time to time under section 422 of the Code, such options shall be
treated as nonqualified stock options.
2.2.7 Notwithstanding the provisions of Sections 2.2.4 and 2.2.5, to
the extent required under section 422 of the Code an incentive stock option may
not be granted under the Plan to an individual who, at the time the option is
granted, owns stock possessing more than 10% of the total combined voting power
of all classes of stock of his employer corporation or of its parent or
subsidiary corporations (as such ownership may be determined for purposes of
section 422(b)(6) of the Code) unless (a) at the time such incentive stock
option is granted the option exercise price is at least 110% of the Fair Market
Value of the shares subject thereto and (b) the incentive stock option by its
terms is not exercisable after the expiration of 5 years from the date it is
granted.
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2.2.8 The Committee may in its discretion include in any Plan
Agreement with respect to an option (the "original option") a provision that an
additional option (the "additional option") shall be granted to any grantee who,
pursuant to Section 2.3.3(b), delivers shares of Class A Common Stock in partial
or full payment of the exercise price of the original option. The additional
option shall be for a number of shares of Class A Common Stock equal to the
number thus delivered, shall have an exercise price equal to the Fair Market
Value of a share of Class A Common Stock on the date of exercise of the original
option, and shall have an expiration date no later than the expiration date of
the original option. In the event that a Plan Agreement provides for the grant
of an additional option, such Agreement shall also provide that the exercise
price of the original option be no less than the Fair Market Value of a share of
Class A Common Stock on its date of grant, and that any shares that are
delivered pursuant to Section 2.3.3(b) in payment of such exercise price shall
have been held for at least six months.
2.2.9 The Committee may in its discretion include in any Plan
Agreement with respect to any award a dividend equivalent right entitling the
grantee to receive amounts equal to the ordinary dividends that would be paid,
during the time such award is outstanding and unexercised, on the shares of
Class A Common Stock covered by such award if such shares were then outstanding.
In the event such a provision is included in a Plan Agreement,
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the Committee shall determine whether such payments shall be made in cash, in
shares of Class A Common Stock or in another form, whether they shall be
conditioned upon the exercise of the award to which they relate, the time or
times at which they shall be made, and such other terms and conditions as the
Committee shall deem appropriate.
2.3 Exercise of Options and Stock Appreciation Rights
Subject to the provisions of this Article II, each option or stock
appreciation right granted under the Plan shall be exercisable as follows:
2.3.1 Unless the applicable Plan Agreement otherwise provides, an
option or stock appreciation right shall become exercisable in five
substantially equal installments, on each of the first, second, third, fourth
and fifth anniversaries of the date of grant, and each installment, once it
becomes exercisable, shall remain exercisable until expiration, cancellation or
termination of the award.
2.3.2 Unless the applicable Plan Agreement otherwise provides, an
option or stock appreciation right may be exercised from time to time as to all
or part of the shares as to which such award is then exercisable (but, in any
event, only for whole shares). A stock appreciation right granted in connection
with an option may be exercised at any time when, and to the same extent that,
the related option may be exercised. An option or
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stock appreciation right shall be exercised by the filing of a written notice
with the Company, on such form and in such manner as the Committee shall in its
discretion prescribe.
2.3.3 Any written notice of exercise of an option shall be
accompanied by payment for the shares being purchased. Such payment shall be
made: (a) by certified or official bank check (or the equivalent thereof
acceptable to the Company) for the full option exercise price; or (b) unless the
applicable Plan Agreement provides otherwise, by delivery of shares of Class A
Common Stock acquired at least six months prior to the option exercise date and
having a Fair Market Value (determined as of the exercise date) equal to all or
part of the option exercise price and a certified or official bank check (or the
equivalent thereof acceptable to the Company) for any remaining portion of the
full option exercise price; or (c) at the discretion of the Committee and to the
extent permitted by law, by such other provision as the Committee may from time
to time prescribe.
2.3.4 Promptly after receiving payment of the full option exercise
price, or after receiving notice of the exercise of a stock appreciation right
for which payment will be made partly or entirely in shares, the Company shall,
subject to the provisions of Section 3.3, deliver to the grantee or to such
other person as may then have the right to exercise the award, a certificate or
certificates for the shares of Class A Common Stock for which the award has been
exercised. If the method of
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payment employed upon option exercise so requires, and if applicable law
permits, an optionee may direct the Company to deliver the certificate(s) to the
optionee's stockbroker.
2.3.5 No grantee of an option or stock appreciation right (or other
person having the right to exercise such award) shall have any of the rights of
a shareholder of the Company with respect to shares subject to such award until
the issuance of a stock certificate to such person for such shares. Except as
otherwise provided in Section 1.5.2, no adjustment shall be made for dividends,
distributions or other rights (whether ordinary or extraordinary, and whether in
cash, securities or other property) for which the record date is prior to the
date such stock certificate is issued.
2.4 Termination of Employment; Death
2.4.1 Except to the extent otherwise provided in Section 2.4.2 or
2.4.3 or in the applicable Plan Agreement, all options and stock appreciation
rights not theretofore exercised shall terminate upon termination of the
grantee's employment for any reason (including death).
2.4.2 If a grantee's employment terminates for any reason other than
death or dismissal for cause, the grantee may exercise any outstanding option or
stock appreciation right on the following terms and conditions: (a) exercise may
be made only to the extent that the grantee was entitled to exercise the
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award on the date of employment termination; and (b) exercise must occur within
three months after employment terminates, except that the three-month period
shall be increased to one year if the termination is by reason of disability,
but in no event after the expiration date of the award as set forth in the Plan
Agreement. In the case of an incentive stock option, the term "disability" for
purposes of the preceding sentence shall have the meaning given to it by section
422(c)(7) of the Code.
2.4.3 If a grantee dies while employed by the Company or any
subsidiary, or after employment termination but during the period in which the
grantee's awards are exercisable pursuant to Section 2.4.2, any outstanding
option or stock appreciation right shall be exercisable on the following terms
and conditions: (a) exercise may be made only to the extent that the grantee was
entitled to exercise the award on the date of death; and (b) exercise must occur
by the earlier of the first anniversary of the grantee's death or the expiration
date of the award. Any such exercise of an award following a grantee's death
shall be made only by the grantee's executor or administrator, unless the
grantee's will specifically disposes of such award, in which case such exercise
shall be made only by the recipient of such specific disposition. If a grantee's
personal representative or the recipient of a specific disposition under the
grantee's will shall be entitled to exercise any award pursuant to the preceding
sentence, such representative or recipient shall be bound by all
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the terms and conditions of the Plan and the applicable Plan Agreement which
would have applied to the grantee including, without limitation, the provisions
of Sections 3.3 and 3.7 hereof.
2.5 Grant of Restricted Stock
2.5.1 The Committee may grant restricted shares of Class A Common
Stock to such key persons, in such amounts, and subject to such terms and
conditions as the Committee shall determine in its discretion, subject to the
provisions of the Plan. Restricted stock awards may be made independently of or
in connection with any other award under the Plan. A grantee of a restricted
stock award shall have no rights with respect to such award unless such grantee
accepts the award within such period as the Committee shall specify by executing
a Plan Agreement in such form as the Committee shall determine and, if the
Committee shall so require, makes payment to the Company by certified or
official bank check (or the equivalent thereof acceptable to the Company) in
such amount as the Committee may determine.
2.5.2 Promptly after a grantee accepts a restricted stock award, the
Company shall issue in the grantee's name a certificate or certificates for the
shares of Class A Common Stock covered by the award. Upon the issuance of such
certificate(s), the grantee shall have the rights of a shareholder with respect
to the restricted stock, subject to the nontrans-
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ferability restrictions and Company repurchase rights described in Sections
2.5.4 and 2.5.5 and to such other restrictions and conditions as the Committee
in its discretion may include in the applicable Plan Agreement.
2.5.3 Unless the Committee shall otherwise determine, any
certificate issued evidencing shares of restricted stock shall remain in the
possession of the Company until such shares are free of any restrictions
specified in the applicable Plan Agreement.
2.5.4 Shares of restricted stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided in this Plan or the applicable Plan Agreement. The
Committee at the time of grant shall specify the date or dates (which may depend
upon or be related to the attainment of performance goals and other conditions)
on which the nontransferability of the restricted stock shall lapse. Unless the
applicable Plan Agreement provides otherwise, additional shares of Class A
Common Stock or other property distributed to the grantee in respect of shares
of restricted stock, as dividends or otherwise, shall be subject to the same
restrictions applicable to such restricted stock.
2.5.5 During the 120 days following termination of the grantee's
employment for any reason, the Company shall have the right to require the
return of any shares to which restrictions
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on transferability apply, in exchange for which the Company shall repay to the
grantee (or the grantee's estate) any amount paid by the grantee for such
shares.
2.6 Grant of Restricted Stock Units
2.6.1 The Committee may grant awards of restricted stock units to
such key persons, in such amounts, and subject to such terms and conditions as
the Committee shall determine in its discretion, subject to the provisions of
the Plan. Restricted stock units may be awarded independently of or in
connection with any other award under the Plan.
2.6.2 At the time of grant, the Committee shall specify the date or
dates on which the restricted stock units shall become fully vested and
nonforfeitable, and may specify such conditions to vesting as it deems
appropriate. In the event of the termination of the grantee's employment by the
Company and its subsidiaries for any reason, restricted stock units that have
not become nonforfeitable shall be forfeited and cancelled. The Committee at any
time may accelerate vesting dates and otherwise waive or amend any conditions of
an award of restricted stock units.
2.6.3 At the time of grant, the Committee shall specify the maturity
date applicable to each grant of restricted stock units. Such date may be later
than the vesting date or dates of the award. On the maturity date, the Company
shall
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transfer to the grantee one unrestricted, fully transferable share of Class A
Common Stock for each restricted stock unit scheduled to be paid out on such
date and that has not been previously forfeited. The Committee shall specify the
purchase price, if any, to be paid by the grantee to the Company for such shares
of Class A Common Stock.
2.7 Other Stock-Based Awards
The Board may authorize other types of stock-based awards, which the
Committee may grant to such key persons, in such amounts and subject to such
terms and conditions, as the Committee shall in its discretion determine,
subject to the provisions of the Plan. Such awards may entail the transfer of
actual shares of Class A Common Stock to Plan participants, or payment in cash
or otherwise of amounts based on the value of shares of Class A Common Stock.
2.8 Right of Recapture
2.8.1 If at any time within one year after the date on which a
participant exercises an option or stock appreciation right, or on which
restricted stock vests, or which is the maturity date of restricted stock units,
or on which income is realized by a participant in connection with any other
stock-based award (each of which events is a "Realization Event"), the
participant (a) is terminated for cause or (b) engages in any activity
determined in the discretion of the Committee to be in
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competition with any activity of the Company, or otherwise inimical, contrary or
harmful to the interests of the Company (including, but not limited to,
accepting employment with or serving as a consultant, adviser or in any other
capacity to an entity that is in competition with or acting against the
interests of the Company), then any gain ("Gain") realized by the participant
from the Realization Event shall be paid by the participant to the Company upon
notice from the Company. Such Gain shall be determined as of the date of the
Realization Event, without regard to any subsequent change in the Fair Market
Value of a share of Class A Common Stock. The Company shall have the right to
offset such Gain against any amounts otherwise owed to the participant by the
Company (whether as wages, vacation pay, or pursuant to any benefit plan or
other compensatory arrangement).
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ARTICLE III
MISCELLANEOUS
3.1 Amendment of the Plan; Modification of Awards
3.1.1 The Board may from time to time suspend, discontinue, revise
or amend the Plan in any respect whatsoever, except that no such amendment shall
materially impair any rights or materially increase any obligations under any
award theretofore made under the Plan without the consent of the grantee (or,
after the grantee's death, the person having the right to exercise the award).
For purposes of this Section 3.1, any action of the Board or the Committee that
alters or affects the tax treatment of any award shall not be considered to
materially impair any rights of any grantee.
3.1.2 To the extent required under section 422 of the Code,
shareholder approval shall be required with respect to any amendment which
increases the aggregate number of shares which may be issued pursuant to
incentive stock options or changes the class of employees eligible to receive
such options.
3.1.3 The Committee may amend any outstanding Plan Agreement,
including, without limitation, by amendment which would (a) accelerate the time
or times at which the award becomes unrestricted or may be exercised, or (b)
waive or amend any goals, restrictions or conditions set forth in the Agreement.
However, any such amendment (other than an amendment pursuant to
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Section 3.7.2) that materially impairs the rights or materially increases the
obligations of a grantee under an outstanding award shall be made only with the
consent of the grantee (or, after the grantee's death, the person having the
right to exercise the award).
3.2 Tax Withholding
3.2.1 As a condition to the receipt of any shares of Class A Common
Stock pursuant to any award or the lifting of restrictions on any award, or in
connection with any other event that gives rise to a federal or other
governmental tax withholding obligation on the part of the Company relating to
an award (including, without limitation, FICA tax), the Company shall be
entitled to require that the grantee remit to the Company an amount sufficient
in the opinion of the Company to satisfy such withholding obligation.
3.2.2 If the event giving rise to the withholding obligation is a
transfer of shares of Class A Common Stock, then, unless otherwise specified in
the applicable Plan Agreement, the grantee may satisfy the withholding
obligation imposed under Section 3.2.1 by electing to have the Company withhold
shares of Class A Common Stock having a Fair Market Value equal to the amount of
tax to be withheld. For this purpose, Fair Market Value shall be determined as
of the date on which the amount of tax to be withheld is determined (and any
fractional share amount shall be settled in cash).
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3.3 Restrictions
3.3.1 If the Committee shall at any time determine that any Consent
(as hereinafter defined) is necessary or desirable as a condition of, or in
connection with, the granting of any award under the Plan, the issuance or
purchase of shares or other rights thereunder, or the taking of any other action
thereunder (each such action being hereinafter referred to as a "Plan Action"),
then such Plan Action shall not be taken, in whole or in part, unless and until
such Consent shall have been effected or obtained to the full satisfaction of
the Committee.
3.3.2 The term "Consent" as used herein with respect to any Plan
Action means (a) any and all listings, registrations or qualifications in
respect thereof upon any securities exchange or under any federal, state or
local law, rule or regulation, (b) any and all written agreements and
representations by the grantee with respect to the disposition of shares, or
with respect to any other matter, which the Committee shall deem necessary or
desirable to comply with the terms of any such listing, registration or
qualification or to obtain an exemption from the requirement that any such
listing, qualification or registration be made and (c) any and all consents,
clearances and approvals in respect of a Plan Action by any governmental or
other regulatory bodies.
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3.4 Nonassignability
Except to the extent otherwise provided in the applicable Plan
Agreement, no award or right granted to any person under the Plan shall be
assignable or transferable other than by will or by the laws of descent and
distribution, and all such awards and rights shall be exercisable during the
life of the grantee only by the grantee or the grantee's legal representative.
3.5 Requirement of Notification of Election Under Section 83(b) of the Code
If any grantee shall, in connection with the acquisition of shares
of Class A Common Stock under the Plan, make the election permitted under
section 83(b) of the Code (i.e., an election to include in gross income in the
year of transfer the amounts specified in section 83(b)), such grantee shall
notify the Company of such election within 10 days of filing notice of the
election with the Internal Revenue Service, in addition to any filing and
notification required pursuant to regulations issued under the authority of Code
section 83(b).
3.6 Requirement of Notification Upon Disqualifying Disposition Under Section
421(b) of the Code
Each Plan Agreement with respect to an incentive stock option shall
require the grantee to notify the Company of any disposition of shares of Class
A Common Stock issued pursuant to the exercise of such option under the
circumstances described in
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section 421(b) of the Code (relating to certain disqualifying dispositions),
within 10 days of such disposition.
3.7 Change in Control
3.7.1 For purposes of this Section 3.7, a "Change in Control" shall
have occurred if:
(a) any "person", as such term is used in Sections 13(d) and
14(d) of the 1934 Act (other than (i) the shareholders of the Company as of
November 1, 1996 (the "Current Shareholders", such term to include their heirs
or estates, or trusts or other entities the primary beneficiaries of which are
the Current Shareholders or persons designated by them), (ii) the Company or any
80% or more-owned subsidiary of the Company, (iii) any trustee or other
fiduciary holding securities under an employee benefit plan of the Company or of
any 80% or more-owned subsidiary of the Company, or (iv) any company owned,
directly or indirectly, by the shareholders of the Company in substantially the
same proportions as their ownership of stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the 1934 Act), directly or
indirectly, of securities of the Company representing 50% or more of the
combined voting power of the Company's then outstanding securities without the
prior written consent of the Committee or the Board; or
(b) in the event that the Current Shareholders no longer
control more than 50% of the voting equity of the Company,
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if during any period of two consecutive years, individuals who at the beginning
of such period constitute the Board of Directors of the Company, and any new
director (other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in clause (a), (c)
or (d) of this Section 3.7.1) whose election by the Board of Directors or
nomination for election by the Company shareholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute at least
a majority thereof;
(c) the shareholders of the Company approve a merger or
consolidation of the Company with any other company (other than a 80% or
more-owned subsidiary of the Company), other than (i) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) 50% or more of the combined voting power of voting securities of the
Company or such surviving entity outstanding immediately after such merger or
consolidation or (ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no "person"
(as defined in Section 3.7.1(a) above with the exceptions noted therein)
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acquires 50% or more of the combined voting power of the Company's then
outstanding securities); or
(d) the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets (or any transaction
having a similar effect).
3.7.2 Upon the happening of a Change in Control and unless otherwise
provided in an applicable Plan Agreement:
(a) notwithstanding any other provision of this Plan, any
option or stock appreciation right then outstanding shall become fully vested
and immediately exercisable;
(b) to the extent permitted by law, the Committee may, in its
discretion, amend any Plan Agreement in such manner as it deems appropriate,
including, without limitation, by amendments that advance the dates upon which
any or all outstanding awards of shares of restricted stock shall become free of
restrictions, or that advance the dates upon which any or all outstanding awards
of any type shall terminate.
3.7.3 Whenever deemed appropriate by the Committee, any action
referred to in Section 3.7.2(b) may be made conditional upon the consummation of
the applicable Change in Control transaction.
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3.8 Right of Discharge Reserved
Nothing in the Plan or in any Plan Agreement shall confer upon any
grantee the right to continue in the employ of the Company or any subsidiary or
affect any right which the Company or any subsidiary may have to terminate such
employment.
3.9 Nature of Payments
3.9.1 Any and all grants of awards and issuances of shares of Class
A Common Stock under the Plan shall be in consideration of services performed
for the Company by the grantee.
3.9.2 All such grants and issuances shall constitute a special
incentive payment to the grantee and shall not be taken into account in
computing the amount of salary or compensation of the grantee for the purpose of
determining any benefits under any pension, retirement, profit-sharing, bonus,
life insurance or other benefit plan of the Company or under any agreement
between the Company and the grantee, unless such plan or agreement specifically
provides otherwise.
3.10 Non-Uniform Determinations
The Committee's determinations under the Plan need not be uniform
and may be made by it selectively among persons who receive, or are eligible to
receive, awards under the Plan (whether or not such persons are similarly
situated). Without limiting the generality of the foregoing, the Committee shall
be
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entitled, among other things, to make non-uniform and selective determinations,
and to enter into non-uniform and selective Plan agreements, as to (a) the
persons to receive awards under the Plan, (b) the terms and provisions of awards
under the Plan, and (c) the treatment of leaves of absence pursuant to Section
1.6.4.
3.11 Other Payments or Awards
Nothing contained in the Plan shall be deemed in any way to limit or
restrict the Company from making any award or payment to any person under any
other plan, arrangement or understanding, whether now existing or hereafter in
effect.
3.12 Section Headings
The section headings contained herein are for the purpose of
convenience only and are not intended to define or limit the contents of the
sections.
3.13 Effective Date and Term of Plan
The Plan was adopted by the Board and approved by the Company's
shareholders on November 6, 1996. Unless sooner terminated by the Board, the
provisions of the Plan respecting the grant of incentive stock options shall
terminate on the tenth anniversary of the adoption of the Plan by the Board, and
no incentive stock option awards shall thereafter be made under the Plan. All
awards made under the Plan prior to its termination shall remain in effect until
such awards have been satisfied or
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<PAGE> 34
terminated in accordance with the terms and provisions of the Plan and the
applicable Plan Agreements.
3.14 Governing Law
All rights and obligations under the Plan shall be construed and
interpreted in accordance with the laws of the State of New York, without giving
effect to principles of conflict of laws.
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<PAGE> 1
Exhibit 10.6
MOBIUS MANAGEMENT SYSTEMS, INC.
1996 STOCK INCENTIVE PLAN
GRANTEE STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT (the "Agreement"), dated as of
_________________, between MOBIUS MANAGEMENT SYSTEMS, INC. (the "Company"), a
Delaware corporation, and (the "Grantee").
Pursuant to the terms of the Company's 1996 Stock Incentive Plan
(the "Plan") and the Stock Option Agreement dated _________ between the Grantee
and the Company (the "Option Agreement"), Grantee has been granted a stock
option (the "Option") to purchase ______ shares of Class A Non-Voting common
stock of the Company (the "Shares") at a price per share of ______ (the
"Exercise Price"). Grantee has informed the Company that he/she wishes to
exercise such option for the purchase of _______ Shares pursuant to the terms of
the Plan and the Option Agreement.
Section 7 of the Option Agreement requires the Grantee to enter into
this Agreement prior to, and as a condition of, Grantee's exercise of the Option
for the purchase of the Shares.
In consideration of the foregoing and the exercise of the Option,
and such other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Grantee represents, covenants and agrees as
follows:
1. Confirmation of Option Agreement. Grantee hereby confirms and
reaffirms as of the date hereof the representations, warranties, covenants and
agreements set forth in the Option Agreement. Without limiting the foregoing,
Optionee hereby confirms and reaffirms as of the date hereof the representations
and understandings set forth in sections 6.1, 6.2 and 6.3 of the Option
Agreement.
2. Transfer Restrictions. 2.1 Grantee shall not, so long as this
Agreement is in effect, directly or indirectly, sell, pledge, give, bequeath,
transfer, assign or in any other way whatsoever encumber or dispose of
(hereinafter collectively called "transfer") any of the Shares (or any interest
therein), or any stock certificate or certificates representing the Shares,
except as permitted by this Agreement or as may be consented to in writing by
the Company.
2.2 Notwithstanding anything to the contrary contained in this
Agreement, Grantee is under no restrictions as to the transfer of Shares, during
Grantee's lifetime, to Grantee's Permitted Transferees (as defined herein),
provided that each such Permitted Transferee shall first (i) execute a written
consent to be bound by all the provisions of this Agreement and (ii) give a
<PAGE> 2
duplicate original of such consent to the Company. The Permitted Transferees
shall consist of Grantee's spouse and adult lineal descendants, the adult
spouses of such lineal descendants, trusts for the benefit of Grantee's minor or
adult lineal descendants, or trusts of which Grantee is the trustee or sole
beneficiary. In the event of any transfer by the Grantee to a Permitted
Transferee of all or any part of the Shares (or in the event of any subsequent
transfer by any such Permitted Transferee of such Shares), such Permitted
Transferees shall receive and hold said Shares subject to the terms of this
Agreement and the rights and obligations hereunder of the Grantee as though said
shares were still owned by the Grantee. There shall be no further transfer of
such Shares by a Permitted Transferee except between and among such Permitted
Transferee, the Grantee and the other Permitted Transferees of the Grantee, or
except as permitted by this Agreement.
2.3 Following the termination of this Agreement pursuant to an
underwritten public offering, as provided for in Section 6, grantee shall not,
directly or indirectly, for such period as the underwriters in that offering
reasonable request, except with the prior consent of the underwriters: (i)
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant for
the sale of or otherwise dispose of or transfer any Shares (which term shall
include shares of the Company's common stock into which the Shares may have been
converted) or any securities convertible into or exchangeable or exercisable for
Shares, whether now owned or hereafter acquired or (ii) enter into any swap or
any other agreement or any transaction that transfers, in whole or in part,
directly or indirectly, the economic consequences of ownership of the Shares,
whether any such swap or transaction is to be settled by delivery of the Shares
or other securities, in cash or otherwise. This Section 2.3 shall survive the
termination of this Agreement.
3. Right of First Refusal.
3.1 If the Grantee desires to sell all or any part of the
Shares and the Grantee shall have received a bona fide arm's length written
offer, which is unconditional and irrevocable except as hereinafter provided
(hereinafter called the "Bona Fide Offer"), for the purchase of such shares from
a party who is not a Permitted Transferee of the Grantee (hereinafter called the
"Outside Party"), the Grantee shall give 45 days notice in writing (hereinafter
called the "Option Notice") to the Company setting forth such desire to sell
such Shares, which notice shall be accompanied by a photocopy of the original
executed Bona Fide Offer, shall set forth at least the name and address of the
Outside Party, the number of Shares being sold and the price and terms of such
offer and shall be accompanied by written evidence proving to the satisfaction
of the Board of
-2-
<PAGE> 3
Directors of the Company that the Outside Party is capable of performing and has
committed the funds necessary to perform the Bona Fide Offer in accordance with
its terms. On or before the 45th day after the day on which the Option Notice
was given, the Company may send a written counter-notice to Grantee whereunder
the Company shall elect one of the following choices:
(a) the Company consents to the sale by the Grantee to the Outside
Party, in which event, such sale may proceed pursuant to the terms
of the Bona Fide Offer; or
(b) that the Company elects to purchase all of the shares of the
Grantee for which the Bona Fide Offer was made, at the same price
per share and upon the same terms and conditions as contained in the
Bona Fide Offer, in which event the Company shall be obligated to
purchase and the Grantee shall be obligated to sell such shares
before the 30th day after the day on which the counternotice was
given at the same price per share and upon the same terms and
conditions as contained in the Bona Fide Offer, including, among
other things, time and manner of payment.
If the Company fails to give a timely counter-notice electing either choice (a)
or (b), the Company shall be deemed to have elected choice (a) and to have
consented to the sale by the Grantee to the Outside Party.
4. Right of Repurchase. If at anytime during the term of this
Agreement the Grantee no longer is employed by the Company (other than by reason
of death or disability):
4.1 If Grantee has been terminated by the Company for cause,
the Company may, at its option exercisable within 180 days of such termination,
repurchase all the Shares from the Grantee at a price per share equal to the
Exercise Price. Company shall provide Grantee with written notice within such
180 day period of its election to so repurchase the Shares, and shall repurchase
such shares within 30 days of the date of such notice.
4.2 If Grantee is no longer employed by the Company (other
than by reason of termination for cause), the Company may, at its option
exercisable within 180 days of such termination of employment, repurchase all
the Shares from the Grantee at a price per share equal to the fair market value
of such share at the time of such repurchase. Company shall provide the Grantee
with written notice within such 180 day period of its election to so repurchase
the Shares, and shall repurchase such shares within 30 days of the date of such
notice.
-3-
<PAGE> 4
5. Legend on Certificates. The following statement shall be
inscribed on all certificates representing the Shares so long as this Agreement
is in effect:
"The common stock represented by this certificate is subject to a certain
Shareholders Agreement dated _____, 1997, by and among the Company and
__________, as amended, a copy of which is on file at the principal office
of the Company, and any sale, pledge, gift, bequest, transfer, assignment,
encumbrance or other disposition of this certificate in violation of the
Shareholders Agreement shall be invalid."
SECTION 6. Term. This Agreement (other than Section 2.3) shall
terminate upon the consummation by the Company of an underwritten public
offering of at least $30,000,000 of common stock, where at least $10,000,000 of
the proceeds from such offering are received by the Company.
SECTION 7. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and the successors and
assigns of the Company and, to the extent consistent with this Agreement, the
heirs and personal representatives of the Grantee.
SECTION 8. Governing Law. This Agreement shall be interpreted,
construed and administered in accordance with the laws of the State of New York
as they apply to contracts made, delivered and performed entirely within such
state.
SECTION 9. Notices. Any notice to be given to the Company hereunder
shall be in writing and shall be addressed to Mobius Management Systems, Inc.,
One Ramada Plaza, New Rochelle, New York 10801, or at such other address as the
Company may hereafter designate to the Optionee by notice as provided in this
Section 9. Any notice to be given to the Optionee hereunder shall be addressed
to the Optionee at the address set forth beneath his signature hereto, or at
such other address as the Optionee may hereafter designate to the Company by
notice as provided herein. A notice shall be deemed to have been duly given when
personally delivered or, if mailed by registered or certified mail to the party
entitled to receive it, five days after the date the notice was so mailed.
THE REST OF THIS PAGE IS BLANK
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date and year first written above.
MOBIUS MANAGEMENT SYSTEMS, INC.
ATTEST: _________________________ By ___________________________________
Name:
Title:
GRANTEE
______________________________________
Address: _____________________________
______________________________________
______________________________________
Social Security Number
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<PAGE> 1
Exhibit 10.7
OLD BOSTON POST ROAD ASSOCIATES LLC
Landlord,
and
MOBIUS MANAGEMENT SYSTEMS, INC.
Tenant
LEASE
120 Old Boston Post Road
Rye, New York
Managing Agent: Alfred Weissman Real Estate, Inc.
1 Larkin Plaza
Yonkers, New York 10701
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
LEASE.................................................................................................. 1
ARTICLE 1
DEFINITIONS..................................................................................................... 1
1.1.................................................................................................... 1
ARTICLE 2
DEMISE, TERM AND RENT........................................................................................... 5
2.1 Demise............................................................................... 5
2.2 Term................................................................................. 5
2.3 Rent................................................................................. 5
2.4 No Setoff............................................................................ 5
2.5 Delay in Landlord's Delivery of Premises............................................. 6
ARTICLE 3
LANDLORD'S WORK................................................................................................. 6
3.1 Landlord's Work...................................................................... 6
3.2 Ready for Occupancy.................................................................. 6
3.3 Delays............................................................................... 7
3.4 Punch List........................................................................... 7
3.5 Early Access and Possession.......................................................... 7
3.6 Warranty............................................................................. 7
ARTICLE 4
USE............................................................................................................. 7
4.1 Tenant's Business.................................................................... 7
4.1 Permits.............................................................................. 7
4.2 Restrictions......................................................................... 8
ARTICLE 5
SUBORDINATION................................................................................................... 8
5.1 Superior Leases and Mortgages........................................................ 8
5.2 Notice............................................................................... 9
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
5.3 Attornment........................................................................... 9
ARTICLE 6
ASSIGNMENT AND SUBLETTING....................................................................................... 9
6.1 Consent Required..................................................................... 9
6.2 Collection of Rent, etc.............................................................. 10
6.3 Related Corporations................................................................. 10
6.4 Conditions to Sublease............................................................... 11
6.5 Further Conditions................................................................... 11
6.6 Compliance........................................................................... 12
6.7 Conditions of Subletting............................................................. 12
6.8 Consideration........................................................................ 12
ARTICLE 7
ESTOPPEL CERTIFICATE; MEMORANDUM................................................................................ 13
7.1 Delivery of Certificate.............................................................. 13
7.2 Memorandum of Lease.................................................................. 14
ARTICLE 8
REQUIREMENTS OF LAW............................................................................................. 14
8.1 Compliance........................................................................... 14
8.2 Prohibitions......................................................................... 14
8.3 Hazardous Substances................................................................. 15
ARTICLE 9
PROPERTY LOSS AND INDEMNIFICATION............................................................................... 16
9.1 Limitation of Liability.............................................................. 16
9.2 Tenant's Indemnification............................................................. 16
ARTICLE 10
DESTRUCTION - FIRE AND OTHER CASUALTY........................................................................... 16
10.1 Repairs.............................................................................. 16
10.2 Termination.......................................................................... 17
10.3 Tenant's Property.................................................................... 17
ARTICLE 11
INSURANCE....................................................................................................... 18
11.1 Landlord's Insurance................................................................. 18
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
11.2 Liability Insurance.................................................................. 18
11.3 Waiver of Subrogation................................................................ 18
11.4 Forms of the Policies................................................................ 19
ARTICLE 12
CONDEMNATION.................................................................................................... 19
12.1 Total Taking......................................................................... 19
12.2 Partial Taking....................................................................... 19
12.3 Award................................................................................ 20
ARTICLE 13
REPAIRS......................................................................................................... 20
13.1 Landlord's Repairs................................................................... 20
13.2 Tenant's Repairs..................................................................... 20
13.3 Abatement. ......................................................................... 21
ARTICLE 14
SERVICES........................................................................................................ 21
14.1 Building Services. ................................................................. 21
14.2 Intentionally Omitted. ............................................................. 22
14.3 Limitation of Liability. ........................................................... 22
ARTICLE 15
ALTERATIONS..................................................................................................... 22
15.1 Requirements. ...................................................................... 22
15.2 Permits. ........................................................................... 23
15.3 Violations. ........................................................................ 24
15.4 Labor Strife. ...................................................................... 24
ARTICLE 16
ESCALATIONS - TAXES, OPERATING EXPENSES, UTILITIES.............................................................. 24
16.1 Escalations.......................................................................... 24
16.2 Definitions. ....................................................................... 24
16.3 Tax Escalation. .................................................................... 27
16.4 Tax Payments. ...................................................................... 27
16.5 Survival and Proration. ............................................................ 27
16.6 Intentionally Omitted. ............................................................. 27
16.7 Tax Refunds. ....................................................................... 27
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C>
16.8 Operating Expense Payment. ......................................................... 27
16.9 Audit Rights. ...................................................................... 28
ARTICLE 17
ELECTRIC ENERGY................................................................................................. 29
17.1 Electricity Charge. ................................................................ 29
17.2 Capacity. .......................................................................... 29
17.3 No Liability. ...................................................................... 29
17.4 Planned Shut-Down. ................................................................. 29
ARTICLE 18
SIGNS........................................................................................................... 30
18.1 Signs. ............................................................................. 30
ARTICLE 19
LIMITATION OF LANDLORD'S LIABILITY.............................................................................. 30
ARTICLE 20
BROKER.......................................................................................................... 31
ARTICLE 21
DEFAULT - CONDITIONS OF LIMITATION.............................................................................. 31
21.1 Bankruptcy. ........................................................................ 31
21.2 Assignment. ........................................................................ 31
21.3 Events of Default. ................................................................. 32
ARTICLE 22
RE-ENTRY BY LANDLORD............................................................................................ 33
22.1 Summary Dispossess. ................................................................ 33
22.2 Waivers. ........................................................................... 33
22.3 Injunctive Relief. ................................................................. 33
22.4 Retention of Monies. ............................................................... 34
ARTICLE 23
DAMAGES......................................................................................................... 34
23.1 Acceleration, Reletting. ........................................................... 34
</TABLE>
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<PAGE> 6
<TABLE>
<S> <C>
23.2 Successive Suits, etc. ............................................................. 35
23.3 Condition of Premises. ............................................................. 36
23.4 Interest. .......................................................................... 36
ARTICLE 24
SURRENDER....................................................................................................... 36
24.1 Condition of Premises. ............................................................. 36
24.2 Intentionally Omitted. ............................................................. 37
24.3 Tenant's Property. ................................................................. 37
24.4 Indemnification. ................................................................... 37
24.5 Survival. .......................................................................... 37
ARTICLE 25
ACCESS TO DEMISED PREMISES...................................................................................... 37
25.1 Landlord's Rights. ................................................................. 37
25.2 Intentionally Omitted. ............................................................. 38
25.3 Third Party Access. ................................................................ 38
25.4 No Eviction. ....................................................................... 38
ARTICLE 26
WAIVERS......................................................................................................... 38
26.1 Order of Payment. .................................................................. 38
26.2 Trial by Jury. ..................................................................... 38
ARTICLE 27
NO SURRENDER, ETC............................................................................................... 39
27.1 Delivery of Keys, etc. ............................................................. 39
27.2 Options. ........................................................................... 39
ARTICLE 28
CURING DEFAULTS................................................................................................. 40
28.1 Landlord's Right to Cure. .......................................................... 40
28.2 Tenant's Right to Cure. ............................................................ 40
28.3 Landlord Reimbursement. ............................................................ 40
28.4 Tenant Reimbursement. .............................................................. 40
</TABLE>
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<PAGE> 7
<TABLE>
<S> <C>
ARTICLE 29
NOTICES......................................................................................................... 41
ARTICLE 30
ARBITRATION..................................................................................................... 42
30.1 Express Provision. ................................................................. 42
30.2 Fees. .............................................................................. 43
ARTICLE 31
SECURITY DEPOSIT................................................................................................ 43
31.1 Security Deposit. .................................................................. 43
ARTICLE 32
NO REPRESENTATIONS - ENTIRE AGREEMENT........................................................................... 45
ARTICLE 33
CHANGES AND MODIFICATIONS....................................................................................... 45
ARTICLE 34
SUCCESSORS AND ASSIGNS.......................................................................................... 45
ARTICLE 35
INABILITY TO PERFORM............................................................................................ 46
ARTICLE 36
NO CONTINUING WAIVER............................................................................................ 46
ARTICLE 37
INTENTIONALLY OMITTED........................................................................................... 46
ARTICLE 38
NOTICE OF ACCIDENTS............................................................................................. 47
</TABLE>
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<PAGE> 8
<TABLE>
<S> <C>
ARTICLE 39
RULES AND REGULATIONS........................................................................................... 47
ARTICLE 40
PARKING RIGHTS.................................................................................................. 47
ARTICLE 41
CONSENTS........................................................................................................ 48
41.1 Express Provision. ................................................................. 48
41.2 Consent and Approval. .............................................................. 48
41.3 Representative of Party. ........................................................... 48
41.4 Dispute. ........................................................................... 48
ARTICLE 42
RENEWAL OPTION.................................................................................................. 49
42.1 Exercise of Options. ............................................................... 49
42.2 Determination of Fixed Rent. ....................................................... 49
ARTICLE 43
REPRESENTATIONS................................................................................................. 50
43.1 Tenant Representations. ............................................................ 50
43.2 Landlord Representations. .......................................................... 50
ARTICLE 44
NO OFFER TO LEASE............................................................................................... 50
ARTICLE 45
QUIET ENJOYMENT................................................................................................. 51
ARTICLE 46
EXPANSION....................................................................................................... 51
ARTICLE 47
LATE CHARGE..................................................................................................... 51
</TABLE>
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<PAGE> 9
ARTICLE 48
<TABLE>
<S> <C>
GOVERNING LAW; SEVERABILITY; CAPTIONS; MISCELLANEOUS............................................................ 52
</TABLE>
- viii -
<PAGE> 10
<TABLE>
<CAPTION>
Table of Exhibits
<S> <C> <C>
Exhibit A - Legal Description
Exhibit B - Landlord's Work
Exhibit C - Cleaning Specifications
</TABLE>
- ix -
<PAGE> 11
LEASE
LEASE (the "Lease") dated as of the 4th day of December, 1997 by and between OLD
BOSTON POST ROAD ASSOCIATES LLC, a New York limited liability company, having
its address at c/o ALFRED WEISSMAN REAL ESTATE, INC., 1 Larkin Plaza, Yonkers,
New York 10701 (herein called "Landlord"), and MOBIUS MANAGEMENT SYSTEMS, INC.,
a Delaware corporation, having an address at One Ramada Plaza, New Rochelle, New
York (herein called "Tenant").
W I T N E S S E T H:
Landlord and Tenant hereby covenant and agree as follows:
ARTICLE 1
Definitions
1.1 As used in this Lease, the following terms have the meanings set
forth below:
Additional Rent: All sums of money other than Fixed Rent as shall
become due and payable by Tenant to landlord pursuant to this Lease, including
but not limited to the amounts set forth in Article 16. Landlord shall have the
same remedies for a failure in the payment of Additional Rent as for a failure
in the payment of Fixed Rent.
Alterations: As defined in Section 15.1.
Applicable Law: All laws, statutes and ordinances (including building
codes and zoning ordinances) and the orders, rules, regulations, directives and
requirements of all federal, state, county, city and borough departments,
bureaus, boards, agencies, offices, commissions and other subdivisions thereof,
or of any official thereof, or of any other governmental, public or quasi-public
authority, whether now or hereafter in force, which are or become, or purport to
be, applicable to the Project or any part thereof or the sidewalks, curbs or
areas adjacent thereto and all requirements, obligations and conditions of all
instruments of record affecting the Demised Premises or any part thereof on the
date of this Lease [or to which this Lease is or becomes subordinate].
Base Operating Year: As defined in Section 16.2.
Building: The office building premises known as and by street address
120 Old Boston Post Road, Rye, New York.
Business Days: Shall mean any date which is not a Saturday, Sunday or a
State of New York or federal legal holiday.
- 1 -
<PAGE> 12
Business Hours: Shall mean 8:00 a.m. to 6:00 p.m. on Business Days.
Commencement Date: As defined in Section 2.2.
Demised Premises: The entire Building and the Property.
Escalation Statement: As defined in Section 16.2.
Expiration Date: As defined in Section 2.2.
Fixed Rent: As defined in Section 2.3.
Force Majeure: Shall mean any and all causes beyond the reasonable
control of Landlord or Tenant, as the case may be, including delays caused by
the other party hereto, governmental restrictions, regulations or controls
(including energy and water conservation measures), shortages or inability to
obtain labor, fuel, steam, water, electricity or materials, acts of God, enemy
action, civil commotion, fire or other casualty or the process of settling
insurance claims, but, shall specifically exclude lack of funds or financial
inability to perform.
Insurance Expense: As defined in Section 16.2.
Insurance Requirements: All present and future requirements of any
insurance policy covering or applicable to all or any part of the Demised
Premises or the use thereof, all requirements of any administrative body
governing the underwriting standards of insurance companies issuing policies
within the State of New York and having jurisdiction over all or any portion of
the Demised Premises.
Landlord: Only the owner at the time in question of the Demised
Premises or of a lease of the Demised Premises, so that in the event of any
transfer of title to the Demised Premises or of Landlord's interest in a lease
of the Demised Premises, the transferor shall be and hereby is relieved and
freed of all obligations of Landlord under this Lease first arising after such
transfer, and it shall be deemed without further agreement that such transferee
has assumed and agreed to perform and observe all obligations of Landlord herein
[during the period it is the holder of Landlord's interest under this Lease].
Landlord's Agents: The agents, contractors and employees of Landlord,
including but not limited to the Managing Agent.
Landlord's Work: As defined in Section 3.1.
- 2 -
<PAGE> 13
Lease Year: The twelve (12) month period commencing on the Commencement
Date and ending at 11:59 p.m. on the day before the first anniversary of the
Commencement Date and each twelve (12) month period thereafter during the Term.
Managing Agent: Alfred Weissman Real Estate, Inc., 1 Larkin Plaza,
Yonkers, New York 10701, or such other party as Landlord may hereafter designate
by notice to Tenant. Any notice to be given by Landlord shall be deemed to have
been made by Landlord if made by Managing Agent.
Nondisturbance Requirements: A subordination, nondisturbance and
attornment agreement that provides (i) in the event of a termination of a
Superior Lease or the foreclosure, or deed in lieu thereof, of a Superior
Mortgage (a) the Superior Lessor or Superior Mortgagee, as the case may be, (and
there respective successors and assigns) and Tenant shall be directly bound to
each other in respect of their obligations under this Lease accruing after such
termination, foreclosure or deed in lieu thereof, (b) provided, no Event of
Default exists and is continuing, Tenant's rights under this Lease shall not be
disturbed and (iii) such Superior Lessor or Superior Mortgagee, as the case may
be, recognizes the applicability of (and such Superior Lessor or Superior
Mortgagee agrees to be bound by) the provisions respecting casualty proceeds and
condemnation awards as set forth in this Lease.
Operating Expenses: As defined in Section 16.2.
Operational Year: As defined in Section 16.2.
Person: The term "person" shall mean any natural person or persons, a
partnership, a corporation, and any other form of business or legal association
or entity.
Prime Rate: The prime rate published as such by The Wall Street
Journal, or, in the event The Wall Street Journal ceases to publish a prime
rate, then the prime rate as published by such other national publication
selected by Landlord.
Property: All of the land and improvements thereon owned or
groundleased by Landlord and comprising the Demised Premises as more
particularly described in Exhibit A attached hereto and made a part hereto. The
foregoing shall include, in addition, any other parcels of land or improvements
or any facility serving the Demised Premises and made available by easement,
agreement or otherwise.
Ready for Occupancy: As defined in Section 3.2.
Real Estate Tax Base: As defined in Section 16.2.
Real Estate Taxes: As defined in Section 16.2.
- 3 -
<PAGE> 14
Regulations: As defined in Section 8.1.
Related Corporation: As defined in Section 6.3.
Rent: As defined in Section 2.3.
Repair: The term "repair" shall be deemed to include restoration and
replacement as may be necessary to achieve and maintain good working order and
condition.
Rules and Regulations: As defined in Section 39.1.
Superior Lease and Superior Lessor: As defined in Section 5.1.
Superior Mortgage and Superior Mortgagee: As defined in Section 5.1.
Tax Year: As defined in Section 16.2.
Tenant: The Tenant herein named or any assignee or successor in
interest (immediate or remote of the Tenant herein named, which at the time in
question is the owner of the Tenant's estate and interest granted by this Lease;
but the foregoing shall not be construed to permit any assignment of this Lease
or to relieve the Tenant herein named or any assignee or other successor in
interest (whether immediate or remote) of the Tenant herein named from the full
and prompt payment, performance, and observance of the covenants, obligations
and conditions to be paid, performed and observed by Tenant under this Lease.
Tenant's Agents: The officers, employees, servants, contractors,
licensees, concessionaires and agents of Tenant.
Tenant Delay: A delay in the completion of Landlord's Work as a result
of an event described in Section 3.3.
Tenant's Property: The furniture and furnishings of Tenant and the
following which are furnished and installed by or for Tenant without expense to
Landlord and without any allowance or credit to Tenant: movable partitions,
chandeliers and other hanging, standing or projecting special lighting fixtures,
special cabinet work, other business and trade fixtures, business machines,
business equipment and communications equipment, whether or not attached to or
built into the Demised Premises and which can be removed without permanent
structural damage to, or permanent defacement of, the Building.
Term: As defined in Section 2.2, except that if this Lease is renewed
or extended, the word "Term" shall include any such renewal or extension period.
- 4 -
<PAGE> 15
ARTICLE 2
Demise, Term and Rent
2.1 Demise. Landlord hereby leases to Tenant, and Tenant hereby hires
from Landlord, upon and subject to the terms, covenants, provisions and
conditions of this Lease, the Demised Premises.
2.2 Term. The term of this Lease (herein called the "Term") (a) shall
commence on the date (herein called the "Commencement Date") which shall be the
date on which the Demised Premises are "Ready for Occupancy" (as defined in
Article 3) and (b) shall end at 11:59 p.m. on the day before the tenth 10th
anniversary of the Commencement Date (the "Expiration Date"), or on such earlier
date upon which the Term shall expire or be canceled or terminated pursuant to
any of the conditions or covenants of this Lease, or pursuant to law.
2.3 Rent. The rents reserved under this Lease, which shall be payable
throughout the Term shall be and consist of:
(a) fixed rent (herein called "Fixed Rent"), commencing on the
Commencement Date which shall be payable as follows:
<TABLE>
Lease Year Per Annum Rent Per Month Rent
<S> <C> <C>
1-2 $ 965,693.00 $80,474.42
3-5 1,055,109.00 87,925.25
6-10 1,099, 817.00 91,651.42
</TABLE>
Fixed Rent shall be payable in equal monthly installments in the amount set
forth above, in advance on the first day of each and every calendar month during
the Term commencing on the Rent Commencement Date, and
(b) Additional Rent. The various items of Additional Rent shall
commence to be paid on the Commencement Date unless otherwise set forth in this
Lease.
All Fixed Rent and Additional Rent is to be paid in lawful money of the United
States to Landlord at Landlord's address first set forth above or to such other
person and/or at such other place as Landlord may designate by notice to Tenant.
Fixed Rent and Additional Rent are herein sometimes collectively called "Rent".
2.4 No Setoff. Tenant shall pay Fixed Rent and Additional Rent promptly
when due without notice or demand therefor and without any abatement, deduction
or setoff for any reason whatsoever, except as may be expressly provided in this
Lease.
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<PAGE> 16
2.5 Delay in Landlord's Delivery of Premises. In the event that the
Demised Premises are not Ready for Occupancy (as defined below) on or before
March 10, 1998, and such delay is not as a result of a Tenant Delay, then for
each day after March 10, 1998 that the Demised Premises are not Ready for
Occupancy, up to and including March 25, 1998, Tenant shall receive an abatement
of Fixed Rent due under this Lease for two (2) days, and for each day after
March 25, 1998 that the Demised Premises are not Ready for Occupancy, Tenant,
provided such delay is not as a result of a Tenant Delay, shall receive an
abatement of Fixed Rent due under this Lease for three (3) days. In the event
that the Demised Premises are not Ready for Occupancy on or before September 30,
1998 and such delay is not a result of a Tenant Delay, then at any time
thereafter until the Demised Premises are Ready for Occupancy, Tenant shall have
the right to terminate this Lease upon ten (10) days' written notice to
Landlord.
ARTICLE 3
Landlord's Work
3.1 Landlord's Work. The Demised Premises shall be completed and
prepared for Tenant's occupancy in the manner, and subject to the provisions of,
the Work Letter attached hereto as Exhibit B and made a part hereof. The
facilities, materials and work to be furnished, installed and performed in the
Demised Premises by Landlord at its expense are herein and in Exhibit B are
called "Landlord's Work". All of the terms, covenants, provisions and conditions
of Exhibit B are incorporated in this Article as if fully set forth at length
herein. Subject to Section 3.4 below, the taking of possession by Tenant of the
Demised Premises shall be conclusive evidence as against Tenant that the Demised
Premises is in good and satisfactory condition at the time such possession was
taken, except for latent conditions and defects. Landlord shall provide Tenant
with weekly reports with respect to the status and progress of Landlord's Work.
3.2 Ready for Occupancy. The Demised Premises shall be deemed "Ready
for Occupancy" on the date on which Landlord's Work shall have been
substantially [completed and Landlord shall have delivered to Tenant a
Certificate of Occupancy (either temporary or permanent) permitting Tenant's
lawful occupancy of the Demised Premises]; and the same shall be substantially
completed notwithstanding the fact that minor or insubstantial details of
construction, mechanical adjustment or decoration remain to be performed, the
noncompletion of which will not interfere with Tenant's use of the Demised
Premises, except in de minimus respects. Landlord shall give Tenant at least ten
(10) Business Days' notice of the date on which Landlord's Work will be
substantially completed. Except as otherwise set forth in this Lease, any
variance between the date so estimated and the date on which Landlord's Work
shall have been substantially completed shall be of no consequence. Tenant shall
use its reasonable efforts to occupy the Demised Premises within a commercially
reasonable period after the same are Ready for Occupancy.
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<PAGE> 17
3.3 Delays. If the substantial completion of Landlord's Work shall be
delayed due to any act or omission of Tenant or Tenant's Agents (including, but
not limited to, (i) any delays due to changes in or additions to Landlord's
Work, or (ii) any delays by Tenant in the submission of plans, drawings,
specifications or other information or in approving any working drawings or
estimates or in giving any authorizations or approvals, or (iii) Tenant's
material interference with the progress of Landlord's Work during any time that
Tenant is given access to the Demised Premises under Section 3.5 below.), then
the Demised Premises shall be deemed Ready for Occupancy on the date when they
would have been ready but for such delay; provided, however, such delay shall
only be considered a delay if Landlord shall give written notice to Tenant [(i)
of the action or inaction giving rise thereto and Tenant fails to cure same
within three (3) Business Days thereafter; and (ii)] within ten (10) Business
Days of the act or omission of Tenant or Tenant's Agents which is the cause of
the delay stating with reasonable specificity the act or omission that caused a
delay and the period thereof.
3.4 Punch List. The Demised Premises shall be conclusively presumed to
be in satisfactory condition on the Commencement Date except for latent defects
and conditions and except for any minor or insubstantial details referred to in
Section 3.2 of which Tenant gives Landlord notice within thirty (30) days after
the Commencement Date specifying such details with reasonable particularity
which details Landlord shall repair within sixty (60) days of receipt of such
notice.
3.5 Early Access and Possession. Tenant shall have access to the
Demised Premises [from the start of construction of Landlord's Work for the
purposes of fixturing and installing telephone and computer systems and related
wiring and cabling. Any access by Tenant to the Demised Premises prior to the
Commencement Date] shall be deemed to be upon all the terms, covenants and
provisions of this Lease except that no Rent shall be due for such early
possession.
3.6 Warranty. Landlord hereby warrants Landlord's Work against defects
due to faulty workmanship or materials for a period of one (1) year from the
date that the Demised Premises are Ready for Occupancy.
ARTICLE 4
Use
4.1 Tenant's Business. Tenant shall use and occupy the Demised Premises
for general office purposes and uses ancillary thereto and for no other
purposes.
4.1 Permits. If any governmental license or permit, other than a
certificate of occupancy, shall be required for the proper and lawful conduct of
Tenant's business in the Demised Premises, or any part thereof, Tenant, at its
expense, shall duly procure and
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<PAGE> 18
thereafter maintain such license or permit and promptly following Landlord's
request, submit the same to inspection of Landlord. Tenant shall at all times
comply with the terms and conditions of each such license or permit.
4.2 Restrictions. Tenant shall not at any time use or occupy, or suffer
or permit anyone to use or occupy, the Demised Premises, or do anything in the
Demised Premises, in any manner (a) which violates the certificate of occupancy
for the Demised Premises (assuming such certificate of occupancy permits a
general office use); (b) which causes or is liable to cause injury to the
Building or any equipment, facilities or systems therein; (c) which constitutes
a violation of Applicable Law or the Insurance Requirements; (d) which impairs
the character, reputation or appearance of the Building as a first-class office
building; (e) which impairs the proper and economic maintenance, operation and
repair of the Building and/or its equipment, facilities or systems; or (f) which
creates a nuisance.
ARTICLE 5
Subordination
5.1 Superior Leases and Mortgages. This Lease, and all rights of Tenant
hereunder, are and shall be subject and subordinate to all ground leases,
overriding leases and underlying leases affecting the Project now or hereafter
existing (the "Superior Lease(s)") and to all mortgages which may now or
hereafter affect the Project or any of such leases (the "Superior Mortgage(s)")
whether or not such mortgages shall also cover other lands, buildings or leases,
to each and every advance made or hereafter to be made under such mortgages, and
to all renewals, modifications, replacements and extensions of such leases and
such mortgages and spreaders and consolidations of such mortgages. This Section
shall be self-operative and no further instrument of subordination shall be
required [provided that in each instance the Superior Lessor or Superior
Mortgagee (as such terms are defined below) enters into a subordination,
nondisturbance and attornment agreement with Tenant that contains the
Nondisturbance Requirements.] Tenant shall promptly execute, acknowledge and
deliver any instrument that Landlord, the lessor under any such lease or the
holder of any such mortgage or any of their respective successors in interest
may reasonably request to evidence such subordination. As used herein the lessor
of a Superior Lease or its successor in interest is herein called "Superior
Lessor"; and the holder of a Superior Mortgage is herein called "Superior
Mortgagee". Landlord represents and warrants that as of the date hereof, the
Demised Premises is subject only to a mortgage (the "Current Mortgage") in favor
of 120 Old Post Road Associates recorded in Liber 22768 at Page 68 in the
Westchester County Clerk's Office. Landlord represents to Tenant that Landlord
intends to refinance the Current Mortgage promptly after the execution of this
Lease and Landlord agrees to obtain and Tenant's subordination hereunder is
conditioned upon Landlord obtaining a Subordination, Non-Disturbance and
Attornment Agreement from such mortgagee which contains the Nondisturbance
Requirements.
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<PAGE> 19
5.2 Notice. If any act or omission of Landlord would give Tenant the
right, immediately or after lapse of a period of time, to cancel or terminate
this Lease, or to claim a partial or total eviction, Tenant shall not exercise
such right (a) until, it has given written notice of such act or omission to
Landlord and to any Superior Mortgagee or Superior Lessor whose names shall
previously have been furnished to Tenant, and (b) until a reasonable period for
remedying such act or omission shall have elapsed following the giving of such
notice.
5.3 Attornment. If any Superior Lessor or Superior Mortgagee shall
succeed to the rights of Landlord under this Lease, whether through possession
or foreclosure action or delivery of a new lease or deed, Tenant shall attorn to
and recognize such Successor Landlord as Tenant's landlord under this Lease and
shall promptly execute and deliver any instrument that such Successor Landlord
may reasonably request to evidence such attornment, provided same does not
adversely effect Tenant's rights or obligations under this Lease. Upon such
attornment this Lease shall continue in full force and effect as a direct lease
between the Successor Landlord and Tenant upon all of the terms, conditions and
covenants as are set forth in this Lease. [In addition, the subordination,
nondisturbance and attornment agreement entered into between Tenant and such
successor Landlord shall provide, if required by the Superior Lessor or Superior
Mortgagee, that the successor Landlord shall not] (a) be liable for any previous
act or omission of Landlord under this Lease; (b) be subject to any offset, not
expressly provided for in this Lease; or (c) be bound by any previous
modification of this Lease or by any previous prepayment of more than one
month's Fixed Rent, unless such modification or prepayment shall have been
expressly approved in writing by the Successor Landlord (or predecessor in
interest) or permitted hereby.
ARTICLE 6
Assignment and Subletting
6.1 Consent Required. (a) Tenant covenants and agrees that neither this
Lease, nor the estate hereby granted, nor the interest of Tenant in any sublease
or the rentals thereunder, shall be assigned, mortgaged, pledged, encumbered or
otherwise transferred by Tenant, the Tenant's legal representatives, or
successors in interest by operation of law or otherwise, and that neither the
Demised Premises nor any part thereof shall be encumbered in any manner by
reason of any act or omission on the part of Tenant, or shall be sublet, except
as otherwise permitted hereby or expressly consented to in writing by Landlord,
which consent shall not be unreasonably withheld or delayed. A transfer of fifty
percent (50%) or greater interest (whether stock, partnership interest,
membership interest or otherwise) of Tenant shall be deemed to be an assignment
of this Lease, either in one transaction or in any series of transactions unless
either (i) Tenant's stock is publicly traded on a recognized stock exchange or
in the over-the-counter market (publicly traded to included, without limitation,
the act of going public on such exchange or market), or (ii) the
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<PAGE> 20
transfer was not made with the intent of otherwise circumventing the provisions
of this Article 6 and the transferee, after giving effect to the assignment,
shall have a net worth of at least equal to the greater of that of Tenant at the
time of this Lease.
(b) In the event Tenant desires to assign its interest in this Lease or
sublease all or any portion of the Demised Premises, Tenant shall remain fully
liable for the payment of Fixed Rent or Additional Rent due or to become due
pursuant to this Lease and for the performance of all obligations, covenants,
agreements, terms and conditions contained in this Lease.
6.2 Collection of Rent, etc. If this Lease be assigned, whether or not
in violation of the provisions of this Lease, Landlord may collect Rent from the
assignee. If the Demised Premises or any part thereof be sublet or used or
occupied by anyone other than Tenant, whether or not in violation of this Lease,
Landlord may, after default beyond all applicable grace and cure periods after
notice by Tenant, collect Rent from the subtenant or occupant. In either event,
Landlord may apply the net amount collected to Rent, but no such assignment,
subletting, occupancy or collection shall be deemed a waiver of any of the
provisions of Section 6.1, or the acceptance of the assignee, subtenant or
occupant as tenant, or a release of Tenant from the further performance by
Tenant of Tenant's obligations under this Lease. The consent by Landlord to an
assignment, mortgaging, pledging, encumbering, transfer, use, occupancy or
subletting pursuant to any provision of this Lease shall not in any way be
considered to relieve Tenant from obtaining the express consent of Landlord to
any other or further assignment, mortgaging, pledging, encumbering, transfer,
use, occupancy or subletting. The listing of any name other than that of Tenant
on any door of the Demised Premises or on any directory or in any elevator in
the Building, or otherwise, shall not operate to vest in the person so named any
right or interest in this Lease or in the Demised Premises, or be deemed to
constitute, or serve as a substitute for, or any waiver of, any prior consent of
Landlord required under this Article. Neither any assignment of Tenant's
interest in this Lease, nor any subletting, occupancy or use of the Demised
Premises, or any part thereof, by any person other than Tenant, nor any
collection of rent by Landlord from any person other than Tenant, as provided in
this Article, nor any application of any such rent, as provided in this Article
shall, under any circumstances, relieve Tenant of any of its obligations under
this Lease.
6.3 Related Corporations. Notwithstanding the foregoing Tenant, without
Landlord's consent and without Landlord becoming entitled to any amounts
pursuant to Section 6.8 of this Lease, may, upon written notice to Landlord:
(a) Sublet any part of the Demised Premises to a corporation or other
business entity (herein called a "Related Corporation") which shall control, be
controlled by, or be under common control with, Tenant.
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<PAGE> 21
(b) Assign this Lease to a Related Corporation, provided that such
Related Corporation shall assume Tenant's obligations thereafter arising under
this Lease.
Concurrently with providing notice to Landlord of the making of a sublease to a
Related Corporation or assigning this Lease to a Related Corporation (all as set
forth in Sections 6.3(a) or (b)), as the case may be, Tenant shall be required
to submit proof that the sublessee or assignee is a Related Corporation,
together with an executed counterpart of the assignment or sublease, as the case
may be. As used herein in defining Related Corporation, control must include
over fifty percent (50%) of the stock or other voting interest of the controlled
corporation or other business entity. Similar proof that such sublessee or
assignee continues to be a Related Corporation shall be furnished by Tenant to
Landlord within fifteen (15) days after request therefor. Any assignment or
sublease to a Related Corporation shall not relieve Tenant from liability under
this Lease.
6.4 Conditions to Sublease. Provided that Tenant is not in default of
any of Tenant's obligations under this Lease, then Landlord's consent (which
must be in writing and in form reasonably satisfactory to Landlord) to any
proposed assignment or sublease shall not be unreasonably withheld or delayed
(in the event Landlord has not either consented or denied consent within 30
days, then such consent shall be deemed granted), provided that the following
conditions are met:
(a) In Landlord's reasonable judgment the proposed assignee or
subtenant is engaged in a business and the Demised Premises, or the relevant
part thereof, will be used in a manner which (i) is in keeping with the then
standards of the Building, (ii) is limited to the use expressly permitted under
Section 4.1 and (iii) will not cause an undue amount of traffic in the Building
or impose any material additional burden upon Landlord in the operation of the
Building or providing services and utilities;
(b) The proposed assignee or subtenant is a reputable person of good
character and the Landlord has been furnished with reasonable proof thereof;
(c) The form of the proposed sublease or assignment shall be reasonably
satisfactory to Landlord and shall comply with the applicable provisions of this
Article; and
(d) Tenant shall reimburse Landlord on demand for any reasonable costs
that may be incurred by Landlord in connection with said assignment or sublease,
including, without limitation, the cost of making investigations as to the
acceptability of the proposed assignee or subtenant and reasonable legal fees
incurred in connection with the granting of any requested consent.
6.5 Further Conditions. Each subletting and/or assignment pursuant to
this Article shall be subject to all of the covenants, agreements, terms,
provision and conditions contained in this Lease. Tenant further agrees that
notwithstanding any such subletting or
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<PAGE> 22
assignment, no other and further subletting or assignment of the Demised
Premises or any part thereof by Tenant or any person claiming through or under
Tenant shall or will be made except upon compliance with and subject to the
provisions of this Article. If Landlord shall decline to give its consent to any
proposed assignment or sublease, Tenant shall indemnify, defend and hold
harmless Landlord against and from any and all loss, liability, damages, costs
and expenses (including reasonable counsel fees) resulting from any claims that
may be made against Landlord by the proposed assignee or sublessee or by any
brokers or other persons claiming a commission or similar in connection with the
proposed assignment or sublease.
6.6 Compliance. In the event that Tenant fails to execute and deliver
the assignment or sublease to which Landlord consented within ninety (90) days
after the giving of such consent, then, Tenant shall again comply with all of
the provisions and conditions of this Article before assigning this Lease or
subletting the Demised Premises.
6.7 Conditions of Subletting. With respect to each and every sublease
or subletting authorized by Landlord under the provisions of this Lease, it is
further agreed as follows:
(a) No subletting shall be for a term ending later than one day prior
to the Expiration Date;
(b) No sublease shall be valid, and no subtenant shall take possession
of the Demised Premises or any part thereof, until an executed counterpart of
such sublease has been delivered to Landlord; and
(c) Each sublease shall provide that it is subject and subordinate to
this Lease and to the matters to which this Lease is or shall be subordinate,
and that in the event of termination, re-entry or dispossess by Landlord under
this Lease Landlord may, at its option, terminate such sublease or take over all
of the right, title and interest of Tenant, as sublessor, under such sublease,
and such subtenant shall, at Landlord's option, attorn to Landlord pursuant to
the then executory provisions of such sublease, except that Landlord shall not
(i) be liable for any previous act or omission of Tenant under such sublease,
(ii) be subject to any offset, not expressly provided in such sublease, which
theretofore accrued to such subtenant against Tenant, or (iii) be bound by any
previous modification of such sublease (unless consented to by Landlord) or by
any previous prepayment of more than one month's rent.
6.8 Consideration. If Landlord shall give its consent to any assignment
of this Lease or to any sublease, Tenant shall, in consideration therefor, pay
to Landlord, as Additional Rent:
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<PAGE> 23
(a) In the case of an assignment, an amount equal to fifty percent
(50%) of all sums and other consideration paid to Tenant, after deducting
therefrom Tenant's out-of-pocket costs and expenses incurred in connection with
such assignment including, without limitation, commissions, legal fees, and
construction expenses, by an assignee for or by reason of or in any way
connected with such assignment (including, but not limited to, sums paid for the
sale or rental of Tenant's fixtures, leasehold improvements less, in the case of
a sale thereof, the then net unamortized or undepreciated cost thereof
determined on the basis of Tenant's federal income tax returns); and
(b) In the case of a sublease, fifty percent (50%) of any rent,
additional charge or other consideration paid under the sublease to Tenant,
after deducting therefrom Tenant's reasonable out-of-pocket costs and expenses
incurred in connection with such sublease including, without limitation,
commissions, legal fees, and construction expenses, by the subtenant which is in
excess of Fixed Rent and Additional Rent accruing during the term of the
sublease in respect of the subleased space (at the rate per square foot payable
by Tenant hereunder) pursuant to the terms thereof (including but not limited to
sums paid for the sale or rental of Tenant's fixtures, leasehold improvements
less, in the case of the sale thereof, the then net unamortized or undepreciated
cost thereof determined on the basis of Tenant's federal income tax returns).
The sums payable under this section 6.8(b) shall be paid to Landlord as and when
paid by the subtenant to Tenant.
ARTICLE 7
Estoppel Certificate; Memorandum
7.1 Delivery of Certificate. Landlord or Tenant shall, at any time and
from time to time, within ten (10) days after request by the other party,
certify by written instrument duly acknowledged and delivered to any proposed or
actual mortgagee, assignee of any mortgage or purchaser, or any other person,
firm or corporation specified by Landlord or Tenant:
(a) That this Lease is unmodified and in full force and effect (or, if
there has been any modification, that the same is in full force and effect as
modified and stating the modification);
(b) Whether or not there are then existing any set-offs, or defenses
against the enforcement of any of the agreements, terms, covenants or conditions
hereof upon the part of Tenant to be performed or complied with (and, if so
specifying the same);
(c) The dates, if any, to which the Rent has been paid in advance; and
(d) Any other matters reasonably requested.
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<PAGE> 24
7.2 Memorandum of Lease. At the request of Tenant, Landlord shall
promptly execute, acknowledge and deliver a memorandum in form reasonably
satisfactory to Tenant with respect to this Lease, or any amendment of or other
agreement supplementary to this Lease, sufficient for recording. Unless Landlord
otherwise expressly requests or consents, such memorandum shall not state the
monetary payments required to be made hereunder, or anything else which is not
required by the applicable recording statute. Such memorandum shall not in any
circumstance be deemed to change or otherwise affect any of the terms, covenants
and conditions of this Lease. The recording of any such memorandum shall be at
Tenant's sole expense.
ARTICLE 8
Requirements of Law
8.1 Compliance. Landlord shall deliver the Demised Premises in
substantial compliance with all Applicable Laws and Insurance Requirements
(collectively, "Regulations") on the Commencement Date. Tenant, at Tenant's sole
cost and expense, shall promptly comply with all Regulations with respect to the
Demised Premises or the use or occupancy thereof, except that nothing herein
shall require Tenant to make repairs or alterations unless Tenant has by its
particular manner of use of the Demised Premises or method of operation therein
violated any Regulations. Tenant may contest and appeal any such Regulations
provided same is done with all reasonable promptness and provided such appeal
shall not subject Landlord to prosecution for a criminal offense or constitute a
default under any lease or mortgage under which Landlord may be obligated, or
which may encumber the Demised Premises, the Building or the Property or cause
the Demised Premises, the Building or the Property to be condemned or vacated.
8.2 Prohibitions. Tenant shall not knowingly do or knowingly permit any
act or thing to be done in or to the Demised Premises which is contrary to
Applicable Laws or the Insurance Requirements, or which will invalidate or be in
conflict with public liability, fire or other policies of insurance at any time
carried by or for the benefit of Landlord with respect to the Demised Premises
or the Building or which shall subject Landlord to any liability or
responsibility to any person or for property damage, nor shall Tenant keep
anything in the Demised Premises except as now or hereafter permitted by
Applicable Law and Insurance Requirements, and then only in such manner and such
quantity so as not to increase the rate for fire insurance applicable to the
Building, nor use the Demised Premises in a wrongful manner which will increase
the insurance rate for the Building or any property located therein over that
otherwise in effect. Tenant shall pay all costs, expenses, fines, penalties or
damages which may be imposed upon Landlord by reason of Tenant's failure to
comply with any Applicable Laws or Insurance Requirements and if by reason of
Tenant's failure to comply with any Applicable Laws or Insurance Requirements
the fire insurance rate shall, at the beginning of this Lease or at any time
thereafter, be higher than it otherwise would be, then Tenant shall reimburse
Landlord, as Additional Rent hereunder, for that
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<PAGE> 25
portion of all fire insurance premiums thereafter paid by Landlord which shall
have been charged because of such failure by Tenant, and shall make such
reimbursement upon the first day of the month following such outlay by Landlord.
8.3 Hazardous Substances. (a) Tenant shall not cause or permit any
Hazardous Substance to be used, stored, generated or disposed of on or in the
Demised Premises by Tenant or Tenant's Agents without first obtaining Landlord's
written consent. If Hazardous Substances are used, stored, generated or disposed
of on or in the Demised Premises except as permitted above, or if the Demised
Premises become contaminated in any manner for which Tenant is legally liable,
Tenant shall indemnify and hold harmless the Landlord from any and all claims,
damages, fines, judgments, penalties, costs, liabilities or losses (including,
without limitation, a decrease in value of the Demised Premises, damages due to
loss or restriction of rentable or usable space, or any damages due to adverse
impact on marketing of the space, and any and all sums paid for settlement of
claims, attorneys' fees, consultant and expert fees) arising during or after the
Term of the Lease and arising as a result of such contamination by Tenant. This
indemnification includes, without limitation, any and all costs incurred due to
any investigation of the site or any cleanup, removal or restoration mandated by
a federal, state or local agency or political subdivision. Without limitation of
the foregoing, if Tenant causes or permits the presence of any Hazardous
Substance on the Demised Premises and such results in contamination, Tenant
shall promptly, at its sole expense, take any and all necessary actions to
return the Demised Premises to the condition existing prior to the presence of
any such Hazardous Substance on the Demised Premises. Tenant shall first obtain
Landlord's approval for any such remedial action. The terms and conditions of
this Section 8.3(a) shall survive the termination or expiration of this Lease.
(b) As used herein, "Hazardous Substance" means any substance which is
toxic, ignitable, reactive or corrosive and which is now or at any time in the
future regulated by any local government, the State of New York or the United
States government. "Hazardous Substance" includes any and all material or
substances which are now or may be in the future designated or defined as
"hazardous waste", "extremely hazardous waste" or a "hazardous substance"
pursuant to state, federal or local governmental law. "Hazardous Substance"
includes, but is not restricted to, asbestos, polychlorobiphenyls ("PCB's") and
petroleum.
(c) Landlord hereby represents and warrants to the best of Landlord's
knowledge that as of the date hereof there are, and as of the Commencement Date
there shall be no Hazardous Substances used, stored, generated or disposed of on
or in the Demised Premises. Landlord agrees to indemnify and hold Tenant
harmless from and against any and all claims, damages, fines, judgments,
penalties, costs and liabilities resulting from the use, storage, generation or
disposal of Hazardous Substances on or in the Demised Premises prior to the
Commencement Date (subject to Tenant's indemnity above if Tenant occupies the
Demised
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<PAGE> 26
Premises) or by Landlord on the Demised Premises. The terms of this Section
8.3(c) shall survive the termination or expiration of this Lease.
ARTICLE 9
Property Loss and Indemnification
9.1 Limitation of Liability. Landlord or Landlord's Agents shall not be
liable for any damage to property of Tenant or of others entrusted to employees
of the Building, nor for loss of or damage to any property of Tenant by theft or
otherwise, nor for injury or damage to persons or property resulting from any
cause of whatsoever nature, unless (in any of the foregoing instances) caused by
or due to the negligence of Landlord or Landlord's Agents, nor shall Landlord or
Landlord's Agents be liable for any such damage caused by other tenants or
persons in, upon or about the Building or caused by operations in construction
of any private, public or quasi-public work.
9.2 Tenant's Indemnification. Tenant shall indemnify and hold harmless
Landlord and Landlord's Agents (of whose identities Tenant is given notice) from
and against any and all claims arising from or in connection with (a) the
conduct or management of the Demised Premises or of any business therein, or any
work or thing whatsoever done, or any condition created (other than by Landlord
or Landlord's Agents) in or about the Demised Premises during the Term or during
the period of time, if any, prior to the Commencement Date that Tenant shall
have taken possession of the Demised Premises; (b) any act, omission or
negligence of Tenant, Tenant's Agents or any subtenants or licensees or their
partners, officers, agents, employees or contractors; (c) any accident, injury
or damage whatever (unless caused by Landlord's or Landlord's Agents negligence)
occurring in, at or upon the Demised Premises; and (d) any breach or default by
Tenant in the full and prompt payment and performance of Tenant's obligations
under this Lease; together with all costs, expenses and liabilities incurred in
or in connection with each such claim or action or proceeding brought thereon,
including, without limitation, all reasonable attorneys' fees and expenses. In
case any action or proceeding be brought against Landlord or Landlord's Agents
by reason of any such claim, Tenant, upon notice from Landlord, shall resist and
defend such action or proceeding (by counsel reasonably satisfactory to
Landlord).
ARTICLE 10
Destruction - Fire and Other Casualty
10.1 Repairs. If the Demised Premises shall be damaged by fire or other
casualty, Tenant shall give immediate notice thereof to Landlord and this Lease
shall continue in full force and effect except as hereinafter set forth. If the
Demised Premises are partially unusable, the damage thereto shall be repaired by
Landlord with reasonable dispatch after Landlord is provided with a reasonable
opportunity (not to exceed sixty (60) days) to collect
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the insurance proceeds attributable to such damage, subject to delays due to
causes beyond Landlord's control, and Rent, until such repairs shall be
substantially completed, shall be apportioned from the day following the
casualty according to the part of the Demised Premises which is unusable.
Landlord, however, shall have no obligation to repair any damage to Tenant's
personal property. If the Demised Premises are totally damaged or rendered
unusable by Tenant for the carrying on of Tenant's business by fire or other
casualty then the Fixed Rent shall be proportionately paid up to the time of the
casualty and thenceforth shall cease until the date when the Demised Premises
shall have been repaired and restored by Landlord, subject to Landlord's right
to elect not to restore the same as hereinafter provided.
10.2 Termination. If the Building shall be so damaged that Landlord
shall decide to demolish it or not to rebuild it (Landlord agreeing to give
Tenant written notice of Landlord's decision with regard thereto within
forty-five (45) days after such fire or casualty), then Landlord or Tenant may
elect to terminate this Lease by written notice to the other party given within
sixty (60) days after such fire or casualty. Such notice shall specify a date
for the expiration of this Lease, and upon the date specified the Term shall
expire as fully and completely as if such date were the date set forth above for
the termination of this Lease and Tenant shall forthwith quit, surrender and
vacate the Demised Premises, without prejudice however, to either party's rights
and remedies against the other under the Lease provisions in effect prior to
such termination, and any Rent owing shall be paid up to the date the Demised
Premises were rendered unusable and any payments of Rent made by Tenant which
were on account of any period subsequent to such date shall be returned to
Tenant. Unless Landlord or Tenant shall serve a termination notice as provided
for herein, Landlord within such sixty (60) day period shall deliver an estimate
of the time needed to repair or restore the Demised Premises, and thereafter
shall make repairs and restoration as herein set forth with reasonable dispatch
after a reasonable period of time has been allowed to provide for collection of
the insurance proceeds as provided in Section 10.1. If the repair or restoration
is estimated by Landlord as provided above to take (or if such repair or
restoration in fact does take, with no extension for events of Force Majeure)
more than 270 days, then Tenant shall have the right to terminate this Lease
upon written notice to Landlord.
10.3 Tenant's Property. Tenant acknowledges that Landlord will not
carry insurance on Tenant's Property or on Tenant's business records or other
property of Tenant or Tenant's Agents, and Tenant agrees that Landlord will not
be obligated to repair any damage thereto or to replace the same.
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ARTICLE 11
Insurance
11.1 Landlord's Insurance. At all times during the Term of this Lease,
Landlord will maintain (a) fire and extended coverage insurance covering the
Building and all improvements located upon the Property for the full replacement
value thereof, and (b) public liability and property damage insurance with
limits which are the same as the limits required to be carried by Tenant in
Section 11.2 below.
11.2 Liability Insurance. Tenant shall provide after taking possession
of the Demised Premises and shall keep in force during the Term for the benefit
of Landlord and Tenant a comprehensive or commercial policy of liability
insurance protecting Landlord and Tenant against any liability whatsoever
occasioned by accident on or about the Demised Premises or appurtenances
thereof. Such policy is to be written by good and solvent insurance companies
licensed in the State of New York rated A VII or better by Best's Key Rating
Guide, with a combined single occurrence limit of not less than Five Million and
00/100 ($5,000,000.00) Dollars. Such insurance may be carried under a blanket
policy covering the Demised Premises and other locations of Tenant provided such
blanket policy complies with the above amounts of insurance for the Demised
Premises and the other requirements provided above. Prior to the time such
insurance is first required to be carried by Tenant, and thereafter, at least
ten (10) days prior to the expiration of any such policy, Tenant agrees to
deliver to Landlord either a duplicate original of the aforesaid policy or a
certificate evidencing such insurance. Such insurance may not be canceled except
upon ten (10) days' notice to Landlord. At any time on or after the sixth (6th)
anniversary of the Commencement Date, upon written notice to Tenant, Landlord
shall have the right to require that Tenant reasonably increase the limits of
Tenant's insurance coverage to an amount that is not in excess of amounts then
customarily required of comparable tenants in comparable buildings in
Westchester County, New York.
11.3 Waiver of Subrogation. Landlord and Tenant each shall secure an
appropriate clause in, or an endorsement upon, each insurance policy obtained by
it and covering or applicable to the Demised Premises or the personal property,
fixtures and equipment located therein or thereon, pursuant to which the
insurance company waives subrogation or permits the insured, prior to any loss,
to agree with a third party to waive any claim it might have against said third
party without invalidating the coverage under the insurance policy. The waiver
of subrogation or permission for waiver of any claim shall extend to Landlord
and Landlord's Agents and Tenant and Tenant's Agents. Landlord and Tenant shall
look first to any insurance in their respective favor before making any claim
against the other party for recovery for loss or damage resulting from fire or
other casualty, and to the extent that such insurance is in effect, Landlord and
Tenant hereby release each other and their Agents in respect of any claim
(including a claim for negligence) which it might otherwise have against the
other party or its Agents for loss, damage or destruction by fire or other
casualty
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(including rental value or business interest, as the case may be) occurring
during the Term of this Lease and normally covered under a fire insurance policy
with extended coverage endorsement.
11.4 Forms of the Policies. All policies of liability insurance which
Tenant is obligated to maintain according to this Lease (other than any policy
of worker's compensation insurance) will name Landlord and such other persons or
firms as Landlord specifies from time to time as additional insureds. Reasonably
satisfactory evidence of such insurance along with evidence of the payment of
all premiums of such policies will be delivered to Landlord prior to Tenant's
occupancy of the Demised Premises and from time to time at least ten (10) days
prior to the expiration of the term of each such policy. All public liability
and property damage liability policies maintained by Tenant will contain a
provision that Landlord and any other additional insured, although named as an
insured, will nevertheless be entitled to recover under such policies for any
loss sustained by it, its agents and its employees as a result of the acts or
omissions of Tenant. All such policies maintained by Tenant will provide that
they may not be terminated or amended except after ten (10) days prior written
notice to Landlord. All public liability, property damage liability and casualty
policies maintained by Tenant will be written as primary policies, not
contributing (except in the case where Landlord and Tenant are both found
proportionately liable for such loses) with and not in excess of coverage that
Landlord may carry. No insurance required to be maintained by Tenant by this
paragraph will be subject to any deductible without Landlord's prior written
consent, provided, however such policies may contain a commercially reasonable
deductible, not to exceed $25,000.00.
ARTICLE 12
Condemnation
12.1 Total Taking. If all or substantially all of the Demised Premises
shall be lawfully condemned or taken in any manner for any public or
quasi-public use, this Lease shall cease and terminate as of the date of the
vesting of title in the condemnor.
12.2 Partial Taking. If less than all of the Demised Premises shall be
so condemned or taken, but if such taking shall substantially affect the means
of access thereto, then Landlord and/or Tenant shall have the right to terminate
this Lease and the term and estate hereby granted by the delivery of written
notice to the other party within thirty (30) days following the date of actual
vesting of title in the condemnor. Such termination shall take effect as of the
date of actual vesting of title in the condemnor or thirty (30) days after the
giving of such notice of termination, whichever is later. If Landlord and/or
Tenant shall not so elect to terminate, this Lease shall be and remain
unaffected by such condemnation or taking, except that, effective as of the date
of the vesting of title in the condemnor, Rent shall be reduced in the
proportion which the area of the part of the Demised Premises so
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condemned or taken bears to the total area of the Demised Premises prior to such
condemnation or taking.
12.3 Award. In the event of the termination of this Lease in accordance
with this Article, Rent shall be prorated and paid to the effective date of the
termination. Tenant, whether this Lease be canceled pursuant to this Article,
shall not be entitled to claim or receive any part of any award or compensation
which may be issued or receive any part of any award or compensation which may
be issued or rendered in any such condemnation proceeding or as a result of such
condemnation or taking, and shall not be entitled to claim or receive any
damages against Landlord, whether the same be for the value of the unexpired
term of this Lease or otherwise. Nothing herein contained, however, shall be
deemed to preclude Tenant from making a separate claim against the condemnor for
the value of Tenant's Property or for Tenant's moving expense provided the award
of such claim or claims is not in diminution of the award made to Landlord.
ARTICLE 13
Repairs
13.1 Landlord's Repairs. Except as set forth in Section 13.2, Landlord
shall maintain and repair the public portions of the Project, both exterior and
interior, and the structural elements and systems in the Building, in good
condition.
13.2 Tenant's Repairs. Except as expressly set forth in Section 13.1
above, Tenant shall take good care of the Demised Premises and the fixtures and
appurtenances therein and, at Tenant's cost and expense, make all non-structural
repairs thereto as and when needed to preserve them in good working order and
condition, reasonable wear and tear, obsolescence and damage from the elements,
fire or other casualty excepted. Notwithstanding the foregoing, all damage or
injury to the Demised Premises or to any other part of the Project, or to its
fixtures, equipment and appurtenances, whether requiring structural or
non-structural repairs, caused by or resulting from the following shall be
repaired promptly by Tenant at its sole cost and expense:
(a) the performance or existence of Alterations;
(b) the installation, use or operation of Tenant's Property in the
Demised Premises;
(c) the moving of Tenant's Property in or out of the Building; or
(d) the act, omission, misuse or neglect of Tenant, Tenant's Agents or
any subtenant.
All the aforesaid repairs shall be of quality or class equal to the
original work or construction. If Tenant fails after thirty (30) days' notice to
proceed with due diligence to
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make repairs required to be made by Tenant, the same may be made by Landlord at
the expense of Tenant and the reasonable expenses thereof incurred by Landlord
shall be collectible as Additional Rent after rendition of a bill or statement
therefor. Tenant shall give Landlord prompt notice after learning of any
defective condition in any plumbing, heating system or electrical lines located
in servicing or passing through the Demised Premises and following such notice,
Landlord, at Landlord's expense, shall remedy the condition with due diligence,
but at the expense of Tenant if repairs are necessitated by damage or injury
resulting from (a) through (d) above.
13.3 Abatement. Neither (i) the making by Landlord or Tenant of any
decorations, repairs, alterations, additions or improvements in or to the
Demised Premises, nor (ii) the failure of Landlord to make any such decorations,
repairs, alterations, additions or improvements, nor (iii) any damage to the
Demised Premises or to the property of Tenant, nor any injury to any persons,
caused by other persons in the Building, or by operations in the construction of
any private, public or quasi-public work, or by any other cause, nor (iv) any
inconvenience or annoyance to Tenant or injury to or interruption of Tenant's
business by reason of any of the events or occurrences referred to in the
foregoing subdivisions (i) through (iv), shall entitle Tenant to any abatement
or diminution of rent, or relieve Tenant from any of its obligations under this
Lease, or impose any liability upon Landlord, or Landlord's Agents or any
Superior Lessor or Superior Mortgagee other than such liability as may be
imposed upon Landlord by law for Landlord's negligence or the negligence of
Landlord's Agents in the operation or maintenance of the Building or for the
breach by Landlord of any express covenant of this Lease on Landlord's part to
be performed. Notwithstanding the foregoing, in connection with the occurrences
referred to in subdivisions (i) through (iv) above, in the event that Tenant is
unable to use, and in fact does not use the Demised Premises for the conduct of
its business for more than three (3) consecutive Business Days as a result of
Landlord's acts or omissions, then Tenant shall receive an abatement of Rent, to
the extent the Demised Premises are not usable, and in fact not used, until such
time as the Demised Premises are once again useable. Landlord shall use
reasonable efforts not to obstruct Tenant's access to the Demised Premises and
not to unreasonably interfere with Tenant's use of the Demised Premises for the
conduct of its business. Tenant shall not claim a constructive eviction unless
Tenant is deprived of possession of the Demised Premises for thirty (30)
consecutive days.
ARTICLE 14
Services
14.1 Building Services. Throughout the Term, Landlord shall provide:
(a) one (1) elevator subject to call at all times;
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(b) water for ordinary lavatory, kitchen, pantry, plant watering,
drinking and cleaning purposes;
(c) cleaning service for the Demised Premises on Business Days as
described on Exhibit C attached hereto and made a part hereof. Tenant shall pay
to Landlord the cost of removal of any of Tenant's refuse and rubbish, if and
when such refuse and rubbish is in excess of that normally generated by a
general office use, if Landlord removes or causes the removal of such refuse and
rubbish;
(d) heating, ventilation and air-conditioning/cooling capable of
maintaining inside temperatures in the range from a low of 70 degrees during the
heating season to a high of 74 degrees at all other times, regardless of outside
temperature; and
(e) general cleaning and maintenance of the exterior portion of the
Demised Premises, to the extent not set forth in Exhibit C.
14.2 Intentionally Omitted.
14.3 Limitation of Liability. Landlord shall use reasonable care to
provide services referred to in this Article 14, however, provided Landlord has
used such reasonable care, Landlord shall have no liability to Tenant for
consequential damages caused by the failure to supply the services agreed to in
this Lease. Further, Landlord reserves the right to stop services of the
heating, elevators, plumbing, air-conditioning, power systems or cleaning or
other services, if any, when necessary by reason of accident or for repairs,
alterations, replacements or improvements reasonably necessary in the judgment
of Landlord for as long as may be reasonably required by reason thereof or by
reason of any of the events described in Section 35.1.
ARTICLE 15
Alterations
15.1 Requirements. Tenant may from time to time, at its expense, make
such alterations (herein called "Alterations") in and to the Demised Premises,
excluding structural changes, as Tenant may reasonably consider necessary for
the conduct of its business in the Demised Premises, provided and upon condition
that: (a) the outside of the Building shall not be affected; (b) the proper
functioning of the mechanical, electrical, sanitary and other service systems of
the Building shall not be adversely affected and the usage of such systems by
Tenant shall not be materially increased; (c) before proceeding with any
Alteration which either (i) has an anticipated cost in excess of $100,000, or
(ii) will have an effect (other than a de minimus effect) on the mechanical,
electrical, sanitary or other service systems of the Building, Tenant shall
submit to Landlord for Landlord's approval plans and specifications for the work
to be done, and Tenant shall not proceed with such work until it obtains
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Landlord's approval, which shall not be unreasonably withheld or delayed;
[provided, that if Landlord has not granted or denied such consent within
fifteen (15) Business Days of Landlord's receipt of such request, then Landlord
shall not be deemed to have granted consent;] (d) Tenant shall pay to Landlord
upon demand the reasonable cost and expense of Landlord in reviewing said plans
and; (e) Tenant shall fully and promptly comply with and observe the reasonable
rules and regulations of Landlord then in force with respect to the making of
Alterations. Tenant agrees that any review or approval by Landlord of any plans
and/or specifications with respect to any Alteration and any inspection thereof
are solely for Landlord's benefit, and without any representation or warranty
whatsoever to Tenant with respect to the adequacy, correctness or efficiency
thereof or otherwise. Tenant shall not make any structural changes or
alterations to the Building or any of the Building systems (including, without
limitation, the plumbing, electrical and HVAC systems) without the prior written
consent of Landlord, which consent shall not be unreasonably withheld or
delayed. Notwithstanding the foregoing, without the consent of Landlord, Tenant
shall have the right, at Tenant's sole cost and expense, to redecorate (e.g.
recarpet, repaint) the interior of the Demised Premises.
15.2 Permits. Tenant, at its expense, shall obtain all necessary
governmental permits and certificates for the commencement and prosecution of
Alterations and for final approval thereof upon completion, and shall cause
Alterations to be performed in compliance therewith and with all Regulations.
Alterations shall be diligently performed in a good and workmanlike manner,
using new materials and equipment at least equal in class to the original
installations of the Building. Alterations shall be performed by contractors
chosen by Tenant and first approved by Landlord, which approval shall not be
unreasonably withheld or delayed; provided, however, that any Alterations in or
to the mechanical, electrical, sanitary, heating, ventilating, air-conditioning
or other systems of the Building shall be performed only by the contractor(s)
designated by Landlord. Alterations shall be performed in such manner as not to
unreasonably interfere with or delay and as not to impose any material
additional expense upon Landlord in the maintenance, repair or operation of the
Building; and if any such additional expense shall be incurred by Landlord as a
result of Tenant's performance of any Alterations, Tenant shall pay such
additional expense upon demand. Throughout the performance of Alterations,
Tenant, at its expense, shall carry, or cause to be carried, worker's
compensation insurance in statutory limits and general liability insurance, with
completed operation endorsement, for any occurrence in or about the Building,
under which Landlord shall be named an insured, in such limits as Landlord may
reasonably require, with insurers reasonably satisfactory to Landlord. Tenant
shall furnish Landlord with reasonably satisfactory evidence that such insurance
is in effect at or before the commencement of Alterations and, on request, at
reasonable intervals thereafter during the continuance of Alterations. If any
Alterations shall involve the removal of any fixtures, equipment or other
property in the Demised Premises which are not Tenant's Property, such fixtures,
equipment or other property shall be promptly replaced at Tenant's expense with
new fixtures, equipment or other property of like utility and at least equal
value unless Landlord shall otherwise expressly consent.
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15.3 Violations. Tenant, at its expense, and with diligence and
dispatch, shall procure the cancellation or discharge of all notices of
violation arising from or otherwise connected with Alterations, or any other
work, labor, services or materials done for or supplied to Tenant, or any person
claiming through or under Tenant, which shall be issued by a public authority
having or asserting jurisdiction. Tenant shall defend, indemnify and save
harmless Landlord from and against any and all mechanics' and other liens and
encumbrances filed in connection with Alterations, or any other work, labor,
services or materials done for or supplied to Tenant, or any person claiming
through or under Tenant, including without limitation, security interests in any
materials, fixtures or articles so installed in and constituting part of the
Demised Premises and against all costs, expenses and liabilities incurred in
connection with any such lien or encumbrance or any action or proceeding brought
thereon. Tenant, at its expense, shall procure the satisfaction or discharge of
record (whether by bonding or otherwise) of all such liens and encumbrances
within sixty (60) days after notice of the filing thereof. Notice is hereby
given that Landlord shall not be liable for any work performed or to be
performed at the Demised Premises for Tenant or for any subtenant, or for any
materials furnished or to be furnished at the Demised Premises for Tenant or any
subtenant, upon credit, and that no mechanic's or other lien for such work or
materials shall attach to or affect the estate or interest of Landlord in and to
the Demised Premises.
15.4 Labor Strife. Tenant shall not, at any time prior to or during the
Term, directly or indirectly employ, or permit the employment of, any
contractor, mechanic or laborer in the Demised Premises, whether in connection
with any Alteration or otherwise, if such employment will materially interfere
or cause any material conflict with other contractors, mechanics, or laborers
engaged in the construction, maintenance or operation of the Demised Premises by
Landlord, Tenant or others. In the event of any such interference or conflict,
Tenant, upon demand of Landlord, shall cause all contractors, mechanics or
laborers causing such interference or conflict to leave the Demised Premises
immediately.
ARTICLE 16
Escalations - Taxes, Operating Expenses, Utilities
16.1 Escalations. In addition to the Fixed Rent and all other amounts
due and payable by Tenant to Landlord pursuant to this Lease, as Additional
Rent, Tenant shall pay to Landlord in the manner set forth in this Article 16,
the Tax Payment and the Operating Expense Payment.
16.2 Definitions. As used in this Article 16 the following definitions
shall apply:
(a) "Base Operating Year" shall mean the calendar year 1998, [provided
however, since the Term will not commence until after January 1, 1998, for the
purpose of ensuring that the Operating Expenses reflected in the Base Operating
Year are for a full calendar year,
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the actual Operating Expenses for the period from January 1, 1999 until the last
day of the first Lease Year shall be included in the total Operating Expenses
incurred in the Base Operating Year.]
(b) "Escalation Statement" shall mean a statement in writing signed by
Landlord or Managing Agent setting forth the amount payable by Tenant for a
specified Tax Year or Operational Year (as the case may be) pursuant to this
Article 16.
(c) "Insurance Expense" shall mean all insurance premiums incurred by
Landlord for insurance premiums relating to the Demised Premises, including but
not limited to fire and extended coverage, public liability, rental insurance,
business interruption and all risk insurance together with all other additional
insurance of whatsoever nature Landlord desires to carry provided such insurance
is of a nature generally maintained by prudent property owners of similar
first-class office buildings in the Westchester County, New York, area. Nothing
herein contained shall be interpreted to require Landlord to maintain any
particular type or amount of insurance, nor shall it provide Tenant with any
interest in said insurance or the proceeds thereof.
(d) "Operating Expenses" shall mean [only the following (unless Tenant
requests or consents to additional services or expenses) incurred by Landlord
with respect to the Demised Premises:
(i) The cost of supplies for the Demised Premises and of
exterminating, maintaining and repairing the Demised Premises;]
(ii) Costs incurred in connection with all energy sources for
the Demised Premises, such as propane, butane, natural gas, steam,
electricity (not included pursuant to Article 17 hereof) solar energy
and fuel oil;
(iii) The costs of water and sewer service, janitorial
services, refuse removal, security, general maintenance and repair of
the Demised Premises, including but not limited to the HVAC systems and
non-structural components of the Building;
(iv) Landscaping, maintenance, snow plowing, cleaning, repair
and striping of all parking areas, sidewalks and walkways at the
Demised Premises;
(v) Labor costs incurred by Landlord and Managing Agent for
employees of Landlord and Managing Agent to the extent such employees
are engaged in the operation, maintenance and management of the Demised
Premises, including wages and other payments of whatsoever nature,
including but not limited to payroll taxes, welfare, medical, surgical
and other fringe benefits, which fringe benefits shall include but not
be limited to group life insurance and pension payments but excluding
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all of the foregoing with respect to Landlord's or Managing Agent's
executive personnel;
(vi) Costs to Landlord or Managing Agent for worker's
compensation and disability insurance for employees or others relating
to the operation, maintenance and management of the Demised Premises;
(vii) Professional building management fees, legal,
accounting, inspection and consultation fees incurred in connection
with the Demised Premises;
(viii) Any costs incurred by Landlord in making capital
improvements or other modifications to the Demised Premises or any part
thereof which Landlord reasonably estimates will reduce the Operating
Expenses; these costs will be amortized over the useful life of such
improvement or modification; however, the annual amortization amount
will not exceed the reduction in Operating Expenses as projected by
Landlord's accountant for the relevant year, and the amortization
schedule will be extended accordingly if necessary; and
(ix) The Insurance Expense.
[Operating Expenses shall be calculated on a consistent basis, but otherwise in
accordance with Managing Agent's normal procedures for calculating same. Except
as expressly set forth in clause (viii) no capital expenditures shall be
included in Operating Expenses.]
(e) "Operational Year" shall mean each calendar year during the Term.
(f) "Real Estate Tax Base" shall mean the Real Estate Taxes for the
calendar year 1998, It being understood that said Real Estate Tax Base may
include Real Estate Taxes for a portion of more than one fiscal year of the
applicable taxing authority.
(g) "Real Estate Taxes" shall mean the aggregate amount of real estate
taxes, school taxes, water and sewer rents and or taxes (to the extent not
included in Operating Expenses), and any other public benefit costs, expenses or
liabilities, pursuant to any general or special assessments (exclusive of
penalties and interest thereon) imposed upon the Project by any governmental
and/or municipal or county entity or authority. If because of any change in the
taxation of real estate any other tax or assessment (including, without
limitation, any franchise, profit, sales, use, occupancy, gross receipts or
rental tax) is imposed upon Landlord or the owner of the Demised Premises, or
the occupancy, rents or income from either of them, in substitution for any of
the foregoing taxes, such other tax or assessment, computed as if the Demised
Premises were the Landlord's sole asset, will be deemed part of Real Estate
Taxes. All expenses (up to an aggregate of 20% of the resulting savings),
including attorneys' fees and disbursements, experts' and other witnesses' fees,
incurred in contesting the validity or amount of any Real Estate Taxes or in
obtaining a
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refund of Real Estate Taxes will be considered as part of the Real Estate Taxes
for the Tax Year in which such expenses are incurred. If requested by Tenant,
and provided Tenant agrees to pay all costs and expenses associated therewith,
Landlord shall contest the validity of any Real Estate Taxes.
(h) "Tax Year" shall mean (i) with respect to school taxes July 1 -
June 30, (ii) with respect to city taxes January 1 - December 31 and (iii) with
respect to state, county and sewer taxes January 1 - December 31.
16.3 Tax Escalation. In addition to the Fixed Rent payable during the
Term of this Lease and all other amounts payable in connection with this Lease,
commencing on and after January 1, 1999, if the Real Estate Taxes for any Tax
Year shall be greater than the Real Estate Tax Base, then Tenant shall pay to
Landlord as Additional Rent an amount equal to such excess (herein called the
"Tax Payment").
16.4 Tax Payments. Any Tax Payment for any Tax Year shall be due and
payable on the later of (a) fifteen (15) days after receipt of an Escalation
Statement or (b) fifteen (15) days prior to the date on which the Real Estate
Taxes which are the subject of such Escalation Statement are due and payable
without penalty or interest.
16.5 Survival and Proration. If this Lease ends on a day other than
December 31 the amount of the payments pursuant to this paragraph payable by
Tenant with respect to the year in which such end will occur will be prorated on
the basis which the number of days of the Term of the Lease included in such
year bears to three hundred sixty-five (365). In addition to any matters set
forth in Article 23 or otherwise, the obligations of Landlord and Tenant
concerning Tax Payments for any period prior to the expiration or termination of
this Lease shall survive the expiration or termination of this Lease.
16.6 Intentionally Omitted.
16.7 Tax Refunds. If Landlord shall receive a refund of Real Estate
Taxes for any Tax Year, except the Real Estate Tax Base, Landlord, at Tenant's
option, shall either pay to Tenant, or permit Tenant to credit against
subsequent payments under this Lease in the event Landlord does not promptly
make such payment to Tenant, the net refund (after deducting from such total
refund the costs and expenses, including, but not limited to, appraisal,
accounting and legal fees of obtaining the same, to the extent that such costs
and expenses were not included in the Real Estate Taxes for such Tax Year);
provided, however, such payment or credit to Tenant shall in no event exceed
Tenant's Tax Payment paid for such Tax Year.
16.8 Operating Expense Payment. (a) In addition to the Fixed Rent
payable in connection with this Lease and all other amounts payable in
connection with this Lease, if the Operating Expenses for any Operational Year
shall be greater than the Operating Expenses
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for the Base Operating Year, then Tenant shall pay as Additional Rent such
excess for each Operational Year of the Term of this Lease (the "Operating
Expense Payment").
(b) On or before the first day of each month during each Operational Year,
Tenant will pay to Landlord one-twelfth (1/12th) of the Operating Expense
Payment for the prior Operational Year; however, if a notice of such amount is
not given prior to the commencement of an Operational Year, Tenant will continue
to pay on the basis of the prior year's payment until the month after such
notice is given.
(c) After the expiration of any Operational Year, Landlord shall furnish Tenant
with the Escalation Statement of the Operating Expenses incurred for such
Operational Year. Within thirty (30) days after receipt of such statement for
any Operational Year, setting forth the Operating Expenses, Tenant shall pay
same to Landlord as Additional Rent less all estimated payments paid pursuant to
paragraph 16.8(b) above. If Tenant's payment of Operating Expenses exceeds the
actual Operating Expenses for any Operational Year as shown on such statement
then Landlord shall at Landlord's option, either (i) credit such amount to
Tenant's next succeeding Rent payment or (ii) refund such amount to Tenant. The
statement of Operating Expenses required to be furnished under this paragraph
(c) shall be certified by an officer of Landlord or the Managing Agent.
(d) Pending the determination of any dispute respecting the amount of Additional
Rent payable pursuant to this Article by agreement or arbitration, Tenant shall,
within thirty (30) days after receipt of such statement, pay Additional Rent in
accordance with Landlord's statement and such payment shall be without prejudice
to Tenant's position. If the dispute shall be determined in Tenant's favor,
Landlord shall forthwith pay Tenant the amount of Tenant's overpayment of
Additional Rent resulting from compliance with Landlord's statement together
with interest thereon at the rate set forth in Section 23.4.
(e) In the event that the Expiration Date or other termination of this Lease
shall be a day other than the last day of an Operational Year, the amount of
payments pursuant to this paragraph payable by Tenant with respect to the year
in which such commencement or end will occur will be prorated on the basis which
the number of days of the Term of the Lease included in such year bears to three
hundred sixty-five (365). In addition to any matters set forth in Article 23 or
otherwise, the obligations of Landlord and Tenant concerning Operating Expense
Payments for any period prior to the expiration or termination of this Lease
shall survive the expiration or termination of this Lease.
16.9 Audit Rights. Tenant shall have the right, at Tenant's sole cost
and expense, upon prior notice to Landlord at any time during regular business
hours to audit, review and photocopy Landlord's records pertaining to Operating
Expenses for the then current Operational Year plus the prior two (2)
Operational Years. Tenant agrees to keep all information thereby obtained by
Tenant confidential subject to Tenant's right to reveal such information to its
attorneys, accountants and other independent consultants, provided, such
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parties shall be subject to the confidentiality requirements contained herein
[and further, except Tenant's right to reveal such information in connection
with an arbitration proceeding under this Lease. Any dispute over Operating
Expenses raised pursuant to such audit, if not resolved by Landlord and Tenant
within thirty (30) days, may be submitted to arbitration as provided in this
Lease by either party.]
ARTICLE 17
Electric Energy
17.1 Electricity Charge. (a) At the sole cost and expense of Landlord,
Landlord shall install one (1) direct meter for measuring the usage of
electricity in the Demised Premises; the maintenance of such meter shall be at
the sole cost and expense of Tenant.
(b) In addition to those amounts included in Operating Expense Payments for
electricity, and in addition to the Fixed Rent, the Additional Rent set forth in
Article 16 and all other amounts due in connection with this Lease commencing on
and after the Commencement Date, Tenant shall pay as and when due directly to
the applicable utility company all charges for electricity used at the Demised
Premises.
17.2 Capacity. The electric capacity of the Building as of the
Commencement Date shall be as set forth in Exhibit B. Tenant's use of electrical
energy shall never exceed the Building's capacity.
17.3 No Liability. Landlord shall have no liability to Tenant for any
loss, damage or expense which Tenant may sustain or incur by reason of any
change, failure, inadequacy or defect in the supply or character of the
electrical energy furnished to the Demised Premises or if the quantity or
character of the electrical energy is no longer available or suitable for
Tenant's requirements, except for any actual damage suffered by Tenant by reason
of any such failure, inadequacy or defect cause by the negligence or Landlord or
Landlord's Agents, and, in such event, Tenant, and those claiming by or through
Tenant, waive, to the fullest extent permitted by Applicable Law any
consequential damages resulting therefrom.
17.4 Planned Shut-Down. Landlord shall, subject to Force Majeure, and
except in the case of emergency, give the Tenant written notice of any planned
or scheduled shut-down of all or any part of the electrical systems for the
Demised Premises at least seventy-two (72) hours in advance of Landlord's
scheduling of such shut-down. Any such scheduled shutdown shall be during
non-business hours and shall be coordinated with Tenant.
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ARTICLE 18
Signs
18.1 Signs. Subject to Applicable Law, Tenant, at its sole cost and
expense, shall have the right to place a sign, the size and design of which
shall be subject to the prior written consent of Landlord, which consent shall
not be unreasonably withheld or delayed, identifying Tenant in the landscaped
area at the entrance to the Demised Premises where the former Dictaphone sign
was located.
Except for the foregoing signs, Tenant shall not have the right without the
prior written consent of Landlord, which consent shall not be unreasonably
withheld or delayed, to cause or permit any sign or other object to be placed on
or affixed to any part of the exterior of the Building or which is readily
visible from the exterior of the Building. If Tenant shall not comply with the
terms and conditions of this Article 18, Landlord, upon prior notice to Tenant,
shall have the right, in addition to any other rights or remedies, without
notice or liability to Tenant, to remove and dispose of any such sign or other
object and to make any repairs necessitated by such removal, all at Tenant's
sole cost and expense, and Landlord's cost and expense in performing such
removal and repair shall be deemed Additional Rent payable with the next
installment of Fixed Rent due hereunder.
ARTICLE 19
Limitation of Landlord's Liability
19.1 Tenant shall look solely to the estate and interest of Landlord in
the Project (including, without limitation, proceeds of a sale of the Demised
Premises and condemnation awards) for the satisfaction of Tenant's remedies for
the collection of any judgment (or other judicial process) requiring the payment
of money by Landlord in the event of any default or breach by Landlord with
respect to any of the terms, covenants and conditions of this Lease to be
observed or performed by Landlord, and no other property or assets of Landlord
shall be subject to levy, execution or other enforcement procedure for the
satisfaction of Tenant's remedies under or with respect to either this Lease,
the relationship of Landlord and Tenant hereunder or Tenant's use and occupancy
of the Demised Premises, provided that this Article shall not affect any rights
of Tenant under this Lease in and to any insurance proceeds received by
Landlord.
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ARTICLE 20
Broker
20.1 Tenant and Landlord covenant, warrant and represent to each other
that Cushman & Wakefield and Insignia/Rostenberg-Doern were the sole brokers who
negotiated and brought about the consummation of this Lease, and that no
discussions or negotiations were had with any other broker concerning the
leasing of space in the Building. Based on the foregoing warranty and
representation, Landlord has agreed to pay a commission to Cushman & Wakefield
of Connecticut, Inc. and Insignia/Rostenberg-Doern, a division of
Insignia/Edward S. Gordon, Inc. in connection with the consummation of this
Lease. Tenant and Landlord agree to indemnify, defend and hold each other
harmless from and against any claim for a brokerage commission or other
compensation arising out of any discussions or negotiations had by the
indemnifying party with any other broker. The foregoing indemnity shall survive
the termination or expiration of this Lease.
ARTICLE 21
Default - Conditions of Limitation
21.1 Bankruptcy. If at any time during the Term of this Lease there is
filed against Tenant in any court pursuant to any statute, either of the United
States of America or any state, a petition in bankruptcy or insolvency, or for
reorganization, or for the appointment of a receiver or trustee of all or a
portion of Tenant's property, or for other relief of debtors, and, within ninety
(90) days after such filing, Tenant fails to secure a dismissal thereof; or if
Tenant shall make a voluntary application for any of the foregoing relief, or an
assignment for the benefit of creditors or petition for or enter into an
arrangement for the benefit of creditors, or admit in writing the inability to
pay its debts; then, in any such event, this Lease, at the option of Landlord,
may be terminated by written notice to Tenant (but if any of such events occurs
prior to the Commencement Date, this Lease shall, without any obligation on the
part of the Landlord to give such notice, thereupon be terminated), and, whether
such termination occurs prior to or during the Term hereof, neither Tenant nor
any person claiming through or under Tenant by virtue of any statute or any
order of any court shall be entitled to possession or to remain in possession of
the Demised Premises, but shall forthwith quit and surrender the same. Landlord,
in addition to the other rights and remedies it may have by virtue of any other
provision herein contained (including, without limitation, Article 23 hereof) or
by virtue of any statute, judicial decision or other rule of law, may retain, to
be credited against the damages described in Article 23 below, any rent,
security deposit or monies received by it from Tenant or others on behalf of
Tenant.
21.2 Assignment. Without limiting any of the foregoing provisions of
this Article or any of the provisions of Article 23 if, pursuant to the
Bankruptcy Code of 1978, as amended, Tenant is permitted to assign or otherwise
transfer this Lease (whether in whole or
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in part) without regard to the restrictions contained in this Article and/or
Article 6, Tenant agrees that adequate assurance of future performance by the
assignee or transferee permitted under such Code shall mean the deposit of
security with Landlord (in addition to the security deposit otherwise held by
Landlord hereunder) in an amount equal to the sum of six (6) months' Fixed Rent
then reserved hereunder plus an amount equal to one-third (1/3) of all
Additional Rent payable under Article 16 and any other provisions of this Lease
for the calendar year preceding the year in which such assignment is intended to
become effective, which deposit shall be held by Landlord for the balance of the
Term as security for the full and faithful performance of all of the obligations
under this Lease on the part of Tenant yet to be performed. If Tenant receives
or is to receive any valuable consideration for such an assignment or transfer
(in whole or in part) of this Lease, such consideration (after deducting
therefrom any brokerage commissions, any portion of such consideration
reasonably allocated to the purchase by the assignee of Tenant's personal
property in the Demised Premises and any other expenses reasonably incurred by
Tenant for such assignment) shall be and become the sole and exclusive property
of Landlord and shall be paid over to Landlord directly by such assignee or
transferee. In addition, adequate assurance shall mean that any such assignee of
this Lease shall have a net worth (exclusive of good will) equal to at least two
(2) times the aggregate of the annual Fixed Rent reserved hereunder plus all
Additional Rent for said preceding calendar year. Such assignee or transferee
shall expressly assume this Lease by an agreement reasonably satisfactory in
form and substance to Landlord.
21.3 Events of Default. The following events shall be deemed "Events of
Default" under this Lease:
(a) if Tenant shall, whether by action or inaction, be in default of any of its
obligations under this Lease (other than a default in the payment of Fixed Rent
or Additional Rent) and such default shall continue and not be remedied within
thirty (30) days after Landlord shall have given to Tenant a notice specifying
the same, or, in the case of a default which cannot with due diligence be cured
within a period of thirty (30) days and the continuance of which for the period
required for cure will not subject Landlord to criminal penalty or to
prosecution for a crime or termination of any Superior Lease or foreclosure of
any Superior Mortgage, if Tenant shall not, (i) within said thirty (30) day
period advise Landlord of Tenant's intention to take all steps necessary to
remedy such default, (ii) duly commence within said thirty (30) day period, and
thereafter diligently prosecute to completion, all steps necessary to remedy the
default and (iii) complete such remedy within a reasonable time after the date
of said notice of Landlord, or
(b) if any event shall occur or any contingency shall arise whereby this Lease
or the estate hereby granted or the unexpired term hereof, either by law or
otherwise, devolve upon or pass to any person, firm or corporation other than
Tenant, except as expressly permitted by Article 6, or
(c) if Tenant shall abandon the Demised Premises.
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Upon the occurrence of any Non-Monetary Event of Default, Landlord shall have
the right to serve upon Tenant a written three (3) days notice of cancellation
of this Lease, and upon the expiration of such three (3) day period, this Lease
and the term hereunder shall end and expire as fully and completely as if the
expiration of such three (3) day period were the Expiration Date.
ARTICLE 22
Re-Entry by Landlord
22.1 Summary Dispossess. If there shall be a Non-Monetary Event of
Default [or if Tenant shall default in the payment of any Fixed Rent or
Additional Rent, and such default shall continue for ten (10) days after written
notice from Landlord (a "Monetary Event of Default" and together with a
Non-Monetary Event of Default, an "Event of Default")] or if this Lease shall
terminate as provided in Article 21, Landlord or Landlord's Agents and employees
may immediately or at any time thereafter re-enter the Demised Premises, or any
part thereof, either by summary dispossess proceedings or by any suitable action
or proceeding at law, without being liable to indictment, prosecution or damages
therefor, and may repossess the same, and may remove any person therefrom, to
the end that Landlord may have, hold and enjoy the Demised Premises. The word
"re-enter", as used herein, is not restricted to its technical meaning. If this
Lease is terminated under the provisions of Article 21, or if Landlord shall
re-enter the Demised Premises under the provisions of this Article, or in the
event of the termination of this Lease, or of re-entry, by or under any summary
dispossess or other proceeding or action or any provision of law by reason of
default hereunder of the part of Tenant, Tenant shall thereupon pay to Landlord
the Fixed Rent and Additional Rent payable up to the time of such termination of
this Lease, or of such recovery of possession of the Demised Premises by
Landlord, as the case may be, and shall also pay to Landlord damages as provided
in Article 23.
22.2 Waivers. Tenant, on its own behalf and on behalf of all persons
claiming through or under Tenant, including creditors, does hereby waive any and
all rights and privileges so far as is permitted by law which Tenant and all
such persons might otherwise have under any present or future law to (a) the
service of any notice of intention to re-enter or to institute legal proceedings
to that end, (b) to redeem the Demised Premises, (c) to re-enter or repossess
the Demised Premises, or (d) to restore the operation of this lease, after
Tenant shall have been dispossessed by a judgment or by warrant of any court or
judge, or after any re-entry by Landlord, or after any expiration or termination
of this Lease and the Term, whether such dispossess, re-entry, expiration or
termination shall be by operation of law or pursuant to the provisions of this
Lease.
22.3 Injunctive Relief. In the event of a breach or threatened breach
by Landlord or Tenant of any of their respective obligations under this Lease,
the non-breaching party shall also have the right of injunction. The special
remedies to which Landlord may resort
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hereunder are cumulative and are not intended to be exclusive of any other
remedies to which Landlord may lawfully be entitled at any time and Landlord may
invoke any remedy allowed at law or in equity as if specific remedies were not
provided for herein.
22.4 Retention of Monies. If this Lease shall terminate under the
provisions of Article 21, or if Landlord shall re-enter the Demised Premises
under the provisions of this Article, or in the event of the termination of this
Lease, or of re-entry, by or under any summary dispossess or other proceeding or
action or any provision of law by reason of default hereunder on the part of
Tenant, Landlord shall be entitled to retain all monies, if any, paid by Tenant
to Landlord, whether as advance rent, security or otherwise, but such monies
shall be credited by Landlord against any Fixed Rent or Additional Rent due from
Tenant at the time of such termination or re-entry or, at Landlord's option,
against any damages payable by Tenant under Article 23 or pursuant to law.
ARTICLE 23
Damages
23.1 Acceleration, Reletting. If this Lease is terminated under the
provisions of Article 21, or if Landlord shall re-enter the Demised Premises
under the provisions of Article 22, or in the event of the termination of this
Lease, or of re-entry, by or under any summary dispossess or other proceeding or
action or any provision of law by reason of default hereunder on the part of
Tenant, Tenant shall pay to Landlord as damages at the election of Landlord,
either:
(a) a sum which at the time of such termination of this Lease or at the time of
any such re-entry by Landlord, as the case may be, represents the then value of
the excess, if any, of (i) the aggregate amount of the Fixed Rent and the
Additional Rent which would have been payable by Tenant for the period
commencing with such earlier termination of this Lease or the date of any such
re-entry, as the case may be, and ending with the date contemplated as the
expiration date hereof if this lease had not so terminated or if Landlord had
not so reentered the Demised Premises, over (ii) the fair market rental value of
the Demised Premises for the same period, or
(b) sums equal to the Fixed Rent and the Additional Rent which would have been
payable by Tenant had this Lease not so terminated, or had Landlord not so
re-entered the Demised Premises, payable upon the due dates therefor specified
herein following such termination or such re-entry and until the date
contemplated as the expiration date hereof if this Lease had not so terminated
or if Landlord had not so re-entered the Demised Premises, provided, however,
that if Landlord shall relet the Demised Premises during said period, Landlord
shall credit Tenant with the net rents received by landlord from such reletting,
such net rents to be determined by first deducting from the gross rents as and
when received by Landlord from such reletting the expenses incurred or paid by
Landlord in terminating this Lease or in
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re-entering the Demised Premises and in securing possession thereof, as well as
the expenses of reletting, including, without limitation, altering and preparing
the Demised Premises for new tenants, brokers' commissions, legal fees, and all
other expenses properly chargeable against the Demised Premises and the rental
therefrom, it being understood that any such reletting may be for a period
shorter or longer than the remaining Term, provided, Landlord shall use
commercially reasonable efforts to re-let the Demised Premises, but in no event
shall Tenant be entitled to receive any excess of such net rents over the sums
payable by Tenant to Landlord hereunder nor shall Tenant be entitled in any suit
for the collection of damages pursuant to this subdivision to a credit in
respect of any net rents from reletting, except to the extent that such net
rents are actually received by Landlord. If the Demised Premises or any part
thereof should be relet in combination with other space, then proper
apportionment on a square foot basis shall be made of the rent received from
such reletting and of the expenses of reletting.
If the Demised Premises or any part thereof be relet by Landlord for the
unexpired portion of the Term, or any part thereof, before presentation of proof
of such damages to any court, commission or tribunal, the amount of rent
reserved upon such reletting shall, prima facie, be the fair and reasonable
rental value for the Demised Premises, or part thereof, so relet during the term
of the reletting. Subject to Landlord's obligations under the foregoing
paragraph, Landlord shall not be liable in any way whatsoever for its failure or
refusal to relet the Demised Premises or any part thereof, or if the Demised
Premises or any part thereof are relet, for its failure to collect the rent
under such reletting, and no such refusal or failure to relet or failure to
collect rent shall release or affect Tenant's liability for damages or otherwise
under this Lease.
23.2 Successive Suits, etc. Suit or suits for the recovery of such
damages, or any installments thereof, may be brought by Landlord from time to
time at its election, and nothing contained herein shall be deemed to require
Landlord to postpone suit until the date when the Term of this Lease would have
expired if it had not been so terminated under the provisions of Article 21, or
under any provision of law, or had Landlord not re-entered the Demised Premises.
Nothing herein contained shall be construed to limit or preclude recovery by
Landlord against Tenant of any sums or damages to which, in addition to the
damages particularly provided above, Landlord may lawfully be entitled by reason
of any default hereunder on the part of Tenant. Nothing herein contained shall
be construed to limit or prejudice the right of Landlord to prove for and obtain
as damages by reason of the termination of this Lease or re-entry on the Demised
premises for the default of Tenant under this Lease an amount equal to the
maximum allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, such damages are to be proved whether or not
such amount be greater, equal to, or less than any of the sums referred to in
Section 23.1.
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23.3 Condition of Premises. In addition, if this Lease is terminated
under the provisions of Article 21, or if Landlord shall re-enter the Demised
Premises under the provisions of Article 22, Tenant agrees that:
(a) the Demised Premises then shall be in the same condition as that in which
Tenant has agreed to surrender the same to Landlord at the expiration of the
term hereof;
(b) Tenant shall have performed prior to any such termination any covenant of
Tenant contained in this Lease for the making of any Alteration or for restoring
or rebuilding the Demised Premises or the Building, or any part thereof; and
(c) for the breach of any covenant of Tenant set forth in this Section 23.3,
Landlord shall be entitled immediately, without notice or other action by
Landlord, to recover, and Tenant shall pay, as and for liquidated damages
therefor, the cost of performing such covenant (as estimated by an independent
contractor selected by Landlord).
23.4 Interest. In addition to any other remedies Landlord may have
under this Lease, and without reducing or adversely affecting any of Landlord's
rights and remedies under Article 21, if any Fixed Rent, Additional Rent or
damages payable hereunder by Tenant to Landlord is not paid within thirty (30)
days after demand therefor, the same shall bear interest at the rate of one
percent (1%) per month or the maximum rate permitted by law, whichever is less,
from the due date thereof until paid, and the amount of such interest shall be
Additional Rent hereunder.
ARTICLE 24
Surrender
24.1 Condition of Premises. (a) On the last day of the Term or upon any
earlier termination of this Lease, or upon any re-entry by Landlord upon the
Demised Premises, Tenant shall, at its own expense, quit and surrender the
Demised Premises to Landlord broom clean, in good order, condition and repair,
except for ordinary wear and tear and such damage or destruction as Landlord is
required to repair or restore under this Lease. Tenant shall remove from the
Demised Premises all of Tenant's Property and all personal property and personal
effects of all persons claiming through of under Tenant, and shall pay the cost
of repairing all damage to the Building and the Demised Premises occasioned by
such removal.
(b) Tenant shall not be obligated, at or before quitting and surrendering the
Demised Premises, to restore the Demised Premises, or any part thereof, to the
state or condition of the Demised Premises, or such part, existing at any time
prior to the completion of the initial preparation of the Demised Premises.
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24.2 Intentionally Omitted.
24.3 Tenant's Property. Any Tenant's Property or other personal
property (other than money, securities, documents, or other valuables) which
shall remain in the Demised Premises after the termination of this Lease shall
be deemed to have been abandoned and either may be retained by Landlord as its
property or may be disposed of in such manner as Landlord may see fit.
24.4 Indemnification. If the Demised Premises are not surrendered upon
the termination of this Lease and such holdover shall continue for ninety (90)
days after the expiration or termination of this Lease, then in addition to the
Fixed Rent provided in the previous sentence, in the event Landlord has executed
a new lease for all or a portion of the Demised Premises with a third party,
Tenant shall indemnify Landlord against all actual out-of-pocket loss, liability
claims, damage, cost and expense, in respect of such period following such
ninety (90) days resulting from delay by Tenant in so surrendering the Demised
Premises as provided in Section 24.1, including without limitation, any lost
rents which would have been payable by any succeeding tenant founded on such
delay, but, excluding consequential or contractual damages.
24.5 Survival. Tenant's obligations under this Article shall survive
the termination of this Lease.
ARTICLE 25
Access to Demised Premises
25.1 Landlord's Rights. Upon reasonable prior notice to Tenant, except
in the case of emergency no such notice shall be required, Landlord and
Landlord's Agents shall have the following rights in and about the Demised
Premises: (i) to enter the Demised Premises at all reasonable times to examine
the Demised Premises or for any of the purposes set forth in this Article or for
the purpose of performing any obligation of Landlord under this Lease or
exercising any right or remedy reserved to Landlord in this Lease, and if Tenant
or Tenant's Agents shall not be personally present or shall not open and permit
an entry into the Demised Premises at any time when such entry shall be
necessary due to an emergency, to use a master key or to forcibly enter the
Demised Premises; (ii) to exhibit the Demised Premises to potential buyers and
mortgagees for the entire Term of this Lease, and to potential tenants of the
Demised Premises during the last six (6) months of the term; (iii) to make such
decorations, repairs, alterations, improvements or additions, or to perform such
maintenance, including, but not limited to, the maintenance of all heating,
air-conditioning, elevator, plumbing, electrical and other mechanical
facilities, as Landlord may deem necessary or desirable, provided Landlord shall
use reasonable efforts to minimize any interference of Tenant's business; (iv)
to take all materials into and upon the Demised Premises that may be required in
connection with any such decorations, repairs, alterations,
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improvements, additions or maintenance; and (v) to install on the inside of the
windows a film or other similar substance to reduce the usage of energy in the
Building.
25.2 Intentionally Omitted.
25.3 Third Party Access. Landlord and Landlord's Agents shall have the
right to permit access to the Demised Premises, whether or not Tenant shall be
present, to any receiver, trustee, assignee for the benefit of creditors,
sheriff, marshal or court officer entitled to, or reasonably purporting to be
entitled to, such access for the purpose of taking possession of, or removing
any property of Tenant or any other occupant of the Demised Premises, or for any
other lawful purpose, or by any representative of the fire, police, building,
sanitation or other department of the City, State or Federal Governments.
Neither anything contained in this Section, nor any action taken by Landlord
under this Section, shall be deemed to constitute recognition by Landlord that
any person other than Tenant has any right or interest in this lease or the
Demised Premises. Landlord shall use reasonable efforts to ensure that only
those entitled to such access are permitted access.
25.4 No Eviction. The exercise by Landlord or Landlord's Agents of any
right reserved to Landlord in this Article shall not entitle Tenant to any
abatement or diminution of rent, or relieve Tenant from any of its obligations
under this Lease, or impose any liability upon Landlord, or Landlord's Agents,
or upon any Superior Lessor or Superior Mortgagee by reason of inconvenience or
annoyance to Tenant, or, except as otherwise set forth in this Lease, injury to
or interruption of Tenant's business. Notwithstanding the above, Landlord
covenants that, subject to Force Majeure, Landlord will take all reasonable
measures to minimize interference with Tenant's use and operation of the Demised
Premises.
ARTICLE 26
Waivers
26.1 Order of Payment. If Tenant is in arrears in payment of Fixed Rent
or Additional Rent, Tenant waives Tenant's right, if any, to designate the items
which any payments made by Tenant are to be credited, and Tenant agrees that
Landlord may apply any payments made by Tenant to such items as Landlord sees
fit, irrespective of and notwithstanding any designation or request by Tenant as
to the items which any such payments shall be credited.
26.2 Trial by Jury. Landlord and Tenant hereby waive trial by jury in
any action, proceeding or counterclaim brought by either against the other on
any matter whatsoever arising out of or in any way connected with this Lease,
the relationship of Landlord and Tenant and Tenant's use or occupancy of the
Demised Premises, including, without limitation, any claim of injury or damage,
and any emergency and other statutory remedy
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with respect thereto; provided, however, the foregoing shall not apply to an
action for personal injury or property damage.
ARTICLE 27
No Surrender, etc.
27.1 Delivery of Keys, etc. No act or thing done by Landlord or
Landlord's Agents during the Term shall constitute a valid acceptance of a
surrender of the Demised Premises or any remaining portion of the Term except a
written instrument accepting such surrender, executed by Landlord. No employee
of Landlord or the Managing Agent shall have any authority to accept the keys of
the Demised Premises prior to the termination of this Lease, and the delivery of
such keys to any such employee shall not operate as a termination of this Lease
or a surrender of the Demised Premises; however, if Tenant desires to have
Landlord sublet the Demised Premises for Tenant's account, Landlord or
Landlord's Agents are authorized to receive said keys for such purposes without
releasing Tenant from any of its obligations under this Lease, and, except in
the case of Landlord's gross negligence or willful misconduct, Tenant hereby
relieves Landlord of any liability for loss of, or damage to, any of Tenant's
Property or other effects in connection with such subletting. The receipt by
Landlord or Payment by Tenant of Rent with knowledge of the breach or violation
by Tenant of any term, covenant or condition of this Lease on Tenant's part to
be observed or performed shall not be deemed a waiver of such breach or
violation. Landlord's failure to enforce any Rules or Regulations against Tenant
or against any other occupant of the Building shall not be deemed a waiver of
any such Rules or Regulations. No provision of this lease shall be deemed to
have been waived by Landlord or Tenant unless such waiver shall be set forth in
a written instrument executed by the other. No payment by Tenant or receipt by
Landlord of a lesser amount than the aggregate of all Fixed Rent and Additional
Rent then due, no endorsement or statement on any check or no letter
accompanying any check or other Rent payment in any such lesser amount and no
acceptance of any such check or other such payment by Landlord shall constitute
an accord and satisfaction and Landlord may accept any such check or payment
without prejudice to Landlord's right to recover the balance of such Rent or to
pursue any other legal remedy.
27.2 Options. Neither any option granted to Tenant in this Lease or in
any collateral instrument to renew or extend the Term, nor the exercise of any
such option by Tenant, shall prevent Landlord from exercising any option or
right granted or reserved to Landlord in this Lease or in any collateral
instrument or which Landlord may have by virtue of any law, to terminate this
Lease and the Term or any renewal or extension of the Term either during the
original Term or during the renewed or extended term. Any termination of this
Lease and the Term pursuant to the terms of this Lease, shall serve to terminate
any such renewal or extension of the Term and any right of Tenant to any such
renewal or extension, whether or not Tenant shall have exercised any such option
to renew or extend the Term. Any such option or right on the part of Landlord to
terminate this lease shall continue
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during any extension or renewal of the Term. No option granted to Tenant to
renew or extend the Term shall be deemed to give Tenant any further option to
renew or extend.
ARTICLE 28
Curing Defaults
28.1 Landlord's Right to Cure. If Tenant shall default in the
performance of any of Tenant's obligations under this Lease, beyond the
expiration of all applicable grace and cure periods after notice, Landlord,
without thereby waiving such default, may (but shall not be obligated to)
perform the same for the account and at the expense of Tenant, without notice in
a case of emergency, and in any other case only if such default continues after
the expiration of fifteen (15) days from the date Landlord gives Tenant notice
of the default.
28.2 Tenant's Right to Cure. If Landlord shall default in the
performance of any of Landlord's obligations under this Lease, and such default
shall continue for a period of thirty (30) days after written notice from
Tenant, Tenant without thereby waiving such default, may (but shall not be
obligated to) perform the same for the account and at the expense of Landlord.
28.3 Landlord Reimbursement. Bills for any expenses incurred by
Landlord in connection with any such performance by it for the account of
Tenant, and bills for all costs, expenses and disbursements of every kind and
nature whatsoever, including reasonable counsel fees, involved in collecting or
endeavoring to collect the Fixed Rent or Additional Rent or any part thereof or
enforcing or endeavoring to enforce any rights against Tenant or Tenant's
obligations hereunder, under or in connection with this Lease or pursuant to
law, including any such cost, expense and disbursement involved in instituting
and prosecuting summary proceedings or in recovering possession of the Demised
Premises after default by Tenant or upon the expiration or sooner termination of
this Lease, and interest on all sums advanced by Landlord under this Article at
the rate of one percent (1%) per month or the maximum rate permitted by law,
whichever is less, may be sent by Landlord to Tenant monthly, or immediately, at
Landlord's option, and such amounts shall be due and payable in accordance with
the terms of such bills as Additional Rent.
28.4 Tenant Reimbursement. Bills for any expenses incurred by Tenant in
connection with any performance by it under Section 28.2 above for the account
of Landlord and the reasonable costs of enforcement and attorneys' fees, and
interest on all sums advanced by Tenant under Section 28.2 at the rate of one
percent (1%) per month or the maximum rate permitted by law, whichever is less,
shall be due and payable by Landlord to Tenant within ten (10) days following
receipt by Landlord of a bill therefor, together with copies of bills or
invoices therefor.
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ARTICLE 29
Notices
29.1 All notices, requests and demands to be made hereunder to the
parties hereto shall be in writing (at the addresses set forth below) and shall
be given by any of the following means: (a) personal service (including, without
limitation, overnight delivery, courier or messenger services); (b) electronic
communication, whether by telex, telegram or telecopying (if confirmed in
writing sent by registered or certified, first-class mail, postage prepaid,
return receipt requested), or (c) registered or certified, first-class United
States mail, postage prepaid, return receipt requested. Such addresses may be
changed by notice to the other parties given in the same manner as provided
above. Any notice, demand or request sent (x) pursuant to subsection (a) shall
be deemed received upon such personal service, (y) pursuant to subsection (b)
shall be deemed received one (1) day after dispatch by electronic means, and (z)
pursuant to subsection (c) shall be deemed received five (5) days following
deposit in the mail.
To Tenant: Prior to the Commencement Date
One Ramada Plaza
New Rochelle, NY
At the Demised Premises after the Commencement Date
Attention: Kevin Dahill
Telecopy:
With copies to: Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022
Attention: Larry M. Loeb, Esq.
Telecopy: (212) 715-8000
To Landlord: OLD BOSTON POST ROAD ASSOCIATES LLC
c/o ALFRED WEISSMAN REAL ESTATE, INC.
1 Larkin Plaza
Yonkers, New York 10701
Attention: Alan Weissman
Telecopy: (914) 963-0962
With copies to: WINTHROP, STIMSON, PUTNAM & ROBERTS
695 East Main Street
P.O. Box 6760
Stamford, Connecticut 06904-6760
Attention: Steven Kapiloff, Esq.
Telecopy: (203) 965-8226
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ARTICLE 30
Arbitration
30.1 Express Provision. Landlord or Tenant may at any time request
arbitration, of any matter in dispute where arbitration is expressly provided
for in this Lease. The party requesting arbitration shall do so by giving notice
to that effect to the other party, specifying in said notice the nature of the
dispute, and said dispute shall be determined in the City of White Plains, New
York, by three (3) arbitrators, in accordance with the rules then obtaining of
the American Arbitration Association (or any organization which is the successor
thereto). The award in such arbitration may be enforced on the application by
either party by the order or judgment of a court of competent jurisdiction.
The parties shall accept all notices from the AAA by telephone. Such
notices by the AAA shall subsequently be confirmed in writing to the
parties. Should there be a failure to confirm in writing any notice
hereunder, the proceeding shall nonetheless be valid if notice has, in
fact, been given by telephone.
When no disclosed claim or counterclaim exceeds $50,000, exclusive of
interest and arbitration costs, the AAA shall submit simultaneously to
each party an identical list of five proposed arbitrators drawn from
the National Panel of Commercial Arbitrators, from which one arbitrator
shall be appointed. Each party may strike two names from the list on a
peremptory basis. The list is returnable to the AAA within seven days
from the date of AAA's mailing to the parties.
If for any reason the appointment of an arbitrator cannot be made from
the list, the AAA may make the appointment from among other members of
the panel without the submission of additional lists.
The parties will be given notice by telephone by the AAA of the
appointment of the arbitrator, who shall be subject to disqualification
for the reasons specified in Section 19 of the AAA rules. The parties
shall notify the AAA, by telephone, within seven days of any objection
to the arbitrator appointed. Any objection by a party to the arbitrator
shall be confirmed in writing to the AAA with a copy to the other party
or parties.
The arbitrator shall set the date, time, and place of the hearing. The
AAA will notify the parties by telephone, at least seven days in
advance of the hearing date. A formal Notice of Hearing will be sent by
the AAA to the parties.
Generally, the hearing shall be completed within one day, unless the
dispute is resolved by submission of documents under Section 37 of the
AAA rules. The
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arbitrator, for good cause shown, may schedule an additional hearing to
be held within seven days.
Unless otherwise agreed by the parties, the award shall be rendered not
later than fourteen (14) days from the date of the closing of the
hearing.
30.2 Fees. The fees and expenses of any arbitration shall be borne by
the parties equally, but each party shall bear the expense of its own attorneys
and experts and the additional expenses of presenting its own proof.
ARTICLE 31
Security Deposit
31.1 Security Deposit. On or before the date hereof, Tenant shall
deposit with Landlord a clean, irrevocable and unconditional letter of credit in
the form attached hereto ("Letter of Credit") issued by Silicon Valley Bank East
or such other bank that is a member of the New York Clearing House Association
or is otherwise acceptable to Landlord in Landlord's reasonable discretion
(hereinafter referred to as the "Bank") in favor of Landlord, in the amount of
Five Hundred Thousand and 00/100 Dollars ($500,000.00) as security for the
faithful performance and observance by Tenant of the terms, conditions and
provisions of this Lease, including without limitation the surrender of
possession of the Premises to Landlord as herein provided. The Letter of Credit
shall have a term of no less than one (1) year, and shall automatically renew
for additional one (1) year terms, unless Landlord receives at least thirty (30)
days prior written notice that the Bank will not renew the Letter of Credit. If
Tenant fails to renew the Letter of Credit at least thirty (30) days in advance
of its expiration (or deposit cash in lieu thereof) or if the Bank notifies
Landlord that the Letter of Credit will not renew and Tenant does not deliver a
substitute Letter of Credit therefor or deposit cash in lieu thereof, or
defaults in respect of any of the terms, conditions or provisions of this Lease
including, but not limited to, the payment of Fixed Rent or Additional Rent, and
Tenant fails to cure any such default after any required notice and within any
applicable cure period hereunder (i) Landlord shall have the right to require
the Bank to make payment to Landlord or its designee of the entire proceeds of
the Letter of Credit, and (ii) Landlord may, at the option of Landlord (but
Landlord shall not be required to) apply or retain the whole or any part of such
sum so paid to it by Tenant or the Bank to the extent required for the payment
of any Fixed Rent and Additional Rent or any other sum as to which Tenant is in
default, and (iii) Landlord or its designee shall hold the remainder of such sum
paid to it by the Bank or Tenant, if any, as security for the faithful
performance and observance by Tenant of the terms, covenants, and conditions of
this Lease on Tenant's part to be observed and performed, with the same rights
as hereinabove set forth to apply or retain the same in the event of any further
default by Tenant under this Lease. If Landlord applies or retains any part of
the proceeds of the Letter of Credit or the cash amount deposited by Tenant,
Tenant, immediately upon demand, shall deposit with Landlord or its
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designee the amount so applied or retained so that Landlord or its designee
shall have the full deposit on hand at all times during the term of this Lease
(and any extension). Tenant's failure to do so within ten (10) days of receipt
of such demand shall constitute a breach of this Lease. The Letter of Credit
shall provide that as long as no Event of Default has occurred and is
continuing, (i) at the end of the second (2nd) Lease Year the amount of the
Letter of Credit shall be reduced to Four Hundred Thousand and 00/100 Dollars
($400,000.00) (ii) at the end of the third (3rd) Lease Year the amount of the
Letter of Credit shall be further reduced to Three Hundred Thousand and 00/100
Dollars ($300,000.00) (iii) at the end of the fourth (4th) Lease Year shall be
further reduced to Two Hundred Seventy-five Thousand and 00/100 Dollars
($275,000.00) and (v) shall remain at Two Hundred Seventy-five Thousand Dollars
($275,000.00) for the remainder of the Term. In addition, in the event that at
any time during the Term Tenant shall complete an initial public offering (an
"IPO") of its common stock which IPO raises in excess of Ten Million Dollars
($10,000,000.00) of equity in Tenant, then at the time such IPO becomes
effective, the Letter of Credit shall be reduced to Two Hundred Seventy-five
Thousand and 00/100 Dollars ($275,000.00).
A. Tenant, at any time during the term hereof (including any
extension), but at least 30 days prior to the expiration of the Letter of
Credit, may deposit with Landlord the equivalent cash amount as security
hereunder in lieu of the Letter of Credit. Any cash security deposit held by
Landlord shall be held in a segregated interest bearing account in a bank
located in Westchester County or New York City. Landlord shall have all of the
same rights with respect to such cash security as Landlord has hereunder with
respect to the Letter of Credit, and Tenant shall have the same obligations with
respect to the deposit of additional funds with Landlord if Landlord applies or
retains all or any portion of such cash security as provided in the previous
subsection.
B. In the event of a transfer, sale or lease of Landlord's
interest in the Building, Landlord shall transfer or cause to be transferred
either the cash or Letter of Credit or any sums collected thereunder by Landlord
or its designee from the Bank, together with any other sums then held by
Landlord or its designee as such security, to the transferee, vendee or lessee,
and Landlord thereupon shall be released by Tenant from all liability under this
Article. Tenant agrees to look solely to the new landlord for the return of the
cash or Letter of Credit or any sums collected thereunder and any other
security, and it is agreed that the provisions hereof shall apply to every
transfer or assignment made of the Letter of Credit or any sums collected
thereunder and any other security to a new landlord. Tenant further covenants
that it shall not assign or encumber or attempt to assign or encumber any part
of such security and that neither Landlord nor its successors or assigns shall
be bound by any such assignment, encumbrance, attempted assignment, or attempted
encumbrance. Landlord shall not be required to exhaust its remedies against
Tenant before having recourse to the Letter of Credit or such cash security held
by Landlord. Recourse by Landlord to the Letter of Credit or such security shall
not affect any remedies of Landlord which are provided in this Lease or which
are available to Landlord in law or equity.
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<PAGE> 55
C. In the event that Tenant shall fully and faithfully comply
with all of the terms, provisions, covenants and conditions of this Lease, the
Letter of Credit and/or cash, except as same may have been applied by Landlord
in accordance with this Lease, shall be returned to Tenant within thirty (30)
days after the expiration of this Lease.
ARTICLE 32
No Representations - Entire Agreement
32.1 Tenant expressly acknowledges and agrees that Landlord has not
made and is not making, and Tenant, in executing and delivering this Lease, is
not relying upon, any warranties, representations, promises or statements,
except to the extent that the same are expressly set forth in this Lease or in
any other written agreement which may be made between the parties concurrently
with the execution and delivery of this Lease and shall expressly refer to this
Lease. All understandings and agreements heretofore had between the parties are
merged in this Lease and any other written agreement(s) made concurrently
herewith, which alone fully and completely express the agreement of the parties
and which are entered into after full investigation, neither party relying upon
any statement or representation not embodied in this Lease or any other written
agreement(s) made concurrently herewith.
ARTICLE 33
Changes and Modifications
33.1 No agreement shall be effective to change, modify, waive, release,
discharge, terminate or effect an abandonment of this Lease, in whole or in
part, unless such agreement is in writing, refers expressly to this Lease and is
signed by the party against whom enforcement of the change, modification,
waiver, release, discharge, termination or effectuation of the abandonment is
sought.
If any Superior Mortgagee shall require any modification of this Lease,
Tenant shall, at Landlord's request, promptly execute and deliver to Landlord
such instrument effecting said modification as Landlord shall require, provided
that such modification does not adversely affect any of Tenant's rights under
this Lease or increase any of Tenant's obligations under this Lease.
ARTICLE 34
Successors and Assigns
34.1 Except as otherwise expressly provided in this Lease, the
obligations of this Lease shall bind and benefit the successors and assigns of
the parties hereto with the same
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effect as if mentioned in each instance where a party is named or referred to;
provided, however, that (a) no violation of the provisions of Article 6 shall
operate to vest any rights in any successor or assignee of Tenant and (b) the
provisions of this Article shall not be construed as modifying the conditions of
limitation contained in Article 21.
ARTICLE 35
Inability to Perform
35.1 The obligations of Landlord and Tenant hereunder shall be in no
wise affected, impaired or excused, nor shall Landlord or Tenant have any
liability whatsoever to the other, because (a) Landlord is unable to fulfill, or
is delayed in fulfilling, any of its obligations under this Lease by reason of
Force Majeure, provided, Landlord or Tenant, as the case may be, uses reasonable
efforts to rectify any inability or delay or (b) of any failure or defect in the
supply, quantity or character of electricity or water furnished to the Demised
Premises by reason of any requirement, act or omission of the public utility or
others serving the Building with electric energy, steam, oil, gas or water, or
for any other reason whether similar or dissimilar, beyond Landlord's reasonable
control.
ARTICLE 36
No Continuing Waiver
36.1 No waiver of any default hereunder shall be implied from any
omission by either party to take any action on account of such default if such
default persists or is repeated, and no express waiver shall affect any default
other than the default specified in the express waiver, and then only for the
time and to the extent therein stated. No delay or omission by either party
hereto to exercise any right or power accruing upon any non-compliance or
default by the other party with respect to any of the terms hereof, or otherwise
accruing hereunder, shall impair any such right or power or be construed to be a
waiver thereof. One or more waivers of any breach of any covenant, term or
condition of this Lease shall not be construed as a waiver of any subsequent
breach of the same covenant, term or condition. The consent or approval by a
party to or of any act by the other party requiring the former party's consent
or approval shall not be deemed to waive or render unnecessary such former
party's consent or approval to or of any subsequent similar acts by the other
party.
ARTICLE 37
Intentionally Omitted
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<PAGE> 57
ARTICLE 38
Notice of Accidents
38.1 Tenant shall give notice to Landlord, promptly after Tenant learns
thereof, of (a) any accident in or about the Demised Premises or the Building
for which Landlord might be liable, (b) any fire in the Demised Premises, (c)
all damage to or defects in the Demised Premises including the fixtures,
equipment and appurtenances thereof for the repair of which Landlord might be
responsible, and (d) all damage to or defects in any parts or appurtenances of
the air-conditioning, elevator, plumbing, electrical, sanitary, mechanical or
other service or utility systems located in or passing through the Demised
Premises.
ARTICLE 39
Rules and Regulations
39.1 Tenant and its employees and agents shall faithfully observe and
strictly comply with any reasonable rules and regulations promulgated in writing
by Landlord and delivered to Tenant, provided such rules and regulations do not
conflict with the terms of this Lease or interfere with Tenant's use and
enjoyment of the Demised Premises.
ARTICLE 40
Parking Rights
40.1 Tenant shall have the exclusive (so long as Tenant leases the
entire Building, and if Tenant does not lease the entire Building such rights
shall be non-exclusive) right to use the parking areas located at the Demised
Premises. Landlord represents that as of the date hereof and as of the
Commencement Date there shall be 145 parking spaces at the Demised Premises. [In
addition, Landlord shall apply to the applicable authorities in the City of Rye,
no late than January 31, 1998, for a permit or approval, as applicable, to
construct an additional forty-five (45) parking spaces at the Demised Premises.
Thereafter, Landlord shall diligently pursue such applications, including,
without limitation hiring such professionals or consultants as may be reasonably
required to secure such permits or approvals. If such additional parking is
approved and a permit to construct is issued, Landlord shall promptly and
diligently construct such additional parking and such additional parking shall
be available to Tenant on or before June 10, 1998. All costs associated with the
approval and construction of such additional parking shall be borne solely by
Landlord and shall not be included in Operating Expenses. The foregoing is not
intended as a guarantee that approvals for such additional parking can be
obtained.]
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ARTICLE 41
Consents
41.1 Express Provision. The provisions of this Article shall apply only
in cases where either party hereto shall have specifically agreed not to
unreasonably withhold its consent or approval as provided in this Lease, or
where this Lease expressly provides that a judgment, opinion, requirement, act,
sum of money or time limit be reasonable.
41.2 Consent and Approval. Wherever in this Lease it is provided that
either party shall not unreasonably withhold consent or approval, such consent
or approval (herein referred to collectively as "consent") shall also not be
unreasonably delayed. All consents shall be in writing. If a party considers
that the other party has unreasonably withheld or delayed a consent it shall so
notify the other party within thirty (30) days after receipt of notice of denial
of the requested consent or, in case notice of denial is not received, within
thirty (30) days after the expiration of the time period during which a reply to
a request should have been given, or if no specific time period is provided,
within thirty (30) days after making its request for the consent, and within ten
(10) days after giving the first-mentioned notice may submit the question of
whether the withholding or delaying of such consent is unreasonable to
determination by arbitration in the manner provided in Article 30. A consent
shall not be deemed to have been unreasonably withheld or delayed unless the
aggrieved party complies with the foregoing procedure and it shall be so
determined by arbitration as aforesaid. In the event of such determination the
requested consent shall be deemed to have been granted for all purposes of this
Lease. The party who shall have refused or failed to give such consent shall not
have any liability to the other party therefor, each party hereby waiving any
claim for damages which it may have against the other based upon any assertion
that the other party has unreasonably refused or failed or delayed to give a
requested consent. The only remedy for an alleged unreasonable withholding or
delaying of consent by either party shall be as provided in this Section.
41.3 Representative of Party. Wherever in this Lease or any Exhibit it
is provided that the approval of a representative of either party (such as
Landlord's engineer or architect or Tenant's designer or engineer) is required
for any particular matter, such approval shall be deemed to be a consent of the
party for the purposes of Section 41.2, provided that a true copy of the notice
requesting such approval is served upon the party so represented before the
other party may claim that such approval has been unreasonably withheld or
delayed.
41.4 Dispute. If any dispute shall arise between the parties as to
whether or not a particular judgment, opinion, requirement, act, sum of money or
time limit which is expressly required or provided by the provisions of this
Lease or any Exhibit to be reasonable, is reasonable, such dispute shall be
determined by arbitration pursuant to Article 30 at the instance of either
party.
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ARTICLE 42
Renewal Option
42.1 Exercise of Options. Provided Tenant is not in default (beyond
applicable notice and grace periods) pursuant to any of the terms and conditions
of this Lease, Tenant shall have the option (the "Option") to renew this Lease
for an additional five (5) year period (the "Option Period") for the period
commencing on the date following the Expiration Date upon the terms and
conditions contained in this Lease, except, as provided in this Article 42. To
exercise the Option, Tenant shall give Landlord notice (the "Extension Notice")
of its intent to exercise said Option not less than nine (9) months or more than
twelve (12) months prior to the date on which the Option Period will commence.
The notice shall be given as provided in Article 29 hereof. In the event Tenant
shall exercise the Option, this Lease will terminate in its entirety at the end
of the Option Period and Tenant will have not further options hereunder.
42.2 Determination of Fixed Rent. The Fixed Rent for the Option shall
be determined as follows:
(a) Landlord and Tenant will have until the date which is eight (8) months from
the scheduled Expiration Date within which to agree on the then-fair market
rental value of the Demised Premises, as defined in subsection (c) below. If
they agree on the Fixed Rent within thirty (30) days, they will amend this Lease
by stating the Fixed Rent.
(b) If Landlord and Tenant are unable to agree on the Fixed Rent for the option
period within thirty (30) days, then, the Fixed Rent for the option period will
be 90% of the then-fair market rental value of the Demised Premises , as of the
Expiration Date, as determined in accordance with subsection (d); [provided,
however, in no event shall the Fixed Rent be less than $24.00 per rentable
square foot in the Building, nor greater than $27.50 per rentable square foot in
the Building.]
(c) The "fair market rental value of the Demised Premises" means what a landlord
under no compulsion to lease the Demised Premises and a tenant under no
compulsion to lease the Demised Premises would determine as Fixed Rent
(including initial monthly rent and rental increases) for the Option Period, as
of the commencement of the Option Period, taking into consideration the uses
permitted under this Lease, the quality, size, design and location of the
Demised Premises, and the rent for comparable buildings located in the vicinity
of [Westchester, New York and the fact that the Base Operating Year and Real
Estate Tax Base shall not change.]
(d) Within thirty (30) days after the expiration of period set forth in
subsection (b) above, Landlord and Tenant shall each appoint one licensed real
estate appraiser, and the two appraisers so appointed shall jointly attempt to
determine and agree upon the then fair market
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rental value of the Demised Premises. If they are unable to agree, then each
appraiser so appointed shall set one value, and notify the other appraiser, of
the value set by him or her, concurrently with such appraiser's receipt of the
value set by the other appraiser. The two appraisers then shall, together,
select a third licensed appraiser (or if the two appraisers cannot agree upon
such third appraiser, then such third appraiser shall be selected to arbitration
as provided under Article 30 above), who shall make a determination of the then
fair market rental value, after reviewing the reports of the first two
appraisers appointed by the parties, and after doing such independent research
as he/she deems appropriate. The value determined by the third appraiser shall
be the then fair market rental value of the Demised Premises.
ARTICLE 43
Representations
43.1 Tenant Representations. (i) Tenant hereby covenants and warrants
that Tenant is a duly organized Delaware corporation duly qualified to do
business in New York; and (ii) Tenant represents and warrants that the person
executing this Lease on behalf of Tenant is duly authorized to execute and
deliver this Lease on behalf of and that this Lease is binding upon Tenant in
accordance with its terms.
43.2 Landlord Representations. Landlord represents to Tenant that the
party executing this Lease on behalf of Landlord is duly authorized to execute
and deliver this Lease on behalf of Landlord and that this Lease is binding upon
Landlord in accordance with its terms and that Landlord is a New York Limited
Liability Company duly organized and existing in New York.
ARTICLE 44
No Offer to Lease
44.1 This Lease is not to be construed as an offer to lease and shall
not in any way bind Landlord until such time as Landlord shall have executed
this Lease and made delivery thereof to Tenant.
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ARTICLE 45
Quiet Enjoyment
45.1 If and so long as Tenant pays the Fixed Rent and Additional Rent
and performs and observes all the terms, covenants and conditions hereof on the
part of Tenant to be performed and observed, Tenant shall quietly enjoy the
Demised Premises during the Term without hindrance or molestation by any one
claiming by, through or under Landlord, subject, however, to the terms of this
Lease.
ARTICLE 46
Expansion
[46.1 Landlord and Tenant acknowledge that at some point in the future,
Tenant may desire for Landlord to construct an addition to the Building thereby
providing additional rentable square feet for Tenant's occupancy. In such event,
Tenant shall give Landlord written notice stating that Tenant desires Landlord
to construct such addition and the number of additional square feet that Tenant
desires Landlord to construct. Upon receipt of such notice, Landlord and Tenant
shall meet to discuss such addition. Landlord agrees to cooperate and attempt to
facilitate Tenant's request in all reasonable respects, including, without
limitation, seeking approvals from the City of Rye permitting such addition. In
addition, Landlord and Tenant shall negotiate in good faith regarding the terms
and conditions upon which Landlord shall build and Tenant shall occupy such
additional space. Such terms to negotiate shall include, without limitation, the
size and location of such space, the extent of the build out of such space, the
rent for such space, the term of the Lease with respect to such additional
space, as well as the Demised Premises under this Lease and the respective
liabilities of the parties with respect to the costs associated with
constructing such space (approval costs, consultant costs, hard and soft
construction costs, financing costs, etc.). The foregoing agreement is not
intended as a covenant on the part of Landlord to construct such additional
space or a guarantee that approvals for such additional space can be obtained or
that such additional space can be in fact be constructed.]
ARTICLE 47
Late Charge
47.1 In the event that any payment of Fixed Rent or Additional Rent
required to be made by Tenant under this Lease shall be overdue more than ten
(10) calendar days after Landlord mails written notice to Tenant thereof a late
charge of three percent (3%) of such overdue amount may be charged by Landlord
for each month, or fraction of each month, from its due date until paid, for the
purpose of defraying the expenses incurred in handling delinquent payments,
provided, however, no such late charge shall be due for the first two
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<PAGE> 62
(2) late payments in any twelve (12) calendar month period. It is understood
that the late charge payable under this Article is in addition to the payment of
interest on overdue payments pursuant to Section 23.4. Further, Landlord's
failure to send such notice shall in no way whatsoever waive, modify, amend or
otherwise limit Landlord's rights pursuant to Article 22 or otherwise but shall
merely affect Landlord's right to charge a Late Charge pursuant to this Article
47.
ARTICLE 48
Governing Law; Severability; Captions; Miscellaneous
48.1 Irrespective of the place of execution or performance, this Lease
shall be governed by and construed in accordance with the Laws of the State of
New York. If any provision of this Lease or the application thereof to any
person or circumstances shall, for any reason and to any extent, be invalid or
unenforceable, the remainder of this Lease and the application of that provision
to other persons or circumstances shall not be affected but rather shall be
enforced to the extent permitted by law. The table of contents, captions,
headings and titles in this Lease are solely for convenience of reference and
shall not affect its interpretation. All terms and words used in this Lease,
regardless of the number or gender in which they are used, shall be deemed to
include any other number and any other gender as the context may require.
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<PAGE> 63
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of
the day and year first above written.
LANDLORD:
OLD BOSTON POST ROAD ASSOCIATES LLC
By: /s/ Alfred Weissman
--------------------------------
Name: Alfred Weissman
Title: Member
TENANT:
MOBIUS MANAGEMENT SYSTEMS, INC.
By: /s/ Joseph J. Albracht
--------------------------------
Name: Joseph J. Albracht
Title: Executive Vice President
- 53 -
<PAGE> 64
EXHIBIT A
All that certain plot, piece or parcel of land situate, lying and being in the
city of Rye, County of Westchester and State of New York shown and designated as
a portion of Plot "A" and a portion of Plot "B" on a certain map entitled
"Subdivision of part of Osborn Home Property in the City of Rye, Westchester
County, New York", made by Frank T. Robinson on January 20, 1966, revised March
10, 1966 and filed in the Westchester County Clerk's Office, division of Land
Records on September 23, 1966 as Map No. 14971, said portions when taken
together are more particularly bounded and described as follows:
BEGINNING at the corner formed by the intersection of the northerly side of Old
Boston Post Road with the westerly side of Playland Access Drive;
RUNNING THENCE along the northerly side of Old Boston Post Road, South 62
degrees 02' West 357.21 feet and westerly on a curve to the left having a radius
of 300.7855 feet, a distance of 174.39 feet to a point;
RUNNING THENCE along other lands of Miriam Osborn Memorial Home Associates,
North 41 degrees 17' 40: West 588.75 feet to a point;
RUNNING THENCE through Plot A the following courses and distances:
1) North 52 degrees 51' 45" East 66.31 feet; and
2) South 70 degrees 00' 00" East 77.00 feet to the division line between
Plot A and Plot B on said map;
RUNNING THENCE along the said division line North 52 degrees 51' 45" East 404.93
feet to a point;
RUNNING THENCE through Plot B the following courses and distances:
1) South 70 degrees 00' 00" East 49.32 feet; and
2) North 61 degrees 21' 30" East 100.00 feet to a point on the westerly
side of Playland Access Drive;
RUNNING THENCE along the same South 28 degrees 38' 30" East 506.55 feet to the
point or place of BEGINNING.
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<PAGE> 65
EXHIBIT B
As per Section 17.2, the electrical capacity of the building as of the
Commencement Date is 2,000 Amps, 3-Phase, 120/208 Volts.
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<PAGE> 66
Mobius Management Systems, Inc.
120 Old Boston Post Road
Rye, New York 10580
WORK LETTER
> PARTITIONS
Landlord, at Landlord's expense, shall furnish drywall partitions as
per the drawings, attached to and part of this Agreement. Partitions will be
built with 3 5/8" metal studs 16: on center and 5/8" gypsum board, each side
taped, spackled and painted. All partitions will be furnished with 4" base,
either cove or straight. Tenant will choose one (1) color from 40 choices. The
construction of the partitions will be based on the following schedule:
<TABLE>
<CAPTION>
Room Type # of Rooms Insulation Partition Height
---- ---- ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
1 A 8+/- Yes Slab to slab
2 Conference All Yes Slab to slab
3 Computer All Yes Slab to slab
4 Pantries All Yes Slab to slab
5 Lavatories All Yes Slab to slab
6 B 35+/- Yes Deck to ceiling
7 C/D 168+/- No Deck to ceiling
</TABLE>
> DOORS, BUCKS, AND HARDWARE
a. All interior partition doors will be 6' 8" height, one and
three-quarter inches (1 3/4") in thickness hollow core and width of three feet
(3'), paint grade, and shall have passage latch sets and template butt hinges.
All of the doors provided shall be as follows: twelve (12) doors with lock sets,
remaining interior doors will have latch sets, and all exterior perimeter doors
to have lock sets. The locks will be lever locks with satin chrome finish
building standard. Doors labeled where necessary by law. Schlage or equal
manufacturer. Conference room will have light oak or mahogany solid core
mahogany. Exterior doors to have closing door checks.
b. All door bucks are to be steel 18-gauge K.D. type. All jointed heads
on knock down door bucks to be flush type. Doors to be supplied by lessor
according to plan. Each office door will have a door stop and a coat hook
installed by Landlord.
> PAINTING
Lessor shall paint, with Benjamin Moore or equal, all surfaces with one
(1) prime coat, one (1) undercoat and one (1) finish coat, all interior walls,
non-acoustically treated ceilings, doors and door bucks, and all other masonry
or metal surfaces. This painting shall consist of latex base, flat on walls, and
semi-gloss on doors, buck and metal surfaces. Colors for the initial painting of
the dry wall partitioning may be selected by Lessee from
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<PAGE> 67
Lessor's color chart. There shall be no limitation on the selection of light
colors excepting however, where two colors abut on walls. A paint schedule shall
be provided to Lessor by Lessee. Such finish schedule shall mean the complete
listing of the finishes to be applied to all wall and floor surfaces forming a
part of the Finish Work and detailed building standard specifications of such
wall and floor coverings, including cover samples, identification of material by
manufacturers, catalog numbers if applicable, and any information which Lessor
will need to order material to perform the work. Lessee shall select finishes
from finish samples submitted to Lessee by Lessor. Tenant shall have choice of
one (1) color from a selection of 15 colors.
> FLOORS/CARPETING
All floors to be reasonably level, smooth and clean to receive their
respective floor finishes. Flash patching if required, for pitted and ridged
areas. Carpet: 26 oz. commercial grade loop pile. Philadelphia Volunteer by Shaw
Industries or equal with glue down application. VCT: Armstrong 12 x 12 glue
down; color as per Lessee selection.
Lessor shall furnish and install building standard carpeting,
throughout demised premises in a color to be selected by Lessee from swatches
provided by Lessor or provide building standard vinyl composition tile. Tenant
shall have choice of one (1) color from a selection of 36 colors.
> CEILING
Lessor shall furnish and install a 2' x 4' acoustical tile ceiling,
Armstrong second look Cortega texture laid in an exposed white suspension Tee
Bar Grid System, throughout all lessee areas.
> LIGHTING
a. New, diffused (2 x 4 with T-8 lamps or 2 x 2) prismatic fluorescent
fixtures with thermally protected electronic ballast, shall be provided capable
of producing and maintaining a minimum of 60 foot candles at desk level.
b. Where required by Lessee's design conditions, Lessee may substitute
for the building standard fixture another fixture, or equal cost and expense.
c. Corridor, Halo or equal, recessed hi-hat compact fluorescent lamp
every ten (10) feet.
d. Location of all lighting fixtures shall conform to the ceiling grid,
and shall not conflict with main "Ts".
e. Lessor will furnish and install all initial incandescent and
fluorescent thermally protected ballast and lamps. All subsequent replacement
cost will be borne by Lessee.
- 57 -
<PAGE> 68
f. Lessor shall furnish and install all miscellaneous building standard
fixtures, either fluorescent or incandescent for such areas as mechanical
spaces, rest rooms, stairwells, exits, etc. In the quantities to conform with
the applicable building code.
g. Upgraded areas: One (1) main conference room, three (3) 2 x 2
fixtures and nine (9) hi-hats; three (3) staff conference rooms, four (4) 2 x 4
fixtures.
h. Reception area: three (3) asymmetric directional fixtures and eight
(8) ceiling recessed hi-hats.
> ELECTRICAL
a. Lessor shall furnish and install standard electrical duplex wall
outlets, with required associated wiring facilities, designated in Lessee's
plan, not to exceed a total of 650. Dedicated requirements are separate.
b. Lessor shall furnish and install switches and associated wiring
facilities required to service the ceiling lighting fixtures in the location
designated on Lessee's plans not to exceed one (1) switch per private office and
one (1) switch per entrance to open work areas and three (3) switches for the
main conference room and two (2) switches for other conference rooms.
c. Electricity for Lessee's use will be furnished and supplied through
Lessee's exclusive meter.
d. Switching at each door.
e. Individual offices switch separately. Zoning of corridor switches to
be determined.
> PLUMBING
a. Lessor shall modernize existing toilets to meet the requirements of
the Americans with Disabilities Act. Existing fixtures to remain and toilet
partitions to be electrostatically painted. Existing partitions and ceramic
floor tiles to remain.
b. Lessor will provide plumbing to and fixtures for pantries as shown
on the attached plan, American Standard or equal.
c. All broken fixtures, mirrors, dispensers and partitions will be
replaced at beginning of Lease.
> HEATING, VENTILATION AND AIR CONDITIONING
Supply and install new air conditioning duct system in the Demised
Lessee Area, as partitioned and to be used and occupied in accordance with
Lessee's Plans, year round
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<PAGE> 69
heating, ventilation and cooling conforming to the New York State Energy
Conservation Code and to the U.S. Department of Energy Temperature Control
regulations, subject to the following criteria. System is oil heat and electric
air conditioning. System noise to be within permissible industry standards.
Heating, air conditioning and ventilation systems will be provided
which are capable of maintaining inside temperatures in the range from a low of
70 degrees during the heating season to a high of 74 degrees at all other times
throughout the entire leased premises and service areas, regardless of outside
temperatures. Heat supplied by base board on exterior glazed walls and all other
interior space heat supplied through new duct work distribution.
Three (3) perimeter offices per thermostat control subject to final
engineers approved design. Interior office controls every 4,000 square feet.
Location of controls to be decided.
Computer rooms and conference rooms to have separate controls.
Conference room will have additional exhaust.
> ENGINEERING - LESSEE'S DRAWINGS - FILING OF PLANS
Lessor shall, with reasonable speed and diligence at its own cost and
expense, file Lessor's plans with the appropriate department of the municipality
where the Building is located and shall take whatever action shall be necessary
(including modification of the Lessor's Plans) to obtain and maintain all
necessary approvals and permits from said department (or other governmental
authorities having jurisdiction) with respect to such plans, the completion of
the work reflected therein or having any modification of the Building's
Certificate of Occupancy (temporary or permanent) which may be required and
shall deliver copies of all of the same to Lessee. Lessee shall cooperate with
Lessor in connection with the aforesaid and shall cause Lessee to make any
changes in such plans as prepared which may be necessary for Lessor to comply
with its obligations hereunder to meet the necessary applicable code
requirement. The parties will make reasonable efforts to minimize impact on
Lessee.
> BUILDING STANDARD
All materials and workmanship shall be industry standard quality unless
otherwise specified, and the obligation of lessor shall be for the work required
to be performed by Lessor in the Work Letter and the lease and approved
construction drawings, which shall be performed in a good and workmanlike
manner.
> TELEPHONE/DATA
Lessee shall be responsible for the installation of all telephone and
data wiring, connections, jacks and other item in connection with such an
installation.
- 59 -
<PAGE> 70
> FIRE ALARM SYSTEM
New Class E system control located in mechanical room.
> WINDOWS
All exterior windows to be thermo pane, double glazed with tinted
glass.
> MILLWORK ITEMS AND PANTRIES
Four (4) pantries to have built in millwork cabinets (upper and lower).
Cabinets with plastic laminate finish surface, pulls and hardware, stainless
steel sink, plastic laminate finish counter tops with one (1) shelf in each
cabinet. Tenant will have choice of one (1) color from a choice of 3 standard
colors.
New reception desk consisting of transaction top with laminate finish
desk top underneath with pencil draw and file draws. Tenant will have choice of
one (1) color from a selection of 50 colors for the reception desk.
> INTERIOR STAIRWAYS
Paint the stairway, including treads and risers, and railings in colors
and patterns to be selected by tenant.
> ELEVATOR
The size 5'8" x 6'4" x 7'6" high; doors 7'6" high; 2,500 lb. capacity;
operation hydraulic; rating 125 feet per minute.
Finish is brushed stainless steel on control panel wall, plastic
laminate interior panels and carpet floor finish.
Control panel to comply with American with Disabilities Act.
- 60 -
<PAGE> 71
EXHIBIT C
Clean Schedule
<TABLE>
<CAPTION>
Daily Weekly Monthly Bi-Monthly
<S> <C> <C> <C> <C>
Sweep and wash flooring. x
Wash polish mirrors and bright work. x
Vacuum upholstered furniture and drapes. x
Wash toilet seats sinks and bowls. x
Damp wipe partitions, tiles and wall dispensers x
Empty, clean, refill towel and sanitary x
Sweep flooring with special cloth. x
Wash and mop lobby. x
Vacuum carpeted areas and elevators. x
Sweep stair towers, mop entrance mats. x
Empty and clean waste baskets and ashtrays. x
Clean cigarette urns. x
Remove waste to designated area(s) x
Dust and wipe clean furniture desk, equipment, x
telephones and window sills with special cloth.
Dust baseboards, chair rails, trim pictures. x
Window cleaning both interior and exterior to be YES
performed done time per year.
Shampooing of carpets at tenants request. As requested
at no extra
cost.
Clean kitchen areas, floors and surface. x
Spot clean interior lobby glass, doors and x
directories.
Multiple tenancy floors, marble, terrazzo, N/A
ceramic in elevator, foyers, corridors will be
washed weekly.
Elevator, stair, office utility doors checked for x
cleanliness.
Remove finger marks from metal partitions and x
similar surfaces.
Wash and policy glass furniture tops removing x
stains.
Scrub and wax public corridors. x
Dust pictures, frames, charts and similar wall x
hanging not reached in nightly cleaning.
Dust exterior of light fixtures. x
Dust overhead pipes, sprinklers. x
Dust venetian blinds. x
Dust window frames. x
Dust vertical surfaces, i.e. partitions, vents, x
louvers
</TABLE>
- 61 -
<PAGE> 1
Exhibit 10.8
LEASE AMENDMENT AGREEMENT
This Lease Amendment Agreement made of the 27th day of August, 1996, between
American National Bank and Trust Company of Chicago, not individually but as
Trustee under a Trust Agreement dated February 14, 1983 and known as Trust No.
56881 ("Landlord") and Mobius Management Systems, Inc., a New York corporation
("Tenant").
WHEREAS, Landlord and Tenant have entered into a lease ("Lease") dated December
20, 1993 for certain premises containing approximately 7,214 rentable square
feet (the "Premises") in the building commonly known as 600 West Fulton Street,
Chicago, Illinois (the "Building") for a Term ending January 31, 1999; and
WHEREAS, Landlord and Tenant desire to extend the Term of the Lease and also
increase the size of the Premises:
NOW, THEREFORE, in consideration of the covenants and agreements contained
herein, the parties covenant and agree as follows:
1. Effective September 1, 1996, the Premises are increased by the addition of
5,179 rentable square feet on the third floor, said 5,179 rentable square being
leased on an "as is" basis. Effective September 1, 1996, the Premises, for all
purposes of the Lease shall comprise a total of 12,393 rentable square feet on
the third floor and is described in plan attached hereto as Exhibit A.
2. The Term of the Lease is hereby extended to the end of August 31, 2001 upon
the terms and conditions contained in the Lease as amended hereby.
3. Effective September 1, 1996, the Base Rent shall be as follows:
Annual Base
Lease Period Base Rent Monthly Rent
- ------------ --------- ------------
September 1, 1996 -
August 31, 1997 $155,678.04 $12,973.17
September 1, 1997 -
August 31, 1998 $158,791.60 $13,232.63
September 1, 1998 -
February 28, 1999 $161,967.43 $13,497.29
March 1, 1999 -
August 31, 1999 $154,168.92 $12,847.41
<PAGE> 2
September 1, 1999
August 31, 2000 $157,275.73 $13,106.31
September 1, 2000 -
August 31, 2001 $160,421.24 $13,368.44
4. Effective September 1, 1996 Tenant's Proportionate share shall be 6.37%.
5. Effective September 1, 1996 Paragraphs R-6 and R-7 are no longer in
effect.
6. Each party warrants and represents that it has not dealt with any broker
in connection with this Lease Amendment Agreement. Each party agrees to defend,
save and hold harmless the other from any claims for fees and commissions and
against any liability (including reasonable attorneys' fees) by reason of its
breach of such representation and warranty.
7. Paragraphs R-5 of the Rider to the Lease entitled "Renewal Option" is
amended in the following respects:
a. The reference to "October 31, 1998" is deleted and replaced by
"January 31, 2001".
b. The reference to "February 1, 1999 to January 31, 2004" is deleted
and replaced by "September 1, 2001 to August 31, 2006".
c. The reference to "January 31, 2004" after "its option to extend the
Term of the Lease to" is deleted and replaced by "August 31, 2006".
d. The reference to "October 21, 2003" is deleted and replaced by
"January 31, 2006".
e. The reference to "February 1, 2004 to January 31, 2009" is deleted
and replaced by "September 1, 2006 to August 31, 2011".
f. The reference in both renewal options to "the then prevailing market
rate for comparable space" is deleted and replaced by "the then
prevailing market rate (the rate at which Landlord is offering space
to prospective tenants) for comparable space".
8. Except as modified herein, all of the provisions of the Lease remain in
full force and effect. In the event of any inconsistency or conflict between the
Lease and this Lease Amendment Agreement, this Lease Amendment Agreement shall
prevail and control.
9. This instrument is executed by the undersigned Landlord, not personally,
but solely as Trustee aforesaid, and it is expressly understood and agreed by
the parties hereto, anything herein to the contrary notwithstanding, that each
and all of the covenants, undertakings, representations
-2-
<PAGE> 3
and agreements of the Trustee are not made individually, or for the purpose of
binding it personally, but this instrument is executed and delivered by Landlord
as Trustee, solely in the exercise of powers conferred upon it as such Trustee
under said Trust Agreement and no personal liability or personal responsibility
is assumed by, nor shall at any time be asserted or enforced against the
Landlord on account hereof, or on account of any covenant, undertaking,
representation or agreement herein contained, either expressed or implied, all
such personal liability, if any, being duly expressly waived and released by the
parties hereto, and by all persons claiming by or through or under said parties.
IN WITNESS WHEREOF, the parties hereto have executed this Lease Amendment
Agreement as of the date first above written.
TENANT LANDLORD
Mobius Management Systems, Inc. American National Bank and
Trust Company of Chicago
as Trustee aforesaid
By: By:
----------------------------- ----------------------------
Its Authorized Officer
-3-
<PAGE> 4
April 27, 1994
Mr. David Gordon
Mobius Management Systems, Inc.
One Ramada Plaza
New Rochelle, NY 10801
Dear David:
Enclosed please find your fully executed Lease Agreement for space in The 600
Fulton Building.
If you have any questions, please don't hesitate to call me.
Sincerely,
Sondra Berman Epstein
President
dj
Enclosure
cc: Mr. Richard Prince w/enclosures
Mr. Raymond Epstein
Mr. Sidney Epstein
Ms. Kay Shannon
Ms. Wendy Struck
<PAGE> 5
LEASE
-----
BUILDING: 600 West Fulton Building
ADDRESS: 600 West Fulton Street, Chicago, Illinois
LANDLORD
American National Bank and Trust Company of Chicago, not individually, but as
Trustee under a Trust Agreement dated February 14, 1983, and known as Trust No.
56881.
TENANT
------
Mobius Management Systems, Inc.
-------------------------------
a New York corporation
----------------------
DATE OF LEASE
December 20, 1993
-----------------
<PAGE> 6
TABLE OF CONTENTS
Paragraph Page
1 BASE RENT 1
2 ADDITIONAL RENT 1
3 SERVICE 7
4 CONDITION OF PREMISES 8
5 FAILURE TO GIVE POSSESSION 9
6 USE OF PREMISES 10
7 CARE AND MAINTENANCE 13
8. ALTERATIONS 14
9 ACCESS TO PREMISES 16
10 UNTENANTABILITY 17
11 INSURANCE 18
12 SUBROGATION 19
13 EMINENT DOMAIN 20
14 ASSIGNMENT-SUBLETTING 20
15 WAIVER OF CLAIMS AND INDEMNITY 22
16 MORTGAGE-GROUND LEASE 24
17 CAPITAL EXPENDITURES 25
18 CERTAIN RIGHTS RESERVED TO THE LANDLORD 25
19 HOLDING OVER 27
<PAGE> 7
20 LANDLORD'S REMEDIES 27
21 DEFAULT UNDER OTHER LEASE 31
22 SURRENDER OF POSSESSION 31
23 NOTICES 32
24 RELOCATION OF TENANT
25 SECURITY DEPOSIT
26
27 MISCELLANEOUS 34
28 LANDLORD'S LIABILITY 37
EXHIBIT A - PLAN OF PREMISES
EXHIBIT B - LEGAL DESCRIPTION
RIDER
- ii -
<PAGE> 8
THIS LEASE, made as of this 20th day of December ___, 1993, between
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, not individually but as
Trustee under a Trust Agreement dated February 14, 1983, and known as Trust No.
______ ("Landlord") and Mobius Management Systems, Inc., a New York corporation
("Tenant");
W I T N E S S E T H:
THAT Landlord hereby leases to Tenant, and Tenant accepts the premises
(the "Premises") being 7,214 rentable square feet at the southwest corner of the
third floor and described in the plan attached hereto as Exhibit A in the
building (the "Building"), situated on the premises legally described on Exhibit
B and commonly known as 600 West Fulton Street, Chicago, Illinois (the
"Property"), for a term of five (5) years, unless sooner terminated as provided
herein, commencing February 1, 1994, and ending January 31, 1999 (the "Term"),
to be occupied and used by the Tenant for general offices and no other purpose,
subject to the agreements herein contained.
IN CONSIDERATION THEREOF, THE PARTIES COVENANT AND AGREE AS FOLLOWS:
1. BASE RENT. The Tenant shall pay as Base Rent to Landlord or to such
other person or at such other place as Landlord may direct in writing, the sum
of $________ see Rider ____, in equal monthly installments of $ see Rider _____,
in advance without notice on or before the first day of each calendar month of
the term commencing February 1, 1994, without any set-off or deduction
whatsoever, except that Tenant shall pay the monthly installment for the first
full month of the Term for which rent is due upon the execution of this Lease.
Unpaid rent shall bear interest at the rate set forth in Section 27(f), from the
date due until paid. Tenant agrees to do and perform each and every
<PAGE> 9
covenant, agreement and obligation to be performed by Tenant hereunder. If the
Term commences on other than the first day of a month or ends on other than the
last day of a month, then the rent for such month shall be prorated for such
fractional period and paid promptly by Landlord.
2. ADDITIONAL RENT. In additional to paying the Base Rent specified in
Paragraph 1, Tenant shall pay as "Additional Rent" the amounts determined as
hereinafter set forth. The Base Rent and the Additional Rent are sometimes
hereinafter collectively referred to as the "Rent."
(a) Definitions. As used in this Paragraph 2, the terms:
(i) "Calendar Year" shall mean the twelve month period
January through December for any year in which this Lease is
in effect;
(ii) "Tenant's Proportionate Share" shall be 3.71%, a
percentage determined by dividing 194,581 square feet, the
rentable area contained in the Building, into 7,214 square
feet, the rentable area of the third floor contained in the
Premises;
(iii) "Taxes" shall mean all real estate taxes and
assessments, special or otherwise, levied or assessed upon or
with respect to the Property and/or Building, and ad valorem
taxes for Landlord's personal property used in connection
therewith. Should the State of Illinois or the City of
Chicago, or any political subdivision of either, or any other
governmental authority having jurisdiction over the Property
or the Building, impose a tax, assessment, charge or fee, or
increase a then existing tax assessment, charge or fee, which
Landlord shall be required to pay, either by way of
substitution for such real estate taxes and ad valorem
personal property taxes, or assessed against the Property or
Building, or in addition to such real estate taxes and ad
valorem personal property taxes, or impose an income or
franchise tax or a tax on rents which may be in addition to or
in substitution for a tax levied against the Property and/or
the Building and/or Landlord's personal property used in
connection with the Property and Building, such taxes,
assessments, fees or charges shall be deemed to constitute
Taxes hereunder. In the event the Property and Building are
not fully assessed for real estate tax purposes for any
Calendar Year, the Taxes for that year shall be adjusted by
Landlord to reflect the Taxes as though the Property and
Building were fully assessed. "Taxes" shall include all
special taxes and assessments, installments of which are
required to be paid and all fees and costs incurred by
Landlord in seeking
-2-
<PAGE> 10
to obtain reduction of, or a limit on the increase in any
Taxes, regardless of whether any reduction or limitation is
obtained.
(iv) "Operating Expenses" for any Calendar Year shall
mean all expenses, costs and disbursements of every kind and
nature (other than Taxes) incurred by Landlord in connection
with the ownership, maintenance, operation and repair of the
Building, including, but not limited to, salaries and wages of
employees of the Building (including social security taxes,
unemployment insurance costs, cost of disability benefits,
pension, hospitalization or retirement plans), insurance
premiums, management fees, utilities (except to the extent
separately metered and payable by tenants in the Building),
scavenger and snow removal services and other expenses similar
or dissimilar. Operating Expenses shall not include:
a. costs of capital improvements, except for any
capital improvements made or installed for the purpose
of saving labor or otherwise reducing Operating
Expenses;
b. depreciation (except on miscellaneous equipment
used in the maintenance of the Property), interest and
principal payments on mortgages, and other debt costs,
if any; and
c. real estate broker's leasing commissions or
compensation.
Any services provided by Landlord shall be at rates that are
competitive with rates of third parties who would be providing
similar services. In the event the Building is not fully
occupied during any Calendar Year, the Operating Expenses for
that year shall be adjusted by Landlord to reflect the
Operating Expenses as though the Building were fully occupied.
(v) "Base Tax Amount" shall equal $2.65 per rentable
square foot;
(vi) "Operating Expense Base Amount" shall equal $ See
Rider;
(vii) "Rentable Area" shall be computed by measuring the
inside finish of exterior glass panels and shall include,
without limitation, all areas within such glass panels and
shall also include:
a. with respect to each single tenancy floor,
toilets, air conditioning rooms, fan rooms, janitors
closet, telephone closets, electrical closets and
elevator lobbies within and serving only such floor, or
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b. with respect to each multiple tenancy floor,
the Tenant's Proportionate Share of the areas described
in the preceding subsection.
Rentable areas shall exclude the lobby, the loading dock
receiving room, the basement, elevator shafts, flues, stacks
and vertical ducts with their enclosing walls;
(viii) "Lease Year" shall be a twelve month period of
the Lease commencing on the calendar day on which the Lease
Term first begins.
(b) Tax and Operating Expense Escalation. Tenant shall pay to
Landlord as Rent, in addition to the Base Rent required by Paragraph 1,
(i) an amount ("Tax Escalation Amount") equal to Tenant's Proportionate
Share of the amount by which the Taxes assessed with respect to each
Calendar Year exceed the Base Tax Amount and (ii) an amount ("Operating
Expenses Escalation Amount") equal to Tenant's Proportionate Share of the
amount by which the Operating Expenses incurred by Landlord with respect
to each Calendar Year exceeds the Operating Expense Base Amount with
respect to each Calendar Year, in monthly installments for each month in
which this Lease is in effect, at the same time and place as Base Rent
under Paragraph 1 is to be paid, in amounts reasonably estimated based on
prior year increases from time to time by Landlord by a written notice to
Tenant. Landlord agrees to keep books and records showing Operating
Expenses and Taxes in accordance with a system of accounts and accounting
practices consistently maintained on a year-to-year basis. Landlord shall
deliver to Tenant within ninety (90) days after the close of each Calendar
Year (including the Calendar Year in which this Lease terminates), a
report certified by an officer or agent of Landlord. The report shall
contain the following:
(i) The officer's or agent's statement that the books and
records covering the operation of the Building have been maintained
in accordance with the requirements of this paragraph;
(ii) The amount by which the Taxes for such Calendar Year
exceed the Base Tax Amount; and
(iii) The amount by which the Operating Expenses for such
Calendar Year exceed the Operating Expense Base Amount.
After receipt of such report, Landlord shall cause the Tax Escalation
Amount and the Operating Expense Escalation Amount for such Calendar Year
to be computed based on such report and shall deliver to Tenant a
statement of the Tax Escalation Amount and the Operating Expense
Escalation Amount. Tenant shall pay any deficiency with respect to the Tax
Escalation Amount and/or the Operating Expense Escalation Amount to
Landlord as shown by such statement within fifteen (15) days after demand
therefor. If the total amount paid by Tenant during any Calendar Year with
respect to the Tax Escalation Amount exceeds
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the Tax Escalation Amount for such Calendar Year or if the total amount
paid by Tenant during any Calendar Year with respect to the Operating
Expense Escalation Amount exceeds the Operating Expense Escalation Amount
for such Calendar Year, such excess shall be credited against payments
next due under this Paragraph 2(b). If no such payments are next due, such
excess shall be refunded by Landlord. The amount of any refund of Taxes
received by Landlord shall be credited against Taxes for the year in which
such refund is received. In determining the amount of Taxes for the year,
the amount of special assessments to be included shall be limited to the
amount of the installment (plus any interest payable thereon) of such
special assessment which would have been required to have been paid during
such year if the Landlord had elected to have such special assessment paid
over the maximum period of time permitted by law. Except as provided in
the preceding two sentences, all references to Taxes for a particular year
shall be deemed to refer to Taxes levied, assessed or otherwise imposed
for such year without regard to when such Taxes are payable. If the Term
commences on other than the first day of a Calendar Year, or ends on other
than the last day of the Calendar Year, then the Additional Rent due under
this Paragraph 2(b) for such Calendar Year shall be prorated for such
fractional Calendar Year.
(c) Miscellaneous. All amounts due under this Paragraph 2 as
Additional Rent shall be payable in the manner and at such place as Base
Rent provided for in Paragraph 1. Without limitation on other obligations
of Tenant which shall survive the expiration of the Term, the obligations
of Tenant to pay the Additional Rent provided for in this Paragraph 2
shall survive the expiration of the Term.
3. SERVICE. The Landlord shall furnish:
(a) Heat and air-cooling when necessary, in the Landlord's judgment,
to provide for the comfortable occupation and use of the Premises, daily
from 7:00 A.M. to 6:00 P.M. (Saturdays 8:00 A.M. to 1:00 P.M.); Sundays
and holidays excepted. When Tenant desires heat and air-cooling at hours
other than those stated in the preceding sentence, the cost of such
service shall be paid by Tenant to Landlord as additional rent at rates
fixed by Landlord. Wherever heat generating machines or equipment are used
by Tenant in the Premises, which affect the temperature otherwise
maintained by the air-cooling system, Landlord reserves the right to
install supplementary air-conditioning units in the Premises and the
expense of installation shall be paid by Tenant. The expense resulting
from the operation and maintenance of the supplementary air conditioning
system shall be paid by the Tenant to the Landlord as additional rent at
rates fixed by Landlord.
(b) Cold water in common with other tenants for drinking, lavatory
and toilet purposes drawn through fixtures installed by the Landlord, or
by Tenant in the Premises with Landlord's written consent, and hot water
in common with other tenants for lavatory purposes from regular Building
supply. Tenant shall pay Landlord as additional rent at rates fixed by
Landlord for water furnished for any other purposes.
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(c) Automatic passenger elevator service. Freight elevator service
shall be subject to scheduling by Landlord.
(d) Landlord shall permit Tenant to receive direct service from
public utility companies at Tenant's sole cost and expense. Tenant shall
make all necessary arrangements for metering and paying for such service
furnished to Tenant and Tenant shall pay for all charges for such service
on the Premises during Tenant's occupancy thereof.
The Landlord will maintain the building and provide a level of service
consistent with first class renovated office buildings in the Chicago area.
However, the Landlord does not warrant that any of the services above mentioned
will be free from interruptions caused by war, insurrection, civil commotion,
riots, acts of God or the enemy, governmental action, repairs, renewals,
improvements, alterations, strikes, lockouts, picketing, whether legal or
illegal, accidents, inability of the Landlord to obtain fuel or supplies or any
other cause or causes beyond the reasonable control of the Landlord. Any such
interruption of service shall never be deemed an eviction or disturbance of the
Tenant's use and possession of the Premises or any part thereof, or render the
Landlord liable to the Tenant for damages, or relieve the Tenant from
performance of the Tenant's obligations under the Lease.
4. CONDITION OF PREMISES. The Tenant's taking possession shall be
conclusive evidence as against the Tenant that the Premises were in good order
and satisfactory condition when the Tenant took possession (it being understood
that the Premises are being leased in an as is condition and that Tenant has
been in possession of the Premises prior to the date hereof). No promise of the
Landlord to alter, remodel, decorate, clean or improve the Premises or the
Building and no representation respecting the condition of the Premises or the
Building have been made by the Landlord to the Tenant, unless the same is
contained herein, or made a part hereof, or in a written document signed by
Landlord or its Agent. This Lease does not grant any air rights over the
Property.
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5. USE OF PREMISES. The Tenant shall occupy and use the Premises during
the Term for the purpose specified at the beginning of this Lease and none
other. In this connection, Tenant covenants that Tenant shall:
(a) Not make or permit to be made any use of Premises which,
directly or indirectly is forbidden by public law, ordinance or
governmental regulation or which may be dangerous to persons or property,
or which may invalidate or increase the premium cost of any policy of
insurance carried on the Building or covering its operations; nor shall
Tenant do, or permit to be done, any act or thing upon the Premises which
will be in conflict with fire insurance policies covering the Building.
The Tenant, at its sole expense, shall comply with all rules, regulations
or requirements of the local Inspection and Rating Bureau, or any other
similar body, and shall not do, or permit anything to be done upon the
Premises, or bring or keep anything thereon in violation of such rules,
regulations, or requirements, and then only in such quantity and manner of
storage as not to increase the rate of fire insurance applicable to the
Building.
(b) Not install any sign in the Premises other than signs installed
by Landlord at Tenant's expense and in such manner, character and style as
Landlord may approve in writing, such approval not to be unreasonably
withheld.
(c) Not advertise the business, profession or activities of the
Tenant conducted in the Building in any manner which violates the letter
or spirit of any code of ethics adopted by any recognized association or
organization pertaining to such business, profession or activities, and
shall not use the name of the Building for any purpose other than that of
business address of the Tenant, and shall never use any picture or
likeness of the Building in any circulars, notices, advertisements or
correspondence without the Landlord's express prior written consent;
(d) Not obstruct, or use for storage, or for any purpose other than
ingress and egress, the sidewalks, entrances, passages, courts, corridors,
vestibules, halls, elevators and stairways of the Building;
(e) Not permit a bicycle or other vehicle or dog or other animal or
bird to be brought into the Building or any part thereof;
(f) Not make or permit any noise or odor that is objectionable to
other occupants of the Building to emanate from the Premises, and shall
not create or maintain a nuisance thereon, and shall not disturb, solicit
or canvass any occupant of the Building, and shall not do any act tending
to injure the reputation of the Building;
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(g) Not install any musical instrument or equipment in the Building
or any antennas, aerial wires or other equipment inside or outside the
Building, without, in each and every instance, prior written consent of
the Landlord. The use thereof, if permitted, shall be subject to control
by the Landlord to the end that others shall not be disturbed or annoyed;
(h) Not waste water by tying, wedging or otherwise fastening open,
any faucet;
(i) Not attach any additional locks or similar devices to any door.
No keys for any door other than those provided by the Landlord shall be
made. If more than two keys for one lock are desired by the Tenant, the
Landlord may provide the same upon payment therefor by the Tenant. Upon
termination of this Lease or of the Tenant's possession, the Tenant shall
surrender all keys for the Premises and shall advise the Landlord of all
combinations for locks on safes, cabinets and vaults;
(j) Be responsible for the locking of doors in and to the Premises.
Any damage resulting therefrom shall be paid for by the Tenant;
(k) Not bore, cut or install wires or cables for telegraphic,
telephonic, burglar alarm or signal service, without the prior written
approval of the Landlord which shall not be unreasonably withheld. The
Landlord will direct where and how connections and all wiring for such
service shall be introduced and run;
(l) Not install shades, draperies or other forms of inside window
covering without prior approval of the Landlord which shall not be
unreasonably withheld as to shape, color and material;
(m) Not overload any floor. Safes, furniture and all large articles
shall be brought through the Building and into the Premises at such times
and in such manner as the Landlord shall direct and at the Tenant's sole
risk and responsibility. The Tenant shall list all furniture, equipment
and similar articles to be removed from the Building, and the list must be
approved at the Office of the Building or by a designated person before
building employees will permit any article to be removed;
(n) Not install or operate any steam or internal combustion engine,
boiler, machinery, refrigerating except small kitchen refrigerator or
heating device except coffee machines or air-conditioning apparatus in or
about the Premises, or carry on any mechanical business therein, or use
the Premises for housing accommodations or lodging or sleeping purposes,
or do any cooking therein or install or permit the installation of any
vending machines, or use any illumination other than electric light, or
use or permit to be brought into the Building any inflammable oils or
fluids such as gasoline, kerosene, naphtha and benzene, or any explosive
or other articles hazardous to persons or property, without the prior
written consent of Landlord in each and every instance;
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(o) Not place or allow anything to be against or near the glass of
partitions, doors or windows of the Premises which may diminish the light
in, or be unsightly from the exterior of the Building, public halls or
corridors;
(p) Not install in the Premises any equipment which uses a
substantial amount of electricity without the advance written consent of
the Landlord. The Tenant shall ascertain from the Landlord the maximum
amount of electrical current which can safely be used in the Premises,
taking into account the capacity of the electric wiring in the Building
and the Premises and the needs of other tenants in the Building, and shall
not use more than such safe capacity. The Landlord's consent to the
installation of electric equipment shall not be construed to permit the
Tenant to use more electricity than such safe capacity;
(q) Unless installed by Landlord, install, maintain and not remove
carpet padding and carpet in the entire Premises, or such other floor
covering as approved in writing in advance by Landlord;
(r) Provide janitorial service for the Premises at its own expense
on a daily basis, each business day. Landlord shall furnish Tenant with a
list of acceptable name(s) of janitorial services for Tenant's use. If the
Tenant and substantially all other Tenants are not satisfied with the
janitorial service, Landlord shall provide Tenant with a list of other
janitorial services which may be used by Tenant;
(s) Pay for all utility services used in the Premises, except for
those utilities which Landlord is specifically providing in this Lease and
then only to the extent payment by Landlord is specifically provided in
this Lease.
The Tenant shall be liable to the Landlord for all damages resulting from the
breach of any covenant contained in this Paragraph 6, including the right to
enjoin Tenant from continuing the breach of any such covenants. Nothing in this
Lease shall be construed to impose any duty or obligation upon Landlord to
enforce any of the provisions of this Paragraph 6, or the terms, covenants or
conditions of any other lease against any other Tenant, and the Landlord shall
not be liable to the Tenant for violation of the same by any other tenant, its
servants, employees, agents, invitees or licensees.
6. CARE AND MAINTENANCE. Subject to the provisions of Paragraph 10, the
Tenant shall, at Tenant's own expense, keep the Premises in good condition and
shall pay for the repair of any damage caused by Tenant, its employees, agents,
invitees, or Licensees during the
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Term. The Tenant shall pay the Landlord for
overtime and for any other expense incurred in the event repairs, alterations,
decorating or other work in the Premises cannot be made during ordinary business
hours.
7. ALTERATIONS. The Tenant shall not do any painting or decorating, or
erect any partitions, make any alterations in or additions to the Premises or do
any mailing, boring or screwing into the ceilings, walls or floors, in
accordance with the rules of Landlord for doing so. Unless otherwise agreed by
Landlord and Tenant in writing, all such work shall be performed either by or
under the direction of Landlord, but at the expense of Tenant. The Landlord's
decision to refuse such consent shall be conclusive which shall not be
unreasonably withheld. If the Landlord consents to such alterations or
additions, before commencement of the work or delivery of any materials onto the
Premises or into the Building, the Tenant shall furnish the Landlord for
approval:
(a) Plans and specifications;
(b) Names and addresses of contractors;
(c) Copies of contracts;
(d) Necessary permits;
(e) Indemnification in form and amount satisfactory to Landlord and
certificates of insurance from all contractors performing labor or
furnishing materials, insuring against any and all claims, costs, damages,
liabilities and expenses which may arise in connection with the
alterations or additions.
Whether the Tenant furnishes the Landlord the foregoing or not, the Tenant
hereby agrees to hold the Landlord, its beneficiaries, and their respective
agents and employees harmless from any and all liabilities of every kind and
description which may arise out of or be connected in any way with said
alterations or additions. Any mechanic's lien filed against the Premises, or the
Building
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of which the same form a part, for work claimed to have been furnished
to the Tenant shall be discharged of record by the Tenant within ten (10) days
thereafter, at the Tenant's expense. Provided that such discharge shall not be
required if Tenant provides Landlord security adequate in Landlord's reasonable
judgment, to protect Landlord from any loss, cost, damage and expense in
connection with any such lien. Upon completing any alterations or additions, the
Tenant shall furnish the Landlord with contractors' affidavits and full and
final waivers of lien and receipted bills covering all labor and materials
expended and used. All alterations and additions shall comply with all insurance
requirements and with all ordinances and regulations of any pertinent
governmental authority. All alterations and additions shall be constructed in a
good and workmanlike manner and good grades of materials shall be used.
All additions, decorations, fixtures, hardware, non-trade fixtures and all
improvements, temporary or permanent, in or upon the Premises, whether placed
there by the Tenant or by the Landlord, shall, unless the Landlord requests
their removal, become the Landlord's property and shall remain upon the Premises
at the termination of this Lease by lapse of time or otherwise without
compensation or allowance or credit to the Tenant. If, upon the Landlord's
request, the Tenant does not remove said additions, decorations, fixtures,
hardware, non-trade fixtures and improvements, the Landlord may remove the same
and the Tenant shall pay the cost of such removal to the Landlord upon demand.
Notwithstanding the foregoing, it is understood that the foregoing items which
are present in the Premises as of the date of this Lease shall remain and shall
not be subject to Landlord's request for their removal.
8. ACCESS TO PREMISES. The Tenant shall permit the Landlord to erect, use
and maintain pipes, ducts, wiring and conduits in and through the Premises. The
Landlord or Landlord's
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agents shall have the right to enter upon the Premises, to inspect the same, and
to make such decorations, repairs, alterations, improvements or additions to the
Premises or the Building as the Landlord may deem necessary or desirable, and
the Landlord shall be allowed to take all material into and upon said Premises
that may be required therefor without the same constituting an eviction of the
Tenant in whole or in part and the rent reserved shall not abate (except as
provided in Paragraph 10) while said decorations, repairs, alterations or
improvements are being made, by reason of loss or interruption of business of
the Tenant, or otherwise. If the Tenant shall not be personally present to
permit an entry into said Premises, when for any reason an entry therein shall
be necessary or desirable, the Landlord or Landlord's agents may enter the same
by a master key, or may forcibly enter the same, without rendering the Landlord
or such agents liable therefor (if during such entry Landlord or Landlord's
agents shall accord reasonable care to Tenant's property), and without in any
manner affecting the obligations and covenants of this Lease. Nothing herein
contained, however, shall be deemed or construed to impose upon the Landlord any
obligations, responsibility or liability whatsoever, for the care, supervision
or repair of the Building or any part thereof, other than as herein provided.
The Landlord shall also have the right at any time without the same constituting
an actual or constructive eviction and without incurring any liability to the
Tenant therefor, to change the arrangement and/or location of entrances or
passageways, doors and doorways and corridors, elevators, stairs, toilets or
public parts of the Building, and to close entrances, doors, corridors,
elevators or other facilities. The Landlord shall not be liable to the Tenant
for any expense, injury, loss or damage resulting from work done in or upon, or
the use of, any adjacent or nearby building, land, street or alley.
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9. UNTENANTABILITY. If the Premises or the Building are made untenantable
by fire or other casualty, Landlord may elect:
(a) To terminate this Lease as of the date of the fire or casualty
by notice to the Tenant within sixty (60) days after that date, or
(b) To proceed with due diligence to repair, restore or rehabilitate
the Building or the Premises at Landlord's expense, in which latter event
this Lease shall not terminate. If said repair, restoration or
rehabilitation is not substantially completed within six (6) months after
the date of such fire or other casualty, Tenant may elect to terminate
this Lease as of the date of such fire or other casualty by written notice
to Landlord within ten (10) days after the expiration of said six (6)
month period.
In the event the Lease is not terminated pursuant to this Paragraph, rent shall
abate on a per diem basis during the period of untenantability of the Premises.
In the event of the termination of this Lease pursuant to this Paragraph, rent
shall be apportioned on a per diem basis and paid to the date of the fire or
other casualty. In the event that the Premises are partially damaged by fire or
other casualty but are not made wholly untenantable, then Landlord shall, except
during the last year of the Term, proceed with due diligence to repair and
restore the Premises and the rent shall abate in proportion to the nonusability
of the Premises during the period of untenantability. If a portion of the
Premises are made untenantable as aforesaid during the last year of the Term,
Landlord shall have the right to terminate this Lease as of the date of the fire
or other casualty by giving written notice thereof to Tenant within thirty (30)
days after the date of fire or other casualty, in which event the rent shall be
apportioned on a per diem basis and paid to the date of such fire or other
casualty.
10. INSURANCE. Tenant agrees that it will at all times during the Term,
and any extensions, keep in full force and effect:
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(a) comprehensive general public liability insurance with respect to
the Premises and the business operated by Tenant or any other occupant of
the Premises, such insurance to afford protection to the limit of not less
than $1,000,000 in respect to each person and to the limit of not less
than $2,000,000 in respect to any one occurrence, and to the limit of not
less than $500,000 in respect to property damage; and
(b) insurance against fire, sprinkler, leakage, vandalism, and the
extended coverage perils for the full insurable value of all additions,
improvements and alterations to the Premises (except to the extent the
same are included within the definition of "Work," but not "Additional
Work" as set forth in Exhibit C), and all office furniture, trade
fixtures, office equipment, merchandise and all other items of Tenant's
property on the Premises.
Such policies shall name Tenant and Landlord, and any other person, firm or
corporation involved with the Building and reasonably designated by Landlord as
insureds and shall contain a clause that the insurer will not cancel or change
the insurance without first giving Landlord at least ten (10) days prior written
notice thereof. The insurance shall be in form (including the amount of any
so-called "deductible"), and written by insurance companies reasonably
acceptable to Landlord, and a certificate of insurance shall be delivered to
Landlord prior to commencement of the Term and not less than ten (10) days prior
to the expiration of the term of such insurance, whether expiration is due to
lapse of time or cancellation or for any other reason. In the event Tenant shall
fail to provide said insurance, Landlord may, but shall be under no obligation
to, procure such insurance in which event Tenant agrees to pay to Landlord, as
Additional Rent, the amount of premium therefor on the first day following the
month in which Landlord notifies Tenant of the amount of premium due hereunder.
11. SUBROGATION. The parties hereto agree to have any and all fire,
extended coverage or any and all material damage insurance which may be carried
endorsed with the following subrogation clause: "This insurance shall not be
invalidated should the insured waive prior to a loss any or all right of
recovery against any party for loss occurring to the property
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described herein." Each party hereto hereby waives all claims for recovery from
the other party for any loss or damage to any of its property insured under
valid and collectible insurance policies to the extent of any recovery
collectible under such insurance.
12. EMINENT DOMAIN. If the Building, or a substantial part of the
Premises, shall be lawfully taken or condemned for any public or quasi-public
use or purpose, or conveyed under threat of such condemnation, the Term of this
Lease shall end upon, and not before, the date of the taking of possession by
the condemning authority, and without apportionment of the award. Tenant hereby
assigns to the Landlord Tenant's interest in such award, if any. Current Rent
shall be apportioned as of the date of such termination. If any part of the
Building, other than the Premises or any part of the Building not constituting a
substantial part of the Premises, shall be so taken or condemned, or if the
grade of any street or alley adjacent to the Building is changed by any
competent authority and such taking or change of grade makes it necessary or
desirable to substantially remodel or restore the Building, the Landlord shall
have the right to cancel this Lease upon not less than ninety (0) days prior
written notice to the Tenant specifying the date of cancellation. No money or
other consideration shall be payable by the Landlord to the Tenant for the right
of cancellation, and the Tenant shall have no right to share in the condemnation
award or in any judgment for damages caused by the change of grade.
13. ASSIGNMENT-SUBLETTING. Tenant shall not, without Landlord's prior
written consent which shall not be unreasonably withheld:
(a) Assign, hypothecate, mortgage, encumber, or convey this Lease or
any interest under it;
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(b) Allow any transfer thereof or any lien upon Tenant's interest by
operation of law;
(c) Sublet the demised Premises in whole or in part.
The following provisions apply to subletting:
(d) Prior to making any sublease, Tenant shall first notify Landlord
in writing of its election to sublease all or a portion of the Premises,
such notice to include a copy of the proposed sublease. At any time within
thirty (30) days after service of said notice, Landlord shall notify
Tenant that:
(i) it consents to the sublease, or
(ii) it refuses to consent to the sublease, or
(iii) with respect to the proposed sublease of the entire
Premises, it cancels the Lease effective as of the beginning of the
sublease term, or
(iv) with respect to the proposed sublease of part of the
Premises, effective as of the beginning of the sublease term it
amends the Lease to reduce the Premises by the portion of the
Premises proposed to be sublet and further appropriately amends the
Lease because of the reduction of the Premises.
(e) The use for which the Premises may be sublet shall be only for
lawful office use in keeping with the general character of the Building.
(f) If Tenant shall sublet the Premises at a rental in excess of the
Rent, said excess rental shall be shared equally between Landlord and
Tenant and shall be paid to Landlord promptly when due under any such
subletting as additional rent hereunder.
Any assignment or subletting shall not release Tenant of liability under
this Lease or permit any subsequent prohibited act, unless specifically provided
in such consent.
14. WAIVER OF CLAIMS AND INDEMNITY. Except for the negligence of the
Landlord, its beneficiaries and their respective agents and employees (but not
to the extent that Tenant does not have insurance coverage with respect
thereto), to the extent permitted by law, the Tenant releases the Landlord, its
beneficiaries, and their respective agents and servants from, and
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waives all claims for, damage to person or property sustained by the Tenant or
any occupant of the Building or Premises resulting from the Building or Premises
or any part of either or any equipment or appurtenance becoming out of repair,
or resulting from any accident in or about the Building, or resulting directly
or indirectly from any act or neglect of any tenant or occupant of the Building
or of any other person, other than Landlord's agents and servants as provided
above. Without limiting the generality of the foregoing, this Paragraph 14 shall
apply to the flooding of basements or other subsurface areas, and to damage
caused by refrigerators, sprinkling devices, air-conditioning apparatus, water,
snow, frost, steam, excessive heat or cold, falling plaster, broken glass,
sewage, gas, odors or noise, or the bursting or leaking of pipes or plumbing
fixtures, and shall apply equally whether any such damage results from the act
or neglect of other tenants, occupants or servants in the Building or of any
other person (other than Landlord's agents and servants as provided above), and
whether such damage be caused or result from any thing or circumstances above
mentioned or referred to, or any other thing or circumstance whether of a like
nature or of a wholly different nature. If any such damage, whether to the
Premises or to the Building or any part thereof, or whether to the Landlord or
other tenants in the Building, results from any act or neglect of the Tenant,
its employees, agents, invitees and customers, the Tenant shall be liable
therefor and the Landlord may, at the Landlord's option, repair such damage and
the Tenant shall, upon demand by Landlord, reimburse the Landlord forthwith for
the total cost of such repairs. The Tenant shall not be liable for any damage
caused by its act or neglect if the Landlord or a tenant has recovered the full
amount of the damage from insurance and the insurance company has waived its
right of subrogation against the Tenant. All property belonging to the Tenant or
any occupant of the Premises that is in the building or the Premises shall be
there at the risk of the Tenant or other person only, and the Landlord shall not
be liable for damage thereto or theft or misappropriation thereof.
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Except for the negligence of the Landlord, its beneficiaries and their
respective agents and employees, Tenant agrees to indemnify and save the
Landlord, its beneficiaries, and their respective agents and employees harmless
against any and all claims, demands, costs and expenses, including reasonable
attorney's fees for the defense thereof, arising from Tenant's occupation of the
Premises or from any breach or default on the part of Tenant in the performance
of any covenant or agreement on the part of Tenant to be performed pursuant to
the terms of this Lease, or from any act or negligence of Tenant, its agents,
servants, employees or invitees, in or about the Premises. In case of any action
or proceeding brought against Landlord, its beneficiaries, or their respective
agents or employees by reason of any such claim, upon notice from Landlord,
Tenant covenants to defend such action or proceeding by retaining counsel
reasonably satisfactory to Landlord.
15. MORTGAGE-GROUND LEASE. Landlord may execute and deliver a mortgage or
trust deed in the nature of a mortgage (both hereinafter referred to as a
"Mortgage") against the Property or any interest therein, and may sell and lease
back the underlying land on which the Building is situated. This Lease and the
rights of Tenant hereunder shall be and are hereby made expressly subject and
subordinate at all times to any such Mortgage and/or ground lease, now or
hereafter existing and all amendments, modifications and renewals thereof and
extensions, consolidations or replacements thereof, and to all advances made or
hereafter to be made upon the security thereof. Tenant agrees to execute and
deliver such further instruments subordinating this Lease to said Mortgage or
ground lease as may be requested in writing by Landlord from time to time.
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<PAGE> 26
Should any Mortgage affecting the Building or the Property be foreclosed
or if any ground lease be terminated:
(a) The liability of the mortgagee, trustee or purchaser at such
foreclosure sale or the liability of a subsequent owner designated as
Landlord under this Lease shall exist only so long as such trustee,
mortgagee, purchaser or owner is the owner of the Property and such
liability shall continue or survive after further transfer of ownership;
(b) Upon request of the mortgagee or trustee, Tenant will attorn, as
tenant under this Lease, to the purchaser at any foreclosure sale
thereunder or if any ground lease be terminated for any reason, Tenant
will attorn as tenant under this Lease to the ground Lessor under the
ground lease and will execute such instruments as may be necessary or
appropriate to evidence such attornment. The aforesaid subordination of
this Lease is subject to Tenant's right to continue in possession of the
Premises so long as Tenant is not in default hereunder and is attorning as
required herein.
16. CERTAIN RIGHTS RESERVED TO THE LANDLORD. The Landlord reserves and may
exercise the following rights in a reasonable manner without affecting Tenant's
obligations hereunder:
(a) To change the name or street address of the Building;
(b) To install and maintain a sign or signs on the interior or
exterior of the Building;
(c) To have access for the Landlord and the other tenants of the
Building to any mail chutes located on the Premises according to the rules
of the United States Post Office;
(d) To designate all sources furnishing sign painting and lettering,
ice, towels, coffee cart service and toilet supplies, lamps and bulbs used
on the Premises;
(e) To decorate, remodel, repair alter or otherwise prepare the
Premises for reoccupancy if Tenant vacates the Premises prior to the
expiration of the Term;
(f) To retain at all times pass keys to the Premises;
(g) To grant to anyone the exclusive right to conduct any particular
business or undertaking in the Building;
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(h) To exhibit the Premises to others and to display "For Rent"
signs on the Premises;
(i) To close the Building after regular working hours and on the
legal holidays subject, however, to Tenant's right to admittance, under
such reasonable regulations as Landlord may prescribe from time to time,
which may include, without limiting the generality of the foregoing, that
persons entering or leaving the Building identify themselves to a watchman
by registration or otherwise and that said persons establish their right
to enter or leave the Building;
(j) To approve the weight, size and location of safes or other heavy
equipment or articles, which articles may be moved in, about, or out of
the Building or Premises only at such times and in such manner as Landlord
shall direct and in all events, however, at Tenant's sole risk and
responsibility;
(k) To take any and all measures, including inspections, repairs,
alterations, decoration, additions and improvements, to the Premises or to
the Building, as may be necessary or desirable for the safety, protection
or preservation of the Premises or the Building or the Landlord's
interests, or as may be necessary or desirable in the operation of the
Building.
The Landlord may enter upon the Premises and may exercise any or all of
the foregoing rights hereby reserved without being deemed guilty of an eviction
or disturbance of the Tenant's use or possession and without being liable in any
manner to the Tenant and without abatement of rent or affecting any of the
Tenant's obligations hereunder.
17. HOLDING OVER. If the Tenant retains possession of the Premises or any
part thereof after termination of the Term or any extension thereof, by lapse of
time or otherwise, the Tenant shall pay the Landlord the monthly Rent, at 150%
of the rate payable for the month immediately preceding said holding over
(including increases for Expenses and Taxes which Landlord may reasonably
estimate), computed on a per-month basis, for each month or part thereof
(without reduction for any such partial month) that the Tenant thus remains in
possession, and in addition thereto, if such retention of possession by Tenant
is for a period in excess of fifteen (15)
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<PAGE> 28
business days after Landlord gives Tenant written notice to vacate (which notice
may be given prior to the termination of the Term), but not sooner than January
10, 1999, Tenant shall pay the Landlord all damages, consequential as well as
direct, sustained by reason of the Tenant's retention of possession. The
provisions of this paragraph do not exclude the Landlord's rights of re-entry or
any other rights hereunder.
18. LANDLORD'S REMEDIES. All rights and remedies of the Landlord herein
enumerated shall be cumulative and none shall exclude any other right or remedy
allowed by law.
(a) If the Tenant defaults in the payment of Rent, and the Tenant
does not cure the default within five (5) days after demand for payment of
such Rent or if the Tenant defaults in the prompt and full performance of
any other provisions of this Lease, and the Tenant does not cure the
default within twenty (20) days after written demand by the Landlord that
the default be cured (unless the default involves a hazardous condition,
which shall be cured forthwith) or if the leasehold interest of the Tenant
be levied upon under execution or be attached by process of law, or if the
Tenant makes an assignment for the benefit of creditors or admits its
inability to pay its debts generally, or if a receiver be appointed for
any property of the Tenant, or if the Tenant abandons the Premises, then,
and in any such event, the Landlord may, if the Landlord so elects but not
otherwise, and with or without notice of such election, and with or
without any demand whatsoever, either forthwith terminate this Lease and
the Tenant's right to possession of the Premises or, without terminating
this Lease, forthwith terminate the Tenant's right to possession of the
Premises.
(b) Upon termination of this Lease, whether by lapse of time or
otherwise, or upon any termination of the Tenant's right to possession
without termination of the Lease, the Tenant shall surrender possession
and vacate the Premises immediately, and deliver possession thereof to the
Landlord, and hereby grants to the Landlord full and free license to enter
into and upon the Premises in such event with process of law and to
repossess the Landlord of the Premises as of the Landlord's former estate
and to expel or remove the Tenant and any others who may be occupying or
be within the Premises and to remove any and all property therefrom, using
such force as may be necessary, without being deemed in any manner guilty
of trespass, eviction or forcible entry or detainer, and without
relinquishing the Landlord's rights to Rent or any other right given to
the Landlord hereunder or by operation of law.
(c) If the Landlord elects to terminate the Tenant's right to
possession only, without terminating the Lease, the Landlord may, at the
Landlord's option, enter into the
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<PAGE> 29
Premises, remove the Tenant's sign and other evidences of tenancy, and
take and hold possession thereof as in subparagraph (b) of this Paragraph,
without such entry and possession terminating the Lease or releasing the
Tenant, in whole or in part, from the Tenant's obligation to pay the Rent
hereunder for the full Term, and in any such case the Tenant shall pay
forthwith to the Landlord, if the Landlord so elects, a sum equal to the
entire amount of the Rent for the remainder of the Term plus any other
sums then due hereunder. Upon and after entry into possession without
termination of the Lease, the Landlord may, but need not, relet the
Premises or any part thereof for the account of the Tenant to any person,
firm or corporation other than the Tenant for such rent, for such time and
upon such terms as the Landlord in the Landlord's sole discretion shall
determine, and the Landlord shall not be required to accept any tenant
offered by the Tenant or to observe any instructions given by the Tenant
about such reletting. In any such case, the Landlord may make repairs,
alterations additions in or to the Premises and redecorate the same to the
extent deemed by the Landlord necessary or desirable, and the Tenant
shall, upon demand, pay the cost thereof, together with the Landlord's
expenses of the reletting. If the consideration collected by the Landlord
upon any such reletting for the Tenant's account is not sufficient to pay
monthly the full amount of the Rent reserved in this Lease, together with
the cost of repairs, alterations, additions, redecorating and the
Landlord's expenses, the Tenant shall pay to the Landlord the amount of
each monthly deficiency upon demand.
(d) If any involuntary action or proceeding under any section or
sections of any bankruptcy act in any court or tribunal shall adjudge or
declare Tenant insolvent or unable to pay Tenant's debts, or if any
voluntary petition or similar proceeding under any section or sections of
any bankruptcy act shall be filed by Tenant in any court or tribunal to
declare Tenant insolvent or unable to pay Tenant's debts, then and in any
such event Landlord may, if Landlord so elects but not otherwise, and with
or without notice of such election, and with or without entry or other
action by Landlord, forthwith terminate this Lease, and notwithstanding
any other provision of this Lease, Landlord shall forthwith upon such
termination be entitled to recover damages in an amount equal to the then
present value of the Rent for the remainder of the Term, less the fair
rental value of the Premises for the remainder of the Term.
(e) Any and all property which may be removed from the Premises by
the Landlord pursuant to the authority of the Lease or of law, to which
the Tenant is or may be entitled, may be handled, removed or stored by the
Landlord at the risk, cost and expense of the Tenant, and the Landlord
shall in no event be responsible for the value, preservation or
safekeeping thereof. The Tenant shall pay to the Landlord, upon demand,
any and all expenses incurred in such removal and all storage charges
against such property so long as the same shall be to the Landlord's
possession or under the Landlord's control. Any such property of the
Tenant not retaken from storage by the Tenant within thirty (30) days
after the end of the Term, however terminated, shall be conclusively
presumed to have been conveyed by the Tenant to the Landlord under this
Lease as a bill of sale without further payment or credit by the Landlord
to the Tenant.
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<PAGE> 30
(f) Tenant hereby grants to Landlord a first lien upon the interest
of Tenant under this Lease to secure the payment of moneys due under this
Lease, which lien may be enforced in equity, and Landlord shall be
entitled as a matter of right to have a receiver appointed to take
possession of the Premises and relet the same under order of court.
(g) The Tenant shall pay upon demand all the Landlord's reasonable
costs, charges and expenses, including the fees of counsel, agents and
others retained by the Landlord, incurred in enforcing the Tenant's
obligations hereunder or incurred by the Landlord in any litigation,
negotiation or transaction in which the Tenant causes the Landlord,
without the Landlord's fault, to become involved or concerned.
19. DEFAULT UNDER OTHER LEASE. If the term of any lease, other than this
Lease, made by the Tenant for any premises in the Building shall be terminated
or terminable after the making of this Lease because of any default by the
Tenant under such other lease, such fact shall empower the Landlord, at the
Landlord's sole discretion, to terminate this Lease by notice to the Tenant.
20. SURRENDER OF POSSESSION. Upon the expiration or other termination of
the terms of this Lease, Tenant shall quit and surrender to Landlord the
Premises, broom clean, in good order and condition, ordinary wear expected, and
Tenant shall remove all of its property except as otherwise provided in
Paragraph 8.
If the Tenant does not remove its property of every kind and description
from the Premises prior to the end of the Term, however ended, and Landlord
shall not have requested the removal of same by Tenant pursuant to Paragraph 8,
the Tenant shall be conclusively presumed to have conveyed the same to the
Landlord under this Lease as a bill of sale without further payment or credit by
the Landlord to the Tenant and the Landlord may remove the same and the Tenant
shall pay the cost of such removal to the Landlord upon demand.
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Tenant's obligation to observe or perform this covenant shall survive the
expiration or other termination of the Term of this Lease.
21. NOTICES. Notices shall be in writing. The time of mailing shall be the
time of the notice.
(a) Notices shall be effectively served by Landlord upon Tenant by
forwarding through Certified or Registered Mail, postage prepaid, to
Tenant at: Mobius Management Systems, Inc., 1 Ramada Plaza, New Rochelle,
NY 10801.
(b) Notice shall be effectively served by Tenant upon Landlord when
addressed to Landlord and served by forwarding through Certified or
Registered Mail, postage prepaid, to Landlord c/o Epstein Real Estate,
Inc. at the Building or if notified of another address by Landlord, in
writing, at such other address.
22. SECURITY DEPOSIT. Tenant agrees to deposit with Landlord, upon the
execution of this Lease, the sum of $6,913.42 as security for the full and
faithful performance by Tenant of each and every term, provision, covenant and
condition of this Lease. If Tenant defaults in respect to any of the terms,
provisions, covenants and conditions of this Lease including, but not limited
to, payment of the Base Rent and Additional Rent, Landlord may use, apply, or
retain the whole or any part of the security so deposited for the payment of any
such rent in default, or for any other sum which the Landlord may expend or be
required to expend by reason of Tenant's default including, without limitation,
any damages or deficiency in the reletting of the Premises, whether such damages
or deficiency shall have accrued before or after any re-entry by Landlord. If
any of the security shall be so used, applied or retained by Landlord at any
time or from time to time, Tenant shall promptly, in each such instance, on
written demand therefor by Landlord, pay to Landlord such additional sum as may
be necessary to restore the security to the original amount set forth in the
first sentence of this paragraph. If Tenant shall fully and faithfully comply
with all the terms, provisions, covenants,
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<PAGE> 32
and conditions of this Lease, the security, or any balance thereof, shall be
returned to Tenant upon the last to occur of the following events:
(a) The time fixed as the expiration of the Term;
(b) The removal of Tenant from the Premises;
(c) The surrender of the Premises by Tenant to Landlord in
accordance with this Lease;
(d) The time required for the Additional Rent to have been computed
by Landlord and paid by Tenant.
Except as otherwise required by law, Tenant shall not be entitled to any
interest on the security deposit. In the absence of evidence satisfactory to
Landlord to an assignment of the right to receive the security deposit or the
remaining balance thereof, Landlord may return the security deposit to the
original Tenant, regardless whether this Lease has been subsequently assigned by
Tenant. If Landlord transfers ownership of the Building during the Term,
Landlord shall also transfer Tenant's security deposit to the new owner and
Landlord shall thereafter be relieved of any liability for returning the
security deposit to Tenant.
23. COVENANT AGAINST LIENS. Tenant has no authority or power to cause or
permit any lien or encumbrance of any kind whatsoever, whether created by act of
Tenant, operation of law or otherwise, to attach to or be placed upon Landlord's
title or interest in the Property, Building or Premises, and any and all liens
encumbrances created by Tenant shall attach to Tenant's interest only. Tenant
covenants and agrees no to suffer or permit any lien of mechanics or materialmen
or others to be placed against the Property, Building or the Premises with
respect to work or services claimed to have been performed for or materials
claimed to have been furnished
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<PAGE> 33
to Tenant or the Premises, and in case any such lien attaches, Tenant covenants
and agrees immediately to cause it to be released and removed.
24. MISCELLANEOUS
(a) No receipt of money by the Landlord from the Tenant after the
termination of this Lease or after the service of any notice or after the
commencement of any suit, or after final judgment for possession of the
Premises shall reinstate, continue or extend the Term or affect any such
notice, demand or suit.
(b) No waiver of any default of the Tenant hereunder shall be
implied from any omission by the Landlord to take any action on account of
such default if such default persists or is repeated, and no express
waiver shall affect any default other than the default specified in the
express waiver and then only for the time and to the extent therein
stated.
(c) The words "Landlord" and "Tenant" wherever used in the Lease
shall be construed to mean plural where necessary, and the necessary
grammatical changes required to make the provision hereof apply either to
corporations or individuals, masculine or feminine, shall in all cases be
assumed, as though in each case fully expressed.
(d) Each provision hereof shall extend to and shall, as the case may
require, bind and inure to the benefit of the Landlord and the Tenant and
their respective heirs, legal representatives, successors and assigns in
the event this Lease has been assigned with the express written consent of
the Landlord.
(e) Submission of this instrument for examination does not
constitute a reservation of or option for the Premises. The instrument
does not become effective as a lease or otherwise until executed and
delivered by both Landlord and Tenant.
(f) Unless otherwise provided in this Lease, all amounts owed by the
Tenant to the Landlord shall be paid within ten (10) days from the date
the Landlord renders statements of account therefor. All such amounts
(including Base Rent and Additional Rent) shall bear interest from the
date due until the date paid at the rate of 2% above the announced prime
rate of interest of the First National Bank of Chicago in effect on the
date of payment.
(g) All riders attached to this Lease and initialed by the Landlord
and the Tenant are hereby made a part of this Lease as though inserted in
this Lease.
(h) The paragraph headings are for convenience only and do not limit
or construe the contents of the paragraphs.
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<PAGE> 34
(i) If the Tenant shall occupy the Premises prior to the beginning
of the Term with the Landlord's consent, all the provisions of this Lease
shall be in full force and effect as soon as the Tenant occupies the
Premises.
(j) Should any Mortgage require a modification of this Lease, which
modification will not bring about any increased cost or expense to Tenant
or in any other way substantially change the rights and obligations of
Tenant, then and in such event, Tenant agrees that this Lease may be so
modified.
(k) The Tenant represents that the Tenant has not dealt with any
real estate broker in connection with this Lease, except for Cawley &
Associates, whose fee shall be paid by Landlord, and that insofar as the
Tenant knows, no other broker negotiated this Lease or is entitled to any
commission in connection therewith. Tenant indemnifies and holds Landlord,
its beneficiaries and their respective agents and employees harmless from
all claims of any other broker or brokers in connection with this Lease.
(l) The Tenant agrees that from time to time upon not less than ten
(10) days prior request by the Landlord, the Tenant will deliver to the
Landlord a statement in writing certifying (i) that this Lease is
unmodified and in full force and effect (or if there have been
modifications that the same is in full force and effect as modified and
identifying the modifications), (ii) the dates to which the Rent and other
charges have been paid, and (iii) that so far as the person making the
certificate knows, the Landlord is not in default under any provision of
this Lease.
(m) The Tenant agrees that from time to time upon not less than ten
(10) days' prior request by the Landlord, the Tenant will deliver to
Landlord if requested of Landlord by a prospective lender or a prospective
purchaser of the Building, a letter of limited financial information,
including references.
(n) The Landlord's title is and always shall be paramount to the
title of the Tenant, and nothing herein contained shall empower the Tenant
to do any act which can, shall or may encumber such title.
(o) The laws of the State of Illinois shall govern the validity,
performance and enforcement of this Lease.
(p) If any term, covenant or condition of this Lease or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application
of such term, covenant or condition to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be
affected thereby and each term, covenant or condition of this lease shall
be valid and be enforced to the fullest extent permitted by law.
(q) Landlord shall have the right to adopt reasonable rules and
regulations pertaining to the Building which will be binding on the
Tenant.
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<PAGE> 35
(r) Tine is of the essence of this Lease, and all provisions herein
shall be strictly construed.
25. LANDLORD's LIABILITY. This Lease is executed by the undersigned
Landlord, not personally, but solely as Trustee as aforesaid, and it is
expressly understood and agreed by the parties hereto, anything herein to the
contrary notwithstanding, that each and all of the covenants, undertakings,
representations and agreements of the Trustee are not made individually, or for
the purpose of binding it personally, but this instrument is executed and
delivered by the Landlord as Trustee, solely in the exercise of the powers
conferred upon it as such Trustee under said trust agreement and no personal
liability or personal responsibility is assumed by, nor shall at any time be
asserted or enforced against the Landlord on account hereof, or on account of
any covenant, undertaking, representation or agreement herein contained, either
expressed or implied, all such personal liability, if any, being hereby
expressly waived and released by the parties hereto, and by all persons claiming
by or through or under said parties.
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<PAGE> 36
IN WITNESS WHEREOF, the parties hereto have executed this Lease on the
date first above written.
LANDLORD
AMERICAN NATIONAL BANK AND TRUST COMPANY OF
CHICAGO, NOT PERSONALLY BUT AS TRUSTEE UNDER
TRUST AGREEMENT DATED FEBRUARY 14, 1983, AND
KNOWN AS TRUST NO. 56881.
By
-------------------------
Its -------------------------
ATTEST:
By -------------------------
Its -------------------------
TENANT
MOBIUS MANAGEMENT SYSTEMS, INC.
By -------------------------
Its -------------------------
ATTEST:
By -------------------------
Its -------------------------
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<PAGE> 37
EXHIBIT A
PLAN OF PREMISES
<PAGE> 38
EXHIBIT B
LEGAL DESCRIPTION
Lots 18 to 22 both inclusive, in Block 11 in Canal Trustees' Subdivision of lots
and blocks in the South West 1/4 of Section 9, Township 39 North, Range 14 East
of the Third Principal Meridian, according to the Plat thereof recorded August
31, 1848 in Book 29 of Maps Page 52 (New Volume Page 24 and re-recorded
September 24, 1877 in Book 13 of Plats, Page 22) said Subdivision being also
known as part of original Town of Chicago Section 9, Township 39 North, Range 14
East of the Third Principal Meridian, in Cook County, Illinois.
<PAGE> 39
RIDER ATTACHED TO AND MADE A PART OF THAT CERTAIN LEASE DATED DECEMBER 20, 1993,
FOR A PORTION OF THE PROPERTY COMMONLY KNOWN AS 600 WEST FULTON STREET, CHICAGO,
ILLINOIS BY AND BETWEEN AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, NOT
INDIVIDUALLY, BUT AS TRUSTEE UNDER A TRUST AGREEMENT DATED FEBRUARY 14, 1983,
AND KNOWN AS TRUST AGREEMENT, LANDLORD AND MOBIUS MANAGEMENT SYSTEMS, INC., A
NEW YORK CORPORATION, TENANT.
R-1 USE OF TERMS; INCONSISTENCIES. All of the descriptive terms contained
in this Rider shall have the same meanings as those that are in the Lease. In
the event of any inconsistency between the provisions of this Rider and the
Lease, the provisions of this Rider shall prevail.
R-2 BASE RENT. Effective February 1, 1994, the Base Rent for the Premises,
shall be as follows:
Annual Base
Lease Period Base Rent Monthly Rent
- ------------ --------- ------------
February 1, 1994 -
January 31, 1995 $82,961.04 $6,913.42
February 1, 1995 -
January 31, 1996 $84,620.28 $7,051.69
February 1, 1996 -
January 31, 1997 $86,312.64 $7,192.72
February 1, 1997 -
January 31, 1998 $88,038.84 $7,336.57
February 1, 1998 -
January 31, 1999 $89,799.60 $7,483.30
R-3 OPERATING EXPENSE BASE AMOUNT. Effective February 1, 1994, the
Operating Expense Base Amount shall equal $4.30 per rentable square foot
(irrespective of whether the 1994 actual Operating Expenses are more or less
than $34.30 per rentable square foot). The Operating Expense Escalation Amount
(being the Tenant's Proportionate Share of the amount by which the actual
Operating Expenses incurred by Landlord for each Calendar Year exceeds the
Operating Expense Base Amount) for the period of February 1, 1994 thru December
31, 1994, shall be computed on the excess of the actual Operating Expenses for
1994 over the Operating Expense Base Amount, prorated for the period of February
1, 1994 thru December 31, 1994. Thereafter, the Operating Expense Escalation
Amount shall not exceed 106% on an annual cumulative basis of the 1994 actual
Operating Expenses.
R-4 RIGHT OF FIRST OPPORTUNITY If Tenant shall duly and faithfully perform
all of the terms, covenants and conditions of the Lease and so long as Tenant
has not notified
<PAGE> 40
Landlord of its desire to assign the Lease or sublet all or any portion of the
Premises, Tenant shall have the right of first opportunity to lease space on the
third floor of the Building which is contiguous to the Premises if and when such
space becomes available for occupancy by other than the then existing occupant
of such space upon the basic terms set forth in Landlord's notice described in
the next sentence. Said right of first opportunity shall be exercisable by
written notice to Landlord within three days following Tenant's being notified
by Landlord that such space will be available, which notice shall set forth the
basic terms upon which Landlord is prepared to offer such space to a third
party, except that Tenants' right with respect to such space on the third floor
shall be subject to the leasing rights of Andersen Consulting and the Fraternal
Order of Police with respect thereto, for a term expiring on January 31, 1999
or, if Tenant has exercised its option to extend pursuant to paragraph R-5
below, January 31, 2004 or January 31, 2009, as the case may be. If Tenant duly
exercises its right of first opportunity but Tenant does not sign and deliver to
Landlord an amendment to this Lease prepared by Landlord for said space within
three days after being furnished with same, then Tenant's right of first
opportunity shall be null and void.
R-5 RENEWAL OPTION. If Tenant shall duly and faithfully perform all of the
terms, covenants and conditions of this Lease and so long as Tenant has not
notified Landlord of its desire to assign the Lease or sublet all or any portion
of the Premises, Tenant shall have the right exercisable by giving written
notice to Landlord not later than October 31, 1998, to extent the Term of this
Lease for the five year period of February 1, 1999, to January 31, 2004, upon
the same terms and conditions as contained in the Lease, except that the Base
Rent for the Premises shall be at 95% of the then prevailing market rate for
comparable space in the Building as determined by the Landlord, the Additional
Rent shall be the same as then being offered by the Landlord for comparable
space in the Building (without any limitation on the Operating Expense
Escalation Amount). If Tenant shall duly and faithfully perform all of the
terms, covenants and conditions of this Lease and has exercised its option to
extend the Term of the Lease to January 31, 2004, and so long as Tenant has not
notified the Landlord of its desire to assign the Lease or sublet all or any
portion of the Premises, Tenant shall have the right exercisable by giving
written notice to Landlord not later than October 31, 2003, to extend the Term
of the Lease for the five year period of February 1, 2004 to January 31, 2009,
upon the same terms and conditions contained in the Lease, except that the Base
Rent for the Premises shall be at 95% of the then prevailing market rate for
comparable space in the Building as determined by Landlord, the Additional Rent
shall be the same as then being offered by Landlord for comparable space in the
Building (without any limitation on the Operating Expense Escalation Amount).
R-6 CANCELLATION OPTION. Provided that Tenant has fully performed all the
Terms and conditions of this Lease and Tenant has not leased any additional
space pursuant to paragraph R-4 above, Tenant shall have the option to terminate
the Lease effective as of January 31, 1997, exercisable by written notice to
Landlord no later than six months prior to the effective date of termination and
the payment by Tenant to Landlord with such notice of the sum of $20,000.00.
R-7 Landlord shall be responsible for the cost to prepare floor for
re-carpeting, recarpet and repaint the Premises.
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<PAGE> 41
Whenever reference is made in this Lease to the Term of Lease, the same shall
include the extension of the Term resulting from the exercise of the option
conferred upon Tenant hereunder unless the context requires otherwise. The
options of Tenant to extend set forth in this Paragraph R-5 shall include the
Premises and any additional space leased by Tenant pursuant to Paragraph R-4
above.
LANDLORD TENANT
AMERICAN NATIONAL BANK AND MOBIUS MANAGEMENT SYSTEMS,
TRUST COMPANY OF CHICAGO,
NOT PERSONALLY BUT AS TRUSTEE INC.
UNDER TRUST AGREEMENT DATED
FEBRUARY 14, 1983, AND KNOWN
AS TRUST NO. 56881.
By By
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Its Its
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Exhibit 10.9
MOBIUS MANAGEMENT SYSTEMS, INC.
STOCK PURCHASE AGREEMENT
As of May 12, 1997
To the Investors
(as hereinafter defined)
Dear Sirs:
The undersigned, MOBIUS MANAGEMENT SYSTEMS, INC., a Delaware corporation
(the "Corporation"), and MITCHELL GROSS and JOSEPH J. ALBRACHT (each
individually, a "Founder" and collectively, the "Founders"), hereby agree with
each of the parties listed on Schedule I hereto (each, an "Investor", and
collectively, the "Investors") as follows:
SECTION 1. Amended and Restated Certificate of Incorporation; Certificate
of Designation. Prior to the execution and delivery of this Agreement, the
Corporation shall have filed with the Secretary of State of the State of
Delaware an Amended and Restated Certificate of Incorporation (the "Certificate
of Incorporation"), a copy of which is attached hereto as Exhibit A, and a
Certificate of Designation, Preferences and Rights of Series A Convertible
Preferred Stock (the "Certificate of Designation"), a copy of which is attached
hereto as Exhibit B and which designates 40,910 shares of Preferred Stock, $.01
par value (the "Preferred Stock"), as Series A Convertible Preferred Stock (the
"Series A Preferred Stock") and sets forth the terms, designations, powers,
preferences and relative, participating, optional and other special rights, and
the qualifications, limitations and restrictions, of the Series A Preferred
Stock.
SECTION 2. Issuance and Sale of Preferred Shares and Reservation of
Reserved Common Shares; Closing.
2.1. Issuance of Preferred Shares and Reservation of Reserved Common
Shares. Subject to the terms and conditions hereof, the Corporation has
authorized the issuance on the Closing Date (as defined in Section 2.4 hereof)
of an aggregate of 40,910 shares of Series A Preferred Stock (such shares of
Series A Preferred Stock being sometimes hereinafter collectively referred to as
the "Preferred Shares"), and the reservation of an equal number of shares of
Common Stock, $.01 par value (the "Common Stock"), of the Corporation for
issuance upon conversion of the Preferred Shares (such reserved Common Stock
being sometimes hereinafter referred to as the "Reserved Common Shares").
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2.2. Agreement to Sell and Purchase the Series A Preferred Shares. Subject
to the terms and conditions hereof, the Corporation is selling to each Investor
and each Investor is severally purchasing from the Corporation at the Closing
(as hereinafter defined), the number of Preferred Shares set forth opposite the
name of such Investor on Schedule I hereto for a purchase price of $293.33 per
share, representing an aggregate purchase price of $12,000,130.33 for the
Preferred Shares purchased by all Investors.
2.3. Delivery of Series A Preferred Shares. At the Closing, the
Corporation shall deliver to each Investor a certificate or certificates,
registered in the name of such Investor, representing that number of Series A
Preferred Shares being purchased by such Investor. Delivery of certificates
representing Series A Preferred Shares shall be made against receipt by the
Corporation of a check payable to the Corporation or a wire transfer to an
account designated by the Corporation in the full amount of the purchase price
for the Series A Preferred Shares being purchased by such Investor at the
Closing.
2.4. The Closing. The closing (the "Closing") hereunder with respect to
the transactions contemplated hereby is taking place on the date hereof at the
offices of O'Sullivan Graev & Karabell, LLP, 30 Rockefeller Plaza, New York, New
York 10112 (the date hereof sometimes being referred to herein as the "Closing
Date").
SECTION 3. Representations and Warranties of the Corporation and the
Founders. Except as otherwise set forth on the Disclosure Schedule attached
hereto (the "Disclosure Schedule"), such Disclosure Schedule to be arranged in
sections corresponding to the numbered and lettered sections contained in this
Section 3 (it being understood, however, that any disclosure set forth in any
section of the Disclosure Schedule shall be deemed to qualify all other sections
in this Section 3 to which such disclosure may be applicable), the Corporation
and the Founders hereby jointly and severally represent and warrant to the
Investors as follows:
3.1. Organization; Power and Authority; Qualifications. The Corporation is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
corporate authority to own, lease and operate its properties, to carry on its
business as presently conducted and as presently proposed to be conducted and to
carry out the transactions contemplated by this Agreement, the Stockholders'
Agreement (as defined in Section 5.5 hereof) and the Registration Rights
Agreement (as defined in Section 5.6 hereof) (each, a "Document" and
collectively, the "Documents"). Each Founder has the full and absolute power and
capacity to enter into the Documents and to
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carry out the transactions contemplated thereby. The Corporation is qualified to
transact business as a foreign corporation and is in good standing in the State
of New York and all other jurisdictions in which the character of the property
owned or leased or the nature of the activities conducted by the Corporation
makes such qualification necessary and the failure to so qualify would have a
material adverse effect on the Corporation. The Corporation has provided
O'Sullivan Graev & Karabell, LLP, special counsel to the Investors, with true,
correct and complete copies of its Certificate of Incorporation, including the
Certificate of Designation, and its By-laws (the "By-laws"), in each case, as
amended to, and as in effect on, the date hereof, copies of which are attached
hereto as Exhibits A, B and C, respectively.
3.2. Authorization of the Documents; No Conflicts. The execution, delivery
and performance by the Corporation of the Documents have been duly authorized by
all requisite corporate action by the Corporation and each such Document
constitutes a valid and binding obligation of the Corporation, enforceable
against the Corporation in accordance with its terms. The Documents have been
duly executed and delivered by the Founders and each such Document constitutes a
valid and binding obligation of each Founder, enforceable against such Founder
in accordance with its terms. The execution, delivery and performance of the
Documents and the consummation of the transactions contemplated thereby and
compliance with the provisions thereof by the Corporation and the Founders, and
the issuance, sale and delivery of the Series A Preferred Shares and the
Reserved Common Shares by the Corporation, will not (a) to the Best Knowledge
(as hereinafter defined) of the Corporation and the Founders, violate any
provision of law, statute, rule or regulation, or any ruling, writ, injunction,
order, judgment or decree of any court, administrative agency or other
governmental body applicable to the Corporation, either Founder or any of their
respective properties or assets or (b) conflict with or result in any breach of
any of the terms, conditions or provisions of, or constitute (with due notice or
lapse of time, or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, or result in the creation of any
Encumbrance (as defined in Section 3.11 hereof) upon any of the properties or
assets of the Corporation or either Founder under, the Certificate of
Incorporation or By-laws, or, to the Best Knowledge of the Corporation and the
Founders, any note, indenture, mortgage, lease agreement or other contract,
agreement or instrument to which the Corporation or either Founder is a party or
by which any of them or any of their respective properties is bound or affected,
except for any such violations, conflicts, breaches, defaults or rights of
termination, cancellation or acceleration that would not, individually or in the
aggregate, have a material adverse effect on the transactions contemplated
hereby or on the business, properties, assets or condition (financial or
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otherwise) of the Corporation and the Subsidiaries (as hereinafter defined),
taken as a whole.
3.3. Authorization of Series A Preferred Shares and Reserved Shares. The
authorization, issuance, sale and delivery of the Series A Preferred Shares and
the authorization, reservation, issuance, sale and delivery of the Reserved
Common Shares have been duly authorized by all requisite corporate action of the
Corporation, and when issued, sold and delivered upon conversion of the Series A
Preferred Shares, as the case may be, the Reserved Common Shares will be validly
issued and outstanding, fully paid and nonassessable with no personal liability
attaching to the ownership thereof, and not subject to preemptive or any other
similar rights of the stockholders of the Corporation or others (except as
contemplated by the Stockholders' Agreement). The terms, designations, powers,
preferences and relative, participating, optional and other special rights, and
the qualifications, limitations and restrictions, of the Series A Preferred
Shares are as stated in the Certificate of Designation.
3.4. No Consent or Approval Required. To the Best Knowledge of the
Corporation and the Founders, no consent of any person and no consent, approval
or authorization of, or declaration to or filing with, any governmental or
regulatory authority is required for the valid authorization, execution and
delivery by the Corporation or either Founder of any Document or for the
consummation of the transactions contemplated thereby or for the valid
authorization, issuance and delivery of the Series A Preferred Shares, or for
the valid authorization, reservation, issuance and delivery of the Reserved
Common Shares, other than (a) those consents, approvals, authorizations,
declarations or filings (including those filings required to be made under
applicable Federal securities and/or state securities and "blue sky" laws) which
have been or will timely be obtained or made, as the case may be, and which are
identified on Section 3.4 of the Disclosure Schedule and (b) those consents of
persons (but not governmental or regulatory authorities) which the failure to
obtain would not have a material adverse effect on the business, properties,
assets or condition (financial or otherwise) of the Corporation and the
Subsidiaries, taken as a whole.
3.5. Capitalization. (a) The authorized capital stock of the Corporation
immediately upon the consummation at the Closing of the transactions
contemplated hereby, including the application of the proceeds contemplated by
Section 3.26 hereof and of the Disclosure Schedule, shall consist of:
(i) 400,000 shares of Common Stock, $.01 par value, of which (A)
109,090 shares shall have been validly issued and be outstanding, fully
paid and nonassessable, with no personal liability attaching to
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the ownership thereof, (B) 40,910 shares shall have been duly reserved for
issuance upon conversion of the Preferred Shares and (C) 20,455 shares
shall have been duly reserved for issuance upon conversion of the Class A
Common (as hereinafter defined);
(ii) 50,000 shares of Class A Non-Voting Common Stock, $.01 par
value ("Class A Common"), of which (A) no shares shall have been validly
issued or be outstanding and (B) 20,455 shares shall have been duly
reserved for issuance to officers, employees or directors of, or
consultants to, the Corporation; and
(iii) 200,000 shares of Preferred Stock, $.01 par value, of which
40,910 shares shall have been duly designated as Series A Convertible
Preferred Stock, all of which shares shall have been validly issued and be
outstanding, fully paid, nonassessable, with no personal liability
attaching to the ownership thereof.
(b) Section 3.5 of the Disclosure Schedule contains a list of (i)
all holders of capital stock of the Corporation, including the number of shares
of capital stock held by each such holder, and (ii) all outstanding warrants,
options, agreements, convertible securities or other commitments pursuant to
which the Corporation is or may become obligated to issue any shares of the
capital stock or other securities of the Corporation, which list names all
persons entitled to receive such shares or other securities and the shares of
capital stock or other securities required to be issued thereunder. Except as
contemplated by the Documents, there are, and immediately upon consummation at
the Closing of the transactions contemplated hereby, there will be, no
preemptive or similar rights to purchase or otherwise acquire shares of the
capital stock of the Corporation pursuant to any provision of law, the
Certificate of Incorporation or By-laws or any agreement to which the
Corporation is a party; and there is, and immediately upon the consummation at
the Closing of the transactions contemplated hereby, there will be, no
agreement, restriction or encumbrance (such as a right of first refusal, right
of first offer, proxy, voting trust, voting agreement, etc.) with respect to the
sale or voting of any shares of capital stock of the Corporation (whether
outstanding or issuable upon conversion or exercise of outstanding securities),
except as contemplated by the Documents. All shares of the capital stock and
other securities issued by the Corporation at or prior to the Closing have been
or are being issued in transactions exempt from registration under the
Securities Act of 1933, as amended (the "Securities Act"), and all applicable
state securities or "blue sky" laws. The Corporation has not violated the
Securities Act or any applicable state securities or "blue sky" laws in
connection with the
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issuance of any shares of capital stock or other securities at or prior to the
Closing.
3.6. Subsidiaries. Set forth in Section 3.6 of the Disclosure Schedule is
a complete list of each subsidiary of the Corporation (each, a "Subsidiary" and
collectively, the "Subsidiaries") and all other direct or indirect proprietary
interests of the Corporation in any other corporation, association, trust,
partnership, joint venture or other entity. The Corporation owns, of record and
beneficially, all of the issued and outstanding capital stock of each
Subsidiary. To the Best Knowledge of the Corporation and the Founders, the
Corporation has provided O'Sullivan Graev & Karabell, LLP, special counsel to
the Investors, with true, correct and complete copies of the certificate of
incorporation and by-laws, or similar constituent documents, of each Subsidiary.
3.7. No Defaults. Neither the Corporation nor, to the Best Knowledge of
the Corporation and the Founders, any of the Subsidiaries is in default (a)
under its certificate of incorporation or by-laws, or any Contract (as
hereinafter defined) or (b) of any order, writ, injunction or decree of any
court or any Federal, state, municipal or other domestic or foreign governmental
department, commission, board, bureau, agency or instrumentality, other than any
such defaults which would not have a material adverse effect on the business,
properties, assets or condition (financial or otherwise) of the Corporation and
the Subsidiaries, taken as a whole. There exists no condition, event or act
which constitutes, or which after notice, lapse of time or both, would
constitute, a default under any of the foregoing.
3.8. Financial Information. (a) Section 3.8(a) of the Disclosure Schedule
contains the following information (collectively, the "Financial Statements"):
(i) the audited consolidated balance sheet of the Corporation and
the Subsidiaries as of June 30, 1996, and the related consolidated
statements of operations, stockholders' equity and cash flows (including
the notes thereto) for the fiscal year then ended, certified by KPMG Peat
Marwick LLP; and
(ii) the unaudited consolidated balance sheet of the Corporation and
the Subsidiaries (the "Interim Balance Sheet") as of March 31, 1997 (the
"Interim Balance Sheet Date"), and the related unaudited consolidated
statements of operations and cash flows for the nine-month period then
ended (collectively, the "Interim Financial Statements"), prepared by the
Corporation.
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(b) The Financial Statements (in the case of the Interim Financial
Statements, to the Best Knowledge of the Corporation and the Founders) (i) are
in accordance with the books and records of the Corporation and the Subsidiaries
and (ii) present fairly the financial condition and results of operations of the
Corporation and the Subsidiaries as of the date and for the periods indicated
(except as otherwise set forth therein) in accordance with generally accepted
accounting principles consistently applied (except as set forth in the notes
thereto and subject, in the case of the Interim Financial Statements, to normal
year-end audit adjustments, which adjustments shall not be material individually
or in the aggregate).
3.9. Absence of Undisclosed Liabilities. To the Best Knowledge of the
Corporation and the Founders, as of the Interim Balance Sheet Date, (a) neither
the Corporation nor any of the Subsidiaries had any material liability (whether
matured or unmatured, fixed or contingent) which was not provided for or
disclosed in the Interim Balance Sheet and (b) all liability reserves
established by the Corporation and set forth in the Interim Balance Sheet are
adequate for all such liabilities at the applicable date thereof. To the Best
Knowledge of the Corporation and the Founders, there are no loss contingencies
(as such term is used in Statement of Financial Accounting Standards No. 5
issued by the Financial Accounting Standards Board in March 1975) which are not
adequately provided for in the Interim Balance Sheet as required by said
Statement No. 5.
3.10. Absence of Changes. Since the Interim Balance Sheet Date there has
not been (a) any material adverse change in the financial condition, results of
operations, assets, liabilities or business of the Corporation and the
Subsidiaries, taken as a whole, (b) any material borrowing or agreement to
borrow any funds or any liability or obligation of any nature whatsoever
(contingent or otherwise) incurred by the Corporation or any of the
Subsidiaries, other than liabilities or obligations incurred in the ordinary
course of business, (c) any material asset or property of the Corporation or any
of the Subsidiaries made subject to a material Encumbrance of any kind, (d) any
waiver of any valuable right of the Corporation or any of the Subsidiaries, or
the cancellation of any debt or claim held by the Corporation or any of the
Subsidiaries, (e) any payment of dividends on, or other distributions with
respect to, or any direct or indirect redemption or acquisition of, any shares
of the capital stock of the Corporation, or any agreement or commitment
therefor, (f) any issuance of any stock, bond or other security of the
Corporation or any of the Subsidiaries or any agreement or commitment therefor
(including, without limitation, options, warrants or rights or agreements or
commitments to purchase such securities or grant such options, warrants or
rights), (g) any mortgage, pledge, sale, assignment or transfer
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of any material tangible or intangible assets of the Corporation or any of the
Subsidiaries, except, with respect to tangible assets, in the ordinary course of
business, (h) any loan of more than $25,000 individually or $200,000 in the
aggregate at any one time outstanding by the Corporation or any of the
Subsidiaries to any officer, director, employee, consultant or stockholder of
the Corporation or any of the Subsidiaries, or any agreement or commitment
therefor, (i) any damage, destruction or loss (whether or not covered by
insurance) materially affecting the business, assets, properties, operations or
condition, financial or otherwise, or results of operations of the Corporation
and the Subsidiaries, taken as a whole, (j) any extraordinary increase, direct
or indirect, in the compensation paid or payable to any officer, director,
employee, consultant or agent of the Corporation or any of the Subsidiaries or
(k) any change in the accounting methods, practices or policies followed by the
Corporation in the preparation of the Financial Statements or any change in
depreciation or amortization policies or rates theretofore adopted in the
preparation of the Financial Statements.
3.11. Title to Assets, Properties and Rights. The Corporation and the
Subsidiaries have good and marketable title to all material properties,
interests in properties and assets, real, personal and mixed, tangible or
intangible, used in the conduct of their business, free and clear of all
material mortgages, judgments, claims, liens, security interests, pledges,
escrows, charges or other encumbrances of any kind or character whatsoever,
whether or not related to credit or the borrowing of money ("Encumbrances"),
except for (i) Encumbrances disclosed in the Financial Statements; (ii)
Encumbrances for current Taxes (as defined in Section 3.20) not yet due and
payable or which are past due and being contested in good faith; (iii)
mechanics', materialmens', carriers', warehousemens', landlords' and similar
liens securing obligations not yet delinquent or which are being contested in
good faith; (iv) such imperfections of title, covenants, encroachments and
Encumbrances as do not, in any material respect, detract from the value or
interfere with the present or proposed use of the properties or assets subject
thereto or affected thereby; and (v) security interests in personal property
taken by or granted to a person or entity who, by making advances or incurring
an obligation, gives value to enable the Corporation to acquire rights in or the
use of such property or asset, provided that such security interest does not
extend to or cover any other property and the total cost to the Corporation that
would be required to discharge such security interest in full does not exceed
the value so given by such person or entity to the Corporation.
3.12. Burdensome Restrictions. To the Best Knowledge of the Corporation
and the Founders, neither the Corporation nor any of the Subsidiaries is
obligated under any contract or
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agreement or subject to any charter or other corporate restriction which
presently materially adversely affects, or in the future would reasonably be
expected to materially adversely affect, the business, properties, assets or
condition (financial or otherwise) of the Corporation and the Subsidiaries,
taken as a whole.
3.13. Intellectual Property Rights. (a) Section 3.13 of the Disclosure
Schedule sets forth each copyright, trademark, service mark, tradename or patent
owned by the Corporation or any of the Subsidiaries or in which the Corporation
or any of the Subsidiaries asserts proprietary rights, and each Federal, state
or foreign registration thereof or application relating to the registration
thereof.
(i) To the Best Knowledge of the Corporation and the Founders, the
Corporation and the Subsidiaries own or have the right to use all
Intellectual Property Rights material to the conduct of their business as
presently conducted (the "Requisite Rights"). The Corporation and the
Subsidiaries have the right to use, sell, license and bring actions for
the infringement of the Intellectual Property Rights owned by them. To the
Best Knowledge of the Corporation and the Founders, the Corporation and
the Subsidiaries have the right to sell and license all products and
services sold or licensed by them.
(ii) To the Best Knowledge of the Corporation and the Founders, no
material royalties, honorariums, fees or other amounts are payable by the
Corporation or any of the Subsidiaries to other persons by reason of the
ownership, sale, lease, license or use of the Requisite Rights.
(iii) No product, service or process manufactured, marketed, sold or
used, or currently proposed to be manufactured, marketed, sold or used, by
the Corporation or any of the Subsidiaries, to the Best Knowledge of the
Corporation and the Founders, violates, or will violate, any license or
infringes, or will infringe, any current Intellectual Property Rights of
another; and there is no pending or, to the Best Knowledge of the
Corporation and the Founders, threatened claim or litigation against the
Corporation or any of the Subsidiaries (nor does there exist any basis
therefor) contesting the validity of or right to use any of the foregoing,
nor has the Corporation or any of the Subsidiaries received any notice
that any of the Requisite Rights or the operation or proposed operation of
the business of the Corporation and the Subsidiaries conflicts, or will
conflict, with the asserted Intellectual Property Rights of others, nor,
to the Best Knowledge of the Corporation and the Founders, does there
exist any basis for any such conflict, in each case, where such violation,
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claim, litigation or conflict would reasonably be expected to have a
material adverse effect on the business, properties, assets or condition
(financial or otherwise) of the Corporation and the Subsidiaries, taken as
a whole.
(iv) To the Best Knowledge of the Corporation and the Founders, no
third party is infringing or has infringed on any of the Requisite Rights.
(b) As used herein, the term "Intellectual Property Rights" means
all industrial and intellectual property rights, including, without limitation,
Proprietary Technology, patents, patent applications, patent rights, trademarks,
trademark applications, trade names, service marks, service mark applications,
copyrights, know-how, certificates of public convenience and necessity,
franchises, licenses, trade secrets, proprietary processes and formulae. As used
herein, "Proprietary Technology" means all source and object code, algorithms,
architecture, structure, display screens, layouts, processes, inventions, trade
secrets, know-how, development tools and other proprietary rights owned by the
Corporation pertaining to any product or service manufactured, marketed or sold,
or proposed to be manufactured, marketed or sold (as the case may be), by the
Corporation or used, employed or exploited in the development, license, sale,
marketing, distribution or maintenance thereof, and all documentation and media
constituting, describing or relating to the above, including, without
limitation, manuals, memoranda, know-how, notebooks, patents and patent
applications, trademarks and trademark applications, copyrights and copyright
applications, records and disclosures.
3.14. Employment of Officers, Employees and Consultants. No third party
has asserted or, to the Best Knowledge of the Corporation and the Founders, may
assert any valid claim against the Corporation, any Subsidiary or any of the
Designated Persons with respect to (a) the continued employment by, or
association with, the Corporation or any Subsidiary of any of the present
officers or employees of or consultants to the Corporation or any Subsidiary
(collectively, the "Designated Persons") or (b) the use, in connection with any
business presently conducted or proposed to be conducted by the Corporation and
the Subsidiaries or any of the Designated Persons of any information that the
Corporation and the Subsidiaries or any of the Designated Persons would be
prohibited from using under any prior agreements or arrangements or any legal
considerations applicable to unfair competition, trade secrets or proprietary
information, in either case, where such claim would reasonably be expected to
have a material adverse effect on the business, properties, assets or condition
(financial or otherwise) of the Corporation and the Subsidiaries, taken as a
whole.
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3.15. ERISA Plans and Contracts. (a) For purposes of this Agreement, the
term "Employee Plan" means each employee bonus, retirement, pension, profit
sharing, stock option, stock appreciation, stock purchase, incentive, deferred
compensation, hospitalization, medical, dental, vision, life and other health
and disability (whether provided by insurance or otherwise), severance,
termination and other plan, program, arrangement, policy or payroll practice
providing employee benefits, including, without limitation, each "employee
benefit plan" as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended to the date hereof ("ERISA"), and including
plans which have been frozen or terminated during the five-year period ending on
the date of this Agreement, in each instance maintained by the Corporation or to
which the Corporation contributes or has contributed and under which any person
presently employed by the Corporation (an "Employee") or formerly so employed by
the Corporation (a "Former Employee") participates or had accrued any rights or
under which the Corporation is liable in respect of an Employee or Former
Employee. As used in this Section 3.15, the term "Corporation" will include,
where applicable, the Subsidiaries. The terms "Employee" and "Former Employee"
will include, where applicable, the beneficiaries and dependents of an Employee
or Former Employee. Section 3.15 of the Disclosure Schedule lists or describes
all Employee Plans.
(b) The Corporation does not maintain or contribute to any material
Employee Plan.
(c) No Employee Plan is or has been since the enactment of ERISA a
"multiemployer plan" as defined in Section 3(37) of ERISA. No complete or
partial withdrawal from any multiemployer plan has occurred which could subject
the Corporation to material "withdrawal liability" as defined in Section 4201 of
ERISA.
(d) Contributions, premiums, benefits or other payments required to
be made by the Corporation or any subsidiary thereof to or with respect to any
Employee Plan for all periods preceding the date of this Agreement have been
made or properly accrued as liabilities on the Financial Statements, and the
Corporation will not have any material liability (actual or contingent) under
any insurance policy (or ancillary agreement relating to such insurance policy)
in the nature of a retroactive rate adjustment or loss sharing or similar
arrangement.
(e) Each Employee Plan which is intended to be qualified under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), is
so qualified and has been so qualified during the period from its adoption to
date, and each trust forming a part thereof is exempt from tax pursuant to
Section 501(a) of the Code. The Corporation has furnished to
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O'Sullivan Graev & Karabell, LLP, special counsel to the Investors, true,
correct and complete copies of the most recent Internal Revenue Service
determination letters with respect to any such Employee Plans, which
determination letters are all favorable and relate to each such Employee Plan as
amended to comply with the Tax Equity and Fiscal Responsibility Act of 1982, the
Deficit Reduction Act of 1984 and the Retirement Equity Act of 1984. Each
Employee Plan has been amended to the extent required to comply with the Tax
Reform Act of 1986, and has been maintained in material compliance with its
terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations, including, without limitation, ERISA and the Code
(including the provisions thereof which are effective with respect to such
Employee Plans as of the date hereof but which do not require amendments to have
been made to the applicable Employee Plans as of the date hereof), which are
applicable to such Employee Plans.
(f) No Employee Plan provides benefits, including, without
limitation, death or medical benefits (whether or not insured) with respect to
Employees or Former Employees beyond their retirement or other termination of
service other than (i) coverage mandated by applicable laws, (ii) death benefits
under any "employee welfare benefit plan" or "employee pension benefit plan" (as
defined in Sections 3(1) and 3(2) of ERISA, respectively), (iii) retirement
benefits under any employee pension benefit plans, (iv) deferred compensation
benefits accrued as liabilities on the Financial Statements, (v) severance
benefits or (vi) rights to purchase capital stock of the Corporation.
(g) To the Best Knowledge of the Corporation and the Founders, no
facts or circumstances exist, no actions have been taken or omitted to be taken,
nothing has occurred and nothing will occur as a result of the execution,
delivery and performance of this Agreement, such that the Corporation could be
subject (directly or indirectly, such as through an indemnification, guarantee
or similar agreement or obligation) to any material liability for any claims,
judgments, damages, penalties, taxes (including excise taxes), assessments or
similar terms, including, without limitation, any claim by a plan or by the
Pension Benefit Guaranty Corporation under Section 412 of the Code or under
Title IV of ERISA, with respect to any of the Employee Plans or any "employee
benefit plan" (as defined in Section 3(3) of ERISA) currently or formerly
maintained by a business entity that is or has been aggregated with, or treated
as the same employer as, the Corporation for any purpose under ERISA or the Code
(other than liability for benefit payments incurred in the normal operations of
any such Employee Plan for periods preceding the Closing Date), nor does the
Corporation have any such material liability. Without limiting the scope of the
previous sentence, none of the Corporation or any Employee
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Plan has, since the inception of each Employee Plan, violated the "prohibited
transaction" provisions of Section 4975(c) and (d) of the Code or Sections 406
and 408 of ERISA such that a material liability has or could result therefrom.
(h) There has been no material failure to comply with the
continuation health care coverage requirements of Section 4980B of the Code and
Sections 601 through 608 of ERISA, with respect to each Employee or Former
Employee and any other employee or former employee of the Corporation and, to
the Best Knowledge of the Corporation and the Founders, any member of a
"controlled group of corporations" (as defined in Section 1563(a) of the Code)
that included the Corporation ("COBRA Employee") and any "qualified beneficiary"
(as defined in 4980B(g)(1) of the Code) of any COBRA Employee that could result
in a material liability for the Corporation.
3.16. Agreements. Neither the Corporation nor any Subsidiary is currently
a party to any written or, to the Best Knowledge of the Corporation and the
Founders, oral contract not made in the ordinary course of business and, whether
or not made in the ordinary course of business, neither the Corporation nor any
Subsidiary is a party to any written or, to the Best Knowledge of the
Corporation and the Founders, oral: (a) contract with any labor union; (b)
contract for the future purchase of fixed assets or for the future purchase of
materials, supplies or equipment in excess of normal operating requirements; (c)
contract for the employment of any officer, individual employee or other person
on a full-time basis or any material contract with any person on a consulting
basis; (d) agreement or indenture relating to the borrowing of money or to the
mortgaging, pledging or otherwise placing a lien on any material assets of the
Corporation or any Subsidiary; (e) guaranty of any material obligation for
borrowed money or otherwise; (f) lease or agreement under which the Corporation
or any Subsidiary is lessee of or holds or operates any material property, real
or personal, owned by any other party; (g) lease or agreement under which the
Corporation is lessor of or permits any third party to hold or operate any
property, real or personal, owned or controlled by the Corporation; (h)
agreement or other commitment for capital expenditures in excess of $250,000;
(i) contract, agreement or commitment under which the Corporation or any
Subsidiary is obligated to pay any broker's fees, finder's fees or any such
similar fees, to any third party; or (j) any other contract, agreement,
arrangement or understanding which is material to the business of the
Corporation and the Subsidiaries, taken as a whole, or which is material to a
prudent investor's understanding of the business of the Corporation and the
Subsidiaries, taken as a whole (collectively, the "Contracts"). To the Best
Knowledge of the Corporation and the Founders, (x) all such contracts and
agreements constitute the valid and binding obligations of the respective
parties thereto, enforceable in accordance with their
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terms, and (y) neither the Corporation or any Subsidiary, as the case may be,
nor any other party thereto is in default thereunder and there exists no
condition, event or act which constitutes, or which after notice, lapse of time
or both, would constitute, a default by the Corporation or any Subsidiary, as
the case may be, or any other party thereunder.
3.17. Compliance; Licenses and Permits. To the Best Knowledge of the
Corporation and the Founders, the Corporation and the Subsidiaries have complied
in all material respects with all Federal, state, local or foreign laws,
ordinances, regulations or orders applicable to their business as presently or
previously conducted. To the Best Knowledge of the Corporation and the Founders,
the Corporation and the Subsidiaries have all material Federal, state, local and
foreign governmental licenses and permits which are required for the conduct of
their business presently or previously conducted, which licenses and permits are
in full force and effect, and no violations are outstanding or uncured with
respect to any such licenses or permits and no proceeding is pending or
threatened to revoke or limit any thereof. Section 3.17 of the Disclosure
Schedule lists all material Federal, state, local and foreign governmental
licenses and permits of the Corporation and, to the Best Knowledge of the
Corporation and the Founders, the Subsidiaries which are used in or relate to
its business.
3.18. Labor Relations; Employees. At March 31, 1997, the Corporation and
the Subsidiaries had 224 full-time employees, including the Founders. (i)
Neither the Corporation nor any Subsidiary is delinquent in payments, in any
material respect, to any of its employees for any wages or salaries or, to the
Best Knowledge of the Corporation and the Founders, commissions, bonuses or
other direct compensation for any services performed by them to the date hereof
or amounts required to be reimbursed to such employees, (ii) there is no labor
strike, dispute, slowdown or stoppage actually pending or threatened against or
involving the Corporation or any Subsidiary and (iii) neither any grievance nor
any arbitration proceeding arising out of or under collective bargaining
agreements is pending and no claim therefor has been asserted.
3.19. Litigation. There is no action, suit, customer claim, proceeding or
investigation at law or in equity or by or before any governmental
instrumentality or other agency now pending nor, to the Best Knowledge of the
Corporation and the Founders, threatened against, or affecting the assets or
properties of, the Corporation or, to the Best Knowledge of the Corporation and
the Founders, any Subsidiary, an adverse outcome in which would have a material
adverse effect on the business, properties, assets or condition (financial or
otherwise) of the Corporation and the Subsidiaries, taken as a whole (including,
without limitation, any action, suit, claim, proceeding or
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litigation involving the claims contemplated by Sections 3.13 and 3.14), nor
does there exist any basis for any such action, suit, customer claim, proceeding
or investigation.
3.20. Tax Matters. The Corporation and the Subsidiaries (in the case of
any foreign Taxes, to the Best Knowledge of the Corporation and the Founders)
have (a) filed all state, local and foreign tax returns, declarations of
estimated tax, tax reports, information returns and statements (collectively,
the "Returns") required to be filed by them prior to the Closing (other than
those for which extensions shall have been granted prior to the Closing)
relating to any Taxes (as defined below) with respect to any income, properties
or operations of the Corporation and the Subsidiaries prior to the Closing; (b)
as of the time of filing, the Returns were complete and correct in all material
respects and all Taxes shown on the Returns to be due have been paid or adequate
reserves have been made therefor; (c) neither the Corporation nor any Subsidiary
is delinquent in the payment of any Taxes, other than Taxes for which the
Corporation or any Subsidiary has requested an extension of time within which to
file any Return or the payment of which is being contested in good faith; (d)
there are no pending tax audits of any Returns of the Corporation; (e) no tax
liens have been filed and no deficiency or addition to Taxes, interest or
penalties for any Taxes with respect to any income, properties or operations of
the Corporation or any Subsidiary has been proposed, asserted or assessed in
writing other than for Taxes, the payment of which is being contested in good
faith; (f) neither the Corporation nor any Subsidiary has granted any extension
of the statute of limitations applicable to any Return or other Tax claim with
respect to any income, properties or operations of the Corporation or any
Subsidiary; (g) the Corporation has not, during the five-year period preceding
the date hereof, been a personal holding company within the meaning of Section
542 of the Code; and (h) the Corporation has not made any election under Section
341(f) of the Code. As used in this Agreement, the term "Tax" shall mean any of
the Taxes and the term "Taxes" shall mean, with respect to any person or entity,
(i) all income taxes (including any tax on or based upon net income, or gross
income, or income as specially defined, or earnings, or profits, or selected
items of income, earnings or profits) and all gross receipts, sales, use, ad
valorem, transfer, franchise, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property or windfall profits taxes,
alternative or add-on minimum taxes, customs duties or other taxes, fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by any taxing
authority (domestic or foreign) on such person or entity and (ii) any liability
for the payment of any amount of the type described in the immediately preceding
clause (i) as a result of being a "transferee" (within the meaning of Section
6901 of the
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Code or any other applicable law) of another person or entity or a member of an
affiliated or combined group.
3.21. Related Party Transactions. No current stockholder, director,
officer or employee of the Corporation, nor any "associate" (as defined in the
rules and regulations promulgated under the Securities Act) of any such person,
is presently, directly or indirectly through his, her or its affiliation with
any other person or entity, a party to any transaction with the Corporation or
any Subsidiary, providing for the furnishing of services by or to, or rental of
real or personal property from or to, or otherwise requiring cash payments to or
by any such person, in any such case, that would be disclosable pursuant to Item
404 of Regulation S-K promulgated by the Securities and Exchange Commission. For
the purposes of this Agreement, a transaction of the type described in this
Section 3.20 is sometimes herein referred to as a "Related Party Transaction."
3.22. Offerees. Except as set forth in Section 3.22 of the Disclosure
Schedule, the Corporation has not, during the past 12 months, offered any Series
A Preferred Stock or Common Stock, or any security or securities similar to any
thereof, for sale to, or solicited any offers to buy any of the foregoing from,
or otherwise approached or negotiated in respect thereof, with any person or
persons other than the Investors and a limited number of institutional or other
sophisticated investors and other than pursuant to employee stock option plans
or agreements.
3.23. Offering Exemption. Assuming the accuracy of the representations and
warranties of the Investors set forth in Section 4 hereof, the offering and sale
of the Series A Preferred Shares and the Reserved Common Shares upon conversion
of the Series A Preferred Shares are or will be exempt from registration under
the Securities Act; and the aforesaid offering and sale is and will be exempt
from registration under applicable state securities and "blue sky" laws. The
Corporation has made or will make all requisite filings and has taken or will
take all action necessary to be taken to comply with such state securities or
blue sky laws.
3.24. Brokers. Neither the Corporation, the Founders nor any of the
officers, directors, employees or stockholders of the Corporation has employed
any broker or finder in connection with the transactions contemplated by this
Agreement and no brokerage, finders, broken deal or other fees of any kind are
payable to any person upon the execution and delivery of this Agreement or upon
the consummation of the transactions contemplated hereby.
3.25. Registration Rights. Except as contemplated by the Registration
Rights Agreement, no person has any right to
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cause the Corporation to effect the registration under the Securities Act of any
shares of Common Stock or any other securities (including debt securities) of
the Corporation.
3.26. Use of Proceeds. The net proceeds received by the Corporation from
the sale of the Series A Preferred Shares shall be used by the Corporation for
the purposes set forth in Section 3.26 of the Disclosure Schedule.
3.27. Insurance. All of the insurable properties of the Corporation and
the Subsidiaries are insured for their respective benefit in amounts and against
all risks that are normal and customary for persons operating similar businesses
and properties in the localities where such businesses and properties are
located under policies in effect and issued by insurers of recognized
responsibility.
3.28. Disclosure. Neither this Agreement nor any other document,
certificate, instrument or written statement furnished or made available to
O'Sullivan Graev & Karabell, LLP, special counsel to the Investors, or the
Investors by or on behalf of the Corporation pursuant to this Agreement,
including, without limitation, the Disclosure Schedule, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein, viewed as a whole,
not misleading. There is no fact which materially adversely affects, or in the
future would, insofar as the Corporation and the Founders may reasonably
foresee, materially adversely affect, the business, operations, affairs,
condition (financial or otherwise), properties or assets of the Corporation
which has not been set forth in this Agreement or in the other Documents,
certificates, instruments or written statements furnished to O'Sullivan Graev &
Karabell, LLP, special counsel to the Investors, or the Investors by or on
behalf of the Corporation pursuant to this Agreement.
3.29. Definition of "Best Knowledge". As used herein, the term the "Best
Knowledge" shall mean and include (a) actual knowledge and (b) that knowledge
which a prudent businessperson could have obtained in the management of his or
her business affairs after making due inquiry and exercising due diligence with
respect thereto. In connection with the foregoing, the knowledge of the
Corporation shall be defined as the knowledge (both actual and constructive) of
any of the Founders or the Chief Financial Officer of the Corporation.
3.30. Predecessor Company. All references to the Corporation in this
Section 3 shall be deemed to include the Corporation and any predecessor
thereto, including, without limitation, Mobius Management Systems, Inc., a New
York corporation ("NY Mobius").
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SECTION 4. Representations and Warranties of the Investors. (a) Each
Investor severally represents and warrants to the Corporation, as to itself,
that (i) such Investor is and will be acquiring the Series A Preferred Shares to
be purchased by such Investor hereunder and, in the event that such Investor
should acquire any Reserved Common Shares, that such Investor will be acquiring
such Reserved Common Shares, for its own account, for investment and not with a
view to the distribution thereof within the meaning of the Securities Act.
(b) Each Investor understands that (i) the Preferred Shares have not
been, and that the Reserved Common Shares will not be, registered under the
Securities Act, by reason of their issuance by the Corporation in transactions
exempt from the registration requirements of the Securities Act and (ii) the
Series A Preferred Shares and the Reserved Common Shares must be held by such
Investor indefinitely unless a subsequent disposition thereof is registered
under the Securities Act or is exempt from registration.
(c) Each Investor further understands that, with respect to the
Reserved Common Shares, the exemption from registration afforded by Rule 144
(the provisions of which are known to such Investor) promulgated under the
Securities Act depends on the satisfaction of various conditions, and that, if
applicable, Rule 144 may only afford the basis for sales only in limited
amounts.
(d) Each Investor severally represents and warrants, as to itself,
that it is an "accredited investor" as such term is defined in Rule 501(a)
promulgated under the Securities Act.
(e) Each Investor severally agrees, as to itself, that the
Corporation may place a legend on the certificates delivered hereunder stating
that the Series A Preferred Shares and any Reserved Common Shares have not been
registered under the Securities Act, and, therefore cannot be offered, sold or
transferred unless they are registered under the Securities Act or an exemption
from such registration is available, and that the Corporation may place stop
transfer orders on the transfer books of the Corporation.
(f) Each Investor severally represents and warrants that (i) the
source of funds for the acquisition by such Investor of Series A Preferred
Shares does not constitute "plan assets" for purposes of Title I of ERISA and
(ii) the acquisition of Series A Preferred Shares by the Investor and the
transactions contemplated hereby shall neither (x) cause the Corporation to
become a member of a controlled group of corporations or to be under common
control with other trades or businesses within the meaning of Sections 414(b),
(c), (m) or (o) of the Code or for
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purposes of Title IV of ERISA nor (y) subject the Corporation to any liability,
contingent or otherwise, with respect to any employee pension benefit plan (as
defined in Section 3(2) of ERISA).
(g) No Investor will acquire Reserved Common Shares upon conversion
of the Series A Preferred Shares to be purchased by such Investor hereunder if
such transaction would cause the Corporation to become either (i) a member of a
controlled group of corporations or to be under common control with other trades
or businesses within the meaning of Sections 414(b), (c), (m) or (o) of the Code
or for purposes of Title IV of ERISA or (ii) subject to any liability,
contingent or otherwise, with respect to any employee pension benefit plan (as
defined in Section 3(2) of ERISA).
(h) No Investor will transfer any Series A Preferred Shares acquired
hereunder, nor any Reserved Common Shares acquired upon the conversion of Series
A Preferred Shares, if such transfer either (i) may give rise to a prohibited
transaction under Section 406 of ERISA or Section 4975 of the Code or (ii) could
cause the Corporation to become either (x) a member of a controlled group of
corporations or to be under common control with other trades or businesses
within the meaning of Sections 414(b), (c), (m) or (o) of the Code or for
purposes of Title IV of ERISA or (y) subject the Corporation to any liability,
contingent or otherwise, with respect to any employee pension benefit plan (as
defined in Section 3(2) of ERISA).
(i) Each Investor severally represents and acknowledges that neither
the Corporation nor the Founders have made, or are making, any representation or
warranty with respect to the Corporation, the Series A Preferred Stock, the
Common Stock, this Agreement or the transactions contemplated hereby except as
expressly set forth in this Agreement, the other Documents or the Disclosure
Schedule. No representation or warranty of the Corporation or the Founders of
any kind is intended, inferred or relied upon by such Investor with respect to
the economic return which may accrue as a result of an investment in the Series
A Preferred Stock or Common Stock pursuant to this Agreement. Prior to making an
investment decision regarding the Series A Preferred Stock, (A) each Investor
carefully considered all relevant factors and consulted its own experienced
counsel, accountant and tax, business and other advisors in connection with the
transactions contemplated by this Agreement and (B) each Investor has been
provided the full opportunity to ask questions of, and has received answers
thereto satisfactory to such Investor from, the Corporation, the Founders and
their representatives regarding the Corporation, and each Investor has been
provided with full access to all of the books, records, properties, officers and
employees of the Corporation and has obtained all additional information
requested
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by such Investor of the Corporation and its representatives; provided, however,
that neither such consideration, consultation, opportunity nor access shall in
any way obviate or diminish the representations and warranties of the
Corporation and the Founders contained in this Agreement, the other Documents or
the Disclosure Schedule.
SECTION 5. Conditions Precedent to the Closing. The several obligations of
the Investors to purchase and pay for Series A Preferred Shares at the Closing
are subject to satisfaction of the following conditions precedent:
5.1. Corporate Proceedings. All corporate and other proceedings to be
taken and all waivers and consents approvals, qualifications and/or
registrations required to be obtained or effected in connection with the
execution, delivery and performance of the Documents and the transactions
contemplated thereby, including, but not limited to, the reservation, issuance,
sale and delivery of the Series A Preferred Shares and the Reserved Common
Shares, shall have been taken, obtained or effected (except for the filing of
any notice subsequent to such Closing which may be required under applicable
Federal and state securities or "blue sky" laws which, if required, shall be
filed on a timely basis as may be so required), and all documents incident
thereto shall be satisfactory in form and substance to the Investors and to
their special counsel, O'Sullivan Graev & Karabell, LLP. The Investors and
O'Sullivan Graev & Karabell, LLP, shall have received all such originals or
certified or other copies of such documents as have been reasonably requested.
5.2. Opinion of Counsel. The Investors shall have received from Kramer,
Levin, Naftalis & Frankel, counsel for the Corporation, its favorable opinion
addressed to the Investors, dated the date of the Closing, substantially in the
form of Exhibit D attached hereto.
5.3. Payment of Legal Fees. Simultaneously with the Closing, the
Corporation shall pay to O'Sullivan Graev & Karabell, LLP, special counsel to
the Investors, its fees (up to a maximum of $25,000) and charges incurred in
connection with the transactions contemplated hereby.
5.4. Filing of Certificates. The Certificate of Incorporation and the
Certificate of Designation shall have been filed with and accepted by the
Secretary of State of the State of Delaware, and a copy of each of the
Certificate of Incorporation and the Certificate of Designation, certified by
the Secretary of State of the State of Delaware, shall have been delivered to
the Investors.
5.5. Stockholders' Agreement. A stockholders' agreement (the
"Stockholders' Agreement") among the Corporation,
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the Investors and the Founders, in the form of Exhibit E hereto, shall have been
executed and delivered by the Corporation and such parties. In addition, the
Corporation and such parties shall have complied with all of the terms and
conditions of the Stockholders' Agreement, including, among other things, the
placement of the legends required to be placed on securities owned by such
parties.
5.6. Registration Rights Agreement. A registration rights agreement (the
"Registration Rights Agreement") among the Corporation and the Investors, in the
form of Exhibit F hereto, shall have been duly executed and delivered by the
Corporation and such parties. In addition, the Corporation and such parties
shall have complied with all of the terms and conditions of the Registration
Rights Agreement, including, among other things, the placement of any legend
required to be placed on securities owned by such parties.
5.7. Board of Directors. Effective immediately upon the consummation of
the Closing, the Board of Directors of the Corporation shall be comprised of the
following individuals, all of whom shall have been duly elected as directors:
Mitchell Gross
Joseph J. Albracht
Edward F. Glassmeyer
Peter J. Barris
Kenneth P. Kopelman
5.8. Reincorporation. NY Mobius shall have been merged with and into the
Corporation (the "Merger"); the separate existence of NY Mobius shall have
ceased and the Corporation shall possess all of the rights, privileges, powers
and franchises as well of a public as of a private nature of NY Mobius, as
provided by the Delaware General Corporation Law; and, in connection therewith,
all consents, authorizations, orders or approvals of, and filings with, any
Federal, state, municipal, foreign or other governmental court, department,
commission, board, bureau, agency or instrumentality or any other person
required for or in connection with the Merger shall have been obtained or made,
except for those consents, authorizations, orders, approvals or filings the
failure to so obtain or have made would not have a material adverse effect on
the Corporation and its Subsidiaries, taken as a whole.
5.9. Termination of Prior Stockholders' Agreement. The Stockholders'
Agreement dated August 14, 1981, as amended, among NY Mobius and the Founders
shall have been terminated by a written instrument executed by all of the
parties thereto.
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SECTION 6. Information Rights.
6.1. Access to Records. The Corporation shall afford to the Investors and
their employees, counsel and other authorized representatives free and full
access, upon reasonable advance notice, to all of the books, records and
properties of the Corporation and to all officers and employees of the
Corporation, for any reasonable purpose whatsoever. Each Investor shall use
reasonable efforts to maintain the confidentiality of any confidential and
proprietary information so obtained by it; provided, however, that the foregoing
shall in no way limit or otherwise restrict the ability of any Investor or such
authorized representatives to disclose any such information concerning the
Corporation which it may be required to disclose (i) to its partners or limited
partners to the extent required to satisfy its fiduciary obligations to such
persons, provided that such partners or limited partners agree for the benefit
of the Corporation to maintain the confidentiality of such information, or (ii)
pursuant to or as required by law, provided that the disclosing party shall
provide the Corporation with prompt notice of any such legal requirement so that
the Corporation may seek an appropriate protective order.
6.2. Financial Reports. The Corporation agrees to furnish each Investor
with the following:
(a) Monthly Statements. Within 30 days after the end of each monthly
accounting period, an unaudited financial report of the Corporation, which
report shall be prepared in accordance with generally accepted accounting
principles consistently applied, and which shall include the following:
(i) a profit and loss statement for such monthly accounting
period, together with a cumulative profit and loss statement from
the first day of the current year to the last day of, such monthly
accounting period;
(ii) a balance sheet as at the last day of such monthly
accounting period;
(iii) a cash flow analysis for such monthly accounting period
on a cumulative basis for the fiscal year to date;
(iv) a schedule showing all expenditures of a capital nature
in excess of $100,000 individually during such monthly accounting
period; and
(v) a comparison between the actual figures for such monthly
accounting period, the comparable
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figures (with respect to clauses (i) and (ii) only) for the prior
year (if any) and the comparable figures included in the Budget (as
defined in Section 6.2(h) hereof) for such monthly accounting
period, with an explanation of any material differences between
them;
certified by the chief executive officer and chief financial officer of
the Corporation as being prepared in accordance with generally accepted
accounting principles (except with respect to footnote disclosure and
subject to normal year-end audit adjustments) consistently applied and
accompanied by a statement showing the number of shares of each class and
series of capital stock, and securities convertible into or exercisable
for shares of capital stock, of the Corporation outstanding at the end of
such monthly accounting period, the number of shares of Common Stock
issuable upon conversion or exercise of any outstanding securities
convertible or exercisable for Common Stock and the exchange ratio or
exercise price applicable thereto, all in sufficient detail to permit the
Investors to calculate their percentage equity ownership interest in the
Corporation.
(b) Quarterly Reports. As soon as available, but not later than 45
days after the end of each quarterly accounting period, (i) an unaudited
consolidated financial report of the Corporation, certified by the chief
executive officer and chief financial officer of the Corporation as being
prepared in accordance with generally accepted accounting principles
consistently applied, except that such financial statements shall not
include footnotes and shall be subject to normal year-end audit
adjustments, including, with respect to such quarterly accounting period,
the statements and comparisons referred to in Section 6.2(a) (except that
such statements and comparisons shall be furnished with respect to such
quarterly, rather than monthly, accounting period) and (ii) a report by
management of the Corporation of the operating and financial highlights of
the Corporation for such quarterly accounting period which shall include
(A) a comparison between operating and financial results and the Budget
and (B) an analysis of the operations of the Corporation for the prior
quarterly accounting period.
(c) Annual Audit. As soon as available, but not later than 90 days
after the end of each fiscal year of the Corporation, audited financial
statements of the Corporation, which shall include a statement of cash
flows and statement of operations for such fiscal year and a balance sheet
as at the last day thereof, each prepared in accordance with generally
accepted accounting principles, consistently applied, and accompanied by
the report of a
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firm of independent certified public accountants of recognized standing
selected by the Board of Directors of the Corporation (the "Accountants").
The Corporation shall maintain a system of accounting sufficient to enable
its independent certified public accountants to render the report referred
to in this Section 6.2(c).
(d) Subsidiaries. If for any period the Corporation shall have any
subsidiary or subsidiaries whose accounts are consolidated with those of
the Corporation, then in respect of such period the financial statements
delivered pursuant to the foregoing Sections 6.2(a), (b) and (c) shall be
the consolidated (and, in the case of the cash flow statement delivered
pursuant to Sections 6.2(c), consolidating if normally prepared by the
Corporation) financial statements of the Corporation and all such
consolidated subsidiaries.
(e) Miscellaneous. Promptly upon becoming available:
(i) upon request, copies of all financial statements, reports,
press releases, notices, proxy statements and other documents sent
by the Corporation to its stockholders generally or released to the
public and copies of all regular and periodic reports, if any, filed
by the Corporation with the Securities and Exchange Commission, or
any securities exchange;
(ii) upon request, copies of all reports prepared for or
delivered to the management of the Corporation by its independent
public accountants; and
(iii) any other routinely collected financial or other
information available to management (including, without limitation,
routinely collected statistical data) of the Corporation or as the
Investors shall have reasonably requested on a timely basis.
(f) No Default Certificate. With the financial statements referred
to in Sections 6.2(b) and 6.2(c), the Corporation shall deliver to each of
the Investors a certificate executed by the chief executive officer and
the chief financial officer of the Corporation, and with the financial
statements of the Corporation referred to in Section 6.2(c), the
Corporation shall deliver to each of the Investors a statement of the
Accountants, in each case, to the effect that no knowledge has been
obtained of any material violation or default by the Corporation in the
performance of its agreements or covenants contained herein, in the
Documents or in any other material agreement to which
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the Corporation or any Subsidiary is a party or of the occurrence of any
condition, event or act which, with or without notice or lapse of time, or
both, would constitute such a violation or an event of default, or, if
such firm or officer shall have obtained knowledge of any such violation,
condition, event or act, it or he or she (as the case may be) shall
specify in such certificate all such violations, conditions, events and
acts and the nature and status thereof.
(g) Notice of Certain Events. The Corporation shall deliver written
notice to the Investors promptly following its receipt of notice of the
commencement of any action, suit, claim, legal or administrative or
arbitration proceeding or investigation, any of which could reasonably be
expected, on the basis of current economic conditions and other facts and
circumstances known to the Corporation at the time, to have a material
adverse effect on the Corporation and the Subsidiaries, taken as a whole.
In making such determination, the Corporation may rely on the opinion of
its counsel regarding the likelihood and extent of an adverse decision in
any litigation, administrative or arbitration proceeding or investigation
against the Corporation or any Subsidiary.
(h) Budget. The Corporation has previously delivered to each of the
Investors a budget and operating plan for the fiscal year ending June 30,
1997 (the "FY 1997 Budget"). With respect to each fiscal year commencing
with the fiscal year ending June 30, 1998, the Corporation shall, not
later than 30 days prior to the commencement of each such fiscal year,
prepare and deliver to the Investors one copy of a budget and operating
plan (together with the FY 1997 Budget, each a "Budget") of the
Corporation (containing monthly and quarterly breakdowns of income and
cash flow). The Budget shall be accepted as the Budget for such fiscal
year when it has been approved by the Board of Directors of the
Corporation. The Budget shall be reviewed by the Corporation periodically
and all material changes therein and all material deviations therefrom
shall be resubmitted to the Board in advance and shall be accepted when
approved by the Board of Directors.
6.3. Designated Offering. Notwithstanding the foregoing provisions of this
Section 6, the rights of the Investors and the obligations of the Corporation
under this Section 6, except those contained in Section 6.2(e)(i) (which shall
survive), shall terminate upon the consummation of a firm commitment
underwritten public offering of the Common Shares under the Securities Act,
which results in aggregate net cash proceeds of not less than $20,000,000, at an
offering price per
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<PAGE> 26
share (as constituted on the date hereof) of not less than $586.66 (a
"Designated Offering").
SECTION 7. Additional Agreements of the Corporation.
7.1. Meetings of the Board of Directors. The Board of Directors shall
call, and use its best efforts to have, regular meetings not less often than
quarterly. The Corporation shall pay all reasonable travel expenses and other
out-of-pocket disbursements incurred by any director designated by the Investors
in connection with attending meetings of the Board of Directors of the
Corporation.
7.2. Right of First Offer. (a) Except in the case of Excluded Securities
(as hereinafter defined), the Corporation shall not issue, sell or exchange,
agree to issue, sell or exchange, or reserve or set aside for issuance, sale or
exchange, any (i) Common Shares, (ii) any other equity security of the
Corporation, (iii) any debt security of the Corporation which by its terms is
convertible into or exchangeable for any equity security of the Corporation or
has any other equity feature, (iv) any security of the Corporation that is a
combination of debt and equity or (v) any option, warrant or other right to
subscribe for, purchase or otherwise acquire any equity security or any such
debt security of the Corporation, unless in each case the Corporation shall have
first offered to sell to each Investor such Investor's Proportionate Percentage
(as hereinafter defined) of such securities (the "Offered Securities") (and to
sell thereto such Offered Securities not subscribed for by the other Investors
as hereinafter provided), at a price and on such other terms as shall have been
specified by the Corporation in writing delivered to such Investors (the
"Offer"), which Offer by its terms shall remain open and irrevocable for a
period of 15 days from the date it is delivered by the Corporation to the
Investors.
(b) Notice of each Investor's intention to accept, in whole or in
part, an Offer shall be evidenced by a writing signed by such Investor and
delivered to the Corporation prior to the end of the 15-day period of such
Offer, setting forth such portion of the Offered Securities as such Investor
elects to purchase (the "Notice of Acceptance"). If any Investor shall subscribe
for less than its Proportionate Percentage of the Offered Securities to be sold,
the other subscribing Investors shall be entitled to purchase the balance of
that Investor's Proportionate Percentage in the same proportion in which they
were entitled to purchase the Offered Securities in the first place (excluding
for such purposes such Investor). The Corporation shall notify each Investor
five days following the expiration of the 15-day period described above of the
amount of Offered Securities which each Investor may purchase pursuant to the
foregoing sentence, and each Investor shall then have five
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<PAGE> 27
days from the delivery of such notice to indicate such additional amount, if
any, that such Investor wishes to purchase.
(c) In the event that Notices of Acceptance are not given by the
Investors in respect of all the Offered Securities, the Corporation shall have
90 days from the expiration of the foregoing 15-day or 25-day period, whichever
is applicable, to sell all or any part of such Offered Securities as to which
Notices of Acceptance have not been given by the Investors (the "Refused
Securities") to any other person or persons, but only upon terms and conditions
in all respects, including, without limitation, unit price and interest rates,
which are no more favorable, in the aggregate, to such other person or persons
or less favorable to the Corporation than those set forth in the Offer. Upon the
closing, which shall include full payment to the Corporation, of the sale to
such other person or persons of all the Refused Securities, the Investors shall
purchase from the Corporation, and the Corporation shall sell to the Investors,
the Offered Securities in respect of which Notices of Acceptance were delivered
to the Corporation by the Investors, on the terms specified in the Offer.
(d) In each case, any Offered Securities not purchased by the
Investors or any other person or persons in accordance with Section 7.2(c) may
not be sold or otherwise disposed of until they are again offered to the
Investors under the procedures specified in Sections 7.2(a), (b) and (c).
(e) The rights of the Investors under this Section 7.2 shall not
apply to the following securities (the "Excluded Securities"):
(i) Class A Common Stock or Common Stock issued to officers,
employees or directors of, or consultants to, the Corporation, pursuant to
the Corporation's 1996 Stock Incentive Plan or any other agreement, plan
or arrangement approved by the Board of Directors, or options to purchase
or rights to subscribe for such Class A Common Stock or Common Stock, or
securities by their terms convertible into or exchangeable for such Class
A Common Stock or Common Stock, or options to purchase or rights to
subscribe for such convertible or exchangeable securities, in each case as
approved by the Board of Directors; provided, however, that the maximum
number of shares of Class A Common Stock and Common Stock issued or
issuable prior or subsequent to the date hereof pursuant to all such
agreements, plans and arrangements shall not exceed an aggregate of 30,000
shares (subject to adjustment to reflect stock splits, stock dividends,
stock combinations, recapitalizations and like occurrences) of Class A
Common Stock and Common Stock plus an amount equal to any increase in the
number of shares reserved for issuance pursuant to the Corporation's 1996
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<PAGE> 28
Stock Incentive Plan in accordance with Section 1.5.1(c) of such Plan;
(ii) the Reserved Common Shares;
(iii) Common Shares issued as a stock dividend or upon any stock
split or other subdivision or combination of Common Shares; and
(iv) securities issued pursuant to the acquisition of another
corporation by the Corporation by merger or purchase of substantially all
of such other corporation's assets whereby the Corporation owns not less
than 51% of the voting power of such other corporation.
(f) Notwithstanding the foregoing provisions of this Section 7.2,
the rights of the Investors and the obligations of the Corporation under this
Section 7.2 shall be inapplicable to a Designated Offering and the provisions of
this Section 7.2 shall terminate (i) as to all of the Investors, upon the
consummation of a Designated Offering and (ii) as to any Investor, in the event
that such Investor's Group (as defined below) in the aggregate owns less than
one-third of the Preferred Shares (or Reserved Common Shares issued upon
conversion thereof) purchased by such Group pursuant to this Agreement (subject
to adjustment to reflect stock splits, stock dividends, stock combinations,
recapitalizations and like occurrences). As used in this Agreement, NEA Ventures
1997, NEA President's Fund L.P., New Enterprises Associates VII, L.P., New
Ventures Partners III L.P. and Glynn Ventures III, L.P. shall be deemed members
of the same Group and Oak Investment Partners VI, Limited Partnership and Oak VI
Affiliates Fund, Limited Partnership shall be deemed members of the same Group.
(g) "Proportionate Percentage" shall mean, as to each Investor, the
percentage figure that expresses the ratio that (x) the number of shares of
outstanding Common Stock then owned by such Investor on a fully-diluted basis
bears to (y) the aggregate number of shares of outstanding Common Stock on a
fully-diluted basis. For purposes solely of the computations required under
clauses (x) and (y) above, each Investor shall be treated as having converted,
exercised or exchanged all of the Corporation's securities held by such Investor
that are then convertible into or exercisable or exchangeable for Common Shares
at the rate at which such securities are convertible into or exercisable or
exchangeable for Common Shares in effect at the time of delivery by the
Corporation of the notice of the Offer contemplated by Section 7.2(a).
7.3. Securities Act Registration Statements. Except for securities of the
Corporation registered on Form S-4 or Form S-8 promulgated under the Securities
Act or any successor forms
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<PAGE> 29
thereto, the Corporation shall not file any registration statement under the
Securities Act covering any securities unless it shall first have given each
Investor that may be deemed to be a controlling person of the Corporation
written notice thereof. The Corporation further covenants that each Investor
shall have the right, at any time when it may be deemed to be a controlling
person of the Corporation, to participate in the preparation of such
registration statement. In connection with any registration statement referred
to in this Section 7.3, the Corporation will indemnify, to the extent permitted
by law, each Investor that may be deemed to be a controlling person of the
Corporation, its partners, officers and directors and each person, if any, who
controls such Investor within the meaning of Section 15 of the Securities Act,
against all losses, claims, damages, liabilities and expenses caused by any
untrue statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus or any preliminary prospectus or any
amendment thereof or supplement thereto or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or expenses are caused by any untrue
statement or alleged untrue statement or omission or alleged omission contained
in written information furnished to the Corporation by such Investor for use in
such registration statement. If, in connection with any such registration
statement, an Investor shall furnish written information to the Corporation for
use in the registration statement, such Investor will indemnify, to the extent
permitted by law, the Corporation, its directors, each of its officers who sign
such registration statement and each person, if any, who controls the
Corporation within the meaning of the Securities Act against all losses, claims,
damages, liabilities and expenses caused by any untrue statement or alleged
untrue statement of a material fact or any omission or alleged omission of a
material fact required to be stated in the registration statement or prospectus
or any preliminary prospectus or any amendment thereof or supplement thereto or
necessary to make the statements therein not misleading, but only to the extent
that such untrue statement or alleged untrue statement or such omission or
alleged omission is contained in or omitted from information so furnished in
writing by such Investor for use therein.
7.4. Compliance. Each of the Corporation and each Subsidiary (a) in
carrying out its business will comply in all respects with all Federal, state,
local and foreign laws, ordinances, regulations and orders applicable to it, its
business and the ownership of its assets and (b) will obtain and maintain in
full force and effect all Federal, state, local and foreign governmental
licenses and permits material to and necessary in the conduct of its business
and such licenses and permits shall be maintained, in full force and effect,
except where the failure
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<PAGE> 30
to so comply, obtain or maintain would not reasonably be expected to have a
material adverse effect on the business, properties, assets or condition
(financial or otherwise) of the Corporation and the Subsidiaries, taken as a
whole.
7.5. Insurance. All the insurable properties of the Corporation and the
Subsidiaries will be insured for the benefit of the Corporation or such
Subsidiary, as applicable, in amounts deemed adequate by the Corporation against
all risks usually insured against by persons operating similar properties in the
localities in which such properties are located under policies in effect and
issued by insurers of recognized responsibility.
7.6. Corporate Existence, Properties, Etc. Each of the Corporation and
each Subsidiary shall maintain, preserve and keep in full force and effect its
corporate existence and all rights, franchises, licenses and permits necessary
to the proper conduct of its business, and the ownership, lease, or operation of
its properties that, if not so maintained, could reasonably be expected to have
a material adverse effect on the Corporation and the Subsidiaries, taken as a
whole; and take all action which may be reasonably required to obtain, preserve,
renew and extend all material licenses, permits, authorizations, trade names,
trademarks, service names, service marks, copyrights and patents which are
necessary for the continuance of the operation of any such property by it.
7.7. Payment of Taxes. Each of the Corporation and each Subsidiary shall
pay all taxes, assessments and governmental charges or liens imposed upon its
income or receipts or upon any of its properties (except with respect to taxes
being contested in good faith by appropriate legal proceedings), which if not so
paid could reasonably be expected, individually or in the aggregate, to have a
material adverse effect on the Corporation and the Subsidiaries, taken as a
whole.
7.8. Termination of Certain Obligations. The Corporation's obligations set
forth in Sections 7.4, 7.5, 7.6 and 7.7 shall terminate (a) as to all of the
Investors, upon the consummation by the Corporation of a Designated Public
Offering and (b) as to any Investor, at such time as such Investor's Group in
the aggregate owns less than one-third of the Preferred Shares (or Reserved
Common Shares issued upon conversion thereof) purchased by such Group pursuant
to this Agreement (subject to adjustment to reflect stock splits, stock
dividends, stock combinations, recapitalizations and like occurrences).
SECTION 8. Restriction on Transfer. (a) Series A Preferred Stock and/or
any Common Shares issued upon conversion of such Series A Preferred Stock held
by an Investor shall not be sold, transferred, assigned, pledged, encumbered or
otherwise disposed of (each, a "Transfer") except upon the conditions
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<PAGE> 31
specified in this Section 8, which conditions are intended to insure compliance
with the provisions of the Securities Act.
(b) Each certificate for shares of the capital stock of the
Corporation held by an Investor and each certificate for any such securities
issued to subsequent transferees of any such certificate shall (unless otherwise
permitted by the provisions of Sections 8(c) and 8(d)) be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. ADDITIONALLY, THE
TRANSFER OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS SPECIFIED IN
SECTION 8 OF THE STOCK PURCHASE AGREEMENT DATED AS OF MAY 12, 1997, AMONG
MOBIUS MANAGEMENT SYSTEMS, INC. AND THE OTHER PARTIES THERETO, AND NO
TRANSFER OF THESE SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED. UPON THE FULFILLMENT OF CERTAIN OF SUCH
CONDITIONS, MOBIUS MANAGEMENT SYSTEMS, INC. HAS AGREED TO DELIVER TO THE
HOLDER HEREOF A NEW CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE
SECURITIES REPRESENTED HEREBY REGISTERED IN THE NAME OF THE HOLDER HEREOF.
COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST
MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF
MOBIUS MANAGEMENT SYSTEMS, INC."
(c) Each Investor agrees, prior to any Transfer of such shares
stock, to give written notice to the Corporation of such Investor's intention to
effect such Transfer and to comply in all other respects with the provisions of
this Section 8. Each such notice shall describe the manner and circumstances of
the proposed Transfer and shall be accompanied by the written opinion, addressed
to the Corporation, of counsel for the holder of such shares, stating that in
the opinion of such counsel (which opinion and counsel shall be reasonably
satisfactory to the Corporation) such proposed Transfer does not involve a
transaction requiring registration or qualification of such shares under the
Securities Act or the securities "blue sky" laws of any relevant state of the
United States; provided, however, that no such opinion of counsel shall be
necessary for a Transfer by an Investor that is a partnership to a partner of
such Investor, or a retired partner of such holder who retires after the date
hereof, or the estate of any such partner or retired partner, if in each case
the transferee agrees in writing to be subject to the terms of this Section 8 to
the same extent as if such transferee were originally a signatory to this
Agreement. Such Investor shall thereupon be entitled to Transfer such shares
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in accordance with the terms of the notice delivered by it to the Corporation.
Each certificate or other instrument evidencing the securities issued upon the
Transfer of any such shares (and each certificate or other instrument evidencing
any untransferred balance of such shares) shall bear the legend set forth in
Section 8(b) unless (x) in such opinion of counsel registration of any future
Transfer is not required by the applicable provisions of the Securities Act or
(y) the Corporation shall have waived the requirement of such legends; provided,
however, that such legend shall not be required on any certificate or other
instrument evidencing the securities issued upon such Transfer in the event such
Transfer shall be made in compliance with the requirements of Rule 144 and the
transferee is not an affiliate of the Corporation. No Investor shall Transfer
any shares until such opinion of counsel has been given (unless waived by the
Corporation or unless such opinion is not required in accordance with the
provisions of this Section 8(c)).
(d) Notwithstanding the foregoing provisions of this Section 8, the
restrictions imposed by this Section 8 upon the transferability of any shares of
the capital stock of the Corporation held by an Investor shall cease and
terminate when (i) any such shares are sold or otherwise disposed of pursuant to
an effective registration statement under the Securities Act or as otherwise
contemplated by Section 8(c) and, pursuant to Section 8(c), the securities so
transferred are not required to bear the legend set forth in Section 8(b) or
(ii) the holder of such shares has met the requirements for Transfer of such
shares pursuant to subparagraph (k) of Rule 144. Whenever the restrictions
imposed by this Section 8 shall terminate, as herein provided, each Investor
holding shares as to which such restrictions have terminated shall be entitled
to receive from the Corporation, without expense, a new certificate not bearing
the restrictive legend set forth in Section 8(b) and not containing any other
reference to the restrictions imposed by this Section 8.
SECTION 9. Fees. (a) The Corporation will pay, and save the Investors
harmless against all liability for the payment of, (i) all costs and other
expenses incurred in connection with the Corporation's performance of and
compliance with all agreements and conditions contained herein on its part to be
performed or complied with and (ii) the fees (up to a maximum of $25,000) and
charges of O'Sullivan Graev & Karabell, LLP, special counsel to the Investors,
for its services in connection with the transactions contemplated by this
Agreement, which fees and charges will be paid by the Corporation at the Closing
and thereafter upon presentation of an invoice therefor.
(b) The Corporation further agrees that it will pay, and will save
the Investors harmless from, any and all liability with respect to any stamp or
similar taxes which may be
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determined to be payable in connection with the execution and delivery and
performance of the Documents or any modification, amendment or alteration of the
terms or provisions of the Documents, and that it will similarly pay and hold
the Investors harmless from all issue taxes in respect of the issuance of the
Reserved Shares to the Investors.
SECTION 10. Exchanges; Lost, Stolen or Mutilated Certificates. Upon
surrender by any Investor to the Corporation of any certificate representing
Series A Preferred Shares or Reserved Common Shares, the Corporation at its
expense will issue in exchange therefor, and deliver to such Investor, a new
certificate or certificates representing such shares, in such denominations as
may be requested by such Investor. Upon receipt of evidence satisfactory to the
Corporation of the loss, theft, destruction or mutilation of any certificate
representing any Series A Preferred Shares or Reserved Common Shares purchased
or acquired by an Investor upon conversion of the Series A Preferred Shares, and
in case of any such loss, theft or destruction, upon delivery of any indemnity
agreement satisfactory to the Corporation, or in case of any such mutilation,
upon surrender and cancellation of such certificate, the Corporation at its
expense will issue and deliver to such Investor a new certificate for such
Reserved Shares of like tenor, in lieu of such lost, stolen or mutilated
certificate.
SECTION 11. Survival of Representations, Warranties and Agreements, Etc.
All representations and warranties hereunder shall survive the Closing until the
earlier of (i) the one-year anniversary of the Closing and (ii) the consummation
of a Designated Offering. All representations and warranties contained in any
certificate or other written instrument delivered by the Corporation or the
Founders pursuant to this Agreement, including, without limitation, the other
Documents and the Disclosure Schedule, shall constitute representations and
warranties by the Corporation and the Founders under this Agreement. All
agreements contained herein shall survive indefinitely until, by their
respective terms, they are no longer operative.
SECTION 12. Indemnification. (a) The Corporation shall indemnify, defend
and hold the Investors harmless against all liability, loss or damage actually
suffered by the Investors, together with all reasonable costs and expenses
related thereto (including reasonable legal and accounting fees and expenses),
arising from the untruth, inaccuracy or breach of any of the representations,
warranties, covenants or agreements of the Corporation and the Founders herein
or any facts or circumstances constituting any such untruth, inaccuracy or
breach or with respect to any liability for any brokers' or finders' fees or
compensation owing or alleged to be owing in connection with the transactions
contemplated hereby. The Corporation's obligation
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to indemnify and hold the Investors harmless for the untruth, inaccuracy or
breach of any of the representations and warranties herein shall terminate on
the first anniversary of the date hereof; provided, however, that such
obligation to indemnify and hold harmless shall not so terminate with respect to
any such claim for indemnification that the Investors shall have, prior to the
first anniversary of the date hereof, previously asserted, in good faith, by
delivering a written notice of such claim, stating in reasonable detail the
facts and circumstances underlying such claim and the nature of the liability,
loss or damage for which indemnity is sought.
(b) Each Investor, severally but not jointly, shall indemnify,
defend and hold the Corporation and the Founders harmless against all liability,
loss or damage, together with all reasonable costs and expenses related thereto
(including reasonable legal and accounting fees and expenses), arising from the
untruth, inaccuracy or breach of any of the representations, warranties,
covenants or agreements of such Investor herein or any facts or circumstances
constituting any such untruth, inaccuracy or breach. The Investors' obligation
to indemnify and hold the Corporation and the Founders harmless for the untruth,
inaccuracy or breach of any of the representations and warranties herein shall
terminate on the first anniversary of the date hereof; provided, however, that
such obligation to indemnify and hold harmless shall not so terminate with
respect to any such claim for indemnification that the Corporation and the
Founders shall have, prior to the first anniversary of the date hereof,
previously asserted, in good faith, by delivering a written notice of such
claim, stating in reasonable detail the facts and circumstances underlying such
claim and the nature of the liability, loss or damage for which indemnity is
sought.
(c) This Section 12 shall be the exclusive remedy of the parties
hereto for the breach of any representation and warranty set forth herein.
SECTION 13. Remedies. In case any one or more of the covenants and/or
agreements set forth in this Agreement shall have been breached by the
Corporation or the Founders, the Investors (or any Investor) may proceed to
protect and enforce its or their rights either by suit in equity and/or by
action at law, including, but not limited to, an action for damages as a result
of any such breach and/or an action for specific performance of any such
covenant or agreement contained in this Agreement.
SECTION 14. Successors and Assigns. This Agreement shall bind and inure to
the benefit of the Corporation, the Founders and the Investors and the
respective successors, assigns, heirs and personal representatives (as
applicable) of the Corporation, the Founders and the Investors. The rights
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<PAGE> 35
(other than the rights set forth in Section 6.1) and duties of the Investors as
set forth herein may be freely assigned, in whole or in part, by the Investors
to any transferor of Preferred Shares (or Reserved Common Shares issued upon
conversion thereof). Any transferee (other than an Investor or partner or
affiliate thereof) to whom rights under Section 6 or 7.3 are transferred shall,
as a condition to such transfer, deliver to the Corporation a written instrument
by which such transferee identifies itself, gives the Corporation notice of the
transfer of such rights, identifies any securities of the Corporation owned or
acquired by it and agrees to be bound by the obligations imposed hereunder and
under the Stockholders' Agreement upon Investors to the same extent as if such
transferee were an Investor hereunder. A transferee to whom rights are
transferred pursuant to this Section 14 may not again transfer such rights to
any other person or entity, other than as provided in this Section 14.
SECTION 15. Entire Agreement. This Agreement and the other writings
referred to herein or delivered pursuant hereto which form a part hereof contain
the entire agreement among the parties with respect to the subject matter hereof
and supersede all prior and contemporaneous arrangements or understandings with
respect thereto.
SECTION 16. Notices. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or sent by
nationally-recognized overnight courier or first class registered or certified
mail, return receipt requested, postage prepaid, addressed to such party at the
address set forth below or such other address as may hereafter be designated in
writing by such party to the other parties:
(i) if to the Corporation or the Founders, to:
Mobius Management Systems, Inc.
One Ramada Plaza
New Rochelle, New York 10801
Attention: President or such Founder, as the case may be;
with a copy to:
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
Attention: Kenneth P. Kopelman, Esq.; and
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<PAGE> 36
(ii) if to the Investors, to their respective addresses set forth on
Schedule I hereto, with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Julie M. Allen, Esq.
All such notices, requests, consents and other communications shall be deemed to
have been delivered (a) in the case of personal delivery or delivery by
telecopy, on the date of such delivery, (b) in the case of dispatch by
nationally-recognized overnight courier, on the next business day following such
dispatch and (c) in the case of mailing, on the third business day after the
posting thereof.
SECTION 17. Changes. The terms and provisions of this Agreement may not be
modified or amended, nor may any of the provisions hereof be waived, temporarily
or permanently, except pursuant to a written instrument executed by the
Corporation and Investors holding at least 51% of the Series A Preferred Shares
(or Reserved Common Shares issued upon conversion of Series A Preferred Shares)
then held by all Investors (except that any modification, amendment or waiver
sought to be enforced against the Founders shall additionally require the
written consent of the Founders). Any modification, amendment or waiver in
compliance with the preceding sentence shall be binding on all parties hereto.
SECTION 18. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 19. Headings. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be a
part of this Agreement.
SECTION 20. Nouns and Pronouns. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice-versa.
SECTION 21. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed wholly therein.
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Very truly yours,
MOBIUS MANAGEMENT SYSTEMS, INC.
By:________________________________
Name: Mitchell Gross
Title: Chief Executive Officer
THE FOUNDERS:
___________________________________
Mitchell Gross
___________________________________
Joseph J. Albracht
THE INVESTORS:
OAK INVESTMENT PARTNERS VI,
LIMITED PARTNERSHIP
By: Oak Associates VI, L.L.C.,
its General Partner
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<PAGE> 38
By:________________________________
Managing Member
OAK VI AFFILIATES FUND,
LIMITED PARTNERSHIP
By: Oak VI Affiliates, L.L.C.,
its General Partner
By:________________________________
Managing Member
NEA VENTURES 1997
By:________________________________
Nancy Dorman
Vice President
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<PAGE> 39
NEA PRESIDENT'S FUND L.P.
By New President's Partners L.P.
By:________________________________
Name:
Title:
NEW ENTERPRISE ASSOCIATES VII L.P.
By New Enterprise Partners VII L.P.
By:________________________________
Name:
Title:
NEW VENTURE PARTNERS III L.P.
By:________________________________
General Partner
GLYNN VENTURES III, L.P.
By:________________________________
General Partner
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<PAGE> 40
SCHEDULE I
Investors
<TABLE>
<CAPTION>
========================================================================================================
Number of
Series A Preferred Shares
Name and Address of Investor Being Purchased Aggregate Purchase Price
========================================================================================================
<S> <C> <C>
OAK INVESTMENT PARTNERS VI, 19,989 $5,863,373.37
LIMITED PARTNERSHIP
One Gorham Island
Westport, Connecticut 06880
Attention: Edward F. Glassmeyer
- --------------------------------------------------------------------------------------------------------
OAK VI AFFILIATES FUND, LIMITED 466 $136,691.78
PARTNERSHIP
One Gorham Island
Westport, Connecticut 06880
Attention: Edward F. Glassmeyer
- --------------------------------------------------------------------------------------------------------
NEA VENTURES 1997 17 $4,986.61
1119 St. Paul Street
Baltimore, Maryland 21202
Attention: Peter J. Barris
- --------------------------------------------------------------------------------------------------------
NEA PRESIDENT'S FUND L.P. 273 $80,079.09
1119 St. Paul Street
Baltimore, Maryland 21202
Attention: Peter J. Barris
- --------------------------------------------------------------------------------------------------------
NEW ENTERPRISE ASSOCIATES VII 18,119 $5,314,846.27
L.P.
1119 St. Paul Street
Baltimore, Maryland 21202
Attention: Peter J. Barris
- --------------------------------------------------------------------------------------------------------
NEW VENTURE PARTNERS III L.P. 1,023 $300,076.59
1119 St. Paul Street
Baltimore, Maryland 21202
Attention: Howard D. Wolfe
- --------------------------------------------------------------------------------------------------------
GLYNN VENTURES III, L.P. 1,023 $300,076.59
Building 4, Suite 235
3000 Sand Hill Road
Menlo Park, California 94025
Attention: John W. Glynn, Jr.
========================================================================================================
TOTAL: 40,910 $12,000,130.30
========================================================================================================
</TABLE>
<PAGE> 41
================================================================================
MOBIUS MANAGEMENT SYSTEMS, INC.
-----------------------------------
STOCK PURCHASE AGREEMENT
-----------------------------------
As of May 12, 1997
================================================================================
<PAGE> 42
TABLE OF CONTENTS
Page
----
SECTION 1. Amended and Restated Certificate of
Incorporation; Certificate of Designation.................. 1
SECTION 2. Issuance and Sale of Preferred Shares and
Reservation of Reserved Common Shares;
Closing.................................................... 1
2.1. Issuance of Preferred Shares and Reservation
of Reserved Common Shares.................................. 1
2.2. Agreement to Sell and Purchase the Series A
Preferred Shares........................................... 1
2.3. Delivery of Series A Preferred Shares......................... 2
2.4. The Closing................................................... 2
SECTION 3. Representations and Warranties of the
Corporation and the Founders............................... 2
3.1. Organization; Power and Authority;
Qualifications............................................. 2
3.2. Authorization of the Documents; No Conflicts.................. 3
3.3. Authorization of Series A Preferred Shares
and Reserved Shares........................................ 4
3.4. No Consent or Approval Required............................... 4
3.5. Capitalization................................................ 4
3.6. Subsidiaries.................................................. 6
3.7. No Defaults................................................... 6
3.8. Financial Information......................................... 6
3.9. Absence of Undisclosed Liabilities............................ 7
3.10. Absence of Changes............................................ 7
3.11. Title to Assets, Properties and Rights........................ 8
3.12. Burdensome Restrictions....................................... 8
3.13. Intellectual Property Rights.................................. 9
3.14. Employment of Officers, Employees and
Consultants............................................... 10
3.15. ERISA Plans and Contracts.................................... 10
3.16. Agreements................................................... 13
3.17. Compliance; Licenses and Permits............................. 13
3.18. Labor Relations; Employees................................... 14
3.19. Litigation................................................... 14
3.20. Tax Matters.................................................. 14
3.21. Related Party Transactions................................... 15
3.22. Offerees..................................................... 16
3.23. Offering Exemption........................................... 16
3.24. Brokers...................................................... 16
3.25. Registration Rights.......................................... 16
3.26. Use of Proceeds.............................................. 16
3.27. Insurance.................................................... 16
3.28. Disclosure................................................... 17
3.29. Definition of "Best Knowledge"............................... 17
3.30. Predecessor Company.......................................... 17
i
<PAGE> 43
Page
----
SECTION 4. Representations and Warranties of the
Investors................................................. 17
SECTION 5. Conditions Precedent to the Closing.......................... 19
SECTION 6. Information Rights........................................... 21
6.1. Access to Records............................................ 21
6.2. Financial Reports............................................ 22
6.3. Designated Offering.......................................... 25
SECTION 7. Additional Agreements of the Corporation..................... 25
7.1. Meetings of the Board of Directors........................... 25
7.2. Right of First Offer......................................... 25
7.3. Securities Act Registration Statements....................... 28
7.4. Compliance................................................... 29
7.5. Insurance.................................................... 29
7.6. Corporate Existence, Properties, Etc......................... 29
7.7. Payment of Taxes............................................. 29
7.8. Termination of Certain Obligations........................... 30
SECTION 8. Restriction on Transfer...................................... 30
SECTION 9. Fees......................................................... 32
SECTION 10. Exchanges; Lost, Stolen or Mutilated
Certificates.............................................. 32
SECTION 11. Survival of Representations, Warranties and
Agreements, Etc........................................... 32
SECTION 12. Indemnification.............................................. 33
SECTION 13. Remedies..................................................... 34
SECTION 14. Successors and Assigns....................................... 34
SECTION 15. Entire Agreement............................................. 34
SECTION 16. Notices...................................................... 34
SECTION 17. Changes...................................................... 35
SECTION 18. Counterparts................................................. 35
SECTION 19. Headings..................................................... 35
SECTION 20. Nouns and Pronouns........................................... 36
SECTION 21. Governing Law................................................ 36
ii
<PAGE> 44
Page
----
iii
<PAGE> 45
Page
----
ATTACHMENTS
SCHEDULES
Schedule I - Investors
Disclosure Schedule
EXHIBITS
Exhibit A - Restated Certificate of Incorporation
Exhibit B - Certificate of Designation
Exhibit C - By-laws
Exhibit D - Opinion of Kramer, Levin, Naftalis & Frankel
Exhibit E - Stockholders' Agreement
Exhibit F - Registration Rights Agreement
iv
<PAGE> 1
Exhibit 10.10
STOCKHOLDERS' AGREEMENT dated as
of May 12, 1997, among MOBIUS
MANAGEMENT SYSTEMS, INC., a Delaware
corporation (the "Corporation"), and
the undersigned stockholders of the
Corporation (collectively, the
"Stockholders").
The Corporation is a corporation duly organized and existing under the
laws of the State of Delaware with an authorized capitalization of 400,000
shares of common stock, $.01 par value per share (the "Common Stock"), 50,000
shares of Class A non-voting common stock, $.01 par value per share (the "Class
A Non-Voting Common Stock"), and 200,000 shares of Preferred Stock, $.01 par
value per share (the "Preferred Stock"), of which 40,910 shares have been
designated as Series A Convertible Preferred Stock (the "Series A Preferred
Stock"). It is deemed to be in the best interests of the Corporation and the
Stockholders that provision be made for the continuity and stability of the
business and policies of the Corporation and, to that end, the Corporation and
the Stockholders hereby set forth their agreement with respect to the shares of
Stock (as hereinafter defined) owned by the Stockholders.
NOW, THEREFORE, in consideration of the premises and of the mutual
consents and obligations hereinafter set forth, the parties hereto hereby agree
as follows:
SECTION 1. Definitions. As used herein, the following terms shall have the
following respective meanings:
"Affiliate", with respect to any Stockholder, shall mean any individual,
partnership, corporation, group or trust that directly or indirectly controls,
is controlled by or is under common control with such Stockholder, with
"control" being the power to direct or cause the direction of management and
policies, whether through ownership of voting securities, by contract or
otherwise.
"Designated Public Offering" shall mean a firm commitment underwritten
public offering of shares of Common Stock of the Corporation under the
Securities Act of 1933, as amended, which results in aggregate net cash proceeds
of not less than $20,000,000 to the Corporation at an offering price per share
of not less than $586.66 (as constituted on the date hereof).
"Group" shall mean:
(i) in the case of any Stockholder who is an individual, (A) such
Stockholder, (B) the spouse and lineal descendants of such Stockholder,
(C) a trust for the benefit
<PAGE> 2
of any of the foregoing and (D) a not-for-profit entity of the type
described in Section 501(c)(3) of the Internal Revenue Code of 1986, as
amended, that is controlled by such Stockholder;
(ii) in the case of any Stockholder that is a partnership, (A) such
partnership and any of its limited or general partners, (B) any
corporation or other business organization to which such partnership shall
sell all or substantially all of its assets or with which it shall be
merged and (C) any Affiliate of such partnership; and
(iii) in the case of any Stockholder that is a corporation, (A) such
corporation, (B) any corporation or other business organization to which
such corporation shall sell or transfer all or substantially all of its
assets or with which it shall be merged and (C) any Affiliate of such
corporation;
it being understood that (x) Oak Investment Partners VI, Limited Partnership and
Oak VI Affiliates Fund, Limited Partnership shall be deemed to be members of the
same Group and (y) the Management Shareholders shall be deemed to be members of
the same Group.
"Investors" shall mean Oak Investment Partners VI, Limited Partnership and
Oak VI Affiliates Fund, Limited Partnership (collectively, "Oak"), and NEA
Ventures 1997, NEA President's Fund L.P., New Enterprise Associates VII, L.P.,
New Venture Partners III L.P. and Glynn Ventures III, L.P. (collectively, "NEA")
and shall include any successor to, or permitted assignee of, any of the
Investors who or which agree in writing to be treated as an Investor and to be
bound by the terms and comply with the provisions hereof.
"Management Stockholders" shall mean Mitchell Gross ("Gross") and Joseph
J. Albracht ("Albracht").
"Non-Selling Stockholders" shall mean, in the case of Section 3 hereof,
all Stockholders other than the Selling Group(s).
"Proportionate Percentage" shall mean the pro rata percentage of Stock
being offered by a Selling Group pursuant to Section 3 hereof that each of the
Non-Selling Stockholders shall be entitled to purchase, as the case may be; such
pro rata percentage, as to each such Non-Selling Stockholder, being equal to the
percentage figure which expresses the ratio, based upon Common Stock
equivalents, between the number of shares of Stock owned by such Non-Selling
Stockholder and the aggregate number of shares of Stock owned by all Non-Selling
Stockholders.
-2-
<PAGE> 3
"Purchase Agreement" shall mean the Stock Purchase Agreement dated as of
the date hereof, among the Corporation, the Management Stockholders and the
Investors.
"Sell", as to any Stock, shall mean to sell, or in any other way directly
or indirectly transfer, assign, distribute, encumber or otherwise dispose of,
either voluntarily or involuntarily.
"Selling Group" shall mean a Stockholder or member of the Group of a
Stockholder proposing to Sell its Stock, or who has delivered a notice of
intention to Sell, pursuant to Section 3 hereof.
"Stock" shall mean (i) the presently issued and outstanding shares of
capital stock of the Corporation and any stock options or stock subscription
warrants exercisable therefor (which options and warrants shall be deemed to be
that number of outstanding shares of Stock for which they are exercisable), (ii)
any additional shares of capital stock hereafter issued and outstanding and
(iii) any shares of capital stock of the Corporation into which such shares may
be converted or for which they may be exchanged or exercised.
"Stockholders" shall mean those persons identified on Schedule I attached
hereto as the holders of Stock and shall include any other person who agrees in
writing with the parties hereto to be bound by and to comply with all applicable
provisions of this Agreement.
SECTION 2. Limitations on Sales of Stock by Stockholders. (a) Anything
contained in this Agreement to the contrary notwithstanding, for a period of one
year from the date hereof, each Stockholder and each member of the Group of a
Stockholder hereby agrees that she, he or it shall not Sell any Stock except
with the consent of all Stockholders or by transfer to another member of the
Group to which such Stockholder belongs or, in the case of the Management
Stockholders, by transfer of not more than an aggregate of 15,000 shares of
Common Stock (as constituted on the date hereof) at any time after the date
hereof to a charitable remainder unitrust or similar entity established by
either of the Management Stockholders or any member of their Group; provided
that the recipient of such Stock shall agree in writing with the parties hereto
to be bound by and to comply with all applicable provisions of this Agreement
and to be deemed a Stockholder for all purposes of this Agreement.
(b) Anything contained in this Agreement to the contrary notwithstanding,
each Stockholder and each member of the Group of a Stockholder hereby agrees
that she, he or it shall not at any time beginning with the first anniversary of
the date
-3-
<PAGE> 4
hereof and for the remainder of the term of this Agreement Sell any Stock
except:
(i) by sale in accordance with Section 3 hereof; or
(ii) by transfer to another member of the Group to which such
Stockholder belongs; or
(iii) in the case of the Management Stockholders, by transfer of not
more than an aggregate of 15,000 shares of Common Stock (as constituted on
the date hereof) at any time after the date hereof to a charitable
remainder unitrust or similar entity established by either of the
Management Stockholders or any member of their Group;
provided that, in either case, the recipient of such Stock shall agree in
writing with the parties hereto to be bound by and to comply with all applicable
provisions of this Agreement and to be deemed a Stockholder for all purposes of
this Agreement.
(c) Anything contained in this Agreement to the contrary notwithstanding,
in no event shall any Stockholder Sell any Stock to any competitor of the
Corporation without the express written consent of each of the Management
Stockholders. The good faith determination of the Management Stockholders as to
who is a competitor of the Corporation shall be final and binding on each of the
Stockholders.
SECTION 3. Procedures on Sale of Stock to Third Parties. Except as
otherwise expressly provided herein, each Stockholder and each member of the
Group of a Stockholder hereby agrees that she, he or it shall not Sell any
Stock, except in accordance with the following procedures:
(a) The Selling Group shall first deliver to the Corporation and the
Non-Selling Stockholders a written notice (the "Section 3 Offer Notice"),
which shall be irrevocable for a period of 75 days after delivery thereof,
offering all or any part of the Stock owned by the Selling Group at the
purchase price and on the terms specified therein, whereupon the
Corporation shall have the right and option, for a period of 45 days after
the delivery of the Section 3 Offer Notice (the "Section 3 Corporation
Option Period"), to accept all or any part of the Stock so offered at the
purchase price and on the terms specified therein, and the Non-Selling
Stockholders shall have the right and option, for a period of 30 days
after the expiration of the Section 3 Corporation Option Period (the
"Section 3 Investor Option Period"), to accept all or part of their
respective Proportionate Percentages of the shares of Stock so offered and
not accepted by the Corporation at the purchase price
-4-
<PAGE> 5
and on the terms specified therein, subject to Section 3(d) hereof, and to
offer, in any written notice of acceptance, to purchase any of such Stock
not accepted by the other Non-Selling Stockholders (in which case such
Stock not accepted by the other Non-Selling Stockholders shall be deemed
to have been offered to and accepted by the Non-Selling Stockholders which
exercised the aforesaid option pro rata in accordance with their
respective Proportionate Percentages (computed without including the
Non-Selling Stockholders which have not accepted all of their
Proportionate Percentages of the Stock not accepted by the Corporation).
Such acceptance shall be made by delivering a written notice to the
Selling Group within said period.
(b) Sales of Stock under the terms of Section 3(a) above shall be
made at the offices of the Corporation on a mutually satisfactory business
day within 30 days after the expiration of the applicable period. Delivery
of certificates or other instruments evidencing such Stock duly endorsed
for transfer shall be made on such date against payment of the purchase
price therefor.
(c) If effective acceptance shall not be received pursuant to
Section 3(a) above with respect to all Stock offered for sale pursuant to
the Section 3 Offer Notice, then the Selling Group may Sell the remaining
Stock not purchased by the Corporation and/or the Non-Selling Stockholders
at a price not less than the price, and on terms not more favorable to the
purchaser thereof than the terms, stated in the Section 3 Offer Notice at
any time within 90 days after the expiration of the offer required by
Section 3(a) above. In the event that the Stock is not sold by the Selling
Group during such 90-day period, the right of the Selling Group to Sell
such Stock shall expire and the obligations of this Section 3 shall be
reinstated; provided, however, that in the event that the Selling Group
determines, at any time during such 90-day period, that the sale of all or
any part of the remaining Stock on the terms set forth in the Section 3
Offer Notice is impractical, the Selling Group can terminate the offer and
reinstate the procedure provided in this Section 3 by delivering a new
Section 3 Offer Notice without waiting for the expiration of such 90-day
period.
(d) The Selling Group may specify in the Section 3 Offer Notice that
all Stock mentioned therein must be sold, in which case any acceptance
received pursuant to Section 3(a) hereof shall be deemed conditioned upon
(i) receipt of written notices of acceptance with respect to all Stock
mentioned in such Section 3 Offer Notice and/or (ii) the sale of the
remaining Stock, if any, pursuant to Section 3(c) above.
-5-
<PAGE> 6
(e) Anything contained herein to the contrary notwithstanding, any
purchaser of Stock pursuant to Section 3 who is not a Stockholder shall
agree in writing in advance with the parties hereto to be bound by and
comply with all applicable provisions of this Agreement and shall be
deemed to be a Stockholder for all purposes of this Agreement.
SECTION 4. Election of Directors. At each annual meeting of the
stockholders of the Corporation, and at each special meeting of the stockholders
of the Corporation called for the purpose of electing directors of the
Corporation, and at any time at which stockholders of the Corporation shall have
the right to, or shall, vote for or consent in writing to the election of
directors of the Corporation, then, and in each such event, the Stockholders
shall vote all shares of Stock owned by them for, or consent in writing with
respect to such shares in favor of, the election of a Board of Directors
consisting of up to seven persons, as follows:
(i) a designee of Gross, for so long as he or his Group continues to
own Stock, who shall initially be Gross;
(ii) a designee of Albracht, for so long as he or his Group
continues to own Stock, who shall initially be Albracht;
(iii) a designee of the Management Stockholders, for as long as they
continue to own Stock, who shall initially be Kenneth P. Kopelman;
(iv) a designee of Oak, for so long as Oak continues to own Stock,
who shall initially be Edward F. Glassmeyer;
(v) a designee of NEA, for so long as NEA continues to own Stock,
who shall initially be Peter J. Barris; and
(vi) up to two independent directors who shall be acceptable to at
least a majority of the other directors;
provided, however, that in the event that any of the above listed parties,
together with their respective Groups, owns less than one-third of the Series A
Preferred Stock (or shares of Common Stock issued upon conversion thereof) or
Common Stock, as the case may be, owned by such party on the date hereof
(subject to adjustment to reflect stock splits, stock dividends, stock
combinations, recapitalizations and like occurrences), such party shall no
longer be bound by the terms of this Section 4, nor shall such party be entitled
pursuant to this Section 4 to designate for election a member of the Board of
Directors.
-6-
<PAGE> 7
SECTION 5. Corporate Matters. (a) The Stockholders agree that they shall
refrain from taking or causing the Corporation to take, and the Corporation
agrees that it shall not take, any of the following types of action without the
prior written consent of each of the Management Stockholders:
(i) issue or dispose of any capital stock or other security or
create or assume any liability for borrowed money other than obligations
to trade creditors incurred in the ordinary course of business;
(ii) declare or pay any dividend or authorize or make any
distribution on any stock of the Corporation now or hereafter outstanding,
or apply any property or assets to the purchase, acquisition, redemption
or other retirement of any shares of such stock, directly or indirectly;
(iii) create, assume or suffer to exist any mortgage, pledge or
other encumbrance upon any of its properties or assets now owned or
hereafter acquired;
(iv) assume, guaranty, endorse or otherwise become liable upon the
obligation of any person, firm or corporation, except by the endorsement
of negotiable instruments for deposit or collection in the ordinary course
of business;
(v) purchase or acquire, except in the ordinary course of business,
any property or assets or obligations or stock of or interest in, make any
capital contributions to, or otherwise invest directly or indirectly in,
or make loans or advances to, any person, firm or corporation;
(vi) make any change in the character of its business or undertake
any new ventures or transactions or engage in any type of business not
incidental and directly related to its present business;
(vii) pay or incur any obligation for the payment of salaries, fees
or other remuneration, or change the rate of compensation or other
remuneration, or pay any debts claimed to be owing, directly or
indirectly, to any Stockholder or director of officer of the Corporation;
(viii) amend or change its certificate of incorporation or by-laws,
dissolve or merge or consolidate with or into any other corporation;
(ix) sell, lease, transfer or otherwise dispose of any of its assets
or properties, except in the ordinary course of business;
-7-
<PAGE> 8
(x) enter into any transaction, contract or commitment other than in
the ordinary course of business; or
(xi) convene a meeting of the Board of Directors of the Corporation
without the presence of at least one of the Management Stockholders or
their written consent to convene in their absence.
(b) The Stockholders recognize that at some future time it may be
desirable to vote or Sell their shares of Stock or otherwise act unanimously in
order to effectuate (i) a sale of all of substantially all of the assets of the
Corporation at an aggregate purchase price of not less than $100,000,000 during
the period beginning with the date hereof until the first anniversary of the
date hereof, $125,000,000 during the period beginning with the day after the
first anniversary of the date hereof until the second anniversary of the date
hereof and $150,000,000 during the period beginning with the day after the
second anniversary of the date hereof; (ii) a merger or consolidation of the
Corporation with or into another Corporation in which the Stockholders receive
aggregate consideration having a value of not less than $100,000,000 during the
period beginning with the date hereof until the first anniversary of the date
hereof, $125,000,000 during the period beginning with the day after the first
anniversary of the date hereof until the second anniversary of the date hereof
and $150,000,000 during the period beginning with the day after the second
anniversary of the date hereof; (iii) a Designated Public Offering; (iv) a
private sale by the Stockholders of all or substantially all of the Stock at a
price per share of Stock of not less than $586.66 during the period beginning
with the date hereof until the first anniversary of the date hereof, $733.33
during the period beginning with the day after the first anniversary of the date
hereof until the second anniversary of the date hereof and $879.99 during the
period beginning with the day after the second anniversary of the date hereof.
Accordingly, the Stockholders agree that, at any time on or prior to the fifth
anniversary of the date hereof, they shall each vote or Sell their shares of
Stock or otherwise act in conformity with any decision with respect to any such
sale of assets, merger or consolidation, Designated Public Offering or private
sale of Stock which is recommended and approved by the Management Stockholders
and shall not exercise any statutory appraisal rights in connection with any
such transaction.
SECTION 6. Legend on Stock Certificates. Each certificate representing
shares of Stock shall bear a legend containing the following words:
"THE SALE, TRANSFER, ASSIGNMENT, PLEDGE, OR ENCUMBRANCE OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE AND/OR THE RIGHTS OF THE HOLDER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE IN RESPECT OF THE ELECTION OF
DIRECTORS ARE
-8-
<PAGE> 9
SUBJECT TO THE TERMS AND CONDITIONS OF A STOCKHOLDERS' AGREEMENT DATED AS
OF MAY 12, 1997, AMONG MOBIUS MANAGEMENT SYSTEMS, INC. AND CERTAIN HOLDERS
OF THE OUTSTANDING CAPITAL STOCK OF SUCH CORPORATION. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER
OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF MOBIUS MANAGEMENT
SYSTEMS, INC.
SECTION 7. Duration of Agreement. The rights and obligations of each
Stockholder under this Agreement shall terminate as to such Stockholder upon the
earlier to occur of (a) the transfer of all Stock owned by such Stockholder and
(b) the occurrence of a Designated Public Offering.
SECTION 8. Severability; Governing Law. If any provisions of this
Agreement shall be determined to be illegal and unenforceable by any court of
law, the remaining provisions shall be severable and enforceable in accordance
with their terms. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware applicable to contracts made
and to be performed wholly therein and with respect to corporations organized
thereunder.
SECTION 9. Successors and Assigns. This Agreement shall bind and inure to
the benefit of the parties and their respective successors and assigns, legal
representatives and heirs.
SECTION 10. Notices. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or sent by
nationally-recognized overnight courier or first class registered or certified
mail, return receipt requested, postage prepaid, addressed to such party at the
address set forth below or at such other address as may hereafter be designated
in writing by such party to the other parties:
(i) if to the Corporation or the Management Stockholders, to them at:
Mobius Management Systems, Inc.
One Ramada Plaza
New Rochelle, New York 10801
Attention: President or such Management
Stockholder, as the case may be;
-9-
<PAGE> 10
with a copy to:
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
Attention: Kenneth P. Kopelman, Esq.; and
(ii) if to the Investors, to their respective addresses set forth on
Schedule I hereto;
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Julie M. Allen, Esq.
All such notices, requests, consents and other communications shall be deemed to
have been delivered (a) in the case of personal delivery, on the date of such
delivery, (b) in the case of dispatch by nationally-recognized overnight
courier, on the next business day following such dispatch and (c) in the case of
mailing, on the third business day after the posting thereof.
SECTION 11. Modification. Except as otherwise provided herein, neither
this Agreement nor any provisions hereof can be modified, changed, discharged or
terminated except by an instrument in writing signed by the party against whom
the enforcement of any modification, change, discharge or termination is sought
or by the agreement of Stockholders holding at least 51% of the Stock then held
by all Stockholders; provided, however, that no modification or amendment shall
be effective to reduce the percentage of the shares of Stock the consent of the
holders of which is required under this Section 10.
SECTION 12. Headings. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be a
part of this Agreement.
SECTION 13. Nouns and Pronouns. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice-versa.
SECTION 14. Entire Agreement. This Agreement, the Purchase Agreement and
the other writings referred to therein or delivered pursuant thereto contain the
entire agreement among the parties hereto with respect to the subject matter
hereof and supersede all prior and contemporaneous agreements and understandings
with respect thereto, including, without
-10-
<PAGE> 11
limitation, the Stockholders' Agreement dated August 14, 1981, as amended, among
the Corporation's predecessor and the Management Stockholders.
SECTION 15. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
-11-
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed this Stockholders'
Agreement as of the date first above written.
MOBIUS MANAGEMENT SYSTEMS, INC.
By:________________________________
Name:
Title:
OAK INVESTMENT PARTNERS VI,
LIMITED PARTNERSHIP
By:________________________________
OAK ASSOCIATES VI, L.L.C., AS
GENERAL PARTNER
-12-
<PAGE> 13
By:________________________________
A Managing Member
OAK VI AFFILIATES FUND, LIMITED
PARTNERSHIP
By: OAK VI AFFILIATES, L.L.C.,
ITS GENERAL PARTNER
By:________________________________
-13-
<PAGE> 14
A Managing Member
NEA VENTURES 1997
By:________________________________
Nancy Dorman
Vice President
NEA PRESIDENT'S FUND L.P.
By New President's Partners L.P.
By:________________________________
Name:
Title:
NEW ENTERPRISE ASSOCIATES VII L.P.
By New Enterprise Partners VII L.P.
By:________________________________
Name:
Title:
NEW VENTURE PARTNERS III L.P.
By:________________________________
General Partner
GLYNN VENTURES III, L.P.
By:________________________________
General Partner
-14-
<PAGE> 15
___________________________________
Mitchell Gross
___________________________________
Joseph J. Albracht
-15-
<PAGE> 16
SCHEDULE I
STOCKHOLDERS
Name and Address of Stockholder
- -------------------------------
OAK INVESTMENT PARTNERS VI, LIMITED PARTNERSHIP
One Gorham Island
Westport, Connecticut 06880
Attention: Edward F. Glassmeyer
OAK VI AFFILIATES FUND, LIMITED PARTNERSHIP
One Gorham Island
Westport, Connecticut 06880
Attention: Edward F. Glassmeyer
NEA VENTURES 1997
1119 St. Paul Street
Baltimore, Maryland 21202
Attention: Peter J. Barris
NEA PRESIDENT'S FUND L.P.
1119 St. Paul Street
Baltimore, Maryland 21202
Attention: Peter J. Barris
NEW ENTERPRISE ASSOCIATES VII L.P.
1119 St. Paul Street
Baltimore, Maryland 21202
Attention: Peter J. Barris
NEW VENTURE PARTNERS III L.P.
1119 St. Paul Street
Baltimore, Maryland 21202
Attention: Howard D. Wolfe
GLYNN VENTURES III, L.P.
Building 4, Suite 235
3000 Sand Hill Road
Menlo Park, California 94025
Attention: John W. Glynn, Jr.
Mitchell Gross
c/o Mobius Management Systems, Inc.
One Ramada Plaza
New Rochelle, New York 10801
<PAGE> 17
Joseph J. Albracht
c/o Mobius Management Systems, Inc.
One Ramada Plaza
New Rochelle, New York 10801
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Exhibit 10.11
REGISTRATION RIGHTS AGREEMENT
dated as of May 12, 1997, among MOBIUS
MANAGEMENT SYSTEMS, INC., a Delaware
corporation (the "Corporation"), the
INVESTORS (as herein defined) and the
FOUNDERS (as herein defined).
The Investors own shares of Series A Preferred Stock (as hereinafter
defined) that are convertible into Common Stock, $.01 par value per share (the
"Common Stock"), of the Corporation. The Founders own shares of Common Stock.
The parties hereto deem it to be in their respective best interests to set forth
the rights of the Investors and the Founders in connection with public offerings
and sales of such shares of Common Stock.
NOW, THEREFORE, in consideration of the premises and mutual covenants and
obligations hereinafter set forth, the Corporation and the Investors hereby
agree as follows:
SECTION 1. Definitions. As used in this Agreement, the following terms
shall have the following meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934 or any
successor Federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.
"Founders" shall mean Mitchell Gross and Joseph J. Albracht.
"Investors" shall mean Oak Investment Partners VI, Limited Partnership,
Oak VI Affiliates Fund, Limited Partnership, NEA Ventures 1997, NEA President's
Fund L.P., New Enterprise Associates VII L.P., New Venture Partners III L.P. and
Glynn Ventures III, L.P., and shall include any successor to, or permitted
assignee or transferee of, any of the Investors who or which agree in writing to
be treated as an Investor and to be bound by the terms and comply with all
applicable provisions hereof.
"Other Shares" shall mean at any time those shares of Common Stock which
do not constitute Primary Shares or Registrable Shares.
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"Primary Shares" shall mean at any time the authorized but unissued shares
of Common Stock or shares of Common Stock held by the Corporation in its
treasury.
"Purchase Agreement" shall mean the Stock Purchase Agreement dated as of
the date hereof, among the Corporation, the Investors and the Founders.
"Registrable Shares" shall mean the shares of Common Stock held by the
Investors and the Founders which constitute Restricted Shares.
"Registration Date" shall mean the date upon which the registration
statement pursuant to which the Corporation shall have initially registered
shares of Common Stock under the Securities Act for sale to the public shall
have been declared effective.
"Restricted Shares" shall mean the shares of Series A Preferred Stock
purchased by the Investors under the Purchase Agreement and the shares of Common
Stock owned by the Founders on the date hereof, and any shares of Common Stock
or other securities received in respect thereof, in any case, which have not
theretofore been sold to the public pursuant to a registration statement under
the Securities Act or pursuant to Rule 144.
"Rule 144" shall mean Rule 144 promulgated under the Securities Act or any
successor rule thereto or any complementary rule thereto (such as Rule 144A).
"Securities Act" shall mean the Securities Act of 1933 or any successor
Federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect from time to time.
"Series A Preferred Stock" shall mean the Series A Convertible Preferred
Stock, $.01 par value, of the Corporation.
"Transfer" shall include any disposition of any Restricted Shares or of
any interest therein which would constitute a sale thereof within the meaning of
the Securities Act other than any such disposition pursuant to an effective
registration statement under the Securities Act and complying with all
applicable state securities and "blue sky" laws.
SECTION 2. Required Registration. At any time after the earlier of (a) the
Registration Date and (b) (i) November 12, 1999, with respect to a request for a
registration under the Securities Act of Registrable Securities for sale at an
offering
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price per share of not less than $586.66 or (ii) in all other cases, May 12,
2002, if the Corporation shall be requested by the holders of at least 51%
percent of the Restricted Shares then held by the Investors (based on Common
Stock equivalents) to effect the registration under the Securities Act of
Registrable Shares, then the Corporation shall, within 10 days of such request,
deliver a written notice of such proposed registration to all holders of
outstanding Registrable Shares and shall offer to include in such proposed
registration any Registrable Shares requested to be included in such proposed
registration by the holders of Registrable Shares who or which shall respond in
writing to the Corporation's notice within 15 days after delivery thereof. The
Corporation shall promptly thereafter use its best efforts to effect such
registration under the Securities Act of the Registrable Shares which the
Corporation has been so requested to register; provided, however, that the
Corporation shall not be obligated to effect any registration under the
Securities Act except in accordance with the following provisions:
(a) the Corporation shall not be obligated to use its best efforts
to file and cause to become effective (i) more than one registration
statement initiated pursuant to this Section 2 pursuant to which the
Registrable Shares requested to be included therein have been effectively
sold thereunder; provided, however, that any registration proceeding begun
pursuant to this Section 2 which is subsequently withdrawn at the request
of the holders of a majority of the Registrable Shares requested to be
registered shall constitute such registration statement which the holders
of Registrable Shares have the right to cause the Corporation to effect
pursuant to this Section 2; provided further, however, that such withdrawn
registration shall not be so counted if such withdrawal is based upon
material adverse information relating to the Corporation or its condition,
business, or prospects that was not known by the holders of Registrable
Shares at the time of their request or if the Investors shall have
reimbursed the Corporation for all out-of-pocket expenses incurred in
connection with such withdrawn registration statement, or (ii) any
registration statement during any period in which any other registration
statement (other than on Form S-4 or Form S-8 promulgated under the
Securities Act or any successor forms thereto) pursuant to which Primary
Shares are to be or were sold has been filed and not withdrawn or has been
declared effective within the prior 90 days;
(b) the Corporation may delay the filing or effectiveness of any
registration statement for a
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period of up to 120 days after the date of a request for registration
pursuant to this Section 2 if:
(i) at the time of such request the Corporation is engaged, or
has fixed plans to engage within 90 days of the time of such
request, in a firm commitment underwritten public offering of
Primary Shares in which the holders of Restricted Shares may include
Registrable Shares pursuant to Section 3, or
(ii) the Corporation shall furnish to the Investors requesting
such registration a certificate signed by the President of the
Corporation stating that, in the good faith, reasonable judgment of
the Board of Directors of the Corporation, (x) it would be
materially detrimental to the Corporation and its stockholders for
such registration statement to be filed and therefore necessary to
defer the filing of such registration statement or (y) material
adverse information relating to the Corporation or its condition,
business or prospects that is not generally known to the holders of
Registrable Shares necessitates the deferment of the filing of such
registration statement; and
(c) with respect to any registration pursuant to this Section 2, the
Corporation may include in such registration any Primary Shares or Other
Shares; provided, however, that if the managing underwriter advises the
Corporation that the inclusion of all Registrable Shares, Primary Shares
and Other Shares proposed to be included in such registration would
interfere with the successful marketing (including pricing) of the
Registrable Shares proposed to be included in such registration, then the
number of Registrable Shares, Primary Shares and/or Other Shares proposed
to be included in such registration statement shall be included in the
following order:
(i) first, the Registrable Shares requested to be included in
such registration by the Investors (or, if necessary, such
Registrable Shares pro rata among the Investors, based upon the
number of Restricted Shares (based upon Common Stock equivalents)
owned by each such Investor at the time of such registration);
(ii) second, the Registrable Shares requested to be included
in such registration by the Founders (or, if necessary, such
Registrable
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Shares pro rata among the Founders (based upon the number of
Restricted Shares owned by each such Founder at the time of such
registration);
(iii) third, the Primary Shares; and
(iv) fourth, the Other Shares.
SECTION 3. Piggyback Registration. If the Corporation at any time proposes
for any reason to register Primary Shares or Other Shares under the Securities
Act (other than on Form S-4 or Form S-8 promulgated under the Securities Act or
any successor forms thereto), it shall promptly give written notice to the
holders of Restricted Shares of its intention so to register the Primary Shares
or Other Shares and, upon the written request, given within 15 days after
delivery of any such notice by the Corporation, of the holders of Restricted
Shares to include in such registration Registrable Shares (which request shall
specify the number of Registrable Shares proposed to be included in such
registration), the Corporation shall use its best efforts to cause all such
Registrable Shares to be included in such registration on the same terms and
conditions as the securities otherwise being sold in such registration.
Notwithstanding the foregoing, if the managing underwriter advises the
Corporation that the inclusion of all Registrable Shares or Other Shares
proposed to be included in such registration would interfere with the successful
marketing (including pricing) of Primary Shares or Other Shares proposed to be
registered by the Corporation, then the number of Primary Shares, Registrable
Shares and Other Shares proposed to be included in such registration shall be
included in the following order:
(i) first, the Primary Shares; and
(ii) second, the Registrable Shares held by the Investors and the
Founders requested to be included in such registration and the Other
Shares set forth in the notice delivered by the Corporation pursuant to
this Section 3, based upon the total number of Registrable Shares
requested to be included in the registration and such Other Shares.
(iii) third, the Other Shares.
SECTION 4. Registrations on Form S-3. Anything contained in Section 2 to
the contrary notwithstanding, at such time as the Corporation shall have
qualified for the use of Form S-3 promulgated under the Securities Act or any
successor form thereto, the holders of Restricted Shares shall have the right to
request in writing an unlimited number of registrations on Form
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S-3, or such successor form, of Registrable Shares held by them (the Corporation
to bear the costs of such registrations), which request or requests shall (i)
specify the number of Registrable Shares intended to be sold or disposed of,
(ii) state the intended method of disposition of such Registrable Shares and
(iii) relate to Registrable Shares having an anticipated aggregate offering
price of at least $2,000,000; provided, however, that the Corporation shall not
be required to effect more than one such registration in any 12-month period. A
requested registration on Form S-3, or any such successor form, in compliance
with this Section 4 shall not count as a registration statement initiated
pursuant to Section 2 but shall otherwise be treated as a registration initiated
pursuant to Section 2 and shall, except as otherwise expressly provided in this
Section 4, be subject to Section 2.
SECTION 5. Holdback Agreement. If the Corporation at any time shall
register shares of Common Stock under the Securities Act (including any
registration pursuant to Sections 2, 3 or 4) for sale to the public, the
Investors and the Founders shall not sell publicly, make any short sale of,
grant any option for the purchase of or otherwise dispose publicly of, any
Restricted Shares (other than those shares of Common Stock included in such
registration pursuant to Sections 2, 3 or 4) without the prior written consent
of the Corporation for a period designated by the Corporation in writing to the
holders of Registrable Shares, which period shall not begin more than 10 days
prior to the effectiveness of the registration statement pursuant to which such
public offering shall be made and shall not last more than 180 days after the
effective date of such registration statement; provided, however, that the
Corporation enters into identical agreements with each officer and director of
the Corporation.
SECTION 6. Preparation and Filing. If and whenever the Corporation is
under an obligation pursuant to the provisions of this Agreement to use its best
efforts to effect the registration of any Registrable Shares, the Corporation
shall, as expeditiously as practicable:
(a) use its best efforts to cause a registration statement that
registers such Registrable Shares to become and remain effective for a
period of 90 days or until all of such Registrable Shares have been
disposed of (if earlier);
(b) furnish, at least five business days before filing a
registration statement that registers such Registrable Shares, a
prospectus relating thereto or any amendments or supplements relating to
such a registration statement or prospectus, to one counsel selected by
the Investors holding Registrable Shares
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included in such registration statement (the "Investors' Counsel") and to
the Founders' counsel, if other than counsel for the Corporation (the
"Founders' Counsel"), copies of all such documents proposed to be filed
(it being understood that such five-business-day period need not apply to
successive drafts of the same document proposed to be filed so long as
such successive drafts are supplied to the Investors' Counsel and the
Founders' Counsel in advance of the proposed filing by a period of time
that is customary and reasonable under the circumstances);
(c) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for the lesser of (i) 90 days and (ii) until all of
such Registrable Shares have been disposed of, and to comply with the
provisions of the Securities Act with respect to the sale or other
disposition of such Registrable Shares;
(d) notify in writing the Investors' Counsel and the Founders'
Counsel promptly (i) of the receipt by the Corporation of any notification
with respect to any comments by the Commission with respect to such
registration statement or prospectus or any amendment or supplement
thereto or any request by the Commission for the amending or supplementing
thereof or for additional information with respect thereto, (ii) of the
receipt by the Corporation of any notification with respect to the
issuance by the Commission of any stop order suspending the effectiveness
of such registration statement or prospectus or any amendment or
supplement thereto or the initiation or threatening of any proceeding for
that purpose and (iii) of the receipt by the Corporation of any
notification with respect to the suspension of the qualification of such
Registrable Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purposes;
(e) use its best efforts to register or qualify such Registrable
Shares under such other securities or blue sky laws of such jurisdictions
as the Investors and the Founders reasonably request and do any and all
other acts and things which may be reasonably necessary or advisable to
enable the holders of Registrable Shares to consummate the disposition in
such jurisdictions of such Registrable Shares; provided, however, that the
Corporation will not be required to qualify generally to do business,
subject itself to general taxation or consent to general
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service of process in any jurisdiction where it would not otherwise be
required to do so but for this paragraph (e);
(f) furnish to the holders of Registrable Shares included in such
registration statement such number of copies of a summary prospectus or
other prospectus, including a preliminary prospectus, in conformity with
the requirements of the Securities Act, and such other documents (such as
a term sheet) as such holders of Registrable Shares may reasonably request
in order to facilitate the public sale or other disposition of such
Registrable Shares;
(g) notify the holders of Registrable Shares on a timely basis at
any time when a prospectus relating to such Registrable Shares is required
to be delivered under the Securities Act within the appropriate period
mentioned in subparagraph (a) of this Section 6, of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing and, at the request of the holders of
Registrable Shares, prepare and furnish to the holders of Registrable
Shares a reasonable number of copies of a supplement to or amendment of
such prospectus as may be necessary so that, as thereafter delivered to
the offerees of such shares, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing;
(h) make available for inspection by the holders of Registrable
Shares included in such registration statement, any underwriter
participating in any disposition pursuant to such registration statement
and any attorney, accountant or other agent retained by the holders of
Registrable Shares or any underwriter (collectively, the "Inspectors"),
all pertinent financial and other records, pertinent corporate documents
and properties of the Corporation (collectively, the "Records"), as shall
be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Corporation's officers, directors and
employees to supply all information (together with the Records, the
"Information") reasonably requested by any such holders
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of Registrable Shares in connection with such registration statement;
provided, however, that any of the Information which the Corporation
determines in good faith to be confidential, and of which determination
the Inspectors are so notified, shall not be disclosed by the Inspectors
unless (i) the disclosure of such Information is necessary to avoid or
correct a misstatement or omission in the registration statement, (ii) the
release of such Information is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction or (iii) such Information has
been made generally available to the public; and provided further,
however, that the holders of Registrable Shares agree that they will, upon
learning that disclosure of such Information is sought in a court of
competent jurisdiction, give notice to the Corporation and allow the
Corporation, at the Corporation's expense, to undertake appropriate action
to prevent disclosure of the Information deemed confidential;
(i) use its best efforts to obtain from its independent certified
public accountants "cold comfort" letters in customary form and at
customary times and covering matters of the type customarily covered by
cold comfort letters;
(j) use its best efforts to obtain from its counsel an opinion or
opinions in customary form;
(k) provide a transfer agent and registrar (which may be the same
entity and which may be the Corporation) for such Registrable Shares;
(l) issue to any underwriter to which the holders of Registrable
Shares may sell shares in such offering certificates evidencing such
Registrable Shares;
(m) list such Registrable Shares on any national securities exchange
on which any shares of the Common Stock are listed or, if the Common Stock
is not listed on a national securities exchange, use its best efforts to
qualify such Registrable Shares for inclusion on the Nasdaq National
Market System or the Nasdaq SmallCap Market or such other national
securities exchange as the holders of a majority of the Registrable Shares
held by the Investors shall request;
(n) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission and make available to its
securityholders,
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as soon as reasonably practicable, earnings statements (which need not be
audited) covering a period of 12 months beginning within three months
after the effective date of the registration statement, which earnings
statements shall satisfy the provisions of Section 11(a) of the Securities
Act; and
(o) use its best efforts to take all other steps reasonably
necessary to effect the registration of such Registrable Shares
contemplated hereby.
For purposes of this Agreement, the Corporation's best efforts shall mean the
Corporation's best efforts without the expenditure of time or funds other than
is customary for registrations of the type contemplated herein.
SECTION 7. Expenses. All expenses incurred by the Corporation in complying
with Section 6, including, without limitation, all registration and filing fees
(including all expenses incident to filing with the National Association of
Securities Dealers, Inc.), fees and expenses of complying with securities and
blue sky laws, printing expenses, fees and expenses of the Corporation's counsel
and accountants and reasonable fees and expenses of the Investors' Counsel and
the Founders' Counsel (but not the Inspectors), shall be paid by the
Corporation; provided, however, that all underwriting discounts and selling
commissions applicable to the Registrable Shares or Other Shares shall not be
borne by the Corporation but shall be borne by the holders of Registrable Shares
and holders of Other Shares in proportion to the number of Registrable Shares or
Other Shares sold by each of them.
SECTION 8. Indemnification. In connection with any registration of any
Registrable Shares under the Securities Act pursuant to this Agreement, the
Corporation shall indemnify and hold harmless the holders of Registrable Shares,
each underwriter, broker or any other person acting on behalf of the holders of
Registrable Shares and each other person, if any, who controls any of the
foregoing persons within the meaning of the Securities Act against any losses,
claims, damages or liabilities, joint or several (or actions in respect
thereof), to which any of the foregoing persons may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in the
registration statement under which such Registrable Shares were registered under
the Securities Act, any preliminary prospectus or final prospectus contained
therein or otherwise filed with the Commission, any amendment or supplement
thereto or any document incident to registration or qualification of any
Registrable Shares, or arise out of or are based upon the omission or alleged
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omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading or, with respect to any
prospectus, necessary to make the statements therein in light of the
circumstances under which they were made not misleading, or any violation by the
Corporation of the Securities Act or state securities or blue sky laws
applicable to the Corporation and relating to action or inaction required of the
Corporation in connection with such registration or qualification under such
state securities or blue sky laws; and shall reimburse the holders of
Registrable Shares, such underwriter, such broker or such other person acting on
behalf of the holders of Registrable Shares and each such controlling person for
any legal or other expenses reasonably incurred by any of them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Corporation shall not be liable in any such
case to the extent that any such loss, claim, damage, liability or action arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in said registration statement, preliminary
prospectus, final prospectus, amendment, supplement or document incident to
registration or qualification of any Registrable Shares in reliance upon and in
conformity with written information furnished to the Corporation through an
instrument duly executed by the holders of Registrable Shares or underwriter
specifically for use in the preparation thereof.
In connection with any registration of Registrable Shares under the
Securities Act pursuant to this Agreement, the holders of Registrable Shares
shall indemnify and hold harmless and reimburse (in the same manner and to the
same extent as set forth in the preceding paragraph of this Section 8) the
Corporation, each director of the Corporation, each officer of the Corporation
who shall sign such registration statement, each underwriter, broker or other
person acting on behalf of the holders of Registrable Shares and each person who
controls any of the foregoing persons within the meaning of the Securities Act
with respect to any statement or omission from such registration statement, any
preliminary prospectus or final prospectus contained therein or otherwise filed
with the Commission, any amendment or supplement thereto or any document
incident to registration or qualification of any Registrable Shares, if such
statement or omission was made in reliance upon and in conformity with written
information furnished to the Corporation or such underwriter by the holders of
Registrable Shares specifically for use in connection with the preparation of
such registration statement, preliminary prospectus, final prospectus,
amendment, supplement or document; provided, however, that the maximum amount of
liability in respect of such indemnification shall be limited, in the case of
each seller of Registrable Shares, to an amount equal to the net proceeds
actually received by such seller
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from the sale of Registrable Shares effected pursuant to such registration.
Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of this Section 8, such indemnified party will, if a claim in respect
thereof is made against an indemnifying party, give written notice to the latter
of the commencement of such action. In case any such action is brought against
an indemnified party, the indemnifying party will be entitled to participate in
and to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be responsible for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof; provided, however, that if any indemnified party shall have
reasonably concluded that there may be one or more legal or equitable defenses
available to such indemnified party which are additional to or conflict with
those available to the indemnifying party, or that such claim or litigation
involves or could have an effect upon matters beyond the scope of the indemnity
agreement provided in this Section 8, the indemnifying party shall not have the
right to assume the defense of such action on behalf of such indemnified party
and such indemnifying party shall reimburse such indemnified party and any
person controlling such indemnified party for that portion of the fees and
expenses of any one counsel retained by the indemnified party which is
reasonably related to the matters covered by the indemnity agreement provided in
this Section 8.
If the indemnification provided for in this Section 8 is held by a court
of competent jurisdiction to be unavailable to an indemnified party with respect
to any loss, claim, damage, liability or action referred to herein, then the
indemnifying party, in lieu of indemnifying such indemnified party hereunder,
shall contribute to the amounts paid or payable by such indemnified party as a
result of such loss, claim, damage, liability or action in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and of the indemnified party on the other in connection with the statements
or omissions which resulted in such loss, claim, damage, liability or action as
well as any other relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the indemnifying party or by the indemnified
party and the
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parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
SECTION 9. Underwriting Agreement. Notwithstanding the provisions of
Sections 5, 6, 7 and 8, to the extent that the holders of Registrable Shares
shall enter into an underwriting or similar agreement, which agreement contains
provisions covering one or more issues addressed in such Sections, the
provisions contained in such underwriting or similar agreement shall control as
to the party or parties so entering into such underwriting agreement.
SECTION 10. Information by Holder. Each of the holders of Registrable
Shares proposing to sell the same pursuant to a registration to which this
Agreement relates shall furnish to the Corporation such written information
regarding the holders of Registrable Shares and the distribution proposed by
such holders of Registrable Shares as the Corporation may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Agreement.
SECTION 11. Exchange Act Compliance. From the Registration Date or such
earlier date as a registration statement filed by the Corporation pursuant to
the Exchange Act relating to any class of the Corporation's securities shall
have become effective, the Corporation shall comply with all of the reporting
requirements of the Exchange Act (whether or not it shall be required to do so)
and shall comply with all other public information reporting requirements of the
Commission which are conditions to the availability of Rule 144 for the sale of
the Common Stock. The Corporation shall cooperate with the holders of
Registrable Shares in supplying such information as may be reasonably necessary
for the Investors to complete and file any information reporting forms presently
or hereafter required by the Commission as a condition to the availability of
Rule 144.
SECTION 12. No Conflict of Rights. The Corporation represents and warrants
to the holders of Registrable Shares that the Corporation has not granted any
registration rights prior to the date hereof. The Corporation shall not, after
the date hereof, grant any registration rights which conflict with or impair the
registration rights granted hereby.
SECTION 13. Termination. This Agreement shall terminate and be of no
further force or effect when there shall not be any Restricted Shares; provided,
however, that the rights of a holder of Registrable Shares hereunder shall
terminate at such time as such holder shall have the unrestricted right, in the
unqualified opinion of counsel for the Corporation, to sell
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all of such Registrable Shares without restriction pursuant to Rule 144(k)
promulgated under the Securities Act.
SECTION 14. Successors and Assigns. This Agreement shall bind and inure to
the benefit of the Corporation, the holders of Registrable Shares and, subject
to Section 15, the respective successors and assigns of the Corporation and
holders of Registrable Shares.
SECTION 15. Assignment. Each holder of Registrable Shares may assign its
rights hereunder to any permitted purchaser or permitted transferee of
Restricted Shares (including with respect to any applicable transfer or sale
restrictions set forth in the Stockholders' Agreement, dated as of the date
hereof, among the Corporation and the other parties thereto (the "Stockholders'
Agreement")); provided, however, that such purchaser or transferee shall, as a
condition to the effectiveness of such assignment, be required to execute a
counterpart to this Agreement agreeing to be treated as the seller or transferor
hereunder whereupon such purchaser or transferee shall have the benefits of, and
shall be subject to the restrictions contained in, this Agreement.
SECTION 16. Entire Agreement. This Agreement, the Stockholders' Agreement
and the Stock Purchase Agreement dated as of the date hereof, among the
Corporation and the other parties thereto, and the other writings referred to
therein or delivered pursuant thereto, contain the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior and
contemporaneous arrangements or understandings with respect thereto.
SECTION 17. Notices. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or sent by
nationally-recognized overnight courier or first class registered or certified
mail, return receipt requested, postage prepaid, addressed to such party at the
address set forth below or such other address as may hereafter be designated in
writing by such party to the other parties:
(i) if to the Corporation or the Founders, to it or them at:
Mobius Management Systems, Inc.
One Ramada Plaza
New Rochelle, New York 10801
Attention: Board of Directors or such Founders, as the case may be;
with a copy to:
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<PAGE> 15
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
Attention: Kenneth P. Kopelman, Esq.; and
(iii) if to the Investors, to their respective addresses set forth on
Schedule I hereto, with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Julie M. Allen, Esq.
All such notices, requests, consents and other communications shall be deemed to
have been delivered (a) in the case of personal delivery, on the date of such
delivery, (b) in the case of dispatch by nationally-recognized overnight
courier, on the next business day following such dispatch and (c) in the case of
mailing, on the third business day after the posting thereof.
SECTION 18. Modifications; Amendments; Waivers. The terms and provisions
of this Agreement may not be modified or amended, nor may any provision be
waived, except pursuant to a writing signed by the Corporation and the Investors
holding at least a 51% (by voting power) of the Restricted Shares at the time
outstanding; provided, however, that any modification, amendment or waiver that
adversely affects the rights of the Founders hereunder shall require the written
agreement of the Founders.
SECTION 19. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 20. Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be a part of this Agreement.
SECTION 21. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed wholly therein.
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<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the date first written above.
MOBIUS MANAGEMENT SYSTEMS, INC.
By:________________________________
Name: Mitchell Gross
Title: Chief Executive Officer
OAK INVESTMENT PARTNERS VI,
LIMITED PARTNERSHIP
By: OAK ASSOCIATES VI, L.L.C.,
AS GENERAL PARTNER
By:________________________________
A Managing Member
OAK VI AFFILIATES FUND, LIMITED
PARTNERSHIP
By: OAK VI AFFILIATES, L.L.C.,
ITS GENERAL PARTNER
By:________________________________
A Managing Member
NEA VENTURES 1997
By:________________________________
Nancy Dorman
Vice President
NEA PRESIDENT'S FUND L.P.
By New President's Partners L.P.
___________________________________
Name:
Title:
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<PAGE> 17
NEW ENTERPRISE ASSOCIATES VII L.P.
By New Enterprise Partners VII L.P.
By:________________________________
Name:
Title:
NEW VENTURE PARTNERS III L.P.
By:________________________________
General Partner
GLYNN VENTURES III, L.P.
By:________________________________
General Partner
___________________________________
Mitchell Gross
___________________________________
Joseph J. Albracht
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<PAGE> 18
SCHEDULE I
INVESTORS
Name and Address of Investor
OAK INVESTMENT PARTNERS VI,
LIMITED PARTNERSHIP
One Gorham Island
Westport, Connecticut 06880
Attention: Edward F. Glassmeyer
OAK VI AFFILIATES FUND,
LIMITED PARTNERSHIP
One Gorham Island
Westport, Connecticut 06880
Attention: Edward F. Glassmeyer
NEA VENTURES 1997
1119 St. Paul Street
Baltimore, Maryland 21202
Attention: Peter J. Barris
NEA PRESIDENT'S FUND L.P.
1119 St. Paul Street
Baltimore, Maryland 21202
Attention: Peter J. Barris
NEW ENTERPRISE ASSOCIATES VII L.P.
1119 St. Paul Street
Baltimore, Maryland 21202
Attention: Peter J. Barris
NEW VENTURE PARTNERS III L.P.
1119 St. Paul Street
Baltimore, Maryland 21202
Attention: Howard D. Wolfe
GLYNN VENTURES III, L.P.
Building 4, Suite 235
3000 Sand Hill Road
Menlo Park, CA 94025
Attention: John W. Glynn, Jr.
<PAGE> 1
Exhibit 10.14
AGREEMENT AND GENERAL RELEASE
This Agreement and General Release ("Agreement") is made and entered
into by and between Mobius Management Systems, Inc. and Joseph Tinnerello.
DEFINITIONS
As used throughout this Agreement:
A. "Mobius" refers to Mobius Management Systems, Inc. together with
its past and present parents, subsidiaries, and affiliates, and each of their
respective past and present officers, directors, agents, employees, successors,
and assigns.
B. "Tinnerello" refers to Joseph Tinnerello, his heirs, executors,
administrators, agents, successors, assigns, and dependents.
RECITALS
WHEREAS, Tinnerello has been employed by Mobius; and
WHEREAS, the parties have agreed that Tinnerello's employment by
Mobius shall end effective October 1, 1997; and
WHEREAS, the parties hereto desire to settle any and all disputes
and extinguish any and all claims relating to Tinnerello's employment by Mobius
which Tinnerello now has or might otherwise hereafter have against Mobius;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, and intending to be and being legally bound
hereby, the parties agree as follows:
AGREEMENT
1. Tinnerello will cease to be employed by Mobius effective October
1, 1997 (the "Termination Date").
2. (a) Except as necessary to enforce the terms of this Agreement,
and in exchange for and in consideration of the promises, covenants, and
agreements set forth herein, Tinnerello hereby releases Mobius to the maximum
extent permitted by law from all actions, causes of action, suits, debts, dues,
sums of money, accounts, reckonings, extents, executions, claims, and demands
whatsoever, in law, admiralty or equity, which against Mobius, Tinnerello ever
had, now have or hereafter can, shall or may, have for, upon, or by reason of
any matter, cause or thing whatsoever from the beginning of the world to the day
of the date of this
<PAGE> 2
Agreement and including without limitation all causes of action relating to
Tinnerello's employment with Mobius, the termination of that employment on
October 1, 1997, any claim to any options under any agreement except as set
forth in this Agreement and any claim for further or additional compensation.
(b) Except as necessary to enforce the terms of this
Agreement, and in exchange for and in consideration of the promises, covenants,
and agreements set forth herein, Mobius hereby releases Tinnerello to the
maximum extent permitted by law from all actions, causes of action, suits,
debts, dues, sums of money, accounts, reckonings, extents, executions, claims,
and demands whatsoever, in law, admiralty or equity, which against Tinnerello,
Mobius ever had, now have or hereafter can, shall or may, have for, upon, or by
reason of any matter, cause or thing whatsoever actually known to the President,
Executive Vice President or Chief Financial Officer of Mobius as of the date
hereof.
3. Except as necessary to enforce the terms of this Agreement, each
party promises never to file or participate in a lawsuit, arbitration, agency,
or other legal proceeding asserting any claims that are released by such party
pursuant to this Agreement. If a party breaks such promise and files or
participates in a legal proceeding based on claims such party has released
pursuant to this Agreement, such party agrees to pay for all costs, including
reasonable attorneys' fees, incurred by the other party in defending against
such party's claim.
4. (a) Tinnerello acknowledges and recognizes the highly competitive
nature of the Company's business and that access to Mobius' confidential records
and proprietary information renders him special and unique within Mobius'
industry. In consideration of the grant of options by Mobius to Tinnerello
pursuant to Paragraph 6(a) hereof (the "Termination Grant") and the acceleration
of the exercisability of certain options pursuant to Paragraph 6(b) hereof (the
"Acceleration"), Tinnerello agrees that during the period beginning on the Date
of Termination and ending twenty-four months after the Date of Termination (the
"Covered Time"), Tinnerello will not compete with the business of Mobius, which
means that Tinnerello will not engage, directly or indirectly, in any business
related to the development, sale, or provision of any services related to the
archiving and retrieval of documents and records or other related document and
record management services.
(b) In further consideration of the Termination Grant and the
Acceleration, Tinnerello agrees that during the Covered Time he shall not (i)
directly or indirectly solicit or attempt to solicit any of the employees,
agents, consultants or representatives of Mobius to terminate his, her, or its
relationship with Mobius; (ii) directly or indirectly solicit or attempt to
solicit any of the employees, agents, consultants or representatives of Mobius
to become employees, agents, representatives or consultants of any other person
or entity; or (iii) directly or indirectly solicit or attempt to solicit any
customer, vendor or distributor of Mobius with respect to any product or service
being furnished, made, sold or leased by Mobius.
(c) Tinnerello understands that the provisions of this Paragraph 4
may limit his ability to earn a livelihood in a business similar to the business
of Mobius but nevertheless agrees and hereby acknowledges that the consideration
provided under this Agreement is
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<PAGE> 3
sufficient to justify the restrictions contained in such
provisions. In consideration thereof and in light of Tinnerello's education,
skills and abilities, Tinnerello agrees that he will not assert in any forum
that such provisions prevent him from earning a living or otherwise are void or
unenforceable or should be held void or unenforceable.
5. Tinnerello acknowledges that during the course of his employment
with Mobius he had access to proprietary information and confidential records of
Mobius. Tinnerello covenants that he shall not, directly or indirectly, use for
his own purpose or for the benefit of any person or entity other than Mobius,
nor otherwise disclose, any proprietary information to any individual or entity,
unless such disclosure has been authorized in writing by Mobius or is otherwise
required by law. Tinnerello acknowledges and understands that the term
"proprietary information" includes, but is not limited to: (a) the name and/or
address of any customer, vendor or affiliate of Mobius or any information
concerning the transactions or relations of any customer, vendor or affiliate of
Mobius with Mobius or any of its partners, principals, directors, officers or
agents; (b) any information concerning any product, technology, or procedure
employed by Mobius but not generally known to its customers, vendors or
competitors, or under development by or being tested by Mobius but not at the
time offered generally to customers or vendors; (c) any information relating to
Mobius' computer software, computer systems, pricing or marketing methods, sales
margins, cost of goods, cost of material, capital structure, operating results,
borrowing arrangements or business plans; (d) any information which is generally
regarded as confidential or proprietary in any line of business engaged in by
Mobius; (e) any business plans, budgets, advertising or marketing plans; (f) any
information contained in any of Mobius' written or oral policies and procedures
or manuals; (g) any information belonging to customers, vendors or affiliates of
Mobius or any other person or entity which Mobius has agreed to hold in
confidence; (h) any inventions, innovations or improvements covered by this
Agreement; and (i) all written, graphic and other material relating to any of
the foregoing. Tinnerello acknowledges and understands that information that is
not novel or copyrighted or patented may nonetheless be proprietary information.
The term "proprietary information" shall not include information generally
available to and known by the public or information that is or becomes available
to me on a non-confidential basis from a source other than Mobius or Mobius'
directors, officers, employees, partners, principals or agents (other than as a
result of a breach of any obligation of confidentiality).
6. In full and complete consideration for Tinnerello's promises,
covenants, and agreements set forth herein, with no further services to be
rendered by Tinnerello to Mobius and regardless of Tinnerello's employment
status elsewhere:
(a) Mobius will grant to Tinnerello fully vested options to purchase
1,000 shares of the common stock of Mobius, in accordance with the Mobius 1996
Stock Incentive Plan and the Stock Option Agreement (the "Stock Option
Agreement") attached hereto as Exhibit A.
(b) Mobius shall accelerate to the date hereof the exercisability of
options to purchase 800 shares of the common stock of Mobius previously granted
to Tinnerello by Mobius pursuant that certain stock option agreement dated as of
November 6, 1996 (the "1996
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<PAGE> 4
Agreement"). All other options to purchase shares of the common stock of Mobius
granted pursuant to the 1996 Agreement are hereby irrevocably cancelled.
7. The parties agree that it is a material condition of this
Agreement that Tinnerello maintain strictly confidential and shall take all
reasonable steps to prevent the disclosure to any person or entity the
existence, terms, or subject matter of this Agreement. This provision does not
prohibit Tinnerello from providing this information to his attorneys or
accountants for purposes of obtaining legal or tax advice or as otherwise
required by law. To the extent Tinnerello makes any disclosure to any attorney
or accountant as permitted pursuant to this paragraph, he shall instruct such
person not to make any further disclosure except in accordance with this
paragraph.
8. In executing this Agreement, neither Mobius nor Tinnerello admits
any liability or wrongdoing, and the considerations exchanged herein do not
constitute an admission of any liability, error, contract violation, or
violation of any federal, state, or local law or regulation.
9. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
10. The unenforceability or invalidity of any provision or
provisions of this Agreement shall not render any other provision or provisions
hereof unenforceable or invalid.
11. This Agreement and the Stock Option Agreement constitute the
entire agreement between the parties and cannot be altered except in a writing
signed by the parties. The parties acknowledge that they entered into this
Agreement, that they fully understand all of its provisions, and that no
representations were made to induce execution of this Agreement and the Stock
Option Agreement which are not expressly contained herein.
12. The parties agree that any disputes concerning the
interpretation or application of this Agreement shall be governed by New York
law and submitted to a court in New York, without regard to principles of
conflict of law or where the parties are located at the time a dispute arises.
13. Tinnerello acknowledges that he has been afforded an opportunity
to consider this Agreement and has been advised to consult with an attorney
prior to executing this Agreement and the Stock Option Agreement. Tinnerello
acknowledges that he has had an adequate opportunity to review this Agreement
before its execution.
the remainder of this page is blank
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<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Agreement as of
September 30, 1997.
MOBIUS MANAGEMENT SYSTEMS, INC.
/s/ Joseph Tinnerello By: /s/ Mitchell Gross
- ------------------------- ----------------------
Joseph Tinnerello Mitchell Gross, President
- 5 -
<PAGE> 1
Exhibit 10.15
STOCK OPTION AGREEMENT (the "Agreement"), dated as of September 30,
1997, between MOBIUS MANAGEMENT SYSTEMS, INC. (the "Company"), a New York
corporation, and Joseph Tinnerello (the "Optionee"), an employee of the Company.
The Company's Board of Directors has determined that the objectives
of the Company's 1996 Stock Incentive Plan (the "Plan") will be furthered by
granting to the Optionee a stock option pursuant to the Plan. Capitalized terms
used herein without definition shall have the meaning as described thereto in
the Plan.
In consideration of the foregoing and of the mutual undertakings set
forth in this Agreement, the Company and the Optionee hereby agree as follows:
SECTION 1 Grant of Option
The Company hereby grants to the Optionee a stock option (the
"Option") to purchase 1,000 shares ("the Shares") of Class A Non-Voting common
stock of the Company ("Common Stock") at a purchase price of $694.44 per share
(the "Exercise Price"). It is intended that the Option not qualify as an
"incentive stock option" as defined in section 422 of the Internal Revenue Code
of 1986, as amended (the "Code").
SECTION 2 Exercisability
Subject to the further terms of this Agreement, the Option shall
become exercisable immediately upon the date hereof. Unless earlier terminated
pursuant to the provisions of the Plan, the unexercised portion of the Option
shall expire and cease to be exercisable at 12:01 a.m. on the 5th anniversary of
the date of this Agreement.
SECTION 3 Method of Exercise
The Option or any part thereof may be exercised only by the giving
of written notice to the Company on such form and in such manner as the
Committee shall prescribe. Such written notice must be accompanied by payment of
the full purchase price for the number of shares being purchased. Such payment
may be made by one or a combination of the following methods: (a) by certified
or official bank check (or the equivalent thereof acceptable to the Company);
(b) with the consent of the Company, by delivery of shares of Common Stock
acquired prior to the option exercise date and having a Fair Market Value on the
exercise date equal to part or all of the purchase price; or (c) by such other
method as the Company may authorize. Pursuant to Section 3.2 of the Plan, it
shall be a condition precedent to the issuance of Shares upon exercise of the
Option that the Optionee shall remit to the Company an amount sufficient to
satisfy all applicable withholding tax requirements. The date of exercise of the
Option shall be the date on which written notice of exercise is hand delivered
to the Company, during normal business hours, at its address as provided in
Section 11 of this Agreement, or, if mailed, the date on which it is postmarked,
provided such notice is actually received.
SECTION 4 Death
If the Optionee dies during the period in which the Option is
exercisable, the Option shall be exercisable only until the earlier of the
expiration date of the Option (specified in Section 2 of this Agreement) or 90
days after the Optionee's death.
SECTION 1
SECTION 2 Forfeiture of Option Gains
If at any time within one year after the exercise of all or any
portion of the Option the Optionee engages in any activity determined in the
sole discretion of the Board to be in competition with any activity of the
<PAGE> 2
Company, or otherwise contrary or harmful to the interests of the Company
(including, but not limited to accepting employment with or serving as a
consultant, adviser or in any other capacity to, an entity that is in
competition with the Company), then any option gain realized by the Optionee
from exercising such option shall, upon notice from the Company, be paid by the
Optionee to the Company. For purposes of this Section, "option gain" means the
excess of the Fair Market Value of a share of Common Stock on the date of
exercise of the Option over the option exercise price, multiplied by the number
of shares with respect to which the Option was exercised, without regard to any
subsequent decrease or increase in the Fair Market Value of such shares. The
Company shall have the right to offset such option gain against any amounts
otherwise owed to the Optionee by the Company (whether as wages, vacation pay,
or pursuant to any benefit plan or other compensatory arrangement).
SECTION 3 Investment Representations
The Optionee hereby represents and warrants to and agrees with the
Company as follows:
SECTION 3.1 Acquisition of Shares for Own Account. The Optionee will
acquire the Shares, if at all, pursuant to this Agreement with the Optionee's
own funds, and not with the funds of anyone else. The Shares will be acquired,
if at all, for the Optionee's own account, not as a nominee or agent and not for
the account of any other person or firm. No one else has or will have on any
exercise of the Option or any portion thereof any interest, beneficial or
otherwise, in any of the Shares to be acquired on such exercise. The Optionee is
not, and prior to any exercise of the Option will not be, obligated to transfer
any of the Shares or any interest therein to anyone else and the Optionee does
not and will not have any agreement or understandings to do so. The Optionee
does not, and on any exercise of the Option will not, intend to subdivide the
Optionee's acquisition of any Shares with anyone.
SECTION 3.2 Agreement to Refrain from Resales. The Optionee
agrees that, notwithstanding any provision hereof or in the Plan to the
contrary, the Optionee shall in no event make any disposition of all or any part
of or interest in the Shares and that such Shares shall not be encumbered,
pledged, hypothecated, sold or transferred by the Optionee nor shall the
Optionee receive any consideration for such Shares or for any interest therein
from any person, unless and until prior to any proposed transfer, encumbrance,
disposition, pledge, hypothecation or sale of any Shares, either (1) a
registration statement on form S-1 or S-8 (or any other form replacing such form
or appropriate for the purpose under the Securities Act of 1933, as amended)
with respect to such shares proposed to be transferred or otherwise disposed of
shall be then effective or (2) (i) the Optionee shall have notified the Company
of the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, (ii) the
Optionee shall have furnished the Company with an opinion of counsel in form and
substance satisfactory to the Company to the effect that such disposition will
not require registration of any such Shares under the Act or qualification of
any such shares under any other securities law, (iii) such opinion of counsel
shall have been concurred in by counsel for the Company and (iv) the Company
shall have advised the Optionee of such concurrence.
SECTION 3.3 Shares May Be "Restricted Securities";
Certificates Representing Shares May Be Legended
The Optionee understands and agrees that:
SECTION 3.3.1 the Shares, if and when issued, may be
"restricted securities," as that term is defined in Rule 144 under the Act, and,
accordingly, the Optionee may be required to hold the Shares indefinitely unless
they are registered under the Act or an exemption from such registration is
available;
SECTION 3.3.2 the Company is not under any obligation to
register the Shares under the Act or to comply with any exemption thereunder;
and
SECTION 3.3.3 certificates representing any Shares
received by the Optionee on exercise of the Option may bear a legend on the face
thereof (or on the reverse thereof with a reference to such legend on the face
thereof) substantially in the form set forth below, which legend restricts the
sale, transfer or disposition of the Shares otherwise than in accordance with
this Agreement, as well as such
<PAGE> 3
other legend as the Company may deem appropriate referencing the transfer
restrictions included in the shareholders' agreement provided for in Section
7.1.2:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
ENCUMBERED, PLEDGED, HYPOTHECATED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR
AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION AND CONCURRED IN BY
THE CORPORATION'S COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
SAID ACT OR SUCH TRANSACTION COMPLIES WITH RULES PROMULGATED BY THE
SECURITIES AND EXCHANGE COMMISSION UNDER SAID ACT. IN ADDITION, SALE,
TRANSFER, ENCUMBRANCE, HYPOTHECATION, GIFT OR OTHER DISPOSITION OR
ALIENATION OF SUCH SHARES OR ANY INTEREST THEREIN IS RESTRICTED BY AND
SUBJECT TO A STOCK OPTION AGREEMENT DATED __________ A COPY OF WHICH MAY
BE INSPECTED AT THE PRINCIPAL OFFICE OF THE CORPORATION AND ALL OF THE
PROVISIONS OF WHICH ARE INCORPORATED BY REFERENCE IN THIS CERTIFICATE.
SECTION 4 Exercise Prior to Initial Public Offering
Notwithstanding any other provision to the contrary contained
herein, in the event that prior to the exercise, in whole or in part, of the
Option, the Company has not completed an underwritten public offering of at
least $30,000,000 of Common Stock, where at least $10,000,000 of the proceeds
from such offering are received by the Company, the following terms and
provisions shall apply:
SECTION 4.1 Prior to the Optionee's exercise of the Option,
and as a condition precedent to such exercise and the issuance of any Shares,
the Company may require the Optionee to:
SECTION 4.1.1 confirm to the Company, in such form as
the Company may specify, the representations and warranties of the Optionee set
forth in Section 6 above or to make similar or additional representations,
warranties and agreements with respect to such Shares.
SECTION 4.1.2 execute and deliver to the Company an
appropriate counterpart to a shareholders' agreement with the Company, which
agreement shall include such terms and provisions as the Company in its
discretion deems necessary or desirable to restrict the Optionee's right to
transfer such Shares, including, without limitation, a right of first refusal
exercisable by the Company or its shareholders on the transfer of the Shares
received by the Optionee, a right to repurchase the Shares upon the Optionee's
termination of employment at the Exercise Price if such termination was for
cause or at Fair Market Value if such termination was for a reason other than
for cause.
SECTION 5 Nonassignability
The Option shall not be assignable or transferable, voluntarily or
involuntarily, other than by will or by the laws of descent and distribution.
The Option shall be exercisable during the life of the Optionee only by the
Optionee or the Optionee's legal representative.
SECTION 6 Right of Discharge Reserved
Nothing in this Agreement shall confer upon the Optionee the right
to continue in the employ of the Company or affect any right which the Company
may have to terminate such employment.
SECTION 7 421(b) Disqualifying Disposition Notice
<PAGE> 4
With respect to the transfer or other disposition of Shares issued
pursuant to the exercise of any "incentive stock options" granted hereunder, the
Optionee shall notify the Company of any such transfer of disposition made under
the circumstances described in Section 421(b) of the Code (relating to certain
disqualifying dispositions). Such notice shall be delivered to the Company in
accordance with the provisions of Section 12 below within 10 days of such
transfer or other disposition.
SECTION 8 Plan Provisions to Prevail
This Agreement is subject to all of the terms and provisions of the
Plan. Without limiting the generality of the foregoing, by entering into this
Agreement the Optionee agrees that no member of the Board or the Committee nor
any employee of the Company or any of its subsidiaries shall be liable for any
action or determination made in good faith with respect to the Plan or this
Agreement. In the event that there is any inconsistency between the provisions
of this Agreement and of the Plan, the provisions of the Plan shall govern.
SECTION 9 Notices
Any notice to be given to the Company hereunder shall be in writing
and shall be addressed to Mobius Management Systems, Inc., One Ramada Plaza, New
Rochelle, New York 10801, or at such other address as the Company may hereafter
designate to the Optionee by notice as provided in this Section 11. Any notice
to be given to the Optionee hereunder shall be addressed to the Optionee at the
address set forth beneath his signature hereto, or at such other address as the
Optionee may hereafter designate to the Company by notice as provided herein. A
notice shall be deemed to have been duly given when personally delivered or, if
mailed by registered or certified mail to the party entitled to receive it, five
days after the date the notice was so mailed.
SECTION 10 Successors and Assigns
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and the successors and assigns of the Company and, to the extent
consistent with Section 4.1 of this Agreement and with the Plan, the heirs and
personal representatives of the Optionee.
SECTION 11 Governing Law
This Agreement shall be interpreted, construed and administered in
accordance with the laws of the State of New York as they apply to contracts
made, delivered and performed entirely within such state.
SECTION 12 Severability
If any provision of this Agreement (including any provision of the
Plan that is incorporated herein by reference) shall hereafter be held to be
invalid, unenforceable or illegal in whole or in part, in any jurisdiction under
any circumstances for any reason, (i) such provision shall be reformed to the
minimum extent necessary to cause such provision to be valid, enforceable and
legal while preserving the intent of the parties as expressed in, and the
benefits to the parties provided by, this Agreement and the Plan or (ii) if such
provision cannot be so reformed, such provision shall be severed from this
Agreement and an equitable adjustment shall be made to this Agreement
(including, without limitation, addition of necessary further provisions to this
Agreement) so as to give effect to the intent as so expressed and the benefits
so provided. Such holding shall not affect or impair the validity,
enforceability or legality of such provision in any other jurisdiction or under
any other circumstances. Neither such holding nor such reformation or severance
shall affect or impair the legality, validity or enforceability of any other
provision of this Agreement or the Plan.
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date and year first written above.
MOBIUS MANAGEMENT SYSTEMS, INC.
ATTEST: By: /s/ E. Kevin Dahill
----------------------------- ------------------------
Name: E. Kevin Dahill
Title: Chief Financial Officer
OPTIONEE: /s/ Joseph Tinnerello
------------------------
Joseph Tinnerello
Address: 1335 West Altgeld Avenue
Chicago, IL 60614
<PAGE> 1
Exhibit 10.16
December 28, 1997
Mr. Joseph Tinnerello
1335 West Allgeld Avenue
Chicago, IL 08614
Dear Joe,
As we have discussed, and in contemplation of your commencing employment with
Mobius on January 15, 1998, as set forth in Mobius offer of employment to you
dated December 28, 1997, (the "Offer"), Mobius will advance to you $160,000 in
order for you to exercise your vested incentive stock option shares. This
advance will be repaid to Mobius through one of the following means:
1. Should you sell any of these ISO shares, you will promptly apply the proceeds
of such sale to reduce or eliminate this advance.
2. Mobius will apply this commission earnings that are above your draw amount
set forth in the Offer to reduce the advance, on a dollar for dollar basis,
during and following the non-recoverable draw period. Should this recovery
mechanism not discharge your obligation, you will make a balloon payment to
repay and remainder 36 months after you rejoin the company.
3. Should your employment with Mobius be terminated before the advance is
repaid, the advance will be due and payable upon such termination
As security for this advance, Mobius will hold shares of stock owned by you
equivalent in value to the then outstanding balance. This number of shares will
be reduced no more frequently than once every 180 days (unless the advance
obligation is fully discharged) and will be valued for calculation purposes at
the lowest value established by the market price of the shares during the
preceding 180 day period or, if not publicly traded, by the best judgment of the
board of directors.
In consideration for this advance, please execute and return to me the Release
attached as exhibit A to this letter. I look forward to working with you on the
projects we have outlined and to a long and mutually beneficial relationship.
Sincerely,
/s/ E. Kevin Dahill
--------------------------------
E. Kevin Dahill
AGREED TO AND ACKNOWLEDGED
/s/ Joseph Tinnerello
- --------------------------------
Joseph Tinnerello
<PAGE> 1
Exhibit 10.17
MOBIUS MANAGEMENT SYSTEMS, INC.
1996 STOCK INCENTIVE PLAN
GRANTEE STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT (the "Agreement"), dated as of December 30, 1997,
between MOBIUS MANAGEMENT SYSTEMS, INC. (the "Company"), a Delaware corporation,
and Joseph Tinnerello, (the "Grantee").
Pursuant to the terms of the Company's 1996 Stock Incentive Plan (the
"Plan") and the Stock Option Agreement dated November 6, 1996 between the
Grantee and the Company (the "Option Agreement"), Grantee has been granted a
stock option (the "Option") to purchase 4,000 shares of Class A Non-Voting
common stock of the Company (the "Shares") at a price per share of $125.00 (the
"Exercise Price"). Grantee has informed the Company that he/she wishes to
exercise such option for the purchase of 800 Shares pursuant to the terms of the
Plan and the Option Agreement.
Section 7 of the Option Agreement requires the Grantee to enter into this
Agreement prior to, and as a condition of, Grantee's exercise of the Option for
the purchase of the Shares.
In consideration of the foregoing and the exercise of the Option, and such
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Grantee represents, covenants and agrees as follows:
1. Confirmation of Option Agreement. Grantee hereby confirms and reaffirms
as of the date hereof the representations, warranties, covenants and agreements
set forth in the Option Agreement. Without limiting the foregoing, Optionee
hereby confirms and reaffirms as of the date hereof the representations and
understandings set forth in sections 6.1, 6.2 and 6.3 of the Option Agreement.
2. Transfer Restrictions.
2.1 Grantee shall not, so long as this Agreement is in effect,
directly or indirectly, sell, pledge, give, bequeath, transfer, assign or in any
other way whatsoever encumber or dispose of (hereinafter collectively called
"transfer") any of the Shares (or any interest therein), or any stock
certificate or certificates representing the Shares, except as permitted by this
Agreement or as may be consented to in writing by the Company.
2.2 Notwithstanding anything to the contrary contained in this
Agreement, Grantee is under no restrictions as to the transfer of Shares, during
Grantee's lifetime, to Grantee's Permitted Transferees (as defined herein),
provided that each such Permitted Transferee shall first (1) execute a
<PAGE> 2
written consent to be bound by all the provisions of this Agreement and (ii)
give a duplicate original of such consent to the Company. The Permitted
Transferees shall consist of Grantee's spouse and adult lineal descendants, the
adult spouses of such lineal descendants, trusts for the benefit of Grantee's
minor or adult lineal descendants, or trusts of which Grantee is the trustee or
sole beneficiary. In the event of any transfer by the Grantee to a Permitted
Transferee of all or any part of the Shares (or in the event of any subsequent
transfer by any such Permitted Transferee of such Shares), such Permitted
Transferees shall receive and hold said Shares subject to the terms of this
Agreement and the rights and obligations hereunder of the Grantee as though said
shares were still owned by the Grantee. There shall be no further transfer of
such Shares by a Permitted Transferee except between and among such Permitted
Transferee, the Grantee and the other Permitted Transferees of the Grantee, or
except as permitted by this Agreement.
2.3 Following the termination of this Agreement pursuant to an
underwritten public offering, as provided for in Section 6, grantee shall not,
directly or indirectly, for such period as the underwriters in that offering
reasonably request, except with the prior consent of the underwriters: (i)
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant for
the sale of or otherwise dispose of or transfer any Shares (which term shall
include shares of the Company's common stock into which the Shares may have been
converted) or any securities convertible into or exchangeable or exercisable for
Shares, whether now owned or hereafter acquired or (ii) enter into any swap or
any other agreement or any transaction that transfers, in whole or in part,
directly or indirectly, the economic consequences of ownership of the Shares,
whether any such swap or transaction is to be settled by delivery of the Shares
or other securities, in cash or otherwise. This Section 2.3 shall survive the
termination of this Agreement.
3. Right of First Refusal.
3.1 If the Grantee desires to sell all or any part of the Shares and
the Grantee shall have received a bona fide arm's length written offer, which is
unconditional and irrevocable except as hereinafter provided (hereinafter called
the "Bona Fide Offer"), for the purchase of such shares from a party who is not
a Permitted Transferee of the Grantee (hereinafter called the "Outside Party"),
the Grantee shall give 45 days notice in writing (hereinafter called the "Option
Notice") to the Company setting forth such desire to sell such Shares, which
notice shall be accompanied by a photocopy of the original executed Bona Fide
Offer, shall set forth at least the name and address of the Outside Party, the
number of Shares being sold and the price and terms of such offer and shall be
accompanied by written evidence proving to the satisfaction of
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<PAGE> 3
the Board of Directors of the Company that the Outside Party is capable of
performing and has committed the funds necessary to perform the Bona Fide Offer
in accordance with its terms. On or before the 45th day after the day on which
the Option Notice was given, the Company may send a written counter-notice to
Grantee whereunder the Company shall elect one of the following choices:
(a) the Company consents to the sale by the Grantee to the
Outside Party, in which event, such sale may proceed pursuant to the terms of
the Bona Fide Offer; or
(b) that the Company elects to purchase all of the shares of
the Grantee for which the Bona Fide Offer was made, at the same price per share
and upon the same terms and conditions as contained in the Bona Fide Offer, in
which event the Company shall be obligated to purchase and the Grantee shall be
obligated to sell such shares before the 30th day after the day on which the
counternotice was given at the same price per share and upon the same terms and
conditions as contained in the Bona Fide Offer, including, among other things,
time and manner of payment.
If the Company fails to give a timely counter-notice electing either choice (a)
or (b), the Company shall be deemed to have elected choice (a) and to have
consented to the sale by the Grantee to the Outside Party.
4. Right of Repurchase. If at anytime during the term of this Agreement
the Grantee no longer is employed by the Company (other than by reason of death
or disability):
4.1 If Grantee has been terminated by the Company for cause, the
Company may, at its option exercisable within 180 days of such termination,
repurchase all the Shares from the Grantee at a price per share equal to the
Exercise Price. Company shall provide Grantee with written notice within such
180 day period of its election to so repurchase the Shares, and shall repurchase
such shares within 30 days of the date of such notice.
4.2 If Grantee is no longer employed by the Company (other than by
reason of termination for cause), the Company may, at its option exercisable
within 180 days of such termination of employment, repurchase all the Shares
from the Grantee at a price per share equal to the fair market value of such
share at the time of such repurchase. Company shall provide the Grantee with
written notice within such 180 day period of its election to so repurchase the
Shares, and shall repurchase such shares within 30 days of the date of such
notice.
5. Legend on Certificates. The following statement shall be inscribed on
all certificates representing the Shares so long as this Agreement is in effect:
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<PAGE> 4
"The common stock represented by this certificate is subject to a certain
Shareholders Agreement dated December 30,1997, by and among the Company and
Joseph Tinnerello, as amended, a copy of which is on file at the principal
office of the Company, and any sale, pledge, gift, bequest, transfer,
assignment, encumbrance or other disposition of this certificate in violation of
the Shareholders Agreement shall be invalid."
SECTION 6. Term. This Agreement (other than Section 2.3) shall terminate
upon the consummation by the Company of an underwritten public offering of at
least $30,000,000 of common stock, where at least $10,000,000 of the proceeds
from such offering are received by the Company.
SECTION 7. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and the successors and assigns of
the Company and, to the extent consistent with this Agreement, the heirs and
personal representatives of the Grantee.
SECTION 8. Governing Law. This Agreement shall be interpreted, construed
and administered in accordance with the laws of the State of New York as they
apply to contracts made, delivered and performed entirely within such state.
SECTION 9. Notices. Any notice to be given to the Company hereunder shall
be in writing and shall be addressed to Mobius Management Systems, Inc., One
Ramada Plaza, New Rochelle, New York 10801, or at such other address as the
Company may hereafter designate to the Optionee by notice as provided in this
Section 9. Any notice to be given to the Optionee hereunder shall be addressed
to the Optionee at the address set forth beneath his signature hereto, or at
such other address as the Optionee may hereafter designate to the Company by
notice as provided herein. A notice shall be deemed to have been duly given when
personally delivered or, if mailed by registered or certified mail to the party
entitled to receive it, five days after the date the notice was so mailed.
THE REST OF THIS PAGE IS BLANK
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<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first written above.
MOBIUS MANAGEMENT SYSTEMS, INC.
/s/ E. Kevin Dahill
--------------------------------
ATTEST: __________ Name: E. Kevin Dahill
Title: Chief Financial Officer
GRANTEE
/s/ Joseph Tinnerello
--------------------------------
Joseph Tinnerello
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<PAGE> 1
Exhibit 10.18
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT is entered into as of _______________,
1997, by and between SILICON VALLEY BANK, a California-chartered bank, with its
principal place of business at 3003 Tasman Drive, Santa Clara, California 95054
and with a loan production office located at Wellesley Office Park, 40 William
Street, Suite 350, Wellesley, Massachusetts 02181, doing business under the name
"Silicon Valley East" ("Bank") and MOBIUS MANAGEMENT SYSTEMS, INC., a Delaware
corporation, with its chief executive offices located at One Ramada Plaza, New
Rochelle, New York 10801 ("Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the following terms shall have
the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods (including, without
limitation, the licensing of software and other technology) or the
rendering of services by Borrower, whether or not earned by performance,
and any and all credit insurance, guaranties, and other security therefor,
as well as all merchandise returned to or reclaimed by Borrower and
Borrower's Books relating to any of the foregoing.
"Advance" or "Advances" means a loan advance under the Committed
Revolving Line.
"Affiliate" means, with respect to any Person, any Person that owns
or controls directly or indirectly such Person, any Person that controls
or is controlled by or is under common control with such Person.
"Bank Expenses" means all reasonable costs or expenses (including
reasonable attorneys' fees and expenses) incurred in connection with the
preparation, negotiation, administration, and enforcement of the Loan
Documents; and Bank's reasonable attorneys' fees and expenses incurred in
amending, enforcing or defending the Loan Documents, (including fees and
expenses of appeal or review, or those incurred in any Insolvency
Proceeding) whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and records
including, without limitation: ledgers; records concerning Borrower's
assets or liabilities, the Collateral, business operations or financial
condition; and all computer programs, or tape files, and the equipment,
containing such information.
"Borrowing Base" means an amount equal to (i) seventy-five percent
(75.0%) of Eligible Accounts plus (ii) fifty percent (50.0%) of Borrower's
Eligible Lease Receivables, as determined by Bank with reference to the
most recent Borrowing Base Certificate delivered by Borrower.
"Business Day" means any day that is not a Saturday, Sunday, or
other day on which banks in the State of California are authorized or
required to close.
"Closing Date" means the date of this Agreement.
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<PAGE> 2
"Code" means the Massachusetts Uniform Commercial Code.
"Collateral" means the property described on Exhibit A attached
hereto.
"Committed Revolving Line" means a credit extension of up to Five
Million Dollars ($5,000,000.00).
"Contingent Obligation" means, as applied to any Person, any direct
or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or
other obligation of another, including, without limitation, any such
obligation directly or indirectly guaranteed, endorsed, co-made or
discounted or sold with recourse by that Person, or in respect of which
that Person is otherwise directly or indirectly liable; (ii) any
obligations with respect to undrawn letters of credit issued for the
account of that Person; and (iii) all obligations arising under any
interest rate, currency or commodity swap agreement, interest rate cap
agreement, interest rate collar agreement, or other agreement or
arrangement designated to protect a Person against fluctuation in interest
rates, currency exchange rates or commodity prices; provided, however,
that the term "Contingent Obligation" shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of
any Contingent Obligation shall be deemed to be an amount equal to the
stated or determined amount of the primary obligation in respect of which
such Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as determined
by such Person in good faith; provided, however, that such amount shall
not in any event exceed the maximum amount of the obligations under the
guarantee or other support arrangement.
"Credit Extension" means each Advance, Letter of Credit, Exchange
Contract or any other extension of credit by Bank for the benefit of
Borrower hereunder.
"Current Financial Statements" means the draft consolidated
financial statements of Borrower for fiscal year ending June 30, 1997,
which have been provided to Bank.
"Current Liabilities" means, as of any applicable date, all amounts
that should, in accordance with GAAP, be included as current liabilities
on the consolidated balance sheet of Borrower and its Subsidiaries, as at
such date, plus, to the extent not already included therein, all
outstanding Credit Extensions made under this Agreement, including all
Indebtedness that is payable upon demand or within one year from the date
of determination thereof unless such Indebtedness is renewable or
extendable at the option of Borrower or any Subsidiary to a date more than
one year from the date of determination, but excluding Subordinated Debt.
"Eligible Accounts" means those Accounts that arise in the ordinary
course of Borrower's business that comply with all of Borrower's
representations and warranties to Bank set forth in Section 5.4; provided,
that standards of eligibility may be fixed and revised from time to time
by Bank in Bank's reasonable judgment and upon sixty (60) days prior
notification thereof to Borrower in accordance with the provisions hereof.
Unless otherwise agreed to by Bank in writing, Eligible Accounts shall not
include the following:
(a) Lease Receivables, except those Lease Receivables due and
payable within thirty (30) days of lease inception that are normally
included in Borrower's accounts receivable;
(b) Accounts that the account debtor has failed to pay within
ninety (90) days of invoice date;
(c) Accounts with respect to an account debtor, fifty percent
(50%) of whose Accounts the account debtor has failed to pay within
ninety (90) days of invoice date;
(d) Accounts with respect to an account debtor, including
Affiliates of such account debtor, whose total obligations to
Borrower exceed twenty-five percent (25%) of all Accounts, to the
extent such obligations exceed the aforementioned percentage, except
as approved in writing by Bank;
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<PAGE> 3
(e) Accounts with respect to which the account debtor does not
have its principal place of business in the United States, except
for Eligible Foreign Accounts;
(f) Accounts with respect to which the account debtor is a
federal, state, or local governmental entity or any department,
agency, or instrumentality thereof, except for those Accounts of the
United States or any department, agency or instrumentality thereof
as to which the payee has assigned its rights to payment thereof to
Bank and the assignment has been acknowledged, pursuant to the
Assignment of Claims Act of 1940, as amended (31 U.S.C. 3727);
(g) Accounts with respect to which Borrower is liable to the
account debtor for goods sold or services rendered by the account
debtor to Borrower, but only to the extent of any amounts owing to
the account debtor (sometimes referred to as "contra" accounts, e.g.
accounts payable, customer deposits, credit accounts etc.) against
amounts owed to Borrower;
(h) Accounts generated by demonstration or promotional
equipment, or with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval, bill and hold, or
other terms by reason of which the payment by the account debtor may
be conditional;
(i) Accounts with respect to which the account debtor is an
Affiliate, officer, employee, or agent of Borrower,;
(j) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank
believes, in its sole discretion, that there may be a legitimate and
reasonable basis for dispute (but only to the extent of the amount
subject to such dispute or claim), or is subject to any Insolvency
Proceeding, or becomes insolvent, or goes out of business; and
(K) Accounts the collection of which Bank reasonably
determines to be doubtful.
"Eligible Foreign Accounts" means Accounts with respect to which the
account debtor does not have its principal place of business in the United
States and that are: (1) covered by credit insurance in form and amount,
and by an insurer satisfactory to Bank less the amount of any
deductible(s) which may be or become owing thereon; or (2) supported by
one or more letters of credit either advised or negotiated through Bank or
in favor of Bank as beneficiary, in an amount and of a tenor, and issued
by a financial institution, acceptable to Bank; or (3) approved by Bank on
a case-by-case basis.
"Eligible Lease Receivables" means that portion of Borrower's Lease
Receivables that arise in the ordinary course of Borrower's business, and
are under sixty (60) days from invoice date.
"Equipment" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and
attachments in which Borrower or any of its Subsidiaries has any interest.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the regulations thereunder.
"Exchange Contract" has the meaning set forth in Section 2.1.3.
"GAAP" means generally accepted accounting principles as in effect
in the United States from time to time.
"Guarantor" means any present or future guarantor of the
Obligations.
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<PAGE> 4
"Indebtedness" means (a) all indebtedness for borrowed money or the
deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety
bonds and letters of credit, (b) all obligations evidenced by notes,
bonds, debentures or similar instruments, (c) all capital lease
obligations and (d) all Contingent Obligations.
"Insolvency Proceeding" means any proceeding commenced by or against
any Person under any provision of the United States Bankruptcy Code, as
amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings
seeking reorganization, arrangement, or other relief.
"Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance
or capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Lease Receivables" means all income arising out of leases entered
into between the Borrower and any other Person.
"Letter of Credit" means a letter of credit or similar undertaking
issued by Bank pursuant to Section 2.1.2.
"Letter of Credit Reserve" has the meaning set forth in Section
2.1.2.
"Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any note or
notes executed by Borrower, and any other present or future agreement
entered into between Borrower and/or for the benefit of Bank in connection
with this Agreement, all as amended, extended or restated from time to
time.
"Material Adverse Effect" means a material adverse effect on (i) the
business operations or condition (financial or otherwise) of Borrower and
its Subsidiaries taken as a whole or (ii) the ability of Borrower to repay
the Obligations or otherwise perform its obligations under the Loan
Documents.
"Maturity Date" means one day prior to one year from the Closing
Date.
"Negotiable Collateral" means all of Borrower's present and future
letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper, in each
case solely to the extent constituting part of the Collateral.
"Obligations" means all debt, principal, interest, Bank Expenses and
other amounts owed to Bank by Borrower pursuant to this Agreement or any
other agreement, whether absolute or contingent, due or to become due, now
existing or hereafter arising, including any interest that accrues after
the commencement of an Insolvency Proceeding and including any debt,
liability, or obligation owing from Borrower to others that Bank may have
obtained by assignment or otherwise.
"Payment Date" means the first calendar day of each month commencing
on the first such date after the Closing Date and ending on the Maturity
Date.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under
this Agreement or any other Loan Document (including, without
limitation, the Obligations);
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<PAGE> 5
(b) Indebtedness existing on the Closing Date and disclosed in
the Current Financial Statements;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary
course of business;
(e) Indebtedness secured by Permitted Liens;
(f) Indebtedness incurred in the ordinary course of business
in connection with capital expenditures, operating leases for
equipment or capitalized leases;
(g) Indebtedness in respect to deferred taxes;
(h) Indebtedness in respect of employee benefit plans or
similar arrangements;
(i) Indebtedness arising from the endorsement of drafts and
other instruments for collection in the ordinary course of business;
(j) Indebtedness arising out of the extension, renewal,
refunding or refinancing of any Indebtedness specified in clauses
(a) through (i) above, provided that the principal amount of the
Indebtedness being extended, renewed, refunded or refinanced does
not increase; and
(k) Indebtedness other than that specified in clauses (a)
through (i) above, provided that, for any particular fiscal year of
Borrower, the amount of such Indebtedness shall not exceed
$250,000.00 in the aggregate for Borrower and its Subsidiaries.
"Permitted Investments" means:
(a) Investments existing on the Closing Date disclosed in the
Current Financial Statements; and
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any
agency or any State thereof maturing within one (1) year from the
date of acquisition thereof, (ii) commercial paper maturing no more
than one (1) year from the date of creation thereof and currently
having the highest rating obtainable from either Standard & Poor's
Corporation or Moody's Investors Service, Inc., and (iii) checking,
savings or money market accounts with or certificates of deposit or
bankers' acceptances maturing no more than one (1) year from the
date of investment therein issued by any commercial bank the
commercial paper of which is rated A2 or P2 or higher, respectively,
by Standard & Poor's Corporation or Moody's Investors Service, Inc.;
and
(c) the creation or formation of, or any cash Investment up to
a maximum amount of $1,500,000.00 (in the aggregate) or other
non-cash investment in or to, a Subsidiary of Borrower, whether now
or hereafter existing.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed in
the Current Financial Statements, or arising under this Agreement or
the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings and as to which adequate
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<PAGE> 6
reserves are maintained on Borrower's Books or its Subsidiary's
books and records in accordance with GAAP;
(c) Liens (i) upon or in any Equipment acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price of
such Equipment or Indebtedness incurred solely for the purpose of
financing the acquisition of such Equipment, or (ii) existing on
such Equipment at the time of its acquisition, provided that the
Lien is confined solely to the property so acquired and improvements
thereon, and the proceeds of such Equipment;
(d) Leases or subleases and licenses or sublicenses granted to
others in the ordinary course of Borrower's or its Subsidiaries'
business not interfering in any material respect with the business
of Borrower and its Subsidiaries taken as a whole, and any interest
or title of a lessor, licensor or under any lease or license
provided that such leases, subleases, licenses and sublicenses do
not prohibit the grant of the security interest granted hereunder;
(e) Statutory Liens incurred in the ordinary course of
business and securing Indebtedness that is either not delinquent or
being contested in good faith by appropriate proceedings;
(f) Cash pledges or deposits in connection with workers'
compensation, unemployment insurance, social security legislation or
benefits or other liability insurance programs;
(g) Grants of security and rights of setoff in deposit
accounts, securities and other properties held at banks or financial
institutions to secure payment or reimbursement under overdraft,
acceptance or other facilities;
(h) Rights of setoff, bankers' Liens and other similar Liens
arising by operation of law;
(i) Liens incurred in connection with the extension, renewal
refunding or refinancing of the Indebtedness secured by Liens of the
type described in clauses (a) through (h) above, provided that any
extension, renewal or replacement Lien shall be limited to the
property encumbered by the existing Lien and the principal amount of
the Indebtedness being extended, renewed, refunded or refinanced
does not increase; and
(j) Liens other than those described in clauses (a) through
(i) above, provided that, for any particular fiscal year of
Borrower, such Liens do not relate to property or assets that in the
aggregate are valued in excess of $250,000.00.
"Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit
corporation, firm, joint stock company, estate, entity or governmental
agency.
"Prime Rate" means the variable rate of interest, per annum, most
recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.
"Quick Assets" means, as of any applicable date, the consolidated
cash, cash equivalents, accounts receivable and investments with
maturities of fewer than 90 days of Borrower determined in accordance with
GAAP. Quick Assets shall not include deferred income (from maintenance or
otherwise) or revenue.
"Responsible Officer" means each of the Chief Executive Officer, the
Executive Vice President, the Chief Financial Officer and the Controller
of Borrower.
"Schedule" means the schedule of exceptions attached hereto, if any.
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<PAGE> 7
"Subordinated Debt" means any Indebtedness incurred by Borrower that
is subordinated to the Obligations owing by Borrower to Bank on terms
reasonably acceptable to Bank (and identified as being such by Borrower
and Bank).
"Subsidiary" means with respect to any Person, any corporation,
partnership, company association, joint venture, or any other business
entity of which more than fifty percent (50%) of the voting stock or other
equity interests is owned or controlled, directly or indirectly, by such
Person.
"Tangible Net Worth" means as of any applicable date, the
consolidated total assets of Borrower and its Subsidiaries minus, without
duplication, (i) the sum of any amounts determined on a consolidated basis
attributable to (a) goodwill, (b) intangible items such as unamortized
debt discount and expense, patents, trade and service marks and names,
copyrights and research and development expenses except prepaid expenses,
and (c) all reserves not already deducted from assets, and (ii) Total
Liabilities.
"Total Liabilities" means as of any applicable date, all obligations
that should, in accordance with GAAP be classified as liabilities on the
consolidated balance sheet of Borrower, including in any event all
Indebtedness, but specifically excluding Subordinated Debt.
1.2 Accounting and Other Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP and all calculations
and determinations made hereunder shall be made in accordance with GAAP. When
used herein, the term "financial statements" shall include the notes and
schedules thereto. The terms "including"/ "includes" shall always be read as
meaning "including (or includes) without limitation", when used herein or in any
other Loan Document.
2. LOAN AND TERMS OF PAYMENT
2.1 Credit Extensions. Borrower promises to pay to the order of Bank, in
lawful money of the United States of America, the aggregate unpaid principal
amount of all Credit Extensions made by Bank to Borrower hereunder. Borrower
shall also pay interest on the unpaid principal amount of such Advances at rates
in accordance with the terms hereof.
2.1.1 (a) Subject to and upon the terms and conditions of this Agreement,
Bank agrees to make Advances to Borrower in an aggregate outstanding amount not
to exceed (i) the Committed Revolving Line or the then-current Borrowing Base,
whichever is less, minus (ii) the face amount of all outstanding Letters of
Credit (including drawn but unreimbursed Letters of Credit) and minus (iii) the
Foreign Exchange Reserve. Subject to the terms and conditions of this Agreement,
amounts borrowed pursuant to this Section 2.1 may be repaid and reborrowed at
any time during the term of this Agreement.
(b) Whenever Borrower desires an Advance, Borrower will notify Bank
by facsimile transmission or telephone no later than 3:00 p.m. Pacific time, on
the Business Day that the Advance is to be made. Each such notification shall be
promptly confirmed by a Payment/Advance Form in substantially the form of
Exhibit B hereto. Bank is authorized to make Advances under this Agreement,
based upon instructions received from a Responsible Officer or a designee of a
Responsible Officer, or without instructions if in Bank's discretion such
Advances are necessary to meet Obligations which have become due and remain
unpaid. Bank shall be entitled to rely on any telephonic notice given by a
person who Bank reasonably believes to be a Responsible Officer or a designee
thereof, and Borrower shall indemnify and hold Bank harmless for any damages or
loss suffered by Bank as a result of such reliance. Bank will credit the amount
of Advances made under this Section 2.1 to Borrower's deposit account or another
account as designated by Borrower in the relevant Payment/Advance Form.
(c) The Committed Revolving Line shall terminate on the Maturity
Date, at which time all Advances under this Section 2.1 and other amounts due
under this Agreement (except as otherwise expressly specified herein) shall be
immediately due and payable.
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2.1.2 Letters of Credit.
(a) Subject to the terms and conditions of this Agreement, Bank
agrees to issue or cause to be issued Letters of Credit for the account of
Borrower in an aggregate outstanding face amount not to exceed (i) the Committed
Revolving Line or the then-current Borrowing Base, whichever is less, minus (ii)
the then outstanding principal balance of the Advances. Each Letter of Credit
shall have an expiry date no later than one hundred eighty (180) days after the
Maturity Date provided that Borrower's Letter of Credit reimbursement obligation
shall be secured on terms acceptable to Bank at any time after the Maturity Date
if the term of this Agreement is not extended by Bank. All Letters of Credit
shall be, in form and substance, reasonably acceptable to Bank and shall be
subject to the terms and conditions of Bank's form of standard Application and
Letter of Credit Agreement, and the Bank's standard fees.
(b) The obligation of Borrower to immediately reimburse Bank for
drawings made under Letters of Credit shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement and such Letters of Credit, under all circumstances whatsoever.
Borrower shall indemnify, defend, protect, and hold Bank harmless from any loss,
cost, expense or liability, including, without limitation, reasonable attorneys'
fees, arising out of or in connection with any Letters of Credit, except in the
case of Bank's breach, misconduct or gross negligence in respect thereto.
(c) Borrower may request that Bank issue a Letter of Credit payable
in a currency other than United States Dollars. If a demand for payment is made
under any such Letter of Credit, Bank shall treat such demand as an Advance to
Borrower of the equivalent of the amount thereof (plus cable charges) in United
States currency at the then prevailing rate of exchange in San Francisco,
California, for sales of that other currency for cable transfer to the country
of which it is the currency.
(d) Upon the issuance of any Letter of Credit payable in a currency
other than United States Dollars, Bank shall create a reserve under the
Committed Revolving Line for Letters of Credit against fluctuations in currency
exchange rates, in an amount equal to ten percent (10%) of the face amount of
such Letter of Credit (the "Letter of Credit Reserve"). The amount of such
reserve may be amended by Bank from time to time to account for fluctuations in
the exchange rate. The availability of funds under the Committed Revolving Line
shall be reduced by the amount of such reserve for so long as such Letter of
Credit remains outstanding.
2.1.3 Foreign Exchange Contract; Foreign Exchange Settlements.
(a) Subject to the terms of this Agreement, Borrower may enter into
foreign exchange contracts (the "Exchange Contracts") not to exceed an aggregate
amount of $500,000.00 (the "Contract Limit"), pursuant to which Bank shall sell
to or purchase from Borrower foreign currency on a spot or future basis.
Borrower shall not request any Exchange Contracts at any time it is out of
compliance with any of the provisions of this Agreement. All Exchange Contracts
must provide for delivery of settlement on or before the Maturity Date. The
amount available under the Committed Revolving Line at any time shall be reduced
as provided in Section 2.1.1(a) by the following amounts (the "Foreign Exchange
Reserve") on any given day (the "Determination Date"): (i) on all outstanding
Exchange Contracts on which delivery is to be effected or settlement allowed
more than two Business Days after the Determination Date, 10% of the gross
amount of the Exchange Contracts; plus (ii) on all outstanding Exchange
Contracts on which delivery is to be effected or settlement allowed within two
Business Days after the Determination Date, 100% of the gross amount of the
Exchange Contracts.
(b) Bank may, in its discretion, terminate the Exchange Contracts at
any time (a) that an Event of Default occurs or (b) that there is no sufficient
availability under the Committed Revolving Line and Borrower does not have
available funds in its bank account to satisfy the Foreign Exchange Reserve. If
Bank terminates the Exchange Contracts, and without limitation of any applicable
indemnities, Borrower agrees to reimburse Bank for any and all reasonable fees,
costs and expenses relating thereto or arising in connection therewith.
(c) Borrower shall not permit the total gross amount of all Exchange
Contracts on which delivery is to be effected or settlement allowed in any two
Business Day period to be more than $250,000.00 (the "Settlement
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Limit") nor shall Borrower permit the total gross amount of all Exchange
Contracts to which Borrower is a party, outstanding at any one time, to exceed
the Contract Limit. Notwithstanding the above, however, the amount which may be
settled in any two (2) Business Day period may be increased above the Settlement
Limit up to, but in no event to exceed, the amount of the Contract Limit under
either of the following circumstances:
(i) if there is sufficient availability under the Committed
Revolving Line in the amount of the Foreign Exchange Reserve as of each
Determination Date, provided that Bank in advance shall reserve the full
amount of the Foreign Exchange Reserve against the Committed Revolving
Line; or
(ii) if there is insufficient availability under the Committed
Revolving Line, as to settlements within any two (2) Business Day period,
provided that Bank, in its sole discretion, may: (A) verify good funds
overseas prior to crediting Borrower's deposit account with Bank (in the
case of Borrower's sale of foreign currency); or (B) debit Borrower's
deposit account with Bank prior to delivering foreign currency overseas
(in the case of Borrower's purchase of foreign currency).
(d) In the case of Borrower's purchase of foreign currency, Borrower
in advance shall instruct Bank upon settlement either to treat the settlement
amount as an Advance under the Committed Revolving Line, or to debit Borrower's
account for the amount settled.
(e) Borrower shall execute all standard from applications and
agreements of Bank in connection with the Exchange Contracts and, without
limiting any of the terms of such applications and agreements, Borrower will pay
all standard and reasonable fees and charges of Bank in connection with the
Exchange Contracts.
(f) Without limiting any of the other terms of this Agreement or any
such standard form applications and agreement of Bank, Borrower agrees to
indemnify Bank and hold it harmless, from and against any and all claims, debts,
liabilities, demands, obligations, actions, costs and expenses (including,
without limitation, reasonable attorneys' fees of counsel of Bank's choice), of
every nature and description which it may sustain or incur, based upon, arising
out of, or in any way relating to any of the Exchange Contracts or any
transactions relating thereto or contemplated thereby, except in the case of
Bank's breach, misconduct or gross negligence in respect thereof.
2.1.4 Cash Management Services Sublimit. Borrower may utilize up to an
aggregate amount not to exceed $500,000.00 for Cash Management Services provided
by Lender, which services may include merchant services, PC-ACH, direct deposit
of payroll, business credit card, Firstax, and other related check cashing
services as defined in certain Cash Management Services Agreement to be provided
to Borrower (a "Cash Management Service", or the "Cash Management Services").
All amounts actually paid by Lender in respect of a Cash Management Service or
Cash Management Services shall, when paid, constitute an advance under the Line
of Credit.
2.2 Overadvances. If, at any time or for any reason, the amount of
Obligations owed by Borrower to Bank pursuant to Section 2.1.1, of this
Agreement is greater than the lesser of (i) the Committed Revolving Line or (ii)
the then-current Borrowing Base, Borrower shall immediately pay to Bank, in
cash, the amount of such excess.
2.3 Interest Rates, Payments, and Calculations.
(a) Interest Rate. Except as set forth in Section 2.3(b), any
Advances shall bear interest, on the average daily balance thereof, at a per
annum rate equal to the Prime Rate.
(b) Default Rate. All Obligations shall bear interest, from and
after the occurrence of an Event of Default, at a rate equal to five (5)
percentage points above the interest rate applicable immediately prior to the
occurrence of the Event of Default.
(c) Payments. Interest hereunder shall be due and payable on each
Payment Date. Borrower hereby authorizes Bank to debit any accounts with Bank,
including, without limitation, Account Number _____________________ for payments
of principal and interest due on the Obligations and any other amounts owing
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by Borrower to Bank. Bank will notify Borrower as promptly as practicable in
writing of all debits which Bank has made against Borrower's accounts. Any such
debits against Borrower's accounts in no way shall be deemed a set-off. Any
interest not paid when due shall be compounded by becoming a part of the
Obligations, and such interest shall thereafter accrue interest at the rate then
applicable hereunder.
(d) Computation. In the event the Prime Rate is changed from time to
time hereafter, the applicable rate of interest hereunder shall be increased or
decreased effective as of 12:01 a.m. on the day the Prime Rate is changed, by an
amount equal to such change in the Prime Rate. All interest chargeable under the
Loan Documents shall be computed on the basis of a three hundred sixty (360) day
year for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence of an Event of Default,
Bank shall credit a wire transfer of funds, check or other item of payment to
such deposit account or Obligation as Borrower specifies. After the occurrence
of an Event of Default, the receipt by Bank of any wire transfer of funds,
check, or other item of payment, whether directed to Borrower's deposit account
with Bank or to the Obligations or otherwise, shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment in
respect of the Obligations unless such payment is of immediately available
federal funds or unless and until such check or other item of payment is honored
when presented for payment. Notwithstanding anything to the contrary contained
herein, any wire transfer or payment received by Bank after 2:00 p.m. Pacific
time shall be deemed to have been received by Bank as of the opening of business
on the immediately following Business Day. Whenever any payment to Bank under
the Loan Documents would otherwise be due (except by reason of acceleration) on
a date that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.
2.5 Fees. Borrower shall pay to Bank the following:
(a) Facility Fee. A Facility Fee equal to Ten Thousand Dollars
($10,000.00), which fee shall be due on the Closing Date and shall be
fully earned and non-refundable;
(b) Financial Examination and Appraisal Fees. Bank's customary fees
and reasonable out-of-pocket expenses for Bank's audits of Borrower's
Accounts, and for each appraisal of Collateral and financial analysis and
examination of Borrower performed from time to time by Bank or its agents;
(c) Bank Expenses. Upon demand from Bank, including, without
limitation, upon the date hereof, all Bank Expenses incurred through the
date hereof, including reasonable attorneys' fees and, after the date
hereof, all Bank Expenses, including reasonable attorneys' fees and
expenses, as and when they become due.
2.6 Additional Costs. In case any change in any law, regulation, treaty or
official directive or the interpretation or application thereof by any court or
any governmental authority charged with the administration thereof or the
compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law), in each case
after the date of this Agreement:
(a) subjects Bank to any tax with respect to payments of principal
or interest or any other amounts payable hereunder by Borrower or
otherwise with respect to the transactions contemplated hereby (except for
taxes on the overall net income of Bank imposed by the United States of
America or any political subdivision thereof);
(b) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect to its
performance under this Agreement,
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and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans, Bank shall notify Borrower thereof in writing. Borrower agrees to pay
to Bank the amount of such increase in cost, reduction in income or additional
expense as and when such cost, reduction or expense is incurred or determined,
upon presentation by Bank of a statement of the amount and setting forth Bank's
calculation thereof, all in reasonable detail, which statement shall be deemed
true and correct absent manifest error.
2.7 Term. Except as otherwise set forth herein, this Agreement shall
become effective on the Closing Date and, subject to Section 12.7, shall
continue in full force and effect for a term ending on the Maturity Date.
Notwithstanding the foregoing, Bank shall have the right to terminate its
obligation to make Credit Extensions under this Agreement immediately and
without notice upon the occurrence and during the continuance of an Event of
Default. Notwithstanding termination of this Agreement, Bank's lien on the
Collateral shall remain in effect for so long as any Obligations are
outstanding.
3. CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Credit Extension. The obligation of
Bank to make the initial Credit Extension is subject to the condition precedent
that Bank shall have received, in form and substance satisfactory to Bank, the
following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with respect to
articles, bylaws, incumbency and resolutions authorizing the execution and
delivery of this Agreement;
(c) an opinion of Borrower's counsel as to the authority of Borrower
to enter into this Agreement;
(d) financing statements (Forms UCC-1);
(e) insurance certificate;
(f) payment of the fees and Bank Expenses then due specified in
Section 2.5 hereof;
(g) Certificates of Good Standing (Delaware) and Foreign
Qualification (New York) with respect to Borrower; and
(h) such other documents, and completion of such other matters, as
Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Credit Extensions. The obligation of Bank
to make each Credit Extension, including the initial Credit Extension, is
further subject to the following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as provided
in Section 2.1.1(b); and
(b) the representations and warranties contained in Section 5 shall
be true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Credit Extension as
though made at and as of each such date, and no Event of Default shall
have occurred and be continuing, or would result from such Credit
Extension. The making of each Credit Extension shall be deemed to be a
representation and warranty by Borrower on the date of such Credit
Extension as to the accuracy of the facts referred to in this Section
3.2(b).
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4. CREATION OF SECURITY INTEREST (THIS IS NOT AN ALL ASSETS SECURITY
INTEREST)
4.1 Grant of Security Interest. Borrower grants and pledges to Bank a
continuing security interest in all presently existing and hereafter acquired or
arising Collateral, in order to secure prompt payment of any and all Obligations
and in order to secure prompt performance by Borrower of each of its covenants
and duties under the Loan Documents. Except as set forth in the Schedule, such
security interest constitutes a valid, first priority security interest in the
presently existing Collateral, and will constitute a valid, first priority
security interest in Collateral acquired after the date hereof. Borrower
acknowledges that Bank may place a "hold" on any Deposit Account pledged as
Collateral to secure the Obligations. Notwithstanding termination of this
Agreement, Bank's Lien on the Collateral shall remain in effect for so long as
any Obligations are outstanding.
4.2 Delivery of Additional Documentation Required. Borrower shall from
time to time execute and deliver to Bank, at the request of Bank, all financing
statements and other documents that Bank may reasonably request, in form
satisfactory to Bank, to perfect and continue perfected Bank's security
interests in the Collateral and in order to fully consummate all of the
transactions contemplated under the Loan Documents.
4.3 Right to Inspect. Bank (through any of its officers, employees, or
agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours, to inspect Borrower's Books and to make
copies thereof and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, condition of, or any other
matter relating to, the Collateral.
4.4 Insurance. Borrower shall have Bank named as loss payee on a liability
policy acceptable to Bank.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each Subsidiary of
Borrower is a corporation duly existing and in good standing under the laws of
its state of incorporation and qualified and licensed to do business in, and is
in good standing in, any state in which the conduct of its business or its
ownership of property requires that it be so qualified, except for any failure
to so qualify or be licensed or be in such good standing which is not reasonably
likely to have a Material Adverse Effect.
5.2 Due Authorization; No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles/Certificate of Incorporation or
Bylaws, nor will they constitute an event of default under any material
agreement to which Borrower is a party or by which Borrower is bound. Borrower
is not in default under any agreement to which it is a party or by which it is
bound, which default could have a Material Adverse Effect.
5.3 No Prior Encumbrances. Borrower has good and indefeasible title to the
Collateral, free and clear of Liens, except for Permitted Liens.
5.4 Bona Fide Eligible Accounts; Lease Accounts. The Eligible Accounts and
Eligible Lease Receivables are bona fide existing obligations. The service or
property giving rise to such Eligible Accounts and/or Eligible Lease Receivables
has been performed or delivered to the account debtor or to the account debtor's
agent for immediate shipment to and unconditional acceptance by the account
debtor. Borrower has not received notice of actual or imminent Insolvency
Proceeding of any account debtor whose accounts are included in the most recent
Borrowing Base Certificate as an Eligible Account and/or Eligible Lease
Receivable.
5.5 Name; Location of Chief Executive Office. Except as disclosed in the
Schedule, Borrower has not done business and will not without at least thirty
(30) days prior written notice to Bank do business under any name
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other than that specified on the signature page hereof. The chief executive
office of Borrower is located at the address indicated in Section 10 hereof.
5.6 Litigation. Except as set forth in the Schedule, there are no actions
or proceedings pending, or, to Borrower's knowledge, threatened by or against
Borrower or any Subsidiary of Borrower before any court or administrative agency
in which an adverse decision could have a Material Adverse Effect or a material
adverse effect on Borrower's interest or Bank's security interest in the
Collateral.
5.7 No Material Adverse Change in Financial Statements. All consolidated
financial statements related to Borrower and any Subsidiary of Borrower that
have been delivered by Borrower to Bank fairly present in all material respects
Borrower's consolidated financial condition as of the date thereof and
Borrower's consolidated results of operations for the period then ended. There
has not been a material adverse change in the consolidated financial condition
of Borrower since the date of the most recent of such financial statements
submitted to Bank on or about the Closing Date.
5.8 Solvency. The fair saleable value of Borrower's assets (including
goodwill minus disposition costs) exceeds the fair value of its liabilities; the
Borrower is not left with unreasonably small capital after the transactions
contemplated by this Agreement; and Borrower is able to pay its debts (including
trade debts) as they mature.
5.9 Regulatory Compliance. Borrower and each Borrower Subsidiary has met
the minimum funding requirements of ERISA with respect to any employee benefit
plans subject to ERISA, except for any failure to do so which is not reasonably
likely to have a Material Adverse Effect. No event has occurred resulting from
Borrower's failure to comply with ERISA that is reasonably likely to result in
Borrower's incurring any liability that could have a Material Adverse Effect.
Borrower is not an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940.
Borrower is not engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulations G, T and U of the Board of
Governors of the Federal Reserve System). Borrower has complied in all material
respects with all the provisions of the Federal Fair Labor Standards Act.
Borrower has not violated any statutes, laws, ordinances or rules applicable to
it, violation of which is reasonably likely to have a Material Adverse Effect.
5.10 Environmental Condition. None of Borrower's or any Borrower
Subsidiary's properties or assets has ever been used by Borrower or any Borrower
Subsidiary or, to the best of Borrower's knowledge, by previous owners or
operators, in the disposal of, or to produce, store, handle, treat, release, or
transport, any hazardous waste or hazardous substance other than in accordance
with applicable law; to the best of Borrower's knowledge, none of Borrower's
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a hazardous waste or
hazardous substance disposal site, or a candidate for closure pursuant to any
environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary of Borrower; and neither Borrower
nor any Subsidiary of Borrower has received a summons, citation, notice, or
directive from the Environmental Protection Agency or any other federal, state
or other governmental agency concerning any action or omission by Borrower or
any such Subsidiary resulting in the release, or other disposition of hazardous
waste or hazardous substances into the environment.
5.11 Taxes. Borrower and each Subsidiary of Borrower has filed or caused
to be filed all material tax returns required to be filed on a timely basis, and
has paid, or has made adequate provision for the payment of, all taxes reflected
therein, except those being contested in good faith by proper proceedings with
adequate reserves under GAAP.
5.12 Subsidiaries. Borrower does not own any stock, partnership interest
or other equity securities of any Person, except for Permitted Investments.
5.13 Government Consents. Borrower and each Subsidiary of Borrower has
obtained all consents, approvals and authorizations of, made all declarations or
filings with, and given all notices to, all governmental
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authorities that are necessary for the continued operation of Borrower's
business as currently conducted, except for any failure to do so which is not
reasonably likely to have a Material Adverse Effect.
5.14 Full Disclosure. No representation, warranty or other statement made
by Borrower in any certificate or written statement furnished to Bank contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained in such certificates or
statements not misleading.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
a Credit Extension hereunder, Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain its and each of its
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify is reasonably likely to have a Material Adverse Effect.
Borrower shall maintain, and shall cause each of its Subsidiaries to maintain,
to the extent consistent with prudent management of Borrower's business, in
force all licenses, approvals and agreements, the loss of which is reasonably
likely to have a Material Adverse Effect.
6.2 Government Compliance. Borrower shall meet, and shall cause each
Subsidiary of Borrower to meet, the minimum funding requirements of ERISA with
respect to any employee benefit plans subject to ERISA, except for any failure
to do so which is not reasonably likely to have a Material Adverse Effect.
Borrower shall comply, and shall cause each Subsidiary of Borrower to comply,
with all statutes, laws, ordinances and government rules and regulations to
which it is subject, noncompliance with which is reasonably likely to have a
Material Adverse Effect or a material adverse effect on the Collateral or the
priority of Bank's Lien on the Collateral.
6.3 Financial Statements, Reports, Certificates. Borrower shall deliver to
Bank: (a) as soon as available, but in any event within thirty (30) days after
the end of each calendar month, a company prepared consolidated balance sheet
and income statement covering Borrower's consolidated operations during such
period, in a form and certified by an officer of Borrower reasonably acceptable
to Bank; (b) as soon as available, but in any event within ninety (90) days
after the end of Borrower's fiscal year, audited consolidated financial
statements of Borrower prepared in accordance with GAAP, consistently applied,
together with an unqualified opinion on such financial statements of an
independent certified public accounting firm reasonably acceptable to Bank; (c)
promptly upon receipt of notice thereof, a report of any legal actions pending
or threatened against Borrower or any Subsidiary of Borrower that could result
in damages or costs to Borrower or any such Subsidiary of One Hundred Thousand
Dollars ($100,000) or more; and (d) such budgets, sales projections, operating
plans or other financial information as Bank may reasonably request from time to
time.
Within thirty (30) days after the last day of each calendar month,
Borrower shall deliver to Bank a Borrowing Base Certificate signed by a
Responsible Officer in substantially the form of Exhibit C hereto, together with
aged listings of accounts receivable.
Within thirty (30) days after the last day of each calendar month,
Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the form
of Exhibit D hereto.
Bank shall have a right from time to time hereafter to audit Borrower's
Accounts at Borrower's expense, provided that such audits will be conducted no
more often than every twelve (12) months unless an Event of Default has occurred
and is continuing.
6.4 Taxes. Borrower shall make, and shall cause each Subsidiary to make,
due and timely payment or deposit of all material federal, state, and local
taxes, assessments, or contributions required of it by law, and will execute and
deliver to Bank, on demand, appropriate certificates attesting to the payment or
deposit thereof; and Borrower will make, and will cause each Subsidiary of
Borrower to make, timely payment or deposit of all material tax payments and
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withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish Bank with proof
satisfactory to Bank indicating that Borrower or a Subsidiary of Borrower has
made such payments or deposits; provided that Borrower or a Subsidiary of
Borrower need not make any payment if the amount or validity of such payment is
(I) contested in good faith by appropriate proceedings , (ii) is reserved
against (to the extent required by GAAP) by Borrower and (iii) no lien other
than a Permitted Lien results.
6.5 Insurance. Borrower, at its expense, shall keep its assets insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain insurance
relating to Borrower's ownership and use of its assets in amounts and of a type
that are customary to businesses similar to Borrower's.
6.6 Depository. Borrower shall maintain an operating bank account with
Bank.
6.7 Quick Ratio. Borrower shall maintain, as of the last day of each
calendar month, beginning with month ending June 30, 1997, a ratio of Quick
Assets to Current Liabilities of at least 1.5 to 1.0.
6.8 Debt-Net Worth Ratio. Borrower shall maintain, as of the last day of
each calendar month, beginning with month ending June 30, 1997, a ratio of Total
Liabilities less Subordinated Debt less deferred maintenance revenue, to
Tangible Net Worth plus Subordinated Debt of not more than 1.25 to 1.0.
6.9 Tangible Net Worth. Borrower shall maintain, as of the last day of
each calendar month, beginning with month ending June 30, 1997, a Tangible Net
Worth of not less than Five Million Dollars ($5,000,000.00), plus seventy-five
(75.0%) percent of quarterly net income (with no deduction for any quarterly
losses), on a cumulative basis, beginning with quarter ending September 30,
1997.
6.10 Further Assurances. At any time and from time to time Borrower shall
execute and deliver such further instruments and take such further action as may
reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any Credit Extension
hereunder shall be available and until payment in full of the outstanding
Obligations or for so long as Bank may have any commitment to make any Advances,
Borrower will not do any of the following:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose of
(collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer, all
or any substantial part of its business or property, other than Transfers: (i)
of non-exclusive licenses and similar arrangements for the use of the property
of Borrower or its Subsidiaries in the ordinary course of business; (ii) that
constitute payment of normal and usual operating expenses in the ordinary course
of business;; or (iii) of worn-out or obsolete Equipment.
7.2 Changes in Business, Ownership, or Management, Business Locations.
Engage in any business, or permit any of its Subsidiaries to engage in any
business, other than the businesses currently engaged in by Borrower and its
Subsidiaries and any business substantially similar or related thereto (or
incidental thereto), or suffer a material change in Borrower's ownership or
management. Borrower will not, without at least thirty (30) days prior written
notification to Bank, relocate its chief executive office or add any new offices
or business locations other than the addition of sales or distribution offices
from time to time.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person.
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<PAGE> 16
7.4 Indebtedness. Create, incur, assume or be or remain liable with
respect to any Indebtedness, or permit any Subsidiary of Borrower so to do,
other than Permitted Indebtedness.
7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien with
respect to any of its property, or assign or otherwise convey any right to
receive income in relation to Accounts, or permit any of its Subsidiaries so to
do, except for Permitted Liens.
7.6 Distributions. Pay any dividends or make any other distribution or
payment on account of or in redemption, retirement or purchase of any capital
stock.
7.7 Investments. Make any Investment in or to any Person, or permit any of
its Subsidiaries so to do, other than Permitted Investments.
7.8 Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower except
for transactions that are in the ordinary course of Borrower's business, upon
fair and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm's length transaction with a nonaffiliated Person.
7.9 Subordinated Debt. Make any payment in respect of any Subordinated
Debt, or permit any of its Subsidiaries to make any such payment, except in
compliance with the terms of such Subordinated Debt, or amend any provision
contained in any documentation relating to the Subordinated Debt without Bank's
prior written consent.
7.10 Compliance. Become an "investment company" or a company controlled by
an "investment company," within the meaning of the Investment Company Act of
1940, or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose;
permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to
occur which is reasonably likely to have a Material Adverse Effect; fail to
comply with the Federal Fair Labor Standards Act or violate any other law or
regulation, which failure to comply or violation is reasonably likely to have a
Material Adverse Effect or a material adverse effect on the Collateral or the
priority of Bank's Lien on the Collateral; or permit any of its Subsidiaries to
do any of the foregoing.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay, when due, any of the
Obligations.
8.2 Covenant Default.
(a) If Borrower fails to perform any obligation under Sections 6.3,
6.6, 6.7, 6.8, 6.9, or 6.10, or violates any of the covenants contained in
Article 7 of this Agreement, or
(b) If Borrower fails or neglects to perform, keep, or observe any
other material term, provision, condition, covenant, or agreement contained in
this Agreement, in any of the Loan Documents, or in any other present or future
agreement between Borrower and Bank and as to any default under such other term,
provision, condition, covenant or agreement that can be cured, has failed to
cure such default within thirty (30) days after notice by Bank to Borrower of
the occurrence thereof; provided, however, that if the default cannot by its
nature be cured within the thirty (30) day period or cannot after diligent
attempts by Borrower be cured within such thirty (30) day period, and such
default is likely to be cured within a reasonable time, then Borrower shall have
an additional reasonable period (which shall not in any case exceed thirty (30)
days) to attempt to cure such default, and within such reasonable time period
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<PAGE> 17
the failure to have cured such default shall not be deemed an Event of Default
(provided that no Advances will be required to be made during such cure period);
8.3 Material Adverse Change. If there (i) occurs a material adverse change
in the business, operations, or condition (financial or otherwise) of the
Borrower, or (ii) is a material impairment of the prospect of repayment of any
portion of the Obligations or (iii) is a material impairment of the value or
priority of Bank's security interests in the Collateral;
8.4 Attachment. If any material portion of Borrower's assets is attached,
seized, subjected to a writ or distress warrant, or is levied upon, or comes
into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within thirty (30) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets and such lien or encumbrance has not been removed, discharged
or rescinded within 30 days, or if a notice of lien, levy, or assessment is
filed of record with respect to any material portion of Borrower's assets by the
United States Government, or any department, agency, or instrumentality thereof,
or by any state, county, municipal, or governmental agency, and the same is not
paid within thirty (30) days after Borrower receives notice thereof, provided
that none of the foregoing shall constitute an Event of Default where such
action or event is stayed or an adequate bond has been posted pending a good
faith contest by Borrower (provided that no Credit Extensions will be required
to be made during such cure period);
8.5 Insolvency. If Borrower becomes insolvent, or if an Insolvency
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within 30 days (provided that no
Advances will be made prior to the dismissal or stay of such Insolvency
Proceeding);
8.6 Other Agreements. If there is a default in any agreement to which
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness of Borrower in an amount in excess of Two Hundred Fifty
Thousand Dollars ($250,000) or that is reasonably likely to have a Material
Adverse Effect;
8.7 Subordinated Debt. If Borrower makes any payment on account of
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8 Judgments. If a judgment or judgments for the payment of money in an
amount, individually or in the aggregate, of at least One Hundred Thousand
Dollars ($100,000) shall be rendered against Borrower which is not covered by
insurance and shall remain unsatisfied and unstayed for a period of thirty (30)
days (provided that no Credit Extensions will be made prior to the satisfaction
or stay of such judgment); or
8.9 Misrepresentations. If any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate or writing delivered to Bank by Borrower or any
Person acting on Borrower's behalf pursuant to this Agreement or any other Loan
Document.
8.10 Guaranty. Any guaranty of all or a portion of the Obligations ceases
for any reason to be in full force and effect, or any Guarantor fails to perform
any material obligation under any guaranty of all or a portion of the
Obligations, or any material misrepresentation or material misstatement exists
now or hereafter in any warranty or representation set forth in any guaranty of
all or a portion of the Obligations or in any certificate delivered to Bank by a
Guarantor in connection with such guaranty, or any of the circumstances
described in Sections 8.4, 8.5 or 8.8 occur with respect to any Guarantor.
9. BANK'S RIGHTS AND REMEDIES
9.1 Rights and Remedies. Upon the occurrence and during the continuance of
an Event of Default, Bank may, at its election, without notice of its election
and without demand (unless otherwise specified) (but with written
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<PAGE> 18
notice of such actions given to Borrower promptly following such actions), do
any one or more of the following, all of which are authorized by Borrower:
(a) Declare in writing all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately
due and payable (provided that upon the occurrence of an Event of Default
described in Section 8.5 all Obligations shall become immediately due and
payable without any action by Bank);
(b) Cease advancing money or extending credit to or for the benefit
of Borrower under this Agreement or under any other agreement between
Borrower and Bank;
(c) Demand in writing that Borrower (i) deposit cash with Bank in an
amount equal to the amount of any Letters of Credit remaining undrawn, as
collateral security for the repayment of any future drawings under such
Letters of Credit, and Borrower shall forthwith deposit and pay such
amounts, and (ii) pay in advance all Letters of Credit fees scheduled to
be paid or payable over the remaining term of the Letters of Credit;
(d) Liquidate any Exchange Contracts not yet settled and demand in
writing that Borrower immediately deposit cash with Bank in an amount
sufficient to cover any losses incurred by Bank due to liquidation of the
Exchange Contracts at the then prevailing market price;
(e) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
(f) Without notice to or demand upon Borrower, make such payments
and do such acts as Bank considers necessary or reasonable to protect its
security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires, and to make the Collateral available to
Bank as Bank may designate. Borrower authorizes Bank to enter the premises
where the Collateral is located, to take and maintain possession of the
Collateral, or any part of it, and to pay, purchase, contest, or
compromise any encumbrance, charge, or lien which in Bank's determination
appears to be prior or superior to its security interest and to pay all
expenses incurred in connection therewith. With respect to any of
Borrower's premises, Borrower hereby grants Bank a license to enter such
premises and to occupy the same, without charge in order to exercise any
of Bank's rights or remedies provided herein, at law, in equity, or
otherwise;
(g) Without notice to Borrower set off and apply to the Obligations
any and all (i) balances and deposits of Borrower held by Bank, or (ii)
indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;
(h) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell (in the manner provided for herein)
the Collateral. Bank is hereby granted a non-transferrable, non-exclusive,
royalty-free license or other right, solely pursuant to the provisions of
this Section 9.1, to use, without charge, Borrower's labels, rights of use
of any name, trade names, and advertising matter, or any property of a
similar nature, as it pertains to the Collateral, in completing production
of, advertising for sale, and selling any Collateral and, in connection
with Bank's exercise of its rights under this Section 9.1, Borrower's
rights under all licenses and all franchise agreements shall inure to
Bank's benefit;
(i) Sell the Collateral at either a public or private sale, or both,
by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply the proceeds thereof to
the Obligations in whatever manner or order it deems appropriate;
(j) Bank may credit bid and purchase at any public sale, or at any
private sale as permitted by law; and
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<PAGE> 19
(k) Any deficiency that exists after disposition of the Collateral
as provided above will be paid immediately by Borrower.
9.2 Power of Attorney. Effective only upon the occurrence and during the
continuance of an Event of Default, Borrower hereby irrevocably appoints Bank
(and any of Bank's designated officers, or employees) as Borrower's true and
lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or bill of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) settle and adjust disputes and claims respecting the accounts
directly with account debtors, for amounts and upon terms which Bank determines
to be reasonable. The appointment of Bank as Borrower's attorney in fact, and
each and every one of Bank's rights and powers, being coupled with an interest,
is irrevocable until all of the Obligations have been fully repaid and performed
and Bank's obligation to provide advances hereunder is terminated.
9.3 Accounts Collection. Upon the occurrence and during the continuance of
an Event of Default, (i) Bank may notify any Person owing funds to Borrower
constituting payment of the Collateral of Bank's security interest in such funds
and verify the amount of such Account, and (ii) Borrower shall collect all
amounts owing to Borrower constituting payment of the Collateral for Bank,
receive in trust all payments as Bank's trustee, and if requested or required by
Bank, immediately deliver such payments to Bank in their original form as
received from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish any
required proof of payment due to third persons or entities, as required under
the terms of this Agreement, then Bank may do any or all of the following: (a)
make payment of the same or any part thereof; (b) set up such reserves under the
Committed Revolving Line as Bank deems necessary to protect Bank from the
exposure created by such failure; or (c) if Borrower fails to comply with
Section 6.5, obtain and maintain insurance policies of the type discussed in
Section 6.5 of this Agreement, and take any action with respect to such policies
as Bank reasonably deems prudent. Any amounts so paid or deposited by Bank shall
constitute Bank Expenses, shall be immediately due and payable upon written
demand, and shall bear interest at the then applicable rate hereinabove
provided, and shall be secured by the Collateral. Any payments made by Bank
shall not constitute an agreement by Bank to make similar payments in the future
or a waiver by Bank of any Event of Default under this Agreement.
9.5 Bank's Liability for Collateral. So long as Bank complies with
reasonable banking practices, Bank shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower.
9.6 Remedies Cumulative. Bank's rights and remedies under this Agreement,
the Loan Documents, and all other agreements shall be cumulative. Bank shall
have all other rights and remedies not expressly set forth herein as provided
under the Code, by law, or in equity. No exercise by Bank of one right or remedy
shall be deemed an election, and no waiver by Bank of any Event of Default on
Borrower's part shall be deemed a continuing waiver. No delay by Bank shall
constitute a waiver, election, or acquiescence by it. No waiver by Bank shall be
effective unless made in a written document signed on behalf of Bank and then
shall be effective only in the specific instance and for the specific purpose
for which it was given.
9.7 Demand; Protest. Except as otherwise specified herein, Borrower waives
demand, protest, notice of protest, notice of default or dishonor, notice of
payment and nonpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees at any time held by Bank on which
Borrower may in any way be liable.
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<PAGE> 20
10. NOTICES
Unless otherwise provided in this Agreement, all notices or demands by any
party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, by certified mail, postage prepaid, return receipt requested,
or by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:
If to Borrower Mobius Management Systems, Inc.
One Ramada Plaza
New Rochelle, New York 10801
Attn: Mr. E. Kevin Dahill, Chief Financial Officer
FAX: (914) 632-1789
With a copy to Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
Attn: Kenneth P. Kopelman, Esquire
FAX: (212) 715-8000
If to Bank Silicon Valley East
40 William Street
Wellesley, Massachusetts 02181
Attn: Mr. James C. Maynard, Vice President
FAX: (617) 431-9906
With a copy Riemer & Braunstein
Three Center Plaza
Boston, Massachusetts 02108
Attn: David A. Ephraim, Esquire
FAX: (617) 723-6831
All notices shall be deemed given when received. The parties hereto may
change the address at which they are to receive notices hereunder, by notice in
writing in the foregoing manner given to the other.
11. CHOICE OF LAW AND VENUE; JURY WAIVER
The laws of the Commonwealth of Massachusetts shall apply to this
Agreement. BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, SUIT,
OR PROCEEDING OF ANY KIND, AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS
AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR ANY REASON BANK CANNOT AVAIL ITSELF OF
THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS, BORROWER ACCEPTS JURISDICTION
OF THE COURTS AND VENUE IN SANTA CLARA COUNTY, CALIFORNIA.
BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE
LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH
PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL AND THAT IT
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<PAGE> 21
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS
12.1 Successors and Assigns. This Agreement shall bind and inure to the
benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of but with written notice to Borrower to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank's obligations, rights and benefits hereunder.
12.2 Indemnification. Borrower shall indemnify, defend, protect and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any third
party in connection with the transactions contemplated by the Loan Documents;
and (b) all losses or Bank Expenses in any way suffered, incurred, or paid by
Bank as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under the Loan Documents, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for, in each case, losses caused by Bank's gross negligence or willful
misconduct.
12.3 Time of Essence. Time is of the essence for the performance of all
obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration. This Agreement cannot be amended
or terminated except by a writing signed by Borrower and Bank. All prior
agreements, understandings, representations, warranties, and negotiations
between the parties hereto with respect to the subject matter of this Agreement,
if any, are merged into this Agreement and the Loan Documents.
12.6 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.7 Survival. All covenants, representations and warranties made in this
Agreement shall continue in full force and effect so long as any Obligations
remain outstanding. The obligations of Borrower to indemnify Bank with respect
to the expenses, damages, losses, costs and liabilities described in Section
12.2 shall survive until all applicable statute of limitations periods with
respect to actions that may be brought against Bank have run; provided that so
long as the obligations referred to in the first sentence of this Section 12.7
have been satisfied, and Bank has no commitment to make any Credit Extensions or
to make any other loans to Borrower, Bank shall release all security interests
granted hereunder and redeliver all Collateral held by it in accordance with
applicable law.
12.8 Countersignature. This Agreement shall become effective only when it
shall have been executed by Borrower and Bank (provided, however, in no event
shall this Agreement become effective until signed by an officer of Bank in
California).
12.9 Determinations. All calculations and determinations required to be
made by Bank hereunder shall be made in good faith and in a commercially
reasonable manner.
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<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
MOBIUS MANAGEMENT SYSTEMS, INC.
By:
---------------------------------------------
Title:
------------------------------------------
By:
---------------------------------------------
Title:
------------------------------------------
SILICON VALLEY BANK, d/b/a SILICON VALLEY
EAST
By:
----------------------------------------------
Name:
--------------------------------------------
Title:
-------------------------------------------
SILICON VALLEY BANK
By:
----------------------------------------------
Name:
--------------------------------------------
Title:
-------------------------------------------
(Signed in Santa Clara County, California)
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<PAGE> 23
EXHIBIT A
(THIS IS NOT AN ALL ASSETS SECURITY AGREEMENT)
The Collateral shall consist of all right, title and interest of Borrower
in and to the following:
(a) All now existing and hereafter arising accounts, lease
receivables, and all other forms of obligations owing to Borrower arising
out of the sale or lease of goods;
(b) All proceeds, documents, cash, deposit accounts, securities,
investment property, letters of credit of which it is a beneficiary,
certificates of deposit, instruments and chattel paper now owned or
hereafter acquired by Borrower and Borrower's Books, in each case solely
to the extent relating to the Accounts.
<PAGE> 24
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE: __________________________
FAX#: (408) __________________________ TIME: ____________________
FROM:___________________________________________________________________________
BORROWER'S NAME
FROM:___________________________________________________________________________
AUTHORIZED SIGNER'S NAME
- --------------------------------------------------------------------------------
AUTHORIZED SIGNATURE
PHONE:__________________________________________________________________________
FROM ACCOUNT #______________________________ TO ACCOUNT#________________________
- --------------------------------------------------------------------------------
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
PRINCIPAL INCREASE (ADVANCE) $
PRINCIPAL PAYMENT (ONLY) $
INTEREST PAYMENT (ONLY) $
PRINCIPAL AND INTEREST (PAYMENT) $
OTHER INSTRUCTIONS:
- --------------------------------------------------------------------------------
All representations and warranties of Borrower stated in the Loan and
Security Agreement are true, correct and complete in all material respects as of
the date of the telephone request for and Advance confirmed by this Advance
Request; provided, however, that those representations and warranties expressly
referring to another date shall be true, correct and complete in all material
respects as of such date.
- --------------------------------------------------------------------------------
BANK USE ONLY:
TELEPHONE REQUEST:
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
- -------------------------
Authorized Requester
-----------------------------------
Authorized Signature (Bank)
Phone #
----------------------------
- --------------------------------------------------------------------------------
<PAGE> 25
EXHIBIT C
BORROWING BASE CERTIFICATE
Borrower: Mobius Management Systems, Inc. Bank: Silicon Valley Bank
Commitment Amount:$5,000,000.00
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of _____ $____________
2. Additions (please explain on reverse) $____________
3. TOTAL ACCOUNTS RECEIVABLE $____________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days past invoice date $____________
5. Balance of 50% over 90 day accounts $____________
6. Concentration Limits $____________
7. Ineligible Foreign Accounts $____________
8. Governmental Accounts $____________
9. Contra Accounts $____________
10. Promotion or Demo Accounts $____________
11. Intercompany/Employee Accounts $____________
12. Other (please explain on reverse) $____________
13. Ineligible Lease Receivables $____________
14. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $____________
15. Eligible Accounts (#3 minus #14) $____________
16. LOAN VALUE OF ACCOUNTS (75.0% of #15) $____________
BALANCES
17. Maximum Loan Amount $____________
18. Eligible Lease Receivables $____________
19. Loan Value of Eligible Lease Receivables (50.0%
of #18) $____________
20. Total Funds Available Lesser of #17 or (#16 plus
#19) $____________
21. Present balance owing on Line of Credit $____________
22. Outstanding under Sublimits ( ) $____________
23. RESERVE POSITION (#20 minus #21 and #22) $____________
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Silicon Valley Bank.
COMMENTS: ============================
BANK USE ONLY
MOBIUS MANAGEMENT SYSTEMS, INC. Received
By:____________________
Date:________________
By: Reviewed
----------------------- By:____________________
Authorized Signer Compliance Status: Yes / No
============================
<PAGE> 26
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: MOBIUS MANAGEMENT SYSTEMS, INC.
The undersigned authorized officer of MOBIUS MANAGEMENT SYSTEMS, INC.
hereby certifies that in accordance with the terms and conditions of the Loan
and Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower
is in complete compliance for the period ending with all required covenants
except as noted below and (ii) all representations and warranties of Borrower
stated in the Agreement are true and correct in all material respects as of the
date hereof. Attached herewith are the required documents supporting the above
certification. The Officer further certifies that these have been prepared in
accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes subject to normal recurring year-end
adjustments. The Officer expressly acknowledges that no borrowings may be
requested by the Borrower at any time or date of determination that Borrower is
not in compliance with any of the terms of the Agreement, and that such
compliance is determined not just at the date this certificate is delivered.
Please indicate compliance status by circling Yes/No under "Complies" column.
Reporting Covenant Required Complies
- ------------------ -------- --------
Monthly financial statements Monthly within 30 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
A/R Agings Monthly within 30 days Yes No
Financial Covenant Required Actual Complies
- ------------------ -------- ------ --------
Maintain on a Monthly Basis:
Minimum Quick Ratio 1.5:1.0 _____:1.0 Yes No
Minimum Tangible Net Worth (See Loan Agreement) $________ Yes No
Maximum Debt/Tangible Net Worth 1.25:1.0 _____:1.0 Yes No
Comments Regarding Exceptions: =============================
BANK USE ONLY
Sincerely, Received
MOBIUS MANAGEMENT SYSTEMS, INC. By:____________________
Date:________________
Reviewed
Date: By:____________________
- ------------------------ --------------- Compliance Status: Yes / No
SIGNATURE =============================
- ---------------------------
TITLE
<PAGE> 27
DISBURSEMENT REQUEST AND AUTHORIZATION
Borrower: Mobius Management Systems, Inc. Bank: Silicon Valley Bank
LOAN TYPE. This is a Variable Rate, Revolving Line of Credit of a principal
amount up to $5,000,000.00.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.
SPECIFIC PURPOSE. The specific purpose of this loan is: Working capital.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Bank's conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:
Revolving Line
Amount paid to Borrower directly: $0.00
-----
Undisbursed Funds $5,000,000.00
-------------
Principal $5,000,000.00
-------------
AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct from
Borrower's account numbered ______ the amount of any loan payment. If the funds
in the account are insufficient to cover any payment, Bank shall not be
obligated to advance funds to cover the payment.
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO ADVERSE CHANGE IN ANY MATERIAL RESPECT IN BORROWER'S
FINANCIAL CONDITION AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT
TO BANK. THIS AUTHORIZATION IS DATED AS OF ______, 19___.
BORROWER: MOBIUS MANAGEMENT SYSTEMS, INC.
- ------------------------------------
Authorized Officer
<PAGE> 1
Exhibit 21.1
MOBIUS MANAGEMENT SYSTEMS, INC.
SUBSIDIARY LIST
1. Mobius Management Systems, (UK) LTD
Clock House
Station Approach
Shepperton, Middlesex
England TW17 8AS
Phone: 011-44-1932-228877
Fax: 011-44-1932-244050
2. Mobius Management Systems, (Deutschland) Gmbh.
Kari-Arnold-Str.1
47877 Willich
Phone: 011-49-2154-92460
Fax: 011-49-2154-924646
3. Mobius Managements Systems, (France), S.a.r.l.
Tour Maine Montparnasse
33, Avenue du Maine
BP 158
75015 Paris
Phone: 011-33-1-45-38-26-00
Fax: 011-33-1-45-38-26-20
4. Mobius Management Systems, (Italy) S.r.l.
Strada 4, Palazzo A5
Milanofiori
20090 Assago (Milano)
Phone: 011-39-2-57501-1458
Fax: 011-39-2-57501706
5. Mobius Management Systems, Sweden AB
Kanalvagen 10 C
S-194 61 Upplands Vasby
Phone: 011-46-8590-747-30
Fax: 011-46-8590-717-81
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Mobius Management Systems, Inc.:
The audits referred to in our report dated February 23, 1998, included the
financial statement schedule as of June 30, 1996 and 1997 and for each of the
years in the three year period ended June 30, 1997, included in the
registration statement. This financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion on
this financial statement schedule based on our audits. In our opinion, such
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" and "Selected Financial Data" in the
Prospectus.
KPMG Peat Marwick LLP
Stamford, Connecticut
February 27, 1998
